### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 1 of 110 **6560 -**  **50 -**  **P ENVIRONMENTAL PROTECTION AGENCY**  **40 CFR Parts 51, 52, 70 and 71 [EPA**  **- HQ**  **- OAR** **- 2009**  **- 0517**  **; FRL -**  **]**

**RIN 2060 -**  **AR10 Prevention of Significant Deterioration and Title V Greenhouse**  **Gas Tailoring Rule Step 3, GHG**

**Plantwide Applicability Limitations and GHG Synthetic Minor Limitations AGENCY**  : Environmental Protection Agency (EPA). **ACTION** : Proposed rule. **SUMMARY** : This propos al concerns the third step (Step 3) in the EPA’s T ailoring Rul e . We are proposing to maintain the applicability thresholds for greenhouse gas ( GHG )

- emitting sources at the current levels . We are also proposing two streamlining approaches, which will improve the administration of GHG Prevention of Significant Deterior ation ( PSD ) and title V permitting programs. The first proposal addresses the i mplement ation of GHG plantwide applicability limitations (PAL s) . We propose to allow permitting authorities to issue GHG PAL s on either a mass

- basis (tpy) or a carbon dioxide equivalent ( CO 2 e )

- basis and to allow PALs to be used as an alternative approach for determining whether a project is a major modification and whether GHG emissions are subject to regulation . The second propo sal would create the regulatory authorit y for the EPA to issue sy nthetic minor limitations for GHG s in areas subject to a GHG PSD Federal Implementation P lan (FIP). We also discuss our progress in evaluating the suitability of other streamlining approaches and solicit further comment
. **DATES** : Comments must be received on or before **[INSERT DATE 45**  **DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER**  ]. Public Hearing

. Two public hearing will be held on March XX , 2012, and March XX , 2012. For

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 2 of 110 additional instructions on the two public hearings , go to the **SUPPLEMENTARY INFORMATION** section of this document. **ADDRESSES** : Submit your comments, identified by Docket ID No. EPA

- HQ
- OAR
- 2009

– 0517 , by one of the following methods:

 Http://www.regulations.gov: Follow the online ins tructions for submitting comments.

 Email: a - and

- r - docket@epa.gov. Attention Docket ID No. EPA

–HQ

– OAR

–2009

– 0517
.
 Fax: (202) 566

- 9744.

 Mail: Attention Docket ID No. EPA

–HQ

– OAR

–2009

– 0517 , Air and Radiation Docket and In formation Center, Mailcode: 2822T, U.S. Environmental Protection Agency , 1200 Pennsylvania Avenue, NW, Washington, D

. C
. 20460. Please include a total of two copies. In addition, please mail a copy of your comments on the information collection provisions to the Office of Information and Regulato ry Affairs, Office of Management and Budget, Attn: Desk Officer for EPA, 725 17 th Street, NW, Washington, D.C. 20503.

 Hand Delivery : Air and Radiation Docket and Information Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Avenue, NW, Washington, D

. C
. 20004, Attention Docket ID No. EPA

–HQ

– OAR

–2009

– 0517 . Such deliveries are onl y accepted during the Docket Center ’ s normal hours of operation, and special arrangements should be made for deliveries of boxed information. Instructions: Direct your comments to Docket ID No. EPA

- HQ
- OAR
- 2009

– 0517 . The EPA’s policy is that all comments received will be included in the public docket without change and may be made available online at www.regulations.gov , including an y personal information provided, unless the
comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted b y statute. Do not submit information that you consider to be

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 3 of 110 CBI or otherwise protected through www.regulations.gov or emai l. The www.regulations.gov website is an “anon ym ous access” sy stem, which means the EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an email comment directly to the EPA without going thr ough www.regulations.gov your email address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, the EPA recommends that you include your name and other contact information in the body of your comment and with an y disk or CD

- ROM you submit. If the EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, the EPA may

not be able to consider your comment. Electronic files should avoid the use of special characters, an y form of encry ption, and be free of any

defects or viruses. For additional instructions on submitting comments, go to section I .C of the **SUPPLEMENTARY INFORMATION** section of this doc ument. Docket: All documents in the docket are listed in the www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g. , CBI or other information whose disclosure is restricted b y statute. Certain other material, such as cop yr ighted material, will be publicly available onl y in hard copy . Publicly available docket materials are available either electronicall y in www.regulations.gov or in hard cop y at the Air and Radiation Docket and Information Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Avenue, NW, Washington, D

. C. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday , excluding legal holiday s. The telephone number for the Public Reading Room is (202) 566

- 1744, and the te lephone number for the Air and Radiation Docket and Information Center is (202) 566

- 1742. Public Hearing : Two public hearings will be held on this proposed rule . The March XX, 2012, hearing will be held at the

_________________ , Washington, DC

_____ ; phone number

___________ .

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 4 of 110 The March XX, 2012, hearing will be held at the __________________Chicago , IL

_____ ; phone number

_______________ . Both public hearings will convene at 10:00 a.m. and continue until 7:00 p.m. (local time) or later, if necessary , depending on the number of speakers wishing to participate. The EPA will make every

effort to accommodate all speakers that arrive and register before 7:00 p.m. A lunch break is scheduled from 12:30 p.m. until 2:00 p.m. during both hearings. The EPA w ebsi te for the rulemaking, which includes the proposal and information about the public hearings, can be found at: www.epa.gov/nsr

. **FOR FURTHER INFORMATION CONTACT** : Michael S. Brooks, Air Quality Policy Division, Office of Air Quality

Planning and Standards (C504

- 05), Environmental Protection Agency , Research Triangle Park, North Carolina 27711; telephone number (919) 541

- 3539; fax number (919) 541

- 5509; email address: brooks.michaels@epa.gov

. To register to speak, attend or f or information pertaining to the public hearing s on this document, contact Ms. Pamela S. L ong, Air Quality Policy Division, Office of Air Qualit y Planning and Standards (C504

- 0 1 ), Environmental Protection Agency , Research Triangle Park, North Carolina 27711; telephone number (919) 541

- 06 41; fax number (919) 541

- 5509; email address: long.pam@epa.gov

. **SUPPLEMENTARY INFORMATION** : The information in this Supplementary Information section of this preamble is organized as follows: I. General Information A. Does this action appl y to me? B. Where can I get a cop y of this document and other related information? C. What should Iconsider as Iprepare m y c omments for the EPA? 1. Submitting CBI 2. Tips for Preparing Your Comments D. How can I find information about the public hearing? E
. What acron ym s, abbreviations and units are used in this preamble? II. Overview of the Proposed Rule

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 5 of 110 III. Background A. Statutory

and Regulatory Background for PSD and Title V B . How has the Tailoring Rule addressed GHG emissions under PSD and Title V? C . In the Tailoring Rule, what commitments did the EPA make for Step 3? D . In the Tailoring Rule, what plan did the EPA announce for developing streamlining measures? E. In the Tailoring Rule, what commitments did the EPA make for subsequent action? IV
. Availa

ble Information on GHG Permitting A. GHG Permitting Activity to Date B. Consultations with States C. Additional Technical Support for the Step 3 Rule V. Proposed Step 3 Rule A. Overview B. Have states had adequate time to ramp up their resources? C. What is the ability

of permitting authorities to issue timely permits? D. Has the EPA developed streamlining methods? E. Limited Benefit from L owering Thresholds in Step 3 F. Conclusion VI
. Streamlining for PSD and Title V Permitting of GHGs A. Plantwide Applicability L imitations for GHGs 1. What is the EPA Proposing? 2. What is a PAL ? 3. Why are we proposing to amend the regulations? 4. Options for Allowing GHG

- Onl y Sources to Obtain a GHG PAL 5. Extending PAL s to GHGs on a CO 2 e Basis, and Using PALs To Determine Whether GHG Emissions Are “Subject to Regulation” 6. Can a GHG source that already has a mass

- based GHG PAL obtain a CO 2 e - based PAL once we issue final changes to the PALrules? 7. How whould we change the regulatory provisions to implement PAL s for GHG

- onl y major sources? B. Sy nthetic Minor Source Permitting Authority for GHGs 1. What is the EPA proposing? 2. What is sy

nthetic minor limitation, and what is its function? 3. What is a “subject to regulation” limitation? 4. Why does the EPA need authority to issue s ynthetic minor source permits? 5. What are the benefits to a federal GHG s ynthetic minor permit program? 6. What is the legal rationale for EPA’s GHG s ynthetic minor source permitting authorit y? 7. What changes would EPA make to the PSD regulations to allow EPA to issue GHG s ynthetic minor permits? C. Redefining Potential to Emit and Source Category Specific PTE D. General Permitting for GHGs 1. What is a general permit? 2. What is the legal authority for general permits ? 3. Have the states used general permits? 4. What steps has the EPA made toward developing general permits?

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 6 of 110 5. General Permits and Title V E. Presumptive BACT for GHGs 1. Definition of BACT 2. What is presumptive BACT? 3. How the EPA Could Consider Implementing Presumptive BACT 4. Possible Impediments to Presumptive BACT F. Title V Empty

Permits VII. Request for Comment A. Solicitation of Comment on Proposed Step 3 1. General 2. Call for Additional Information Concerning State Burdens B. Solicitation of Comment on Streamlining Techniques 1. Plantwide Applicability L imitations for GHGs 2. Sy nthetic Minor Source Permitting Authority for GHGs 3. Redefining PTE and Source Category Specific PTE 4. General Permits for GHGs 5. Presumptive BACT for GHGs 6. Empty

Permits VII I. Statutory

and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulatio n and Regulatory Review B. Paperwork Reduction Act C. Regulatory

Flexibility

Act D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments G. Executive Order 13045: Protection of Children from Environmental Health and Safety Ris ks H. Executive Order 13211: Actions That Significantly Affect Energy

Suppl y, Distribution or Use I. National Technology

Transfer and Advancement Act J. Executive Order 12898: Federal Actions To Address Environmental Justice in Minority Populations and L ow - Income Populations K. Determination under Section 307(d) **I** X. Statutory

Authorit y **I. General**  **Information** A. Does this action appl y to me? Entities affected b y this action include sources in all sectors of the economy, including commercial and residential sources. Entities potentially affected b y this action also include states, local permitting auth orities and tribal authorities. The majority of categories and entities potentially affected

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 7 of 110 by this action are expected to be in the following groups: **Industry Group NAICS**  **a** Agriculture, fishing, and hunting

................... 11 Mining

................................ ............................ 21 Utilities (electric, natural gas, other sy stems)

................................ .................... 2211, 2212, 2213 Manufacturing (food, beverages, tobacco, textiles, leather)

................................ ........ 311, 312, 313, 314, 315, 316 Wood product, paper manufacturing

............. 321, 322 Petroleum and coal products manufacturing.

................................ ......... 32411, 32412, 32419 Chemical manufacturing.

............................... 3251, 3252, 3253,3254, 3255, 3256,3259 Rubber product manufacturing

...................... 3261, 3262 Miscellaneous chemical products

.................. 32552, 32592, 32591, 325182, 32551 Nonmetallic mineral product manufacturing

. 3271, 3272, 3273, 3274, 3279 Primary and fabricated metal manufacturing

................................ .......... 3311, 3312, 3313, 3314, 3315, 3321, 3322, 3323, 3324, 3325, 3326, 3327, 3328, 3329 Machinery

manufacturing

.............................. 3331, 3332, 3333, 3334, 3335, 3336, 3339 Computer and electronic products manufacturing

................................ .......... 3341, 3342, 3343, 3344, 3345, 4446 Electrical equipment, appliance, and component manufacturing

....................... 3351, 3352, 3353, 3359 Transportation equipment manufacturing

...... 3361, 3362, 3363, 3364, 3365, 3366, 3366, 3369 Furniture and related product manufacturing

................................ .......... 3371, 3372, 3379 Miscellaneous manufacturing

........................ 3391, 3399 Waste management and remediation

............. 5622, 5629 Hospitals/Nursing and residential care facilities

................................ .................... 6221, 6231, 6232,6233, 6239 Personal and laundry

services

........................ 8122, 8123 Residential/private households

...................... 8141 Non
- Residential (Commercial)

...................... Not available. Codes only exist for private households, construction and leasing/sales industries. a North American Industry Classification Sy stem. B. Where can I get a cop y of this document and other related information? In a ddition to being available in the docket, an electronic cop y of this proposed rule will also be

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 8 of 110 available on the World Wide Web. Following signature b y the EPA Administrator, a cop y of this proposed rule will be posted in the regulations and standards sect ion of our New Source Review (NSR) website, under Regulations & Standards, at http://www.epa.gov/nsr

. C. What should Iconsider as Iprepare m y comments for the EPA? 1. Submitting CBI Do not submit this information to the EPA through www.regulations.gov or email. Clearl y mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to the EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically

within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a cop y of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR Part 2. Send or deliver information identified as CBI onl y to the following address: Roberto Morales, OAQPS Document Control Officer (C404

- 02), Environmental Protection Agency , Research Triangle Park, NC 27711, Attention Docket ID No. EPA

- HQ
- OAR
- 2009

– 0517
. 2. Tips for Preparing Your Comments When submitting comments , remember to:

 Id entify

the rulemaking by

docket number and other identifying information (subject heading, Federal Register date and page number).

 Follow directions

– The agency may ask you to respond to specific questions or organize comments by

referencing a Code of Federal Regulations (CFR) part or section number.

 Explain why

you agree or disagree; suggest alternatives and substitute language for your requested changes.

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 9 of 110  Describe an y assumptions and provide an y technical information and/or data that you used.

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

 Provide specific examples to illustrate your concerns, and suggest alternatives.

 Explain your views as clearl y as possible, avoiding the use of profanity or personal threats.

 Make sure to submit yo ur comments by the comment period deadline identified. D. How can I find information about the public hearing? Persons interested in presenting oral testimony should contact Ms. Pamela Long, Air Quality Policy Division (C504

- 0 1 ), Environmental Protection Agency , Research Triangle Park, NC 27711; telephone number (919) 541

- 0641 or email long.pam@ep a.gov at least 2 day s in advance of the public hearing s . P ersons interested in attending the public hearing s should also contact Ms. L ong to verify the time, date and location of the hearing. The public hearing s will provide interested parties the opportun ity to present data, views or arguments concerning these proposed rules

. E. What acron ym s, abbreviations and units are used in this preamble? The following acron ym s, abbreviations and units are used in this preamble: AFUE BACT Annual F uel Utilization E fficie ncy

Best Available Control Technology CAA or Act Clean Air Act CFR CH 4 Code of Federal Regulations

Methane CO 2 Carbon Dioxide CO 2 e Carbon Dioxide Equivalent DOE EPA U.S. Department of Energy

U.S. Environmental Protection Agency ECOS FIP Environmental Council of the States

Federal Implementation Plan FR GHG Federal Register

Greenhouse Gas GP GWP General Permit

Global Warming Potential

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 10 of 110 HFCs Hydrofluorocarbons ICR In formation Collection Request LDVR Li ght

- Dut y Vehicle Rule N 2 O Nitrous Oxide NAAQS National Ambient Air Quality Standard NACAA NRDC NSR National Association of Clean Air Agencies

Natural Resources Defense Council New Source Review NTTAA National Technology Transfer and Advancement Act OMB Office of Management and Budget PAL PFCs P lantwide Applicability L imitation Perfluorocarbons PSD Prevention of Significant Deterioration PTE Potential to Emit RFA Regulatory Flexibility

Act SBA Small Business Administration SF 6 Sulfur Hexafluoride SIP State Implementation Plan SNPR Supplemental Notice of Proposed Rulemaking TSD Technical Support Document tpy Tons Per Year UMRA Unfunded Mandates Reform Act **II. Overview of the Proposed Rule**  In the Tailoring Rule, 1 we included an enforceable commitment to propose or solicit comment on what we call Step 3 of the process for phasing in, or tailoring, the applicability thresholds at which GHG emission sources are subject to the Clean Air Act ( CAA or “the Act”) PSD and title V permitting requirements. W e als o stated in that rule that we would lower the Tailoring Rule thresholds onl y after we determined that the s tates have had enough time to develop the necessary infrastructure and increase their GHG permitting expertise and capacity to efficiently manage the expected increase in administrative burden, and only after we had the opportunity to expedite GHG permit issuance through streamlining measures. In addition, i n the Tailoring Rule, we committed to complete action on the Step

1 “Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule,” 75 FR 31,514 (June 3, 2010) (the Tailoring Rule).

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 11 of 110 3 rulemaking b y July

1 , 2012, and to make the Step 3 rule effective on July 1, 2013. Inthe short period of time since the EPA promulgated th e Tailoring Rule, the s tates and we have made progress in GHG permitting capacit y and streamlining in some areas, but not enough to justify lowering the thresholds at this time. As a result, in this rulemaking, we propose to maintain Step 3 of the Tailoring R ule at current levels. In section III of this proposal , we discuss background information, including the potential numbers of permit actions , amounts of GHG emissions, and administrative costs of permit actions for the sources that are potentially subject to GHG permitting for Step 3. In section IV , we discuss the available information regarding the impact that GHG permitting is having on perm itting authorities. In section V, we discuss our proposal to maintain the current applicability

requirements for GHG PSD and title V permitting at the levels established under Steps 1 and 2 of the Tailoring Rule, which we generally refer to as the 100,000/ 75,000 levels. Our basis for maintaining the current applicability requirements stems from the Tailoring Rule itself , in which we determined that with the Step 1 and 2 thresholds, permitting authorities would be required to handle a large number of GHG permitting actions that would impose significant administrative burdens on the permitting authorities, and that lowering those thresholds in Step 3 w ould bring in more permitting actions that in turn would add more burden . Accordingl y, we stated we would lower the GHG thresholds only if certain criteria are met
. T he criteria are : (i) the develop ment of what we call streamlining
measures that wo uld make GHG permitting more efficient , (ii) whether permitting authorities had the time need ed to ramp up their resources, and (iii) the ability of sources to meet the requirements of the PSD program and the permitting authorities’ ability to issue timely permits. 2 Information currentl y

2 75 FR 31559.

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Page 12 of 110 available indicate s that the permitting authorities are not significantly better positioned now to process more GHG permits than they were at the time we promulgated Steps 1 and 2 in the Tailoring Rule. We also note that lowering the thresholds to include the relativel y low

- emitting sources currentl y under consideration for Step 3 would result in a very small addition to the amount of GHG emissions subject to permitting requirements while potentially adding thousands of so urces to the permitting process

. For these reasons, we propose in Step 3 to maintain, and not lower, the current applicability thresholds. As we committed to do in the Tailoring Rule, we have been exploring a variety of approaches that could be used to streamline PSD and title V permitting for sources of GHGs. In section VI, we discuss streamlining techniques with the potential to make the PS D and title V permitting programs more efficient to administer for GHG

- emitting sources , and propose two streamlining techniques

. In section VI.A, we propose to add provisions to the PSD regulations at 40 CFR 51.166 and 52.21 to better address PALs for GHGs
. More specificall y, we propose regulatory changes to implement GHG PALs on either a mass

- basis (tpy) or a CO 2 e - basis, including for existing sources that are not yet currentl y major for an y regulated NSR pollutants and are not major sources because of their GHG emissions , and we also propose allow ing PAL s to be used as an alternative approach for determining both whether a project is a major modification and whether GHG emissions are subject to regulation

. Insection VI.B, we propose to add provisions to the PSD regulations at 40 CFR 52.21 to create GHG sy nthetic minor source permitting authorit y, in areas subject to a GHG PSD FIP
. In doing so, we propose changes to c reat e the regulatory authorit y for the EPA to issue sy nthetic minor limitations for GHG emissions to allow sources to restrict emissions below the PSD applicability thresholds. A s yn thetic minor limit may also allow sources to restrict emissions below the title V permitting applicability thresh old on a source - wide basis

. We also request comment on whether an y s tates with approved SIPs lack authorit y to issue GHG sy nthetic minor limitations

.

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 13 of 110 In the rest of section VI, we discuss our progress in evaluating the suitability of other streamlining options and request further comment, for the purposes of both PSD and title V permitting, on potential

- to - emit calculations and the use of general permits; and for PSD permitting, on the use of presumptive best available control technology (BACT). In secti on VII, we solicit comment on the full range of topics discussed in this proposal. In addition, we call for additional information from states as to their current and expected air permit budgets as well as their current and expected future levels of permitting based on the current thresholds and the possibility

of lower thresholds in the future

. **III. Background**  This section describes key aspects of the background for this rulemaking. For other background information, such as a description of GHGs and their sour ces, the regulatory backdrop to the Tailoring Rule, and the EPA’s GHG PSD and t itle V program s , see the Tailoring Rule, the related actions that the EPA took shortly

before finalizing the Tailoring Rule, 3 and the GHG PSD and title V implementation rules th at we call the GHG PSD SIP Call and GHG FIP , 4 as well as the GHG PSD and title V Narrowing

3 “Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act,” 74 FR 66,496 (December 15, 2009) (the Endangerment and Cause

- or - Contribute Fi ndings); “L ight

- Dut y Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule,” 75 FR 25,324 (May 7, 2010) (the Light

- duty

Vehicle Rule); “Interpretation of Regulations that Determine Pollutants Covered b y Clean Ai r Act Permitting Programs,” 75 FR 17,004 (April 2, 2010) (the Timing Decision or the Johnson Memo Reconsideration).
4 “Action to Ensure Authority to Issue Permits under the Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP Call

— Final Rule,” 75 FR 77,698 (December 13, 2010) (the GHG PSD SIP Call); “Action to Ensure Authority to I ssue Permits Under the Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Emissions: Federal Implementation Plan; Final Rule,” 75 FR 82246 (December 30, 2010) (the GHG PSD SIP Call FIP)

.

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Page 14 of 110 Rules. 5 For purposes of this proposal, we assume that the reader is familiar with the above

- referenced materials. In the following paragraphs we provide a brief summ ary of key statutory and regulatory background for the PSD permit and title V programs

. A. Statutory

and Regulatory Background for PSD and Title V Under the CAA, PSD applies to any “major emitting facility” that commences construction or undertakes a “modification. ” The Act defines “major emitting facility” as a stationary source that emits any air pollutant in the amount of at least 100 or 250 tpy on a mass basis, depending on the source category
. The Act also defines “modification” as any phy sical or operational change that “increases the amount” of an y ai r pollutant emitted by the source

. CAA section 165(a), 169(1), 169(2)(C), 111(a)(4). Under the CAA , t itle V applies to a “major source ,” which is defined to include any stationary

source that is a “ major stationary source” under s ection 302 of the Act

. CAA §501(2). Under s ection 302, a “major stationary

source” is defined as any stationary

facility or source of air pollutants which directly emits, or has the potential to emit, 100 tpy or more of any air pollutant. CAA §302(j) . The EPA’s regulations implement these requirements, though they use different terminology

. Under the regulations, PSD applies to any

“major stationary

source” that commences construction or undertakes a “major modification. ” 40 CFR 51.166(a)(7)(i)

- (ii). The regulations define a “major stationary source” as a stationary source that emits, depending on the source category , at least 100 or 250 tpy , on a mass basis, of a “regulated NSR pollutant.” 40 CFR 51.166(b)(1)(i)(a)

- (b). A “ma jor modification” is defined as any phy sical or operational change that would result in a “significant emissions increase” and a “significant

5 “L imitation of Approval of Prevention of Significant Deterioration Provisions Concerning Greenhouse Gas Emitting Sources in State Implem entation Plans; Final Rule,” 75 FR 82535 (December 30, 2010) (the PSD Narrowing Rule); “Action to Ensure Authority to Implement Title V Permitting Programs Under the Greenhouse Gas Tailoring Rule; Final Rule,” 75 FR 82254 (December 30, 2010) (the Title V Narrowing Rule).

