## Revisions to Air Plan; Arizona; Stationary Sources; New Source Review

EPA's Response to Public Comments on a Notice of Proposed Rulemaking

New or Amended Rules from Arizona Administrative Code, Title 18, Chapter 2, Articles 1, 2, 3, and 4; New or Amended Statutory Provision s from Arizona Revised Statutes, Title 49, Chapter 1



# Response to Comments

Docket ID: EPA

- R09

- OAR

- 2015

- 0187

June 2015Response to Comments
AZ NSR SIP Submittal

June 2015 Page 2 of 43 

### 1. Introduction

On March 18, 2015, the U.S. Environmental Protection Agency (EPA) provided notice of, and requested public comment on, a proposed Clean Air Act (CAA or Act) rulemaking to revise certain portions of the Arizona State Implementation Plan (SIP) for the Arizon a Department of Environmental Quality (ADEQ). 80 FR 14044 (Mar. 18, 2015). This document provides excerpts or summaries of the public comments received by EPA on our proposed action on the ADEQ New Source Review (NSR) 1 SIP submittal. 2 Our responses to the comments made are provided below. In some cases, similar comments are grouped together and addressed by one EPA response. The full text of all public comments and other documents relevant to this action are available in the docket (visit www.regulations.gov and search by
the Docket ID: EPA

- R09

- OAR

- 2015

- 0187 ).

Commenters:

• Robert Ukeiley

• Barbara Sprungl, Salt River Project Agricultural Improvement and Power District (SRP)

• Eric Massey, Arizona Department of Environm ental Quality (ADEQ)



### 2. Comments and Responses

PM 2.5 Increments

Comment 1: (Commenter: Robert Ukeiley)

The Federal Register notice does not make it clear if the Arizona rules proposed to be approved into
the SIP include the PM 2.5 increments. EPA must disapprove this rule if it does not include the PM 2.5 increments.

Response 1: In EPA’s March 18, 2015 Federal Register notice, we proposed to approve ADEQ rule R18

- 2

- 218 into the Arizona SIP, and stated “ADEQ adopted the increments, or maximum allowable increases, in R18

- 2

- 218

– Limitation of Pollutants in Classified Attainment Areas .” 80 FR 14044, 14045, 14051. The PM 2.5 increments are included in Section A of ADEQ rule R18

- 2

- 218. As such, ADEQ submitted

, and we are approving into the Arizona SIP, ADEQ rule R18

- 2

- 218 containing the PM 2.5 increments. 3

1 By “NSR” or “NSR program” we are generally referring to the collective requirements of the minor NSR, Prevention of Significant Deterioration (PSD) and Nonattainment NSR (NA

- NSR) programs.

2 The SIP revisions that are the subject of this action are refer red to herein as ADEQ’s “NSR SIP submittal,” although the revisions and our current action also address two rules and one statutory provision that are not directly related to NSR.

3 Our proposed action also points out that certain terminology used in ADEQ’ s PSD rules with respect to the increments is not clear, and that ADEQ’s rules contain provisions that allow for exclusions from increment consumption for certain temporary emissions that do not conf o rm to the analogous federal regulatory requirements. The se issues provided a basis for our proposed limited disapproval of ADEQ’s PSD program. See Section II.C.1 of the preamble at 80 FR 14051. Neither this commenter nor any other commenter addressed these specific issues, thus we continue to believe that these issues areResponse to Comments
AZ NSR SIP Submittal

June 2015 Page 3 of 43 ADEQ’s Methodology for Establishing Minor NSR Thresholds

Comment 2 : (Commenter: ADEQ)

ADEQ states that its methodology for establishing minor NSR thresholds was valid for all ar eas under ADEQ’s jurisdiction. The Clean Air Act does not impose strict, specific requirements on NSR programs for minor sources, as it does for major NSR. Rather, section 110(a)(2)(C) generally requires that each state include a program regulating the mod ification and construction of any stationary source as

necessary to assure achievement of the NAAQS. The sizes of minor source facilities, buildings, structures, or installations are assessed and compared to threshold levels to determine whether their
pote ntial to emit is so high as to affect the NAAQS. Each state establishes its own threshold levels to define the limits of its minor NSR regulations to create an effective pollution control strategy without also creating unnecessary regulatory burden.

Citing EPA’s proposed Tribal NSR Rule, ADEQ states that in the past, EPA has asserted that threshold levels are appropriate where “sources and modifications with emissions below the thresholds are inconsequential to attainment and maintenance of the NAAQS. ” 4 In creating a federal minor NSR program for Indian Country, EPA emphasized the importance of a cost

- effective plan, as well as one that reduces the burden on sources and reviewing authorities.

ADEQ set an adequate, yet cost

- effective threshold level o f one half the significant level (SL) for nonattainment areas. Just as EPA did in the Tribal Minor NSR R ule, ADEQ identified the level at which a lower threshold merely creates a larger pool of regulated minor sources without substantially reducing emissio ns. Research data pro vided by a consultant was used to make an informed
determination which threshold levels would in fact be most cost

- effective, while still achieving the goals of the minor source program. ADEQ included a table of the results provided by its contractor for two potential NSR threshold scenarios. 5 Scenario 1 illustrates the impact of a minor threshold of one
half the SL and S cenario 2 illustrates the impact of a threshold set at one quarter the SL. Lowering the threshold beyond one half th e SL essentially doubles the percentage of sources regulated, which certainly increases the state’s ability to reach more minor sources. However, regulating more sources does not necessarily translate to effective emissions reductions. Rather there is a di minishing return on emission reductions as the threshold level is pushed further down to include sources with fewer

emissions.

ADEQ illustrated this statement through a figure provided in its comments showing a comparison of potential threshold levels an d relative impact, by pollutant. 6 The figure compares the percent of emissions regulated with the percent of sources regulated at the two NSR exemption scenarios

deficiencies that ADEQ must correct for full approval of the PSD portion of the ADEQ NSR SIP submittal , and these issues provide a basis for our final limited disapproval.

4 71 FR 48696, 48701 (Aug

. 21, 2006).

5 EPA provided the same table in its TSD for this action. See Table 5 of the TSD

- Results of ADEQ’s Stationary Source Distribution Analysis.

6 See ADEQ’s April 17, 2015 comment letter at 14.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 4 of 43 considered by ADEQ. ADEQ states that the slopes between the significance level points in the g raph for each pollutant illustrate the incremental percentage of emissions that would be covered when the threshold level is moved from one half to one quarter. Both possible threshold options would result in a relatively large percentage of emissions from minor sources becoming subject to regulation. However, the average emissions covered per source decreases significantly for all additional sources that fall below one half of the significant level. The disproportionate effect between the changes in the

am ount of sources relative to the change in the amount of emissions covered provides a firm basis for ADEQ’s decision. The thresholds in ADEQ’s minor NSR program meet federal requirements without creating a system in which the burdens of regulation would out weigh the benefits to air quality.

Response 2 : As noted by ADEQ , CAA section 110(a)(2) generally requires that each state include a program regulating the modification and construction of any stationary source as necessary to assure achievement of the NAAQS. While we appreciate ADEQ’s comments on this issue, to date, ADEQ has not provided sufficient information about the nature, scope and emissions that are contributing to nonattainment in the areas subject to ADEQ’s jurisdi ction to change our proposed determination that ADEQ has not provided an adequate basis for its NSR exemption thresholds as applied in such

nonattainment areas.

The implementing regulations for the minor NSR program make clear that SIPs must include lega lly enforceable procedures that enable the decisionmaking authority to determine whether the construction or modification of stationary sources will result in a violation of applicable portions of the control strategy or interfere with attainment or mainte nance of the NAAQS, and that such procedures include means by which the decisionmaking authority can prevent such construction or modification if it will result in such violation or interference. 40 CFR 51.160(a) and (b). Further, 40 CFR 51.160(e) provides :

The procedures must identify types and sizes of facilities, buildings, structures or installations which will be subject to review under this section. The plan must discuss the basis for determining which facilities will be subject to review.

Under CAA section 110(a)(2) and 40 CFR 51.160(e), we agree with ADEQ that States are not necessarily required to regulate all stationary sources under the minor NSR program. States can exempt from review those stationary sources with emissions that they can demonst rate would not pose a threat to the attainment or maintenance of the NAAQS, thereby satisfying the requirement in CAA section 110(a)(2)(C) that their minor NSR program regulate the modification and construction of any stationary
source within the areas cov ered by the plan as necessary to ensure that the NAAQS are achieved. EPA’s interpretation was discussed in the proposal for our Tribal Minor NSR Rule:

A review of several State minor NSR programs indicated that a number of State programs have
established cutoff levels or minor NSR thresholds, below which sources are exempt from their minor NSR rules. We believe that such an approach is also appropriate in Indian country. Section 110(a)(2)(C) of the Act requires minor NSR programs to assure that the NAAQS a reResponse to Comments
AZ NSR SIP Submittal

June 2015 Page 5 of 43 attained and maintained. Applicability thresholds are proper in this context provided that the sources and modifications with emissions below the thresholds are inconsequential to attainment and maintenance of the NAAQS. For each pollutant, only around 1 percent (or less) of total emissions would be exempt under the minor NSR program.

Review of New Sources and Modifications in Indian Country, Proposed Rule, 71 FR 48696, 4870 3 (Aug. 21, 2006); see also Review of New Sources and Modifications in Indian Co untry, Final Rule, 76 FR 3875 8 (finding that sources with emissions below the permitting exemption thresholds selected by EPA in the
Tribal Minor NSR Rule would be inconsequential to attainment or maintenance of the NAAQS). We
note that in our Tribal NSR R ule , “the selected minor source thresholds distinguish between minor stationary sources of regulated NSR pollutants located in nonattainment areas and attainment areas,” with lower thresholds in nonattainment areas. 71 FR at 48702; see 76 FR at 38758 (fina lizing thresholds as proposed).

In our proposed action on ADEQ’s NSR SIP submittal, we found deficiencies in the basis ADEQ provided for determining which sources would be subject to review under its minor NSR program under 40 CFR 51.160(e), applying the statutory and regulatory standard discussed above. 80 FR at 14049. These deficiencies provided a basis (among other bases) for our proposed limited disapproval of ADEQ’s minor NSR program. As stated in our proposal, we found ADEQ’s general approach to meet ing 40 CFR 51.160(e) acceptable. However, we proposed a limited disapproval for three aspects of ADEQ’s minor NSR program under 40 CFR 51.160(e): the adequacy of ADEQ’s NSR exemption thresholds for nonattainment areas; certain exemptions for agricultural a nd fuel burning equipment; and the lack of any basis for the PM 2.5 NSR exemption threshold in any areas under ADEQ’s jurisdiction. None of the comments on our proposal address ed our proposed limited disapprovals related to agricultural and fuel burning equ ipment exemptions or the missing explanation in the submittal for the PM 2.5 NSR exemption threshold. As such, we continue to determine that these two issues warrant a limited disapproval, and further consider ADEQ’s comments as they apply to the basis prov ided for ADEQ’s NSR exemption thresholds for pollutants in nonattainment areas. 7

ADEQ’s comments focus largely on the argument that expanding its minor NSR program to cover even smaller sources ( i.e. , sources with emissions of approximately 1⁄4 of the PSD significant emission rates) would result in diminishing returns on emission reductions. ADEQ argues that while more emissions would be regulated under such an approach, in some instances, this would re sult in significantly more stationary sources becoming subject to the program. In the case of VOC, for example, the percentage of all stationary sources regulated would approximately double from 8% to 16%. ADEQ appears to reason that while ADEQ would be ab le to regulate more emissions with such a lower threshold, the types of projects brought into the program would be smaller and less likely to be regulated in a way to achieve useful emission reductions. However, as discussed above, our determination of whe ther a

7 We note that the reasoning EPA provides in these responses to c omments concerning permitting exemption thresholds in nonattainment areas would apply equally to our review of the basis for NSR exemption thresholds for PM 2.5 in

nonattainment areas.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 6 of 43 minor NSR program is sufficient to meet CAA SIP requirements is based on whether the State has provided an adequate basis that the exempt emissions do not need to be reviewed to ensure attainment and maintenance of the NAAQS in the particular geogra phic areas covered by the program because they are inconsequential to attainment or maintenance , considering the particular air quality concerns in such areas. The information provided by ADEQ to date, including the amount of sources regulated as compared with the volume of emissions per such source, does not demonstrate that the adopted thresholds are those necessary to assure attainment and maintenance of the NAAQS. For example, if an area happens to have a large volume of sources in a particular source category that are typically minor sources but emit the pollutants that contribute to nonattainment, then regulation of those sources may be necessary to assure attainment and maintenance of the NAAQS in that area. The
thresholds established in the Tribal N SR Rule exempted around 1 percent of total emissions, while
exempt ing from 42 percent to 76 percent of sources, depend ing on the pollutant. 76 FR at 3 8758.

We recognize that the reference that EPA made in its proposed action to ADEQ’s submittal not provid ing a clear basis for concluding that its NSR exemption thresholds would ensure that a “sufficient percentage of minor sources” would be subject to review in nonattainment areas, rather than referring to a “sufficient percentage of minor source emissions,” was imprecise and may have led to confusion about the nature of EPA’s concern. As such, we are clarifying that our disapproval is related to ensuring that ADEQ’s NSR program exempts from review only those sources with emissions that do not pose a
threat t o attainment and maintenance of the NAAQS because they are inconsequential to attainment

or maintenance . The particular percentage of stationary sources that are being regulated would generally not be an adequate basis under 40 CFR 51.160(e) for determinin g the sizes and types of stationary sources that will be subject to NSR review as necessary to ensure compliance with CAA section 110(a)(2) and 40 CFR 51.160(a) and (b). As noted, the Tribal NSR Rule exempted as many as 76 percent of the sources of a pollu tant, but required review of about 99% of total emissions . 76 FR at

38758. In this case, ADEQ has not shown that the emissions exempt from its NSR program will not threaten attainment and maintenance of the NAAQS in its nonattainment areas. Accordingly , af ter consideration of ADEQ’s comments, we continue to find that a limited disapproval of ADEQ’s program under 40 CFR 51.160(e), as it pertains to the NSR exemption threshold for nonattainment areas, is

necessary.

As stated in our proposal, in addressing t his deficiency, ADEQ does not necessarily have to consider overall lower permitting exemption th resholds in nonattainment areas, s ee 80 FR 14049 n. 13

, although, as noted, the Tribal NSR Rule established lower thresholds for nonattainment areas. 76 FR at

3 8758 . For example, ADEQ could provide further analysis to demonstrate that the adopted thresholds are protective of the NAAQS i n nonattainment areas, or ADEQ could consider a different approach, such as requiring minor sources in nonattainment areas subjec t to a pre

- existing SIP requirement for the nonattainment pollutant, or its precursors

, to be subject to review under ADEQ’s registration program. In addressing this limited disapproval issue, we recommend that ADEQ focus its
consideration on the contribut ion that emissions from minor stationary sources with emissions below its currently adopted permitting exemption thresholds are expected to make with respect to attainment and maintenance of the NAAQS in nonattainment areas.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 7 of 43 In addition, we wish to clari fy that while EPA’s proposed rulemaking for the Tribal NSR program
discussed cost

- effectiveness and attempted to strike a “balance between environmental protection and economic growth,” it also recognized the need for exemption thresholds to ensure “that s ources with emissions below the proposed minor NSR thresholds will be inconsequential to attainment and maintenance of the NAAQS.” 71 FR at 48703. See also 76 FR at 38758. EPA recognized the overarching need for standards stringent enough to ensure NAAQS protection, and agreed to “consider changing the minor NSR thresholds as appropriate” to ensure that they are sufficiently protective. 76 FR at 38759. Thus, cost

- effectiveness is not a relevant criterion for determining whether a minor NSR program’s exempt ion thresholds will assure attainment and maintenance of the NAAQS, and the test is not whether the benefits of the program outweigh the burdens of regulation, but whether the state’s program meets the requirement in CAA section 110(a)(2)(C) to “assure tha t national ambient air quality standards are achieved.”

