ENVIRONMENTAL PROTECTIONAGENCY 40 CFR Part 52 [EPA-R09-0AR-2010-0062; FRLApproval and Promulgation of Implementation Plans, State of California, San Joaquin Valley UnifiedAir Pollution Control District, New Source Review AGENCY: Environmental ProtectionAgency (EPA). ACTION: Final rule. SUMMARY: EPA is taking final action on revisions to the San Joaquin Valley UnifiedAir Pollution Control District portion of the California State Implementation Plan. Specifically, EPA is taking final action on three amended District rules, one ofwhich

was submitted onMarch 7, 2008 and the other two of which were submitted on March 17, 2009. Two of the submitted rules reflect revisions to approved District rules that provide for review of

new andmodified stationary sources ("new source review" orNSR) within the District, and the third reflects revisions to an approved District rule that provides a mechanismby which existing stationary sources mayvoluntarily limit their operations to avoid the requirement to secure a federallymandated operating permit. The NSR rule revisions relate to exemptions from permitting and offsets requirements for certain agricultural operations, to the establishment ofNSR applicability and offset thresholds consistent with a classification of "extreme" nonattainment for the ozone standard,2 and to the implementation of EPA's NSR Reform Rules. With respect to the revised District NSR rules, EPA is finalizing a limited approval and limited disapproval because, although the changes would strengthen the SIP, there are deficiencies in enforceability that prevent full approval. With respect to the rule pertaining to operating permit requirements, EPA is finalizing a full approval. EPA is also taking final action to

remove certain obsolete conditions placed on previous approvals ofvarious California nonattainment plans. Lastly, EPA is deferring further action on the Agency's proposal to correct the May 2004 approval of the previous version of the District's NSR rules pending receipt from California of an interpretation of the District's legal authority with respect to agricultural sources under state law. The limited approval and limited disapproval action triggers

a sanctions clock, and EPA's obligation to promulgate a Federal implementationplan, because the revisions to the District rules that are the subject of this action are required under antibackslidingprinciples established for the transition from the 1- hour to the 8-hour ozone standard. EFFECTIVE DATE: This rule is effective on [FEDERAL REGISTER OFFICE: Insert date 30 days from the date ofpublication in the Federal Register]

. ADDRESSES: EPAhas established docket number EPA-R09-0AR-2010-3 0062 for this action. The index to the docket is available electronically at www.regulations.gov and in hard copy at EPA Region IX, 75 Hawthorne Street, San Francisco, California. While all documents in the docket are listed in the index, some information maybe publicly available only at the hard copy location (e.g., copyrightedmaterial), and some may not be publicly available in either location (e.g., CBI). To inspect the hard copymaterials, please schedule an appointment during normal business hours with the contact listed in the FOR FURTHER INFORMATION CONTACT section. FOR FURTHER INFORMATION CONTACT: Laura Yannayon, Permits Office (AIR-3), u.S. Environmental ProtectionAgency, Region IX, (415) 972-3534, yannayon.laura@epa.gov. SUPPLEMENTARY INFORMATION: Throughout this document, "we," "us" and "our" refer to EPA. Table of Contents I. ProposedAction A. Correction ofEPA's May 2004 Final Approval B. ProposedAction onAmended District Rules 1. Summary ofEvaluation of Changes Related to MinorNSR 2. Summary ofEvaluation of Changes Related to "Extreme" Ozone AreaNSRRequirements 3. Summary ofEvaluation of Changes Implementing EPA's NSR Reform Rules4 4 . Summary of Evaluation ofAmended Rules for Enforceability 5 . Summary of Evaluation ofAmended Rule 2530 6 . Summary ofEvaluation ofAmended Rules for Compliance with CAA Section 110(1) C. Removal ofObsolete Conditions on SIPApprovals II. Public Comments and EPA's Responses III. Final Action IV. Statutory and Executive OrderReviews I. ProposedAction On January 29, 2010 (75 FR 4745), under the CleanAirAct (CAA or "Act"), we proposed three actions in connection with the permitting rules for the San Joaquin Valley UnifiedAir Pollution Control District ("District") portion of the California State Implementation Plan (SIP).l A. Correction 

### ofEPA's May 2004 FinalApproval First, we proposedto correct an error in ourMay 2004 final rule approving the District's Rules 2020 and 2201 that establish

1 The SanJoaquinValley includes all of SanJoaquin, Stanislaus, Merced, Madera, Fresno, Kings and Tulare counties, and the western half of Kern County, in the State of California. The San JoaquinValley is designated as a nonattainment area for the 1997 8-hour ozone national ambient air quality standard (NAAQS) and the 1997 (annual) and 2006 (24-hour) fine particulate matter (PM2.s) NAAQS and is designated as attainment orunclassifiable for the otherNAAQS. See 40 CFR 81.303. The area is further classified as "serious" for the 8-hour ozone NAAQS, but the State of California has submitted a request to reclassify the area to "extreme." See 74 FR 43654 (August 27, 2009) for EPA's proposed approval of the State's reclassification request. The San JoaquinValley was further classified as an "extreme" area for the now-revoked I-hour ozone NAAQS when EPA designated the area with respect to the 8-hour ozone NAAQS.5 the requirements and exemptions for review ofnew or modified stationary sources ("new source review" or "NSR"). In our proposed rule, we explainedhow our error arose from the failure, based on information available at the time, to recognize that the District did not have the authority under state law to implement Rules 2020 and 2201 with respect to permitting ofminor agricultural sources with actual emissions less than 50% of the applicable "major source" thresholds and with respect to the imposition of emissions offset requirements for minor agricultural sources. In response to ourproposed rule, several comments were submitted that object to ourproposed correction action and the interpretation of state law upon which it is based, and raise significant questions as to the true extent ofDistrict authority with respect to agricultural sources under state law. Specifically, the commenters who object to our proposed correction cite "savings" clauses in state law that they contend ratify District NSR rules that contain no permitting or offsets exemptions for agricultural sources notwithstanding other provisions in state law that would otherwise limit such District authority over those sources. To ensure our action is based on a correct interpretation of state law, we have decided to request the State of California to provide us with a legal interpretation of the extent ofDistrict authority with respect to agricultural6

sources under state law and to defer further rulemaking on the correctionproposal until we have the opportunity to consider the State's response to our request. B. ProposedAction onAmendedDistrictRules In this section, we summarize the information we provided in the proposed rule concerning the submitted rules subject to this final action, the changes in the rules relative to the corresponding rules in the existing SIP, and our evaluation of the amended rules relative to the applicable CAA and EPA requirements. We provide only a summary of this information herein. For a more detailed discussion of these issues, please

see our January 29, 2010 proposed rule. Table 1 lists the rules on which we proposed action in our January 29, 2010 proposed rule with the dates that they were revised by the District and submitted to EPAby the California Air Resources Board (CARB) the three listed rules. Today, we are taking final action on

TABLE 1.--SUBMITTED RULES FORWHICH WE ARE TAKING FINALACTION IN TODAY'S ACTION Local Rule # Rule Title Amended Submitted Agency SJVUAPCD 2020 Exemptions 12/20/07 03/07/08

SJVUAPCD 2201 New andModified Stationary 12/18/08 03/17/09 Source Review Rule

2530 Federally Enforceable 12/18/08 03/17/09 SJVUAPCD Potential to Emit7 Local Rule # Rule Title Amended Submitted Agency

with respect to District Rule 2020 ("Exemptions"), the rule's purpose is to specify emission units that are not required to obtain anAuthority to Construct or Permit to Operate and to specify the recordkeeping requirements to verify such exemptions. Generally, the changes that we are taking action on today relative to the existing SIP version would revise and clarify certain exemptions and exempt certain agricultural sources from permitting requirements. Among the changes in amended District Rule 2020 relative to the version previously approved into the SIP are changes that will do the following:

• Revise the existing exemption for steam generators, steam superheaters, water boilers, water heaters, steam cleaners, and closed indirect heat transfer systems that have a maximum input heat rating of five million Btu per hour or less and that are fired exclusively on natural gas or liquefiedpetroleumgas (LPG) (see paragraph 6.1.1 of the submitted rule);2