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Page 15 of 110 net emissions increase” of “a regulated NSR pollutant” from the major stationary source. 40 CFR 51.166(b)(2)(i). A “significant emissions increase” is defined as “an increase in emissions that is significant ... for that pollutant. ” 40 CFR 51.166(b)(39)

. The term “significant” is defined as a specified number for certain listed regulated NSR pollutants and zero for an y non - listed pollutants. 40 CFR 51.166(b)(23)(i)

- (ii)

. A “significant net emissions increase” refers to emissions increases net of emissions decreases. 40 CFR 51.166(b)(3). A “regulated NSR pollutant[]” is defined as any of the following: (i) in general, any pollutant subject to a NAAQS, (ii) any pollutant subject to a new source standard of performance under CAA §111, (iii) any of a certain t ype of stratospheric ozone depleting substances, or (iv) “[a]ny pollutant that otherwise is subject to regulation un der the Act. ” 40 CFR 51.166(b)(49)(i)

- (iv) . The title V regulations define a “major source” in 40 CFR 70.2

. In the Tailoring Rule, the EPA promulgated, for the first time, a regulatory definition of the term “subject to regulation” for purposes of the PSD regulations, and include d that term, as defined, in the title V regulations. Under the Tailoring Rule regulations, a pollutant is “subject to regulation” if, in general, the pollutant is subject to actual control of the quantity of emissions

. E.g. , 40 CFR 51.166(b)(48) , 40 CFR 70.2 . In addition , the Tailoring R ule also provides a special rule for GHGs, which provides that GHGs become pollutants “ subject to regulation ,” and therefore subject to PSD and title V, if they

meet the following two - step phase

- in thresholds

. Step 1 applies the applicable requirements of PSD, including the BACT requirement to projects that increase net GHG emissions by the applicable threshold (75,000 tpy CO 2 e) provided these projects would be subject to PSD any way by significantl y increasing emissions of at least one non

- GHG pollutant. Under Step 1, for the title V program, onl y sources with current title V permits for non

- GHG pollutants will have to address GHGs. Step 2 then expands the program b y phasing in addition al large sources of GHG emissions that are not already subject to PSD or title V permitting requirements due to non

- GHG emissions. In Step 2,

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 16 of 110 PSD and title V requirements will apply to new sources that emit, or have the potential to emit, at least 100,000 tpy

CO 2 e. For existing sources, Step 2 applies title V requirements to existing sources that emit, or have the potential to emit, 100,000 tpy CO 2 e and that are not already subject to title V requirements, and also applies PSD requirements to those sources that emit, or have the potential to emit, 100,000 tpy CO 2 e and undertake a modification that increases net emissions by at least 75,000 tpy

CO 2 e. See 75 FR 31516. In the Tailoring Rule, the EPA explained that “we selected the ‘subject to regulation’ mechanism” as the legal mechanism for establishing the phase

- in thresholds because we had received information that states could more expeditiously adopt those thresholds through that mechanism. The EPA added that “our action in this rulemaking [in establishing the phase

- in thresholds] should be interpreted to rely

on any of several legal mechanisms to accomplish this result ... [including] revising the meaning of several terms in the [PSD] definition [ provisions].” 75 FR 31582. B. How does the Tailoring Rule address GHG emissions under PSD and Title V? 6 In the Tailoring Rule, the EPA explained that the rulemaking wa s necessary because without it, the CAA PSD preconstruction review permitting program and the title V operating permit program would , under a literal reading of those provisions, apply to all stationary

sources that emit or have the potential to emit more than 100 or 250 tpy of GHGs beginning on January 2, 2011. This was the date when the EPA’s recentl y promulgated Li ght Dut y Veh icle Rule (LDVR) took effect, imposing control requirements for the first time on carbon dioxide (CO 2 ) and other GHGs, thereby making them subject to regulation and triggering the PSD and title V permitting requirements. Therefore, a source owner proposing to construct any new major source that would emit or have the potential to emit at or higher

6 We include this discussion of the Tailoring Rule for background purposes only . We do not reopen for comment an y of the determinations made in the Tailoring Rule or our rationale for them.

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Page 17 of 110 than the 100/250 tpy applicability levels (and which therefore may be referred to as a “major” source) or modify an y existing major source in a way that would inc rease GHG emissions, would need to obtain a permit under the PSD program that addresses these emissions before construction or modification could begin. Similarly , title V would apply to a new or existing GHG source exceeding the 100 tpy applicability thre shold in the Act. In the Tailoring Rule, we further explained that under these circumstances, and in the absence of streamlining methods, state and local permitting authorities would be burdened b y the need to issue PSD permits to tens of thousands of small sources and to issue title V permits to millions of small sources. These extraordinary

numbers of permit applications are orders of magnitude greater than the current inventory of annual applications and would vastl y exceed the current administrativ e resources of the permitting authorities. Permit gridlock would result with the permitting authorities able to issue only a tiny fraction of the permits requested. In the Tailoring Rule, we further explained that “[t]hese impacts ... are so severe that they bring the judicial doctrines of ‘absurd results,’ ‘administrative necessity ,’ and ‘one

- step - at - a - time’ into the Chevron two - step analy

tical framework for statutes administered by agencies.” Tailoring Rule, 75 FR at 31517. We further explain ed that on the basis of this legal interpretation, we would phase

- in the applicability

of PSD and title V to GHG
- emitting sources so that those requirements would appl y “at least to the largest sources initially , at least to as many more sources as possible and as promptly as possible over time ... and at least to a certain point.” Id . In the Tailoring Rule , we went on to promulgate the first two steps of the phase

- in program, which we call Steps 1 and 2, and we made commitments for subsequent action. In the Tailoring Rule, we closely reviewed the numbers of additional permitting actions for GHG
- emitting sources, and the resulting administrative burdens, that would occur at various permitting

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Page 18 of 110 thresholds. For example, we estimated the following permitting burdens associated with the Step 1 and Step 2 thresholds: Step 1: Number of sources subject to PSD and title V permitting: Additional workload hours PSD program: Additional workload hours title V program: the same 34,000 at a cost of $3 million 27,468 at a cost of $1 million Step 2: Number of additional sources subject to PSD permitting: 2 new sources, 915 modified sources Additional workload hours PSD program: 310,655 at a cost of $24 million Number of additional sources subject to title V permitting: 190 sources for each of the first 3 ye ars Additional workload hours title V program: 141,322 at a cost of $7 million
75 FR 31541. We further estimated that the combined additional PSD and title V permitting burdens due to Steps 1 and 2 would, on an annual basis, mean a 42 percent increase in costs over the current PSD and title V program. 75 FR 31540, Table V

- 1. C. In the Tailoring Rule, what commitments did the EPA make for Step 3? In the Tailoring Rule, we noted that “ following implementation of the first phase of PSD and title V applicability

to GHG sources, generally at th e [proposed] threshold, additional action would be required over time to assure full compliance with the statute. ” 75 FR 31571. Accordingl y, we included in the Tailoring Rule an enforceable commitment to issue a notice of proposed rulemaking in which we
wo uld propose or solicit comment on a third step of the phase

- in, which we call Step 3 . We committed to complete Step 3 by

July 1, 2012 , and to make Step 3 effective b y July 1, 2013 . We committed to

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Page 19 of 110 solicit comment on lowering the thresholds, so that more so urces would be subject to PSD and title V requirements, 40 CFR 52.22(b)(1), 40 CFR 70.12(b)(1), but we did not commit to either propose or finalize lower thresholds. We further stated that in light of the administrative burdens, we would not, in Step 3, lo wer the thresholds below the 50,000/50,000 tpy CO 2 e levels. In the Tailoring Rule, we recognized that lowering the thresholds in Step 3, and thereb y bringing more sources into PSD and t itle V permitting, would mean that the permitting authorities would confront even greater administrative burdens. For example, we estimated that lowering the thresholds to the 50,000/50,000 level would increase administrative costs by 40 percent above administrative costs associated with Step 2. 7 Accordingl y, we explained that whether we could lower the thresholds in Step 3 depended on (i) whether the EPA could develop streamlining measures, (ii) the time that permitting authorities need to ramp up their resources, and (iii) sources’ abilities to meet the requirem ents of the PSD program and permitting authorities’ ability to issue timely permits. 75 FR 31524. We elaborated: (2) Criteria for Establishing Phase

- in Schedule The specific phase

- in schedule under the tailoring approach will depend on several things. Th e first is our progress in developing streamlining methods that will render the permitting authority workload more manageable b y t aking some sources off the table (through regulations or guidance interpreting “potential to emit”), and by allowing for more efficient permit processing (through general permits and presumptive BACT). At the same time, streamlining techniques will lower permitting costs to sources or even eliminate some sources’ obligations to obtain permits altogether. The second is the time th at permitting authorities need to ramp up their resources in an orderly and efficient manner to manage the additional workload. The third is information we have as to the sources’ abilities to meet the requirements of the PSD program and the permitting authorities’ ability

to process permits in a timely fashion. That information will be based on the real

- world experience the permitting authorities will accumulate as they proceed to process permit application for the larger GHG sources. Thus, under our pres ent approach, we will develop streamlining techniques, we expect the permitting authorities to ramp up resources in response to the additional demands placed upon them in the first two steps, and we will gather real world

-

7 75 FR 31540 (Table V

- 1).

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Page 20 of 110 information about the GHG permitt ing process; and based on all that, we will address expanding the PSD program in a step

- by

- step fashion to include more sources over time. We intend to follow this process to establish ... the PSD applicability thresholds .... 75 FR 31559. With respect to the third criterion, we note that in the Tailoring Rule, we made clear that sources’ abilities to meet the requirements of the PSD and title V program s depend at least in part on the ability of the states to develop, as part of the state programs, outre ach and educational efforts to facilitate source compliance. Accordingl y, for present purposes, we think this component concerning sources may be examined by

a review of the states’ progress in developing state GHG permitting programs. We also note that pe rmitting authorities’ abilities to issue timely GHG permits may

be measured by

the extent of any permitting backlog, and depend in large part on the permitting authorities’ development of expertise. In this rulemaking, we seek information from the states a s to their ability to issue timely

permits, including data concerning their backlog, but we also are examining, more broadly , the states’ progress in develop ing expertise in GHG permitting

. D. In the Tailoring Rule, what plan did the EPA announce for devel oping streamlining measures? In the Tailoring Rule, we announced a plan to explore streamlining techniques that could make the permitting programs more efficient to administer for GHGs, and that therefore could allow expanding those programs to smaller so urces. Streamlining techniques to be evaluated include: 1) defining PTE for various source categories, 2) establishing source category emission limits for presumptive BACT, 3) establishing general permits and permits

- by

- rule, 4) establishing a process for electronic permitting, and 5) establishing a process for lean techniques for more efficient permitting processes. We believe that these techniques have the potential to streamline the PSD and title V permitting programs for GHGs to “allow the expeditious e xpansion of PSD and title V applicability to more GHG
- emitting sources while protecting those sources and the permitting authorities from undue expenses.” 75 FR 31526.

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Page 21 of 110 While we intend to move forward and develop streamlining approaches, we also stated in the Tailoring Rule that we did not expect to develop and implement any of these prior to Step 2. We also stated in the rule that several of these streamlining approaches will take several ye ars to develop, requiring separate rulemaking both at the federal level, and then through state and local processes. We, nonetheless, committed to explore a number of possible streamlining actions prior to the Step 3 rulemaking. In addition, with respect to title V, in the Tailoring Rule we noted that commenters on the proposal for that rule stated that the EPA should apply the title V program only

to sources that are subject to applicable requirements, so that sources should not be required to hold “empty permits” ( e.g. , permits issued to a source that is not subject to any applicable requirement for any pollutant). In the Tailoring Rule , w e recognized that not requiring sources to hold such “empty permits” is a potential means for relieving title V permitting burdens

. [ 75 FR 31566.] We also stated that

–

We need to gather more information concerning the potential number and utility of “empt y permits” for GHG sources, in light of the fact that the need for requirements in title V permits will vary

based on the requireme nts of each SIP, and the fact that some SIPs contain broadly

applicable requirements. 75 FR 31566. We added that in the Step 3 rulemaking, “we may consider whether to limit title V applicability

to GHG sources in order to minimize the number of GHG sourc es with ‘empt y’ permits.” Tailoring Rule, 75 FR 31567. E. In the Tailoring Rule, what commitments did the EPA make for subsequent action? In addition, in the Tailoring Rule, we established an enforceable commitment that we will (i) complete a study b y Ap ril 30, 2015, to evaluate the status of PSD and title V permitting for GHG

emitting sources, including progress in developing streamlining techniques; and (ii) complete further rulemaking based on that study by April 30, 2016, to address the permitting of smaller sources. That

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Page 22 of 110 rulemaking may

also consider additional permanent exclusions based on the “absurd results” doctrine, where applicable. In the Tailoring Rule, we also included a provision assuring that no source with emissions or potential to emit below 50,000 tpy CO 2 e, and no modification resulting in an increase and a net GHG increases of less than 50,000 tpy CO 2 e, w ould be subject to PSD or title V permitting b efore April 30, 2016
. We included this provision on th e basis of our conclusion that th e administrative burdens that would accompan y permitting sources below the 50,000 tpy threshold would be so great that it would be impossible to administer the permit programs for these sources until at least 2016, even with the streamlining actions that the EPA may be able to develop, and the increases in permitting resources that we reasonabl y expect the permitting authorities to acquire. **IV. Available Information on GHG Permitting**  To support this Step 3 rulemaking, the EPA has gathered additional information on the impact that GHG permitting is having on permitting authorities at the current threshold levels and the potential impact that would result from a reduction in the GHG permitting thresholds to levels as low as 50,000 tpy CO 2 e. Section IV.A discusses the actual permitting that has occurred since January 1, 2011. Section IV .B discusses information gathered through preliminary consultations with eight state PSD permitting authorit ies, as well as , experience garnered from the EPA r egion al offic e s that are the PSD permitting authorities for certain s tates
. 8 Section IV.C presents information from an analy sis of the number of existing and new sources that would be potentially major sources of GHGs at a range of thresholds between the current level of 100,000 tpy CO 2 e and 50,000 tpy

CO 2 e.

8 Inthe title V program, the responsible permitting agency is referred to as the “permitting authority ,” while in the PSD program, this entity is referred to as the “reviewing authority .” We use the two terms interchangeabl y in this preamble.

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Page 23 of 110 A. GHG Permitting Activity to Date As of D ecember 1, 2011, the EPA and state permitting authorities had issued 18 PSD permits with GHG requirements. We also estimate that as of that date, the EPA and state permitting a uthorities had received an additional 50 GHG PSD permit applications. The ty pes of source categories for which permitting authorities have issued GHG permits include: biofuel production, cement plants, electric generating units, lime production faciliti es, outer continental shelf exploration, pulp and paper mills, and refineries. Eleven states and three EPA regions issued these permits

. In most cases , no permitting authority issued a permit for the same source category more than once. We discuss in secti on V the extent to which these permitting actions have provided information relevant to Step 3. B. Consultations with States To obtain additional information on the current status of GHG permitting based on the implementation of Step 1 and Step 2 and the potential impact of reducing the GHG thresholds in Step 3,
we consulted with eight state permitting authorities

– Io wa, Louisi ana, Michigan, New Jersey , North Carolina, Pennsylvania, South Dakota and Utah

– all of which have experience with GHG permitting, and which represent a cross - section of state programs geographically and in terms of population and ty pes of sources. In addi tion, we reviewed the experience of the EPA r egional o ffices that act as PSD permitting authorities in state jurisdictions: Region 4, which issues PSD permits for GHG emissions in Florida and for all regulated pollutant emissions from outer continental she lf sources in the eastern portion of the Gulf of Mexico; Region 6, which issues PSD permits for GHG emissions in Arkansas and Texas; and Region 9, which issues PSD permits for all regulated pollutants in many of the local air quality management districts i n California. For additional information concerning responses to the survey , please refer to the Docket ID No. EPA

- HQ
- OAR
- 2009
- 0517. These states and regional offices confirm that they have not yet experienced the increase in the

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Page 24 of 110 number of major source pe rmitting actions that was predicted to result from the implementation of Step 1 and Step 2. T he y generally do not believe that 2011 has been representative of the permitting burdens that they expect will ultimately

occur under the current Tailoring Rule. In addition, the states confirmed that to this point, they have not been able to build up their GHG permitting infrastructure. For example the permitting activity to date has provided limited, if any , opportunity

to build internal capacity to handle GH G permitting for a diverse set of sources or more efficiency for any particular source category . Similarly , the lack of permitting experience greatl y diminished the opportunity to develop meaningful streamlining approaches to address GHG permitting. As a r esult, states indicated that they have made little or no progress in implementing streamlining measures, and have not adopted an y such measures specificall y to address GHGs. C. Additional Technical Support for the Step 3 Rule To support the decision

- making pr ocess for this Step 3 rule, the EPA carried out an anal ys is to estimate the number of facilities that would exceed different GHG emissions threshold levels. 9 This anal ys is built upon anal ysis the EPA included in the Tailoring Rule to support the threshold decisions in that action. 10 In the Tailoring Rule analysis, the EPA evaluated eight different PTE thresholds between 100 and 100,000 tpy

CO 2 e, including 50,000 tons per year. For th is Step 3 anal ys is, the EPA evaluated nine additional thresholds between 50, 000 and 100,000 tpy CO 2 e in 5,000 tpy

increments (that is, 55,000 through 95,000 tp y CO 2 e). T he EPA considered stationary sources in the following sectors:

 Electricity

Generation (facilities with fossil fuel

- fired electric generating units);

9 See Technical Support Document “Summary of Methodology

and Data Used to Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG) Permitting Thresholds” (December 2011). 10 See “ Technical Support Document for Greenhouse Gas Emissions Thresholds Evaluation, ” March 29, 2010 , Docke t No. EPA
- HQ
- OAR
- 2009
- 0517
- 19158.

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Page 25 of 110  Industrial sources (14 subcategories of industries with process and combustion GHG emissions);

 Energy

(oil and gas extraction, transport, and processing; underground coal mining);

 Waste Treatment (landfills and municipal solid waste incinerators);

 Agriculture (statio nary fuel combustion);

 Commercial (stationary fuel combustion); and

 Residential (stationary fuel combustion). For each sector, the analy sis estimated the number of s ources that would become major sources for GHGs at each of the different threshold levels and the number of new major sources projected to be added each ye ar. The study found that at a Step 3 major source threshold of 50,000 tpy CO 2 e, approximately

4,650 additional sources would become major sources of GHGs (increasing from 5,326 at 100,000 tpy CO 2 e, to 9,980 at 50,000 tpy). About half of these would be in the “unspecified industrial stationary combustion” subcategory of industrial facilities; 16 percent in the waste treatment sector, landfill subcategory ; 14 percent in the energy sector, oil and gas subcategory ; 12 percent in the commercial/stationary

fuel combustion sector; 4 percent in the electricit y generation sector and the remaining 4 percent scattered among the remaining sectors and industrial subcategories

. At a threshold of 80,000 tpy

CO 2 e the number of commercial sources that become major sources of GHGs significantly increases and at a threshold of 55,000 tpy CO 2 e, some multi

- family residential sources become major
sources. The anal ys is found that no sources in the agricultural or single family residential categories would become major sources of GHGs at a threshold of 50,000 tpy CO 2 e. Note that this analy sis d id not differentiate between sources that become major only because of the source’s GHGs emissions from sources that that ar e already major for one or more other pollutants. The EPA’s anal ys is identified sources that would become subject to permitting requirements

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Page 26 of 110 because of GHG emissions alone

. 11 Based on thi s analy sis, w e estimate that a reduction from the current Step 2 thre shold to 50,000 tpy CO 2 e would result in nearl y 3,000 sources becoming major sources due to their GHG emissions alone (increasing from 552 sources at 100,000 tp y C O 2 e, to 3,539 at 50,000 tpy). In addition, we estimate that 1,0 14 additional modifications would be subject to PSD permitting based on GHG emissions at 50,000/ 50,000 tpy CO 2 e versus the Step 2 thresholds of 100,000/75,000 (increasing from 917 per year to 1,931). In addition to determining the amount of potential additional permit actions asso ciated with the various thresholds, the EPA also determined the administrative burdens associated with those actions. To do so, the EPA relied on the same per

- permit administrative cost figures used in the Tailoring Rule for both PSD and title V permitting , for both commercial/residential sources and industrial sources, as well as for both new construction and modifications. 12 The EPA also determined the amount of GHG stationary source emissions associated with the sources potentiall y affected by the various thresholds. To determine the impacts of lowering the thresholds in Step 3, the EPA compared the amounts of administrative costs and GHG inventory covered at the various cut

- points to the amounts at the 100,000/75,000 Step 2 levels. 13 For example, with respect to the PSD administrative costs, as we stated in the Tailoring Rule, 75 FR 31540 (Table V

- 1), at the 100,000/75,000 Step 2 levels, we expect annual PSD permitting actions for GHG

- emitting sources to include 242 newl y constructed sources and 1, 365

11 See “Summary

of Methodology

and Data Used to Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG) Permitting Thresholds,” December 2011. 12 We note that none of the challenges to the Tailoring Rule have addressed these burden estimates; we have not revisited them for purposes of this rule, nor are we are re

- opening them for comment. 13 This level refers to new sources as well as existing sourc es that are not “any way” sources and that emit, or have the potential to emit, at least 100,000 tpy CO 2 e, as well as existing sources that emit or have the potential to emit at least 100,000 tpy CO 2 e and that undertake a modification that increases net emi ssions of GHGs by

at least 75,000 tpy

CO 2 e .

