```

[Federal Register: June 3, 2010 (Volume 75, Number 106)]
[Rules and Regulations]               
[Page 31513-31608]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr03jn10-14]                         

[[Page 31513]]

-----------------------------------------------------------------------

Part II

Environmental Protection Agency

-----------------------------------------------------------------------

40 CFR Parts 51, 52, 70, et al.

 Prevention of Significant Deterioration and Title V Greenhouse Gas 
Tailoring Rule; Final Rule

[[Page 31514]]

-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, 70, and 71

[EPA-HQ-OAR-2009-0517; FRL-9152-8]
RIN 2060-AP86

 
Prevention of Significant Deterioration and Title V Greenhouse 
Gas Tailoring Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: EPA is tailoring the applicability criteria that determine 
which stationary sources and modification projects become subject to 
permitting requirements for greenhouse gas (GHG) emissions under the 
Prevention of Significant Deterioration (PSD) and title V programs of 
the Clean Air Act (CAA or Act). This rulemaking is necessary because 
without it PSD and title V requirements would apply, as of January 2, 
2011, at the 100 or 250 tons per year (tpy) levels provided under the 
CAA, greatly increasing the number of required permits, imposing undue 
costs on small sources, overwhelming the resources of permitting 
authorities, and severely impairing the functioning of the programs. 
EPA is relieving these resource burdens by phasing in the applicability 
of these programs to GHG sources, starting with the largest GHG 
emitters. This rule establishes two initial steps of the phase-in. The 
rule also commits the agency to take certain actions on future steps 
addressing smaller sources, but excludes certain smaller sources from 
PSD and title V permitting for GHG emissions until at least April 30, 
2016.

DATES: This action is effective on August 2, 2010.

ADDRESSES: EPA has established a docket for this rulemaking under 
Docket ID No. EPA-HQ-OAR-2009-0517. All documents in the docket are 
listed in the http://www.regulations.gov index. Although listed in the 
index, some information is not publicly available, e.g., Confidential 
Business Information or other information whose disclosure is 
restricted by statute. Certain other material, such as copyrighted 
material, is not placed on the Internet and will be publicly available 
only in hard copy. Publicly available docket materials are available 
either electronically in http://www.regulations.gov or in hard copy at 
the EPA Docket Center EPA/DC, EPA West, Room 3334, 1301 Constitution 
Avenue, Northwest, Washington, DC. The Public Reading Room is open from 
8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal 
holidays. The telephone number for the Public Reading Room is (202) 
566-1744, and the telephone number for the EPA Docket Center is (202) 
566-1742.

FOR FURTHER INFORMATION CONTACT: Mr. Joseph Mangino, Air Quality Policy 
Division, Office of Air Quality Planning and Standards (C504-03), 
Environmental Protection Agency, Research Triangle Park, NC 27711; 
telephone number: (919) 541-9778; fax number: (919) 541-5509; e-mail 
address: mangino.joseph@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    Entities affected by this action include sources in all sectors of 
the economy, including commercial and residential sources. Entities 
potentially affected by this action also include States, local 
permitting authorities, and tribal authorities. The majority of 
categories and entities potentially affected by this action are 
expected to be in the following groups:

------------------------------------------------------------------------
             Industry group                         NAICS \a\
------------------------------------------------------------------------
Agriculture, fishing, and hunting......  11.
Mining.................................  21.
Utilities (electric, natural gas, other  2211, 2212, 2213.
 systems).
Manufacturing (food, beverages,          311, 312, 313, 314, 315, 316.
 tobacco, textiles, leather).
Wood product, paper manufacturing......  321, 322.
Petroleum and coal products              32411, 32412, 32419.
 manufacturing.
Chemical manufacturing.................  3251, 3252, 3253, 3254, 3255,
                                          3256, 3259.
Rubber product manufacturing...........  3261, 3262.
Miscellaneous chemical products........  32552, 32592, 32591, 325182,
                                          32551.
Nonmetallic mineral product              3271, 3272, 3273, 3274, 3279.
 manufacturing.
Primary and fabricated metal             3311, 3312, 3313, 3314, 3315,
 manufacturing.                           3321, 3322, 3323, 3324, 3325,
                                          3326, 3327, 3328, 3329.
Machinery manufacturing................  3331, 3332, 3333, 3334, 3335,
                                          3336, 3339.
Computer and electronic products         3341, 3342, 3343, 3344, 3345,
 manufacturing.                           4446.
Electrical equipment, appliance, and     3351, 3352, 3353, 3359.
 component manufacturing.
Transportation equipment manufacturing.  3361, 3362, 3363, 3364, 3365,
                                          3366, 3366, 3369.
Furniture and related product            3371, 3372, 3379.
 manufacturing.
Miscellaneous manufacturing............  3391, 3399.
Waste management and remediation.......  5622, 5629.
Hospitals/Nursing and residential care   6221, 6231, 6232, 6233, 6239.
 facilities.
Personal and laundry services..........  8122, 8123.
Residential/private households.........  8141.
Non-Residential (Commercial)...........  Not available. Codes only exist
                                          for private households,
                                          construction, and leasing/
                                          sales industries.
------------------------------------------------------------------------
\a\ North American Industry Classification System.

B. How is this preamble organized?

    The information presented in this preamble is organized as follows:
Outline
I. General Information
    A. Does this action apply to me?
    B. How is this preamble organized?
    C. Preamble Acronyms and Abbreviations
II. Overview of the Final Rule
III. Background
    A. What are GHGs and their sources?
    B. Endangerment Finding and the LDVR
    1. Endangerment Finding
    2. Light-Duty Vehicle Rule
    C. What are the general requirements of the PSD program?
    1. Overview of the PSD Program
    2. General Requirements for PSD
    D. What are the general requirements of the Title V operating 
permits program?
    1. Overview of Title V
    2. Title V Permit Requirements
    E. The Interpretive Memo
IV. Summary of Final Actions

[[Page 31515]]

    A. How do you define the GHG pollutant for PSD and Title V 
purposes?
    1. GHG Pollutant Defined as the Sum-of-Six Well-Mixed GHGs
    2. What GWP values should be used for calculating 
CO2e?
    B. When will PSD and Title V applicability begin for GHGs and 
emission sources?
    1. What are the Step 1 thresholds, timing, and calculation 
methodology?
    2. What are the Step 2 thresholds, timing, and calculation 
methodology?
    3. What about Step 3?
    4. What about the proposed 6-year exclusion for smaller sources?
    5. When and how will EPA take further action on smaller sources?
    C. How do state, local, and tribal area programs adopt the final 
GHG applicability thresholds?
    D. How do you treat GHGs for purposes of Title V permit fees?
    E. Other Actions and Issues
    1. Timing for Permit Streamlining Techniques
    2. Guidance for BACT Determinations
    3. Requests for Higher Category-Specific Thresholds and 
Exemptions From Applicability
    4. Transitional Issues Including Requests for Grandfathering
V. What is the legal and policy rationale for the final actions?
    A. Rationale for Our Approach to Calculating GHG Emissions for 
PSD and Title V Applicability Purposes
    1. Grouping of GHGs Into a Single Pollutant
    2. Identifying Which GHGs Are Included in the Group
    3. Use of GWP vs. Mass-Based GHG Thresholds
    4. Determining What GWP Values Are To Be Used
    5. Use of Short Tons vs. Metric Tons
    B. Rationale for Thresholds and Timing for PSD and Title V 
Applicability to GHG Emissions Sources
    1. Overview
    2. Data Concerning Costs to Sources and Administrative Burdens 
to Permitting Authorities
    3. ``Absurd Results,'' ``Administrative Necessity,'' and ``One-
Step-at-a-Time'' Legal Doctrines
    4. The PSD and Title V Programs
    5. Application of the ``Absurd Results'' Doctrine for the PSD 
Program
    6. Application of the ``Absurd Results'' Doctrine for the Title 
V Program
    7. Additional Rulemaking for the PSD and Title V Programs
    8. Rationale for the Phase-in Schedule for Applying PSD and 
Title V to GHG Sources
    9. ``Administrative Necessity'' Basis for PSD and Title V 
Requirements in Tailoring Rule
    10. ``One-Step-at-a-Time'' Basis for Tailoring Rule
    C. Mechanisms for Implementing and Adopting the Tailoring 
Approach
    1. PSD Approach: Background and Proposal
    2. Rationale for Our Final Approach to Implementing PSD
    3. Other Mechanisms
    4. Codification of Interpretive Memo
    5. Delaying Limited Approvals and Request for Submission of 
Information From States Implementing a SIP-Approved PSD Program
    6. Title V Programs
    D. Rationale for Treatment of GHGs for Title V Permit Fees
    E. Other Actions and Issues
    1. Permit Streamlining Techniques
    2. Guidance for BACT Determinations
    3. Requests for Higher Category-Specific Thresholds or 
Exemptions From Applicability
    4. Transitional Issues Including Requests for Grandfathering
VI. What are the economic impacts of the final rule?
    A. What entities are affected by this final rule?
    B. What are the estimated annual benefits to sources due to 
regulatory relief from the statutory requirements?
    1. What are annual estimated benefits or avoided burden costs 
for title V permits?
    2. What are annual benefits or avoided costs associated with NSR 
permitting regulatory relief?
    C. What are the economic impacts of this rulemaking?
    D. What are the costs of the final rule for society?
    E. What are the net benefits of this final rule?
VII. Comments on Statutory and Executive Order Reviews
    A. Comments on Executive Order 12866--Regulatory Planning and 
Review
    B. Comments on the Paperwork Reduction Act
    C. Comments on the RFA
    D. Comments on the Unfunded Mandates Reform Act
    E. Comments on Executive Order 13132--Federalism
    F. Comments on Executive Order 13175--Consultation and 
Coordination With Indian Tribal Governments
    G. Comments on Executive Order 13211--Actions That Significantly 
Affect Energy Supply, Distribution, or Use
VIII. Statutory and Executive Order Reviews
    A. Executive Order 12866--Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132--Federalism
    F. Executive Order 13175--Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045--Protection of Children From 
Environmental Health and Safety Risks
    H. Executive Order 13211--Actions That Significantly Affect 
Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898--Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act
    L. Judicial Review
IX. Statutory Authority

C. Preamble Acronyms and Abbreviations

    The following are abbreviations of terms used in this preamble.

ANPR Advance Notice of Proposed Rulemaking
APA Administrative Procedure Act
AQRVs Air Quality Related Values
BACT Best Available Control Technology
Btu British thermal units
Btu/hr British thermal units per hour
CAA or Act Clean Air Act
CAAAC Clean Air Act Advisory Committee
CAFE Corporate Average Fuel Economy
CH4 Methane
CO Carbon Monoxide
CO2 Carbon Dioxide
CO2e Carbon Dioxide Equivalent
EPA U.S. Environmental Protection Agency
FDA Food and Drug Administration
FIP Federal Implementation Plan
FTEs Full-Time Equivalents
GHG Greenhouse Gas
GHz Gigahertz
GWP Global Warming Potential
HAP Hazardous Air Pollutant
HFCs Hydrofluorocarbons
ICR Information Collection Request
IPCC Intergovernmental Panel on Climate Change
LDVR Light-Duty Vehicle Rule
MACT Maximum Achievable Control Technology
MCL Maximum Contaminant Level
N2O Nitrous Oxide
NAAQS National Ambient Air Quality Standard
NHTSA National Highway Traffic Safety Administration
NMOC Nonmethane Organic Compounds
NOX Nitrogen Oxides
NPDES National Pollutant Discharge Elimination System
NSPS New Source Performance Standard
NSR New Source Review
NTAA National Tribal Air Association
NTTAA National Technology Transfer and Advancement Act
OMB Office of Management and Budget
PFCs Perfluorocarbons
PM Particulate Matter
PSD Prevention of Significant Deterioration
PTE Potential to Emit
RFA Regulatory Flexibility Act
RIA Regulatory Impact Analysis
RTC Response to Comment
SBA Small Business Administration
SBAR Small Business Advocacy Review
SBREFA Small Business Regulatory Enforcement Fairness Act
SF6 Sulfur Hexafluoride
SIP State Implementation Plan
SNPR Supplemental Notice of Proposed Rulemaking
TIP Tribal Implementation Plan
TRS Total Reduced Sulfur
TSD Technical Support Document
tpy Tons Per Year
UMRA Unfunded Mandates Reform Act
UNFCCC United Nations Framework Convention on Climate Change
VOC Volatile Organic Compound

[[Page 31516]]

II. Overview of the Final Rule

    EPA is relieving overwhelming permitting burdens that would, in the 
absence of this rule, fall on permitting authorities and sources. We 
accomplish this by tailoring the applicability criteria that determine 
which GHG emission sources become subject to the PSD and title V 
programs \1\ of the CAA. In particular, EPA is establishing with this 
rulemaking a phase-in approach for PSD and title V applicability, and 
is establishing the first two steps of the phase-in for the largest 
emitters of GHGs. We also commit to certain follow-up actions regarding 
future steps beyond the first two, discussed in more detail later. Our 
legal basis for this rule is our interpretation of the PSD and title V 
applicability provisions under the familiar Chevron \2\ two-step 
framework for interpreting administrative statutes, taking account of 
three legal doctrines, both separately and interdependently: They are 
what we will call (1) The ``absurd results'' doctrine, which authorizes 
agencies to apply statutory requirements differently than a literal 
reading would indicate, as necessary to effectuate congressional intent 
and avoid absurd results, (2) the ``administrative necessity'' 
doctrine, which authorizes agencies to apply statutory requirements in 
a way that avoids impossible administrative burdens; and (3) the ``one-
step-at-a-time'' doctrine, which authorizes agencies to implement 
statutory requirements a step at a time. This legal basis justifies 
each of the actions we take with this rule--e.g., each of the first two 
steps of the phase-in approach--both (1) as part of the overall 
tailoring approach, and (2) independently of each other action we take 
with this rule. EPA also has authority for this Tailoring Rule under 
CAA section 301(a)(1), which authorizes the Administrator ``to 
prescribe such regulations as are necessary to carry out his functions 
under [the CAA].''
---------------------------------------------------------------------------

    \1\ Unless otherwise indicated, references in this preamble to 
``title V,'' ``title V requirements,'' the ``title V program,'' and 
similar references are to the operating permit provisions in CAA 
sections 501-506, and not the ``small business stationary source 
technical and environmental compliance assistance program'' under 
CAA section 507.
    \2\ Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984).
---------------------------------------------------------------------------

    For the first step of this Tailoring Rule, which will begin on 
January 2, 2011, PSD or title V requirements will apply to sources' GHG 
emissions only if the sources are subject to PSD or title V anyway due 
to their non-GHG pollutants. Therefore, EPA will not require sources or 
modifications to evaluate whether they are subject to PSD or title V 
requirements solely on account of their GHG emissions. Specifically, 
for PSD, Step 1 requires that as of January 2, 2011, the applicable 
requirements of PSD, most notably, the best available control 
technology (BACT) requirement, will apply to projects that increase net 
GHG emissions by at least 75,000 tpy carbon dioxide equivalent 
(CO2e), but only if the project also significantly increases 
emissions of at least one non-GHG pollutant. For the title V program, 
only existing sources with, or new sources obtaining, title V permits 
for non-GHG pollutants will be required to address GHGs during this 
first step.
    The second step of the Tailoring Rule, beginning on July 1, 2011, 
will phase in additional large sources of GHG emissions. New sources as 
well as existing sources not already subject to title V that emit, or 
have the potential to emit, at least 100,000 tpy CO2e will 
become subject to the PSD and title V requirements. In addition, 
sources that emit or have the potential to emit at least 100,000 tpy 
CO2e and that undertake a modification that increases net 
emissions of GHGs by at least 75,000 tpy CO2e will also be 
subject to PSD requirements. For both steps, we also note that if 
sources or modifications exceed these CO2e-adjusted GHG 
triggers, they are not covered by permitting requirements unless their 
GHG emissions also exceed the corresponding mass-based triggers (i.e., 
unadjusted for CO2e.)
    EPA believes that the costs to the sources and the administrative 
burdens to the permitting authorities of PSD and title V permitting 
will be manageable at the levels in these initial two steps, and that 
it would be administratively infeasible to subject additional sources 
to PSD and title V requirements at those times. However, we also intend 
to issue a supplemental notice of proposed rulemaking (SNPR) in 2011, 
in which we will propose or solicit comment on a third step of the 
phase-in that would include more sources, beginning by July 1, 2013. In 
the same rulemaking, we may propose or solicit comment on a permanent 
exclusion from permitting for some category of sources, based on the 
doctrine of ``absurd results,'' within the Chevron framework. We are 
establishing an enforceable commitment that we will complete this 
rulemaking by July 1, 2012, which will allow for 1 year's notice before 
Step 3 would take effect.
    In addition, we commit to explore streamlining techniques that may 
well make the permitting programs much more efficient to administer for 
GHGs, and that therefore may allow their expansion to smaller sources. 
We expect that the initial streamlining techniques will take several 
years to develop and implement.
    We are also including in this action a rule that no source with 
emissions below 50,000 tpy CO2e, and no modification 
resulting in net GHG increases of less than 50,000 tpy CO2e, 
will be subject to PSD or title V permitting before at least 6 years 
from now, April 30, 2016. This is because we are able to conclude at 
the present time that the administrative burdens that would accompany 
permitting sources below this level will be so great that even the 
streamlining actions that EPA may be able to develop and implement in 
the next several years, and even with the increases in permitting 
resources that we can reasonably expect the permitting authorities to 
acquire, it will be impossible to administer the permit programs for 
these sources until at least 2016.
    Further, we are establishing an enforceable commitment that we will 
(1) Complete a study by April 30, 2015, to evaluate the status of PSD 
and title V permitting for GHG-emitting sources, including progress in 
developing streamlining techniques; and (2) complete further rulemaking 
based on that study by April 30, 2016, to address the permitting of 
smaller sources. That rulemaking may also consider additional permanent 
exclusions based on the ``absurd results'' doctrine, where applicable.
    This Tailoring Rulemaking is necessary because without it, PSD and 
title V would apply to all stationary sources that emit or have the 
potential to emit more than 100 or 250 tons of GHGs per year beginning 
on January 2, 2011. This is the date when EPA's recently promulgated 
Light-Duty Vehicle Rule (LDVR) takes effect, imposing control 
requirements for the first time on carbon dioxide (CO2) and 
other GHGs. If this January 2, 2011 date were to pass without this 
Tailoring Rule being in effect, PSD and title V requirements would 
apply at the 100/250 tpy applicability levels provided under a literal 
reading of the CAA as of that date. From that point forward, a source 
owner proposing to construct any new major source that emits at or 
higher than the applicability levels (and which therefore may be 
referred to as a ``major'' source) or modify any existing major source 
in a way that would increase GHG emissions would need to obtain a 
permit under the PSD program that addresses these emissions before 
construction or modification could begin. Similarly, title V would 
apply to a new or existing source exceeding the 100 tpy

[[Page 31517]]

applicability level in the Act, if the source did not already have a 
title V permit.
    Under these circumstances, many small sources would be burdened by 
the costs of the individualized PSD control technology requirements and 
permit applications that the PSD provisions, absent streamlining, 
require. Additionally, state and local permitting authorities would be 
burdened by the extraordinary number of these permit applications, 
which are orders of magnitude greater than the current inventory of 
permits and would vastly exceed the current administrative resources of 
the permitting authorities. Permit gridlock would result with the 
permitting authorities able to issue only a tiny fraction of the 
permits requested.
    These impacts--the costs to sources and administrative burdens to 
permitting authorities--that would result from application of the PSD 
and title V programs for GHG emissions at the statutory levels as of 
January 2, 2011, are so severe that they bring the judicial doctrines 
of ``absurd results,'' ``administrative necessity,'' and ``one-step-at-
a-time'' into the Chevron two-step analytical framework for statutes 
administered by agencies. Under the U.S. Supreme Court's decision in 
Chevron, the agency must, at Step 1, determine whether Congress's 
intent as to the specific matter at issue is clear, and, if so, the 
agency must give effect to that intent.\3\ If congressional intent is 
not clear, then, at Step 2, the agency has discretion to fashion an 
interpretation that is a reasonable construction of the statute.
---------------------------------------------------------------------------

    \3\ Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-43 (1984).
---------------------------------------------------------------------------

    To determine congressional intent, the agency must first consider 
the words of the statutory requirements, and if their literal meaning 
answers the question at hand, then, in most cases, the agency must 
implement those requirements by their terms. However, under the 
``absurd results'' doctrine, the literal meaning of statutory 
requirements should not be considered to indicate congressional intent 
if that literal meaning would produce a result that is senseless or 
that is otherwise inconsistent with--and especially one that 
undermines--underlying congressional purpose. In these cases, if 
congressional intent for how the requirements apply to the question at 
hand is clear, the agency should implement the statutory requirements 
not in accordance with their literal meaning, but rather in a manner 
that most closely effectuates congressional intent. If congressional 
intent is not clear, then an agency may select an interpretation that 
is reasonable under the statute.
    Under the ``administrative necessity'' doctrine, Congress is 
presumed, at Chevron Step 1, to intend that its statutory directives to 
agencies be administrable, and not to have intended to have written 
statutory requirements that are impossible to administer. Therefore, 
under this doctrine, an agency may depart from statutory requirements 
that, by their terms, are impossible to administer, but the agency may 
depart no more than necessary to render the requirements administrable. 
Under the ``one-step-at-a-time'' doctrine, Congress is presumed at 
Chevron Step 1 to have intended to allow the agency to administer the 
statutory requirements on a step-by-step basis, as appropriate, when 
the agency remains on track to implement the requirements as a whole. 
Each of these doctrines supports our action separately, but the three 
also are intertwined and support our action in a comprehensive manner.
    Here, we have determined, through analysis of burden and emissions 
data as well as consideration of extensive public comment, that the 
costs to sources and administrative burdens to permitting authorities 
that would result from application of the PSD and title V programs for 
GHG emissions at the statutory levels as of January 2, 2011 should be 
considered ``absurd results.'' Therefore, we conclude that under the 
``absurd results'' doctrine, Congress could not have intended that the 
PSD or title V applicability provisions--in particular, the threshold 
levels and timing requirements--apply literally to GHG sources as of 
that date.
    Even so, the PSD and title V provisions and their legislative 
history do indicate a clear congressional intent, under Chevron Step 1, 
as to whether the two permitting programs applied to GHG sources, and 
that the intent was in the affirmative, that the permitting programs do 
apply to GHG sources. Our previous regulatory action defining the 
applicability provisions made this clear, and we do not reopen this 
issue in this rulemaking. Moreover, even if this long-established 
regulatory position were not justifiable based on Chevron Step 1--on 
the grounds that in fact, congressional intent on this point is not 
clear--then we believe that this position, that the statutory 
provisions to apply PSD and title V generally to GHG sources, was 
justified under Chevron step 2.\4\
---------------------------------------------------------------------------

    \4\ In this preamble and the response to comments document we 
fully address arguments that commenters and others have presented 
about congressional intent and coverage of GHGs. We do so to be 
fully responsive, even though we believe that this is a settled 
matter for which the time for judicial review has passed.
---------------------------------------------------------------------------

    As to how to apply the PSD program to GHG sources, congressional 
intent, as expressed in the various statutory provisions and statements 
in the legislative history, is clear that PSD should apply at least to 
the largest sources initially, at least to as many more sources as 
possible and as promptly as possible over time--consistent with 
streamlining actions that we intend to consider coupled with increases 
in permitting authority resources--and at least to a certain point. 
This is the approach we take in this Tailoring Rule, and because it is 
consistent with congressional intent, we believe it is required under 
Chevron Step 1. Even if congressional intent were not clear as to how 
to apply the PSD requirements to GHG sources, we would have authority 
under Chevron Step 2 to establish a reasonable interpretation that is 
consistent with the PSD provisions, and we believe that the tailoring 
approach so qualifies.
    As for title V, the statutory provisions and legislative history, 
which of course are different than those concerning the PSD program, do 
not express a clear intent as to how title V applies to GHG sources, 
which leads our analysis to Chevron Step 2, and here, again, we believe 
that the tailoring approach is a reasonable interpretation that is 
consistent with the title V provisions.
    For both PSD and title V, we intend to use the tailoring approach 
to address smaller GHG sources over time, consistent with Congress's 
expectations that the programs would not impose undue costs to sources 
or undue administrative burdens to permitting authorities. However, we 
cannot say at this point how close to the statutory thresholds we will 
eventually reach. Because this rule establishes only the first two 
phases of the tailoring approach, we do not find it necessary to answer 
these questions in this rule, and instead we expect to resolve them 
through future rulemaking. We will remain mindful of the concerns that 
Congress expressed about including small sources in either program. We 
intend to consider the issue of the applicability of title V to GHG 
sources without applicable requirements (i.e., ``empty permits'') in 
future steps of our tailoring approach. When we do so, we will further 
assess the potential for the approach of excluding empty permits from 
title V to relieve burden consistent with statutory requirements.
    In addition, because Congress can be said to have intended the PSD 
and title

[[Page 31518]]

V programs to apply to GHG sources, the Tailoring Rule is also 
justifiable under the ``administrative necessity'' and ``one-step-at-a-
time'' doctrines.
    The legal analysis just described justifies each of the actions in 
this rule. The first two steps that we promulgate in this rule, which 
take effect on January 2, 2011 and July 1, 2011, constitute the most 
that permitting authorities can reasonably be expected to do by those 
times. Similarly, the 50,000 tpy floor that we promulgate through at 
least April 30, 2016 is reasonable because the information we have 
available now shows that it constitutes the most that permitting 
authorities can reasonably be expected to do by that date. Finally, the 
study and two additional rulemakings--to take effect by July 1, 2013 
and April 30, 2016--to which we commit in this rule establish a track 
for acquiring additional information and for taking further steps to 
address the application of PSD and title V more closely to the literal 
statutory levels. We intend to apply them as closely to those levels as 
is consistent with congressional intent and administrative imperatives, 
in light of the ``absurd results,'' ``administrative necessity,'' and 
``one-step-at-a-time'' doctrines, although, as noted previously, we 
will consider in future rulemaking how closely to the statutory 
thresholds we will be able to implement the PSD and title V programs as 
well as what to require with respect to a potentially large number of 
sources with empty title V permits.
    In this rule, we are adopting regulatory language codifying our 
phase-in approach. As we will explain, many state, local and tribal 
area programs will likely be able to immediately implement our approach 
without rule or statutory changes by, for example, interpreting the 
term ``subject to regulation'' that is part of the applicability 
provisions for PSD and title V. We ask permitting authorities to 
confirm that they will follow this implementation approach for their 
programs, and if they cannot, then we ask them to notify us so that we 
can take appropriate follow-up action to narrow our federal approval of 
their programs before GHGs become subject to regulation for PSD and 
title V programs on January 2, 2011. Narrowing our approval will ensure 
that for federal purposes, GHG sources below the size thresholds we 
establish in this Tailoring Rule are not obligated to hold PSD or title 
V permits until the states develop and submit revised PSD and title V 
programs that EPA approves, either because they adopt our tailoring 
approach or because, if they continue to cover smaller GHG sources, the 
states have demonstrated that they have adequate resources to 
administer those programs.
    The thresholds we are establishing are based on CO2e for 
the aggregate sum of six greenhouse gases that constitute the pollutant 
that will be subject to regulation, which we refer to as GHGs.\5\ These 
gases are: CO2, methane (CH4), nitrous oxide 
(N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), 
and sulfur hexafluoride (SF6). Thus, in this rule, we 
provide that PSD and title V applicability is based on the quantity 
that results when the mass emissions of each of these gases is 
multiplied by the Global Warming Potential (GWP) of that gas, and then 
summed for all six gases. However, we further provide that in order for 
a source's GHG emissions to trigger PSD or title V requirements, the 
quantity of the GHGs must equal or exceed both the applicability 
thresholds established in this rulemaking on a CO2e basis 
and the statutory thresholds of 100 or 250 tpy on a mass basis.\6\ 
Similarly, in order for a source to be subject to the PSD modification 
requirements, the source's net GHG emissions increase must exceed the 
applicable significance level on a CO2e basis and must also 
result in a net mass increase of the constituent gases combined.
---------------------------------------------------------------------------

    \5\ The term ``greenhouse gases'' is commonly used to refer 
generally to gases that have heat-trapping properties. However, in 
this notice, unless noted otherwise, we use it to refer to 
specifically to the pollutant regulated in the LDVR.
    \6\ The relevant thresholds are 100 tpy for title V, and 250 tpy 
for PSD, except for 28 categories listed in EPA regulations for 
which the PSD threshold is 100 tpy.
---------------------------------------------------------------------------

    We are adopting this rule after careful consideration of numerous 
public comments. On October 27, 2009 (74 FR 55292), EPA proposed the 
GHG Tailoring Rule. EPA held two public hearings on the proposed rule, 
and received over 400,000 written public comments. The public comment 
period ended on December 28, 2009. The comments have provided detailed 
information that has helped EPA understand better the issues and 
potential impacts of this rule, and the final rule described in this 
preamble incorporates many of the suggestions we received. We respond 
to many of these comments in explaining our rationale for the final 
rule, which is described in section V. The final rule adopts many 
elements of the proposal but differs from the proposal in several 
important respects. We proposed to apply PSD and title V to GHG sources 
that emit or have the potential to emit at least 25,000 tpy 
CO2e, and we proposed a PSD significance level in a range 
between 10,000 and 25,000 tpy CO2e, but based on 
consideration of the additional information we received and our further 
analysis, we are finalizing the threshold levels in the amounts and on 
the schedule described previously. In addition, the mechanism for 
state, local, and tribal program implementation has been significantly 
changed to reflect the comments received that we needed to develop an 
implementation approach that states could adopt under state law more 
expeditiously.
    The remainder of this notice describes our approach and rationale 
in more detail. Following this overview, section III of this preamble 
provides background information on the nature of GHG emissions, recent 
regulatory developments that affect when and how GHG emissions are 
subject to stationary source permitting, and the general requirements 
of the PSD and title V programs. Section IV describes in detail the 
summary of the key actions being taken in this rule, including the 
determination of emissions, the thresholds and timing for the phase-in, 
our approach to implementing the phase-in, and the additional future 
actions we will take. Section V provides a more detailed description of 
each action, explaining the policy and legal rationale and responding 
to comments received. Section V begins with our decisions on how to 
calculate the mass-based and CO2e-based emissions used in 
the phase-in. Section V then turns to our legal and policy rationale 
for the first two steps of the phase-in, the 50,000 tpy floor, and the 
subsequent study and rulemakings to determine whether and how smaller 
sources should be subject to permitting. This section then describes 
key implementation issues including the approach to state adoption. 
After describing our plans for follow-up on title V fee programs, the 
section concludes by describing permit streamlining techniques; 
guidance on BACT for the GHG sources that are affected under the first 
two steps of the Tailoring Rule phase-in; requests for exemptions; and 
transitional issues, including grandfathering. Finally, section VI 
describes the expected impacts that will result from the phase-in 
approach (i.e., the narrower application of PSD and title V 
requirements during the phase-in period) and sections VII and VIII 
address administrative requirements.

III. Background

A. What are GHGs and their sources?

    Greenhouse gases trap the Earth's heat that would otherwise escape 
from the atmosphere into space, and form the

[[Page 31519]]

greenhouse effect that helps keep the Earth warm enough for life. 
Greenhouse gases are naturally present in the atmosphere and are also 
emitted by human activities. Human activities are intensifying the 
naturally occurring greenhouse effect by increasing the amount of GHGs 
in the atmosphere, which is changing the climate in a way that 
endangers human health, society, and the natural environment.
    Some GHGs, such as CO2, are emitted to the atmosphere 
through natural processes as well as human activities. Other gases, 
such as fluorinated gases, are created and emitted solely through human 
activities. As previously noted, the well-mixed GHGs of concern 
directly emitted by human activities include CO2, 
CH4, N2O, HFCs, PFCs, and SF6. These 
six GHGs will, for the purposes of this final rule, be referred to 
collectively as ``the six well-mixed GHGs,'' or, simply, GHGs, and 
together constitute the ``air pollutant'' upon which the GHG thresholds 
in this action are based. These six gases remain in the atmosphere for 
decades to centuries where they become well-mixed globally in the 
atmosphere. When they are emitted more quickly than natural processes 
can remove them from the atmosphere, their concentrations increase, 
thus increasing the greenhouse effect. The heating effect caused by the 
human-induced buildup of GHGs in the atmosphere is very likely the 
cause of most of the observed global warming over the last 50 years. A 
detailed explanation of greenhouse gases, climate change and its impact 
on health, society, and the environment is included in EPA's technical 
support document (TSD) for the endangerment finding final rule (Docket 
ID No. EPA-HQ-OAR-2009-0472-11292).
    In the United States, the combustion of fossil fuels (e.g., coal, 
oil, gas) is the largest source of CO2 emissions and 
accounts for 80 percent of the total GHG emissions. Anthropogenic 
CO2 emissions released from a variety of sources, including 
through the use of fossil fuel combustion and cement production from 
geologically stored carbon (e.g., coal, oil, and natural gas) that is 
hundreds of millions of years old, as well as anthropogenic 
CO2 emissions from land-use changes such as deforestation, 
perturb the atmospheric concentration of CO2 and the 
distribution of carbon within different reservoirs readjusts. More than 
half of the energy related emissions come from large stationary sources 
such as power plants, while about a third comes from transportation. Of 
the six well-mixed GHGs, four (CO2, CH4, 
N2O, and HFCs) are emitted by motor vehicles. In the United 
States industrial processes (such as the production of cement, steel, 
and aluminum), agriculture, forestry, other land use, and waste 
management are also important sources of GHGs.
    Different GHGs have different heat-trapping capacities. The concept 
of GWP was developed to compare the heat-trapping capacity and 
atmospheric lifetime of one GHG to another. The definition of a GWP for 
a particular GHG is the ratio of heat trapped by one unit mass of the 
GHG to that of one unit mass of CO2 over a specified time 
period. When quantities of the different GHGs are multiplied by their 
GWPs, the different GHGs can be summed and compared on a 
CO2e basis. For example, CH4 has a GWP of 21, 
meaning each ton of CH4 emissions would have 21 times as 
much impact on global warming over a 100-year time horizon as 1 ton of 
CO2 emissions. Thus, on the basis of heat-trapping 
capability, 1 ton of CH4 would equal 21 tons of 
CO2e. The GWPs of the non-CO2 GHGs range from 21 
(for CH4) up to 23,900 (for SF6). Aggregating all 
GHGs on a CO2e basis at the source level allows a facility 
to evaluate its total GHG emissions contribution based on a single 
metric.

B. Endangerment Finding and the LDVR

1. Endangerment Finding
    On April 2, 2007, the U.S. Supreme Court found that GHGs are air 
pollutants under CAA section 302(g). Massachusetts v. EPA, 549 U.S. 497 
(2007). As a result, the Supreme Court found that EPA was required to 
determine, under CAA section 202(a), whether (1) GHGs from new motor 
vehicles cause or contribute to air pollution which may reasonably be 
anticipated to endanger public health or welfare, or (2) the science is 
too uncertain to make a reasoned decision. After issuing a proposal and 
receiving comment, on December 7, 2009, the Administrator signed two 
distinct findings regarding GHGs under CAA section 202(a):
     Endangerment Finding: The Administrator found that the 
current and projected atmospheric concentrations of the mix of six 
long-lived and directly emitted GHGs--CO2, CH4, 
N2O, HFCs, PFCs, and SF6 (referred to as ``well-
mixed greenhouse gases'' in the endangerment finding)--are reasonably 
anticipated to endanger the public health and welfare of current and 
future generations.
     Cause or Contribute Finding: The Administrator found that 
the emissions of the single air pollutant defined as the aggregate 
group of six well-mixed greenhouses gases from new motor vehicles and 
new motor vehicle engines contributes to the GHG air pollution that 
threatens public health and welfare.

These findings, which were published December 15, 2009 (74 FR 66496), 
do not themselves impose any requirements on industry or other 
entities. However, they were a prerequisite to finalizing the GHG 
standards for light-duty vehicles, described next.
2. Light-Duty Vehicle Rule
    The LDVR, 75 FR 25324 (May 7, 2010), is a joint rule between EPA 
and the Department of Transportation's National Highway Traffic Safety 
Administration (NHTSA) that establishes a national program consisting 
of new standards for light-duty vehicles that will reduce GHG emissions 
and improve fuel economy. EPA finalized the national GHG emissions 
standards under the Act, and NHTSA finalized Corporate Average Fuel 
Economy (CAFE) standards under the Energy Policy and Conservation Act, 
as amended. The new standards apply to new passenger cars, light-duty 
trucks, and medium-duty passenger vehicles, starting with model year 
2012. The EPA GHG standards are projected to result in an estimated 
combined average emissions level of 250 grams of CO2 per 
mile for model year 2016 vehicles. The standards begin with the 2012 
model year, with standards increasing in stringency through model year 
2016. The standards are a fleet average for each manufacturer, based on 
a footprint attribute curve, meaning that the actual target for a 
vehicle will vary depending on the size of the vehicle. Under the 
footprint-based standards, each manufacturer will have a GHG standard 
unique to its fleet, depending on the footprints of the vehicle models 
produced by that manufacturer. A manufacturer will have separate 
footprint-based standards for cars and for trucks.
    The endangerment and contribution findings described previously 
require EPA to issue standards under section 202(a) ``applicable to 
emission'' of the air pollutant that EPA found causes or contributes to 
the air pollution that endangers public health and welfare. The final 
emissions standards satisfy this requirement for GHGs from light-duty 
vehicles. Under section 202(a), the Administrator has significant 
discretion in how to structure the standards that apply to the emission 
of the air pollutant at issue here, the aggregate group of six GHGs. 
EPA has the discretion under section 202(a) to adopt separate standards 
for each gas, a single

[[Page 31520]]

composite standard covering various gases, or any combination of these. 
In the LDVR, EPA finalized separate standards for N2O and 
CH4, and a CO2 standard that provides for credits 
based on reductions of HFCs, as the appropriate way to issue standards 
applicable to emission of the single air pollutant, the aggregate group 
of six GHGs. EPA did not set any standards for PFCs or SF6, 
as they are not emitted by motor vehicles.

C. What are the general requirements of the PSD program?

1. Overview of the PSD Program
    The PSD program is a preconstruction review and permitting program 
applicable to new major stationary sources and major modifications at 
existing major stationary sources. The PSD program applies in areas 
that are designated ``attainment'' or ``unclassifiable'' for a National 
Ambient Air Quality Standard (NAAQS). The PSD program is contained in 
part C of title I of the CAA. The ``nonattainment new source review 
(NSR)'' program applies in areas not in attainment of a NAAQS or in the 
Ozone Transport Region and is implemented under the requirements of 
part D of title I of the CAA. Collectively, we commonly refer to these 
two programs as the major NSR program. The governing EPA rules are 
contained in 40 CFR 51.165, 51.166, 52.21, 52.24, and part 51, 
Appendices S and W. There is no NAAQS for CO2 or any of the 
other well-mixed GHGs, nor has EPA proposed any such NAAQS; therefore, 
unless and until we take further such action, we do not anticipate that 
the nonattainment NSR program will apply to GHGs.
    The applicability of PSD to a particular source must be determined 
in advance of construction or modification and is pollutant-specific. 
The primary criterion in determining PSD applicability for a proposed 
source is whether the source is a ``major emitting facility,'' based on 
its predicted potential emissions of regulated pollutants, within the 
meaning of CAA section 169(1) and either constructs or undertakes a 
modification. EPA has implemented these requirements in its 
regulations, which use somewhat different terminology for determining 
PSD applicability, which is whether the source is a ``major stationary 
source'' or whether the proposed project is a ``major modification.''
a. Major Stationary Source
    Under PSD, a ``major stationary source'' is any source belonging to 
a specified list of 28 source categories which emits or has the 
potential to emit 100 tpy or more of any pollutant subject to 
regulation under the CAA, or any other source type which emits or has 
the potential to emit such pollutants in amounts equal to or greater 
than 250 tpy. We refer to these levels as the 100/250-tpy thresholds. A 
new source with a potential to emit (PTE) at or above the applicable 
``major stationary source threshold'' is subject to major source NSR. 
These limits originate from section 169 of the CAA, which applies PSD 
to any ``major emitting facility'' and defines the term to include any 
source that emits or has a PTE of 100 or 250 tpy, depending on the 
source category. Note that the major source definition incorporates the 
phrase ``subject to regulation,'' which, as described later, will begin 
to include GHGs on January 2, 2011, under our interpretation of that 
phrase discussed in the recent Interpretive Memo notice. 75 FR 17004, 
April 2, 2010.
b. Major Modifications
    PSD also applies to existing sources that undertake a ``major 
modification,'' which occurs: (1) When there is a physical change in, 
or change in the method of operation of, a ``major stationary source;'' 
(2) the change results in a ``significant'' emission increase of a 
pollutant subject to regulation (equal to or above the significance 
level that EPA has set for the pollutant in 40 CFR 52.21(b)(23)); and 
(3) there is a ``significant net emissions increase'' of a pollutant 
subject to regulation that is equal to or above the significance level 
(defined in 40 CFR 52.21(b)(23)). Significance levels, which EPA has 
promulgated for criteria pollutants and certain other pollutants, 
represent a de minimis contribution to air quality problems. When EPA 
has not set a significance level for a regulated NSR pollutant, PSD 
applies to an increase of the pollutant in any amount (that is, in 
effect, the significance level is treated as zero).
2. General Requirements for PSD
    This section provides a very brief summary of the main requirements 
of the PSD program. One principal requirement is that a new major 
source or major modification must apply BACT, which is determined on a 
case-by-case basis taking into account, among other factors, the cost 
effectiveness of the control and energy and environmental impacts. EPA 
has developed a ``top-down'' approach for BACT review, which involves a 
decision process that includes identification of all available control 
technologies, elimination of technically infeasible options, ranking of 
remaining options by control and cost effectiveness, and then selection 
of BACT. Under PSD, once a source is determined to be major for any 
regulated NSR pollutant, a BACT review is performed for each attainment 
pollutant that exceeds its PSD significance level as part of new 
construction or for modification projects at the source, where there is 
a significant increase and a significant net emissions increase of such 
pollutant.\7\
---------------------------------------------------------------------------

    \7\ We note that the PSD program has historically operated in 
this fashion for all pollutants--when new sources or modifications 
are ``major,'' PSD applies to all pollutants that are emitted in 
significant quantities from the source or project. This rule does 
not alter that for sources or modifications that are major due to 
their GHG emissions.
---------------------------------------------------------------------------

    In addition to performing BACT, the source must analyze impacts on 
ambient air quality to assure that no violation of any NAAQS or PSD 
increments will result, and must analyze impacts on soil, vegetation, 
and visibility. In addition, sources or modifications that would impact 
Class I areas (e.g., national parks) may be subject to additional 
requirements to protect air quality related values (AQRVs) that have 
been identified for such areas. Under PSD, if a source's proposed 
project may impact a Class I area, the Federal Land Manager is notified 
and is responsible for evaluating a source's projected impact on the 
AQRVs and recommending either approval or disapproval of the source's 
permit application based on anticipated impacts. There are currently no 
NAAQS or PSD increments established for GHGs, and therefore these PSD 
requirements would not apply for GHGs, even when PSD is triggered for 
GHGs. However, if PSD is triggered for a GHG emissions source, all 
regulated NSR pollutants which the new source emits in significant 
amounts would be subject to PSD requirements. Therefore, if a facility 
triggers review for regulated NSR pollutants that are non-GHG 
pollutants for which there are established NAAQS or increments, the air 
quality, additional impacts, and Class I requirements would apply to 
those pollutants.
    The permitting authority must provide notice of its preliminary 
decision on a source's application for a PSD permit, and must provide 
an opportunity for comment by the public, industry, and other 
interested persons. After considering and responding to comments, the 
permitting authority must issue a final determination on the 
construction permit. Usually NSR permits are issued by state or local 
air

[[Page 31521]]

pollution control agencies, which have their own permit programs 
approved by EPA in their State Implementation Plans (SIPs). In some 
cases, EPA has delegated its authority to issue PSD permits to the 
state or local agency. In other areas, EPA issues the permits under its 
own authority.

D. What are the general requirements of the title V operating permits 
program?

1. Overview of Title V
    The operating permit requirements under title V are intended to 
improve sources' compliance with other CAA requirements. The title V 
program is implemented through regulations promulgated by EPA, 40 CFR 
part 70, for programs implemented by state and local agencies and 
tribes, and 40 CFR part 71, for programs generally implemented by EPA.
    In summary, the title V program requires major sources (defined and 
interpreted by EPA to include sources that emit or have a PTE of 100 
tpy of any pollutant subject to regulation) and certain other sources 
to apply for operating permits. Under EPA's long-standing 
interpretation, a pollutant, such as a GHG, is ``subject to 
regulation'' when it is subject to a CAA requirement establishing 
actual control of emissions. Title V generally does not add new 
pollution control requirements, but it does require that each permit 
contain all pollution control requirements or ``applicable 
requirements'' required by the CAA (e.g., New Source Performance 
Standard (NSPS), and SIP requirements, including PSD), and it requires 
that certain procedural requirements be followed, especially with 
respect to compliance with these requirements. ``Applicable 
requirements'' for title V purposes include stationary source 
requirements, but do not include mobile source requirements. Other 
procedural requirements include providing review of permits by EPA, 
states, and the public, and requiring permit holders to track, report, 
and annually certify their compliance status with respect to their 
permit requirements.
2. Title V Permit Requirements
    This section provides a brief summary of the requirements of the 
title V program that are most relevant to this action. A source 
generally must apply for a title V permit within 1 year of first 
becoming subject to permitting--for new sources, this is usually within 
1 year of commencing operation. The application must include, among 
other things, identifying information, a description of emissions and 
other information necessary to determine applicability of requirements 
and information concerning compliance with those requirements. The 
permitting authority uses this information to develop the source's 
operating permit.
    Title V permits generally contain the following elements: (1) 
Emissions limitations and standards to assure compliance with all 
applicable requirements; (2) monitoring, recordkeeping, and reporting 
requirements, including submittal of a semiannual monitoring report and 
prompt reporting of deviations from permit terms; (3) fee payment; and 
(4) an annual certification of certification by a responsible official. 
The detailed requirements are set forth at 40 CFR 70.6.
    In addition to the permit content requirements, there are 
procedural requirements that must be followed in issuing title V 
permits, including (1) Application completeness determination; (2) 
public notice and a 30-day public comment period, including an 
opportunity for a public hearing, on draft permits; (3) EPA and 
affected state review; and (4) a statement of the legal and factual 
basis of the draft permit. The permitting authority must take final 
action (issue or deny) on the permit applications within 18 months of 
receipt. EPA also has 45 days from receipt of a proposed permit to 
object to its issuance, and citizens have 60 days after that to 
petition EPA to object to a permit. Permits may also need to be revised 
or reopened if new requirements come into effect during the permit 
terms or if the source makes changes that conflict with, or necessitate 
changes to, the current permit. Permit revisions and re-openings follow 
procedural requirements which vary depending on the nature of the 
necessary change to the permit.

E. The Interpretive Memo

    On December 18, 2008, EPA issued a memorandum, ``EPA's 
Interpretation of Regulations that Determine Pollutants Covered by 
Federal Prevention of Significant Deterioration (PSD) Permit Program'' 
(known as the ``Johnson Memo'' or the ``PSD Interpretive Memo,'' and 
referred to in this preamble as the ``Interpretive Memo'') that set 
forth EPA's interpretation regarding which EPA and state actions, with 
respect to a previously unregulated pollutant, cause that pollutant to 
become ``subject to regulation'' under the Act. Whether a pollutant is 
``subject to regulation'' is important for the purposes of determining 
whether it is covered under the federal PSD and title V permitting 
programs. The Interpretive Memo established that a pollutant is 
``subject to regulation'' only if it is subject to either a provision 
in the CAA or regulation adopted by EPA under the CAA that requires 
actual control of emissions of that pollutant (referred to as the 
``actual control interpretation''). On February 17, 2009, EPA granted a 
petition for reconsideration on the Interpretive Memo, and announced 
its intent to conduct a rulemaking to allow for public comment on the 
issues raised in the memorandum and on related issues. EPA also 
clarified that the Interpretive Memo would remain in effect pending 
reconsideration.
    On March 29, 2010, EPA signed a notice conveying its decision to 
continue applying (with one limited refinement) the Interpretive Memo's 
interpretation of ``subject to regulation'' (``Interpretation of 
Regulations that Determine Pollutants Covered by Clean Air Act 
Permitting Programs''). See 75 FR 17004. EPA concluded that the 
``actual control interpretation'' is the most appropriate 
interpretation to apply given the policy implications. However, we 
refined our interpretation in one respect: we established that PSD 
permitting requirements apply to a newly regulated pollutant at the 
time a regulatory requirement to control emissions of that pollutant 
``takes effect'' (rather than upon promulgation or the legal effective 
date of the regulation containing such a requirement). In addition, 
based on the anticipated promulgation of the LDVR, we stated that the 
GHG requirements of the vehicle rule would take effect on January 2, 
2011, because that is the earliest date that a 2012 model year vehicle 
may be introduced into commerce. In other words, the compliance 
obligation under the LDVR does not occur until a manufacturer may 
introduce into commerce vehicles that are required to comply with GHG 
standards, which will begin with model year 2012 and will not occur 
before January 2, 2011. We also reiterated EPA's interpretation that 
the 100 tpy major source threshold for title V is triggered only by 
pollutants ``subject to regulation'' under the Act, and we defined and 
applied that term for title V purposes in the same way that we did for 
PSD purposes. That is, we stated that a pollutant is ``subject to 
regulation'' if it is subject to a CAA requirement establishing 
``actual control of emissions;'' that a pollutant is considered 
``subject to regulation'' for title V purposes when such a requirement 
``takes effect''; and, based on the anticipated promulgation of the 
LDVR, that the GHG requirements of the

[[Page 31522]]

vehicle rule would take effect on January 2, 2011.
    On April 1, 2010, we finalized the LDVR as anticipated, confirming 
that manufacturer certification can occur no earlier than January 2, 
2011. Thus, under the terms of the final notice for the Interpretive 
Memo, GHGs become subject to regulation on that date, and PSD and title 
V program requirements will also begin to apply upon that date.

IV. Summary of Final Actions

    This section describes the specific actions we are taking in this 
final rule. It describes the overall tailoring approach for NSR and 
title V applicability, the steps we are taking to put it into place, 
and future actions that we commit to take. The next section, V, 
provides the legal and policy rationale for these actions. In that 
section, we provide a description of our rationale and response to 
comments for each action, presented in the same order as we describe 
the actions here.

A. How do you define the GHG pollutant for PSD and title V purposes?

1. GHG Pollutant Defined as the Sum-of-Six Well-Mixed GHGs
    We are identifying the air pollutant for purposes of PSD and title 
V applicability to be the pollutant subject to regulation, which is the 
air pollutant for GHGs identified in EPA's LDVR, as well as EPA's 
endangerment and contribution findings.\8\ In the LDVR, EPA set 
emissions standards under section 202(a) that were ``applicable to 
emission'' of a single air pollutant defined as the aggregate sum of 
six GHGs. The six GHGs, which are well-mixed gases in the atmosphere, 
are CO2, CH4, N2O, HFCs, PFCs, and 
SF6. Earlier, EPA made the contribution finding for this 
single air pollutant.
---------------------------------------------------------------------------

    \8\ See 74 FR 66496, 66499, 66536-7. December 15, 2009.
---------------------------------------------------------------------------

    Furthermore, as proposed, we are using an emissions threshold that 
allows all six constituent gases to be evaluated using a common 
metric--CO2e. Thus, to determine applicability, a source's 
GHG emissions are calculated on a CO2e basis by multiplying 
the mass emissions of any of the six GHGs that the source emits by that 
gas's GWP and then summing the CO2e for each GHG emitted by 
the source. This sum, expressed in terms of tpy CO2e, is 
then compared to the applicable CO2e-based permitting 
threshold to determine whether the source is subject to PSD and title V 
requirements.
    In addition, because we are implementing this phase-in through the 
term ``subject to regulation,'' the regulatory language is structured 
such that the statutory mass-based thresholds (i.e., for PSD, 100/250 
tpy for new construction and zero tpy for modifications at a major 
stationary source, and for title V, 100 tpy) continue to apply. As a 
result, stationary source apply and stationary sources or modifications 
that do not meet these thresholds are not subject to permitting 
requirements. While technically evaluation of the mass-based thresholds 
is the second step in the applicability analysis, from a practical 
standpoint most sources are likely to treat this as an initial screen, 
so that if they would not trigger PSD or title V on a mass basis, they 
would not proceed to evaluate emissions on a CO2e basis. We 
have treated evaluation of mass-based thresholds as the initial step in 
our descriptions. As applicable, a source would evaluate these mass-
based thresholds by summing each of the six GHGs it emits on a mass 
basis (i.e., before applying GWP). We expect that it will be very rare 
for a new stationary source or modification to trigger permitting based 
on CO2e and not also trigger based on mass alone.
    Determining permit program applicability for the GHG ``air 
pollutant'' by using the sum-of-six GHGs is based on EPA's 
interpretation that the PSD and title V requirements apply to each 
``air pollutant'' that is ``subject to regulation'' under another 
provision of the CAA. As discussed previously, the final LDVR for GHGs 
makes it clear that the emissions standards EPA adopted are standards 
applicable to emission of the single air pollutant defined as the 
aggregate mix of these six well-mixed GHGs. See LDVR, May 7, 2010, 75 
FR 25398-99, section III.A.2.c, and 40 CFR 86.1818-12.\9\ For reasons 
explained in more detail in section V, we have determined it is legally 
required, and preferable from a policy standpoint, for EPA to use the 
same definition of the air pollutant for permitting purposes as that 
used in the rule that establishes the control requirements for the 
pollutant. We also believe there are implementation advantages for 
applying PSD and title V in this way. Thus, this rule establishes that 
a stationary source will use the group of six constituent gases for 
permitting applicability, rather than treating each gas individually. 
Similarly, you will include all six constituent gases because that is 
how the air pollutant is defined, even though motor vehicles only emit 
four of the six.
---------------------------------------------------------------------------

    \9\ 40 CFR 86.1818-12(a).
---------------------------------------------------------------------------

2. What GWP values should be used for calculating CO2e?
    We are requiring that wherever you perform an emissions 
calculations involving CO2e for the purposes of determining 
the applicability of PSD or title V requirements, you use the GWP 
values codified in the EPA's mandatory GHG reporting rule.\10\ This 
approach will assure consistency between the values required for 
calculations under the reporting rule and for PSD or title V. In 
addition, because any changes to Table A-1 of the mandatory GHG 
reporting rule regulatory text must go through a rulemaking, this 
approach will assure that the values used for the permitting programs 
will reflect the latest values adopted for usage by EPA after notice 
and comment.
---------------------------------------------------------------------------

    \10\ Table A-1 to subpart A of 40 CFR part 98--Global Warming 
Potentials, 74 FR 56395.
---------------------------------------------------------------------------

B. When will PSD and title V applicability begin for GHGs and emission 
sources?

Overview
    In this action, we establish the first two phases of our phase-in 
approach, which we refer to as Steps 1 and 2. We also commit to a 
subsequent rulemaking in which we will propose or solicit comment on 
establishing a further phase-in, that is, a Step 3, that would apply 
PSD and title V to additional sources, effective July 1, 2013, and on 
which we commit to take final action, as supported by the record,\11\ 
by no later than July 1, 2012.
---------------------------------------------------------------------------

    \11\ Although we commit to propose or solicit comment on lower 
thresholds and to take final action on that proposal by July 1, 
2012, we cannot, at present, commit to promulgate lower thresholds. 
It will not be until the Step 3 rulemaking itself that we will 
gather and analyze data and receive comments that determine whether 
we have basis for promulgating lower thresholds.
---------------------------------------------------------------------------

    We also commit to undertaking an assessment of sources' and 
permitting authorities' progress in implementing PSD and title V for 
GHG sources, and to complete this assessment by 2015. We further commit 
to completing another round of rulemaking addressing smaller sources by 
April 30, 2016. Our action in that rulemaking would address permitting 
requirements for smaller sources, taking into account the remaining 
problems concerning costs to sources and burdens to permitting 
authorities. Finally, we determine in this action that we will apply 
PSD or title V requirements to sources that emit GHGs, or that conduct 
modifications that result in increases in emissions of GHGs, in amounts 
of less than 50,000 tpy CO2e any earlier than when we take 
the required further action to address smaller sources by April 30, 
2016.

[[Page 31523]]

    Through this process, we will implement the phase-in approach by 
applying PSD and title V at threshold levels that are as close to the 
statutory levels as possible, and do so as quickly as possible, at 
least to a certain point. The level and timing of the thresholds that 
we promulgate in future actions will be based on our assessment of the 
resulting costs to sources and burdens to permitting authorities, and 
that, in turn, will depend on such variables as our progress in 
developing streamlining approaches and on permitting authorities' 
progress in developing permitting expertise and acquiring more 
resources. At this time, we cannot foresee exactly when or in what 
manner those developments will occur. Therefore, we cannot promulgate 
more components of the tailoring approach beyond what we promulgate in 
this action. We can say only that we may continue the phase-in process 
with further rulemaking after 2016. Alternatively, we may make a 
definitive determination in one of the future rulemaking actions that, 
under the ``absurd results'' doctrine, PSD or title V applies only to 
certain GHG sources, and does not apply to the remaining GHG sources, 
and with that rulemaking, bring this tailoring process to a close.
1. What are the Step 1 thresholds, timing, and calculation methodology?
a. PSD Permitting
    Step 1 of the Tailoring Rule phase-in will begin on January 2, 
2011. With respect to the PSD program, GHG sources will become subject 
to PSD for their GHG emissions if they undergo PSD permitting anyway, 
either for new construction or for modification projects, based on 
emissions of non-GHG pollutants, in which case they will be subject to 
the PSD requirements for GHG if they increase GHG emissions by 75,000 
tpy CO2e or more. Under this step, only these sources, which 
we refer to as ``anyway'' PSD sources, will become subject to PSD; no 
sources will become major sources for PSD purposes or be treated as 
undertaking modifications that trigger PSD based solely on their GHG 
emissions. As a result, no additional PSD permitting actions will be 
necessary solely due to GHG emissions. However, existing or newly-
constructed sources that are determined to be major sources based on 
non-GHG emissions are required to conduct a BACT review for their GHG 
emissions (from new construction) or emissions increases (from 
modifications), if they are subject to PSD due to their non-GHG 
emissions from construction or modification actions and each of the 
following conditions is met:
    (1) The GHG emissions (or net emissions increase) due to the new 
construction (or modification) project, calculated as the sum of the 
six well-mixed GHGs on a mass basis (no GWPs applied) exceed a value of 
0 tpy; and
    (2) The GHG emissions (or net emissions increase) due to the new 
construction (or modification) project, calculated as the sum of the 
six well-mixed GHGs on a CO2e basis (GWPs applied) equal or 
exceed a value of 75,000 tpy CO2e.
    The purpose of the first condition is to determine whether the GHG 
emissions or net emissions increase has resulted in an ``increase in 
the amount'' of an air pollutant as required by the Act. Because EPA 
has not defined a mass-based regulatory significance level for GHGs, 
that level, in effect, is treated as zero. See 40 CFR 52.21(b)(23)(ii) 
and 51.166(b)(23)(ii). In practice, this means any amount of new 
emissions or an emission increase will exceed the mass-based limit. We 
are not, at this time, establishing a significance level based on mass 
emissions, and instead we are establishing one based on CO2e 
that addresses permitting burdens. The zero mass-based amount applies, 
but only as an initial screen to exclude sources or changes that have 
no mass increase of GHGs.
b. Title V Permitting
    Under Step 1, only sources required to have title V permits for 
non-GHG pollutants (i.e., ``anyway'' title V sources) will be required 
to address GHGs as part of their title V permitting. That is, no 
sources will become major for title V based solely on their GHG 
emissions. Note further, however, that the 75,000 tpy CO2e 
limit does not apply to title V, so that anyway title V sources must 
apply any title V requirements to their GHG emissions. Sources with 
title V permits must address GHG requirements when they apply for, 
renew, or revise their permits. These requirements will include any GHG 
applicable requirements (e.g., GHG BACT requirements from a PSD 
process) and associated monitoring, record-keeping and reporting. When 
a permit application is otherwise required, they will also need to 
identify GHG emissions and other information in that application to the 
extent required under 40 CFR 70.5(c) and 71.5(c), including information 
necessary to determine applicable requirements.\12\
---------------------------------------------------------------------------

    \12\ EPA notes, however, that many sources subject to title V 
under Steps 1 and 2 will also be subject to the GHG mandatory 
reporting rule. For these sources, the emissions description 
requirements in the title V regulations will generally be satisfied 
by referencing information provided under the reporting rule.
---------------------------------------------------------------------------

2. What are the Step 2 thresholds, timing, and calculation methodology?
a. PSD Permitting
    Step 2 will begin July 1, 2011. Under Step 2, anyway PSD sources--
that is, sources already subject to PSD based on non-GHGs and covered 
under Step 1 previously--will remain subject to PSD. In addition, 
sources with the potential to emit 100,000 tpy CO2e or more 
of GHG will be considered major sources for PSD permitting purposes 
(provided that they also emit GHGs or some other regulated NSR 
pollutant above the 100/250 tpy (mass based) statutory thresholds. 
Additionally, any physical change or change in the method of operation 
at a major source (including one that is only major due to GHGs) 
resulting in a net GHG emissions increase of 75,000 tpy CO2e 
or more will be subject to PSD review and requirements with respect to 
GHGs (provided that it also results in an increase of GHG emissions on 
a mass basis).
    Specifically, for purposes of determining whether a GHG emission 
source, resulting from either new construction or a physical or 
operational change at an existing source, is considered a major source 
under PSD, both of the following conditions must be met:
    (1) The GHG emission source, which is not major for another 
pollutant, emits or has the potential to emit GHG in amounts that equal 
or exceed the following, calculated as the sum-of-six well-mixed GHGs 
on a mass basis (no GWPs applied):
     100 tpy for sources in any of the 28 major emitting 
facility source categories listed under PSD, or
     250 tpy for any other stationary source.
    (2) The GHG emission source emits or has the potential to emit GHGs 
in amounts that equal or exceed 100,000 tpy CO2e basis.
    For determining whether a modification project at a major 
stationary source is subject to PSD review, both of the following 
conditions must be met:
    (1) The net GHG emissions increase resulting from the project, 
calculated as the sum-of-six well-mixed GHGs on a mass basis (no GWPs 
applied) equals or exceeds 0 tpy.
    (2) The net GHG emissions increase resulting from the project, 
calculated as the sum-of-six well-mixed GHGs on a

[[Page 31524]]

CO2e basis (GWPs applied) equals or exceeds 75,000 tpy 
CO2e.
    The purpose of the first condition in both of these determinations 
is to confirm whether the GHG emissions or emissions increase have 
exceeded, on a mass-basis, the statutory major source thresholds (where 
the source is not otherwise major) and mass-based statutory 
significance level for GHGs, which, as noted previously, is 0 tpy. See 
40 CFR 52.21(b)(23)(ii) and 51.166(b)(23)(ii).
    As an example of how the mass-based test would apply, consider a 
modification project that results in a 5 tpy increase of GHG emissions 
on a mass basis, associated with a high-GWP GHG gas (for example, 
SF6, with a GWP value of 23,900), but also results in a 100 
tpy reduction in CO2 emissions (assume no other 
contemporaneous increases or decreases of GHG). In this example, there 
would be a net decrease of GHG emissions on a mass basis (5 tpy-100 tpy 
= -95 tpy). Because there is no mass-based increase of GHG, this 
project does not trigger PSD, despite the fact that the net GWP-
adjusted emissions increase of SF6 in this example would 
equal 119,500 tpy of CO2e and the project would thus exceed 
75,000 tpy CO2e.
b. Title V Permitting
    Under Step 2, ``anyway'' title V sources--that is, sources already 
subject to title V based on non-GHGs and that are covered under Step 1 
previously--will continue to be subject to title V. In addition, GHG 
emission sources that equal or exceed the 100,000 tpy CO2e 
threshold will be required to obtain a title V permit if they do not 
already have one. It is important to note that the requirement to 
obtain a title V permit will not, by itself, result in the triggering 
of additional substantive requirements for control of GHG. Rather, 
these new title V permits will simply incorporate whatever applicable 
CAA requirements, if any, apply to the source being permitted. Both of 
the following conditions need to be met in order for title V to apply 
under Step 2 to a GHG emission source:
    (1) An existing or newly constructed source emits or has the 
potential to emit GHGs in amounts that equal or exceed 100 tpy 
calculated as the sum of the six well-mixed GHGs on a mass basis (no 
GWPs applied).
    (2) An existing or newly constructed source emits or has the 
potential to emit GHGs in amounts that equal or exceed 100,000 tpy 
calculated as the sum of the six well-mixed GHGs on a CO2e 
basis (GWPs applied).
3. What about Step 3?
    In this rule, EPA establishes an enforceable commitment to complete 
another rulemaking no later than July 1, 2012, in which we will propose 
or solicit comment on a Step 3 of the phase-in and may also consider 
other approaches that may result in the permanent exclusion of a 
category of sources from PSD or title V requirements, under the Chevron 
framework, taking account of the ``absurd results'' doctrine.
    Consistent with our phase-in approach, it is important for us to 
consider whether, at some point during the implementation of Step 2, it 
will become possible to administer GHG permitting programs for 
additional sources. For example, if EPA is able to promulgate measures 
that streamline programs to at least some extent, if permitting 
authorities increase their resources, or if implementation experience 
and more seasoned staff results in more effective use of scarce 
permitting resources, then we expect that we will be able to phase in 
the application of PSD and title V to more sources by establishing Step 
3. We do not have enough information now to establish a final Step 3, 
particularly because there will be significant transition occurring in 
the GHG permitting programs during Steps 1 and 2. However, we believe 
that it will be possible to develop a record on which to base Step 3 
sometime soon after we begin to implement Step 2.
    Therefore, we plan to propose a rule in which we solicit comment on 
or propose lower thresholds for PSD and title V applicability, and we 
establish an enforceable commitment to finalize a rule in which we 
address those matters by July 1, 2012. In order to provide a year for 
permitting authorities and sources to prepare for any additional GHG 
permitting action in Step 3, we will establish that Step 3 would take 
effect on July 1, 2013. We also commit to explore, between now and the 
Step 3 proposal, a wide range of streamlining options. In the proposal, 
we will take comment on streamlining approaches we think may be viable 
(except to the extent we will have already issued guidance documents 
concerning streamlining approaches), and we will address those options 
in the final rule.
    In addition, as part of the Step 3 action, we may solicit comment 
on a permanent exclusion of certain sources from PSD, title V or both, 
based on an ``absurd results'' rationale. For example, we may make a 
final determination that under the ``absurd results'' doctrine, PSD 
and/or title V do not apply to a set of GHG sources that, although 
above the statutory thresholds for those programs, are too small and 
relatively inconsequential in terms of GHG contribution. Another type 
of such exclusion for the title V program could be for sources that 
would otherwise be required to obtain an ``empty permit,'' that is, for 
example, one that would not contain any applicable requirements because 
there are none that apply to the source. If we promulgate a permanent 
exclusion, we may conclude that by that time, we will have brought into 
the PSD and title V programs the full set of sources that would be 
consistent with congressional intent (or, if congressional intent on 
that point is unclear, with a reasonable policy consistent with 
statutory requirements) and, under those circumstances, we would find 
that such a rule brings the tailoring process to a close. The 
application of the ``absurd results'' rationale for a permanent 
exclusion is discussed in more detail in section V.B, later in this 
preamble.