2 The existing exemption is limited to the types of equipment described above but also establishes the following specifications for bothnatural gas and LPG combustedby the equipment: "provided the fuel contains no more than five percent by weight hydrocarbons

... andno more than 0.75 grains of total sulfurper 100 standard cubic feet of gas.... /1 The revised exemption establishes separate specifications for natural gas and for LPG. The hydrocarbon.content limit remains five percent for natural gas but drops to8

• Clarify and tighten the existing exemption for certain types of transfer equipment, such as loading and unloading racks, and equipment used exclusively for the transfer of refined lubricating oil (see paragraph 6.7 of the submitted rule); and

• Exempt agricultural sources to the extent such sources are exempt pursuant to California Health &Safety Code (CH&SC) section 42301.16 (see paragraph 6.20 of the submitted rule) CH&SC section 42301.16 essentially exempts agricultural

sources with actual emissions less than 50 percent of a major

source applicability threshold from permitting unless the District makes certain findings. with respect to District Rule 2201 ("New and Modified Stationary Source Review Rule"), the rule's purpose is to provide for the review of new and modified stationary sources of air**po~lution** and to provide mechanisms including emission trade-offs by whichAuthorities to Construct such sources may be granted, without interfering with the attainment ormaintenance of ambient air quality standards. District Rule 2201 is also intended to provide for no net increase in emissions above specified thresholds from new and modified stationary sources of all nonattainment pollutants and their precursors.

two percent for LPG. The sulfur content limit increases from 0.75 grains, to 1.0 grain for natural gas, and to 15 grains (per 100 standard cubic feet of gas). The revised exemption requires use of the latest versions of the9 Generally, amended District Rule 2201 incorporates three major changes relative to the version ofRule 2201 that is approved into the SIP. First, amendedDistrict Rule 2201 would replace the term, "MajorModification," with two terms, "Federal majormodification" and uSB 288 majormodification." (See paragraphs 3.17 and 3.34 of the amended rule.) The former term incorporates EPA's NSR reformprinciples, and the latter term retains the pre-NSR reform approach to determining whether a modification is a major modification.3 Second, amended District Rule 2201 would incorporate the lower "major source" and "Federal major modification" emissions thresholds, and higher offset ratios, for the ozone precursors, VOC andNOx, consistent with an "extreme" ozone classification. (See paragraphs 3.17, 3.23, and 3.34 of the amended rule). Lastly, changes to District Rule 2201 would exempt new or modified agricultural sources from offset requirements to the extent providedby CH&SC section 42301.18(c), which exempts agricultural sources from the offsets requirement 

### if emissions reductions from such sources would not meet the criteria for real, permanent, quantifiable, and enforceable emissions reductions, unless the offsets are required by federal

relevantASTM test methods. 3 Using these two definitions, the Districtperforms two separate "major modification" determinations. Where the modification of an existing source falls within the definition of USB 288 MajorModification," the modification will be required at a minimumto meet the NSR SIP requirements that had appliedprior to adoption by the District of the 2002 NSR Reforms into Rule 2201. Where the modification also falls within the definition of "Federal MajorModification," the modificationwill have to meet additional NSR10 CAA requirements. (See paragraph 4.6.9 of the amended rule.) Unlike District Rules 2020 and 2201 1 District Rule 2530 ("Federally Enforceable Potential to Emitll ) is not an NSR rule l but is a rule that relies on thresholds based on certain percentages of the major source thresholds established for NSR purposes as a basis to exempt sources from the requirements of Rule 2520 ("FederallyMandated Operating Permits ll ). Relative to the corresponding rule in the existing SIP 1 the amended rule would lower the thresholds below which sources ofVOC or NOx are exempt from the requirements ofRule 2520 (see paragraph 6.1 of the amended rule) 1 would lower the thresholds below which sources

are exempt from certain recordkeeping and reporting requirements under Rule 2530 (see paragraph 5.4.1.2 of the amended rule); and would lower certain alternative operational limits (see l e.g' l paragraph 6.2.4 of the amended rule). In evaluating the amendments to the three District Rules l we found that significant changes fall into four broad categories: changes affecting minor source NSR permitting requirements; changes relating to the area/s extreme classification for the 1- hour ozone standard; changes relating to NSR Reform; and changes affecting the mechanismused by sources to avoid title V requirements 1 and we evaluated these changes for compliance with the requirements under CAA section 110(a) 1 section 110(1) 1 and

Requirements consistent with 2002 NSR Reform.11 section 182(e) and (f). In addition, we reviewed the amended rules for compliance with EPA's regulations for NSR, including 40 CFR 51.160 through 40 CFR 51.165. In so doing, we took into account the pollutant-specific designations for the San Joaquin Valley, summarized in table 2.4 TABLE**2.-~SAN** JOAQUINVALLEYAREADESIGNATIONS

Pollutant Designation Classification (Revoked) Ozone

- Nonattainment Extreme (at the I-hour standard time of designation for the 1997 8-hour ozone standard) Ozone

- 1997 8- Nonattainment Seriousa hour standard Respirable Attainment Not Applicable Particulate Matter (PM1O) Fine Particulate Nonattainment Not Applicable Matter (PM2.5) CarbonMonoxide Attainment (4 urban Not Applicable areas); Unclassifiable/ Attainment (rest of valley) Nitrogen Dioxide Unclassifiable/Attainment Not Applicable SulfurDioxide Unclassifiable/Attainment Not Applicable

a The State of California has requested reclassification of the San Joaquin Valley to "extreme" for the 1997 8-hour ozone standard. See 74 FR 43654 (August 27, 2009)

.

1. Summary ofEvaluation of Changes Related to MinorNSR As to the changes related to minor source NSRpermitting

4 We also identified and evaluated a number of other, less substantive changes, and found all of them to be eitherneutral or strengthening relative to the existing SIP and consistent with all applicable requirements. See section IV.B.5 of the January 29, 2010 proposed rule.12 requirements, we found that the amended rules would affect minor

source NSR ("minorNSR") by revising an existing permitting exemption for certain natural-gas- or LPG-fired combustion and heat transfer systems (see paragraph 6.1 in submittedDistrict Rule 2020), by exempting minor agricultural sources with actual emissions less than 50 percent of the major source threshold (see paragraph 6.20 in submittedDistrict Rule 2020) frompermitting, and by exempting all new or modifiedminor agricultural sources from the offset requirement (see paragraph 4.6.9 of submitted District Rule 2201)

. We concluded that the amended rules met EPA's minor NSR requirements in 40 CFR 51.160 because, even with the new and amended exemptions, the District NSRprogramwould continue to provide the District with the information necessary to determine whether the construction or modification of a stationary source would result in a violation of applicable portions of the control strategy; or would result in interference with attainment or maintenance of the NAAQS. With respect to the revised exemption for certain smaller combustion and heat transfer systems, we based this conclusion on ourdetermination that the relaxed sulfur content specification in amended Rule 2020, paragraph 6.1, would have no significant impact on emissions in the valley. With respect the limitedpermitting exemption for agricultural sources, we based this conclusion on a number of13 factors. For pqrticulate matter, we rely upon the implementation of certainprohibitory rules, such as District Rule 4550 (UConservationManagement Practices") and the District's Regulation VIII (UFugitive PM10 Prohibitions", particularly, Rules 8011 and 8081) to act as non-permitting means to reduce fugitive dust emissions at agricultural sources that fall under the exemption and thereby reduce the potential for localized exceedances of the PM10 and PM2.5 standards. For ozone precursors (VOC and NOx) , we noted that the limitedpermitting exemption would only apply to agricultural operations with Uactual" emissions (i.e., including fugitive emissions)5 of less than 5 tons peryear, and that, as such, the scope of the exemption would be limited to small-scale agricultural operations and would be acceptable so long as the ozone plans for the valley do not count on permitting of such sources. With respect to the regional planning context, for the proposed rule, we reviewed the various approved and submitted San