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Page 27 of 110 modifications ( 917 for GHG emissions alone plus 448 for an yw ay sources) and we expect that these PSD GHG permitting actions would increase permitting authority administrative burdens by 42 percent above existing total air permitting burdens (includ ing permitting for conventional ( i.e. , non - GHG pollutants under Tailoring Rule Step 1) , because these actions would trigger permitting requirements for both PSD and title V . In total, we estimate the facilities meeting the Step 2 major source applicability thresholds account for approximately 67 percent of the total national stationary source GHG emissions. At the 50,000/50,000 levels, the EPA e stimates annual PSD permitting actions involving GHG

- emitting sources to include 243 newly constructed sources and 2,379 modifications ( 1 more newl y constructed source and 1,014 more modifications than at the 100,000/75,000 level). While the EPA estimates these GHG permitting actions to increase permitting authority administrative burdens by 40 percent above the total burdens at Step 2 levels (and 99% above the administrative burdens without GHG permitting) , we estimate the facilities meeting these major source applicability thresholds to account for approximately 70 percent of total national stationary source GHG emis sions, just three percent more than currently covered under Step 2

. For a more complete description of the EPA’s anal ysis and an explanation, see the Technical Support Document titled , “Summary of Methodology

and Data Used to Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG) Permitting Thresholds ” ( December 2011 ). **V. Proposed Step 3 Rule**  A. Overview The Tailoring Rule’s phase

- in approach is based on data concerning the numbers of GHG permitting actions the permitting authorities would have to undertake and the costs of those actions

– both absolute and in comparison to their current budgets

– at various different thresholds for the applicability

of PSD and t itle V to GHG

- emitting sources. In the Tailoring Rule, we began the phase

- in by establis hing Steps 1 and 2, which applied PSD and t itle V to “an ywa y” sources and sources emitting

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Page 28 of 110 GHGs at the 100,000/75,000 tpy CO 2 e level. To do so, we determined that permitting authorities could handle the hundreds of additional permitting actions that wou ld occur under Steps 1 and 2, even though the authorities’ administrative costs would increase by 42 percent over their then

- current administrative costs for both PSD and title V programs

. The present rulemaking represents the fulfillment of our commitment in the Tailoring Rule to undertake Step 3 of the GHG PSD and title V phase

- in process. At this time we believe state permitting authorities have not had sufficient time and opportunity to develop the necessary infrastructure and increase their GHG permitting expertise and capacity , which makes it administratively in feasible to apply PSD and title V permitting requirements to additional sources. Accordingl y, we are proposing to leave the applicability

thresholds for GHGs unchanged. In the Tailoring Rule, we committed to undertake future rulemaking, including this Step 3 rulemaking, to examine whether we could lower the thresholds to, potentially , as low as 50,000/50,000, and thereb y app ly

PSD and t itle V to more sources. We recognized that lowering the thresholds would add more administrative costs on top of those added by Steps 1 and 2, and as a result, we stated that whether and when we would lower the thresholds would depend on the pa ce at which the EPA and permitting authorities could develop streamlining measures to expedite permit program administration and permitting authorities could hire and train staff, as well as gain experience with GHG permitting. Specificall y, we indicated that further phase

- in of GHG applicabilit y would depend on three criteria: (i) whether the EPA could develop streamlining measures, (ii) the time that permitting authorities need to ramp up their resources, and (iii) sources’ abilities to meet the requireme nts of the PSD program and permitting authorities’ abilities to issue timely permits. As described in the following , the s tates and the EPA have made some progress in these areas. For example, the s tates have issued some GHG permits and we are proposing s treamlining measures in

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Page 29 of 110 this rulemaking. However, neither the s tates nor the EPA have had the opportunity to make significant progress in these areas. First, the s tates have had only limited experience in GHG permitting and therefore have not had the opportunity to develop significant expertise. The ma in reason s for this are the unexpectedly

low number of PSD permit application s submitted to date and the short amount of time since GHG permitting began . Second, the s tates have not been able to develop their GHG permitting infrastructure

– e.g. , hiring additional personnel, establishing policies and conducting outreach programs to sources unfamiliar with the permitting process

– largel y because their permitting resources have not increased and, in fact, in some cases have decreased and may decre ase further in the near future. Similarly , for title V, applications for title V permits are not generall y due until a year after title V becomes applicable to a source. Thus, for Step 2 title V sources, permit a pplications are generall y not due until July

1, 2012, and states have not gained title V permitting experience. Third, we have not had the opportunity

to develop significant streamlining approaches, largely because, as we stated in the Tailoring Rule, cert ain streamlining approaches require a longer process. Because of these reasons and following the criteria, described in the Tailoring Rule, we are establishing Step 3 at the current levels. The following discusses these criteria , beginning with the ability of states to ramp up and build infrastructure, and notes the states’ and our experience with GHG permitting to date under the current Step 1 and Step 2 applicability thresholds. We also address the additional two criteria noted above and the environmenta l benefits potentially associated with any

further reduction in the GHG PSD permitting thresholds. B. Have s tates had a dequate t ime to r amp up their r esources? A criteri on that we described in the Tailoring Rule for whether to lower the thresholds in Step 3
w as whether the permitting authorities could increase their resources. As discussed previousl y in the background section, we stated in the Tailoring Rule that we expected Steps 1 and 2 to result in an

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Page 30 of 110 increase in PSD permits for new construction and modific ations and in title V permits. We estimated that Steps 1 and 2 would result in a 42 percent increase in administrative burdens for permitting authorities. We expected that some increase in state permitting resources would be needed to accommodate, at least in part, those new demands. As noted, to this point s tates have not been confronted with the amount of GHG permit applications that we had expected in the Tailoring Rule for Steps 1 and 2. W e expect that this situation will be short

- lived, and that the pa ce of permitting will pick up. Thus, it is prudent for s tates to continue to plan on confronting additional administrative de mands expected as part of Steps 1 and 2. As discussed in the following , they have confronted other administrative burdens as wel l and if the thresholds are lowered in Step 3, they will confront still more administrative burdens. Importantly , based on our consultations with a limited number of states, we do not believe that s tates have had the opportunity

to obtain the necessary resources and to develop their infrastructure to accommodate the level of permitting expected in Steps 1 and 2. In addition, an August 2011 report b y the Environmental Council of the States (ECOS) 14 emphasizes the continued need for additional resources be fore full implementation of the program can begin. It also notes that permitting authorities expect workloads to double or triple as a result of applications for s ynthetic minor limits to sources who wish to avoid GHG permitting. Further, as quantified in the Tailoring Rule, lowering the thresholds would increase those burdens. We have estimated that lowering the thresholds to 60,000/60,000 would increase administrative burdens b y 2 0 percent above the total burdens at Step 2 levels (and 40 percent above the pre - GHG permitting burdens)

. As noted above, l owering them to 50,000/50,000 would increase administrative

14 S. Brown, A. Fishman, “ The Status of State Environmental Agency Budgets, 2009

- 2011, ” Steven Brown, Executive Director, and Adam Fishman, Intern

.

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Page 31 of 110 burdens b y 4 0 percent above the total burdens at Step 2 levels (and 99 percent above the pre

- GHG permitting burdens)

. As we discussed in the Tailorin g Rule, lowering applicability thresholds would trigger requirements for more sources that never before have been regulated under the PSD and t itle V permitting programs. As a result, permitting agencies will need to conduct an education and outreach progr am to raise awareness and understanding of the regulatory requirements for these smaller sources. Absent this outreach effort, we believe that man y sources will not understand, and perhaps may not even be aware of, their new regulatory obligations. Finally , we note that certain procedural aspects of the GHG permitting process have proved to be
more resource - and time

- intensive for states than anticipated at the time of the Tailoring Rule

. In the final Tailoring Rule, we finalized the applicability thresholds within the definition of “subject to regulation,” instead of within the “major stationary source” definition. We made this change in regulatory

approach because we received information indicating that many states could adopt the applicable thresho lds through a regulatory interpretation of the term “subject to regulation,” instead of a SIP revision. 15 Since finalizing the Tailoring Rule, we discovered that in fact, very few states were able to adopt the applicable thresholds by interpretation alone, and instead needed SIP revisions to be able to regulate GHGs under their approved PSD programs at the levels of the final Tailoring Rule. Moreover, some states were obliged to invoke emergency procedures to expedite revision of their state laws. This
unexpected, additional state process required for adopting the Tailoring Rule thresholds may have delayed some states in developing their permitting program infrastructure.

15 As discussed in the preamble to the final Tailoring Rule (75 FR 31581), we participated in teleconferences with 1 local and 6 state agency permitting authorities on this topic, and they generally agreed that this approach would better facilitate state incorporation of the limitations in the final rule

. We therefore co ncluded that it wa s likely that the state rules we re sufficiently open - ended to apply EPA’s approach b y interpretation (although some states might elect to pursue rulemaking in addition to or instead of interpretation).

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Page 32 of 110 By the same token, for title V programs, we believed that man y states could adopt the T ailoring Rule thresholds through a regulatory interpretation of the term “subject to regulation,” and that this approach would allow permitting authorities to implement title V for GHGs quickly with little rulemaking burden. However, as it has happened, mo st states need to change the state laws and/or regulations governing their title V programs to be able to permit GHGs at the Tailoring Rule threshold levels. In fact, it turned out that only 5 state programs and numerous local districts in California, did not need to enact program revisions. In the Tailoring Rule, we expected that over time, permitting authorities would have the opportunity

to increase their resources to allow them to process more GHG permit applications in a timely fashion. To this point, we see little evidence that permitting authorities could increase resources and, in fact, permitting authorities generall y are facing fewer resources. Reductions in state environmental agency

budgets are full y consistent with the overall reductions in state budgets recently seen in the United States. The August 2010 ECOS report , noted previously , 16 conclud ed that state budgets decreased b y an average of approximately $21 million per state from 2009 to 2011. On June 28, 2011, the National Association of Clean Air Agencies (NACAA) sent a letter to the U.S. House of Representatives detailing the status of 40 state and local air quality agencies. 17 The NACAA letter indicates that 80 percent of air agencies experienced a decline in staffing levels in the last 4 ye ars. Over the ye ars 2008
- 2010, the average loss of staff per agency was 16.7 percent. In addition to staffing losses, 48 percent of

16 “ The Status of State Environmenta l Agency Budgets, 2009

- 2011, ” p . 3
. 17 S. William Becker to Honorable Michael Simpson, Chairman Subcommittee on Interior, Environment, and Related Agencies, and Honorable James Moran Ranking Member, Subcommittee on Interior, Environment, and Related Agencies

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Page 33 of 110 air agencies experienced furloughs, and the majority faced significant declines in budgets. These cutbacks resulted in curta iling core air program activities including permit issuance, and education and outreach programs. In our recent consultations with state s most confirmed that they have seen their budgets and staffs reduced in recent ye ars as the states have responded to th e economic downturn and budget shortfalls. For the previously described reasons, states have not had the opportunity to build capacity and resources to handle GHG permitting. Accordingl y, this criterion of state resources supports maintaining the current thresholds. C. What is the ability of permitting authorities to issue timely permits? The second criterion we address is whether permitting authorities have the ability to issue timely permits based on efficiencies resulting from GHG permitting implementation experience. 18 Indescribing this criterion in the Tailoring Rule, we expected that permitting authorities, by acting on the anticipated volume of GHG PSD permit actions, would have the opportunity to establish efficient methods for resolving issues and proc essing permits, including developing expertise within their staff. This would allow them to achieve efficiencies that, in turn, would create capacity for processing more GHG permit applications. Thus, with this criterion, w e based our commitment to complet e the Step 3 rulemaking in part on the assumption that Steps 1 and 2 would provide us with the necessary information to determine whether and when it has become possible for states to administer GHG permitting programs for additional sources. This has not yet happened. While we recognize that w e have not yet completed a full year of implementation for Steps 1 and 2 , GHG permit applications are fewer than we had expected. As of December 1, 2011, the EPA and state permitting authorities have issued only 18 GHG PSD permits. As noted, these 18 permit actions have

18 As noted above, this criterion may be measured by

the period of time permitting authorities need to issue permits, and it also encompasses the sources’ ability to meet GHG permitting requirements

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Page 34 of 110 been spread among 11 states and the EPA. Almost all of the states have issued only one GHG permit, and only Michigan has issued as many as three permits. This activity has simply

been too limited to
a llow States to build internal capacity to handle GHG permitting for a diverse set of sources, to develop more efficient techniques for permitting an y particular source category, or to develop streamlining approaches to address GHG permitting. In our consul tations with the states, some have confirmed that they have not been able to build up their GHG permitting infrastructure. However, they generall y have added that the y do not believe that 2011 has been representative of the permitting burdens that they exp ect will ultimately

occur under the current Tailoring Rule. In sum, the state s ’ experience s to date do not provide a basis for us to conclude that permitting authorities in fact have the ability to issue timely permits based on GHG permitting experience thus far. D. Has the EPA d eveloped s treamlining m ethods? In the final Tailoring Rule, we indicated that implementation of permit streamlining approaches would assist permitting authorities by removing some sources from the permit program, or allowing more ef ficient processing of applications. As we indicated in the final Tailoring Rule, however, we expected it w ould take several ye ars for the EPA to develop and for States to gain authority to implement effective streamlining methods. W e did not anticipate that streamlining approaches would be available b y the time of the Step 3 rulemaking. We also note that in the previous ly described consultations , the state s reported that they have made little progress in implementing streamlining measures, and none have adopted measures specifically to address GHGs. This information is consistent with EPA’s estimate, in general, that it would take at least 3 ye ars for EPA to develop, and for states to adopt and implement streamlining methods, so that sufficient progress o n streamlining would likel y not occur before the Step 3 rulemaking deadline. W e are proposing requirements for PAL s and sy nthetic minor limitations for sources, and these

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 35 of 110 also constitute streamlining methods that can be expected to free up administrative resources. However, these methods will not be available in time to enhance the state’s ability to manage the GHG permitting programs during Step 3 . The benefits of a PAL will not be seen until the States adopt these requirements into their SIPs and sources apply for and receive permits that reflect PALs. For the previously

- described reasons, although we are making progress in developing streamlining measures, the current status of stream lining measures supports maintaining the thresholds for Step 3. In add ition, as noted, we are continuing to consider other streamlining approaches, including limits on potential

- to - emit, general permits, and presumptive BACT. For the most part, the se other streamlining methods even if further developed, would have limited be nefit for improving permitting administration for the source categories currently subject to GHG PSD permitting or that are under consideration for Step 3. We discuss our progress in developing these other streamlining methods , and their limited utility

fo r Step 3, in section VI. This rulemaking provides a good opportunity to provide the EPA with input on additional streamlining ideas for implementation of the GHG permitting programs. More specificall y, in section VII.B w e request comment on other potential streamlining techniques that may hold promise to reduce PSD and/or title V permitting burden for sources of G HGs and permitting authorities. E. Limited B enefit from L owering T hresholds in Step 3 The fact that PSD would apply to the great bulk of GHG emissio ns at the Tailoring Rule thresholds was a factor in our decision to establish the thresholds at the 100,000/75,000 levels. For the current rulemaking, we have conducted further analy sis, which shows that reducing the thresholds in Step 3 to as low as 60,00 0/60,000 would bring within the potential ambit of the PSD program less than an additional 1 percent of all GHG emissions from all stationary sources above the statutory thresholds while potentially

adding a significant number of sources into the permittin g programs . This is because of

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Page 36 of 110 the large amount of GHG emissions that come from very large sources, coupled with the relativel y small number of additional sources that emit between the 100,000/75,000 and the 60,000/60,000 levels. Lowering the thresholds to 50,000/50,000 would bring within the ambit an additional 3 percent , above the 100,000/75,000 levels , of all GHG emissions from all stationary sources above the statutory thresholds . Please refer to the following Chart. Of course, in any year, onl y a fract ion of those emissions would actuall y become subject to PSD controls, which would be the fraction emitted by sources that undertake modifications or new construction. Thus, the additional reductions in GHG emissions from lowering the thresholds in Step 3 w ould be small under an y ci rcumstances even if the thresholds were lowered to 50,000/50,000. Th is small amount of environmental benefit is an additional factor that, along with the additional burden associated with permitting these sources supports not lowe ring the thresholds in Step 3.

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F. Conclusion In the Tailoring Rule, we recognized that the Step 1 and 2 thresholds we promulgated would create significant administrative burdens on permitting authorities thresholds , and thereb y create additional administrative burdens develop efficiencies in GHG permitting through streamlining measures opportunity

to build up their GHG permitting infrastructure and t and (iii) sources have the ability to meet the requirements of the PSD program have the ability to issue timely permits made cle ar . As a result , consistent with the commitment we made in the Tailoring Rule thresholds is not feasible at this time.

3,539 1,503 1,207 9,980

7,561 7,240 70% 67%

0 2,000 4,000 6,000 8,000 10,000 12,000

50K 60K

Newly Major Sources 

## Chart 1. Existing Sources Exceeding Threshold **and Corresponding GHG Emissions Coverage** 

**Threshold for** **N u** **m b** **e r** **o f** **S o** **u r** **c e** **s C** **o v** **e r** **e d**  

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Interagency Review. Subject to Further Policy Review.

Page 37 of 110 In the Tailoring Rule, we recognized that the Step 1 and 2 thresholds we promulgated would create significant administrative burdens on permitting authorities

. W e stated that we would lower the

and thereb y create additional administrative burdens , onl y after : (i) we had the opportunity to develop efficiencies in GHG permitting through streamlining measures ; (ii) the s tates had the opportunity

to build up their GHG permitting infrastructure and t o develop GHG permitting expertise

to meet the requirements of the PSD program and permitting authorities to issue timely

permits

. These things have not happened, as t he preceding , consistent with the commitment we made in the Tailoring Rule at this time.

1,207 1,116 1009 739 552 7,240 6,441 6,298 5,756 5,326 67% 67% 67% 67% 67%

70K 75K 80K 90K 100K # of Sources Covered GHG Emissions Covered 

## Chart 1. Existing Sources Exceeding Threshold **and Corresponding GHG Emissions Coverage** 

**Threshold for**  **Applicability** 

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In the Tailoring Rule, we recognized that the Step 1 and 2 thresholds we promulgated would e stated that we would lower the we had the opportunity to tates had the o develop GHG permitting expertise ;

and permitting authorities he preceding discussion has , consistent with the commitment we made in the Tailoring Rule , lowering the 5,326 67%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

100K**% o** **f N** **a t** **i o** **n a** **l S** **t a** **t i** **o n** **a r** **y S** **o u** **r c** **e G** **H G** **E m** **i s** **s i** **o n** **s C** **o v** **e r** **e d** 

GHG Emissions Covered

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Page 38 of 110 Importantly , we consider the relative lull in permit activity to be temporary , and we expect that the pace of permit appl ications will increase. In fact, it is difficult to predict whether the increase in permit activity

under Step 2 will occur incrementally or rapidly . If it occurs rapidly , it would be particularl y burdensome for states. As a result, even a modest increase in permitting burden that could result from lowering thresholds in Step 3 could overwhelm state permitting capacity and result in substantial delay s in processing permit applications

. All told, these considerations support maintaining the Tailoring Rul e thresholds through Step 3. A dditional time is required to develop streamlining measures to expedite permit program administration, and p ermitting authorities need additional time to secure resources, hire and train staff, and gain experience with GHG permitting before we move toward full implementation of the program. Accordingl y and consistent with our Tailoring Rule commitment , we propose to maintain the thresholds of 100,000/75,000 tpy

CO 2 e. We note that maintaining PSD and title V applicability for GHG sources at the current thresholds for Step 3 does not have implications for whether we will lower the thresholds in Step 4 or afterwards. Our actions in Step 4 will depend on our evaluation of the criteria and other factors described above. If those criteria and other factors point in the direction of lowering the thresholds, we will do so, and we will lower them to whatever level indicated. A decision not to lower the thresholds in Step 3 do es not foreclose a decision to lower them in Step 4. **VI. Streamlining for PSD and Title V Permitting of GHGs**  In the Tailoring Rule, the EPA committed to explore streamlining measures as an integral part of the phase

- in approach to permitting requirements for GHG emissions under PSD and t itle V. Streamlining techniques would allow permitting authorities to be more efficient in administering th eir GHG permit programs by reducing the overall resources required to administer the PSD permitting

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Page 39 of 110 program now and in the future. By implementing effective streamlining techniques permitting authorities could move more rapidl y toward regulating a larger s et of GHG sources. In the Tailoring Rule, we identified potential streamlining options. We also acknowledged that it will take us several ye ars to develop, and for states to gain authority to implement effective streamlining methods. We committed to continue to explore the identified options, and to request comment on these and any additional streamlining approaches in the Step 3 rulemaking. Today , we propose to adopt two regulations: one that streamlines the PSD permit program, and one that potentially

streamlines both the PSD and the title V permit program. The first regulation expands the existing PAL provisions to allow reviewing authorities to establish GHG PAL s on either a
mass - basis (tpy) or a CO 2 e - basis, including for existing sources that are no t yet GHG major sources, and allows PAL s to be used as an alternative approach for determining both whether a project is a major modification and whether GHG emissions are subject to regulation. The second regulation establishes a mechanism that allows ind ividual sources to obtain sy nthetic minor limitations (potential to emit (PTE) limitations) for GHG emissions in areas subject to a GHG PSD FIP

. We previously

had not identified PAL s as a viable streamlining technique. Since we finalized the Tailoring Rule, we recognized that the existing PALregulation has limited value for GHG sources, and that revising the current PALregulations to address the unique applicability aspects associated with GHGs could streamline PSD permitting for more sources and make PALs for GHGs more useful for all source categories

. Specifically , by amending the regulations, we hope to encourage greater use of GHG PAL s, which in turn would encourage sources to reduce existing GHG emissions through efficiency improvements and other measures to maximize the operational flexibility provided by

the PAL. In contrast, our proposed Tailoring Rule discussed the sy nthetic minor

- PTE mechanism we now propose, but expressed concerns that this approach might overwhelm permitting authorities b ased on the

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Page 40 of 110 sheer number of sources that could apply for individual sy

nthetic minor permits. Since finalizing the Tailoring Rule, we have continued to evaluate this. We have concluded that offering a mechanism to establish PTE limits for individual sources provides environmental benefit, and helps streamline the PSD and t itle V permit programs, at least in the short term. Accordingl y, today we propose to amend the f ederal PSD regulations to create authorit y for ( i ) reviewing and permitting authorities to i ssue PALs to major and potentially

