ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-0AR-2010-0062; FRLApproval and Promulgation of Implementation Plans, State of

California, San Joaquin Valley Unified Air Pollution Control

District, New Source Review

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

SUMMARY: EPA is taking final action on revisions to the San

Joaquin Valley Unified Air Pollution Control District portion of

the California State Implementation Plan. Specifically, EPA is

taking final action on three amended District rules, one of which

was submitted on March 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 and modified stationary sources ("new source review" or NSR)

within the District, and the third reflects revisions to an

approved District rule that provides a mechanism by which

existing stationary sources may voluntarily 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 of NSR

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

of various 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

implementation plan, because the revisions to the District rules

that are the subject of this action are required under antibacksliding principles 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 of publication in the

Federal Register] .

ADDRESSES: EPA has 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 may be publicly available only at the hard copy

location (e.g., copyrighted material), and some may not be

publicly available in either location (e.g., CBI). To inspect the

hard copy materials, 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 Protection Agency, 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. Proposed Action

A. Correction of EPA's May 2004 Final Approval

B. Proposed Action on Amended District Rules

1. Summary of Evaluation of Changes Related to Minor NSR

2. Summary of Evaluation of Changes Related to "Extreme"

Ozone Area NSR Requirements

3. Summary of Evaluation of Changes Implementing EPA's

NSR Reform Rules
4

4 . Summary of Evaluation of Amended Rules for

Enforceability

5 . Summary of Evaluation of Amended Rule 2530

6 . Summary of Evaluation of Amended Rules for Compliance

with CAA Section 110(1)

C. Removal of Obsolete Conditions on SIP Approvals

II. Public Comments and EPA's Responses

III. Final Action

IV. Statutory and Executive Order Reviews

I. Proposed Action

On January 29, 2010 (75 FR 4745), under the Clean Air Act

(CAA or "Act"), we proposed three actions in connection with the

permitting rules for the San Joaquin Valley Unified Air Pollution

Control District ("District") portion of the California State

Implementation Plan (SIP).l

A. Correction of EPA's May 2004 Final Approval

First, we proposed to correct an error in our May 2004 final

rule approving the District's Rules 2020 and 2201 that establish

1 The San Joaquin Valley includes all of San Joaquin, Stanislaus, Merced,

Madera, Fresno, Kings and Tulare counties, and the western half of Kern

County, in the State of California. The San Joaquin Valley 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 or unclassifiable for the

other NAAQS. 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

Joaquin Valley 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 of new or modified

stationary sources ("new source review" or "NSR"). In our

proposed rule, we explained how 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 of minor

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 our proposed rule, several comments were

submitted that object to our proposed correction action and the

interpretation of state law upon which it is based, and raise

significant questions as to the true extent of District 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 of District authority with respect to agricultural
6

sources under state law and to defer further rulemaking on the

correction proposal until we have the opportunity to consider the

State's response to our request.

B. Proposed Action on Amended District Rules

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 EPA by the California

Air Resources Board (CARB)

the three listed rules.

Today, we are taking final action on

TABLE 1.--SUBMITTED RULES FOR WHICH WE ARE TAKING FINAL ACTION IN

TODAY'S ACTION

Local Rule # Rule Title Amended Submitted Agency

SJVUAPCD 2020 Exemptions 12/20/07 03/07/08

SJVUAPCD 2201

New and Modified Stationary 12/18/08 03/17/09 Source Review Rule

2530 Federally Enforceable 12/18/08 03/17/09 SJVUAPCD Potential to Emit
7

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 an Authority 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

liquefied petroleum gas (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 both natural gas and LPG

combusted by the equipment: "provided the fuel contains no more than five

percent by weight hydrocarbons ... and no more than 0.75 grains of total

sulfur per 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 to
8

• 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 which Authorities to Construct such sources may be granted,

without interfering with the attainment or maintenance 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 the
9

Generally, amended District Rule 2201 incorporates three

major changes relative to the version of Rule 2201 that is

approved into the SIP. First, amended District Rule 2201 would

replace the term, "Major Modification," with two terms, "Federal

major modification" and uSB 288 major modification." (See

paragraphs 3.17 and 3.34 of the amended rule.) The former term

incorporates EPA's NSR reform principles, 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 and NOx , 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 provided by 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

relevant ASTM test methods.