5 The District's view on the whether CH&SC section 42301.16 (and cited in District Rule 2020, section 6.20) covers fugitive VOC emissions is found in the District's Final StaffReport (page B-13, response to comment #19) on proposed amendments to Rule 2201 and Rule 2530 (dated December 18, 2008): "The District appreciates the opportunity to reiterate that, for the purposes of implementing CH&SC sections 40724.6(c) and 42301.16(c), all emissions, except for fugitive dust, must be included in calculations to determine district permitting requirements based on one-half of the major source thresholds. The statutory language of these sections is consistent, which read separately or in the interrelatednature inwhich theywere intended to be read, and [sic] District's implementation adheres to this statutory language." Thus, fugitive VOC emissions are included in the determination ofwhether actual emissions from a minor agricultural operation are greater than 50% of the applicable major source thresholdwhich, for VOC, is 10 tons peryear, or, in other words, greater than 5 tons peryear.14 JoaquinValley attainment or maintenance plans, and noted that

none of these plans rely upon reductions from NSR for agricultural sources less than 50 percent of the major source threshold. We also noted that, for attainment planning purposes, growth in emissions from agricultural sources has been establishedby CARB's area source inventory growthmethodologies, and no mitigation of that growth from an offsets requirement has been considered when determining the impact of the growth on the District's ability to achieve attainment with the standards.6 We concluded that, because the plans do not rely on emission reductions from permitting of agricultural sources less than 50% of the major source threshold and do not rely on offsets for new

ormodifiedminor agricultural sources, approval of the amended Rules 2020 and 2201 wouldbe consistent with regional planning efforts to attain andmaintain the NAAQS. Lastly, with respect to minor source NSR changes, we noted that, under federal law, minor sources are not required to obtain offsets, and thus, the exemption for minor agricultural sources from the offsets requirement is consistent with federal requirements. 2. Summary of Evaluation of Changes Related to "Extreme" Ozone Area NSR Requirements

Also see the District's CleanAirAct section 110(1) analysis, entitled "San JoaquinValleyUnifiedAir Pollution Control District Rules 2020 and 2201, as amended September 21, 2006, District's CleanAirAct 110(1) Analysis," datedNovember 20, 2007.15 In our January 29, 2010 proposed rule, we identified the applicable requirements for nonattainment areas classified as Uextreme" for the 1-hour ozone standard and reviewed the amended District rules for compliance with the applicable requirements. For such areas, the relevant NSR requirements include a major

source threshold of 10 tons peryear ofVOC orNOx [see CAA section 182(e) and'182(f) and 51.165(a)(1) (iv)], an offset ratio of 1.5 to 1 [see CAA section 182(e) (1) and 40 CFR 51.165(a) (9)], and definition ofmajor modification that applies to any change at a major stationary source which results in any increase in emissions from any discrete operation, unit, or other pollutant emitting activity at the source [see CAA section 182(e)(2) and 40 CFR 51.165(a) (1) (x) (E)]. As submitted on March 17, 2009, the VOC andNOx provisions In District Rule 2201 have been amended to include the 10 ton per year threshold (see paragraph 3.23 of amended Rule 2201), the 1.5 to 1 offset ratio (see paragraph 4.8.1 of amended Rule 2201), and the uany increase" threshold for major modifications (see paragraph 3.17.1.4 ofamended Rule 2201). As such, we concluded that District Rule 2201 has adequately been amended to reflect Uextreme" ozone area requirements under the CAA and 40 CFR 51.165. 3. Summary of Evaluation of Changes Implementing EPA's NSR Reform Rules16 In ourproposed rule, we described EPA's implementation of NSR ReformRules and the ensuing litigation and identified the basic program elements that NSRprograms must be amended to include. We concluded that, as submitted onMarch 17, 2009, District Rule 2201 has been amended to provide for the minimum program elements of the 2002 NSR ReformRules that remain in the wake of subsequent litigation and EPA rulemaking. The amended District Rule provides for the minimumprogram elements by replacing a single definition for UMajorModification" with two definitions, one for uFederal MajorModification" and the other for USB 288 MajorModification." As discussed above, the former term captures the NSR Reformprogram elements (and the Uany increase" emissions threshold required in Uextreme" ozone areas), while the latter retains the pre-Reform approach to determining majormodification status. Paragraph 3.17.1 of amended Rule 2201 incorporates the newmethod for determining baseline actual emissions and the actual-to-projected-actual methodology for determining whether a majormodification has occurred. Paragraph 3.17.2 incorporates provisions allowing major stationary sources to comply with Plantwide Applicability Limits (PALs). 4. Summary of Evaluation ofAmended Rules for Enforceability For the reasons given in the January 2010 proposed rule and summarized above, we found the amendments to District Rules 2020 and 2201 to be acceptable under applicable NSR regulations;17 however, SIP rules must also be enforceable [see CAA section 110(a)], and we found two specific deficiencies related to enforceability ofRules 2020 and 2201 that prevent our full approval. These deficiencies arise from the ambiguity introduced by the references in bothparagraph 6.20 (of Rule 2020) and paragraph 4.6.9 (of Rule 2201) to State law under circumstances where the State law has not been submitted to EPA for approval into the SIP. Specifically, paragraph 6.20 (of Rule 2020) provides a permitting exemption for: UAgricultural sources, but only to the extent providedby California Health and Safety Code, Section 42301.16." In turn, CH&SC section 42301.16(a) requires districts to extendpermitting requirements to all agricultural

sources that are urequired to obtain a permit pursuant to Title I

... or Title V

... of the federal CleanAirAct," which we have interpreted as referring to Umajor" sources under the CAA, and to all other agricultural sources (referred to herein as Uminor") with actual emissions one-half of the applicable major source emissions thresholds (or greater) for any air contaminant, excluding fugitive dust. See CH&SC section 42301.16(b). However, CH&SC section 42301.16(b) also provides a means through which a district can extend the exemption from uone-half of any applicable emissions threshold" to the Umajor source" threshold if certain findings are made in a public hearing. Because CH&SC section 42301.16 is not included in the18 California SIPr nor has California submitted the section to EPA for approvalr the SIP would be ambiguous as to the extent of the agricultural source permitting exemption ifEPAwere to approve submittedDistrict Rule 2020 into the SIP. Effective enforcement of the permitting requirements would rely onjudicial notice of the statutoryprovision cited in the ruler and suchjudicial notice mayor may not be forthcoming. There is no need to rely on judicial notice when the District can eliminate the ambiguityby clearly stating the exemption for agricultural sources in District Rule 20tO orby submitting CH&SC section 42301.16 to EPA for approval into the SIP. Moreoverr even ifwe could assume that ( judicial notice of the statutoryprovision wouldbe takenr CH&SC section 42301.16 by its terms allows for a relaxation of the onehalf ofmajor source permitting threshold for agricultural sources, and such relaxations shouldbe reviewedby EPAunder section 110 for approval as a SIP revision. Thereforer we proposed a limited approval and limited disapproval of submitted Rule 2020. In our January 2010 proposed rule, we noted that the deficiency in Rule 2020 canbe remedied by the District by replacing the statutory reference to CH&SC section 42301.16 in paragraph 6.20 with a clear description of the sources coveredby the exemption, and by submitting the amended rule to EPA (via CARB) as a SIP revision. In todayrs documentr we are taking final limited approval and limited disapproval action today on amended19 Rule 2020 consistent with our January 29, 2010 proposal. Paragraph 4.6.9 of submittedRule 2201 contains a similarlyambiguous reference to state law in listing emission offset exemptions: "Agricultural sources, to the extent providedby California Health and Safety Code, section 42301.18(c), except that nothing in this section shall circumvent the requirements of section 42301(a)." CH&SC section 42301.18(c) states: "A district may not require an agricultural source to obtain emissions offsets for criteriapollutants for that source if emissions reductions from that source would not meet the criteria for real, permanent, quantifiable, and enforceable emission reductions." Our understanding is that the District has no plans to require emissions offsets for new or modified agricultural sources unless such new ormodified source is a "Major Source" or a "Federal MajorModification" as defined in another section of Rule 2201. Once again, there is no need for ambiguity in the applicability of the emissions offset exemption, and therefore, EPAproposed a limited approval and limited disapproval of submittedRule 2201. The deficiency in Rule 2201 canbe remedied by either submittal of the statutoryprovisions cited in paragraph 4.6.9 orby replacing the references with a clear description of the applicability of the offset requirement to agricultural sources, andby submitting the amended rule to EPA (via CARB) as a SIP revision. In today's document, we are taking final limited20 approval and limited disapproval action today on amended Rule 2201 consistent with our January 29, 2010 proposal. 5. Summary of Evaluation ofAmended Rule 2530 In our January 2010 proposed rule, we discussed the purpose ofDistrict Rule 2530 and the applicable EPA guidance and corresponding parameters for such rules, and explained that the emission limits and the alternative operational limits in the rule were amendedby the District in step with the valley's classification of**~extreme"** for the 1-hour ozone NAAQS. We reviewed the amended limits in District Rule 2530, as submitted