- major GHG stationary sources on either a mass

- basis or a CO 2 e basis and also to allow such PAL s to be used as an alternative approach for determining whether a project is a major modification and subject to regulation for GHGs by amending regulations in 40 CFR 51.166 and 52.21, and ( ii ) federal reviewing authorities to issue GHG s ynthetic minor permits by amending regulations in 40 CFR 52.21. We also discuss our progress in evaluating the suitability of other streamlini ng options that we identified in the final Tailoring Rule including: (1) Defining PTE for various source categories, (2) Establishing emission limits for various source categories that constitute presumptive BACT, (3) Establishing procedures for use of general permits. Although we propose two streamlining regulations on a more rapid schedule th an we originall y envisioned, we do not project that these approaches will provide a sufficient reduction in the immediate permit workload to justify a decrease from the Step 1 and Step 2 applicability levels. The PALrule, in fact, may increase the immediate short term workload by requiring development of PALprovisions and potential SIP revisions , as well as gaining experience in issuing PALs , but will reduce the long term workload on reviewing authorities and sources. The GHG s ynthetic minor permit program will reduce the short term workload by providing a less burdensome permitting process, and it may allow some sources to avoid PSD and title V permitting at the current Step 1 and Step 2 applicability levels. We

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 41 of 110 believe that these streamlining regulations will offer advantages to industry, permitting authorities and the environment. They w i l l provide operat ional flexibility to source s and will also provide incenti ves for
source s to install good emission control sy stems to maximize operational flexibility

. These streamlining regulations also help build GHG permitting capacity , because both regulations still require the reviewing authority to gain an understanding of GHG emissions for the individual source in context of establishing appropriate emission limitations and monitoring, recordkeeping and reporting requirements. Accordingl y, we believe implementation of both regulations should decrease overall administrative burdens and thus could enable us to reduce the GHG applicability thresholds at some time in the future. The following discussion outlines our two streamlining proposals, and then discusses the viability of other streamlining options. A. Plantwide Applicabi lity L imitations for GHGs 1. What is the EPA p roposing? Our proposal intends to provide reviewing authorities with the authority to issue GHG PALs to sources at which GHG emissions could become subject to regulation, and which then must undertake a maj or modification NSR applicability determination

. We provide a summary of several approaches for amending the regulatory

language to implement a GHG PALs program, and request comment on possible changes to the regulations, any of which we may

finalize. W e propose three changes to the existing PSD regulations in 40 CFR 51.166 and 52.21 . These changes allow reviewing authorities to issue PAL s to both existing major and potentially major GHG stationary sources on either a mass

- basis or a CO 2 e basis and to al low GHG PAL s to be used as an alternative approach for determining whether a project is a major modification and subject to regulation for GHGs. The proposed changes would continue to protect the environment from adverse impacts from projects that would in crease emissions

. The changes would also streamline GHG preconstruction

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 42 of 110 permitting as part of our overall efforts to tailor the PSD applicability provisions to include regulation of GHG emissions. Specificall y, we propose to amend the regulations to allow reviewing authorities to (1) issue PAL s to GHG
- only

sources 19 ; (2) issue either a mass

- based (tp y) or a CO 2 e - based PAL to a particular source; and (3) allow compliance with a GHG PALto be used as an alternative applicability approach for determining whether a project is a major modification and subject to regulation 20 for GHGs . We believe these changes are appropriate to enable the use of PAL s for GHG, given the unique characteristics of GHGs and the subject to regulation applicability approach adopted for GHGs in the Tailoring Rule. We request comment on each aspect of th i s proposal. 2. What is a PAL ? Under the E PA’s regulations, a PALis an emissions limitation expressed in tons per y ear for a pollutant that is enforceable as a practical matter and is established source

- wide in accordance with specific criteria. 21 PAL s are voluntary in the sense that sources may , but are not required, to appl y for a PAL , and whether to issue a PAL to particular source is at the discretion of the reviewing authority

. PAL s offer an alternative method for determining major NSR applicability . I f the overall emissions at a
source rem ain below the PALlevel, the source can make changes at the source that do not trigger major NSR. This allows sources to respond rapidl y to market conditions, while assuring there is no adverse impact to the environment from the change. A PAL also results in significant environmental benefit, by

19 A GHG
- onl y source is a source that emits or has the potential to emit 100/250 tpy GHG on a mass
basis, and emits or has the potential to emit 100,000 tons per y ear of CO 2 e or more, but does not emit or have the potential to emit any other regulated NSR pollutant at or above the applicable major source threshold

. 20 For an explanation of “subject to regulation,” see the b ackground s ection in the Tailoring Rule at 75 FR 31516
. 21 40 CFR 52.21(aa)(2)(v).

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Page 43 of 110 provid ing the communit y with an understanding of the long

- term emissions impact from a facility , prevent ing emissions creep ( i.e., a series of unrelated individual emissions increases that are below major NSR applic ability

thresholds), and requiring enhanced monitoring, recordkeeping and reporting to demonstrate compliance with the PAL

. 3. Why

are we p roposing to amend the r egulations? The EPA reads its current PALand PSD regulations as restricting permitting authori ties from issuing certain kinds of GHG PALs. The current regulation s restrict sources that can obtain GHG PAL s to existing major stationary sources . 22 The PSD provisions generall y define a “major stationary source” as a stationary source which emits or has the potential to emit 100 or 250 tpy or more of a regulated NSR pollutant, depending on the ty pe of source. 24 A GHG
- only source is a source that emits or has the potential to emit 100/250 tpy GHG
on a mass - basis, and emits or has the potential to emit 100,000 tons per year of CO 2 e or more, but does not emit or have the potentia l to emit any other regulated NSR pollutant at or above the applicable major source threshold

. 25 Regardless of the amount of emissions, a GHG
- onl y source is a minor source for purposes of PSD, and only becomes major for PSD when it proposes to undertake a change that increases GHG emissions by at least 75,000 tpy

CO 2 e . Currently , reviewing authorities using the federal PALprovisions can onl y issue a PALto a GHG
- only source when the source proposes to undertake such a change , thus becoming a major stationary source. . 26 As a result, GHG

- only sources may

not currentl y use the alternate major NSR applicability provisions provide d by

a PALin the same way

that

22 40 CFR 52.21(aa)(1). 24 40 CFR 52.21(b)(1)(i)( a)

- (b ). 25 For the purpose of this rule, we term such sources “GHG

- onl y sources.” 26 40 CFR 52.21(b)(49)(v)(b).

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Page 44 of 110 existing major stationary

source of other regulated NSR pollutants may . Instead, GHG

- onl y sources must wait to obtain a PAL until they actually propose to make a change that qualifies the source as a major stationary

source under the PSD program. 27 Moreover, under current ragulations an y EPA
- established PAL can only be mass

- based. This requirement is due to the fact that PALs are an alternative for NS R determination, which is triggered by
mass - based changes in emissions. Consequently , GHG sources use tpy CO 2 e to determine whether a change causes GHG emissions to be subject to regulation, but tpy of the pollutant to determine whether a change results in a major modification. Thus, under the current regulations, sources using the PAL provisions must still monitor both metrics to ultimately determine whether a change tri ggers major NSR review. We believe changing the regulations to remove these restrictions will provide sources with additional operational flexibility , and reduce GHG workload burdens on reviewing authorities by decreasing the number of PSD permit ap plications reviewing authorities must process for these sources over the long term. P roviding an option that allows a source to use a GHG PALwill help streamline the major NSR permitting program and provide more operational flexibility to sources. B eing able to establish a PALwould provide planning certaint y to sources, and would relieve the current time pressure to issue a PALpermit concurrent with authorization for a planned major modification which could potentially

delay that project. We also b elieve that compliance with a GHG PALgenerall y assures that the environment remains protected from adverse air impacts resulting from changes a source undertakes in compliance with such a PAL , regardless of which metric is specified to measure GHG emissio ns in

27 Because an an yw ay

source emits or has the potential to emit another regulated NSR pollutant in amounts at or above the major source thresholds, it is a major stationary source, and it may apply for a PALfor its GHG emissions on a mass basis at an y time under the current regulations as long as it otherwise qualifies ( e.g. , has sufficient emissions data to establish a PAL).

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Page 45 of 110 that PAL , because emissions cannot exceed this pre

- established level without further review. PALs also provide an incentive for a source to minimize GHG emissions increases from future projects

. A significant rate is a threshold for appl yi ng NSR to modifications

. Only emissions rate increase s above the significant rate trigger major NSR require ments
. Currently , a reviewing authority may establish the PALlevel for a pollutant b y add ing its significant rate to baseline actual emissions

. Unless the EPA stipulates otherwise, the significant rate is effectivel y zero, i.e., an y increase in emissions would trigger NSR. T he EPA did not promulgate a mass - based significant emissions rate for GHG emissions in the final Tailoring Rule

. Thus, if a reviewing authority establishes a mass

- based GHG PAL, under our current interpretation of the regulations, the PAL may not include any

margin above the baseline actual emissions for emissions growth. Absent this margin, a GHG PAL provides less flexibility to a source when compared to PALs for other regulated NSR pollutants. The proposed rule would allow GHG sources to establish a CO 2 e - based PALusing the 75,000 tpy CO 2 e applicability

threshold for GHGs defined as subject to regulation in the final Tailoring Rule

. A reviewing authorit y could add the 75,000 tpy CO 2 e to a source’s CO 2 e baseline actual emissions to establish the PALlevel, because the Tailoring Rule established 75,000 tpy CO 2 e as the appropriate rate of emissions increase for the GHG applicability threshold. Changing the regulations will also have the effect of streamlining future major NSR applicability determinations for sources that choose a CO 2 e PAL , by eliminating the need to evaluate GHG emissions on a mass basis for major NSR applicability as long as the source is complying with the CO 2 e PAL, because a CO 2 e PAL can function to assure both that GHG emissions are not subject to regulation, and that a change does not tri gger a major modification. In sum, we believe that the current PAL regulations are inconsistent with the outcome achieved

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Page 46 of 110 when the PAL rules are applied to regulated NSR pollutants other than GHGs, and therefore are overly restrictive with respect to GHG
- onl y s ources . Accordingl y, we are proposing to amend the major NSR regulations and PAL rules to allow reviewing authorities to (1) issue PAL s to GHG
- onl y sources ; (2) issue either a mass

- based (tpy) or a CO 2 e - based PAL to a particular source; (3) allow CO 2 e - based PAL s to include the 75,000 tpy

CO 2 e rate of emissions increase applicability threshold; and (4) allow compliance with a GHG PALto be used as an alternative applicability approach for determining both whether a project is a major modification and whether GHG emissions are subject to regulation

. Provided a source complies with a GHG PAL, GHG emissions at the source will not be “subject to regulation,” and a project at the source will not result in a major modification. We request comment on each one of these proposals. In the Tailoring Rule the EPA amended the definition of “subject to regulation” to establish a threshold level of GHG emissions to be considered an NSR regulated pollutant for PSD permitting purposes . , To be consistent with the Tailoring Rule, for this rule the EPA is continuing to focus on the “subject t o regulation” provision , even though the EPA also made clear that its action effectively revised other components of the definition of “major stationary source” to achieve the same effect. 4. Options for A llowing GHG

- O nl y S ources to O btain a GHG PAL We request comment on two approaches for regulating GHG

- onl y sources under a PAL. We call th e first approach the Major Source Opt

- in Approach. This approach is consistent with the current restriction that only

allows reviewing authorities to issue PAL s to existing major stationary sources, but the approach would provide GHG

- onl y sources the abili ty to become existing major stationary sources. A GHG
- onl y source could become a major stationary source b y agreeing to be considered an existing major stationary

source, without having a specific qualifying project that increases CO 2 e emissions at the source b y at least 75,000 tpy CO 2 e.

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Page 47 of 110 We call the second approach the Minor Source Approach. In contrast to the Major Source Opt

- in approach, under the Minor Source Approach a GHG

- onl y source would remain a minor source, and a reviewing authorit y could issue GHG PALs to the GHG

- onl y sources without requiring the source to become an existing major stationary source. Under the Major Source Opt

- in Approach, we would amend the regulations to allow any existing stationary source that emits or has the potential to emit GHGs in amounts above the first part of the “subject to regulation” applicability threshold (currentl y 100,000 tpy CO 2 e) and above the 100/250 tpy major stationary

source threshold, to submit an application for a PAL, in which the source agrees to be considered an existing major stationary source for GHG emissions. As long as the source complies with the GHG PAL, it would not trigger the PSD permitting requirements for GHGs for an y project, but the regulations would continue to require the source to evaluate whether the change triggers PSD applicability

for other regulated NSR pollutants in the attainment or unclassifiable area. This is because PSD applies whenever a major stationary source undertakes a project that results in a significant net emissions increase of any regulated NSR pollutant. The EPA believes that allowing GHG

- onl y sources to opt into major stationary source status is consistent with the Act. But for the Tailoring Rule , GHG
- onl y sources qualify as “major emitting facilities,” because such sources emit or have the potential to emit 100 or 250 tpy GHG. T hus, these sources fall within the s tatutory scope of sources that, absent the Tailoring Rule , we would have authority t o r egulate for purposes of PSD . Although we took a limited interpretation of how to exercise this authority

through the Tailoring Rule, we believe that the Major Source Opt

- in Approach is consistent with the Tailoring Rule ’ s schedule for further phasing

- in ad ditional GHG sources into the PSD permitting program. In the final Tailoring Rule, we indicated that we would base our decision to include additional

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Page 48 of 110 sources in the GHG permitting programs on an assessment of three criteria. These criteria are (i) whether the EPA could develop streamlining measures, (ii) the time that permitting authorities need to ramp up their resources, and (iii) sources’ abilities to meet the requirements of the PSD program and permitting authorities’ ability to issue timely

permits. E ach of these criteria supports expanding the PSD permit program to include a source that opts into the GHG PAL regulatory structure. First, while the Major Source Opt

- in Approach has the potential to increase the total number of GHG major stationary
source s, it does so in a manner that decreases the long

- term permitting burden for both the source and the reviewing authority . This is because the source would likely require fewer permit actions over the life of a PAL

. Thus, the Major Source Opt

- in approach streamlines the PSD permitting program , which will assist permitting authorities when the EPA regulates additional GHG sources under the PSD program. Second, permitting authorities can gain valuable experience in issuing PAL permits that can build staff expe rtise. This, in turn, helps permitting authorities’ efforts to ramp up their PSD permitting programs in a more timely and efficient manner

. Third, sources demonstrate an ability to comply

with major stationary

source permitting requirements by voluntaril y seeking a PAL under the Major Source Opt
- in provisions. I f a source could not compl y, then it would not seek a GHG PAL . Moreover, reviewing authorities likely would onl y agree to issue a PAL if they believe they

have the necessary resources to issue the PAL(s), and doing so would not detrimentally a ffect their obligations to otherwise issue timely

permits. In sum, if a source opts

- into the pro gram, and a reviewing authority agrees to permit the source, then we believe these sources are properl y brought within the PSD permitting program. Under the Major Source Opt

- in Approach, a source could also choose to establish PAL s for its
non - GHG regulate d NSR pollutants to better manage applicability for all pollutants at the source, including those regulated NSR pollutants for which the source is not major . Under this approach, the

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Page 49 of 110 source will continue to be considered a major source under PSD and title V at the expiration of the PAL

. I f the source is subject to the federal PSD program for GHG emissions, and to a state SIP
- approved PSD program for its non

- GHG regulated NSR pollutants, then whether a source can apply for, and receive, a PALfor its non

- GHG regulated NSR pollutants will be governed b y the applicable SIP
- approved regulations and the state reviewing authority. Neither the EPA , nor its delegated authorit y, would issue PAL s for non

- GHG regulated NSR pollutants under 40 CFR 52.21, unless a FIP would govern PSD applicability

for that pollutant. As with the current PALregulations, the ultimate decision to issue a PAL remains with the reviewing authority. We are concerned, however, about the potential impact on reviewing authorities of allowi ng GHG
- onl y sources to obtain PAL s for all their regulated NSR pollutants, as this could cause a short

term increase in regulatory burden on permitting authorities at a time when they are ramping up their programs to address other GHG major stationary sour ces. We request comment on this aspect of the Major Source Opt

- in Approach and welcome suggestions for refining the approach to address concerns with short

- term workload burdens for permitting authorities. Under the Minor Source Approach, we would amen d the regulations to allow a GHG

- only source to submit an application for a GHG PAL, and would also allow the source to maintain its minor source status. A GHG
- only source that complies with its GHG PALwill not trigger PSD permitting requirements for GHGs , but could trigger PSD for other regulated NSR pollutant if it undertakes a change that increase s emissions by a “major” amount for any non - GHG regulated pollutant. See 40 CFR 51.166 (b)(1)(i)( c ). That is, this approach would authorize permitting authorit ies to use the PALprogram for minor sources only

to regulate GHG emissions. Moreover, under the Tailoring Rule existing minor sources that emit only GHGs, but no other regulated pollutants in major amounts, must determine whether an y project will result in GHG emissions

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Page 50 of 110 that are subject to regulation (on a CO 2 e basis), and correspondingl y will also result in a major modification (on a mass basis). Because GHG

- only sources must undertake these determinations for any change , even those that would not make the source major for GHGs, we believe that extension of the PALprogram to these sources through the Minor Source Approach is consistent with the purposes and design of the PAL program

- to allow use of a PAL as an alternate major modification applicability approach. Issuing PALs to GHG

- only sources that remain minor sources does not conflict with the basis for the current PALrules. When we promulgated the PALrules in 2002 (67 FR 80186), we limited the application of the PAL provisions to existing major st ationary sources only . We included this provision based on our decision to limit PAL s to sources that had historical emissions through which the reviewing authorit y could establish a baseline actual emissions level. New major stationary sources do not have historical actual emissions from which a reviewing authority can establish an actuals PAL, and so we declined to include these sources in the actuals PALprogram. When we originally

promulgated the PAL rules, we also chose not to extend the PALprogram t o minor (source) NSR permit programs, because PAL s are an alternate major NSR applicability provision to determine whether a project results in a major modification, and we did not believe the program would be useful to minor sources. At that time, the rul es generall y required only existing major stationary sources to undertake a major modification applicability analy sis to determine whether a change triggers PSD review. 28 Given the unique “subject to regulation” PSD applicability requirement for GHGs, where in an existing source that emits major amounts of GHGs is a major stationary source only at the time it proposes to undertake a project that will result in an emissions increase of 75,000 tpy

28 The provisions in 40 CFR 51.166(b)(3)(iii) illustrate an exception to this general rule but we did not contemplate that exception in creating the PAL rules in 2002.

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Page 51 of 110 CO 2 e or more, we do not believe that extending the PALprovision s to GHG
- only sources runs afoul of the reasoning we provided when initially limiting the PALprogram to existing major stationary sources. As explained previously , we propose to limit the Minor Source approach to allow reviewing authorities to establish PAL s onl y for GHG emissions, and not for other regulated NSR pollutants for which the source remains a minor source. Because the GHG

- onl y source remains a minor source (absent any other PSD

- triggering change) and, generall y, will not trigger a major modifi cation applicability anal ys is for increases in other regulated NSR pollutants, we believe it unnecessary to extend the PAL authority under this approach to other pollutants. Moreover we recognize that extending the PAL program in that way

could place a bur den on permitting authorities and redirect resources needed to issue permits to other GHG major stationary sources. T he Minor Source Approach is consistent with the CAA in that it regulates sources that but for the Tailoring Rule would be major stationary sources based on the mass of their GHG emissions. This approach is also consistent with our Tailoring Rule principles. But unlike the Major Source Opt

- in Approach, which defines the scope of pollutants included in the PALbased on an individual permitting authority ’s discretion and ability to regulate a given source, under the Minor Source Approach, the EPA has determined that the scope of the program is limited only to a source’s GHG emissions. Again, as with the Major Source Opt

- in Approach, the Minor Source Approach fulfills our streamlining goals by bringing more sources into the major NSR permitting provisions, in a manner that best manages reviewing authorities’ long

- term permit burden. We request comment on both the Major Source Opt

- in Approach and the Minor Source Approach. We also request comment on whether we should finalize both approaches. That is, sources would have the abilit y, consistent with the ultimate decision of its reviewing a uthorit y, either to opt into major stationary

source status and establish PAL s for all pollutants, or to maintain minor source status

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Page 52 of 110 and obtain a PAL for GHG emissions only

. 5. Extending PAL s to GHGs on a CO 2 e B asis and U sing PALs T o D etermine Whether GHG E missions Are “ S ubject to R egulation” Currently , the EPA reads the PALregulations to allow reviewing authorities to establish a GHG PALonl y on a mass basis. Today w e propose to allow reviewing authorities to establish GHG PAL s on either a mass basis or a CO 2 e basis

. More specifically , we propose to allow reviewing authorities to establish a CO 2 e - based GHG PALby adding up to an amount equal to the second part of the “subject to regulation” applicability

threshold (e.g., 75,000 CO 2 e) to the source ’ s bas eline actual emissions. W e also propose to allow GHG PAL s , either on a mass basis or a CO 2 e basis, to serve as an alternate applicability

approach for determining whether GHG emissions are subject to regulation. That is, rather than applying the emissions increase tests (significant emissions increase and significant net emissions increase) currentl y contained in the “subject to regulation” definition, a source could demonstrate that GHG emissions are not “subject to regulation” b y complying with a GHG PAL

. Compliance with a GHG PAL would be used as an alternative applicability approach for determining that the source neither causes GHG emissions to be subject to regulation, nor causes the GHG source to have a major modification. We further believe that it is necessary to allow the alternative applicability provision to be included in “subject to regulation” determinations for GHG PALs , because failing to do so would negate the flexibility

gained b y creating a GHG PAL. This is because sources would still be required to monitor individual emissions changes using the procedures in 40 CFR 5 2 .21(a)(2)(iv) to determine whether a source triggers the subject to regulation definition. These procedures rel y on an emissions

- unit

- by

emissions

- unit analy sis, and a sho rter contemporaneous period to measure emissions changes compared to a PAL
. We believe that the enhanced recordkeeping, reporting and monitoring burdens of a PAL, and

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Page 53 of 110 the environmental benefits resulting from a PAL, warrant extension of the alternate applicability provisions to subject to regulation determinations to assure that the PAL provides the intended flexibility to sources. When we proposed the Tailoring Rule, we proposed to include applicability thresholds within the definitions of major stat ionary source and major modification, based on tpy emissions of CO 2 e . We also proposed to establish a CO 2 e - based significant emissions rate. In the final rule, we changed our regulatory

approach and instead included these applicability thresholds within th e “subject to regulation” definition, and we did not revise the definition of significant to include a CO 2 e - based emissions rate. We did so, in part, because we intended this change in regulatory structure to facilitate more rapid adoption of the rules b y reviewing authorities. Nonetheless, we intended the definition of “subject to regulation” to function in tandem with the definitions of “major stationary source” and “major modification” to determine whether a given project triggers PSD preconstruction per mit requirements. That is, if a source emits GHG emissions at a level that causes the emissions to become “subject to regulation,” that same level of emissions increase will likely cause the source to be a major stationary source and trigger PSD requirements as a major modification. Accordingly , since the 75,000 CO 2 e applicability threshold contained in the second part of the “subject to regulation” definition works in tandem with the “major modification” provision to determine whether major NSR applies we are proposing that a CO 2 e - based GHG PAL can be established by adding up to an amount equal to 75,000 CO 2 e to the source ’ s baseline actual emissions as this is the appropriate applicability threshold for CO 2 e tpy