3 Using these two definitions, the District performs two separate "major

modification" determinations. Where the modification of an existing source

falls within the definition of USB 288 Major Modification," the modification

will be required at a minimum to meet the NSR SIP requirements that had

applied prior to adoption by the District of the 2002 NSR Reforms into Rule

2201. Where the modification also falls within the definition of "Federal

Major Modification," the modification will have to meet additional NSR
10

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 Emit ll ) 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 ("Federally Mandated Operating Permitsll). Relative to

the corresponding rule in the existing SIP 1 the amended rule

would lower the thresholds below which sources of VOC or NOx are

exempt from the requirements of Rule 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 mechanism used 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 JOAQUIN VALLEY AREA DESIGNATIONS

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 Serious a

hour standard

Respirable Attainment Not Applicable

Particulate

Matter (PM1O )

Fine Particulate Nonattainment Not Applicable

Matter (PM2 . 5 )

Carbon Monoxide Attainment (4 urban Not Applicable

areas) ; Unclassifiable/

Attainment (rest of

valley)

Nitrogen Dioxide Unclassifiable/Attainment Not Applicable

Sulfur Dioxide 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 of Evaluation of Changes Related to Minor NSR

As to the changes related to minor source NSR permitting

4 We also identified and evaluated a number of other, less substantive

changes, and found all of them to be either neutral 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 ("minor NSR") by revising an existing permitting

exemption for certain natural-gas- or LPG-fired combustion and

heat transfer systems (see paragraph 6.1 in submitted District

Rule 2020), by exempting minor agricultural sources with actual

emissions less than 50 percent of the major source threshold (see

paragraph 6.20 in submitted District Rule 2020) from permitting,

and by exempting all new or modified minor 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 NSR program would 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 our determination 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 limited permitting exemption for

agricultural sources, we based this conclusion on a number of
13

factors. For pqrticulate matter, we rely upon the implementation

of certain prohibitory rules, such as District Rule 4550

(UConservation Management 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 limited permitting exemption

would only apply to agricultural operations with Uactual"

emissions (i.e., including fugitive emissions)5 of less than 5

tons per year, 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 Staff Report (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 interrelated nature in which they were intended to be read, and [sic]

District's implementation adheres to this statutory language." Thus, fugitive

VOC emissions are included in the determination of whether actual emissions

from a minor agricultural operation are greater than 50% of the applicable

major source threshold which, for VOC, is 10 tons per year, or, in other

words, greater than 5 tons per year.
14

Joaquin Valley 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

established by CARB's area source inventory growth methodologies,

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

or modified minor agricultural sources, approval of the amended

Rules 2020 and 2201 would be consistent with regional planning

efforts to attain and maintain 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 Clean Air Act section 110(1) analysis, entitled

"San Joaquin Valley Unified Air Pollution Control District Rules 2020 and

2201, as amended September 21, 2006, District's Clean Air Act 110(1)

Analysis," dated November 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 per year of VOC or NOx [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 of major 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 and NOx 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 u any increase" threshold for major modifications (see

paragraph 3.17.1.4 of amended 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

Rules
16

In our proposed rule, we described EPA's implementation of

NSR Reform Rules and the ensuing litigation and identified the

basic program elements that NSR programs must be amended to

include. We concluded that, as submitted on March 17, 2009,

District Rule 2201 has been amended to provide for the minimum

program elements of the 2002 NSR Reform Rules that remain in the

wake of subsequent litigation and EPA rulemaking. The amended

District Rule provides for the minimum program elements by

replacing a single definition for UMajor Modification" with two

definitions, one for uFederal Major Modification" and the other

for USB 288 Major Modification." As discussed above, the former

term captures the NSR Reform program elements (and the Uany

increase" emissions threshold required in Uextreme" ozone areas),

while the latter retains the pre-Reform approach to determining

major modification status. Paragraph 3.17.1 of amended Rule 2201

incorporates the new method for determining baseline actual

emissions and the actual-to-projected-actual methodology for

determining whether a major modification has occurred. Paragraph

3.17.2 incorporates provisions allowing major stationary sources

to comply with Plantwide Applicability Limits (PALs).