on March 17, 2009, and found them to be acceptable. Based on our review of the amended rule in relation to its underlying purpose,

we are taking final action today to approve amendedDistrict Rule 2530 because we find that it has been appropriatelymodified to reflect the decrease in the major source threshold for VOC and NOx consistent with the area's**~extreme"** classification for the 1-hour ozone standard. 6. Summary of Evaluation ofAmended Rules for Compliance with CAA Section 110(1) CAA section 110(1) provides:**~Each** revision to an implementationplan submittedby a State under this chapter shall be adoptedby such State after reasonable notice and public hearing. The administrator shall not approve a revision of a plan if the revision would interfere with any applicable requirement21 concerning attainment and reasonable further progress (as defined in section 7501 of this title) or any other applicable requirement of this chapter." 42 U.S.C. § 7410(1). In our January 2010 proposed rule, for the purposes of CAA section 110(1), we took into account the overall effect of the revisions included in this action. Given the wide application of the lowermajor source thresholds to all types of new ormodified stationary sources ofVOC and NOx and the limited extent of the exemptions from permitting and offsets for certain types of agricultural sources, we found that the overall effect of the revisions would strengthen the SIP, notwithstanding deficiencies identified above in enforceability. Moreover, we concluded that

we do not anticipate localized exceedances of the PM10 or PM2.5 standards, due to the permitting exemption for certain agricultural sources, given the application ofnon-permitting requirements in the SIP. Lastly, we noted that the revisions are consistent with the assumptions of the various air qualityplans developed for the valley. Accordingly, we concluded that the revisions to Rules 2020, 2201, and 2530 would not interfere with any applicable requirements for attainment and reasonable further progress or any other applicable requirement of the CAA and are approvable under section 110(1) of the CleanAirAct. C. Removal ofObsolete Conditions on SIPApprovals22 In our January 29, 2010 proposed rule, we also proposed to

remove certain obsolete conditions placed on SIP approvals of certain California nonattainment plans in the 1980's. These NSRrelated conditions are identified in table 3, below, by applicable county, EPA action, and CFR citation. TABLE 3.--0BSOLETE CONDITIONS BEING REMOVED Conditional Approval County Federal Register Regulatory citation Citation Kern Countya 46 FR 42450 (August 40 CFR 52.232(a) (5) (i)(A) 21, 1981) San Joaquin 47 FR 19694 (May 7, 40 CFR 52.232(a)(6)(i) (A) County 1982), amended at 50 FR 7591 (February 25, 1985) Kings, Madera, 47 FR 19694 (May 7, 40 CFR 52.232(a) (10) (i)(A) Merced, 1982) Stanislaus, and Tulare Counties Fresno County 47 FR 28617 (July I, 40 CFR 52.232(a) (11)(i) (A) 1982)

a In today's document, we are removing the Kern County condition for carbon monoxide and ozone only.

We proposed removal of the condition in 40 CFR 52.232(a) (5) (i) (A) because we concluded that it was obsolete as to carbon monoxide and ozone in light of the approval ofDistrict NSR rules in 2004 (69 FR 27837, May 17, 2004), the change in the boundary for the I-hour ozone nonattainment boundary for San Joaquin Valley (66 FR 56476, November 8, 2001), and the redesignation of the East Kern County I-hour ozone nonattainment23

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

Kern CountyACPD, one of the original county-basedAPCDs covering San JoaquinValley, was not entirely consolidated into the current SanJoaquin ValleyUnifiedAir Pollution Control District (herein, referred to as "District"), but its jurisdiction is no longer county-wide, and is limited to the easternportion of the county. 8 The condition establish in 40 CFR 52.232(a)(11) also relates to Ventura County, but removal of the condition is proper as to Ventura County in light ofEPA's subsequent approval of the Ventura County nonattainment NSR rules at24 "attainment." II. Public Comments and EPA's Responses Our January 29, 2010 proposed rule (75 FR 4745) provided for

a 30-day comment period. During that period, we received adverse comments from three groups: Greenberg-Glusker law firm (referred to herein as "Dairy Cares"), onbehalf ofDairy Cares, a coalition of California's dairyproducer andprocessor associations, by letter datedMarch 1, 2010; Earthjustice, by letter datedMarch 1, 2010; and the Center on Race, Poverty &the Environment (referred to herein as "AIR"), onbehalf of the Association of Irritated Residents and other community and environmental groups, by letter datedMarch 1, 2010. AIRjoins in the comments from Earthjustice, but also adds comments of its

own. As noted previously, we have decided to defer further rulemaking action on ourproposal to correct ourMay 2004 approval of the previous version ofDistrict NSR rules pending a legal interpretation from the state regarding the extent of the District's permitting and offsets authority in connection with agricultural sources under state law. Thus, we have not responded to the comments related to that aspect of ourproposal in this document, but will respond to those comments in a separate final rule ifwe subsequently finalize ourproposed correction as proposed on January 29, 2010. In the following paragraphs, we

68 FR 9561 (February 28, 2003).25 provide a summary of the significant adverse comments and our responses (i.e., related to the aspects of our proposal other than the error correction)

. Comment #1: Dairy Cares disagrees with EPA's approval of the District's Rule Revisions to the extent it is predicated on an interpretation that the exemption for emission offsets does not apply to major sources. Dairy Cares claims that CH&SC section 42301.18(c) prohibits any district from requiring any agricultural source to obtain offsets until agricultural source reductions meet the criteria for creditability. Dairy Cares claims that, under CH&SC 42301.18(c), the District does not have the requisite state,authority to require emission offsets unless the offsets canbe credited. Dairy Cares acknowledges that CH&SC section 42301.16(a) requires that agricultural sources obtain permits "consistent with federal requirements," and that the CleanAirAct generally requires certain emission offsets from

new or expanding federal major sources, but argues that integral to such emission offsets requirements is the ability to credit emission reductions. To the extent there is a conflict between sections 42310.16(a) and 42301.18(c), Dairy Cares asserts that the more specific provision

- section 42301.18(c)

- must control. Response #1: Dairy Cares is correct that EPA's proposed (limited) approval (and limited disapproval) of revised District Rule 2201 is predicated inpart on an interpretation of CH&SC26 sections 42301.16(a) and 42301.18(c) to the effect that CH&SC section 42301.16(a) limits the applicability of the emission offset exemption in CH&SC section 42301.18(c) so as to exclude major agricultural sources from the exemption. In other words, we have concluded that state law requires the District to impose the emissions offsets requirements on new ormodified agricultural

sources that are considerednew major sources or major modifications, notwithstanding the limitation on District authority set forth in CH&SC section 42301.18(c). Paragraph 4.6.9 of revisedDistrict Rule 2201 provides that emission offsets shall not be required for: "Agricultural sources, to the extent providedby California Health and Safety Code, section 42301.18(c), except that nothing in this section shall circumvent the requirements of section 42301.16(a) " CH&SC section 42301.16(a) provides: "In addition to complying with the requirements of this chapter, a permit system establishedby a district pursuant to section 42300 shall ensure that any agricultural source that is required to obtain a permit pursuant to Title I (42 U.S.C. Sec. 7401 et seq.) or Title V (42 U.S.C. Sec. 7661 et seq.) of the federal CleanAirAct is requiredby district regulations to obtain a permit in a manner that is consistent with the federal requirements."27 CH&SC section 42301.18(c) provides: UA district may not require an agricultural source to obtain emissions offsets for criteriapollutants for that source if emissions reductions from that source would not meet the criteria for real, permanent, quantifiable, and enforceable emission reductions." EPA interprets the reference in CH&SC section 42301.16(a) to Uany agricultural source that is required to obtain a permit pursuant to Title I