4. What about the proposed 6-year exclusion for smaller sources?
    The tailoring proposal contemplated at least a 6-year exclusion 
from permitting for small sources. This proposed exclusion was based on 
the overwhelming numbers of permitting actions at small sources and the 
need for time for permitting authorities to secure resources, hire and 
train staff, and gain experience with GHG permitting for new types of 
sources and technologies. It was also based on the time needed for EPA 
to develop, and for states to adopt, streamlining measures to reduce 
the permitting burden (e.g., concerning PTE, presumptive BACT, or 
general permits). We therefore proposed such an exclusion, and proposed 
that it would last 6 years--5 years to complete a required study 
evaluating permitting burden and assessing the effect of streamlining 
measures or techniques in reducing this burden, plus an additional year 
to complete a final rulemaking that would phase in additional sources 
as appropriate based on the study.
    We are finalizing the 6-year exclusion, and for reasons described 
later, are establishing that in no event will sources below 50,000 tpy 
CO2e be subject to PSD or title V permitting during the 6-
year period, nor will modifications be subject to PSD unless they 
increase emissions by 50,000 tpy CO2e or more. The exclusion 
will last until we take the action described later to address smaller 
sources, which is required by April 30, 2016. The exclusion provides 
certainty that, before this date, EPA will not act to cover

[[Page 31525]]

sources and modifications below these thresholds, including during the 
required Step 3 rulemaking that will occur in 2012. In effect, this 
means that Step 3 will establish a major source threshold and 
significance level no lower than 50,000 tpy CO2e. This does 
not necessarily mean we will cover sources below this level on April 
30, 2016. It simply means that the provision we are adopting would 
assure that EPA does not cover such sources any sooner than that.
5. When and how will EPA take further action on smaller sources?
    As we proposed, we are establishing an enforceable commitment to 
act within 5 years to complete a study projecting the administrative 
burdens that remain for small sources after permitting authorities have 
had time to secure resources, hire and train staff, and gain experience 
with GHG permitting for new types of sources and technologies, and 
after EPA has had time to develop (and states have had time to adopt) 
streamlining measures to reduce the permitting burden for such sources. 
We will use the results of this study to serve as the basis for an 
additional rulemaking that would take further action to address small 
sources. Similar to the enforceable commitment to act on Step 3, we are 
making an enforceable commitment to complete this rulemaking by April 
30, 2016.
    We cannot predict at this time what form that final action will 
take. It could function as a Step 4, bringing in additional sources 
based on, for example, streamlining actions, increased permitting 
authority resources, and experienced and more efficient permitting 
staff; and it could further indicate that we intend to follow-up with a 
Step 5 to bring in more sources. Alternatively, it could also function 
as a final step excluding certain sources permanently based on our 
application of the Chevron framework, taking account of the ``absurd 
results'' doctrine, and subjecting the remaining sources to permitting. 
However, whatever final action we take would explain any necessary 
changes to the Step 3 thresholds and would supersede the 6-year 
exclusion for sources and modifications below 50,000 tpy 
CO2e.

C. How do state, local and tribal area programs adopt the final GHG 
applicability thresholds?

    We are finalizing our proposed approach to change the definition of 
``major stationary source'' in the PSD implementing regulations, and 
the ``major source'' definition in the title V implementing regulations 
to tailor the application of these permitting programs to GHG 
emissions. We are also finalizing a significance level for GHG 
emissions for purposes of defining a major modification under the PSD 
program, and add an exclusion from PSD and title V permitting for GHG 
emissions, until we complete a rulemaking required by April 30, 2016, 
for any sources that are not already subject to PSD and title V 
permitting and that emit less than 50,000 tpy of CO2e.
    As explained earlier, we are adopting thresholds that phase in the 
applicability of GHG permitting over a specified time period. In 
adopting regulatory changes to implement these thresholds, we follow an 
approach that is substantively the same as the approach proposed, but 
takes a different form for purposes of revisions to our PSD and title V 
regulations. Specifically, in this final rule, for our regulations, in 
conjunction with the definitions of ``major stationary source'' and 
``major modification'' (for PSD) and ``major source'' (for title V), we 
are adopting a definition of the term ``subject to regulation.'' 
Moreover, we are defining this term so that GHG emissions from sources 
above the threshold are treated as subject to regulation, and therefore 
the sources that emit them are subject to PSD and title V. We are not 
finalizing the approach we proposed, which was to revise the numerical 
thresholds in the definitions so that GHG sources would have a higher 
threshold. Although we are defining the term ``subject to regulation,'' 
we recognize that from a substantive standpoint, our tailoring approach 
entails interpreting the definitions of ``major emitting facility,'' 
``major modification,'' and ``major source'' to phase in the 
applicability of PSD and title V, as applicable, to GHG sources, and it 
makes no difference whether we interpret those definitions through a 
definition of the term ``subject to regulation,'' revising the 
numerical thresholds, or revising other terms in those definitions.
    We are adopting definitions of the term ``subject to regulation'' 
to implement the tailoring approach because that will facilitate rapid 
implementation of the final rules by states. Under this approach, 
states may not need to undertake a regulatory or legislative action 
before implementing the final rule. These states would be able to 
establish their interpretations of the term ``subject to regulation'' 
used in existing state rules before January 2, 2011, which is the date 
that the LDVR and permitting requirements would take effect, and 
thereby exempt sources below the threshold from PSD and title V as a 
matter of both federal and state law. We are also codifying in this 
definition EPA interpretations discussed in our recent action 
``Reconsideration of Interpretation of Regulations that Determine 
Pollutants Covered by Clean Air Act Permitting Programs'' (75 FR 17704) 
to provide a complete picture of the meaning of this phrase as it 
applies to all air pollutants.
    Because we are finalizing the rule in a manner that will allow most 
states to rapidly implement the final rule, and because our recent 
action on the Interpretive Memo allowed for a longer transition time 
than we anticipated at proposal, we are delaying final action on our 
proposal to issue limited approvals for SIP-approved PSD programs and 
part 70 operating permit programs.\13\ Instead, we are requesting that 
states submit information to the appropriate EPA Regional Administrator 
by August 2, 2010 so that we may determine whether it is still 
necessary to finalize any of our proposed limited approvals for any 
SIP-approved PSD and part 70 title V state programs. In that letter, 
states should explain whether they will apply the meaning of the term 
``subject to regulation'' established by EPA in this action in 
implementing both their PSD and part 70 title V permitting programs, 
and if so, whether the state intends to do so without undertaking a 
regulatory or legislative process. If a state must revise its statutes 
or regulations to implement this rule, we ask that it provide an 
estimate of the time to adopt final rules in its letter to the Regional 
Administrator. If a state chooses not to apply the approach reflected 
in this rule, the letter should address whether the state has 
alternative authority to implement the final rule's tailoring approach 
or some other approach that is at least as stringent, but which also 
addresses the expected shortfalls in personnel and funding that would 
exist if the state carried out permitting at thresholds lower than 
those in the final rules. For any state that is unable or unwilling to 
apply the permitting thresholds in the final rules, and otherwise is 
unable to demonstrate adequate personnel and funding, or alternate 
authority to permit GHG emissions sources consistent with the final 
rules, EPA will move forward with finalizing a limited approval of the 
state's permitting program. By the same token, if we do not receive a 
letter from

[[Page 31526]]

a state in response to this request by August 2, 2010, we will be 
obliged to move forward with finalizing a narrowing of our approval of 
the existing SIP or title V program.
---------------------------------------------------------------------------

    \13\ In the alternative, we also proposed to use our 110(k)(6) 
error correction authority to revise SIP-approved PSD programs.
---------------------------------------------------------------------------

    We also ask any state that currently lacks authority to issue PSD 
or title V permits to any GHG emissions sources to notify the EPA 
Regional Administrator by letter as to whether the state intends to 
undertake rulemaking to revise its rules consistent with these 
applicability thresholds. For any state that lacks the ability to issue 
PSD or title V permits for GHG emissions sources consistent with the 
final rule, we intend to undertake a separate action to call for 
revisions to these programs. We also intend to move quickly to impose a 
Federal Implementation Plan (FIP) for PSD through 40 CFR 52.21, and use 
our federal title V authority to ensure that GHG sources will be 
permitted consistent with the final rules. Our request for information 
from states is discussed further in section V.C.

D. How do you treat GHGs for purposes of title V permit fees?

    We are not amending the title V regulations for fees at this time, 
including any of the provisions specifying the presumptive minimum fee. 
We are also not, at this time, calling for each state, local or tribal 
program to submit new fee adequacy demonstrations as a result of 
increased GHG permitting workload during Steps 1 and 2. However, as 
described in section VI.D the statutory and regulatory requirement to 
collect fees sufficient to cover all reasonable (direct and indirect) 
costs required to develop and administer title V programs still 
applies. Therefore, we are recommending that each program review its 
resource needs for GHG-emitting sources and determine if the existing 
fee approaches will be adequate. If those approaches will not be 
adequate, we suggest that state, local and tribal agencies should be 
proactive in raising fees to cover the direct and indirect costs of the 
program or develop other alternative approaches to meet the shortfall. 
We will closely monitor approved title V programs during implementation 
of the first two steps of the Tailoring Rule to ensure that the added 
workload from incorporating GHGs into the permit program does not 
result in fee shortfalls that imperil operating permit program 
implementation and enforcement. In developing alternative approaches, 
we note the value of approaches that do not require a per-ton fee for 
GHG and therefore do not require a GHG inventory to develop. Finally, 
we offer to work with permitting authorities that request our 
assistance with developing fee approaches.

E. Other Actions and Issues

    This section describes other actions we intend to take in the 
future related to GHG permitting in addition to the actions that we are 
promulgating with this final rule. This section also responds to 
commenters' suggestions that we undertake certain additional actions in 
this rule, which we decline to do.
1. Timing for Permit Streamlining Techniques
    As described at proposal, we intend to develop a series of 
streamlining approaches as an integral part of our phase-in approach. 
The approaches we described at proposal included: (1) Defining PTE for 
various source categories, (2) establishing emission limits for various 
source categories that constitute presumptive BACT, (3) establishing 
procedures for use of general permits and permits-by-rule, (4) 
establishing procedures for electronic permitting, and (5) applying 
lean techniques to establish more efficient permitting processes. Taken 
as a whole, these techniques have the potential to obviate the 
applicability of PSD and title V requirements for some GHG-emitting 
sources; promote more efficient treatment of GHG-emitting sources that 
will already be subject to PSD and title V; and allow the expeditious 
expansion of PSD and title V applicability to more GHG-emitting sources 
while protecting those sources and the permitting authorities from 
undue expenses.
    As a result, we fully intend to move forward expeditiously with 
developing streamlining approaches. However, for reasons discussed in 
section V.E, we do not expect to develop and implement any of these 
approaches before Step 2 begins. Moreover, we generally expect that 
each of the first three--which are the most far-reaching--will take 
several years to implement because we will need to undertake notice and 
comment rulemaking to develop them, and then the permitting authorities 
will need to adopt them through the appropriate state or local 
processes. We commit to explore a wide range of possible approaches 
before the Step 3 rulemaking, and, in that rulemaking, to propose those 
that we think may be viable once we have had time to gather and review 
key supporting data, and once the states and we have key implementation 
experience that can inform our thinking. Because the streamlining 
approaches generally carry uncertainty--as demonstrated by comments we 
received raising legal and policy concerns, as discussed later, that we 
will have to address--we cannot commit with this action to adopt any 
streamlining actions in particular, nor to adopting them on any 
particular schedule. However, we intend to pursue streamlining options 
as expeditiously as possible, beginning immediately and proceeding 
throughout the phase-in period, and we encourage permitting authorities 
to do the same.
2. Guidance for BACT Determinations
    Through this final rule we are not amending our regulations or 
issuing guidance on BACT for GHGs. As described in our proposal, we 
recognize the need to develop and issue technical and policy guidance 
for permitting of GHGs, and we plan to accomplish it through a separate 
effort that will involve stakeholder input. This effort is already 
underway; in addition to comments EPA received on the proposed 
Tailoring Rule related to GHG BACT guidance and information needs, EPA 
received a suite of recommendations from the Clean Air Act Advisory 
Committee (CAAAC) to which EPA is actively responding. This includes 
technical guidance and database tools that EPA anticipates issuing by 
June 2010, and policy guidance that will be issued by the end of 2010. 
Thus, this important information will be available to support 
permitting agencies in their BACT determinations at the time that the 
GHGs become a regulated NSR pollutant, once the LDVR takes effect in 
January 2011. EPA is confident that these measures will help support a 
smooth transition to permitting emissions of GHGs.
3. Requests for Higher Category-Specific Thresholds and Exemptions From 
Applicability
    EPA has decided not to provide exemptions from applicability 
determinations (major source and major modification) under title V and 
PSD for certain GHG emission sources, emission activities, or types of 
emissions at this time. Commenters requested several applicability 
exemptions with respect to GHGs from, for example, agricultural 
sources, residential sources, small businesses, energy-intensive 
industrial processes (e.g., aluminum, steel, cement, glass, and pulp 
and paper manufacturers), lime production, semiconductor production, 
poultry production, solid waste landfills, biomass combustion/biogenic 
emissions, fugitive emissions, and pollution control projects. For 
reasons explained in section V.E, we have

[[Page 31527]]

decided to address the need for tailoring through a uniform threshold-
based approach, rather than through a collection of various specific 
exclusions.
4. Transitional Issues Including Requests for Grandfathering
    For reasons explained in section V.E, EPA has determined that 
transitional issues for pending applications and permitted sources are 
adequately addressed by existing requirements and the amount of lead 
time provided before permitting requirements apply to GHGs under this 
rule and the March 29, 2010 final action regarding the Interpretive 
memo. This rule does not contain any additional exemptions or 
grandfathering provisions addressing the transition to PSD and title V 
permitting for GHGs.
    We are not promulgating an exemption for PSD permit applications 
that are pending when Step 1 of the permitting phase-in begins for 
those sources that would otherwise need to obtain a PSD permit based on 
emissions of pollutants other than GHGs. Any PSD permits issued to such 
Step 1 sources on or after January 2, 2011 will need to address GHGs. 
This action makes no change to the position we expressed on this issue 
on April 2, 2010.
    Final PSD permits issued before January 2, 2011 need not be 
reopened or amended to incorporate requirements for GHGs that take 
effect after the permit is issued. A source that is authorized to 
construct under a PSD permit but has not yet begun actual construction 
on January 2, 2011 may begin actual construction after that date 
without having to amend the previously-issued PSD permit to incorporate 
GHG requirements, provided the permit has not expired.
    Sources that are not subject to PSD permitting requirements until 
Step 2 need not obtain a PSD permit addressing GHGs in order to 
continue any actual construction that begins before July 1, 2011, when 
such a source was not a major stationary source required to obtain a 
PSD permit. However, Step 2 sources that begin actual construction in 
Step 2 may do so only after obtaining a PSD permit.
    The title V permitting regulations already include a robust set of 
provisions to address the incorporation of new applicable requirements 
and other transitional considerations. A title V source applying for 
the first time must submit its permit application within 12 months 
after the source becomes subject to the operating permit program or an 
earlier time at the discretion of the permitting authority. Where a 
source is required to obtain a PSD permit, the source must apply for a 
title V permit or permit revision within 12 months of commencing 
operation or on or before such earlier date as the permitting authority 
may establish. Where additional applicable requirements become 
applicable to a source after it submits its permit application, but 
prior to release of a draft permit, the source is obligated to 
supplement its application. Permitting authorities may also ask for 
additional information during the processing of an application. In 
addition, where a source that already has a title V permit becomes 
subject to additional applicable requirements, the permitting authority 
is required to reopen the permit to add those applicable requirements 
if the permit term has 3 or more years remaining and the applicable 
requirements will be in effect prior to the date the permit is due to 
expire.

V. What Is the Legal and Policy Rationale for the Final Actions?

    In this section, we describe the legal and policy rationale for our 
action, including our rationale for the following: (1) Our approach to 
calculating GHG emissions for PSD and title V applicability purposes, 
(2) our approach to establishing the thresholds and timing of PSD and 
title V applicability to GHG emissions sources; (3) how state, local, 
and tribal area programs adopt the final GHG applicability thresholds; 
(4) treatment of GHGs for title V permit fees; (5) future activities, 
including streamlining actions. We present the rationale description in 
the following five subsections, corresponding to the basic presentation 
of the approach in section IV.

A. Rationale for Our Approach to Calculating GHG Emissions for PSD and 
Title V Applicability Purposes

1. Grouping of GHGs Into a Single Pollutant
    In this section, we explain our treatment of the air pollutant at 
issue for purposes of PSD and title V, such that sources that emit that 
pollutant in the requisite quantities become subject to PSD and/or 
title V requirements. We explain our rationale for treating the GHG air 
pollutant as a combined group of six GHGs instead of six separate air 
pollutants defined by each individual GHG, and our rationale for 
including all six of the GHGs in that group. We also define the GHG 
metric to use for comparison to the applicability thresholds.
    We proposed to identify the air pollutant as the aggregate group of 
the six GHGs that comprise the GHG pollutant, and to use a GHG metric 
for the applicability thresholds based on CO2e. The summed 
CO2e emissions would then be compared to the applicable 
permitting threshold to determine whether the source is subject to PSD 
and title V requirements. Historically, the PSD and title V regulatory 
provisions do not, in the first instance, define the ``air pollutant'' 
to which they apply, but rather rely for the definition of the 
pollutant on a cross-reference to the regulatory provision under 
another part of the Act that establishes the emission standards or 
limits for that pollutant that in turn causes the pollutant to be 
subject to regulation under PSD and title V permitting. As an example, 
the pollutant ``total reduced sulfur'' (TRS) is a pollutant comprised 
of the sum of multiple compounds that was originally defined under the 
NSPS, subpart BB, Standards of Performance for Kraft Pulp Mills, which 
then caused it to be subject to regulation under the PSD program. The 
actual compounds that define the pollutant TRS are identified in the 
NSPS. The PSD program regulations did not introduce its own independent 
definition of TRS, but instead relied on the definition as contained in 
the Kraft Pulp Mills NSPS.
    However, at the time of our proposal, the endangerment and cause or 
contribute findings had not been completed and the LDVR for GHGs had 
not been finalized. Thus, there was no final agency action defining the 
``air pollutant'' consisting of GHGs to be considered ``subject to 
regulation.'' Absent a definition of ``greenhouse gases'' under another 
regulatory provision that we could cross-reference, we proposed to 
define ``greenhouse gases'' for permitting purposes as ``the single air 
pollutant that is comprised of the group of six GHGs, as proposed in 
the [CAA] section 202(a) endangerment and contribution findings.'' 74 
FR 55329, col. 1. The six well-mixed GHGs identified in the proposed 
contribution finding were: CO2, CH4, 
N2O, SF6, HFCs, and PFCs.
    In the proposal, we further recognized that the LDVR for GHGs, as 
it was proposed, would result in reductions of only four of the gases, 
not all six, because only four are emitted by vehicles. However, we 
concluded that if the LDVR were finalized as proposed, then the air 
pollutant for purposes of PSD and title V applicability would be a 
single air pollutant that is the aggregate mix of the group of six GHGs 
because--

[t]hese six GHGs as a class comprise the air pollutant that is the 
subject of the

[[Page 31528]]

endangerment finding and companion contribution finding and 
constitute the air pollutant that is regulated by the light-duty 
vehicle rule through measures that address the components of that 
air pollutant that are emitted from the mobile sources. Thus, 
although the CAA section 202(a) proposal establishes controls only 
with respect to four GHGs, as a legal matter, the proposal covers 
the entire set of GHGs that as a class are the single ``air 
pollutant'' in the proposed endangerment and contribution findings.

74 FR 55329 col. 1.

    We also solicited comment on whether we should identify the GHG 
metric in a different way, such as addressing each GHG constituent 
compound individually or including (whether individually or as a group) 
only those four GHG constituent compounds for which reductions would 
occur through the emission standards or limits proposed in the LDVR.
    A minority of the comments on our proposal addressed this issue. 
Some commenters supported combining the individual GHGs as one 
pollutant for purposes of determining permitting applicability, and 
stated that it is not uncommon for EPA to recognize ``collective'' air 
pollutants comprised of many individual compounds based upon shared 
threats to health and welfare, including such EPA-created group 
pollutants as sulfur oxides, nitrogen oxides, volatile organic 
compounds (VOCs), and particulate matter (PM).
    On the other hand, a significant number of commenters also raised 
concerns about grouping the individual GHGs into one metric. Some of 
these commenters argued that grouping GHGs is not appropriate because 
GHGs are not like other air pollutants that are comprised of numerous 
substances of concern (e.g., VOCs and PM), individual GHGs do not 
interact or combine to create a pollutant of concern, and EPA has not 
established a ``GHG'' NAAQS that supports the definition of the 
pollutant as a group. Some were concerned that regulating the GHGs as a 
group would increase the likelihood that a source will trigger 
permitting requirements, adding that this is unnecessary and would 
conflict with the ``absurd results'' and ``administrative necessity'' 
doctrines because it would lead to larger numbers of sources becoming 
subject to permitting. Some commenters opposing grouping suggested that 
we should explore regulating each of the GHG pollutants on an 
individual mass basis rather than collectively because in their view, 
it is reasonable and feasible to regulate and control emissions of each 
of the listed pollutants, other than CO2, at the 100/250 tpy 
thresholds, or less if deemed necessary, in accordance with the 
established mechanisms of the Act and doing so would lead to a better 
environmental result. Finally, some commenters argued that 
disaggregating the pollutants would also allow for more appropriate 
technology review.
    After considering these comments, and taking into account other 
related actions that have occurred since proposal, we have determined 
that PSD and title V permitting program requirements will apply, as 
proposed, to the ``single air pollutant that is comprised of the group 
of six GHGs.'' 74 FR 55329, col. 1. We believe that this approach is 
both compelled by the statute and reflects the preferable policy 
approach.
    As more fully discussed elsewhere in this rulemaking, the PSD 
requirements apply to a ``major emitting facility'' that undertakes 
construction or ``modification.'' CAA sections 165(a), 169 (2)(C). The 
term ``major emitting facility'' is defined as, in general, a source 
that emits 100 or 250 tons of ``any air pollutant,'' CAA section 
169(1), and, similarly, the term ``modification'' is defined as a 
physical or operational change that results in the increased or new 
emissions of ``any air pollutant.'' CAA sections 169(2)(C), 111(a)(4). 
Through regulation, we have interpreted the term ``any air pollutant,'' 
as found in both the terms ``major emitting facility'' and 
``modification,'' more narrowly to mean any ``regulated NSR 
pollutant,'' and we further define this term to include any pollutant 
that is ``subject to regulation under the Act.'' 40 CFR 
52.21(b)(50)(iv), 52.21.(b)(2).\14\
---------------------------------------------------------------------------

    \14\ By the same token, CAA section 165(a)(4) requires that a 
source subject to PSD impose best available control technology for 
``each pollutant subject to regulation under this chapter'' that the 
source emits.
---------------------------------------------------------------------------

    Similarly, as discussed elsewhere, the title V requirements apply 
to a ``major source,'' which is defined, in general, as any source that 
emits at least 100 tpy of ``any air pollutant.'' CAA sections 502(a), 
501(2)(B), 302(j). EPA has interpreted the term ``any air pollutant'' 
narrowly so that applies only with respect to air pollutants that are 
subject to regulation under the CAA. Memorandum from Lydia N. Wegman, 
Deputy Director, Office of Air Quality Planning and Standards, U.S. 
EPA, ``Definition of Regulated Air Pollutant for Purposes of Title V'' 
(Apr. 26, 1993).
    Based on these provisions, the key issue for present purposes in 
determining whether a source is subject to PSD (because it qualifies as 
a major emitting facility that undertakes construction or modification) 
or title V is whether the pollutant or pollutants that the source emits 
comprise the ``air pollutant'' that is ``subject to regulation'' under 
the Act.
    The phrase ``subject to regulation under the Act,'' by its terms, 
identifies the air pollutant that is subject to PSD and title V as the 
same air pollutant that is identified in the regulatory action under 
another provision of the Act. The term is a simple cross-reference. It 
carries no implication that EPA, in identifying the pollutant to which 
PSD or title V apply, may redefine the pollutant that is regulated 
elsewhere in the Act. Whatever the pollutant is that is regulated 
elsewhere, it is that pollutant to which PSD and title V apply.
    Since the time of our proposal, we have finalized both the 
contribution finding and the LDVR for GHGs. The final LDVR for GHGs 
specifies, in the rule's applicability provisions, the air pollutant 
subject to control as the aggregate group of the six GHGs, including 
CO2, CH4, N2O, SF6, HFCs, 
and PFCs.\15\ Because it is this pollutant that is regulated under the 
LDVR, it is this pollutant to which PSD and title V apply. 
Specifically, the applicability provision in the LDVR provides a clear 
reference to the definition of the single pollutant comprised of the 
aggregate group of the six well-mixed GHGs, which makes clear PSD and 
title V applicability depends on the same sum-of-six GHG construct. We 
must follow this construct of the aggregate group of the six gases and 
do not have discretion to interpret the GHG ``air pollutant'' 
differently for the purposes of PSD or title V.
---------------------------------------------------------------------------

    \15\ The applicability provision of the LDVR is found in 40 CFR 
86.1818-12(a).
---------------------------------------------------------------------------

    This construct of the pollutant as the aggregate group of the six 
gases is also consistent with the definition of the air pollutant in 
the final contribution finding for GHGs [see 74 FR 66496, 66499, 66536-
7 (December 15, 2009)]. There, the Administrator defined the air 
pollutant as the ``aggregate group of the same six * * * greenhouse 
gases,'' (74 FR 66536), and these well-mixed GHGs are defined to 
include CO2, CH4, N2O, SF6, 
HFCs, and PFCs.
    Moreover, even if we had discretion to identify the GHGs air 
pollutant differently in the permitting programs than in the LDVR, we 
believe it is reasonable to identify the GHGs air pollutant through the 
sum-of-six construct for the same reasons why we adopted that 
definition in the contribution finding and for additional reasons noted 
below specific to the permit programs. The term ``air

[[Page 31529]]

pollutant'' is defined under CAA section 302(g) as ``any air pollution 
agent or combination of such agents, including any physical, chemical, 
biological, radioactive * * * substance or matter which is emitted into 
or otherwise enters the ambient air.'' Under this definition, EPA has 
broad discretion to identify an air pollutant, including, as 
appropriate, treating a combination of air pollutant agents as a single 
air pollutant. Here, we think that the six well-mixed gases are 
appropriately combined into a single air pollutant because, as noted in 
the contribution findings, they share several important attributes: 
Each of the six gases:
     Is directly emitted (and is not formed by secondary 
processes in the atmosphere);
     Is long-lived in the atmosphere after it is emitted;
     Is sufficiently long-lived that it becomes ``well-mixed,'' 
which means that its concentration is essentially uniform in the 
atmosphere (as opposed to having significant local/regional variation); 
and
     Has well understood atmospheric properties (e.g., 
radiative forcing).

See 74 FR 66516-66518.

    In addition, treating the six GHGs as a single air pollutant is 
consistent with the actions of international scientific bodies. For 
example, the Intergovernmental Panel on Climate Change (IPCC) considers 
in various reports how the six gases drive human-induced climate change 
and how that affects health, society, and the environment. Similarly, 
the United Nations Framework Convention on Climate Change (UNFCCC) 
requires reporting of these six gases and the commitments under the 
UNFCCC and Kyoto Protocol are based on the combined emissions of these 
six gases. Finally, as discussed later, it is standard practice to 
compute the ``CO2 equivalency'' of aggregate emissions using 
GWP.
    We disagree with commenters who argued that grouping all six GHGs 
is not appropriate because GHGs are not like other air pollutants that 
are comprised of numerous substances of concern (e.g., VOCs and PM). 
First, as noted previously, we are following the approach to a single 
air pollutant comprised of the aggregate of the six GHGs initially 
adopted in the contribution finding and followed in the LDVR. Many of 
these same comments have already been addressed in the contribution 
finding and Response to Comment (RTC) document for that action, and 
those responses apply equally here.
    In addition to the reasons described in the endangerment and 
contribution findings, there are CAA permitting programmatic and policy 
advantages to using the sum-of-six construct for the GHG air pollutant 
for PSD and title V applicability purposes. We believe now, as we did 
at proposal, that the benefits in using the cumulative group of GHGs 
outweigh any implementation advantages to using an individual-GHG-based 
metric. The advantages to sum-of-six definition include that it may: 
(1) Allow significantly more flexibility to sources for designing and 
implementing control strategies that maximize reductions across 
multiple GHGs and would also likely align better with possible future 
regulations that allow for such flexibility; (2) more effectively 
support possible future offsets or trading mechanisms that involve 
different source categories and different compositions of GHG 
emissions; and (3) could better accommodate and harmonize with future 
regulations because it establishes one class of pollutants that 
includes individual components that may, in turn, become subject to 
specific emission standards under future regulatory efforts.
    We disagree with commenters who believe that aggregating the GHGs 
under one GHG metric for permitting applicability purposes would lead 
to an excessive amount of source permitting activity. This is because 
the phase-in approach addresses overwhelming permitting burdens 
associated with permitting of GHGs. It does so by designing our 
applicability thresholds to allow for a manageable amount of new 
permitting actions based on the emissions from sources using the sum-
of-six metric. If we based applicability on individual gases, 
(assuming, again, that we had authority to deviate from the definition 
of ``air pollutant'' as used in the LDVR), we would still need to 
determine what level of permitting is manageable and appropriate based 
on thresholds on an individual gas basis and would expect that the 
final rule would result in the same levels of remaining burden. 
Accordingly, unless the permitting program were being implemented at 
the statutory thresholds, the effect of a decision to aggregate or not 
aggregate would not reduce workload; rather, it would simply shift work 
from permitting facilities that trigger based on combined GHGs to those 
that trigger based on individual GHGs. Although we acknowledge that 
this may affect applicability for a particular source, we disagree with 
the comment that doing so would conflict with our conclusions based on 
the ``absurd results'' or ``administrative necessity'' doctrines. By 
using a consolidated and weighted measurement, we are able to direct 
the limited administrative resources to those new sources and 
modifications with the greatest impact on GHG emissions.
    We also believe that the additional flexibility resulting from the 
sum-of-six GHG metric will provide substantially more opportunities for 
sources to address emission increases of GHGs than they would have had 
under an individual gas based metric, and, thereby, possibly reduce 
their permitting burden through multi-gas mitigation strategies. We 
disagree with the comment that isolating BACT review on sources that 
emit a single GHG necessarily leads to better environmental results 
than it would for sources that undergo a combined review for all six 
gases. To the contrary, given that Congress built in considerations of 
energy, environmental, and economic impacts into the BACT requirement, 
we think that allowing consideration of those factors across six gases 
will likely result in decisions that more appropriately account for 
those impacts at the source.
2. Identifying Which GHGs Are Included in the Group
    As discussed previously, we proposed to include the combination of 
six well-mixed GHGs as the air pollutant that triggers PSD and title V 
applicability: CO2, CH4, N2O, 
SF6, HFCs, and PFCs. Some commenters supported including all 
six. They cite the proposed contribution findings that identify the 
pollutant through the sum-of-six construct, and they emphasize that 
EPA, in order to protect the public, has to control all the GHGs it has 
regulated and reduce the overall impact of the mix of six GHGs.
    However, a substantial number of commenters, mainly from industry 
sectors who also disagree with grouping the GHGs together, contend that 
only the constituent gases that are actually subject to controls under 
the LDVR should be included in determining applicability under the 
Tailoring Rule. Some of these commenters believe that only the three 
compounds (CO2, CH4, N2O) for which 
the LDVR contains emissions standards or caps should be considered in 
the GHG metric for permitting, while others would also add HFCs (which 
are included in a credit flexibility arrangement under the LDVR) for a 
total of four GHGs. These commenters argued that PSD is not triggered 
for all six GHGs by the LDVR because under the proposed PSD

[[Page 31530]]

interpretation in the Interpretive Memo, actual emission controls under 
the Act are required to trigger PSD obligations for a given pollutant. 
They also argue that including all six would conflict with EPA's 
rationale for the Tailoring Rule by leading to larger numbers of 
sources subject to permitting, thereby increasing the harm that EPA 
says it wants to avoid. They further assert that the EPA cannot 
exercise its discretion to widen the scope of PSD and title V 
applicability to six GHGs when it is relying on the judicial doctrines 
of ``absurd results'' and ``administrative necessity'' to narrow PSD 
and title V applicability. They explain that in their view, those 
doctrines apply only when EPA has taken all steps possible to narrow 
the scope of PSD and title V and thereby avoid the administrative 
problems that force it to rely on those doctrines.
    There were a few comments on whether to include specific gases as 
part of the sum-of-six grouping. Several commenters representing 
sectors that have significant SF6 usage specifically argue 
that SF6 should not be included as a GHG, at least at this 
time, because there are no known SF6 controls, it is not 
clear how PTE would be calculated from such facilities, and EPA has not 
addressed the economic burden that regulation of these facilities would 
create. A solid waste industry commenter asserts that the Tailoring 
Rule should confirm that CH4 and N2O will not be 
regulated under PSD or title V because these pollutants are only 
emitted in miniscule amounts from automobiles.
    We disagree with commenters who suggest that because the LDVR 
actually reduces only four of the six GHGs, EPA may apply PSD and title 
V to only those four GHGs. It is true that the LDVR standard for the 
single air pollutant that is comprised of the aggregate of six GHGs 
consists of individual standards for only four particular constituents 
of the single air pollutant--which are emissions limits or caps for 
three GHGs (CO2, CH4, and N2O) and an 
emission crediting option for one GHG (HFCs)--but this does not dictate 
that only those four compounds are subject to regulation for permitting 
purposes. Although the LDVR results in reductions only with respect to 
four specific GHGs, as a legal matter the LDVR standard covers the 
entire set of GHGs that as a class are the single ``air pollutant'' in 
the contribution finding. Similar to our rationale for addressing the 
group of six GHGs as one pollutant for PSD and title V applicability 
purposes, we must adhere to the definition of applicability, cited 
previously, in the final LDVR for GHGs and include CO2, 
CH4, N2O, SF6, HFCs, and PFCs. We do 
not have discretion to select only a subset of these gases in defining 
our GHG threshold metric for the permitting applicability purposes. See 
LDVR, May 7, 2010, 75 FR 25398-99, section III.A.2.c. (discussing EPA's 
exercise of discretion under section 202(a) in setting emissions 
standards applicable to emission of the single air pollutant).
    For the same reasons, we disagree that this approach is 
inconsistent with the Agency's final action in ``EPA's Interpretation 
of Regulations that Determine Pollutants Covered by Federal Prevention 
of Significant Deterioration (PSD) Permit Program.'' While it is the 
case that only four constituent gases are reduced by the LDVR, the 
``air pollutant'' that is controlled, and thus ``subject to 
regulation,'' is the group of six, and it is this ``air pollutant'' to 
which PSD and title V apply.
    We also disagree with commenters who suggested that including all 
six GHGs in determining permitting applicability would conflict with 
our ``absurd results'' and ``administrative necessity'' rationale for 
the phase-in periods and applicability thresholds for GHGs. Even if we 
did have discretion to identify the air pollutant for PSD and title V 
purposes as consisting of only four of the six well-mixed GHGs, we do 
not believe that doing so would have any meaningful impact on the 
administrative burdens that are at the heart of our reliance on the 
``absurd results'' and ``administrative necessity'' doctrines. The 
number of additional permitting actions and amount of additional 
permitting burden resulting from including all six GHGs, rather than 
four, is minimal. This is because the administrative burden of GHG 
permitting is dominated by CO2 and CH4 emission 
sources. For example, with a major source threshold set at 100,000 tpy 
CO2e, the combined population of sources that would be major 
for N2O, HFCs, PFCs, and SF6 accounts for fewer 
than two percent of the GHG sources that would remain covered.
    For similar reasons, we disagree with commenters who specifically 
suggest SF6 emissions should not be included in the 
applicability metric for GHGs. As we have stated earlier in this 
section, our selection of the GHG metric is driven by the definition of 
the ``air pollutant'' as defined in the LDVR, and in consideration of 
the final GHG endangerment finding. SF6 is specifically 
included as one of the ``well-mixed greenhouse gases'' in the 
definition of air pollutant in the contribution finding, and is 
included in the definition of the air pollutant in the LDVR for which 
that rule is applicable. We do not believe we have the discretion to 
define the ``air pollutant'' differently for PSD and title V 
applicability purposes than the definition of the ``air pollutant'' 
that is regulated elsewhere. In any event, including SF6 
emissions based on the thresholds finalized in this rulemaking does not 
add an excessive administrative burden for permitting authorities. 
Based on our threshold evaluation study, we estimate that less than 40 
sources of SF6 nationwide would exceed the 100,000 tpy 
CO2e threshold. Furthermore, SF6 is a high GWP 
gas and, as discussed elsewhere, we have included a mass-based trigger 
for high GWP gases that will likely have the effect of further reducing 
this count.
    For the same reasons, we disagree with the commenters who suggest 
we include black carbon and other short-lived climate forcers to the 
list of GHGs, as well as commenters asking for an exclusion of 
CH4 and N2O. The definition of the air pollutant, 
as cited in the LDVR, includes CH4 and N2O and 
does not include black carbon or other short-lived gases.
3. Use of GWP vs. Mass-Based GHG Thresholds
    For the reasons discussed previously, we are determining permit 
program applicability based on the sum-of-six well-mixed gases that 
comprise the GHG air pollutant. This section discusses our use of both 
the CO2e metric and mass emissions of the GHGs for 
applicability purposes.
    Under our proposal, a source's emissions of all six GHGs would be 
combined into a single metric by multiplying the mass of each 
individual GHG (in tpy) by its GWP value, and summing these products to 
determine the total emissions of the GHG pollutant in tpy 
CO2e. We received comments on this aspect of the proposed 
metric. Several commenters explicitly support the use of GWP and the 
CO2e metric for GHG emissions. These commenters believe EPA 
has the authority to select an appropriate metric to measure GHGs in 
the PSD program, and policy considerations support the choice of GWP. 
Some of them note that GWP is a widely-used metric which employs 
internationally-recognized conversion factors to compare GHGs based 
upon their climate properties, and some add that states and local areas 
that have climate action plans for GHG reductions use CO2e. 
Some of these commenters believe this metric will ensure a

[[Page 31531]]

standard measure across all permitting agencies and will lead to a more 
effective system for permitting authorities and create more 
opportunities to reduce emissions over the full class of GHGs, rather 
than focusing on reducing individual GHGs.
    On the other hand, some commenters oppose the use of GWP and 
CO2e, believing that thresholds should be based on 
individual mass-based emissions for each GHG. Some of these commenters 
felt that EPA has no discretion to ignore the metric for regulation 
established by Congress for PSD in section 169 of the Act. Some 
commenters were also concerned that the use of CO2e will 
complicate the implementation of BACT because sources that trigger PSD 
will be required to install BACT for each regulated pollutant, not for 
CO2e. As a result, a source that exceeds the threshold 
primarily due to its CO2 emissions would be forced to 
install BACT for all other individual GHGs, regardless of how minor 
those other emissions may be. Finally, a commenter was concerned that 
use of GWP would complicate implementation because GWP values can 
sometimes change.
    In our proposal preamble discussion of GHG metric, EPA also raised 
the possibility of including a limitation in the metric to address the 
prospect (expected to occur only rarely) that high-GWP gases could be 
emitted in quantities less than statutory thresholds for PSD and title 
V but nevertheless exceed the proposed thresholds in terms of 
CO2e. Most commenters on this subject support a dual 
threshold under which a source would be subject to title V or PSD only 
if its GHG emissions exceeded both the statutory thresholds on an 
actual tonnage basis and the tailored thresholds on a CO2e 
basis. Commenters supporting this approach felt that it would be 
unlawful to apply PSD when GHGs are below the statutory thresholds, or 
when there is not a net emissions increase. Others added that the 
complexity of accounting for emissions according to both mass and GWP 
should be manageable and is not a reason to ignore the role of mass-
based emission rates in determining the applicability of PSD 
requirements. Additionally, one commenter observed that a dual 
threshold is consistent with phasing in the Tailoring Rule and is an 
effective way to address the current uncertainty surrounding how to 
measure high-GWP gases such as SF6. In contrast, a few 
commenters stated they do not support a dual threshold, primarily on 
the grounds that there is no benefit to the added complexity.
    After considering these comments, we have decided to adopt 
applicability thresholds in the final rule based on a CO2e 
metric for the sum-of-six well-mixed gases, and also to adopt an 
additional mass-based threshold for the sum-of-six gases as discussed 
in the proposal. First, as discussed in the previous section, we have 
explained why the appropriate pollutant for PSD purposes is the single 
pollutant GHG, which is composed of the six well-mixed gases. Regarding 
the CO2e metric, we continue to believe there are a number 
of advantages, as laid out in the proposal, to a CO2e 
measure that would not be available if we used only a mass-based 
metric. These include: (1) A CO2e metric, by incorporating 
the GWP values, best addresses the relevant environmental endpoint, 
which is radiative forcing of the GHGs emitted; (2) when combined with 
a sum-of-six gases approach, the CO2e metric best allows for 
consideration of their combined effects when sources emit any one or 
combination of the six well-mixed GHGs; (3) a cumulative 
CO2e metric is consistent with the metric used in the 
mandatory GHG reporting rule and other related rules and guidelines; 
and (4) a CO2e metric allows more flexibility for designing 
and implementing control strategies that maximize reductions across 
multiple GHGs. We recognize the tension between the mass-based metric 
in the statute and the CO2e-based metric we are adopting in 
this rule, but as discussed later, we will address this by also 
retaining the mass-based metric. Moreover, given our need to tailor our 
approach to covering sources of GHGs, we believe that the 
considerations driving our choice to also use a CO2e-based 
metric are appropriate for defining the phase-in and allow for 
permitting resources to be directed at those sources and modifications 
that have the greatest impact on radiative forcing of the GHGs emitted.
    We recognize the concern of commenters who stated that we cannot 
ignore the statutory thresholds based on the mass-based emissions of an 
air pollutant as described under CAA section 169(1). As we mentioned in 
the proposal, because both the PSD and title V statutory thresholds are 
expressed on a mass basis (i.e., tons of a pollutant with no weighting 
values applied) we were concerned from a legal standpoint that the 
metric proposed (CO2e) could have the effect of subjecting 
to PSD or title V requirements a source whose emissions fall below the 
statutory threshold limits on a strictly mass basis, but whose 
CO2e-based emissions exceed the CO2e thresholds 
we establish under the Tailoring Rule. As an example, in rare instances 
it is possible that a source may emit only a non-CO2 GHG in 
very small amounts, on a mass basis, but one that carries a very large 
GWP. In this case, it is possible that the source may emit the GHG in 
amounts that fall below the PSD and/or title V statutory applicability 
threshold (100 or 250 tpy, as applicable) on a mass basis, but exceed 
the 100,000 CO2e PSD and title V applicability thresholds 
for Step 2 finalized in this action. Under these circumstances, without 
a mass-based threshold, the source would trigger PSD and title V for 
its CO2e emissions even though its GHG mass emissions would 
not, in fact, exceed the statutory triggers.
    Upon review of the comments pertaining to this issue and further 
analysis of the legal and programmatic implications, we are adopting a 
two-part applicability process, for both major source applicability 
determinations for GHGs under PSD and title V and for determining if a 
net increase has occurred in PSD applicability determinations for 
modifications. As explained in the RTC document, we accomplish this 
two-step applicability approach by continuing to rely on the existing 
mass-based applicability provisions in the current regulations, and by 
including new regulatory provisions that add a definition of ``subject 
to regulation'' that in turn includes the phase-in thresholds. 
Similarly, for PSD modification reviews and associated netting 
analyses, the same two-step process must be used. Our summary in 
section IV.A described how we expect this provision to be implemented 
in practice.
    We acknowledge that the possibility of changing GWP values is a 
downside to the use of CO2e for the GHG metric, and we 
address this comment in the next section, where we discuss our plan to 
codify GWP values. By codifying GWP, any changes will be manageable, 
and, in our judgment, will not outweigh the benefits of a 
CO2e-based approach. We also acknowledge that a 
CO2e-based approach may appear to complicate the BACT review 
and implementation process. However, we disagree with the commenter's 
ultimate conclusion that BACT will be required for each constituent gas 
rather than for the regulated pollutant, which is defined as the 
combination of the six well-mixed GHGs. To the contrary, we believe 
that, in combination with the sum-of-six gases approach described 
above, the use of the CO2e metric will enable the 
implementation of flexible approaches to design and implement 
mitigation and control strategies that look across all six

[[Page 31532]]

of the constituent gases comprising the air pollutant (e.g., 
flexibility to account for the benefits of certain CH4 
control options, even though those options may increase 
CO2). Moreover, we believe that the CO2e metric 
is the best way to achieve this goal because it allows for tradeoffs 
among the constituent gases to be evaluated using a common currency.
4. Determining What GWP Values Are To Be Used
    At proposal, we proposed to link the calculation of CO2e 
for GHGs to GWP values in EPA's ``Inventory of U.S. Greenhouse Gas 
Emissions and Sinks'' (GHG Inventory). See, e.g., proposed 40 CFR 
51.166(b)(58). Numerous commenters expressed concerns about this 
proposal on various grounds, including the following:
     The EPA should follow the proper notice-and-comment 
procedures and the requirements of the Information Quality Act for the 
relevant technical underpinnings of the proposal. The EPA relies upon 
the GWPs of the IPCC without providing the supporting data for review, 
and it is inappropriate to use this as a basis for this rule without 
first making all the raw data available for public inspection and 
comment.
     The EPA cannot tie the definition of GWP to the GHG 
Inventory because it is a non-regulatory document that may be changed 
without notice-and-comment rulemaking. Before EPA uses a new GWP, that 
GWP must be subject to notice and comment to comply with the 
requirements of CAA section 307 and the Administrative Procedure Act 
(APA).
     An annual update of GWP would create a moving target for 
sources conducting applicability determinations and assessing 
compliance with minor NSR and PSD emission limits. The EPA needs to 
ensure that applicability and compliance with limits continue to be 
based on the GWP that existed when the determination was made or the 
limit was established.
     The EPA should freeze the GWP at the current values by 
incorporating those values into the regulation. The EPA could still 
revise the ``NSR'' GWP, but would have to revise the regulation to do 
so.
    Commenters added that it is important to ensure that all permitting 
agencies are using the same calculations for the determination of 
CO2e for GHGs.
    We agree with commenters who suggested we should codify, either in 
the Tailoring Rule or through reference to codified values in another 
rulemaking, the GWP values to be used in permitting analyses. We agree 
that this approach provides certainty as to which GWP values need to be 
used by permitting authorities and allows sources to plan appropriately 
for possible changes in the GWP values. As mentioned in the comments, 
recommended GWP values from IPCC can change over time. While this is 
infrequent--the last such changes were in 2007--when it occurs, there 
are generally significant lag times in universal adoption of new values 
because of inconsistencies that could be created in national 
inventories and emission reporting mechanisms. In a regulatory setting, 
such as in the permitting programs, this could potentially create 
significant implementation issues, such as when a GWP change occurs 
while a permit action is in progress.\16\ EPA also recognized similar 
potential implementation issues in developing its final mandatory GHG 
reporting rule, and codified in the regulatory text for that rule the 
GWP values to be used in reporting GHGs as part of that final 
rulemaking.
---------------------------------------------------------------------------

    \16\ We note that our approach does not entirely avoid the 
possibility that a GWP change can occur while a permit is in 
progress although it will ensure advance notice of such a change. In 
the event that we plan to propose a change to GWP values, we will 
work with permitting authorities as necessary to provide guidance to 
sources on transitional issues.
---------------------------------------------------------------------------

    For these reasons, we have decided to follow the approach in the 
mandatory GHG reporting rule and require that for PSD and title V 
permitting requirements, wherever emissions calculations are performed, 
that permitting authorities and sources use GWP values that are 
codified in EPA rules. We will establish the GWP values for PSD and 
title V rules based on a cross-reference to the values that are 
codified in the EPA's mandatory GHG reporting rule. 74 FR 56395, Table 
A-1 to subpart A of 40 CFR part 98--Global Warming Potentials. Any 
changes to Table A-1 of the mandatory GHG reporting rule regulatory 
text must go through an appropriate regulatory process. In this manner, 
the values used for the permitting programs will reflect the latest 
values adopted for usage by EPA after a regulatory process and will be 
consistent with those values used in the EPA's mandatory GHG reporting 
rule. Furthermore, the lead time for adopting changes to that rule will 
provide a transition time to address implementation concerns raised by 
commenters.
5. Use of Short Tons vs. Metric Tons
    We proposed that the GHG metric would be expressed in terms of 
English (or short) tons, rather than metric (or long) tons. A few 
commenters support using short tons for this purpose. Others prefer the 
use of metric tons, and most of them note that the mandatory GHG 
reporting rule is based on metric tons and believe that the Tailoring 
Rule should be consistent with that rule. These commenters believe that 
using different units in the two rules would be confusing and could 
result in sources that are not subject to the mandatory GHG reporting 
rule becoming subject to PSD. Some of the commenters add that various 
``cap and trade'' legislative proposals also quantify GHGs in metric 
tons. A few other commenters recommend that EPA harmonize the 
applicability thresholds established under the Tailoring Rule and the 
mandatory GHG reporting rule without expressing a preference for short 
or metric tons.
    We are finalizing our proposal to use short tons because short tons 
are the standard unit of measure for both the PSD and title V 
permitting programs and the basis for the threshold evaluation to 
support this rulemaking. Calculation inputs for PSD are typically 
prepared in English units (e.g., pounds of fuel, British thermal units 
(Btu), etc.) which is the common convention for all PSD analyses and 
the units of the statutory thresholds under the Act.
    It is true that the GHG reporting rule uses metric tons, but this 
does not create an inconsistency between permitting programs and the 
reporting rule because the two rules already use different 
applicability approaches. Although we originally proposed 25,000 tpy as 
the major source level for permitting programs, which was similar to 
the threshold in the reporting rule, we decided to adopt substantially 
higher thresholds in the final rule. Furthermore, even if the numbers 
were similar, the thresholds used for the reporting rule are based on 
actual emissions, while the PSD and title V programs thresholds are 
based on PTE. Therefore, we are less persuaded by arguments for 
consistency, and believe it is more important for ease of permit 
program implementation to ensure that GHG emissions calculations for 
PSD and title V will build on the same set of input variables used to 
develop short-ton based estimates for non-GHG pollutants. Thus, the use 
of short tons should actually facilitate the development of the GHG 
emission estimate. It would likely be more confusing to require a 
multi-pollutant PSD applicability analysis to present emissions 
information using different units for different pollutants, as would be 
the case if we required metric tons for GHG but continue to use short 
tons

[[Page 31533]]

for every other pollutant. Finally, we do not expect this choice to 
introduce additional complexity because the conversion between short 
tons and metric tons is a very simple calculation. Therefore, based on 
these considerations we are requiring that short tons be used as the 
basis for emission calculations used to meet PSD and title V permitting 
requirements.

B. Rationale for Thresholds and Timing for PSD and Title V 
Applicability to GHG Emissions Sources

    In this subsection, we describe our legal and policy rationale for 
our determinations concerning PSD and title V applicability to GHG 
emissions sources. This subsection includes: (1) An overview of our 
rationale; (2) data concerning costs to sources and administrative 
burdens to permitting authorities; (3) a review of the Chevron legal 
framework and the ``absurd results,'' ``administrative necessity,'' and 
``one-step-at-a-time'' doctrines, as well as a review of how those 
doctrines fit into the Chevron framework; (4) an overview of the 
relevant PSD and title V requirements and their legislative history; 
(5) our application of the ``absurd results'' doctrine for tailoring 
the PSD requirements; (6) our application of the ``absurd results'' 
doctrine for tailoring the title V requirements; (7) our plans to issue 
further rulemaking that will address the ``absurd results'' basis for 
both PSD and title V requirements; (8) our rationale for the phase-in 
schedule for applying PSD and title V to GHG sources; (9) our 
application of the ``administrative necessity'' basis for tailoring the 
PSD and title V requirements; and (10) our application of the ``one-
step-at-a-time'' basis for tailoring the PSD and title V requirements.
1. Overview
    Under the familiar Chevron two-step approach to construction of 
agency-administered statutes, the agency must first, at Chevron Step 1, 
determine whether Congress's intent in a particular provision on a 
specific question is clear; and if so, then the agency must follow that 
intent. If the intent of the provision is not clear, then the agency 
may, under Chevron Step 2, fashion a reasonable interpretation of the 
provision. The best indicator of congressional intent is the literal 
meaning of the provision and generally, according to the case law, if 
the literal meaning addresses the specific question, then the agency 
should follow the literal meaning.
    However, the courts have developed three doctrines relevant here 
that authorize departure from a literal application of statutory 
provisions. The first is the ``absurd results'' doctrine, which 
authorizes such a departure if the literal application would produce a 
result that is inconsistent with congressional intent, and particularly 
if it would undermine congressional intent. The judicial doctrine of 
``administrative necessity'' authorizes an agency to depart from 
statutory requirements if the agency can demonstrate that the statutory 
requirements, as written, are impossible to administer. The ``one-step-
at-a-time'' doctrine authorizes an agency, under certain circumstances, 
to implement a statutory requirement through a phased approach. Each of 
the three doctrines fits into the Chevron framework for statutory 
construction because each of the three is designed to effectuate 
congressional intent.
    To apply the statutory PSD and title V applicability thresholds 
literally to sources of GHG emissions would bring tens of thousands of 
small sources and modifications into the PSD program each year, and 
millions of small sources into the title V program. These extraordinary 
increases in the scope of the permitting programs would mean that the 
programs would become several hundred-fold larger than what Congress 
appeared to contemplate. Moreover, the great majority of additional 
sources brought into the PSD and title V programs would be small 
sources that Congress did not expect would need to undergo permitting 
and that, at the present time, in the absence of streamlined permit 
procedures, would face unduly high permitting costs. Further, again at 
the present time, in the absence of streamlined permit procedures the 
administrative strains would lead to multi-year backlogs in the 
issuance of PSD and title V permits, which would undermine the purposes 
of those programs. Sources of all types--whether they emit GHGs or 
not--would face long delays in receiving PSD permits, which Congress 
intended to allow construction or expansion. Similarly, sources would 
face long delays in receiving title V permits, which Congress intended 
to promote enforceability. For both programs, the addition of enormous 
numbers of additional sources would provide relatively little benefit 
compared to the costs to sources and the burdens to permitting 
authorities. In the case of PSD, the large number of small sources that 
would be subject to control constitute a relatively small part of the 
environmental problem. In the case of title V, a great many of the 
sources that would be newly subject to permit requirements would have 
``empty'' permits, that is, permits that do not include any applicable 
requirements, and that therefore serve relatively little purpose. For 
these reasons, the ``absurd results'' doctrine applies to avoid a 
literal application of the thresholds at this time. By the same token, 
the impossibility of administering the permit programs brings into play 
the ``administrative necessity'' doctrine. This doctrine also justifies 
not applying the PSD or title V applicability threshold provisions 
literally to GHG sources at this time.
    The situation presented here is exactly the kind that the ``absurd 
results,'' ``administrative necessity,'' and ``one-step-at-a-time'' 
doctrines have been developed to address. Separately and 
interdependently, they authorize EPA and the permitting authorities to 
tailor the PSD and title V applicability provisions through a phased 
program as set forth in this rule, and to use the initial period of 
phase-in to develop streamlining measures, acquire expertise, and 
increase resources, all of which would facilitate applying PSD and 
title V on a broader scale without overburdening sources and permitting 
authorities. In this manner, the phased approach reconciles the 
language of the statutory provisions with the results of their 
application and with congressional intent.
2. Data Concerning Costs to Sources and Administrative Burdens to 
Permitting Authorities
    This final action concerning applicability of PSD and title V to 
GHG-emitting sources, including the decisions on timing for the 
selected permitting thresholds, is based on our assessments of both the 
costs to the regulated sources to comply with PSD and title V 
permitting requirements and the administrative burdens to the 
permitting authorities to process PSD and title V permit actions for 
GHG-emitting sources. This section provides a summary of our cost and 
administrative burden assessments of permitting that would be required 
in the absence of any tailoring as well as under various tailoring 
options.
    Our estimates of costs to the sources and administrative burdens to 
the permitting authorities from PSD and title V applicability for GHG 
emissions are based on labor and cost information from the existing 
Information Collection Requests (ICRs) for PSD and title V 
programs.\17\ We apply the same basic

[[Page 31534]]

methodology used for the proposal, which incorporates information on 
numbers and types of affected sources and estimated permitting actions. 
We evaluate administrative burdens in terms of staffing needs, time for 
processing permits, and monetary costs, and we make some judgments 
about how those burdens would affect the permitting authorities' 
ability to effectively manage and administer their programs with the 
addition of GHG emission sources. We present the administrative burden 
data for applying PSD and title V requirements at the literal statutory 
thresholds--that is, the 100/250 tpy levels for PSD (and 0 tpy for 
modifications) and the 100 tpy level for title V--as well as at other 
thresholds, which range from 25,000 tpy CO2e to 100,000 tpy 
CO2e. We have significantly revised upwards our assessments 
of costs to sources and administrative burdens since proposal, and we 
summarize later our reasons for doing so. We also present significant 
comments concerning administrative burdens, and our responses to those 
comments.
---------------------------------------------------------------------------

    \17\ ``Summary of Methodology and Data Used to Estimate Burden 
Relief and Evaluate Resource Requirements at Alternative Greenhouse 
Gas (GHG) Permitting Thresholds;'' Prepared by EPA Staff; March 
2010.
---------------------------------------------------------------------------

    In the next section, concerning legal and policy rationale for our 
actions, we discuss how these data on costs to the sources and 
administrative burdens to the permitting authorities informed our 
decisions that PSD and title V requirements should not, at present, be 
applied to GHG-emitting sources under the literal terms of the 
statutory thresholds as well as our decisions concerning what 
thresholds to apply for Steps 1 and 2 of the applicability phase-in 
approach and the applicability floor of 50,000 tpy CO2e.
a. Costs to Sources
    As we did at proposal, we have estimated costs to the sources of 
complying with PSD and title V starting from the data in the ICRs. We 
recognize that the sizes of the sources, as measured by their 
emissions, that would be swept into the PSD and title V programs would 
vary greatly, and that their permitting costs would vary as well. For 
example, their PSD permitting costs would depend on the amount and 
types of their emissions and their control requirements. Accordingly, 
we have determined average costs, as described later.
    For PSD, at proposal, we estimated that on average, an industrial 
source would incur costs of $84,500 to prepare the PSD application and 
receive the permit, and on average, a commercial or residential source 
would incur costs of 20 percent that amount, or $16,900. 74 FR 55337 
col. 3 to 55339 col. 3. For this action, we retain the same burden 
estimates for an average industrial source. This type of source would 
need 866 hours, which would cost $84,500, to prepare the application 
and the PSD permit. However, based on comments received, we have 
determined that a more accurate estimate for an average commercial or 
residential source is 70 percent of that amount of time that an 
industrial source would need, up from our proposal of 20 percent. Thus, 
an average commercial or residential source would need 606 hours, which 
would cost $59,000, to prepare the PSD application and receive the 
permit. We are increasing this time over what we proposed because we 
now recognize that virtually all commercial and residential sources 
will have no experience with the PSD permitting process, and therefore 
will face a significant learning curve that will entail more time to 
complete the application, develop control recommendations, and take the 
other required steps. We believe this learning period could extend from 
2 to possibly 4 years or more from the date that the sources become 
subject to PSD requirements, depending on the type and actual number of 
new sources that come in for permitting. In addition, we expect that in 
many cases, draft PSD permits for GHGs will receive comments from 
various stakeholders, from citizens groups to equipment vendors, who 
will seek to participate in the permit process, and that all this could 
add to the hours that the permittee will need to invest in the 
process.\18\ The actual costs to sources to install BACT controls, 
while still uncertain at this point, would likely add additional costs 
across a variety of sources in a sector not traditionally subject to 
such permitting requirements.
---------------------------------------------------------------------------

    \18\ ``Summary of Methodology and Data Used to Estimate Burden 
Relief and Evaluate Resource Requirements at Alternative Greenhouse 
Gas (GHG) Permitting Thresholds''; Prepared by EPA Staff; March 
2010.
---------------------------------------------------------------------------

    For title V, at proposal, we estimated that on average, an 
industrial source would incur costs of approximately $46,400 to prepare 
the title V application and receive the permit, and on average, a 
commercial or residential source would incur costs of 10 percent that 
amount, or almost $5,000. 74 FR 55338 col. 1 to 55339 col. 3. For this 
action, we retain the same burden estimates for an average industrial 
source. This type of source would need 350 hours, which would cost 
$46,400, to prepare the application and the title V permit. However, we 
have determined that a more accurate estimate for an average commercial 
or residential source is 50 percent of that amount of time that an 
industrial source would need, up from our proposal of 10 percent. Thus, 
an average commercial or residential source would need about 175 hours, 
which would cost $23,200, to prepare the title V application and 
receive the permit. This increase is due to the same reasons as with 
the PSD program just discussed. We now recognize that virtually all 
commercial and residential sources will have no experience with the 
title V permitting process and, therefore, will face a significant 
learning curve that will entail more time to assess, for the first 
time, their GHG emissions (because such sources are not covered by 
EPA's mandatory GHG reporting rule), complete the application, respond 
to permitting authority comments, meet other title V administrative 
requirements, and respond to interested stakeholders.\19\
---------------------------------------------------------------------------

    \19\ ``Summary of Methodology and Data Used to Estimate Burden 
Relief and Evaluate Resource Requirements at Alternative Greenhouse 
Gas (GHG) Permitting Thresholds''; Prepared by EPA Staff; March 
2010.
---------------------------------------------------------------------------

b. Administrative Burdens to Permitting Authorities
(1) Estimated Permitting Authority Burden at Proposal
    As at proposal, we estimated the administrative burdens to the 
permitting authorities at the various threshold 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. We employed 
the same methodology for this final rule, but, as discussed later, and 
described in more detail in our final burden analysis,\20\ we have 
updated several key assumptions since the proposal as a

[[Page 31535]]

result of our consideration of comments received.
---------------------------------------------------------------------------

    \20\ ``Summary of Methodology and Data Used to Estimate Burden 
Relief and Evaluate Resource Requirements at Alternative Greenhouse 
Gas (GHG) Permitting Thresholds''; Prepared by EPA Staff; March 
2010.
---------------------------------------------------------------------------

    First, we present the administrative burdens at the statutory 
levels for PSD and title V applicability. At proposal, for the PSD 
program, we estimated the administrative burdens that would result from 
applying PSD at the 100/250 tpy major emitting facility threshold 
levels in two ways, as described in this section. We stated that at 
present, 280 sources are subject to PSD each year, both for new 
construction and modifications. This figure served as the baseline from 
which to calculate increases in administrative burdens due to 
permitting GHG-emitting sources.
    The first method that we used to calculate the administrative 
burdens to the permitting authorities was in terms of workload hours, 
which we then converted to monetary costs. To make the workload 
calculation, we first estimated the number of GHG-emitting sources that 
would become subject to PSD through new construction and modification. 
Based on our GHG threshold data analysis, we estimated that almost 
41,000 new and modified sources per year would become subject to PSD 
review. We first calculated the number of new sources that would become 
subject to PSD. To do this, we estimated growth rates for the various 
sectors, and then applied those growth rates to the numbers of sources 
in those sectors. We then calculated the number of modifications. To do 
this, we first assumed that each year, two percent of sources that meet 
or exceed the threshold levels for PSD applicability due to their 
conventional pollutants undertake modifications. We then calculated the 
number of sources that would meet or exceed the threshold levels for 
PSD applicability due to their GHG emissions, and applied the same 
assumption that two percent of them would undertake modifications. In 
this manner, we estimated the number of modifications of GHG-emitting 
sources that would become subject to PSD.
    We noted that currently, 280 PSD permits are issued each year, but 
that applying PSD to GHG-emitting sources at the 100/250 tpy statutory 
threshold levels would cause an increase in permits of more than 140-
fold. The reason for the extraordinary increase in PSD applicability 
lies simply in the fact that it takes a relatively large source to 
generate emissions of conventional pollutants in the amounts of 100/250 
tpy or more, but many sources combust fossil fuels for heat or 
electricity, and the combustion process for even small quantities of 
fossil fuel produces quantities of CO2 that are far in 
excess of the sources' quantities of conventional pollutants and that, 
for even small sources, equal or exceed the 100/250 tpy levels.
    Based on the 140-fold increase in permits, we then estimated the 
per-permit burden on permitting authorities. As we stated in the 
proposal:

    We estimated the number of workload hours and cost a permitting 
authority would expend on each new source and each modification. We 
based these estimates on the workload hours and cost for processing 
permits for new sources of non-GHG emissions, which we derived from 
labor and cost information from the existing ICRs for PSD programs. 
The ICRs show that permitting authorities expend 301 hours to permit 
a new or modified industrial source * * *.
    We then made assumptions for number of workload hours and costs 
for new sources of GHG emissions. We assumed that permitting new 
industrial GHG sources that emit in excess of the 250-tpy threshold 
would be of comparable complexity to permitting non-GHG emitting 
industrial sources that are subject to PSD. Thus, for these sources, 
we assumed that permitting authorities would expend the same number 
of workload hours and costs, on a per-permit basis, as they do for 
non-GHG emitting industrial sources. On the other hand, for 
commercial and residential GHG sources that emit GHGs above the 250-
tpy threshold (and as a result would be subject to the requirements 
of the PSD permitting program at this threshold level), we assumed 
that the workload hours and cost for permitting these sources would 
be significantly less than--only 20 percent of--the hours and cost 
necessary to prepare and issue initial PSD permits or permit 
modifications for industrial GHG sources. This 20-percent estimate 
amounts to 60 hours of permitting authority time per residential or 
commercial permit.
    Based on these assumptions, the additional annual permitting 
burden for permitting authorities, on a national basis, is estimated 
to be 3.3 million hours at a cost of $257 million to include all GHG 
emitters above the 250-tpy threshold.

74 FR 55301 col. 2.

    Note that at the proposal, in calculating the PSD administrative 
burdens that would occur each year due to GHG emissions, we did not 
undertake separate calculations for the administrative burdens 
associated with permitting obligations stemming from the GHG emissions 
of the 280 sources already subject to PSD permitting requirements due 
to their conventional pollutants. In effect, we treated these 280 
sources are part of the over 40,000 sources that would become subject 
to PSD due to their GHG emissions.
    The second way that we evaluated the burden on permitting 
authorities was by reviewing a study conducted by state and local air 
permitting agencies. As we said in the preamble:

    In addition to conducting our burden analysis, we also reviewed 
summary information from state and local air permitting agencies 
regarding additional resources and burden considerations if GHG 
sources that emit above the 100/250-tpy thresholds were subjected to 
the PSD and title V programs. This information covered 43 state and 
local permitting agencies, representing programs from different 
regions of the country and various permitting program sizes (in 
terms of geographic and source population coverage) * * *. This 
information showed significant burdens projected by permitting 
agencies with adding sources of GHG emissions in terms of staffing, 
budget, and other associated resource needs. Importantly, the 
agencies based their analysis on the assumption that, for purposes 
of determining whether a source is major, its emissions would be 
calculated on an actual emissions (``actuals'') basis, and not on a 
PTE basis. On an actuals basis, the agencies estimated a 10-fold 
increase in the number of permits.
    Specifically, the agencies estimated that:
     Assuming, again, that number of permits was to increase 
by 10-fold (based on actual emissions), the resulting workload would 
require an average of 12 more [full-time equivalents (FTEs)] per 
permitting authority at an estimated cost of $1 million/year;
     Without the additional FTEs, the average processing 
time for a permit would increase to 3 years, which is three times 
the current average processing time;
     Permitting authorities would need 2 years on average to 
add the necessary staff;
     Permitting authorities would also need, on average, 
eight additional enforcement and judicial FTEs;
     Ninety percent of permitting agencies would need to 
train their staff in all aspects of permitting for sources of GHG 
emissions.
     A quarter of permitting agencies were currently under a 
hiring freeze.