4. Summary of Evaluation of Amended 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 of Rules 2020 and 2201 that prevent our full

approval. These deficiencies arise from the ambiguity introduced

by the references in both paragraph 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 provided by California Health and Safety Code,

Section 42301.16." In turn, CH&SC section 42301.16(a) requires

districts to extend permitting requirements to all agricultural

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

... or Title V ... of the federal Clean Air Act," 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 the
18

California SIP r nor has California submitted the section to EPA

for approval r the SIP would be ambiguous as to the extent of the

agricultural source permitting exemption if EPA were to approve

submitted District Rule 2020 into the SIP. Effective enforcement

of the permitting requirements would rely on judicial notice of

the statutory provision cited in the ruler and such judicial

notice mayor may not be forthcoming. There is no need to rely on

judicial notice when the District can eliminate the ambiguity by

clearly stating the exemption for agricultural sources in

District Rule 20tO or by submitting CH&SC section 42301.16 to EPA

for approval into the SIP. Moreover r even if we could assume that

(

judicial notice of the statutory provision would be taken r CH&SC

section 42301.16 by its terms allows for a relaxation of the onehalf of major source permitting threshold for agricultural

sources, and such relaxations should be reviewed by EPA under

section 110 for approval as a SIP revision. Therefore r 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 can be 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 covered by

the exemption, and by submitting the amended rule to EPA (via

CARB) as a SIP revision. In todayr s document r we are taking final

limited approval and limited disapproval action today on amended
19

Rule 2020 consistent with our January 29, 2010 proposal.

Paragraph 4.6.9 of submitted Rule 2201 contains a similarlyambiguous reference to state law in listing emission offset

exemptions: "Agricultural sources, to the extent provided by

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 criteria pollutants 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 or modified source is a "Major Source" or a "Federal

Major Modification" 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, EPA proposed a

limited approval and limited disapproval of submitted Rule 2201.

The deficiency in Rule 2201 can be remedied by either submittal

of the statutory provisions cited in paragraph 4.6.9 or by

replacing the references with a clear description of the

applicability of the offset requirement to agricultural sources,

and by submitting the amended rule to EPA (via CARB) as a SIP

revision. In today's document, we are taking final limited
20

approval and limited disapproval action today on amended Rule

2201 consistent with our January 29, 2010 proposal.

5. Summary of Evaluation of Amended Rule 2530

In our January 2010 proposed rule, we discussed the purpose

of District 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 amended by 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 amended District Rule

2530 because we find that it has been appropriately modified 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 of Amended Rules for Compliance with CAA

Section 110(1)

CAA section 110(1) provides: ~Each revision to an

implementation plan submitted by a State under this chapter shall

be adopted by 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 requirement
21

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 lower major source thresholds to all types of new or modified

stationary sources of VOC 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 of non-permitting

requirements in the SIP. Lastly, we noted that the revisions are

consistent with the assumptions of the various air quality plans

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 Clean Air Act.

C. Removal of Obsolete Conditions on SIP Approvals
22

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 of District

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 nonattainment
23

area to attainment (69 FR 21731, April 22, 2004). However, as to

particulate matter, we found the condition to be unfulfilled

because the Kern County Air 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 County APCD retains jurisdiction

remains nonattainment for PM10 (see 73 FR 66759, November 12,

2008), and because we have yet to approve a revision to Kern

County APCD 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 of District

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 County APCD'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 County ACPD, one of the original county-based APCDs covering San

Joaquin Valley, was not entirely consolidated into the current San Joaquin

Valley Unified Air Pollution Control District (herein, referred to as

"District"), but its jurisdiction is no longer county-wide, and is limited to

the eastern portion 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

of EPA's subsequent approval of the Ventura County nonattainment NSR rules at
24

"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"), on behalf of Dairy Cares, a

coalition of California's dairy producer and processor

associations, by letter dated March 1, 2010; Earthjustice, by

letter dated March 1, 2010; and the Center on Race, Poverty & the

Environment (referred to herein as "AIR"), on behalf of the

Association of Irritated Residents and other community and

environmental groups, by letter dated March 1, 2010. AIR joins in

the comments from Earthjustice, but also adds comments of its

own. As noted previously, we have decided to defer further

rulemaking action on our proposal to correct our May 2004

approval of the previous version of District 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 our proposal in this

document, but will respond to those comments in a separate final

rule if we subsequently finalize our proposed 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 can be credited. Dairy Cares acknowledges that CH&SC

section 42301.16(a) requires that agricultural sources obtain

permits "consistent with federal requirements," and that the

Clean Air Act 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 in part on an interpretation of CH&SC
26