GHG. In our proposed Tailoring Rule, we no ted that, in rare instances, there may be an exception to this general principle, if a source emits very small amounts of a particular non

- CO 2 GHG that carries a very large GWP. 74 FR 55330. We noted our concern that the proposed rule could cause sources, whose mass emissions do not meet the major stationary source tpy

threshold, to nonetheless be regulated under

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Page 54 of 110 the permit programs. When we finalized the Tailoring Rule using the subject to regulation approach, we resolved this concern b y retaining both a m ass - based threshold and a CO 2 e - based threshold. Our intent in retaining both thresholds was to assure that no source was subject to PSD that would not otherwise meet the statutory

criteria for treatment as a major stationary source. T his same regulatory

structure creates the opposite effect for sources operating under a GHG PAL
. Instead of providing GHG PAL sources with the ability to use either threshold to show that they are not a major stationary sources and that major NSR does not apply , so urce s must monitor both thresholds to prove this outcome under the current rules

. This is because a mass

- based GHG PAL cannot assure that there is no increase in CO 2 e tp y GHG. E xpan ding the GHG PAL program to allow GHG PAL s to be used as an alternative applicability provision for both the major modification and “subject to regulation” determinations resolves this dual threshold issue. We also believe that we may properly allow GHG PALs to be expressed on either a mass or CO 2 e - basis, because, in essence, we intended the subject to regulation determination to be functionally equivalent to making a major modification applicability

determination for GHG sources. We resolve our previous concern that rel yi ng on a single metric might lead to over

- inclusion of so urces that do not meet the statutory threshold for the PSD program b y limiting the GHG PALs program to GHG

- onl y sources, which are defined as those sources that, by definition, meet the 100/250 tpy major stationary

source threshold. We request comment on a ll aspects of this proposal. 6. Can a GHG s ource that a lready has a m ass - b ased GHG PAL o btain a CO 2 e - b ased PAL o nce we i ssue f inal c hanges to the PALrules? We are proposing to add transition provisions to the PALregulations that would allow a GHG
source that has a mass

- based GHG PAL to convert to a CO 2 e - based GHG PAL once , at the source’s option, and if agreed to by the reviewing authority. We intended these provisions to provide integrity to

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Page 55 of 110 the PALprovisions, and assure that sources avoid casuall y opti ng out of the PALprogram, rather than go through the rigorous procedures for increasing the level of the PAL

. The current PAL regulations do not contain specific provisions for dissolving an established PALduring the PAL term, but contain provisions for when a PAL expires. It is inappropriate to apply these rigorous procedures to sources that would have elected to seek a CO 2 e - based PAL in lieu of a
mass - based PAL, had such an option been available. We propose to include regulatory language that the expiration of PALprovisions do not apply when a source elects to convert from a mass

- based GHG PALto a CO 2 e - based PAL. Instead, a source could transition to a CO 2 e - based PALand the permitting authority could dissolve the mass

- based PAL without retaining the m ass - based PALlevel as a restriction on allowable emissions. We also propose to include provisions that allow the mass

- based GHG PAL to be converted to a CO 2 e - based GHG PAL in the middle of the PALeffective period. Under the transition provision, the
rev iewing authorit y would propose to dissolve the existing mass

- based PAL permit at the time it proposes the new CO 2 e - based PAL permit for public comment. The reviewing authorit y would establish the new CO 2 e - based GHG PALfollowing the standard procedures (10

- ye ar lookback for baseline actual emissions, 10 y ear PAL effective period, etc.) in the current PAL regulations. Once a final CO 2 e - based PALpermit is issued, the permitting authorit y may also finalize its proposed action to dissolve the mass

based PAL pe rmit and remove any applicable requirements from the title V permit following the appropriate t itle V procedures. This would, in essence, create a new PAL and establish a new 10 ye ar term. We also propose to allow a reviewing authority to use a slightl y di fferent procedure for this conversion from the standard PAL procedures. If the baseline actual emissions period the reviewing authority used to establish the mass

- based GHG PALis no longer within the 10 y ear lookback period

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Page 56 of 110 currentl y available to the source, then the transition provisions would allow that source a one

- time conversion of a mass

- based GHG PAL to a CO 2 e - based GHG PAL using the same baseline actual emissions period used to establish the mass

- based GHG PAL. The new PAL effective period would be the remainder of the mass

- based GHG PAL’s effective period. For example, if a reviewing authority issued a mass

- based GHG PALto a source that became effective in 2011, that PAL ’s effective period runs for 10 ye ars through 2021. If the same source convert s that mass

- based GHG PAL to a CO 2 e - based PALin 2014, and elects to use the expired, mass

- based GHG PALs baseline actual emissions y ears, then the CO 2 e - based GHG PAL would be effective for the remaining 7 years of the mass

- based GHG’s PAL effective period

. We request comment on these procedures for converting a mass

- based GHG PALto a CO 2 e based GHG PAL. Specifically , we request comment on whether there are existing mass

- based GHG PAL s for which transition provisions are needed. More specificall y, should we allow such a transition, or should we decline to provide transition provisions ? If we decline to provide a transition should we instead require sources either to maintain both PALs, or require the sources to comply with a source wide emissions cap equal to the PALlevel that functions as a s ynthetic minor limitation ? We also request comment on whether we should provide a temporary transition provision to allow sources to convert from the mass

- based GHG PAL to the CO 2 e - based GHG PAL onl y for a limite d time after the effective date of the regulatory changes, or whether the procedures should remain available for the duration of the PAL provisions. Specifically , we request comment on whether there are implications for major NSR compliance if sources are allowed to switch from a mass

- based PALto CO 2 e - based PAL at any time, or whether providing the option for the duration of the program could encourage certain t ypes of environmentall y preferable projects. 7. How w ould we c hange the r egulat ory p rovisions to i mplement PAL s for GHG

- o nl y m ajor

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Page 57 of 110 s ources? To implement our proposed changes, we would revise a number of existing regulatory provisions, depending on the specific approach selected. Under the Major Source Opt

- in Approach, we propose to change the definitio n of major stationary source to add a paragraph that defines Major Source Opt
- in GHG

- onl y sources as major stationary sources. Under the Minor Source Approach, we propose to revise the applicability paragraph for the PAL provisions at 40 CFR 52.21(aa)(1) t o include GHG

only sources. In addition, under the Major Source Opt

- in Approach, we propose to revise the PALPermit Application Requirements provisions and Contents of the PAL Permit provisions to include provisions for opting into existing major station ary source status. Under either approach, we would: (1) revise the PALrules to add transition provisions for converting from a mass

- based PAL to a CO 2 e - based PALincluding revisions to the PALexpiration provisions; (2) add a paragraph to the “subject to regulation” definition and the PALapplicability section to indicate that a source that complies with a GHG PAL is not subject to regulation for GHG emissions; (3) allow CO 2 e - based PALs to include the 75,000 tpy CO 2 e rate of emissions increase applicabili ty

threshold b y adding this amount to a source’s baseline actual emissions; and (4) revise the definition of PALand PALpollutant to include CO 2 e as a metric of GHG emissions

. B. Sy

nthetic Minor Source Permitting Authority for GHGs 1. What is the EPA proposing? We are proposing to create sy nthetic minor permit authority , within the existing federal PSD regulations in 40 CFR 52.21, for the purpose of issuing “subject to regulation” sy nthetic minor permit limitations on a CO 2 e basis for GHGs. We are a lso proposing to amend the f ederal minor NSR program in Indian country

for the purpose of issuing s ynthetic minor permit limitations for GHGs. These

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Page 58 of 110 regulatory

changes would allow certain sources or projects that might otherwise be required to obtain a GHG PSD permit, pursuant to 40 CFR 52.21, to obtain a “subject to regulation” limitation that restricts the source’s GHG emissions below the “subject to regulation” threshold(s ). That is, for sources located in a jurisdiction in which the f ederal PSD permitti ng program applies, we propose a mechanism that would allow the EPA, or its delegated agent, to issue a permit containing s ynthetic minor limitations for GHGs to an y source that emits or has the potential to emit GHGs above the applicable subject to regulation thresholds and that voluntarily requests a restriction on its PTE. Although we would establish this program using our PSD permitting authorit y, a synthetic minor permit limitation issued under this authority could also effectively

limit the source’ s GHG PTE for purposes of t itle V applicability

. As a general matter, we believe that sy nthetic minor limits for GHGs should be available as an option for sources that would prefer to take a legall y and practicabl y enforceable limitation on GHG emissions in order to avoid major source permitting requirem ents. We believe that many state and local permitting authorities will already have mechanisms in place to issue such GHG s ynthetic minor limits to sources that request them, including title V permitting programs, state minor source permitting programs, or federally enforceable state operating permit programs. Nonetheless, w e request comment on whether permitting authorities implementing SIP
- approved PSD permitting programs lack mechanisms to create sy nthetic minor limitations for GHG s , and if so, how that gap in permitting authority or mechanism could best be filled. It is important to note that we only propose to issue sy

nthetic minor permits for GHG emissions, not for other regulated NSR pollutants, and we will only do so for sources located in areas whe re the EPA is the GHG permitting authorit y (including areas subject to a GHG FIP). These s ynthetic minor permits would also be available where the federal PSD program is implemented by a state permitting authority under a delegation agreement because deleg ated states issue PSD permits on behalf of the EPA

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Page 59 of 110 in those areas under 40 CFR 52.21. We, however, are not proposing to issue sy nthetic minor source limits for non

- GHG pollutants under this rule. States and some tribes operate minor source permitting progr ams that cover these other pollutants, and the EPA also operates a minor source permitting program in Indian country . I f a source wishes to obtain a sy nthetic minor limit for any other pollutant, it should seek that limit under the applicable minor source program. The EPA has long recognized sy nthetic minor permits as a way to restrict a source’s PTE and thus avoid major source NSR and title V permitting requirements. 29 While we discussed the use of sy nthetic minor permits for establishing PTE restrictions on GHG emissions in our proposed Tailoring Rule, we expressed concerns that establishing GHG sy nthetic minor limitations in individual permits could overwhelm reviewing and permitting authorities based on the sheer number of sources that we anticipated wo uld appl y for PSD permits. Thus, we proposed to focus our attention on developing category specific approaches for limiting PTE. Since finalizing the Tailoring Rule, we reconsidered this conclusion, and now believe that establishing s ynthetic minor limitations for individual sources could increase permitting authorities’ capacity to regulate GHG emissions by providing experience in addressing emissions limitations, and monitoring, recordkeeping and reporting requirements specific to GHG emissions. We also believe that it would lead to an overall reduction of permitting burden in that synthetic minor permits generall y require fewer administrative resources than full PSD permitting and t itle V permitting, to which these sources could otherwise be subject. Mo reover, streamlining ideas often result from repeat experiences. After issuing permits that

29 See , e.g. , Guidance on Limiting Potential to Emit in New Source Permitting (June 13, 1989); Guidance an Enforceability Requirements for Limiting Potential to Emit through SIP and §112 Rules and General Permits (Jan. 25, 1995). The rules proposed here for limiting potential to emit should be read in light of our extensive prior guidance on this issue.

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Page 60 of 110 share common features, a reviewing or permitting authority might formulate new ideas for effective streamlining techniques. We now believe that issuing s ynthetic mi nor permits is a key component of our overall efforts to gain experience in permitting GHG sources to phase additional sources into the GHG program, because it can help manage sources currently subject to the program and help identify opportunities for fur

ther streamlining the GHG permitting programs. Moreover, allowing sources to obtain a sy

nthetic minor limitation, in lieu of triggering major NSR requirements, encourages sources to effectivel y minimize project emissions through efficiency improvements or other measures such that the total GHG emissions to the environment from the project are lower than might otherwise occur. We acknowledge that other mechanisms may currently exist to establish synthetic minor limitations for GHGs. We do not intend today ’s proposal to supplant or supersede other available mechanisms for creating sy nthetic minor limitations. Rather, our intent is to ensure that we are able to issue GHG s ynthetic minor limits in the areas subject to the federal PSD permitting program for GHGs to avoid a potential gap in sy nthetic minor permitting authorit y and to ensure that we are able to efficientl y manage our administrative resources for the federal PSD program. Notwithstanding today ’s proposal, we encourage States to use appropriate existin g mechanisms, or to create new authority if needed, to issue s ynthetic minor limitations for GHGs. 2. What is sy

nthetic minor limitation, and what is its function? A sy nthetic minor limitation is a legall y and practicabl y enforceable restriction that a sour ce voluntarily

seeks to avoid major stationary source requirements, such as the PSD or title V permitting programs. Sy

nthetic minor limitations allow sources to avoid these permit programs in two way s. First, a reviewing or permitting authority can issue a sy

nthetic minor limitation to assure that a stationary source does not emit above the major stationary source threshold, and therefore, that the stationary source remains a minor source for either one or both permit programs. Second, a reviewing or permitting

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Page 61 of 110 authority can issue a s ynthetic minor limitation to assure that emissions increases from a project remain below the relevant significant rate for a specific regulated NSR pollutant. As we explained in the Background Section, our regulations define a “major stationary source” for purposes of PSD as a stationary source that emits, or has a potential to emit, at least 100 tpy , if the source is in one of 28 listed source categories, or, if the source is not, then at least 250 tpy , of a regulated NSR pollutant. CAA sec tion 169. A “major stationary source” for t itle V includes sources that emit or have the potential to emit above 100 tp y or more of an y air pollutant subject to regulation. CAA sec tions 501, 302. 30 We refer to these 100 or 250 tpy amounts as th e major source applicability thresholds. T hese thresholds are computed on a mass

- basis for each regulated NSR pollutant or title V air pollutant. Because the definition of major stationary so urce relies, in large part on, a source’s “potential to emit,” th e definition of “potential to emit” is extremely important in determining the applicability of PSD and t itle V for a particular source. T he PSD regulations define PTE as: the maximum capacity

of a stationary

source to emit a pollutant under its phy sical an d operational design. An y phy sical or operational limitation on the capacit y of the source to emit a pollutant, including air pollution control equipment and restrictions on hours of operation or on the ty pe or amount of fuel combusted, stored or processed , shall be treated as part of its design if the limitation or the effect it would have on emissions is federall y enforceable. 31 40 CFR 52.21(b)(4), 51.165(a)(1)(iii), 51.166(b)(4). The title V regulations are similar. 40 CFR 70.2. If a source has no prac ticably enforceable emissions limitations that restrict the amount of a pollutant the source may

emit, and the source has no restrictions on its capacity utilization or hours of

30 As explained in the Tailoring Rule, while the statutory provision addresses any

air pollutant, we have historically

applied the PSD and title V programs only to pol lutants subject to regulation. 31 40 CFR 52.21(b)(4). Following two court decisions, National Mining Association v. EPA , 59 F.3d 1351 (D.C. Cir.1995) and Chemical Manufacturers Ass'n v. EPA, No. 89
- 1514 (D.C. Cir.1995), we clarified that the term “federal ly enforceable” should be read to mean “federall y enforceable or legally and practicabl y enforceable by a state or local air pollution control agency .” Release of Interim Policy on Federal Enforceability of L imitations on Potential to Emit, at 3 (Jan. 22, 1996).

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Page 62 of 110 operation, we require the source to use its highest expected emissions rate an d “assume operation at maximum design or achievable capacity (whichever is higher) and continuous operation (8760 hours per ye ar)” to compute its potential to emit. 32 Thus, if a source will actually emit below its maximum capacity to emit, a s ynthetic minor limitation can play an integral role in limiting the source’s PTE to a level below this maximum level. If the source accepts legally and practicably

enforceable limits and requirements sufficient to limit its PTE, that source can be treated as a minor source, rather than a major source, for purposes of our regulations. Sy nthetic minor limitations are also important for determining whether a project will result in an emissions increase that exceeds the significant rate for a regulated NSR pollutant, thus triggering PSD permitting requirements

. While the significant rate for GHGs is currentl y zero tpy , thus making this ty pe of sy nthetic minor limit less practical for GHG sources, the methods used to determine such emission increases are applicable to GHGs be cause they are also used to determine whether GHGs are “subject to regulation. ” To compute whether a project will result in a “significant emissions increase” under the federal PSD regulations, a source has the option of using either “projected actual emissions,” or PTE to estimate post

- change emissions. A source opting to use PTE can reduce the amount of its PTE by accepting legally

and practicabl y enforceable limitations on its operations. To compute whether a project will result in a “significant net emissions increase,” a source must compute emissions increases from projects that occur during the contemporaneous period. A creditable emissions increase is computed by comparing “baseline actual emissions” to the unit’s post

- change PTE . A permitting authority can use a sy nthetic minor limitation to limit an emissions unit’s post

- change PTE to reduce the amount of

32 See Memo from Terrell E. Hunt, Associate Enforcement Counsel Air Enforcement Division Office of Enforcement and Compliance Monitoring, and John S. Seitz, Director Stationary Source Compliance Division Office of Air Quality Planning and Standards , June 13, 1989.

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Page 63 of 110 emissions increase that is creditable in a net emissions increase anal ys is. In computing a creditable emissions decrease, a s ource may onl y take credit for an emissions decrease that is legally and practicabl y enforceable. Thus a reviewing authority can use a s ynthetic minor limitation to create a creditable emissions reduction. 40 CFR 52.21(b)(3)(vi)(b). We call an y permit use d to restrict a source’s PTE below either the major stationary source threshold or below the significant rate a “s ynthetic minor permit.” We call a source that accepts limitations on its operations a “s ynthetic minor source.” This is in contrast to a “true ” or “natural minor ”
source , which is a source whose PTE remains below the threshold without any additional restrictions on the source. Again, because the major stationary source threshold and significant rate are mass

- based for all non

- GHG regulated NSR p ollutants and title V air pollutants, sy nthetic minor limitations, historically , have reduced a source’s mass emissions. 3. What is a “subject to regulation” limitation? A “subject to regulation” sy nthetic minor limitation is unique to the GHG permitting programs. Instead of allowing a source to avoid the PSD or title V permit program s by establishing PTE limitations that reduce tp y mass emissions, a “subject to regulation” limitation reduces CO 2 e - based GHG emissions. This unique ty

pe of limit is specific to GHGs, because of the unique way in which the EPA regulated GHG emissions through the Tailoring Rule. As we explained in the Background Section, a source must meet two applicability requirements to trigger PSD permitting req uirements for GHGs: 1) it must emit GHGs in amounts

– calculated on a CO 2 e basis

– that make GHGs “subject to regulation” 33 , and 2) it must also emit GHGs in amounts

– calculated on a mass basis

– that qualify as a major stationary

source ( e.g. , 100 or 250 tpy) and, if

33 Previously

in this preamble we refer to the two

- step phase

- in thresholds 75 FR 31516.

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Page 64 of 110 relevant, qualify

as a major modification ( e.g. , net emissions increase of more than 0 tpy). For title V, GHGs are “subject to regulation” at a stationary source that emits or has the potential to emit 100,000 tpy CO 2 e . A “subject to regulatio n” limitation prevents a source from emitting GHGs in amounts that exceed the relevant “subject to regulation” applicability threshold that we established in the final Tailoring Rule. Accordingl y, just like other s ynthetic minor limitations, a source that complies with a “subject to regulation” limitation can avoid triggering PSD or title V GHG permitting requirements. As noted previousl y , in the Tailoring Rule, although the EPA amended the definition of “subject to regulation” to establish a level of GHG e missions that a source must meet, on both a source and project basis, before GHGs will be considered an NSR regulated pollutant for PSD permitting purposes , the EPA also made clear that its action had the same substantive effect, and should be treated, as having revised other components of the definition of “major stationary source” to achieve the same effect. Even so, because in the Tailoring Rule it was the “subject to regulation” provision that the EPA chose to incorporate the phase

- in thresholds, in thi s proposal concerning PALs , EPA is continuing to focus on the “subject to regulation” provision as the codification of the Tailoring Rule requirements, to be consistent with the approach in Tailoring Rule. Like the major stationary source applicability thr eshold, the “subject to regulation” threshold relies on the concept of PTE. And like the major modification significant rate, the subject to regulation threshold also relies on PTE to compute changes in GHG emissions at the source. Accordingl y, the EPA pro poses to create new regulatory language to affirm the EPA’s and other reviewing and permitting authorities’ ability

to establish limitations on a source that prevent a source from emitting GHG emissions above subject to regulation threshold s on a source - wide basis or for individual modifications. Because we are not proposing to amend the regulatory definition of PT E , consistent with the EPA’s current policy , we will recognize legally and practicabl y enforceable restrictions for determining

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Page 65 of 110 whether a source’s PTE is below the subject to regulation threshold and for determining whether an individual modification is below the subject to regulation threshold

. As with limitations on “potential to emit” in traditional sy

nthetic minor permits under our current policy , these restrictions need not be federally enforceable as long as they are enforceable by

the permitting authority

. 34 4. Why

does the EPA need authority to issue s ynthetic minor source permits? In general, the EPA does not have a federal per mitting program for minor sources. Although the EPA recentl y finalized a minor NSR permitting program for Indian country, that program did not affect permitting outside of Indian country or include regulation of GHG emissions. 35 The EPA is now the GHG permi tting authority in areas subject to a PSD FIP, including Indian country , but does not have a generall y applicable minor source permitting program that the EPA can use to restrict GHG PTE for sources that might want to request voluntary limitations to avoid PSD permitting for GHGs. 36 Inthese areas it is not clear whether sources will be able to obtain sy nthetic minor limits for GHGs from states or local permitting authorities through other permitting mechanisms, or through any other cognizable mechanisms for establishing a s ynthetic minor limit. Without a federal synthetic minor permitting program for GHGs, a source that would be subject to PSD permitting requirements because of a

34 We may

alter this policy in final response to address the Courts’ decisions in National Mining Association v. EPA , 59 F.3d 1351 (D.C. Cir.1995) and C hemical Manufacturers Ass'n v. EPA, No. 89
- 1514 (D.C. Cir.1995). 35 See 76 F R 38748 (2011) (promulgating Tribal minor source rule). 36 The EPA recently

increased the number of areas in which it is the PSD permitting authority . On December 30, 2010 , the EPA imposed a partial PSD FIP for GHGs in some jurisdictions in the Action to Ensure Authorit y to Issue Permits Under the Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Emissions: Federal Implementation Plan . Once that FIP became effective , the EPA became the GHG PSD permitting authority for seven states: Arizona: Both Pinal County and Rest of State (excluding Maricopa County , Pima County , and Indian Country), Arkansas, Florida, Idaho, Kansas, Oregon, and W yoming . In addition, the EPA has long been the PSD permitting authority in a few other states, in Indian country , and in some areas of the Outer Continental Shelf.