    We went on to explain that this state survey significantly 
underestimated the administrative burdens:

    It is important to reiterate that the state and local permitting 
information on burden was based on the number of additional 
facilities subject to PSD because their emissions of GHGs exceed the 
100/250-tpy thresholds at actual emissions rates, not PTE-based 
emissions rates. However, the PSD applicability requirements are 
based on PTE. By adjusting the increase in number of permits to 
account for GHG sources that exceed the 100/250-tpy applicability 
thresholds based on their PTE emissions, EPA estimated a 140-fold 
increase in numbers of PSD permits, much more than the 10-fold 
increase estimated by the states based on actual emissions.

74 FR 55301 col. 2-3.

    In addition to PSD, we also estimated title V burdens at the 
statutory threshold. At proposal, for the title V program, we estimated 
the administrative burdens that would result from applying title V 
requirements at the 100 tpy major

[[Page 31536]]

source threshold level in the same two ways as for PSD, as follows. The 
first method was to calculate the administrative burdens in terms of 
workload hours, which we then converted to monetary costs. To make the 
workload calculation, we first estimated the number of existing GHG-
emitting sources that would become subject to title V. Based on our GHG 
threshold data analysis, we estimated that approximately 6 million 
sources would become subject to title V. Compared to the 14,700 title V 
permits currently issued, this would be an increase in permits of more 
than 400-fold. We noted, in addition, that most of the 14,700 sources 
already subject to title V also emit GHGs and may be affected as well.
    We then described the type of work that the permitting authorities 
would need to do for these GHG-emitting sources--the six million that 
would become newly subject to title V and most of the 14,700 that are 
already subject to title V--as follows. Note at the outset that the 
permitting authorities' workload is greater for sources newly subject 
to title V than for existing sources that seek a revised or renewed 
permit. As EPA noted in the preamble:

    [T]he [ ] permits [for the 6 million new sources] would need to 
include any requirements for non-GHGs that may apply to the source, 
such as provisions of an applicable SIP. For any such requirements, 
permitting authorities would also need to develop terms addressing 
the various compliance assurance requirements of title V, including 
monitoring, deviation reporting, six-month monitoring reports, and 
annual compliance certifications.
    Adding to the burden described above would be the burden to add 
GHG terms to the 14,700 existing title V permits. While, in general, 
existing title V permits would not immediately need to be revised or 
reopened to incorporate GHG (because as noted above, there are 
generally not applicable requirements for GHGs that apply to such 
sources), permitting authorities may face burdens to update existing 
title V permits for GHG under two possible scenarios: (1) EPA 
promulgates or approves any applicable requirements for GHGs that 
would apply to such a source, which would generally require a permit 
reopening or renewal application, or (2) the source makes a change 
that would result in an applicable requirement for GHGs to newly 
apply to the source, such as PSD review, which would generally 
require an application for a permit revision. Permitting authorities 
will also need to process permit renewal applications, generally on 
a five-year cycle, and such renewals would need to assure that the 
permit properly addresses GHG. Finally they would have to process 
title V applications for new sources (including all the PSD sources 
previously discussed).

74 FR 55302 cols. 2-3.

    In light of those demands, we estimated the per-permit burden on 
permitting authorities as follows. Note, at the outset, that as with 
PSD, we based the workload hours on information in ICRs for industrial 
sources, and we then assumed that the workload for commercial and 
residential sources would be the indicated percentage of the workload 
for industrial sources:

    As with PSD, we have quantified the extent of the administrative 
problem that would result in workload hours and cost on the basis of 
information concerning hours and costs for processing existing title 
V permits that is indicated on ICRs. However, we recognize that more 
than 97 percent of these new sources would be commercial and 
residential sources. We estimate that for permitting authorities, 
the average new commercial or residential permit would require 43 
hours to process, which is 10 percent of the time needed for the 
average new industrial permit. For an average existing permit, which 
permitting authorities would need to process through procedures for 
significant revisions and permit renewals, adding GHG emissions to 
the permit would result in, we estimate, 9 additional hours of 
processing time, which is 10 percent of the amount of time currently 
necessary for processing existing permits. We estimate that the 
total nationwide additional burden for permitting authorities for 
title V permits from adding GHG emissions at the 100-tpy threshold 
would be 340 million hours, which would cost over $15 billion.

74 FR 55302 col. 3.

    As with PSD, the second way that we evaluated the burden on 
permitting authorities at the statutory threshold was by reviewing a 
study conducted by state and local air permitting agencies of the 
burden of applying title V to existing GHG-emitting sources at the 100 
tpy statutory threshold level. As we said in the preamble to the 
proposed rule:

    [W]e also reviewed summary information from state and local 
permitting agencies, which showed significant burdens associated 
with adding GHGs in their title V programs in terms of staffing, 
budget, and other associated resource needs.\21\ Again, note that 
the permitting agencies based their estimates on numbers of permits 
that would be required from sources subject to the 100-tpy title V 
applicability threshold on an actuals--not PTE--basis. Based on that 
level, the agencies assumed a 40-fold increase in numbers of 
permits, and estimated that:
---------------------------------------------------------------------------

    \21\ ``NACAA Summary on Permitting GHGs Under the Clean Air 
Act''; Memorandum from Mary Stewart Douglas, National Association of 
Clean Air Agencies to Juan Santiago, EPA/OAQPS, September 3, 2009.
---------------------------------------------------------------------------

     The resulting workload would require an average of 57 
more FTEs per permitting agency at an estimated cost of $4.6 
million/year;
     Without the additional FTEs, the average processing 
time for a permit would increase to almost 10 years, which is 20 
times the current average permit processing time;
     Permitting authorities would need 2 years on average to 
add the necessary staff;
     On average, permitting authorities would need 29 
additional enforcement and judicial staff;
     Eighty percent of permitting authorities would need to 
train their staff in all aspects of permitting for sources of GHG 
emission.
     A quarter of permitting agencies were currently under a 
hiring freeze.

    As with PSD, we added that this state survey significantly 
underestimated the administrative burdens:

    It is important to reiterate that, as with PSD, the state and 
local information on projected permitting burden is based on the 
number of additional facilities subject to title V because their 
emissions of GHGs exceed the 100-tpy thresholds at actual emissions 
rates, not the PTE-based emissions rates. However, the title V 
applicability requirements are based on PTE. As noted elsewhere in 
this preamble, the state and local agencies estimated a 40-fold 
increase in numbers of title V permits based on the amount of GHG 
sources' actual emissions. By adjusting the summary estimates 
provided by the state and local agencies to account for GHG sources 
that exceed the 100-tpy threshold based on their PTE emissions, EPA 
estimated that the average permitting authority would need 570 more 
FTEs to support its title V permitting program.

74 FR 55302 col. 3--55303 col. 1.

(2) Revisions to Proposal Estimates of Permitting Authority Burden
    We received numerous comments from state and local authorities 
stating that EPA had underestimated the administrative burden on the 
permitting authorities in the proposal. State and local authorities 
stated that in particular, EPA underestimated the number of 
modifications and the amount of time it would take permitting 
authorities to process permits, particularly for commercial and 
residential sources. Based on the comments and additional analysis that 
we have conducted in response, we are revising in several respects our 
estimates of the administrative burdens for applying PSD and title V at 
the statutory threshold levels.
    First we present revisions to our analysis regarding the burdens at 
the statutory levels. Before we present those changes, we want to note 
a revision to our methodology that affected our estimate of the number 
of permits currently issued under existing programs. We are revising 
upwards the number of sources that are already subject to PSD 
permitting requirements anyway for their conventional pollutants, 
which, as discussed previously, we refer to as ``anyway'' sources. This 
revision has implications

[[Page 31537]]

both for (1) the number of sources that would become subject to PSD due 
to their GHG emissions; and also (2) the baseline number of sources 
already subject to PSD, which we use to compare the amount of increases 
in administrative burden due to permitting GHG sources. At proposal, we 
stated that 280 sources each year are subject to PSD due to their new 
construction or modifications. However, upon further analysis, we have 
realized that this figure is too low because it includes only sources 
that have emissions of one or more NAAQS pollutants at the 100/250 tpy 
thresholds and that are located in areas of the country that are 
designated attainment or unclassifiable for all of those pollutants, 
and thus are not designated nonattainment for any of those NAAQS 
pollutants. We estimate that another 520 sources have emissions of one 
or more NAAQS pollutants at the 100/250 tpy thresholds and are located 
in areas of the country that are nonattainment for at least one of 
those NAAQS pollutants. Some of these 520 sources may also emit one or 
more pollutants at the 100/250 tpy level for which their area is 
designated attainment or unclassifiable, and therefore may be subject 
to PSD for those pollutants. Accordingly, the correct number of 
``anyway'' sources subject to PSD each year is the 280 sources that are 
located in areas that are attainment or unclassifiable for each 
pollutant that the sources emit at the 100/250 tpy level, plus at least 
some of the 520 sources that are located in areas that are 
nonattainment for at least one of the NAAQS pollutants that the sources 
emit at or above the 100/250 tpy threshold. In the absence of data on 
the number of nonattainment NSR permits that do not have a PSD 
component, and because we expect this to be a small number, we have 
assumed for purposes of this action, that each of the 520 sources is 
subject to PSD for at least one pollutant, so that we will consider all 
800 sources as subject to PSD. Of this number, we estimate that 70 
percent, or 560 sources will undergo a modification, while the 
remaining 240 permitting actions will involve new construction. Of the 
modifications, we assume that 80 percent, or 448, would become subject 
to additional requirements due to their GHG emissions because those 
projects have combustion-related activities that would likely emit GHGs 
in the requisite quantities. Our estimate of 80 percent of modification 
activities significantly involving combustion activities is based on a 
review of a random sample of PSD permits. In total we estimate that 688 
sources, either upon new construction or modification, would need to 
add GHG requirements to their otherwise required PSD permitting action.
    We should also note that in this rulemaking we are justifying our 
conclusions about permitting authority administrative burdens on the 
basis of their PSD and title V cost as calculated on both a separate 
basis and a combined basis. That is, we believe that the administrative 
burdens of the PSD program justify our tailoring approach for the PSD 
requirements, and the administrative burdens of the title V program 
justify our tailoring approach for the title V requirements, but in 
addition, the administrative burdens of both programs on a combined 
basis justify the tailoring approaches. Viewing the administrative 
burdens on a combined basis provides a useful perspective because most 
permitting authorities have a single organizational unit that is 
responsible for both the PSD program and the title V program, and in 
many cases, the same employees work on both programs. In addition, in 
some jurisdictions, permitting authorities issue a single, merged 
permit that includes both PSD and title V requirements. For these 
reasons, considering administrative burdens on a combined PSD and title 
V basis, offers a more accurate picture of the issues these agencies 
will face in transitioning to GHG permitting.
    Turning to the revisions to our burden estimates that we made as a 
result of public comment, we begin by noting that many commenters 
believed that we significantly underestimated the administrative 
burdens associated with the proposed thresholds or that the 
administrative burden under the proposed thresholds would still 
overwhelm the states and result in significant permitting delays and 
uncertainty for sources. Many of these commenters indicate that our 
estimate of the number of sources that would be subject to permitting 
is too low, and some add that we have underestimated the per-permit 
effort required. (More detail on these comments is given elsewhere on 
the methodology used in the analysis.) Several state and local agencies 
provided estimates of the increased number of permits and/or staff that 
would be required under the thresholds we proposed that were higher 
than our original estimates. Specifically, commenters recommended that 
we increase the estimated administrative burdens for PSD permits by 
anywhere from 100 percent to over 2,000 percent; and that we increase 
the burdens for title V permits by anywhere from 29 percent to 240 
percent. Many commenters indicated that EPA has not adequately 
accounted for ``synthetic minor'' sources or modification projects, 
stating that many such sources and projects will not be able to keep 
GHGs below the proposed thresholds, and those who could do so may not 
be able to establish enforceable synthetic minor limits. Numerous 
commenters also stated that the EPA has underestimated the rate of 
major modifications for GHGs under PSD. Some commenters assert that we 
underestimated the number of permits required for specific industry 
sectors, including the oil and gas production industry, the natural gas 
transmission industry, the semiconductor industry, the wood products 
industry, the brick industry, and landfills. Some of the state and 
local commenters also believe that we have overestimated their ability 
to hire and train sufficient staff to administer GHG permitting.
    We are persuaded by the data and arguments provided by the many 
commenters who believe EPA underestimated the number of permitting 
actions and the burdens of each action, and thus the overall 
administrative burdens associated with permitting GHG sources. 
Accordingly, we have reevaluated our assessment of these administrative 
burdens, for both the PSD and title V programs. In conducting this 
reevaluation, we considered arguments made by the commenters, as well 
as any actual data they provided, and then we determined whether and 
how to modify various aspects of our detailed assessment of the 
burdens. Based on this consideration we have substantially revised 
upwards our estimate of administrative burdens, based on the analysis 
included in the final docket for this rulemaking.\22\ The revisions 
affect two elements of our analysis by showing: (1) A substantial 
increase in the number of PSD and title V permits that will occur at a 
given threshold, and (2) an increase in the average burden estimate for 
each such permit.
---------------------------------------------------------------------------

    \22\ ``Summary of Methodology and Data Used to Estimate Burden 
Relief and Evaluate Resource Requirements at Alternative Greenhouse 
Gas (GHG) Permitting Thresholds''; Prepared by EPA Staff; March 
2010.
---------------------------------------------------------------------------

    Regarding the increase in our estimate of the number of projects 
that will occur, we estimated an increase in both PSD and title V 
permit actions, though the greatest changes were for PSD. At proposal, 
we estimated that, if PSD requirements were to apply to GHG sources at 
the 100/250 tpy statutory levels, 40,496 projects--consisting of 3,299 
projects at industrial sources and 37,197 projects at commercial or

[[Page 31538]]

residential sources--would need PSD permits each year. Some of these 
projects involve the construction of an entirely new source, but the 
majority of these are modifications. We now estimate that at the 100/
250 tpy levels, 81,598 projects would become subject to PSD each year. 
These projects include 26,089 actions at industrial sources and 55,509 
at commercial and residential sources. We describe our calculation of 
this 81,598 amount in a TSD.\23\ The great majority of these 81,598 
projects that would become subject to PSD are modifications. We base 
these estimates on the assumption that the significance levels would be 
100 tpy regardless of category.
---------------------------------------------------------------------------

    \23\ ``Summary of Methodology and Data Used to Estimate Burden 
Relief and Evaluate Resource Requirements at Alternative Greenhouse 
Gas (GHG) Permitting Thresholds''; Prepared by EPA Staff; March 
2010.
---------------------------------------------------------------------------

    Our estimate of the number of PSD modifications is where we made 
our most significant upward revisions from our proposal, based on 
comments. Our doubling of the estimated PSD permitting actions--from 
40,496 at proposal to 81,598--results from three separate adjustments 
we made to our estimates at proposal of the number of permit actions 
that would result from applying PSD to GHG sources. Two of these 
increased the number of major modifications, and one of these increased 
the number of major sources and modifications. The most significant 
adjustment, and one that was raised by multiple commenters, was that we 
undercounted the number of major modification projects at existing 
major sources because we did not include the existing projects that 
avoid major PSD review by either taking ``synthetic minor'' limits or 
by netting out for conventional pollutants, but that would not be able 
to avoid PSD through those mechanisms for GHGs.
    We agree that the ability and procedures for sources to achieve 
reductions, or minimize increases, due to GHGs through adoption of 
enforceable limits or through netting out are not well established at 
this point. We believe that there will be numerous instances, 
particularly for combustion-related projects, where it will not be 
possible for sources to achieve the same level of reductions for 
CO2 emissions as they do for emissions of nitrogen oxides 
(NOX), for example, simply because there are not as many 
proven control techniques that can reduce CO2 emissions to 
the same degree as NOX. Also, more research will be 
necessary in the type of emission units and processes resulting in GHG 
emissions, and how they operate over a wide range of utilization 
patterns at a variety of source categories, before permitting 
authorities will be able to establish procedures and rules for 
developing minor source permit limitations. Therefore, we adjusted our 
count of major modification permits under PSD upward to account for 
this.
    The second change to the number of permits concerns the general 
modification rate of 2 percent that we applied at proposal, based on 
historical experience across all pollutant types. Commenters provided 
information that suggest that this 2 percent figure is an underestimate 
for GHG sources because their emissions of CO2 are high and 
accumulate quickly from various changes involving combustion units. 
Therefore, a greater percentage of their physical or operational 
changes will result in GHG emissions in excess of the significance 
levels that we identified at proposal. In light of these comments, we 
reviewed the source populations and pollutant mix within the various 
populations, and determined that we should revise our general 
modification rate to 4 percent for GHG sources. This 4 percent rate was 
obtained by dividing the current annual major NSR permit actions 
involving modifications by the 14,700 existing sources. We have revised 
our burden analysis accordingly. Again, the burden analysis in the 
docket describes our basis for these calculations in more detail.
    The third adjustment to the number of permits involves our estimate 
of the number of sources with PTE that is greater than the various 
thresholds considered. This affects the number of major sources at the 
statutory thresholds, which we used to estimate the number of PSD and 
title V major sources, but also has an effect on the number of major 
modifications because the number of modifications depends on the size 
of the population of major sources. Commenters provided evidence that 
our estimates of capacity utilization (which, as described previously, 
we use for estimating potential-to-emit based on data for actual 
emissions) for the general manufacturing source category (referred to 
as ``unspecified stationary combustion'' in our analysis) and for the 
oil and gas industry were not accurate. In our proposal, our estimated 
range for capacity utilization for ``unspecified stationary 
combustion'' varied from 70 to 90 percent depending on manufacturing 
category. For the oil and gas industry, our estimate was 90 percent. We 
received comments indicating that these utilization rates are higher 
than what is normally achieved in real-world conditions, particularly 
for smaller manufacturing type facilities. Accordingly, in this action, 
we are using a 50 percent capacity utilization rate for both of these 
source categories, which better reflects what can be deemed reasonable 
operation under normal conditions for facilities in these source 
categories. This adjustment increased the overall number of affected 
facilities at various threshold levels and we have revised our burden 
analysis accordingly.
    A few commenters asserted that we underestimated the number of 
residential homes, commercial buildings, and retail stores that would 
be subject to permitting requirements because these commenters believed 
the estimate in EPA's TSD was based on actual emissions from space 
heating equipment rather than PTE. We wish to clarify that our 
threshold analysis estimates for the number of residential and 
commercial sources (as well as all other sources) did use a PTE basis. 
To calculate the PTE amount for these sources, we extrapolated from the 
actual emissions data for the residential and commercial sources. 
Specifically, we assumed that a typical residential facility operates 
its fuel combustion sources at only 10 percent of its capacity and a 
typical commercial facility operates at only 15 percent of its 
capacity. Based on these assumptions, we multiplied residential actual 
emissions by a factor of 10, and commercial actual emissions by a 
factor of 6.6 to obtain PTE-based estimates. There is very little 
information available on the capacity utilization rates of fuel 
combustion equipment at different types of residential and commercial 
facilities, but we believe our methodology was reasonable for these 
types of sources and we did not adjust it in response to this comment. 
Information on the development of these estimates is provided in our 
Technical Support Document for Greenhouse Gas Emissions Thresholds 
Evaluation.
    The second source of upward revisions to our administrative burden 
estimate is that we are increasing the estimated average cost to 
permitting authorities of issuing each PSD and title V permit at the 
statutory thresholds. At proposal, we estimated that for PSD permits, 
permitting authorities would expend, on average, 301 hours to permit an 
industrial source of GHG emissions, and 20 percent of that time, or 60 
hours to permit a commercial or residential source. After estimating 
that amount of workload, we went on to estimate the monetary cost to 
permitting authorities of that workload. Similarly, for title V 
permits, we estimated at proposal that permitting authorities would 
expend 10 percent of the number of hours needed to process an 
industrial permit in order

[[Page 31539]]

to process a commercial or residential permit for GHG sources.
    We received comments from both permitting authorities and sources 
asserting that our methodology underestimated the administrative burden 
on grounds that (1) Our methodology fails to recognize that when a 
source triggers PSD for conventional pollutants, additional labor hours 
would be required to issue BACT for GHGs; (2) our estimate of 60 hours 
(versus 301 hours) to issue PSD permits to commercial and residential 
sources of GHGs is unrealistically low; (3) our estimate failed to 
account for the increase in the complexity of permits for criteria 
pollutants due to (i) increases in criteria pollutant emissions 
becoming newly subject to BACT at sources that are major only for GHGs, 
which will result in increased permitting and (ii) BACT controls for 
criteria pollutants (e.g., an oxidizer for VOCs) may result in 
significant GHG emissions, triggering an additional BACT determination; 
and (4) our methodology failed to account for the significant 
additional PSD and title V burdens due to sources that obtain federally 
enforceable permit limits on GHGs in order to become ``synthetic 
minors'' and thereby avoid PSD (and possibly also title V).
    Based on these comments and our own reassessment of permitting 
actions created by the addition of GHGs, we have revised upwards in 
several ways our estimate of the additional per-permit costs of 
applying PSD and title V to GHG sources, including the following: First 
we have added an estimate of the additional permitting cost for adding 
a GHG component to ``anyway'' PSD and title V permitting actions for 
conventional pollutants. We estimated this burden based on information 
in the comments together with our own judgment about how to adjust the 
burden numbers contained in the current supporting statements for our 
approved permitting ICRs. These adjustments are found in our revised 
burden estimate document.
    Second, we have raised the per-permit burden hours for commercial 
and residential sources for PSD and title V. At proposal, our estimates 
were based on the fact that many of these permits will be technically 
simpler due to such factors as a lower number of emissions points, 
simpler processes, and less required modeling. However, commenters 
pointed out that, until EPA streamlines its permitting procedures, 
there are many permitting activities that represent a fixed cost, such 
as public notice, hearing, and response to comment activities. In 
addition, we agree, as commenters pointed out, that many of these 
sources will need significantly more permitting authority staff time to 
assist them in the permit application and preparation process because 
of their lack of experience with these requirements. In addition, 
permitting authorities will have little, if any, experience in 
permitting commercial and residential sources, and therefore will face 
a learning curve that will entail more time to take permitting action. 
In addition, we expect that in many cases PSD and title V permit 
applications for GHGs will receive comments from various stakeholders, 
from citizens groups to equipment vendors, who will seek to participate 
in the permit process, and responding and revising permits accordingly 
will add to the hours that the permitting authority will spend.
    As a result, we raised the PSD per-permit hours for various steps 
in the permitting process, as described in the burden estimate 
document. While we continue to estimate that permitting authorities 
will expend, on average, 301 hours to issue a PSD permit to an 
industrial source, and that this would cost $23,243, we now recognize 
that a permitting authority would expend 70 percent of that time or 210 
hours, to permit a commercial or residential source, which would cost 
$16,216. Similarly, for title V, while we continue to estimate that 
permitting authorities will expend, on average, 428 hours to issue a 
title V permit to an industrial source, and that this would cost 
$19,688, we now recognize that a permitting authority would expend 50 
percent of the time, or 214 hours, to permit a commercial or 
residential source, which would cost $9,844.
    We disagree with commenters who suggested that by basing our 
estimates on the numbers of newly constructing and modifying sources 
with high enough emissions to qualify as major emitting facilities, we 
failed to account for the costs of sources that seek ``synthetic 
minor'' permits to avoid PSD, and possibly title V, requirements. In 
fact, our methodology includes sources that might take such limits as 
newly-major sources for their GHG emissions; and therefore we count the 
full administrative burden associated with a PSD permit and a title V 
permit for those sources. In effect, we assume that such sources would 
go through PSD or title V permitting, rather than take ``synthetic 
minor'' limits. We take this approach because although we suspect that 
there may, in fact, be significant synthetic minor activity, we do not 
have data that would allow us to determine whether, and how many of, 
these sources will be able to adopt ``synthetic minor'' limits or 
restrict their operations to obtain minor source permitting status. Nor 
do we have data on the amount of the administrative burden that would 
fall on any particular permitting authority to establish a ``synthetic 
minor'' limit, except that we understand that the amount varies widely 
across states. As a result, we opted to include these sources in our 
analysis as sources receiving a PSD or title V permit. Therefore, to 
the extent that synthetic minor activity occurs, our estimate would 
already have included the burden for that activity. In fact, our 
estimate would have overestimated the burden to the extent that a 
permitting authority would have less administrative costs to issuing a 
``synthetic minor'' permit, as compared to a PSD or title V permit.
    (3) Revised Burden Estimates at Statutory Thresholds Based on the 
revisions just described, we estimate that in all, if sources that emit 
GHGs become subject to PSD at the 100/250 tpy levels, permitting 
authorities across the country would face over $1.5 billion in 
additional PSD permitting costs each year. This would represent an 
increase of 130 times the current annual burden hours under the NSR 
major source program for permitting authorities. The permitting 
authorities would need a total of almost 10,000 new FTEs to process PSD 
permits for GHG emissions.
    In addition, we estimate that in all, if sources that emit GHGs 
become subject to title V at the 100 tpy level, permitting authorities 
across the country would incur about 1.4 billion additional work hours, 
which would cost $63 billion. We estimate that most of this work would 
be done over a 3 year period, which would amount to 458 million in 
additional work hours, and $21 billion in additional costs, on an 
annual basis over that 3-year period.
    We also note that the survey of state and local permitting 
authorities described in the proposed rulemaking continues to shed 
light on the extent of the administrative burdens, including staffing, 
budget, and other associated resource needs, as projected by the 
permitting authorities. As noted previously, that survey concluded that 
application of the PSD requirements to GHG-emitting sources at the 
level of 100/250 tpy or more of actual emissions would, without 
additional FTEs, increase the average processing time for a PSD permit 
from one to 3 years. The survey further concluded that application of 
the title V requirements to GHG-emitting sources at the level of 100 
tpy or more of actual emissions would, without additional FTEs, 
increase the average processing time for

[[Page 31540]]

a title V permit from 6 months to 10 years. As we noted at proposal, 
this survey assumed a ten-fold increase in the number of PSD permits 
and a 40-fold increase in the number of title V permits due to GHG-
emitting sources, but those assumptions were severely underestimated 
because they were based on actual emissions. At proposal, our 
calculations, which were based on potential emissions, indicated a 140-
fold increase in PSD permits and a more than 400-fold increase in title 
V permits. In this rulemaking, we recognize that even our estimates at 
proposal were severely underestimated. We now recognize that the number 
of PSD permits will be about twice what we estimated at proposal, and 
the average processing time for both PSD and title V permits will be 
two or three times greater than what we estimated at proposal. The 
survey of state and local permitting authorities provided other useful 
information as well, including the fact that it would take the 
permitting authorities 2 years, on average, to hire the staff necessary 
to handle a ten-fold increase in PSD permits and a 40-fold increase in 
title V permits, and that 90 percent of their staff would need 
additional training in all aspects of permitting for GHG sources.
(4) Revised Estimates of Administrative Burdens at Various Threshold 
Levels
    In order to determine the appropriate PSD and title V applicability 
level for GHG sources, we not only estimated the burden at the 
statutory thresholds, as described previously, but we also estimated 
the number of sources, number of permitting actions, and amount of 
administrative burden at various applicability levels for both PSD and 
title V, based on the revised methodology described previously, that we 
used to estimate the administrative burdens of applying PSD and title V 
at the statutory levels. This information is summarized in Table V-1. 
Note that Table V-1 also includes, in the last column, the 
administrative burdens, described previously, associated with the 100/
250 tpy thresholds.

                                                                           Table V-1--Coverage and Burden Information
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                      ``Anyway''  source
                                   Current  program      approach  75k     100k Major source  100k Major  source  100k Major  source   50k Major source    25k Major  source  100/250 Major, 100
                                          \1\             major  mod.       100k major mod.     75k major mod.      50k major mod.      50k major mod.      25k major mod.           mod.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Number of Major Sources.........  15,000............  15,000............  15,550............  15,550............  15,550............  18,500............  22,500............  6,118,252.
Number of Newly Major GHG         N/A...............  0.................  550...............  550...............  550...............  3,500.............  7,500.............  6,105,913.
 Sources.
Number of PSD New Construction    240...............  240...............  242...............  242...............  242...............  243...............  250...............  19,889.
 Actions.
Number of PSD Modification        448...............  448...............  468...............  1,363.............  2,257.............  2,354.............  9,645.............  62,284.
 Actions at Covered major
 sources.
Permitting Authority Cost to Run  $12M/yr...........  $15M/yr...........  $15M/yr...........  $36M/yr...........  $57M/yr...........  $59M/yr...........  $229M/yr..........  $1.5B/yr.
 PSD programs.
Permitting Authority Work Hours   150,795...........  185,195...........  192,055...........  461,450...........  730,544...........  764,781...........  2.97 M............  19.7 M.
 to Run PSD programs \2\.
Permitting Authority Cost to Run  $62M/yr...........  $63M/yr...........  $67M/yr...........  $69M/yr...........  $70M/yr...........  $88M/yr...........  $126M/yr..........  $21 B/yr.
 Title V Programs.
Permitting Authority Work Hours   1.35 M............  1.38 M............  1.46 M............  1.49 M............  1.53 M............  1.92 M............  2.74 M............  460 M.
 to Run Title V Programs.
Annual Total Cost to Run PSD and  $74M/yr...........  $78M/yr 5%          $82M/yr 11%         $105M/yr 42%        $127M/yr 72%        $147M/yr 99%        $355M/yr 380%       $22.5 B/yr 30,305%
 Title V Programs and percent                          increase (once      increase.           increase.           increase.           increase.           increase.           increase.
 increase in cost over current                         states adopt).
 program.
% GHG emissions covered \3\.....  0.................  65%...............  67%...............  67%...............  67%...............  70%...............  75%...............  78%.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: (1) As explained in the preamble, ``current program'' figures for PSD permits also reflect NSR permits in nonattainment areas that we assume include a PSD component for at least one
  pollutant. (2) Number of FTEs may be calculated as work hours divided by 2,000 hours. (3) Percent of national GHG stationary source emissions emitted from sources that would be considered
  major for GHG emissions under each threshold scenario.

    As described in the TSD, we considered several different major 
source/major modification threshold combinations. We chose the 
combinations to reflect representative, incremental steps along the 
possible range. Because it is time- and resource- intensive to develop 
estimates for a given step, we chose intervals that best reflect 
representative points within the range, given those time and resource 
constraints. Here, we discuss key observations about some of the 
combinations that we assessed. As the table indicates, under the 
current PSD and title V programs, approximately 15,000 sources qualify 
as major PSD sources for at least one pollutant and therefore meet the 
applicability thresholds. Of these, approximately 668 sources are 
subject to PSD requirements each year for at least one pollutant--240 
because they undertake new construction, and 448 because they undertake 
modifications. The permitting authorities' administrative burdens for 
the NSR program are 153,795 work hours, and $12 million. For the title 
V program, the 15,000 sources are, for the most part already permitted, 
and therefore need revised permits as required and renewal permits on a 
5-year schedule. The permitting authorities' title V administrative 
burdens on an annual basis are 1,349,659 work hours and $62 million.
    The first threshold Table 1 describes--and which, as discussed 
later, we are adopting for Step 1--is the

[[Page 31541]]

``anyway'' source approach. Under this approach, (i) PSD applies to the 
GHG emissions from projects that are subject to PSD anyway as new 
sources or major modifications due to their emissions of non-GHG 
pollutants and that result in an increase (or, in the case of 
modifications, a net increase) of at least 75,000 tpy CO2e; 
and (ii) title V applies to what we will call ``anyway'' title V 
sources, that is, sources that are subject to title V anyway due to 
their emissions of non-GHG pollutants. Under this approach, the number 
of sources subject to PSD each year--including new construction and 
modifications--is the same as under the current program, but the 
permitting authorities will need to address GHG emissions as part of 
those permitting actions each year and, to do so, will require, each 
year, 34,400 additional workload hours costing an additional $3 
million. For title V, we estimate that the number of title V sources 
that require permitting actions will, on average, be the same each 
year, but permitting authorities will need to address GHG requirements 
for some of them; as a result, permitting authorities will need, each 
year, 27,468 additional work hours costing $1 million in additional 
funding.
    Another threshold described in Table V-1 is the one we are adopting 
under Step 2, as described later, under which (i) sources will be 
subject to PSD on account of their GHG emissions if they newly 
construct and emit at least 100,000 tpy CO2e, or if they are 
existing sources that emit at least 100,000 tpy CO2e of GHGs 
and make a modification that results in a net emissions increase of at 
least 75,000 tpy CO2e; and (ii) existing sources will be 
subject to title V due to their GHG emissions if they emit 100,000 tpy 
CO2e in GHG emissions. Under this approach, which we will 
call the 100,000/75,000 approach, we estimate that each year, compared 
to current levels, the permitting authorities will need to issue GHG 
permits to two additional sources that newly construct and to 915 
additional sources that undertake modifications. Doing so will require 
310,655 additional workload hours costing an additional $24 million, 
compared to the current program. For title V, an additional 190 sources 
will require new title V permits each of the first 3 years, and the 
permitting authorities' associated costs will be 141,322 work hours and 
$7 million more than the current program.
    The last approach we will describe here may be called the 50,000/
50,000 approach, which, as discussed later, we adopt as the floor for 
thresholds during the first 6 years after promulgation. Under this 
approach, (i) sources will be subject to PSD on account of their GHG 
emissions if they newly construct and emit at least 50,000 tpy 
CO2e, or if they are existing sources that emit at least 
50,000 tpy CO2e of GHGs and make a modification that results 
in a net emissions increase of at least 50,000 tpy CO2e; and 
(ii) existing sources will be subject to title V on account of their 
GHG emissions if they emit 50,000 tpy CO2e in GHG emissions. 
Under this approach, each year, the permitting authorities will need to 
issue GHG permits to 3 additional sources that newly construct and 
1,900 that undertake modifications above current permitting levels. 
Doing so will require 613,986 additional workload hours costing $47 
million, compared to the current program. For title V, an additional 
1,189 sources will require new title V permits each of the first 3 
years and the permitting authorities' associated costs will be 568,017 
work hours and $26 million more than the current program.
    We present the remaining entries in the table to illustrate how the 
cost and burden estimates vary with increasing or decreasing thresholds 
relative to those selected in this rule. These variations are important 
in understanding how alternative thresholds would compare to the ones 
selected. We also include entries reflecting the baseline (current 
program without GHG permitting) and the burdens if we immediately 
implemented the full statutory thresholds on January 2, 2011, without 
tailoring or streamlining.
3. ``Absurd Results,'' ``Administrative Necessity,'' and ``One-Step-at-
a-Time'' Legal Doctrines
a. Introduction and Summary
    Having described the factual underpinnings of our action, which are 
the costs to sources and administrative burdens to permitting 
authorities, we now describe the legal underpinnings. They involve the 
framework for analyzing agency-administered statutes, as established by 
the U.S. Supreme Court in Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 
842-43 (1984). In this case, Chevron framework must take into account 
the ``absurd results,'' ``administrative necessity,'' and ``one-step-
at-a-time'' legal doctrines. We believe that each of these doctrines 
provides independent support for our action, but in addition, the three 
doctrines are directly intertwined and can be considered in a 
comprehensive and interconnected manner. Moreover, although each of the 
three doctrines pre-date the 1984 Chevron decision, in which the U.S. 
Supreme Court established the framework for construing agency-
administered statutes, each fits appropriately into the Chevron 
framework.\24\
---------------------------------------------------------------------------

    \24\ Although we set out an analysis of how the three doctrines 
fit into the Chevron framework, we note that even if the doctrines 
are viewed independently of the Chevron framework, they support this 
action.
---------------------------------------------------------------------------

    To reiterate, for convenience, the statutory provisions at issue: 
Congress, through the definition of ``major emitting facility,'' 
applied the PSD program to include ``any * * * source [that] emit[s], 
or ha[s] the potential to emit, one hundred [or, depending on the 
source category two hundred fifty] tons per year or more of any air 
pollutant.'' CAA sections 165(a), 169(1). In addition, Congress, 
through the definition of ``modification,'' applied the PSD program to 
include ``any physical change in, or change in the method of operation 
of, a stationary source which increases the amount of any air pollutant 
emitted by such source or which results in the emission of any air 
pollutant not previously emitted.'' CAA sections 165(a), 169(2)(C), 
111(a)(4). Similarly, Congress, through the definition of ``major 
source,'' specified that the title V program includes ``any stationary 
facility or source of air pollutants which directly emits, or has the 
potential to emit, one hundred tons per year or more of any air 
pollutant.'' CAA sections 502(a), 501(2)(B), 302(j). EPA, through long-
established regulatory action, in the case of PSD, and long-established 
guidance, in the case of title V, has interpreted these definitions 
narrowly so that they apply only with respect to air pollutants that 
are subject to regulation under the CAA.
    Applying these definitions by their terms, as interpreted narrowly 
by EPA, to GHG sources at the present time would mean that the PSD and 
title V programs would apply to an extraordinarily large number of 
small sources, the sources would incur unduly high compliance costs, 
and permitting authorities would face overwhelming administrative 
burdens. As a result, we believe Congress did not intend for us to 
follow this literal reading, and instead, with this action, we chart a 
course for tailoring the applicability provisions of the PSD program 
and the title V program by phasing them in over time to the prescribed 
extent.
    For our authority to take this action, we rely in part on the 
``absurd results'' doctrine, because applying the PSD and title V 
requirements literally (as previously interpreted narrowly by

[[Page 31542]]

EPA) would not only be inconsistent with congressional intent 
concerning the applicability of the PSD and title V programs, but in 
fact would severely undermine congressional purpose for those programs. 
We also rely on the ``administrative necessity'' doctrine, which 
applies because construing the PSD and title V requirements literally 
(as previously interpreted narrowly by EPA) would render it impossible 
for permitting authorities to administer the PSD provisions. The 
tailoring approach we promulgate in this action is consistent with both 
doctrines. It is also consistent with a third doctrine, the ``one-step-
at-a-time'' doctrine, which authorizes administrative agencies under 
certain circumstances to address mandates through phased action.
    Our discussion of the legal bases for this rule is organized as 
follows: In this section V.B.3, we provide an overview of the three 
doctrines and describe how they fit into the Chevron framework for 
statutory construction. In section V.B.4, we discuss the PSD and title 
V programs, including each program's relevant statutory provisions, 
legislative history, and regulatory history. In sections V.B.5 and 
V.B.6 we discuss the ``absurd results'' approach for PSD and title V, 
respectively, that we are finalizing in our action. In section V.B.7., 
we discuss additional rulemaking in which we may consider exempting 
certain categories of sources from PSD and title V under the ``absurd 
results'' doctrine. In section V.B.8, we discuss the legal and policy 
rationale for the phase-in schedule that we are adopting for applying 
PSD and title V to GHG sources. In section V.B.9 we discuss the 
``administrative necessity'' approach for PSD and title V, 
respectively. In section V.B.10, we discuss the third legal basis for 
our action, the ``one-step-at-a-time'' doctrine.
b. The ``Absurd Results'' Doctrine
    Turning first to the ``absurd results'' doctrine, we note at the 
outset that we discussed the doctrine at length in the notice of 
proposed rulemaking, and we incorporate by reference that discussion, 
although we make some refinements to that discussion in this preamble. 
The starting point for EPA's interpretation of the PSD and title V 
applicability provisions and reliance on the ``absurd results'' 
doctrine is the familiar Chevron two-step analysis. We discuss this 
analysis in greater detail later, but in brief, in interpreting a 
statutory provision, an agency must, under Chevron Step 1, determine 
whether Congress's intent on a particular question is clear; if so, 
then the agency must follow that intent. If the intent of the provision 
is not clear, then the agency may, under Step 2, fashion a reasonable 
interpretation of the provision. Chevron U.S.A. Inc. v. NRDC, 467 U.S. 
837, 842-43 (1984).
    The courts consider the best indicator of congressional intent to 
be the plain meaning of the statute. However, the U.S. Supreme Court 
has held that the literal meaning of a statutory provision is not 
conclusive ``in the `rare cases [in which] the literal application of a 
statute will produce a result demonstrably at odds with the intentions 
of the drafters' * * * [in which case] the intention of the drafters, 
rather than the strict language, controls.'' United States v. Ron Pair 
Enterprises, 489 U.S. 235, 242 (1989). This doctrine of statutory 
interpretation may be termed the ``absurd results'' doctrine.
    Although, as just noted, the U.S. Supreme Court has described the 
``absurd results'' cases as ``rare,'' in that case the Court seemed to 
be referring to the small percentage of statutory-construction cases 
that are decided on the basis of the doctrine. The DC Circuit, in 
surveying the doctrine over more than a century of jurisprudence, 
characterized the body of law in absolute numbers as comprising 
``legions of court decisions.'' In re Franklyn C. Nofziger, 925 F.2d 
428, 434 (DC Cir. 1991). Indeed, there are dozens of cases, dating from 
within the past several years to well into the 19th century,\25\ in 
which the U.S. Supreme Court has applied the ``absurd results'' 
doctrine to avoid the literal application of a statute, or if not so 
holding, has nevertheless clearly acknowledged the validity of the 
doctrine. Some of the more recent of these cases include: Logan v. 
United States, 552 U.S. 23, 36-37 (2007) (``[s]tatutory terms, we have 
held, may be interpreted against their literal meaning where the words 
`could not conceivably have been intended to apply' to the case at hand 
[citation omitted]''); Nixon v. Missouri Municipal League, 541 U.S. 
125, 132-33 (2004) (``any entity'' includes private but not public 
entities); Raygor v. Regents of Univ. of Minn., 534 U.S. 533, 542-45 
(2002) (``implying a narrow interpretation of * * * `any claim 
asserted' so as to exclude certain claims dismissed on Eleventh 
Amendment grounds''); United States v. X-Citement Video, Inc., 513 U.S. 
64, 69 (1994) (rejecting a literal interpretation of the statutory term 
``knowingly'' on grounds that Congress could not have intended the 
``positively absurd'' results that some applications of such an 
interpretation would produce, ``[f]or instance, a retail druggist who 
returns an uninspected roll of developed film to a customer ``knowingly 
distributes'' a visual depiction and would be criminally liable if it 
were later discovered that the visual depiction contained images of 
children engaged in sexually explicit conduct''); Rowland v. Cal. Men's 
Colony, 506 U.S. 194, 200 (1993) (finding that an artificial entity 
such as an association is not a ``person'' under the statute, and 
describing the absurdity doctrine as a ``common mandate of statutory 
construction''); United States v. Ron Pair Enterprises, 489 U.S. 235, 
242 (1989) (the plain meaning of a statutory provision is not 
conclusive ``in the `rare cases [in which] the literal application of a 
statute will produce a result demonstrably at odds with the intentions 
of the drafters' * * * [in which case] the intention of the drafters, 
rather than the strict language, controls''); Green v. Bock Laundry 
Machine Company, 490 U.S. 504 (1989) (provision in Federal Rule of 
Evidence that protects ``the defendant'' against potentially 
prejudicial evidence, but not the plaintiff, refers to only criminal, 
and not civil, defendants); Public Citizen v. United States Dep't of 
Justice, 491 U.S. 440, 453-54 (1989) (rejecting a broad, 
straightforward reading of the term ``utilize,'' on grounds that a 
literal reading would appear to require the absurd result that all of 
FACA's restrictions apply if a President consults with his own 
political party before picking his Cabinet, and such a reading ``was 
unmistakably not Congress' intention''); Watt v. Alaska, 451 U.S. 259, 
266 (1981) (rejecting reliance on plain statutory language and 
concluding that the term ``minerals'' in section 401(a) of the Wildlife 
Refuge Revenue Sharing Act applies only to minerals on acquired refuge 
lands; stating ``[t]he circumstances of the enactment of particular 
legislation may persuade a

[[Page 31543]]

court that Congress did not intend words of common meaning to have 
their literal effect''); Train v. Colorado Public Interest Research 
Group, Inc., 426 U.S. 1, 23-24 (1976) (prohibition in Federal Water 
Pollution Control Act against discharging into navigable waters 
``pollutants,'' which are defined to include ``radioactive materials,'' 
does not apply to three specific types of radioactive materials); 
Jackson v. Lykes Bros. S.S. Co., 386 U.S. 731, 735 (1967) (refusing to 
distinguish between a longshoreman hired by ``an independent stevedore 
company'' and one hired by ``the shipowner * * * to do exactly the same 
kind of work,'' despite the clear terms of the Act, and stating: ``[w]e 
cannot hold that Congress intended any such incongruous, absurd, and 
unjust result in passing this Act,'' when the Act was ``designed to 
provide equal justice to every longshoreman similarly situated''); 
Lynch v. Overholser, 369 U.S. 705, 710, (1962) (statutory construction 
is not confined to the ``bare words of a statute''); United States v. 
Bryan, 339 U.S. 323, 338 (1950) (``Despite the fact that the literal 
language would encompass testimony elicited by the House Committee in 
its questioning of respondent relative to the production of the records 
of the association, the Court will not reach that result if it is 
contrary to the congressional intent and leads to absurd conclusions. 
And we are clearly of the opinion that the congressional purpose would 
be frustrated if the words, ``in any criminal proceeding,'' were read 
to include a prosecution for willful default under R.S. Sec.  
102.'').\26\
---------------------------------------------------------------------------

    \25\ For early cases in which the U.S. Supreme Court applied the 
``absurd results'' doctrine, see Holy Trinity Church v. U.S., 143 
U.S. 457, 516-17 (1892) (``any alien'' does not include a foreign 
pastor; Court stated, ``It is a familiar rule, that a thing may be 
within the letter of the statute and yet not within the statute, 
because not within its spirit, nor within the intention of its 
makers * * *. If a literal construction of the words be absurd, the 
Act must be construed as to avoid the absurdity''); Chew Heong v. 
United States, 112 U.S. 536, 555 (1884) (rejecting a literal 
interpretation of treaty that would have prevented the re-entry of a 
person into the U.S. upon the ground that he did not possess a 
certificate which did not exist prior to his departure, and which 
could not possibly have been issued); Heyenfeldt v. Daney Gold 
Mining Co., 93 U.S. 634, 638 (1877) (statutory language expressly 
referred to past land sales and dispositions, ``but evidently they 
were not employed in this sense, for no lands in Nevada had been 
sold or disposed of by any act of Congress,'' and the language of 
the statute ``could not * * * apply to past sales or dispositions, 
and, to have any effect at all, must be held to apply to the 
future'').
    \26\ For other U.S. Supreme Court cases, see Utah Junk Co. v. 
Porter, 328 U.S. 39, 44 (1946) (``literalness may strangle 
meaning''); Markham v. Cabell, 326 U.S. 404, 409 (1945) (``The 
policy as well as the letter of the law is a guide to decision.''); 
United States v. American Trucking Associations, Inc. 310 U.S. 534 
(1940) (the term ``employees'' in the Federal Motor Carrier Act, is 
limited to employees whose activities affect safety); C.V. Sorrels 
v. U.S., 287 U.S. 435, 446-49 (1932) (provisions of National 
Prohibition Act that criminalize possessing and selling liquor do 
not apply if defendant is entrapped; Court declines to apply the 
``letter of the statute'' because doing so ``in the circumstances 
under consideration is foreign to its purpose''); United States v. 
Katz, 271 U.S. 354, 362 (1926) (holding that the statutory words 
``no person'' refer only to persons authorized under other 
provisions of the Act to traffic alcohol, thus rejecting a literal 
application of general terms descriptive of a class of persons made 
subject to a criminal statute); Hawaii v. Mankichi, 190 U.S. 197, 
212-14 (1903) (refusing to adopt a literal application of the 
``Newlands resolution'' which would have entitled every criminal in 
the State of Hawaii convicted of an offense between 1898-1900 to be 
set at large, as ``surely such a result could not have been within 
the contemplation of Congress'').
---------------------------------------------------------------------------

    The DC Circuit has also handed down numerous decisions that applied 
the absurd results doctrine to avoid a literal interpretation or 
application of statutory provisions or that have acknowledged the 
doctrine. Some of the most recent ones include: Arkansas Dairy 
Cooperative Ass'n, Inc., v. U.S. Dep't of Agriculture, 573 F.3d 815 (DC 
Cir. 2009) (rejecting the canon of construction that presumes that 
Congress is aware of existing law pertinent to the legislation that it 
enacts, when in this case, the presumption that Congress was aware of 
the Departments definition of ``hearing'' would lead to ``the absurd 
result that Congress intended to impose a requirement with which the 
Secretary could not comply;'' stating: ``Courts, `in interpreting the 
words of a statute, [have] some scope for adopting a restricted rather 
than a literal or usual meaning of its words where acceptance of that 
meaning would lead to absurd results * * * or would thwart the obvious 
purpose of the statute * * *.' '' (quoting In re Trans Alaska Pipeline 
Rate Cases, 436 U.S. 631, (1978)); Buffalo Crushed Stone, Inc. v. 
Surface Transportation Board, 194 F.3d 125, 129-30 (DC Cir. 1999) 
(regulation of Surface Transportation Board providing that if a notice 
of exemption ``contains false or misleading information, the use of the 
exemption is void ab initio'' does not apply to a notice containing 
false information when declaring the notice void ab initio would 
undermine the goals of the governing statute; a conflict between the 
``literal application of statutory language'' and maintaining the 
integrity of the regulatory scheme should be resolved by construing the 
text in accordance with its purpose); Mova Pharm. Corp. v. Shalala, 140 
F.3d 1060, 1068-69 (DC Cir. 1998) (as discussed later, describes the 
``absurd results'' doctrine in the context of the Chevron framework for 
statutory construction; invalidates a Food and Drug Administration's 
(FDA) regulation designed to remedy what the FDA described as the 
absurd result of a literal application of the statutory provisions 
governing FDA approval of successive generic drug applications, on 
grounds that ``[i]n effect, the FDA has embarked upon an adventurous 
transplant operation in response to blemishes in the statute that could 
have been alleviated with more modest corrective surgery;'' states that 
``[t]he rule that statutes are to be read to avoid absurd results 
allows an agency to establish that seemingly clear statutory language 
does not reflect the ``unambiguously expressed intent of Congress,'' 
Chevron, 467 U.S. at 842, and thus to overcome the first step of the 
Chevron analysis''); Environmental Defense Fund v. EPA, 82 F.3d 451, 
468-69 (DC Cir. 1996) (although Act requires that a federal action 
conform to the SIP that is currently in place, EPA may instead require 
conformity to a revised implementation plan that state commits to 
develop; ``[t]his is one of those rare cases * * * [that] requires a 
more flexible, purpose-oriented interpretation if we are to avoid 
`absurd or futile results.' ''); American Water Works Ass'n v. EPA, 40 
F.3d 1266, 1271 (DC Cir. 1994) (holding that EPA's interpretation of 
the term ``feasible'' so as to require a treatment technique instead of 
a maximum contaminant level (MCL) for lead is reasonable; the court 
stated: ``Indeed, where a literal reading of a statutory term would 
lead to absurd results, the term simply `has no plain meaning * * * and 
is the proper subject of construction by the EPA and the courts.' If 
the meaning of `feasible' suggested by the NRDC is indeed its plain 
meaning, then this is such a case; for it could lead to a result 
squarely at odds with the purpose of the Safe Drinking Water Act.'' 
(quoting Chem. Mfrs. Ass'n v. Natural Res. Def. Council, Inc., 470 U.S. 
116, 126 (1985)) (citation omitted); In re Nofziger, 925 F.2d 428, 434-
35 (DC Cir. 1991) (provision authorizing payment of attorney fees to 
the subject of an investigation conducted by an independent counsel of 
the Department of Justice only if ``no indictment is brought'' against 
such individual does not preclude payment of attorney fees when an 
indictment is brought but is determined to be invalid).
c. The ``Administrative Necessity'' Doctrine
    In the proposed rulemaking, we also described in detail the 
``administrative necessity'' doctrine, 74 FR 55311 col. 3 to 55318 col. 
3, and we incorporate that discussion by reference into this notice. 
Under this doctrine, if a statutory provision, however clear on its 
face, is impossible for the agency to administer, then the agency is 
not required to follow the literal requirements, and instead, the 
agency may adjust the requirements in as refined a manner as possible 
to assure that the requirements are administrable, while still 
achieving Congress's overall intent. The DC Circuit set out the 
doctrine of ``administrative necessity'' in a line of cases that most 
prominently includes Alabama Power v. Costle, 636 F.2d 323 (DC Cir. 
1980). The Court cited the doctrine most recently in New York v. EPA, 
443 F.3d 880, 884, 888 (DC Cir. 2006).
    As we stated in the proposed rulemaking, ``We believe that the 
``administrative necessity'' case law establishes a three-step process 
under which an administrative agency may, under the appropriate 
circumstances, in

[[Page 31544]]

effect revise statutory requirements that the agency demonstrates are 
impossible to administer so that they are administrable.'' 74 FR 55315 
col. 1. Specifically:

    [T]he three steps are as follows: When an agency has identified 
what it believes may be insurmountable burdens in administering a 
statutory requirement, the first step the agency must take is to 
evaluate how it could streamline administration as much as possible, 
while remaining within the confines of the statutory requirements. 
The second step is that the agency must determine whether it can 
justifiably conclude that even after whatever streamlining of 
administration of statutory requirements (consistent with those 
statutory requirements) it conducts, the remaining administrative 
tasks are impossible for the agency because they are beyond its 
resources, e.g., beyond the capacities of its personnel and funding. 
If the agency concludes with justification that it would be 
impossible to administer the statutory requirements, as streamlined, 
then the agency may take the third step, which is to phase in or 
otherwise adjust the requirements so that they are administrable. 
However, the agency must do so in a manner that is as refined as 
possible so that the agency may continue to implement as fully as 
possible Congressional intent.

74 FR 55315 cols. 1-2.

    It should also be noted that we believe the administrative burdens 
encountered by the state and local permitting authorities are fully 
relevant under the ``administrative necessity'' doctrine. Although the 
case law that discusses the doctrine focuses on federal agencies (see 
74 FR 55312-14), under the CAA, state and local agencies are EPA's 
partners in implementing provisions of the CAA, and have primary 
responsibility for implementing the PSD program. They generally adopt 
EPA's PSD requirements in their SIPs, as required under CAA section 
110(a)(2)(C); and they generally adopt EPA's title V requirements in 
their title V programs, as required under CAA section 502(d). They 
issue the PSD and title V permits and are responsible in the first 
instance for enforcing the terms of the permits. In all these respects, 
the law that the state and local permitting authorities administer is 
both federal and state law. Under certain circumstances, EPA may become 
responsible for permit issuance and enforcement in the first instance, 
but even then, EPA may, and frequently has, delegated those duties to a 
state, in which case, the state implements federal law directly. Thus, 
although the PSD and title V programs are federal requirements, for the 
most part, it is the states that implement those programs. For this 
reason, the administrative burdens that the states face in implementing 
the programs are relevant in determining the applicability of the 
``administrative necessity'' doctrine.
d. ``One-Step-at-a-Time'' Doctrine
    In addition to the ``absurd results'' and ``administrative 
necessity'' doctrines, another judicial doctrine supports at least part 
of EPA's Tailoring Rule, and that is the doctrine that agencies may 
implement statutory mandates one step at a time, which we will call the 
``one-step-at-a-time'' doctrine. In the notice of proposed rulemaking, 
we also described this doctrine and recent case law applying it. 74 FR 
55319 col. 1-3. As we noted, that the U.S. Supreme Court recently 
described the doctrine in Massachusetts v. EPA, 549 U.S. 497, 524 
(2007), as follows: ``Agencies, like legislatures, do not generally 
resolve massive problems in one fell regulatory swoop;'' and instead 
they may permissibly implement such regulatory programs over time, 
``refining their preferred approach as circumstances change and as they 
develop a more nuanced understanding of how best to proceed.'' We 
assume familiarity with our discussion in the proposal, but we expand 
upon it here to review the case law in greater detail and to highlight 
certain components of the doctrine that are particularly relevant to 
the Tailoring Rule. The roots of the doctrine go back at least to the 
DC Circuit's 1979 decision in United States Brewers Association, Inc. 
v. EPA, 600 F.2d 974 (DC Cir. 1979). There, the Court considered a 
challenge to EPA's guidelines for managing beverage containers, which 
EPA was required to promulgate under the Resource Conservation and 
Recovery Act of 1976 (RCRA). RCRA gave EPA one year to promulgate the 
guidelines. EPA promulgated a partial set of guidelines, started two 
others, and was challenged before the year was out by petitioners who 
objected to the initial guideline, saying it fell short of the 
statutory mandate. The Court upheld the initial guideline, stating: 
``Under these circumstances we think the question of whether the Agency 
has fully satisfied the mandate of the statute is not fit for judicial 
review at this time, when the Agency, still well within the one-year 
period granted by statute, is deeply involved in the process of 
formulating rules designed to carry out the congressional mandate. The 
Agency might properly take one step at a time.'' States Brewers 
Association, Inc. v. EPA, 600 F.2d at 982.
    The Court addressed the doctrine at greater length in National 
Association of Broadcasters v. FCC, 740 F.2d 1190, 1209-14 (DC Cir. 
1984). There, the Court noted that under certain statutory schemes, 
step-by-step agency action might not be authorized; but the Court 
emphasized that when it is authorized, it may offer significant 
benefits; and the Court went on to delineate some of the circumstances 
under which its use is justified. In that case, the Court held that 
Federal Communications Commission (FCC) acted reasonably in making a 
spectrum allocation decision that granted direct broadcast satellite 
service priority use of a gigahertz (GHz) band in 5-years time, and--
although acknowledging that fixed service users that were, at that 
time, using that band, would have to relocate to other bands--in 
postponing the details of the fixed service relocation to future 
proceedings. The Court described in some detail ``[t]he circumstances 
under which * * * [an] agency may defer resolution of problems raised 
in a rulemaking,'' as follows:

    The requisite judgment is in essence a pragmatic one. In an 
ideal world, of course, agencies would act only after comprehensive 
consideration of how all available alternatives comported with a 
well-defined policymaking objective, and in some circumstances, 
statutes indeed mandate that agencies proceed by only such a course 
* * *. But administrative action generally occurs against a shifting 
background in which facts, predictions, and policies are in flux and 
in which an agency would be paralyzed if all the necessary answers 
had to be in before any action at all could be taken * * *. We have 
therefore recognized the reasonableness of [an agency's] decision to 
engage in incremental rulemaking and to defer resolution of issues 
raised in a rulemaking even when those issues are ``related'' to the 
main ones being considered * * *. At the same time, [an agency] 
cannot `restructure [an] entire industry on a piecemeal basis' 
through a rule that utterly fails to consider how the likely future 
resolution of crucial issues will affect the rule's rationale * * *.
    Drawing a line between the permissible and the impermissible in 
this area will generally raise two questions. First the agency will 
likely have made some estimation, based upon evolving economic and 
technological conditions, as to the nature and magnitude of the 
problem it will have to confront when it comes to resolve the 
postponed issue. With regard to this aspect of the agency's 
decision, as long as the agency's predictions about the course of 
future events are plausible and flow from the factual record 
compiled, a reviewing court should accept the agency's estimation * 
* *. Second, once the nature and magnitude of the unresolved issue 
is determined, the relevant question is whether it was reasonable, 
in the context of the decisions made in the proceeding under review, 
for the agency to have deferred the issue to the future. With 
respect to that question, postponement will be most easily justified 
when an agency acts against a background of rapid technical and 
social change and when

[[Page 31545]]

the agency's initial decision as a practical matter is reversible 
should the future proceedings yield drastically unexpected results. 
In contrast, an incremental approach to agency decision making is 
least justified when small errors in predictive judgments can have 
catastrophic effects on the public welfare or when future 
proceedings are likely to be systematically defective in taking into 
account certain relevant interests * * *.

740 F.2d at 1210-11 (citations omitted).

    In City of Las Vegas v. Lujan, 891 F.2d 927 (DC Cir. 1989), the 
Court suggested that one component of upholding partial agency 
compliance with a statutory directive is evidence that the agency was 
on track for full compliance. There, the Court upheld the Department of 
Interior's decision to list the population of desert tortoises living 
north and west of the Colorado River (the ``Mojave'' population) as 
endangered species, but not the nearby population living south and east 
of the river (the ``Sonoran'' population). The agency explained that 
the Mojave population faced certain threats that the Sonoran population 
did not, and the Court found nothing to fault in that reasoning. The 
Court added: ``Since agencies have great discretion to treat a problem 
partially, we would not strike down the listing if it were a first step 
toward a complete solution, even if we thought it `should' have covered 
both the Mojave and Sonoran populations.'' City of Las Vegas v. Lujan, 
891 F.2d 927, 935 (DC Cir. 1989) (footnote omitted).
    In Grand Canyon Air Tour Coalition v. F.A.A., 154 F.3d 455 (DC Cir. 
1998), the DC Circuit added another component to the ``one-step-at-a-
time'' doctrine: While reiterating that ``ordinarily, agencies have 
wide latitude to attack a regulatory problem in phases and that a 
phased attack often has substantial benefits,'' id. at 471, the Court 
went on to uphold partial agency action even when that action was long-
delayed. There, the relevant statute was the Overflights Act, which 
required the Federal Aviation Administration (FAA) to reduce aircraft 
noise from sightseeing tours in Grand Canyon National Park, and 
established the goal of ``substantial restoration of natural quiet and 
experience of the park.'' The statute required the agency to develop a 
plan to implement the statutory requirements within 120 days after 
enactment, and report to Congress within 2 years after the date of the 
plan as to the plan's success. In fact, the FAA did not develop, 
through rulemaking, a plan until ten years after enactment, and when it 
did, it acknowledged that the plan was only a partial one, and that it 
would need two more rules and another ten years to meet the statutory 
goal of substantial restoration. Although recognizing that the 
Overflights Act did not establish an explicit timetable for meeting the 
statutory goal, the Court stated that ``[t]he language of the 
Overflights Act does manifest a congressional concern with expeditious 
agency action,'' and described the agency's action variously as 
``tardy,'' ``undeniably slow,'' and ``slow and faltering.'' Id. at 476-
77. Even so, the Court upheld the FAA's action against different 
challenges from appellants and intervenors that (i) the agency acted 
unreasonably in not promulgating a complete plan to meet the statutory 
goal, instead of promulgating just the first step; and (ii) the agency 
acted unreasonably in not waiting until it had a complete plan before 
promulgating the first step. The Court stated: ``We agree that it would 
be arbitrary and capricious for an agency simply to thumb its nose at 
Congress and say--without any explanation--that it simply does not 
intend to achieve a congressional goal on any timetable at all * * *,'' 
but went on to emphasize that the FAA's rule was the first of three 
that the agency assured would achieve the statutory goal. The Court 
cited City of Las Vegas v. Lujan, discussed previously, for the 
proposition that ``a court will not strike down agency action `if it 
were a first step toward a complete solution.' '' Grand Canyon Air Tour 
Coalition v. F.A.A., 154 F.3d 455, 477-78 (DC Cir. 1998).\27\
---------------------------------------------------------------------------

    \27\ For other cases, see Arizona Public Service Co. v. EPA, 562 
F.3d 1116, 1125-26 (10th Cir. 2009); General American Transp. Corp. 
v. ICC, 872 F.2d 1048, 1058 (DC Cir. 1989); Hazardous Waste 
Treatment Council v. EPA, 861 F.2d 277, 287 (DC Cir. 1988); Western 
Union International, Inc. v. FCC, 725 Fl2d 732, 754 (DC Cir. 1984).
---------------------------------------------------------------------------

e. Consistency of Doctrines With Chevron Framework
    Although the formation of the ``absurd results,'' ``administrative 
necessity,'' and ``one-step-at-a-time'' doctrines pre-date the Chevron 
two-step analysis for construing statutes that Congress has authorized 
an agency to administer, we believe that the doctrines can be 
considered very much a part of that analysis, and courts have continued 
to apply them post-Chevron. Under Chevron Step 1, an agency must 
determine whether ``Congress has directly spoken to the precise 
question at issue.'' If so, ``the court, as well as the agency, must 
give effect to the unambiguously expressed intent of Congress.'' 
However, if ``the statute is silent or ambiguous with respect to the 
specific issue, the question for the court is whether the agency's 
answer is based on a permissible construction of the statute.''
    Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-42 (1984).

    Thus, Step 1 under Chevron calls for determining congressional 
intent for the relevant statutory directive on the specific issue 
presented. To determine Congress's intent, the agency must look first 
to the statutory terms in question, and generally interpret them 
according to their literal meaning, within the overall statutory 
context, and perhaps with reference to the legislative history. If the 
literal meaning of the statutory requirements is clear then, absent 
indications to the contrary, the agency must take it to indicate 
congressional intent and must implement it. Even if the literal meaning 
of the statutory requirements is not clear, if the agency can otherwise 
find indications of clear congressional intent, such as in the 
legislative history, then the agency must implement that congressional 
intent.
    The DC Circuit has indicated that the ``absurd results'' doctrine 
fits into the Chevron Step 1 analysis in the following way: Recall that 
in the cases in which the courts have invoked this doctrine, the 
literal meaning of the statutory requirements has been clear, but has 
led to absurd results. This can occur when the literal meaning, when 
applied to the specific question, conflicts with other statutory 
provisions, contradicts congressional purpose as found in the 
legislative history--and, in particular, undermines congressional 
purpose--or otherwise produces results so illogical or otherwise 
contrary to sensible public policy as to be beyond anything Congress 
would reasonably have intended. See United States v. Ron Pair 
Enterprises, 489 U.S. 235, 242-43 (1989); Griffin v. Oceanic 
Contractors, Inc., 458 U.S. 564, 571 (1982).
    Under these circumstances, the agency must not take the literal 
meaning to indicate congressional intent. As the DC Circuit has 
explained, ``where a literal reading of a statutory term would lead to 
absurd results, the term `simply has no plain meaning * * * and is the 
proper subject of construction by the EPA and the court.' '' American 
Water Works Assn v. EPA, 40 F.3d 1266, 1271 (DC Cir. 1994) (quoting 
Chemical Manufacturers' Association v. NRDC, 470 U.S. 116, 126 (1985)). 
Under these circumstances, if the agency can find other indications of 
clear congressional intent, then the agency must implement that intent. 
See United States v. Ron Pair Enterprises, 489 U.S. 235, 242-43 (1989). 
This may mean implementing the statutory terms, albeit not in 
accordance with their literal meaning,

[[Page 31546]]

but in a way that achieves a result that is as close as possible to 
congressional intent. As the DC Circuit said in Mova Pharm. Corp. v. 
Shalala, 140 F.3d 1060 (DC Cir. 1998):

    The rule that statutes are to be read to avoid absurd results 
allows an agency to establish that seemingly clear statutory 
language does not reflect the ``unambiguously expressed intent of 
Congress,'' * * * and thus to overcome the first step of the Chevron 
analysis. But the agency does not thereby obtain a license to 
rewrite the statute. When the agency concludes that a literal 
reading of a statute would thwart the purposes of Congress, it may 
deviate no further from the statute than is needed to protect 
congressional intent * * *. [T]he agency might be able to show that 
there are multiple ways of avoiding a statutory anomaly, all equally 
consistent with the intentions of the statute's drafters * * *. In 
such a case, we would move to the second stage of the Chevron 
analysis, and ask whether the agency's choice between these options 
was ``based on a permissible construction of the statute.'' 
Otherwise, however, our review of the agency's deviation from the 
statutory text will occur under the first step of the Chevron 
analysis, in which we do not defer to the agency's interpretation of 
the statute.

Id. at 1068 (quoting Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842, 
843 (1984) (citations omitted)).

    The ``administrative necessity'' doctrine is not as well developed 
as the ``absurd results'' doctrine, so that the courts have not had 
occasion to explicitly describe how the doctrine fits into the Chevron 
analytical framework. However, we think that a reasonable approach, in 
line with the DC Circuit's approach to the ``absurd results'' doctrine 
as just described, is as follows: Recall that under the 
``administrative necessity'' doctrine, an agency is not required to 
implement a statutory provision in accordance with the literal 
requirements when doing so would be impossible, but the agency must 
nevertheless implement the provision as fully as possible. Placed in 
the context of the Chevron framework, we think that that the 
``administrative necessity'' doctrine is based on the premise that 
inherent in the statutory design is the presumption that Congress does 
not intend to impose an impossible burden on an administrative agency. 
See Alabama Power v. Costle, 636 F.2d 323, 357 (DC Cir. 1980) 
(describing the ``administrative necessity'' approach as one of the 
``limited grounds for the creation of exemptions [that] are inherent in 
the administrative process, and their unavailability under a statutory 
scheme should not be presumed, save in the face of the most unambiguous 
demonstration of congressional intent to foreclose them'').