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 or modified agricultural

sources that are considered new 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 revised District Rule 2201 provides that

emission offsets shall not be required for:

"Agricultural sources, to the extent provided by 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 established by 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 Clean Air Act is required by 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 criteria pollutants 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 Clean Air

Act" as a reference to sources considered Umajor sources" under

the Clean Air Act and not to uminor sources" because only the

former are required to obtain a permit. A state may exempt new or

modified minor sources from regulation so long as the overall

program for regulation of new 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 (and major modifications 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 modified major sources, including but not

limited to, emission offsets [see CAA section 173(a) (1)] and use

of emissions control technology representing the lowest
28

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 of major agricultural sources from

the offset requirement does not conflict with the Clean Air Act.

Dairy Cares points to Clean Air Act sections 173(c) and

182 (e) (2), 40 CFR 51.165 (a) (1) (vi) (A) and 40 CFR part 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 only by 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 or by obtaining emissions
29

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 intended major 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 other provisions cited by Dairy 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 of modifications

/

a~ "major modifications." Dairy Cares is correct in that the

limited ability by agricultural sources to use internal credits

may well make it harder to avoid "major modification" status and

the corresponding requirements. However, there is simply no
30

language in either the statutory provision or regulatory

provision cited above that conditions Umajor modification" 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 stationary pumps, can already be

used for internal credits in a major modification applicability

determination at an agricultural source.

Dairy Cares points to a provision ln 40CFR part 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

major modifications, 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 program must impose
31

an emissions offset requirement for new major sources and major

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 or major modifications, 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 and minor) new or

modified agricultural sources until agricultural source

reductions meet the criteria for creditability. As explained

above, however, such a reading would prevent 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 should be 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 (both major and minor)

agricultural sources whereas the other generally relates to

permitting of major sources. We see no reason to interpret the

two statutory provisions in question as in direct conflict and
32

thereby to choose one provision over the other, but rather to

give effect to both by interpreting CH&SC section 42301.18(c) as

withholding the authority from Districts to impose an emission

offset requirement on new or modified agricultural sources (until

emissions reductions from such sources are creditable) but only

with respect to non-major agricultural sources and modifications.

Our interpretation of CH&SC sections 42301.16(a) and

42301.18(c) is further supported by our knowledge of the

regulatory context in which Senate Bill 700 (SB 700), which

established the two cited provisions, was promulgated by 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 EPA based 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 deficiency by 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 Air
33

Pollution Control Officers dated September 3, 2008, the CARB

Executive Officer requests the heads of the various air districts

in California to update their permit 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 should be 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 can be 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 air pollution. Only non-major

sources are provided any exemption from offsetting
34

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 of major agricultural sources, the law

would not have met EPA's requirement that we subject major

California agricultural sources to federal permitting

requirements, and EPA would 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 view paragraph

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 law
35

and the language found in paragraph 4.6.9 of revised District

Rule 2020. Thus, we disagree with Dairy Care's assertion that we

are again making 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 Joaquin Valley, 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 our proposed rule, we noted that EPA has not

yet taken action on the submitted San Joaquin Valley 2007 Ozone

Plan or the submitted San Joaquin Valley 2008 PM2 . 5 Plan. Thus, it

is incorrect to say that we have based our proposed 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 the
36

assumptions and control strategies in these plans and found that

the changes are indeed consistent with the plans and would

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 undermined by 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 and particulate matter standards, but California will

not necessarily be required to extend permitting and offsets

requirements to minor agricultural sources to meet that

requirement. While certain SIP requirements are prescribed by the

Act and EPA regulations, extending permitting and offsets

requirements to minor agricultural sources would be 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 new permitting
37

exemption. Rathe~/ the existing exemption found in the current

SIP version of paragraph 6.1 of Rule 2020 is being revised in

certain ways/ only one of which arguably expands the exemption.