Minor Sources in Nonattainment Areas

Comment 3 : (Commenters: SRP and ADEQ)

SRP and ADEQ state that EPA may not substitute its policy preferences for ADEQ’s in proposing to disapprove ADEQ’s minor NSR program with respect to nonattainment areas. There are no regulatory provisions or CAA statutory provisions that specify that a State must regulate a "suffici ent percentage"
of minor sources in nonattainment areas

. EPA 's objection appears to be based on its own policy preferences, and EPA simply lacks authority to substitute its prefe rences for those of the State. EPA points to no flaws in the reasoning behind the analysis, nor does EPA provide an alternative analysis demonstrating that modifications or construction of minor sources of a certain size or type have caused air quality concerns within ADEQ's jurisdiction.

Further, each state, region, and control a rea encounters unique circumstances that contribute to air quality issues, as well as the strategies necessary to comply with the requirements of the Clean Air Act. At page 14049 n. 12 of the proposal, which accompanied a generalized comparison to other st ates, EPA referenced threshold levels for Sacramento, California. It is erroneous for EPA to compare Arizona’s minor NSR program with that of California, due to the extraordinary severity of the nonattainment problems in California. EPA’s implication that ADEQ should create a minor source NSR program that looks and functions like other states, and particularly California, is an improper basis for disapproval.

ADEQ also asserts that EPA has advanced no reason for concluding that ADEQ’s analysis is any less valid
for nonattainment areas than it is for attainment areas.

Response 3 : Contrary to the commenters’ assertion s , our proposed limited disapproval of ADEQ’s program concerning the NSR exemption threshold for nonattainment areas was not based on an EPA policy preference to regulate “more” sources in nonattainment areas. As explained in detail in our response

to comment 2 , EPA’s proposed disapproval based on 40 CFR 51.160(e) stemmed in part from the lack
of suff icient justification in ADEQ’s NSR submittal to support its chosen thresholds for coverage of theResponse to Comments
AZ NSR SIP Submittal

June 2015 Page 8 of 43 minor NSR program in nonattainment areas as required by 40 CFR 51.160(e) and CAA section 110(a)(2). It is the State’s obligation to demonstrate that emission s from sources exempt under its chosen NSR exemption threshold will not pose a threat to attainment or maintenance of the NAAQS. We found at the time of our proposal that ADEQ had not done so with respect to the NSR exemption thresholds in

nonattainment ar eas, and we continu e to find that this is the case

. 8

Our March 18, 2015 proposed action made clear that ADEQ could consider various options for addressing this deficiency and we did not mandate that ADEQ adhere to a particular EPA policy choice
in this re gard. 80 FR at 14049 and n. 13. See also response to comment 2 . EPA agrees with the commenters that ADEQ has the discretion to determine the types and sizes of sources that need to be regulated under its NSR program to attain and maintain the NAAQS. But AD EQ, like other States, must provide a reasoned basis for the scope of emissions (and stationary sources of such emissions) regulated under its program that demonstrates that exemption of such emissions from NSR review will
not threaten the attainment and m aintenance of the NAAQS in nonattainment areas.

Air quality concerns in nonattainment areas differ from those in attainment areas and thus the measures necessary to attain and maintain the NAAQS may be more stringent in nonattainment areas
than in attain ment areas. When an area is already in nonattainment with a NAAQS for a particular pollutant, it is logical to conclude that relatively low levels of emissions increases of that nonattainment pollutant may well contribute to nonattainment and interfere wit h achievement of the NAAQS, while a source with the same level of emissions in an attainment area may pose little threat to maintaining the NAAQS. Thus, SIPs may need to provide greater or more detailed justification for exempting smaller sources of emissi ons from NSR review in nonattainment areas, depending on the particular air quality concerns in the area at issue. Indeed, as noted, EP A’s Tribal NSR Rule established more stringent thresholds for minor NSR in nonattainment areas, in most cases at 50% of t he thresholds for attainment areas. 76 FR 38758 (Table).

ADEQ’s jurisdiction covers both attainment and nonattainment areas, and ADEQ’s analysis supporting its NSR exemption thresholds made no distinction between these types of areas nor did it provide

a ddit ional information to support the thresholds in nonattainment areas under ADEQ’s jurisdiction. For example, ADEQ’s analysis indicated that it would exempt approximately 65% of CO emissions, 78% of

SO 2 emissions, and 40% of VOC emissions from review unde r its NSR program . By comparison, EPA’s analysis for the Tribal Minor NSR program, cited by ADEQ in its analysis, demonstrated that EPA anticipated exempt ing around 1% of stationary source emissions from review under NSR

, based on
National E missions I nventory data for all stationary point source emissions in both attainment and

nonattainment areas . As such, ADEQ did not provide enough detail to demonstrate that NSR review of emissions from the exempted sources would not be necessary for attainment and maintenance of the
NAAQS in nonattainment areas because sources below the thresholds would be “inconsequential to attainment or maintenance of the NAAQS.” 76 FR at 38758 . Accordingly, we found that ADEQ had not

8 We addressed the comment concerning the reference in EPA’s proposal t o regulation of a “sufficient percentage of minor

sources ” in our response to comment 2.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 9 of 43 provided an adequate basis under 40 CFR 51.16 0(e) for its NSR program exemption thresholds as they pertain to nonattainment areas.

In the case of attainment areas, EPA is approving the basis provided by ADEQ for its selected NSR exemption thresholds. We find it reasonable to conclude, based on the information and analysis provided by ADEQ, that expanding the NSR program to cover more emissions in areas that are already attaining the NAAQS will ensure that those areas will continue to attain and maintain the NAAQS. We
cannot reach the same conclusio n for nonattainment areas where the minor sources in a particular nonattainment area may, in fact, significantly contribute to nonattainment in that area. 9

The reference in our proposal to the approaches taken by other permitting programs, including a

Ca lifornia agency, with respect to NSR exemption thresholds in nonattainment areas is not an indication that EPA believes that such approaches or thresholds are required for ADEQ, but simply information showing that it is common for agencies in nonattainment areas to find it necessary to regulate more emissions. In providing this information, EPA was not suggesting that there was a particular percentage of emissions that should be regulated, but that other nonattainment areas have found it necessary to exempt fewer emissions from their programs (including Maricopa County, Arizona, Colorado

, and EPA’s Tribal Minor NSR rule, which were also referenced in our proposed

action 10 ). It was ADEQ’s lack of demonstration that its selected thresholds are adequate to ensur e attainment and maintenance of the NAAQS in light of the specific air quality issues in the nonattainment areas under its jurisdiction that led to our proposed disapproval.

In sum, EPA did not conclude that ADEQ’s NSR exemption thresholds are necessaril y deficient, or suggest that some other agency’s threshold must be applied. EPA’s proposed limited disapproval for ADEQ’s NSR exemption thresholds for nonattainment area s under 40 CFR 51.160(e) relates only to the fact that ADEQ had not provided an adequat e basis for the thresholds that were set for these areas. As discussed in response to comment 2, o ur final limited disapproval is also based on this finding.

Authority to Deny a “Proposed Final Permit” Satisfies NSR Requirements

Comment 4 : (Commenter: ADEQ)

ADEQ submitted comments related to EPA’s proposed limited disapproval of ADEQ’s NSR SIP submittal for its use of the term “proposed final permit.” ADEQ explains that the purpose of allowing sources to construct after issuance of a proposed final permit

– t he version of the permit that ADEQ forwards to EPA for review under the title V program for title V sources

– is to ensure that Arizona's unitary permit

9 We acknowledge that ADEQ’s analysis explained that sources that contribute to noncompliance with the SO 2 NAAQS are
well

- defined, large industrial sources already subject to the permitting program. However, ADEQ’s analysis did not provide information or details to support these statements or otherwise provide information sufficient to allow EPA to reach the

c onclusion that the permitting exemption thresholds selected by ADEQ exempt only those stationary sources with emissions that do not pose a threat to attainment and maintenance of the NAAQS in nonattainment areas.

10 There was a typographical error in our FR notice that referenced a “Table 3,” when there was not a Table 3 in the Federal Register notice. The notice should have referenced Table 3 of our TSD.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 10 of 43 program does not place restrictions on Arizona industries that they would not face in jurisdictions wit h binary permitting programs. Under a binary program, separate permits are issued to construct and operate, and only permits to operate are subject to EPA review under title V. Thus a source in a jurisdiction with a binary program ordinarily would have the authority to proceed with construction under a construction permit before EPA review of the title V permit or permit revision occurred.

ADEQ specifically takes issue with EPA’s proposed determination that the program does not provide ADEQ with clear auth ority to prevent construction or modification before it issues a final decision on the request for authority to construct as is required per 40 CFR 51.160(a) and (b). 80 Fed. Reg. at 14048. ADEQ states that this objection is invalid for two reasons.

Fir st, 40 C.F.R. § 51.160(b) does not require a minor NSR program to include authority to prevent construction “before [an agency] issues a final decision.” It requires only that the program include procedures by which the agency “will prevent ... constructio n or modification.” The Arizona program manifestly includes such procedures: ADEQ can prevent construction of a source that threatens the NAAQS or control strategy by denying the permit application before a proposed final permit is issued. No more is requi red. Second, by “final” EPA appears to mean subject to administrative and judicial review. See 80 Fed. Reg. at 14053. EPA maintains that although ADEQ has issued guidance stating that it “will treat [a] proposed final permit as a final, appealable agency a ction," the rule itself is not sufficiently clear to be fully approved. 80 Fed. Reg. at 14048.

EPA, however, has mischaracterized ADEQ’s guidance. ADEQ did not state that it “will treat” proposed final permits” as appealable agency actions. Rather, the De partment stated that it “must” do so. Under Arizona administrative law, an "appealable agency action" is defined as "an action that determines the legal rights, duties or privileges of a party." A.RS. § 41

- 1092(3). Because a proposed final permit or permit revision under the revised rules determines the applicant's right to construct, it must be treated as an appealable agency action separate from the issuance of the final permit or permit revision. ADEQ must therefore issue a notice of appealable agency ac tion under A.R.S § 41

- 1092.03 for both the proposed final permit or permit revision, as well as the final permit or permit revision.

ADEQ states that there is no ambiguity under Arizona law (which mirrors the administrative law of most states). Under the clear terms of ADEQ’s regulations, a proposed final permit confers a right to construct and is therefore appealable.

Response 4 : EPA appreciates ADEQ’s comments concerning the question of whether ADEQ’s NSR program provides
for the issuance of a final N SR decision prior to sources being allowed to begin construction. Our proposed action on ADEQ’s NSR SIP submittal stated that certain sources were allowed to begin construction upon issuance of a proposed final permit, and that we believed that ADEQ’s regu lations were ambiguous as to whether issuance of a “proposed final permit” was a final NSR decision. As a result, we proposed to find that ADEQ’s NSR SIP submittal did not satisfy several related CAA requirements, and those deficiencies provided some of th e bases for our proposed limited disapproval of ADEQ’s PSD program, NA

- NSR program, and minor NSR program.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 11 of 43 EPA continues to believe that the CAA and its implementing regulations require that PSD and NA

- NSR programs must provide for the issuance of final N SR permit decisions imposing permit conditions necessary to ensure compliance with the applicable NSR program requirements before sources subject to those programs may begin construction. We also interpret the CAA to require that PSD programs provide an op portunity for judicial review of PSD permit decisions. See generally CAA sections 110(a)(2)(C), 165, 172(c)(5), 173; 40 CFR 51.165(a)(2), 51.166(a)(7)(iii), 166(q)(2)(vii). 11

The CAA and its implementing regulations also require that minor NSR programs pr ovide for legally enforceable procedures including means by which the Agency responsible for final decisionmaking on an application for approval to construct or modify has authority to prevent such construction or
modification if such construction or modif ication will result in a violation of applicable portions of the control strategy or will interfere with the attainment or maintenance of a national ambient air quality standard (NAAQS). CAA section 110(a)(2)(C), 40 CFR 51.160(a)

- (b). We continue to belie ve that decisionmaking authorities must make final NSR decisions for minor sources, as well as major sources, subject to their NSR program prior to allowing sources to begin construction in order to satisfy this requirement that the plan provide for such “ legally enforceable procedures.” 12

EPA acknowledges the interpretation that ADEQ recently provided to clarify that ADEQ must treat “proposed final permits” as “appealable agency actions,” which are defined under Arizona law as

a ctions that “determine[] the legal rights, duties or privileges of a party” pursuant to A.R.S. section 41

- 1092(3). ADEQ Memorandum

– Proposed Final Permits to Be Treated as Appealable Agency Actions, dated February 10, 2015. ADEQ also provided additional c larifications after the end of the public comment period, specifically stating that “[p]roposed final permits are enforceable at the time that the permits are issued.” 13 After further review of this issue and consideration of ADEQ’s comments and interpretat ion of its regulations, and in reliance on ADEQ’s stated interpretation of its regulations

, we have determined that “proposed final permits” constitute final, binding, and enforceable NSR decisions by ADEQ that are issued before sources may begin construct ion and which are immediately subject to

review.

We therefore conclude that ADEQ’s NSR program provides, in all instances, for the issuance of a final NSR decision prior to sources being allowed to begin construction, thus this issue no longer provides a basis for our limited disapproval of the ADEQ NSR SIP submittal. Specifically, we agree that : (1) ADEQ’s

11 The notice for our proposed action noted discussed the fact that we interpret the CAA to require an op portunity for judicial review of a decision to grant or deny a PSD permit, whether issued by EPA or by a State under a SIP

- approved or delegated PSD program. See 80 FR 14053.

12 We agree that ADEQ has authority to decline to issue a proposed final permit fo r a particular source if it finds that the emissions from such source would result in a violation of applicable portions of the control strategy or would interfere with the attainment or maintenance of the NAAQS. However, in cases where a permit requiremen t would be needed to ensure compliance with the NAAQS for a particular source, if such a permit decision were not final, binding and enforceable at the time construction of the source was authorized, there would not be a legally enforceable procedure in pl ace to prevent construction of that source in a manner that could violate the NAAQS as required by 40 CFR 51.160.

13 See June 8, 2015 email “Clarification of ADEQ’s Comments on EPA’s Proposed Action” from Eric C. Massey, Air Quality

Division Director at A DEQ to Lisa Beckham, Air Permits Office, EPA Region 9.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 12 of 43 NSR program provides ADEQ with clear authority to prevent construction or modification before it
issues a final decisi on on the request for authority to construct as required by 40 CFR 51.160(a) and (b); (2) ADEQ’s PSD and NA

- NSR programs do not allow a source to begin construction prior to issuance of
a final PSD or NA

- NSR permit; and (3) ADEQ’s PSD program satisfies the CAA requirement for an opportunity for judicial review of PSD permit decisions. We are also including the clarifying

memo randum from ADEQ dated February 10, 2015 as additional material in our final rule.