    Therefore, if the literal meaning of a statutory directive would 
impose on an agency an impossible administrative burden, then that 
literal meaning should not be considered to be indicative of 
congressional intent. Rather, congressional intent should be considered 
to achieve as much of the statutory directive as possible. As a result, 
the agency must adopt an approach that implements the statutory 
directive as fully as possible. This is consistent with the DC 
Circuit's holding in Mova Pharm. Corp that if congressional intent is 
clear, but the plain meaning of a statute does not express that intent, 
then the agency must, under Chevron Step 1, select an interpretation 
that most closely approximates congressional intent. Mova Pharm. Corp, 
140 F.3d at 1068.\28\
---------------------------------------------------------------------------

    \28\ We recognize that we described the relationship between the 
Chevron framework and the ``administrative necessity'' doctrine 
somewhat differently in the proposal, 74 FR 55312, and that, after 
further analysis, we are refining our view of that relationship as 
described previously.
---------------------------------------------------------------------------

    The ``one-step-at-a-time'' doctrine fits into the Chevron framework 
in much the same manner that the ``administrative necessity'' doctrine 
does. That is, inherent in the statutory design is the presumption that 
Congress intended an agency, under certain circumstances, to implement 
the statutory requirements in a one-step-at-a-time fashion, as long as 
the agency stays on a path towards full implementation.
    Under all of the circumstances described previously, congressional 
intent is clear--whether it is indicated by the plain language or 
otherwise--and as a result, the agency must follow that intent under 
Chevron Step 1. On the other hand, the agency may determine that 
congressional intent on the specific issue is not clear. In these 
cases, the agencies should proceed to Chevron Step 2 and select an 
interpretation or an application that is a permissible construction of 
the statute. This situation generally occurs when the statutory 
provisions are ambiguous or silent as to the specific issue, and there 
are no other indications of clear congressional intent. In addition, in 
some cases in which the literal meaning of the statutory provision, 
when applied to the specific question, leads to an absurd result--and, 
therefore, the statutory provision should be considered not to have a 
plain meaning--there may be no other indications of clear congressional 
intent. Under all these circumstances, the agency is authorized, under 
Chevron Step 2, to develop and implement a construction of the statute 
that the courts will uphold as long as it is reasonable.
    As noted previously, the DC Circuit, has pointed out that this 
situation may also occur when the literal language leads to an absurd 
result, and, in attempting to implement congressional intent, the 
agency is ``able to show that there are multiple ways of avoiding a 
statutory anomaly, all equally consistent with the intentions of the 
statute's drafters * * *. In such a case, we would move to the second 
stage of the Chevron analysis, and ask whether the agency's choice 
between these options was `based on a permissible construction of the 
statute.' '' Mova Pharm. Corp, 140 F.3d at 1068. As the U.S. Supreme 
Court has recently said, although in a context different than ``absurd 
results,'' ``In the end, the interpretation applied by EPA ``governs if 
it is a reasonable interpretation of the statute--not necessarily the 
only possible * * * interpretation, nor even the interpretation deemed 
most reasonable by the courts.'' Entergy Corp. v. Riverkeeper, Inc., 
129 S.Ct. 1498. 1505 (2009).
    As a related matter, although the courts have described Chevron 
Step 2 as requiring that the agency's policy be ``a permissible 
construction of the statute,'' see Mova Pharm. Corp, 140 F.3d at 1068 
(quoting Chevron, 467 U.S. at 842-43), if the statutory requirements 
cannot be read literally because doing so would produce ``absurd 
results,'' then the agency's policy need not be completely consistent 
with those particular requirements. The policy must still, in order to 
be upheld, be consistent with Congress's actions, but those actions 
should be considered to afford the agency broad discretion considering 
that both the statutory terms cannot be considered dispositive and 
underlying congressional intent is not clear. As the U.S. Supreme Court 
has recently said, although in a context different than ``absurd 
results,'' In the end, the interpretation applied by the agency governs 
if it is a reasonable interpretation of the statute--not necessarily 
the only possible * * * interpretation, nor even the interpretation 
deemed most reasonable by the courts.'' Entergy Corp. v. Riverkeeper, 
Inc., 129 S.Ct. 1498. 1505 (2009).
    There is another aspect of the ``administrative necessity'' 
doctrine worth noting in this context: The doctrine applies when (i) a 
literal application of the statutory directive to the case at hand is 
impossible for the agency to administer; and (ii) even so, either 
Congress clearly intended the statutory directive to apply to the case

[[Page 31547]]

at hand or, if Congress did not clearly intend that, then the agency 
reasonably construes the statute to apply the statutory directive to 
the case at hand. In contrast, if Congress did not intend the statutory 
directive to apply to the case at hand, or if congressional intent is 
uncertain and the agency considers another approach to be reasonable, 
then the ``administrative necessity'' doctrine would not apply. As a 
result, the agency would not be required to implement the statutory 
directive to the case at hand at all, much less in a more administrable 
fashion.
f. Interconnectedness of the Legal Doctrines
    Although we believe that each of the ``absurd results,'' 
``administrative necessity,'' and ``one-step-at-a-time'' doctrines 
provide independent support for our action, we also believe that in 
this case, the three doctrines are intertwined and form a comprehensive 
basis for EPA's tailoring approach. As just discussed, each of the 
three doctrines is tied into the Chevron analytical framework because 
each is designed to give effect to underlying intent. As discussed 
previously, each of the three doctrines comes into play in this case 
because a literal reading of the PSD and title V applicability 
provisions results in insurmountable administrative burdens. Those 
insurmountable administrative burdens--along with the undue costs to 
sources--must be considered ``absurd results'' that would undermine 
congressional purpose for the PSD and title V programs. Under the 
``absurd results'' doctrine, EPA is authorized not to implement the 
applicability provisions literally--that is, not to implement them as 
applying on the January 2, 2011 date that PSD and title V are triggered 
to all GHG sources at or above the statutory thresholds--but instead to 
tailor them in a manner consistent with congressional intent. That 
means applying the PSD and title V requirements through a phase-in 
approach to as many sources as possible and as quickly as possible, 
starting with the largest sources, as EPA does with this Tailoring 
Rule,\29\ at least to a certain point. By the same token, the 
insurmountable administrative burdens bring into play the 
``administrative necessity'' doctrine, under which EPA is, again, 
authorized not to implement the applicability provisions literally, but 
instead to apply them in a manner consistent with administrative 
resources. This also means phasing them in through the approach in the 
Tailoring Rule. Finally, the ``one-step-at-a-time'' doctrine, which 
authorizes incremental action by agencies to implement statutory 
requirements under certain circumstances, provides further support for 
the phased tailoring approach in the Tailoring Rule.
---------------------------------------------------------------------------

    \29\ As discussed later, EPA may, in future rulemaking, make a 
final determination that under the ``absurd results'' doctrine, 
Congress did not intend for EPA to apply PSD to very small sources, 
that is, those, with emissions at or near the 100/250 tpy statutory 
levels.
---------------------------------------------------------------------------

g. Application of Chevron Approach
    The Chevron analytical approach, and the three legal doctrines at 
issue here, apply to this action in the following manner: To reiterate, 
for convenience, the statutory provisions at issue: Congress, through 
the definition of ``major emitting facility,'' applied the PSD program 
to include (i) ``any * * * stationary sources of air pollutants which 
emit or have the potential to emit, one hundred [or, depending on the 
source category, two hundred fifty] tons per year or more of any air 
pollutant,'' CAA sections 165(a), 169(1); and (ii) and such sources 
that undertake a physical or operational change that ``increases the 
amount of any air pollutant emitted'' by such sources, CAA sections 
165(a), 169(2)(C), 111(a)(4).\30\ Similarly, Congress, through the 
definition of ``major source,'' specified that the title V program 
includes ``any stationary facility or source of air pollutants which 
directly emits, or has the potential to emit, one hundred tons per year 
or more of any air pollutant.'' CAA sections 502(a), 501(2)(B), 302(j). 
EPA, through long-established regulatory action, in the case of PSD, 
and long-established interpretation, in the case of title V, has 
interpreted these definitions so that they apply only with respect to 
air pollutants that are subject to regulation under the CAA.
---------------------------------------------------------------------------

    \30\ A physical or operational change is treated as a 
``modification'' that is subject to PSD if it either ``increases the 
amount of any air pollutant emitted'' by the source or ``results in 
the emission of any air pollutant not previously emitted.'' For 
convenience, unless otherwise indicated, when we refer to changes 
that ``increase[ ] the amount of any air pollutant emitted,'' we 
mean both to those types of changes and changes that ``result[ ] in 
the emission of any air pollutant not previously emitted.''
---------------------------------------------------------------------------

    For each of these applicability provisions, the approach under 
Chevron is as follows: Under Chevron Step 1, we must determine whether 
Congress expressed an intention on the specific question, which is 
whether the PSD or title V applicability provisions apply to GHG 
sources. Said differently, the specific question is whether, in the 
case of PSD, Congress intended that the definitions of ``major emitting 
facility'' and ``modification'' apply, respectively, to all GHG sources 
that emit at least 100 or 250 tpy or GHGs and to all physical or 
operational changes by major emitting facilities that ``increase[ ] the 
amount'' of GHGs; and, in the case of title V, whether the definition 
of ``major source'' applies to all GHG sources that emit at least 100 
tpy GHGs.
    To determine intent, we must first examine the terms of the statute 
in light of their literal meaning. Here, the literal reading of each 
provision covers GHG sources. For PSD, a GHG source that emits at least 
100 or 250 tpy GHGs literally qualifies as ``stationary source [ ] of 
air pollutants which emit[s] or ha[s] the potential to emit, one 
hundred [or two hundred fifty] tons per year or more of any air 
pollutant [subject to regulation under the CAA].'' CAA section 169(1). 
For modifications, a physical or operational change that increases the 
amount of GHG emissions qualifies as a ``modification'' because it 
``increases the amount of any air pollutant emitted'' by the source. 
Similarly, for title V, a GHG source that emits at least 100 tpy GHGs 
literally qualifies as ``any stationary facility or source of air 
pollutants which directly emits, or has the potential to emit, one 
hundred tons per year or more of any air pollutant [subject to 
regulation under the CAA].'' CAA sections 502(a), 501(2)(B), 302(j).
    Although each definition is clear that it applies to GHG sources as 
a general matter, applying each definition in accordance with its 
literal meaning to all GHG sources at the specified levels of emissions 
and at the present time--in advance of the development of streamlining 
methods and greater permitting authority expertise and resources--would 
create undue costs for sources and impossible administrative burdens 
for permitting authorities. These results are not consistent with other 
provisions of the PSD and title V requirements, and are inconsistent 
with--and, indeed, undermine--congressional purposes for the PSD and 
title V provisions. Accordingly, under the ``absurd results'' doctrine, 
neither the PSD definition of ``major emitting facility'' or 
``modification'' nor the title V definition of ``major source,'' should 
be applied literally to all GHG sources, and therefore none should be 
considered to have a literal meaning with respect to its application to 
all GHG sources.
    In analyzing the provisions of each definition more closely, we 
believe that each has four terms, any one of which could be considered 
not to have its literal meaning, in this respect. Specifically, each 
provision includes (i) The term ``any * * * source,'' or ``a stationary 
source,'' and that term could be considered not to refer literally to 
all

[[Page 31548]]

of the GHG sources; (ii) either the term ``two hundred fifty tons per 
year'' or ``100 tons per year,'' or the term ``increases the amount,'' 
and those terms could be considered not to refer literally to the 
tonnage amount of emissions from all of the GHG sources; (iii) the term 
``any air pollutant,'' \31\ and that term could be considered not to 
refer literally to the emissions from all of the GHG sources; and (iv) 
the term ``subject to regulation under the CAA'' (which we have 
interpreted ``any air pollutant'' to include), and that term could be 
considered not to refer literally to the emissions from all of the GHG 
sources. As long as any one of those four terms may be considered not 
to have its literal meaning as applied to GHG sources, then the 
definition as a whole--again, for PSD, the terms ``major emitting 
facility'' or ``modifications,'' and for title V, the term ``major 
source''--cannot be considered to apply literally to GHG sources. 
Because we read the terms together, as integral parts of each 
definition as a whole, we do not think that the choice of which of 
those four terms within each definition cannot be considered to apply 
literally to GHG sources has substantive legal effect. In other words, 
we believe that any one of these terms, or all of them together as part 
of each definition as a whole, should be considered not to apply 
literally in the case of GHG sources.
---------------------------------------------------------------------------

    \31\ We do not believe that this term is ambiguous with respect 
to the need to cover GHG sources under either the PSD or title V 
program, only with respect to what sources of GHG should be covered 
under the circumstances presented here.
---------------------------------------------------------------------------

    Having determined that each definition does not have a literal 
meaning with respect to the applicability of PSD or title V applies to 
all GHG sources, we must next inquire as to whether Congress has 
nevertheless expressed an intent on that question through other means. 
We discuss the statutory terms and legislative history of the PSD and 
title V provisions in more detail later, but for now it suffices to say 
that on the issue of whether PSD and title V apply to GHG sources, we 
believe that congressional intent is clear, and that is to apply PSD 
and title V to GHG sources generally. We believe that this intent is 
clear from the broad phrasing of the applicability provisions--as noted 
earlier, the definitions apply by their terms to GHG source generally, 
even though the definitions should not be applied literally to all GHG 
sources--the fact that the various components of the PSD and title V 
programs can be readily applied to GHG sources, and the fact that the 
two programs can readily accommodate at least some GHG sources. As a 
result, we believe that as a matter of Chevron Step 1, PSD and title V 
generally apply to GHG sources. Our previous regulatory action defining 
the applicability provisions made this clear, and we do not reopen this 
issue in this rulemaking. Moreover, even if this long-established 
regulatory position were not justifiable based on Chevron step 1--on 
the grounds that in fact, congressional intent on this point is not 
clear--then we believe that this position, that the statutory 
provisions to apply PSD and title V generally to GHG sources, was 
justified under Chevron step 2.\32\
---------------------------------------------------------------------------

    \32\ In this preamble and the response to comments document we 
fully address arguments that commenters and others have presented 
about congressional intent and coverage of GHGs. We do so to be 
fully responsive, even though we believe that this is a settled 
matter for which the time for judicial review has past.
---------------------------------------------------------------------------

    On the issue of how to apply PSD to GHG sources, including the 
specific threshold levels and the timing, we believe that Congress 
could be considered to have expressed a clear intent that GHG sources 
be included in the PSD program at as close to the statutory thresholds 
as possible, and as quickly as possible, and at least to a certain 
point, all as consistent with the need to assure that the PSD program 
does not impose undue costs on sources or undue administrative burdens 
on the permitting authorities. Under this view, EPA would be required 
at Chevron Step 1 to adopt the Tailoring Rule because, by phasing in 
PSD applicability, it most closely gives effect to Congress's intent. 
Under these circumstances, EPA is authorized to exercise its expert 
judgment as to the best approach for phasing in the application of PSD 
to GHG sources.
    Even so, we recognize that it could be concluded that on the issue 
of how to apply PSD to GHG sources, congressional intent is unclear. 
Under these circumstances, EPA has the discretion at Chevron Step 2 to 
adopt the Tailoring Rule because it is a reasonable interpretation of 
the statutory requirements (remaining mindful that the applicability 
requirements cannot be applied literally). Under the Tailoring Rule, 
EPA seeks to include as many GHG sources in the permitting programs at 
as close to the statutory thresholds as possible, and as quickly as 
possible, although we recognize that we ultimately may stop the phase-
in process short of the statutory threshold levels.
    As for title V, we believe that taken together, the various 
statutory requirements and statements in the legislative history do not 
evidence a clear congressional intent for how title V is to be applied 
to GHG sources. As discussed later, the relevant title V requirements 
and statements in legislative history differ from PSD, not least 
because they include provisions that concern empty permits that point 
in different directions. As a result, here, too, EPA has the discretion 
at Chevron Step 2 to adopt the Tailoring Rule as a reasonable 
interpretation of the statutory requirements. Alternatively, even if 
the statute does express a clear intent as to title V that, similar to 
PSD, title V requirements must be phased in as closely to the statutory 
threshold as possible and as quickly as possible, this Tailoring Rule 
is consistent with that intent.
    It should also be noted that although EPA has concluded that 
applying the PSD and title V applicability provisions literally in the 
case of GHG sources would produce ``absurd results'' and therefore is 
not required, this conclusion has no relevance for applying other CAA 
requirements--such as the requirements concerning endangerment and 
contribution findings under CAA section 202(a)(1) or emission standards 
for new motor vehicles or new motor vehicle engines under CAA section 
202--to GHGs or GHG sources. EPA's conclusions with respect to the PSD 
and title V applicability requirements are based on the specific terms 
of those requirements, other relevant PSD and title V provisions, and 
the legislative history of the PSD and title V programs.
    Within the context of the Chevron framework, the ``administrative 
necessity'' doctrine applies as follows: Under the doctrine, Congress 
is presumed to intend that the PSD and title V applicability 
requirements be administrable. Here, those applicability requirements, 
if applied to GHG sources in accordance with their literal meaning, 
would be impossible to administer. Accordingly, under Chevron Step 1, 
it is consistent with congressional intent that EPA and the permitting 
authorities be authorized to implement the applicability requirements 
in a manner that is administrable, that is, through the tailoring 
approach.
    As for the ``one-step-at-a-time'' doctrine, we believe it applies 
within the Chevron framework in conjunction with the ``absurd results'' 
and ``administrative necessity'' doctrines. As we discuss elsewhere, 
the PSD and title V applicability provisions by their terms require 
that sources at or above the 100/250 tpy thresholds comply with PSD and 
title V requirements at the time those requirements are triggered, 
which

[[Page 31549]]

is when GHGs become subject to regulation. Therefore, if the literal 
meaning of the applicability provisions as applied to GHG sources were 
controlling--that is, if it reflected congressional intent--it would 
foreclose use of the one-step-at-a-time doctrine to implement a phase-
in approach. However, the literal meaning is not controlling because--
in light of the absurd results, including the insurmountable 
administrative burdens, that would result from the literal meaning--
congressional intent is not to require the application of the PSD and 
title V requirements to all GHG sources at or above the statutory 
thresholds at the time that GHGs become subject to regulation. Instead, 
as described previously, we consider congressional intent for the 
applicability provisions, as applied to GHG sources, either (i) to be 
clear that PSD and title V should be phased in for GHG sources as 
quickly as possible, or (ii) to be unclear, so that EPA may reasonably 
choose to phase PSD and title V in for those sources in that manner. 
Under either view, congressional intent for PSD and title V 
applicability to GHG sources accommodates the ``one-step-at-a-time'' 
approach.
4. The PSD and Title V Programs
    Having discussed both the factual underpinnings and, immediately 
above, the legal underpinnings for our tailoring approach, we now 
discuss the PSD and title V programs themselves, including, for each 
program, the key statutory provisions, their legislative history, and 
the relevant regulations and guidance documents through which EPA has 
implemented the provisions. We start with the PSD program.
a. The PSD program
(1) PSD Provisions
    Several PSD provisions are relevant for present purposes because of 
the specific requirements that they establish and the window that they 
provide into congressional intent. These provisions start with the 
applicability provisions, found in CAA sections 165(a) and 169(1), 
which identify the new sources subject to PSD, and CAA section 
111(a)(4), which describes the modifications of existing sources that 
are subject to PSD. CAA section 165(a) provides:

    No major emitting facility on which construction is commenced 
after August 7, 1977, may be constructed in any area to which this 
part applies unless--
    (1) A permit has been issued for such proposed facility in 
accordance with this part setting forth emission limitations for 
such facility which conform to the requirements of this part;
    (2) The proposed permit has been subject to a review in 
accordance with this section * * *, and a public hearing has been 
held with opportunity for interested persons including 
representatives of the Administrator to appear and submit written or 
oral presentations on the air quality impact of such source, 
alternatives thereto, control technology requirements, and other 
appropriate considerations;
* * * * *
    (4) The proposed facility is subject to the best available 
control technology for each pollutant subject to regulation under 
this chapter emitted from, or which results from, such facility * * 
*.

    The term ``major emitting facility'' is defined, under CAA section 
169(1) to include:

    * * * stationary sources of air pollutants which emit, or have 
the potential to emit, one hundred tons per year or more of any air 
pollutant from [28 listed] types of stationary sources. * * * Such 
term also includes any other source with the potential to emit two 
hundred and fifty tons per year or more of any air pollutant. This 
term shall not include new or modified facilities which are 
nonprofit health or education institutions which have been exempted 
by the State.

    As for modification of existing sources, CAA section 169(1)(C) 
provides that the term ``construction,'' as used in CAA section 165(a) 
(the PSD applicability section) ``includes the modification (as defined 
in section 111(a)(4)) of any source or facility.'' Section 111(a)(4), 
in turn, provides:

    The term ``modification'' means any physical change in, or 
change in the method of operation of, a stationary source which 
increases the amount of any air pollutant emitted by such source or 
which results in the emission of any air pollutant not previously 
emitted.

    As interpreted by EPA regulations, these provisions, taken 
together, provide that new stationary sources are subject to PSD if 
they emit at the 100/250-tpy thresholds air pollutants that are subject 
to EPA regulation, and that existing stationary sources that emit such 
air pollutants at the 100/250-tpy thresholds are subject to PSD if they 
undertake a physical or operational change that increases their 
emissions of such air pollutants by any amount.
    Other provisions of particular relevance are the requirements for 
timely issuance of permits. The permitting authority must ``grant[ ] or 
den[y] [any completed permit application] not later than one year after 
the date of filing of such completed application.'' CAA section 165(c).
    In addition, the PSD provisions articulate ``the purposes of [the 
PSD program],'' which are to balance environmental protection and 
growth. CAA section 160. One of the purposes, in subsection (1), is 
specifically ``to protect public health and welfare,'' and another, in 
subsection (3), is ``to insure that economic growth will occur in a 
manner consistent with the preservations of existing clean air 
resources.''
    The PSD provisions also include detailed procedures for 
implementation. Most relevant for sources of GHG are the provisions 
that the proposed permit for each source must be the subject of a 
public hearing with opportunity for interested persons to comment, CAA 
section 165(a)(2), and each source must be subject to BACT, as 
determined by the permitting authority on a source-by-source basis, CAA 
section 165(a)(4), 169(3).
(2) PSD Legislative History
    The legislative history of the PSD provisions, enacted in the 1977 
CAA Amendments, makes clear that Congress was largely focused on 
sources of criteria pollutants: primarily sulfur dioxide, PM, 
NOX, and carbon monoxide (CO). This focus is evident in the 
basic purpose of the PSD program, which is to safeguard maintenance of 
the NAAQS. See S 95-127 (95th Cong., 1st Sess.), at 27.
    Congress designed the PSD provisions to impose significant 
regulatory requirements, on a source-by-source basis, to identify and 
implement BACT and, for criteria pollutant, to also undertake certain 
studies. Congress was well aware that because these requirements are 
individualized to the source, they are expensive. Accordingly, Congress 
designed the applicability provisions (i) to apply these requirements 
to industrial sources of a certain type and a certain size--sources 
within 28 specified source categories and that emit at least 100 tpy--
as well as all other sources that emit at least 250 tpy, and, by the 
same token, (ii) to exempt other sources from these requirements.\33\
---------------------------------------------------------------------------

    \33\ Coverage of modifications by the PSD program was addressed 
by a technical amendment which added a cross reference in section 
169 to section 111. The legislative history of this provision is 
scant and there is no suggestion that Congress would have 
contemplated sweeping in large number of changes from smaller 
sources through the addition of this provision.
---------------------------------------------------------------------------

    Although Congress required that CAA requirements generally apply to 
``major emitting facilities,'' defined as any source that emits or has 
the potential to emit 100 tpy of any pollutant, Congress applied PSD to 
only sources at 100 tpy or higher in 28 specified industrial source 
categories, and at 250 tpy or

[[Page 31550]]

more in all other source categories. This distinction was deliberate: 
According to Sen. McClure, Congress selected the 28 source categories 
after reviewing an EPA study describing 190 industrial source 
categories. 122 Cong. Rec. 24521 (July 29, 1976) (statement by Sen. 
McClure).
    Congress also relied on an EPA memorandum that identified the range 
of industrial categories that EPA regulated under its regulations that 
constituted the precursor to the statutory PSD program,\34\ and listed 
both the estimated number of new sources constructing each year and the 
amount of pollution emitted by the ``typical plant'' in the category. 
The memorandum was prepared by B.J. Steigerwald, Director of the Office 
of Air Quality Planning and Standards and Roger Strelow, EPA's 
Assistant Administrator for Air and Waste Management (``Steigerwald-
Strelow memorandum''). The Steigerwald-Strelow memorandum makes clear 
that the 100 tpy cut-off for the 28 listed sources categories, and the 
250 tpy cut-off for all other sources, was meaningful; that is, there 
were a large number of sources below those cut-offs that Congress 
explicitly contemplated would not be included in the PSD program. Id. 
at 24548-50.
---------------------------------------------------------------------------

    \34\ Beginning in 1974, EPA implemented a program that required 
sources of certain NAAQS pollutants seeking to construct in 
attainment or unclassifiable areas to implement emission controls 
for the purpose of preventing deterioration in the ambient air 
quality in those areas. This program was the precursor to the PSD 
program Congress enacted in 1977.
---------------------------------------------------------------------------

    Consistent with this, the legislative history on the Senate side 
also specifically identified certain source categories that Senators 
believed should not be covered by PSD. The Senate bill language limited 
PSD to sources of 100 tpy or more in 28 listed source categories, and 
to any other categories that the Administrator might add. Sen. Muskie 
stated that the Senate bill excluded ``houses, dairies, farms, 
highways, hospitals, schools, grocery stores, and other such sources.'' 
123 Cong. Rec. 18021 (June 8, 1977) (statement of Sen. Muskie). Sen. 
McLure's list of excluded source categories were ``[a] small gasoline 
jobber, or a heating plant at a community college, [which] could have 
the potential to emit 100 tons of pollution annually.'' 122 Cong. Rec. 
24548-49 (July 29, 1976) (statement of Sen. McClure). The Senate 
Committee Report included a comparable list, and in describing it, 
concisely articulated the cost-conscious basis for the line-drawing: 
``[the PSD] procedure * * * must include an effective review-and-permit 
process. Such a process is reasonable and necessary for very large 
sources, such as new electrical generating plants or new steel mills. 
But the procedure would prove costly and potentially unreasonable if 
imposed on construction of storage facilities for a small gasoline 
jobber or on the construction of a new heating plant at a junior 
college, each of which may have the potential to emit 100 tons of 
pollution annually.'' S. Rpt. 95-127 at 96-97.
    The enacted legislation differs from the Senate bill by replacing 
the authorization to EPA to include by regulation source categories in 
addition to the listed 28 source categories with an inclusion of all 
other sources if they exceed 250 tpy, and with an authorization for the 
states to exempt hospitals and educational institutions. But Congress's 
overall intention remains clear, as the DC Circuit described in Alabama 
Power: ``Congress's intention was to identify facilities which, due to 
their size, are financially able to bear the substantial regulatory 
costs imposed by the PSD provisions and which, as a group, are 
primarily responsible for emissions of the deleterious pollutants that 
befoul our nation's air * * *. [With respect to] the heating plant 
operating in a large high school or in a small community college * * * 
[w]e have no reason to believe that Congress intended to define such 
obviously minor sources as `major' for the purposes of the PSD 
provision.'' \35\ 636 F.2d at 353-54.
---------------------------------------------------------------------------

    \35\ Note that although Congress specifically authorized the 
states to exempt ``nonprofit health or education institutions'' from 
the definition of ``major emitting facility,'' this statement by the 
DC Circuit should be taken as the Court's view that Congress did not 
design PSD to cover sources of the small size described.
---------------------------------------------------------------------------

    A particularly important indication of congressional intent to 
limit the PSD program it was designing to larger sources comes in 
considering the emissions profile of the small-sized boilers. Congress 
focused closely on identifying which sources with emissions in excess 
of 100 tpy should not be subject to PSD even though they are subject to 
CAA requirements generally. But Congress viewed a large set of sources 
as emitting below 100 tpy and therefore not included in the PSD 
program. Chief among these sources, in terms of absolute numbers of 
sources, were small boilers. The Steigerwald-Strelow memorandum 
identified two categories of these boilers, differentiated by size. The 
first ranges in size from 10 to 250 x 10 \6\ Btu per hour (Btu/hr), and 
has a ``typical plant'' size of 10 \7\ Btu/hr, with ``BACT emissions 
from typical plant'' of 53 tpy, and a total of 1,446 sources in the 
category. The second category ranges in size from 0.3 to 10 x 10 \6\ 
Btu/hr, and has a ``typical plant'' size of 1.3 x 10 \6\ Btu/hr, with 
``BACT emissions from typical plant'' of 2 tpy, and a total of 11,215 
sources in the category. The memorandum discusses these two categories 
in the context of explaining which source categories exceed a size of 
100 tpy--and therefore would be subject to PSD if a 100 tpy threshold 
were set--by stating, ``Fortunately, most truly small boilers and 
typical space heating operations would not be covered.'' 122 Cong. Rec. 
24549 (July 29, 1976).
    The legislative history also provides a window into the scope of 
the program that Congress anticipated and related administrability 
concerns. According to the Steigerwald-Strelow memorandum, the number 
of new sources each year whose ``BACT emissions from typical plant'' 
exceed 100 for the 28 listed source categories and 250 for all other 
source categories is less than 100 per year. Although the Steigerwald-
Strelow memorandum does not attempt to estimate the number of 
modifications, it appears that based on this information, Congress had 
reason to expect the total size of the PSD program to be measured in 
the hundreds or perhaps thousands of permits each year. A program of 
this size would be manageable by EPA and the permitting authorities.
(3) PSD Regulatory History: Regulations Concerning the Definition of 
``Major Stationary Source''
    For present purposes, the regulatory history of the PSD program is 
most noteworthy because it shows that since the inception of the 
program following the 1977 CAA Amendments, EPA has interpreted the 
statutory PSD applicability provisions to apply more narrowly--to any 
air pollutant subject to regulation--than their literal meaning (``any 
air pollutant''). EPA's initial rulemaking implementing the PSD 
program, which was proposed and finalized in 1977-1978, made explicit 
that the entire PSD program applied to only pollutants regulated under 
the Act. 43 FR 26380, 26403, 26406 (June 19, 1978) (promulgating 40 CFR 
51.21(b)(1)(i)). In 1979-1980, EPA revised the PSD program to conform 
to Alabama Power v. Costle, 636 F.2d 323 (DC Cir. 1980). 44 FR 51924 
(September 5, 1979) (proposed rule); 45 FR 52676 (August 7, 1980) 
(final rule). In this rulemaking, EPA did not disturb the pre-existing 
provisions that limited the applicability of the PSD program to

[[Page 31551]]

regulated air pollutants.\36\ In 1996 EPA proposed, and in 2002 
finalized, a set of amendments to the PSD provisions that included 
revisions to conform with the 1990 CAA Amendments, which, in relevant 
part, exempted hazardous air pollutants (HAPs) from PSD, under CAA 
section 112(b)(6). See 61 FR 38250 (July 23, 1996), 67 FR 80186 
(December 31, 2002). In the preamble to the final rule, EPA noted that 
based on a request from a commenter, EPA was amending the regulations 
to ``clarify which pollutants are covered under the PSD program.'' EPA 
accomplished this by promulgating a definition for ``regulated NSR 
pollutant,'' which listed categories of pollutants regulated under the 
Act, and by substituting that defined term for the phrase ``pollutants 
regulated under the Act'' that was previously used in various parts of 
the PSD regulations. 67 FR 80240. The definition of ``regulated NSR 
pollutant'' includes several categories of pollutants (including, in 
general, NAAQS pollutants and precursors, pollutants regulated under 
CAA section 111 NSPS, Class I or II substances regulated under CAA 
title VI) and a catch-all category, ``[a]ny pollutant that otherwise is 
subject to regulation under the Act.'' E.g., 40 CFR 52.21(b)(50). As in 
the previous rulemakings, EPA did not address the difference between 
the definition of ``major emitting facility'' and its regulatory 
approach or indicate that it had received comments on this issue. While 
the definition of ``major modification'' in the PSD regulations has 
changed over time with respect to how emission increases are 
calculated, the regulatory history with respect to pollutant coverage 
parallels that of major emitting facility.
---------------------------------------------------------------------------

    \36\ As noted elsewhere in this notice, in Alabama Power, the DC 
Circuit noted that the definition of ``major emitting facility'' 
under CAA section 169(1) could apply to air pollutants not regulated 
under other provisions of the Act, and discussed the contrast of 
this broad definition to the narrower application of the BACT 
provisions. 636 F.2d at 352-53 & n. 60. In its rulemaking notices 
responding to Alabama Power, EPA discussed at length certain issues, 
such as the applicability of NSR to pollutants emitted below the 
``major'' thresholds, that are based on the reference in ``major 
emitting facility'' to ``any air pollutant.'' However, throughout 
its discussion, EPA interpreted that reference as ``any regulated 
air pollutant,'' again without specifically acknowledging the 
difference or without acknowledging the above-noted statements in 
Alabama Power. See 45 FR 52710-52711. EPA did not indicate that it 
had received comments on this issue.
---------------------------------------------------------------------------

    We recount this regulatory history as background information. We 
are not reconsidering or reopening these regulations to the extent they 
interpret the definition of ``major emitting facility'' and 
``modification'' narrowly to be limited to pollutants subject to 
regulation under the Act.
b. Title V Program
    Having reviewed the key statutory provisions, their legislative 
history, and the relevant administrative interpretations for the PSD 
program, we now do the same for the title V program.
(1) Title V Provisions
    The key title V provisions for present purposes start with the 
applicability provisions, which are found in CAA sections 502(a), 
501(2)(B), and 302(j). These provisions provide that it is unlawful for 
any person to operate a ``major source'' without a title V permit, 
section 502(a), and define a ``major source'' to include ``any major 
stationary facility or source of air pollutants which directly emits, 
or has the potential to emit, one hundred tons per year or more of any 
air pollutant.'' CAA sections 501(2)(B) and 302(j). As noted elsewhere, 
these provisions, taken together and as interpreted by EPA, provide 
that stationary sources are subject to title V if they emit at the 100-
tpy threshold air pollutants that are subject to EPA regulation.
    In addition, although title V does not have a set of provisions 
describing its purpose, it is clear from its provisions and its 
legislative history, discussed later, that its key goal is to gather 
into one permitting mechanism the CAA requirements applicable to a 
source and impose conditions necessary to assure compliance with such 
requirements, and thereby promote the enforceability of CAA 
requirements applicable to the covered sources. Section 503(b)(1) 
requires that the source's permit application contain a compliance plan 
describing how the source will ''comply with all applicable 
requirements'' of the CAA, and section 504(a) requires that ``[e]ach 
permit issued under [title V] shall include * * * such * * * conditions 
as are necessary to assure compliance with applicable requirements of 
[the Act].'' See H.R. Rep. No. 101-490, at 351 (1990) (``It should be 
emphasized that the operating permit to be issued under this title is 
intended by the Administration to be the single document or source of 
all of the requirements under the Act applicable to the source.'').
    Importantly, title V is replete with provisions designed to make 
the permitting process as efficient and smooth-running as possible, 
including the expeditious processing of permit applications and the 
timely issuance of permits. Section 503(c) requires that ``the 
permitting authority shall approve or disapprove a completed 
application * * * and shall issue or deny the permit, within 18 months 
after the date of receipt thereof * * *.'' Section 502(b)(6) requires 
the permitting authority to develop ``adequate, streamlined, and 
reasonable procedures for expeditiously determining when applications 
are complete, for processing such applications, for public notice * * * 
and for expeditious review of permit actions, including * * * judicial 
review in State court of the final permit action by [specified 
persons].'' Section 502(b)(7) includes a ``hammer'' provision designed 
to reinforce timely permit issuance, which is that the permitting 
authority's program must include:
    To ensure against unreasonable delay by the permitting 
authority, adequate authority and procedures to provide that a 
failure of such permitting authority to act on a permit application 
or permit renewal application (in accordance with the time periods 
specified in [CAA] section 503 * * *) shall be treated as a final 
permit action solely for purposes of obtaining judicial review in 
State court of an action brought by any person referred to in 
paragraph (6) to require that action be taken by the permitting 
authority on such application without additional delay.

Section 502(b)(8) requires the permit program to include ``[a]uthority 
and reasonable procedures consistent with the need for expeditious 
action by the permitting authority on permit applications and related 
matters, to make available to the public [certain permit-related 
documents]''. Section 502(b)(9) requires a permit revision to 
incorporate requirements promulgated after issuance of the permit, but 
only if the permit is for a major source and has a term of 3 or more 
years remaining. In addition, the revision must occur ``as 
expeditiously as practicable.'' Section 502(b)(10) requires the permit 
program to include operational flexibility provisions that ``allow 
changes within a permitted facility * * * without requiring a permit 
revision, if the changes are not modifications * * * and * * * do not 
exceed the emissions allowable under the permit * * *.''
    In addition, title V includes a comprehensive and finely detailed 
implementation schedule that mandates timely issuance of permits while 
building in EPA and affected state review, public participation, and 
timely compliance by the source with reporting requirements. Following 
the date that sources become subject to title V, they have 1 year to 
submit their permit applications. CAA section 503(c). As noted 
previously, the permitting authority then has 18 months to issue or 
deny the permit. CAA section 503(c). Permitting authorities must 
provide an opportunity for public comment and a hearing. CAA section 
502(b)(6). If the permitting authority proposes to issue

[[Page 31552]]

the permit, the permitting authority must submit the permit to EPA, and 
notify affected states, for review. CAA section 505(a)(1). EPA then has 
45 days to review the permit and, if EPA deems it appropriate, to 
object to the permit. CAA section 505(b)(1). If EPA does object, then 
the permitting authority must, within 90 days, revise it to meet the 
objections, or else EPA becomes required to issue or deny the permit. 
CAA section 505(c). If EPA does not object, then, within 60 days of the 
close of the 45-day review period, any person may petition EPA to 
object, and EPA must grant or deny the petition within 60 days. CAA 
section 505(b)(2). If a permit is issued, it must include a permit 
compliance plan, under which the permittee must ``submit progress 
reports to the permitting authority no less frequently than every 6 
months,'' and must ``periodically (but no less frequently than 
annually) certify that the facility is in compliance with any 
applicable requirements of the permit, and [ ] promptly report any 
deviations from permit requirements to the permitting authority.'' CAA 
section 503(b).
(2) Title V Legislative History
    The legislative history of title V, enacted by Congress in the 1990 
CAA Amendments, indicates the scope of the program that Congress 
expected: Congress expected the program to cover some tens of thousands 
of sources, which would approximate the scope of the permit program 
under the Clean Water Act. The Senate Committee on Environment and 
Public Works stated:

    EPA estimates that the new permit requirements will cover about 
8,200 major sources that emit 100 tons per year or more of criteria 
pollutants (which are regulated under SIPs). In addition, many 
smaller sources are (or, as EPA promulgates additional regulations, 
will be) covered by new source performance standards under section 
111 of the Act, hazardous air pollutant standards under section 112 
of the Act, and nonattainment provisions of this legislation. By 
comparison, under the Clean Water Act, some 70,000 sources receive 
permits, including more than 16,000 major sources. Although many air 
pollution sources have more emission points than water pollution 
sources, the additional workload in managing the air pollution 
permit system is estimated to be roughly comparable to the burden 
that States and EPA have successfully managed under the Clean Water 
Act.

S. Rep. 101-228, at 353 (1990).\37\ Sen. Mitchell, the Senate Majority 
Leader, stated that he expected ``over 10,000 permits [to] * * * be 
issued under this program.'' 136 Cong. Rec. S3239-03 (March 27, 1990). 
Others in Congress had similar estimates. See, e.g., 136 Cong. Rec. 
S3166 (``thousands and thousands of permit applications * * * will be 
required to be submitted'') (statement of Sen. Nickles).
---------------------------------------------------------------------------

    \37\ The House Committee on Energy and Commerce acknowledged 
that it was ``uncertain about the magnitude of permit applications 
likely to be submitted under the bill initially and thereafter in 
each State or to EPA,'' H. Rep. 101-490 p. 346.
---------------------------------------------------------------------------

    Furthermore, the legislative history indicates that Congress did 
not contemplate that large numbers of very small sources would be 
subject to title V's requirements.\38\ This becomes clear by reviewing 
the legislative history of a companion piece of legislation to the 
operating permits provisions that Congress enacted into CAA section 
507, which is the ``Small business stationary source technical and 
environmental compliance assistance program.'' CAA section 507. Under 
this provision, sources that, among other things, ``are not major 
stationary source[s]'' and that emit less than 50 tpy of any regulated 
pollutant, as well as less than 75 tpy or all regulated pollutants, are 
eligible for assistance under CAA section 507. CAA section 507(c)(1). 
The House Committee Report described this provision--including what 
types of sources it expected this provision to benefit--as follows:

    \38\ Title V can apply to certain small businesses in some 
circumstances. Under CAA sections 502(a) and 501(2)(A), title V 
applies to major sources of HAPs, which includes sources that may 
emit as little as 10 tpy of a single HAP, and which may include some 
dry cleaners and other small businesses. In addition, under CAA 
section 502(a), title V applies to area sources subject to standards 
under CAA sections 111 or 112 (or required to have a PSD or 
nonattainment NSR permit), unless the Administrator exempts those 
sources from title V because compliance would be impracticable, 
infeasible, or unnecessarily burdensome.

    New section [507] is a small source/small business provision 
added by the Committee. It seeks to help small businesses to comply 
with the problems that are likely to occur under the Act as amended 
by this bill. For purposes of this section, small businesses or 
small emitters are defined as sources that are emitting 100 tons or 
less per year and that have a number of employees that would qualify 
them for assistance from the Small Business Administration (SBA). As 
we look to the future of environmental protection under the Act, we 
take special steps here to ensure that it is possible for these 
small businesses to comply with minimum hassle and in recognition of 
the problems that are unique to them. Such small businesses include 
printers, furniture makers, dry cleaners, and millions of other 
---------------------------------------------------------------------------
small businesses in this country.

House Committee Report, H.R. 101-590, at 354. In this manner, the House 
Committee Report made clear that it expected ``millions of * * * small 
businesses''--including ``printers, furniture makers, dry cleaners'' 
and many others--to benefit from the CAA section 507 small source/small 
business program, but Congress did not expect them to become subject to 
the operating permit requirements of title V because their emissions 
fell below 100 tpy, which is, in general, the threshold for title V 
applicability as a ``major source.''
    The legislative history of title V confirms that Congress viewed a 
principal purpose of title V as providing a vehicle to compile the 
requirements applicable to the source. As the report of the House 
Committee on Energy and Commerce (``House Committee Report'') stated, 
``It should be emphasized that the operating permit to be issued under 
this title is intended by the Administration to be the single document 
or source of all of the requirements under the Act applicable to the 
source.'' H.R. Rep. No. 101-490, at 351 (1990). Combined with the 
source's reporting requirements, this compilation of applicable 
requirements would facilitate public awareness of a source's 
obligations and compliance and would facilitate compliance and 
enforcement.
    On the Senate side, Sen. Chafee, one of the floor managers of the 
bill, made a similar point:

    The permits will serve the very useful function of gathering and 
reciting in one place--the permit document itself--all of the duties 
imposed by the Clean Air Act upon the source that holds the permit. 
This would clearly be an improvement over the present system, where 
both the source and EPA must search through numerous provisions of 
state implementation plans and regulations to assemble a complete 
list of requirements that apply to any particular plant * * *.
    Once these permits are in place, plant managers will be better 
able to understand and to follow the requirements of the Clean Air 
Act. At the same time, EPA will be better able to monitor how well 
each plant is complying with those requirements. This is a highly 
sensible approach for all concerned.

    136 Cong. Rec. S213 (January 24, 1990) (statement of Sen. Chafee). 
Sen. Lieberman made a similar statement. 136 Cong. Rec. 3172-73 (March 
26, 1990) (statement of Sen. Lieberman). Thus, a central purpose of the 
title V permit program is to compile all the requirements applicable to 
the source into a single place, the permit. Implicit in this purpose is 
that the sources subject to title V will have applicable requirements 
to be compiled. As Sen. Chafee directly stated, ``[T]he vast majority 
of these permit applications will * * *, in all likelihood, only codify 
the existing requirements of the applicable State implementation 
plan.''

[[Page 31553]]

136 Cong. Rec. S2720 (March 20, 1990) (statement of Sen. Chafee).
    More broadly, the legislative history also indicates congressional 
concern about the costs of permitting for small businesses, and a 
determination to minimize those costs to the extent possible. This 
concern is reflected in several provisions of title V. For example, 
section 502(a) authorizes EPA to exempt all or part of a source 
category--except for any major source from the title V permit program 
if EPA ``finds that compliance with [title V] requirements is 
impracticable, infeasible, or unnecessarily burdensome on such 
categories.'' Similarly, the permit fee provisions include a 
presumptive minimum fee amount, but authorize an exemption from that 
presumptive amount upon a showing that a lesser amount will meet 
overall fee requirements, CAA section 502(b)(3)(B)(iv). One of the 
drafters of this provision, Rep. Wyden, explained that its purpose was 
to preserve the flexibility of states to impose lower fees of small 
businesses:

    I note that the provision on fees allows reductions for small 
sources where appropriate. The state has some flexibility, under the 
general permit fee provisions, to adjust fee levels for any source 
so long as the average fee charged meets the statutory minimum.

136 Cong. Rec. H12884 (Oct. 26, 1990) (statement of Rep. Wyden). See, 
e.g., 136 Cong. Rec. H2559 (May 21, 1990) (statement of Rep. Wyden) 
(discussing need to ``help small businesses through the air permit 
labyrinth'').
    The legislative history also indicates that Congress was deeply 
concerned both about the need not to burden sources generally with 
undue costs and to assure the administrability of the title V program, 
and as a result, was determined to make the program as smooth-running 
as possible. These goals are reflected in many of the title V 
requirements, as discussed previously. See, e.g., CAA section 502(b)(6) 
(requiring ``adequate, streamlined, and reasonable procedures for 
expeditiously determining when applications are complete, for 
processing such applications, for public notice * * * and for 
expeditious review of permit actions); CAA section 502(b)(7) (includes 
a ``hammer'' provision designed to reinforce timely permit issuance); 
CAA section 502(b)(9)-(10) (limiting circumstances under which permit 
revision is required; requiring revision to occur ``as expeditiously as 
practicable;'' including operational flexibility provisions).
    The legislative history confirms that these provisions were 
designed to reduce costs to sources and promote administrability. The 
``Chafee-Baucus Statement of Senate Managers'' for the bill explained 
the purpose of the CAA section 502(b)(6) requirement for ``[a]dequate, 
streamlined, and reasonable procedures for expeditious[ ]'' permit 
actions as follows:

    [M]uch concern has been expressed that this new permitting 
process will unduly delay the proper functioning of many sources, 
and we intend to mitigate any delay by directing that the process be 
expeditious.
    In addition to this general directive for expeditious 
processing, we mandate in new section 503 that permitting 
authorities approve or reject permit applications within certain 
specified time periods following filing. In this fashion, we have 
taken explicit steps to protect against undue delays.

136 Cong. Rec. S16941 (statement of Sen. Chafee). The same statement 
explained that the permit revision procedures of CAA section 502(b)(9) 
reflect a--

careful effort to ensure that the permit program works effectively 
and efficiently. Succinctly, this provision accommodates two 
competing concerns. On the one hand, it is important to ensure that 
permit requirements remain up-to-date as the provisions of the Clean 
Air Act are developed and new requirements are imposed. On the other 
hand, it also is important to be sure that we do not reduce the 
permit program to a shambles by requiring sources to engage in a 
continuous process of revising their permits as these new 
requirements are imposed.

136 Cong. Rec. 16942 (Oct. 27, 1990) (Chafee-Baucus statement of Senate 
Managers) (statement of Sen. Chafee).
    In addition, these concerns were at the bottom of the following 
statement by Sen. Chafee, in which he described how the bill's drafters 
had revised it in response to a concern by industry that an earlier 
version of the bill would have put undue costs on industry:

    We have also heard concerns from industry that S. 1630 would 
burden sources unduly by requiring them to submit--along with their 
permit applications--plans explaining how they intend to comply with 
all requirements of the Clean Air Act that apply to them.
    But, Mr. President, we emphatically do not intend to burden 
industry with preparation and submission of unnecessary compliance 
plans. The substitute clarifies that any compliance plans would 
address only those matters by which the sources would comply with 
new requirements imposed by this act as it is finally signed into 
law. These plans would not need to address compliance with any 
existing Clean Air Act requirements, unless the source is in 
violation of those requirements.

136 Cong. Rec. S2107 (March 5, 1990) (statement of Sen. Chafee).
    As another indication of congressional concern over 
administrability, Congress recognized that at the beginning of the 
program, large numbers of permit applications might overwhelm the 
permitting authorities. To protect against this, Congress included in 
CAA section 503(c) a phase-in schedule for permitting authorities to 
act on the initial set of permit applications. Under 503(c), permitting 
authorities were not required to act on the initial set of permit 
applications within 18 months after it received the application, but 
rather could act on one-third of them on an annual basis over a 3-year 
period. Sen. Chafee, in describing an early version of this provision--
which would have allowed permitting authorities to phase in the 
submission of permit applications--explained that its purpose was ``to 
avoid a logjam of permit applications[,] * * * ensure that [regulatory] 
gridlock can be avoided, and [ensure] that the permitting process will 
work with a minimum of disruption and delay.'' 136 Cong. Rec., S2106 
(March 5, 1990) (statement of Sen. Chafee).
(3) Title V Regulatory History
    As with PSD, for present purposes, the regulatory history of the 
title V program is most noteworthy because it shows that beginning 
shortly after the inception of the program following the 1990 CAA 
Amendments, EPA has interpreted the statutory title V applicability 
provisions to apply more narrowly--to any air pollutant subject to 
regulation--than their literal meaning (``any air pollutant''). As 
discussed previously, title V applies to any ``major source,'' defined, 
as relevant here, under CAA sections 501(2)(B) and 302(j), as ``any 
stationary facility or source of air pollutants which directly emits, 
or has the potential to emit, one hundred tons per year or more of any 
air pollutant * * *.'' EPA's regulations mirror the CAA definitional 
provisions. 40 CFR 70.2.
    However, since 1993, EPA has interpreted the applicability 
provisions more narrowly. At that time, which was shortly after title V 
was enacted, EPA issued a guidance document making clear that it 
interprets this requirement to apply to sources of pollutants ``subject 
to regulation'' under the Act. Memorandum from Lydia N. Wegman, Deputy 
Director, Office of Air Quality Planning and Standards, U.S. EPA, 
``Definition of Regulated Air Pollutant for Purposes of Title V'' (Apr. 
26, 1993) (Wegman Memorandum). The interpretation in this memorandum 
was based on: (1) EPA's reading of the definitional chain for ``major 
source'' under title V, including the definition of ``air pollutant'' 
under section 302(g) and

[[Page 31554]]

the definition of ``major source'' under 302(j); (2) the view that 
Congress did not intend to require a variety of sources to obtain title 
V permits if they are not otherwise regulated under the Act (see also 
CAA section 504(a), providing that title V permits are to include and 
assure compliance with applicable requirements under the Act); and (3) 
consistency with the approach under the PSD program.
    While the specific narrow interpretation in the Wegman Memorandum 
of the definition of ``air pollutant'' in CAA section 302(g) is in 
question in light of the holding in Massachusetts v. EPA, 549 U.S. 497, 
533 (2007) (finding this definition to be ``capacious''), we believe 
that the overall rationale for our interpretation of the applicability 
of title V remains sound. EPA continues to maintain its interpretation, 
consistent with CAA sections 302(j), 501, 502 and 504(a), that the 
provisions governing title V applicability for ``a major stationary 
source'' can only be triggered by emissions of pollutants subject to 
regulation. This interpretation is based primarily on the purpose of 
title V to collect all regulatory requirements applicable to a source 
and to assure compliance with such requirements, see, e.g., CAA section 
504(a), and on the desire to promote consistency with the approach 
under the PSD program.
    In the Tailoring Rule notice of proposed rulemaking, EPA 
acknowledged the Wegman Memorandum and affirmed the memorandum's 
continued viability, stating that ``EPA continues to maintain this 
interpretation.'' 74 FR 55300, col. 3, fn. 8; see also 75 FR 17022-23 
(Interpretive Memo reconsideration).
    As with PSD, we recount this regulatory history as background 
information, and we are not reconsidering or re-opening this 
interpretation of the definition of ``major source'' narrowly to be 
limited to pollutants subject to regulation under the Act.
5. Application of the ``Absurd Results'' Doctrine for the PSD Program
    Having reviewed the factual background, legal doctrines, and the 
key components of the PSD and title V programs, we now turn towards 
interpreting the PSD and title V requirements in accordance with the 
Chevron framework, accounting for the applicable legal doctrines. We 
begin with the ``absurd results'' doctrine, and apply it first to the 
PSD requirements.
    In this action, we finalize, with some refinements, the ``absurd 
results'' basis we proposed. Specifically, we are revising our 
regulations to limit PSD applicability to GHG emitting sources by 
revising the regulatory term, ``regulated NSR pollutant,'' and although 
our revised regulations do not accord with a literal reading of the 
statutory provisions for PSD applicability, which are incorporated into 
the definition of ``major emitting facility'' and ``major 
modification,'' we have concluded that based on the ``absurd results'' 
doctrine, a literal adherence to the terms of these definitions is not 
required. Even so, we believe Congress did intend that PSD apply to GHG 
sources as a general matter. Further, we may apply PSD to GHG sources 
in a phased-in manner, as we do through the tailoring approach, because 
either congressional intent is clear on that issue and the tailoring 
approach best reflects it, or congressional intent is unclear and the 
tailoring approach is a reasonable interpretation of the statute.
a. Congressional Purpose for the PSD Program
    To reiterate, for convenience, CAA section 169(1) defines a ``major 
emitting facility'' to include ``any * * * source[] [that] emit[s], or 
ha[s] the potential to emit, [depending on the source category], one 
hundred [or two hundred fifty] tons per year or more or more of any air 
pollutant.'' CAA section 169(1); and a ``modification'' as any physical 
or operational change in ``a stationary source which increases the 
amount of any air pollutant emitted by such source,'' CAA section 
169(2)(C), 111(a)(4). We also reiterate that, as discussed above, 
beginning with our initial rulemaking in 1977-1978 to implement the PSD 
program, we have interpreted these definitions more narrowly by reading 
into them the limitation that a source is subject to PSD only if the 
air pollutants in question are ``subject to regulation under the Act.'' 
40 CFR 51.166(b)(49)(iv). EPA is not re-opening this interpretation in 
this regulation in this action.
    Under the current interpretation of the PSD applicability 
provision, EPA's recent promulgation of the LDVR will trigger the 
applicability of PSD for GHG sources at the 100/250 tpy threshold 
levels as of January 2, 2011. This is because PSD applicability hinges 
on the definition of ``major emitting facility,'' which, under EPA's 
long-standing narrowing interpretation, but absent further tailoring, 
applies PSD to sources of any air pollutant subject that is subject to 
regulation under another provision of the CAA. EPA's promulgation of 
the LDVR means that GHGs will become subject to regulation on the date 
that the rule takes effect, which will be January 2, 2011.
    But absent tailoring, the January 2, 2011 trigger date for GHG PSD 
applicability will subject an extraordinarily large number of sources, 
more than 81,000, to PSD each year, an increase of almost 300-fold. And 
the great majority of these new sources will be small commercial or 
residential sources. We believe that for many reasons, this result is 
contrary to congressional intent for the PSD program, and in fact would 
severely undermine what Congress sought to accomplish with the program. 
As a result, under our Chevron analysis, accounting for the ``absurd 
results'' doctrine, the statutory definition for ``major emitting 
facility'' (as interpreted narrowly to include ``subject to 
regulation'') should not be read to apply to all GHG sources at or 
above the 100/250 tpy threshold as of the January 2, 2011 date. Rather, 
the definitions of ``major emitting facility'' and ``modification'' 
should be tailored so that they apply to GHG sources on a phased-in 
basis, with the largest sources first, as we describe in this rule.
    As explained previously, Chevron Step 1 calls for a determination 
of congressional intent, and the courts consider the best indicator of 
congressional intent to be the plain meaning of the statute. However, 
the U.S. Supreme Court has held that the literal meaning of a statutory 
provision is not conclusive ``in the `rare cases [in which] the literal 
application of a statute will produce a result demonstrably at odds 
with the intentions of the drafters' * * * [in which case] the 
intention of the drafters, rather than the strict language, controls.'' 
United States v. Ron Pair Enterprises, 489 U.S. 235, 242 (1989). To 
determine whether ``the intentions of the * * * drafters'' differ from 
the result produced from ``literal application'' of the statutory 
provisions in question, the courts may examine the overall context of 
the statutory provisions, including whether there are related statutory 
provisions that either conflict or are consistent with that 
interpretation; and the legislative history to see if it exposes what 
the legislature meant by the terms in question. In addition, the courts 
may examine whether a literal application of the provisions produces a 
result that the courts characterize variously as absurd, futile, 
strange, or indeterminate, and therefore so illogical or otherwise 
contrary to sensible public policy as to be beyond anything Congress 
would reasonably have intended. In such cases, the literal language 
cannot be said to reflect the intention of the drafters, and

[[Page 31555]]

therefore does not control. See United States v. Ron Pair Enterprises, 
489 U.S. 235, 242-43 (1989); Griffin v. Oceanic Contractors, Inc., 458 
U.S. 564, 571 (1982).
    Here, applying the definitions of ``major emitting facility'' and 
``modification'' literally (as EPA has interpreted them more narrowly) 
at the present time--in the absence of streamlining measures or 
additional permitting authority resources, and without tailoring--would 
be contrary to congressional purpose for the PSD provisions, as found 
in the statutory provisions and legislative history, especially in 
light of the impact from applying those definitions literally. Congress 
established the PSD program in large measure because it was concerned 
that around the country, industrial development, which was confronting 
barriers to locating in nonattainment areas (that is, areas that do not 
meet the NAAQS), would attempt to locate in clean air areas (that is, 
attainment areas or unclassifiable areas), but that as a consequence, 
the clean air areas would see their air quality deteriorate to the 
point where they, too, would no longer meet the NAAQS. The end result 
would be the spread of environmental and health problems to those 
formerly clean air areas, as well as more barriers to further 
industrial development. With these concerns in mind, Congress designed 
the PSD program to require newly constructing or modifying sources in 
areas with air quality that meets the NAAQS (or that is unclassifiable) 
to analyze their emissions of NAAQS pollutants and to implement 
controls as needed to assure that those emissions do not significantly 
deteriorate air quality. Many of the PSD requirements, and much of the 
discussion in the legislative history, reflect these aspects of the PSD 
program. E.g., CAA sections 162, 163, 164, 165(a)(3), 165(d)(2), 
165(e), 166; see generally H. Rep. 95-294, 95th Cong., 1st Sess. (1977) 
103-78.
    Congress also designed the PSD program to impose controls on non-
NAAQS pollutants, through the requirement under CAA section 165(a)(4) 
that the source be ``subject to the best available control technology 
for each pollutant subject to regulation under this chapter emitted 
from, or which results from, such facility.'' For example, when 
Congress enacted the PSD provisions in 1977, sources emitting HAPs were 
required to implement BACT for those pollutants, although in the 1990 
CAA Amendments, Congress redesigned CAA section 112, which includes the 
requirements for HAPs, and excluded HAPs from PSD. CAA section 
112(b)(6).
    Congress was keenly aware that the PSD program needed to serve two 
purposes: Protect the environment and promote economic growth. Congress 
explicitly identified these two goals in the ``purposes'' section of 
the PSD provision, CAA section 160, and various PSD requirements 
clearly reflect them. For example, to protect economic growth, the PSD 
program expedites the permit process to include a 1-year limitation on 
the time that the permitting authority has act on permit applications. 
To protect the environment, in addition to including many provisions 
that focus on NAAQS pollutants, the PSD program requires that the 
preconstruction permit impose emission limits that reflect BACT for 
each pollutant subject to regulation under another CAA provision. CAA 
section 165(a)(4). This BACT provision also makes clear, by its terms, 
that although Congress designed the PSD program largely with NAAQS 
pollutants in mind, Congress also intended that sources subject to PSD 
control the emissions of their other pollutants as well. The DC Circuit 
has recognized the twin goals of environmental protection and economic 
development that underlie PSD, and has upheld EPA interpretations of 
the PSD program that reflect a balancing of those goals. See, e.g., New 
York v. EPA, 413 F.3d 3, 27 (DC Cir.), rehearing en banc den. 431 F.3d 
801 (2005).
    Congress was also keenly aware that the PSD analyses and controls 
that it was mandating had to be implemented on a source-by-source 
basis, and that this process would be expensive for sources. As a 
result, Congress intended to limit the PSD program to large industrial 
sources because it was those sources that were the primary cause of the 
pollution problems in question and because those sources would have the 
resources to comply with the PSD requirements. Congress's mechanism for 
limiting PSD was the 100/250 tpy threshold limitations. Focused as it 
was primarily on NAAQS pollutants, Congress considered sources that 
emit NAAQS pollutants in those quantities generally to be the large 
industrial sources to which it intended PSD to be limited.
    That Congress paid careful attention to the types and sizes of 
sources that would be subject to the PSD program and designed the 
thresholds deliberately to limit the program's scope is evident from 
the legislative history. Several Senate floor statements and the 
Committee Report made clear that PSD should not apply to small sources. 
As discussed later, Congress scrutinized information that EPA provided 
as to types and sizes of sources, found largely in the Steigerwald-
Strelow memorandum. Sen. Muskie stated that the Senate bill excluded 
``houses, dairies, farms, highways, hospitals, schools, grocery stores, 
and other such sources.'' 123 Cong. Rec. 18021 (June 8, 1977) 
(statement of Sen. Muskie). Sen. McClure stated that PSD should be 
limited to ``industrial plants of significant impact,'' and should 
exclude ''[a] small gasoline jobber, or a heating plant at a community 
college, [which] could have the potential to emit 100 tons of pollution 
annually.'' 122 Cong. Rec. 24548-49 (July 29, 1976) (statement of Sen. 
McClure). The Senate Committee Report mirrored Sen. McClure's 
statement, and concisely articulated the cost-related basis for the 
line-drawing: ``[The PSD] procedure * * * must include an effective 
review-and-permit process. Such a process is reasonable and necessary 
for very large sources, such as new electrical generating plants or new 
steel mills. But the procedure would prove costly and potentially 
unreasonable if imposed on construction of storage facilities for a 
small gasoline jobber or on the construction of a new heating plant at 
a junior college, each of which may have the potential to emit 100 tons 
of pollution annually.'' S. Rpt. 95-127 at 96-97.
    The DC Circuit had occasion, in Alabama Power, to acknowledge this 
legislative history. ``Congress's intention was to identify facilities 
which, due to their size, are financially able to bear the substantial 
regulatory costs imposed by the PSD provisions and which, as a group, 
are primarily responsible for emissions of the deleterious pollutants 
that befoul our nation's air.'' Alabama Power, 636 F.2d at 353. The 
Court added, ``Though the costs of compliance with [the PSD] 
requirements are substantial, they can reasonably be borne by 
facilities that actually emit, or would actually emit when operating at 
full capacity, the large tonnage thresholds specified in section 
169(1).''. Id. at 354.
    It is not too much to say that applying PSD requirements literally 
to GHG sources at the present time--in the absence of streamlining or 
increasing permitting authority resources and without tailoring the 
definition of ``major emitting facility'' or ``modification''--would 
result in a program that would have been unrecognizable to the Congress 
that designed PSD. Congress intended that PSD be limited to a 
relatively small number of large industrial sources.

[[Page 31556]]

Without phasing in PSD and title V applicability to GHG sources so as 
to allow the development of streamlining methods and increases in 
permitting authority resources, the PSD program would expand by January 
2, 2011, from the current 280 sources per year to almost 82,000 
sources, virtually all of which would be smaller than the sources 
currently in the PSD program and most of which would be small 
commercial and residential sources. Until EPA could develop 
streamlining methods, all of the sources that would become newly 
subject to PSD--whether they be larger or smaller sources, whether 
industrial or commercial/residential sources--would have to undergo 
source-specific BACT determinations for their GHG emissions, as well as 
their emissions of conventional pollutants in amounts in excess of the 
significance levels. We estimate that the commercial and residential 
sources--the great majority of which are small business--would each 
incur, on average, almost $60,000 in PSD permitting expenses. This 
result would be contrary to Congress's careful efforts to confine PSD 
to large industrial sources that could afford these costs.
    A closer look at the legislative history confirms the view that 
Congress did not expect PSD to apply to large numbers of small sources, 
including commercial and residential sources, and instead expected the 
100/250 tpy thresholds to limit PSD's applicability to larger sources. 
As noted previously, Congress relied on an EPA memorandum--the 
Steigerwald-Strelow memorandum--that identified the range of industrial 
categories that EPA regulated under its program that constituted the 
precursor to the statutory PSD program, and listed both the estimated 
number of new sources constructing each year and the amount of 
pollution emitted by the ``typical plant'' in the category. The 
Steigerwald-Strelow memorandum makes clear that the 100 tpy cut-off for 
the 28 listed sources categories, and the 250 tpy cut-off for all other 
sources, would exclude from PSD a large number of sources. 122 Cong. 
Rec. 24548-50 (July 29, 1976). However, virtually all, if not all, of 
the sources in half the 28 source categories emit CO2 in 
quantities that equal or exceed the 100 tpy threshold, and almost all 
of the sources in the remaining categories emit CO2 in 
quantities that equal or exceed the 100 tpy threshold. Therefore, 
applying the ``major emitting facility'' definition to GHG sources, in 
the absence of streamlining methods and without tailoring, would, as a 
practical matter, vitiate much of the purpose of the 100 tpy cut-off 
for industrial sources.\39\
---------------------------------------------------------------------------

    \39\ Specifically, of the 28 source categories under CAA section 
169(1), information available to EPA indicates that all of the 
sources in the following categories emit at least 100 tpy of 
CO2 annually: fossil-fuel fired steam electric plants of 
more than 250 million Btu per hour heat input, Portland Cement 
plants, primary zinc smelters, iron and steel mill plants, primary 
aluminum ore reduction plants, municipal incinerators capable of 
charging more than 50 tons of refuse per day, nitric acid plants, 
petroleum refineries, lime plants, primary lead smelters, fossil-
fuel boilers of more than 250 Btus per hour heat input. In addition, 
all but a few kraft pulp mills and glass fiber processing plants 
emit at least 100 tpy CO2 annually. Our information is 
incomplete with respect to the remaining source categories, but with 
the possible exception of petroleum storage and transfer facilities 
with a capacity exceeding three hundred thousand barrels, we suspect 
that virtually all sources emit at least 100 tpy CO2 
annually. See ``Technical Support Document for Greenhouse Gas 
Emissions Thresholds Evaluation''; Office of Air Quality Planning 
and Standards; March 29, 2010.
---------------------------------------------------------------------------

    Most telling, in this regard, is the small-sized boilers, which the 
Steigerwald-Strelow memorandum describes, in terms of size, pollutants 
emitted, and numbers of sources, as follows: The memorandum identified 
two categories of these boilers, differentiated by size. The first 
ranges in size from 10 to 250 x 10\6\ Btu/hr, and has a ``typical 
plant'' size of 10\7\ Btu/hr, with ``BACT emissions from typical 
plant'' of 53 tpy, and a total of 1,446 sources in that category. The 
second category ranges in size from 0.3 to 10 x 10\6\ Btu/hr, and has a 
``typical plant'' size of 1.3 x 10\6\ Btu/hr, with ``BACT emissions 
from typical plant'' of 2 tpy, and a total of 11,215 sources in the 
category. That memorandum makes clear that EPA did not believe that 
sources in these two categories--and especially the smallest one--would 
be subject to PSD under a 100 tpy threshold, by stating, ``Fortunately, 
most truly small boilers and typical space heating operations would not 
be covered.'' 122 Cong. Rec. 24549 (July 29, 1976). However, these data 
and conclusions were all based on emissions of NAAQS pollutants, the 
amounts of which placed these boilers well below the PSD threshold 
limitations. In general, most boilers of these small sizes are fired 
with natural gas, and a natural gas boiler greater than 0.5 x 10\6\ 
Btu/hr emits at least 250 tpy CO2. Therefore, if the 
CO2 emissions of these small boilers are considered--as 
would occur by applying the definition of ``major emitting facility'' 
to GHG sources without tailoring--then most of them would in fact be 
subject to PSD. Again, this result would directly contravene Congress's 
intention to limit PSD to ``industrial plants of significant impact.'' 
