### From: "King, Heidi R." < Heidi_R._King@omb.eop.gov > To: Suzanne Kocchi/DC/USEPA/US@EPA Date: 03/02/2011 06:32 PM Subject: Summary of final interagency comments under EO12866 on GHG Deferral and Biogenic Guidance

Suzie,

Here are the last of the interagency comments under EO12866 review.

Best regards, heidi(See attached file: Interagency_Comments_Under EO12866_on_Biogenic_Deferral.docx)(See attached file: Summary of Interagency EO12866_Comments_on_Biogenic_Guidance.docx)Interagency working comments submitted during EO12866 review. Subject to further policy review. **6560.50**

**ENVIRONMENTAL PROTECTION AGENCY 40 CFR Parts 51, 52, 70, and 71**  **[EPA-HQ-OAR-2011-0083; FRL- ]**

**RIN 2060-XXXX**

**Deferral for CO 2**  **emissions from Bioenergy and Other Biogenic**

**Sources under the Prevention of Significant Deterioration (PSD) and Title V Programs: Proposed Rule** 

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

**ACTION:** Proposed Rule.

**SUMMARY** : This action proposes to defer for a period of three (3) years the application of the Prevention of Significant Deterioration (PSD) and Title V permitting requirements to biogenic carbon dioxide (CO 2 ) emissions from bioenergy and other biogenic stationary sources. This action is being taken as part of the process of granting the Petition for Reconsideration filed by the National Alliance of Forest Owners (NAFO) on August 3, 2010, related to the PSD and Title V Greenhouse Gas Tailoring Rule.

**DATES:** Comments. Comments must be received on or before [INSERT DATE 45 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. Public Hearing . EPA will hold one hearing on this action. The hearing will be conducted on [INSERT THE DATE

15 DAYS AFTER THE DATE OF PUBLICATION IN THE FEDERAL*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 2 of 97

REGISTER ], in the Washington, DC area. The EPA will provide further information about the hearing on its webpage: http://www.epa.gov/NSR/actions.html. To register to speak at the hearing, please go to the webpage: http://www.epa.gov/NSR/actions.html or contact the person

listed in the “ **FOR FURTHER INFORMATION CONTACT** ” section.

**ADDRESSES:** Submit your comments, identified by Docket ID No. EPA–HQ–OAR–2011-0083 by one of the following methods: Federal eRulemaking Portal : http:// www.regulations.gov . Follow the online instructions for submitting comments.

E-mail : GHGbiogenic@epa.gov . Include docket ID No. EPA-HQ-OAR-2011-0083 in the subject line of the message.

Fax : (202) 566–1741.

Mail : Environmental Protection Agency, EPA Docket Center (EPA/DC), Mailcode 6102T, Attention Docket ID No. EPA–HQ–OAR–2011-0083, 1200 Pennsylvania Avenue, NW., Washington, DC 20460. Hand/Courier Delivery : EPA Docket Center, Public Reading Room, EPA West Building, Room 3334, 1301 Constitution Avenue, NW., Washington, DC 20004. Such deliveries are only accepted during the Docket’s normal*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 3 of 97 hours of operation, and special arrangements should be made

for deliveries of boxed information.

Instructions : Direct your comments to Docket ID No. EPA–HQ–OAR–2011-0083. EPA’s policy is that all comments received will be included in the public docket without change and may be made available online at http://www.regulations.gov , including any personal information provided, unless the comment includes

information claimed to be confidential business information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through http://www.regulations.gov

or e-mail. Send or deliver information identified as CBI to only the mail or hand/courier delivery address listed above, attention: Docket ID No. EPA-HQ-OAR-2011-0083. The http://www.regulations.gov website is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through http://www.regulations.gov your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 4 of 97 and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD–ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses.

Docket : All documents in the docket are listed in the http://www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in http://www.regulations.gov or in hard copy at the Air Docket, EPA/DC, EPA West, Room B102, 1301 Constitution Ave., NW., Washington, DC. This Docket Facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566–1744, and the telephone number for the Air Docket is (202) 566–1742.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 5 of 97

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

. Worldwide Web (WWW ): In addition to being available in the docket, an electronic copy of today’s proposal, memoranda to the docket, and all other related information will also be available through the WWW on EPA’s website at http://www.epa.gov/NSR/actions.html

**SUPPLEMENTARY INFORMATION:** Acronyms and Abbreviations

. The following acronyms and

abbreviations are used in this document. ANPR Advanced notice of proposed rulemaking BACT Best Available Control Technology BAU Business as usual CAA Clean Air Act CAR U.S Climate Action Report CBI Confidential Business Information CFI Call for Information CFR Code of Federal Regulations CH 4 methane CO 2 Carbon dioxide CO 2 e Carbon dioxide equivalents EO Executive Order EPA U.S. Environmental Protection Agency FR Federal Register GHG Greenhouse gas GWP Global warming potential HFC Hydrofluorocarbon*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 6 of 97 ICR Information Collection Request IPCC Intergovernmental Panel on Climate Change LUCF Land-Use Change and Forestry MSW Municipal solid waste N 2 O Nitrous oxide NAFO National Alliance of Forest Owners NAAQS National Ambient Air Quality Standards NOx Nitrogen oxides NSPS New Source Performance Standards NSR New Source Review NTTAA National Technology Transfer and Advancement Act of 1995 OMB Office of Management and Budget PFC Perfluorocarbon PSD Prevention of Significant Deterioration PTE Potential to Emit RFA Regulatory Flexibility Act SMC Significant monitoring concentration SF 6 sulfur hexafluoride SIL Significant impact level SIP State implementation plan SMC Significant monitoring concentration Tg Teragram tpy Tons per year U.S. United States UMRA Unfunded Mandates Reform Act UNFCCC United Nations Framework Convention on Climate Change USDA U.S. Department of Agriculture WWW Worldwide Web

**TABLE OF CONTENTS I. General Information**  A. What is the purpose of this action? B. Does this action apply to me? C. What are biogenic CO 2 emissions? D. What should I consider as I prepare my comments to EPA? **II. Relevant Background** A. Carbon Source and Sink Dynamics B. PSD, Title V, and Tailoring Rule C. Complexity of determining net atmospheric impact of CO 2 emissions and incorporating this information into the PSD and Title V Programs D. Designing and Implementing an Accounting Approach*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 7 of 97 **III. Interim Deferral of Biogenic CO 2**  **Emissions Under the PSD and Title V Permitting Programs**  A. General Rationale and Legal Justification for the Interim Deferral B. CO 2 Emissions that are Deferred C. Non-CO 2 GHGs D. Mechanism for Deferral and State Implementation E. Requesting comment **IV. Statutory and Executive Order Reviews** A. Executive Order 12866: Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform Act (UMRA) E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments G. Executive Order 13045: Protection of Children from Environmental Health Risks and Safety Risks H. Executive Order 13211: Actions that Significantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer and Advancement Act J. Executive Order 12898: Federal Actions to AddressEnvironmental Justice in Minority Populations and LowIncome Populations

I. General Information A. What is the purpose of this action? This action proposes to defer for a period of three (3) years the consideration of CO 2 emissions from bioenergy and other biogenic sources (hereinafter referred to as “biogenic CO 2 emissions”) when a stationary source is determining whether its emissions meet the Prevention of Significant Deterioration (PSD) and Title V applicability thresholds, including those for the application of Best Available Control Technology (BACT). Stationary sources*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 8 of 97 that combust biomass and construct or modify during the deferral period will avoid the application of PSD to those actions. This deferral applies only to CO 2 emissions and

does not affect non-GHG pollutants or other greenhouse gases (GHGs) (e.g., methane (CH 4 ) and nitrous oxide (N 2 O))

emitted from the combustion of biomass fuel

. . Also, this does not affect any other EPA programs that pertain to stationary sources, such as New Source Performance Standards (NSPS) or the GHG Reporting Program. On January 12, 2011, EPA explained in letters to Members of Congress and to the National Alliance of Forest Owners (NAFO) 1 , the steps the Agency intends to take to address the issues associated with biogenic CO 2 emissions from stationary sources. First, EPA granted a Petition for Reconsideration filed by the NAFO on August 3, 2010, related to the PSD and Title V Greenhouse Gas Tailoring Rule (75 FR 31514, June 3, 2010)(“Tailoring Rule”). Second, the Agency is undertaking this rulemaking to defer for three years the application of the PSD and Title V permitting requirements to biogenic CO 2 emissions from stationary sources. Third, concurrent with this

1 See Docket EPA-HQ-OAR-2011-0083 for copies of the letters or http://www.epa.gov/nsr/actions.html#jan11 Comment [dsg1]: Is a word missing here? Construct or modify what?

Deleted: or non-GHG pollutants*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 9 of 97 rulemaking, we are providing an interim guidance document (discussed further in section III.D.3) to help permitting authorities establish a basis for concluding that BACT for biogenic CO 2 emissions at stationary sources is simply combustion of biomass fuels. Fourth, EPA will be conducting a detailed examination of the science associated with biogenic CO 2 emissions from stationary sources, including engaging with an independent scientific panel, and considering technical issues, that the Agency must resolve in order to account for biogenic CO 2 emissions in ways that are scientifically sound and also manageable in practice (discussed further in section II.C and II.D). Finally, EPA intends to use the feedback from the scientific and technical review to develop a rulemaking on

how these emissions should be treated and accounted for in PSD and Title V permitting. B. Does this action apply to me? This action applies to stationary sources that emit biogenic CO 2 . **Table 1. Examples of Affected Entities by Category Category NAICS Examples of affected facilities**  Biomass combustion 221 Electric utilities burning biomass fuels.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 10 of 97 **Category NAICS Examples of affected facilities** 321 Wood products manufacturing, and wood pellet fuel manufacturing. 322 Pulp and paper manufacturing. Municipal solid waste combustion 562213 Solid waste combustors and incinerators.

Sources/users of biogas 112 Animal production manure management operations. 221320 Sewage treatment facilities. 562212 Solid waste landfills. Fermentation processes 325193 Ethanol manufacturing. Other 311/312 Food/Beverage processors burning agricultural biomass residues, using fermentation processes, or producing/using biogas from anaerobic digestion of waste materials.

Table 1 of this preamble lists the types of entities that potentially could be affected by the deferral covered by this proposal. This list is not intended to be exhaustive, but rather provides a guide for readers regarding facilities likely to be affected by this action. Note that this rule does not make or infer any policy determination on the part of EPA as to whether, or what part of, emissions from any of these sources may be determined "fugitive" emissions for the purposes of accounting and applicability under air permitting requirements. Such determinations are not within the scope*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 11 of 97 of this rule and are part of the case-by-case application and review process established under the regulations covering these permitting requirements. If you have questions regarding the applicability of this action to a particular facility, consult the person listed in the “ **FOR**

**FURTHER INFORMATION CONTACT”** section of this preamble. C. What are biogenic CO 2 emissions? Carbon dioxide emissions from bioenergy and other biogenic sources (hereinafter referred to as “biogenic CO 2 emissions”) are generated during the combustion or decomposition of biologically-based material 2 . In this action we are addressing only the CO 2 emissions from biogenic sources, not emissions of other GHGs or non-GHG pollutants. The term “biogenic CO 2 emissions” is defined

here as emissions of CO 2 from a stationary source directly resulting from the combustion or decomposition of biologically-based materials other than fossil fuels. Examples of “biogenic CO 2 emissions” include, but are not

limited to:

2 Non-fossilized and biodegradable organic material originating from plants, animals or micro-organisms, including products, by-products, residues and waste from agriculture, forestry and related industries as well as the non-fossilized and biodegradable organic fractions of industrial and municipal wastes, including gases and liquids recovered from the decomposition of non-fossilized and biodegradable organic material.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 12 of 97

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

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

 CO 2 from fermentation during ethanol production;

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

 CO 2 from combustion of the biological fraction of tirederived fuel; and

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

For stationary sources co-firing fossil fuel and biologically-based fuel, and/or combusting mixed fuels (e.g, tire-derived fuels, municipal solid waste (MSW), etc.), the biogenic CO 2 emissions from that combustion are included in this deferral. However, as stated above, the

fossil CO 2 emissions are not. Various methods are available to calculate both the biogenic and fossil portions of CO 2 emissions, including those methods contained in the GHG Reporting Program (40 CFR 98). EPA is requesting comment

on whether this deferral should specify that stationary sources subject to the PSD and Title V programs use a specific method(s) for determining their biogenic CO 2 emissions. EPA also seeks comment on other ways to ensure there is an accurate estimate of how much biogenic CO 2 is*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 13 of 97 subject to the deferral for a specific facility, particularly when combusting mixed fuels. D. What should I consider as I prepare my comments to

EPA? 1. Submitting CBI Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the

comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information marked as CBI will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. Do not submit information that you consider to be CBI or otherwise protected through http://www.regulations.gov

or e-mail. Send or deliver information identified as CBI to only the mail or hand/courier delivery address listed above, attention: Docket ID No. EPA-HQ-OAR-2011-0083. If you have any questions about CBI or the procedures for claiming CBI, please consult the person identified in*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 14 of 97

the “ **FOR FURTHER INFORMATION CONTACT”** section. 2. Tips for Preparing Your Comments When submitting comments, remember to: Identify the rulemaking by docket number and other identifying information (e.g., subject heading, Federal Register date and page number). Follow directions. EPA may ask you to respond to specific questions or organize comments by referencing a CFR part or section number. Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes. Describe any assumptions and provide any technical information and/or data that you used. If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced. Provide specific examples to illustrate your concerns and suggest alternatives. Explain your views as clearly as possible, avoiding the use of profanity or personal threats. Make sure to submit your information and comments by the comment period deadline identified in the preceding*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 15 of 97

section titled **DATES** . To ensure proper receipt by EPA, be sure to identify the docket ID number assigned to this action in the subject line on the first page of your response. You may also provide the name, date, and Federal Register citation. To expedite review of your comments by Agency staff, you are encouraged to send a separate copy of your comments, in addition to the copy you submit to the official docket, to Carole Cook, U.S. EPA, Office of Atmospheric Programs, Climate Change Division, Mail Code6207-J, Washington, DC, 20460, telephone (202) 343–9263, email GHGbiogenic@epa.gov. You are also encouraged to send a separate copy of your CBI information to Carole Cook at the provided mailing address in the “ **FOR FURTHER INFORMATION CONTACT” section**  . Please do not send CBI information to the electronic docket or by email. II. Relevant Background The purpose of this section is to provide relevant background on this action. Section II.A provides basic information on biogenic CO 2 emissions including the relevant information concerning carbon source and sink dynamics and how biogenic CO 2 emissions are accounted for in the Inventory of U.S. Greenhouse Gas Emissions and Sinks*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 16 of 97 (Inventory) 3 . While we are presenting this information for context, as explained in that section and in later parts of this preamble, the Inventory is an annual report that

tracks US GHG emissions at the national scale. The Inventory is not intended to quantify the net atmospheric impacts of a particular type of fuel from a stationary source over a specified time period that extends into the

future. Section II.B identifies general information concerning the PSD and Title V permitting programs and the steps EPA undertook in the GHG PSD and Title V Tailoring Rule to implement the requirements of those permitting programs in a common sense manner, given congressional intent and the overwhelming administrative burden that would otherwise have resulted if EPA were to apply the permitting programs to GHG at the statutory PSD and Title V thresholds. The relevant history and information concerning EPA’s treatment of biomass under the Tailoring Rule and in subsequent GHG permitting guidance and other actions is also addressed, including this rulemaking to defer the inclusion of

3 “Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2008.” U.S. Environmental Protection Agency, EPA 430–R–10–006, April 15, 2010. http://www.epa.gov/climatechange/emissions/usinventoryreport.html (incorporated by reference into Docket EPA-HQ-OAR-2011-0083) Deleted: latter

Comment [dsg2]: Should this text be added?*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 17 of 97 biogenic CO 2 emissions in making PSD and Title V applicability determinations and anticipated additional

future actions. Section II.C sets forth the complexities associated with determining the net atmospheric impact of biogenic CO 2 emissions and factors to consider to ensure the determinations are sound from a practical, predictable and scientific basis when accounting for these emissions in the PSD and Title V Programs. Section II.D discusses information that is lacking and

needed for EPA to determine how to account for CO 2 emissions from various types of feedstocks and facilities. A. Carbon Source and Sink Dynamics 1. Cycling of CO 2 between plants and the atmosphere Through relatively rapid photosynthesis, plants absorb

CO 2 from the atmosphere and add it to their biomass, which contains roughly 50% carbon by weight, through a process called sequestration. Some of the carbon absorbed by plants may eventually be transferred from dead organic matter to the soil where it can remain for long periods of time. Plant biomass, dead organic matter, and soil carbon are “pools” that together make up the carbon stock on a given area of land. Carbon can cycle fairly rapidly back Comment [dsg3]: Does EPA mean to be that specific in this context?*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 18 of 97 to the atmosphere or it can remain stored on land. Stored carbon can be released naturally back into the atmosphere

as CO 2 through decomposition or plant respiration. When biological material such as plant biomass is harvested or cleared from the land, burned for energy, used as an input to an industrial process, or biodegraded as part of waste treatment processes, the material acts as a source of carbon, releasing its stored carbon back into the atmosphere as CO 2 . Over large spatial scales such as states, regions, or continents, if more carbon is sequestered in plant biomass than is emitted to the atmosphere through processes such as harvest, fire, or natural decomposition, plant biomass acts as a net sink for carbon. Conversely, if more carbon is released than is sequestered, plant biomass acts as a net source for carbon. Soils can also be net sources or sinks depending on the balance of carbon added from biomass and lost through disturbances such as tillage or deforestation. 2. Treatment of biogenic CO 2 emissions in the U.S. GHG

Inventory National-level GHG inventories are a common starting point for quantification of the source and sink status for particular land areas. The Inventory tracks annual GHG*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 19 of 97 emissions including emissions of CO 2 , CH 4 , N 2 O, hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF 6 ). The United States (U.S.) has submitted the Inventory to the Secretariat of the United Nations Framework Convention on Climate Change (UNFCCC) under its obligation as a Party to the Convention every year since 1993. The UNFCCC, ratified by the U.S. in 1992, defines the overall framework for intergovernmental efforts to tackle the challenge posed by climate change. The Inventory submitted by the U.S. is consistent with national inventory data submitted by other UNFCCC Parties, and uses internationally accepted methodologies established by the Intergovernmental Panel on Climate Change (IPCC). The Revised 1996 IPCC Guidelines (IPCC Guidelines) 4 provide methodologies for estimating all anthropogenic sources and sinks of GHG emissions at the national scale, classified into six broad sectors: Energy, Industrial Processes, Solvents and Other Product Uses, Agriculture, Land-Use Change and Forestry (LUCF), and Waste.

4 “Revised 1996 IPCC Guidelines for National Greenhouse Gas Inventories.” Intergovernmental Panel on Climate Change (IPCC), Prepared by the National Greenhouse Gas Inventories Programme. 1996. http://www.ipcc-nggip.iges.or.jp/public/gl/invs1.html (incorporated by reference into Docket EPA-HQ-OAR-2011-0083)*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 20 of 97 The Energy Sector includes all GHGs emitted during the production, transformation, handling and consumption of energy commodities, including fuel combustion. The LUCF Sector includes emissions and sequestration resulting from human activities that influence the way land is used or that affect the size of carbon stocks on land. According to the IPCC Guidelines, CO 2 emissions from biomass

combustion:

“... should not be included in national CO 2 emissions from fuel combustion. If energy use, or any other factor, is causing a long term decline in the total carbon embodied in standing biomass (e.g. forests), this net release of carbon should be evident in the calculation of CO 2 emissions described in the Land Use Change and Forestry chapter .” 5 Thus, at the national level, these CO 2 emissions are not included in the estimate of emissions from a country’s Energy Sector, even though the emissions physically occur at the time and place in which useful energy is being generated (i.e., power plant or other stationary source). The purpose of this accounting convention is to avoid double-counting of CO 2 emissions from the Energy Sector and LUCF Sector that would provide a misleading characterization of a country’s contribution to global GHG. Carbon dioxide emissions from a subset of bioenergy sources

5 Id., Reference Manual (Vol. 3), Page 1.10.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 21 of 97 are reported as information items in the Energy Sector ofthe Inventory, but are not included in national fuelcombustion totals to avoid this double-counting at the

national scale. 6 The Inventory is a comprehensive report of emissions at the national scale. All biogenic CO 2 emissions, as defined in this deferral, are also included in the Inventory. However, because the Inventory is organized by broad sector, not by facility type, this deferral covers biogenic CO 2 emissions that may be reported in any sector of the Inventory. 3. Accounting for carbon stocks on land in the U.S. GHG

Inventory The LUCF Sector includes all of the land-based source categories of GHG emissions and sinks. In the U.S. Inventory, EPA’s estimate of emissions and sinks from U.S. land areas is divided into forest land, crop land, grassland, wetlands, settlements, and other land. The largest stocks of carbon are found on forestlands.

