# Prevention of Sign ificant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide Applicability Limitations Response to Comments Supplement for Tailoring Rule Methodology(This page intentionally left blank.)

# Prevention of Significant Deterioration and

**Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide Applicability** 

**Limitations Response to Comments**  **Supplement for Tailoring Rule Methodology**

Air Quality

Policy Division Office of Air Quality

Policy and Standards U. S. Environmental Protection Agency Research Triangle Park, NC 27711

June 2012(This page intentionally left blank.)Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide Applicability Limitations

– Response to Comments

Supplement for Tailoring Rule Methodology

1 **Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3**

**and GHG Plantwide Applicability Limitations Response to Comments** 

**– Supplement for Tailoring Rule Methodology**  This document is a supplement to the Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide Applicability L imitations

– Response to Comments document. The purpose of this document is to describe the key components, for purposes of the Tailoring R ule Step 3 rulemaking, of the data sets and methodology the EPA used in the Tailoring Rule as the basis for the estimates of administrative permitting burdens. The most thorough exposition of most components of the data and methodology that the EPA used in the Tailoring Rule is found in a technical support document (TSD) entitled: “Summary

of Methodology

and Data Used to Estimate Burden Relief and Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG) Permitting Thresholds” (March 2010), inclu ded as Attachment C to the “Regulatory Impact Anal ys is for the Final Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule: Final Report” (May 2010) (“Tailoring Rule Summary of Methodology”)
. In this document, the EPA estimates the number of newl y constructed “anyway” sources, the number of modifications, and the number of hours needed to process those ty pes of permits. In addition, the EPA developed estimates of newly constructed GHG

- onl y sources in a TSD entitled: “ Technical S upport Document for Greenhouse Gas Emissions Thresholds Evaluation ” (March 29, 2010), included as Attachment B to the “Regulatory Impact Anal ys is for the Final Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule: Final Report” (May

2010) (“Tailoring Rule TSD for New GHG

- onl y Sources”). In the Tailoring Rule, we generall y described how we estimated administrative burdens as follows: [W] e estimated the administrative burdens to the permitting authorities at the various threshol d levels for PSD or title V applicability as follows. First, for a particular threshold level, we estimated the number of GHG

- emitting sources that would be subject to PSD requirements because they would undertake new construction or modification, and the number of existing sources that would be subject to title V requirements. Second, we estimated the average additional administrative burden and cost of each PSD permitting action and each title V permitting action for the GHG

- emitting sources. Third, we multiplied those two estimates, and the product is the additional administrative burden at the particular threshold level. Tailoring Rule, 75 FR 31534/col. 3.Prevention of Signi ficant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and

GHG Plantwide Applicability Limitations

– Response to Comments Supplement for Tailoring Rule Methodology

2 **a . Sources of**  **D ata**  **S ets**  In the Tailoring Rule, we estimated the amount of the permitting actio ns by relying primarily on the data sets in the NSR I CR, as well as, to lesser extents, the data sets in the Title V ICR and GHG Mandatory Reporting Rule. This section describes these three sources of data
. This section also mentions, for purposes of comparison and to respond to commenters, another possible source of data, which is the RACT

- BACT
- LAER Clearinghouse
. In addition, this section notes our current informal efforts to track GHG permitting in the States. **i . NSR ICR**  We developed our estimates base d on the overall number of PSD permitting actions included in the NSR I CR
. The NSR I CR identifies the information the PSD permit applicants must provide to the EPA or to state or local permitting authorities to obtain a PSD permit. Under the Paperwork Redu ction Act, the NSR I CR must meet certain requirements and be approved by the Office of Management and Budget
. Moreover, the NSR I CR must be renewed periodicall y. The NSR I CR also identifies the amount of time that permit applicants may be expected to spend completing their applications, and the amount of time that the permitting authority may be expected to spend processing the applications. The NSR I CR documents also contain information about the total numbers of permits and total numbers of minor sou rces. All this information is based on data provided b y the sources and the states. The EPA developed the first NSR I CR shortly after the enactment of the PSD and nonattainment NSR permitting programs. The EPA has renewed the NSR ICR every three years sin ce then
. The renewal process provides for two notices in the Federal Register, which give the public two opportunities to comment
. Prior to the promulgation of the Tailoring Rule, the most recent renewal of the NSR I CR had occurred in 2008, so that it wa s information in the 2008 NSR I CR that served as part of the data sets for the EPA ’s administrative burden estimates in the Tailoring Rule. The EPA is currently

in the process of renewing the NSR I CR
. In this renewal, the EPA identified the number of perm it applications, minor sources, and time spent as the same as the 2008 I CR, except that the EPA adjusted the number of permit applications to account for, among other things, tribal and GHG permitting. The EPA published the two Federal Register notices containing the NSR ICR on November 25, 2011 (76 FR 72700