122 Cong. Rec. 24548-49 (statement of Sen. McClure).
    Perhaps the most compelling reason why applying the PSD program to 
GHG sources without tailoring, and before the development of 
streamlining methods, would be inconsistent with congressional intent, 
is that the resulting program would prove unadministrable. Although the 
legislative history of the PSD program does not reveal much explicit 
congressional focus on administrability issues, the Steigerwald-Strelow 
Memorandum, which identifies the source categories and numbers of 
sources that were before Congress as it considered PSD, suggests that 
the program that Congress fashioned could be expected to cover at most 
a few thousand sources each year. This appears to be approximately the 
size of the program that EPA administered before the 1977 CAA 
Amendments, so that it seems reasonable to assume that Congress 
expected the PSD program it enacted to be within EPA's and the states' 
administrative capacities.
    Moreover, the Alabama Power court stressed the importance of 
administrability concerns: Most importantly, the Court held that EPA, 
in interpreting the ``modification'' provisions that apply PSD to 
physical or operational changes by major emitting facilities that 
``increase the amount of any air pollutant emitted,'' CAA section 
111(a)(4), may ``exempt from PSD review some emission increases on 
grounds of de minimis or administrative necessity,'' and went on to 
state that in establishing the exemption thresholds, ``[t]he Agency 
should look at the degree of administrative burden posed by enforcement 
at various de minimis threshold levels.'' 636 F.2d at 400,405. In 
addition, the Court based its holding that potential-to-emit for 
purposes of the applicability thresholds should be defined as emissions 
at full capacity with implementation of control equipment, in part on 
its view that with this definition, the number of sources subject to 
PSD would be manageable:

    Though the costs of compliance with section 165 requirements are 
substantial, they can reasonably be borne by facilities that 
actually emit, or would actually emit when operating at full 
capacity, the large tonnage thresholds specified in section 169(1). 
The numbers of sources that meet these criteria, as we delineate 
them, are reasonably in line with EPA's administrative capability.

Alabama Power, 636 F.2d at 354. However, applying PSD to GHG sources 
before streamlining and without tailoring would increase the size of 
the PSD program at least an order of magnitude beyond what Congress 
seems

[[Page 31557]]

to have expected, which would have been far beyond the ``administrative 
capability'' that Alabama Power described EPA as having.
    Beyond this disconnect with congressional expectations, what is 
most important is that the extraordinarily large number of permit 
applications would overwhelm permitting authorities and slow their 
ability to process permit applications to a crawl. Our best estimate at 
present is that permitting authorities would need to process almost 
82,000 permit applications per year, compared to, at most, 800 in the 
current PSD program. The total additional workload, in work hours, for 
PSD permits would be more than 19.5 million more work hours, compared 
to 150,795 work hours for the current PSD program, and the total 
additional costs would be over $1.5 billion, compared with $12 million 
for the current PSD program.
    At proposal, we noted that the states had estimated that the influx 
of permit applications that would result from applying the 250 tpy 
threshold at actual emissions would, without additional resources, 
result in permitting delays of 3 years. In fact, as we noted at 
proposal, a literal reading of the PSD requirements would require their 
application at the 250 tpy PTE level, which would result in ten times 
more permit applications than were assumed when the states made the 3-
year estimate. Further, our current estimates of the numbers of sources 
that would be subject to PSD requirements are about twice what we 
estimated at proposal, as described elsewhere. Moreover, our estimate 
of the number of hours that permitting authorities would need to 
process a permit application from a source in the commercial or 
residential sector--which is, by far, the largest single sector--is 
three and one-half times as long as we estimated at proposal. And under 
a literal reading of the PSD applicability provisions as applied to GHG 
sources, the permitting authorities would be required to implement a 
program of this size beginning on January 2, 2011, less than 9 months 
from now. We received many comments from states and industry raising 
concerns about the cost to sources and administrative burdens of PSD 
permitting if the statutory threshold were to apply for GHG emissions. 
One commenter estimated a cost of over $5 billion and the dedication of 
over 17,000 FTEs to this effort.
    We consider it difficult to overstate the impact that applying PSD 
requirements literally to GHG sources as of January 2, 2011--before 
streamlining or increasing permitting resources and without tailoring--
would have on permitting authorities and on the PSD program, and we are 
concerned that this impact could adversely affect national economic 
development. The number of PSD permits that would be required from such 
an approach is far beyond what the PSD program has seen to date. It is 
clear throughout the country, PSD permit issuance would be unable to 
keep up with the flood of incoming applications, resulting in delays, 
at the outset, that would be at least a decade or longer, and that 
would only grow worse over time as each year, the number of new permit 
applications would exceed permitting authority resources for that year. 
Because PSD is a preconstruction program, during this time, tens of 
thousands of sources each year would be prevented from constructing or 
modifying. In fact, it is reasonable to assume that many of those 
sources will be forced to abandon altogether plans to construct or 
modify. As a result, a literal application of the PSD applicability 
provisions to GHG sources would slow construction nationwide for years, 
with all of the adverse effects that this would have on economic 
development.
    The remedies for this scenario would be for permitting authorities 
to increase their PSD funding by over 100-fold, from $12 million to 
over $1.5 billion, or the development by EPA and the permitting 
authorities of streamlining techniques. But it is not possible for 
permitting authorities to increase their funding to those levels in the 
foreseeable future, partly because of the sheer magnitude of those 
levels and partly because of the financial challenges that states 
currently face. And, for the reasons discussed later, although 
streamlining offers genuine promise to improve the manageability of the 
PSD workload, streamlining cannot do so in the very near term and, in 
any event, the extent to which it can do so has not yet come into 
focus.
    So clear are at least the broad outlines of this picture that EPA 
did not receive any substantive comments arguing that permitting 
authorities could in fact administer the PSD program with the 
applicability requirements applied literally to GHG sources beginning 
in the very near future.\40\ Every permitting authority that addressed 
this issue in their comments on the proposed Tailoring Rule stated 
unequivocally that it could not administer the PSD program at the 
statutory levels. To cite a few examples (each of which considered both 
the PSD and title V programs together): NACAA, which represents air 
pollution control agencies in 53 states and territories, stated it ``* 
* * agrees with the EPA that immediately attempting to implement the 
PSD and title V programs using the statutory thresholds meets the test 
for invoking the administrative necessity and absurd results 
doctrines.'' Similarly, the California Air Resources Board stated that 
it ``* * * concurs with the United States, EPA that if more appropriate 
applicability thresholds [as opposed to the statutory thresholds] are 
not set for GHG it will not be administratively possible to implement 
these [the PSD and tile V] permitting programs.'' All other state and 
local permitting agencies that commented on the proposed tailoring 
provided similar comments that they would not have the adequate staff 
capacity or resources to be able to successfully administer their 
permitting programs with the addition of GHG emission sources at the 
statutory thresholds for PSD and title V.
---------------------------------------------------------------------------

    \40\ EPA did receive a smaller number of comments that asserted 
in conclusory fashion that permitting authorities could administer 
the 100/250 tpy levels.
---------------------------------------------------------------------------

    It is the many-year delays in permit issuance and the consequent 
chilling of economic development that provide perhaps the clearest 
indication that applying the PSD applicability provisions to GHG 
sources without tailoring produces absurd results. These effects would 
undermine one of Congress's central purposes in establishing the PSD 
program, which was to promote development in clean air areas by large 
industrial sources (as long as they included environmental safeguards). 
As discussed previously, this goal is manifest in the structure of the 
PSD provisions, and Congress even went so far as to make this goal 
explicit in the purposes section of the PSD provisions.
    Moreover, at the present time, there is relatively little 
environmental benefit in subjecting large numbers of small GHG sources 
to the expensive, source-by-source PSD permitting requirements. They 
represent a relatively small share of the GHG inventory and the control 
options available to them, at present, are limited. As a result, 
approaches other than source-by-source permitting presently offer more 
promise for generating emissions reductions in an efficient manner. 
These approaches, which may be developed through both federal and state 
efforts, include requirements, incentives, and educational outreach to 
promote efficiency improvements to boilers and furnaces and energy 
efficient operations, including, for example, weatherization programs.
    For all these reasons, interpreting the definition of ``major 
emitting facility''

[[Page 31558]]

and ``modification'' literally--that is, as EPA has interpreted them 
more narrowly, but without tailoring and before the program 
requirements can be streamlined or permitting authority resources can 
be increased--would produce results that are not consonant with, and, 
in fact, would severely undermine, Congress's purpose for the PSD 
program. These results may fairly be characterized as the type of 
absurd results that support our view that the literal terms of the PSD 
applicability provisions do not indicate congressional intent for how 
those provisions should applied to GHG sources.
b. Congressional Intent for the Applicability Provisions
(1) Congressional Intent for Whether and How PSD Applies to GHG Sources
    Several of the PSD provisions and statements in the legislative 
history are particularly important in determining whether and how the 
PSD program should apply to GHG sources, as discussed elsewhere:
    (1) The applicability provisions, under CAA section 165(a) and 
169(1). These provisions are written broadly, and although, as we 
explain above, they cannot be read literally to apply to GHG sources at 
or above the 100/250 tpy, they nevertheless can be read to indicate 
that directionally, Congress intended that PSD be applied inclusively.
    (2) The various PSD provisions that identify the pollutants subject 
to PSD. Compare, e.g., CAA sections 162, 163, 164, 165(a)(3), 
165(d)(2), 165(e), and 166 (NAAQS pollutants) with CAA sections 
165(a)(3)(C), 165(a)(4) (other pollutants). These provisions indicate 
that a major purpose of the PSD program is to control NAAQS pollutants, 
but that the program also covers non-NAAQS pollutants.
    (3) The requirement that permitting authorities act on PSD 
applications within 1 year. CAA section 165(c). This provision 
indicates that Congress anticipated the PSD program would be of a size 
that would allow permitting authorities to meet this deadline.
    (4) The purpose provision. CAA section 160. This provision makes 
clear that PSD is designed both to protect public health and welfare 
and to promote economic growth.
    (5) In addition, we consider important the legislative history 
indicating the Congress intended PSD to apply to large industrial 
sources because they were the primary source of the air pollution 
problems and they have the resources to manage the demands of the PSD 
permitting process; and that, by the same token, Congress expected that 
small sources would not be subject to PSD. The legislative history does 
not specifically mention GHG sources.

Looking at these provisions and the legislative history together, we 
think Congress can be said to have intended that the PSD program apply 
to GHG sources as a general matter. The most important indication of 
congressional intent in this regard is the applicability provisions, 
which provide, in part, that PSD applies to (i) ``any * * * source[ 
that] emit[s], or ha[s] the potential to emit [the specified quantity] 
of any air pollutant,'' CAA section 169(1); and (ii) to any such source 
that undertakes a physical or operational change that ``increases the 
amount of any air pollutant emitted.'' CAA section 169(2)(C), 
111(a)(4). These terms are quite broad, and should be read to include 
GHG sources and GHGs. See Massachusetts v. EPA, 549 U.S. 497, 533 
(2007) (``Because greenhouse gases fit well within the Clean Air Act's 
capacious definition of `air pollutant,' we hold that EPA has the 
statutory authority to regulate the emission of such gases from new 
motor vehicles.''). Moreover, including GHG sources--under certain 
circumstances--is consistent with the PSD provisions that refer to 
other pollutants, establish the time-frame for acting on PSD 
applications, and establish the overall purpose of the program. In 
addition, including GHG sources--again, under certain circumstances--is 
consistent with the legislative history that PSD be limited to sources 
that cause a meaningful part of the air pollution problem and have the 
resources to manage the PSD requirements. No PSD provision explicitly 
imposes any limitation of PSD to large industrial sources, and 
Congress's reasoning for focusing on large industrial sources--which 
was that these sources are best suited to handle the resource -
intensive analyses required by the PSD program--could extend to GHG 
sources under certain circumstances (that is, large sources first, and 
smaller sources after streamlining methods are developed). Similarly, 
as discussed previously, it is reasonable to read into Congress's 
intent that the PSD program be limited to a size that permitting 
authorities would be able to administer, but it is consistent with that 
reading to recognize that the permitting authorities could take certain 
steps--including adoption of streamlining measures and ramping up 
resources--that would allow them to handle a higher volume of 
permitting. Finally, we find nothing in the PSD provisions or 
legislative history that would indicate congressional intent to exclude 
GHG sources. Accordingly, we believe that Congress must be said to have 
intended an affirmative response for whether PSD applies to sources of 
GHGs as a general matter. Our previous regulatory action defining the 
PSD applicability provisions made this clear, and we do not reopen this 
issue in this rulemaking. Moreover, even if this long-established 
regulatory position were not justifiable based on Chevron Step 1--on 
the grounds that in fact, congressional intent on this point is not 
clear--then we believe that this position, that the statutory 
provisions to apply PSD to GHG sources in general, was justified under 
Chevron Step 2.
    As to how PSD applies to GHG sources, although, for reasons 
discussed previously, the 100/250 tpy threshold provision, which 
establishes the scope of PSD applicability, should not be read as 
applying literally to GHG sources--and as a result, the applicability 
provision as a whole cannot be said to have a plain meaning as to the 
scope of coverage of GHG sources--we believe that the applicability 
provisions and legislative history nevertheless indicate a 
congressional intent for how PSD should apply to GHG sources. That is 
to apply PSD to as many sources as possible as quickly as possible, at 
least to a certain point. We believe that this intent can be inferred 
from the inclusiveness of the applicability provision, combined with 
the legislative history that focuses on Congress's desire to include in 
the PSD program sources that have the resources to comply with the 
requirements and, as the Court in Alabama Power recognized, Congress's 
concern about administrability. That is, at first, PSD may apply to the 
largest GHG sources because they may be expected to have the resources 
to comply with PSD's requirements and permitting authorities may be 
expected to accommodate those sources; and over time, with streamlining 
and increases in permitting authority resources, PSD may apply to more 
GHG sources. As discussed later, the tailoring approach is consistent 
with congressional intent in this regard.
    We recognize the tension between the applicability provisions, 
which are inclusive, and the statements in the legislative history that 
express Congress's expectation that PSD be limited to large industrial 
sources. At least to a point, the applicability provisions and these 
statements can be reconciled by recognizing that the reason why 
Congress expected that PSD would be limited to large industrial sources 
was that Congress recognized that PSD applied on a source-by-source 
basis, that this would be costly to

[[Page 31559]]

sources, and that only the large industrial sources could afford those 
costs. Taking certain actions--including streamlining PSD 
requirements--can render PSD more affordable and thereby allow its 
application to smaller sources in a more cost-effective manner. In this 
way, PSD's inclusive applicability provisions can be reconciled with 
the narrower scope Congress expected, and this is part of the reason 
why we characterize congressional intent as being consistent with 
phasing in the applicability of PSD to GHG sources through the 
tailoring approach.\41\
---------------------------------------------------------------------------

    \41\ Reconciling the applicability provisions with the 
statements in the legislative history in this manner is also 
consistent with the U.S. Supreme Court's view that the Clean Air Act 
has inherent flexibility, as it stated in Massachusetts v. EPA, 549 
U.S. 497, 532 (2007):
    While the Congresses that drafted Sec.  202(a)(1) might not have 
appreciated the possibility that burning fossil fuels could lead to 
global warming, they did understand that without regulatory 
flexibility, changing circumstances and scientific developments 
would soon render the Clean Air Act obsolete. The broad language of 
Sec.  202(a)(1) reflects an intentional effort to confer the 
flexibility necessary to forestall such obsolescence. See 
Pennsylvania Dept. of Corrections v. Yeskey, 524 U. S. 206, 212 
(1998) (``[T]he fact that a statute can be applied in situations not 
expressly anticipated by Congress does not demonstrate ambiguity. It 
demonstrates breadth'' (internal quotation marks omitted)).
---------------------------------------------------------------------------

    On the other hand, if Congress cannot be said to have expressed an 
intent as to the manner and scope of PSD applicability to GHG sources, 
then, under Chevron Step 2, EPA may apply a reasonable interpretation 
of the applicability provisions to determine the scope of coverage of 
GHG sources that is consistent with the statutory requirements. The 
Tailoring Rule is a reasonable interpretation under Chevron Step 2. It 
is consistent with (1) The applicability provisions, recognizing that 
as we have seen, those provisions cannot be applied literally under 
these circumstances,\42\ (2) the provisions described above concerning 
which pollutants the PSD provisions cover and the timetable for 
permitting authority action on PSD applications; (3) the purpose 
provisions of PSD, and the accompanying legislative history, because it 
protects public health and welfare without inhibiting economic 
development; and (4) the legislative history indicating Congress 
intended that PSD be limited to sources that cause a meaningful part of 
the problem and can manage its requirements, because it will expand 
PSD's applicability only after streamlining methods and greater 
permitting authority resources will allow for such an expansion in an 
orderly manner.
---------------------------------------------------------------------------

    \42\ For the reasons discussed above, we believe that Step 2 of 
the Chevron framework, which authorizes the exercise of agency 
discretion as long as the agency remains consistent with a 
reasonable construction of the statute, does not require a literal 
construction of the statute in a case such as this one, in which the 
``absurd results'' doctrine applies so that the statutory 
requirements cannot be read literally.
---------------------------------------------------------------------------

(2) Criteria for Establishing Phase-in Schedule
    The specific phase-in schedule under the tailoring approach will 
depend on several things. The first is our progress in developing 
streamlining methods that will render the permitting authority workload 
more manageable by taking some sources off the table (through 
regulations or guidance interpreting PTE), and by allowing for more 
efficient permit processing (through general permits and presumptive 
BACT). At the same time, streamlining techniques will lower permitting 
costs to sources or even eliminate some sources' obligations to obtain 
permits altogether. The second is the time that permitting authorities 
need to ramp up their resources in an orderly and efficient manner to 
manage the additional workload. The third is information we have as to 
the sources' abilities to meet the requirements of the PSD program and 
the permitting authorities' ability to process permits in a timely 
fashion. That information will be based on the real-world experience 
the permitting authorities will accumulate as they proceed to process 
permit application for the larger GHG sources.
    Thus, under our present approach, we will develop streamlining 
techniques, we expect the permitting authorities to ramp up resources 
in response to the additional demands placed upon them in the first two 
steps, and we will gather real-world information about the GHG 
permitting process; and based on all that, we will address expanding 
the PSD program in a step-by-step fashion to include more sources over 
time. We intend to follow this process to establish both the PSD 
applicability thresholds and, as we describe next, the significance 
levels.
(3) Criteria for Establishing Significance Levels \43\
---------------------------------------------------------------------------

    \43\ It should be noted that strictly speaking, we do not, in 
our drafting of the regulatory revisions that are part of this 
rulemaking, establish a significance level for GHG emissions based 
on CO2e. Rather, we establish an applicability criteria 
for determining whether GHGs are subject to regulation with respect 
to the particular source. We explain our approach in more detail in 
the Response to Comments document. Throughout this preamble, we 
refer to this action, for convenience, as a significance level.
---------------------------------------------------------------------------

    The criteria for establishing the significance levels are the same 
as for establishing the ``major emitting facility'' thresholds. As 
noted previously, under the applicable CAA sections, any physical or 
operational change at a stationary source that ``increases the amount 
of any air pollutant emitted by such source'' or that results in the 
emission of a new pollutant is treated as a ``modification'' that is 
subject to PSD requirements. Although the CAA, by its terms, treats as 
an ``increase'' any amount of emissions that is greater than zero, the 
DC Circuit held in Alabama Power v. Costle that EPA may establish a 
threshold--called the significance level--on de minimis grounds for the 
amount of any particular pollutant that may be increased. 636 F.2d at 
400.
    Of particular importance, the Court in Alabama Power indicated that 
EPA may rely on administrative considerations to establish significance 
levels. Id. To reiterate, the Court held that ``EPA does have 
discretion, in administering the statute's `modification' provision, to 
exempt from PSD review some emission increases on grounds of de minimis 
or administrative necessity.'' 636 F.2d at 400. The Court added a more 
detailed exposition of its views in a subsequent part of its opinion, 
where it discussed the BACT provision, under CAA section 165(a)(4), and 
the Court made clear that those views applied as well to the 
``modification'' provision. There, the Court invalidated an EPA 
regulation that established a 100- and 250-tpy exemption from the BACT 
requirement. Both the BACT provision and the modification provision 
apply by their terms to all emissions from a source, but the Court 
stated that each provision must be read to incorporate an exemption 
based on de minimis or administrative considerations, and explained:

    We understand that the application of BACT requirements to the 
emission of all pollutants from a new facility, no matter how 
miniscule some may be, could impose severe administrative burdens on 
EPA, as well as severe economic burdens on the construction of new 
facilities. But the proper way to resolve this difficulty is to 
define a de minimis standard rationally designed to alleviate severe 
administrative burdens, not to extend the statutory 100 or 250-ton 
threshold to a context where Congress clearly did not apply it. Just 
as for the applicability of PSD to modifications, the de minimis 
exemption must be designed with the specific administrative burdens 
and specific regulatory context in mind. This the Agency has failed 
to do. We do not hold that 100 tons per year necessarily exceeds a 
permissible de minimis level; only that the Agency must follow a 
rational approach to determine what level of emission is a de 
minimis amount.
    A rational approach would consider the administrative burden 
with respect to each statutory context: what level of emission is de 
minimis for modification, what level de minimis for application of 
BACT. Concerning

[[Page 31560]]

the application of BACT, a rational approach would consider whether 
the de minimis threshold should vary depending on the specific 
pollutant and the danger posed by increases in its emission. The 
Agency should look at the degree of administrative burden posed by 
enforcement at various de minimis threshold levels. It is relevant 
that our decision requires the Agency, in its evaluation of 
emissions of facilities, to take into account the facility's air 
pollution controls. It may also be relevant, though it is certainly 
not controlling, that Congress made a judgment in the Act that new 
facilities emitting less than 100 or 250 tons per year are not 
sizeable enough to warrant PSD review.

Id. at 405. As just quoted, the Court acknowledged the 100 and 250 tpy 
thresholds for a major emitting facility, and did not indicate whether 
the modification exemption level could exceed those statutory levels, 
but nevertheless, the Court made clear that EPA may ``consider the 
administrative burden'' associated with modifications to establish an 
exemption level for modifications.
    EPA has established significance levels for various pollutants, 
generally relying on a de minimis basis. See, e.g., 45 FR 52676, 52705-
52710 (August 7, 1980). In these actions, EPA generally established the 
level based on the triviality of the amount of emissions excluded. To 
this point, we have not attempted to determine de minimis--that is, 
trivial--levels for GHGs. Instead, in this rulemaking, EPA is 
establishing a phase-in schedule for significance levels based on the 
Chevron framework, accounting for the ``absurd results,'' 
``administrative necessity,'' and ``one-step-at-a-time'' doctrines. It 
is not necessary to establish a permanent de minimis level in this 
rulemaking. For one thing, the Court in Alabama Power explicitly 
authorized an administrative basis for significance levels. Moreover, 
were EPA to establish a de minimis level, that amount could be below--
perhaps even well below--the ``major emitting facility'' thresholds 
established in this rulemaking on grounds of ``administrative 
necessity'' and the other doctrines. Accordingly, at present, if we 
were to establish a permanent significance level on a de minimis basis, 
that level could result in too many small sources being required to 
submit permit applications while the phase-in is occurring. This would 
give rise to the same problems concerning undue costs to the sources 
and administrative burdens for the permitting authorities for which we 
are fashioning a remedy. Accordingly, the significance levels we 
establish with this action are the lowest levels that sources and 
permitting authorities can reasonably be expected to implement at the 
present time in light of the costs to the sources and the 
administrative burdens to the permitting authorities.
c. Other Possible Approaches to Reconciling a Literal Reading of PSD 
Applicability Provisions and Congressional Intent
    Commenters have suggested another approach to reconciling the 
inconsistency between the definition of ``major emitting facility'' and 
congressional intent. They urge that the ``major emitting facility'' 
definition should be applied so that only sources that emit NAAQS 
pollutants, for which the area is designated attainment or 
unclassifiable, in the requisite quantities would be subject to PSD, 
and sources would not be subject to PSD based solely on their emissions 
of non-NAAQS pollutants or a NAAQS pollutant for which an area has been 
designated nonattainment. Some commenters argue that this approach is 
mandated by several of the PSD provisions, read together or at least 
that the relevant statutory provisions are ambiguous and that this 
approach is a reasonable reading of them. Under this approach, we would 
not need to phase in the application of PSD by lowering the 
applicability threshold for GHG emitters.
    Specifically, many commenters have questioned whether EPA has the 
authority to regulate GHGs under the PSD provisions. Although the 
specific lines of reasoning vary somewhat from one commenter to 
another, in general, they based their arguments largely on CAA sections 
161 and 165(a). Under CAA section 161:

    In accordance with the policy of section 101(b)(1), each 
applicable implementation plan shall contain emission limitations 
and such other measures as may be necessary, as determined under 
regulations promulgated under this part, to prevent significant 
deterioration of air quality in each region (or portion thereof) 
designated pursuant to section 107 as attainment or unclassifiable.

Commenters point out that section 107 applies only to NAAQS pollutants 
and directs that areas be designated as attainment, nonattainment, or 
unclassifiable on a pollutant-by-pollutant basis. Under CAA section 
165(a), a ``major emitting facility'' cannot be constructed ``in any 
area to which this part applies'' unless it meets certain requirements. 
According to some commenters, these provisions, read together, limit 
PSD's applications to only NAAQS pollutants that are emitted from 
sources in areas that are designated attainment or unclassifiable for 
those pollutants. Other comments make a similar point, except to state 
that PSD applies more broadly to pollutants with a local, ambient 
impact.
    Some commenters go on to take the position that NAAQS pollutants 
for which the area is designated attainment or unclassifiable are the 
only pollutants that can be regulated under any provision of the PSD 
requirements; while others take the position that once PSD is triggered 
for a source on the basis of its NAAQS pollutants, then other, non-
NAAQS, pollutants may be regulated under certain PSD provisions, in 
particular, the BACT provision under CAA section 165(a)(4). These 
commenters agree, however, that emissions of GHGs, by themselves, 
cannot trigger PSD applicability. Finally, some commenters state that 
even if the PSD provisions cannot be read by their terms to preclude 
GHGs from triggering PSD, then they can be read to authorize EPA to 
determine that GHG emissions do not trigger PSD.
    We recognize, as we have said elsewhere, that a major purpose of 
the PSD provisions is to regulate emissions of NAAQS pollutants in an 
area that is designated attainment or unclassifiable for those 
pollutants. However, we do not read CAA sections 161 and the ``in any 
area to which this part applies'' clause in 165(a), in the context of 
the PSD applicability provisions, as limiting PSD applicability to 
those pollutants. The key PSD applicability provisions are found in 
sections 165(a) and 169(1). Section 165(a) states, ``No major emitting 
facility on which construction is commenced after August 7, 1977, may 
be constructed in any area to which this part applies unless [certain 
requirements are met].'' A ``major emitting facility'' is defined, 
under CAA section 169(1), as ``any * * * stationary source[s] which 
emit[s], or ha[s] the potential to emit, one hundred [or, depending on 
the source category, two hundred fifty] tons per year or more of any 
air pollutant.'' As discussed elsewhere, EPA has long interpreted the 
term ``any air pollutant'' to refer to ``any air pollutant subject to 
regulation under the CAA,'' and for present purposes, will continue to 
read the ``subject to regulation'' phrase into that term.
    Although section 165(a) makes clear that the PSD requirements apply 
only to sources located in areas designated attainment or 
unclassifiable, it does not, by its terms, state that the PSD 
requirements apply only to pollutants for which the area is designated 
attainment or unclassifiable. Rather, section 165(a) explicitly states 
that the PSD requirements apply more broadly to any pollutant that is 
subject to regulation. Moreover, another

[[Page 31561]]

requirement in CAA section 165(a) also applies to air pollutants 
broadly. Under CAA section 165(a)(3), one of the requirements for 
securing a preconstruction permit is to demonstrate that the source's 
emissions ``will not cause, or contribute to, air pollution in excess 
of any (A) maximum allowable increase or maximum allowable 
concentration for any pollutant in any area [to which the PSD 
requirements apply], (B) [NAAQS] in any air quality control region, or 
(C) any other applicable emission standard or standard of performance 
under this chapter.'' As just quoted, subparagraph (C), by its terms 
clearly applies to non-NAAQS pollutants. This is because it refers to 
(1) ``any other applicable emission standard,'' which distinguishes it 
from subparagraph (B) and therefore from NAAQS pollutants; and (2) 
``any * * * standard of performance under this chapter,'' which refers 
to standards of performance under section 111, several of which are for 
non-NAAQS pollutants. See, e.g., 40 CFR 60.33c(a) ``municipal solid 
waste landfill emissions.'' By the same token, CAA section 110(j) 
specifically contemplates that a source required to hold a permit under 
title I of the Act, which includes a PSD permit, demonstrate that the 
source complies with ``standards of performance,'' which may include 
requirements for pollutants other than NAAQS.
    In addition, CAA section 163(a)(4) includes as a PSD requirement 
that ``the proposed facility is subject to the best available control 
technology for each pollutant subject to regulation under this chapter 
emitted from, or which results from, such facility.'' Section 
163(a)(4)'s broad reference to ``each pollutant subject to regulation 
under this chapter'' clearly indicates that it applies to non-NAAQS 
pollutants, as long as they are regulated under other provisions of the 
Act.\44\ The DC Circuit, in Alabama Power v. Costle, 636 F.2d 323, 361 
n.90 (DC Cir. 1980) indicated that, under the law applicable at the 
time the Court handed down the decision in 1980, PSD applies to 
HAPs.\45\
---------------------------------------------------------------------------

    \44\ We find no support for the proposition raised by some 
commenters that this provision is limited to ``NAAQS'' pollutants. 
To the contrary, ``under this chapter'' unambiguously signals an 
intent to cover any pollutant regulated under the Act. Had Congress 
intended a narrower focus, they would have specified ``any NAAQS 
pollutant'' or any pollutant subject to regulation under this Part 
(PSD).
    \45\ In the 1990 CAA Amendments, Congress added section 
112(b)(6), which provides that PSD ``shall not apply to pollutants 
listed under this section,'' that is, HAPs.
---------------------------------------------------------------------------

    In addition, PSD requirements are part of SIPs, and although SIPs 
generally are limited to provisions that implement the NAAQS, and 
therefore generally are limited to controlling NAAQS pollutants (or 
non-NAAQS pollutants that affect ambient air quality), see generally 
CAA section 110, Congress explicitly required SIPs to include 
requirements to protect visibility, under CAA section 169A-B. See CAA 
sections 110(a)(2)(D)(i)(II), 169A(b)(2)(A). Congress took much the 
same approach with the PSD program, which was to require that PSD 
requirements be included in the SIPs, but to explicitly require that 
PSD apply to non-NAAQS pollutants.
    These provisions--sections 165(a)(3), 165(a)(4), and 110(j)--all 
indicate by their terms that PSD requirements apply to non-NAAQS 
pollutants. As such, they lend credence to our view that Congress 
intended the PSD applicability provisions to include GHG sources. At 
the very least, they demonstrate that Congress certainly knew how to 
specifically describe certain air pollutants--e.g., ``air pollution in 
excess of * * * any other applicable emission standard or standard of 
performance under this chapter,'' CAA section 165(a)(3)(C)--which 
indicates that its decision not to specifically describe air pollutants 
in the applicability provisions suggests an intent to cover air 
pollutants broadly.
    To return to sections 161 and the ``in any area to which this part 
applies'' phrase in 165(a), which commenters rely on as the cornerstone 
of their argument, commenters in effect take the position that Congress 
intended the geographic references in these provisions--that is, the 
references to areas designated as attainment or unclassifiable--to 
limit the scope of the permitting provisions. We think it unpersuasive 
that Congress would have taken such an indirect, and silently implied, 
route to limit the scope of the permitting provisions. As noted 
previously, the permitting provisions apply broadly by their terms. Had 
Congress intended to limit PSD permitting in the manner urged by 
commenters, it certainly could have done so directly, such as by 
limiting PSD permitting to ``any pollutant for which an area is 
designated attainment or unclassifiable.'' Indeed, Congress did so in 
other PSD provisions, discussed previously. Similarly, in other 
sections of the CAA, Congress also directly limited the scope of 
pollutant applicability by specifying which pollutants are or are not 
subject to the provision. See, e.g., section 111(d) (performance 
standards for existing sources apply only to pollutants other than 
NAAQS or HAPs), section 112(a)(1) (applying air toxics requirements in 
section 112 to sources that emit above the specified tonnage thresholds 
of ``hazardous air pollutants'').
    In addition, although section 161 requires that SIPs contain 
emission limitations and other measures as necessary to prevent 
significant deterioration in areas designated as attainment or 
unclassifiable, it does not by its terms limit SIPs to only those 
measures.
    Most broadly, we read the PSD provisions and their legislative 
history to evidence Congress's intent that PSD apply throughout the 
country to large sources that undertake new construction or 
modifications, and that Congress's overall purpose was to assure that, 
as the industrial stock of the nation turned over, it would become 
cleaner for all air pollutants emitted. Greenhouse gas sources, as a 
general matter, fit readily into this overall vision. At the time that 
Congress enacted the PSD provisions in 1977, every area of the nation 
was designated attainment or unclassifiable for at least one air 
pollutant, and that has remained the case to the present time. 
Accordingly, at all times, PSD has applied in every area of the 
country. The PSD requirements clearly cover all air pollutants emitted 
by the source, and provide a process for reviewing those emissions and 
determining BACT for them under CAA section 165(a)(4). It is true that 
at the time Congress adopted the PSD provisions, it was primarily 
concerned about the NAAQS pollutants--or, as some commenters assert, 
pollutants with local, ambient impact--because those pollutants 
represented a major component of the air pollution problems it was 
aware of and was addressing. But its overall purpose was broad enough 
to cover additional pollutants; the process it enacted for establishing 
BACT was broad enough to encompass additional pollutants; and the 
applicability provisions it established were phrased broadly enough to 
encompass additional pollutants, see section 169(1). As a result, we 
believe that the PSD applicability provisions, which, again, refer to, 
as we have interpreted them, ``any air pollutant [subject to regulation 
under the CAA],'' should be seen as ``capacious'' and therefore 
encompass GHG sources, in much the same manner as the U.S. Supreme 
Court viewed the definition of ``air pollutant'' to be ``capacious'' 
and therefore encompass GHGs. Massachusetts v. EPA, 549 U.S. 497, 533 
(2007).
    In addition, it should not be overlooked that we have applied PSD 
to

[[Page 31562]]

non-NAAQS pollutants since the inception of the program over 30 years 
ago. For example, prior to the 1990 CAA Amendments, PSD applied to HAPs 
regulated under CAA section 112; and over the years, EPA has 
established significance levels for fluorides, sulfuric acid mist, 
hydrogen sulfide, TRS, reduced sulfur compounds, municipal waste 
combustor organics, municipal waste combustor metals, municipal waste 
combustor acid gases, and municipal solid waste landfill emissions, see 
40 CFR 51.166(b)(23)(i); and EPA has proposed a significance level for 
ozone depleting substances. See 61 FR 38307 (July 23, 1996). Of course, 
the basis for all these actions is PSD's applicability to these non-
NAAQS air pollutants. We are not aware that EPA's actions in 
establishing significance levels for these pollutants gave rise to 
challenges on grounds that the PSD provisions do not apply to them. As 
the U.S. Supreme Court recently stated in upholding an EPA approach in 
another context: ``While not conclusive, it surely tends to show that 
the EPA's current practice is a reasonable and hence legitimate 
exercise of its discretion * * * that the agency has been proceeding in 
essentially this fashion for over 30 years.'' Entergy Corp. v. 
Riverkeeper, Inc., 129 S.Ct. 1498, 1509 (2009) (citations omitted).
    Finally, we note that excluding GHG sources from PSD applicability 
would create inequitable results. Consider the hypothetical case of two 
sources that construct in the same area, each of which emits the same 
amount of GHGs, and that amount is large enough to trigger PSD 
applicability. Assume that the first one, but not the second, also 
emits NAAQS pollutants amounts large enough to trigger PSD 
applicability. If GHG sources are excluded from PSD applicability, then 
the first of those sources, but not the second, would be subject to PSD 
requirements for its GHG emissions. Similarly, consider the 
hypothetical case of two sources that emit identical amounts of the 
same NAAQS pollutant and identical amounts of GHGs, all amounts of 
which are large enough to trigger PSD applicability requirements. 
Assume that the first source constructs in an area that is an 
attainment or unclassifiable area for the NAAQS pollutant that it 
emits, and that the second source constructs in an area that is not an 
attainment or unclassifiable area for that NAAQS pollutant. Here again, 
if GHG sources are excluded from PSD applicability, then the first of 
those sources, but not the second, would be subject to PSD requirements 
for its GHG emissions. These results are inequitable and would create 
an uneven playing field and for this reason, too, support our view that 
the PSD applicability provisions apply to GHG sources.
    Accordingly, we reject the argument that section 165 must be, or 
may reasonably be, limited in scope to pollutants for which an area has 
been designated as attainment or unclassifiable. Rather, the PSD 
applicability provision--the definition of ``major emitting facility'' 
in CAA section 169(1)--applies by its terms (as we have interpreted 
them narrowly through regulation) to sources emitting any air pollutant 
subject to regulation, and is not limited to any NAAQS air pollutant. 
Our research has not disclosed any explicit statements in the 
legislative history that Congress intended to limit PSD applicability 
to sources of NAAQS pollutants.
6. Application of the ``Absurd Results'' Doctrine for the Title V 
Program
    Having discussed the application of the Chevron framework, taking 
account of the ``absurd results'' doctrine, for the PSD applicability 
requirements, we now turn towards applying the same approach to the 
title V applicability requirements. Because of the parallels between 
the PSD and title V applicability provisions, much of the discussion 
later parallels the previous discussion of PSD. As with PSD, we 
finalize, with some refinements, the ``absurd results'' basis we 
proposed. Specifically, we are revising our regulations to limit title 
V applicability to GHG emitting sources by revising the regulatory 
term, ``major source,'' and although our revised regulations do not 
accord with a literal reading of the statutory provisions for title V 
applicability, which are incorporated into the statutory definition of 
``major source,'' we have concluded that based on the ``absurd 
results'' doctrine, a literal adherence to the terms of this definition 
is not required. Rather, we may apply title V to GHG sources in a 
phased-in manner, as we do through the tailoring approach, because 
although congressional intent is clear that title V applies to GHG 
sources in general, congressional intent is unclear on the question of 
how title V applies, and the tailoring approach is a reasonable 
interpretation of the statute.
    To reiterate, for convenience, the title V applicability provisions 
provide that after the effective date of a title V program, it is 
unlawful for any person to operate a ``major source'' without a title V 
permit (CAA section 502(a), and define a ``major source'' to include 
``any major stationary facility or source of air pollutants which 
directly emits, or has the potential to emit, one hundred tons per year 
or more of any air pollutant.'' CAA sections 501(2)(B) and 302(j).
    Under the current interpretation of the title V applicability 
provisions, EPA's recent promulgation of the LDVR will trigger the 
applicability of title V for GHG sources at the 100 tpy threshold 
levels as of January 2, 2011. This is because title V applicability 
hinges on the definition of ``major source,'' which, under EPA's long-
standing narrowing interpretation, but absent further tailoring, 
applies title V to sources of any air pollutant that is subject to 
regulation under another provision of the CAA. EPA's promulgation of 
the LDVR means that GHGs will become subject to regulation on the date 
that the rule takes effect, which will be January 2, 2011.
    But absent tailoring, the January 2, 2011 trigger date for GHG PSD 
applicability will see an extraordinarily large number of sources--some 
6.1 million--become subject to title V, an increase of over 400-fold 
over the 14,700 sources that currently are subject to title V. The 
great majority of these will be small commercial or residential 
sources.
    We believe that for many reasons, this result is contrary to 
congressional intent for the title V program, and in fact would 
severely undermine what Congress sought to accomplish with the program. 
As a result, under Chevron, accounting for the ``absurd results'' 
doctrine, the statutory definition for ``major source'' (as EPA has 
already narrowed it to refer to any air pollutant ``subject to 
regulation'') should not be read to apply to all GHG sources at or 
above the 100 tpy threshold as of the January 2, 2011 date. Rather, the 
definition of ``major source'' should be tailored so that it applies to 
GHG sources on a phased-in basis, with the largest sources first, as we 
describe in this rule.
a. Congressional Intent for the Title V Program
    As we said, previously, in a similar circumstance involving the PSD 
program, applying title V requirements to GHG sources without tailoring 
the definition of ``major source''--and, as discussed later, without 
streamlining the title V requirements or allowing for time for 
permitting authorities to ramp up resources--would result in a program 
unrecognizable to the Congress that enacted title V, and one that would 
be flatly unadministrable. Without tailoring, the PSD program would 
expand from the current 14,700 sources to some 6.1 million, with the 
great

[[Page 31563]]

majority of the sources being small commercial and residential sources 
that not only have never been permitted before, but that in many cases 
have no applicable requirements under the CAA to include in the permit. 
In the next several sections, we will describe some of the specific 
ways that this literal application of title V would not only differ 
from, but would undermine, congressional intent. But the big picture is 
readily drawn: The influx of millions of permit applications would do 
nothing less than overwhelm the program Congress finely crafted for 
thousands of sources, with its multi-step deadlines measured in days 
and months, its multiple mandates for expeditious permit processing, 
its nuanced limitations on the need for permit revisions, its efforts 
to save smaller sources permit fees. Regulatory gridlock, precisely 
what Congress strove to avoid, would result.
    Most visibly, interpreting the applicability provisions literally 
to include GHG sources at the 100 tpy level immediately would revise 
the program from what Congress envisioned in three major ways, the 
legislative history of each of which was discussed previously:
     It would immediately expand the program to cover several-
hundred-fold more sources than Congress anticipated.
     It would immediately expand the program to cover very 
small sources that Congress expected would not be included in the 
program.
     It would immediately expand the program so that a large 
number of sources have empty permits, that is, permits without 
applicable requirement, and undermine the implementation of the program 
for sources with applicable requirements.
    Revising the program in this way through a literal interpretation 
of the applicability provisions--without tailoring the applicability 
requirements and without streamlining the program requirements--is 
clearly inconsistent with Congress's conception of the program's scope, 
and these inconsistencies are foundational. Most importantly, the 
program that would result would be unduly costly to sources and 
impossible for permitting authorities to implement, and therefore would 
frustrate the purposes that Congress intended to achieve with the 
program that it did design.
    As discussed previously, Congress was fully aware that with the 
title V program, it was subjecting sources and permitting authorities 
to additional costs and administrative burdens, and it was fully aware 
of concerns that absent careful design, the program could become a 
formula for regulatory gridlock. Determined to make the program 
workable, Congress crafted the provisions to be efficient and workable.
    However, if title V were to apply to GHG sources at the 100 tpy 
level, until EPA could develop streamlining methods, all of these 
sources newly subject to title V would need to apply for permits. We 
estimate that the commercial and residential sources would incur, on 
average, expenses of $23,175, while an industrial source would incur 
expenses of $46,350, to prepare a permit application and receive a 
permit. The great majority of these sources would be small commercial 
and residential sources of the type that Congress did not expect would 
be included in title V. For example, as discussed above, the 
legislative history of title V, including both the permit program under 
CAA sections 501-506 and the ``small business stationary source 
technical and environmental compliance assistance program'' under CAA 
section 507, indicated that Congress did not expect that ``printers, 
furniture makers, dry cleaners, and millions of other small 
businesses'' would become subject to title V. House Committee Report, 
H.R. 101-590, at 354. These sources generally do not have the potential 
to emit conventional pollutants at or above the 100 tpy threshold.\46\ 
However, many do have the potential to emit GHGs above that threshold. 
Many printers and furniture makers use a variety of combustion 
equipment that has the potential to emit at least 100 tpy 
CO2, and many commercial dry cleaners have gas-fired driers 
that have the potential to emit at least 100 tpy of CO2. All 
told, there are in fact ``millions of * * * small businesses'' that 
would become subject to title V--of the 6.1 million sources that would 
become subject to title V, the great majority are small businesses--if 
the title V applicability provisions are applied literally to GHG 
sources.
---------------------------------------------------------------------------

    \46\ As noted previously, the fact that some small sources are 
subject to title V because they are ``major sources'' of HAPs or 
certain area sources and therefore are covered under CAA sections 
502(a) and 501(2)(A) does not alter the conclusion from the 
legislative history that Congress did not expect large numbers of 
small sources to become subject to title V. The fact that Congress 
authorized the Administrator to exempt area sources from the title V 
program where compliance with title V would be ``impracticable, 
infeasible, or unnecessarily burdensome'' reinforces the conclusion 
that Congress did not intend the program to be ``impracticable, 
infeasible or unnecessarily burdensome'' for small sources.
---------------------------------------------------------------------------

    Moreover, the overall cost to all 6.1 million sources--before the 
development of streamlining methods--would be a staggering $49 billion 
per year over a 3 year period. Imposing burdens of this magnitude on 
these sources--individually and in total--would of course be contrary 
to Congress's efforts to minimize the expenses of title V, especially 
to small sources. The magnitude of the costs is, in a sense, heightened 
because a great many of these sources will not have applicable 
requirements to include in their permits; therefore, much of the costs 
will produce relatively little benefit.
    Yet, the most important reason why applying the title V program to 
GHG sources without tailoring, and before the development of 
streamlining methods, would be inconsistent with congressional intent, 
is that the resulting program would prove unadministrable. Adding some 
6.1 million permit applications to the 14,700 that permitting 
authorities now handle would completely overwhelm permitting 
authorities, and for all practical purposes, bring the title V 
permitting process to a standstill.
    The costs to permitting authorities of this multi-million-source 
program would again be staggering. On average, and without 
streamlining, a permitting authority would expend 214 hours, which 
would cost $9,844, to issue a permit to a commercial or residential 
source; and 428 hours, which would cost $19,688, to issue a permit to 
an industrial source. In all, permitting authorities would face over 
$21 billion in additional permitting costs each year due to GHGs, 
compared to the current program cost of $62 million each year.
    Beyond this disconnect with congressional expectations as to scope 
of the program, the extraordinarily large number of permit applications 
would overwhelm permitting authorities and slow their ability to 
process permit applications to a crawl. As described at proposal, the 
survey of permitting authorities conducted by NACAA found that a 
literal application of the title V applicability provisions to all GHG 
sources would result in permitting delays of some 10 years. However, as 
we further noted at proposal, this estimate was based on the assumption 
that the applicability threshold would be 100 tpy based on actual 
emissions; in fact, the applicability threshold would be 100 tpy based 
on PTE, which would sweep in many more sources. Moreover, as stated 
elsewhere, we currently estimate the amount of per-permit work hours 
for permitting authorities in processing title V permit applications to 
be several times higher than what we estimated at proposal. As with 
PSD, such a program would be beyond anything within our experience, and 
it is difficult to give a meaningful estimate

[[Page 31564]]

for how long the permitting process would take for each permit on 
average. But it is clear that the period would be many years longer 
than even the 10 years estimated by NACAA.
    In addition, applying title V to all GHG sources without tailoring 
would be in tension with a specific CAA requirement, that of CAA 
section 503(c), which imposes a time limit of 18 months from the date 
of receipt of the completed permit application for the permitting 
authority to issue or deny the permit. It would be impossible for 
permitting authorities to meet this statutory requirement if their 
workload increases from some 14,700 permits to 6.1 million, and without 
streamlining. Instead, as just noted, permit applications would face 
multi-year delays in obtaining their permits.
    Moreover, these delays would undermine the overall statutory design 
that promotes the smooth-running of the permitting process, and the 
underlying purpose of the title V program itself. As noted elsewhere, 
Congress intended through title V to facilitate sources' compliance 
with their CAA obligations by establishing an operating permit program 
that requires the source to combine all of its CAA requirements, and 
explain how it will assure compliance with such requirements. Congress 
established a comprehensive process to implement the operating permit 
program. Through this process, following the date that sources become 
subject to title V, they have 1 year to submit their permit 
applications. CAA section 503(c). As noted, the permitting authority 
then has 18 months to issue or deny the permit. CAA section 503(c). 
Permitting authorities must provide an opportunity for public comment 
and a hearing. CAA section 502(b)(6). If the permitting authority 
proposes to issue the permit, the permitting authority must submit the 
permit to EPA for review, and notify affected states. CAA section 
505(a)(1). EPA then has 45 days to review the permit and, if EPA deems 
it appropriate, to object to the permit. CAA section 503(b)(1). If EPA 
does object, then the permitting authority must, within 90 days, revise 
it to meet the objections, or else EPA becomes required to issue or 
deny the permit. CAA section 503(c). If EPA does not object, then, 
within 60 days of the close of the 45-day review period, any person may 
petition EPA to object, and EPA must grant or deny the petition within 
60 days. CAA section 505(b)(2). This set of applicant, permitting 
authority, and EPA actions and deadlines establishes the process for 
the prompt and efficient issuance of operating permits for the 
appropriate universe of sources.
    But at least for an initial period, until resources could be ramped 
up and streamlining methods could be developed, the extraordinary 
numbers of these permit applicants would sweep aside this carefully 
constructed program, and instead, backlog the permit authorities. This 
initial period would last for many years. As discussed elsewhere, it 
would take several years to develop and apply streamlining measures--in 
particular, general permits--and during that time, the permit backlog 
would grow so large that it would take many more years for permitting 
authorities to catch up by raising the requisite funds and hiring and 
training the necessary employees.
    What's more, only a fraction of these millions of sources newly 
covered by title V will be subject to any CAA requirements due to their 
GHG emissions, and we suspect that a larger number will not be subject 
to any CAA requirements at all. As a result, for most of these sources, 
although they would need to apply for and receive a permit, there would 
be no applicable requirements to include in the permit and thus the 
exercise would not improve compliance.
    The picture that emerges from a literal application of title V's 
requirements to all GHG sources--at the 100 tpy level, beginning on 
January 2, 2011--shows multi-year delays in issuance of all permits, 
for both the sources that have applicable requirements and that 
Congress clearly intended the program to cover, and for the millions of 
sources that may not be subject to any applicable requirements. In 
short, this literal interpretation would apply title V to millions of 
sources that Congress did not expect be covered, and the ensuing 
administrative burdens--at least initially--would impede the issuance 
of permits to the thousands or perhaps tens of thousands of sources 
that Congress did expect be covered. This is the type of ``absurd 
results'' from a literal application of statutory provisions that the 
courts have held should be avoided. And even beyond all that, the sheer 
magnitude of the numbers involved--millions of permits requiring 
thousands of FTEs at a cost to the permitting authorities of billions 
of dollars, all this beginning immediately at the time that GHGs become 
subject to regulation--makes clear that this result of a literal 
application of the title V provisions to GHG sources cannot be what 
Congress intended.
b. EPA's Reconciliation of Applicability Provisions With Congressional 
Intent
    For the reasons just described, we should not consider the literal 
meaning of the applicability provisions to be determinative of 
congressional intent as to the applicability of title V to all GHG 
sources; rather, we should examine other provisions of the statute and 
the legislative history to determine congressional intent on that 
question. If congressional intent is clear, we must adopt and implement 
an applicability approach that is as close as possible to congressional 
intent; and if congressional intent is not clear, then we must select 
an interpretation that is reasonable and consistent with the statutory 
requirements. This section explains EPA's view of congressional intent 
for the applicability of the title V program to GHG sources and the 
principles and approach EPA is using for tailoring. In addition, we 
also respond to other approaches that were suggested by commenters.
    To determine congressional intent, we consider the statutory 
provisions and legislative history, and this analysis is similar to 
that for PSD. The most important title V provisions and legislative 
history for this purpose are the following:
    (1) The applicability provisions themselves, which, as we have 
interpreted them, apply title V to all sources that emit at least 100 
tpy of any air pollutant subject to regulation. CAA sections 502(a), 
501(2)(B), 302(j). Although we do not believe these provisions should 
be applied literally to GHG sources, their broad phrasing indicates, 
directionally, a congressional intent towards inclusiveness of sources 
in title V, including GHG sources.
    (2) The provisions for general permits, CAA section 504(d); and 
title V fees, CAA section 502(b)(3)(A). These provisions give title V 
an important measure of flexibility as to its scope. The explicit 
authorization of general permits means that title V may be applied to 
more sources and more efficiently, thereby saving costs to both source 
and permitting authority. The requirements for permit fees provide a 
mechanism for permitting authorities to, over time, develop their 
programs to cover more sources. In this sense, these provisions could 
be construed to indicate congressional intent to apply title V 
inclusively, to the extent that permitting authorities can accommodate 
additional sources through general permits and permit fees.
    (3) The detailed procedural requirements--including time periods, 
such as the 18-month time period for action on permit applications--for 
title V permit processing. CAA sections 503, 505. Although these 
requirements are consistent with applying title V to GHG sources--in 
the sense that at least in

[[Page 31565]]

theory, there is nothing intrinsic to GHG sources that would mean that 
permitting authorities could not comply with these requirements--these 
requirements cast doubt on whether Congress can be said to have 
intended that title V cover the many small GHG sources (at least 
immediately) in light of the risk that including all those sources in 
title V would strain the process.
    (4) The provisions and legislative history concerning applicable 
requirements, which indicate that a purpose of title V is to include 
sources' applicable requirements in their permits. CAA sections 
503(b)(2), 504(a). These provisions, and the accompanying legislative 
history, discussed previously, suggest an intent to include within 
title V GHG sources that have applicable requirements, but may also 
suggest that Congress would not have intended to include in title V the 
large numbers of GHG sources that have ``empty permits,'' at least 
where their inclusion would undermine implementation of the program for 
sources with applicable requirements.
    (5) The small-business-assistance provisions of section 507 and the 
legislative history of title V--both the permitting program and the 
small-business-assistance program--concerning the scope of the 
permitting program and small businesses. These indicate that Congress 
intended title V to cover some tens of thousands of sources, and did 
not intend that title V apply to small businesses. These provisions and 
legislative history suggest that Congress did not intend for title V to 
apply to include large numbers of small GHG sources.

Finally, the legislative history of title V does not explicitly mention 
GHG sources, which could suggest that Congress did not have occasion to 
focus on whether and how title V would apply to GHG sources.
    With all this, we believe that Congress had a clear intent on the 
question of whether title V generally applies to GHG sources, and that 
was that it does. As with PSD, the most important indication of 
congressional intent in this regard is the applicability provisions, 
which provide, in part, that title V applies to ``any stationary 
facility or source of air pollutants which directly emits, or has the 
potential to emit, [the requisite quantity] of any air pollutant.'' CAA 
sections 502(a), 501(2)(B), 302(j). This term is quite broad, and 
should be read to include GHG sources. See Massachusetts v. EPA, 549 
U.S. 497, 533 (2007) (``Because greenhouse gases fit well within the 
Clean Air Act's capacious definition of `air pollutant,' we hold that 
EPA has the statutory authority to regulate the emission of such gases 
from new motor vehicles.''). Moreover, including GHG sources--under 
certain circumstances--is consistent with the various statutory 
provisions and statements in the legislative history described 
previously.
    In the alternative, if it is concluded that Congress did not 
express a clear intent on that question, then, under Chevron Step 2, 
EPA exercises its discretion to conclude that title V applies to GHG 
sources as a general matter. This is a reasonable policy because 
applying the title V program to at least the larger GHG sources will 
assure promote accountability and enforceability for those sources, 
which is a key goal of the title V program, and will not impose 
obligations that are beyond the resources of those sources or 
insurmountable burdens on the permitting authorities. This policy is a 
reasonable interpretation of the statutory provisions for the same 
reasons just discussed.
    As to the question of how title V applies to GHG sources, we 
believe that Congress cannot be said to have expressed a clear intent. 
A central aspect of how title V is to apply to GHG sources concerns 
``empty permits,'' and on this aspect, some of the above-described 
provisions and statements in the legislative history point in different 
directions. This is particularly true of, on the one hand the title V 
applicability provisions, which apply by their terms inclusively and, 
on the other hand, the requirement that sources include applicable CAA 
requirements in their permits, and the statements in the legislative 
history indicating that Congress intended title V to cover sources 
subject to other CAA requirements.
    Because Congress cannot be said to have expressed an intent as to 
the manner and scope of title V applicability to GHG sources, then, 
under Chevron Step 2, EPA may apply a reasonable interpretation of the 
applicability provision to determine the scope of coverage of GHG 
sources that is consistent with the statutory requirements. The 
Tailoring Rule qualifies as such an interpretation. The Tailoring Rule 
in effect reads the applicability provisions not to apply title V to 
GHG sources at or above the 100 tpy level, but instead to apply title V 
to as many of the GHG sources at or above that level as possible and as 
quickly as possible, starting with the largest sources first, that is 
consistent with both the permitting authorities' ability to administer 
the program and with a sensible imposition of costs to sources. This 
tailoring approach is consistent with the inclusive direction of the 
applicability provision, the flexibility in title V's scope that is 
inherent in the provisions authorizing general permits and requiring 
permit fees, the detailed process requirements, and the legislative 
history that focuses on Congress's concern about costs to sources and 
administrability. With the tailoring approach, over time, more sources 
may be included in title V, consistent with those provisions and 
legislative history. This reconciles the inclusiveness of the 
applicability provisions with Congress's expectations of a more limited 
scope for the title V program.\47\ However, as part of the tailoring 
approach, we recognize that we may at some point determine that it is 
appropriate to exclude certain sources, such as the smallest of the GHG 
sources. In addition, we intend to address the issue of sources with 
``empty permits'' in a later rulemaking, as discussed previously.
---------------------------------------------------------------------------

    \47\ As with PSD, this way of reconciling the PSD applicability 
provisions with Congress's expectations for a narrower PSD program 
is consistent with the U.S. Supreme Court's view that the CAA should 
be read to include ``regulatory flexibility, [without which] 
changing circumstances and scientific developments would soon render 
the Clean Air Act obsolete.'' Massachusetts v. EPA, 549 U.S. 532.
---------------------------------------------------------------------------

    The specific phase-in schedule will depend on the following: We 
will gather information about the permitting authorities' ability to 
process permits, and we will develop streamlining techniques. Based on 
that information, we will address expanding the title V program in a 
step-by-step fashion to include more sources over time. Each step will 
be based on our assessment of the permitting authorities' and sources' 
ability to comply with their respective obligations under the title V 
program.
    We recognize that the availability of permit fees to support title 
V permit actions creates a potentially important source of resources, 
and that this has implications for the permitting authorities' ability 
to implement the title V program for sources of GHGs. At least in 
theory, permitting authorities could assess and collect sufficient fees 
to support hiring and training sufficient personnel so that they could 
expand their programs to match the expansion in the number of sources 
covered by the program.
    Even so, title V fees cannot be considered a panacea that will 
resolve all resource problems that permitting authorities will have, 
for several reasons. Permitting authorities will likely be constrained 
as to the rate in which they can increase fees in light of

[[Page 31566]]

the costs to sources. As indicated elsewhere, at least at the outset of 
the program before streamlining techniques have been developed, a 
literal application of the title V applicability provisions to GHG 
sources would, on average, cost each industrial source $46,400 and each 
commercial or residential source $23,200 to complete the permit 
application and take other associated actions; and it would cost each 
permitting authority, on average, $19,688 to process the industrial 
source permit and $9,844 to process the commercial or residential 
source permit. Particularly in light of the high costs to sources of 
applying for a permit, it is not likely that permitting authorities 
would be able to pass on to the sources in the form of fees, the 
entirety of the permitting authorities' own high costs for processing 
those permits, at least not right away. Even to the extent it would be 
possible to raise permit fees, permitting authorities would have to 
undergo a process to assess, impose, and collect those fees, and then 
hire and train personnel. The survey from the state and local agencies 
described previously forecast a 2-year period for hiring and training, 
without counting time for the fee process. For these reasons, we do not 
believe that the authorization for fees will allow the permitting 
authorities either to accelerate Steps 1 or 2 of the tailoring schedule 
or to permit a larger number of sources at those steps. Step 1 will 
take effect on January 2, 2011, Step 2 will take effect on July 1, 
2011, and the process for determining and collecting fees, and then 
hiring and training personnel will take at least several years after 
July 1, 2011.
    Moreover, we do not believe that the authorization for fees means 
that permitting authorities can reasonably be expected to permit title 
V sources at levels below 50,000 tpy CO2e before 2016. The 
next level below 50,000 tpy CO2e for which we have data is 
25,000 tpy CO2e, and the costs to permitting authorities to 
run their programs at that level ($126 million) is more than double 
their current costs ($62 million). We do not consider it reasonable to 
expect permitting authorities to more than double their program within 
the first 6 years of title V applicability to GHG sources. That it is 
not reasonable to expect that is made even clearer when the permitting 
authorities' burdens in implementing their PSD programs are considered. 
The ability of permitting authorities to impose fees may have more 
important implications for subsequent steps, and as we address those 
subsequent steps in future rulemakings, we will consider the fees. 
EPA's approach to fees in this rulemaking is discussed elsewhere.
c. Other Possible Approaches to Reconciling Literal Reading of Title V 
Applicability Provisions and Congressional Intent
    Having described how the Chevron framework, accounting for the 
``absurd results'' doctrine, applies to title V requirements in this 
case and why it supports this Tailoring Rule--under which we expect to 
apply title V to more sources, in a step-by-step fashion, over time--we 
turn to the last part of our discussion of this doctrine. Here, we 
address another possible approach suggested by comments, which is that 
EPA should apply the title V program only to sources that are subject 
to applicable requirements, so that sources should not be required to 
hold ``empty permits'' (e.g., permits issued to a source that is not 
subject to any applicable requirement for any pollutant). To the extent 
that commenters argue that the statute requires EPA to adopt a ``no-
empty-permits'' theory, we disagree. We believe that although various 
provisions of title V indicate that one of title V's purposes is to 
gather a source's applicable requirements into a single permitting 
mechanism, see CAA sections 503(b)(1), 504(a), we do not read those 
provisions as expressly limiting, as a matter of Chevron Step 1, title 
V to sources with applicable requirements. The applicability 
provisions, by their terms, include sources based on amount of 
emissions, and do not include any explicit limits to applicability 
based on whether the sources has applicable requirements. As described 
previously, we believe that Congress, although clearly expressing an 
intent that title V apply to GHG sources generally, did not express a 
clear intent as to how title V applies to GHG sources. The tension 
between these two sets of provisions, which we identified in the 
proposal and commenters further discussed, provides further support for 
that conclusion. Accordingly, we have discretion under Chevron Step 2 
to determine a reasonable approach, consistent with the statutory 
requirements, concerning the application of title V to GHG sources with 
empty permits.
    We note that to date, we have issued permits to sources without 
applicable requirements, albeit on rare occasions. We have little 
reason to believe that the ``empty-permits'' issue will arise in Steps 
1 and 2 of our tailoring approach because we believe there will be no 
``empty permits'' in Step 1 or Step 2 or, if there are, that they will 
be very few in number. As stated elsewhere, we believe that the 
tailoring approach we adopt in this rulemaking for Steps 1 and 2 is a 
reasonable approach that is consistent with statutory requirements.
    We need to gather more information concerning the potential number 
and utility of ``empty permits'' for GHG sources, in light of the fact 
that the need for requirements in title V permits will vary based on 
the requirements of each SIP, and the fact that some SIPs contain 
broadly applicable requirements. As stated elsewhere, we intend to 
consider the issue of the applicability of title V to GHG sources with 
``empty permits'' in Step 3 of our tailoring approach. When we do so, 
we will further assess the potential for the approach of excluding 
empty permits from title V to relieve burden consistent with statutory 
requirements.
7. Additional Rulemaking for the PSD and Title V Programs
    The previous sections 5 and 6 discussed our application of the 
Chevron framework, accounting for the ``absurd results'' doctrine, to 
the PSD and title V applicability requirements, respectively. As 
another point in this regard, which is relevant for both PSD and title 
V purposes, we also commit to subsequent rulemakings in which we may 
further address the ``absurd results'' doctrine.
    Specifically, we will propose or solicit comment on establishing a 
further phase-in, that is, a Step 3, that would apply PSD and title V 
to additional sources, effective July 1, 2013, and on which we commit 
to take final action, as supported by the record, by no later than July 
1, 2012. We further commit to completing another round of rulemaking 
addressing smaller sources by April 30, 2016. Our action in that 
rulemaking would take into account the severity of the remaining 
problems associated with permitting authority burden and source costs.
    While committing to future action, we do not decide in this rule 
when the phase-in process will ultimately end, or at what threshold 
level, because all that depends on uncertain variables such as our 
progress in developing streamlining approaches and on permitting 
authorities' progress in developing permitting expertise and acquiring 
more resources. We may continue the phase-in process with further 
rulemaking(s) after 2016. Alternatively, we may make a final 
determination through future rulemaking that, under the ``absurd 
results'' doctrine, PSD and/or title V do not apply to GHG sources 
that, while small and relatively inconsequential in terms of GHG 
contribution, are above

[[Page 31567]]

the statutory tonnage thresholds for these programs, and thereby end 
the phase-in process. In addition, we may consider whether to limit 
title V applicability to GHG sources in order to minimize the number of 
GHG sources with ``empty'' permits.
8. Rationale for the Phase-In Schedule for Applying PSD and Title V to 
GHG Sources
    Having discussed in sections V.B.5, V.B.6, and V.B.7 the reasons 
for tailoring the PSD and title V programs, we now describe our 
rationale for selecting the specific phase-in schedule in this rule for 
applying PSD and title V to GHG-emitting sources. To reiterate for 
convenience, under Step 1 of this schedule, which begins on January 2, 
2011, (1) PSD applies to the GHG emissions of ``anyway'' PSD sources, 
that is, sources that are subject to PSD anyway due to their emissions 
of conventional pollutants and that undertake a modification that 
results in an increase of at least 75,000 tpy CO2e; and (2) 
title V applies to ``anyway'' title V sources, that is, sources that 
are subject to title V anyway due to their emissions of conventional 
pollutants. Under Step 2, which begins on July 1, 2011, (1) sources 
will be subject to PSD on account of their GHG emissions if they newly 
construct and emit at least 100,000 tpy CO2e, or if they are 
existing sources that emit at least 100,000 tpy CO2e of GHGs 
and make a modification that results in the emission of at least 75,000 
tpy CO2e; and (2) existing and new sources will be subject 
to title V on account of their GHG emissions if they emit 100,000 tpy 
CO2e in GHG emissions. In addition, EPA intends to begin 
another round of rulemaking--Step 3--in 2011 and commits to complete it 
by July 1, 2012. In that rulemaking, we will propose or solicit comment 
on a further phase-in of GHG sources for PSD and title V applicability, 
and we may propose or solicit comment on another application of the 
``absurd results'' doctrine that excludes categories of sources from 
PSD or title V. However, under this rule, in no event will EPA apply 
PSD or title V to sources below the 50,000 tpy CO2e levels 
in Step 3, or any other step we might promulgate prior to April 2016. 
In addition, EPA commits to conduct a study, to be concluded by April 
30, 2015, evaluating the status of PSD and title V applicability to GHG 
sources, and, based on the study, complete a rulemaking by April 30, 
2016 that addresses another round of a phase-in.
a. Rationale for Step 1
    In Step 1 of our tailoring approach, which begins on January 2, 
2011, PSD and title V requirements will apply to only those sources 
that are subject to PSD or title V requirements anyway due to their 
conventional pollutants (``anyway'' sources) and that, in the case of 
PSD, make modifications that result in an increase in GHG emissions of 
at least 75,000 tpy CO2e. No sources would become major for 
PSD or title V under this step based on their GHG emissions alone. This 
section describes our proposal, comments on the proposal and our 
response to those comments, and our rationale for Step 1.