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Page 66 of 110 project’s potential GHG emissions, but that would be willing to reduce emission s from the source or project to avoid those requirements, might not have a viable permit mechanism for committing to these emissions reductions and making them enforceable. Thus, we are proposing to fill this gap in federal regulatory authorit y, because we believe doing so is important to our GHG phase

- in efforts and permitting authorities’ ability to manage their GHG permit workload (including our ability to efficiently issue GHG permits), and because we believe that synthetic minor limitations for GHGs ca n result in increased environmental benefit. We believe that sy

nthetic minor limits for GHGs provide a valuable mechanism to help manage GHG permitting burden and potentially reduce GHG emissions, and that such limits should generally be available as an o ption for sources that would prefer to take a legally and practicabl y enforceable limitation on GHG emissions in order to avoid major source permitting requirements. Before the Tailoring Rule, state and local reviewing authorities predominantl y issued sy nthetic minor permits to sources, even when the EPA was the permitting authority for the PSD permits. State and local agencies used their SIP
- approved minor NSR permit authority , or in some instances their Part 70 permit authority or their federall y enforcea ble state operating permit program , to issue permits to a source that requested sy nthetic minor permit restrictions. Recently , the EPA assumed GHG PSD permitting authorit y for a number of jurisdictions. 37 In many of these jurisdictions, as well as jurisdict ions in which the EPA has long been the PSD permitting authority , state, local and tribal agencies may lack mechanisms to create restrictions on a source’s potential to emit GHG emissions. This could occur if their minor NSR program regulations do not include GHG emissions or perhaps if it onl y include s GHG emissions on a mass basis, and if they

do not have any

other legal mechanism under which they could issue a s ynthetic

37 See FN 33 above.

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Page 67 of 110 minor limit for GHGs. As we noted in the proposed Tailoring Rule, s tates may but are not required to regulate GHG emissions through their minor NSR programs. Accordingl y, if a gap in minor NSR permitting authorit y exists it may continue to exist. On the other hand, these states may have other viable mechanisms for issuing s ynthetic minor limits for GHGs, which might alleviate the potential sy nthetic minor permitting gap. To better understand the extent of state, local, and tribal authorities’ sy nthetic minor GHG permitting authorit y, we request comment on whether there is a minor source permitting gap in areas subject to EPA permitting authorit y for PSD permits for GHG. For each s tate in which the EPA is the GHG PSD permittin g authority , we request information on the s tates’ current efforts to interpret or amend their minor NSR permit authority to include GHG emissions, and on other mechanisms that may be available to create s yn thetic minor limitations on a source’s GHG emissi ons. If there is a gap in either permitting authorit y or available mechanisms for issuing synthetic minor permits for GHG s , we request input on how that gap could best be filled. W e are also requesting comment on whether there are sufficient permitting mec hanisms and permitting authority to create GHG sy

nthetic minor limitations in areas subject to a SIP
- approved PSD permit program for GHGs. If a gap exists outside of federal GHG PSD permitting areas, we request suggestions for way s to address that gap

. 5. What are the benefits to a federal GHG s ynthetic minor permit program? A federal GHG s ynthetic minor permit program will increase EPA’s GHG permitting capacity and provide valuable knowledge and experience that the EPA can use to develop effective streamlini ng methods that assist in the EPA’s phase

- in of the GHG PSD and t itle V permit programs to statutory levels. It will also assist the EPA in managing the GHG permit workload for sources already potentially subject to permitting at existing applicability thr esholds, and may

result in enhanced environmental protection compared to permitting a source as a major source through PSD and/or title V.

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Page 68 of 110 We believe that creating federal authority to issue synthetic minor permits to restrict a source’s GHG PTE will decre ase the long term permit burden on the EPA (and eventually reviewing and permitting authorities if they assume the role for PSD and/or title V permit issuance) b y allowing sources to avoid PSD permitting when their actual emissions will not exceed the majo r source applicability

threshold and the subject to regulation thresholds. In addition, such federal authorit y could reduce state and federal title V permitting burdens, because a PTE limit may be structured in such a way that it also allows a source to av oid the need to undergo title V permitting. We believe that the cost and level of burden for sources applying for a s ynthetic minor permit, and for permitting authorities to issue the permit , are generally

far lower than issuing either a PSD permit or a ti tle V permit. We request information about permitting authorities’ and sources’ experiences in this regard. Moreover, the ability

to apply for s ynthetic minor permits can result in greater environmental benefits than those obtained through a PSD permit, b ecause it creates an incentive for sources to reduce emissions to levels below the applicability thresholds. For example, to accommodate a need for an increase in capacity , suppose a source has the option of either modifying an old, inefficient existing
em issions unit to increase its capacit y, or adding a new, high efficiency, lower emitting emissions unit. Under the federal PSD regulations, the post

- change emissions for a new emissions unit are equal to that unit’s PTE, while the source may use the project ed actual emissions to estimate post

- change emissions for the existing emissions unit. Suppose the source only operates 16 hours a day . If the source modifies an existing emissions unit, it may project its emissions using the anticipated 16 hours of operat ion. In contrast, unless the source can obtain a legall y and practicabl y enforceable restriction on its hours of operation, to determine its PTE, it must calculate emissions for the new emissions unit assuming a full day (24 hours) of operation. As a resul t, PSD may be triggered for the addition of the new emissions unit, while PSD may

not be triggered for the modification of the existing unit. Depending on the cost of

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Page 69 of 110 emissions controls, and the delay in obtaining the preconstruction permit, the source may chose to modify its existing emissions unit, rather than install the environmentall y preferable new emissions unit if it cannot obtain a PTE limit. Providing the EPA the ability to issue sy

nthetic minor permits for GHG emissions gives the EPA a tool to av oid this outcome. Finally , because we believe that sy nthetic minor permits generall y require fewer administrative resources than full PSD permitting, establishing this sy nthetic minor program allows permitting authorities to focus greater resources on larg er sources that , for whatever reason, cannot or do not want to restrict the emissions to lower levels. Accordingl y, for all the reasons described here, as part of the EPA’s effort to phase

- in the permitting requirements for GHGs, the EPA proposes to add a uthority to issue sy

nthetic minor permits to sources for which the EPA, or its delegated agent, is the GHG PSD permitting authority . We propose to add the authority

to issue CO 2 e - based s ynthetic minor permits to sources whose potential emissions are above the statutory

major source threshold ( i.e. , 100 or 250 tpy GHG ) on a mass basis or the subject to regulation thresholds on a CO 2 e basis. We request comment on our conclusion that a federal s ynthetic minor permit program will assist in the EPA’s efforts to phase

- in the GHG permit program and efficiently manage its GHG permitting resources. We also request comment on our conclusion that sy nthetic minor permits can achieve enhanced environmental protection. We also note that a sy

nthetic minor limit on GHG emis sions could further reduce administrative burdens under the t itle V permitting program for two reasons. First, as long as the t itle V GHG applicability

threshold is equal to or higher than the PSD threshold, any s yn thetic minor limit that establishes GHG e missions below the PSD threshold would also prevent such sources from becoming t itle V sources based on their PSD major source status and/or applicable PSD requirements for GHGs.

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Page 70 of 110 Second, if the s ynthetic minor permit restricts GHGs below the subject to regulation threshold for t itle V, such sources would not qualify as t itle V sources because of their GHG emissions alone. Of course, if such a source qualifies as a t itle V source based on their emissions of a non

- GHG pollutant or based on t itle V applicable requirements, that source would still be required to comply with those t itle V obligations, regardless of the sy nthetic minor limit for GHGs. 6. What is the legal rationale for EPA’s GHG s ynthetic minor source permitting authority? O ur authorit y to issue GH G sy nthetic minor permits arises from the fact that , but for the Tailoring Rule, the sources eligible for this ty pe of permit would qualify as “major emitting facilities” under CAA section 169 b ecause they emit or have the potential to emit more than 100 o r 250 tpy GHGs on a mass basis, depending on the source category. As a result, we interpret CAA section 165 to convey to PSD permitting authorities, including the EPA, the legal authorit y to issue preconstruction permits to these sources. We note that we d o not expect that sources at or near the 100/250 tpy levels would seek such permits at this time, since such sources are unlikely to trigger PSD under the current applicability tests. Instead, we expect that larger sources would avail themselves of this op tion. Although CAA § 165 b y its terms authorizes the EPA to issue permits to major sources, and sources to whom we issue a GHG sy nthetic minor source permit are, in many instances , not major sources, we propose that under the present circumstances, CAA § 165 authorizes the EPA to issue these permits. As noted, these sources would be major sources but for the Tailoring Rule, and as explained in that rule, the administrative burden associated with immediately implementing the PSD program at statutory levels for GHGs would have crippled the program. T hus, we decided to tailor the program and phase

- in the permitting requirements to ensure that the PSD permitting program would be administrable for GHGs. Similar to the approach in the Tailoring Rule, we view the GHG sy nthetic minor program as another tool to help ensure that the PSD program for GHGs can be administered in an effective and

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Page 71 of 110 efficient manner. Because the GHG sy nthetic minor program will have those effects, CAA § 165 may be read to authorize it. CAA § 301(a)(1), which authorizes the Administrator “to prescribe such regulations as are necessary

to carry out his functions under [the CAA],” provides additional authority

. 7. What changes would EPA make to the PSD regulations to allow EPA to issue GHG s yntheti c minor permits? We are proposing to change both the federal PSD permitting program in 40 CFR 52.21 and the federal minor NSR program in Indian country in 40 CFR Part 49. For the f ederal PSD permitting program, we propose to add a new section to the existing PSD regulations. In this section we would adopt permit requirements similar to the requirements we established in Indian country in 40 CFR Part 49, most particularly

at 40 CFR 4 9.158. These requirements would include permit application and permit content requirements, as well as requirements for monitoring, recordkeeping and reporting, and public participation. We request comment on what would need to be amended in the Part 49 provisions to establish a GHG s ynthetic minor permitting program in 40 CFR 52.21, and on any additional provisions that might be required

. In addition, we request comment on the appropriate procedures for administrative review

. Finally , we would also amend the existing regulations in Part 49 to ensure that we have s ynthetic minor permitting authority for GHG source s located in Indian country . Amending our existing minor source authority for Indian country

to add GHG s ynthetic minor authority would retain all sy nthetic minor authorities for Indian country within one rule. We believe this would be easier for sources in Indian country to implement, but we request comment on whether we should instead limit the proposed changes to only 40 CFR 52.21. C. Redefining Potential to Emit and Source Category Specific PTE Th is section discusses our current thinking on developing category specific PTE rules or guidance and request s comment on the appropriate categories and requirements

. Inaddition w e are also

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Page 72 of 110 exploring a novel approach that would provide an individual source, in an y of multiple source categories, a way

to obtain streamlined, as well as legally and practicabl y enforceable restrictions, on the source’s hours of operation. We outline and request comment on a potential approach for creating such a rule; however, we do not intend to finalize this approach in this rulemaking. As explained in the Tailoring Rule, because the PSD and title V applicability are based on PTE, rather than on actual emissions, they coul d sweep enormous numbers of sources into the PSD and title V programs even though those sources’ actual emissions are far below the applicability thresholds. For example, sources that operate for onl y part of the year, but that have no legally and practica

bl y enforceable limitation on their operating hours, must calculate their PTE on the basis of the amount of emissions that would result if those sources did operate, and therefore emit, on a year

- round basis (8760 hours per ye ar) . Our proposed sy nthetic mi nor rule would give sources the option to accept legall y and practicabl y enforceable limits on their operations by, for example, agreeing to limit the hours the source s operate and compl yi ng with recordkeeping, monitoring, and reporting requirements to ens ure that th ese limit s are enforceable as a practical matter. As we have explained, the issu anc e of sy nthetic minor permits to individual sources benefits the GHG phase

- in program, but we would like to continue to explore methods that can reduce the number of individual permits a reviewing or permitting authority need to issue. Therefore, in addition to individual minor source permitting, we continue to explore adopting, or encouraging state permitting authorities to adopt, rules for source categories that w e expect include large numbers of sources whose actual GHG emissions are well below applicability thresholds, but which, absent legal ly and practicabl y enforceable limitations, have PTE above those thresholds. As we noted in our proposed Tailoring R ule, the first step necessary to develop a source specific PTE regulation or guidance is to identif y source categories that are generally conducive to a streamlined PTE approach. 74 FR 55321. Inselecting one or more source categories, one consideration is how to

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Page 73 of 110 address the possibility

that the GHG applicability thresholds could change in the future. Today , we have more information on sources with a potential to emit 100,000 tpy or more CO 2 e, and may

be better situated to propose a source category specific PTE rule for a one of these source categories, in the nearer term. We have less information about smaller sources, and developing a PTE rule will require significant additional information collection, and technical analy sis. Source category

PTE rules or guid ance continue to offer the opportunity for reducing administrative and permitting burden related to sources of all sizes . W e are broadly soliciting information on source categories with sources at all levels of emissions, ranging from sources with actual e missions below the PSD and title V statutory thresholds to those that are just below the Steps 1 and 2 thresholds or the thresholds under consideration for this rulemaking. Therefore, we request comment on all source categories that would be candidates for creation of a PTE

- specific rule or guidance. Candidates include source categories that currently have PTE substantially

higher than their actual emissions, so that, if we were to revise the thresholds to fall below their PTE but remain above their actual emissions, a rule or guidance that adjusted how sources in those source categories calculate PTE could allow them to fall below the revised thresholds. For instance, we request comment on the usefulness of a PTE regulation for natural gas fired boilers that use a limited amount of fuel. As another example, we solicit comment on whether this approach might be useful for sources whose onl y emissions units are metered, natural

- gas fired units with actual GHG emissions below the relevant applicability

threshold s, which because of their metering are able to track and determine their GHG emissions on a continuous basis

. This option would essentially allow sources to determine PTE with reference to their actual emissions based on actual fuel use. Conceptuall y, this option would likely be available for such metered sources that have historically alway s had emissions below the applicability thresholds and that will maintain and operate their meters on a going

- forward basis. For such sources,

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Page 74 of 110 actual GHG emissions can b e continuously determined by m onitoring their fuel use so that they remain below the applicability

thresholds, as well as comply with recordkeeping and reporting requirements. For an y source category

identified in comments, we specifically solicit informat ion on how the source category

should be defined, t ypical hours of operation over a ye ar and whether those vary by , for example, season , production cycle, or over a day , and information on ty pical emissions. We specifically request input on what sorts of G HG
- emitting source categories may onl y operate seasonall y or otherwise have a limited production time

-- e.g. , limited number of shifts, operate only during day

- time hours, operate onl y in the evenings, or emit emissions only from heating during winter months

-- or have phy sical restrictions on their operations that might make them well suited for a PTE rule or guidance. W e request comment on the time period that reflects these sources’ maximum historical operations, which we could use to establish, whether through guidance or rulemaking, the PTE for sources in those source categories. We also solicit comment on what ty pe of documentation would be necessary to demonstrate that sources in a source category have a history

of limited operations

. For example, wo uld it suffice for sources to demonstrate a 5 or 10 ye ar history of limited actual hours of operation? Suppose a representative set of sources in a source category ha s records documenting that they operated onl y two, 8
- hour shifts at their facilities for the past 10 years, and that when workers are not working, emissions units are not running. Alternativel y, suppose a representative set of sources in a source category ha s records that show that they onl y operate during summer months, and that the longest th ey have operated in the summer is for 4 months. In such circumstances, could the EPA interpret, through guidance or rulemaking, PTE for sources in that source category to reflect that maximum level of actual operation? We are also exploring the development of a streamlined method that reduces the permitting burden for sources that have historicall y operated with reduced hours of operations and are willing to accept an hourl y limit at or below the maximum level of historical operation . The purpose of such a rule

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Page 75 of 110 would be to create a legal mechanism by which sources in at least certain t ypes of source categories could take legall y and practicabl y enforceable limits on hours of operation without having to go through the more burdensome process of obtaining indi vidual sy nthetic minor permits. Rather, we contemplate that under such an approach, a source would report and document its historical maximum hours of operation to EPA in some way , and accept a legally and practicably

enforceable limit to operate at or bel ow that level, along with obligations designed to ensure enforceability , such as recordkeeping, reporting, and monitoring requirements. In order to develop our thinking on this new approach, we are asking for comment on several specific issues. We request comment on whether such a rule would be helpful to permitting authorities in reducing GHG permit burden. In addition, we request comment on whether hours of operation is an operating parameter that does not need source specific limitations to assure compl iance. Have permitting authorities included hours of operation restrictions in numerous sy nthetic minor permits? What success or difficulties have permitting authorities experienced in enforcing hours of operation restrictions through s ynthetic minor permi ts? Have terms and conditions of such permits been uniform within or between source categories? Additionally , we are requesting input on whether such a rule should target specific source categories, or be made broadly available to all source categories, and on what ty pes of GHG

- emitting source categories may

only operate seasonall y or have a limited production time

. We request comment on the appropriate structure and requirements for such a rule. What sorts of application requirements, permit limits, and recordkeeping, monitoring, and reporting have permitting authorities required for such hourly limits? What time period adequatel y reflects maximum historical operations, for purposes of determining a restriction on future operations? We also request comme nt on mechanisms the rule should provide to ensure that the source does

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Page 76 of 110 not exceed an y limit ation on hours of operations that it agrees to accept . Finally , we request comment on whether such a process can be rigorous enough to maintain the necessary integrity in PTE calculations, and made legally

and practicabl y enforceable through reporting , monitoring, and ongoing recordkeeping requirements, but streamlined when compared to the burden of issuing and obtaining an individual sy nthetic minor permit. Again, we are just request ing comment in this action on the idea of developing a rule to voluntarily restrict hours of operation across multiple source categories and we are not proposing a specific rule at this time. If, after reviewing comments, we determine th at this is a viable approach for streamlining GHG permitting, we may proceed to propose a specific rule in the future. D. General Permitting for GHGs 1. What is a general permit? A general permit is a permit that the permitting authority adopts once and then applies identicall y to each source that requests coverage and meets the specific eligibility requirements. General permits are best suited for the regulation of sources that perform the same or similar operations, emit similar air pollutants and are subjec t to the same limitations, standards and requirements. General permits are a mechanism that provides for greater efficiency in issuing required permits, thereby saving costs to both the source and the permitting authority. As noted in the following, some s tates have programs that authorize general permits. These programs show very

clearly that there are benefits to using general permits. The issuance process for the permit is relatively

simple and streamlined. The applicable requirements for these sources h ave already been identified for the applicant in both the application and the permit. The applicant knows, prior to application submittal, what conditions the permit will contain. In addition, public review is simplified. The public review process for gene ral permits occurs before the general permit is finalized, rather than

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Page 77 of 110 on a permit by

permit basis. In the context of GHG, the issuance of PSD or title V general permits would promote more efficient treatment of GHG

- emitting sources that would be subject t o permitting, and allow the expeditious expansion to more GHG

- emitting sources while protecting those sources and the permitting authorities from undue burden. 2. What is the L egal Authority for G eneral P ermits ? The CAA gives the EPA the authority in section 504(d) to issue general permits for title V sources, and the EPA has regulations in place to create general permits for title V sources. Although there is no provision in the CAA that expressly authorizes the use of general permits in the PSD program, the D.C. Circuit, in the Alabama Power case, recognized that “[c]onsiderations of administrative necessit y may be a basis for finding implied authorit y for an administrative approach not explicitly provided in the statute” and expressl y identified general per mits as an alternative to the exemptions that were at issue in that case. See 636 F.2d at 360. Further, courts have recognized the EPA’s authority

to use general permits under section 402 of the Clean Water Act without an express provision authorizing such general permits. Environmental Defense Center v. EPA , 344 F.3d 832, 853 (9 th Cir. 2003) (“General permitting has long been recognized as a lawful means of authorizing discharges.”) (citing NRDC. v. Costle. , 568 F.2d 1369, 1381 (D.C. Cir. 1977)); NRDC v. T rain. , 396 F. Supp. 1393, 1402 (D.D.C. 1975) (The EPA has “substantial discretion to use administrative devices, such as area permits, to make EPA’s burden manageable.”). 3. Have the states u s ed general permits? Many states have taken advantage of the ability to u s e general permits. In reviewing state programs, w e have found that though the concepts are similar, the structure and content of the various programs i s quite diverse. For example, the New Jersey Department of Environmental Protection

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Page 78 of 110 (NJDEP) has developed a general permit program (GP

- 017) 38 that allows for the construction, installation, reconstruction, modification and operation of boilers and heaters less than 5 MMBTU/hour. NJDEP defines a general permit as a pre

- approved permit and certificate which applies to a specific class of significant sources. By issuing a general permit, NJDEP indicates that it approves the activities authorized by

the general permit, provided that the owner or operator of the source registers with the Department and meets the requirements of the general permit. If a source belongs to a class of sources which qualify

for a general permit and the owner or operator of the source registers for the general permit, the registration satisfies the requirements of NJAC 7:27

- 8. 3 39 for a permit and certificate. Ohio’s Division of Air Pollution Control (DAPC) also has developed model general permits

- to intall and model general permits

- to - install and operate for select sources in Ohio. The regulations for general permits can be foun d in OAC Rule 3745

- 31
- 29. O hio states that a general permit is the same as any permit

- to - install or permits

- to - install and to operate that DAPC issues; the only difference is that all the terms and conditions of the permit have been developed in advance. This is referred to as the "model general permit." P otential applicant s can review the model general permit qualifying criteria, terms and conditions, and if they

believe they

qualify , they

can complete the application and sign the qualifying criteria docum ent. The DAPC will review the applicants’ information to confirm that they meet the qualifications, and then issue the general permit to the applicant s . 4. What steps has the EPA made toward developing general permits? In the context of streamlining the permitting process for GHGs, the EPA is considering various

38 http://www.state.nj.us/dep/aqpp/downloads/gp17.pdf

. 39 The permittee shall not construct, reconstruct, install, or modify a significant source or control apparatus serving the significant source without first obtaining a preconstruction permit under N.J.A.C. 7:27
- 8. [N.J.A.C. 7:27
- 8.3(a)] The permittee shal l not operate (nor cause to be operated) a significant source or control apparatus serving the significant source without a valid operating certificate. [N.J.A.C. 7:27

- 8.3(b)]

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Page 79 of 110 methods for developing general permits. As a procedural matter, the EPA is evaluating the possibility of proposing an enabling rule to enable the development of PSD general permits for GHG emitting sources. This rule would enable the EPA to create and implement PSD general permits for GHG emissions only for selected source or emissions unit categories. The enabling rule would lay out the basic foundation for gener al permits. It would identify the general provisions that would be found in all EPA