However, we continue to recommend that ADEQ revise its regulations to clarify that a proposed final permit is a final, enforceable, and appealable NSR permit decision in order to minimize confusion among the public and the regulated community. We reiterate that such a revision is not a requirement for app roval of ADEQ’s NSR program into the SIP.

Sufficiency of ADEQ’s Minor NSR Requirements to Protect the NAAQS

Comment 5 : (Commenters: ADEQ and SRP)

ADEQ disagrees with EPA’s proposed limited disapproval of ADEQ’s program under 40 CFR 51.160(a)(2) and (b)(2 ) because rule R18

- 2

- 334 does not require ADEQ to evaluate whether the project under review will interfere with attainment or maintenance of the NAAQS in all cases, and instead allows sources to apply reasonably available control technology (RACT) in lieu of such an evaluation. ADEQ
also takes issue with EPA’s determination that R18

- 2

- 334(E) allows for too great of Director’s discretion when determining when to require a NAAQS analysis. ADEQ believes this objection is fundamentally at odds with EPA’s own ap proach to air quality impact analysis (AQIA) in the Tribal Minor NSR Rule. The tribal rule initially imposes a case

- by

- case control technology requirement, but gives the “reviewing authority” (which may be EPA or a tribe with delegated authority) discretio n to conduct an AQIA. 40 CFR 51.154(c) and (d). ADEQ also cites to EPA’s response to comments for the Tribal Minor NSR Rule
where EPA indicated that reviewing authorities implementing the Tribal Minor NSR Rule should be allowed the discretion to determine when an AQIA might be needed from the applicant. See 76 FR 38761. Further, ADEQ argues that ADEQ’s rule is actually stricter and confers less d iscretion than EPA’s Tribal Minor NSR Rule. ADEQ must consider the source’s emission rates, location of emission units within the facility and their proximity to ambient air, the terrain in which the source is or will be located, the source type, the locat ion and emissions of nearby sources, and background concentration of regulated minor NSR pollutants. By comparison, the criteria in EPA’s Tribal Minor NSR Rule states
that if the reviewing authority has reason to be concerned that the construction of your minor source
or modification would cause or contribute to a NAAQS or PSD violation, it may require the source to conduct and submit an AQIA. (emphasis added). ADEQ believes that this comparison demonstrates that ADEQ’s discretion is far from being “too gre at;” ADEQ’s discretion under R18

- 2

- 334(E) is minimal.

Finally, ADEQ disagrees with EPA’s determination that R18

- 2

- 334(C)(1)(a)

- (b) “appears to allow sources with lower levels of emissions to avoid both substantive NAAQS review and RACT requirements” and that the state’s minor NSR Program therefore fails to ensure “that all sources subject to review under its NSR program will not interfere with attainment or maintenance of the NAAQS.” This objection is incorrect for two reasons. First, R18

- 2

- 334(C)(1)(a)

- ( c) represents ADEQ’s reasonable judgment thatResponse to Comments
AZ NSR SIP Submittal

June 2015 Page 13 of 43 the imposition of RACT on units with low emissions (20 percent of the source threshold) within a source otherwise subject to RACT is not a cost

- effective means of protecting the NAAQS. Second, this provision do es not, as EPA contends, allow sources to avoid substantive NAAQS review. This provision clearly applies solely to sources that elect to comply with minor NSR through installation of RACT. These sources remain subject to the obligation to conduct an AQIA o n the Director’s request under

R18

- 2

- 334(E), and there is nothing in the rule to suggest that emissions from units below the R18

- 2

- 334(C)(1)(a)

- (b) thresholds would be excluded from the AQIA.

SRP also disagrees with EPA’s proposed disapproval based on EPA ’s finding that the Director's
discretion under R

- 18

- 2

- 334(E) was too great, and asserts that EPA’s proposed action conflicts with US EPA's policy on approving director discretion provisions. SRP argues that the Director’s discretion in this regard is suff iciently specific in identifying when it applies and what criteria are to be applied and that therefore the relevant provisions are fully approvable into the Arizona SIP.

Response 5 : Upon review of ADEQ’s comments, including clarifications regarding how the provisions of R18

- 2

- 334(E) apply, and in reliance on ADEQ’s stated interpretation of its regulations, we no longer find that ADEQ’s minor NSR program does not satisfy 40 CFR 51.160(a)(2) and (b)(2) based on the view that rule

R18

- 2

- 334 does not requir e ADEQ to evaluate whether all sources subject to review under that rule

may interfere with attainment or maintenance of the NAAQS

. 14 After the close of the public comment period, ADEQ provided additional clarifications, stating that it interprets R18

- 2

- 334 to “require[] ADEQ to consider the air quality impacts of a project, using the criteria established in R18

- 2

- 334(E)(1) through (6), in each instance where the applicant has not submitted an AQIA under R18

- 2

- 334(C)(2).” 15 ADEQ has explained that it interpret s R18

- 2

- 334 to require ADEQ to consider, for all sources subject to R18

- 2

- 334, whether there is reason to believe that the source could interfere with attainment or maintenance of the NAAQS. Some sources will comply with this requirement by submitting an A QIA
under R18

- 2

- 334(C)(2). All other sources will be reviewed by ADEQ using the criteria in R18

- 2

- 334(E), and those criteria will be used to determine whether a more formal AQIA is necessary. That is, ADEQ
does not have discretion to determine in which ins tances it will or won’t apply the criteria in R18

- 2

- 334(E)(1) through (6); instead, ADEQ interprets its regulations to require that ADEQ apply such criteria for all sources subject to R18

- 2

- 334 where the applicant has not submitted an AQIA. Accordingly, this issue does not provide a basis for our final limited disapproval.

We would also like to clarify that our proposed limited disapproval was not specifically related to ADEQ’s choice to apply RACT for some sources subject to R18

- 2

- 334 while allowing cer tain smaller sources subject to the rule to avoid RACT. Rather, our proposed disapproval action related only to what we understood to be the potential for sources subject to R18

- 2

- 334 to apply RACT (or to proceed without applying RACT for certain sources w ith lower emissions) in lieu of any review by ADEQ of the source’s potential impacts on the NAAQS under the ADEQ NSR program. As discussed immediately

14 EPA’s proposal inadvertently referred to R18

- 2

- 334(G) instead of R18

- 2

- 334(E) when describing this issue.

15 See June 8, 2015 email “Clarification of ADEQ’s Comments on EPA’s Proposed Action” from Eric C. Massey, Air Quality Division Director at ADEQ to Lisa Beckham, Air Permits Office, EPA Region 9.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 14 of 43 above, this is no longer a concern as ADEQ has explained that it must review all sources subject to R18

- 2

- 334 to consider whether the source could interfere with attainment or maintenance of the NAAQS.

Given our revised determination on this issue, it is not necessary to address all the arguments made by SRP concerning this issue, but we note that we agree w ith SRP (and ADEQ) that the criteria ADEQ will be applying when making its determination under R18

- 2

- 334(E) do not afford undue discretion to the

Director.

Impos ition of a Federal Implementation Plan or Sanctions

Comment 6 : (Commenter: SRP)

One commenter takes issue with EPA’s statements that finalizing its proposed limited disapproval would trigger an obligation for EPA to promulgate a Federal Implementation Plan (FIP) and impose CAA sanctions if ADEQ does not correct the alleged deficiencies wi thin 18 to 24 months. The commenter asserts that this contradicts the statutory limitations on EPA's SIP

- action authority under the CAA.

Section 110(c)(1) provides the EPA the authority to promulgate a FIP in only two circumstances: 1) the
State failed to make a required SIP submission, or 2) the Administrator disapproves a SIP submission in whole or part. Section 179(a) contains similar conditions for imposing sanctions in nonattainment areas. The commenter claims that EPA interprets its authority to im pose a FIP or sanctions only when the disapproval relates to a mandatory SIP submission. In support of this assertion, the commenter cites to one action from EPA Region 6 that disapproved elements of the Texas Commission of Environmental Quality's (TCEQ's) major NSR rule to address the 2002 NSR changes ("[t]he provisions in these submittals ...were not submitted to meet a mandatory requirement of the Act. Therefore, this final action to disapprove ...the State submittals does not trigger a sanction or Feder al Implementation Plan clock."). The commenter concludes that such an interpretations of Section 110(c)(1) and Section 179(a) are reasonable because EPA would otherwise, for example, be required to promulgate a FIP for disapproving a State's request to inc lude odor provisions in its SIP that are unrelated to NAAQS compliance.

The commenter further states that ADEQ's current SIP contains fully

- approved, minor NSR and major NSR permitting programs. As such, the State's requested SIP revisions addressed in E PA’s proposed action are not mandatory. T he commenter further argues that EPA referenced no information suggesting that it made a formal call for plan revision as required by Section 110(k)(5) of the CAA related to its proposed limited disapproval of ADEQ’ s NSR SIP submittal. As such, in general, Arizona is not under a mandatory duty to revise its existing SIP with regards to its NSR programs. The commenter argues that it is inappropriate for EPA to replace a fully approved

- SIP with a program that it allege s does not fully satisfy CAA requirements by using an approach that triggers the FIP clock and potentially imposes sanctions. ADEQ could withdraw the requested SIP submission and face no threat of an EPA

FIP or sanctions.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 15 of 43 Response 6 : EPA disagrees with t he commenter’s statement that EPA's limited disapproval in this action does not trigger a FIP clock or potential san ctions, and disagrees that EPA’s action is inappropriate in light of
this result

.

EPA continues to believe that limited disapproval of ADEQ’s NSR SIP submittal triggers an obligation to promulgate a FIP unless ADEQ corrects the identified deficiencies and EPA approves the related SIP revisions within 2 years, and that sanctions would be triggered by EPA’s limited disapproval of ADEQ’s

NA

- NSR program revisions based on deficiencies related to CAA title I, Part D requirements for

nonattainment areas if ADEQ fails to remedy the identified deficiencies so that EPA can approve the

revisions i nto the SIP before the sanctions apply. As stated in the notice for our proposal, we intend to work with ADEQ to remedy these deficiencies in a timely manner. Importantly, we note that EPA’s other option would have been a full disapproval of ADEQ’s NSR SI P submittal, which would have required ADEQ to continue to implement the outdated rules in its SIP while also implementing its
newer rules under State law . This would requir e ADEQ and permit applicants to continue to implement and comply with two redundant and sometimes inconsistent sets of NSR rules , contrary to ADEQ’s request to update its SIP to i ncorporate its newer rules and remove its older, outdated rules

.

Pursuant to section 110(c)(1) of the CAA, EPA must promulgate a FIP within two years after our final limited disapproval of ADEQ’s NSR SIP submittal, unless ADEQ adequately corrects the identified deficiencies and EPA approves the corrected program into the Arizona SIP before that time. The commenter argues that the FIP clock applies only when a di sapproval relates to a mandatory SIP
submission , and asserts that the submitted revisions are not mandatory because ADEQ's existing SIP contains fully

- approved minor and major NSR programs, and the revisions were not developed in
response to a SIP call und er CAA section 110(k)(5). The EPA disagrees with the commenter’s argument.

Even if EPA has not issued a SIP call under CAA section 110(k)(5), 16 a FIP is generally required under CAA section 110(c)(1) when EPA disapproves a plan submission, unless the State adequately corrects the basis for the disapproval and EPA approves a corrected SIP submittal in a timely manner, or EPA
determines that an exi sting plan is in place that meets the relevant CAA requirements. See AIR v. EPA

, 686 F.3d 668, 675

- 76 (9 th Cir. 2012). We note that NSR programs consistent with CAA requirements are required elements of a SIP. CAA §§ 110(a)(2)(C), 161, 165, 172(c)(5), 173; 40 CFR 51.160

- 51.166.

In this case, EPA cannot rely on provisions in the existing Arizona SIP to adequately address the deficiencies with the ADEQ NSR SIP submittal that we identified in our proposed rule and which form
the basis for our final limited d isapproval. ADEQ must address these deficiencies in a timely manner in order to avoid the requirement for EPA to promulgate a FIP. As we made clear in the notice for our proposed action, 17 ADEQ’s NSR SIP submittal included the removal of most of ADEQ’s exis ting NSR

16 There is no existing SIP call under CAA section 110(k)(5) th at specifically pertains to the deficiencies with ADEQ’s NSR

program.

17 See 80 FR at 14046

- 14047.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 16 of 43 program elements from the Arizona SIP. 18 Upon our final action 19 , there will not be an “existing plan” that could potentially satisfy the specific CAA NSR requirements that EPA has determined are not satisfied in ADEQ’s NSR SIP submittal. 20 In genera l, EPA’s role in reviewing SIP submittals, including the ADEQ NSR SIP submittal, is to defer to the State’s choices as to how to implement CAA requirements provided those choices are consistent with the pertinent CAA requirements, whether or not a program submittal is considered “mandatory.” EPA’s limited approval/limited disapproval action on ADEQ’s NSR SIP submittal, including ADEQ’s request to remove old and largely outdated NSR provisions from the Arizona SIP, allows us to approve into the SIP the State ’s choice to adopt and implement its updated and strengthened NSR program while giving ADEQ time to remedy certain deficiencies that cause us not to grant full approval of the submittal. Furthermore, even if one assumed arguendo that these
older Arizona NS R provisions were not being removed from the Arizona SIP, the commenter has not explained how the old NSR provisions would, in fact, meet the NSR requirements for which EPA has found specific deficiencies in ADEQ’s updated NSR program. 21

Similarly, for de ficiencies related to CAA title I, Part D requirements for nonattainment areas, final limited disapproval of ADEQ’s NSR SIP submission will result in the application of sanctions under CAA section 179 unless the deficiencies have been adequately corrected before the sanctions apply.

18 See October 29, 2012 ADEQ submittal at 4 and Table 2

- 1; see also ADEQ’s February 23, 2015 supplemental submittal at 3

- 7.

19 We note that EPA’s limited approval/limited disapproval of ADEQ’s NSR SIP submission allows ADEQ to use its updated NSR rules, to the extent EPA is granting limited approval in this action, to carry out the NSR program. Continuing to leave
old and outdate d Arizona NSR SIP elements in place would not be consistent with ADEQ’s SIP submission and request to EPA, and would require ADEQ and permit applicants to implement and comply with two redundant and sometimes inconsistent sets of NSR rules. Whether ADEQ co uld withdraw its ADEQ NSR SIP submittal and what consequences would ensue is not relevant; ADEQ has not done so.

20 The commenter asserts that when EPA Region 6 disapproved elements of the Texas Commission of Environmental Quality's (TCEQ's) major NSR rule, EPA found that the provisions in the submittals were not submitted to meet a mandatory requirement of the Act and thus noted that its final action to disapprove the State submittals did not trigger a sanction or FIP clock. The TCEQ example is inapposite, however, because our action on the ADEQ NSR SIP submittal approves rules with identified deficiencies into the SIP where the Region 6 action did not. Region 6 found the deficiencies in the TCEQ submission to be separable and issued partial disapprovals for them, resulting in a SIP that did not contain the deficiencies

. In that situation, whether the deficiencies that were disapproved were contained in “mandatory” SIP submissions was relevant because if they were “mandato ry” then disapproval likely would have resulted in TCEQ needing to submit another plan revision to replace the disapproved plan elements. But because the deficiencies were found to be separable and contained in plan elements that were not mandatory, EPA i ssued a partial disapproval of those elements, keeping the deficiencies out of the approved SIP and with TCEQ under no obligation to submit another SIP revision because the disapproved plan elements were not “mandatory.” In contrast, the provisions includi ng the identified deficiencies in the ADEQ NSR SIP submittal are integrated parts of the submittal and are being approved into the SIP as part of our limited approval/limited disapproval action, so whether the ADEQ plan revisions containing the deficiencie s are “mandatory” is not relevant and is not a basis to avoid a FIP duty or sanctions.