(1) Proposal
    In our proposal, we proposed (1) the application of PSD and title V 
requirements to sources that emit at least 25,000 tpy CO2e, 
(2) a PSD significance level of between 10,000 and 25,000 tpy 
CO2e, and (3) a commitment to undertake a study to be 
followed by further rulemaking after 6 years. In addition, we solicited 
comment on the alternative of limiting PSD and title V applicability to 
``anyway'' sources for at least the first 6 years. Under this approach, 
PSD and title V applicability would be determined based on non-GHG 
pollutants, and without regard to GHGs, but those sources subject to 
PSD would also be subject to BACT requirements for GHGs if their GHG 
emissions exceeded the significance level established in the final 
rule, and those sources subject to title V would be required to include 
any applicable requirements for GHGs in their permits.
(2) Comments
    Many commenters supported this ``anyway''-source approach, and 
offered a variety of reasons: According to the commenters, (1) This 
approach is a better reading of Congress's intent in the Act and is 
consistent with Alabama Power v. Costle, 636 F.2d 323 (DC Cir. 1980); 
(2) this approach would reduce the permitting workload on sources 
currently considered minor and focus PSD and title V requirements on 
large sources of non-GHG pollutants, as intended by Congress; (3) it is 
appropriate to base PSD and title V applicability on non-GHG emissions 
until data on GHG emissions are available from the mandatory GHG 
reporting rule; (4) in the initial phase, this approach would be more 
straightforward to administer, would provide a more predictable 
permitting workload, and would prevent a flood of newly regulated 
sources from overburdening state agencies; (5) this approach would 
provide permitting agencies time to develop experience handling GHG 
sources and requirements under the PSD and title V programs; (6) this 
approach would provide EPA and the permitting agencies the time needed 
to develop streamlining techniques; (7) this approach is consistent 
with the ``absurd results'' and ``administrative necessity'' doctrines 
because the scope of the permitting programs would remain consistent 
with both congressional intent and current administrative practice, but 
EPA and state agencies would still be allowed to begin regulating GHG 
emissions from existing PSD and title V sources; and (8) sources 
already required to obtain PSD permits are best equipped to work 
through BACT issues with permitting authorities.
    Commenters added that if BACT is applied for GHGs due to permit 
actions involving non-GHG pollutants, EPA would need to set a 
significance threshold for the application of BACT, without which BACT 
could apply to very small (e.g., 1 ton) GHG increases associated with 
projects that otherwise triggered PSD for increases of non-GHG.
(3) Determination as to Step 1, PSD and Title V Applicability and PSD 
Significance Level
    After considering the administrative burdens from increased 
permitting actions and the need for permitting authorities to have 
sufficient time to develop necessary expertise and staffing resources 
to address that burden, we have decided in this final action to 
establish the ``anyway'' source approach as Step 1. Beginning on 
January 2, 2011, sources subject to PSD requirements for their 
conventional pollutants anyway will be required to apply BACT to their 
GHG emissions if they construct or modify and in so doing, emit at 
least 75,000 tpy CO2e in GHGs. Similarly, sources subject to 
title V requirements anyway due to their conventional pollutants will 
be required to meet certain requirements for their GHGs, as described 
elsewhere. These requirements at Step 1 for PSD and title V will not 
expire. On July 1, 2011, a further phase-in of PSD and title V 
applicability--Step 2--will kick in.
    At Step 1, by definition, all of the covered sources are already 
subject to PSD and title V permitting requirements, and will simply be 
adding a GHG component to what would be an otherwise occurring 
permitting action for conventional pollutants. These sources include 
fossil fuel-fired power plants, petroleum refineries, cement plants, 
iron and steel plants, pulp and paper plants, petroleum refineries, 
large

[[Page 31568]]

landfills, and other large industrial sources. These sources will need 
to perform some additional analysis that is unique to GHG emission 
units, particularly related to the BACT review and selection process, 
but they will likely be able to utilize information developed as part 
of other permitting requirements for conventional pollutants, such as 
equipment fuel usage and operational parameters. Also, because these 
facilities are familiar with the case-by-case permitting processes, 
including all the steps from the application to the final review 
process, they will not confront a high PSD or title V learning curve.
    The ``anyway'' source approach has particular appeal during the 
first step of the phase-in approach because it begins to apply key PSD 
and title V program requirements as soon as January 2, 2011 to large 
sources of emissions, but because it applies only to sources that are 
already subject to PSD for other pollutants, it can be implemented 
efficiently and with an administrative burden that is manageable in the 
next 8 months. We expect that under this approach, the sources and 
permitting authorities will still face substantial additional work to 
address the GHG emissions. In addition to the activities discussed 
elsewhere, there will be significant and complex policy questions about 
how BACT will be implemented for GHGs that must be resolved. These 
issues will include how to determine BACT for GHGs, how to do netting, 
and other similar issues. Even with EPA guidance, many case-specific 
policy issues will arise and will have to be resolved by the permitting 
authority in the context of a specific permit application. 
Nevertheless, with the ``anyway'' source approach, this work will be 
manageable because the associated permitting burden will be limited to 
adding a GHG component to each existing permit action for which it will 
be required, and will avoid the significantly greater burdens 
associated with large numbers of new permit actions that would be 
required for sources and modifications that would be subject to PSD for 
the first time. Instead, this ``anyway'' source approach allows 
permitting authorities sufficient time to develop necessary expertise 
and staffing resources to address GHG BACT.
    We agree with commenters that the establishment of a significance 
level--which, in effect, is a BACT threshold--is appropriate, and we 
have decided to establish this level at 75,000 tpy CO2e 
because, for reasons discussed later, that is the level that will apply 
during Step 2. At this level, the administrative burdens, described 
later, will be manageable. Importantly, we believe a consistent 
significance level between Steps 1 and 2, as opposed to a lower 
significance level in Step 1, will provide for a smoother transition 
and avoid the problems that would arise if PSD applied to modifications 
during Step 1 that PSD would not apply to in Step 2. Otherwise, we 
would create a perverse incentive for companies to delay such projects 
until Step 2 to avoid BACT.
    We estimate that Step 1 will result in a 23 percent increase in 
permitting authority work hours and a $3 million increase--which 
amounts to a 25 percent increase from the current program cost of $12 
million--in their annual costs for running PSD programs. This is 
primarily due to the GHG BACT review requirements. For title V 
programs, we estimate a 2 percent increase in permitting authority work 
hours and a $1 million increase in the title V annual program costs for 
permitting authorities under Step 1 as compared to the current program 
cost of $62 million. These work hours and costs will be needed 
primarily to review GHG emissions information, add any GHG-related 
requirements to title V revisions and renewal actions that would 
otherwise be occurring, respond to comments and petitions from the 
public, as well as develop fee requirements and make fee determinations 
associated with issuing new or revised title V permits that add GHG-
related information. For both the PSD and title V programs on a 
combined basis, the additional costs for Step 1 will be $4 million, 
which amounts to a 5 percent increase in the current combined program 
cost of $74 million.
    In addition to these workload and monetary costs, permitting 
authorities will confront additional burdens before and during Step 1, 
which we have not attempted to quantify. One of the most significant of 
these is training staff in the PSD-related areas of GHG emissions 
calculations and BACT evaluations. In addition, permitting staff will 
need to build staff expertise and capacity for addressing GHG 
requirements in preparation for Step 2, which will begin only 6 months 
after Step 1; and in communicating and providing outreach to sources 
addressing GHG emissions for the first time. Based on comments we 
received on the proposal from permitting authorities, we believe these 
additional training and outreach requirements--for both the PSD and 
title V programs--will add significantly to the permitting authorities' 
burden during the initial 6-month period under Step 1.
    We believe that these administrative burdens are substantial but 
manageable. Following this action, permitting authorities will have 
only 8 months to prepare for Step 1, when they will need to increase 
their resources by 5 percent for both the PSD and title V programs 
combined, and be able to implement BACT requirements for GHG sources. 
During Step 1, they will need to prepare for Step 2, when, as discussed 
later, they will need to process over 900 additional PSD permits each 
year and begin to process over 1,100 additional title V permit actions.
    We have decided to limit Step 1 to the ``anyway'' source approach, 
and not apply PSD or title V to sources based on their GHG emissions, 
for several reasons. First, we believe that the administrative burdens 
described previously are the most that the permitting authorities can 
reasonably be expected to manage before and during Step 1. Tighter PSD 
and title V applicability requirements would mean greater 
administrative burdens.
    Second, we believe that the costs of GHG permitting to the sources, 
as described previously, are substantial and as a result, necessitate 
that we wait for the permitting authorities to develop the PSD and 
title V programs for GHG sources during the first 6 months of 2011 
before subjecting sources to PSD and title V requirements on account of 
their GHG emissions. By July 1, 2011, when Step 2 takes effect, the PSD 
and title V programs will be better developed. For example, the 
permitting authorities will have more experience making BACT 
determinations. In addition, by that time, sources will have had more 
time to prepare for the permitting processes. In addition, as suggested 
by one commenter, the additional time will allow sources and permitting 
authorities to address the current uncertainty surrounding how to 
measure high-GWP gases.
    Third, we estimate that ``anyway'' sources account for 
approximately 65 percent of total national stationary source GHG 
emissions. As a result, limiting Step 1 to these sources will still 
capture a large portion of the GHG inventory.
    A large number of commenters urged us to leave this ``anyway'' 
source approach in place until such time as we complete an assessment 
and conduct further rulemaking, which we proposed would be 6 years from 
now. We are not taking this action; rather, for the reasons discussed 
next, we believe it is reasonable to use GHG thresholds to begin to 
phase in PSD and title V applicability to additional sources in Step 2.

[[Page 31569]]

b. Rationale for Step 2
(1) Proposal
    We proposed to establish the applicability level for PSD and title 
V to GHG sources at 25,000 tpy CO2e, and we proposed a PSD 
significance level in the range of 10,000 to 25,000 tpy 
CO2e. Our burden estimates at proposal led us to conclude 
that at those threshold levels, for the PSD program, ``approximately 
400 additional new or modified facilities would be subject to PSD 
review in a given year. These include approximately 130 new facilities 
and approximately 270 modifications * * *.'' 74 FR 55331, col. 1. We 
estimated that processing these numbers of additional permits, along 
with doing the additional work associated with GHG emissions from 
sources subject to PSD anyway due to their conventional emissions, 
would increase permitting authority burdens by ``approximately 112,000 
staff hours at an additional cost of approximately $8 million. This 
workload amount represents an increase of about 1.3 times, or 32 
percent, in the current burden for permitting authorities on a 
nationwide basis.'' Id. col. 3. We concluded that ``this additional 
burden is manageable,'' but that ``any threshold lower than 25,000 tpy 
CO2e, would create undue administrative burdens.'' Id.
    For the title V program, we estimated that at a 25,000-tpy 
CO2e permitting threshold, ``about 13,600 existing 
facilities'' would become subject to title V, and that to manage the 
additional workload associated with permitting those sources and with 
the other permit revisions and modifications that would result from the 
25,000 tpy CO2e threshold, permitting authorities would 
require an additional 492 FTEs, which would be an estimated 50 percent 
increase over current title V staffing levels. 74 FR 55335, cols. 1-2.
(2) Comments
    We received a significant number of comments from both permitting 
authorities and industry representatives that our proposed GHG 
threshold of 25,000 tpy CO2e for major source applicability 
was too low and would result in an unmanageable amount of permitting 
actions in the near term. Many offered evidence that we severely 
underestimated both the number of permitting actions and the per-permit 
administrative burden, for both PSD and title V programs.
    Commenters also asserted that the proposed 25,000 tpy threshold is 
too low because it will subject small sources (including many small 
businesses) to PSD and title V, which is not in keeping with Congress's 
intent to limit PSD and title V to large sources when Congress set the 
100/250 tpy thresholds for the permitting programs. EPA, in 
collaboration with the SBA, conducted an outreach meeting designed to 
exchange information with small entities that may be interested in 
these regulations. The EPA took this small business outreach effort 
into account when finalizing this rule. Many commenters from this 
outreach effort said that there were many more small businesses that 
would become subject to PSD and title V due to the proposed permitting 
thresholds than EPA estimated at proposal.
    Many commenters recommended specific major source thresholds for 
PSD and title V, including levels of 25,000 (as proposed), 40,000, 
50,000, 100,000, 150,000, 250,000, and 1,000,000 tpy CO2e. A 
majority of the commenters--including both industry and state agency 
commenters--recommended major source thresholds of 100,000 tpy 
CO2e. However, several state agency commenters recommended 
thresholds of 50,000 tpy CO2e. Other commenters recommended 
sector-specific thresholds. For example, solid waste industry 
commenters suggested thresholds of 820,000 tpy CO2e for PSD 
[which they calculate to be equivalent to the existing PSD threshold 
for ``municipal solid waste landfill emissions,'' i.e., 250 tpy 
nonmethane organic compounds (NMOC)] and 320,000 tpy CO2e 
for title V (calculated to be equivalent to the existing major source 
applicability threshold of 100 tpy NMOC). Other commenters urged EPA to 
set the GHG thresholds at levels that correspond to emissions of 
conventional pollutants at the 100/250 tpy level.
    Many of the commenters that recommended increasing the thresholds 
cited EPA's estimates that a particular threshold would significantly 
reduce the number of sources subject to the rule while causing only a 
slight reduction in the percentage of GHGs captured. Several of these 
commenters noted that Table VIII-2 in the proposal preamble indicates 
that shifting the major source threshold for PSD from 25,000 to 100,000 
tpy CO2e would reduce the number of major sources from 
13,661 to 4,850 while reducing the coverage of U.S. stationary source 
GHG emissions by only about 4 percent. Other commenters referred to the 
regulatory impact analysis (RIA) for the mandatory GHG reporting rule 
to conclude that raising the threshold from 25,000 to 100,000 tpy 
CO2e would exclude thousands of entities that, on a combined 
basis, emit only one percent of the nation's GHG emissions. See the RTC 
document for this final rulemaking for more detailed description of 
comments received on our proposed burden assessment.
    Many commenters also recommended specific PSD GHG significance 
thresholds, including levels of 10,000 (as proposed), 15,000 (within 
the proposed range), 25,000 (also as proposed), 40,000, 50,000, and 
100,000, and 150,000 tpy CO2e, as well as suggesting sector-
specific thresholds. These recommendations were based on the view that 
we had underestimated the number of modifications and that the burden 
of permitting at the proposed levels would therefore be much worse than 
we projected. A number of the commenters argued that the significance 
threshold should be no less than the major source threshold, at 
whatever level that is set. The largest number of commenters 
recommended a PSD significance threshold of 100,000 tpy 
CO2e, although significant numbers also support 25,000 and 
50,000 tpy CO2e.
(3) Rationale for Step 2
    Based on these comments, we reassessed our original burden 
estimates from our proposal. This reassessment is discussed at the 
beginning of this section. We decided that, once this adjustment is 
taken into account, the burdens at the proposed 25,000 threshold and 
the proposed 10,000-25,000 significance levels would be unmanageable. 
We therefore evaluated higher thresholds ranging from a 25,000 tpy 
CO2e major source applicability level for PSD and title V to 
a 50,000, 75,000, or 100,000 tpy CO2e level, with associated 
PSD GHG significance levels of equal or lesser magnitude; and we 
selected the 100,000/75,000 tpy CO2e level. Central to our 
decision to promulgate higher thresholds than what we proposed is our 
recognition, based on comments and further analysis, that applying PSD 
to GHG sources at the statutory or any other threshold level or 
significance level that we have considered would result in (1) a 
greater number of sources, and significantly greater number of 
modifications than we first estimated becoming subject to those 
programs; and (2) a greater per-permit cost than we first estimated to 
the permitting authority of processing those permit actions. We 
discussed our revised estimates and reasoning at the beginning of this 
section.
    We now estimate that the 25,000/25,000 tpy level would result in 
250 additional PSD permit actions for new construction (either for GHG-
only sources or additions to otherwise occurring permits) and an 
additional 9,200 PSD permits for modifications

[[Page 31570]]

each year (compared to our estimate at proposal of 130 for new 
construction and 270 for modifications). This level of permitting would 
require an additional 2,815,927 work hours, or 1,400 FTEs (compared to 
our estimate at proposal of 112,000 additional work hours, or 57 FTEs); 
and would cost an additional $217 million each year (compared to our 
estimate at proposal of an additional $8 million). See 74 FR 55331 
(proposal). This $217 million amount represents approximately a 1,800 
percent increase over current permitting authority annual cost of $12 
million for the major NSR programs.
    For title V, under our final burden analysis at a 25,000 tpy 
CO2e threshold, we estimate a $64 million annual increase in 
program costs to permitting authorities to add GHG emission sources, 
which reflects a greater than 100 percent increase over current program 
costs of $62 million. We estimate that this increased burden would 
result in the need for almost 700 new FTEs nationwide at permitting 
authorities (compared to our estimate at proposal of 492 additional 
FTEs, or about a 50 percent increase in existing program size). This 
increase in burden is due to an estimated annual increase of 2,500 new 
title V permits, over 9,500 permit revisions, and over 2,600 permit 
renewal actions due to GHG emission sources. These additional title V 
actions compare to current annual program actions of approximately 50 
new title V permits, 1,394 significant revisions, and 3,267 permit 
renewals.
    Based on this information, we have decided not to finalize our 
proposal to apply a 25,000 tpy CO2e applicability threshold 
to GHG sources at the time that PSD and title V take effect. At that 
level, too many sources--many more than we thought at proposal--would 
be subject to high permitting costs. In addition, permitting at that 
level and at that time would not be administratively feasible. The 
resulting increase in the number of PSD and title V permitting actions 
and workload would create insurmountable resource demands for 
permitting agencies in the near term, which would jeopardize the 
functioning of these permitting programs. We are mindful that not only 
would the permitting programs have to bear the costs that our estimates 
are able to monetize, but they would also incur burdens associated with 
hiring and training staff to make and implement GHG BACT 
determinations, GHG emissions evaluations, and other evaluations 
required under the PSD program for a wide variety of formerly 
unpermitted sources, including significant numbers and types of small 
manufacturing and commercial or residential establishments. They would 
also incur burdens associated with reviewing applications, citizen 
comment and petitions, and the need to communicate and provide outreach 
to new categories of sources, including, again, significant numbers and 
types of small manufacturing and commercial or residential sources. 
Thus, the increased administrative burdens at the 25,000/25,000 tpy 
CO2e levels are so great that we have concluded that they 
would not be consistent with the goals of avoiding absurd results that 
contravene congressional intent, including avoiding a permitting burden 
that would overwhelm the capacity of permitting authorities to 
effectively implement their programs.
    Based on our revised burden analysis, in this final action, we have 
decided to establish a multi-step, phase-in approach that contains a 
significantly higher initial threshold level. We have determined that a 
100,000 tpy CO2e major source threshold level for PSD and 
title V purposes, and a 75,000 tpy CO2e significance level, 
produce a level of permitting activity that would certainly be an 
increase over current workload, but that would be administratively 
feasible by July 1, 2011. As a result, we have decided to finalize 
these thresholds as Step 2.
    In reaching this conclusion, we needed to consider both the 
sources' abilities to manage the permitting process and the permitting 
authorities' capacity to address newly-major sources as expeditiously 
as possible. As to the former, sources subject to Step 2 will, for the 
most part, continue to include the ``anyway'' sources subject to Step 
1. In addition, we estimate that Step 2 will include about 500 
additional sources that are not already subject to permitting. Most of 
them will become subject to PSD and title V because of fuel burning. In 
order to meet the 100,000/75,000 threshold, they will have to burn a 
significant quantity of fuel, and that means they will be a significant 
size. In general, these sources include municipal or commercial 
landfills that are large, but not large enough to be covered by the 
NSPS, pulp and paper facilities, electronics manufacturing plants, 
chemical production plants, and beverage producers. Although these 
sources have not been subject to PSD permitting before, some of them 
have already been subject to minor source permitting, and so will have 
some familiarity with the permitting process. In addition, in general, 
these sources are in source categories that have larger sources that 
are already subject to PSD and title V. As a result, they are in 
industries that have experience in the permitting process. Because of 
their relatively large size and access to knowledge about the 
permitting processes, we believe these sources will be able to manage 
the permitting requirements.
    As to the permitting authorities' capacity to handle the Step 2 
workload, we note first that our Step 1 approach does not cover newly-
major sources. As a result, the Step 2 threshold and timing has to be 
established in a way that takes into account permitting authority 
challenges in addressing many sources and categories that would be 
subject to major source permitting for the first time.
    We considered the various PSD and title V threshold applicability 
and significance level options in our final burden analysis, summarized 
in Table VI-1, including levels at 50,000 CO2e and 100,000 
CO2e. As Table VI-1 indicates, we estimate that a 100,000 
tpy CO2e major source applicability threshold would result 
in approximately 550 sources becoming newly classified as major sources 
for PSD based on their GHG emissions, while a 50,000 tpy 
CO2e threshold would result in 3,500 newly classified major 
sources.
    We then considered the impact on both PSD and title V programs of 
different PSD significance level options for GHGs. The choice of a PSD 
significance level has a direct impact on title V burdens because PSD 
permit requirements resulting from modification activities will result 
in required title V permit revisions. We developed PSD and title V 
burden estimates based on significance levels of 50,000 tpy, 75,000 tpy 
and 100,000 tpy CO2e, combined with a major source 
applicability level of 100,000 tpy CO2e.
    At a 50,000 tpy CO2e significance level, we estimated an 
annual increase of approximately 1,800 PSD permitting actions and 
almost 2,000 additional title V permitting actions, as compared to Step 
1. At a 75,000 tpy CO2e significance level, we estimated an 
annual increase of approximately 900 PSD permitting actions and just 
over 1,000 additional title V permitting actions as compared to Step 1. 
At a 100,000 tpy CO2e significance level we estimated an 
annual increase of approximately 25 PSD permitting actions and 210 
additional title V permitting actions as compared to Step 1. For title 
V, under these different scenarios, the major source applicability 
level of 100,000 tpy CO2e results in approximately 200 new 
permits annually, but, as noted, the choice of significance levels 
affects the number of required permit revisions.

[[Page 31571]]

    Based on this information, we have decided to set our final Step 2 
thresholds at 100,000 tpy CO2e for major source 
applicability under PSD and title V and at a 75,000 tpy CO2e 
significance level for PSD. Overall, we estimate that the almost 900 
additional PSD permitting actions (virtually all of which would be 
modifications) per year at these levels will result in an approximately 
$21 million increase (from Step 1) in states' annual costs for running 
PSD programs. In addition, we estimate that the 1,000 additional title 
V permit actions will cause the total title V burden for permitting 
authorities to increase by $6 million annually from Step 1. This total 
increase in permit program burdens of $27 million represents a 34 
percent increase over the $78 million in total cost of PSD and title V 
programs at Step 1. We consider this a substantial increase 
particularly because Step 2's start date of July 1, 2011, is only 6 
months after Step 1's start date of January 2, 2011. What's more, Step 
1 will entail a substantial increase in permitting authority 
obligations, so that adding the costs of Step 1 and Step 2 together--
$31 million--means that permitting authorities will be required to 
increase their permitting resources by approximately 42 percent between 
now and Step 2. In addition to the administrative burdens we have been 
able to monetize, we must be mindful that permitting authorities will 
incur other burdens, including the significant support and outreach 
activities by permitting staff for the many newly permitted sources. We 
believe that any lower thresholds in this timeframe, whether in the PSD 
and title V applicability levels or in the significance level, would 
give rise to administrative burdens that are not manageable by the 
permitting authorities.
    Although the burdens at the 100,000 tpy CO2e/75,000 tpy 
CO2e levels are steep, we consider them manageable. Step 2 
permitting for GHGs will mostly involve source categories in which some 
sources have traditionally been subject to permitting, which should 
render applying even the new GHG requirements more manageable. These 
source categories include fossil fuel-fired power plants, petroleum 
refineries, cement plants, iron and steel plants, and petroleum 
refineries, in addition to other large industrial type source 
categories. A full description of the type of sources that we expect 
will have GHG emissions that exceed the 100,000 tpy CO2e 
threshold is provided in the ``Technical Support Document for 
Greenhouse Gas Emissions Thresholds Evaluation'' located in the public 
docket for this rulemaking. In addition, because Step 2 does not begin 
until July 1, 2011, permitting authorities have about 14 months to 
prepare for it.
    In addition, we believe that the sources that will become subject 
to PSD and title V requirements at the 100,000/75,000 tpy 
CO2e levels will be able to accommodate the additional costs 
of permitting. For the most part, these sources will be of a comparable 
size and activity level as those sources that are already subject to 
those requirements.
    Because the administrative burdens at the 100,000/75,000 tpy 
CO2e level are as heavy as the permitting authorities can 
reasonably be expected to carry, adopting these threshold levels is 
consistent with our legal basis under the ``absurd results'' doctrine. 
Under this basis, we are reconciling the statutory levels with 
congressional intent by requiring that the PSD and title V requirements 
be applied to GHG sources at levels as close as possible to the 
statutory thresholds, and as quickly as possible, in light of costs to 
sources and administrative burdens.
    Because the administrative burdens at the 100,000/75,000 tpy 
CO2e level are manageable, we do not believe that higher 
threshold levels are justifiable for Step 2. Specifically, at the 
100,000/100,000 level--which would entail a 100,000 tpy CO2e 
significance level, rather than a 75,000 tpy CO2e level--
permitting sources would need to handle only 20 additional 
modifications beyond current levels, and thus would not incur 
substantial additional costs. By the same token, we disagree with 
commenters who suggested that we needed to set permanent GHG permitting 
thresholds for major sources at a rate equivalent to the amount of GHGs 
that would be emitted by conventional pollutants at the 100 and 250 tpy 
level in order to meet the legal bases of the ``absurd results'' and 
``administrative necessity'' doctrines. These levels would likely be 
well above 300,000 tpy CO2e, depending on fuel types and 
assumptions regarding the relative emissions of GHGs compared to the 
conventional pollutants. Our data show that none of the levels above 
100,000/75,000 tpy CO2e would result in significant 
increases in administrative burdens. As a result, establishing these 
levels would not apply PSD or title V requirements to GHG sources as 
quickly as possible, and thus would not be consistent with our approach 
in the Tailoring Rule.
    We estimate that facilities meeting the Step 2 major source 
applicability thresholds account for approximately 67 percent of total 
national stationary source GHG emissions. Many commenters felt that 
this should be an important basis for our selection of a threshold, 
stating that there is no significant loss in GHG emissions coverage of 
source categories at the 100,000 tpy CO2e threshold, and in 
some cases arguing that as a result, we should set the level even 
higher. We agree that it is important that the coverage in Step 2 
represents 86 percent of the coverage at full implementation of the 
statutory 100/250 thresholds.
c. Rationale for EPA's Plan Beyond Step 2
    EPA commits that after Step 2, EPA will begin another rulemaking in 
2011 and complete it by July 1, 2012, and in that rulemaking take 
comment on a further phase-in of GHG sources for PSD and title V 
applicability (Step 3). However, under this rule, in no event will EPA 
apply PSD or title V to sources below the 50,000 tpy CO2e 
levels prior to 2016. In addition, EPA commits to conduct a study, to 
be concluded by April 30, 2015, evaluating the status of PSD and title 
V applicability to GHG sources, and, based on the study, complete a 
rulemaking by April 30, 2016, that addresses another round of a phase-
in.
(1) Proposal
    In our proposal, we noted that following implementation of the 
first phase of PSD and title V applicability to GHG sources, generally 
at the 25,000 tpy CO2e threshold, additional action would be 
required over time to assure full compliance with the statute. We did 
not establish more steps in the schedule, but we did commit to conduct 
a study, to be completed by 5 years after promulgation, evaluating the 
status of PSD and title V applicability to GHG sources, and, based on 
the study, complete a rulemaking by 6 years after promulgation that 
addressed an additional step of the phase-in.
(2) Comments
    A number of commenters supported the proposal's overall approach to 
phase in the permitting of GHGs, mainly because this approach will 
allow permitting of the largest sources of GHGs immediately while 
collecting more information about smaller sources and more fully 
considering streamlining options for subsequent phases. Many of these 
commenters made clear that they do not support implementation of the 
statutory 100/250 tpy thresholds, even through a phase-in approach. On 
the other hand, one commenter asserted that EPA has failed to 
demonstrate that

[[Page 31572]]

it needs 6 years to study and implement NSR and title V for sources 
emitting less than 25,000 tpy. The commenter contends that EPA has not 
analyzed, among other things, what combined effect the full 
implementation of its streamlining proposals in the 15 months before 
the due-date for title V permit applications would be to reduce the 
cost, complexity, and number of title V permit applications that would 
have to be submitted.
(3) Rationale for Further Steps
    We agree with commenters who support a phased-in approach to the 
Tailoring Rule. Our final action reflects a multi-step process that we 
believe will facilitate a manageable expansion of PSD and title V 
applicability, as appropriate, to GHG-emitting sources. In our final 
action, we have established the initial two steps of a multi-step 
phase-in of lower threshold applicability with a commitment to take 
further regulatory activity to consider adopting lower thresholds. We 
believe this process will provide substantial opportunity for 
permitting authorities and sources to establish enough experience and 
information, and to provide significant real-world feedback to EPA, so 
as to better inform decisions on future phase-in steps.
    With this overall phase-in approach in mind, in this final rule, 
EPA includes an enforceable commitment to undertake a notice-and-
comment rulemaking that would begin with an SNPR that we expect to be 
issued in 2011 and that we commit will be finalized in 2012. The notice 
will propose or solicit comment on further reductions in the 
applicability levels. This rulemaking will take effect by July 1, 2013, 
and therefore, in effect, constitute Step 3. In this action, we are 
committing to a rulemaking for Step 3, but are not promulgating Step 3, 
because it is important to allow EPA and the permitting authorities to 
gain experience permitting sources under Steps 1 and 2, and to allow 
time to develop streamlining methods, before attempting to determine 
what would be the next phase-in levels for PSD and title V 
applicability. While committing to future action, we do not decide in 
this rule when the phase-in process will ultimately end, or at what 
threshold level, because all that depends on uncertain variables such 
as our progress in developing streamlining approaches and on permitting 
authorities' progress in developing permitting expertise and acquiring 
more resources. We may continue the phase-in process with further 
rulemaking(s) after 2016. Alternatively, we may make a final 
determination through future rulemaking that, under a Chevron analysis, 
accounting for the ``absurd results'' doctrine, PSD and/or title V do 
not apply to GHG sources that, while small and relatively 
inconsequential in terms of GHG contribution, are above the statutory 
tonnage thresholds for these programs, and thereby end the phase-in 
process.
    In addition, in this action, we are determining that in no event--
whether through Step 3 or a subsequent step--will we apply PSD or title 
V to sources at the 50,000/50,000 tpy CO2e level or lower 
prior to May 1, 2016. We have several reasons for making this 
determination at this time. Most importantly, our examination of the 
expected burdens to the permitting authorities of applying PSD and 
title V to GHG sources convinces us that extending the permitting 
programs to sources at or below the 50,000/50,000 tpy CO2e 
level within 6 years of promulgation would result in prohibitively 
heavy burdens. This threshold option would result in close to 2,000 
additional annual PSD permitting actions per year over the current 
program and more than 1,000 over Step 2, including both new 
construction and modifications. For title V, we estimated an increase 
of over 1,000 new title V permits (all newly permitted sources because 
of GHG emissions) over 2,000 permit revisions per year over the current 
program, and about 980 new title V permits and 900 permit revisions 
more than the Step 2 amounts.
    These increases, which could occur between 2013 and 2016 under our 
approach depending on the outcome of the Step 3 rulemaking, represent 
very substantial additions to the permitting program. In terms of cost, 
we estimate that these additional actions would result in a $73 million 
per year increase in joint PSD and title V program costs over the 
current programs--which is almost a doubling of costs--and $42 million 
annual cost increase over Step 2 for the current programs. We believe 
that it would take permitting authorities some time to adjust to this 
workload. This is particularly true because at the 50,000/50,000 tpy 
CO2e level, smaller sources--including ones not previously 
subject to permitting requirements--will become subject to PSD and 
title V. It will take some time for both the permitting authorities and 
the sources to absorb these new obligations.
    Importantly, the next lower cut-off--below 50,000 tpy 
CO2e for the major threshold level--is the 25,000/25,000 tpy 
CO2e level. For the reasons discussed previously, this level 
is clearly not manageable within the first 6 years after this action. 
This applicability level would bring in over 7,000 sources that would 
be newly subject to title V permitting and result in close to 10,000 
new PSD permitting actions. This would result in a 380 percent increase 
over current program costs for PSD and title V to run these programs. 
Based on comments we received from state and local permitting agencies 
on our proposed Tailoring Rule, these levels of permitting activities 
would far exceed the administrative capabilities of the permitting 
agencies for at least the near future. Thus, the 6-year exclusion is 
necessary to provide these agencies and their permittees certainty that 
this will not occur.
    We recognize that at present, we do not have data that would allow 
us to compile administrative burden estimates for specific levels 
between the 50,000/50,000 and 25,000/25,000 tpy CO2e levels 
we assessed. However, it is clear that the burdens begin to rise 
sharply below the 50,000/50,000 tpy CO2e level. To 
reiterate, the combined PSD and title V administrative burdens at the 
50,000/50,000 tpy CO2e level cost almost twice as much as 
the current programs, but the burdens at the 25,000/25,000 tpy 
CO2e level cost almost four times as much as the current 
programs. As a result, we conclude that dropping the level below 
50,000/50,000 tpy CO2e too soon would quickly expose the 
permitting authorities to unacceptably high burdens.
    As a further reason for concluding that we will not reduce 
thresholds beyond 50,000/50,000 tpy CO2e during the first 6 
years, we recognize that the PSD permitting process in particular 
carries important ramifications for the permitting authorities and the 
affected sources. If we have underestimated the permitting burden or 
the ability of states to respond to their additional workload, then 
permitting backlogs will result, and PSD permit issuance will be 
delayed, and sources seeking a PSD permit will not be able to construct 
or modify. If this were to happen on a large enough scale, it could 
have potentially serious consequences for the national economy.
    Moreover, we need to be mindful that the best information we 
currently have as to permitting authority burdens represents a national 
average, as described previously. Our information at the individual 
state and local level, where permitting occurs, is not as robust. 
Accordingly, we recognize that a particular state may encounter 
permitting costs that are higher than average, and this may result in 
permitting backlogs in that state, with

[[Page 31573]]

the consequence that sources in that state will face long delays in 
constructing or modifying. Similarly, even if a particular state's 
costs are in line with the national average, that state may not be able 
to find the additional resources to cover those costs as readily as 
other states. For this reason, too, sources in that state could face 
long delays in constructing or modifying.
    Beyond the administrative burdens to permitting authorities, we 
recognize that the costs of PSD and title V permitting to sources may 
be high, and we are not inclined to allow their imposition at this time 
on sources smaller than the 50,000/50,000 tpy CO2e 
threshold. At that level, the permitting programs will apply to a 
significant number of newly permitted sources, including a variety of 
small manufacturing, commercial and residential categories. The next 
level that we have analyzed is the 25,000/25,000 tpy CO2e 
threshold. At that level, more than 7,000 more sources would become 
subject to PSD each year--almost all due to modifications--and another 
4,000 sources would become subject to title V each year. These sources 
would be even smaller than those that already will have become subject 
to PSD and title V due to their GHG emissions. We do not think it 
reasonable to subject more of those types of sources, and smaller ones, 
to permitting costs within the next 6 years.
    Finally, we note that moving from a 50,000 tpy CO2e 
threshold to 25,000 tpy CO2e will increase the emissions 
coverage of GHG stationary sources from 70 percent to 75 percent 
nationwide, which we consider to be a relatively small amount.
    We recognize that our progress in developing streamlining methods 
will be a key determinant to the ability of permitting authorities to 
administer, and sources to comply with, PSD and title V at GHG emission 
levels below 50,000/50,000 tpy CO2e. Although we commit to 
pursue streamlining, we cannot predict our progress. This uncertainty 
may be problematic for stakeholders, primarily permitting authorities 
and industry. That is, permitting authorities will face uncertainty in 
planning the scope of their programs over the next few years, and 
industry will face uncertainty as to what new construction projects and 
modifications will be subject to PSD for GHGs. By determining now that 
for the next 6 years we will not impose PSD requirements below a floor 
at the 50,000/50,000 tpy CO2e level, we add a measure of 
needed certainty.
    We also recognize that selecting a level that is too high or 
keeping a level for too long means that some sources may construct or 
modify without implementing BACT level controls, and this could result 
in additional emissions of GHGs. We need to be vigilant and to protect 
against this outcome. Even so, all things considered, we believe that 
our determination not to apply the PSD or title V permitting 
requirements to sources below the 50,000/50,000 tpy CO2e 
level for the first 6 years also represents a reasonable balancing of 
protection of the environment with promotion of economic development. 
This type of balancing is consistent with our authority under the PSD 
provisions.
    We also raised the issue of ``hollow'' or ``empty'' permits in 
discussing our rationale for why it may make sense to delay title V 
permitting under our proposal. We were concerned that many title V 
permits for GHG sources would contain no applicable requirements, and 
their issuance would therefore be of little value and would not be the 
best use of scarce resources. Several commenters agreed that 
implementing title V for GHGs will, at least initially, require ``empty 
permits'' to be issued to GHG sources because such sources will not be 
subject to ``substantive'' requirements, and that this would not be the 
best use of scarce resources.
    We believe that the amount of resources that would be spent on, and 
the limited value that would result from, ``empty permits'' does 
warrant consideration under the Chevron analysis, taking account of the 
``absurd results'' doctrine. Therefore, we intend to consider the role 
of ``empty permits'' when we undertake future rulemaking. However, we 
believe the issue of ``empty permits'' has limited or no relevance to 
the first two steps of the phase-in that we are promulgating in this 
rule. During Step 1, permitting for GHGs is only required if the source 
is otherwise subject to permitting for its emissions of non-GHGs. Those 
sources very likely will be subject to existing substantive applicable 
requirements for non-GHGs (e.g., NSPS, Maximum Achievable Control 
Technology (MACT), and SIP requirements, including PSD). Thus, there 
should be no, or at least no additional, ``empty permits'' during Step 
1. For Step 2, it is possible that sources that become subject to title 
V requirements for GHG emissions may not be subject to other 
requirements, but our assessment suggests that this is very unlikely. 
We estimate that virtually all of the 550 newly-major sources in Step 2 
will be subject to applicable requirements under the CAA because they 
are from categories that have been traditionally subject to 
regulations, such as smaller industrial sources from already regulated 
categories, large landfills, and oil/gas/coal production. Even the 
approximately 50 newly-subject commercial sources in Step 2, which we 
estimate to be comprised of very large hospitals, are likely to be 
covered by standards for medical waste incinerators. In addition, we 
expect these sources may well be subject to SIP requirements. Thus, we 
do not expect any, or at most very few ``empty permits'' during Step 2.
    In later stages of implementation (e.g., prospective Step 3) or in 
the event that we permit smaller, non-traditional sources of GHGs that 
have never otherwise been subject to major source permitting, there 
would be a greater potential for ``empty permits'' to be issued under 
title V. Cognizant of this, we intend to further explore in the 
rulemaking for Step 3 ``empty permit'' theories under the ``absurd 
results'' rationale that may serve to permanently narrow the scope of 
title V to exclude sources that would potentially be required to obtain 
an ``empty permit'' due to GHG emissions.
    In this action, EPA is also finalizing its proposal to commit to 
conduct an assessment of the threshold levels--to be completed in 2015, 
5 years after this action--that will examine the permitting 
authorities' progress in implementing the PSD and title V programs for 
GHG sources as well as EPA's and the permitting authorities' progress 
in developing streamlining methods. We further commit to undertake 
another round of rulemaking--beginning after the assessment is done, 
and to be completed by April 30, 2016--to address smaller sources.
    We disagree with the commenter who asserted that we do not need 6 
years to study and implement PSD and title V for smaller sources. As we 
discussed in the proposal, and reiterate in this final action, we do 
not have sufficient information at this time to determine the 
applicability and effectiveness of the various permitting streamlining 
techniques. For reasons discussed in more detail in section V.E.1 
regarding streamlining, we are not now able to determine how such 
techniques will be implemented or whether they will prove viable or 
effective. We agree with the commenter that these measures may reduce 
the scope, cost, and complexity of these programs, but there is 
considerable uncertainty as to the extent of this effect. We do commit 
in this action to fully investigate, propose, and evaluate permit 
streamlining techniques to determine where they may have applications, 
how they would be applied, and whether they can withstand legal 
challenge. Even for

[[Page 31574]]

those techniques that may ultimately be deemed viable, there is a 
significant time period necessary for rulemaking and state adoption, 
all of which could take up to 3 years or more. We also note that we 
will be required to complete our study of the effectiveness of these 
techniques within 5 years, meaning that, in order to complete it in 
time, we will essentially need to begin the study as soon as relevant 
data are starting to become available. Finally, the sixth year, in 
which EPA must complete rulemaking, requires proposal and promulgation 
of a rule within 1 year, which is an ambitious schedule. Therefore we 
believe that 6 years is appropriate for this type of effort. We also 
have received a substantial number of comments from permitting 
authorities that agreed with our 5-year timeframe, or a greater 
timeframe, to get more prepared for permitting smaller sources.
d. Other Comments on ``Absurd Results'' Doctrine
    We received other comments on our application of the ``absurd 
results'' doctrine, which we respond to in the RTC document. One 
comment was overarching, and so we respond to it here: Commenters have 
asserted that under the ``absurd results'' doctrine, EPA does not have 
authority to, or at least should not, promulgate the endangerment/cause 
or contribute findings (which we will sometimes refer to as the 
``findings'') or the LDVR because doing so would trigger the PSD and 
title V requirements, which in turn would give rise to ``absurd 
results''. According to commenters, under the ``absurd results'' case 
law, EPA is obliged to avoid taking any action that would trigger 
absurd results and in this case that means foregoing the endangerment/
cause or contribute findings and/or the LDVR, or at least deferring 
finalizing them until EPA has time to streamline PSD and title V 
requirements so as to avoid ``absurd results''. Commenters made the 
related comment that if we promulgate the LDVR, and thereby trigger 
PSD, we cannot rely on the ``absurd results'' doctrine because it is 
our own actions--the promulgation of the LDVR--that will have given 
rise to the ``absurd results,'' and under those circumstances, the 
doctrine is not available.
    The comments that EPA had no authority to promulgate, or should not 
have promulgated, the endangerment/cause or contribute findings or the 
LDVR at the times that EPA did are not relevant to this rule, the 
Tailoring Rule. EPA has already promulgated the findings and the LDVR, 
and the LDVR triggers PSD and title V applicability, as we have seen. 
These comments would have been relevant only to the proposed findings 
and LDVR, and we are not, in this rulemaking, revisiting or reopening 
the findings or the LDVR.\48\
---------------------------------------------------------------------------

    \48\ EPA does have pending before it ten petitions to reconsider 
the endangerment and cause or contribute findings. EPA is carefully 
evaluating those petitions and expects to issue its decision(s) on 
or about July 30, 2010.
---------------------------------------------------------------------------

    Commenters claim that if EPA promulgates the LDVR, the ``absurd 
results'' doctrine will no longer apply to the Tailoring Rule because 
it will have been EPA's own action--promulgation of the LDVR--that 
gives rise to the ``absurd results''. We disagree for several reasons. 
For one thing, commenters have not cited case law, and our research has 
disclosed none, in which a court specifically addressed a similar 
situation and issued a holding along the lines of what commenters urge. 
Moreover, commenters' approach would be punitive because the absurd 
results would occur absent this rule going final. Such an outcome would 
be counter to the purpose of the doctrine. That is, it would mean that 
PSD and title V would apply to GHG sources by their terms--at the 
statutory levels, as of January 2, 2011--with all the adverse 
consequences described elsewhere.
    In any event, and although we are not obligated to respond to these 
comments on the merits, they are incorrect on the merits, for the 
reasons that follow. This discussion should not be viewed as reopening 
the endangerment/cause or contribute findings or the LDVR because, as 
stated previously, we are not reconsidering or reopening those two 
actions in this rule.
    In determining and implementing congressional intent, it is 
important that the statutory provisions at issue be considered 
together--(1) The obligation to make a determination on endangerment 
and contribution under CAA section 202(a); (2) if affirmative 
endangerment/cause or contribute findings are made, the obligation to 
promulgate standards applicable to the emission of any air pollutant 
from new motor vehicles or new motor vehicle engines under CAA section 
202(a); and (3) the PSD and title V applicability provisions. The most 
appropriate reading, and certainly a reasonable reading, is that we are 
required to take the action we have taken, and are taking with this 
rule, and that is to issue the findings, promulgate the LDVR, and 
promulgate the Tailoring Rule. Our approach gives effect to as much of 
Congress's intent for each of these provisions, and the CAA as a whole, 
as possible.
    With respect to the endangerment/cause or contribute findings under 
CAA section 202(a), congressional intent is clear that, as we stated in 
making the findings and the Supreme Court held in Massachusetts v. EPA, 
we are precluded from considering factors other than the science based 
factors relevant to determining the health and welfare effects of the 
air pollution in question. Accordingly, EPA determined that under 
Massachusetts v. EPA, 549 U.S. 497 (2007) we were precluded from 
deferring or foregoing the findings due to concern over impacts on 
stationary sources affected by PSD or title V requirements. See 74 FR 
at 66496, 66500-01 (``Taken as a whole, the Supreme Court's decision 
clearly indicates that policy reasons do not justify the Administrator 
avoiding taking further action on the questions here.''); see also 
Massachusetts v. EPA, 549 U.S. at 533; see also 74 FR at 66515-16 
(December 9, 2009). (The Administrator ``must base her decision about 
endangerment on the science, and not on the policy considerations about 
the repercussions or impact of such a finding).\49\ Moreover, as EPA 
also noted, ``EPA has the ability to fashion a reasonable and common-
sense approach to address greenhouse gas emissions and climate 
change.'' 74 FR at 66516.
---------------------------------------------------------------------------

    \49\ Note, that at least one petition for reconsideration on the 
endangerment/contribution findings raises the same arguments related 
to the timing of decisions and absurd results. As noted before, EPA 
is carefully evaluating all the pending petitions for 
reconsideration.
---------------------------------------------------------------------------

    Regarding the timing of the LDVR, Congress's intent was that 
endangerment/cause or contribute findings under section 202(a) would in 
fact lead to control of the air pollutants from new motor vehicles and 
new motor vehicle engines contributing to the harm. The primary goal of 
section 202(a) is to achieve such reductions by requiring that EPA 
adopt emissions standards, and as a result, proceeding with the LDVR is 
consistent with that goal. In contrast, deferring the LDVR and thereby 
delaying achievement of the public health and welfare benefits Congress 
expected and required under section 202(a) would run directly counter 
to what Congress intended under section 202(a)--EPA issuing emissions 
standards to address the public health and welfare problems that were 
identified, not EPA refusing to do so.
    Moreover, we have compelling reasons to proceed with the LDVR, in 
the manner that we did. As we stated in the LDVR, in response to 
similar comments that we were not obligated to

[[Page 31575]]

conduct that rulemaking, or to conduct it at the time that we did:
    Some of the comments relating to the stationary source 
permitting issues suggested that EPA should defer setting GHG 
standards for new motor vehicles to avoid * * * [adverse] stationary 
source permitting impacts. EPA is issuing these final GHG standards 
for light-duty vehicles as part of its efforts to expeditiously 
respond to the Supreme Court's nearly three year old ruling in 
Massachusetts v. EPA, 549 U.S. 497 (2007). In that case, the Court 
held that greenhouse gases fit within the definition of air 
pollutant in the Clean Air Act, and that EPA is therefore compelled 
to respond to the rulemaking petition under section 202(a) by 
determining whether or not emissions from new motor vehicles cause 
or contribute to air pollution which may reasonably be anticipated 
to endanger public health or welfare, or whether the science is too 
uncertain to make a reasoned decision. The Court further ruled that, 
in making these decisions, the EPA Administrator is required to 
follow the language of section 202(a) of the CAA. The Court stated 
that under section 202(a), ``[i]f EPA makes [the endangerment and 
cause or contribute findings], the Clean Air Act requires the agency 
to regulate emissions of the deleterious pollutant.'' 549 U.S. at 
534. As discussed above, EPA has made the two findings on 
contribution and endangerment. 74 FR 66496 (December 15, 2009). 
Thus, EPA is required to issue standards applicable to emissions of 
this air pollutant from new motor vehicles.
    The Court properly noted that EPA retained ``significant 
latitude'' as to the ``timing * * * and coordination of its 
regulations with those of other agencies'' (id.). However it has now 
been nearly three years since the Court issued its opinion, and the 
time for delay has passed. In the absence of these final standards, 
there would be three separate federal and state regimes 
independently regulating light-duty vehicles to increase fuel 
economy and reduce GHG emissions: NHTSA's CAFE standards, EPA's GHG 
standards, and the GHG standards applicable in California and other 
states adopting the California standards. This joint EPA-NHTSA 
program will allow automakers to meet all of these requirements with 
a single national fleet because California has indicated that it 
will accept compliance with EPA's GHG standards as compliance with 
California's GHG standards. 74 FR at 49460. California has not 
indicated that it would accept NHTSA's CAFE standards by themselves. 
Without EPA's vehicle GHG standards, the states will not offer the 
federal program as an alternative compliance option to automakers 
and the benefits of a harmonized national program will be lost. 
California and several other states have expressed strong concern 
that, without comparable federal vehicle GHG standards, the states 
will not offer the federal program as an alternative compliance 
option to automakers. Letter dated February 23, 2010 from 
Commissioners of California, Maine, New Mexico, Oregon and 
Washington to Senators Harry Reid and Mitch McConnell (Docket EPA-
HQ-OAR-2009-0472-11400). The automobile industry also strongly 
supports issuance of these rules to allow implementation of the 
national program and avoid ``a myriad of problems for the auto 
industry in terms of product planning, vehicle distribution, adverse 
economic impacts and, most importantly, adverse consequences for 
their dealers and customers.'' Letter dated March 17, 2010 from 
Alliance of Automobile Manufacturers to Senators Harry Reid and 
Mitch McConnell, and Representatives Nancy Pelosi and John Boehner 
(Docket EPA-HQ-OAR-2009-0472-11368). Thus, without EPA's GHG 
standards as part of a federal harmonized program, important GHG 
reductions as well as benefits to the automakers and to consumers 
would be lost.165 In addition, delaying the rule would impose 
significant burdens and uncertainty on automakers, who are already 
well into planning for production of MY 2012 vehicles, relying on 
the ability to produce a single national fleet. Delaying the 
issuance of this final rule would very seriously disrupt the 
industry's plans.
    Instead of delaying the LDV rule and losing the benefits of this 
rule and the harmonized national program, EPA is directly addressing 
concerns about stationary source permitting in other actions that 
EPA is taking with regard to such permitting. That is the proper 
approach to address the issue of stationary source permitting, as 
compared to delaying the issuance of this rule for some undefined, 
indefinite time period.

75 FR 25,402 cols. 1-3 (May 7, 2010) (footnote omitted).
    With respect to both the endangerment/cause or contribute findings 
and the LDVR, it would require speculation and conjecture to defer--or, 
certainly, to forego altogether--the findings or LDVR until EPA 
completed streamlining the PSD and title V requirements on grounds that 
doing so would allow full compliance in the future with all PSD and 
title V statutory provisions. That is the gist of commenters' 
argument--that EPA should defer or forego issuance of the findings and 
the LDVR to avoid causing an absurd result from implementation of the 
separate PSD and title V programs. Underlying this claim is the 
assumption that this would allow EPA to avoid the ``absurd results''. 
As we discuss elsewhere in this rulemaking, there is no basis at this 
point to determine that streamlining will ultimately allow full 
compliance with the PSD and title V requirements. Rather, it is 
possible that EPA may conclude that none of the available streamlining 
techniques will allow all GHG sources at the statutory thresholds to 
comply with PSD and title V requirements in a manner that does not 
impose undue costs on the sources or undue administrative burdens on 
the permitting authorities. Under these circumstances, EPA may then 
permanently exclude GHG source categories from PSD or title V 
applicability under the absurd results doctrine. Moreover, it may well 
take many years before EPA is in a position to come to a conclusion 
about the extent to which streamlining will be effective and therefore 
be able to come to a conclusion as to whether any source categories 
should be permanently excluded from PSD or title V applicability. In 
our rulemaking today, we describe what actions we expect to take in the 
first 6 years after PSD and title V are triggered for GHG sources, and 
we may well be in a situation in which we continue to evaluate 
streamlining measures and PSD and title V applicability to GHG sources 
after this 6-year period.
    Accordingly, deferring the endangerment/cause or contribute 
findings and LDVR until such time that PSD and title V streamlining 
would allow full implementation of these programs at the statutory 
limits would serve only to delay the benefits of the LDVR, as well as 
the benefits that come from phasing in implementation of the PSD 
program to cover larger sources first. It would rely on an assumption 
that is unfounded at this point, that is, that such full compliance 
will be required at some point in the future. Delaying the emissions 
benefits of the LDVR and the related emissions benefits from partial 
implementation of the PSD program fails to implement Congress' intent 
that the endangerment/cause or contribute findings ``shall'' lead to 
emissions standards for new motor vehicles contributing to the 
endangerment, and related emissions controls for the same air pollutant 
under the PSD program. EPA need not determine at this time what 
approach would be appropriate if there was a determination that full 
compliance with PSD and title V would in fact occur at some point in 
the future. In this case, absent such a determination, it would be 
improper to rely on speculation of such a future possibility as a basis 
under section 202(a) to defer or forego issuance of the LDVR on the 
grounds that EPA should defer or forego the LDVR to avoid causing an 
absurd result. Likewise there is no basis to defer proceeding at this 
time with the streamlining of the PSD and title V programs.
    With respect to the PSD and title V applicability requirements, as 
we discuss elsewhere, we believe that Congress expressed a clear intent 
to apply PSD and title V to GHG sources and that the phase-in approach 
incorporated in the Tailoring Rule is fully appropriate. Proceeding now 
with the endangerment/contribution findings and LDVR, even if phasing-
in of the PSD and title V programs is required, is

[[Page 31576]]

consistent with our interpretation of the PSD and title V applicability 
requirements. Delaying the endangerment/contribution findings or LDVR, 
and thereby delaying the triggering of PSD and title V requirements for 
GHG sources, would lead to the loss of a practicable opportunity to 
implement the PSD and title V requirements in important part, and 
thereby lead to the loss of important benefits. As discussed elsewhere, 
promulgating the LDVR and applying the PSD and title V requirements to 
the largest GHG sources, as we do in this Tailoring Rule, is 
practicable because the sources that would be affected by the initial 
implementation steps we promulgate in this rule are able to bear the 
costs and the permitting authorities are able to bear the associated 
administrative burdens. Promulgating the LDVR now provides important 
advantages because the sources that would be affected by the initial 
steps are responsible for most of the GHG emissions from stationary 
sources.
    It should also be noted that as discussed elsewhere in this 
rulemaking, our ability to develop appropriate streamlining techniques 
for PSD and title V requirements is best done within the context of 
actual implementation of the permitting programs, and not in isolation 
of them. That is, because the great majority of GHG sources have not 
been subject to PSD and title V requirements, we will need to rely on 
the early experience in implementing the permitting requirements for 
the very large sources that initially will be subject to those 
requirements in order to develop streamlining techniques for smaller 
sources. It is the real world experience gained from this initial phase 
that will allow EPA to develop any further modifications that might be 
necessary. This would not and could not occur if the LDVR were delayed 
indefinitely or permanently, so that PSD and title V requirements were 
not triggered. It is unrealistic to expect that delaying action until a 
future tailoring rule could resolve all of the problems identified in 
this rulemaking, absent any real world implementation experience.
    At its core, commenters' argument is that EPA should delay (if not 
forego altogether) doing anything to address GHG emissions and the 
problems they cause until it can do so in a way that does not cause any 
implementation challenges, even if that delay results in continued 
endangerment to public health and welfare. EPA does not take such a 
myopic view of its duties and responsibilities under the CAA. Congress 
wrote the CAA to, among other things, promote the public health and 
welfare and the productive capacity of the population. CAA Sec.  
101(b)(1). EPA's path forward does just this. Thus, proceeding with the 
endangerment/cause or contribute findings, the LDVR, and with PSD and 
title V through the phase-in approach of the Tailoring Rule maximizes 
the ability of EPA to achieve the Congressional goals underlying 
sections 202(a) and the PSD and title V provisions, and the overarching 
CAA goal of protecting public health and welfare. Congress called for 
EPA (1) To determine whether emissions from new motor vehicles 
contribute to air pollution that endangers, (2) if that the 
determination is affirmative, to issue emissions standards for new 
motor vehicles to address the endangerment, and (3) to implement the 
PSD and Title V program to address similar emissions in their 
permitting program as another tool to address the air pollutant at 
issue. Delaying both the LDVR and PSD/title V implementation, as 
commenters have called for, would run directly counter to these 
Congressional expectations. Commenters' calls for deferral or foregoing 
of the findings or LDVR are generally phrased in a conclusory fashion, 
and do not demonstrate how EPA could take the required CAA actions 
concerning GHGs while remaining within the requirements of each of the 
various CAA provisions, and achieving the overall goals of the CAA. As 
such the comments do not provide a valid basis for the deferral of 
agency action they suggest.
9. ``Administrative Necessity'' Basis for PSD and Title V Requirements 
in Tailoring Rule
    EPA believes that the ``administrative necessity'' doctrine, within 
the Chevron framework, also justifies this rulemaking. Applying the 
applicability requirements of the PSD and title V programs according to 
a literal reading of their terms (as EPA has narrowed them in the past 
through interpretation) to GHG sources beginning on the January 2, 2011 
date that regulation of GHGs takes effect would sweep so many sources 
into those programs as to render the programs impossible for the 
permitting authorities to administer. Although streamlining the PSD and 
title V programs offers some promise to improve the administrability of 
the programs, given the time needed to implement such streamlining, the 
step-by-step expansion of PSD and title V requirements to GHG sources 
that we are promulgating is the most that the permitting authorities 
can reasonably be expected to administer.
    This section discusses the application of the ``administrative 
necessity'' doctrine. Our views concerning this doctrine remain similar 
to what we said at proposal, except that in this rulemaking we place 
the doctrine more clearly in the Chevron analytical framework, we 
revise our assessment of the administrative burdens due to new analysis 
we have conducted and information we have received since proposal, and 
we make certain revisions to the tailoring approach.\50\ This analysis 
and information, as well as the revisions to the tailoring approach, 
have already been presented previously, in the discussion of the 
``absurd results'' basis. In addition, it is not necessary to reiterate 
the lengthy discussion of the ``administrative necessity'' doctrine 
that we included in the proposal or the factual data presented 
previously; as a result, this section briefly highlights the 
conclusions we have reached about the application of this doctrine.
---------------------------------------------------------------------------

    \50\ In addition, we base our reliance on the ``administrative 
necessity'' doctrine on the administrative burdens to the permitting 
authorities of permitting smaller GHG sources, but not on the 
relatively small amount of GHG emissions associated with the smaller 
sources. See Alabama Power v. Costle, 636 F.2d 323, 357 (DC Cir. 
1980) (establishing the ``administrative necessity'' doctrine as 
``inherent in the administrative process'' and presumptively 
available under the statutory scheme, absent clear congressional 
intent to the contrary; but adding that in contrast, ``there exists 
no general administrative power to create exemptions to statutory 
requirements based upon the agency's perceptions of costs and 
benefits'').
---------------------------------------------------------------------------

    As noted previously, under the PSD and title V applicability 
provision--read literally, as we have long interpreted them--EPA's 
recent promulgation of the LDVR will trigger the applicability of PSD 
and title V for GHG sources at the 100/250 tpy and 100 tpy threshold 
levels, respectively, as of January 2, 2011. This is because PSD 
applicability hinges on the definition of ``major emitting facility'' 
and title V applicability hinges on the definition of ``major 
sources,'' and those terms, read literally, and under EPA's long-
standing narrowing interpretation, apply PSD and title V, respectively, 
to sources of any air pollutant that is subject to regulation under 
another provision of the CAA. EPA's promulgation of the LDVR means that 
GHGs will become subject to regulation on the date that the rule takes 
effect, which will be January 2, 2011.
    Absent tailoring, the January 2, 2011 trigger date for GHG PSD 
applicability will give rise to an extraordinarily large number of PSD 
permitting actions--we estimate more than 81,000 per year--representing 
an increase of almost 300-fold over the current 280 PSD permitting 
actions each year. In addition, over 6 million sources will become 
subject to title V, an increase of

[[Page 31577]]

more than 400-fold over the 14,700 sources that currently are subject 
to title V. The permitting authorities will find it impossible to 
administer programs of these sizes as of that date.
    All this results from a literal application of the PSD and title V 
applicability provisions to GHG sources. However, under Chevron, we 
must interpret and apply statutory requirements on the basis of 
congressional intent. Although the literal meaning of the statutory 
provisions is the first and generally the best indicator of 
congressional intent, there are cases in which that is not so. As 
discussed previously, we believe that as a general matter, statutory 
directives should be considered to incorporate Congress's intent that 
they be administrable, and we believe that this proposition is implicit 
in the ``administrative necessity'' doctrine that the DC Circuit has 
established and that we believe applies here. See Alabama Power v. 
Costle, 636 F.2d 323, 356-57 (DC Cir. 1980). This doctrine authorizes 
EPA to undertake a process for rendering the PSD and title V 
requirements administrable. Indeed, the Court in Alabama Power 
established this doctrine specifically in the context of the PSD 
provisions, including, in particular, the modification provision. As 
noted elsewhere, the Court held that EPA may ``consider the 
administrative burden'' associated with applying PSD for emissions 
increases, and establish significance levels designed to avoid ``severe 
administrative burdens on EPA, as well as severe economic burdens'' on 
sources. Id. at 405.
    As we said in the proposal, we read the case law to establish a 
three-step approach for implementing the ``administrative necessity'' 
doctrine: An agency is not required to adhere to literal statutory 
requirements if the agency, as the first step, makes every effort to 
adjust the requirements within the statutory constraints, but concludes 
with justification--at the second step--that it would be impossible to 
comply with the literal reading of the statute. Under those 
circumstances, the agency may--at the third step--develop what is in 
effect a compliance schedule with the statutory requirements, under 
which the agency will implement the statute as much as administratively 
possible and as quickly as administratively possible. See 74 FR 55315--
55316.
a. First Step of the ``Administrative Necessity'' Analysis: 
Streamlining
    In the proposed rulemaking, EPA discussed at length the prospect of 
streamlining both PSD and title V. EPA described ``several potentially 
useful tools available in the streamlining toolbox for the PSD 
permitting threshold level, the PSD significance level, and the title V 
permitting threshold,'' specifically:

    For the PSD permitting threshold level and significance level, 
there are at least three such tools: The first is interpreting the 
definition of ``potential to emit'' so that the amount of a source's 
emissions that counts in determining whether it qualifies as a major 
source and therefore is above the permitting threshold requirements 
is closer to the amount of its emissions when it is in actual 
operation, rather than the amount of emissions that the source would 
emit if it were operating continuously. Narrowing the definition of 
PTE is a potentially extremely important tool in this context 
because identifying the amount of a source's emissions as closer to 
its actual emissions in this manner would mean that very large 
numbers of residential and commercial sources would have 
significantly lower emissions and would fall below the statutory 
threshold requirements for triggering PSD. Second, EPA believes it 
may be able to develop programs involving general permits, under 
which large numbers of similarly situated sources would each be 
covered by essentially the same permit established through a 
regulatory action by the permitting authority. This approach could 
achieve economies of scale and thereby reduce administrative burden. 
Third, EPA believes it may be able to streamline the single most 
time-consuming element of the PSD permit program, which is the 
determination of BACT as required under CAA Sec.  165(a)(4), by 
establishing presumptive BACT levels for certain source categories 
that comprise large numbers of sources. As for title V, as discussed 
below in detail, EPA believes that defining ``potential to emit'' to 
reflect more closely a source's actual operation and developing a 
program of general permits could streamline the administration of 
title V permits.

74 FR 55315 col. 2-3.

    At proposal we stated that we would, and we still commit to, 
vigorously pursue development of these streamlining measures, and, as 
indicated in our discussion of streamlining methods in section V.E.1 
and in response to comments, we have already begun developing those 
measures. For example, as described elsewhere, we have done much work--
both with stakeholders and in-house--to begin to develop 
recommendations for what controls would qualify as BACT for various 
industries. This work is important as a foundation for developing 
presumptive BACT, which is a potentially efficient streamlining 
measure.
    However, it is not possible for us or the state and local 
permitting authorities to develop and implement streamlining techniques 
by the time that PSD and title V are triggered for sources emitting 
GHGs--January 2, 2011--or shortly thereafter. Developing streamlining 
methods would entail acquiring more information about the affected 
industry, may entail rulemaking, and would likely entail some type of 
public review of proposals for streamlining even if not done through 
rulemaking. As discussed in section V.E, we do not expect that we could 
complete all those steps for meaningful streamlining measures within 2 
years.
b. Second Step of the ``Administrative Necessity'' Analysis: 
Demonstration of Administrative Impossibility
    With no streamlining measures available at the time that PSD and 
title V would apply to sources of GHGs or shortly thereafter, under the 
second step of the ``administrative necessity'' analysis, we must 
determine whether implementation of the statutory requirements at that 
time would be administratively impossible for the permitting 
authorities. We are mindful that the DC Circuit has cautioned that this 
showing is a high hurdle. See 74 FR 55317.
    Even so, we believe there is no question that a literal application 
of the PSD and title V programs to GHG sources as of January 2, 2011 
would be flatly impossible for the state and local permitting 
authorities to administer for at least an initial period of time.\51\ 
The key facts have been recounted previously, and no more than a brief 
recitation is necessary here. On the PSD side, annual permit 
applications would increase by over 300-fold, from 280 to almost 
82,000; costs to the permitting authorities would increase more than 
100-fold, from $12 million to $1.5 billion; and the permitting 
authorities would need to hire, train, and manage 9,772 FTEs. For title 
V, total permit applications would increase by over 400-fold, from 
14,700 to 6.1 million; costs to the permitting authorities would 
increase from $62 million to $21 billion; and the permitting 
authorities would need to hire, train, and manage 229,118 FTEs.
---------------------------------------------------------------------------

    \51\ We recognize that in a few states, we are the permitting 
authority. We do not think that this changes the calculation of 
administrative burdens. We do not believe that we could reasonably 
be expected to adjust our budget to accommodate the large new 
permitting burdens, and even if we could, the administrative burdens 
would remain in most of the rest of the nation where it is the state 
or local agencies that bear permitting responsibility.
---------------------------------------------------------------------------

    We have elaborated upon these burdens elsewhere in this notice. 
They bespeak an impossible administrative task. It is not hyperbole to 
say that if these administrative responsibilities are not considered 
impossible within the

[[Page 31578]]

meaning of the ``administrative necessity'' doctrine, then it is 
difficult to imagine what would be considered impossible.
c. Third Step of the ``Administrative Necessity'' Analysis: Tailoring
    Under the third step of the ``administrative necessity'' analysis, 
we must demonstrate that the steps we intend to take towards 
implementation of the statutory requirements are the most that can be 
done during the indicated time frames, in light of administrative 
resources. In this manner, we adhere most closely to the statutory 
requirements. See 74 FR 55318. This amounts to establishing a schedule 
for phasing in PSD and title V applicability to GHG sources. Because 
this step is based on the administrative resources of the permitting 
authorities, our analysis is similar, and leads to the same 
conclusions, as we described previously concerning the ``absurd 
results'' basis. That is, we believe that our tailoring approach--
including Step 1, to be implemented as of January 2, 2011; Step 2, to 
be implemented as of July 1, 2011; the additional rulemaking that we 
commit to finalize by July 1, 2012, and that will address further 
threshold reductions as a Step 3; the study and subsequent rulemaking 
to address smaller sources by April 30, 2016; and the determination not 
to lower the threshold below 50,000/50,000 tpy CO2e before 
April 30, 2016 at the earliest--is the most that we can do to expand 
the PSD and title V programs, based on administrative resources and the 
information we currently have about the prospects for streamlining and 
increasing permitting resources.