- issued general permits, the criteria and process for establishing a general permit, and discuss the rationale and legal basis for a PSD general permit for GHGs. The enablin g rule would also establish the process for the creation of general permits for the EPA’s use where the EPA is the GHG permitting authority and define mechanisms by

which states could leverage federal general permits to streamline the permitting processes for sources that would trigger PSD for only their emissions of GHGs. We are also considering the overall criteria for determining the source or emissions unit categories for which we may develop the first general permits. Our initial inclination, on which we solicit comment, is that we should focus first on GHG

- onl y sources, that is, GHG

- emitting sources that do not emit non

- GHGs in amounts that would be subject to PSD requirements. This is because complying with PSD for non

- GHG pollutants involves anal ys es and demonstrations, such as a requirement that the source demonstrate that the proposed project will not cause or contribute to a violation of any

NAAQS, which inherentl y are facility and location specific. For GHGs, BACT is the primary substantive PSD pe rmitting requirement, and we believe that BACT can more readil y be established for a source or emissions unit category, thus making the general permit approach feasible for sources and modifications that are major onl y due to GHG emissions. We are considering what source and/or emissions unit categories would be good candidates for the first general permits. Even though natural gas

- fired boilers range from large high performance boilers for industrial applications to small commercial and residential units f or space heating and hot

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Page 80 of 110 water, sources for which the only or predominant source of GHG emissions are boilers may be good candidates for PSD GHG general permits. Because boilers are widel y used throughout industrial and commercial source categories, and can readily be categorized by

design, purpose, efficiency and emissions, they

present opportunities for significant streamlining through the use of general permits and thereb y reductions in administrative burden from PSD permitting. Because the controls for GHGs on natural gas

- fired boilers are sufficientl y uniform, it seems possible to identify standardized control requirements to include in a general permit without significantl y compromising environmental protection. Even so, it is unclear whether a genera l permit rule, for boilers or other emissions units, would be a productive streamlining method for the source categories and projects affected by this Step 3 rulemaking. In man y cases, boilers or other equipment located at a source or involved in a project will emit non

- GHG pollutants in amounts great enough to trigger other significant CAA requirements such as minor NSR, NESHAP and/or NSPS, diminishing the streamlining utility of a PSD general permit for GHG only . We are also mindful that implementation of a general permit program would likely involve regulatory

action and a SIP revision at the state or local permitting authority level , which in and of itself imposes administrative costs, and the limited benefits of a general permit program for the source
c ategories and projects potentially covered in this Step 3 rulemaking could be offset b y the administrative costs of the SIP revision process. Although we are concerned that GHG general permits for boilers and other common emissions unit categories may not provide enough streamlining value for the source categories affected b y this Step 3 rulemaking, we believe such permits may have significant value when we consider smaller sources, especially those with no other emissions units or non

- GHG pollutants emitte d at significant levels. We are also considering how to incorporate a general permit for GHGs into existing state permitting programs. We are mindful that reviewing agencies generally have

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Page 81 of 110 construction permitting processes that address all applicable requi rements, including minor NSR and major NSR/PSD in an integrated fashion. It would be important to structure the general permit program so as to avoid complicating or conflicting with established permitting processes. We are also considering further questi ons, including: (1) S hould general permits be available to greenfield sources? ; (2) When issuing a general permit for a project/modification what do we do with pollutants other than GHGs? ; (3) C an general permits be utilized for projects at an y major sour ce or only at sources major onl y for GHGs? ; (4) Are general permits available to both new and modified units?” (5) “ A re general permits mandatory or optional for states? ; ( 6 ) What is the process for establishing general permits? ; ( 7 ) S hould states or the p ublic be able to request that the EPA propose general permits for source categories and emissions units, and if so, what is the process for this ty pe of request? ; ( 8 ) What should the public participation procedures be? ; ( 9 ) What is the approval or denial p rocess for sources to use a general permit? ; ( 10 ) What would BACT for a general permit look like? ; (1 1 ) H ow would BACT be established? ; (1 2 ) H ow would BACT be updated? ; (1 3 ) What are the Endangered Species Act and environmental justice implications of the general permit? ; (1 4 ) S hould there be a periodic review of the general permit’s provisions, and if so, what would it look like? , and (1 5 ) C ould we develop a process for states to incorporate a general permit program into their SIPs in a way that minimizes the administrative costs of the SIP revision process? We commit to continue to explore the possibility of general permits by

reviewing information that we expect to receive in response to this proposal and the information gathered b y permitting authorities through the implementation of GHG permitting. We believe that establishing general permits will require collection of significant category

- specific data for various source and emission unit ty pes as well as those that have heretofore generall y not been re gulated b y the CAA ( e.g. , small furnaces, water heaters, etc.), which could take a significant amount of resources and time.

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Page 82 of 110 We request comment on, in addition to the issues described previously , possible sources and source categories that may benefit fro m general permits, if such permits were only created for addressing GHG emissions, as a streamlining method to assist in the phase

- in of GHG permitting. We request comment on the appropriate approach for public review, in particular whether public review o f individual uses of a PSD general permit can be satisfied through public participation in the development of the general permit itself or whether each individual use of the PSD general permit requires public participation. W e also request comment on wheth er such a program should be a required minimum element for SIP approved PSD programs, as relevant. 5. General Permits and Title V We expect many

of the issues related to PSD general permits would also be relevant for t itle V general permits. For example, we would expect t itle V general permits to be most useful for GHG sources that trigger t itle V applicability due to boilers , but where sources are subject to other requirements, such as NSR, NESHAP and/or NSPS, the utility of general permits may

be limited. W e request comment on experience with title V general permits issued by state and local permitting authorities, including whether permitting authorities have altered application requirements pursuant to 40 CFR 70.6(d)(2), and other means of ensuring that ge neral permits met the goals of title V for streamlined procedures and assuring compliance. Finally , we request comment on whether such a program should be a required minimum element for s tate Part 70 title V programs, as relevant. E. Presumptive BACT for GHG s 1. Definition of BACT The Act defines BACT as: ... an emission limitation based on the maximum degree of reduction of each pollutant subject to regulation under this Act emitted from or which results from any major emitting facilit y, which the permitting authority , on a case - by

- case basis, taking into

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Page 83 of 110 account energy , environmental, and economic impacts and other costs, determines is achievable for such facility through application of production processes and available methods, sy stems, and techniques, inc luding fuel cleaning, clean fuels, or treatment or innovative fuel combustion techniques for control of each such pollutant. In no event shall application of “best available control technology” result in emissions of any pollutant which will exceed the emi ssions allowed by an y applicable standard established pursuant to section 111 or 112 or this Act. Emissions from an y source utilizing clean fuels, or an y other means, to comply with this paragraph shall not be allowed to increase above levels that would have been required under this paragraph as it existed prior to enactment of the Clean Air Act Amendments of 1990

. CAA section 169(3). Performing case

- by

- case BACT determinations can be complicated, resource

- intensive and time

consuming. In brief, the top

- down BACT process calls for all available control technologies for a given pollutant to be identified and ranked in descending order of control effectiveness. The highest

- ranked (“top”) option(s) should be established as BACT unless the permit applicant d emonstrates to the satisfaction of the permitting authority that technical considerations, or energy, environmental, or economic impacts justify a conclusion that the top

- ranked technology is not “achievable” in that case. If the most effective control str ategy is eliminated in this fashion, then the next most effective alternative should be evaluated, and so on, until an option is selected as BACT. This analy sis should be conducted for each regulated NSR pollutant that is subject to the BACT requirement in a given case. The EPA has broken down this anal yt ical process into the following five steps. Step 1: I dentify

all available control technologies. Step 2: Eliminate technically infeasible options. Step 3: Rank remaining control technologi es. Step 4: Evaluate most effective controls and document results. Step 5: Select BACT. 2. What is presumptive BACT?

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Page 84 of 110 Presumptive BACT is a potential streamlining approach that involves the development of a standardized BACT for certain emissions units. Presumptive BACT would create way s for specific categories of permitted emissions units to move from a sy stem under whic h determinations are made on individual permits on a case

- by

- case basis, to one where BACT is determined for common types of equipment, which could be applied to individual permits with little to no additional revision or anal ysis. In general, the EPA beli eves that presumptive BACT could be implemented on a broad basis for specific emissions units where there are well defined and similar ty pes of emissions units, uniformity in process/emissions unit design and function, and well defined GHG control technolo gi es. Reviewing agencies could adopt presumptive BACT, possibly including model permit language and monitoring, reporting and recordkeeping requirements, to streamline the BACT anal ys is for GHGs within their own established permitting process. The EPA ha s previousl y introduced the concept of presumptive BACT to streamline permitting for desulfurization projects at refineries as well as in other instances, 40 and some state permitting authorities have adopted similar approaches. 41 Based on our understanding o f the ty pes of sources that will become subject to PSD if GHG emissions are regulated at levels below the thresholds currently contained in the Tailoring Rule, we believe the presumptive BACT process could offer significant streamlining benefits. Such stre amlining benefits would arise because many of the sources that would become subject to BACT at lower GHG emission levels will likely have very

similar emissions

40 See Memorandum, "BACT and LAER for Emissions of Nitrogen Oxides and Volatile O rganic Compounds at Tier 2/Gasoline Sulfur Refinery Projects," from John S. Seitz, Director, Office of Air Quality Planning and Standards, to Regional Air Division Directors (January 19, 2001). 41 For example, Wyoming has a minor source permitting program that includes a BACT anal ys is, and they use a presumptive BACT process for issuing minor source permits to a particular source category

— oil and gas production facilities. See Permitting Guidance for Oil and Gas Production Facilities, Wyoming Dept. of Enviro nmental Quality , Air Quality Division (August 2007 revision).

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Page 85 of 110 producing equipment, and we believe there would be little variation across sources with respect to the cost, energy

and environmental considerations in the BACT decision. As discussed in the following, the EPA has expressed interest in soliciting comments on the potential use of presumptive BACT for GHG permitting. It should be understood that pres umptive BACT would be onl y an optional means to streamline the top

- down BACT process b y pre - evaluating what could constitute BACT for specific categories of similarly

- situated emissions units. It should also be understood that this would only be available to address the GHG emissions from those units, and that the pre

- construction permitting process would not be affected in an y other way

. Presumptive BACT would add another option for sources to achieve BACT requirements and provides additional benefits for the source and the permitting authority through streamlining of the permit process. In actual implementation, the choice of a presumptive BACT option would reduce burdens currentl y associated with conducting individualized, top

- down BACT analy ses for each source requiring a PSD permit . Nonetheless, there are several considerations to explore before we can implement a presumptive BACT approach including the role of presumptive BACT in a case

- by

- case decision framework, the role and timing of public review, a nd preserving BACT’s technology

- forcing role within a presumptive BACT framework. 3. How the EPA Could Consider Implementing Presumptive BACT As noted previousl y, the CAA requirement for BACT, found in section 165(a)(4), mandates that BACT determinations be made for each regulated pollutant on a "case

- by

- case basis." Accordingly , the EPA would like to develop a process that benefits from the efficiencies that presumptive BACT would provide while allowing for issuance of individual PSD permits. In the propose d Tailoring Rule, the EPA discussed potential options to explore presumptive BACT as an alternative to the current case

- by

- case nature of conventional BACT. In that discussion and in subsequent consideration by the a gency , two

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Page 86 of 110 potential way s in which to implement a presumptive BACT program have emerged: as an alternative method of completing a BACT analy sis in an individual permitting action or as a way to eliminate the need for an individualized BACT analy sis for all permits in a particular category

. The first approach would develop, through notice

- and

- comment rulemaking or through permitting guidance, a presumptive BACT level for sources in a particular source category that subsequently

could be applied and assessed in individual permitting actions. Under such an approach, while the top

- down anal ysis for an individual permit would be fulfilled by a request to include the presumptive BACT limit, there would still be an opportunity for permitting authorities and the public to examine individual permits to as sess whether there are significant case

- specific energy , economic, and/or environmental impacts that would require adjustment of the presumed limit for that particular source. This form of presumptive BACT would create a rebuttable presumption that the emi ssions covered b y the particular source’s BACT limit will, in fact, be controlled to the maximum degree that can be achieved. This presumption shifts the burden to the permitting authority or other interested parties to produce credible evidence that the a pplication of presumptive BACT to that particular source would not comply

with BACT requirements. If credible evidence w ere produced, then the source would either be required to produce evidence sufficient to show that the presumption is the best achievabl e control technology

or to conduct an individualized top

- down BACT anal ysis. While such an approach could streamline the BACT determination process to some extent, we are concerned that those streamlining benefits could be negated given the prospect that such presumptive BACT determinations would, as a result of permitting authorit y review and public comment, still have to be reviewed for numerous individual sources. Accordingl y, the EPA has also considered a s ys tem in which presumptive BACT levels for a s pecific category of emissions units would be developed through notice

- and

- comment rulemaking but then applied to individual sources in that category without

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Page 87 of 110 requiring permitting authorities to individualize the BACT determination or allowing for public
comment on whether presumptive BACT levels should apply to an individual source. While , as noted in the following , some have argued that such an approach would not strictly adhere to the individual case

by

- case BACT determinations envisioned in the CAA, even if that is the case, maintaining case

- specific BACT determinations may well be impractical given the significant increase in new sources that would likely be brought into the PSD program when GHG permitting thresholds are reduced. Moreover, the D.C. Circui t, in the Alabama Power case previously discussed, stated that courts "frequentl y uphold streamlined agency

[regulatory] approaches or procedures where the conventional course, t ypicall y case by

- case determinations, would, as a practical matter, prevent th e agency from carrying out the mission assigned to it b y Congress." 636 F.2d at 358. The Court recognized that such non

- individualized streamlining measures may be needed when time or personnel constraints or other practical considerations "would make it i mpossible for the agency to carry out its mandate." See id . at 359. A presumptive BACT approach that does not require individualized, source

- specific determinations could well be an important tool to allow the EPA, state and local permitting authorities to carry out the PSD program in as timely

and efficient manner as necessary to promote (rather than hinder) control of GHG emissions from the many new, small source categories that would be required to have PSD permits based on their GHG emissions. This appr oach would preserve opportunities for public participation by taking comment during the determination of presumptive BACT levels for a source category . Although here too, some have argued that this ty pe of presumptive BACT approach, one that does not requi re individualized, source

- specific determinations, would depart from a literal application of the statutory requirements for BACT, even if that is the case, it may nevertheless remain closer to the congressional intent for the PSD program in so far as it w ould reduce administrative burdens in each permitting action, thus allowing more overall sources to become subject to a PSD permitting program that moves

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Page 88 of 110 applicability

thresholds closer to the statutory levels. We received man y comments on presumptive BA CT during the public comment period for the Tailoring Rule. Man y commenters supported the concept of presumptive BACT as a means to streamline PSD permitting. Some noted that it would promote consistency in BACT determinations as various permitting authori ties gain experience with GHG permitting. Some suggested that it would be useful for common combustion sources, and at least one indicated that it would be particularl y justified for natural gas

- fired equipment. Several included recommendations for specifi c industrial sectors. A number of the supportive commenters also recommended that the source have the option to use presumptive BACT or to conduct a case

- by

- case BACT determination. Some commenters opposed presumptive BACT. A few indicated that it would n ot be flexible enough to take into account source

- specific factors. Others asserted that it is contrary to the requirements of the Act for a case

- by

- case BACT determination and opportunity for public review. Some noted that it would dampen the technology

- f orcing role of BACT, and at least one suggested a periodic update not less than every

5 years. The EPA requests comment on the possible approaches to presumptive BACT discussed previously . We request comment on whether the first approach, where each use o f presumptive BACT would be subject to permitting authority review and public comment, would offer significant streamlining value. We also request comment on our legal authority to implement each approach, particularl y on the applicability of Alabama Power principles to the second approach, which does not authorize individualized, source

- specific determinations

. 4. Possible Impediments to P resumptive BACT a. Public comment processes for presumptive BACT The provision of effective and meaningful opportuniti es for public comment on BACT

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Page 89 of 110 determinations is an important element of air permitting process provided for in the CAA. In the context of the two presumptive BACT approaches explained previousl y , the EPA or a state agency could provide opportunity

for publ ic participation either in individual permitting actions to allow the public to rebut the presumption that a pre

- determined BACT limit applies to the specific source under consideration, or in determining the presumptive BACT levels for a source category

. The EPA requests comment on the public participation approaches that would be appropriate to support presumptive BACT determinations. For example, is it sufficient to provide for public review and comment onl y during the rulemaking to establish a presumpti ve BACT level or does the case

- by

- case nature of BACT require comment for individual permitting actions? Even if we follow the approach of establishing a presumptive BACT limit through notice

- and

- comment rulemaking and limiting public input on individual p ermitting actions, are there circumstances in which public comment might also be warranted for those individual permitting actions the presumptive BACT limit? If so, what are they? I f we follow the approach of allowing public input on individual permitting actions that use presumptive BACT, are there way s in which the public comment might be limited to recognize more streamlining benefits? b. General permits The EPA is particularl y i nterested to consider pursuing presumptive BACT as a streamlining approa ch in cases where there would be similar BACT outcomes in multiple permits due to similar source characteristics and available control options. General permits, which are discussed in the previous section, provide one context to implement this. General per mits are particularly

useful in situations where source operations are highl y consistent and relativel y simple across a source category. General permits ty

pically work best where sources in the category are subject to the same applicable air regulatory

requirements, including those associated with criteria pollutant and air toxics regulatory programs.

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Page 90 of 110 We are particularl y interested to consider opportunities to develop presumptive BACT options to complement potential general permitting approaches addressin g GHGs. In the absence of a presumptive BACT approach, general permits addressing GHGs may have limited streamlining value in light of case

by

- case conventional BACT determination needs. Accordingl y, we request comment on opportunities for using presumptiv e BACT approaches in the context of general permits. In addition, we request comment on potential source categories or types of emission units that may be particularly well

- suited for a general permit and presumptive BACT approach due to similarities in so urce characteristics and available GHG control options. We also request comment on whether presumptive BACT approaches for GHGs should be considered for source categories and ty pes of emission units that may not be feasible to address using a general permi t approach. c. Updating of presumptive BACT In general, case

- by

- case BACT determinations allow for the continual evolution of BACT requirements over time and are generally referred to as “technology forcing,” in so much as available controls identified i n prior permits are considered in each subsequent BACT determination and the specific facts of subsequent actions may support application of a top

- ranked control technology that was eliminated in prior actions. However, the EPA recognizes that application of presumptive BACT to a category of sources over many

permitting decisions may diminish the technology

forcing effects of PSD. Updating of BACT is an important concept to consider in the context of developing a presumptive BACT option, and the EPA is inte rested in options that would help maintain advances in control technologies. As previously

explained, the conventional top

- down BACT process incorporates continual updating of the BACT for each t yp e of emission unit through the analy sis that occurs to ens ure that the most current BACT is used. To provide streamlining opportunities, the presumptive BACT process

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Page 91 of 110 would likely need to incorporate some form of updating mechanism to ensure that the BACT remains current over time. We have identified several diffe rent approaches b y which such updating could be accomplished. One approach would be for the EPA or a state agency to periodically

review and consider updates to the presumptive BACT option established for a certain source category or t ype of emission unit. For example, there could be a requirement to update presumptive BACT on a set time interval (such as every

3 or 5 ye ars). Another approach could be to link a presumptive BACT determination to a standard established through some respected standard

- setting programs so that the presumptive BACT level would automatically

update periodically

in conjunction with updating process already used in established standard

- setting programs, as discussed in the following examples. One option would be for the EPA or a state agency

to set presumptive BACT at the same levels used in equipment energy efficiency standards established b y government agencies or other respected standard

- setting bodies. For example, the U.S. Department of Energy (DOE), pursuant to the Energy Polic y and Conservation Act, promulgates energy

efficiency

standards for industrial and commercial boilers. 42 These periodicall y updated equipment energy efficiency

standards could be used as the basis for presumptive BACT in cases where such standards exist. Si milarly , it may be appropriate to use ENERGY STAR equipment certification as a basis for presumptive BACT. Whereas appliance and equipment energy efficiency standards usuall y provide the “ground floor” requirements for performance of new energy consuming
e quipment, ENERGY STAR certification specifications establish minimum performance requirements for high

- efficiency , lower emissions equipment within selected product categories. The ENERGY STAR program, administered b y the EPA in partnership with the DOE, e stablishes voluntary product

42 http://www1.eere.energy.gov/buildings/appliance_standards/residential/furnaces_boilers.html

.

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Page 92 of 110 and equipment energy

efficiency

specifications for certain products and equipment in an effort to transform the market for manufactured goods b y expanding the availability and visibility of energy

efficient products. Commercial and residential products can earn the ENERGY STAR label by meeting the energy

efficiency

requirements set forth in ENERGY STAR product specifications. Accordingl y, ENERGY STAR equipment specifications include energy efficiency performance requirements that exceed DOE appliance and equipment standards. For example, to qualify for ENERGY STAR certification, residential boilers must have annual fuel utilization efficiency (AFUE) ratings of 85 percent or greater. 43 This compares with DOE boiler energy efficie ncy

standards established in 2007 that range from 80 to 83 percent. 44 The EPA requests comment on approaches for ensuring that presumptive BACT options are periodicall y reviewed and refreshed. We also request comments on the feasibility and potential confi guration of approaches that connect presumptive BACT to equipment energy efficiency

standards or certifications or other external factors. In particular, it would be helpful to receive comments on the role DOE industrial equipment and appliance energy effi ciency

standards and/or ENERGY STAR certification for industrial and commercial equipment play in the context of presumptive BACT. In addition to the specific comments requested previously , the EPA seeks overall comments on the use of presumptive BACT, inc luding suggestions for how such limits could be established, updated and used consistently

within the requirements of the CAA, including requirements for a top

- down, case

- by

- case BACT determination process. The EPA invites comments on whether presumptive B ACT options

43 http://www.energy star.gov/index.cfm?fuseaction=find_a_product.showProductGroup&pgw_code=BO 44 htt p://www1.eere.energy .gov/buildings/appliance_standards/residential/pdfs/furnaces_boilers/furnaces _fr_111907.pdf

.