21 ADEQ noted in its submittal that its existing SIP

- approved program did not include the PM 10 increments, the NO 2 increments, or updates related to the “WE P CO” rule for determining when a project is a modification at an electric generating unit. In addition, ADEQ stated that a basis for its revisions to its minor NSR program was to correct the deficiency that its program lack ed explicit procedures designed “to assure that national ambient air quality standards are achieved,” as required by section 110(a)(2)(C) of the Act. See Appendix A of ADEQ’s October 29, 2012 SIP submittal at 1546
and 1547.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 17 of 43 As with its arguments concerning the FIP clock, the commenter argues that CAA sanctions apply only
when a disapproval relates to a mandatory SIP submission , and asserts that the submitted revisions are not mandatory because ADE Q's existing SIP contains fully

- approved NSR permitting programs, and the revisions were not developed in response to a SIP call under CAA section 110(k)(5). The EPA again disagrees with the commenter’s argument.

Even if EPA has not issued a SIP call unde r CAA section 110(k)(5), sanctions generally will apply under CAA section 179 when EPA disapproves a plan submission based on plan deficiencies that relate to title I, Part D requirements, unless ADEQ adequately corrects those deficiencies and EPA takes ac tion to approve a corrected plan submittal before the sanctions apply, or EPA determines that the existing plan meets the applicable Part D requirements. See 40 CFR 52.31. A NA

- NSR program that meets CAA requirements is a required element of a SIP. CAA §§ 110(a)(2)(C), 172(c)(5), 173; 40 CFR 51.165.

As discussed above, ADEQ’s NSR SIP submittal included the removal of most of ADEQ’s existing NSR program elements from the Arizona SIP, so upon EPA’s final action there will not be older NA

- NSR SIP provisions t hat could potentially meet the CAA NA

- NSR requirements that EPA has determined are not
satisfied in the NA

- NSR program in ADEQ’s NSR SIP submittal. EPA’s limited approval/limited disapproval action on ADEQ’s NSR SIP submittal, including ADEQ’s request to r emove old and largely outdated NSR provisions from the Arizona SIP, allows us to approve into the SIP the State’s choice to adopt and implement its updated and strengthened NA

- NSR program while giving ADEQ time to remedy certain deficiencies that cause us not to grant full approval of the submittal. Furthermore,
even if one assumed arguendo that these older Arizona NA

- NSR provisions were not being removed from the Arizona SIP per ADEQ’s request, the commenter has not explained how the old NA

- NSR provisions would, in fact, meet the specific NA

- NSR requirements for which EPA has found deficiencies with ADEQ’s updated NA

- NSR program. For example, ADEQ’s old SIP

- approved program did not include

NO X as a precursor to ozone.

We note that EPA is also finalizing a partial disapproval

– rather than limited approval/limited disapproval

-- for a separable ADEQ NSR program provision that is analogous to a previous federal NSR provision that a federal Court determined is not a permissible component of PSD programs

– the P M 2.5 significant monitoring concentration (SMC). As there is no deficiency related to this issue in the approved plan following our partial disapproval, neither a FIP requirement nor sanctions will result from this partial disapproval action.

EPA’s limit ed disapproval action is based on program elements in ADEQ’s NSR SIP submittal that do not meet CAA requirements and are not satisfied by the existing Arizona SIP provisions that remain in place following our final action. 22 We wish to clarify that all of t he bases for our final limited disapproval action on the ADEQ NSR SIP submittal must be adequately addressed in a timely manner in order to avoid a requirement for a FIP or, for Part D deficiencies, the application of sanctions.

22 In addition, ADEQ’s NSR SIP submittal did not address the regulation of green house gases (GHGs) under the PSD program. As discussed in the notice for our proposed action on ADEQ’s NSR SIP submittal, a FIP is currently in place in Arizona to address PSD requirements for GHGs. See 80 FR at 14054 n.17.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 18 of 43 Finally, our final limite d disapproval also addresses some SIP elements or provisions that are not required ( e.g. , deficiencies concerning optional PAL provisions), but were not separable from ADEQ’s
NSR SIP submittal as they were an integrated part of that submittal . Because we a re approving these provisions into the SIP, EPA will be obligated to implement a FIP and/or sanctions will apply (as applicable) for such optional program elements that remain in the SIP if the deficiencies in those
elements are not corrected to ensure con sistency with CAA requirements

.

On

- The

- Record Severability Determination for Limited Approval, Limited Disapproval

Comment 7 : (Commenter: SRP)

SRP states that to proceed using the limited approval, limited disapproval mechanism, EPA must make

an on

- the

- record determination that the disapproved elements are not severable from the approved
elements. EPA has not made this finding or provided this explanation in its proposed notice.

Response 7 : EPA disagrees with this comment. The commenter cites no authority for this unsupported proposition. Under CAA sections 110(k)(3) and 301(a) and EPA’s long

- standing guidance, limited approval and partial approval are alternatives to full approval or full disapproval of a complete plan submissi on. Limited approval may be appropriate where a plan submittal contains some provisions that meet applicable CAA requirements and other provisions that do not, and the provisions are not separable. Partial approval may be used where a separable portion of a plan submittal meets all applicable CAA requirements. EPA has discretion under the CAA to choose an appropriate approval or disapproval mechanism for a plan submission, and there is no required “finding” that the provisions are not separable for a propo sed or final limited approval or limited disapproval SIP action. See Processing of State Implementation Plan (SIP) Revisions, EPA Memorandum from John Calcagni, Director, Air Quality Management Division, OAQPS, to Air Division Directors, EPA Regional Offic es I

– X, September 7, 1992 ( www.epa.gov/ttn/caaa/t1/memoranda/siproc.pdf ).

Nevertheless, in general, we believe that, with the exception of the partial disapproval of the PM 2.5 significant monitoring concentration that we are finalizing, the components of ADEQ’s NSR SIP
submi ttal are interrelated and not separable from the submi ttal as a whole and therefore not appropriate for partial disapproval. ADEQ has not provided us with any basis to conclude that particular aspects of its NSR SIP submittal for which we proposed limited disapproval are not integral or interrelated parts of the submittal or are otherwise separable and appropriate for partial disapproval. Further, the commenter has not demonstrated that any portion of the ADEQ NSR SIP
submi ttal for which we proposed limited disapproval is, in fact, separable and appropriate for partial disapproval rather than limited disapproval.

ADEQ’s Definition of “Stationary Source”

Comment 8 : (Com menter: SRP)Response to Comments
AZ NSR SIP Submittal

June 2015 Page 19 of 43 One commenter states that EPA’s assertion that ADEQ may not exclude certain pollutant

- emitting activities from PSD misinterprets EPA's regulations. The commenter points to 40 CFR §51.160(e) and states that a State may exclude activities that it anticipates will have negligible or insignificant environmental impacts from either the major or minor NSR permit programs. This regulatory approach makes sense because it allows for a practical integration of the multiple preconstruction requirements. There is no basis for requiring a State to regulate activities with the more stringent requirements contained in the PSD or NA NSR program when those activities fall below the levels of concern established for the minor NSR program.

Response 8 : The regul ations governing PSD and NA

- NSR SIP programs contain the fundamental requirement that such programs adopt a specified definition for “stationary source.” 40 CFR 51.165(a)(1)(i), 51.166(b)(5). The regulations require the use of the prescribed definition, an d state that deviations from the specified wording will be approved only if “the State specifically demonstrates that the submitted definition is “more stringent, or at least as stringent, in all respects” as the prescribed definition. 40 CFR 51.165(a)(1), 51.166(b). As explained in reference to the NA

- NSR program in our March 18, 2015 proposal :

ADEQ must demonstrate that its definition of stationary source is at least as stringent as the federal definition at 51.165(a)(1)(i) in all respects.

See 80 FR at 14056; see also 80 FR at 14054 for the PSD program. The commenter has not addressed how ADEQ’s definition would be at least as stringent as the definitions in 51.165(a)(1)(i) and 51.166(b)(5) in light of the exemption language referenced in our proposal, s ee 80 FR at 14054, nor has ADEQ provided the necessary demonstration that its definition of stationary source is at least as stringent as the definition of “stationary source” under the federal PSD and NA

- NSR programs. Indeed, ADEQ’s comments did not addre ss this basis of our proposed limited disapproval. We continue to find that this issue provides a basis for limited disapproval of ADEQ’s NSR SIP submittal.

We do not interpret 40 CFR 51.160(e) as allowing states to develop less stringent definitions for these programs without the necessary demonstration that the submitted definition is “more stringent, or at least as stringent, in all respects” as the prescribed definition as required by 40 CFR 51.165(a)(1) and 51.166(b). Section 51.160(e) does not contai n any language giving states the discretion to exclude any type of source from the more specific major source permitting requirements in section 51.165 and 51.166. Section 51.160(e) does not say anything about sources that have “negligible or insignificant environmental impacts.” This section simply requires that a state plan identify the types and sizes of stationary sources that are covered by the “legally enforceable procedures” required under section 51.160(a) to review construction or modification of s tationary sources. Sections 51.165 and 51.166 provide more detailed procedures that must apply to major stationary sources. These more specific provisions in sections 51.165 and 51.166 make clear that those procedures must cover the type and
size of source covered by the definitions at 40 CFR 51.165(a)(1)(i) and 51.166(b)(5).Response to Comments
AZ NSR SIP Submittal

June 2015 Page 20 of 43 ADEQ’s “Projected Actual Emissions” Definition and Malfunction Emissions

Comment 9 : (Commenter: SRP)

One commenter takes issue with our proposed limited disapproval of ADEQ's definit ion of projected actual emissions on the basis that it does not specifically require malfunction emissions to be included in the post

- change projection. EPA has not shown how ADEQ's exclusion of this term from ADEQ's
definition makes the definition less st ringent than the Federal rules. Malfunctions, by definition, are emissions associated with an unpredictable and not reasonably preventable event. In this respect, it is axiomatic that a source cannot reasonably project emissions that it cannot predict. By excluding malfunctions from its projected actual emissions procedure, ADEQ recognizes EPA's own interpretation of "malfunctions" and is no less stringent than the federal definition. EPA's proposed action also is inconsistent with other Regional Office SIP approvals that have approved definitions of "projected actual emissions" that do not require inclusion of malfunction emissions. 23 Moreover, the comparable paragraph in the Federal definition of "projected actual emissions" merely clarifies that projected actual emissions includes all post

- change emissions. EPA could approve ADEQ's "projected actual emissions" definition by severing and not acting on paragraph R18

- 2

- 401(20)(b)(iii) and the definition would not lose its intended meaning.

Response 9 : The commenter asserts that EPA has not shown that ADEQ’s exclusion of malfunction emissions from the definition of “projected actual emi ssions” makes the definition less stringent. However, ADEQ has the burden of demonstrating that its alternative definitions are not less stringent than the ones in EPA’s regulation. See 40 CFR 51.165(a)(1), 51.166(b). ADEQ’s definitions under the PSD and N A

- NSR programs warrant a limited disapproval because EPA cannot reasonably conclude that ADEQ’s definition is at least as stringent as the definitions in 40 CFR 51.165(a)(1) and/or 51.166(b). We note that ADEQ’s definition for “baseline actual emissions” s pecifically includes startup, shutdown, and malfunction emissions, while ADEQ’s definition for “projected actual emissions” includes startup and shutdown emissions but does not include malfunction emissions. Further, ADEQ’s definition of “projected actual emissions” specifically excludes malfunction emissions associated with a shutdown. Based on the exclusion of malfunction emissions from the definition of “projected actual emissions”, and in the absence of a response from ADEQ on this issue, we conclude th at ADEQ has not shown that its definition is as stringent as the federal definition. In addition, without a clearer statement from ADEQ, we cannot determine that R18

- 2

- 401(20)(b)(iii) is se parable from the rest of the ADEQ definition of projected actual em issions without losing the apparently intended meaning by ADEQ to specifically include startup and shutdown but exclude malfunction emissions. We note that ADEQ’s comments did
not address this basis for our proposed limited disapproval.

With respect to the claim that EPA has previously approved PSD or NA

- NSR programs that do not include malfunctions emissions under the definition for projected actual emissions, we note that the

23 See

, e.g., EPA 's approva l of Georgia 's PSD progra m , Georgia's P S D pr og ram at 391

- 3

- 1 ; a nd E PA 's a pproval of South

C arolina's regulation a t C h ap t e r 7 Regulation 62.5.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 21 of 43 examples provided by the commenter are not completely analogo us. In those programs, the definition of baseline actual emissions also excluded malfunction emissions, whereas ADEQ has included those emissions in its definition of baseline actual emissions. Without further justification from ADEQ, this inconsistency ac ross definitions makes it difficult for EPA to determine the relative stringency of ADEQ’s definitions as compared with those in 40 CFR 51.165 and 51.166. The commenter has not provided any information about the nature of the demonstrations that was suppli ed by the states that obtained EPA approval for excluding malfunction emissions from both the definition of baseline actual emissions and projected actual emissions.

Notwithstanding prior EPA action in the context of SIPs in the distinct circumstances not ed above, EPA believes the proper interpretation of these definitions is that they require that all emissions, pre

- and
post

- change, including malfunctions, be included in the definitions included in SIPs, consistent with the regulatory text, absent a demo nstration that the State’s regulation is at least as stringent as the federal definition as required by 40 CFR 51.165(a)(1) and 51.166(b).

We note that in reviewing this comment, we also reviewed our proposed limited disapproval related to
the calculation of baseline actual emissions under ADEQ’s PALs program at R18

- 2

- 412(B)(2)

. See 80 FR

14053. Upon review, we determined that our proposed limited disapproval related to the calculation of baseline actual emissions under ADEQ’s PALs program at R18

- 2

- 412(B)(2) was in error because ADEQ’s definition for baseline actual emissions at R18

- 2

- 401(2)(i) specifically includes startup, shutdown, and malfunction emissions. Therefore, this issue no longer provides a basis for our limited disapproval of ADEQ’s NSR SIP submittal.

ADEQ’s Definition of “Regulated NSR Pollutant”

Comment 10 : (Commenter: SRP)

One commenter asserts that ADEQ’s definition of regulated NSR pollu tant is not deficient for not including the final two sentences in 40 CFR 51.166(b)(49)(i)(a). This language addresses issuance of permits before January 1, 2011. Since this SIP revision applies to changes after this date, it is not necessary for the defin ition to address circumstances that existed before SIP approval. Moreover, absence of the language, in any case, does not affect the stringency of the definition.

Response 10 : We agree with the commenter that while ADEQ may want to add to its definition t hese two sentences that provide additional clarification, this clarifying language is not necessary for SIP approval. As such, we no longer find this difference to be a deficiency with ADEQ’s NSR program, and this issue is not a
basis for our final limited disapproval.