6 The Energy Sector of the Inventory does include emissions of CH 4 and N 2 O from the combustion of biomass for energy. These emissions are included in this sector because their magnitude is dependent on the specific way in which the fuel is burned (i.e., combustion technology and operating conditions), which cannot be known by analyzing the changes in the amount of carbon in standing biomass.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 22 of 97 Data from the U.S. Department of Agriculture (USDA) Forest Service Forest Inventory and Analysis Program are used to develop national-scale estimates of forest carbon stocks and carbon stock change. The methodology relies on annual or periodic surveys to assess changes in carbon

stocks over the entire forest land base. The overall change in land-based forest carbon stocks from year to year represents the net carbon balance between atmosphere and forest land. Importantly, this measurement of the net change in forest carbon stocks integrates and inherently includes all of the factors that might influence forest carbon stocks, such as insect outbreaks, wildfire, prescribed fire, all types of harvest (including harvest for bioenergy uses), forest management, enhanced growth, and land use change. As noted earlier, when trees are harvested for bioenergy the CO 2 combustion emissions do not occur in the forest but rather in a power plant or industrial facility. Following the convention established by the IPCC in the Guidelines, EPA nevertheless counts these emissions as occurring on forestland for purposes of developing the Inventory. In assessing CO 2 emissions from the LUCF Sector, EPA looks to the net change in carbon stocks. Over the time*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 23 of 97 period of interest, if the net change in forest carbon stocks is positive, then more carbon was sequestered on land in carbon pools (such as those described in section II.A.1) than was lost to the atmosphere (through all of the processes previously described, such as decomposition, fire, and harvest). In this case the land is acting as a net carbon sink. If the net change in land-based carbon stocks is negative, over the time period of interest more carbon was emitted to the atmosphere than was sequestered on land, and the forest was a net source for carbon. Averaged over the years 1990-2008, data from the Inventory show that the LUCF sector in the U.S. has been a net sink of roughly 815 teragrams (Tg) carbon dioxide equivalent (CO 2 e) per year. 7 This sink is about 12% of the average gross emissions from all other sources combined in the U.S. over the same time period. 8 Future national projections under business as usual (BAU), as reported in the Fifth U.S Climate Action Report (CAR) submitted to the

7 84% of this amount is from C stock change in the forest source categories; the remainder comes from source categories such as Sequestration in Urban Trees and C stock changes in mineral soils on crop land and grassland. U.S. EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2008 (See data archived athttp://www.epa.gov/climatechange/emissions/downloads10/2010-InventoryChapter-Tables.zip ). See also Tables 1 and 2, LUCF sector C storage.pdf, available in docket at EPA-OAR-HQ-2011-0083. 8 See Table ES-4 of U.S. EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2008.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 24 of 97 UNFCCC in 2010, suggest that this LUCF sink is likely to continue, if not increase in size, at least until 2020. 9 In 2010, for the first time since EPA began tracking emissions and sinks, the Inventory included estimates of forest carbon stocks and stock change at the state level. Forestlands in seven (7) U.S. states (AZ, CT, ID, LA, MI, ND, and VT) were net sources of carbon averaged over the time period from 2000 to 2008. In one state (AK) the

forestland was neither a source nor a sink. 10 Forestlands

in all other states were net sinks for carbon over that time period. The IPCC Guidelines, as utilized in the Inventory, seek to estimate net changes in carbon stocks on land for a given period of time that occurred in the past. However, neither the IPCC Guidelines nor the Inventory were designed to quantify the net atmospheric impacts of a particular type of fuel from a stationary source over a specified time period, that extends into the future.

9 U.S. Climate Action Report 2010. Fifth National Communication of the United States of America under the United National Framework Convention on Climate Change. Chapter 5 Projected Greenhouse Gas Emissions, page 81. www.state.gov/documents/organization/140636.pdf 10 U.S. EPA. 2010. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2008. U.S. EPA #430-R-10-06. See Annex 3.12 (Table A-210).Available at http://www.epa.gov/climatechange/emissions/downloads10/USGHG-Inventory-2010-Annex-3-Addtl-Source-Sink-Categories.pdf*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 25 of 97 4. Distinction between biogenic and fossil CO 2 carbon reservoirs, and between biogenic CO 2 and non-GHG pollutants

Once CO 2 is emitted to the atmosphere, it is not possible to distinguish between the radiative forcing

associated with a molecule of CO 2 originating from a biogenic source and one originating from the combustion of fossil fuel. Biogenic CO 2 differs qualitatively from fossil

CO 2 in that there is a significant difference between fossil carbon and biogenic carbon in the length of time required to replenish the reservoirs where the carbon is stored. For example, many coal deposits in North America originated during the Carboniferous Period, hundreds of millions of years ago. In contrast, the reservoirs of carbon found on the surface of Earth, in pools such as tree biomass and cropland soils, have accumulated over decades, not

millennia. Because these land-based biomass carbon stocks can be replenished more quickly than fossil carbon stocks, these biogenic carbon stocks can act as a sink on a far

shorter time scale than fossil carbon. Another way in which biogenic CO 2 differs from fossil

CO 2 , as well as from other regulated pollutants, is the sometimes ambiguous like between emissions caused by human activities and emissions that occur as part of the natural*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 26 of 97 background emission fluxes. There are both natural biogenic CO 2 emissions and anthropogenic biogenic CO 2 emissions. For example, natural fires, decomposition, and plant respiration all result in substantial biogenic

emissions of CO 2 . These transfers of CO 2 between land and atmosphere are critical to the maintenance of life on Earth. However, human activities, such as prescribed fires and land management practices (i.e., anthropogenic biogenic

CO 2 emissions) , can also influence the release of CO 2 from natural systems and these activities have certainly contributed to the buildup of CO 2 in the atmosphere. There are challenges in categorizing the CO 2 emissions that would have occurred naturally versus the emissions attributable to human activity. While the Inventory accounts for all anthropogenic biogenic CO 2 emissions at the national level, this deferral and the Agency’s intent to conduct a detailed examination of the science associated with biogenic CO 2 emissions and technical issues in accounting for those emissions at stationary sources is our effort to better characterize these distinctions and the associated impacts. B. PSD, Title V, and Tailoring Rule Central to today’s action are the PSD and Title V programs and their applicability requirements. This Deleted: (i.e., anthropogenic biogenic CO 2 emissions)*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 27 of 97 section provides background information on those programs as relevant for today’s action. 1. The PSD Program The PSD program is a preconstruction review and permitting program applicable to "new major stationary sources" and "major modifications" at existing major stationary sources, in the terminology of EPA's implementing regulations. The PSD program applies in areas meeting the health-based National Ambient Air Quality Standards (NAAQS) or for which there is insufficient information to determine whether they meet the NAAQS. The applicability of the PSD program to a particular source

must be determined in advance of construction or modification. The primary criterion in determining PSD applicability is whether the proposed project is sufficiently large (in terms of its emissions) to be a major stationary source or major modification. Under the Clean Air Act (CAA), the PSD program applies to any “major emitting facility” that undertakes construction, and such facility is defined to include “any ... source [that] emit[s], or ha[s] the potential to emit, one hundred [or, depending on the source category two hundred fifty] tons per year or more of any air pollutant.”*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 28 of 97 CAA sections 165(a), 169(1). In this notice, we refer to these levels as the 100/250-tpy thresholds. In addition, Congress also applied PSD to any existing major emitting facility that undertakes a “modification,” and defined that term to include “any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source or which results in the emission of any air pollutant not previously emitted.” CAA sections 165(a), 169(2)(C), 111(a)(4). The EPA has reiterated these CAA requirements in its long-standing regulations that implement PSD, although it interpreted these requirements so that they apply only with respect to air pollutants that are subject to regulation under the CAA. Specifically, under EPA’s regulations, a “major stationary source” is any source type belonging to a specified list of 28 source categories which emits or has a potential to emit (PTE) 100 tpy or more of any pollutant subject to regulation under the CAA, or any other source type which emits or has the potential to emit such pollutants in amounts equal to or greater than 250 tpy. See, e.g., 40 CFR 52.21(b)(1). A new source with a PTE at Deleted: narrowly Comment [dsg4]: Suggest deleting as unnecessary and open to potential misinterpretation

Deleted: of*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 29 of 97 or above the applicable "major stationary source threshold" amount is subject to PSD. The regulations also reiterate that PSD applies to not only new construction but also to existing sources that undertake a "major modification," which is defined in terms of the following three criteria: (1) A physical change in, or change in the method of operation of, a "major stationary source" must occur; (2) The change must result in an increase in emissions that is "significant," that is, equal to or above the significance level defined for the pollutant in question, e.g., in 40 CFR 52.21(b)(23)); and (3) The increase in emissions resulting from the change must be a significant net emissions increase. More specifically, with respect to significant levels, when the increase from the project is added to other contemporaneous increases or decreases in actual emissions at the source, the net emissions increase must be significant (equal to or above the significance level defined in regulations). 40 CFR 52.21(b)(23) and (b)(48). Generally, significance levels for PSD are pollutant specific emissions rates. For example, the significance level for emissions of nitrogen oxides (NOx) is 40 tpy. See, e.g., 40 CFR 52.21(b)(23)(i). Under the PSD program, one of the principal substantive requirements is that a new major source or*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 30 of 97 major modification must meet an emissions limitation based on application of BACT, which is an emissions limitation determined on a case-by-case basis taking into account, among other factors, the cost and effectiveness of the control. BACT applies to each “regulated NSR pollutant.” Under PSD, once a source is determined to be major for any regulated pollutant, a BACT review is performed for each pollutant subject to regulation under the CAA ( except for a pollutant for which the area has been designated nonattainment) whose emissions exceed its PSD significance level as part of new construction or modification projects at the source. See 40 CFR 52.21(a)(2), (j)(2) and (3) and 40 CFR 52.21(b)(23). To identify the pollutants covered by the PSD program, EPA regulations define the term “regulated NSR pollutant.” This definition applies to determine both the pollutants subject to the BACT requirement and pollutants that are counted to determine whether a source is a major source required to obtain a PSD permit. The term “regulated NSR pollutant” is incorporated into the definition of BACT and definitions of “major stationary source” and “major modification.” 40 CFR 52.21(b)(12); 40 CFR 52.21(b)(1)- (2). A “regulated NSR pollutant” includes: Deleted: ,*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 31 of 97 (i) Any pollutant for which a national ambient air quality standard has been promulgated and any pollutant identified under this paragraph (b)(50)(i) as a constituent or precursor for such pollutant. ...; (ii) Any pollutant that is subject to any standard promulgated under section 111 of the Act; (iii) Any Class I or II substance subject to a standard promulgated under or established by title VI of the Act; (iv) Any pollutant that otherwise is subject to regulation under the Act; except that any or all hazardous air pollutants either listed in section 112 of the Act or added to the list pursuant to section 112(b)(2) of the Act, which have not been delisted pursuant to section 112(b)(3) of the Act, are not regulated NSR pollutants unless the listed hazardous air pollutant is also regulated as a constituent or precursor of a general pollutant listed under section 108 of the Act.

2. Title V The Title V permit program establishes operating permit requirements that are intended to improve sources' compliance with other CAA requirements. Title V generally does not add new pollution control requirements, but it does require that each source subject to its requirements obtain an operating permit that assures compliance with all pollution control requirements or “applicable requirements” required by the CAA (e.g. , NSPS, and state implementation plan (SIP) requirements, including PSD), and it requires*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 32 of 97 that certain procedural requirements be followed, especially with respect to compliance with these requirements. "Applicable requirements" for Title V purposes include stationary source requirements, but do not include mobile source requirements. Other procedural requirements include providing review of permits by EPA, states, and the public, and requiring permit holders to track, report, and annually certify their compliance status with respect to their permit requirements. The CAA applies Title V, through the definition of “major source,” to “any stationary facility or source of air pollutants which directly emits, or has the potential to emit, one hundred tons per year or more of any air pollutant.” CAA sections 502(a), 501(2)(B), 302(j). EPA codified in the Tailoring Rule its long-established interpretation that this definition applies only with respect to air pollutants that are subject to regulation

under the CAA. 11 3. Tailoring Rule a. Rationale and Requirements

11 Memorandum from Lydia N. Wegman, Deputy Director, Office of Air Quality Planning and Standards, U.S. EPA, “Definition of Regulated Air Pollutant for Purposes of Title V” (April 26, 1993).*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 33 of 97 In the Tailoring Rule, EPA recognized that if the applicability provisions of the PSD and Title V programs were applied literally so that PSD and Title V requirements applied to GHG-emitting sources at the 100/250 tpy levels provided in the CAA, then the permitting authorities would be overwhelmed by the large numbers of permittees and many small sources would be unduly encumbered by the permitting demands. In light of those impacts, EPA concluded that as a legal matter, Congress did not intend that the PSD and Title V applicability requirements be applied literally to GHG-emitting sources as of January 2, 2011 – the date by which EPA determined that GHGs become subject to regulation under the CAA due to the motor vehicle rule, which resulted in PSD and Title V applicability - and instead, that EPA is authorized to tailor those applicability requirements to apply to such sources in a phased-in manner, starting with the largest sources first. Specifically, in the Tailoring Rule, EPA interpreted these PSD and Title V applicability provisions under the

familiar Chevron 12 two-step framework for interpreting administrative statutes, taking into account certain legal doctrines. Those doctrines, insofar as relevant to the

12 Chevron U.S.A. Inc. v. NRDC , 467 U.S. 837 (1984). Deleted: rule,*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 34 of 97 present action, are (1) the “absurd results” doctrine, which authorizes agencies to apply statutory requirements differently than a literal reading would indicate, as necessary to effectuate congressional intent and avoid absurd results; and (2) the “administrative necessity” doctrine, which authorizes agencies to apply statutory requirements in a way that avoids impossible administrative

burdens. 13

Under Chevron , the agency must, at step 1, determine whether Congress’s intent as to the specific matter at issue is clear, and, if so, the agency must give effect to

that intent. 14 If congressional intent is not clear, then, at step 2, the agency has discretion to fashion an interpretation that is a reasonable construction of the

statute. To determine congressional intent, the agency must first consider the words of the statutory requirements, and if their literal meaning answers the question at hand, then, in most cases, the agency must implement those requirements by their terms. However, under the “absurd

13 In the Tailoring Rule, EPA also considered a third doctrine, the “one-step-at-a-time” doctrine, which authorizes agencies to implement statutory requirements a step at a time. This doctrine is not relevant to the present rulemaking. 14 Chevron , 467 U.S. at 842-43.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 35 of 97 results” doctrine, the literal meaning of statutory requirements should not be considered to indicate congressional intent if that literal meaning would produce

a result that is senseless or that is otherwise inconsistent with - and especially one that undermines - underlying congressional purpose. In these cases, if congressional intent for how the requirements apply to the question at hand is clear, the agency should implement the statutory requirements not in accordance with their literal meaning, but rather in a manner that most closely effectuates congressional intent. If congressional intent is not clear, then an agency may select an interpretation

that is reasonable under the statute. Under the “administrative necessity” doctrine, Congress is presumed, at Chevron step 1, to intend that its statutory directives to agencies be administrable, and not to have intended to have written statutory requirements that are impossible to administer. Therefore, under this doctrine, an agency may depart from statutory requirements that, by their terms, are impossible to administer, but the agency may depart no more than necessary to render the requirements administrable.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 36 of 97 In the Tailoring Rule, EPA closely considered the burdens to the permitting authorities of applying PSD and Title V to GHG-emitting sources. For example, EPA calculated, on a national basis, the workload that GHG permit applications would entail, and compared that to the existing workload of permitting authorities. EPA concluded that permitting authorities would be overwhelmed by permit applications if PSD and Title V were applied literally as of January 2, 2011 to GHG-emitting sources. In addition, EPA calculated the cost to the sources of permitting requirements and concluded that many small sources would become subject to unduly high expenses. Accordingly, in applying the Chevron analytical framework, in conjunction with the absurd results and administrative necessity doctrines, EPA concluded thatCongress intended that PSD and Title V apply to GHGemitting sources, but that, in light of the burdens to the permitting authority and the costs to the sources of applying permitting requirements at the statutory thresholds as of January 2, 2011, the application of the permitting programs should be phased in, starting with the largest sources of GHG emissions first. EPA also concluded

that the calculation of the amount of GHG emissions should*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 37 of 97

be based on the amount of GHG pollutant emitted in tons per year, weighted by the global warming potential (GWP) of the particular GHG pollutant, normalized to the GWP of one ton

of CO 2 over a 100-year period, which is called carbon dioxide equivalent (CO 2 e). Accordingly, in the Tailoring Rule, EPA established two steps to implement PSD and Title V, with Tailoring Rule Step 1 beginning on January 2, 2011, which would apply to sources subject to PSD or Title V anyway due to their other pollutants (which we call “anyway” sources) and, as to PSD,

to sources that emit 75,000 tpy CO 2 e (or increase emissions by that amount for modifications)

. Tailoring Rule Step 2 ,beginning on July 1, 2011, would apply to the largest GHGemitting sources. Sources not otherwise subject to Title V would become subject to it as of July 1, 2011 if they emit or have the potential to emit at least 100,000 tpy CO2e, while sources that would not otherwise trigger PSD would trigger PSD if they construct at the 100,000 tpy CO 2 e level and higher or emit at that level and modify at the 75,000 tpy CO 2 e level as of that date. In addition, EPA committed to promulgate by July 1, 2012 another rulemaking – in effect, Step 3 - that would consider whether to reduce the

thresholds further

. EPA also committed to promulgate Deleted: ; Deleted: and Deleted: which

Deleted: ; Deleted: and*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 38 of 97 another rulemaking after that, by April 1, 2016, that would

consider still further action. As EPA stated in the Tailoring Rule, part of the purpose of the phase-in approach embodied in the Tailoring Rule is to allow permitting authorities time to acquire additional resources and to allow EPA time to develop streamlining methods and thereby enable the application of PSD and Title V to more sources in subsequent rulemakings.

b. Biomass As noted previously, in the Tailoring Rule, EPA determined that the amount of each GHG emitted by a facility should be calculated by reference to the weight of the GHG emissions, in tons of CO 2 e per year. The Tailoring Rule proposal referenced EPA’s Inventory submitted annually to the UNFCCC, for the applicable GWP values and guidance on how to calculate a source’s GHG emissions in tpy CO 2 e. 15,16 The Inventory includes emissions of the six

GHGs in terms of CO 2 e units. By linking the calculation of

CO 2 e for GHGs to GWP values, a facility could evaluate its

15 “Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2007,” U.S. Environmental Protection Agency, EPA 430–R–09–004, April 15, 2009. p. ES–3. See also the SAR GWPs (IPCC 1996) in table 1–2, p. 1–6. http://www.epa.gov/climatechange/emissions/usinventoryreport.html 16 Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, 75 Fed. Reg. 31514-31608 (June 3, 2010) (amending 40 CFR Parts 51, 52, 70, and 71) Deleted: the*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 39 of 97 total GHG emissions contribution based on a single metric.