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Page 93 of 110 should be advanced through rulemaking or through guidance. Comments would also be useful regarding considerations that should affect whether presumptive BACT approaches could be used to address only existing units or new units. The EPA also enc ourages comments on the respective roles of state, local and tribal air agencies relative to that of the EPA in establishing presumptive BACT options. F. Title V Empty

Permits In the Tailoring Rule, we identified a possible exclusion for “empt y permits” as a potential means for alleviating the potential burden of title V permitting for GHG sources

. In the Tailoring Rule we described an “empt y permit” as “a permit issued to a source that is not subject to any applicable requirement for an y pollutant.” 45 Empty permits may

occur because the applicability for title V is in part based on major source status, yet there may not be any

applicable requirements that apply . Since the principal purpose of title V is to collect the requirements applicabl e to the source and assure compliance with those requirements it is unclear whether Congress intended sources, particularl y smaller sources, to be subject to title V permitting if there are no applicable requirements for the source. The EPA solicits
comments on whether we may , and should, interpret title V as not requiring permits for sources that are not subject to any

applicable requirements (as defined in 40 CFR 70.2) . The EPA also solicits comments on whether the EPA could adopt such an interpretation through guidance, an interpretative rule (without notice and comment), or only through notice and comment rulemaking, and whether states would, or should, be required to submit program revisions to the EPA for approval in order to exclude such sources from title V permitting. In the Tailoring Rule , the EPA noted that we anticipated very few if an y “empty

permits” as a

45 Empty permits are different from “hollow permits.” A “hollow permit” is a permit for a GHG major source that does not contain requirements f or GHG emissions, but which contains other applicable requirements for pollutants for which the source is not major.

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Page 94 of 110 result of Step 2

. However, there remains significant uncertaint y as to the number of “empty permits” that would exist if the Tailoring Rule thresholds were significantl y lowered . The EPA believes that several SIPs contain generall y applicable requirements for sources that would constitute “applicable requirements” for man y s ources that would become subject to title V solely as a result of GHG
em issions if the thresholds were significantly lowered

. We noted in the final Tailoring Rule that: We need to gather more information concerning the potential number and utility of “empty permits” for GHG sources, in light of the fact that the need for requirements in title V permits will vary

based on the requirements of each SIP, and the fact that some SIPs contain broadly

applicable requirements. Tailoring Rule, 75 FR 31566

. Thus, we solicit comments, particularl y from states on these issues

. For exampl e: What, if any , SIP requirements would be applicable to sources that would become subject to title V permitting solel y as a result of emitting GHG in excess of a lower threshold? What number (or proportion) of sources potentially subject to title V wou ld be expected to have no applicable requirements under the SIP or other CAA programs? Is there a threshold below which the number of empty permits would increase significantl y, as a result of a corresponding threshold in applicability of SIP requirement s? **VII. Request for Comment**  We have requested comment throughout this preamble on many aspects of the GHG permitting program and our proposed rulemaking. In this section, we provide a summary of the issues on which we are requesting comment and refer the reade r to the preceding sections for our requests on more specific points. A. Solicitation of Comment on Proposed Step 3 1. General

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Page 95 of 110 We solicit comment on all issues described previously in section V of this preamble. In particular we solicit comment from the states as to their current and expected air permit budgets as well as their current and expected future levels of permitting

. In addition, we solicit comment on promulgating lower GHGs thresholds for PSD applicability and on promulgating lower GHGs thresholds at any levels we have anal yz ed in this rulemaking for PSD and title V applicability . Commenters advocating lower thresholds should support their position with data demonstrating that the permitting authorities have developed the capacity to handle the current and future permitting volume under the existing thresholds, and will be able to handle the additional permitting volume , in a timely manner, that would be required at reduced thresho lds. Commenters should also be able to support their positions with data demonstrating that sources have the ability to meet the requirements of the PSD program. We note that in this rulemaking, we are not re - opening or soliciting comment on the Tailoring Rule’s decision to phase in the thresholds , to begin with the Steps 1 and 2 levels , or the legal or policy basis for the Tailoring Rule

. By the same token, a s noted previously in section V , in this rulemaking, we are rel yi ng on the same methodology used i n the Tailoring Rule to calculate administrative burdens, and we are not re - opening that methodology or soliciting comment on it. 46 We are simply proposing action and soliciting comment on Step 3 of the phase

- in approach. 2. Call for A dditional Information C on cerning S tate B urdens As stated in the Tailoring Rule, the EPA is committed to tailoring the applicability criteria that determine which GHG emission sources become subject to the PSD and title V programs of the CAA. The following questions are structure d to help the EPA best assess the status of GHG permitting

46 Although the Tailoring Rule has been challenged in the U.S. Court of Appeals for the D.C. Circuit, no party has challenged this methodolo gy .

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Page 96 of 110 programs based on the three criteria outlined in the Tailoring Rule, which forms the basis for this action

. We request states submit responses to the following questions to the appropriate EPA Regi onal Administrator within 45 day s after the date of publication of th is proposal in the Federal Register

. **General Permitting Burden/Resources** 1. Does your state currently have the necessary resources (funding and staff) to run the PSD and title V permitting program as they exist today?
a. If your state is strained for resources please describe the reasons for it? Please list all that apply and provide a short description of the problem providing specific information where possible (i.e., budget cuts of 10 percent during the last y ear; hiring freeze; loss 3 FTE in last two years)

. i. GHG Permitting ii. Other Permitting Issues (SO 2 , NO 2 , etc) iii. Budget cuts iv. Lack of personnel
v. Other (please specify) 2. If permitting activity

were to increase to levels closer to those originally anticipated in the Tailoring Rule 47 , would your state have the necessary resources to manage the increased workload?
a. If not, please estimate the level of additional resources (funding and staff) your state would require to handle the increased burden. 3. In pr oviding perspective on the PSD program, consider the following scenarios where your

47 See 75 FR 31540.

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Page 97 of 110 annual number of PSD permitting activity were to increase b y 10, 20, 30, 50, 100, and 200 permit actions per ye ar (both new permit applications and modifications included) due to the potential lowering of the current GHG applicability thresholds. When assessing the resources to permit these sources, consider that man y of the newly permitted GHG sources under this scen ario would likely

consist of commercial and small industrial sources whose primary GHG emissions units are small, similarly

configured combustion units:
a. How man y more full

- time employees (FTEs) would your program need to address each of these potential per

mitting activity

increases (i.e., 10, 20, 30, 50, 100, and 200 permit actions per ye ar) in PSD due to GHGs and still meet current PSD permit processing times ? b. H ow man y additional dollars annuall y to your staffing budget would these additional FTEs equate to? 4. How h as GHG permitting affected the permitting process in your state? Please consider the areas listed below and provide specific estimates of the impact GHG permitting has had on your program where possible (i.e., responded to 10 percent more permitting questions than usual).
a. Number of source meetings. b. Numbe r of dail y permitting questions.
c. Number of incomplete permit applications. d. T raining for permitting staff to unders tand the GHG permitting process.
e. Is your staff unsure of how and when to permit GH G sources? 5. For states where PSD permits for GHG have been issued, how was the burden (monetary and
man - hours) compared to a ty pical non

- GHG permit? Please provide an estimate where possible (i.e., an additional 20 hours).

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Page 98 of 110 6. In providing perspective on the ti tle V program, consider the following scenarios where your annual number of title V permitting activit y were to increase b y 10, 20, 30, 50, 100, and 200 permit actions per ye ar (both new permit applications and modifications included) due to the potential lowering of the current GHG applicability thresholds. When assessing the resources to permit these sources, consider that man y of the newly permitted GHG sources under this scenario would likely

consist of commercial and small industrial sources whose prim ary GHG emissions units are small, similarly

configured combustion units:
a. How man y more full

- time employees (FTEs) would your program need to address each of these potential permitting activity increases (i.e., 10, 20, 30, 50, 100, and 200 permit actions per ye ar) in title V due to GHGs and still meet current title V permit processing times ? b. H ow man y additional dollars annuall y to your staffing budget would these additional FTEs equate to? 7. Does your state have an active outreach initiat ive and the resources necessary to reach out to smaller sources that may

not be aware of their obligation to appl y for title V or PSD permits due to GHGs?
a. If the GHG permitting thresholds were lowered resulting in additional sources being subject to the PS D and title V permitting programs, how would this affect such initiative? Please be specific about the level of resources necessary where possible. 8. Have the GHG requirements created or added to a backlog of unissued permits?
a. If so, b y what amount?

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Page 99 of 110 9. Has yo ur state modified its title V fees to cover GHG permitting needs? If not, would your state need to do so if additional sources (i.e., 10, 20, 30, 50, 100, and 200 actions per y ear) were added to the permitting programs as a result of lowered thresholds? **S treamlining Specific Questions**  1. Is your state processing applications through an y electronic permitting measures? If not do you plan on implementing an ty pe of electronic permitting? 2. Has your state implemented LEAN techniques to streamline the permitting pr ocess? I f so, how has this improved the efficiency for permitting actions? I f not, do you plan on doing this in the future? 3. Is your state considering any other permitting streamlining technique to help improve the efficiency and reduce the burden associate d with permitting of GHG sources? Please list all streamlining techniques under consideration and the expected implementation timelines. B. Solicitation of Comment on Streamlining Techniques In section VI of this preamble, we discuss a range of streamlining techniques for GHG permitting. In this action we propose rulemaking to implement two of these techniques at this time concerning PALs for GHGs and creation of f ederal sy nthetic minor source permits for GHGs. For the other techniques, we present information on the techniques but propose no rulemaking at this time. We request comment on all these potential streamlining techniques, as discussed in section VI I and in the following sections. More broadly , we request comment on other approaches to streamlining that may hold promise to reduce PSD and/or title V permitting burden for sources of GHGs and permitting authorities. Please include as much detail as possible on how such an approach would wo rk, the amount of burden reduction that could be achieved, the specific legal authority the EPA should rely upon for implementing the approach, and whether EPA rulemaking would be required for implementation.

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Page 100 of 110 1. Plantwide Applicability L imitations for GHGs We request comment on our proposal to undertake rulemaking at this time to provide a more flexible approach for GHG PAL s. We further request comment on which option we should pursue for this rulemaking, the Major Source Opt

- in Approach or the Minor Source Approach, and on how, specificall y, we should revise our rules to implement the preferred approach. Inour discussion of, and rationale for, GHG PALs in section VI .A of this preamble, we requested comment on many specific, related issues. We again request comment on those issues here. 2. Sy

nthetic Minor Source Permitting Authority for GHGs We request comment on our proposal to create s ynthetic minor permit authority, within the existing federal PSD regulations, for the purpose of issuing s ynthetic minor permit limitations for GHGs. In addition, we request comment on our legal authority for implementing such a program. Finally , w e again request comment on other specific, related issues on which we requested comment in the discussion of sy

nthetic minor permit authority in section VI .B of this preamble. 3. Redefining PTE and Source Category Specific PTE We request comment on the dis cussion in this proposal of our current thinking on developing category specific PTE rules or guidance, and on categories for which such a rule or guidance would be appropriate. We also request comment on creating a rule that would allow a source to use hi storical hours of operation in determining an emissions unit’s PTE. In addition, we request comment on the other specific, related issues that we discussed and on which we requested comment in the discussion of approaches to PTE in section VI .C of this pre amble. 4. General Permits for GHGs We request comment on the idea of developing a rule that would allow use of general permits for GHG sources, and on possible sources and source categories that may benefit from general permits. We

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 101 of 110 also request information on the experience of state and local permitting authorities with the use of general permits and their potential applicability to GHG sources. In addition, we request comment on the other specific, related issues that we discussed and on which we requested comment in the discussion of general permits in section VI .D of this preamble. 5. Presumptive BACT for GHGs We request comment on the concept of developing presumptive BACT for sources of GHGs, and on possible source categories and emissions units that may be promising candidates for this approach. We request comment on how and when to update presumptive BACT determinations, on the use of presumptive BACT for general permits, and on the appropriate public participation for the development and application o f presumptive BACT. In addition, we request comment on the other specific, related issues that we discussed and on which we requested comment in the discussion of presumptive BACT in section VI .E of this preamble. 6. Title V Empty

Permits We request comment o n the extent to which SIPs contain requirements that would be applicable to sources that would be subject to title V solely as a result of emissions of GHGs below the current thresholds established by the Tailoring Rule, and whether a significant number of sources would have empty permits at different thresholds. We also solicit comment on whether the EPA can, and should, interpret the title V as not requiring “empt y permits , ” and if so whether state program revisions, approved b y the EPA, would, or should, be necessary to exclude such sources from title V permit requirements. In addition, we request comment on the other specific, related issues that we discussed and on which we requested comment in the discussion of empty permits in section VI .F of this pre amble. **VIII. Statutory and Executive Order Reviews** 

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Page 102 of 110 A. Executive Order 12866: Regulatory Planning and Review and Executive Order 13563: Improving Regulation and Regulatory Review Under Executive Order 12866 (58 FR 51735, October 4, 1993), this action is a “si gnificant regulatory

action” because it raises novel legal or policy issues. Accordingly , the EPA submitted this action to the OMB for review under Executive Orders 12866 and 13563 (76 FR 3821, January 21, 2011) and an y changes made in response to OMB reco mmendations have been documented in the docket for this action. This proposed Step 3 of the Tailoring Rule would continue the phased

- in approach begun in Steps 1 and 2. However, we have determined that it would not be appropriate at this time to expand th e universe of large sources of GHG emissions that must comply with permitting requirements under the Act, and the proposed rule would not reduce the GHG applicability thresholds or bring more sources into the PSD or title V programs. Thus, the proposed rul e would not impose any costs on sources of GHGs to obtain permits or on permitting authorities to issue permits. B. Paperwork Reduction Act This action does not impose an y new information collection burden. The proposed rule would not change the existing GHG permitting thresholds, and therefore would not impose any additional burden on sources to obtain PSD or title V permits or on permitting authorities to issue such permits. The proposed provisions for GHG PALs and sy nthetic minor source permitting authorit y would have the effect of reducing permitting burden in that the burden associated with obtaining or issuing a PAL permit or sy

nthetic minor permit would be more than offset through avoiding subsequent PSD permitting actions with greater associated burden . However the OMB has previously approved the information collection requirements contained in the existing regulations for the NSR and title V programs under the provisions of the Paperwork Reduction Act , 44 U.S.C. 3501 et seq . and has assigned

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 103 of 110 OMB control number 2060

- 0003 to the NSR program and OMB control numbers 2060

- 0243 and 2060

- 0336 to the title V program (40 CFR P art 70 and P art 71 components, respectively). The OMB control numbers for EPA's regulations in 40 CFR are lis ted in 40 CFR P art 9. C. Regulatory

Flexibility

Act The Regulatory

Flexibility

Act (RFA) generall y requires an agency to prepare a regulatory flexibility anal ys is of an y rule subject to notice and comment rulemaking requirements under the Administrative Proc edures Act or an y other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations and small governmental jurisdictio ns. For purposes of assessing the impacts of this proposed action on small entities, small entity is defined as: (1) a small business that is a small industrial entity as defined in the U.S. Small Business Administration (SBA) size standards ( see 13 CFR 1 21.201); (2) a small governmental jurisdiction that is a government of a cit y, county, town, school district or special district with a population of less than 50,000; or (3) a small organization that is any not - for

- profit enterprise that is independently owned and operated and is not dominant in its field. After considering the economic impacts of this proposed action on small entities, I certify that this proposed action will not have a significant economic impact on a substantial number of small entitie s. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern is an y significant adverse economic impact on small entities, since the primary

purpose of the regulatory flexibility

analy s is is to identify

and address regulatory alternatives “which minimize any significant economic impact of the rule on small entities.” 5 U.S.C. 603 and 604. Thus, an agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 104 of 110 economic effect, on all of the small entities subject to the rule. The proposed rule would not change the existing GHG permitting thresholds, and therefore would not impose any

additional burden on any sources (including small entities) to obtain PSD or title V permits or on an y permitting authorities (including small entities, if any) to issue such permits. The proposed provisions for GHG PALs and s ynthetic minor source permitting authorit y would have the effect of reducing permitting burden on all entities, including small entities, in that the burden associated with obtaining or issuing a PALpermit or s ynthetic minor permit would be more than offset through
avo iding subsequent PSD permitting actions with greater associated burden. We have therefore concluded that this proposed rule will be neutral or relieve the regulatory burden for all affected small entities. We continue to be interested in the potential impa cts of the proposed rule on small entities and welcome comments on issues related to such impacts. In addition while we propose to maintain the current thresholds in this rulemaking, we also solicit comment on lowering the thresholds

. If we receive information that persuades us that we should take action to lower the thresholds, we will at that time reassess the applicability

of the requirements of the Regulatory Flexibility

Act. D. Unfunded Mandates Reform Act This rule does not contain a federal mandate that may result in expenditures of $100 million or more for state, local and tribal governments, in the aggregate, or the private sector in any 1 year. The proposed rule would not change the existing GHG permitt ing thresholds, and therefore would not impose any

additional burden on sources to obtain PSD or title V permits or on permitting authorities to issue such permits. The proposed provisions for GHG PAL s and sy nthetic minor source permitting authority would have the effect of reducing permitting burden in that the burden associated with obtaining or issuing a PAL permit or sy nthetic minor permit would be more than offset through avoiding subsequent PSD permitting actions with greater associated burden. Thus, this rule is not subject to the

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Page 105 of 110 requirements of sections 202 or 205 of UMRA. This rule is also not subject to the requirements of section 203 of UMRA because it contains no regulatory

requirements that might significantly or uniquely

affect small governme nts. As noted previously , the effect of the proposed rule would be neutral or relieve regulatory burden. E. Executive Order 13132: Federalism This proposed rule does not have federalism implications. It will not have substantial direct effects on the states, on the relationship between the national government and the states or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132. This proposed rule would maintain the existing structure of the PSD and title V programs and would not, therefore, affect the relationship between the national government and the states or the distribution of power and responsibilities among the various levels of government. In addition, the proposed rule would not change the existing GHG permitting thresholds, and therefore would not impose any

additional burden on state permitting authorities to issue PSD or title V permits or such permits. The proposed provisions for GHG PAL s and sy nthetic minor source permitting authority would have the effect of reducing permitting burden in that the burden associated with issuing a PAL permit or sy

nthetic minor permit would be more than offset through avoiding subsequent PSD permitting actions with greater associated burden

. In the spirit of Executive Order 13132, and consistent with EPA policy to promote communications between the EPA and state and local governments, the EPA specifically solicits comment on this proposed rule from state and local officials. F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments This action does not have tribal implications. There are no tribal authorities currentl y issuing major NSR permits, one tribe is implementing a title V program based on a delegation agre ement under

### Summary of Interagency Working Comments on Draft Language under EO12866 Interagency Review. Subject to Further Policy Review.

Page 106 of 110 40 CFR Part 71 and one tribe has recentl y obtained approval of title V program under 40 CFR Part 70
. However, the proposed rule would not change the existing GHG permitting thresholds, and therefore would not impose any

additional burden on sources to obtain PSD or title V permits or on permitting authorities to issue such permits. The proposed provisions for GHG PALs and sy nthetic minor source permitting authorit y would have the effect of reducing permitting burden in that the burden associated with obtaining or issuing a PALpermit or s ynthetic minor permit would be more than offset through avoiding subsequent PSD permitting actions with greater associated burden. Although Executive Order 13175 does not appl y t o this proposed rule, the EPA spe cificall y solicits additional comment on this proposed action from tribal officials. G. Executive Order 13045: Protection of Children from Environmental Health and Safety Risks The EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applyin g onl y to those regulatory

actions that concern health or safety risks, such that the analy sis required under section 5
- 501 of the Executive Order has the potential to influence the regulation. This action is not subject to Executive Order 13045 because it does not establish an environmental standard intended to mitigate health or safety

risks. H. Executive Order 13211: Actions That Significantly Affect Energy

Suppl y, Distribution or Use This action is not a “significant energy action” as defined in Executiv e Order 13211 (66 FR 28355, May

22, 2001), because it is not likely to have a significant adverse effect on the supply , distribution or use of energy . Further, we have concluded that this rule is not likely to have any

adverse energy effects because this a ction would not create an y new requirements for sources in the energy supply , distribution or use sectors. I. National Technology Transfer and Advancement Act Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA),

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Page 107 of 110 Public L aw N o. 104
- 113, 12(d) (15 U.S.C. 272 note) directs the EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standar ds ( e.g. , materials specifications, test methods, sampling procedures and business practices) that are developed or adopted by voluntary

consensus standards bodies. The NTTAA directs the EPA to provide Congress, through the OMB, explanations when the a genc y decides not to use available and applicable voluntary consensus standards. This proposed rulemaking does not involve technical standards. Therefore, the EPA did not consider the use of an y voluntary consensus standards. J. Executive Order 12898: Federal A ctions To Address Environmental Justice in Minority Populations and L ow - Income Populations Executive Order 12898 (59 FR 7629, February 16, 1994) establishes federal executive policy on environmental justice. Its main provision directs federal agencies, to the greatest extent practicable and permitted by

law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies and activities on minority populations and low

- income populations in the United States. The EPA has determined that this proposed rule will not have disproportionately high and adverse human health or environmental effects on minority or low

- income populations because it does not affect the level of protection provided to human health or the environment. The proposed rule would not change the existing GHG permitting thresholds, and therefore would not affect the universe of sources subject to permitt ing. K. Determination under Section 307(d)

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Page 108 of 110 Pursuant to sections 307(d)(1)(J) and 307(d)(1)(V) of the CAA, the Administrator determines that this action is subject to the provisions of section 307(d). Section 307(d)(1)(J) specifies that the provisions of sec tion 307(d) appl y to “promulgation or revision of regulations under [part] C of title I (pertaining to prevention of significant deterioration of air quality and protection of visibility ) .” This section clearly

subjects the portions of this action that per tain to PSD to the provisions of section 307(d). Section 307(d)(1)(V) provides that the provisions of section 307(d) apply to “such other actions as the Administrator may

determine.” Pursuant to this section, the Administrator determines that the portions of this action that pertain to title V are subject to the provisions of section 307(d). This determination allows for uniform treatment for all aspects of this action. **IX. Statutory Authority**  The statutory

authorit y for this action is provided by section s 101, 111, 114, 116 and 301 of the CAA as amended (42 U.S.C. 7401, 7411, 7414, 7416 and 7601). **List of Subjects 40 CFR Part 51**  Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equiva lents, Greenhouse gases, Hydrofluorocarbons, Intergovernmental relations, Methane, Nitrous oxide, Perfluorocarbons, Reporting and recordkeeping requirements, Sulfur hexafluoride. **40 CFR Part 52** Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Hydrofluorocarbons, Intergovernmental relations, Methane, Nitrous oxide, Perfluorocarbons, Reporting and recordkeeping requirements, Sulfur hexafluoride.

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Page 109 of 110 **40 CFR Part 70**  Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Hydrofluorocarbons, Intergovernmental relations, Methane, Nitrous oxide, Perfluorocarbons, Repor ting and recordkeeping requirements, Sulfur hexafluoride.

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Page 110 of 110 **Page 105**  **of 105**  **- Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring**  **Rule Step 3, Including GHG Plantwide Applicability Limitations and GHG Synthetic Minor Limitations** 
**4 0 CFR Part 71**  Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Hydrofluorocarbons, Methane, Nitrous oxide, Perfluorocarbons, Reporting and recordkeeping r equirements, Sulfur hexafluoride.

___________________________________________ Dated:

___________________________________________ Lisa P. Jackson, Administrator.