    As noted previously, at some point in the process of additional 
rulemaking, we may conclude under the ``absurd results'' doctrine that 
we will not apply PSD or title V to GHG sources below a certain size 
level. The same conclusion may be supportable under the 
``administrative necessity'' doctrine if we decide, based on the 
information available to us, that even with all of the streamlining 
that we are able to accomplish and even with a significant expansion of 
permitting resources, it may not be administratively feasible to 
implement PSD or title V to sources below that level. See Alabama Power 
v. Costle, 636 F.2d at 358 (acknowledging, in discussing the 
``administrative necessity'' doctrine, that ``[c]ategorical exemptions 
from the clear commands of a regulatory statute [are] sometimes 
permitted,'' although emphasizing that such exemptions ``are not 
favored'').
    In addition, as noted above, in a subsequent rulemaking, we may 
conclude that title V should not apply to GHG sources with ``empty 
permits,'' under the ``absurd results'' doctrine. The basis for this 
conclusion could be a determination that (1) although the applicability 
provisions apply by their terms to sources on the basis of their 
emissions, and without regard to whether the sources would hold ``empty 
permits,'' those provisions cannot be read literally under the ``absurd 
results'' doctrine; and (2) it is not clear whether Congress intended 
that title V apply to such sources, and EPA has reasonably determined, 
under Chevron Step 2, that title V does not. If we come to that 
conclusion, then, at that point in time, the ``administrative 
necessity'' doctrine would remain relevant for title V purposes only if 
it is necessary, for administrative reasons, to phase in the 
application of title V to GHG sources that have applicable 
requirements, and that therefore do not have ``empty permits.'' This is 
because the ``administrative necessity'' doctrine is relevant only when 
a statutory directive, read literally, imposes impossible 
administrative obligations, and Congress may be presumed to have 
intended that the directive be administrable. The ``administrative 
necessity'' doctrine would not come into play if it is concluded either 
that under the ``absurd results'' doctrine Congress did not intend the 
statutory directive or that, under that doctrine, Congress's intent was 
not clear and EPA reasonably decided that the directive does not apply.
10. ``One-Step-at-a-Time'' Basis for Tailoring Rule
    In addition to the ``absurd results'' and ``administrative 
necessity'' doctrines, the ``one-step-at-a-time'' judicial doctrine, 
within the Chevron framework, supports EPA's Tailoring Rule. The case 
law under this doctrine, described previously, indicates that the 
doctrine justifies an agency's step-by-step approach under the 
following circumstances or conditions: (1) The agency's ability to 
comply with a statutory directive depends on facts, policies, or future 
events that are uncertain; (2) the agency has estimated the extent of 
its remaining obligation; (3) the agency's incremental actions are 
structured in a manner that is reasonable in light of the 
uncertainties; and (4) the agency is on track to full compliance with 
the statutory requirements. EPA's Tailoring Rule fulfills each of those 
four.
    First, as the DC Circuit stated in National Association of 
Broadcaster v. FCC, 740 F.2d 1190, 1210 (DC Cir. 1984) (``National 
Association of Broadcasters''), incremental agency action is most 
readily justifiable ``against a shifting background in which facts, 
predictions, and policies are in flux and in which an agency would be 
paralyzed if all the necessary answers had to be in before any action 
at all could be taken.'' Those circumstances are present here, and so 
is that fact that the task at hand is extraordinarily demanding. As 
discussed previously, EPA and the permitting authorities' progress in 
implementing the PSD and title V programs for GHG sources will depend 
in large measure on the development of streamlining measures and 
increases in permitting authorities' resources, and those things carry 
some uncertainty and in any event, under the best of circumstances, 
cannot have much impact for at least several years. It will take EPA 
that long to develop streamlining measures, and it will take permitting 
authorities that long to begin to raise money and hire and train FTEs.
    Second, as the Court stated in National Association of 
Broadcasters, ``the agency [should] ma[k]e some estimation, based upon 
evolving economic and technological conditions, as to the nature and 
magnitude of the problem it will have to confront when it comes to 
[undertake the remaining steps]'' and that estimation must be 
``plausible and flow from the factual record compiled.'' Id. at 1210. 
Here, EPA has done this by estimating the number of PSD and title V 
permits and the costs of issuing them, and has provided as much 
information as possible about the development of streamlining methods 
and permitting authority resources.
    Third, again as the Court stated in National Association of 
Broadcasters, it must be ``reasonable, in the context of the decisions 
made in the proceeding under review, for the agency to have deferred 
the issue to the future. With respect to that question, postponement 
will be most easily justified when an agency acts against a background 
of rapid technical and social change and when the agency's initial 
decision as a practical matter is reversible should the future 
proceedings yield drastically unexpected results.'' Id. at 1211. Here, 
our tailoring approach is reasonable in light of changes in permitting 
authority capacity that may occur with the development of streamlining 
methods and increased resources. In addition, the first two steps that 
EPA promulgates today are reasonable initial steps that we expect to 
build on by lowering thresholds, as appropriate, in the future. We have 
no reason to suspect that we may need to reverse either of the first

[[Page 31579]]

two steps. Having received and analyzed extensive comment on the number 
of permitting actions to expect and on permitting authority resources, 
we consider it unlikely that we would need to establish a higher 
threshold level than what we have established in Steps 1 and 2. In 
addition, if we were to adopt an ``empty permits'' approach for title 
V, we would not need to reverse either of Steps 1 and 2, as explained 
above.
    Finally, as the DC Circuit stated in Grand Canyon Air Tour 
Coalition v. F.A.A., 154 F.3d 455, 477-78 (DC Cir. 1998), the Courts 
will accept an initial step towards full compliance with a statutory 
mandate, as long as the agency is headed towards full compliance, and 
we believe that the doctrine is applicable here. EPA intends to require 
full compliance with the CAA applicability provisions of the PSD and 
title V programs, but we believe that in the case of GHG-emitting 
sources, by application of the ``absurd results'' doctrine or the 
``administrative necessity'' doctrine, full compliance with the 
applicability provisions does not necessarily mean full compliance with 
the literal terms of those provisions.\52\ Rather, as we have explained 
elsewhere, in the case of GHG sources, full compliance may mean 
compliance with higher levels that are consistent with congressional 
intent, under the ``absurd results'' doctrine, or that are within the 
reach of permitting authorities in light of their administrative 
constraints, under the ``administrative necessity'' doctrine. This 
rulemaking constitutes a package of initial steps towards that full 
compliance, and, seen in that light, is supported by the ``one-step-at-
a-time'' doctrine.
---------------------------------------------------------------------------

    \52\ For reasons explained elsewhere, our reference to the 
literal terms of the applicability provisions means the literal 
terms of the definition of ``major emitting facility'' for PSD and 
``major source'' for title V, as EPA has narrowed those definitions 
to refer to ``any pollutant'' that is subject to regulation under 
the CAA.
---------------------------------------------------------------------------

    Even if the doctrine were found to apply only when an agency is 
committed to fully implementing statutory requirements according to 
their literal terms, we believe that the steps we promulgate in this 
notice would be considered valid under the one-step-at-a-time doctrine. 
This is because even if we are incorrect about the applicability of the 
``absurd results'' and ``administrative necessity'' doctrines, so that 
GHG sources are required to comply with the literal terms of the PSD 
and title V applicability provisions, the ``one-step-at-a-time'' 
doctrine would allow PSD and title V applicability to be phased in, and 
the first two steps we promulgate in this notice would be upheld as 
reasonable initial steps toward full compliance with the literal terms 
of the CAA. As we have described elsewhere, there is little question 
but that sources and permitting authorities cannot reasonably be 
expected to comply with or implement PSD and title V applicability 
requirements in the near term--by January 2, 2011 and July 1, 2011--
except to the limited extent described under Steps 1 and 2. Nor is 
applicability of the PSD and title V requirements at levels below 
50,000 tpy CO2e reasonable before 6 years from promulgation 
of this rule, as discussed elsewhere. If further steps resulting in 
full compliance with the literal terms of the applicability provisions 
of PSD and title V were required, it would be reasonable for those 
steps to occur in the future, as part of the rulemaking to be completed 
by the sixth year after promulgation, to which EPA commits itself as 
part of this action, or as part of subsequent actions. See Grand Canyon 
Air Tour, 891 F.2d at 476-77 (upholding agency action as a step towards 
full compliance with statutory mandate when the agency expected full 
compliance to occur some 20 years after the deadline in the statute).

C. Mechanisms for Implementing and Adopting the Tailoring Approach

    In this section, we discuss three issues related to adoption of the 
tailoring approach within our regulations and by permitting agencies. 
The first is the regulatory mechanism for implementing the tailoring 
approach--that is, the specific way we are revising the PSD and title V 
applicability provisions to incorporate the tailoring approach--and our 
rationale. The second is the process by which state or local permitting 
authorities may incorporate the tailoring approach into their PSD SIP 
and title V permit programs. Finally, we discuss our reasons for 
delaying action on our proposal to limit approval of both SIP-approved 
PSD programs and title V programs, and we request certain information 
from states on both of their programs and their actions in response to 
this rule.
    In brief, we proposed to exempt sources emitting GHGs below certain 
threshold levels from the definition of the regulatory terms ``major 
stationary source'' and ``major modification'' in PSD programs and the 
definition of the regulatory term ``major source'' in title V programs. 
We further proposed to effectuate this change in SIP-approved PSD 
programs (as included in SIPs) and EPA-approved part 70 title V 
programs by limiting our prior approval of those programs to the 
revised applicability thresholds for GHGs.\53\ These changes would have 
the effect of putting the higher thresholds adopted under the Tailoring 
Rule in place in states PSD and title V programs as a matter of federal 
law. However, state commenters expressed concern that they would not be 
able to adopt the Tailoring Rule under state laws on an expeditious 
basis. To address this, our final action differs from our proposed rule 
in the way we incorporate the limitations promulgated in this Tailoring 
Rule into the ``major stationary source,'' ``major modification'' and 
``major source'' definitions. This approach relies on further defining 
the term ``subject to regulation'' and although this approach is not 
substantively different in effect from the proposed rule, it will 
facilitate more rapid adoption and implementation of the Tailoring Rule 
by states through interpretation of language in existing state 
regulations. We believe these differences are a logical outgrowth of 
our proposed rule. We are also delaying action on our proposed limited 
approval of EPA-approved PSD programs and part 70 title programs to 
determine how each state will implement the final rules.
---------------------------------------------------------------------------

    \53\ In the alternative, we also proposed to use our section 
110(k)(6) error correction authority to revise SIP-approved PSD 
program. We are also delaying action on this proposal.
---------------------------------------------------------------------------

1. PSD Approach: Background and Proposal
    Under CAA section 165(a), no ``major emitting facility'' may 
construct or modify unless it receives a preconstruction permit that 
meets the requirements of the PSD program. CAA section 169(1) defines a 
major emitting facility as ``any * * * source[]'' in one of 28 
specified source categories that ``emit[s], or ha[s] the potential to 
emit, one hundred tons per year or more of any air pollutant;'' or 
``any other source with the potential to emit two hundred and fifty 
tons per year or more of any air pollutant.'' EPA's regulations replace 
the term ``major emitting facility'' with the term ``major stationary 
source'' and define the term as ``[a]ny of * * * [28 types of] 
stationary sources of air pollutants which emits, or has the potential 
to emit, 100 tons per year or more of any regulated NSR pollutant'' or 
``any stationary source which emits, or has the potential to emit 250 
tons per year or more of a regulated NSR pollutant.'' 40 CFR 
51.166(b)(1)(i)(a)-(b). The term ``regulated NSR pollutant'' is defined 
to include, among other things,

[[Page 31580]]

``any * * * air pollutant that otherwise is subject to regulation under 
the Clean Air Act.'' 40 CFR 51.166(b)(50). Note that the regulatory 
definition in effect interprets the statutory definition more narrowly 
to read ``one hundred [or two hundred and fifty] tons per year or more 
of any air pollutant subject to regulation under the Clean Air Act'' 
(emphasis added).
    Similarly, under the statute, a modification occurs if there is a 
physical change or change in the method of operation ``which increases 
the amount of any air pollutant emitted * * * .'' CAA section 165(a), 
169(2)(c), and 111(a)(4). As with the major stationary source 
definition, we have limited coverage of the modification provision to 
physical changes or changes in the method of operation that result a 
significant net emissions increase in emissions of a ``regulated NSR 
pollutant.'' 40 CFR 51.166(b)(2)(i).
    Our proposed rule revised the definition of ``major stationary 
source to (1) exempt GHG from the regulated NSR pollutants that, if 
emitted by a source in the 100 or 250 tpy quantities, would cause the 
source to qualify as a ``major stationary source,'' and (2) add a 
specific threshold at which a source that emits a specified quantity of 
GHGs (at proposal, that quantity was 25,000 tpy CO2e) would 
qualify as a ``major stationary source.'' 74 FR 55351, proposed 40 CFR 
51.166(b)(1)(i)(a), (b), and (d). We also proposed a significance 
threshold, which is the amount of an increase needed to trigger PSD for 
a modification or to require BACT for a new source, at a level between 
10,000 and 25,000 tpy CO2e. 74 FR 55351; 40 CFR 
51.166(b)(23)(i).
    Additionally, we recognized that it may take some time before 
states could change their SIP-approved PSD programs and that as a 
result, absent additional action on our part, GHG-emitting sources 
would remain subject to the 100 or 250 tpy thresholds, and subject to a 
zero significance threshold for major modifications as a matter of 
federal law. To address this issue, we proposed to narrow our previous 
approval of those SIPs. The effect of our proposal would be that EPA 
would have approved the SIP PSD programs only to the extent they apply 
PSD and requirements to GHG sources at or above the thresholds 
established in the Tailoring Rule (which, generally, were 25,000 tpy 
CO2e), and EPA would have taken no action on the SIP PSD 
programs to the extent they apply PSD requirements to GHG sources below 
that threshold. We relied on the authority of the APA and the general 
authority of CAA section 301 and, in the alternative, on the error 
correction mechanism under CAA section 110(k)(6). Our limited approval 
would revise existing EPA-approved SIP PSD programs to authorize 
permitting under the CAA only for GHG sources at the appropriate 
levels.
    In response to our proposed approach, we received numerous comments 
from state and local permitting agencies expressing significant 
concern. They observed that our proposed approach could meet its 
objectives to avoid applying PSD requirements to small sources under 
federal law, but would not succeed in avoiding the application of PSD 
requirements to those small sources under state law. The commenters 
explained that, although EPA was changing federal PSD applicability 
thresholds; for GHG-emitting sources to incorporate the tailoring 
approach, and limiting the scope EPA approval of SIPs consistent with 
these thresholds, the state rules containing the originally-approved 
SIP thresholds would continue to apply as a matter of state law. As 
commenters explained, for the most part, the laws and regulations 
states adopt to implement federal PSD programs mirror EPA's 
regulations, so that the state laws, apply PSD to sources that emit air 
pollutants subject to regulation at the 100/250 tpy threshold. 
Commenters reasoned that, until the states can change their state laws, 
the 100/250 tpy thresholds will continue to apply as a matter of state 
law, even though the higher thresholds apply as a matter of federal 
law.
    Importantly, these commenters emphasized, their state process 
requires that they promulgate a rulemaking, or in some cases, a 
legislative change, to incorporate the higher thresholds for GHG 
sources in their SIPs. These processes would require many months and in 
some cases as long as 2 years. As a result, sources that emit GHGs 
below the federally established levels in the final rule, but at above 
the 100/250 tpy levels in state laws and rules, would still be required 
to obtain PSD permits under state law. As a result, states, in 
attempting to implement state permitting requirements, would be faced 
with the same administrative difficulties that EPA recognized in the 
proposed rule as impossible. Commenters emphasized that this situation 
was untenable.
    In addition to the state comments just described, we received 
comments that took issue with our view that we were in effect revising 
the numerical thresholds for PSD applicability as the legal mechanism 
for the tailoring approach. They asserted that in fact, our mechanism 
consisted of interpreting the term ``any source'' to exclude small GHG-
emitting sources. Other commenters objected to our proposed mechanism 
of narrowing our previous SIP approval, arguing that this mechanism was 
without legal basis.
2. Rationale for Our Final Approach To Implementing PSD
    In response to these concerns, we are adding another mechanism to 
implement the tailoring approach for PSD, and that is to adopt a 
definition, within our PSD regulations, the phrase ``subject to 
regulation,'' as found within the phrase ``any regulated NSR 
pollutant,'' which, in turn, is part of the definitions of ``major 
stationary source'' and ``major modification.'' To implement this 
mechanism, we are defining the phrase ``subject to regulation'' so that 
the GHGs emitted by sources that fall below the thresholds or scope 
established in Steps 1 and 2 are not treated as ``subject to 
regulation,'' and therefore do not trigger PSD for the sources that 
emit them. As discussed in section V.B.3., the term ``subject to 
regulation'' is one of four terms that should be considered not to 
apply literally in the case of GHG sources.
    To understand this approach, it is useful to return to the 
definition of ``major stationary source,'' which, again, is central to 
PSD applicability. The definition, quoted previously, employs the term 
``regulated NSR pollutant,'' which is a defined term. The definition 
incorporates many other elements as well (e.g., the 100/250 threshold 
requirements), but for convenience, we quote it as follows: A ``major 
stationary source'' is ``[a]ny * * * source[-] of air pollutants, which 
emits, or has the potential to emit, [depending on the source category, 
either] 100 [or 250] tons per year or more of any air pollutant that is 
subject to regulation under the Clean Air Act.'' 40 CFR 
51.166(b)(1)(i)(a)-(b). Applying our definition of ``subject to 
regulation'' to exclude GHG sources that emit below specified 
thresholds, the definition may now be paraphrased as follows: A ``major 
stationary source'' is any source of air pollutants, which emits, or 
has the potential to emit, depending on the source category, either 100 
or 250 tpy or more of any air pollutant subject to regulation under the 
CAA, except that the source's GHGs are considered to be subject to 
regulation under the CAA only the extent indicated under Steps 1 and 2 
of the Tailoring Rule, e.g., for Step 2, only if the source's GHG 
emissions exceed the threshold established in Step 2. We adopt the same 
approach for the

[[Page 31581]]

definition of the regulatory term ``major modification.''
    Although EPA is revising its regulations to apply the phrase 
subject to regulation in this manner, we have been advised that states 
may be able to adopt our approach without having to undertake a 
rulemaking action to revise their state regulations or without 
requiring an act of the state legislature. Instead, it is our 
understanding that states may adopt our approach by interpreting the 
term ``subject to regulation'' reflected in their regulations to have 
the same meaning that we are assigning to that term in our regulations 
in this rulemaking. This is particularly--although not exclusively--the 
case in a state that has taken the position, or determines now, that 
the state's definition of ``subject to regulation,'' or, more broadly, 
``regulated NSR pollutant'' or ``major stationary source'' or ``major 
modification,'' is intended to be interpreted in a way that tracks the 
meanings that EPA has assigned to these phrases. Such states can adopt 
the meaning of ``subject to regulation'' that we establish in this rule 
by January 2, 2011, and thereby avoid the situation in which, as a 
matter of state law, GHG-emitting sources above the 100 or 250 tpy 
thresholds become subject to PSD by that date. The following explains 
our basis for concluding that states may apply EPA's approach under 
existing regulations that use the term ``subject to regulation.'' On 
December 18, 2008, EPA issued the Interpretive Memo, establishing EPA's 
interpretation of the definition ``regulated NSR pollutant'' found at 
40 CFR 52.21(b)(50). EPA intended this memorandum to resolve ambiguity 
in subparagraph (iv) of this definition, which includes ``any pollutant 
that otherwise is subject to regulation under the Act.'' Specifically, 
the memorandum stated that EPA will interpret the definition of 
``regulated NSR pollutant'' to exclude pollutants for which EPA 
regulations only require monitoring or reporting but to include 
pollutants subject to either a provision in the CAA or regulation 
adopted by EPA under the CAA that requires actual control of emissions 
of that pollutant.
    After reconsidering this interpretation through a formal notice-
and-comment process, EPA refined its interpretation to establish that 
the PSD permitting requirements will not apply to a newly regulated 
pollutant until a regulatory requirement to control emissions of that 
pollutant ``takes effect.'' 75 FR 17704. Importantly, as stated 
previously, because the term ``regulated NSR pollutant'' is embedded 
within the definition of ``major stationary source,'' this 
interpretation effectively defines which major stationary sources are 
subject to PSD permitting. As a result, for example, EPA explained that 
PSD and title V permitting requirements for GHGs will not apply to GHGs 
until at least January 2, 2011, following the anticipated promulgation 
of EPA regulations requiring control of GHG emissions under title II of 
the CAA. Id.
    In the RTC document for EPA's reconsideration of the PSD 
interpretative memorandum, we stated that,

    Absent a unique requirement of state law, EPA believes that 
state laws that use the same language that is contained in EPA's PSD 
program regulations at 52.21(b)(50) and 51.166(b)(50) are 
sufficiently open-ended to incorporate greenhouse gases as a 
regulated NSR pollutant at the appropriate time consistent with 
EPA's interpretation of these regulations (emphasis added). (Docket 
ID No. EPA-HQ-OAR-2009-0597-0128).

Because the state regulations that include EPA's definition of the term 
``subject to regulation'' in the reconsideration of the Interpretive 
Memo are ``sufficiently open-ended to incorporate greenhouse gases as a 
regulated pollutant,'' those state regulations are also sufficiently 
open-ended to incorporate the further refinement to the meaning of the 
phrase ``subject to regulation'' that we make in this rulemaking.
    By the same token, EPA has historically interpreted certain state 
SIP-approved programs as sufficiently open-ended such that the rules 
provide for the ``automatic assumption for the responsibility for 
review'' of new pollutants before the general deadline for states to 
revise their PSD programs. See, e.g., 52 FR 24682. Conversely, we have 
also read federal rules and state rules approved in SIPs to provide for 
the automatic removal of a pollutant when such pollutant is no longer 
``subject to regulation.'' For example, the 1990 CAA Amendments 
exempted HAPs listed in section 112(b)(1) from the PSD requirements. 
See CAA section 112(b)(6). Following passage of the amendments, EPA 
issued ``New Source Review (NSR) Program Transitional Guidance,'' a 
memorandum from John S. Seitz, Director, Office of Air Quality Planning 
and Standards to Regional Air Division Directors on March 11, 1991. In 
that guidance, EPA interpreted its PSD regulations to automatically 
cease to apply to listed HAPs (with some noted exceptions), and 
implicitly stated that a state with an open-ended SIP-approved PSD rule 
could also take the position that its SIP-approved rule automatically 
ceased to regulate HAPs.
    After reviewing these past practices in the PSD permitting program, 
and EPA's prior statements regarding pollutants subject to the PSD 
program, we conclude that states with SIP-approved rules that contain 
the same language as used in 40 CFR 52.21(b)(50) or 40 CFR 
51.166(b)(49), or that otherwise have sufficiently open-ended PSD 
regulations, would be able to implement our Tailoring Rule approach to 
permitting by interpreting their regulations, and without needing to 
promulgate a regulation or seek state legislative action. This is 
particularly--although not exclusively--the case for states that take 
the position that they intend their rules to apply in the same manner 
as EPA's counterpart rules. If states adopt this reading of their 
regulations, GHG sources falling below the specified cutoffs would not 
be emitting pollutants ``subject to regulation'' within the definition 
of ``regulated NSR pollutant'' and therefore would not be subject to 
PSD permitting as a major stationary source or for making a major 
modification.
    During our consideration of this action, we participated in 
teleconferences with one local and six state agency permitting 
authorities to discuss this issue of whether they could implement the 
proposed rule without the need for state law or regulation changes or a 
revision of the provisions of state law that are a part of the SIP. We 
specifically discussed whether defining the phrase ``subject to 
regulation'' would better facilitate state incorporation of the 
limitations in this final rule. The state and local agencies 
participating in the calls generally agreed that defining the phrase 
``subject to regulation'' would, compared to our proposed approach, 
better facilitate state incorporation of the limitations in the final 
rule in states with regulations that mirror the existing federal rules, 
or in states whose rules are otherwise sufficiently open-ended to 
incorporate the limitations in the final rule by interpretation. 
Participants from each agency also indicated that their rules contain 
the term ``subject to regulation'' and that term has not been 
previously interpreted in ways that would preclude application of the 
meaning assigned to the term by EPA. We therefore concluded it is 
likely the state rules are sufficiently open-ended to apply EPA's 
approach by interpretation (although some states indicated they may 
elect to pursue rulemaking in addition to or instead of 
interpretation). Accordingly, we selected the ``subject to regulation'' 
regulatory approach as the mechanism for implementing the final rule.

[[Page 31582]]

3. Other Mechanisms
    As just described, we selected the ``subject to regulation'' 
mechanism because it most readily accommodated the needs of states to 
expeditiously revise--through interpretation or otherwise--their state 
rules. Even so, it is important to recognize that this mechanism has 
the same substantive effect as the mechanism we considered in the 
proposed rule, which was revising numerical thresholds in the 
definitions of major stationary source and major modification. Most 
importantly, although we are codifying the ``subject to regulation'' 
mechanism, that approach is driven by the needs of the states, and our 
action in this rulemaking should be interpreted to rely on any of 
several legal mechanisms to accomplish this result. Thus, our action in 
this rule should be understood as revising the meaning of several terms 
in these definitions, including: (1) The numerical thresholds, as we 
proposed; (2) the term, ``any source,'' which some commenters 
identified as the most relevant term for purposes of our proposal; (3) 
the term, ``any air pollutant; or (4) the term, ``subject to 
regulation.'' The specific choice of which of these constitutes the 
nominal mechanism does not have a substantive legal effect because each 
mechanism involves one or another of the components of the terms 
``major stationary source''--which embodies the statutory term, ``major 
emitting facility''--and ``major modification,'' which embodies the 
statutory term, ``modification,'' and it is those statutory and 
regulatory terms that we are defining to exclude the indicated GHG-
emitting sources.\54\
---------------------------------------------------------------------------

    \54\ We also think that this approach better clarifies our long 
standing practice of interpreting open-ended SIP regulations to 
automatically adjust for changes in the regulatory status of an air 
pollutant, because it appropriately assures that the Tailoring Rule 
applies to both the definition of ``major stationary source'' and 
``regulated NSR pollutant.''
---------------------------------------------------------------------------

4. Codification of Interpretive Memo
    As noted previously, we recently affirmed and refined our 
interpretation of the term ``subject to regulation'' as it applies 
broadly to the PSD program through a formal notice and comment process. 
``Interpretation of Regulations that Determine Pollutants Covered by 
Clean Air Act Permitting Programs,'' 75 FR 17004. In the proposal 
associated with that action, we requested comment on whether we should 
codify our interpretation in the regulatory text. 74 FR 51535, 51547 
(October 7, 2009). We elected not to codify our interpretation in the 
final action on reconsideration of the Interpretive Memo because we 
concluded such an action was not necessary and that it was important to 
apply the refined interpretation immediately. 75 FR 17015. However, in 
the RTC document for that action, we indicated that we had not ruled 
out the option of codifying our interpretation at a later time. Since 
we are otherwise adopting a definition of ``subject to regulation'' in 
this rule as the mechanism for implementing the phase-in, it makes 
sense in this final rule to codify the interpretation reflected in the 
Interpretive Memo and the final action on reconsideration at the same 
time to bring clarity to our rules. Specifically, the definitions of 
the term ``subject to regulation'' contain a paragraph that reflects 
our existing interpretation of that term (i.e., prior to adopting the 
provisions that implement the phase-in). Codification of the 
Interpretive Memo in this action makes sense to ensure the regulations 
reflect a complete picture of the meaning of ``subject to regulation'' 
applied by EPA. We also are moving existing exceptions (e.g., section 
112 HAPs) to a new paragraph within the definition of ``subject to 
regulation.'' This minor reorganization of these regulations is not 
intended to effect any change in how they are to be implemented, but 
merely simplifies and clarifies the regulations by clearly delineating 
different terms and concepts.
    This codification of this interpretation of ``subject to 
regulation'' from the reconsideration for the Interpretive Memo is not 
necessary to assure the effectiveness of the interpretation, and it 
does not disturb states' existing authority to adopt the definition 
through interpretation of their existing rules. Codifying our existing 
interpretation in this action will ensure that parties reading the 
regulations have a full understanding of how EPA applies the PSD 
program requirements. Since the interpretation described in the 
Interpretive Memo and the April 2, 2010 final action are otherwise 
applicable at this time, the particular time sensitivity discussed in 
the latter action is not the same for this final action tailoring the 
PSD requirements.
5. Delaying Limited Approvals and Request for Submission of Information 
From States Implementing a SIP-Approved PSD Program
    Because we now anticipate that many states will be able to 
implement our tailoring approach through interpretation of the term 
``subject to regulation,'' and without the need to revise their SIPs, 
we are delaying further action on our proposal to limit our approval of 
SIPs until we better understand how permitting authorities will, in 
fact, implement our tailoring approach. For this purpose, we ask each 
state to submit a letter to the appropriate EPA Regional Administrator 
no later than August 2, 2010. In that letter, the state should explain 
whether it will apply EPA's meaning of the term ``subject to 
regulation'' and if so, whether the state intends to incorporate that 
meaning of the term through interpretation, and without undertaking a 
regulatory or legislative process. If a state must undertake a 
regulatory or legislative process, then the letter should provide an 
estimate of the time needed to adopt the final rules. If a state 
chooses not to adopt EPA's meaning by interpretation, the letter should 
address whether the state has alternative authority to implement either 
our tailoring approach or some other approach that is at least as 
stringent, whether the state intends to use that authority. If the 
state does not intend to interpret or revise its SIP to adopt the 
tailoring approach or such other approach, then the letter should 
address the expected shortfalls in personnel and funding that will 
arise if the state attempts to carry out PSD permitting for GHG sources 
under the existing SIP and interpretation.
    For any state that is unable or unwilling to adopt the tailoring 
approach by January 2, 2011, and that otherwise is unable to 
demonstrate adequate personnel and funding, we will move forward with 
finalizing our proposal to limit our approval of the existing SIP. 
Although we received comments questioning our authority to limit 
approval as proposed, using our general rulemaking and CAA section 
110(k)(6) authorities, we are not responding to those comments at this 
time. We will address these comments in any final action we take to 
implement a limited approval.
    In our proposed rule, we also noted that a handful of EPA-approved 
SIPs fail to include provisions that would apply PSD to GHG sources at 
the appropriate time. This is generally because these SIPs specifically 
list the pollutants subject to the SIP PSD program requirements, and do 
not include GHGs in that list, rather than include a definition of NSR 
regulated pollutant that mirrors the federal rule, or because the state 
otherwise interprets its regulations to limit which pollutants the 
state may regulate. At proposal, we indicated that we intended to take 
separate action to identify these SIPs, and to take regulatory action 
to correct this SIP deficiency.
    We ask any state or local permitting agency that does not believe 
its existing

[[Page 31583]]

SIP provides authority to issue PSD permits to GHG sources to notify 
the EPA Regional Administrator by letter, and to do so no later than 
August 2, 2010. This letter should indicate whether the state intends 
to undertake rulemaking to revise its rules to apply PSD to the GHG 
sources that will be covered under the applicability thresholds in this 
rulemaking, or alternatively, whether the state believes it has 
adequate authority through other means to issue federally-enforceable 
PSD permits to GHG sources consistent with this final rule. For any 
state that lacks the ability to issue PSD permits for GHG sources 
consistent with this final rule, we intend to undertake a separate 
action to issue a SIP call, under CAA section 110(k)(5). As 
appropriate, we may also impose a FIP through 40 CFR 52.21 to ensure 
that GHG sources will be permitted consistent with this final rule.
6. Title V Programs
    Our final action also differs from the proposal in the specific 
regulatory mechanism by which we tailor the definition of ``major 
source'' for title V permit programs, but is a logical outgrowth of our 
proposed rule. EPA proposed to implement tailoring for GHGs under title 
V by excluding sources of GHGs from the general definition of ``major 
source'' under 40 CFR 70.2 and 71.2, and adding a separate definition 
of ``major source'' with tailored thresholds for sources of GHGs. In 
response to comments, particularly from states concerned with 
implementation of the proposed approach under state law, EPA is 
adopting an approach in the final rule that (1) amends the definition 
of ``major source'' by codifying EPA's longstanding interpretation that 
applicability for a ``major stationary source'' under CAA sections 
501(2)(B) and 302(j) and 40 CFR 70.2 and 71.2 is triggered by sources 
of pollutants ``subject to regulation,'' and (2) adds a definition of 
``subject to regulation.'' Further, we are delaying our action to move 
forward with limiting our previous approval of existing state part 70 
programs.
    We are finalizing this alternative approach to address concerns 
similar to those we received with respect to state implementation of 
SIP-approved PSD programs. Specifically, we received comments that the 
mechanism we proposed would not address the significant administrative 
and programmatic considerations associated with permitting GHGs under 
title V, because the 100 tpy threshold would continue to apply as a 
matter of state law. Commenters stated that states would need to 
undertake a regulatory and/or legislative process to change the 
threshold in their state laws which they could not complete before the 
laws would otherwise require issuance of operating permits to GHG 
sources.
    After considering the commenters' concerns, we are finalizing an 
approach designed to address the state law concerns for states. As a 
result, it is unnecessary to move forward at this time with our 
proposed approach to limit approval of existing part 70 programs in 
many states.
    EPA's approach involves the interrelationship of terms within the 
part 70 definition of ``major source'' in title V and EPA's 
implementing regulations, and EPA's historical practice of interpreting 
the term ``any air pollutant'' in the ``major stationary source'' 
component of that definition. EPA believes the approach in the final 
rule will allow many states to adopt the final rule through 
interpretation of existing state laws. Specifically, paragraph (3) 
within the definition of ``major source'' found in 40 CFR 70.2 and 71.2 
defines a major source as ``a major stationary source of air 
pollutants, as defined in section 302 of the Act, that directly emits 
or has the potential to emit, 100 tpy or more of any air pollutant * * 
*.'' The EPA previously articulated the Agency's interpretation that 
the regulatory and statutory definitions of ``major source'' under 
title V, including the term ``any air pollutant,'' applies to 
pollutants ``subject to regulation.'' Memorandum. EPA recently re-
affirmed this position in EPA's Reconsideration of Interpretation of 
Regulations that Determine Pollutants Covered by Clean Air Act 
Permitting Programs. 75 FR 17704, 17022-23 (April 2, 2010) 
(Interpretive Memo reconsideration final action).
    Accordingly, under our long-established policy, states historically 
have interpreted the term ``any air pollutant'' under the title V 
definition of ``major source'' to mean any pollutant ``subject to 
regulation'' under the Act. Thus, as a matter of established 
interpretation, EPA and states effectively read the definition of 
``major source'' under title V to include a source ``* * * that 
directly emits or has the potential to emit, 100 tpy or more of any air 
pollutant subject to regulation under the Act'' (emphasis added). By 
amending our regulations to expressly include and define ``subject to 
regulation'' to implement our tailoring for GHGs under title V, we are 
seeking to enable states to adopt and implement this approach through a 
continued interpretation of the phrase ``any air pollutant'' within the 
``major source'' definition, without the need for changes to state 
regulations or statutes. States may be able to track EPA's approach to 
tailoring for GHG permitting without regulatory or statutory changes, 
for example, where a state has taken the position, or determines now, 
that the state's interpretation of ``major source,'' ``subject to 
regulation'' and/or ``any air pollutant'' is intended to track EPA's 
interpretation.
    Thus, EPA is adding the phrase ``subject to regulation'' to the 
definition of ``major source'' under 40 CFR 70.2 and 71.2. EPA is also 
adding to these regulations a definition of ``subject to regulation.'' 
Under the part 70 and part 71 regulatory changes adopted, the term 
``subject to regulation,'' for purposes of the definition of ``major 
source,'' has two components. The first component codifies the general 
approach EPA recently articulated in the ``Reconsideration of 
Interpretation of Regulations That Determine Pollutants Covered by 
Clean Air Act Permitting.'' 75 FR 17704. Under this first component, a 
pollutant ``subject to regulation'' is defined to mean a pollutant 
subject to either a provision in the CAA or regulation adopted by EPA 
under the CAA that requires actual control of emissions of that 
pollutant and that has taken effect under the CAA. See id. at 17022-23; 
Wegman Memorandum at 4-5. To address tailoring for GHGs, EPA includes a 
second component of the definition of ``subject to regulation,'' 
specifying that GHGs are not subject to regulation for purposes of 
defining a major source, unless as of July 1, 2011, the emissions of 
GHGs are from a source emitting or having the potential to emit 100,000 
tpy of GHGs on a CO2e basis.
    As explained previously, we find no substantive difference between 
the alternative mechanisms for implementing GHG tailoring in the final 
rule. Whether we add GHG thresholds directly to the definition of 
``major source'' (as we proposed), or alternatively, expressly add and 
define the term ``subject to regulation,'' both approaches revise the 
definition of ``major source'' to implement the Tailoring Rule. 
Accordingly, we adopt the later approach to facilitate state 
implementation of the final rule through an interpretation of existing 
state part 70 programs. Similar to our explanation previously for PSD, 
while we adopt the ``subject to regulation'' mechanism for implementing 
GHG tailoring in the final rule, the thrust of our rulemaking is to 
apply the title V definition of ``major source''--which includes the 
statutory term, ``major stationary source''--to GHG sources by treating 
only GHG sources

[[Page 31584]]

that emit at levels above the Steps 1 and 2 thresholds as meeting that 
definition. Further, we believe that our action may reasonably be 
construed to revise any of several terms in that definition, including 
(1) The numerical thresholds, as we proposed; (2) the term ``any air 
pollutant,'' (3) the term ``a major stationary source,'' (4) the term 
``subject to regulation,'' which, as discussed previously, our 
regulations graft into the definition of ``major source.'' We believe 
that the specific choice of which term constitutes the legal mechanism 
does not have a substantive legal effect because each mechanism 
involves one of the components of the regulatory term ``major 
source''--which embodies the meaning of the statutory term, ``major 
source''--and it is that term that we are interpreting to tailor title 
V applicability for GHG-emitting sources. Thus, while the ``subject to 
regulation'' mechanism facilitates expeditious implementation by 
states, and we are therefore revising our regulations to adopt this 
approach, we otherwise find no substantive difference between the 
alternative mechanisms we may use to finalize the proposed rule.
    Further, similar to our revised approach for addressing state SIP-
approved PSD programs, we are delaying our action to limit our previous 
approvals for state part 70 operating permit programs. In our proposed 
rule, we explained our concern that states lack adequate personnel and 
resources to carry out part 70 operating permit programs for GHG 
sources that emit or have the potential to emit 100 tpy of GHGs. 
Accordingly, we proposed to use our general rulemaking authority under 
section 301(a) of the CAA and APA section 553 to limit our prior 
approval of state operating permit programs. This limited approval 
action would have had the effect of applying CAA permitting 
requirements only to sources that exceed the permitting thresholds 
established in this rule for the phase-in, because only those sources 
would be covered by the federally approved part 70 programs. 74 FR 
55345. As discussed previously, we are proceeding with a slightly 
revised approach to address concerns similar to those raised with our 
proposed approach for addressing SIP-approved PSD permit programs. 
Because we now recognize that, like the PSD program, many states will 
be able to implement the final rules without the need to revise their 
existing part 70 operating permit programs, we are delaying further 
action on our proposal to limit approval of existing part 70 programs 
until we better understand how permitting authorities will implement 
our final rule.
    In addition to the information requested previously on SIP-approved 
PSD permit programs, we ask each state to submit a letter to the 
appropriate EPA Regional Administrator no later than August 2, 2010 
detailing the state's plan for permitting of GHG sources under the 
state's part 70 program. In that letter, states should explain whether 
they will adopt an interpretation of the terms ``major source'' or any 
of its component terms--``a major stationary source,'' ``any air 
pollutant,'' or ``subject to regulation,'' or the numerical 
thresholds--that is consistent with EPA's regulatory interpretation of 
these terms as codified at 40 CFR 70.2, and whether the state intends 
to adopt the interpretation without undertaking a regulatory or 
legislative process. This approach may be available, for example, where 
a state has taken the position, or determines now, that the state's 
interpretation of these terms is intended to track EPA's 
interpretation, resulting in title V permitting for sources of GHGs as 
described in EPA's regulations adopted in this rule. If a state must 
revise its title V regulations or statutes to implement the 
interpretation, we ask that it provides an estimate of the time to 
adopt final rules or statutes in its letter to the Regional 
Administrator. If a state chooses not to (or cannot) adopt our 
interpretation, the letter should address whether the state has 
alternative authority to implement the GHG tailoring approach or some 
other approach that is at least as stringent, but which also addresses 
the expected shortfalls in personnel and funding and delays in 
permitting that would exist if the state carried out permitting under 
part 70 program thresholds lower than those adopted by EPA in this 
final rule. For any state that is unable or unwilling to adopt the 
permitting thresholds in the final rules, and otherwise is unable to 
demonstrate adequate personnel and funding, EPA will move forward with 
finalizing a narrowed limited approval of the state's existing part 70 
program. If we do so, then we will respond in that action to comments 
on our proposal.
    In our proposed rule, we also noted that a handful of part 70 
operating permit programs may include provisions that would not require 
operating permits for any source of GHG emissions because, for example, 
the programs may apply only to pollutants specifically identified in 
the program provisions, and the provisions do not specifically identify 
GHGs. In these cases, states may be unable to interpret their 
regulatory provisions to interpret the term ``any pollutant'' to 
include pollutants ``subject to regulation.'' We indicated that we 
intended to take separate action to identify these programs, and to 
take regulatory action to correct this deficiency. Accordingly, we ask 
any state or local permitting agency that does not believe its existing 
part 70 regulations convey authority to issue title V permits to GHG 
sources consistent with the final rule to notify the EPA Regional 
Administrator by letter as to whether the state intends to undertake 
rulemaking to revise its rules consistent with these applicability 
thresholds. This notification should be done no later than the 
previously described letter regarding adoption of the Tailoring Rule, 
and could be combined with similar notifications we request regarding 
the PSD program. We intend to undertake a separate regulatory action to 
address part 70 programs that lack the ability to issue operating 
permits for GHG sources consistent with the final rule. We also intend 
to use our federal title V authority to ensure that GHG sources will be 
permitted consistent with the final rule.

D. Rationale for Treatment of GHGs for Title V Permit Fees

    The title V program requires permitting authorities to collect fees 
``sufficient to cover all reasonable (direct and indirect) costs 
required to develop and administer [title V] programs.'' \55\ To meet 
this requirement, permitting authorities either collect an amount not 
less than a minimum amount specified in our rules (known as the 
``presumptive minimum''), or may collect a different amount (usually 
less than the presumptive minimum). We did not propose to change the 
title V fee regulations in our notice of proposed rulemaking for this 
action, nor did we propose to require new fee demonstrations when title 
V programs begin to address GHGs. However, we did recommend that each 
state, local or tribal program review its resource needs for GHGs and 
determine if the existing fee approaches will be adequate. If those 
approaches will not be adequate, we suggested that states should be 
proactive in raising fees to cover the direct and indirect costs of the 
program or develop other alternative approaches to meet the shortfall. 
We are retaining this proposed approach, and are not changing our fee 
regulations as part of this final action establishing Steps 1 and 2 of 
the phase-in. However, we are offering some additional clarification of 
our fee

[[Page 31585]]

approach during these steps in response to comments we received on this 
issue. Additional discussion of fees will be included as part of 
subsequent actions establishing Step 3 and beyond.
---------------------------------------------------------------------------

    \55\ The fee provisions are set forth in CAA section 502(b)(3) 
and in our regulations at 40 CFR 70.9 and 71.9.
---------------------------------------------------------------------------

    A few state commenters suggested that EPA should modify part 70 to 
adopt a presumptive minimum fee (or range for such fee) for GHGs, some 
of whom suggested that current fees may be insufficient to cover the 
costs of their program. It is important to clarify that altering the 
presumptive minimum would only affect those states that chose to charge 
the presumptive minimum fee to sources. Most states--including some of 
the commenters asking EPA to raise the presumptive minimum--collect a 
lower amount that is not based on the presumptive minimum, but rather, 
relies on another fee schedule that it developed and EPA approved as 
adequate to cover costs. Therefore, it is useful to first discuss our 
approach to programs that have fee schedules resulting in a different 
amount before discussing our approach to the presumptive minimum.
    Because of the added GHG title V permitting workload described 
elsewhere in this notice, any state that will not, under its current 
fee structure, collect fees adequate to fund the permitting of GHG 
sources must alter its fee structure in order to meet the requirement 
that fees be adequate to cover costs. Changes may not be required in 
every instance; circumstances will vary from state to state. For 
example, a state may see increases in revenue from newly-covered 
sources (based on emissions of pollutants already subject to fees) that 
fully cover the state's increased costs, or a state may be over-
collecting fees now and could use the surplus to offset the increased 
costs. Nonetheless, in many cases, we think states will need to adjust 
their fee structures to cover the costs of GHG permitting in order to 
meet the requirements of the Act and our regulations.
    For this reason, although we are not calling for new fee 
demonstrations at this time, we plan to closely monitor state title V 
programs during the first two steps of the Tailoring Rule to ensure 
that the added workload from incorporating GHGs into the permit program 
does not result in fee shortfalls that imperil operating permit program 
implementation and enforcement, whatever the basis of the states' fee 
schedule. As described in the proposal, such fee oversight by EPA may 
involve fee audits under the authority of 40 CFR 70.9(b)(5) to ensure 
that adequate fees are collected in the aggregate to cover program 
costs, with emphasis on whether the additional GHG workload is being 
appropriately funded. Also, EPA retains the ability to initiate a 
program revision under 40 CFR 70.4(i)(3) or issue a notice of 
deficiency under the process described in 40 CFR 70.10(b) to address 
fee adequacy issues, which may be uncovered during a fee audit. By 
relying on existing oversight measures, we are ensuring that the fee 
requirements are met with a minimum of disruption to existing programs 
at a time when they will already be facing significant challenges 
related to GHG permitting.
    Turning to the minority of states that do use the presumptive 
minimum, we did not propose to change the presumptive minimum 
calculation method to account for GHGs. Currently under the statute and 
our rules, the presumptive minimum is based on a subset of air 
pollutants (i.e., VOCs, NAAQS pollutants except for CO, and pollutants 
regulated under the NSPS and MACT standards promulgated under sections 
111 and 112 of the Act, respectively) that does not include GHGs. The 
amount is specified on a per-ton basis and changes with inflation (it 
is currently set at $43.75/ton), but does not apply to emissions over 
4,000 tpy of a given pollutant from a given source. We noted several 
difficulties in applying the presumptive minimum to GHG, including the 
large amounts of GHG emissions relative to other pollutants and the 
need for better data to establish a GHG-specific amount. Noting that 
GHGs are not currently included in the Act's list of pollutants to 
which the presumptive fee applies, we also invited comment on whether 
we should raise the fee for listed pollutants to cover the added cost 
of GHG permitting.
    A few state commenters asked us to set a presumptive fee for GHGs, 
which we take to mean we should add GHGs to the list of pollutants to 
which a presumptive fee would apply. However, many commenters noted 
that the current presumptive minimum fee is unreasonable for GHGs 
because GHGs are emitted in greater quantities than the pollutants 
currently subject to presumptive fees, which would result in excessive 
fees. These commenters believe that EPA needs to limit the fees that 
states can charge for GHGs. Moreover, one commenter read the statute to 
prohibit us from listing GHGs in the presumptive fee calculation in the 
first place. Several commenters disagreed with the idea of increasing 
the presumptive fee for other pollutants to cover the cost of 
regulating GHGs, some of whom believed that this would unfairly punish 
existing sources or would bring in no new revenue from sources 
triggering title V for the first time.
    After considering these comments, we remain disinclined, as we were 
at proposal, to change the presumptive fee calculation regulations. 
While there is some support for changing the regulations, the comments 
confirm the challenges in doing so. While we expressly rejected 
charging the full presumptive cost per ton amount for GHG, we also did 
not propose language to establish a different amount just for GHG, to 
establish whether a different tpy cap would apply, or to assess whether 
GHGs could even be added to the list. Thus, many commenters were very 
concerned about whether the full $43.75 or the 4000 tpy cap would apply 
to GHG if we listed it as a regulated pollutant for fee purposes. 
Furthermore, we noted at proposal, and commenters did not disagree, 
that more data would be needed to establish the appropriate basis for 
the GHG presumptive minimum. We are not taking a final position in this 
notice on whether the statute is amenable to including GHG in the 
presumptive fee calculation currently, but these comments illustrate 
some of the difficulties of such an approach.
    At the same time, we are not increasing the presumptive minimum for 
other pollutants already included in the fee calculation. We disagree 
with the commenter who said such an approach would bring in no new 
revenue from newly-subject sources. Many of the newly-subject sources 
would emit already-included pollutants. If new revenue from these 
pollutants were insufficient, and because the Act does not specify how 
the shortfall must be addressed, the amount of any projected shortfall 
could be made up by increasing fees on these pollutants. In fact, the 
projected shortfall could be addressed without having to inventory GHG 
emissions from title V sources, since the emissions of already-included 
pollutants are well-known. We also note that, although some commenters 
are concerned that failing to assess fees for GHGs directly would be 
unfair, the statute does not provide that the presumptive fee be 
proportional to each type of pollutant or be proportionally allocated 
to all sources. Rather, the presumptive fee approach provides a 
backstop for states that do not wish to adopt a more tailored approach. 
Nonetheless, we have decided not to increase the presumptive fee 
amounts for other pollutants because we lack information about the 
extent to which shortfalls exist due to GHG permitting, and which mix 
of sources and fees is appropriate for addressing any such

[[Page 31586]]

shortfall in a state. This decision also provides greater flexibility 
to states and minimizes disruption to existing programs.
    We note that, contrary to the statements of some commenters, the 
CAA provisions allowing for a presumptive fee calculation do not 
override the basic requirement that fees be adequate to cover costs. As 
noted previously, we expect states to see a revenue increase from 
emissions of listed pollutants at newly-major sources for GHGs, and it 
is also possible that the presumptive minimum may currently be 
resulting in over-collection of fees in a state. Thus, a state 
continuing to use the presumptive minimum may not have a shortfall. 
However, if states using the presumptive minimum approach do have a 
revenue shortfall due to GHG permitting, the statute requires the 
shortfall to be addressed. The EPA has had, and will continue to have, 
the ability to require states that use the presumptive minimum to 
increase their fees if the presumptive minimum results in a revenue 
shortfall that imperils operating permit program implementation and 
enforcement. Thus, although we are not changing the presumptive minimum 
in our regulations, we plan to follow the same oversight approach for 
states using the presumptive minimum as for those collecting less based 
on a resource demonstration. As described previously, this approach may 
involve fee audits with emphasis on whether the additional GHG workload 
is being appropriately funded, and other appropriate follow-up.
    Consistent with our proposal, EPA is not modifying its own part 71 
fee structure (which closely mirrors the presumptive minimum) in order 
to charge an additional fee for GHGs. EPA must revise its fee schedule 
if the schedule does not reflect the costs of program administration. 
We have not determined that the existing fee structure will be 
inadequate to fund the part 71 programs costs during the first two 
phases of permitting GHGs as set forth in this action. However, we are 
required to review the fee schedule every 2 years, and make changes to 
the fee schedule as necessary to reflect permit program costs. 40 CFR 
71.9(n)(2). Thus we will continue to examine the increases in part 71 
burden due to GHG permitting, the current revenue collection, and the 
increases in revenue from newly-subject part 71 sources, and will 
adjust the part 71 fee approach accordingly.
    Finally, several state and industry commenters asked EPA to provide 
guidance and recommendations for an appropriate GHG fee structure. We 
note that title V grants permitting authorities considerable discretion 
in charging fees to sources for title V purposes and does not require 
or prohibit fees specifically for GHGs, provided the states collect 
fees in the aggregate that are sufficient to cover all the direct and 
indirect program costs. In responding to requests for guidance, we do 
not wish to limit state discretion. For example, some commenters 
suggest that EPA prohibit emissions-based fees for GHGs or cap the 
amount that can be collected, while others suggest we provide a range 
of acceptable fees. We are concerned that, given the wide variety of 
fee approaches that states now take, providing specific guidance may be 
disruptive, rather than helpful, to states.
    On the other hand, we recognize that it will initially be difficult 
for states to establish an appropriate emissions fee for GHGs. As noted 
previously, there are currently limited data available for establishing 
such a fee, and, due to the large quantities of GHG emissions, such a 
fee may only amount to a few cents per ton. At the same time, as noted 
in the proposal, a number similar to that used for other pollutants 
(e.g., the presumptive minimum of approximately $45/ton of GHG) would 
be inappropriate because it would likely result in huge over-
collection. Because of this challenge, we note that 40 CFR 70.9(b)(3) 
allows the state to charge fees to individual sources on any basis 
(e.g., emission fee, application fee, service-based fees, or others, in 
any combination). While most states use emissions-based fees, there is 
merit to considering all the available fee bases to address increased 
GHG workload, including approaches that do not require a GHG emissions 
inventory for fee purposes. For example, where it is possible to 
estimate a revenue shortfall as a percentage of fee revenue, it may be 
appropriate to simply attach a percentage-based surcharge to each 
source's fee to match that shortfall. Similarly, where the shortfall 
could be estimated as a total dollar amount, a flat surcharge could be 
added to each source's fee to address the shortfall.
    These suggestions should not be read to indicate that EPA prefers 
any particular approach, or that EPA rejects a cost per ton approach. 
Rather, they illustrate that it is possible to address a revenue 
shortfall without establishing a GHG per-ton fee. While the EPA is 
declining to recommend specific approaches in this preamble, we are 
committed to assisting states in implementing the fee requirements for 
GHG. Therefore, we will work with any state that requests assistance 
from EPA in developing a workable fee approach.

E. Other Actions and Issues

1. Permit Streamlining Techniques
    In our proposal, we stated that while we were phasing-in permitting 
requirements, we would make a concerted effort to assess and implement 
streamlining options, tools, and guidance to reduce the costs to 
sources and permitting authorities of GHG permitting. We recognized 
that the development and implementation of these techniques should be 
an integral part of our strategy during the phase-in period, and we 
stated that we would undertake as many streamlining actions as 
possible, as quickly as possible. We discussed several streamlining 
techniques in particular, including: (1) Defining PTE for various 
source categories, (2) establishing emission limits for various source 
categories that constitute presumptive BACT, (3) establishing 
procedures for use of general permits and permits-by-rule, (4) 
establishing procedures for electronic permitting, and (5) establishing 
``lean'' techniques for permit process improvements. The first three of 
these approaches have the potential to have the greatest impact in 
reducing the numbers of sources subject to PSD or title V (the 
definition of PTE) or of reducing permitting costs (presumptive BACT 
and general permits or permits-by-rule).
    In our proposal, we also described the timing for development and 
implementation of these streamlining techniques. We explained that each 
of the first three techniques would generally take 3-4 years to develop 
and implement, and therefore would be of limited use in the near-term. 
This time frame is necessary because EPA will first need to collect and 
analyze small source data that we do not currently have--because these 
are sources that EPA has not traditionally regulated--in order to 
assess which of these techniques are viable or effective for such 
sources. In general, EPA will then need to conduct notice-and-comment 
rulemaking to establish the approaches, and that rulemaking will need 
to address various legal and policy aspects of these approaches. After 
that, the permitting authorities will need some time to adopt the 
streamlining techniques as part of their permitting programs.
    We received several comments on streamlining techniques. In 
general, the comments indicate widespread support for our pursuit of 
streamlining approaches, but some commenters were

[[Page 31587]]

concerned that one or more of EPA's identified streamlining options 
were complex, vague, ineffective, and questionable legally. Noting our 
proposal to phase in permitting, in part to allow more time to develop 
streamlining options for smaller sources, some commenters suggested 
that we should delay permitting for larger sources for the same 
reasons. We disagree. Such a delay is not justified under our legal 
basis for this rule. While implementation of Steps 1 and 2--which will 
cover larger sources--will pose implementation challenges, and some of 
the streamlining tools could assist with meeting these challenges, we 
have assessed the burdens associated with GHG permitting and have 
established a phase-in schedule that represents a manageable workload, 
even in the absence of streamlining techniques. On the other hand, we 
do agree with these commenters that, absent streamlining, applying PSD 
and title V requirements to the much larger number of small sources 
would lead to absurd results and administrative impossibility. The 
sources for whom the phase-in delays applicability are precisely the 
sources that have the greatest need for streamlining measures, and thus 
the greatest need for a deferral while we develop and implement 
streamlining options.
    In addition, commenters generally echoed many of our concerns about 
why it will take time to put these measures in place, and no commenter 
presented any information to suggest that our 3-4 year estimate for the 
PTE, presumptive BACT, and general permit measures was invalid.
    For these three techniques, we continue to believe that as we noted 
at proposal, we will require collection of significant category-
specific data for source and emission unit types that have heretofore 
generally not been regulated by the CAA (e.g., furnaces, water heaters, 
etc.), which could take up to 1 year. Moreover, commenters had 
differences of opinion as to whether and how we should move forward on 
these approaches, and some raised policy and legal issues that we would 
likely want to explore through a notice and comment process in order to 
assess which of these measures are viable to pursue further.\56\ Even 
if a rulemaking were done expeditiously, it would likely require 1 
year. Finally, unlike lean and electronic permitting, these approaches, 
once finalized by EPA, will likely require additional time of up to 2 
years for states to adopt. Thus, it is clear that these approaches will 
not be in place in time to ease any burden prior to the planned 
rulemaking for Step 3.
---------------------------------------------------------------------------

    \56\ We do not attempt to address or resolve the various 
opinions about what legal or policy direction we must take regarding 
any of these streamlining options. The proper forum for doing that 
will be in the action(s) where we apply a given option. Nonetheless, 
our RTC document provides additional detail about the options we 
described and what commenters said about our proposed options. In 
addition, the comments themselves can be accessed in the docket for 
this action.
---------------------------------------------------------------------------

    Some commenters did observe that the fourth and fifth techniques, 
lean and electronic permitting, could, at least theoretically, become 
available sooner. However, these commenters also noted that successful 
design and implementation of these approaches will require 
implementation experience with GHG permitting that is not now 
available. We expect that for the lean and electronic permitting 
techniques, at least 1 year of implementation experience (of the type 
that we will gain starting in 2011) would be required, plus at least an 
additional year to extrapolate that experience to small sources and put 
these approaches into effect for small source permitting. Thus, we do 
not think the lean and electronic permitting would be in place before 
the beginning of 2013. Moreover, a handful of commenters questioned 
whether lean and/or electronic permitting would alleviate significant 
burden. Thus we are not able, at this time, to presume that these 
approaches will ease any burden prior to the planned rulemaking for 
Step 3.
    It is also important to note that, as a practical matter, while 
these efforts to streamline the program for small sources are underway, 
EPA and states will also be devoting a significant amount of their 
permitting resources and expertise to implementing the PSD and title V 
programs for the GHG-emitting sources covered under Steps 1 and 2. We 
have established these steps in a manner that they will be feasible for 
EPA and state/local/tribal authorities, but even so, they will not only 
consume current permitting authority resources, but they will also 
require substantial additional resources. As a result, the efforts to 
develop and implement streamlining techniques will have to compete with 
the work necessary to administer existing programs. For example, during 
the remainder of 2010, as described elsewhere in this notice, EPA 
permitting program resources will, in addition to continuing to 
administer programs for non-GHG pollutants, be used to conduct at least 
the following GHG-related activities in addition to streamlining: (1) 
Develop BACT and other information and guidance for implementing 
programs for sources covered by Step 1, followed by additional guidance 
and information for sources covered by Step 2; (2) review and act on 
information we receive regarding state adoption of GHG permitting 
requirements, which may entail narrowing of previous SIP approvals or 
processing of other programmatic revisions; and (3) propose and 
finalize measures to address programs with deficiencies in GHG 
coverage. As the beginning of Step 2 nears, we will also begin to 
receive and process the first applications for permits that will 
incorporate GHG requirements (i.e., those that will be issued after 
January 2, 2011). States seeking to implement streamlining approaches 
will face similar competition for permitting resources.
    These time frames and resource considerations for streamlining 
confirm the approach to phase-in that we are taking in this rule. First 
and foremost, they make clear that it will not be possible to have 
streamlining measures in place in time for either Step 1 or Step 2. 
Therefore our selection of threshold for those steps is not built on 
assumptions that streamlining will remove some or all of the burden 
during those steps.
    Second, they make clear that, while no significant streamlining can 
be in place by the time we must begin to develop the Step 3 rule (i.e., 
latter half of 2011, to promulgate by July 2012, effective July 2013), 
it is likely that by that time EPA and states will have had an 
opportunity to gain implementation experience that could serve as the 
basis for beginning to implement streamlining techniques that do not 
require rulemaking or state adoption (e.g., lean and electronic 
permitting). It is also likely that we will have had an opportunity to 
gather technical information--which we have already begun to gather--
for certain source and emissions unit categories that would be 
necessary to support proposal of PTE or presumptive BACT approaches for 
those categories. We expect that the Step 3 rulemaking will provide an 
opportunity for us to use that experience and data to begin to propose 
streamlining approaches that need notice and comment rulemaking. We can 
also begin to take into account any burden reductions from possible 
early streamlining efforts--that is, through lean and electronic 
permitting--in the establishment of Step 3.
    Third, it is clear that the potential availability of streamlining 
measures does not call into question our decision that in no event will 
we broaden PSD and title V applicability to cover GHG-emitting sources 
below the 50,000 tpy CO2e level prior to July 2016, as 
discussed elsewhere. EPA cannot now

[[Page 31588]]

predict the resources that will be required to implement PSD and title 
V programs for GHG-emitting sources once various streamlining 
techniques are ultimately completed. This is uncertain not only because 
we need data and implementation experience with GHG permitting during 
Steps 1, 2, and 3 that we can apply to estimates for small sources, but 
also because, as comments indicate, there is a broad range of legal and 
policy issues to consider in crafting the streamlining approaches we 
ultimately adopt. We have presented an initial assessment of options 
and obtained views of commenters both supporting and opposing them, and 
it is the result of these future actions, whose outcomes are uncertain 
at this time, that will ultimately determine the extent to which 
streamlining approaches will allow for the administration of PSD and 
title V programs for numerous small sources. Thus, while we are 
optimistic that we can craft workable, common-sense solutions, we 
nonetheless, believe it is important to preserve our small source 
exclusion until we have not only had time to put the streamlining 
approaches in place, but also have had time to assess the burdens that 
remain, before we bring in additional sources below the 50,000 tpy 
CO2e levels. We believe that the 6-year timeframe will 
require a sustained intensive effort by EPA and states to develop, 
adopt, and implement streamlining techniques, and will require EPA to 
then evaluate those techniques and complete a rulemaking concerning PSD 
and title V applicability to small-sources based on that evaluation. In 
this manner, the 6-year period will give us the necessary time to make 
the best decisions about the actions we should take beyond Step 3.
    While comments make clear that there are issues to be addressed, 
nothing in the comments has persuaded us that we should abandon our 
streamlining efforts. To the contrary, the strong support for these 
efforts shown by many commenters reinforces our intention, as stated at 
proposal, to move forward with these approaches as an integral part of 
our phase-in approach. Moreover, notwithstanding the competition for 
GHG permitting resources and expertise, we believe it is critical that 
we move forward expeditiously. As noted previously, we are already 
taking a first step by initiating permitting for larger sources, 
beginning January 2011, that will begin to provide valuable 
implementation experience. This experience can be useful in allowing 
states to begin implementing early streamlining measures, like lean and 
electronic permitting, which do not require EPA action. We have also 
already begun, and will continue, developing data necessary to support 
possible rulemakings addressing approaches such as PTE, presumptive 
BACT, and/or general permits. We expect to be able to use these data to 
support possible rulemakings on these topics, as appropriate, at about 
the same time as our Step 3 rulemaking. There may also be available 
streamlining options that were not described in our proposal that 
warrant further consideration. Because of the uncertainty surrounding 
such approaches, we are not committing to finalize rules on any 
particular approach, but we do plan to explore all streamlining options 
as expeditiously as possible, beginning immediately and proceeding 
throughout the phase-in period, and we encourage permitting authorities 
to do the same. We commit to consider a wide array of possible 
streamlining measures, and we commit to propose and take comment on, in 
the Step 3 rulemaking, a set of those measures that we determine are 
viable to pursue further.
2. Guidance for BACT Determinations
    The CAA requires that a PSD permit contain, among other things, 
emissions limits based on the BACT for each pollutant subject to 
regulation under the Act emitted from the source that triggers PSD. 42 
U.S.C. 7475(a)(4); 42 U.S.C. 7479(3). BACT is defined as follows:

    (3) The term ``best available control technology'' means an 
emission limitation based on the maximum degree of reduction of each 
pollutant subject to regulation under this Act emitted from or which 
results from any major emitting facility, which the permitting 
authority, on a case-by-case basis, taking into account energy, 
environmental, and economic impacts and other costs, determines is 
achievable for such facility through application of production 
processes and available methods, systems, and techniques, including 
fuel cleaning, clean fuels, or treatment or innovative fuel 
combustion techniques for control of each such pollutant. In no 
event shall application of ``best available control technology'' 
result in emissions of any pollutants which will exceed the 
emissions allowed by any applicable standard established pursuant to 
section 111 or 112 of this Act. Emissions from any source utilizing 
clean fuels, or any other means, to comply with this paragraph shall 
not be allowed to increase above levels that would have been 
required under this paragraph as it existed prior to enactment of 
the Clean Air Act Amendments of 1990.

42 U.S.C. 7479(3).

    Thus, the BACT process is designed to determine the most effective 
control strategies achievable in each instance, considering energy, 
environmental, and economic impacts. However, the case-by-case nature 
of BACT, together with the range of factors and technologies that must 
be considered, presents a challenge in determining BACT for newly 
regulated pollutants. When a new pollutant is regulated, the first 
permit applicants and permitting authorities that are faced with 
determining BACT for a new pollutant will likely need to invest more 
time and resources in gathering and analyzing information necessary to 
make an assessment of BACT under the statutory criteria. Once the PSD 
permitting program matures with respect to the new pollutant, 
successive BACT analyses will establish precedents that can inform 
subsequent BACT determinations. While the BACT provisions clearly 
contemplate that the permitting authority evaluate control strategies 
on a case-by-case basis, EPA recognizes the need to develop and share 
policy guidance and technical information for sources and permitting 
authorities as they begin to permit sources of newly regulated 
pollutants, such as GHGs. When applied in a practical manner, this 
additional EPA guidance and technical information should reduce time 
and resource needs when evaluating BACT for newly regulated pollutants.
    As described in the proposed Tailoring Rule, EPA intends to compile 
and make available technical and background information on GHG emission 
factors, control technologies and measures, and measurement and 
monitoring methodologies for key GHG source categories. We expressed 
our intent to work closely with stakeholders in developing this 
supporting information and to ensure this information is available in 
sufficient time to assist permitting agencies in their BACT 
determinations. The proposal took comment on what other types of 
support or assistance EPA can provide to initially help air pollution 
control agencies with the permitting of GHGs.
    Commenters on the proposed Tailoring Rule generally supported EPA 
providing technical information and policy guidance for sources of 
GHGs. Several commenters specifically requested guidance to clarify 
GHG-related issues, such as how to compute CO2e emissions, 
how to evaluate emissions of CO2 from biomass fuel, and 
whether an air quality analysis will be required for GHGs. 
Additionally, commenters requested that EPA issue ``white papers'' and 
other tools that would provide information on a range of control 
technologies and measures for major stationary source categories, such 
as power plants, cement kilns, glass

[[Page 31589]]

furnaces, and other sources. Many of these commenters further requested 
that EPA provide an opportunity for stakeholder input on the guidance, 
and a few commenters insisted that permitting for sources of GHGs 
should not begin prior to issuing final guidance.