- 72702) and April 17, 2012 (74 FR 22779

- 22780), and allowed 30

- day

comment periods for each notice. The EPA did not receive any comments on the NSR I CRs during those comment periods. Thus, no one has contested the amounts of permitting activity , including the numbers of minor sources, and the permitting authority time spent on processing permits.Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide Applicability Limitations

– Response to Comments

Supplement for Tailoring Rule Methodology

3 **ii . T**  **itle V ICR**  As with the NSR I CR, the EPA has developed an ICR for Title V permitting, which we call the Title V ICR. The EPA developed the first in 1995, after enactment of Title V in the 1990 Clean Air Act Amendments, and has renewed it periodicall y since then
. The Title V I CR contains data concerning the amounts of Title V permitting activity and the time States spend processing Title V permits
. Inpromulgating the Tailoring Rule, the EPA relied on the data in the Title V I CR that was renewed in 2009. Since then, the Title V I CR was renewed on June 13, 2012
. http://www.reginfo.gov/public/do/PRAV iewICR?ref_nbr=201204

- 2060
- 016# The EPA published the two Federal Register notices for this renewal on December 14, 2011 (76 FR 77820) and April 25, 2012 (77 FR 24702

- 24703). This renewal contained essentially the same data as in the version of the I CR rel ied on in the Tailoring Rule, except that in this renewal, the burden estimates were increased because the number of sources in Indian Country and the Outer Continental Shelf as well as Deepwater Port sources was increased. No one commented on the ICR duri ng the two public comment periods for this renewal. **iii. GHG Reporting Requirements** In 2009, the EPA signed what we call the Mandatory GHG Reporting Rule (MRR)
. 74 FR 56260

– 56519 ( October 30, 2009). The 2009 Final MRR included reporting of GHGs from various facilities and suppliers
. The source categories in the 2009 Final MRR cover a pproximately

85 percent of U.S. GHG emissions through reporting b y direct emitters as well as suppliers of fossil fuels and industrial gases. **b . Methodology and**  **A ssumptions** 

**– N**  **umbers of P**  **ermits** The EPA estimated the numbers of newl y constructed sources, which included both “an yway” sources and GHG

- onl y sources; as well as modifications, which also included both “an yway” sources and GHG

- onl y sources . These estimates are discussed immediately below. **i. New ly Constructed Major Sources** 

**– Add Additional GHG (**  **“ a**  **nyway” new**  **sources )**  In the Tailoring Rule Summary of Methodology , the EPA described the methodology for estimating the number of sources in the category entitled “New ly

Constructed Major Sources

– Add Additional GHG,” which we call “an yw ay” new sources, as follows: The August 2008 I CR for the New Source Review (NSR) program estimates that 282 PSD and 519 non

- attainment NSR permits are issued annually . EPA’s initial burden anal ys is concentrated solely on the 282 annual PSD actions. If a source is major for a pollutant for which an area is designated non

- attainment, all significant emissions or significant emissions increases of pollutants for which the area is in attainment are still subject to PSD review. Thus, some of the facilities applying for nonattainment permits may also undergo PSD actions at the same time. Although there is no way of accuratel y predicting which of the 519 nonattainment actions might also coincid e with a PSD action related to GHG emissions, we believe it is likely that most will since they typicall y involve largePrevention of Signi ficant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and

GHG Plantwide Applicability Limitations

– Response to Comments Supplement for Tailoring Rule Methodology

4 emission sources; thus, it is assumed all nonattainment actions from the ICR annual estimate will also need a PSD permit. Therefore, in this final anal ys is, to more accurately

depict the number of PSD permitting actions occurring annually , it is assumed that all 801 permitting actions above involve a PSD action. We estimate that 70% of these permit actions are modifications, or 560 of the 801, based on feedback received from the National Association of Clean Air Agencies (which estimated that some 65% of these permitting actions involve modifications); other commenters on the proposed tailoring rule (who generall y said that most permitting actions involve modifications); and EPA program staff experience... The 240 remaining annual permit actions

—labeled in Table 2

- 1 as “Newl y Constructed Major Source

- Add Additional GHG”

—are assumed to be construction of new major sources as determined by emis sions of one or more NAAQS pollutants. Due to the size and emissions of sources currently subject to the PSD permitting program, it is believed all of these newl y constructed major sources will exceed each of the GHG thresholds we considered, including the 100,000 tpy