We solicited comment on the benefits and limitations of this proposed metric. While we referred to the Inventory for GWP identification purposes only, several commenters appeared to misunderstand our intent, claiming that the Inventory

excludes CO 2 emitted from biomass. These commenters requested that, in calculations of applicability under PSD and Title V, EPA exempt emissions from biogenic activities or biomass combustion or oxidation activities, including solid waste landfills, waste-to-energy projects, fermentation processes, combustion of renewable fuels, ethanol manufacturing, biodiesel production, and other alternative energy production that uses biomass feedstocks (e.g., crops or trees). In particular, these commenters urged that EPA exclude emissions from biomass combustion in determining the applicability of PSD to GHGs based on the notion that such combustion is “carbon neutral” (i.e., that

combustion or oxidation of such materials would cause no net increase in GHG emissions on a lifecycle basis). In response, when finalizing the Tailoring Rule, we acknowledged the role that biomass or biogenic fuels and feedstocks could play in reducing anthropogenic GHG*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 40 of 97 emissions, and did not dispute the commenters’ observations that many state, federal, and international rules and policies treat biogenic and fossil sources of CO 2 emissions differently. See 75 FR 31514. Regarding commenters’ claims that the Inventory excludes CO 2 emissions from biomass, we clarified that the Inventory does not exclude these emissions (see section II.A.2). Rather, they are included in the LUCF Sector rather than the Energy Sector to avoid double-counting at the national scale. The narrow reference to the use of the Inventory’s GWP values for estimating GHG emissions was provided to offer consistent guidance on how to calculate these emissions and not as an indication, direct or implied , that biomass emissions would be excluded from permitting applicability merely by association with the national inventory , s ee 74 FR 55351, under the definition for “carbon dioxide equivalent.” We determined that our application of the “absurd results,” “administrative necessity,” and one-step-at-a-time legal rationales supporting the Tailoring R ule, based on the expected overwhelming permitting burdens in its absence, did not provide sufficient basis to exclude emissions of CO 2 from biogenic sources in determining permitting applicability provisions at that time. We reasoned that Deleted:

. Deleted: S

Deleted: r*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 41 of 97 such an exclusion alone, while reducing burdens for some sources, would not address the overwhelming permitting burdens, and a threshold-based approach would still be needed. At that time, we had not examined burdens with respect to specific source categories impacted by the rule and thus had not analyzed the administrative burden of permitting projects that specifically involve biogenic CO 2 emissions taking account of the threshold-based approach. Commenters also did not provide information to demonstrate that an overwhelming permitting burden would still exist, justifying a temporary exclusion for biomass sources.

In the final rule we indicated that the decision not to provide this type of an exclusion at that time did not foreclose EPA’s ability to either (1) provide this type of

exclusion at a later time with additional information about overwhelming permitting burdens due to biomass sources, or (2) provide another type of exclusion or other treatment based on some other rationale. Although we did not take a final position, we noted that some commenters’ observations

about a different treatment of biomass combustion warranted further exploration as a possible rationale. Therefore, although we did not propose any sort of permanent exclusion from PSD or Title V applicability based*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 42 of 97 on specific characteristics of biogenic CO 2 , we indicated our intent to seek further comment on how we might address emissions of biogenic CO 2 under the PSD and Title V programs through a future action. We further noted that, while not promulgating an applicability exclusion for biogenic emissions and biomass fuels or feedstocks in the final rule, flexibility exists to apply the existing regulations and policies regarding BACT in ways that take into account their net effects on atmospheric GHG concentrations. Without prejudging the outcome of our process to seek comment whether and how we might address emissions of biogenic carbon under the PSD and Title V programs through a future action, we indicated that this issue warranted further exploration. In order to explore the issue further following the promulgation of the Tailoring Rule, on July 15, 2010 (75 FR 41173) , EPA solicited views from the public through a Call for Information (CFI) on approaches to accounting for biogenic CO 2 emissions, including whether some or all of a source's biogenic CO 2 emissions could be discounted based on a determination that they are canceled out by

the CO 2 absorption associated with growing the fuel. Also, we solicited information on the means to estimate*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 43 of 97

and measure CO 2 emissions from a variety of biogenic CO 2 sources that typically have not been part of emission inventories (e.g., landfills, livestock management, and fermentation processes), as well as information on other biogenic sources that may be affected but which were not identified specifically in the CFI. With promulgation of the Tailoring Rule we committed to issue technical and policy guidance for permitting of GHGs. Subsequently, the information gathered from stakeholders in response to the CFI provided diverse perspectives on treatment of biogenic CO 2 emissions in pre-construction reviews and operating permits including many requests to exclude, either partially or wholly, biogenic CO 2 sources from PSD and BACT analyses on the basis of Inventory results and other considerations. On November 10, 2010, EPA issued the draft “PSD and Title V Permitting Guidance for Greenhouse Gases” which provides the basic information that permit writers and applicants need to address GHG emissions in permits. 17 Within the November guidance, EPA acknowledged the numerous stakeholder comments on biogenic CO 2 BACT analyses and

17 “PSD and Title V Permitting Guidance for Greenhouse Gases; Draft.” Prepared by EPA staff. November 2010. Available at: http://www.epa.gov/nsr/ghgdocs/epa-hq-oar-2010-0841-0001.pdf*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 44 of 97 provided general guidance to permitting authorities to consider environmental, energy, and economic benefits that may accrue from the use of certain types of biomass (e.g., biogas from landfills for energy generation), consistent with existing air quality standards. We also committed to provide more detailed technical and policy guidance early in 2011 for completing Step 4 of biogenic

CO 2 BACT analyses to enable permitting authorities to simplify and streamline BACT determinations with respect to certain types of biomass. Public comments on the November guidance were accepted through December 1, 2010, and EPA is considering these comments while developing the detailed permitting guidance. Noting that a variety of federal and state policies have recognized that some types of biomass can be part of a national strategy to reduce dependence on fossil fuels and to reduce emissions of GHGs, EPA determined that it is appropriate for permitting authorities to account for both existing federal and state policies and their underlying objectives in evaluating the environmental, energy and economic benefits of biomass fuel. Based on these considerations, permitting*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 45 of 97 authorities might determine that certain types of biomass by themselves are BACT for GHGs. On August 3, 2010, NAFO petitioned the EPA to reconsider and stay the implementation of the PSD and Title V GHG Tailoring Rule. 18 The petition alleged that the final Tailoring Rule declared, for the first time and without any prior proposal or notice to industry,

that EPA would count CO 2 emissions from combustion of biomass toward the applicability thresholds established for the PSD and Title V permitting programs of the CAA. Petitioners further alleged that EPA’s proposed rule had provided for the appropriate and opposite conclusion:

that CO 2 emissions from combustion of biomass should not

be counted. Petitioners stated that there is nearuniversal recognition that CO 2 emitted from combustion of

fuels derived from biomass should be excluded from GHG regulations because production and combustion of such fuels do not increase atmospheric CO 2 levels. Pending reconsideration, petitioners requested that the

18 National Alliance of Forest Owners’ Petition to Reconsider the Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule and to Stay the Rule Pending Reconsideration. See EPAHQ-OAR-2010-0841-0029.1*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 46 of 97 application of the PSD and Title V permitting programs

to emissions of CO 2 from biomass be stayed. We considered carefully the petitioners’ assertions and noted that we also received comments through the CFI supporting the exclusion of biogenic CO 2 from GHG permitting. Through the CFI, however, EPA also received information supporting the conclusion that biogenic CO 2 should not be excluded from GHG permitting, and that the use of certain types of biomass as fuel could increase atmospheric CO 2 levels. Based on consideration of the petitioners’ arguments, together with the weight of the comments received on the CFI, EPA has concluded that the issue of accounting for biogenic CO 2 emissions is complex enough that further consideration of this important issue is warranted. Therefore, EPA granted the petition on January 12, 2011. However, EPA did not grant the request for an administrative stay of the Tailoring Rule, because the rule is critical for making overall implementation of the PSD program feasible. Furthermore, an administrative stay of the statements in the preamble of the Tailoring Rule that describe EPA’s initial determination not to exempt

emissions of CO 2 from biomass would not provide the*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 47 of 97 requested relief of excluding emissions of CO 2 from biomass from application of the PSD and Title V permitting programs. The effect of a stay of this or any other aspect of the Tailoring Rule would be to return the legal regime

that existed before EPA's issuance of a final rule. As no exemption for emissions of CO 2 from biomass existed prior to the final rule, an administrative stay would not result in an exemption from the requirements of PSD and Title V. C. Complexity of determining net atmospheric impact of

CO 2 emissions and incorporating this information into the PSD and Title V Programs In this section we discuss the complexity of the

issues associated with reconciling facility-based and landbased sequestration accounting systems, as well as with accounting for land-based sequestration. Based on comments received from stakeholders in the CFI, we discuss further some general principles for land-based accounting (e.g., changes in the BAU baseline), and we present some of the proposed accounting methodologies (e.g., case-by-case analysis, categorical exclusion, contingent exclusion, and feedstock-based approaches). 1. Reconciling accounting systems: facility-based emissions and land-based sequestration*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 48 of 97 Within the context of the PSD and Title V Programs, to

account for CO 2 emissions from bioenergy and biogenic sources differently from fossil-based CO 2 emissions at the facility relies on the premise that sequestration occurs. The sequestration occurs offsite, outside the boundaries of the facility. Therefore, it is important that the sequestration be accounted for at a level of spatial and temporal resolution that is meaningful and practical for purposes of facility-based GHG permitting. Such an accounting system must also be predictable, so that it can be utilized effectively by facilities and permitting authorities. Finally, the accounting system should be scientifically sound to allow for accurate accounting of

net CO 2 emissions to the atmosphere. In addition to those commenters suggesting a categorical approach (i.e., as discussed below, an exclusion for all biogenic CO2 emissions based on a finding of a net sink in the LULUCF section of the Inventory) other comments in response to the CFI repeatedly explained that different types of biological material ( e.g., feedstocks) have different effects on atmospheric carbon emissions. Comments also underscored the importance of reconciling the facility-based permitting requirements under PSD and Title Deleted: i.e.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 49 of 97 V with an accounting approach that relies upon estimates of land-based sequestration. This reconciliation will require careful attention to issues of spatial and temporal scale, to ensure that the principles of practicality, predictability, and scientific soundness are met. 2. Complexity in accounting for land-based sequestration Establishing an accounting system for biogenic CO 2 emissions from stationary sources is complex. As mentioned above and below, commenters to the CFI made suggestions ranging from a categorical exclusion to a case by case analysis approach. Multiple factors need to be considered to accurately assess the net atmospheric impacts of a particular type of fuel from a stationary source over a specified time period, that extends into the future: net emissions (emissions and sequestration) of carbon from the biomass used for bioenergy; the time scale against which net emissions should be measured; delineation of geographic areas for measurement; and leakage. Many of these factors are driven by or determined at the local or regional level. Bioenergy production may result in dramatic changes in one region’s carbon stock, for example, and very little change in another’s. Regional variability is also inherent in natural systems, for Comment [dsg5]: This is a term of art that has not been previously defined.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 50 of 97 example in rates of plant growth and disturbance frequencies. Some areas are more prone to disturbances such as drought and fire, while other areas experience warmer temperatures and unpredictable precipitation patterns. Some areas receive more atmospheric nitrogen deposition than others, or are more susceptible to insect outbreaks. Species-specific variations are important as well: some plant species simply grow more quickly than

others. As mentioned above, considerations of spatial and temporal scale become increasingly important in an accounting system that seeks to reconcile facility-based emissions with land-based sequestration. How large an area should be considered when developing an accounting system – should it be facility-level, ownership-level, state-level, regional, or national? What is the appropriate period of time to be considered in the accounting system – should it roughly parallel the length of time required for plant biomass to re-sequester the amount of CO 2 released during the biomass combustion? How might this time period differ for various biomass types? Can the issues of spatial and temporal scale be considered together, such that the time period considered for the analysis varies depending on*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 51 of 97 where the land is located or how large an area is

considered? Given the inherent variability in biological processes, as well as the variability in spatial and temporal scales that can influence estimates of sequestration, general principles that can be broadly applicable to all aspects of accounting for CO 2 emissions from bioenergy and other biogenic sources will likely be most helpful. 3. General principles The level of sequestration that occurs naturally on the landscape without additional intervention can be considered as the “baseline.” In other words, this level of sequestration (or emissions) will likely continue into the future without additional action. For example, if favorable conditions for plant growth cause sequestration to increase beyond what is incorporated into the baseline for that region, then net atmospheric carbon levels will be lower than anticipated under BAU. If sustainable forestry is practiced, then neither gain nor loss from carbon stocks on forestland would be expected over time, and net atmospheric carbon levels would not deviate from those expected in the BAU case. However, if logging is*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 52 of 97 accelerated from a particular region over a certain period of time, and CO 2 emissions from the forest are thereby increased, then the net atmospheric carbon levels will be higher than anticipated in the BAU case. In the context of bioenergy and biogenic emissions, where such a wide variety of potential feedstocks exists, the baseline might be considered the emissions that “would have happened anyway” in the BAU case. Using this approach, it is necessary to determine the extent to which a policy action or an activity increases or reduces CO 2 emissions above or below what would have occurred in comparison with the baseline. From the perspective of bioenergy and other biogenic emissions, emissions that would have occurred anyway -- regardless of whether or not the facility captured the energy from the biofuel use or carried out the process using biological material as a feedstock -- might be treated differently than emissions that would not have occurred anyway (i.e., new emissions generated as the result of policy-based bioenergy incentives). For example, some commenters to the CFI suggested that utilizing logging residue to generate energy, rather than leaving the residue to decompose on the forest floor following harvesting, likely would not cause*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 53 of 97 emissions over and above that which would have taken place if the energy use did not occur, while also noting the length of time required for the residue to decompose (for example, 10-15 years). Land use change has a separate set of considerations under the baseline case. For example, if the rate of land use transition from forest to agricultural use were to increase over and above that which was expected in the BAU case, and if this increase were attributable to market demand for a bioenergy crop, then it would be possible that

these emissions would be additional to the emissions expected under BAU. In that situation, the bioenergy use might result in increased atmospheric CO 2 levels. 4. Complexity in developing accounting methodology In response to the CFI, commenters suggested various approaches to accounting for CO 2 emissions from bioenergy and other biogenic sources. a. Case-by-case analysis Some commenters suggested that analysis of PSDapplicability should rely on a case-by-case, facilityspecific assessment of the net atmospheric impact of the intended biomass fuels. This would require facility-level accounting for the emissions associated with the full chain*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 54 of 97 of fuel production and use. Commenters indicated that this type of facility-specific approach would be the most scientifically sound approach for assessing the net carbon cycle impact of specific biomass fuels. However, other commenters noted that the case-by-case approach, in which a complete analysis would be conducted for each permit application, would likely be prohibitively time-consuming and complex for facilities and permitting

authorities. b. Categorical exclusion Some commenters suggested that a categorical exclusion for all bioenergy and biogenic sources would be appropriate. Using this approach, no emissions from any such sources would be counted for PSD applicability. According to commenters supporting this option, the

rationale for such an exclusion rests on the idea that all biological sources are part of the “active carbon cycle,”

in which CO 2 is cycled between the land and atmosphere on a relatively short timeframe. c. Contingent exclusion In other comments, stakeholders suggested that a categorical exclusion for all bioenergy and other biogenic sources would be appropriate with an added contingency.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 55 of 97 For example, all bioenergy and other biogenic emissions could be excluded from PSD applicability as long as forest land in the U.S. remains a net carbon sink, such that sequestration remains greater than emissions at the national scale. Some commenters suggested that this contingency might also be expressed at a state scale, such

that all facilities that emit CO 2 from bioenergy or other biogenic sources would be excluded from applicability as long as the forest land within that state acts as a net

carbon sink. d. Feedstock-based approach An important area of consensus from commenters was the idea that feedstocks are different, and that the net impact of bioenergy and other biogenic emissions may be traceable to the feedstock that is used. For example, commenters indicated that it would be preferable to distinguish various categories of woody biomass feedstocks, such as wood waste, logging residue, forest treatment thinnings, biomass crops, and whole-tree chips from expanded harvest operations. Various other feedstock categorizations for different types of material were also proposed 19

.

19 Though this proposed rule concerns emissions from stationary sources, we note that various motor vehicle fuels are derived from plant*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 56 of 97 D. Designing and Implementing an Accounting Approach As described in section III below, EPA is proposing to defer the applicability of the PSD and Title V program to biogenic CO 2 emissions from stationary sources for three years in order to allow time for a detailed examination of the science associated with biogenic CO 2 emissions and to consider the technical issues that the Agency must resolve in order to account for biogenic CO 2 emissions in ways that are scientifically sound and also manageable in practice. As part of that examination we intend to engage with an independent scientific panel to ensure a robust review of

the scientific and technical issues associated with this type accounting. During this time period the Agency can

material. For example, ethanol can be produced from plant starch or cellulose, and diesel fuel can be produced from various plant oils. The Energy Independence and Security Act of 2007 (EISA) required EPA, in the context of implementing the renewable fuel program under section 211(o) of the CAA, to evaluate the lifecycle greenhouse gas emissions of these and other motor vehicle fuels. EISA defines lifecycle greenhouse gas emissions as “...the aggregate quantity of greenhouse gas emissions (including direct emissions and significant indirect emissions such as significant emissions from land use changes), as determined by the Administrator, related to the full fuel lifecycle, including all stages of fuel and feedstock production and distribution, from feedstock generation or extraction through the distribution and delivery and use of the finished fuel to the ultimate consumer...”. EPA’s analysis of the various fuels demonstrated that multiple factors, including the type of feedstock used, resulted in a wide variation in their associated lifecycle GHG emissions. For example, from a lifecycle perspective some of the analyzed motor vehicle fuels result in very large reductions in GHG emissions compared to the fossil fuel they replace, while others do not. The lifecycle analyses of the motor vehicle fuels took into account a wide range of factors, including the carbon sequestration associated with the biomass. See 75 FR 14670, 14764-799 (March 26, 2010).*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 57 of 97 develop an appropriate accounting methodology that satisfies the principles of predictability, practicality, and scientific soundness. Should it be necessary, EPA proposes to implement the appropriate accounting methodology through notice-and-comment rulemaking within the three-year timeframe. **III. Interim Deferral of Biogenic CO 2**  **Emissions Under the PSD and Title V Permitting Programs**  As stated above, one critical reason for the proposed deferral is to give EPA time to conduct a detailed examination of the science, to engage with an independent scientific panel and then, if appropriate, to initiate a notice and comment rulemaking to implement an accounting approach all within the proposed three year timeframe. Another important reason for the three-year deferral period, described in Section III.C below, is to allow sufficient time to consider the unique characteristics and attributes of biogenic CO 2 feedstocks, using the results from the detailed examination mentioned previously, within both the state permitting agencies and affected facilities. We concluded that, absent this deferral, there would be significant additional and unique complexities, as

described in more detail in section II.C. As a result Deleted: to*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 58 of 97

there would be additional permitting burden in terms of time and resources requirements, resulting from the associated analysis that would be required for permitting entities that are sources of biogenic CO 2 emissions under Step 2 of the Tailoring Rule, which is scheduled to begin on July 1, 2011. While the interim guidance described in section III.D will help alleviate some of this burden in Step 1 of the Tailoring Rule (which runs from January 2, 2011 to July 1, 2011), we expect that more and more diverse users of biomass combustion or other biogenic CO 2 sources are likely to be affected under Step 2 of the Tailoring Rule because, under Step 2, these sources can trigger permitting requirements based solely on their GHG emissions with no pre-requisite requirement that they otherwise trigger PSD or Title V permitting requirements for a non-GHG pollutant. We believe, absent the deferral period and the completion of EPA’s full analysis of the unique technical issues associated with these diverse facilities emitting biogenic