Necessity of Definition for “Subject to Regulation”

Comment 11 : (Commenters: SRP and ADEQ)Response to Comments
AZ NSR SIP Submittal

June 2015 Page 22 of 43 EPA proposes to disapprove ADEQ's major NSR programs because the SIP submittal does not include a definition for "subject to regulation." Although the Federal regulations contain a definition for "subject to regulation," EPA made clear, at the time it adop ted this definition, that states may adopt (or already have) alternative pathways for defining applicability of the major NSR program

-- US EPA did not intend for codification of "subject to regulation" to be a necessary element for SIP approval. See 75 FR 31514 at 31525. EPA chose the "subject to regulation" pathway because it determined that this would allow other states to adopt EPA's definition through interpretation without the need for a SIP revision.

ADEQ's major source definition refers to NSR re gulated pollutants. ADEQ's definition of NSR regulated pollutant covers all pollutants ADEQ is currently required to regulate under its major NSR programs. ADEQ's program is not currently deficient for failing to include some unknown air pollutant that US EPA may regulate in the future. Should EPA regulate such an air pollutant in the future, EPA may follow the pathway it used for greenhouse gas emissions (GHGs) and issue a SIP call at that time. Similarly, ADEQ's definition of regulated NSR pollutant is no t currently deficient for failing to include some unidentified air pollutant that US EPA might name in the future.

Response 11 : After further review and consideration of the comment, we are not including the absence of a definition of the term “subject to regulation” as a basis for our limited disapproval of the ADEQ NSR SIP submittal. Similarly, we are also not including the omission in ADEQ’s PSD rules of language analogous
to that in 40 CFR 51.166(b)(49)(iv) as a basis for our final limited disapproval of the ADEQ NSR SIP
submittal. We note, h owever, that contrary to commenters’ assertion, the ADEQ SIP is deficient because ADEQ’s definition of regulated NSR pollutant does not cover all pollutants ADEQ is currently required to regulate under its major NSR programs , in that ADEQ’s program does not regulate GHGs. However, EPA has separately taken action to address this deficiency. EPA previously established a FIP for GHGs for Arizona because ADEQ could not apply its PSD program to GHGs due to a State law

pro hibition.

ADEQ’s Definition of Basic Design Parameter

Comment 12 : (Commenter: SRP)

One commenter states that we must approve ADEQ’s definition of basic design parameter because the D.C. Circuit made no finding in State of New York v. EPA that the use of the "basic design parameter" definition was "impermissible." This issue was not before the court in State of New York v. EPA . At the time EPA codified the replacement unit provisions, EPA relied on a previously codified definition of
"basi c design parameter" to explain how it will interpret the phrase "basic design parameters" in implementing the replacement unit provisions. The vacatur of the "basic design parameters" definition for purposes of a separate, unrelated rulemaking has no effec t on EPA's stated interpretation of that phrase for purposes of the replacement unit provisions. Accordingly, EPA's statements in the preamble remain its interpretation for purposes of implementing those provisions. ADEQ's definition is fully

consistent wi th EPA's interpretation.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 23 of 43 Response 12 : EPA agrees with the commenter that our proposed partial disapproval of the definition for “basic design parameter” was erroneous. We note that ADEQ did not adopt any of the other provisions of the Equipment Replacement Provisions, which were the subject of the D.C. Circuit Court’s decision in State of New York v. EPA . We agree with the commenter that ADEQ’s adoption of a definition for basic design parameter is acceptable in this case, and consistent with EPA’s past statements related to this
term. Therefor e, we are not finalizing a partial disapproval of ADEQ’s definition for basic design parameter. Our final action includes this definition as part of ADEQ’s NSR SIP submittal for which EPA is finalizing a limited approval/limited disapproval, but it is not a basis for our limited disapproval.

Technical Correction

Comment 13 : (Commenter: ADEQ)

ADEQ points out that EPA’s March 18, 2015 Federal Register notice contained incorrect submission dates on page 14045. The references to “10/29/2014” in Table 1 shoul d be “10/29/2012.”

Response 13 : EPA agrees that the date “10/29/2014” was a typographical error throughout Table 1 of our March 18, 2015 Federal Register notice, which instead should have referenced “10/29/2012.” The correct date of that portion of the AD EQ NSR SIP submittal was October 29, 2012, as correctly described in the first paragraph of our preamble on page 14045: “On July 28, 2011 and October 29, 2012, ADEQ submitted revisions to the ADEQ portion of the Arizona SIP.” This error is corrected in Tab le 1 of the preamble for
our final action.

Technical Correction

Comment 14 : (Commenter: ADEQ)

ADEQ points out that the definition of the term “begin actual construction” in R9

- 3

- 101 should be retained, since EPA is not acting on the revised definition included in the 2012 submission. Rule R9

- 3

- 101(20) conforms to the current EPA definition and is necessary for a complete NSR program. EPA should add “[excluding subsection (20)]” to the Table 2 entry for R9

- 3

- 101.

Response 14 :
E PA agrees with the comment er. ADEQ had requested that the existing SIP

- approved definition of “begin actual construction” in Rule R9

- 3

- 101(20) remain in the Arizona SIP at this time, and EPA
intended at the time of proposal , and still intends, to take action on the ADEQ NSR SIP sub mittal consistent with that request. See A DEQ’s February 23, 2015 supplement; TSD at 6, Table 2 and n.5 and

62. 24 Due to a typographical error, Table 2 of the March 18, 2015 Federal Register notice for our

24 Other portions of the TSD for our proposed action also ma d e clear that we were not acting on R9

- 3

- 101(20) as part of ADEQ’s request to remove R9

- 3

- 101 from the Arizona SIP and that we were relying on R9

- 3

- 101(20) for our review of ADEQ’s NSR SIP submittal. See TSD at 4

- 5 (Table 1), 17, 34, 45, 61.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 24 of 43 proposal, which describes those pieces of ADEQ’s pr ogram that we intend to remove from the SIP,
indicated that Rule R9

- 3

- 101 would be superseded or removed from the SIP, but did not specify that ADEQ’s definition of “begin actual construction” in Rule R9

- 3

- 101(20) would not be removed from the SIP as part of this action. The text above this Table did make clear that our approval of ADEQ’s new regulations would not have the effect of superseding our prior approval of certain regulation sections that ADEQ had requested that we not remove from the SIP at this time. 80 FR at 14046 and n.5. Our intent is to keep R9

- 3

- 101(20) in the SIP until further EPA action on ADEQ’s revised definition for “begin
actual construction” in R18

- 2

- 101, consistent with ADEQ’s request. See TSD at 6. Accordingly, our final
action does not remove Rule R9

- 3

- 101(20) from the Arizona SIP. We agree with the commenter that the entry for R9

- 3

- 101 in Table 2 should have included “[excluding subsection (20)].” This error has
been corrected in the preamble for our final rule; see Table 2.

Technical Correction

Comment 15 : (Commenter: ADEQ)

ADEQ points out that Table 2 of our March 1 8 , 2015 proposal on page 14046 inadvertently omitted R9

- 3

- 310 and R9

- 3

- 312, but addressed removal of these rules from SIP in the TSD. They should be included

in the final version of Table 2.

Response 15 : EPA agrees with the commenter. ADEQ had requested we remove rules R9

- 3

- 310 and R9

- 3

- 312 from the Arizona SIP in its July 28, 2011 submittal. Due to a typographical error, rules R9

- 3

- 310 and R9

- 3

- 312 were inadver tently omitted from the listing in Table 2 of our March 18, 2015 FR notice. Section 7
of our TSD

– Review of Existing SIP Rules and Stationary Provisions to be Replaced

– identifies and describes the basis for removing these rules from the SIP. See TSD at 6 5. We agree with the commenter that these rules should have been listed in our proposed action. This error has been corrected in our final rule; see Table 2.

ADEQ’s Definition of “Begin Actual Construction”

Comment 16 : (Commenter: SRP)

One commenter states that ADEQ asked EPA not to act on its definition of "begin actual construction,"
because EPA believes that this definition is not consistent with EPA's definition. The commenter then provide s several arguments for why it believes that ADEQ’s revised definition of “begin actual construction” is approvable.

Response 16 : The commenter is correct that ADEQ requested that EPA not act at this time on ADEQ’s revised definition of “begin actual construction” at R18

- 2

- 101(20), and, accordingly, we did not propose any action on ADEQ’s revised definition of “begin actual construction” at R18

- 2

- 101(20), as discussed in our TSD at p. 6. See also 80 FR 14045 and ADEQ’s February 23, 2015 supplement. EPA will take action onResponse to Comments
AZ NSR SIP Submittal

June 2015 Page 25 of 43 ADEQ’s definition of “begin actual const ruction” in a separate action if ADEQ resubmits or otherwise requests approval of the revised definition. In the interim, ADEQ’s program will rely on the existing SIP

approved definition for begin actual construction at R9

- 3

- 101(20), which is not being rem oved from the Arizona SIP as part of our action, consistent with ADEQ’s request. See Table 2 of our final action. Accordingly, to the extent the comment asserts that ADEQ’s revised definition of “begin actual
construction” at R18

- 2

- 101(20) is approvable by EPA, the comment addresses matters outside the scope of our March 18, 2015 notice and our final action on ADEQ’s NSR SIP submittal. See also
response to comment 14

.

Minor Issues and Limited Disapproval

Comment 1 7 : (Commenter: ADEQ)

Throughout the proposal, EPA identifies a number of minor issues, such as erroneous cross

- references and undefined terms, as reasons for limited disapproval. Although ADEQ intends to fix these problems, ADEQ believes that they can all be resolved in the interim through r easonable interpretation of the existing rules and therefore should not be included as bases for limited disapproval. ADEQ is concerned that insistence on classifying obvious, easily resolved errors as deficiencies requiring disapproval could prove costly for Arizona and other states when they submit revised SIPs under the threat of a sanctions or FIP clock. For example, if in the course of amending its Part D rules to correct the deficiencies EPA has identified, ADEQ inadvertently includes an erroneous cro ss

- reference, would EPA then feel obligated to issue limited disapproval of this Part D provision and therefore leave the sanctions clock running?

Response 1 7 : EPA appreciates ADEQ’s concern that a small error in a SIP submittal, such as a future SIP submittal correcting the deficiencies identified in this action, might unnecessarily lead to a FIP or sanctions. While we recognize that limited approval of ADEQ’s u pdated rules into the Arizona SIP will strengthen the SIP overall, in the Federal Register notice for our proposed action, we described the specific federal
statutory and regulatory CAA requirements that we proposed to find were not met by the submittal
be cause of numerous identified deficiencies. Commenters raised issues and/or provided clarification concerning some of the deficiencies identified in our proposal. Based on our careful consideration of those comments, in some instances we revised our determ ination about whether a particular discrepancy between the federal requirements and the provisions in ADEQ’s NSR SIP submittal warranted disapproval, as described elsewhere in these responses to comments.

EPA is confident that ADEQ, as it stated in its c omments, will correct all identified deficiencies in its upcoming rulemaking action, and we intend to work with ADEQ to facilitate ADEQ’s adoption of revisions to its NSR program and other rules in a manner that will lead to full program approval. EPA

reta ins the discretion to review any updated ADEQ NSR SIP submittal based on the specific facts and circumstances presented, and the presence of minor, inadvertent errors would not necessarily require disapproval of the submittal.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 26 of 43 References to Standards Impo sed in Article 2 of Chapter 18 of Arizona’s Air Quality Regulations

Comment 18 : (Commenter: SRP)

One commenter notes that EPA raised concerns with ADEQ’s reference to “state ambient air quality standards” and standards imposed in Article 2 of Chapter 18 of Arizona’s air quality regulations, because EPA is uncertain whether such standards can apply outside of ADEQ jurisdictions. The commenter does not believe that this concern should affect the approvability of ADEQ’s regulations.

The commenter states tha t Article 2 of Chapter 18 references levels of air pollutant concentrations in "ambient air," in a manner that mirrors the NAAQS. ADEQ defines "ambient air" as the "portion of the atmosphere, external to buildings, to which the general public has access. T his definition includes air outside ADEQ's jurisdiction. ADEQ possesses full authority to regulate stationary sources operating within its jurisdiction to prevent emissions that would exceed any specified concentration in any location, even if that locatio n is outside its jurisdiction. It is not necessary for ADEQ to have jurisdiction of all ambient air to regulate how sources in ADEQ's jurisdiction operate and affect that air.

A different commenter, ADEQ, also referenced this topic in the context of its c omments on EPA’s proposed determination concerning ADEQ’s minor NSR rule provisions. ADEQ’s comment “acknowledge[d] that the applicability of the state’s minor NSR program to impacts by Arizona sources
on areas outside the state need s to be clarified, as s tated by EPA.”

Response 18 : We disagree with the first commenter’s assertions. ADEQ’s NSR program regulations apply Arizona air quality standards rather than the NAAQS in the context of NSR review. As we explained in our proposed action, these Arizona ai r quality standards do not appear to apply outside the State of Arizona and ADEQ has not provided a demonstration that they apply outside the State. See 80 FR at 14048, 14056; R18

- 2

- 302.01(C); R18

- 2

- 334(C)(2), (F), (G); and R18

- 2

- 406(A)(5)(a). The CAA and its implementing regulations require that ADEQ’s NSR program ensure that sources subject to NSR review in areas within ADEQ’s jurisdiction will not cause or contribute to exceedances of the NAAQS, which includes areas outside of Arizona, where Arizona air quality standards do not appear to apply. CAA sections 110(a)(2)(C) and (D), 165(a)(3); 40 CFR 51.160(a)(2), (b)(2); 40 CFR 51.165(b); 40 CFR 51.166(k)(1).

ADEQ’s definition for “ambient air” is not sufficient to demonstrate that ADEQ’s NSR regulations

en sure that sources subject to NSR review within Arizona will not cause or contribute to an exceedance of the NAAQS in areas outside of Arizona. The commenter has not demonstrated that ADEQ’s definition of “ambient air” changes the air quality standards that are being applied under ADEQ’s NSR

program

– i.e., Arizona air quality standards

– or the location where they apply, which appears to be limited to Arizona. We agree with the commenter that ADEQ need not have jurisdiction in other areas
in order to ensure that sources within its jurisdiction will not cause adverse impacts outside of its jurisdiction. However, ADEQ’s NSR regulations must provide ADEQ with clear authority to ensure that stationary sources located in areas within its jurisdiction and subject to NSR review will not cause orResponse to Comments
AZ NSR SIP Submittal

June 2015 Page 27 of 43 contribute to violations of the NAAQS in areas outside the State. And, ADEQ acknowledged in its comments on our proposed action that it intends to revise its regulations to remedy this issue and did not suggest or demonstrat e that its regulations are sufficiently clear as currently written to ensure that stationary sources within the State would not cause or contribute to exceedances of the NAAQS in
areas outside of Arizona.

We continue to find this to be a deficiency in th e ADEQ rules covering both major and minor sources regulated under ADEQ’s NSR program as we indicated in our proposal. 80 FR at 14048, 14056. In our final action, we find that this issue is a basis for our limited disapproval of ADEQ’s NSR SIP submittal.