CO 2 e, and will also need to include GHG

- related requirements in the PSD permit. Tailoring Rule Summary of Methodology , 3
- 7 (footnotes omitted). **ii. Newly Constructed Major Sources** This category

includes newly

constructed sources whose emis sions of non

- GHG pollutants are too low to trigger PSD applicability, but whose emissions of GHGs meet or exceed the GHG PSD applicability threshold, and therefore do trigger PSD applicability
. As explained in the technical support document for the propos ed Tailoring Rule, to estimate the number of these sources, the EPA identified the various categories of sources that emit GHGs, ranging from the electric generating sector and many subcategories in the industrial sector to the commercial and residential s ector. The EPA then calculated the number of existing sources in those categories. The EPA primaril y relied on data from the U.S. GHG Inventory and the GHG Mandatory

Reporting Rule. The EPA then

– appl[ied] growth rates in the number of units or facilitie s in a source category to the number of existing facilities at the different thresholds
. Growth rates were available from a variety

of sources including Economic Census data, EIA energy survey data, and various EPA regulatory impact analy ses and informatio n collection requests which require source population estimates
. Insome cases there was sufficient information to distribute new sources to different thresholds based on emission information specific to the new sources....Otherwise EPA assumed the same size and threshold distribution for new units as for existing units... “Technical Support Document for Greenhouse Gas Emissions Thresholds Evaluation” (July 7, 2009), Attachment B in “Regulatory Impact Analysis for the Proposed Greenhouse GasPrevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide Applicability Limitations

– Response to Comments

Supplement for Tailoring Rule Methodology

5 Tailoring Rule: Final Report” (September 2009), at 9
. See 75 FR 31535/col. 1 (noting that the EPA used this approach in the final Tailoring Rule). The EPA calculated that the number of sources in this group, at the Tailoring Rule thresholds (100,000/75,000) is 2, at the 50,000/50,000 threshold is 3, and at the 25,000/25,000 threshold is 10 (although at the statutory threshold of 100 or 250 is 19,649)
. Tailo ring Rule Summary of Methodology , at 5, Table 2

- 1
. For purposes of the present Tailoring Rule Step 3, the number of sources in this group is too small to have a meaningful impact, and as a result, we will not further discuss this group or the EPA ’s metho dology

in estimating the number of sources. We note, however, that the methodology

for this group is particularl y complex because, among other things, it has numerous subcategories, each of which requires a growth estimate, and many of those are based on different sources of data
. As a result, if in the future the EPA found it necessary to reassess its overall methodology , reassessing this component would involve additional complexities. **iii. Current Modifications**

**– Add Additional GHG (“anyway” modifications)**  This category

includes major modifications at major sources that are triggered by increased conventional pollutant emissions, but that also exceed the threshold level for GHGs. In the Tailoring Rule Summary of Methodology , the EPA described the methodology for estimating the numbers of these sources as follows: The August 2008 I CR for the New Source Review (NSR) program estimates that 282 PSD and 519 non

- attainment NSR permits are issued annually .... Although there is no way of accurately

predicting which of the 519 nonattainment actions might also coincide with a PSD action related to GHG emissions, we believe it is likely that most will since they typicall y involve large emission so urces; thus, it is assumed all nonattainment actions from the ICR annual estimate will also need a PSD permit. Therefore, in this final anal ys is, to more accurately

depict the number of PSD permitting actions occurring annually , it is assumed that all 801 permitting actions above involve a PSD action. We estimate that 70% of these permit actions are modifications, or 560 of the 801, based on feedback received from the National Association of Clean Air Agencies (which estimated that some 65% of these permitting actions involve modifications); other commenters on the proposed tailoring rule (who generall y said that most permitting actions involve modifications); and EPA program staff experience. Further, 80% of these modifications are expected to involve combu stion activities with GHG emission levels exceeding the statutory thresholds and an y of the significance levels we considered, up to an [ sic : and] including the 100,000 tpy CO 2 e level, thus requiring the inclusion of GHG related requirements in a PSD permi t
. This equates to 448 modifications annually . We believe that an y of the modifications that would be subject to PSD due to the conventional emissions would also be large enough to increase GHGs b y at least 100,000 tpy

of CO 2 e.Prevention of Signi ficant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and