CO 2 , it would be particularly challenging for permitting authorities and facilities to process permits involving

these emissions.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 59 of 97 Also, as described in section III.D, this proposed deferral is intended to temporarily exclude biogenic CO 2 emissions from the definition of “subject to regulation,” as that term was defined for purposes of the Tailoring Rule, for a period of three years, while EPA further considers, through notice and comment rulemaking, the approach to accounting for these emissions on a permanent

basis. A. General Rationale and Legal Justification for Interim

Deferral 1. Applicability of PSD and Title V to Biogenic CO 2 Emissions from Major Stationary Sources As currently written, the PSD and Title V regulations apply to biogenic CO 2 emissions from major sources or major modifications at such sources according to provisions included under the definition of “subject to regulation” in the SIP regulations at 40 CFR §51.166 and the Title V state program regulations at 40 CFR §70.2, as well as the Federal Implementation Plan requirements at 40 CFR §52.21 and the Title V federal program regulations at 40 CFR §71.2. Thus, revisions to these regulations are necessary to defer application of the PSD and Title V programs to such sources of biogenic CO 2 . Deleted: GHG*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 60 of 97 Specifically, with respect to PSD, EPA’s regulations implement the PSD provisions of the CAA, and the language of these statutory provisions is broad enough to cover biogenic CO 2 emissions. The 100/250 tpy thresholds previously described originate from section 169 of the CAA, which applies PSD to any "major emitting facility" 20 and defines the term to include any source with a potential to emit “any air pollutant” in an amount over 100 or 250 tpy, depending on source category. EPA’s long-standing regulations interpret the PSD applicability provision that refers to “any air pollutant” to refer to any “regulated NSR pollutant,” which in turn includes any air pollutant “subject to regulation.” Similarly, under sections 165(a)(4) and 169(3) of the CAA, the BACT requirement applies to “each pollutant subject to regulation” under the CAA. As noted in other recent EPA actions, GHG are currently “subject to regulation” under the CAA, subject to specific limitations reflected in the definition of that term that EPA adopted in the Tailoring Rule. Thus, under the terms of the CAA, emissions of GHG (including CO 2 ) are considered in determining whether a source is a major

20 EPA's regulations employ the term "major stationary source" in lieu of "major emitting facility." e.g., 40 CFR 52.21(a)(2)(i), (b)(1)(i). Deleted: The

Deleted: EPA’s interpretation of*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 61 of 97 emitting facility subject to PSD, as a result of construction or modification, and whether the BACT requirement applies to GHG (including CO 2 as a component of GHG). In light of the way these regulations are currently written, EPA is unable to exclude biogenic CO 2 emissions

from PSD review. Stationary sources of air pollutants, including sources of biogenic CO 2 emissions, are currently subject to PSD requirements if they emit more than 100 or 250 tpy of a regulated NSR pollutant other than GHG and have triggered

PSD as a result of these emissions. We call these sources “anyway” PSD sources, and bioenergy and other sources of biogenic CO 2 emissions may be among them based on emissions of pollutants other than GHG. Under the Tailoring Rule, as of January 2, 2011 (the beginning of step 1 of the Rule), PSD permits for such a source will have to meet emissions limitations based on application of BACT for GHG if the source is newly constructed and has the potential to emit 75,000 tpy or more of this pollutant on a CO 2 e basis; or is an existing source which, as a result of a modification, increases GHG emissions by 75,000 tpy or more on a CO 2 e basis and by any amount on a mass basis. In addition, starting on July 1, 2011 (the beginning of step 2 of the Deleted: because*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 62 of 97 Tailoring Rule), a source that is not an “anyway” PSD source, but that newly constructs and emits at least 100,000 tpy CO 2 e GHG, or that is an existing source that emits at least 100,000 GHG tpy CO 2 e and that modifies and increases its GHG emissions by at least 75,000 tpy CO 2 e GHG and any amount on a mass basis, will need a PSD permit for its GHG, including any biogenic CO 2 . With respect to Title V, as noted previously, Title V applies to sources, among others, that emit 100 tons per year of specified quantities of “any air pollutant,” see CAA section 502(a), 501(2)(B), 302(g). In the Tailoring Rule, EPA codified its longstanding interpretation that this requirement only extends to major sources of air pollutants subject to regulation, and further defined “subject to regulation” such that it may include GHGs at sources which emit or have the potential to emit 100,000 tpy CO2e as of July 1, 2011. As described immediately above, GHG are currently “subject to regulation” under the CAA (again, subject to specific limitations reflected in the definition of that term that EPA adopted in the Tailoring Rule), and as a result, emissions of GHG, including biogenic CO 2 emissions, are considered in*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 63 of 97 determining whether a source is subject to Title V as of July 1, 2011. Under the Tailoring Rule, as of January 2, 2011 (again, the beginning of step 1), sources that are subject to Title V anyway – which we call “anyway” Title V sources and which include existing sources with Title V permits, or new sources obtaining Title V permits, due to their non-GHG emission – will be required to address GHG, including GHG from biomass, to the extent there are Title V requirements relevant to GHG. This means that their Title V permits must contain, at the appropriate time, conditions necessary to assure compliance with any applicable requirements concerning their GHG emissions. As of July 1, 2011 (again, the beginning of step 2), new or existing sources that are not “anyway” Title V sources, that emit or have the potential to emit at least 100,000 GHG tpy CO 2 e (and 100 tpyon a mass basis), and are subject to an approved or EPApromulgated title V program, will become subject to Title V requirements. Therefore, absent some further regulatory action, EPA is unable to exclude biogenic CO 2 emissions from the applicability of Title V. Deleted: s*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 64 of 97 2. Authority to Exempt De Minimis Emissions As noted, since the relevant provisions of the Act apply to “any air pollutant” or any “air pollutant subject to regulation,” the terms of the CAA suggest that the PSD and Title V requirements should apply to CO 2 emissions from bioenergy or other biogenic sources in the same manner as they apply to emissions of CO 2 from any other type of source, since such emissions are constituents of the regulated pollutant GHG. However, as discussed elsewhere in this preamble, EPA believes it has the authority to exclude biogenic CO 2 emissions from the PSD and Title V requirements for the proposed three-year deferral period and will be exploring whether a permanent exemption is permissible for at least some and perhaps all types of

feedstocks. Courts have recognized that administrative agencies have the implied authority to establish exemptions “when the burdens of regulation yield a gain of trivial or no

value.” Alabama Power Co. v. Costle , 636 F.2d 323, 360 (D.C. Cir. 1980). In this decision that specifically addressed the requirements of the PSD program, the DC Circuit described this principle as follows:*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 65 of 97 Categorical exemptions may also be permissible as an exercise of agency power, inherent in most statutory schemes, to overlook circumstances that in context may fairly be considered de minimis. It is commonplace, of course, that the law does not concern itself with trifling matters, and this principle has often found application in the administrative context. Courts should be reluctant to apply the literal terms of a statute to mandate pointless expenditures of effort. Id. (internal citations omitted). In an earlier case cited by the court in Alabama Power , the

court described the doctrine as follows: The 'de minimis' doctrine that was developed to prevent trivial items from draining the time of the courts has room for sound application to administration by the Government of its regulatory programs . . . . The ability, which we describe here, to exempt de minimis situations from a statutory command is not an ability to depart from the statute, but rather a tool to be used in implementing the legislative design. District of Columbia v. Orleans , 406 F.2d 957, 959 (1968). In this respect, the Alabama Power opinion observed in a

footnote that the de minimis principle “is a cousin of the doctrine that, notwithstanding the ‘plain meaning’ of a statute, a court must look beyond the words to the purpose

of the act where its literal terms lead to ‘absurd or futile results.’” Id. at 360 n. 89 (citations omitted). To apply an exclusion based on the de minimis doctrine, “the agency will bear the burden of making the required showing” that a matter is truly de minimis which naturally will turn on the assessment of particular*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 66 of 97

circumstances. Id. The Alabama Power opinion concluded that “most regulatory statutes, including the CAA, permit such agency showings in appropriate cases.” Id.

A notable limitation on the de minimis doctrine is that it does not authorize the agency to exclude something on the basis of a cost-benefit analysis. As the court explained this, “implied authority is not available for a situation where the regulatory function does provide benefits, in the sense of furthering the regulatory objectives, but the agency concludes that the acknowledged benefits are exceeded by the costs.” Id. The court held that any “implied authority to make cost-benefit decisions must be based not on a general doctrine but on a fair reading of the specific statute, its aims and legislative history.” Id. Since the early years of the PSD program, EPA has applied this de minimis principle to establish various types of values in the PSD regulations that may be used to exempt a source from all or part of the PSD program requirements. These include the significance levels (described previously), which are also called significant emissions rates, and air quality screening values called*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 67 of 97 significant impact levels (SILs) and significant monitoring concentrations (SMCs). The significant emission rates reflect levels below

which EPA considers an emissions increase to be de minimis

. 45 FR 52676, 52705-07. They are applied to allow modifications having minimal impact to proceed without the need for obtaining a PSD permit. See also 40 CFR 51.166(b)(23); 40 CFR 52.21(b)(23). In addition, these values may be used to eliminate the need for a permit to contain BACT limitations for a particular pollutant or to require a source to prepare an ambient air quality analysis for a particular pollutant that is not emitted or increased by significant amounts. the (SMC) 3. Potential for Some Biomass Feedstocks to Have

a De Minimis Impact on Carbon Levels in the Atmosphere As discussed previously in this preamble, EPA has

sufficient information at this time to conclude that at least some biomass feedstocks that may be utilized to produce energy have a negligible impact on the net carbon cycle , such as residue material ( e.g., sawdust from milling operations) that would have decomposed under natural circumstances in a relatively short period of time (e.g., less than 10-15 years). Given this negligible Formatted: Underline Deleted: Similarly, significant impact levels are intended to identify a level of ambient impact on air quality concentrations that EPA regards as de minimis . For a source that emits or increases emissions of a pollutant above the significant emission rate and has to prepare an air quality analysis, these values may be used to reduce the burden of that analysis. EPA considers a source whose individual impact falls below a SIL to have a de minimis impact on air quality concentrations. Thus, a source that demonstrates its impact does not exceed a SIL at the relevant location is not required to conduct more extensive air quality analysis or modeling to demonstrate that its emissions, in combinations with the emissions of other sources in the vicinity, will not cause or contribute to a violation of the NAAQS at that location. In light of Deleted: insignificance of the ambient impact from the source alone, EPA considers the conduct of a cumulative air quality analyses and modeling by such a source to yield information of trivial or no value with respect to the impact of the proposed source or modification. See 75 FR 64864, 64890-94 (October 20, 2010).¶ The significant monitoring concentrations Deleted: i n EPA regulations define a de minimis level of impact that EPA has concluded does not justify collecting pre-construction monitoring data for purposes of an air quality impact analysis. 45 FR 52710. The EPA believes there is little to be gained from preconstruction monitoring of concentrations when the increased emissions from a proposed source or modification has a de minimis impact on ambient concentrations. If a source can show through modeling of its emissions alone that its impacts are less than the corresponding SMC, there is little to be gained by requiring that source to collect additional monitoring data for a particular pollutant to establish background ... [1] Deleted: . For example, this includes Deleted: such as*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 68 of 97 impact on the carbon cycle, the gain from regulating emissions from combustion of this feedstock for bioenergy could be considered to be trivial. Similar conclusions may

be reached for other feedstocks as well. It appears that the potential may exist for EPA to determine that other types of biomass feedstocks would have a negligible impact on the net carbon cycle impact after

further detailed examination of the science associated with biogenic CO 2 emissions. Thus, if EPA were to require all bioenergy facilities to limit emissions of CO 2 before this assessment is complete, it may later determine that such actions have yielded trivial gain. To avoid this outcome,

and because of the administrative burdens described elsewhere in this preamble, EPA believes an initial deferral of the PSD requirements for bioenergy and other biogenic sources is justified at this time. However, the possibility also remains that more detailed examination of the science of biogenic CO 2 will demonstrate that the utilization of some biomass feedstocks for bioenergy production will have a significant impact on the net carbon cycle, making application of the PSD program requirements to such emissions necessary to fulfill Congressional intent. Thus, EPA is proposing only a temporary, rather*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 69 of 97 than a permanent, deferral of PSD requirements for such

sources at this time.

4. Given the burden of case-by-case analysis and potential for de minimis impact, regulation at this time is not justified Since finalizing the Tailoring Rule, EPA has gathered additional information concerning biomass through the CFI. The information collected to this point indicates that at present, attempting to determine the net carbon cycle impact of particular facilities combusting particular types of biomass feedstocks would require extensive analysis and would therefore entail extensive workload requirements. Further, methodologies are not sufficiently developed to assure that various permitting authorities would be able to reasonably and consistently perform the necessary

calculations to determine the correct amount of GHG emissions in particular instances. The extensive workload requirements that PSD and Title V permit applications for bioenergy facilities and other sources of biogenic CO 2 emissions would entail would necessarily strain permitting authority resources and result in delays in processing permits for other applicants. Moreover, at present, devoting these limited*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 70 of 97 permitting authority resources to biomass would not be productive in light of the previously described possibility that EPA may ultimately determine that the utilization of some biomass feedstocks for bioenergy has a negligible or de minimis impact on the net carbon cycle. Therefore, the information EPA has collected since promulgating the Tailoring Rule indicates that it is consistent with the rationale of the Tailoring Rule to defer on a temporary basis biogenic CO 2 emissions from PSD and Title V applicability, pending the detailed examination of the science associated with biogenic CO 2 emissions from stationary sources, including engaging with an independent scientific panel, and considering technical issues, that the Agency must resolve in order to account for biogenic CO 2 emissions in ways that are scientifically sound and also manageable in practice. As noted previously, EPA based the Tailoring Rule on the extreme administrative burdens to permitting authorities, and undue costs to sources, that would result from a literal application of the PSD and Title V 100/250 tpy statutory thresholds, as of January 2, 2011, when those requirements first apply to GHGs. EPA

reasoned that , in accordance with the Chevron analytical framework for statutory construction, taking into account Deleted: potential, Deleted: ,*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 71 of 97 the “absurd results” and “administrative necessity” lines of cases, Congress did not intend that the PSD and Title V requirements apply at the 100/250 tpy statutory thresholds to GHG-emitting sources as of January 2, 2011, but rather that those requirements could be limited, at least initially, through a phase-in approach, to higher-emitting sources. Just as the extensive workload of processing permit applications from sources below the Tailoring Rule thresholds justified exempting those sources at least from the initial steps in the Tailoring Rule phase-in program, pending EPA’s development of streamlining methods and the permitting authorities’ acquisition of additional resources, so too the extensive workload of processing permit applications from biomass facilities justifies exempting those sources for a period of time, pending EPA’s development of a consistent and practical methodology for determining net carbon cycle impacts (see section II.D). The EPA proposes in the present action that a three-year deferral will be adequate to allow time for the development of the methodology. In effect, EPA proposes in this action to revise the Tailoring Rule’s phase-in approach to, in effect, defer the applicability of PSD and Title V to biogenic CO 2 emissions, relying in part, on the same*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 72 of 97 rationale as EPA used to justify the Tailoring Rule’s phase-in approach. An alternative way to reduce the permitting burden would be to apply PSD and Title V to all facilities with biogenic CO 2 emissions that emit at or above the Tailoring Rule thresholds, but without making any effort to take into account net carbon cycle impacts. However, we believe that

it is conceivable that as a result of the scientific examination of biogenic CO 2 emissions described in section II.D, we could conclude that the net carbon cycle impact for some biomass feedstocks is negligible. Accordingly, this could result in regulation that yields trivial gain as previously discussed. To avoid this outcome, given our current state of knowledge, we believe a case-by-case net carbon cycle impact analysis would be required in the course of reviewing each permit application. This burden would be in addition to the currently existing burden associated with obtaining a PSD or Title V permit. In light of the permitting burdens assessed in the Tailoring Rule, adding to that burden would frustrate the goals we sought to accomplish in the Tailoring Rule to ensure that the PSD and Title V programs can be administered in each

state. Deleted: and*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 73 of 97 Furthermore, given the potential that the utilization of at least some biomass feedstocks may have a negligible impact on the net carbon cycle, engaging in this type of burdensome analysis may not be an optimal use of the limited resources of PSD and Title V permitting

authorities. The additional scientific examination proposed by the EPA (see section II.D) could ultimately

conclude that such resources could have been more effectively utilized to target CO 2 emissions that clearly have a detrimental impact on the net carbon cycle. Establishing a three-year deferral period for biogenic CO 2 emissions will enable EPA to consider the results of the

detailed examination of the science of these emissions and undertake a rulemaking to determine the best way to account for biogenic CO 2 emissions when determining PSD applicability. 5. Subjecting biogenic CO 2 emissions to permitting may be counterproductive because it could discourage utilization

of the biomass feedstock as fuel In some cases, the use of biological material as a fuel would clearly reduce net atmospheric CO 2 levels. In these cases, requiring permitting at this time, before conducting the detailed scientific examination discussed in*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 74 of 97 section II.D that is required to develop an appropriate accounting system for bioenergy and other biogenic sources, might actually discourage projects that would have a net benefit for the atmosphere. For example, requiring permitting for facilities seeking to generate energy from the combustion of dead trees, especially those killed due to a widespread event like the mountain pine beetle epidemic, is likely to discourage the utilization of a readily available resource that would clearly reduce CO 2 emissions (e.g., by removing and utilizing biomass material that would otherwise be susceptible to fire or decompose in the forest, leading to CO 2 and CH 4 emissions from decomposition). Likewise, combustion of CH 4 -laden biogas (e.g., from landfills or other large sources of methane) for energy production reduces overall CO 2 e emissions because of the higher GWP for CH 4 . B. CO 2 Emissions that are Deferred

As discussed earlier, the deferral applies to biogenic

CO 2 emissions from biogenic feedstocks, rather than to specific types of facilities. All non-biogenic emissions from a facility continue to be included for purposes of PSD applicability throughout the deferral period. However, the Deleted: have*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 75 of 97 portion of the CO 2 emissions from a facility that result from biologically-derived material are deferred and not included for purposes of determining PSD applicability during the deferral period. If fossil-derived fuel is used within a facility to provide energy for a process that also uses biological material, the emissions associated with the fossil fuel must be counted toward PSD applicability regardless of the use of the biological material. Specifically, the emissions that are deferred from applicability include, but are not limited to:

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

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

 CO 2 from fermentation during ethanol production;

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

 CO 2 from combustion of the biological fraction of tirederived fuel; and

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

C. Non-CO 2 GHGs and Non-GHG Pollutants As explained in section II.A.4, CO 2 is unique among GHGs in that large and relatively rapid fluxes of CO 2 between land and atmosphere occur as part of the global*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 76 of 97 biogeochemical system that maintains life on Earth. 21 Because other non-GHG pollutants and non-CO 2 GHGs do not participate in natural biogeochemical cycles as CO 2 does, this frame of reference – in which sequestration outside the facility is considered as part of the justification for differential treatment in the PSD and Title V programs – is not relevant for those other pollutants. The deferral proposed here does not apply to GHG emissions from bioenergy or biogenic sources other than biogenic CO 2 emissions

, nor does it apply to emissions of non-GHG pollutants. D. Mechanism for Deferral and State Implementation 1. Adding to definition of Subject to Regulation established in Tailoring Rule To implement the proposed deferral, we are proposing to revise the definition of the term “subject to regulation” that EPA adopted in the PSD and Title V GHG Tailoring Rule. We are proposing to add language to the definition of “subject to regulation” to exclude biogenic

CO 2 emissions from stationary sources for a three-year

21 U.S. Greenhouse Gas Inventory Fast Facts, April 2010. Seehttp://www.epa.gov/climatechange/emissions/downloads10/US-GHGInventory-Fast-Facts-2008.pdf*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 77 of 97 period starting on the date the promulgated rule is published in the Federal Register

. The EPA’s PSD regulations implement the PSD provisions of the CAA, and the language of these statutory provisions is broad enough to cover biogenic CO 2 emissions. The 100/250 tpy thresholds previously described originate from section 169 of the CAA, which applies PSD to any "major emitting facility" and defines the term to include any source with a potential to emit “any air pollutant” in an amount equal to or greater than 100 or 250 tpy, depending on the source category. The EPA’s long-standing regulations interpret the PSD applicability provision that refers to “any air pollutant” to refer to any “regulated NSR pollutant,” which includes any air pollutant “subject to regulation.” In the final Tailoring Rule, EPA defined the term “subject to regulation” so that only GHG emissions from sources at or above specified thresholds (depending on the circumstances, 75,000 and/or 100,000 tpy on a CO 2 e basis) are pollutants subject to regulation. Thus, sources that emit amounts exceeding the established thresholds, are subject to PSD as long as that amount of GHG also exceeds 100/250 tpy on a mass basis. Similarly, in the Tailoring Rule, EPA defined “subject to regulation” under the Title V*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 78 of 97 program regulations so GHG emissions from sources at or above 100,000 tpy on a CO 2 e basis are subject to regulation.