References to Article 2 Outside of the PSD Context

Comment 19 : (Commenter: ADEQ)

The basis for EPA’s objection to ADEQ referencing “Article 2” of its rules, rather than the “NAAQS,” outside of the PSD context is unclear. ADEQ states that, as EPA itself n otes, PSD is the only NSR program that requires enforcement of a new NAAQS immediately on its promulgation and the non

inclusion of the latest revision to the PM 2.5 NAAQS is therefore “not a disapproval issue for ADEQ’s
minor NSR and NA

– NSR programs.” 80 F ed. Reg. at 14048 n. 8.

Response 19 : We assume the commenter is referring to language in our proposal and TSD that stated that although “NAAQS” is a defined term in ADEQ’s regulations, ADEQ’s NSR program generally does not refer to the NAAQS and instead generally references the State’s ambien t air standards in Article 2 of ADEQ’s air program. See 80 FR 14048 and TSD at 19. In response, EPA does not have concerns with ADEQ’s general approach of referencing its ambient air standards in Title 18, Chapter 2, Article 2, which generally adopt the NA AQS, instead of directly referencing the NAAQS. EPA’s basis for the limited disapproval referenced by ADEQ, under 40 CFR 51.160(a)(2) and (b)(2), only pertains to the issue that Arizona’s ambient air standards do not apply outside the State of Arizona. We acknowledge that this language in both our proposal and TSD was somewhat unclear. ADEQ acknowledged in its comments on our proposed action that this discrepancy in its rules needs to be clarified, and EPA continues to believe that ADEQ must still address this deficiency related to the fact that ADEQ’s NSR program applies only State air quality standards, which do not apply outside Arizona. But, ADEQ does not have to necessarily correct this issue by referencing the NAAQS so long as the requirements of 40 C FR 51.160(a)(2) and (b)(2) are met. 25

25 EPA’s proposal also noted this issue in the context of provisions that are included in the federal NA

- NSR regulations at 40 CFR 51.165(b) but which address new major stationary sources or major modifications in attainment areas that would cause

or contribute to a violation of a NAAQS in an adjacent area. See 80 FR at 140 56. The deficiency EPA identified concern ing
the reference to ADEQ’s Article 2 air quality standards in this context

– in ADEQ rule R18

- 2

- 406(A)(5)(a)

- (b)

-- is the same as that identified for the other NSR program requi r ements: it does not clearly protec t the NAAQS in areas outside of Arizona,
where Arizona’ s Arti c l e 2 air quality standards do not apply. This issue remains a deficiency that provides a basis for our limited disapproval.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 28 of 43 Use of the Undefined Term “Arizona Ambient Air Quality Standards”

Comment 20 : (Commenter: ADEQ)

ADEQ states that EPA’s claim that use of the undefined term “Arizona Ambient Air Quality Standards” in some NSR provisio ns “makes the standards ambiguous” is incorrect. Although undefined, this term is clearly intended to refer to the standards in Title 18, Chapter 2, Article 2, which restate the current NAAQS. There are no other provisions in ADEQ’s rules that could qualif y as Arizona Ambient Air Quality Standards and thus no ambiguity. ADEQ intends to amend its rules to clarify NAAQS applicability, but does not believe minor errors such as this form a valid basis for objection, as noted in the introduction to ADEQ’s comme nts.

Response 20 : Upon review of ADEQ’s comment, EPA agrees that references to Arizona Ambient Air Quality Standards, and other similar references, in ADEQ’s regulations are intended to reference ADEQ’s
ambient air standards in Title 18, Chapter 2, Articl e 2, as these are the only ambient air standards in ADEQ’s rules and regulations. As such, we no longer find that this issue is a deficiency that must be addressed for full SIP approval, and this issue does not provide a basis for our final limited disappr oval. Nevertheless, because assuring attainment and maintenance of the NAAQS is a cornerstone of the NSR program, we strongly encourage ADEQ to revise its regulations to adopt consistent terminology regarding the air quality standards that are applicable i n the context of its NSR program, as ADEQ has indicated that it plans to do.

EPA’s Proposal and Earlier EPA Recommendations

Comment 21 : (Commenter: SRP)

SRP explained that EPA previously suggested that ADEQ include "a source registration program for smaller facilities that would achieve the same environmental benefit as a traditional permitting program...." SRP asserts that EPA also suggested that ADEQ "exempt those activities l isted as 'insignificant activities' at R18

- 2

- 101.54," and noted that once ADEQ establishes appropriate permitting thresholds, it may "provide a partial or full exemption from the full public process requirements of 51.160(e), consistent with the environmen tal significance of the change." Nonetheless, EPA’s proposed action contradicts these recommendations and would disapprove the very program elements it suggested ADEQ include in its program.

Response 21 : We disagree with the commenter that our proposed r ule improperly contradicts previous suggestions made by EPA to ADEQ with respect to ADEQ’s NSR program and, in particular, its minor NSR program. The commenter cites a letter from EPA to ADEQ dated May 22, 1996 responding to a request from ADEQ for guidanc e from EPA concerning CAA requirements for minor NSR programs, in which EPA provided a brief summary of statutory and regulatory requirements, preamble language and case law relevant to requirements for the minor NSR program.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 29 of 43 As an initial matter, the co mments or suggestions made by EPA that pertained to the ADEQ rule development process were provided to ADEQ for informational purposes and to facilitate that process, and do not represent a final decision by EPA. The commenter appears to imply that our pr eliminary comments to ADEQ were controlling or binding on our final decision in this action. While we aim to, and often do, provide comments early and throughout a state's rulemaking process, those comments are not final agency actions. There is nothing in the Act that requires such comments, much less that makes them binding on EPA such that EPA would be required to approve a SIP submittal that does not meet CAA requirements. To the contrary, Congress entrusted with EPA an oversight role to ensure the

requ irements of the Act are met. Prior to our proposed action on the ADEQ NSR SIP submittal, EPA had taken no rulemaking action nor made any other final decision that concluded that ADEQ’s registration program or current minor NSR program as a whole (or major/ minor NSR program as a whole), as adopted and submitted by ADEQ, was fully approvable in all respects, nor has the commenter identified any such decision by EPA.

While EPA suggested in 1996 that ADEQ consider developing a registration program for smaller stationary sources “ that would achieve the same environmental benefit as a traditional permitting

program ,” we did not indicate that any particular registration program would necessarily meet CAA requirements. In fact, we indicated that the program would n eed to “meet the specified requirements” for minor NSR programs. 26 Further, EPA proposed, and is finalizing, a limited approval and limited disapproval of ADEQ’s NSR SIP submittal, including its minor NSR program, which specifically incorporates the registration program that ADEQ developed in rule R18

- 2

- 302.01 as a compo nent of ADEQ’s minor NSR program designed to satisfy CAA section 110(a)(2)(C) and 40 CFR 51.160

- 51.164. As such, EPA is approving the registration program developed by ADEQ into the SIP. Nevertheless, EPA identified certain deficiencies with ADEQ’s submitt ed registration program when conducting our review to determine whether ADEQ’s NSR SIP submittal satisfies CAA requirements, and these
deficiencies are some of the bases for our final limited disapproval.

Similarly, we do not agree with the commenter’s su ggestion that because EPA staff, in 1996, suggested that ADEQ consider exempting “insignificant activities” as defined in a particular ADEQ rule

– R18

- 2

- 101(54)

-- from regulation under its minor NSR program, there is an improper contradiction in our
limit ed disapproval under 40 CFR 51.160(c)(1). First, in its rulemaking action in 2012, ADEQ modified the definition of “insignificant activity,” expanding the scope of activities that fall within that definition as compared with the definition that EPA had com mented on in 1996. 27 Therefore, the statement EPA made regarding an earlier version of this definition does not apply equally to the revised, broader definition. See Appendix A of ADEQ’s October 29, 2012 submittal at 1581

- 1582. Further, it does not
appear t hat ADEQ elected to fully exempt “insignificant activities” as defined in its rules from the coverage of its minor NSR program as EPA had suggested that it might consider doing. Instead, ADEQ exempted certain activities defined as “trivial” and “categorica lly exempt” from its minor NSR program

26 See EPA letter to ADEQ dated May 22, 1996 at 2.

27 As part of this 20 12 rulemaking, the ADEQ definition of “insignificant activity” was moved to a different regulatory provision, and now appears at ADEQ rule R18

- 2

- 101(68).Response to Comments
AZ NSR SIP Submittal

June 2015 Page 30 of 43 (including both the registration and Class II permitting components of that program) in ADEQ rule R18

- 2

- 302(C)(1). As discussed in our TSD, we find these exemptions from the minor NSR program to be approvable. 28 With r espect to ADEQ’s revised definition of “insignificant activity,” ADEQ rule R18

- 2

- 304(E)(9) provides that permit applications for NSR permits (including both Class II permits, for minor sources with greater emissions, and Class I permits, for major sources) must identify activities defined as “insignificant activities” but need not include emissions data for any such activities. Our limited disapproval of ADEQ’s NSR SIP submittal is based in part on our finding that this ADEQ rule does not fully satisfy the requirement at 40 CFR 51.160(c)(1). This federal rule requires that minor NSR programs include legally enforceable procedures that provide for the submission by applicants of information on the nature and amounts of emissions to be emitted by the project. 29 While our proposal made clear that the requirements of 40 CFR 51.160(c)(1) provided the basis for our limited disapproval of R18

- 2

- 304(c)(9), the commenter has not explained how ADEQ rule R18

- 2

- 304(c)(9) meets the requirements of 40 CFR 51.160(c)(1), and thus we continue to conclude that this issue provides an appropriate basis for our limited disapproval.

Finally, we do not agree with the commenter that there is a contradiction between the statements made by EPA in correspondence from 1996 related to 40 CFR 51.160(e) and our limited disapproval of ADEQ’s NSR SIP submittal under 40 CFR 51.161(a), which relat es to the public participation requirements of the minor NSR program. While EPA indicated at that time that ADEQ may "provide a partial or full exemption from the full public process requirements of 51.160(e), consistent with the environmental significance of the change,” concerns about the scope of sources exempted under 40 CFR 51.160(e) were not, and are not, the basis for our disapproval of ADEQ’s NSR SIP submittal specific to 40 CFR 51.161(a). ADEQ conducted an analysis to demonstrate that the “permitti ng exemption
thresholds” in its rule R18

- 2

- 101(99) were the appropriate emission thresholds for triggering its minor NSR program under 40 CFR 51.160(e). As such, construction or modification projects at or above those thresholds are part of ADEQ’s minor NS R program under 40 CFR 51.160(e), and projects subject to the minor NSR program must adhere to public participation requirements consistent with 40 CFR 51.161(a). The deficiency EPA identified with ADEQ’s minor NSR program under 40 CFR 51.161(a) pertains t o projects that would be at or above this threshold but which ADEQ’s regulations do not subject to public participation requirements as necessitated by 40 CFR 51.161(a). This deficiency provided one basis for our proposed limited disapproval, we continue t o find that this is a deficiency that must be corrected, and the commenter has not shown that this was in error.

Foundation for EPA’s Proposed Action

Comment 22 : (Commenter: SRP)

28 See TSD at 25 (Section 5.2.2.2).

29 In our March 18, 2015 Federal Register notice for this action, w e acknowledged that many of the activities listed in ADEQ’s definition of “insignificant activity” would not be expected to emit regulated NSR pollutants. As such, our limited disapproval relates to the ADEQ rule’s failure to require that applicants provid e emissions information related to those activities defined as “insignificant activities” that generally would be expected to emit regulated NSR pollutants.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 31 of 43 EPA's proposed action lacks the necessary regulatory and statutory foundation to support its proposed limited approval and limited disapproval of core elements of the NSR programs. SRP believes that its comments provide a pathway for approving ADEQ’s NSR S IP submittal. SRP was unable to comment on all issues in the proposal and encourages EPA to determine whether additional issues that EPA raised in the proposal are flawed.

Response 22 : We have responded to all specific comments made by the commenters. Thi s comment is not specific
and th erefore does not require a detailed response. Nevertheless, we disagree with the commenter’s

assertion that our limited approval/limited disapproval of the NSR SIP submittal lacks the necessary regulatory and statutory found ation

, and do not believe that the commenter’s comments provide a basis for full approval of ADEQ’s NSR SIP submittal. We fully describe the CAA statutory and regulatory requirements that provide the bases for our limited disapproval in our proposed and fi nal actions . To
the extent that comments we received raise d questions or concerns about the bases for our proposed action, our response to comments addresses those comments and provide additional detail supporting
our final action.

We appreciate receiving and reviewing comments pointing out potential errors or concerns with our proposal. In addition to responding to comments, we have described and explained changes made between the proposed and final actions on the ADEQ NSR SIP submi ttal.

EPA’s Proposal and ADEQ’s Stakeholder Process

Comment 23 : (Commenter: SRP) One commenter explained that ADEQ undertook an extensive, multi

- year stakeholder process to work with all stakeholder groups to develop revised NSR rules that meet Arizona' s air quality management goals and satisfy federal CAA requirements. Stakeholders included representatives from environmental organizations, regulated entities, and regulators (including EPA Region 9 staff), and spanned over half of a decade. During each p hase of the public outreach process and in numerous meetings with EPA Region 9 staff, ADEQ responded to EPA concerns by incorporating suggested revisions, or explaining ADEQ's rationale for structuring the rules in a specific manner.

The commenter states that ADEQ remains under no obligation to revise and strengthen its existing minor NSR permitting program. Nonetheless, ADEQ worked with stakeholders to craft an improved minor NSR program that better meets Arizona's current air qualit y needs compared to the SIP

approved version of the rule. In doing so, ADEQ followed EPA 's recommendations, and mirrored its provisions after elements of other States' SIP

- approved programs when appropriate for the air quality needs of Arizona. Yet, in EPA 's proposed action, it would disapprove the very program elements that

EPA suggested, use interpretations that conflict with established EPA legal positions, and deny ADEQ the types of flexibility and improvements approved by multiple EPA Regional Offices into other State

SIPs.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 32 of 43 Response 23 : EPA acknowledges the significant stakeholder process undergone by ADEQ in revising and updating its NSR program and appreciates the substantial efforts made by ADEQ in developing its updated and strengthened NSR progra m, including its enhanced minor NSR program. However, we disagree with the statements made by the commenter with respect to our action on this program.

Regarding the commenter’s statements that EPA used “interpretations that conflict with established

U. S. EPA legal positions, and deny ADEQ the types of flexibility and improvements approved by multiple, U.S. EPA Regional Offices into other State SIPs”, the comment did not provide the level of specificity necessary for us to ascertain the commenter’s conce rns with our proposed action in this regard, and therefore we cannot provide a detailed response. To the extent the commenter raises these issues in a more specific manner in other comments, we provide our responses elsewhere in this response to comments d ocument . In general, however, we disagree that our action on ADEQ’s NSR SIP submittal uses interpretations that conflict with established U.S. EPA legal positions. We also believe that our determinations on particular issues, and our final action on ADEQ’s NSR SIP submittal, properly apply the CAA and associated regulatory requirements governing SIPs, including those requirements for NSR programs, and appropriately defer to State choices and flexibilities.