GHG Plantwide Applicability Limitations

– Response to Comments Supplement for Tailoring Rule Methodology

6 Tailoring Rule Summary of M ethodology , at 3
- 6 (footnotes omitted). **iv. Minor Modifications Becoming Newly Major** This category

includes (i) modifications previously considered minor that become major modifications due to GHG emissions occurring at existing major sources, and (ii) m odifications at newl y major GHG sources due solel y to emissions exceeding the significance level threshold for GHG. In the Tailoring Rule Summary of Methodology , the EPA described the methodology for estimating the numbers of these sources as follows:

According to the NSR ICR, approximately 74,591 minor permitting actions occur annuall y, including the following: 30% involve new minor sources, new s ynthetic minor sources, and s ynthetic

- based modifications; 30% involve true minor modifications; 20% involv e netting based minor modifications; and 20% involve minor/administrative permit revisions. We believe that a number of projects that could have taken limits or netted out of PSD review and thereby obtain a minor permit will now be required to apply for a major PSD permit, depending on the significance threshold set for GHG. These projects are identified in Table 2

- 1 under “Minor Modifications Becoming Newl y Major.” Combining the number of s ynthetic

- based modifications (7,459) and netting

- based modification s (14,909) identified in the I CR, approximately 22,368 of these actions could potentially

become major modifications subject to PSD review if their associated GHG emissions increases exceed the selected GHG significance level option. We did not count ‘new minor sources’ and ‘new sy nthetic minors’ because we have already accounted for them as potential major GHG sources if their PTE emissions exceed the selected GHG major source threshold option. Based on staff review of samples of minor source permits, it is estimated that 80% of the current minor modification actions likely involve combustion sources
– totaling 17,894 actions of the total 22,368 minor modification actions. Some of these actions may trigger the requirements of the PSD program depending on their GHG emission increases and the selected GHG significance threshold. In the absence of an y experience involving GHG sources and an y sufficient quantitative data from commenters, we determined the number of these actions on the following basis: We assumed the following percentage of the total 17,984 actions would move to a major modification status due to GHG increases for each of the GHG significance level options considered in this anal ys is: 50% at 25,000 tpy

CO 2 e; 10% at 50,000 tpy CO 2 e; 5% at 75,000 tpy

CO 2 e; and zero at 100,000 tpy

CO 2 e. To determine these percentages, we considered the relative emissions of CO 2 emissions to NOx emissions at the current major modification significance level threshold for NOx (40 tpy). For example, for an average natural gas combustion boiler (a common industrial combustion unit that is part of many modification projects), a 40 tpy NOx emissions would coincide with a 56,000 tpyPrevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide Applicability Limitations

– Response to Comments

Supplement for Tailoring Rule Methodology

7 CO 2 e level. Since many combustion related projects keep just under the 40 tpy NOx level to avoid major modification status, we assume that the CO 2 e emissions for a similar project will be around the 50,000 tp y CO 2 e level. Based on the relationship in combustion

- related emission levels between NOx and CO 2 e just described, we believe it is reasona ble to expect that all these currentl y minor modification projects involving combustion units will exceed the 100 tpy GHG significance level under the baseline scenario. This is because we do not believe that the sources at which these projects occur will be able to structure their operations so as to limit their GHG emissions to less than 100 tpy GHGs. However, at higher GHG significance level options, we assume that a decreasing proportion of projects will be significantl y large enough, or they may emit G HGs close enough to the GHG significance level to be able to limit their operations or net - out for GHGs like they can for NOx. Tailoring Rule Summary of Methodology , at 8
- 10 (footnotes omitted). The EPA estimated that at the 100,000/75,000 level, there would be 895 annual permit actions in this group of “minor modifications becoming newl y major.” Tailoring Rule Summary of Methodology , at 5 (Table 2

- 1).
**v .**  **Modifications at Newly Major Sources.** This category

includes existing but newly classified major sources for GHGs that undergo modifications for which they will then be subject to PSD permitting requirements. In the Tailoring Rule Summary of Methodology , the EPA described the methodology for estimating the numbers of these sources as follows:

[A]n existing, but newly

classified major source for GHG, may undergo a modification for which it will then be subject to PSD permitting requirements. This category

of PSD permitting activity is listed on Table 2

- 1 as “Modifications at Newl y Major Sources.” With this new major source status, these facilities must apply for and be issued a PSD permit, if they undergo a major modification. See Appendix A for a list of newly major sources at different major source GHG thresholds. We estimate that 4% of these newl y m ajor sources will undergo modifications. This rate was obtained b y dividing the current 560 annual PSD modification related permit actions (i.e., 70% of 801 actions identified in the NSR ICR) b y the existing major source population of 14,700 major source title V permits. This represents our best available estimate of the rate of PSD modification activity

at major sources, and we make the assumption that this rate will also apply

for newl y major GHG sources. We recognize that there is some level of uncertainty

in applying this rate to GHG

- only sources, particularl y for sources in unconventional sectors such as commercial and residential categories, however we believe at higher GHG threshold levels, where large industrial sources predominate, that this modific ation rate provides a reasonable estimate of modification activity . As no data are yet available for commercial/residentialPrevention of Signi ficant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and