We believe this is also the most efficient and effective approach for implementing the deferral of biogenic CO 2 emissions proposed in this rule. Under this approach, some states may not need to undertake a regulatory or legislative action to implement the final rule if they are able to interpret the term “subject to regulation” used in existing state regulations in a manner consistent with the revised definition propose in this rule. A full description of the “subject to regulation” mechanism and the basis for its usage in the Tailoring Rule can be found in preamble text for that rulemaking. 22

2. State decision s to adopt deferral Currently, a SIP-approved PSD program that applies to GHG-emitting sources applies to biogenic CO 2 emissions to the same extent as the program applies to all other GHGs. The same is true for an approved Title V program that applies to GHG-emitting sources. However, we believe that many states may not be inclined to apply their PSD or Title V programs to biogenic CO 2 emission sources for the same

22 75 FR 31579-81 (June 3, 2010) Deleted: s*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 79 of 97 fundamental reasons that we are proposing to defer

inclusions of these sources under the PSD and Title V permitting programs for a three-year period. As has been stated previously, one of our primary reasons for reconsideration of application of the Tailoring Rule requirements to biogenic CO 2 emissions sources 23 was to allow for a detailed examination of the science associated with biogenic CO 2 emissions and to consider the technical issues that the agency must resolve in order to account for biogenic CO 2 emissions in ways that are scientifically sound and also manageable in practice. We believe that most, if not all, states are facing similar needs for further scientific examination and analysis to properly consider biogenic CO 2 emissions under a permitting scenario in a way that will not disrupt the proper functioning and timeliness of permitting activity within the state PSD and Title V programs. We believe states will also benefit from the deferral period in order to have sufficient time to respond

to the results of the data collection and examination of the science associated with biogenic emissions and to properly educate and train staff in the unique permitting

23 Letter from Honorable Lisa Jackson, Administrator, U.S. EPA, to R. Martella, Jr., R. Gray, and J. Coleman, Sidley Austin, LLP. January 12, 2011. http://www.epa.gov/NSR/ghgdocs/McCarthytoMartella.pdf*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 80 of 97 issues associated with biogenic sources, including fundamental principles such as accurate emission estimation methodologies and full consideration of environmental impacts associated with these sources. Thus, states that cannot interpret their PSD SIP or Title V requirements to incorporate the three-year deferral are strongly encouraged to submit SIP revisions or Title V program revisions to adopt the three-year deferral. Doing so would allow these states to avoid applying PSD requirements during the period needed for further study. However, EPA recognizes that some states may not have any, or may have only a few, sources that combust biomass, and may have adequate information and resources as to the nature of biogenic emissions from those sources. For those states, the deferral may not be appropriate. Accordingly, EPA requests each state to advise EPA by letter, during the comment period for this proposal, as to the number and type

of biomass sources in their state. 3. Interim Guidance to Address Biogenic CO 2 Sources under

PSD Review Concurrent with this proposal to defer application of the pre-construction and Title V permitting programs to biogenic CO 2 emissions, EPA intends to issue interim*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 81 of 97 guidance to help permitting authorities establish a basis for concluding that BACT (which is one of the statutory conditions for receiving a permit) for GHG emissions at such sources is simply combustion of biomass fuels. As previously noted, under the Tailoring Rule, as of January 2, 2011, large stationary sources that become subject to PSD for other pollutants will need to address GHG such as

CO 2 . Since this proposed rulemaking to defer biogenic CO 2 emissions from PSD permitting requirements for a three-year period is not planned to be finalized until the July 2011 timeframe, there will be an interim period when such biogenic CO 2 emissions will still need to be addressed in making PSD permitting determinations since the deferral will not yet be in effect. 24 For example, if a PSD permit is issued before the planned July 2011 finalization of a rulemaking that would defer biogenic CO 2 emissions from PSD applicability, then existing regulations might require that the PSD permit meet the BACT requirement for GHG emissions, including biogenic CO 2 emissions, during the interim period

of time.

24 As of January 2, 2011, permitting authorities and sources subject to Title V will need to address any applicable requirements for GHG, such as PSD permit requirements, consistent with the requirements of 40 CFR part 70 and approved state programs. However, GHG emissions will not be used to establish Title V applicability before July 1, 2011.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 82 of 97 In its November 2010 GHG permitting guidance, EPA explicitly recognized that a permitting authority might determine that certain types of biomass by themselves are BACT for GHG emissions after considering the environmental, energy, and economic benefits of using the fuel. EPA's supplemental guidance will provide a basis that permitting authorities may use to support the conclusion, during the interim period until the biomass deferral rulemaking is finalized, that BACT for CO 2 emissions at such sources is simply the combustion of biomass fuel. E. Requesting comment Given the detail and rationale above, EPA has concluded this approach to defer application of PSD and Title V permitting requirements to biogenic CO 2 emissions is appropriate. However, EPA is requesting comment on this proposal, including the approach, the rationale and other considerations the Agency should take into account. **IV. Statutory and Executive Order Review** A. Executive Order 12866: Regulatory Planning and Review Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this action is a "significant regulatory action” because it raises novel legal or policy issues arising out of legal mandates, the President’s priorities, or the Deleted: The

Field Code Changed*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 83 of 97 principles set forth in the EO. Accordingly, EPA submitted this action to the Office of Management and Budget (OMB)

for review under EO 12866. B. Paperwork Reduction Act This action does not impose any new information collection burden. Instead, this action will reduce costs incurred by any facility with biogenic CO 2 emissions, as well as permitting authorities, relative to the costs that

would be incurred if EPA did not revise the rule. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. The OMB has previously approved the information collection requirements contained in the existing regulations for PSD (see, e.g., 40 CFR 52.21) and Title V (see 40 CFR parts 70 and 71) under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and has assigned OMB control

number 2060–0003 and OMB control number 2060–0336. The OMB control numbers for EPA’s regulations in 40 CFR are listed in 40 CFR part 9. C. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility Field Code Changed*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 84 of 97 analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a

substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of this proposed rule on small entities, small entity is defined as: (1) A small business as defined by the Small Business Administration’s regulations at 13 CFR 121.201; (2) a small governmental jurisdiction that is a government of a city, county, town, school district or special district with a population of less than 50,000; and (3) a small organization that is any not-for-profit enterprise that is independently owned and operated and is not dominant in its

field. After considering the economic impacts of this proposed action on small entities, I certify that this action will not have a significant economic impact on a substantial number of small entities. In determining whether a rule has a significant economic impact on a substantial number of small entities, the impact of concern Comment [dsg6]: Is “I” correct here?*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 85 of 97 is any significant adverse economic impact on small entities, since the primary purpose of the regulatory flexibility analyses is to identify and address regulatory alternatives “which minimize any significant economic impact of the rule on small entities.” 5 U.S.C. 603 and 604. Thus, an agency may certify that a rule will not have a significant economic impact on a substantial number of small entities if the rule relieves regulatory burden, or otherwise has a positive economic effect on all of the small entities subject to the rule. We believe that this proposed rule will relieve the necessary extensive analysis and corresponding extensive workload requirements for most affected facilities, including small businesses. As a result, the program changes provided in this rule are not expected to result in a significant economic impact on a substantial number of small entities. In addition, EPA determined that the proposed rulemaking would not have a significant impact on small governmental jurisdictions. The EPA has therefore concluded that this proposed action will not have a significant economic impact on a substantial number of

small entities.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 86 of 97 We continue to be interested in the potential impacts of this proposed action on small entities and welcome comments on issues related to such impacts. D. Unfunded Mandates Reform Act (UMRA) This proposed rule does not contain a Federal mandate that may result in expenditures of $100 million or more for State, local, and Tribal governments, in the aggregate, or the private sector in any one year. Only those few states whose permitting authorities do not implement the federal PSD and Title V rules by reference in their SIPs will have

a small increase in burden. These states will have to amend their corresponding SIPs to incorporate the proposed amendments from today’s action, as the deferral that we propose will not otherwise apply to the PSD and Title V programs. Thus, this rule is not subject to the requirements of sections 202 or 205 of the UMRA. This rule is also not subject to the requirements of section 203 of UMRA because it contains no regulatory requirements that might significantly or uniquely affect small governments. As discussed earlier, this rule is expected to result in an administrative burden reduction for all affected permitting authorities and permittees, including small governments.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 87 of 97

E. Executive Order 13132: Federalism This action does not have federalism implications. It will not have substantial direct effects on the States, on the relationship between the national government and the States, or on the distribution of power and responsibilities among the various levels of government, as specified in EO 13132. These proposed amendments would simplify and reduce the burden on implementing the PSD and Title V operating permit programs, by deferral of PSD and Title V application requirements to biogenic CO 2 emissions at a facility. Thus, EO 13132 does not apply to this

action. In the spirit of Executive Order 13132, and consistent with EPA policy to promote communications between EPA and State and local governments, EPA specifically solicits comment on this proposed action from State and local

officials.

F. Executive Order 13175: Consultation and Coordination

with Indian Tribal Governments Executive Order 13175, entitled “Consultation and Coordination with Indian Tribal Governments” (59 FR 22951, November 6, 2000), requires EPA to develop an accountable process to ensure “meaningful and timely input by Tribal*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 88 of 97 officials in the development of regulatory policies that have Tribal implications.” The EPA has concluded that this proposed rule may have tribal implications. However, it will neither impose substantial direct compliance costs on tribal government, nor preempt tribal law. There are no tribal authorities currently issuing major NSR permits; however, this may change in the future. The EPA specifically solicits additional comment on this proposed action from Tribal officials.

G. Executive Order 13045: Protection of Children from Environmental Health Risks and Safety Risks The EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) as applying only to those regulatory actions that concern health or safety risks, such that the analysis required under section 5–501 of the Executive Order 492 has the potential to influence the regulation. This action is not subject to Executive Order 13045 does

not establish an environmental standard intended to mitigate health or safety risks. H. Executive Order 13211: Actions that Significantly Affect Energy Supply, Distribution, or Use*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 89 of 97 This proposed rule is not a “significant energy action” as defined in EO 13211 (66 FR 28355, May 22, 2001) because it is not likely to have a significant adverse effect on the supply, distribution, or use of energy. Further, we have concluded that this rule is not likely to have any adverse energy effects because this action would not create any new requirements for sources in the energy supply, distribution, or use sectors. I. National Technology Transfer and Advancement Act Section 12(d) of the National Technology Transfer and Advancement Act of 1995 (NTTAA), Public Law No. 104-113 (15 U.S.C. 272 note) directs EPA to use voluntary consensus standards in its regulatory activities unless to do so would be inconsistent with applicable law or otherwise impractical. Voluntary consensus standards are technical standards (e.g., materials specifications, test methods, sampling procedures, and business practices) that are developed or adopted by voluntary consensus standards bodies. The NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 90 of 97 This proposed rulemaking does not involve technical standards. Therefore, EPA is not considering the use of any voluntary consensus standards.

J. Executive Order 12898: Federal Actions to AddressEnvironmental Justice in Minority Populations and LowIncome Populations Executive Order 12898 (59 FR 7629, February 16, 1994) establishes Federal executive policy on environmental justice. Its main provision directs Federal agencies, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, as appropriate, disproportionately high and adverse human health or environmental effects of their programs, policies, and activities on minority populations and low-income populations in the U.S. The EPA has determined that this proposed rule will not have disproportionately high and adverse human health or environmental effects on minority or low-income populations because it does not affect the level of protection provided to human health or the environment because any impacts that it will have will be global in nature and will not affect local communities or populations*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 91 of 97 in a manner that adversely affects the level of protection provided to human health or the environment. **List of Subjects**

**40 CFR Part 51** Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Intergovernmental relations, Methane, Nitrous oxide.

**40 CFR Part 52** Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Intergovernmental relations, Methane, Nitrous oxide.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Deferral for CO 2 Emissions from Bioenergy and Other Biogenic

Sources Under the PSD and Title V Programs - Proposed Rule Page 92 o f 9 7 **40 CFR Part 70** Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Intergovernmental relations, Methane, Nitrous oxide.

**40 CFR Part 71** Environmental protection, Administrative practice and procedure, Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Greenhouse gases, Intergovernmental relations, Methane, Nitrous oxide.

__________ Dated:

__________ Lisa P. Jackson, Administrator

.*** E.O. 12866 Review – Draft – Do Not Cite, Quote, or Release During Review*** Page 93 of 97

For the reasons stated in the preamble, title 40, chapter I, of the Code of Federal Regulations is amended as

follows: PART 51 -- [AMENDED] 1. The authority citation for part 51 continues to read

as follows: Authority: 23 U.S.C. 101; 42 U.S.C. 7401-7671q. Subpart I -- [Amended] 2. Section 51.166 is amended by revising paragraph (b)(48)(ii)(a) to read as follows: §51.166 Prevention of significant deterioration of air quality.

* * * * * (b)* * * (48)* * * (ii)* * * (a) Multiplying the mass amount of emissions (tpy), for each of the six greenhouse gases in the pollutant GHGs, by the gas’s associated global warming potential published at Table A–1 to subpart A of part 98 of this chapter — Global Warming Potentials. For purposes of this paragraph (b)(48)(ii)(a), prior to [DATE 3 YEARS AFTER THE EFFECTIVEDATE OF THE FINAL DEFERRAL RULE], the mass of the greenhouse gas carbon dioxide shall not include carbon dioxide emissions resulting from the combustion or decomposition of biologically-based material other than

fossil fuel.

* * * * * PART 52 -- [AMENDED] 3. The authority citation for part 52 continues to read

as follows: **Authority:** 42 U.S.C. 7401, et seq. Subpart A -- [Amended] 4. Section 52.21 is amended by revising paragraph (b)(49)(ii)(a) to read as follows: §52.21 Prevention of significant deterioration of air quality.

* * * * * (b)* * * (49)* * * (ii)* * * (a) Multiplying the mass amount of emissions (tpy), for each of the six greenhouse gases in the pollutant GHGs, by the gas’s associated global warming potential published at Table A–1 to subpart A of part 98 of this chapter — Global Warming Potentials. For purposes of this paragraph, priorto [DATE 3 YEARS AFTER THE EFFECTIVE DATE OF THE FINAL DEFERRAL RULE], the mass of the greenhouse gas carbon

dioxide shall not include carbon dioxide emissions resulting from the combustion or decomposition of biologically-based material other than fossil fuel.

* * * * * PART 70 -- [AMENDED] 5. The authority citation for part 70 continues to read

as follows: **Authority:** 42 U.S.C. 7401, et seq. 6. Section 70.2 is amended by revising paragraph (2) of the definition of “Subject to regulation” to read as

follows: §70.2 Definitions.

* * * * * Subject to Regulation

* * * (2) The term tpy CO 2 equivalent emissions (CO 2 e) shall represent an amount of GHGs emitted, and shall be computed by multiplying the mass amount of emissions (tpy), for each

of the six greenhouse gases in the pollutant GHGs, by the gas’s associated global warming potential published at

Table A–1 to subpart A of part 98 of this chapter—Global Warming Potentials, and summing the resultant value foreach to compute a tpy CO 2 e. For purposes of this paragraph, prior to [DATE 3 YEARS AFTER THE EFFECTIVE DATE OF THE FINAL DEFERRAL RULE], the mass of the greenhouse gas carbon

dioxide shall not include carbon dioxide emissions resulting from the combustion or decomposition of biologically-based material other than fossil fuel.

* * * * * PART 71 -- [AMENDED] 7. The authority citation for part 51 continues to read

as follows: **Authority:** 42 U.S.C. 7401, et seq. Subpart A -- [Amended] 8. Section 71.2 is amended by revising paragraph (2) of the definition of “Subject to regulation” to read as

follows: §71.2 Definitions.

* * * * * Subject to Regulation

* * * (2) The term tpy CO 2 equivalent emissions (CO 2 e) shall represent an amount of GHGs emitted, and shall be computed by multiplying the mass amount of emissions (tpy), for each

of the six greenhouse gases in the pollutant GHGs, by the gas’s associated global warming potential published atTable A–1 to subpart A of part 98 of this chapter—Global Warming Potentials, and summing the resultant value for each to compute a tpy CO 2 e. For purposes of this paragraph, prior to [DATE 3 YEARS AFTER THE EFFECTIVE DATE OF THE FINAL DEFERRAL RULE], the mass of the greenhouse gas carbon

dioxide shall not include carbon dioxide emissions resulting from the combustion or decomposition of biologically-based material other than fossil fuel.

* * * * *Page 67: [1] Deleted dgualtie 3/1/2011 2:49:00 PM 

## in EPA regulations define a de minimis level of impactthat EPA has concluded does not justify collecting preconstruction monitoring data for purposes of an air quality impact analysis. 45 FR 52710. The EPA believes there is little to be gained from preconstruction monitoring of concentrations when the increased emissions from a proposed source or

modification has a de minimis impact on ambient concentrations. If a source can show through modeling of its emissions alone that its impacts are less than the corresponding SMC, there is little to be gained by requiring that source to collect additional monitoring data for a particular pollutant to establish background concentrations for further analysis. 75 FR

65895-97.Summary of Interagency Working Comments during EO12866 Review. Subject to Further Policy Review United States Office of Air and Radiation February 2011 Environmental Protection Agency

_____________________________________________________________________________________________



## GUIDANCE FOR DETERMI NING BEST AVAILABLE CONTROL TECHNOLOG Y FOR REDUCING CARBON DIOXIDE EMISSIONS FROM BIOENERGY PRODUCTIONSummary of Interagency Working Comments during EO12866 Review. Subject to Further Policy Review 

# Guidance for Determining Best Available Control Technology for Reducing Carb on Dioxide Emissions from Bioenergy Production

Prepared by the

Climate Change Division Office of Atmospheric Programs U.S. Environmental Protection Agency Washington, DC

February 2011Disclaimer This document explains the requirements of EPA regulations, describes EPA policies, and recommends procedures for permitting authorities to use to ensure that permitting decisions are consistent with applicable regulations. This document is not a rule or regulation, and the guidance it contains may not apply to a particular situation based upon the individual facts and circumstances. This guidance does not change or substitute for any law, regulation, or any other legally binding requirement and is not legally enforceable. The use of non-mandatory language such as “guidance,” “recommend,” “may,” “should,” and “can,” is intended to describe EPA policies and recommendations. Mandatory termi nology such as “must” and “required” are intended to describe controlling requirements under the terms of the Clean Air Act and EPA regulations, but this document does not establish legally binding requirements in and of itself.Summary of Interagency Working Comments during EO12866 Review. Subject to Further Policy Review

2 

### Table of Contents

I. Introduction

II. CO 2 Emissions from Bioenergy and the Carbon Cycle III. EPA’s Previous Actions Relating to Application of PSD Program to Biogenic CO 2 Emissions IV. Summary of the Top-Down BACT Process V. Step 1 of the Top-Down BACT Process A. Traditional Application of Step 1 B. Previous EPA Guidance on GHG Control Strategies C. Application of Step 1 to Bioenergy Facilities VI. Step 2 – Eliminate Technically Infeasible Options VII. Step 3 – Rank Remaining Control Technologies VIII. Step 4 – Energy, Environmental, and Economic Impacts A. Traditional Step 4 Considerations 1. Environmental impacts 2. Economic impacts 3. Energy impacts B. Specific Considerations at Step 4 for Bioenergy Facilities 1. Environmental impacts 2. Economic impacts 3. Energy impacts C. Potential Conclusions in Step 4 Analysis IX. Step 5 – Selecting BACTSummary of interagency working comments during EO12866 review. Subject to further policy review.