The revision that arguably expands the exemption involves changes

in the maximum sulfur content specifications for natural gas and

liquefied petroleum gas (LPG) combusted by the applicable types

of sources (such as boilers and steam generators with maximum

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

specification used by the relevant utilities in their own

contracts for delivery of natural 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 industry practice by LPG

distributors of adding odorant for safety purposes (typically

mercaptan) containing between 1 and 3 grains of sulfur per 100

scf alone exceeds the existing specification of 0.75 grains of
38

sulfur.

For perspective t 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 per year (based on

AP-42 (section 1.4) emissions factors t 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 again t

assuming maximum continuous operation (based on AP-42 (section

1.5) emissions factors for propane t and sulfur content of 15

grains per 100 cubic feet). In other words t this particular

exemption relates to very small emissions sources t 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 criteria pollutant in its own right t but

is also a precursor pollutant for PM10 and PM2 . S • While San

Joaquin Valley 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. Thus t to satisfy federal Clean

Air Act requirements regarding NSR t the valley must 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 per year.

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 per year (27.4 tons per year). See paragraph 4.5.3 of the

District Rule 2201. Clearly, at less than 1 ton of sulfur dioxide

per year, new sources of the type covered by 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 per year. 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 per year based on

actual emission in 2007. Based on the low rate of sulfur dioxide

emissions generated by types of sources covered by 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 covered by this particular exemption is very limited.

Therefore, for the reasons stated in the proposed rule and
40

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 would be more than offset

itself by the reductions in emissions that would flow from the

lower major source emissions thresholds and more 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 lower major 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 highlighted by EPA in the notice of proposed

rulemaking, the District is also relaxing its equivalency

demonstration outlined in section 7.0 of Rule 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 program prior to the

relaxations adopted by EPA as part of NSR Reform and that the

District now seeks to take advantage of the less stringent NSR

Reform provisions governing major modifications. 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 relaxation l and that

EPA needs 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 of Rule 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 rulesl and (2) now requires

demonstration with current "less stringent" federal NSR program

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 which version of 40 CFR 51.165

should be used for determining equivalency with federal offset

requirements. The underlying requirements for demonstrating
42

equivalency with the federal NSR program offset requirements

remain unchanged.

Second, regarding the claim that the current federal NSR

regulations are less stringent, and therefore fewer federal

offsets are now required, we do not agree that fewer offsets

necessarily means that the San Joaquin Valley NSR program would

achieve fewer emissions reductions overall. Even if the

District's implementation of revised NSR rules that incorporate

NSR reform requires fewer emissions offsets, EPA concludes that

any such foregone offsets are themselves offset by the new lower

"major modification" threshold of zero for ozone precursors, down

from 25 tons per year under the existing SIP District Rule 2201,

and higher offset ratio of 1.5 to 1, up from 1.2 to 1. Moreover,

the regional air quality plans do not take credit for reductions

and mitigations required under the District's NSR rules in that

they do not reduce future year's emissions by taking credit for

emissions reductions provided through permitting actions. See,

e.g., page D-4, of appendix D to the San Joaquin Valley 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 of Rule 2020 had the effect of exempting all

agricultural sources from permitting in the San Joaquin valley

portion of the SIP. AIR contends that EPA's statement is at odds
43

with the p~ain language of the Clean Air Act, which neither

exempts major agricultural stationary sources nor affords EPA the

authority to grant an exemption through a limited

approval/limited disapproval action.

Response #5: AIR is objecting to EPA's background discussion

concerning the effect of EPA's approval (in 2001) of the versions

of the District's NSR rules that preceded the versions of the

rules in the current applicable SIP (which were approved in

2004), and thus AIR's comment has no direct bearing on today's

final action on amended District NSR rules, 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 our January 29, 2010 proposed rule, we are

finalizing a limited approval and limited disapproval of amended

District NSR Rules 2020 and 2201, as submitted on March 7, 2008

9 Nonetheless, we affirm our statement that, prior to our 2004 approval of

the District's NSR rules (Rules 2020 and 2201), the District portion of the

California SIP included a broad exemption from permitting for all agricultural

sources. This is because our 2001 action on previous versions of District Rule

2020 and 2201 was a limited approval and limited disapproval action and that

the version of Rule 2020 approved in 2001 included a full exemption from

permitting for agricultural sources consistent with state law at the time. See

paragraph 4.1.2 of District Rule 2020, as amended on September 17, 1998, and

approved on July 19, 2001. We identified the agricultural permitting exemption

as one of the deficiencies that prevented our full approval of the rules and

that triggered a "sanctions clock." As explained in our July 2001 final rule,

the limited approval and limited disapproval action incorporated the rules

into the SIP, as they were submitted, with no 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 composed of separable