GHG Plantwide Applicability Limitations

– Response to Comments Supplement for Tailoring Rule Methodology

8 sources and because we cannot conclude that they will differ from industrial sources, we select the same 4% rate for modification ac tivity
. Tailoring Rule Summary of Methodology , at 12
- 13. The EPA estimated that at the 100,000/75,000 level, there would be 20 annual permit actions in this group of “modifications at newl y major sources.” Tailoring Rule Summary of Methodology , at 5 (T able 2

- 1).
**c . Methodology and**  **A ssumptions** 

**– Per**  **- P**  **ermit P**  **rocessing T**  **ime** In addition, the EPA estimated the amount of permit

- processing hours needed for the various ty pes of permits
. These estimates are discussed immediately below. **i. Anyway S**  **ources** In the Tailoring Rule Summary of Methodology , the EPA described the methodology for estimating the per

- permit processing time for these sources as follows: For permitting authorities, 50 additional burden hours are estimated to include the GHG requirement s in a permit. 20 20 A we ll

- known gas with a familiar BACT process, such as NOx, requires an average of 20

- 30 burden hours to be included in a permit. As less is known regarding GHGs and the BACT decision process, expert staff judgment set the burden for p ermitting authorities to add GHG to permits at 50 hours. This is because determining BACT entails review and analysis of the available control techniques. For a well

- known pollutant, the experience of the permitting authority allows it to efficiently consi der the various options and narrow them down promptly to the one that should be considered BACT. Because no BACT determinations have ever been made, permitting authorities will need to invest additional time into reviewing the available technologies and se lecting which one should be considered the best for the particular source. In the absence of any previous experience selecting BACT for GHG sources, we estimate that twice as much time will be necessary as for conventional pollutants. Tailoring Rule Summary

of Methodology , at 7 & n.20. **ii. GHG -**  **O nly**  **S ources**  In the Tailoring Rule Summary of Methodology , the EPA described the methodology for estimating the per

- permit processing time for these sources as follows:

In addition to sources becoming subject to PSD requirements because of GHG emissions related to modifications, new construction will occur that will require a PSD permit solely due to the source’s potential GHG emission levels, identified in Table 2

- 1 as “Newl y Constructed Major Sources.” Based on the source data obtained from the GHG thresholds evaluation, these newl y constructed major sources involve both industrial and commercial/residential facilities

. The current NSR I CR notes that permitting authorities spend approximately

300 hours processin g and issuing a new construction industrial source PSD permit. Sources spend almost 870 hours on average preparing for thePrevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide Applicability Limitations

– Response to Comments

Supplement for Tailoring Rule Methodology

9 same permit. In the previous burden anal ys is, commercial/residential permits were assumed to require only 20% of the time necessary f or an industrial permit. While it is still believed that these sources are less complex than their industrial counterparts in terms of numbers and types of emissions sources and control requirements, EPA now estimates the commercial/residential permits to take 70% of the time required to complete an industrial permit, resulting in approximately 210 hours and 866 hours for permitting authorities and sources respectively. This is based on comments received, which stated that we had significantl y underestimate d the amount of time needed. These commenters emphasized that commercial and residential sources will generall y be located in populated areas, and therefore may

elicit significant amounts of public input, which in turn will increase the amount of time need ed compared to our initial estimates. However, the commenters generally did not provide quantitative information. As a result, we conducted further evaluation of the additional support and outreach activities for permitting authorities to assist with appli cability determinations and emissions calculations, as virtuall y all commercial/residential sources will have no experience with the PSD permitting process. There are also many permit preparation activities that represent a fixed cost, such as preparation of notices and public hearings. Of the sources falling in this category , the number requiring PSD permitting will vary depending on where the thresholds for triggering PSD review (both major source and modifications thresholds) are established. Tailoring Rule Summary of Methodology , at 10
- 11 (footnotes omitted)
. Specificall y, the EPA estimated that the average permitting authority burden per GHG PSD permit ty pe would be 301 hours for industrial permits, because that is the amount of time needed for any oth er pollutant. Id ., at 11, Table 2

- 2
. This included estimates of time for activities ranging from attending pre

- application meetings and answering respondent questions to approving the application and notifying the applicant of the permitting authority determination. Id
.