3 I. Introduction This guidance provides an illustration of reasoning that a Prevention of Significant Deterioration (PSD) permitting authority may us e to support the conclusion that the best available control technology (BACT) for carbon dioxide (CO 2 ) emissions at a bioenergy facility 1 is the combustion of biogenic fuels alone. As of January 2, 2011 , greenhouse gases (GHG), including CO 2 , became a pollutant subject to regulation under the Clean Air Act (CAA). 2 Under existing PSD program regulations and EPA interpretations of those regulations, stationary sources of air pollution that require a PSD permit to authorize construction, 3 and that would have the potential to emit (or would increase GHG emissions by) 75,000 tons CO 2 equivalent (CO 2e ) per year (tpy) or more or are requesting to increase GHG emissions by 75,000 tons CO 2 e per year (tpy) but that did not obtain such a permit prior to January 2, 2011, 4 will need to demonstrate to the appropriate reviewing authority 5 that the proposed facility will meet GHG

emission limitations thro ugh application of BACT. 6 To assist PSD permit applicants and reviewing authorities with making this determination, EPA provided guidance on November 10,

1 A ‘bioenergy facility’ is defined, for the purposes of th is guidance, as a facility th at generates energy via the combustion of biologically-derived material other than fossil fuels, such as wood or agricultural products. This could be undertaken either alone or in addition to traditional fossil fuels. 2 75 FR 17004 (April 2, 2010); 75 FR 31514 (June 3, 2010). 3 On June 3, 2010, EPA issued a final rule that “tailors” the applicability provisions of the PSD and title V programs to enable EPA and states to phase in permitting requirements for GHGs in a common sense manner (“Tailoring Rule”). The first Tailoring Rule step begins on January 2, 2011, and ends on June 30, 2011, and this step covers what EPA has called “anyway sources” and “anyway modificat ions” that would be subject to PSD “anyway” based on emissions of pollutants other than GHGs. The second st ep begins on July 1, 2011, and continues thereafter to cover both anyway sources and certain other large emitters of GHGs. 4 75 FR 17021 (April 2, 2010); 75 FR 31526 (June 3, 2010) 5 This may be EPA or a state or local government aut hority depending on the status of implementation. See 75 FR 77698 (December 13, 2010); 75 FR 81874 (December 29, 2010); 75 FR 82246 - 82536 (December 30, 2010); 76 FR 752 (January 6, 2011); 76 FR 2070 (January 12, 2011); 76 FR 2581 (January 14, 2011); 76 FR 2591 (January 14, 2011). 6 40 CFR 52.21(b)(49)-(50); 40 CFR 51.166(b)(48)-(49); 40 CFR 52.21(b)(12); 40 CFR 51.166(b)(12); 40 CFR 52.21(j)(2)-(3); 40 CFR 51.166(j)(2)-(3); 75 FR 17004 (April 2, 2010); 75 FR 31514 (June 3, 2010). Comment [dsg1]: Can this sentence be broken up? Very hard to followSummary of interagency working comments during EO12866 review. Subject to further policy review.

4 2010. The November 10, 2010 guidance includes technical white papers 7 for several industry sectors and general guidance entitled PSD and Title V Permitting Guidance for Greenhouse

Gases (“2010 GHG Permitting Guidance”) , 8 which includes a section on determining BACT for

GHG. As with any other stationary source, a bi oenergy facility that qualifies as a major stationary source required to obtain a PSD permit must address the BACT requirement for GHGs

if it emits or increases its emission of this re gulated pollutant in amounts greater than 75,000 tons

on a CO 2 e basis. 9 This guidance on determining BACT for CO 2 emissions from a bioenergy facility is intended to supplement the 2010 G HG Permitting Guidance, and not to supersede it. This guidance applies to sources that generate energy from biologically–based material, and it does not apply to other sources that may emit biogenic CO 2 but do not generate energy from the biological material. For the sources not covere d by this guidance document, one should consult the 2010 GHG Permitting Guidance and prior guidance EPA has provided on the top-down BACT process. Concurrent with the release of this guidance, EPA is issuing a proposed rule to defer application of PSD permitting requirements to CO 2 emissions from biologically-based material (biogenic CO 2 emissions) for a three-year period. The scope of the proposed deferral is wider than the scope of this guidance: the deferral is intended to cover all sources of biogenic CO 2 emissions, including those that emit CO 2 from biologically-based material but do not generate energy from it. EPA expects to take final action on the proposed deferral rule in the July 2011 timeframe. In the event that EPA finalizes the deferral for the PSD program as proposed, states may require

7 http://www.epa.gov/nsr/ghgpermitting.html 8 http://www.epa.gov/nsr/ghgdocs /epa-hq-oar-2010- 0841-0001.pdf 9 75 Fed. Reg. at 31606-07; 40 CFR 52.21(b)(49); 40 CFR 52.166(b)(48).Summary of interagency working comments during EO12866 review. Subject to further policy review.

5 additional time to review their state laws to incor porate the deferral established by that rule. To

the extent no such deferral is available under the PSD permitting regulati ons applicable at the time a permitting authority issues a PSD permit for a bioenergy facility, the reasoning described below may be used on an interim basis to support a conclusion in such a permit that BACT for

CO 2 is combustion of biomass fuels alone. This document does not provide a final determination of BACT for a particular source, since such determinations can only be made by individual permitting authorities on a case-bycase basis after consideration of the record in each case. Upon considering the record in an individual case, if a permitting authority has a reasoned basis to address particular issues discussed in this document in a different manner than EPA recommends here, permitting authorities (including EPA) have the discretion to do so in decisions on individual permit applications consistent with the relevant requir ements in the CAA and re gulations. However, EPA believes the analysis described below will be sufficient in most cases to support the

conclusion that utilization of biomass fuel alone is BACT for a bioenergy facility. It is also important to note that this guida nce is meant to be interim guidance only and that once EPA completes the detailed examination of the science and technical issues associated with accounting for biogenic CO 2 emissions from stationary sources, as discussed in the proposed deferral, those analyses may outweigh many of the considerations mentioned in this guidance. II. CO 2 Emissions from Bioenergy and the Carbon Cycle

Carbon dioxide emissions from bioenergy facilities are generated during the combustion of biologically-based material (i.e., forest or ag ricultural products) for energy. The term ‘CO 2 emissions from bioenergy’ is used in this guidance to describe biogenic CO 2 emissions from a Comment [dsg2]: Do you mean “e.g.” here. More generally, document often uses e.g. when it seems to mean i.e., and vice versa.Summary of interagency working comments during EO12866 review. Subject to further policy review.

6 stationary source that directly result from the combustion of biologically-based materials other than fossil fuels when these materials are used to generate energy. Although every molecule of

CO 2 has the same radiative forcing in the atmosphere regardless of its source, CO 2 emissions from bioenergy merit unique consideration in the BACT analysis because land-based biomass carbon stocks can be replenished more quickly than fossil fuel carbon stocks, and thus these biogenic carbon stocks can act as a sink on a shor ter time scale than fossil carbon. For example, many coal deposits in North America originated hundreds of millions of years ago. In contrast, the reservoirs of carbon found on the surface of Earth, in pools such as tree biomass and cropland soils, have accumulated over decades, not millennia. Through relatively rapid photosynthesis, plants absorb CO 2 from the atmosphere and add it to their biomass, which contains roughly 50% carbon by weight, through a process called sequestration. When biological material such as plant biomass is harvested or cleared from the land and burned for energy, the material acts as a source of carbon, releasing its stored carbon back to the atmosphere as CO 2 . Over large spatial scales such as states, regions, or continents, if more carbon is sequestered in plant biomass than is emitted to the atmos phere through processes such as harvest, fire, or natu ral decomposition, plant biomass acts as a net sink for carbon. Conversely, if more carbon is released than is sequestered, plant biomass acts as a net source for

carbon. EPA’s Inventory of U.S. Greenhouse Gas Emissions and Sinks (the Inventory) 10 tracks

annual GHG emissions in cluding emissions of CO 2 , methane (CH 4 ), nitrous oxide (N 2 O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF 6 ). This report estimates all anthropogenic sources and si nks of GHG emissions at the national scale,

10 US EPA. 2010. Inventory of U.S Greenhouse Gas Emissions and Sinks: 1990-2008. U.S. EPA #430-R-10-06.Summary of interagency working comments during EO12866 review. Subject to further policy review.

7 classified into six broad sectors: Energy, Indus trial Processes, Solvents and Other Product Uses, Agriculture, Land-Use Change and Forestry (LUCF), and Waste. The Energy Sector includes all GHGs emitted during the production, transformation, handling and consumption of energy commodities, including fuel combustion. The LUCF Sector includes emissions and sequestration resulting from human activ ities that influence the way land is used or that affect the size of carbon stocks on land. Thus, at the national level, CO 2 emissions from biomass combustion are not included in the estimate of emissions from a country’s Energy Sector, even though the emissions physically occur at the time and place in which useful energy is being generated (i.e., power plant or automobile). Averaged over the years 1990-2008, data from the Inventory show that the LUCF sector in the United States has been a net sink of 841 Teragrams carbon dioxide equivalent (CO 2 e) per

year. 11 This sink is roughly 12% of the average gross emissions from all other sources combined in the United States over the same time period. Future national projections under business as usual (BAU), as reported in the Fifth U.S Climate Action Report (CAR) submitted to the UNFCCC in 2010, suggest that this LUCF sink is likely to continue, if not increase in size, at

least until 2020. 12 Biogenic CO 2 emissions are distinct from other regulated pollutants at bioenergy facilities because, unlike other pollutants and other GHGs, CO 2 emissions can participate directly in the global carbon cycle through photosynthesis, which is critical for the maintenance of life on Earth. Further, emissions of CO 2 can dwarf emissions of other GHGs from biomass combustion. For example, CO 2 makes up 97.9% of the global warming potential (GWP) of the GHG

11 See Tables 1 and 2 in Appendix. 12 U.S. Climate Action Report 2010. Fifth National Comm unication of the United States of America under the United National Framework Convention on Climate Change . Chapter 5 Projected Greenhouse Gas Emissions, page 81. www.state.gov/documents /organization/140636.pdf Comment [dsg3]: Should this be e.g.?Summary of interagency working comments during EO12866 review. Subject to further policy review.

8 emissions from wood and wood residuals. 13 Finally, because sequestration of CO 2 emissions in living plant material outside th e boundaries of the facility may counteract the emissions from such facilities on a continuous basis, this uni que dynamic merits consideration in the BACT analysis. This argument is underlined by the fact that GHGs such as CO 2 are well-mixed in the atmosphere at large spatial scales; therefore, the n eed to reduce them directly at the facility is of lesser importance so long as their net atmospheric impact is accounted for and is negative or

zero. III. EPA’s Previous Actions Relating to Application of the PSD Program to Biogenic CO 2 Emissions On the basis of the Inventory results described above and other considerations, stakeholders have requested that EPA exclude, either partially or wholly, biogenic CO 2 emissions for the purposes of the BACT analysis and th e PSD program based on the view that the biological material used to generate energy can also serve as a sink for carbon. In its notice proposing the PSD and Title V Greenhouse Gas Tailoring Rule, EPA referenced the Inventory for the applicable global warming potential (GWP ) values and guidance on how to calculate a source’s GHG emissions in tons per year (tpy) CO 2 e. While EPA referred to the Inventory for GWP identification purposes only, several commenters appeared to misunderstand our intent.

The narrow reference to the use of GWP values for estimating GHG emissions was provided to offer consistent guidance on how to calculate these emissions and was not intended as an indication, direct or implied, that biogenic emissions would be excluded from permitting applicability merely by associa tion with the national Inventory. 14 As noted above, the Inventory

13 See CO 2 , CH 4 and N 2 O GWPs in Table A-1 of 40 CFR Part 98 Subpart A; and emission factors for CO 2 , CH 4 and N 2 O from combustion of wood and wood residuals in Tables C-1 and C-2 of 40 CFR Part 98 Subpart C. 14 See 74 FR 55351, under the definition for ‘carbon dioxide equivalent’Summary of interagency working comments during EO12866 review. Subject to further policy review.

9 does not exclude these emissions, but simply includes them in the LUCF Sector rather than the Energy Sector to avoid double-c ounting at the national scale. In response, when finalizing the Tailoring Rule, EPA acknowledged the role that biogenic fuels and feedstocks could play in re ducing anthropogenic GHG emissions, and did not dispute the commenters’ observations that many state, federal, and international rules and policies treat biogenic and fossil sources of CO 2 emissions differently. 15 Nevertheless, we

determined that we lacked a sufficient record at that time to apply the legal rationales utilized in the Tailoring Rule to exclude emissions of CO 2 from biogenic sources in determining permitting applicability provisions. At that time, we had not requested and did not obtain public comments addressing the particular administrative burden of permitting projects that specifically involve biogenic CO 2 emissions from energy production. Although EPA did not promulgate an applicability exclusion for biogenic emissions in the final Tailoring Rule, EPA did observe that flexibility exists to apply the existing regulations and policies regarding BACT in ways that take into account their net effects on atmospheric GHG concentrations. In order to explore the issue further following the promulgation of the Tailoring Rule, in July 2010 EPA solicited views from the public through a Call for Information (CFI) on approaches to accounting for biogenic emissions, including whether some or all of a source's biogenic CO 2 emissions could be discounted based on a determination that they are canceled out by the CO 2 absorption associated with growing the fuel. Also, we solicited information on the

means to estimate and measure CO 2 emissions from a variety of biogenic fuels.

EPA issued PSD and Title V Permitting Guidance for Greenhouse Gases on November 10, 2010, which provides the basic information that permit writers and applicants need to address

15 See 75 FR 31514.Summary of interagency working comments during EO12866 review. Subject to further policy review.

10 GHG emissions in permits. 16 To assist permitting authorities carrying out BACT analyses for GHGs until EPA took further action, the guida nce indicated that permitting authorities may consider the environmental, energy and economic benefits that may accrue from the use of certain types of biogenic fuels (e.g., biogas from landfills) for energy generation, consistent with existing air quality standards. Noting that a variety of federal and state policies have recognized that some biogenic fuels can be part of a national strategy to reduce dependence on fossil fuels and to reduce emissions of GHGs, EPA determin ed that it is appropriate for permitting authorities to account for both existing federal a nd state policies and their underlying objectives in evaluating the environmental, energy and economic benefits of biogenic fuels. EPA observed that, based on these considerations, permitt ing authorities might determine in the GHG component of the BACT analysis for new or modifi ed bioenergy facilities, as defined in Section I, that such utilization of biogenic fuels is i nherently BACT for GHGs. To assist permitting authorities further in considering these factors, EPA announced its intent to issue guidance that will provide a suggested framework for undertaking an analysis of the environmental, energy and economic impacts of using biogenic fuels in Step 4 of the top-down BACT process.

IV. Summary of the Top-Down BACT Process On November 10, 2010, EPA issued the PSD and Title V Permitting Guidance for

Greenhouse Gases (“2010 GHG Permitting Guidance”) which supplements supplements prior EPA guidance on determining BACT, including EPA’s 1990 Draft New Source Review Workshop Manual (“1990 Workshop Manual”). 17 In the 2010 GHG Permitting Guidance, EPA

16 PSD and Title V Permitting Guidance for Greenhouse Gases. Prepared by EPA staff. November 2010. Available at: http://www.epa.gov/nsr/ghgdoc s/epa-hq-oar-2010-0841-0001.pdf 17 “PSD and Title V Permitting Guidance for Greenhous e Gases.” Prepared by EPA staff. November 2010. Available at: http://www.epa.gov/nsr/ghgdocs/epa-hq-oar-2010-0841-0001.pdf; “New Source Review Workshop Ma nual; Draft.” October 1990. Comment [dsg4]: This should be moved to p. 9 where the term is first defined. Also, the document does not consistently use this short reference for the document, as noted in some specific edits belowSummary of interagency working comments during EO12866 review. Subject to further policy review.

11 recommends that permitting authorities continue to use the Agency’s five-step “top-down” BACT process to determine BACT for GHGs. In brief, the top-down process calls for all available control technologies for a given polluta nt to be identified and ranked in descending order of control effectiveness. A permit ap plicant should first examine the highest-ranked (“top”) option. The top-ranked option(s) should be established as BACT unless the permit applicant demonstrates to the satisfaction of the permitting authority that technical considerations, or energy, environmental, or ec onomic impacts justify a conclusion that the topranked technology is not “achievable” in that case. If the most effective control strategy is eliminated in this fashion, then the next most effective alternative should be evaluated, and so on, until an option is selected as BACT. 18 EPA recommends conducting this analysis for each regulated NSR pollutant that is subject to the BACT requirement in a given case. EPA has broken down this analytical process into the following five steps, some of which

are discussed in detail later in this section.

Step 1: Identify all available control technologies. Step 2: Eliminate technica lly infeasible options. Step 3: Rank remaining control technologies. Step 4: Evaluate most effective controls and document results. Step 5: Select BACT. For additional detail on this process, consu lt the 2010 GHG Permitting Guidance and references contained therein. As this guidance focuses on un ique considerations for bioenergy facilities, the discussion that follows elaborates only on thos e steps where EPA believes such considerations are most likely to arise.

Available at: http://www.epa.g ov/ttn/nsr/gen/wkshpman.pdf. 18 2010 GHG Permitting Guidance at 18.Summary of interagency working comments during EO12866 review. Subject to further policy review.

12 V. Step 1 of the Top-Down BACT Process A. Traditional Application of Step 1 The first step in the top-down BACT process is to identify all ava ilable control options. Available control options are those air pollution control technologies or techniques (including lower-emitting processes and practices) that have the potential for practical application to the emissions unit and the regulated pollutant under evaluation. They typically include the application of alternative production processes, methods, systems, and techniques, including

clean fuels or treatment or innovative fuel com bustion for control of the affected pollutant. 19 However, while Step 1 is intended to cap ture a broad array of potential options for pollution control, this step of the process is not without limits. EPA has recognized that a Step 1 list of options need not necessarily include i nherently lower polluting processes that would fundamentally redefine the nature of the source proposed by the permit applicant. 20 BACT should generally not be applied to regulate the applicant’s purpose or objective for the proposed facility. In assessing whether an option woul d fundamentally redefine a proposed source, EPA recommends that permitting authorities apply th e analytical framework recently articulated by the Environmental Appeals Board. 21 Under this framework, a pe rmitting authority should look

first at the administrative record to see how the applicant defined its goal, objectives, purpose or basic design for the proposed facility in its ap plication. The underlyi ng record will be an essential component of a supportable BACT dete rmination that a proposed control technology

19 See pages 25-34 of “PSD and Title V Permitting Guid ance for Greenhouse Gases.” (November 2010) for more general background on Step 1 of the top-down process. 20 In re Prairie State Generating Company , 13 E.A.D. 1, 23 (EAB 2006). 21 See, generally, In the Matter of American Electric Power Service Corporation, Southwest Electric Power Company, John W. Turk Plant , Petition No. VI-2008-01 (Order on Petition) (December 15, 2009) (title V order referencing and applying framework developed by the EAB) ; In the Matter of Cash Creek Generation, LLC , Petition Nos. IV-2008-1 & IV-2008-2 (Order on Petition) (December 15, 2009) (same).Summary of interagency working comments during EO12866 review. Subject to further policy review.