parts, and while the overall submittal strengthens the SIP, there are

deficiencies that prevent full approval. See 66 FR 37587, at 37590 (July 19,

2001) .
44

and March 17, 2009, respectively. The amended District Rules 2020

and 2201 revise certain existing exemptions; establish an

exemption from permitting, and from offsets, for certain minor

agricultural operations; establish applicability thresholds (for

major sources and major modifications) and offset thresholds

consistent with a classification of "extreme" for the ozone

standard; and implement NSR Reform.

We are finalizing a limited approval and limited disapproval

action, because the individual provisions within District Rules

2020 and 2201 are not separable, and, because, although the rule

amendments would strengthen the SIP and meet all but one of the

applicable requirements for SIPs in general and NSR SIPs in

particular, they contain unacceptably ambiguous references to

statutory provisions that preyent full approval. This action

incorporates amended Rules 2020 and 2201 into the District

portion of the federally enforceable California SIP, including

those provisions identified as deficient. The amended Rules 2020

and 2201 approved herein supersede the versions of the

corresponding rules that were approved in May 2004 in the

applicable SIP.

The final limited disapproval triggers a sanctions clpck and

EPA's obligation to promulgate a Federal implementation plan.

Sanctions will be imposed unless EPA approves subsequent SIP

revisions that correct the rule deficiencies within 18 months of
45

the effective date of this action. These sanctions will be

imposed under section 179 of the Act according to 40 CFR 52.31.

In addition, EPA must promulgate a FIP under section 110(c)

unless we approve subsequent SIP revisions that correct the rule

deficiencies within 24 months. Note that the submitted rules have

been adopted by the District, and EPA's final limited disapproval

does not prevent the local agency from enforcing it.

with respect to amended District Rule 2530, as submitted on

March 17, 2009, we are taking final action to approve the amended

rule because we find that it has been appropriately modified to

reflect the decrease in the major source threshold for VOC and

NOx consistent with an "extreme" classification. This action

incorporates amended Rule 2530 into the District portion of the

federally enforceable California SIP. The amended Rule 2530

approved herein supersedes the previous version of the

corresponding rule that was approved in April 1996 in the

applicable SIP.

EPA is also removing certain obsolete conditions placed on

1980's era approvals by EPA on various nonattainment plans

submitted by California for the San Joaquin Valley.

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 of a legal

interpretation of the extent of District authority with respect
46

to agricultural sources under state law.

IV. Statutory and Executive Order Reviews

A. Executive Order 12866, Regulatory Planning and Review

The Office of Management and Budget (OMB) has exempted this

regulatory action from Executive Order 12866, entitled

"Regulatory Planning and Review."

B. Paperwork Reduction Act

This action does not impose an information collection burden

under the provisions of the Paperwork Reduction Act, 44 U.S.C.

3501 et seq. Burden is defined at 5 CFR 1320.3(b).

c. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an

agency to conduct a regulatory flexibility analysis of any 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/limited disapprovals under section 110 and

subchapter I, part D of the Clean Air Act do not create any new

requirements but simply approve requirements that the State is

already imposing. Therefore, because this limited
47

approval/limited disapproval action and approval action does not

create any new requirements, I certify that this action will not

have a significant economic impact on a substantial number of

small entities.

Moreover, due to the nature of the Federal-State

relationship under the Clean Air Act, preparation of flexibility

analysis would constitute Federal inquiry into the economic

reasonableness of State action. The Clean Air Act forbids EPA to

base its actions concerning SIPs on such grounds. Union Electric

Co., v.U.S. EPA, 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a)

(2) •

D. Unfunded Mandates Reform Act

Under section 202 of the Unfunded Mandates Reform Act of

1995 ("Unfunded Mandates Act"), signed into law on March 22,

1995, EPA must prepare a budgetary impact statement to accompany

any proposed 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 or more. Under -section 205, EPA must select the most

cost-effective and least burdensome alternative that achieves the

objectives of the rule and is consistent with statutory

requirements. Section 203 requires EPA to establish a plan for

informing and advising any small governments that may be

significantly or uniquely impacted by the rule.
48

EPA has determined that the limited approval/limited

\

disapproval action and approval action promulgated today do not

include a Federal mandate that may result in estimated costs of

$100 million or more 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 new requirements. Accordingly, no

additional costs to State, local, or tribal governments, or to

the private sector, result from this action.