Regarding the commenter’s statement that ADEQ has no obligation to revise and strengthen its minor NSR permitting program, this issue is not relevant, because ADEQ has, in fact, acted to update and strengthen its minor NSR program, and has submitted a request that EPA approve this updated program into the SIP while at the same time removing ADEQ’s old NSR provisions from the SIP. Regardless of whether this particular submittal was required, EPA must act on the pending ADEQ NSR SIP submittal. States are required to incorporate minor NSR requirements int o their SIPs to satisfy CAA section 110(a)(2)(C) and 40 CFR 51.160

- 51.164. EPA’s role in reviewing SIP submittals, including the ADEQ NSR SIP submittal, is to defer to the State’s choices as to how to implement CAA requirements provided those choices are c onsistent with the pertinent CAA requirements, whether or not an updated program submittal is required at a particular point in time to address a required SIP element.

Clarity o f Action Being Proposed

Comment 24 : (Commenter: SRP)

One commenter states that EPA 's notice lacks clarity on precisely what action EPA is proposing on different elements of the SIP submission. For example, sections titled "Summary" and "Section Ill. Public Comment and Proposed Action" discuss only a limited approval, limited disapproval, yet within other text of the Federal Register notice, EPA proposes a disapproval without qualifying the disapproval as limited. Moreover, while EPA provides point

- by

- point explanations of alleged concerns with ADEQ's NA NSR a nd PSD programs, EPA often fails to explain how these concerns cause the program to fail to meet minimum NSR program elements or CAA requirements. Indeed, it is hard to imagine how some of the stated concerns (e.g., typographical errors in a rule, potentia l for confusion) rise to the level of potentially triggering a FIP or sanctions if the State does not act quickly enough to
resolve EPA 's concerns.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 33 of 43 Response 24 : We disagree with the commenter that EPA’s notice lacked clarity. The Administrative Procedure Act (APA) requires a notice of proposed rulemaking to include “either the terms or substance of the proposed rule or a description of the subjects and issues invo lved.” 5 U.S.C. § 553(b)(3) . We believe the Federal Register notice for our proposed action more than adequately provided “a description of the
substance and issues involved” in our action, as required by the APA.

Section II of the preamble in the March 18, 2015 Federal Register notice contained a detailed discussion of our proposal and identified the actions we were proposing on the various program
elements a nd provisions in the ADEQ NSR SIP submittal. In S ection II

, we described our proposed limited approval/limited disapproval on the vast majority of the provisions contained in the submittal, a partial disapproval on two separable elements of the submittal r elated to recent court decisions, a limited approval (without limited disapproval at this time) on certain PM 2.5 NA

- NSR provisions, and a limited approval/limited disapproval on certain non

- NSR

- specific provisions. Section III included a summary of our pro posed action. Contrary to the commenter’s assertion that Section III only discusse d a limited approval/limited disapproval action, Section III specifically mentioned that we were “also proposing to partially disapprove two provisions of ADEQ’s NSR program that have been vacated by
the courts.” 30 In addition, section I.C of the preamble referred readers to the TSD for more detailed analysis. 31 We acknowledge that the brief “Summary” section at the beginning of the preamble referred generally to proposed limite d approval/limited disapproval and did not describe the specific proposed actions we intended to take on each component of ADEQ’s lengthy SIP submittal. However, the “Summary” section in our Federal Register notice was intended simply to provide a brief su mmary of the nature of our overall action, which is primarily a limited approval and limited disapproval, with the full extent of the proposed action described in greater detail later in the notice and in supporting
documents. 32

To the extent the commenter asserts that EPA failed to explain how the disapproval issues relating to
the PSD and NA

- NSR program cause ADEQ’s program to fail to meet minimum NSR program elements or CAA requirements, we disagree. The notice for our proposed action identified in each case the specific program element/CAA requirement that was not being met for each disapproval issue, including those which may have been the result of a typographical error or similar drafting mistake. In addition, our TSD provided further detail for each disapproval issue. We also note that CAA NSR regulations at 40 CFR 51.165(a)(1) and 51.166(b) require that SIPs include the specific definitions in the federal regulations, and state that deviations from this wording will be approved only if the State

spec ifically demonstrates that the submitted definition is more stringent, or at least as stringent, in all

30 80 FR at 14060.

31 See 80 FR at 14047 (“We provide our reasoning in general terms below, and inclu de our more detailed analysis in the TSD, which is available in the docket for this proposed rulemaking.”).

32 The style of a Federal Register notice is governed by the Office of Federal Register (OFR), which has issued guidelines to limit the length and contents of the Summary section. The Summary is intended to provide the public a brief, non

- expert summary of t he action that is being taken, and should not be construed as containing our position on every aspect of this action. OFR’s guidance specifically states: “Do not include qualifications, exceptions, or specific details.” See Federal Register Document Drafti ng Handbook at 1

- 8. http://www.archives.gov/federal

- register/write/handbook/chapter

- 1.pdf

.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 34 of 43 respects as the corresponding federal definition. See also response to comment 17

. It is unclear what type of additional information the commenter believes EPA should have provided, as the commenter has not provided any specific examples of disapproval issues for which EPA allegedly did not provide sufficient explanation. To the extent the commenter provides more detail in other comments that relate to this general concern, we address those concerns in our responses to those comments.

EPA’s Burden under Section 110(l)

Comment 25 : (Commenter: SRP)

A commenter asserts that under section 110(l) of the CAA, EPA must approve ADEQ’s requested SIP revision, including provisions related to ADEQ’s minor NSR program exemption thresholds in nonattainment areas, unless EPA shows that the "revision would interfere with any applicable requirement co ncerning attainment and reasonable further progress..., or any other applicable requirement of this chapter." The commenter states that EPA has not cited any basis that supports disapproving ADEQ's SIP submittal based on these CAA criteria.

Response 25 : W e disagree with the commenter’s interpretation of section 110(l) of the Act. As explained in the preamble to the proposed action, EPA reviewed ADEQ’s SIP submittal based on compliance with specific applicable SIP requirements. In addition, EPA concluded th at the SIP revision overall strengthened the provisions of the existing SIP, and therefore did not interfere with attainment

– a conclusion that the commenter does not question. However, the commenter misconstrues section 110(l) of the Act and EPA’s author ity to disapprove SIP revisions.

The commenter appears to interpret section 110(l) as requiring EPA to approve any SIP revision unless EPA concludes that the revision will interfere with attainment or another relevant requirement of the Act. This interpr etation ignores the fact that the SIP revision, including the revisions to the minor NSR program, must satisfy certain specific requirements of the Act:

EPA has reviewed the provisions submitted by ADEQ that are the subject of this action, including those governing NSR for stationary sources under ADEQ jurisdiction for compliance with the CAA’s general requirements for SIPs in CAA section 110(a)(2), EPA’s regulations for stationary source permitting programs in 40 CFR part 51, sections 51.160 through 51.16 6, and the CAA requirements for SIP revisions in CAA section 110(l) and 193.

80 FR at 14047. As explained in the preamble to the proposed action, EPA found that for the most part, ADEQ’s NSR SIP submittal met these requirements, but in some cases, certain CAA statutory and regulatory requirements were not met. 80 FR at 14047. For each disapproval issue discussed in the FR notice for our proposed action on ADEQ’s NSR SIP submittal, we cited a CAA statutory and/or regulatory requirement that we had determine d ADEQ’s program did not meet. As such, EPA demonstrated for each disapproval issue that ADEQ’s submittal would not meet an applicable requirement of the Act. EPA’s determination that ADEQ’s submittal did not meet CAA requirements,Response to Comments
AZ NSR SIP Submittal

June 2015 Page 35 of 43 including the criteria e stablished in EPA’s implementing regulations, provide a reasonable basis on which to disapprove portions of ADEQ’s submittal. As described elsewhere in our final action and in our responses to comments, although we have changed our determinations on certai n of the issues we identified as deficiencies in the proposal, the remaining issues that we identified in the proposal as deficiencies with ADEQ’s NSR SIP submittal do not satisfy certain applicable CAA requirements and therefore provide appropriate bases for our final limited disapproval action.

Contrary to the commenter’s assertion, there is nothing in the language in Section 110(l), nor any other legal authority, that holds that ADEQ is not obligated to meet all the relevant and applicable requirements of the Act for its SIP submittal except when EPA makes a finding that the State’s submittal would interfere with attainment and reasonable further progress under section 110(l). Rather, section 110(l) of the Act clarifies that for SIP revisions, in additio n to other applicable CAA requirements:

The Administrator shall not approve a revision of a plan if the revision would interfere with any applicable requirement concerning attainment and reasonable further progress (as defined in
section 7501 of this ti tle), or any other applicable requirement of this chapter.

42 USC 7410(l).

As explained in our proposal, EPA has determined that our action on ADEQ’s SIP submittal is consistent with CAA section 110(l), in light of the fact that, taken in its entirety, the SIP revision represents a strengthening of ADEQ’s minor NSR, PSD, and NA

- NSR programs as compared to the existing SIP

approved programs which were approved some decades ago, and that our limited approval/limited disapproval of this revision would not i nterfere with any applicable requirement concerning attainment and reasonable further progress, or any other applicable requirement of the Act. As noted above, the commenter does not question our conclusion under section 110(l).

Nonattainment Areas and C ontrol Requirements

Comment 26 : (Commenter: SRP)

One commenter states that EPA provided no supporting documentation to support its assertion that “typically, nonattainment areas have more control requirements that apply to smaller minor sources, compared to attainment areas.” The commenter states that information EPA collected after reviewing 20 minor NSR programs contradicts this assertion; instead, this information demonstrates that applicability levels only "occasionally related to attainment status." 33 Of the four States ADEQ reviewed to support its decision

- making on the appropriate level for Arizona's minor NSR program, one state, Colorado, used different applicability thresholds based on attainment status. New Mexico, Nevada,

33 See " Rev i ew of State a n d L oca l Ag e n c i es ' New So u rc e Pr e co n s t ru ct i on Pe r m it Pr ograms f o r M in or So u rce s : F in a l R e p o rt "

MRI Re p o rt for US E P A

, Se pt e m ber 30

, 1 997

. Ava il ab l e in EPA Docket # EPA

- HQ

- OAR

- 2003

- 0 0 7 6

- 0002.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 36 of 43 and Utah did not. In sum, EPA merely asserts without support that most other States have lower thresholds, and then jumps to a finding that ADEQ's program must be inadequate.

Response 26 : The commenter misinterprets EPA’s statement. In the referenced statement, EPA was referring to control requirements , rather than NSR applicability thresholds

, in nonattainment areas. However, we acknowledge that the Federal Register notice for our proposal lacked clarit y regarding this point. Although we did not cite to any specific examples, our conclusion was based on the fact that jurisdictions regulating nonattainment areas are obligated under the CAA to demonstrate that the particular area will achieve the necessary emission reductions to attain the standard and to comply with the nonattainment SIP requirements in CAA 172(c), including implementation of all reasonably
available control measure s and reasonable further progress toward attainment . In doing so, a State

m ay need to obtain emission reductions from minor sources through control requirements, where such minor sources may contribute to nonattainment. As such, in order to ensure that such sources will comply with the applicable control strategy, it may be prude nt to require an NSR program covering a wider number of sources with smaller emissions than would be necessary in an attainment area in order to ensure the area will attain the NAAQS. 34 For example, we found at least 20 rules in Maricopa County that contain control requirements for source categories that are not covered by ADEQ’s rules and regulations, and as ADEQ explained in its analysis, Maricopa County has for some time employed much lower permitting thresholds than ADEQ due to the severity of air qualit y problems there. 35

Limited Disapproval Related to Proposed Final Permit

Comment 27 : (Commenter: SRP)

One commenter disagreed with EPA’s proposal to disapprove ADEQ's NSR programs because references to a "proposed final permit" do not provide enforceable procedures that meet the requirements of 40 CFR 51.160(a) and (b). The commenter raises several concern s, particularly that 40 CFR 51.160(a) and (b) do not require ADEQ to adopt procedures that "prevent construction until a final permit has been issued” as the provisions contain no requirements for a preconstruction permit program. Instead, the commenter st ates that ADEQ's procedures fully satisfy the requirement for legally enforceable procedures in two ways. First, the Director will review an application and meet all procedural requirements for public availability of information before issuing a proposed f inal permit. Because a source must have a proposed final permit before starting any physical building activities, these procedures prevent construction or modification that fail to meet the applicable requirements in accordance with 40 CFR 51.160(a) and (b ). Second, authorizing a source to begin physical building activities does not qualify as authorizing construction because, at that time, operation is not also authorized. There are two essential elements for an activity to qualify as construction (or modi fication) 1) it must qualify as a physical change or change in operation; and 2) it must be capable of resulting in

34 In fact, the CAA requires a lower major source threshold in some nonattainment areas, presumably so that more sources are subject to control requirements and review.

35 See “List of Additional Source Category

- Specific Rules in Maricopa County,” EPA Region 9, June 2015.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 37 of 43 emissions. Since a stationary source may not begin operation until the Director issues a final permit, there is no potential for the activit y authorized by a proposed final permit to have emissions.

In addition, EPA fails to identify a regulatory provision in 40 CFR 51.160

- 51.166 to support its position. Notwithstanding this failure, ADEQ's letter of interpretation negates the necessity for a revision of the regulations. E PA has a longstanding policy of accepting Sta te interpretive statements rather than requiring revision of the regulations in approving SIP submittals.

Finally, the commenter identifies that EPA has approved similar processes into the SIPs for other States. For example, in 2006, EPA Region 4 approved similar language for Kentucky’s PSD and nonattainment NSR regulations.

Response 27 : The commenter raises a number of issues to support its argument that the language in ADEQ’s NSR program that allows certain sources to begin construction following the i ssuance of a proposed final permit satisfies the requirements in 40 CFR 51.160(a) and (b) and is not a proper basis for EPA’s proposed limited disapproval of ADEQ’s NSR program. As discussed in detail in response to comment 4 above, EPA has determined in l ight of ADEQ’s comments and interpretation of its rules that ADEQ’s NSR program provides that proposed final permits are final, binding, enforceable, and appealable NSR permit decisions, and, as a result, in our final action, the fact that ADEQ’s NSR progr am allows certain sources to begin construction after issuance of a proposed final permit is no longer a basis for our limited disapproval of ADEQ’s NSR SIP submission. 36

Given that this issue is no longer a basis for our limited disapproval, we do not need to address all of the lengthy arguments ma de by the commenter. However, we note that allowing a source to be completely constructed

, but not operate

, prior to issuance of a final NSR decision does not satisfy the requirements of 40 CFR 51.160(a) and ( b). See our partial disapproval of South Dakota’s minor NSR program revisions at 79 FR 36419 (June 27, 2014). In that action

, we partially disapproved South Dakota’s revised minor NSR program because it would have allowed a source to construct or modify

pr ior to the State affirmatively approving the project. Specifically, we stated, “we interpret the CAA and implementing regulations to require regulation and approval of construction of any stationary

source before the construction occurs, not as proposed by the State, review and approval [of] construction in process or after it has occurred.” 79 FR 36422. Also, discussion of the legal requirements for preconstruction review for the minor NSR program in 40 CFR 51.160(a) and (b) is provided in our response to comment 4 above.