... or Title V

... of the federal CleanAir Act" as a reference to sources considered Umajor sources" under the CleanAirAct and not to uminor sources" because only the former are required to obtain a permit. A state may exempt new or modifiedminor sources from regulation so long as the overall program for regulation ofnew or modified stationary sources

assures that the NAAQS are achieved. See section 110(a) (2)(C) of the Act. EPA interprets the directive in CH&SC 42301.16(a) to the Districts to ensure that their permit rules require major agricultural sources (andmajormodifications of such sources) to obtain a permit in a manner Uthat is consistent with the federal requirements" as referring to, in this context, the minimum requirements for new or modifiedmajor sources, including but not limited to, emission offsets [see CAA section 173(a)(1)] and use of emissions control technology representing the lowest28 achievable emission rate [see CAA section 173(a)(2)]. With certain exceptions not relevant here (e.g., rocket engines), the Act does not exempt any major sources or major modifications in nonattainment areas from the offset requirement, regardless of whether emissions reductions for a given source meet the criteria for real, permanent, quantifiable, and enforceable emission reductions. In other words, contrary to Dairy Cares' claim, the ability to credit emission reductions is not integral to the emissions offset requirements. We find no statutory or regulatory basis to support Dairy Cares' claim that exemption ofmajor agricultural sources from the offset requirement does not conflict with the CleanAirAct. Dairy Cares points to CleanAirAct sections 173(c) and 182(e) (2), 40 CFR 51.165(a) (1) (vi) (A) and 40 CFRpart 51, appendix S as support for the general principle that credits are

an integral part of the statutory and regulatory scheme for offsets, and that, further, that one cannot be imposed (emission offsets requirements) without allowing for the other (credits for emissions reductions from the source)

. First, section 173 ("

... may comply with any offset requirement onlyby obtaining emission reductions from the same

source or other sources ... ") provides two basic approaches to meeting the emissions offset requirement, by obtaining emissions reductions from the same source orby obtaining emissions29 reductions from other sources. The fact that, for the time being,

one approach (internal offsets) is quite limited (i.e., limited to certain discrete units at a farm from which emissions reductions are considered creditable, e.g., boilers and stationary engines and pumps) does not justify a full exemption from the emissions offset requirement for all major agricultural

sources. If Congress had intendedmajor agricultural sources to be exempt from the offset requirement, it could well have carved out an exception as it has for rocket engines [see CAA section 173(e)]. Moreover, a new major agricultural source is in no different position than any other new major source in that both have no internal emissions reductions to use to comply with the offset requirement. Two otherprovisions citedbyDairy Cares, CAA section 182(e) (2) ("

... not considered a modification if the owner ... elects to offset the increase

... from discrete operations, units

or activities within the source") and 40 CFR 51.165(a) (1) (vi) (A) ("net emissions increase means ... any other increases and decreases in actual emissions that are ... otherwise creditable") relate to identification ofmodifications

/**a~** "majormodifications." Dairy Cares is correct in that the limited ability by agricultural sources to use internal credits may well make it harder to avoid "majormodification" status and the corresponding requirements. However, there is simply no30 language in either the statutoryprovision or regulatory provision cited above that conditions Umajormodification" status

on whether or not the source can credit its emissions reductions. Furthermore, as noted above, discrete units at agricultural sources, such as boilers and stationarypumps, can already be used for internal credits in a majormodification applicability determination at an agricultural source. Dairy Cares points to a provision ln 40CFRpart 51, appendix S, that allows, under certain circumstances, emissions reduction credits from shutdowns or curtailments as further evidence that allowance for credits from a source are integral to the imposition of the emissions offset requirement on the source. However, once again, the provision allowing under certain circumstances the use of credits from shutdowns or curtailments is but one means to comply with the offset requirement, and its unavailability to a certain category of sources does not negate the underlying statutory requirement on all new major sources and majormodifications, including the category of sources for which shutdown or curtailment credits are unavailable, in nonattainment

areas to provide emissions offsets for the applicable nonattainment pollutants. Hence, with respect to agricultural sources, to be uconsistent with the federal requirements" within the meaning of CH&SC 42301.16(a) means a District permitting programmust impose31

an emissions offset requirement for new major sources andmajor modifications. We view CH&SC 42301.16(a) as not only a grant of authority to Districts to establish a permitting system that, in nonattainment areas, requires imposition of an emissions offset requirement on all agricultural sources that are new major

sources ormajormodifications, but as an affirmative directive to do so. Lastly, we recognize that CH&SC section 42301.18(c), read In isolation, withholds the authority from Districts to require emissions offsets from any (i.e., major andminor) new or modified agricultural sources until agricultural source reductions meet the criteria for creditability. As explained above, however, such a reading wouldprevent District's from establishing permitting programs for major sources and major modifications "consistent with federal requirements" as required by the Legislature through CH&SC section 42301.16(a). We also do not agree that CH&SC section 42301.18(c) is simply a more specific statute that shouldbe given precedence

over the more general statute CH&SC section 42301.16(a). The two CH&SC sections simply address different permitting issues; one generally relates to emissions offsets for (bothmajor and minor) agricultural sources whereas the other generally relates to permitting ofmajor sources. We see no reason to interpret the two statutoryprovisions in question as in direct conflict and32 thereby to choose one provision over the other, but rather to give effect to bothby interpreting CH&SC section 42301.18(c) as withholding the authority from Districts to impose an emission offset requirement on new ormodified agricultural sources (until emissions reductions from such sources are creditable) but only with respect to non-major agricultural sources andmodifications. Our interpretation of CH&SC sections 42301.16(a) and 42301.18(c) is further supportedby our knowledge of the regulatory context in which Senate Bill 700 (SB 700), which established the two citedprovisions, was promulgatedby the California Legislature. One of the principal purposes for promulgation of SB 700 was to respond to a "SIP call" under CAA section 110(k)(5) by EPAbased on the lack of state or District authority to carry out the applicable nonattainment NSR or PSD portions of the SIP with respect to major agricultural sources. See 68 FR 37746 (June 25, 2003). Under Dairy Cares' interpretation, the California Legislature would have failed to address this deficiencyby failing to provide the'necessary authority with respect to nonattainment NSR. However, for the

reasons stated above, the relevant provisions of SB 700, i.e., CH&SC sections 42301.16(a) and 42301.18(c), need not be interpreted that way. Finally, we note that CARB and the District interpret the relevant State law in the same way as EPA. In a letter to Air33 Pollution Control Officers dated September 3, 2008, the CARB Executive Officer requests the heads of the various air districts in California to update theirpermit rules as they apply to agricultural sources in accordance with CH&SC 42301.16. In reference to agricultural sources that are major, the CARB Executive Officer states that "Both federal and state law require "best available control technology" (BACT) and offsets for these

sources. Any exemption for major sources from permit requirements that can arguably be considered to be in your District's rule and in the SIP must be removed." See page 3 of the CARB Sept,ember 3, 2008 letter. Later, in this letter, in reference to the offsets exemption in CH&SC 42301.18(c), the CARB Executive Officer states "This exemption shouldbe narrowly applied, and, in any event, cannot be used to exempt major federal sources from offset requirements." See page 4 of the CARB September 3, 2008 letter. The District's interpretation canbe found in its response to a similar comment as addressed herein, wherein the District stated: "The District appreciates the opportunity to further clarify this very important issue. To state it as clearly as possible, the offset exemption of section 4.6.9 is NOT

[emphasis from original] available to agricultural sources which are major sources of airpollution. Only non-major

sources are provided any exemption from offsetting34 requirements by this section. This is not new language, nor is it new interpretation. There is no confusion in the legislative history, or in CAPCOA's white paper on SB 700 implementation. The purpose of the language of section 42301.16(a) is to specifically require [emphasis from original] offsets from major sources of air contaminants, as this was specifically necessary to fulfill the mandates of the federal SIP call that the state

was under at the time. Without this language specifically requiring offsets ofmajor agricultural sources, the law would not have met EPA's requirement that we subject major California agricultural sources to federal permitting requirements, and EPAwould not have been able to stop the SIP call and the impending sanctions. Therefore the suggested change can not be made." See the District's final staff report on proposed amendment to Rule 2201 (page B-12)