E. Executive Order 13132, Federalism

Federalism (64 FR 43255, 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 of regulatory policies 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 of power and responsibilities among the various

levels of government." Under Executive Order 13132, EPA may not

issue a regulation that has federalism implications, that imposes

substantial direct compliance costs, and that is not required by

/
49

statute, unless the Federal government provides the funds

necessary to pay the direct compliance costs incurred by State

and local governments, or EPA consults with State and local

officials early in the process of developing the proposed

regulation. EPA also may not issue a regulation that has

federalism implications and that preempts State law unless the

Agency consults with State and local officials early in the

process of developing the proposed regulation.

This rule 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, because it merely approves a State rule implementing

a Federal standard, and does not alter the relationship or the

distribution of power and responsibilities established in the

Clean Air ~ct. Thus, the requirements of section 6 of the

Executive Order do not apply to this rule.

F. Executive Order 13175, Coordination with Indian Tribal

Governments

Executive Order 13175, entitled uConsultation and

Coordination with Indian Tribal Governments" (65 FR 67249,

November 9, 2000), requires EPA to develop an accountable process

\

to ensure umeaningful and timely input by tribal officials in the

development of regulatory policies 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

of power 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 Children from

Environmental Health Risks and Safety Risks

EPA interprets Executive Order 13045 (62 FR 19885, April 23,

1997) as applying only to those regulatory actions that concern

health or safety risks, such that the analysis required under

section 5-501'of the Executive Order has 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 that Significantly Affect

Energy Supply, Distribution, or Use

This rule is not subject to Executive Order 13211, "Actions

Concerning Regulations That Significantly Affect Energy Supply,

Distribution, or Use" (66 FR 28355, May 22, 2001) becau~e it is

not a significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act

Section 12 of the National Technology Transfer and
51

Advancement Act (NTTAA) of 1995 requires Federal agencies to

evaluate existing technical standards when developing a new

regulation. To comply with NTTAA, EPA must consider and use

"voluntary consensus standards" (VCS) if available and applicable

when developing programs and policies unless doing so would be

inconsistent with applicable law or otherwise impractical.

The EPA believes that VCS are inapplicable to this action.

Today's action does not require the public to perform activities

conducive to the use of VCS.

J. Congressional Review Act

The Congressional Review Act, 5 U.S.C. section 801 et seq.,

as added by the Small Business Regulatory Enforcement Fairness

,

Act of 1996, generally provides that before a rule may take

effect, the agency promulgating the rule must submit a rule

report, which includes a copy of the rule, to each House of the

Congress and to the Comptroller General of the United States.

EPA will submit a report containing this rule and other required

information to the U.S. Senate, the U.S. House of

Representatives, and the Comptroller General of the United States

prior to publication of the r~le in the Federal Register. A major

rule cannot take effect until 60 days after it is published in

the Federal Register. This action is not a "major rule" as

defined by 5 U.S.C. section 804(2).

K. Petitions for Review of this Action
52

Under section 307(b) (1) of the Clean Air Act, petitions for

judicial review of this action must be filed in the United States

Court of Appeals for the appropriate circuit by [FEDERAL REGISTER

OFFICE: insert date 60 days from date of publication of this

document in the Federal Register]. Filing a petition for

reconsideration by the Administrator of this final rule does not

affect the finality of this rule for the purposes of judicial

review nor does it extend the time within which a petition for

judicial review may be filed, and shall not postpone the

effectiveness of such rule or action. This action may not be

challenged later in proceedings to enforce its requirements.

(See section 307 (b) (2) .)

List of Subjects in 40 CPR Part 52

Environmental protection, Air pollution control,

Incorporation by reference, Intergovernmental relations, Oxides

of nitrogen, Ozone, Reporting and recordkeeping requirements,

Volatile organic compounds.

!tt£d--:--' ( -=------/7-1-/_.2AJ1_0
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 by adding paragraphs

(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]

* * * * *