13 redefines the source. 22 The “redefining the source” issue is ultimately a question of degree that is within the discretion of the permitting authority. The permitting authority should keep in mind that BACT, in most cases, should not be applied to regulate the applicant’s purpose or objective for the proposed facility. 23 Ultimately, any decision to exclude an option on “redefining the source” grounds must be explained and documented in the permit record, especially where such an option has been identified as significant in public comments. 24 The 2010 GHG Permitting Guidance provides more informatio n that permit writers and applicants may consult on this topic.

The CAA includes “clean fuels” in the definition of BACT. 25 While clean fuels that would reduce GHG emissions should be considered, EPA has recognized that the initial list of control options for a BACT analysis does not need to include “clean fuel” options that would fundamentally redefine the source. Such options include those that would require a permit applicant to switch to a primary fuel type (i.e., co al, natural gas, or biomass) other than the type of fuel that an applicant proposes to use for its primary combustion process. B. Previous EPA Guidance on GHG Control Strategies

22 In re Desert Rock Energy Company , PSD Appeal No. 08-03 et al. (EAB Sept. 24, 2009), slip op. at 65, 76. 23 The EPA Environmental Appeals Board has applied this framework for evaluating redefining the source questions in three cases involving coal-fired power plants. In re Desert Rock Energy Company , PSD Appeal No. 08-03 et al. (EAB Sept. 24, 2009); In re Northern Michigan University , PSD Appeal No. 08-02 (EAB Feb. 18, 2009); In re Prairie State Generating Company , 13 E.A.D. 1 (EAB 2006). For additional examples of how EPA approached the redefining the source issue in the context of power plants prior to developing this analytical framework, see the following decisions. In re Old Dominion Electric Cooperative , 3 E.A.D. 779 (Adm’r 1992); In re Hawaiian Commercial & Sugar Co. , 4 E.A.D. 95 (EAB 1992); In re SEI Birchwood Inc ., 5 E.A.D. 25 (EAB 1994). EPA also considered this issue in th e context of waste incinerators prior to developing the recommended analytical framework. In re Pennsauken , 2 E.A.D. 667 (Adm’r 1988); In the Matter of Spokane Regional Waste-to-Energy Facility , 2 E.A.D. 809 (Adm’r 1989); In the Matter of Brooklyn Navy Yard Resource Recovery Facility , 3 E.A.D. 867 (EAB 1992); In re Hillman Power Co., LLC , 10 E.A.D. 673, 684 (EAB 2002). In another case, EPA considered this question in the context of a conversion of a natura l-gas fired taconite ore facility to a petcoke fuel. In re Hibbing Taconite Co ., 2 E.A.D. 838 (Adm’r 1989). For an example of the application of this concept to a fiberglass manufacturing facility, see In re Knauf Fiber Glass , 8 E.A.D 121 (EAB 1998). 24 In re Desert Rock Energy Company , slip op. at 70-71, 76-77; In the Matter of Cash Creek Generation , Order at 7- 10. 25 42 USC 7579(3). EPA has not yet updated the definition of BACT in the PSD regulations to reflect the addition of the “clean fuels” language that occurred in the 1990 amendments to the Clean Air Act. 40 CFR 52.21(b)(12); 40 CFR 51.166(b)(12). Nevertheless, EPA reads and applies its regulations consistent with the terms of the Clean Air Act. Comment [dsg5]: This repeats a sentence earlier in this paragraph. Consider deleting.

Comment [dsg6]: Should this be e.g.?Summary of interagency working comments during EO12866 review. Subject to further policy review.

14 As EPA discussed in the 2010 GHG Permitting G uidance, for the purposes of a BACT analysis for GHGs, EPA classifies carbon capture and sequestration as an add-on pollution control technology 26 that is “available” 27 for large CO 2 -emitting facilities including fossil fuelfired power plants and industria l facilities with high-purity CO 2 streams (e.g., hydrogen production, ammonia production, natural gas processing, ethanol production, ethylene oxide production, cement production, and iron and steel manufacturing). For these types of facilities, CCS should be listed in Step 1 of a top-down BACT analysis for GHGs. This does not necessarily mean CCS should be selected as BA CT for such sources, since other considerations such as technical feasibility or economic impacts may justify elimination of such options at later steps of the process. In addition, EPA has observed that the application of methods, systems, or techniques to increase energy efficiency is a key GHG-reducing opportunity that falls under the category of “lower-polluting processes/practices.” Use of in herently lower-emitting technologies, including energy efficiency measures, represents an opportunity for GHG reductions in these BACT

26 EPA recognizes that CCS systems may have some unique aspects that differentiate them from the types of equipment that have traditionally been cl assified as add-on pollution controls ( i.e., scrubbers, fabric filters, electrostatic precipitators). However, since CCS systems ha ve more similarities to such devices than inherently lower-polluting processes, EPA believes th at CCS systems are best classified as add-on controls for purposes of a top-down BACT analysis. 27 As noted above, a control option is “available” if it has a potential for practical application to the emissions unit and the regulated pollutant under evaluation. Thus, even technologies that are in th e initial stages of full development and deployment for an industry, such as CCS, can be considered “available” as that term is used for the specific purposes of a BACT analysis under the PSD program. In 2010, the Interagency Task Force on Carbon Capture and Storage was established to develop a compre hensive and coordinated federal strategy to speed the commercial development and deployment of this clean coal technology. As part of its work, the Task Force prepared a report that summarizes the state of CCS a nd identified technical and non-technical challenges to implementation. EPA, which participated in the Interagency Task Force, supports the Task Force’s recommendations concerning ongoing investment in demonstrations of the CCS technologies based on the report’s conclusion that: “Current technologies could be used to capture CO 2 from new and existing fossil energy power plants; however, they are not ready for widespread im plementation primarily because they have not been demonstrated at the scale necessary to establish co nfidence for power plant application. Since the CO 2 capture capacities used in current industrial processes are generally much smaller than the capacity required for the purposes of GHG emissions mitigation at a typical power plant, there is considerable uncertainty as sociated with capacities at volumes necessary for commercial deployment.” See Report of the Interagency Task Force on Carbon Capture and Storage, p.50 (http://www.epa.gov/climatechange/policy/ccs_task_force.html). Deleted: November Deleted: g

Deleted: theSummary of interagency working comments during EO12866 review. Subject to further policy review.

15 reviews. EPA has encouraged permitting aut horities to use the discretion available under the PSD program to include the most energy efficien t options in BACT analyses for both GHG and non-GHG regulated New Source Review (NSR) polluta nts. Since the use of add-on controls to

reduce GHG emissions is not as well-advanced as it is for most combustion-derived pollutants, initially, in many instances energy efficient me asures may serve as the foundation for a BACT analysis for GHGs with add-on pollution control technology and other strategies added as they

become more accessible. C. Application of Step 1 to Bioenergy Facilities At the outset, when considering an application to construct or modify a bioenergy facility, it will be important to address the ex tent to which the BACT analysis for GHGs should include comparative evaluation of biogenic fuels and other types of fuels, including fossil fuels. However, where a proposed bioene rgy facility can demonstr ate that utilizing a particular type of biogenic fuel is fundamental to the primary purpose of the project, then at the first step of the top-down process, permitting author ities can rely on that to determ ine that use of another fuel would redefine the proposed source. To the extent this showing is made by a permit applicant proposing to construct or modify an electric generating facility that woul d utilize biomass fuels alone in the primary production process, the options listed a s Step 1 of a top-down BACT analysis for GHGs may be limited to (1) utilization of biomass fuel alone, (2) energy efficiency improvements, and (3) carbon capture and sequestration if the source meets the characteristics summarized above and

described in more detail in the 2010 GHG Permitting G uidance. In cases where a permit applicant proposes to co-fire biomass fuels with another primary fuel type, the list of options should include the option of utilizing both types of primary fuels in Deleted: EPA’s November Deleted: gSummary of interagency working comments during EO12866 review. Subject to further policy review.

16 combination. If the applicant proposes a specific proportional allocation or fuel mix (i.e. , < 5 percent biomass, > 95 percent fossil fuel) and believes other allocations should be eliminated from consideration in the BACT analysis for GHGs, the permit application should provide an explanation as to why the particular allocation desired by the applicant is necessary to achieve a fundamental business objective of the project. If the permit applicant is unable to demonstrate that a different allocation of primary fuels would fundamentally redefine the proposed source, the options at Step 1 should include varying allocations of the two primary fuels if the proportional allocation of fuels has the potential to affect the amount of GHGs emitted from the facility or the net atmospheric GHG concentrations. Although not necessarily a bioenergy energy f acility, recovery furnaces at kraft pulp and paper mills may not have the opti on of considering alternative fu els. The fundamental purpose of recovery furnaces used at this type of facility is to recover and regenerate the cooking chemicals (used in the pulping process) from the spent liquor or “black liquor” exiting the digesters and evaporators. As a secondary benef it, this process also produces energy. Requiring such a recovery furnace that is fully integrated into the production process to utilize a fuel other than the black liquor to generate this energy would frustrate the primary purpose of these furnaces to recover and regenerate the cooking chemicals. Thus, EPA believes the option of using alternative fuels in a recovery furnace would fundamentally redefine this type of unit. Facilities proposing to use black liquor in the re covery furnace of the kraf t pulping process need not include fuels other than black liquor at Step 1 of a top-down BACT analysis for such a unit. Comment [dsg7]: Delete as redundant?Summary of interagency working comments during EO12866 review. Subject to further policy review.

17 VI. Step 2 – Eliminate tech nically infeasible options Step 2 of the top-down BACT analysis should be conducted in the same manner for bioenergy facilities as other types of sources. Details on Step 2 are available in the 2010 GHG Permitting Guidance. With respect to facilities th at are co-firing biomass and other fuels, if the record shows that an option that involves us ing a greater proportion of biomass fuels than proposed by the permit applicant is not technically feasible, it may be eliminated from further consideration at this step with an appropriate justification. VII. Step 3 – Rank remaining control technologies As with Step 2, EPA recommends applying the same consideration in Step 3 of the BACT analysis for a bioenergy facility that would apply to other types of sources. Details on Step 3 are available in the 2010 GHG Permitting Guidance.

VIII. Step 4 – Energy, Environmental, and Economic Impacts A. Traditional Step 4 Considerations Under Step 4 of the top-down BACT analysis , permitting authorities must consider the economic, energy, and environmental impacts arising from each option remaining under consideration. Accordingly, after all available a nd technically feasible control options have been ranked in terms of control effectiveness (BACT St ep 3), the permitting authority should consider any specific energy, environmental, and economic impacts identified with those technologies to either confirm that the top control alternative is appropriate or determine it to be inappropriate. The “top” control option should be established as BACT unless the applicant demonstrates, and the permitting authority agrees, that the energy, environmental, or economic impacts justify a conclusion that the most stringent technology is not “achievable” in that case. If the mostSummary of interagency working comments during EO12866 review. Subject to further policy review.

18 stringent technology is eliminated in this fashion, then the next most stringent alternative is considered, and so on. 1. Environmental impacts EPA and other permitting authorities have most often used this analysis to eliminate more stringent control technologies with significant or unusual effects that are unacceptable in favor of the less stringent technologies with more acceptable collateral environmental effects. However, EPA has also interpreted the BACT requirements to allow for a more stringent technology to

remain in consideration as BACT if the collater al environmental benefits of choosing such a technology outweigh the economic or energy costs of that selection. 28 In other words, the permitting authority is not limited to evaluating th e impacts of only the “top” or most effective technology but can assess the impacts of all technologies under consideration. 29 The same principle applies when assessing t echnologies for controlling GHGs. In BACT Step 4, the applicant and permitting authority should consider both direct and indirect impacts of the emissions control option or strategy being evaluated. EPA has previously referred to BACT Step 4 as the “collateral impacts analysis,” 30 but this term is primarily applicable only to the environmental impact analysis. Overall, the Step 4 analysis is more accurately described as an environmental, economic, and energy impacts analysis that includes both direct and indirect ( i.e., collateral) considerations. Since a BACT limitation must reflect the maximum degree of reduction achievable for each regulated pollutant, EPA has emphasized that the environmental impacts analysis in Step 4 should concentrate on impacts other than direct impacts due to emissions of the regulated

28 In the Matter of North Co unty Resource Recovery Assoc. , 2 E.A.D. at 230-31. 29 In re Knauf Fiber Glass, 8 E.A.D. at 131 n. 15. 30 In re Hillman Power, 10 E.A.D. at 683; In the Matter of Columbia Gulf Transmission Co ., 2 E.A.D. 824, 828 n. 5 (Adm’r 1989); In re Kawaihae Cogeneration Project, 7 E.A.D. 107, 116-17 (EAB 1997).Summary of interagency working comments during EO12866 review. Subject to further policy review.

19 pollutant that is the subject of the BACT analys is. EPA has recognized that consideration of a wide variety of environmental impacts is appropriate, such as solid or hazardous waste generation, discharges of polluted water from a control device, visibility impacts, demand on local water resources, and emissions of other pollutants subject to NSR or pollutants not regulated under NSR such as air toxics. 31 In discussing the particulars of a BACT analysis for GHGs, EPA reiterated in the 2010 GHG Permitting Guidance that the environmental impact analysis should continue to concentrate on impacts other than the direct impacts due to emissions of the regulated pollutant that is the subject of the BACT analysis. 2. Economic impacts EPA has previously advised that the economic impacts component of the analysis should focus on direct economic impacts calculated in term s of cost effectiveness (dollars per ton of pollutant emission reduced). This cost effectiveness should be addressed on both an average basis for each measure and combination of measures, and on an incremental basis comparing the costs and emissions performance level of a control option to the cost and performance of the next most stringent control option. 32 The emphasis should be on the cost of control relative to the amount of pollutant removed, rather than economic parameters that provide an indication of the general affordability of the contro l alternative relative to the source. To justify elimination of an option on economic grounds, the permit applicant should demonstrate that the costs of pollutant removal for that option are disproportionately high. 33 3. Energy impacts

31 1990 Workshop Manual at B.46; In the Matter of North County Resource Recovery Assoc. , 2 E.A.D. 229, 230 (Adm’r 1986).; In the Matter of Columbia Gulf Transmission Co ., 2 E.A.D. at 828. 32 1990 Workshop Manual, Section IV.D.2.b (B.36 – B.44). 33 1990 Workshop Manual at B.31-32.Summary of interagency working comments during EO12866 review. Subject to further policy review.

20 EPA has traditionally called for the energy im pacts analysis to consider only direct energy consumption and not indirect energy impacts, such as the energy required to produce raw materials for construction of control equipment. 34 Direct energy consumption impacts include the consumption of fuel and the consumption of electrical or thermal energy. This energy impacts analysis should include an assessment of demand for both electricity that is generated onsite and power obtained from the electrical grid , and may include an evaluation of impacts on fuel scarcity or a locally desired fuel mix in a particular area. Applicants and permitting authorities should examine whether the energy re quirements for each control option result in any significant or unusual energy penalties or benefits. 35 The costs associated with direct energy impacts should be calculated and included in the economic impacts analysis (i.e., cost analysis). 36

B. Specific Considerations at Step 4 for Bioenergy Facilities While the more traditional approach that EPA has applied in the Step 4 analysis is to eliminate options from the top-down BACT analysis based on unacceptable adverse energy, environmental, or economic impacts, this is not the only way to conduct a Step 4 analysis. EPA has recognized a permitting authority is not limited to evaluating the impacts of only the “top” or most effective technology (based on the ranking options based on control of released from the facility) but can assess the impacts of all technologies under consideration. 37 This approach may include an evaluation of the energy, environmental, and environmental benefits of all options under consideration without explicitly elim inating options based on adverse impacts.

34 In re Power Holdings , PSD Appeal No. 09-04 (EAB Aug. 13, 2010), slip op. at 22, n.17 (citing 1990 Workshop Manual at B.30). 35 1990 Workshop Manual at B.29. 36 1990 Workshop Manual at B.30. 37 In re Knauf Fiber Glass, 8 E.A.D. at 131 n. 15.Summary of interagency working comments during EO12866 review. Subject to further policy review.

21 1. Environmental impacts Although EPA has not recommended focusing on the environmental impacts of the pollutant that is the subject of the BACT analysis, with respect to CO 2 emissions from bioenergy facilities, EPA believes a different frame of refere nce should be considered because of the nature of the carbon cycle and the fact that the pro duction of biomass entails carbon sequestration. Within the context of the PSD program, a potential justification that biogenic CO 2 emissions can be accounted for differently than non-biogenic CO 2 emissions at the facility relies on the argument that sequestration occurs. This seques tration occurs offsite, outside the boundaries of the facility. Therefore, given its traditiona l focus on “collateral” environmental impacts and benefits, Step 4 of the BACT analysis seems well-suited to enable permitting authorities to consider the potential sequestration of carbon in biogenic resources outside the boundaries of the facility when evaluating BACT for greenhouse gases. This approach was reinforced by CFI comments, which emphasized the importance of r econciling the focus of the PSD and Title V program regulations on the amount of emissions re leased from each individual facility with the role that land-based sequestration may play in mitigating the net atmospheric GHG impact of emissions from individual sources. Because other pollutants and non-CO 2 GHGs do not participate in natural biogeochemical cycles to the same extent that CO 2 does, this frame of reference – in which the po tential for sequestration outside the f acility of pollutant subject to the BACT analysis is considered as part of the envi ronmental impacts at Step 4 – is not relevant for those other pollutants. In addition to this new frame of reference in which sequestration outside the boundaries of the facility is considered, it may also be appr opriate to consider broad categories of feedstocks in terms of their net impact on atmospheric GHG stocks. A complete accounting of the netSummary of interagency working comments during EO12866 review. Subject to further policy review.

22atmospheric GHG impact of a facility utilizing particular feedstocks would rely on a case-bycase, facility-specific assessment of the impact ofthe proposed facility. This type of facilityspecific approach would also likely be the most scientifically sound approach for assessing the direct carbon cycle impact of specific biogenic fuels used at the facility, because there is inherent variability in biological processes, as well as the variability in space and time common to estimates of sequestration. The BACT analysis should consider a variety of factors that may influence the net amount of carbon added to the atmosphere from and utilization of bioenergy at a facility. An important area of consensus from commenters on the CFI was the idea that feedstocks are different, and that the net impact of bioenergy an d other biogenic emissions is associated with

the feedstock that is used. The level of sequestration that occurs naturally on the landscape

without additional intervention can be considered the “business as usual” (BAU) case. In other words, this level of sequestration (or emissions ) will likely continue into the future without additional action. For example, if favorable cond itions for plant growth cause sequestration to increase beyond what is incorporated into the BAU case for that region, then net atmospheric carbon stocks will decrease beyond the BAU case. Similarly, if certain activities, such as logging, are accelerated in a particular region over a certain period of time, and associated emissions are thereby increased, then the net atmospheric carbon stocks will increase over the BAU case. In the context of bioenergy and biogenic emissions, where such a wide variety of potential feedstocks exists, the BAU case might be considered the emissions that “would have happened anyway.” Using this approach, a permitting authority would have to assess the extent to which a policy action or an activity increases or reduces CO 2 emissions above or below what would have occurred in comparison to the BAU case. From the perspective of bioenergy andSummary of interagency working comments during EO12866 review. Subject to further policy review.

23 other biogenic emissions, emission s that would have occurred regardless of whether or not the facility captured the energy from the biofuel us e or carried out the process using biological material as a feedstock might demonstrate that th e cost of additional pollutant controls is not justified. Land use change has a separate set of considerations under the BAU case. Specifically, if the rate of transition of land use from forest to agricultural use were to increase over and above that which occurred in the BAU case, and if this increase were attributable to market demand for the bioenergy crop, then it would be possible th at these emissions would be additional to the emissions expected under BAU. In that situation, the BAU case is the non-bioenergy case, such that the bioenergy use might result in increased atmospheric CO 2 levels. However, such a case-by-case analysis of the net atmospheric impact of biomass fuels would likely be prohibitively time-consuming and complex for facilities and permitting

authorities. The information we have collected to this point indicates that at present, attempting to determine the net carbon cycle impact of partic ular facilities combusting particular types of biomass feedstocks would require extensive analysis and would therefore entail extensive workload requirements. Further, additional deta iled examination of science and technical issues is needed to ensure that perm itting authorities would be able to reasonably calculate and implement accounting for the amount of GHG emissions above BAU in particular instances, or to assure consistency among the calculation methodologies of the va rious permitting authorities. Given the challenge of conducting a complete analysis for each permit application, a more practical approach to accounting is needed. Absent this, the burden on permitting authorities is likely to be overwhelming.Summary of interagency working comments during EO12866 review. Subject to further policy review.