. In light of EPA's, CARB's, and the District's interpretation of CH&SC sections 42301.16(a) and 42301.18(c), we viewparagraph 4.6.9 of revised District Rule 2020 as simply, and correctly, reflecting current State law as set forth in the two cited sections of the CH&SC. In other words, with respect to the issue of emissions offsets requirements, we see no difference between the authority granted to the District under applicable State law35 and the language found in paragraph 4.6.9 of revised District Rule 2020. Thus, we disagree withDairy Care's assertion that we

are againmaking the error of approving a rule change that is in conflict with California law. Comment #2: Earthjustice claims that EPA's rationale for approval of the various exemptions being added to the District's NSR rules is flawed because it is premised on the false claim that the District has a plan that will achieve the national standards for particulate matter and ozone. Response #2: In our January 2010 proposed rule, we reviewed the status .of air quality plans in San JoaquinValley, and relied upon the plans as a basis to conclude that the net effect of the changes in the rules would not interfere with reasonable further progress or attainment of any of the NAAQS and thus are approvable under CAA section 110(1). See sections IV.B.1**(~Regulatory** Context") and IV.B.8**(~CAA** Section 110(1)") of the proposed rule. In ourproposed rule, we noted that EPA has not yet taken action on the submitted San Joaquin Valley 2007 Ozone Plan or the submitted San JoaquinValley 2008 PM2.5 Plan. Thus, it is incorrect to say that we have based ourproposed approval of the revised District NSR rules on the premise that the District has a plan that will achieve the national standards for those pollutants. Instead, we have reviewed the plans to ensure that the changes to the District's NSR rules are consistent with the36 assumptions and control strategies in these plans and found that the changes are indeed consistent with the plans andwould strengthen the SIP. Furthermore, we continue to believe that the plans are facially valid, contrary to the unsupported claims by Earthjustice that they are not meaningful plans or that the plans have been underminedby the state. Our detailed review of the plans and subsequent notice-andcomment rulemaking may lead to the requirement that California adopt additional control measures to provide for attainment of the ozone andparticulate matter standards, but California will not necessarilybe required to extendpermitting and offsets requirements to minor agricultural sources to meet that requirement. While certain SIP requirements are prescribedby the Act and EPA regulations, extending permitting and offsets requirements to minor agricultural sources wouldbe considered a discretionary control measure and thus the state may well decide to select some other measure. Comment #3: Earthjustice claims that EPA's analysis under CAA section 110(1) of the boilers and steam generator exemptions is incomplete because it does not address whether the District can allow these sources to be constructed or expanded with no mitigation for emissions increases. Response #3: As an initial starting point, the exemption in amended Rule 2020, paragraph 6.1, would not be a newpermitting37 exemption.**Rathe~/** the existing exemption found in the current SIP version ofparagraph 6.1 of Rule 2020 is being revised in certain ways/ only one ofwhich arguably expands the exemption. The revision that arguably expands the exemption involves changes in the maximum sulfur content specifications for natural gas and liquefiedpetroleumgas (LPG) combustedby the applicable types of sources (such as boilers and steam generators withmaximum input heat ratings of 5 million Btu per hour (gross) or less) With respect to the sulfur content specification/ the amended rule would raise the maximum allowable limit from 0.75 grains (of total sulfur) per 100 standard cubic feet (scf) for both natural gas and LPG/ to 1.0 grain per 100 scf for natural gas and 15 grains per 100 scf for LPG. The District/s memo dated November 13/ 2009/ which is cited ip the proposed rule/ indicates that the reason for the increase is to align the maximum sulfur content specification in the exemption to the corresponding specificationused by the relevant utilities in their own contracts for delivery ofnatural gas. For LPG/ the reason for the increase is to align the specification in the exemption with the corresponding industry standard specifications as set by the Gas Processors Association (GPA). The industrypractice by LPG distributors of adding odorant for safetypurposes (typically mercaptan) containing between 1 and 3 grains of sulfurper 100 scf alone exceeds the existing specification of 0.75 grains of38 sulfur. Forperspectivet we note that the sulfur dioxide emissions from natural gas combustion at 5 million Btu per hour or less amounts to 0.35 lb per day and 0.06 tons per yeart assuming maximum operation 24 hours per daYt 365 days peryear (based on AP-42 (section 1.4) emissions factorst sulfur content of 1 grain per 100 cubic feet). The corresponding sulfur dioxide emissions for LPG are 1.97 lb/day and 0.36 ton per yeart once againt assuming maximum continuous operation (based onAP-42 (section 1.5) emissions factors forpropane t and sulfur content of 15 grains per 100 cubic feet). In other wordst this particular exemption relates to very small emissions sourcest that would not be subject to BACT under District Rule 2201 t paragraph 4.1.1**(~** ... BACT shall be required for

... any new emissions unit ... with a Potential to Emit exceeding 2.0 pounds in anyone day") t

even if such sources were subject to permitting. Sulfur dioxide is a criteriapollutant in its own rightt but is also a precursorpollutant for PM10 and PM2.S• While San JoaquinValley is designated as**~attainment"** for both the sulfur dioxide NAAQS and the PM10 NAAQSt the valley is designated as nonattainment for the PM2.S NAAQS. Thust to satisfy federal Clean AirAct requirements regarding NSRt the valleymust require emissions offsets for new major sources of sulfur dioxide and major modifications at existing major sources of sulfur dioxide.39 The applicable major source threshold for sulfur dioxide, as a precursor to PM2.S, is 100 tons peryear. The District's NSR rule is more broad than required in this respect and applies the emission offset requirement for sulfur dioxide to sulfur dioxide sources with emissions exceeding 54,750 pounds peryear (27.4 tons peryear). See paragraph 4.5.3 of the District Rule 2201. Clearly, at less than 1 ton of sulfur dioxide peryear, new sources of the type coveredby the revised exemption would not otherwise be subject to the offset requirement unless they were located at an existing sulfur dioxide source with emissions greater than 27.4 tons peryear. To gain some perspective as to the number of facilities with sulfur dioxide emissions greater than 27.4 tons per year within the valley, we used CARB's California Emission Inventory Development and Reporting System (CEIDARS) database and reviewed the listings of 3,651 facilities and discovered a total of only 26 that had sulfur dioxide emission greater than 27.4 tons peryear based on actual emission in 2007. Based on the low rate of sulfur dioxide emissions generatedby types of sources coveredby the revised exemption and the small number of sources subject to the offset requirement, the potential in foregone sulfur dioxide emission reductions (offsets) due to the installation of the types of

sources coveredby this particular exemption is very limited. Therefore, for the reasons stated in the proposed rule and40 supplemented herein, we continue to believe that the relaxed sulfur content specification in amended Rule 2020, paragraph 6.1, would have no significant impact on emissions in the valley. Even if there would be some small incremental increase in sulfur dioxide emissions due to the hypothetical relaxation in an otherwise applicable emissions offset requirement on account of the revised exemption, such an increase wouldbe more than offset itselfby the reductions in emissions that would flow from the lower major source emissions thresholds andmore stringent emissions offset requirement for the other PM2.5 precursors, volatile organic compounds and nitrogen oxides. Moreover, we have concluded that overall set of changes in District Rules 2020, 2201, and 2530, including the change in the sulfur fuel content specification, other changes in the permitting and offsets exemptions, the lowermajor source emissions thresholds, and the

more stringent emissions offset requirement, would not interfere with reasonable further progress or attainment of any of the NAAQS and thus are approvable under CAA section 110(1). Comment #4: Earthjustice contends that, in addition to the relaxations highlightedby EPA in the notice ofproposed rulemaking, the District is also relaxing its equivalency demonstration outlined in section 7.0 ofRule 2201 by removing the requirement to demonstrate equivalency with the federal new