Public Review and ADEQ's Registration Program

Comment 28 :

36 We also agree that in certain situations it is appropriate for EPA to rely on State interpretive statements to address ambiguities in State SIP submittals. See EPA’s recent statements regarding EPA’s policy on State interpretive letters at 80 F R

33884

- 338 89.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 38 of 43 (Commenter: SRP)

The commenter indicates that EPA proposes to disapprove ADEQ’s registration program because, among other things, it fails to meet the public notice and comment process required under 40 CFR §51.161(a). EPA 's proposed disapproval fails to comport with the EPA's interpretation of required public notice requirements, and is inconsistent with other recent EPA Regional Office actions related to minor NSR program approvals. The commenter points to other instances where EPA has approved tiered permitting programs, where a portion of the NSR prog ram is not subject to public review. ADEQ conducted an analysis and determined that it need regulate only stationary sources above the specified permitting threshold. While EPA has no supportable basis for declining to approve ADEQ’s registration program, the program, nonetheless, is fully severable from the minor NSR program, and

EPA may act to approve either provision without acting to approve or disapprove the other.

Response 28 : We disagree with the commenter that ADEQ’s registration program for minor stationary sources is not required to adhere to the public participation requirements in 40 CFR 51.161(a). The Act and its implementing regulations allow a State to exempt from federal minor NSR requirements, including the public participation requirements at 40 CFR 51.161(a), only those stationary sources that the State has demonstrated are not necessary to regulate as part of its minor NSR program. See our detailed discussion in response to comment 2

. ADEQ has not made, or attempted to make, a demonstration that emissions from sources subject to its registration program are not necessary for attainment and maintenance of the NAAQS. Rather, ADEQ submitted an analysis as part of its NSR SIP submittal

asse rting that the emissions from sources below its “permitting exemption thresholds”, i.e.

, approximately one

- half of the significant emission rates under the PSD program for the specified pollutants, need not be regulated under its minor NSR program. Minor s tationary sources with emissions at or above the “permitting exemption thresholds” are subject to ADEQ’s minor NSR program, of which there are two components.

A source with emissions at or above the “permitting exemption thresholds” must comply with the

r equirements of ADEQ’s regi stration program under R18

- 2

- 302 .01, which imposes less prescriptive requirements, unless the source has emissions at or above the significant level but below the major source threshold, in which case it is subject to the more tra ditional Class II minor source permitting

p rogram. See R18

- 2

- 302, R18

- 2

- 302 .01, R18

- 2

- 334; see generally ADEQ Notice of Final Rulemaking, 18

A.A.R. 1547

- 1552 (July 6, 2012) and ADEQ’s October 29, 2012 SIP Submittal (Document A.1 under
Docket ID: EPA

- R09

- OA R

- 2015

- 0187

- 0006) . Thus, both the registration program and the Class II permitting program are components of ADEQ’s NSR SIP submittal for purposes of satisfying CAA section 110(a)(2)(C) and 40 CFR 51.160

- 51.164. ADEQ has noted:

Review will be mandatory fo r sources with the potential to emit any regulated minor NSR pollutant above the permitting exemption threshold and discretionary for all other sources. In determining potential to emit for this purpose, elective limits or controls will be considered.

Revi ew is mandatory for sources above the permitting exemption threshold because that has been determined to be the de minimis threshold for the minor NSR program.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 39 of 43 ADEQ Notice of Final Rulemaking, 18 A.A.R. 1552 (emphasis added) and ADEQ’s October 29, 2012 S IP Submittal ( See d ocument A.1 under Docket ID: EPA

- R09

- OAR

- 2015

- 0187

- 0006)

.

Because both the registration component of ADEQ’s minor NSR program under R18

- 2

- 301.01 and the Class II permitting component of the program under R18

- 2

- 334 are part of ADEQ’s min or NSR program for purpose s of the CAA, both components must meet the CAA public participation requirements in 40 CFR 51.161(a). As the registration program is a component of ADEQ’s minor NSR program submittal, we also find that ADEQ’s minor NSR program is not se pa rable from the rest of ADEQ’s minor NSR program under 40 CFR 51.160(e), contrary to the commenter’s assertion.

We acknowledge that the ADEQ Notice of Final Rulemaking for ADEQ’s 2012 NSR final rulemaking action often refers specifically to its Class II permitting for minor sources under R18

- 2

- 334 as “minor NSR,” which may have led to the commenter’s confusion about whether ADEQ’s registration program is a component of ADEQ’s minor NSR program submitted to satisfy CAA section 110(a)(2)(C) and 40 CFR

51.160

- 51.164. The record is clear, however, that ADEQ’s registration program is a component of its minor NSR program submitted to satisfy CAA section 110(a)(2)(C) and 40 CFR 51.160

- 51.164 and therefore must comply with the applicable federal requireme nts for minor NSR programs.

Prevent ing Violation of an Applicable Portion of Control Strategy

Comment 29 : (Commenter: SRP)

One commenter states that EPA faults ADEQ's submittal for not containing specific procedures that prevent a source from violating an applicable portion of the control strategy. In ADEQ's formal rulemaking notice, it identified A.A.C. R18

- 2

- 306(A)(1) of its existing SIP

- approved regula tions as providing authority to assure that minor sources do not violate applicable portions of the control strategy. This regulation requires that each permit issued by the Director ensures compliance with all applicable requirements. ADEQ defines applica ble requirements to include "any federal applicable requirement." The control strategy consist of federally enforceable measures because the measures are approved into the SIP. As such, this existing regulation assures compliance with the provisions of

51. 160(a)(1) and (b)(1). EPA 's limited disapproval does not explain why this existing regulatory provision does not satisfy those requirements.

Response 29 : We agree with the commenter that ADEQ’s program meets this requirement for sources subject to ADEQ’s rule R18

- 2

- 306. However, not all minor sources under ADEQ’s jurisdiction with emissions at or above the permitting exemption threshold for ADEQ’s minor NSR program are subject to R18

- 2

- 306. Specifically, as explained in our proposal, our limited disapprova l based on this issue relates to sources that are regulated under ADEQ’s registration program at R18

- 2

- 302.01. See 80 FR 14048. AlthoughResponse to Comments
AZ NSR SIP Submittal

June 2015 Page 40 of 43 sources regulated under this program are part of ADEQ’s minor NSR program, 37 they are not subject to

R18

- 2

- 306. Therefor e, we continue to conclude that this deficiency warrants a limited disapproval and in our final action this is one basis for our limited disapproval of the minor NSR program portion of ADEQ’s NSR SIP submittal.

ADEQ’s Portable Source Provisions

Comment 30 : (Commenter: SRP)

SRP states that EPA should not disapprove ADEQ's portable source provisions because EPA cannot substantiate its claim that NA NSR permits are not effectively equivalent to PSD permits. The requirements to obtain a NA NSR permit are m ore rigorous (e.g., obtain offsets), and the control technology level is generally more stringent. As such, EPA's basis for disapproving ADEQ's rules for referencing NA NSR permits is not sustainable.

SRP agrees that PAL permits are not equivalent to PSD permits, but believes that the point is irrelevant to the approvability of the cited provision. If a source complies with its PAL permit, it cannot trigger PSD. In this respect, the regulations do not provide an exemption from PSD, because the source is
al ready not subject to PSD.

Response 30 : First, we note that ADEQ’s comments did not object to, disagree with, or address this basis of our proposed limited disapproval on this issue. Further, we disagree with SRP’s assertions that NA

- NSR permit requiremen ts are equivalent to PSD permit requirements at 40 CFR 51.166(j) through (r) and therefore sufficient for the purpose of exempting portable stationary sources with a prior NA

- NSR permit from PSD requirements pursuant to 40 CFR 51.166(i)(1)(iii). While in c ertain regards the requirements for NA

- NSR permits are more stringent than those for PSD permits in CFR 51.166(j) through (r), this alone does not make NA

- NSR permits equivalent to PSD permits. There are several PSD requirements that are not applicable to sources subject to NA

- NSR review. For example, PSD sources must demonstrate that they will not cause or contribute to a violation of the PSD increment, which is
not addressed in NA

- NSR permitting. See 40 CFR 51.166(c), (k)(1)(ii). In addition, PSD permit

r equirements such as BACT and ambient impact analysis potentially apply to each regulated NSR pollutant to be emitted by the source, whereas NA

- NSR permit requirements such as LAER and emission offsets apply solely to the nonattainment pollutant for which t he source is a major source. See 40 CFR 51.165(a)(2)(i). Accordingly, PSD permits typically contain emission limitations and other requirements for several NSR pollutants, but NA

- NSR permits generally contain requirements only for one or, at most, a few no nattainment pollutants. Given the differences between PSD and NA

- NSR permit requirements, we are unable to conclude in the absence of a response from ADEQ on this issue
that NA

- NSR permit requirements are equivalent to PSD permit requirements under 40 CFR

37 See Response to Comment 28 where we clarify that ADEQ’s registration program is a part of its minor NSR program under 40 CFR 51.160(e).Response to Comments
AZ NSR SIP Submittal

June 2015 Page 41 of 43 51.166(i)(1)(iii). Therefore, we continue to determine that this issue provides a basis for our limited disapproval of the ADEQ NSR SIP submittal.

We also disagree with the commenter’s contention that a portable source with a PAL permit would not
potent ially be subject to PSD upon relocation “because the source is already not subject to PSD.” For example, if the PAL limit were taken to avoid a modification at an existing major stationary source being considered a major modification, then the major statio nary source as a whole would still potentially trigger PSD upon relocation as a major stationary source. ADEQ’s program still warrants a limited disapproval for this issue.

Minimum Federal Requirements and Minor NSR

Comment 31 : (Commenter: SRP)

One commenter states that ADEQ is statutorily precluded from going beyond the minimum Federal requirements, citing Arizona Revised Statutes (ARS) section 49

- 408 38 , while other States, for a variety of programmatic reasons, may opt to provide more stringent mino r NSR programs that go beyond the federal minimum requirements. This alone provides a reason why merely comparing programs is inappropriate.

Response 31 : The commenter suggests that ADEQ’s chosen permitting threshold represents a federal minimum
standard , and that other agencies that regulate more minor sources or minor sources with lower levels of emissions under their minor NSR programs are therefore choosing to exceed the federal minimum. We disagree with this assertion.

Even if ADEQ is prohibited un der State law 39 from going beyond minimum Federal requirements, the commenter’s argument is misplaced. The Act does not establish a set of generic federal minimum thresholds for new source review of minor stationary sources. As the commenter stated elsewher e, each agency implementing the Act’s NSR program for minor sources must determine the sizes and types of sources that are necessary to regulate under the minor NSR program to assure the attainment and maintenance of the NAAQS for the applicable area. Demo nstrating that this assurance is provided by the selected sizes and types of sources to be regulated is the requirement that permitting authorities must meet under CAA section 110(a)(2)(C) and 40 CFR 51.160(e). Looking at the approach of other programs, wh en the program under review does not provide sufficient analysis, is valid and a similar approach was even used by ADEQ in portions of its analysis. As stated in response to comment 3, our comparison of ADEQ’s program to other programs should not be constr ued as EPA stating a policy preference for a particular agency’s approach.

38 See SRP comment at 9 and n. 36.

39 We note that A

. R

. S

. section 49

- 408 does not appear to apply in this context. We assume that the commenter meant to refer to a different State law provision to support its contention in this regard.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 42 of 43 A DEQ’s Registration Program and Appendix W

Comment 32 : (Commenter: SRP)

One commenter states that EPA proposes to disapprove ADEQ's Registration Program because it uses SCREEN modeling that EPA asserts does not meet Appendix W. Notably, Appendix W is only a "guideline." Nonetheless, that guideline states, "where a preliminary or conservative estimate is
d esired, point source screening techniques are an acceptable approach ... agreement should be reached between the model user and the appropriate reviewing authority on the choice of the screening model for each analysis ... " ADEQ's SCREEN model which is de fined as "AERSCREEN air dispersion model published by the Administrator in April 2011" is EPA's recommended screening model based on AERMOD. Nevertheless, since sources filing a registration application are outside the scope of the minor NSR program, it is not necessary for the Director to follow Appendix W in identifying exempt sources that ADEQ will require to go through minor NSR permitting.

Response 32 : 40 CFR 51.160 (f)(1) provides that air quality modeling for the minor NSR program shall be based on

“ the applicable models, data bases, and other requirements specified in appendix W.” The commenter misunderstands our limited disapproval of ADEQ’s program as it relates to Appendix W for sources subject to review under ADEQ’s registration program, which is one component of ADEQ’s minor NSR

program , as discussed in Response to Comment 28 . EPA did not propose to disapprove ADEQ’s chosen screen model for registration sources or for any other sources subject to ADEQ’s NSR program, and EPA agrees that AERSCREEN is currently recommended by EPA for screen modeling. The deficiency is that ADEQ ’s regulations applicable to its registration program do not require that NSR modeling, including screen modeling, conducted for sources subject to the registration program fol low Appendix W, as required by 40 CFR 51.160 (f)(1). 40 Appendix W contains additional guidelines beyond the type of model to use. As such, ADEQ’s registration program must contain a requirement that any modeling conducted pursuant to that program, including screen modeling, be consistent with Appendix W. Accordingly, we continue to find that this deficiency is a basis for our final limited disapproval of ADEQ’s NSR SIP submittal. 41

Alternative or Modified Air Models

Comment 33 : (Commenter: ADEQ)

ADEQ stated that EPA’s proposed limited disapproval on the basis that its PSD program does not include the public process to be used for alternative or modified air models was incorrect. ADEQ rule

40 ADEQ’s regulations for NSR review conducted for larger minor sources subject to Cla ss II permitting and for PSD sources include this requirement at R18

- 2

- 334(I) and R18

- 2

- 406(A)(6), respectively.

41 As noted in our Evaluation, when correcting this deficiency, ADEQ may also want to consider adding a reference to R18

- 2

- 409 to rules R18

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- 302.01 and R18

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- 334. This would give ADEQ the ability to seek case

- by

- case approval from EPA of alternatives to Appendix W consistent with 40 CFR 51.160(f)(2)

.Response to Comments
AZ NSR SIP Submittal

June 2015 Page 43 of 43 R18

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- 409(C) related to air modeling contains a reference t o ADEQ’s public participation rules, R18

- 2

- 330.

Response 33 : Upon further review, we agree with ADEQ that its program adequately meets the requirements for public notice of alternative or modified models under 40 CFR 51.102, as required by 40 CFR 51.166(l)(2), through the requirements in R18

- 2

- 409(C). As such, the public notice requirements for alternative or modified models do not form a basis for our final limited disapproval.

Extent of Review by EPA

Comment 34 : (Commenters: ADEQ, SRP)

ADEQ appreciates EPA’s extraordinarily thorough review and analysis and agrees with the overwhelming majority of EPA’s comments. ADEQ has already initiated work on amending the rules to reflect EPA’s comments and fully intends to submit the amendments befo re either the FIP or sanctions clock expires. ADEQ believes that the state’s NSR program will be stronger and clearer as a result of
EPA’s efforts.

SRP would like to commend EPA on the extensive and thorough review conducted on ADEQ’s NSR SIP
submittal. SRP is pleased that EPA recognizes that the submitted SIP revisions would substantially improve and update ADEQ’s NSR programs compared to the existing SIP

- approved programs and provide mechanisms for ADEQ to improve air quality for its citizens.

Respo nse 34 : EPA appreciates these comments and is pleased that ADEQ intends to amend its rules to address the identified deficiencies in a timely manner. EPA also agrees that ADEQ’s submitted NSR program will substantially improve and update ADEQ’s NSR program s compared to the existing SIP

- approved programs and provide mechanisms for ADEQ to impro ve air quality for its citizens.