24 For at least one category of biomass feedstocks that may be used in energy production, it does appear possible at this time to conclude th at the atmospheric impact is negligible. Some commenters on the CFI suggested that utilizing mi ll residue (e.g. sawdust, planar shavings, panel trim) to generate energy, rather than leaving the residue to decompose, likely would not cause emissions over and above that which would have taken place if the energy use did not occur. Given that this material would have decomposed under natural circumstances in a short period of time (e.g., less than 10-15 years) in the absence of utilization as bioenergy, this conclusion appears credible. In some cases, the use of biological mate rial as a fuel would clearly reduce net atmospheric CO 2 stocks in comparison with BAU fossil fu el emissions. In these cases, requiring permitting at this time, before conducting the detailed analysis required to develop an appropriate accounting system for bioenergy and other biogenic sources, might actually discourage projects that would have a net benefit for the atmosphere. For example, requiring permitting for facilities seeking to generate energy from the combustion of dead trees, especially those killed due to a widespread event like the mountain pine beetle epidemic (that would emit CO 2 anyway through natural decomposition), is likely to discourage the utilization of a readily available resource that would clearly reduce CO 2 emissions, in comparison with BAU fossil fuel-related emissions. In November 2010, EPA said it would provide guidance containing qualitative information on useful issues to consider with respect to biomass combustion, such as specific feedstock types and trends in carbon stocks at different spatial scales (e.g. national, regional, state). Upon further review, EPA has concluded that it requires further scientific input from an independent panel before it can make more qualitative characterizations beyond the one

described above for residue material. Comment [dsg8]: Should this be i.e.?Summary of interagency working comments during EO12866 review. Subject to further policy review.

25 2. Economic impacts

As discussed earlier in this section, EPA has previously advised that the economic impacts component of BACT analysis should focus on direct economic impacts calculated in terms of cost effectiveness (dollars per ton of emission reduction). As noted in the 2010 GHG Permitting Guidance, EPA recognizes that at present add-on controls for CO 2 are generally expensive technologies, especially the costs associated with CO 2 capture and compression. As with other electric generating facilities, these di rect costs will generally make the price of electricity from bioenergy used in conjuncti on with add-on control technologies for CO 2 uncompetitive compared to electricity from plan ts with other GHG controls, such as bioenergy

alone. In addition to the direct economic impacts component of the BACT analysis, permitting authorities may also consider indirect economic impacts, including potential economic benefits. Such indirect considerations may include economi c growth and the availability of employment opportunities generated within a particular regi on or community by the utilization of biomass

fuels. As EPA noted in the 2010 GHG Permitting Guidance, it is appropriate for permitting authorities to account for the underlying objectives of federal and state policies to foster expansion of renewable resources and promote biomass. Tax incentives are an example of such policies. Where one of the underlying objectives of a tax incentive or other type of policy promoting renewable energy or biomass utilizatio n is to foster economic growth and create jobs in particular area, this may be considered as a relevant indirect economic impact or benefit that can be considered in Step 4 of a BACT analysis. Where selecting a particular option as BACT would further the goals of such policy, this may form part of the basis for select ing that option as BACT. Likewise, where the record shows that re quiring a particular control option as BACT Deleted: sSummary of interagency working comments during EO12866 review. Subject to further policy review.

26 would counteract, or work at cross purposes from, policies that are intended to promote renewable energy and biomass, this may form part of the justification fo r eliminating an option from further consideration at Step 4 of the BACT analysis. Many federal and state policies, along with a number of regional efforts, are currently underway to foster the expansion of renewable resources and promote bioenergy projects as a way of addressing climate change, increasing dome stic alternative energy production, enhancing forest management and creating related employment opportunities. For example, the federal Renewable Electricity Production Tax Credit, a per-kilowatt-hour tax credit for electricity generated by qualified energy resources including biomass, was originally enacted by the Energy Policy Act of 1992 (largely by amending the Internal Revenue Code of 1986). Numerous pieces of federal legislation, the most recent being the American Recovery and Reinvestment Tax Act of 2009, have since been passed to extend certain related expiring tax provisions and expand the scope of qualified biomass feedstocks, with the duel aims of domestic job creation and economic

stabilization. 38,39 Such policies can improve the economy, especially in rural communities, by generating jobs, income, and taxes through demand for local biogenic resources and construction of bioenergy conversion facilities. Specifically, an improved market for biogenic fuels and forest land could affect economic stabilization through increased incomes (from new jobs), higher local tax base and possibly through the diversification of local energy sources, and increased competition could lower energy prices. As another example of such economic impacts, the Record of Decision for the Biomass Crop Assistance Program (BCAP) –a program cr eated by the 2008 Farm Bill that provides

38 American Recovery and Reinvestment Tax Act of 2009. The Library of Congress. http://thomas.loc.gov/home/h1/Recovery_Bill_Div_B.pdf 39 H. R. 1424 Emergency Economic Stabilization Act of 2008. The Library of Congress. http://thomas.loc.gov H. R. 4520 American Jobs Creation Act of 2004. The Library of Congress. http://thomas.loc.gov H. R. 3090 Job Creation and Worker Assistance Act of 2002. The Library of Congress. http://thomas.loc.govSummary of interagency working comments during EO12866 review. Subject to further policy review.

27 financial assistance to biomass co nversion facilities and owners of agricultural and non-industrial private forest land who wish to establish, produce, and deliver biomass feedstocks – estimated the total economic impact from broad BCAP implementation to include $88.5 billion in related economic activity and the creation of nearly 700,000 jobs. 40 Other potential indirect economic

considerations from biomass utilization as BACT could include, but are not limited to, increased demand for traditional or new biogenic crops and reduced disposal costs for biogenic materials that would otherwise be landfilled or destroyed. 3. Energy impacts With respect to energy impacts, the BACT analysis should assess the relative energy demands of the options under consideration for re ducing emissions from the facility obtaining a permit and may include an evaluation of impacts on fuel scarcity or a locally desired fuel mix in a particular area. For facilities utilizing biogenic fuels, it is appr opriate to broaden the scope of the energy impacts analysis to consider policies that seek to promote diversity in fuels used in a local area, within a state, or nationally. A variety of federal and state policies have recognized that some types of biomass can be part of a national strategy to reduce dependence on fossil fuels. Renewable fuels policies, which in some cases provide incentives for the substitution of renewable fuels for fossil fuels, have not traditionally been part of the BACT energy impacts analysis. However, consideration of renewable energy policies could become part of the BACT analysis, especially if state policies mandate the replacement of fossil fuel with biogenic fuel. 41 In addition to numerous federal programs, as of February 2011, 48 states have so me kind of state-level financial or conservation

40 USDA Farm Service Agency. 2010. www.apfo.usda.gov/FSAProgrammatic Environmental Impact Statement for the Biomass Crop Assistance Program. 2010. http://public.geomarine.com/report.aspx?id=26 41 See p. B.30 of the 1990 NSR Guidance, discussing locally scarce fuels.Summary of interagency working comments during EO12866 review. Subject to further policy review.

28 incentive program that includes biomass production and almost as many states have rules, regulations or policies that promote bioenergy use. 42 For example, certain states, such as

California 43 , Washington , 44 and Massachusetts 45 have policies and progra ms to incentivize forest management for biomass production. California, for example, as of 2009, has the technical potential for 14.2 million bone dry tons a year available from forest residues. 46 After trees are harvested for timber, such forest residues are typical ly left in the forest or disposed of via open burning because only timber of a certain quality can be used in lumber mills and other processing

facilities. An advantage of using forest residues fo r bioenergy production is that a collection infrastructure is already in place to harvest the wood, it reduces the incidence of open burning and provides an additional stream of revenue for forest owners. Programs and policies established to meet the multiple goals of forest management plans -- to establish healthy and naturally diverse forests with a balance between productive harvest and natural ecosystem and

wildlife health – can act as a foundat ion for sustainable bioenergy production. 47

42 Database of State Incentives for Renewabl es & Efficiency. Accessed February 1, 2011. www.dsireusa.org/incentives/ 43 2009 Progress to a Plan: Bioenergy Action Plan for California. California Energy Commission. 2009. www.energy.ca.gov/2010publications/C EC-500-2010-007/CE C-500-2010-007.PDFIntegrated Energy Policy Report. California Energy Commission. 2007. www.energy.ca.gov/2007publications/CEC100-2007-008/ CEC-100-2007-008-CMF.PDF Senate Bill (SB) 71. Economic Development: Sales A nd Use Tax Exclusions. Environmental Technology Project California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA). www.treasurer.ca.gov/caeatfa/sb71/index.asp 44 Washington State Bioenergy Policy Framewor k. www.bioenergy.wa.gov/ BiofuelIncentives.aspx 45 Massachusetts Green Power Purchasing Commitment, 2007, and Renewable Portfolio Standard. 2010. www.dsireusa.org/incentives/index.cfm?EE=0&RE=1&SPV=0&ST=0&implementingsector=S&state=MA&technol ogy=Biomass&sh=1 Act Related to Green Communities. Commonwealth of Massachusetts. 2008. www.malegislature.gov/Laws/SessionLaws/Acts/2008/Chapter169 46 2009 Progress to a Plan: Bioenergy Action Plan for California. California Energy Commission. 2009. www.energy.ca.gov/2010publications/C EC-500-2010-007/CE C-500-2010-007.PDF 47 California Forest Practice Rules. The California Department of Forestry and Fire Protection. 2011. www.fire.ca.gov/resource_mgt/downloads/2011_FP_Rulebook_with_Diagrams_with_Tech_Rule_No_1.pdf. Deleted: ,Summary of interagency working comments during EO12866 review. Subject to further policy review.

29 Conversely, if the proposed biogenic feedstock is scarce in the localized area of the proposed project, then the scarcity of available fu el for the project might be an energy impact suggesting that the proposed feedstoc k should not be selected as BACT. C. Potential Conclusions in Step 4 Analysis The considerations described above can support a conclusion that the exclusive utilization of biomass fuel is BACT for greenhouse gases at a bioenergy facility. As discussed above and in earlier EPA guidance, the costs of applying add-on pollution controls for greenhouse gas emissions are expected to be ex pensive and thus would in most cases justify elimination of this option based on direct economic impacts. However, EPA does not expect that the projected cost of energy efficient technology will by itself justify eliminating this option from consideration at bioenergy facilities. Nevertheless, where a bioenergy facility is projected to provide the energy and economic benefits described above in accordance with existing federal or state policies promoting utilization of biomass for energy production, these considerations may justify selecting the option of ex clusively using a biomass fuel as BACT for a bioenergy facility. Furthermore, in the case of residue material th at would otherwise decompose in a 10-15 year time frame, the net carbon cycle impact of this biomass fuel is expected to be negligible. Thus for a feedstock composed of such residue material, the costs of applying strategies to reduce emissions from the facility level do not appear justified at this time because the carbon dioxide emissions from the individual facility would not be increasing atmospheric impacts above the business as usual case. As discussed above, addi tional information is needed before similar conclusions can be supported for other types of biomass feedstocks, but EPA believes the energy Deleted: s

Comment [dsg9]: ??Summary of interagency working comments during EO12866 review. Subject to further policy review.

30 and economic benefits of this fuel is sufficient at this time to justify selecting biomass fuel as BACT for greenhouse gases without further control. 48 For facilities that are co-firing biomass with another primary fuel, the permitting record should provide a reasoned justification for basing BACT for greenhouse gases on a specific proportional allocation of fuels. 49 The factors described above may be used to justify a higher proportional allocation of biomass fuels as BACT (to the extent technically feasible) but not necessarily to eliminate other strategies for reducing greenhouse gas emissions from a facility that utilizes some proportion of fossil fuels. The costs of add-on pollution controls will still , in

most cases , justify eliminating this technology from a facility that utilizes biomass and another primary fuel type. However, application of methods, systems, or techniques to increase energy efficiency will remain a key GHG- reducing opportunity fo r facilities that utilize a significant proportion of fossil fuels and cannot demonstrate the same degree of energy and economic

benefits achieved from the exclus ive utilization of the biomass fuels, as described above. While

some utilization of biomass fuels will have so me impact on reducing dependence on fossil fuels and promoting economic growth in areas that supply biomass fuels, a small proportion of biomass fuel use may not justify bypassing opportu nities to reduce GHG emissions by improving energy efficiency at a facility that still com busts a significant proportion of fossil fuels. However, when assessing the proportional allocation for biomass and other fuel types at a co-

48 This guidance is applicable to an assessment of BACT for greenhouse gases. When conducting a BACT analysis for other regulated NSR pollutants at the type of source covered by this guidance, EPA recommends continuing to focus on guidance EPA has previously provided on determining BACT using the top-down process. The considerations described here, in terms of federal and state incentives for bioenergy production and sustainable forest management, may still be relevant considerations in Step 4 of a top-down BACT analysis for another regulated NSR pollutant, but these factors should be consider ed in the context of the particular pollutant for which the BACT analysis is conducted. These considerations ma y not apply in the same manner to pollutants other than GHGs, particularly where there is a more established reco rd of the range of costs th at have been acceptable in previous BACT determinati ons for the pollutant. 49 See, In re: Northern Michigan Univ ersity Ripley Heating Plant. PSD Appeal No. 08-02, Slip. Op at 18-23, 28 (EAB 2009) (remanding a permit for a co-fired electric genera ting facility where record did not contain justification for establishing BACT limits based on specific pr oportional allocation of wood and coal).Summary of interagency working comments during EO12866 review. Subject to further policy review.

31 fired energy facility, a permitting authority may cons ider the relative energy efficiency of using a greater proportion of biomass fuels and the eff ect this may have on GHG emissions from an individual facility. Where a residue material is ut ilized, any loss of energy efficiency attributable to the use of this type of biomass feedstock may be offset by the absence of a significant net carbon cycle impact above the business as usual case. IX. Step 5 – Selecting BACT When setting GHG emissions limitations for sources of biogenic CO 2 emissions, one should conduct the same evaluation as that described in the 2010 GHG Permitting Guidance. 50 The permitting authority is responsible for defi ning the form of the BACT limits and making them enforceable as a practical matter. 51 In determining the form of the limit, the permitting authority should consider issues such as averaging times and units of measurement. For example, in the case of co-fired facilities, a final permit may include a standard that specifies the proportional allocation of fuels to be used, thus limiting the options to the fuel mix justified as BACT. When making sure the limit is practically enforceable, the permitting authority must include information regarding th e methods that will be used for determining compliance with the limits (such as operational parameters, timing, tes ting methods, etc.) and ensure that there is no ambiguity in the permit terms themselves. 52 The permitting authority bears the responsibility in Step 5 to fully justify the BA CT decision in the permit record. Regardless of the control level or feedstock proposed by the ap plicant as BACT, the ultimate determination of BACT is made by the permitting authority.

50 “PSD and Title V Permitting Guidance for Greenhouse Ga ses.” Prepared by EPA staff. November 2010. See pages 45-47. Available at: http://www.epa.gov/nsr/ghgdocs/epa-hq-oar-2010-0841-0001.pdf. [should this just be a short cite to the 2010 GHG Permitting Guidance? Only need complete citation information once.] 51 See generally EPA Guidance on Limiting Potential to Emit (PTE) in New Source Permitting (June 13, 1989), available at http://www.epa.gov/reg3artd/permitting/t5_epa_guidance.htm. 52 In re Prairie State Generating Company , 13 E.A.D. at 83, 120. Deleted: ,

Deleted: ,Summary of interagency working comments during EO12866 review. Subject to further policy review.

32 In addition to a permit containing specific numerical emissions limits established in a BACT analysis, a permit can also include conditions requiring the use of a work practice such as an Environmental Management System (EMS) focused on energy efficiency as part of that BACT analysis. The inclusion of such a requirement would be appropriate where it is technically impractical to measure emissions a nd/or energy use from all of the equipment and processes of the plant and apply an output-based standard to each of them. For example, a candidate might be a factory with many different pieces of equipment and processes that use energy. In addition to a BACT emissions limit on the boiler providing energy, the permit could also lay out a requirement to implement an EMS along with a requirement that all suggested actions that result in net savings have to be implemented. Consequently, the plant will operate in the most efficient manner through gradual achievable improvements. However, design, equipment, or work practice standards may not be used in lieu of a numerical emissions limitation(s) unless there is a demonstration in the record that the criteria for applying such a

standard are satisfied.Summary of interagency working comments during EO12866 review. Subject to further policy review.

33 Appendix: LUCF data from the Inventory Table 1: Carbon sequestered by LULUCF sinks as reported in the Inventory (Tg CO 2 Eq.) 53 , ranked in order of magnitude. Forest Land Remaining Forest Land has been further broken up into forest and harvested wood carbon pools.

IPCC Source Category LULUCF Sink 2008 *1990–2008 Average

Forest Land Remaining Forest Land (Carbon Stock Changes) Total Forest Sector C Stock Change (791.9) (688.0)

Forest (703.9) (576.7)

A boveground Biomass (397.2) (373.5)

Soil Organic Carbon (145.9) (68.0) Belowground Biomass (78.8) (74.1)

Litter (55.9) (35.8)

Dead Wood (26.2) (25.3)

Harvested Wood (88.0) (111.2)

SWDS (63.6) (63.7)

Products in Use (24.4) (47.6)

Settlements Remaining Settlements C Stock Changes in Urban Trees (93.9) (75.5) Cropland Remaining Cropland Soil C Stock Changes for Mineral Soils (45.7) (51.5)

Land Converted to Grassland Soil C Stock Changes for Mineral Soils (25.1) (24.0)

Grassland Remaining Grassland Soil C Stock Changes in Mineral Soils (12.4) (23.3)

Other Changes in Yard Trimming and Food Scrap C Stocks in Landfills (9.5) (13.6)

Gross Sequestration from LULUCF Sinks (978.5) (875.9)

* The U.S. Greenhouse Gas Inventories submitted to the UNFCCC provide annual estimates from 1990.

53 The Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990 –2008 (April 2010) and the archive of previous inventories are available online from the Environmental Protection Agency Inventory Report Web site, located at http://www.epa.gov/climatechange/ emissions/usinventoryreport.html

.Summary of interagency working comments during EO12866 review. Subject to further policy review.

34 Table 2: Emissions from LULUCF sources as reported in the Inventory (Tg CO 2 Eq.), ranked in order of magnitude.

IPCC Source Category LULUCF Source 2008 *1990–2008 Average Cropland Remaining Cropland Soil C Stock Changes in Organic Soils 27.7 27.6

Forest Land Remaining Forest Land Non

‐ CO 2 Emissions from Forest Fires 21.7 15.7

Land Converted to Cropland Soil C Stock Changes for Mineral and Organic Soils 5.9 2.8

Cropland Remaining Cropland Liming of Agricultural Soils 3.8 4.4 Cropland Remaining Cropland Urea Fertilization 3.8 3.1

Grassland Remaining Grassland Soil C Stock Changes in Organic Soils 3.7 3.7

Settlements Remaining Settlements Direct N 2 O Fluxes from Settlement Soils 1.6 1.2

Wetlands Remaining Wetlands CO 2 an d N 2 O Emissions from Peatlands Remaining Peatlands 0.9 1.0

Land Converted to Grassland Soil C Stock Changes in Organic Soils 0.9 0.8

Forest Land Remaining Forest Land Direct N 2 O Emissions from Forest Soils 0.4 0.3

Gross Emissions from LULUCF Sources 70.4 60.6

* The U.S. Greenhouse Gas Inventories submitted to the UNFCCC provide annual estimates from 1990.