source review program that was in effect in December 2002.41 Earthjustice asserts that the purpose of this provision was to enshrine equivalency with the federal programprior to the relaxations adopted by EPA as part ofNSR Reform and that the District now seeks to take advantage of the less stringent NSR Reformprovisions governing majormodifications. Earthjustice claims that the change to section 7.1.1 means that fewer offsets will be required in order to demonstrate equivalence l that EPA/s analysis completely fails to address this relaxationl and that EPAneeds to quantify the reduction in offsets this change will allow and explain how this growth in emissions can be reconciled with the fact that the District has no real strategy for attaining the national standards. Response #4: Earthjustice claims that the revisions to Rule 2201 have the effect of (1) relaxing the equivalency demonstration required in Section 7.0 ofRule 2201 1 because it removed the requirement to demonstrate equivalency with the federal NSR program that was in effect in December 2002 1 i.e' l prior to the effective date of EPA/s NSR reform rules l and (2) now requires demonstration with current "less stringent" federal NSRprogram requirements. EPA disagrees with both of these claims. First l the only significant revisions made to Section 7.0 was to remove the December 2002 date reference as to whichversion of 40 CFR 51.165 shouldbe used for determining equivalency with federal offset requirements. The underlying requirements for demonstrating42 equivalencywith the federal NSRprogram offset requirements remain unchanged. Second, regarding the claimthat the current federal NSR regulations are less stringent, and therefore fewer federal offsets are nowrequired, we do not agree that fewer offsets necessarilymeans that the San JoaquinValleyNSRprogramwould achieve fewer emissions reductions overall. Even ifthe District's implementation ofrevisedNSR rules that incorporate NSR reform requires fewer emissions offsets, EPAconcludes that any such foregone offsets are themselves offset by the new lower "majormodification" threshold of zero for ozone precursors, down from 25 tons peryearunder the existing SIPDistrict Rule 2201, and higher offset ratio of 1.5 to 1, up from 1.2 to 1. Moreover, the regional air qualityplans do not take credit for reductions andmitigations requiredunderthe District's NSR rules in that theydo not reduce future year's emissions by taking credit for emissions reductions provided throughpermitting actions. See, e.g., page D-4, ofappendixDto the SanJoaquinValley 2007 Ozone Plan. 

### Comment #5: AIR takes issue with EPA's statement in the proposed rule that the Agency's 2001 limited approval and limited disapproval ofRule 2020 had the effect ofexempting all agricultural sources frompermitting in the SanJoaquinvalley portion ofthe SIP. AIR contends that EPA's statement is at odds

### 43 with the**p~ain** 

### language ofthe CleanAirAct, whichneither exempts major agricultural stationary sources nor affords EPAthe authority to grant an exemption through a limited approval/limiteddisapproval action. 

### Response #5: AIR is objecting to EPA's backgrounddiscussion concerning the effect ofEPA's approval (in 2001) ofthe versions ofthe District's NSR rules that preceded the versions ofthe rules in the current applicable SIP (whichwere approved in 2004), and thus AIR's comment has no direct bearing on today's final action on amendedDistrictNSRrules, as submitted in 2008 and 2009.9 

### III. Final Action Under CAA sections 110(k)(2) and 301(a) and for the reasons set forth above and in ourJanuary 29, 2010 proposed rule, we are finalizing a limited approval and limiteddisapproval ofamended DistrictNSRRules 2020 and 2201, as submitted onMarch 7, 2008

9 Nonetheless, we affirmour statement that, prior to our 2004 approval of the District's NSR rules (Rules 2020 and 2201), the Districtportion of the California SIP includeda broad exemption frompermitting for all agricultural sources. This is because our 2001 action onprevious versions ofDistrict Rule 2020 and 2201 was a limited approval and limiteddisapproval action andthat the version ofRule 2020 approved in 2001 includeda full exemption from permitting for agricultural sources consistent with state law at the time. See paragraph 4.1.2 ofDistrict Rule 2020, as amendedon September 17, 1998, and approved on July 19, 2001. We identified the agricultural permitting exemption as one of the deficiencies thatpreventedour full approval of the rules and that triggered a "sanctions clock." As explained in ourJuly 2001 final rule, the limited approval and limiteddisapproval action incorporated the rules into the SIP, as they were submitted, withno exception as to those provisions that we found deficient. We generally take limited approval and limited disapproval actions where a given SIP revision is not composedof separable parts, andwhile the overall submittal strengthens the SIP, there are deficiencies that prevent full approval. See 66 FR 37587, at 37590 (July 19, 2001)

.

### 44 andMarch 17, 2009, respectively. The amendedDistrict Rules 2020 and 2201 revise certain existing exemptions; establish an exemption frompermitting, and from offsets, for certainminor agricultural operations; establish applicability thresholds (for major sources andmajormodifications) and offset thresholds consistent with a classificationof "extreme" for the ozone standard; and implementNSRReform. We are finalizing a limited approval and limiteddisapproval action, because the individual provisions withinDistrict Rules 2020 and 2201 are not separable, and, because, although the rule amendments would strengthen the SIP andmeet all but one ofthe applicable requirements for SIPs in general andNSR SIPs in particular, they containunacceptably ambiguous references to statutoryprovisions that preyent full approval. This action incorporates amendedRules 2020 and 2201 into the District portion ofthe federally enforceable California SIP, including those provisions identified as deficient. The amendedRules 2020 and 2201 approvedherein supersede the versions ofthe corresponding rules that were approved inMay 2004 in the applicable SIP. The final limiteddisapproval triggers a sanctions clpck and EPA's obligation to promulgate a Federal implementationplan. Sanctions will be imposedunless EPAapproves subsequent SIP revisions that correct the rule deficiencies within 18 months of

### 45 the effective date ofthis action. These sanctions will be imposedunder section 179 oftheAct according to 40 CFR 52.31. In addition, EPAmust promulgate a FIPunder section 110(c) unless we approve subsequent SIP revisions that correct the rule deficiencies within 24 months. Note that the submitted rules have been adoptedby the District, andEPA's final limiteddisapproval does not prevent the local agency from enforcing it. with respect to amendedDistrict Rule 2530, as submittedon March 17, 2009, we are taking final action to approve the amended rule because we find that it has been appropriatelymodified to reflect the decrease in themajor source threshold for VOC and NOx 

### consistent with an "extreme" classification. This action incorporates amendedRule 2530 into the Districtportion ofthe federally enforceable California SIP. The amendedRule 2530 approvedherein supersedes the previous version ofthe corresponding rule that was approved inApril 1996 in the applicable SIP. EPA is also removing certain obsolete conditions placedon 1980's era approvals byEPAonvarious nonattainment plans submittedby California for the SanJoaquinValley. Lastly, we have decided to defer further action on the Agency's January 2010 proposal to correct a previous approval of the District NSR rules pending receipt from California ofa legal interpretation ofthe extent ofDistrict authoritywith respect

### 46 to agricultural sources under state law. IV. Statutory andExecutive Order Reviews A. Executive 

### Order 12866, RegulatoryPlanningandReview 

### The Office ofManagement and Budget (OMB) has exempted this regulatory action from Executive Order 12866, entitled "Regulatory Planning and Review." B. Paperwork ReductionAct 

### This action does not impose an information collectionburden under the provisions ofthe PaperworkReductionAct, 44 U.S.C. 3501 et seq. 

### Burden is defined at 5 CFR 1320.3(b). 

## c. RegulatoryFlexibilityAct 

### The Regulatory FlexibilityAct (RFA) generally requires an agency to conduct a regulatory flexibility analysis ofany rule subject to notice and comment rulemaking requirements unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small not-for-profit enterprises, and small governmental jurisdictions. This rule will not have a significant impact on a substantial number of small entities because SIP approvals and limited approvals/limiteddisapprovals under section 110 and subchapter I, part Dofthe CleanAirAct do not create anynew requirements but simply approve requirements that the State is already imposing. Therefore, because this limited

### 47 approval/limiteddisapproval action and approval action does not create any new requirements, I certify that this actionwill not have a significant economic impact on a substantial number of small entities. Moreover, due to the nature ofthe Federal-State relationship under the CleanAirAct, preparation of flexibility analysis would constitute Federal inquiry into the economic reasonableness of State action. The CleanAirAct forbids EPA to base its actions concerning SIPs on suchgrounds. UnionElectric Co., v.U.S. EPA, 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a) (2)• 

### D. UnfundedMandates ReformAct Under section 202 ofthe UnfundedMandates ReformAct of 1995 ("UnfundedMandates Act"), signed into law onMarch 22, 1995, EPAmust prepare a budgetary impact statement to accompany anyproposed or final rule that includes a Federal mandate that may result in estimated costs to State, local, or tribal**governm~nts** 

### in the aggregate; or to the private sector, of $100 million ormore. Under-section 205, EPAmust select the most cost-effective and leastburdensome alternative that achieves the objectives ofthe rule and is consistent with statutory requirements. Section 203 requires EPA to establish a plan for informing and advising any small governments that maybe significantlyoruniquely impactedby the rule.

### 48 EPAhas determined that the limited approval/limited

\ 

### disapproval action and approval actionpromulgated today do not include a Federal mandate that may result in estimated costs of $100 million ormore to either State, local, or tribal governments in the aggregate, or to the private sector. This Federal action approves pre-existing requirements under State or local law, and imposes no newrequirements. Accordingly, no additional costs to State, local, ortribal governments, or to the private sector, result from this action. 

### E. Executive Order 13132, 

### Federalism Federalism (64 FR43255, August 10, 1999) revokes and replaces Executive Orders 12612 (Federalism) and 12875 (Enhancing the Intergovernmental Partnership). Executive Order 13132 requires EPA to develop an accountable process to ensure "meaningful and timely input by State and local officials in the development ofregulatorypolicies that have federalism implications." "Policies that have federalism implications" is defined in the Executive Order to include regulations that have "substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution ofpower and responsibilities among the various levels ofgovernment." UnderExecutive Order 13132, EPAmaynot issue a regulation that has federalism implications, that imposes substantial direct compliance costs, and that is not requiredby /

### 49 statute, unless the Federal governmentprovides the funds necessary to pay the direct compliance costs incurredby State and local governments, orEPAconsults with State and local officials early in the process ofdeveloping the proposed regulation. EPA also maynot issue a regulation that has federalism implications and that preempts State lawunless the Agency consults with State and local officials early in the process ofdeveloping the proposed regulation. This rulewill not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution ofpower and responsibilities among the various levels ofgovernment, as specified inExecutive Order 13132, because itmerely approves a State rule implementing

a Federal standard, and does not alter the relationship or the distribution ofpower and responsibilities established in the CleanAir**~ct.** 

### Thus, the requirements of section 6 

### ofthe Executive Orderdo not apply to this rule. 

### F. 

### Executive Order 13175, 

### Coordination withIndian Tribal Governments Executive Order 13175, entitled uConsultation and Coordinationwith IndianTribal Governments" (65 FR 67249, November 9, 2000), requires EPA to develop an accountable process

\ 

### to ensure umeaningful and timely input bytribal officials in the development ofregulatorypolicies that have tribal



### r

### 50 implications." This rule does not have tribal implications, as specified in Executive Order 13175. It will not have substantial direct effects on tribal governments, on the relationship between the Federal government and Indian tribes, or on the distribution ofpower and responsibilities between the Federal government and Indian tribes. Thus, Executive Order 13175 does not apply to this rule. 

### G. 

### Executive Order

### 13045, Protection of

### Childrenfrom EnvironmentalHealthRisksandSafetyRisks EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying onlyto those regulatory actions that concern health or safetyrisks, suchthat the analysis requiredunder section 5-501'ofthe Executive Orderhas the potential to influence the**regul~tion.** 

### This rule is not subject to Executive Order 13045, because it approves a State rule implementing a Federal standard. 

### H. 

### Executive Order 13211, 

### Actions thatSignificantlyAffect EnergySupply, Distribution, or

### Use This rule is not subject to Executive Order 13211, "Actions Concerning Regulations That SignificantlyAffect Energy Supply, Distribution, orUse" (66 FR 28355, May 22, 2001)**becau~e** 

### it is not a significant regulatory actionunder Executive Order 12866. 

### I. National TechnologyTransferandAdvancementAct Section 12 ofthe National TechnologyTransfer and

### 51 AdvancementAct (NTTAA) of 1995 requires Federal agencies to evaluate existingtechnical standardswhendevelopinga new regulation. To complywithNTTAA, EPAmust consideranduse "voluntaryconsensus standards" (VCS) ifavailableandapplicable whendevelopingprograms andpolicies unless doing sowouldbe inconsistentwithapplicable laworotherwise impractical. TheEPAbelieves thatVCS are inapplicable to this action. Today's actiondoes not require thepublic toperformactivities conducive to theuse ofVCS. J. Congressional ReviewAct 

### The Congressional ReviewAct, 5U.S.C. section 801 et seq.,



### as addedbythe SmallBusiness RegulatoryEnforcementFairness

, 

### Actof 1996, generallyprovides thatbeforea rulemaytake effect, the agencypromulgatingthe rulemust submit a rule report, whichincludes a copyoftherule, toeachHouse ofthe Congress andto the ComptrollerGeneral oftheUnitedStates. EPAwill submit a report containingthis rule andotherrequired informationto theU.S. Senate, theU.S. House of Representatives, andthe ComptrollerGeneral oftheUnitedStates priortopublicationofthe**r~le** 

### inthe Federal Register. Amajor rule cannot take effectuntil 60 days afterit ispublishedin the Federal Register. This actionis not a "majorrule" as definedby5U.S.C. section 804(2). K. PetitionsforReviewofthisAction52 

### Under section 307(b)(1) ofthe CleanAirAct, petitions for judicial reviewofthis actionmustbe filed intheUnitedStates Court ofAppeals for the appropriate circuitby [FEDERALREGISTER OFFICE: insertdate 60 days fromdate ofpublicationofthis document inthe Federal Register]. Filinga petitionfor reconsiderationbytheAdministratorofthis final rule does not affect the finalityofthis rule for thepurposes ofjudicial reviewnordoes itextendthe timewithinwhicha petitionfor judicial reviewmaybe filed, and shall notpostpone the effectiveness ofsuchrule oraction. This actionmaynotbe challengedlaterinproceedings to enforce its requirements. (See section 307(b)(2).) List ofSubjects in 40 CPRPart 52 

### Environmentalprotection, Airpollutioncontrol, Incorporationbyreference, Intergovernmental relations, Oxides ofnitrogen, Ozone, Reportingandrecordkeepingrequirements, Volatile organic compounds. 

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### 53

Part 52, Chapter I, Title 40 of the Code of Federal Regulations is amended as follows: PART 52 [AMENDED] 1. The authority citation for part 52 continues to read as follows: AUTHORITY: 42 U.S.C. 7401 et seq. Subpart F - California 2. Section 52.220 is amended byaddingparagraphs (c)(354)(i)(E)(14) and (c)(363)(i)(A)(5) and (6)to read as follows: §52.220 Identification of plan.

* * * * * (c) * * * (354) * * * (i) * * * (E) * * * (14) Rule 2020, “Exemptions,” adopted on September 19, 1991 and amended on December 20, 2007.

* * * * * (363) * * * (i) * * * (A) * * * (5) Rule 2201, “New and Modified Stationary Source Review Rule,” adopted on September 19, 1991, and amended on December 18, 2008.

### 54

(6) Rule 2530, “Federally Enforceable Potential to Emit,” adopted

on June 15, 1995, and amended on December 18, 2008.

* * * * * 3. Section 52.232 is revised to remove and reserve paragraphs (a)(6), (a)(10), and (a)(11) and to revise paragraph (a)(5) to read as follows: §52.232 Part D conditional approval. (a) * * * (5) * * * (i) For PM: (A) By November 19, 1981, the NSR rules must be revised and submitted as an SIP revision. The rules must satisfy section 173 of the Clean Air Act and 40 CFR Subpart I, “Review of new sources and modifications.” In revising Kern County’s NSR rules, the State/APCD must address all the requirements in EPA’s amended regulations for NSR (45 FR 31307, May 13, 1980 and 45 FR 52676, August 7, 1980) which the APCD rules do not currently satisfy including those deficiencies cited in EPA’s Evaluation Report Addendum which still apply despite EPA’s new NSR requirements (contained in document File NAP

-CA

-07 at the EPA Library in Washington, DC and the Regional Office). (ii) [Reserved]

* * * * *