    Consistent with our commitment at proposal to involve all 
stakeholders in our guidance development, EPA called upon the CAAAC in 
September 2009, to provide assistance and recommendations for what 
types of guidance and technical information would be helpful.\57\ 
Specifically, our charge to the CAAAC was ``* * * to discuss and 
identify the major issues and potential barriers to implementing the 
PSD Program under the CAA for greenhouse gases * * * [and] focus 
initially on the BACT requirement, including information and guidance 
that would be useful for EPA to provide concerning the technical, 
economic, and environmental performance characteristics of potential 
BACT options.'' This charge also requested the CAAAC to ``identify and 
discuss approaches to enable state and local permitting authorities to 
apply the BACT criteria in a consistent, practical and efficient 
manner.''
---------------------------------------------------------------------------

    \57\ The CAAAC is a senior-level policy committee established in 
1990 to advise the U.S. EPA on issues related to implementing the 
CAA Amendments of 1990. The committee is chartered under the Federal 
Advisory Committee Act and has been renewed every 2 years since its 
creation. The membership is approximately 40 members and experts 
representing state and local government, environmental and public 
interest groups, academic institutions, unions, trade associations, 
utilities, industry, and other experts. The CAAAC meets three times 
a year, normally in Washington, DC. It provides advice and counsel 
to EPA on a variety of important air quality policy issues. The 
committee has formed several subcommittees to provide more detailed 
discussion and advice on many technical issues.
---------------------------------------------------------------------------

    At its October 6, 2009 meeting, the CAAAC established a Climate 
Change Work Group, made up of 35 representatives from a variety of 
industries, state and local governments, and environmental and public 
health non-profit organizations, organized under CAAAC's Permits, New 
Source Review and Toxics Subcommittee. The Work Group initially focused 
its attention on the procedure for evaluating BACT and decided that the 
process and criteria for determining BACT for criteria pollutants 
represented a workable and acceptable framework for GHGs. The Work 
Group also recommended a second phase, in which the Work Group would 
consider member proposals regarding possible alternative or 
supplementary approaches to applying the PSD program to GHG sources.
    In February 2010, the CAAAC completed work on the first phase of 
its effort and sent EPA a list of recommendations that highlighted 
areas of the BACT determination process that are in need of technical 
and policy guidance. For more information, see the Interim Phase I 
Report on Issues related to BACT for GHGs, February 3, 2010 that is 
located in the public docket for this rulemaking and at http://www.epa.gov/air/caaac/climate/2010_02_InterimPhaseIReport.pdf. In 
response, we are working on a number of fronts to develop technical 
information, guidance, and training to assist states in permitting 
large stationary sources of GHGs, including identifying GHG control 
measures for different industries. EPA is currently working with states 
on technical information and data needs related to BACT determinations 
for GHGs. This includes developing the EPA Office of Research and 
Development GHG Mitigation Strategies Database, enhancing the RACT/
BACT/LAER Clearinghouse to include GHG-specific fields, and preparing 
technical information on sector-based GHG control measures. Also, EPA 
is actively developing BACT policy guidance for GHGs that will undergo 
notice and comment and will culminate in training courses for state, 
local, and tribal permitting authorities. The results of all of these 
efforts will roll out over the remainder of 2010. EPA currently awaits 
the Work Group's recommendations from its second phase of 
deliberations, which is underway as of the date of this notice.
    EPA does not agree with some commenters' suggestion that EPA should 
delay permitting of any sources until final BACT guidance is issued. As 
discussed in the final action on reconsideration of the Interpretive 
Memo, delaying the application of BACT to enable the development of 
guidance or control strategies is not consistent with the BACT 
requirements. 63 FR 17008. Furthermore, as just described, EPA expects 
such a delay to be unnecessary because EPA will soon begin providing 
technical information to inform BACT decisions, and will continue to 
provide additional guidance prior to the date that GHG permitting 
begins. However, even in the absence of such guidance, a delay would 
not be justified under the legal doctrines of ``absurd results'' and 
``administrative necessity.'' While implementation of the BACT 
requirement during Steps 1 and 2 will pose implementation challenges, 
EPA has assessed the burden associated with GHG permitting with 
consideration given to these challenges, and has established a phase-in 
schedule that represents a manageable workload.
    Thus, while BACT will remain a case-by-case assessment, as it 
always has been under the PSD program, EPA is confident that this 
guidance development effort will help support a smooth transition to 
permitting emissions of GHGs. Furthermore, EPA will continue to work to 
provide the most updated information and support tools to allow 
permitting authorities to share and access the most updated information 
on GHG BACT determinations as they are made once permitting of GHGs 
begins. EPA remains committed to involving stakeholders in the upcoming 
efforts to develop guidance to help permitting authorities in making 
BACT determinations for sources of GHGs.
3. Requests for Higher Category-Specific Thresholds or Exemptions From 
Applicability
    Although we did not propose any categorical exemptions, many 
commenters requested exemptions from major source and major 
modification applicability determinations under title V and PSD for 
certain types of GHG-emitting sources or certain types of GHG emissions 
as follows:
    Source Categories. Many commenters requested various exemptions or 
exclusions from source applicability for GHGs under both PSD and title 
V permitting, either during the phase-in period or permanently, citing 
anticipated burdens, societal costs, and differences in emission 
characteristics. Commenters representing non-traditional sources or 
source categories (sources that have not historically been required to 
get permits) requested exemptions from permitting based on GHG 
emissions, including agricultural sources, residential sources, and 
small businesses. In general, these commenters sometimes, but not 
always, cited ``absurd results'' and ``administrative necessity'' 
arguments in their exemption requests.
    Several commenters from sectors that consume a great deal of energy 
in their industrial processes and that are subject to international 
competitiveness, such as aluminum, steel, cement, glass, pulp and 
paper, and other manufacturers, requested that they be exempt from 
permitting under this final rule. These commenters state that we have 
not carefully considered the environmental and economic consequences of 
this action because if we had, we would have exempted them for several 
reasons, including (1) other countries typically exempt similar sources 
from GHG cap

[[Page 31590]]

and trade programs because the industries are making significant energy 
efficiency improvements even in the absence of GHG regulation, and (2) 
permitting such sources may cause many facilities to move to countries 
that have less regulation or no regulation for GHGs.
    Other industry groups cited unique characteristics of their 
emissions, or the quantities in which they are emitted, that they 
argued should justify exclusion or unique thresholds. Semiconductor 
production facilities asked for exemptions, arguing that combustion-
related GHG emissions are different from their GHG emissions, which 
result from the use of high-GWP industrial gases, such as PFCs, with 
higher GWP values that are more likely to trigger permitting 
requirements at relatively low tpy values. One lime production 
commenter stated that EPA could encourage energy efficiency projects at 
its plants by excluding calcination and other process emissions, 
arguing that these emissions are a relatively small portion of the 
national inventory that will have no material effect on air quality and 
global warming. Another commenter requested that EPA exclude emissions 
from poultry production (natural bird respiration) from permitting 
consideration because the IPCC excludes them from its GHG emission 
estimates. Representatives of the landfill industry pointed to the 
relationship between current statutory thresholds that apply to their 
regulated emissions, primarily NMOC, and the equivalent amount of GHG 
emissions this corresponds to. They argued for a source-category 
specific threshold that is at least equivalent to their current NMOC 
threshold, or roughly 750,000 tpy CO2e according to their 
estimate.
    Although the proposal for the Tailoring Rule generally addressed 
how the statutory requirements for major source applicability (100/250 
tpy thresholds) could be phased in in ways that would offer relief to 
traditional and non-traditional sources, such as residences, farms, 
small business, and semiconductor manufacturers, it did so by 
establishing relatively high CO2e thresholds during the 
early implementation period and lowering the thresholds over time as 
streamlining mechanisms become available to reduce administrative 
burdens. We did not propose any permanent exemptions of any kind or 
temporary exemptions based on source category. Also, note that the 
proposal discussed energy efficiency, process efficiency improvements, 
recovery and beneficial use of process gases, and certain raw material 
and product changes in the context of short-term, low-cost means of 
achieving GHG emission reductions for small-scale stationary sources, 
but not in the context of exemptions.
    As discussed previously, we are still considering whether permanent 
exemptions from the statute are justified for GHG permitting based on 
the ``absurd results'' legal doctrine. We do not have a sufficient 
basis to take final action at this time to promulgate any of the 
suggested exclusions on the grounds, described previously, suggested by 
the commenters. We note, however, that nothing in this rule forecloses 
the opportunities we may have to explore such options in the future. 
Therefore, we are taking no action in this rule on these various 
commenters' requests for exclusions.
    Some commenters also recommended that we create exclusions for 
their particular source categories for the specific purpose of avoiding 
overwhelming permitting burdens. We did solicit comment on alternative 
approaches to burden relief in the proposal. Some commenters suggested 
that the ``administrative necessity'' or ``absurd results'' rationale, 
each of which would be based on extraordinary administrative burdens, 
could be used to create at least temporary exclusions that would allow 
more sources to escape permitting than what we proposed. However, 
commenters have not, to date, provided specific information about the 
costs and administrative burdens associated with permitting their 
source categories.
    Regarding the specific concerns about the need for a small business 
exclusion, we note that the Office of Advocacy of the SBA made several 
recommendations on the proposal to address concerns about large numbers 
of small businesses becoming subject to the permit programs. For 
example they recommended that EPA adopt major source thresholds of 
100,000 tpy and major modification thresholds of 50,000 tpy 
CO2e. They also recommended that we adopt an interpretation 
of the effective date of the LDVR to provide additional time to 
prepare. We took action consistent with the latter recommendation in 
the Interpretive Memo, and we are taking action consistent with the 
former recommendation in this rule (although the threshold for 
modifications we are adopting is higher, for reasons explained 
previously). We are finalizing Steps 1 and 2 using the threshold-based 
approach, which applies the various legal doctrines, in the context of 
the Chevron framework, in a way that effectively exempts all small 
sources during this part of the phase-in, while assuring the 
administrability of the permitting programs for the sources that remain 
subject to them. We anticipate that virtually all small businesses not 
already subject to PSD and title V would be excluded under this 
approach. Similarly, with respect to high GWP gases as discussed 
previously, we are maintaining the statutory mass-based threshold, and 
this should address commenters' concerns regarding the inclusion of 
those gases. Therefore, we reiterate that we are not finalizing any 
such exclusions in this rule and, as noted above, we are not taking 
final action in the commenters' requests for exclusions.
    Concerning the comment that we did not take appropriate economic 
and environmental considerations into account for this rulemaking 
action, we disagree. The approach we finalize in this notice for Steps 
1 and 2 minimizes economic burdens by limiting permitting to the 
largest GHG emission sources. We further note that the PSD program as 
applied to the sources that are covered in Steps 1 and 2 contains an 
express requirement to take energy, environmental, and economic 
considerations into account when making control technology (i.e., BACT) 
decisions and accordingly many of the concerns about control costs will 
be able to be accounted for in that analysis.
    Biomass Combustion/Biogenic Emissions. Several commenters request 
that EPA exempt emissions from biogenic activities or biomass 
combustion or oxidation activities, including solid waste landfills, 
waste-to-energy projects, fermentation processes, combustion of 
renewable fuels, ethanol manufacturing, biodiesel production, and other 
alternative energy production that uses biomass feedstocks (e.g., crops 
or trees). For example, commenters urged that EPA exclude emissions 
from biomass combustion in determining the applicability of PSD to GHGs 
based on the notion that such combustion is ``carbon neutral'' (i.e., 
that combustion or oxidation of such materials would cause no net 
increase in GHG emissions on a lifecycle basis). Some commenters oppose 
the exemption of biogenic/biomass activities, claiming the lack of a 
valid scientific basis for treating these GHG emissions differently 
than other GHG emissions and expressing concern that we should not 
assume all biomass combustion is carbon neutral.
    The proposed Tailoring Rule did not address this issue of 
exemptions for biomass combustion or biogenic emissions. We are mindful 
of the role that biomass or biogenic fuels and feedstocks could play in 
reducing

[[Page 31591]]

anthropogenic GHG emissions, and we do not dispute the commenters' 
observations that many state, federal, and international rules and 
policies treat biogenic and fossil sources of CO2 emissions 
differently. We note that EPA's technical support document for the 
endangerment finding final rule (Docket ID No. EPA-HQ-OAR-2009-0472-
11292) states that ``carbon dioxide has a very different life cycle 
compared to the other GHGs, which have well-defined lifetimes. Instead, 
unlike the other gases, CO2 is not destroyed by chemical, 
photolytic, or other reaction mechanisms, but rather the carbon in 
CO2 cycles between different reservoirs in the atmosphere, 
ocean, land vegetation, soils, and sediments. There are large exchanges 
between these reservoirs, which are approximately balanced such that 
the net source or sink is near zero.''
    Nevertheless, we have determined that our application of the 
``absurd results,'' ``administrative necessity,'' and one-step-at-a-
time legal rationales that support this rule, which are based on the 
overwhelming permitting burdens described previously, does not provide 
sufficient basis to exclude emissions of CO2 from biogenic 
sources in determining permitting applicability provisions at this 
time. This is because such an exclusion alone, while reducing burdens 
for some sources, would not address the overwhelming permitting burdens 
described above, and a threshold-based approach would still be needed. 
As noted above, we have not examined burdens with respect to specific 
categories and thus we have not analyzed the administrative burden of 
permitting projects that specifically involve biogenic CO2 
emissions taking account of the threshold-based approach, nor did the 
commenters provide information to demonstrate that an overwhelming 
permitting burden would still exist, justifying a temporary exclusion 
for biomass sources.
    At the same time, the decision not to provide this type of an 
exclusion at this time does not foreclose EPA's ability to either (1) 
provide this type of an exclusion at a later time when we have 
additional information about overwhelming permitting burdens due to 
biomass sources, or (2) provide another type of exclusion or other 
treatment based on some other rationale. Although we do not take a 
final position here, we believe that some commenters' observations 
about a different treatment of biomass combustion warrant further 
exploration as a possible rationale. Therefore, although we did not 
propose any sort of permanent exclusion from PSD or title V 
applicability based on lifecycle considerations of biogenic 
CO2, we plan to seek further comment on how we might address 
emissions of biogenic carbon dioxide under the PSD and title V programs 
through a future action, such as a separate Advance Notice of Proposed 
Rulemaking (ANPR). This action would seek comment on how to address 
biogenic carbon under PSD and title V, the legal and policy issues 
raised by options regarding implementation. We will provide an 
opportunity for public comment before adopting any final approach.
    We further note that, while we are not promulgating an 
applicability exclusion for biogenic emissions and biomass fuels or 
feedstocks, there is flexibility to apply the existing regulations and 
policies regarding BACT in ways that take into account their lifecycle 
effects on GHG concentrations. This topic has already been explored by 
the CAAAC workgroup on BACT issues related to GHGs that recently 
provided recommendations to EPA. These recommendations are located in 
the public docket for this rulemaking and at http://www.epa.gov/air/caaac/climate/2010_02_InterimPhaseIReport.pdf. While that group was 
unable to come to a consensus on how biomass-based emissions should be 
treated, it provided us with information that we will consider as we 
issue guidance on BACT. As previously discussed, we plan to issue BACT 
guidance later this year, but are not doing so as part of this 
rulemaking. Without prejudging the outcome of our process to seek 
comment whether and how we might address emissions of biogenic carbon 
under the PSD and title V programs through a future action, this issue 
warrants further exploration in the BACT context as well, and we plan 
to fully explore it and take action if appropriate.
    Fugitive Emissions. Numerous commenters believe that fugitive GHG 
emissions should be excluded from major source determinations, citing 
difficulties in measuring or estimating such emissions. Others believe 
EPA did not address fugitive emissions in the proposal and they ask for 
clarification of the treatment of fugitive GHGs in applicability 
determinations under PSD and title V. Some of these commenters state 
that EPA has not undertaken a rulemaking under CAA section 302(j) for 
any source category of fugitive GHGs, so they should not be included. 
Several commenters representing the solid waste disposal industry 
requested exemptions for fugitive emissions for landfills and waste-to-
energy projects, pointing out that current practice under PSD is for 
fugitive emissions from certain landfills to not be counted toward 
major source determinations.
    In the proposal, EPA did not offer any specific guidance or discuss 
exemptions for fugitive emissions of GHGs. Commenters did not suggest 
that a fugitive exemption would address the overwhelming permitting 
burdens described previously, or that it was necessary to specifically 
tailor GHG applicability through the use of a fugitive emissions 
exclusion for categories that would otherwise be required to include 
them.
    We do agree with commenters who stated that we should clarify how 
to count fugitives in determining applicability under this rule. In 
response, we note that we are not taking final action with respect to 
commenters' request, and we are not finalizing any special rules for 
fugitive emissions related to GHG. Thus, EPA's rules related to the 
treatment of fugitives would apply. Regarding the comment that a CAA 
section 302(j) rulemaking is required before fugitive emissions may be 
counted, we disagree. As we read section 302(j), once EPA has 
established by rule that fugitive emissions are to be counted for a 
specific source category, nothing in section 302(j) requires EPA to 
conduct new rulemaking to allow for the counting of additional 
pollutants from that category. We read section 302(j) as imposing an 
obligation to determine if fugitive emission generally should be 
counted from a source or source category and not requiring that EPA 
list both source categories and relevant pollutants. Indeed, our 
practice in listing categories has not been to limit the pollutants to 
which the listing applies. Therefore, we are applying our existing 
rules and policies for fugitive emissions for GHG as we would any other 
pollutant.
    Pollution Control Projects. Other commenters request exemptions for 
pollution control projects from PSD major modification requirements, 
particularly projects that increase the efficiency or thermal 
performance of a unit or facility, resulting in emission reductions on 
a pounds/megawatt-hour or production basis. The current PSD rules do 
not exclude pollution control projects from being considered a physical 
change or change in the method of operation that would--if it resulted 
in a significant net emissions increase--constitute a major 
modification, and the case law makes clear that we could adopt a 
permanent exclusion in the future.\58\ To the extent

[[Page 31592]]

that the commenters seek an exclusion for pollution control projects 
that relies solely on ``absurd results'' or ``administrative 
necessity'' for reasons similar to those described previously for other 
requested exclusions, we take no action on this request in this 
rulemaking.
---------------------------------------------------------------------------

    \58\ On June 24, 2005, the United States Court of Appeals for 
the District of Columbia Circuit vacated the portions of the 2002 
and 1992 NSR rules that pertained to pollution control projects, 
among other provisions. In response to this Court action, on June 5, 
2007, EPA removed these provisions from the NSR regulations. (See 72 
FR 32526). These provisions were added as part of EPA's NSR 
improvement rule that was issued on December 31, 2002.
---------------------------------------------------------------------------

4. Transitional Issues Including Requests for Grandfathering
    In the Tailoring Rule proposal, we did not discuss or specifically 
ask for comment on any provisions to address the transition from a 
permitting regime that does not incorporate GHGs to one that does, such 
as ``grandfathering'' provisions or similar approaches that would 
exempt previously issued permits or pending applications from having to 
incorporate requirements for GHGs. We nonetheless received several 
public comments that addressed a variety of transitional issues. One 
group of comments addresses situations prior to permit issuance where a 
PSD or title V application is either administratively complete or more 
generally being processed prior to the trigger date for GHG permitting 
(``in process'' applications). Another group of comments addresses 
situations where a PSD or title V permit is issued prior to the GHG 
trigger date and the commenters request that the application and/or 
permit be exempt from any requirements for updates related to GHGs 
after permit issuance.
    With respect to PSD, many commenters requested that we adopt a 
``grandfathering'' approach to applicability to exempt projects that 
have administratively complete PSD or minor NSR permit applications 
pending when the GHG permitting requirements go into effect. Several 
commenters urged us to promulgate transition provisions (without 
specifically using the term ``grandfathering''), pointing out that we 
have provided transition periods for revising pending PSD permits, in 
the past, when new PSD rules were issued (e.g., in late 1970s and 
1980). These commenters assert that GHG requirements will cause more 
disruption than those previous rule changes. Several commenters asked 
that PSD applications be evaluated on the basis of the PSD requirements 
effective when the application is submitted and if submitted prior to 
the trigger date, then the application and permit would not need to 
address GHGs. Several commenters also asked that PSD sources with a 
valid permit that commences construction within 18 months of the 
trigger date not be required to seek a revised PSD permit for GHGs. 
Similarly, several commenters asked that PSD permits issued prior to 
the GHG trigger date not be required to be reopened only for the 
purpose of addressing GHG emissions. Additional commenters asked that 
we clarify that sources or projects not be required to obtain PSD 
permits if they obtained a determination that PSD did not apply (a 
``non-applicability'' determination) prior to the GHG trigger date. 
Finally, many commenters also requested ``grandfathering'' for title V 
so that existing title V applications and permits do not need to be 
amended, revised, or resubmitted to address GHGs after they become 
``subject to regulation.'' Other commenters asked that transition 
provisions for title V be provided in the final action that would be 
similar to those requested for PSD.
    We partially addressed transitional issues for PSD permitting in 
our April 2, 2010 final action on reconsideration of the Interpretive 
Memo. 75 FR 17021. This action addressed the applicability of PSD 
permitting requirements for GHGs to pending PSD permit applications 
that were (or will be) submitted prior to January 2, 2011 based on 
emissions of pollutants other than GHGs. However, we have not yet 
addressed the questions raised by public comments concerning sources 
that obtain PSD permits, minor NSR permits, or determinations that no 
such permits are needed prior to the Step 1 period set forth in this 
rule. We have also not yet addressed questions about the applicability 
of PSD permitting requirements for sources that are not currently 
required to submit an application for a PSD permit but that could be 
required to do so in Step 2 of the phase-in established in this action. 
In addition, our April 2, 2010 action did not address transitional 
issues concerning the application of the title V provisions to GHGs.
a. Transition for PSD Permit Applications Pending When Step 1 Begins
    In our action on April 2, 2010, EPA explained that the Agency did 
not see grounds to establish a transition provision for pending PSD 
permit applications because we had determined that PSD permitting 
requirements would not apply for GHGs for another 9 months. We 
explained that permit applications submitted prior to April 2, 2010 
should in most cases be issued prior to January 2, 2011 and, thus, 
effectively have a transition period of 9 months to complete processing 
before PSD requirements become applicable to GHGs. We also observed 
that, in the case of any PSD permit application review that cannot 
otherwise be completed within the next 9 months based on the 
requirements for pollutants other than GHGs, it should be feasible for 
permitting authorities to begin incorporating GHG considerations into 
permit reviews in parallel with the completion of work on other 
pollutants without adding delay to permit processing. Additional 
discussion of EPA's reasons for not developing transition provisions 
for PSD permit applications that are pending on January 2, 2011 are 
provided in the April 2, 2010 notice. 75 FR 17021-22.
    For these same reasons, we continue to feel that a transition 
period is not warranted to incorporate GHG requirements into any PSD 
permit applications that are pending when Step 1 of the permitting 
phase-in begins for those sources that would otherwise need to obtain a 
PSD permit based on emissions of pollutants other than GHGs. Thus, this 
action makes no change to the position we expressed on this particular 
issue in the April 2, 2010 notice. In this final rule on tailoring the 
PSD program to address GHGs, we have determined that the additional 
burden of incorporating GHG requirements into PSD permits for the 
sources already required to obtain such permits is manageable in the 
Step 1 period. Thus, this rule has added no additional requirements or 
limitations that would justify deferring the establishment of pollution 
controls for this category of GHG sources once PSD permitting 
requirements are initially triggered for GHGs.
    While we do not provide for grandfathering of PSD applications, we 
do note that there are more than 7 months left before GHG BACT 
requirements will be triggered at anyway sources for projects that 
increase GHG emissions by more than 75,000 tpy CO2e and more 
than a year before the requirements would be triggered at sources 
solely because of emissions of GHGs (more than 100,000 tpy of 
CO2e). We intend to work constructively and affirmatively 
with permitting authorities to use this time to ensure expeditious 
processing of pending permits and to further assure that the triggering 
of BACT requirements at such sources will not result in adverse impacts 
on pending projects. We have separately described our plans to 
expeditiously issue GHG

[[Page 31593]]

BACT guidance, but we understand that for pending projects that will be 
permitted soon after January 2, 2011, an opportunity for earlier 
engagement with EPA on BACT issues would be beneficial for permitting 
authorities to issue these permits without delay.
    Therefore, following the issuance of this rule, we will contact 
permitting authorities that have pending PSD permit applications to 
identify those applications with a reasonable likelihood that final 
issuance will occur after January 2, 2011, and therefore will be 
required to contain GHG BACT limits. We will then work closely with 
those permit agencies to provide technical, legal, or policy assistance 
to help prepare BACT analysis and provide additional support as 
necessary to expedite permitting for those pending applications. 
Similarly, when EPA is the permitting authority, we will provide 
assistance to applicants with pending permits to ensure that GHG 
permitting decisions are made promptly, and that administrative 
processes move forward expeditiously.
b. PSD Permits Issued Prior to Step 1
    EPA has not historically required PSD permits to be updated or 
reopened after they are issued in the absence of an action by the 
applicant to change the physical or operational characteristics of the 
source described in the permit application. EPA's PSD permitting 
regulations contain no provisions that address the modification or 
amendment of a PSD permit or require a PSD permit to be reopened or 
modified on the basis of new PSD permitting requirements that take 
effect after the final permit is issued. Since PSD permits are 
construction permits, EPA has not required updates to PSD permits in 
the same manner as is typically required for operating permits that 
incorporate a variety of applicable requirements (such as title V 
permits and National Pollutant Discharge Elimination System (NPDES) 
permits under the Clean Water Act). In addition, unlike operating 
permits, PSD permits are not required to be renewed. However, if 
construction under a PSD permit is not commenced in a timely manner or 
is discontinued for an extended period, a PSD permit may expire if an 
extension is not requested or justified. See 40 CFR 52.21(r)(2); 40 CFR 
124.5(g).
    With respect to the application of PSD permitting requirements for 
GHGs beginning on January 2, 2011, we do not see any cause to deviate 
from our historical practice of not requiring PSD permits to be 
reopened or amended to incorporate requirements that take effect after 
the permit is issued. Thus, we are not promulgating any new rules or 
requirements pertaining to PSD permits issued prior to Step 1 of the 
phase-in described in this rule. There is no mandatory requirement to 
reopen a previously issued PSD permit to incorporate GHG requirements 
that were not applicable at the time the permit was issued.
    A major source that obtains a PSD permit prior to January 2, 2011 
will not be required under EPA regulations to reopen or revise the PSD 
permit to address GHGs in order for such a source to begin or continue 
construction authorized under the permit. Our current PSD permitting 
regulations provide that ``[n]o new major stationary source or major 
modification to which the requirements of paragraphs (j) through (r)(5) 
of this section apply shall begin actual construction without a permit 
that states the major stationary source or major modification will meet 
those requirements.'' 40 CFR 51.166(a)(7)(iii); 40 CFR 
52.21(a)(2)(iii). The term ``begin actual construction'' generally 
means ``initiation of physical onsite construction activities on an 
emissions unit which are of a permanent nature'' and includes 
activities such as ``installation of building supports and foundations, 
laying underground pipework and construction of permanent storage 
structures.'' 40 CFR 51.166(b)(11); 40 CFR 52.21(b)(11). A source that 
begins actual construction authorized under a PSD permit prior to 
January 2, 2011 will not be in violation of the prohibition described 
previously if it continues construction after that date. This portion 
of the regulation precludes only beginning construction without the 
appropriate preconstruction permit and does not require a permit to be 
updated to continue actual construction that has already begun.
    Furthermore, a source that is authorized to construct under a PSD 
permit but has not yet begun actual construction on January 2, 2011 may 
still begin actual construction after that date without having to amend 
the previously-issued PSD permit to incorporate GHG requirements. 
Sections 51.166(a)(7)(iii) and 52.21(a)(2)(iii) require ``a permit that 
states that the major stationary source or major modification will meet 
those requirement,'' which refers to the ``requirements in paragraphs 
(j) through (r)(5)'' referenced earlier in those provisions. EPA 
construes this language to describe a permit that meets the 
requirements of paragraph (j) through (r)(5) that are in effect at the 
time the permit is issued. Permitting and licensing decisions of 
regulatory agencies must generally reflect the law in effect at the 
time the agency makes a final determination on a pending application. 
See Ziffrin v. United States, 318 U.S. 73, 78 (1943); State of Alabama 
v. EPA, 557 F.2d 1101, 1110 (5th Cir. 1977); In re: Dominion Energy 
Brayton Point, LLC, 12 E.A.D. 490, 614-616 (EAB 2006); In re Phelps 
Dodge Corp., 10 E.A.D. 460, 478 n. 10 (EAB 2002).
    Thus, a source may begin actual construction on or after January 2, 
2011 under a PSD permit that authorized construction to begin prior to 
January 2, 2011 because such a permit states that the source will meet 
the requirements of paragraphs (j) through (r)(5) of these regulations 
(or state equivalents) that were in effect at the time the permit was 
issued. However, this would not be the case if the permit has expired 
because the applicant has discontinued construction or failed to 
commence construction by the necessary date. See 40 CFR 52.21(r)(2).
    This approach is consistent with EPA's practice when the 
preconstruction permitting requirements change by virtue of the 
designation of an area as a nonattainment area after a PSD permit is 
issued. In transitional guidance issued by EPA in 1991, EPA explained 
that ``the area designation in effect on the date of permit issuance by 
the reviewing agency determines which regulations (part C or D) apply 
to that permit.'' Memorandum from John S. Seitz, Director OAQPS, New 
Source Review (NSR) Program Transitional Guidance, page 6 (March 11, 
1991). This memorandum explained further that ``where a source receives 
a PSD or other permit prior to the date the area is designated as 
nonattainment, the permit remains in effect'' as long as the source 
meets the conditions necessary to prevent the permit from expiring. Id. 
at 6.
    This approach does not apply if the source engages in a major 
modification after January 2, 2011 that is not authorized by the 
previously issued permit. Once Step 1 of the phase-in begins, if the 
PSD requirements for GHGs are applicable to a previously-permitted 
source that engages in a major modification not covered by the permit, 
such a source will need to obtain a new PSD permit to authorize the 
modification and that permit may need to include GHG requirements 
depending on the level of increase in GHGs that results from the 
modification.
c. Additional Sources for Which PSD Applies in Step 2
    In light of the terms of existing PSD regulations and the lead time 
provided in this action for sources that will first

[[Page 31594]]

become subject to PSD permitting in Step 2, we do not believe there is 
presently a need to establish transition provisions for sources that 
will be required to obtain PSD permits for the first time in Step 2 of 
the phase-in. As described previously, under our current PSD permitting 
regulations, a new major stationary source or major modification may 
not begin actual construction without a PSD permit that meets the 
applicable preconstruction permitting requirements. 40 CFR 
51.166(a)(7)(iii); 40 CFR 52.21(a)(2)(iii).
    Since a permit must be obtained before a major source may begin 
actual construction, the major source preconstruction permitting 
requirements in 40 CFR 51.166 and 52.21 of the regulation do not 
generally apply to a source that begins actual construction at a time 
when it was not a major source required to obtain a PSD permit. One 
exception, however, is the unique circumstance when a source becomes a 
major source solely by virtue of the relaxation of an enforceable 
limitation on the source's PTE. 40 CFR 51.166(r)(2); 40 CFR 
52.21(r)(4). But absent these circumstances, PSD preconstruction 
permitting requirements do not generally preclude a source from 
continuing actual construction that began before the source was a 
source required to obtain a PSD permit. Thus, a source that began 
actual construction under the authorization of any previously required 
minor source or state construction permit is not required to meet any 
PSD preconstruction permitting requirement that becomes applicable 
after actual construction begins unless the source engages in a major 
modification after PSD permitting requirements are applicable. 
Likewise, a PSD permit is not required after a source begins actual 
construction based on a valid determination (by the source or the 
permitting authority) that the source need not obtain either a major 
PSD permitting requirements or and minor NSR permit. Based on these 
provisions in existing regulations, EPA will not require any sources to 
which PSD permitting requirements begin to apply in Step 2 to obtain a 
PSD permit to continue construction that actually begins before Step 2 
begins.
    However, we will expect Step 2 sources that begin actual 
construction in Step 2 (i.e., beginning July 1, 2011) to do so only 
after obtaining a PSD permit in accordance with 40 CFR 52.21 or 51.166, 
or any applicable state regulation that meets the requirements of 40 
CFR 51.166. We recognize the potential for the triggering of Step 2 to 
result in a change in status where a project may legally have begun 
actual construction before Step 2 but did not do so and would then need 
a PSD permit. However we also note that we are providing over a year of 
lead time before PSD permitting requirements become applicable to Step 
2 sources. If projects would be adversely affected by this change in 
status, this lead time affords an opportunity for sources planning such 
projects to secure appropriate minor NSR permits (which generally take 
less than a year to issue), non-applicability determinations, etc. in 
time to avoid such a change in status. If a new or modified source that 
would become newly subject to PSD in Step 2 plans to begin actual 
construction before Step 2, it has more than a year to obtain the 
applicable preconstruction approvals and begin actual construction. 
Likewise, a Step 2 source that does not anticipate the ability to begin 
actual construction before Step 2 begins should have enough lead time 
to submit a PSD permit application and obtain the necessary permit 
without significantly delaying the project further. Therefore, we do 
not think it is necessary or appropriate to promulgate a transition 
provision that would exempt Step 2 sources from PSD permitting 
requirements that will apply based on construction that begins after 
Step 2 takes effect.
    This approach for Step 2 sources that have obtained a minor source 
construction permit or non-applicability determination differs from the 
approach described previously for source that obtained a PSD permit 
prior to Step 1. As described previously, a Step 1 source that is 
authorized to begin actual construction before January 2, 2011 under a 
previously-issued PSD permit may begin actual construction under that 
permit after January 2, 2011 without modifying the PSD permit to 
address GHGs. However, a Step 2 source that was not required to obtain 
a PSD permit before Step 2 begins would need to obtain a PSD permit 
addressing GHGs if it has not yet begun actual construction prior to 
Step 2, even if the source had obtained any preconstruction approvals 
that were necessary to authorize construction prior to Step 2. This is 
because such a Step 2 source that begins actual construction after Step 
2 would likely be doing so without having any permit meeting the 
requirements of paragraphs (j) through (r)(5) of 40 CFR 52.21 or 
51.166, or a state equivalent. A source that has obtained only a minor 
source permit prior to Step 2 but that begins actual construction after 
July 1, 2011 would violate the requirements of 40 CFR 52.21(a)(2)(iii) 
or 51.166(a)(7)(iii), or a state equivalent, unless the source took 
care to ensure that it was authorized to construct under a PSD permit 
or could demonstrate that the source's minor source construction permit 
makes clear that requirement of paragraphs (j) through (r)(5) of 40 CFR 
52.21 or 51.166, or a state equivalent, would be met by the source even 
though such a permit was not nominally a PSD permit. This difference in 
approach for non-PSD sources is driven by the terms of 40 CFR 
52.21(a)(2)(iii) and 51.166(a)(7)(iii). Since we have not provided any 
prior notice that we might be considering revisions to 40 CFR 52.21 and 
51.166 to address this topic, we are unable to revise the regulations 
in this action to achieve the same result for non-PSD sources as for 
PSD sources. Furthermore, at the present time, we see no indication 
that this difference in approach is unreasonable since non-PSD sources 
will not trigger permitting for GHG until Step 2 (only anyway PSD 
source trigger in Step 1). Thus sources will have until July 1, 2011, 
an additional 6 months of lead time (for a total of more than 14 
months), to prepare for the transition described here. Nevertheless, we 
recognize that the transition to the increased coverage of new sources 
and modifications that occurs in July will represent an unusual 
occurrence that may have unanticipated impacts. For this reason it is 
important to note that nothing in this rule forecloses our ability to 
further address such impacts, as necessary, by adopting rule changes or 
using other available tools.
    EPA has previously promulgated exemptions that have authorized some 
sources that were not previously subject to the PSD regulations to 
commence construction on the basis of minor source permits after the 
date new PSD requirements have took effect in 1978 and 1980. See, e.g., 
40 CFR 52.21(i)(1)(iv)-(v). There is a notable distinction between 
these provisions, which use the term ``commence construction,'' and the 
terms of 40 CFR 52.21(a)(2)(iii) and 51.166(a)(7)(iii), which use the 
term ``begin actual construction.'' ``Commence construction'' is 
defined more broadly than ``begin actual construction'' to include 
obtaining all necessarily preconstruction approvals and either 
beginning actual on-site construction or entering into binding 
contracts to undertake a program of actual construction. 40 CFR 
52.21(b)(9); 40 CFR 51.166(b)(9). The term ``commence construction'' is 
also defined in the CAA. 42 U.S.C. 7479(2)(A). Among

[[Page 31595]]

other purposes, the term ``commence construction'' is generally used in 
the Act and EPA regulations to distinguish construction activities that 
are exempt from new PSD permitting requirements from those that are 
not. See, e.g., 42 U.S.C. 7475(a); 40 CFR 52.21(i)(1)(i)-(v). In the 
absence an explicit exemption in the CAA or the PSD regulations that 
uses the term ``commence construction,'' we do not believe we can use 
the date a source ``commences construction'' under a minor source 
construction permit approval as a demarcation point for Step 2 sources 
that may continue ongoing construction activities without having to 
obtain a PSD permit based on emissions of GHGs. Since we did not 
provide prior notice of an intention to adopt transition provisions 
applicable to this situation, we are unable to adopt such an exemption 
in this action that applies the term commence construction in this 
context. Consequently, the approach described previously applies the 
term ``begin actual construction'' based on the language in 40 CFR 
52.21(a)(2)(iii) and 51.166(a)(7)(iii).
d. Transitional Issues for Title V Permitting
    Since the title V permitting regulations already include a robust 
set of provisions to address the incorporation of new applicable 
requirements and other transitional considerations, we do not see 
grounds to establish unique transition or grandfathering provisions for 
GHGs in this action. Furthermore, since the purpose of title V is to 
collect all regulatory requirements applicable to a source and ensure 
compliance, we do not believe special exemptions for GHG requirements 
are likely to be justified. The existing title V rules do not provide 
any exemptions that relieve the obligation to incorporate all 
applicable requirements into a title V permit. However, the title V 
regulations contain numerous provisions that allow a reasonable period 
of time for incorporating new applicable requirements or applying for a 
title V permit that was not previously required. Transitional issues 
for incorporation of GHG requirements into title V permitting generally 
involve questions in the following categories: (1) Permit application 
requirements for sources not previously subject to title V that will 
become subject to title V requirements in Step 2 of the phase-in; (2) 
the need for updates or amendments to title V permit applications that 
are pending when GHGs become subject to regulation in Step 1 of the 
phase-in; and (3) the incorporation of new applicable requirements for 
GHGs into existing permits for sources currently subject to title V.
    With respect to the first category, a title V source applying for 
the first time must submit its permit application within 12 months 
after the source ``becomes subject to the [operating] permit program'' 
or such earlier time that the permitting authority may require (see 40 
CFR 70.5(a)(1)). Sources not otherwise subject to title V can become 
major sources subject to title V due to emissions of GHG no sooner than 
July 1, 2011. If a source becomes ``subject to the [operating] permit 
program'' on July 1, 2011, then its permit application under the title 
V operating permit program would typically have to be submitted no 
later than July 1, 2012.
    There are also existing regulations relevant for the second 
category of GHG transition issues, where sources currently subject to 
title V have title V permit applications pending with a permitting 
authority as of January 2, 2011. Where additional applicable 
requirements become applicable to a source after it submits its 
application, but prior to release of a draft permit, the source is 
obligated to supplement its permit application. See 40 CFR 70.5(b); 
71.5(b). Furthermore, title V permits are generally required to contain 
provisions to assure compliance with all applicable requirements at the 
time of permit issuance. See CAA section 504(a); 40 CFR 70.6(a)(1) and 
71.6(a)(1). If a permitting authority determines that additional 
information is necessary to evaluate or take final action on an 
application (e.g., because of uncertainty over whether a draft permit 
assures compliance with all applicable requirements), it may, and 
should, request additional information from the source in writing and 
set a reasonable deadline for a response. See 40 CFR 70.5(a)(2); 
71.5(a)(2).
    Likewise, the existing title V regulations provide sufficient 
transition for the third category of issues, where a source has 
additional GHG-related applicable requirements (such as the terms of a 
PSD permit) that must be incorporated into its existing title V permit. 
Where a source is required to obtain a PSD permit, the source must 
apply for a title V permit or permit revision within 12 months of 
commencing operation or on or before such earlier date as the 
permitting authority may establish (or prior to commencing operation if 
an existing title V permit would prohibit the construction or change in 
operation). See 40 CFR 70.5(a)(1)(ii); 71.5(a)(1)(ii); see also 40 CFR 
70.7(d) and (e); 71.7(d) and (e) (permit modifications). In addition, 
where a source becomes subject to additional applicable requirements, 
the permitting authority is required to reopen the permit to add those 
applicable requirements if the permit term has three or more years 
remaining and the applicable requirements will be in effect prior to 
the date the permit is due to expire. See 40 CFR 70.7(f)(1)(i); 
71.7(f)(1)(i).
    Finally, EPA notes that the existing title V regulations require 
sources to furnish permitting authorities, within a reasonable time, 
any information the permitting authority may request in writing to 
determine whether cause exists for modifying, revoking, and reissuing, 
or terminating the permit, and for other reasons, and further provide 
that permitting authorities shall reopen and revise permits if EPA or 
the permitting authority determine that the permit must be revised or 
revoked to assure compliance with applicable requirements. See 40 CFR 
70.6(a)(6)(v); 71.6(a)(6)(v) and 70.7(f)(1)(iv); 71.7(f)(1)(iv).
    Thus, EPA believes that the existing title V regulations provide an 
adequate regulatory framework for managing the transition to 
incorporating GHG requirements in title V permits and additional 
specific exemptions or transition rules for title V are not currently 
warranted.

VI. What are the economic impacts of the final rule?

    This section of the preamble examines the economic impacts of the 
final rule including the expected benefits and costs for affected 
sources and permitting authorities. The final rule uses a phased-in 
approach for requiring sources of GHG emissions to comply with title V 
operating permit and PSD statutory requirements, essentially lifting 
this burden for the phase-in period for a large number of smaller 
sources of GHG. Thus, this rule provides regulatory relief rather than 
regulatory requirements for these smaller GHG sources. For larger 
sources of GHGs that will be required to obtain title V permits and/or 
comply on PSD requirements, there are no direct economic burdens or 
costs as a result of this final rule, because these requirements are 
not imposed as a result of this rulemaking. Statutory requirements to 
obtain a title V operating permit or to adhere to PSD requirements are 
already mandated by the CAA and by existing rules, not by this rule. 
Similarly, this rule will impose costs to society in the form of 
foregone environmental benefits resulting from GHG emission reductions 
that, absent this rule, might otherwise

[[Page 31596]]

have occurred at sources deferred from permitting during the phase-in 
period.
    The RIA conducted for this final rule provides details of the 
benefits or regulatory relief that smaller GHG sources will experience 
in terms of costs avoided as a result of this final rule and the 
potential for social costs in terms of foregone environmental benefits 
during this 6-year period. Complete details of the RIA conducted for 
this final rule may be found in the document ``Regulatory Impact 
Analysis for the Final Prevention of Significant Deterioration and 
Title V Greenhouse Gas Tailoring Rule,'' in the docket for this 
rulemaking.
    This rulemaking provides permitting thresholds for sources of GHG 
that exceed levels contained in the CAA, and these levels are phased-in 
steps based upon application of the ``administrative necessity'' and 
``absurd results'' doctrines as explained in section V.B. For Step 1, 
which is effective from January 2, 2011, through June 30, 2011, only 
sources required to undergo title V or PSD permitting based upon non-
GHG air pollutants are required to obtain an operating permit or PSD 
permit to include GHG emissions (referred to as the ``anyway'' 
threshold). Step 2, effective from July 1, 2011, until such time as EPA 
acts on a rule to amend it (which for reasons described previously, we 
assume is June 30, 2013, for the purposes of this analysis), will phase 
in title V permit requirements for larger sources emitting GHG above 
100,000 tpy CO2e (if they do not already have one) and phase 
in for such sources, PSD requirements when they are newly constructed 
or modify in a way that increases emissions by more than a 75,000 tpy 
CO2e significance level. Step 2 is referred to as the 
100,000 tpy CO2e threshold. Thereafter, EPA makes an 
enforceable commitment to consider a possible Step 3 to further lower 
thresholds below 100,000 tpy CO2e and/or permanently exclude 
some sources from the program(s), but only after a regulatory process 
is conducted addressing ``administrative necessity'' and ``absurd 
results'' considerations based upon the actual permitting experiences 
in the first two steps of the phase-in. In addition, EPA provides a 
deferral of permitting until we take required action in April 2016 for 
sources and modifications that emit below 50,000 tpy CO2e. 
The deferral will end when a required study is conducted of the 
permitting process for sources of GHG and EPA acts, based on the study, 
to promulgate a rule that describes the additional GHG permitting 
requirements beyond 2016. In the 6 years following promulgation of this 
rule, the EPA estimates that compared to baseline estimates that do not 
include the effects of this rule, over six million sources of GHG 
emissions in total will be allowed to continue to operate without a 
title V operating permit. During this period, tens of thousands of new 
sources or modifying sources each year will not be subject to PSD 
requirements for GHG. For this large number of smaller sources, this 
rule alleviates the regulatory burden associated with obtaining an 
operating or PSD permit or complying with NSR BACT requirements. 
Therefore, this final action may be considered beneficial to these 
small sources because it provides relief from regulation that would 
otherwise be required.
    This decision does potentially have environmental consequences in 
the form of higher emissions during the 6-year period of time 
(generally because emissions increases would have been lower if BACT 
were applied). These consequences are limited due to the fact that 
sources between 100/250 and 100,000 tpy CO2e account for an 
estimated 11 percent of the six directly emitted GHG nationally from 
industrial, commercial, and residential source categories, while 
representing over 95 percent of the total number of sources potentially 
requiring an operating or PSD permit for GHG under current permitting 
thresholds in the CAA. Moreover, requiring such a large number of small 
sources to obtain permits for the first time would overtax the 
permitting authorities' abilities to process new permits and would 
therefore interfere with any such benefits actually being achieved. 
Moreover, reductions from these small sources will still be occurring, 
notwithstanding the fact that permitting requirements would not apply 
to them. These smaller sources of GHGs will be the focus of voluntary 
emission reduction programs and energy efficiency measures that lead to 
reductions in GHGs. We will also reevaluate this decision after a 6-
year period and complete a study of the implications for those sources 
and permitting authorities of permitting smaller GHG sources beyond 
2016.
    In reaching the preceding decisions for this final rule, we 
carefully considered comments received on the Tailoring Rule proposal. 
We received several comments specifically on our description of the 
impacts of this rule. Most of these comments disagreed with our 
assertion that the rule is a ``relief'' rule. Others assert that we 
should have prepared a more comprehensive RIA than prepared for the 
rule proposal. Those commenting contend: (1) We understated the burdens 
of the rule while overstating its relief at proposal; (2) we 
erroneously omitted the impacts for ``larger sources'' of GHGs from the 
proposal RIA and should have recognized the burden to ``larger 
sources'' due to other GHG actions; (3) the economic impacts the rule 
will have on industry and the U.S. economy and society in general will 
be burdensome, especially given the current state of the economy; and 
(4) we need to propose a full RIA or a complete estimation of impacts 
to comply with CAA section 307(d) and the APA.
    EPA has carefully considered the comments addressing the issue of 
whether the Tailoring Rule is a regulatory ``relief rule,'' and we are 
not persuaded that we erred in concluding that the effect of the 
Tailoring Rule is to provide regulatory relief to a large number of 
sources of GHG for a period of up to 6 years. This final rule will 
provide relief from title V permitting to over 6 million sources of GHG 
in this country. Likewise tens of thousands of sources potentially 
subject to PSD permitting requirements annually for GHG will have 
regulation postponed for a period of up to 6 years under this rule, 
followed by an additional required rule addressing the period beyond 6 
years. While larger sources of GHG may be required to obtain title V 
permits or modify existing permits and to comply with PSD requirements, 
these burdens result not from the Tailoring Rule but rather from the 
CAA requirements to apply PSD and title V to each pollutant subject to 
regulation, which are triggered when the LDVR takes effect. To clearly 
illustrate this, consider what would occur if EPA did not complete the 
Tailoring Rule. Sources would not be relieved of the requirement to 
obtain permits addressing each pollutant subject to regulation when 
they construct or modify, nor would they be relieved of their 
obligation to obtain title V permits. Instead, these requirements would 
simply apply to a much larger population of sources and modifications, 
and would lead to the absurd results and severe impairment to program 
implementation that this rule is designed to address.
    In response to comments asserting that the RIA completed for 
proposal of this rulemaking: (1) Understated the burdens of the rule 
and overstated the benefits, (2) did not fully recognize the rule will 
be burdensome, especially given the current state of the economy; and 
(3) does not consider a complete estimation of impacts to comply with 
the APA and CAA section 307(d) and needs to correct flawed or erroneous

[[Page 31597]]

assumptions, EPA did make improvements and modifications to the RIA 
completed for this final rule. Based upon comments, EPA modified 
estimates of the number of sources affected at various threshold levels 
upward. EPA also improved the burden estimates associated with 
obtaining permits for sources and permitting authorities.
    After consideration of the burden imposed by the proposed rule with 
these improved estimates for affected sources, the EPA modified the 
steps of the phase-in period to include two initial steps, described in 
section V, that are higher, and therefore cover fewer sources and are 
less burdensome than the proposal threshold of 25,000 tpy 
CO2e emissions. EPA also increased the threshold below which 
permitting would not apply for 6 years from 25,000 to 50,000 tpy 
CO2e. After the initial two step period, EPA has committed 
to consider lower thresholds but only down to 50,000 tpy 
CO2e, and only after a regulatory process that uses 
information gathered on actual permitting activity during the first two 
steps of the phase-in period. The RIA conducted for the final rule also 
incorporates improvements in our estimates of the number of sources 
affected at alternative thresholds and improved estimates of the costs 
of obtaining permits by sources and processing permits by permitting 
authorities. The EPA acknowledges that the regulatory relief associated 
with the control costs due to BACT requirements for PSD new and 
modifying sources is not included in the RIA for the final rule due to 
the lack of sufficient data about the nature of those requirements. 
However, it is the case that, as it relates to burden, those estimates 
would simply increase the amount of regulatory relief associated with 
this final rule.
    Finally, with regard to comments that the RIA should have been a 
more comprehensive analysis to include the larger sources of GHG that 
will be required to obtain permits when GHG are regulated, the EPA 
maintains as previously explained that there are no direct economic 
burdens or costs as a result of this rule for these sources. 
Requirements for larger GHG sources to obtain title V or PSD permits 
are already mandated by the Act and by existing rules and are not 
imposed as a result of the Tailoring Rule. Thus the economic impacts 
for larger sources of GHG do not occur because of this Tailoring Rule. 
To include these larger sources in the RIA would actually be an 
inaccurate assessment of how this rule affects sources and would ignore 
the fact that this rule provides regulatory relief.

A. What entities are affected by this final rule?

    As previously stated, this final rule does not itself result in the 
application of permitting requirements to any industrial, commercial, 
or residential entities. Entities affected by this rule are those who 
experience regulatory relief due to the higher thresholds and deferred 
applicability set forth in this rule. This action increases the 
threshold to obtain a title V and PSD permitting from statutory CAA 
levels using a phased-in step process as previously discussed. As Table 
VI-1 shows, this action lifts permitting requirements for over six 
million potential title V sources in total and tens of thousands of 
potential PSD new sources annually that would be otherwise required by 
the CAA to obtain permits. Under Step 1, over six million title V 
sources in total and approximately 20 thousand new PSD sources per year 
will not be required to obtain permits. Under Step 2, requiring sources 
over a 100,000 tpy CO2e to obtain a permit, over six million 
title V sources in total and approximately 19.9 thousand new PSD 
sources per year will obtain regulatory relief. While the threshold 
approach differs for Steps 1 and 2 of the phase-in plan, the estimated 
number of sources affected does not differ greatly as shown in Table 
VI-1. Sectors experiencing this regulatory relief include electricity, 
industrial, energy, waste treatment, agriculture, commercial and 
residential.

              Table VI-1--Estimated Number of Affected Sources Experiencing Regulatory Relief 1, 2
----------------------------------------------------------------------------------------------------------------
                                                     Number of sources experiencing regulatory relief
                                         -----------------------------------------------------------------------
                 Sector                              Step 1 Anyway                    Step 2 100,000 tpy
                                         -----------------------------------------------------------------------
                                               Title V           New PSD           Title V           New PSD
----------------------------------------------------------------------------------------------------------------
Electricity.............................               285                93               285                33
Industrial..............................           170,910               604           170,654               599
Energy..................................             2,588                48             2,536                44
Waste Treatment.........................             3,358                 2             3,165                 1
Agriculture.............................            37,351               299            37,351               299
Commercial..............................         1,355,921            12,041         1,355,870            12,039
Residential.............................         4,535,500             6,915         4,535,500             6,915
                                         -----------------------------------------------------------------------
    Totals..............................         6,105,913            20,002         6,105,361            19,930
----------------------------------------------------------------------------------------------------------------
% Emissions Covered \3\.................                  13%
                                                          11%
----------------------------------------------------------------------------------------------------------------
Notes: (1) Number of sources is determined on a PTE basis. Estimates for title V are the total number of sources
  expected to experience regulatory relief. PSD sources are annual estimates of newly constructed facilities and
  do not include modifications at existing facilities that may also be subject to PSD requirements. (2) See
  appendices to ``Regulatory Impact Analysis of the Final Prevention of Significant Deterioration and Title V
  Greenhouse Gas Tailoring Rule'' for more details of how thresholds and sources affected are developed. (3)
  Percentage of emissions covered represent estimated actual emissions from sources expected to experience
  regulatory relief as a percentage of total stationary source GHG emissions.

B. What are the estimated annual benefits to sources due to regulatory 
relief from the statutory requirements?

    EPA estimated the annual benefits (avoided costs) to sources of GHG 
emissions and permitting authorities anticipated from this final rule. 
In addition, an accounting of the benefits from this action as measured 
by avoided permit processing costs for state, local, and tribal 
permitting authorities is provided. These benefits or avoided costs 
relate specifically to permit burden costs postponed for smaller 
sources of GHG emissions otherwise required to obtain an operating 
permit under title V or required to modify an existing permit to 
address GHG

[[Page 31598]]

emissions. Avoided costs shown also include permit burdens for 
additional PSD permits postponed for new or modifying smaller sources 
of GHG, as well as the avoided costs to state, local and tribal 
permitting authorities. We are providing an illustrative monetary 
estimate of statutory permitting requirements to show the magnitude of 
the savings that hypothetically result from this rulemaking. While we 
believe it is impossible to implement these permit requirements by 
January 2, 2011, for the reasons laid out in this preamble, it is 
useful to understand the scale of what the burden may have been. For 
sake of simplicity, we refer to this illustrative monetary estimate as 
the monetized benefits of the regulatory relief presented by this 
rulemaking or regulatory relief benefits for brevity.
    These benefit estimates do not consider avoided emission control 
costs associated with PSD requirements for potential BACT requirements. 
Estimates for BACT are unavailable at this time because of the 
difficulty predicting the results of the BACT process as it would be 
applied to new pollutants and classes of sources for which there is no 
previous BACT experience on which to rely.
1. What are annual estimated benefits or avoided burden costs for title 
V permits?
    Table VI-2 shows that the estimated annual title V benefits to 
sources and to permitting authorities in terms of avoided information 
collection cost resulting from this final action to be approximately 
$70,535 million under Step 1 of the phase-in. These avoided costs 
become $70,520 million annually under Step 2 of the phase-in. where 
permitting is required for sources at or above the 100,000 tpy 
CO2e threshold. Under the anyway threshold Step 1, 
approximately $49,457 million in regulatory relief will accrue to 
sources and approximately $21,078 million to permitting authorities 
annually in the form of avoided permit processing costs. With the 
100,000 tpy CO2e threshold for phase-in Step 2, these annual 
regulatory relief benefits are expected to be quite similar at $49,447 
million for sources of GHG emissions and $21,072 million for permitting 
authorities. Industrial sources permitting costs are estimated to be 
$46.4 thousand per permit for a new permit and $1.7 thousand for a 
permit revision. The EPA estimates that over tens of thousands of 
industrial sources per year will avoid incurring these permitting costs 
under Steps 1 and 2 of the phase-in period. The cost for a permit for 
new commercial and residential sources is estimated to be $23.2 
thousand per permit with approximately 2 million of these permits 
avoided annually.
    State, local, and tribal permitting authorities will also benefit 
in terms of avoided permitting administrative costs of over $21 billion 
as a result of the decisions final in this action. For industrial 
sources, the cost for permitting authorities to process a new 
industrial title V permit is approximately $19.7 thousand per permit 
and $1.8 thousand for a permit revision. Similarly, permitting 
authority avoided permit processing costs are approximately $9.8 
thousand per permit for a new commercial or residential title V permit. 
All estimates are stated in 2007 dollars.

                                Table VI-2--Annual Title V Regulatory Relief for Sources and Permitting Authorities 1, 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Step one anyway                Step two 100,000 tpy CO2e
                                                                 Cost per permit -----------------------------------------------------------------------
                           Activity                                  (2007$)          Number of       Avoided costs       Number of       Avoided costs
                                                                                       permits      (millions 2007$)       permits      (millions 2007$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources:
    New Industrial............................................           $46,350            71,829            $3,329            71,657            $3,321
    New Commercial/Residential................................            23,175         1,985,948            46,024         1,985,930            46,024
    Permit revisions due to GHG...............................             1,677            61,836               104            60,921               102
                                                               -----------------------------------------------------------------------------------------
        Source Total..........................................  ................         2,119,613            49,457         2,118,508            49,447

Permitting Authority:
    New Industrial............................................            19,688            71,829             1,414            71,657             1,410
    New Commercial/Residential................................             9,844         1,985,948            19,550         1,985,930            19,550
    Permit revisions due to GHG...............................             1,840            61,836               114            60,921               112
                                                               -----------------------------------------------------------------------------------------
        Permitting Authority Total............................  ................         2,119,613            21,078         2,118,508            21,072
                                                               =========================================================================================
            Total Title V Regulatory Relief...................  ................  ................            70,535  ................            70,520
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Sums may not add due to rounding.
\1\ Annual title V avoided costs estimates represent information collection costs for one third of the total number of title V sources obtaining
  regulatory relief shown in Table VI-1 potentially requiring permits or permit revisions for GHG.
\2\ More details on these estimated regulatory relief benefits are available in the appendices to the ``Regulatory Impact Analysis for the Final
  Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule.''

2. What are annual benefits or avoided costs associated with NSR 
permitting regulatory relief?
    Table VI-3 summarizes the estimated annual permit burden costs 
avoided by sources and permitting authorities for PSD permitting due to 
this Tailoring Rule. The benefits associated with avoided cost of 
compliance for BACT for these sources is not included in these 
estimates due to a lack of available data. The estimated avoided burden 
or reporting and recordkeeping cost that would occur absent this rule 
for new industrial sources to obtain permits is estimated to be $84.5 
thousand for a modifying PSD industrial source and $59.2 thousand for a 
modifying commercial or multi-family residential source. New PSD 
sources will also be required to obtain a title V permit increasing 
these costs to $130.9 thousand per permit for new industrial sources 
and to $82.3 thousand per permit for new commercial or multi-family 
residential sources. (Note the title V costs for these new PSD sources 
have been included in title V estimates shown in Table VI-2.) New and 
modifying sources avoid approximately $5.5 billion annually in PSD 
permitting costs with this rule under the phase-in Step 1 threshold. 
Under the phase-in Step 2, 100,000 tpy CO2e threshold and 
75,000 tpy CO2e significance level, this avoided PSD 
permitting cost estimate

[[Page 31599]]

becomes $5.4 billion annually. State, local, and tribal permitting 
authorities are expected to avoid about $1.51 billion annually in 
administrative expenditures associated with postponing PSD program 
requirements for these GHG sources under Step 1 and $1.49 billion under 
Step 2. All estimates are shown in 2007 dollars.

                                  Table VI-3--Annual PSD Regulatory Relief for Sources and Permitting Authorities 1, 2
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                            Step one anyway            Step two 100,000 tpy  threshold,
                                                                                 ------------------------------------      75,000 significance level
                           Activity                              Cost per permit                                     -----------------------------------
                                                                     (2007$)          Number of       Avoided costs       Number of       Avoided costs
                                                                                       permits      (millions 2007$)       permits      (millions 2007$)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sources:
    New Industrial............................................           $84,530            26,089            $2,205            25,174            $2,128
    New Commercial/Residential................................            59,152            55,509             3,283            55,505             3,283
                                                               -----------------------------------------------------------------------------------------
        Source Total..........................................  ................            81,598             5,489            80,679             5,411

Permitting Authority:
    New Industrial............................................            23,243            26,089               606            25,174               585
    New Commercial/Residential................................            16,216            55,509               900            55,505               900
                                                               -----------------------------------------------------------------------------------------
        Permitting Authority Total............................  ................            81,598             1,506            80,679             1,485
                                                               =========================================================================================
            Total Title V Regulatory Relief...................  ................  ................             6,995  ................             6,896
--------------------------------------------------------------------------------------------------------------------------------------------------------
Notes: Sums may not add due to rounding.
\1\ All estimates are based upon PTE. Regulatory relief shown represents annual estimates of PSD permitting costs avoided under Steps 1 and 2 of the
  phase-in period.
\2\ More details on these estimated regulatory relief benefits are available in the appendices to the ``Regulatory Impact Analysis for the Final
  Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule.''

C. What are the economic impacts of this rulemaking?

    This final rulemaking does not impose economic burdens or costs on 
any sources or permitting authorities, but should be viewed as 
regulatory relief for smaller GHG emission sources and for permitting 
authorities. Although sources above the thresholds set in this rule 
will become subject to permitting on January 2, 2011, those impacts are 
not attributable to the present rulemaking. Rather they are mandated by 
the CAA and existing regulations and automatically take effect 
independent of this action.
    In addition to considering the regulatory relief expected for 
affected entities as a result of this final rule, the EPA considered 
the impact of this rulemaking to small entities (small businesses, 
governments and non-profit organizations) as required by the Regulatory 
Flexibility Act (RFA) and the Small Business Regulatory Enforcement 
Fairness Act (SBREFA). For informational purposes, the RIA includes the 
SBA definition of small entities by industry categories for stationary 
sources of GHG and potential regulatory relief from title V and NSR 
permitting programs for small sources of GHG. Since this rule does not 
impose regulatory requirements but rather lessens the regulatory burden 
of the CAA requirements to smaller sources of GHG, no economic costs 
are imposed upon small sources of GHG as a result of this final rule. 
Rather this action provides regulatory relief for small sources. These 
avoided costs or benefits accrue because small sources of GHG are not 
required to obtain a title V permit and new or modifying small sources 
of GHG are not required to meet PSD requirements. Some of the small 
sources benefitting from this action are small entities, and these 
entities will benefit from the regulatory relief finalized by this 
rule. For discussion of comments received and EPA responses regarding 
small entities impacts, see section VII of this preamble.

D. What are the costs of the final rule for society?

    EPA examined the social costs of this final rule. These social 
costs represent the foregone environmental benefits that will occur as 
a result of the regulatory relief offered to sources of GHG emissions. 
This action is one of regulatory relief since it increases the 
emissions thresholds for the title V and PSD programs, as they apply to 
sources of GHG emissions, to levels above those in the CAA. In this 
preamble section, the benefits or avoided regulatory costs of such 
relief are discussed, but there is also a social cost imposed by such 
relief, because this rule may forego some of the possible benefits 
associated with title V and PSD programs for sources of GHG emissions 
below the permitting thresholds established. These benefits are those 
attributed to title V and PSD permitting programs in general. These 
benefits are based upon the relevance of these programs to 
policymaking, transparency issues, and market efficiency, and therefore 
are very difficult to quantify and monetize. For title V, they include 
the benefits of improved compliance with CAA requirements that stem 
from (1) Improved clarity regarding applicability of requirements, (2) 
discovery and required correction of noncompliance prior to receiving a 
permit, (3) improving monitoring, recordkeeping, and reporting 
concerning compliance status, (4) self-certification of compliance with 
applicable requirements initially and annually, and prompt reporting of 
deviations from permit requirements, (5) enhanced opportunity for the 
public to understand and monitor sources' compliance obligations, and 
(6) improved ability of EPA, permitting authorities, and the public to 
enforce CAA requirements. However, it is important to remember that a 
title V permit generally does not add new requirements for pollution 
control itself, but rather collects all of a facility's applicable 
requirements under the CAA in one permitting mechanism. Therefore, the 
compliance benefits above are less when title V permits contains few or 
no CAA applicable requirements. During the initial steps of the phase-
in plan established under this action, we expect that the vast majority 
of sources excluded from title V would be sources that have no CAA 
applicable

[[Page 31600]]

requirements for GHG emissions and few or no requirements for other 
pollutants because their emissions of those pollutants are so small. 
For this reason, while it is extremely difficult to measure the degree 
of improved compliance, if any, that would be foregone, or to quantify 
the social costs that would be imposed, we expect that they would be 
small. We will be evaluating this issue further during subsequent 
phases.
    For PSD, the primary social cost imposed by the Tailoring Rule 
stems from the foregone benefit of applying BACT to the tens of 
thousands of small new sources and modifications that will be below our 
final thresholds during the first steps of the phase-in. This social 
cost potentially weighs against the cost savings described previously 
that stem (in part) from avoiding the administrative and control costs 
of applying BACT to these sources. The BACT requirement assures that 
new and modified sources, when they increase their emissions are using 
state-of-the-art emission controls and affords the public an 
opportunity to comment on the control decision. It does not prohibit 
increases but it assures that such controls are applied. Delaying the 
BACT requirement for numerous small sources during the first steps of 
the phase-in for this final rule could allow increases from these 
smaller sources that are greater than they would be if BACT were 
applied. A detailed analysis of this difference is beyond the scope of 
this rule, because we do not have detailed information on the universe 
of these tens of thousands of small PSD actions, the candidate BACT 
technologies for each of them, how permitting authorities would make 
the BACT decisions, and how the BACT limit would compare to what would 
otherwise be installed absent BACT.
    It is not possible at this time to quantify the social costs of 
avoided BACT. However, we note that the universe of possible emissions 
that would be regulated by sources excluded under the Tailoring Rule is 
small compared to those that would remain subject to PSD. The sources 
excluded in these first two steps of the phase-in plan of this action 
comprise only 11 percent of total stationary source GHG emissions, 
while 67 percent remain subject to regulation. Furthermore, we expect 
the emissions differences due to BACT controls for such sources to be 
relatively small due to the lack of available capture and control 
technologies for GHG at such sources that are akin to those that exist 
for conventional pollutants and sources, as well as the likelihood that 
even in the absence of BACT such sources would already be installing 
relatively efficient GHG technologies to save on fuel costs. Thus, 
while potential benefits would be foregone by excluding smaller sources 
from the permitting programs, these benefits are likely to be small. 
Under the Tailoring Rule, we will be working during the 6-year period 
to greatly improve our understanding of both the administrative costs 
of regulating and the social costs of not regulating smaller sources 
under PSD and title V, and we will be relying on that information to 
support our future threshold analyses called for under the action.
    In reaching the decisions for this Tailoring Rule, the EPA 
recognizes that GHG emissions can remain in the atmosphere for decades 
to centuries, meaning that their concentrations become well-mixed 
throughout the global atmosphere regardless of emission origin, and 
their effects on climate are long lasting and significant. A detailed 
explanation of climate change and its impact on health, society, and 
the environment is included in EPA's TSD for the endangerment finding 
action (Docket ID No. EPA-HQ-OAR-2009-0171). The EPA recognizes the 
importance of reducing climate change emissions for all sources of GHG 
emissions including those sources afforded regulatory relief in this 
rule and plans to address potential emission reductions from these 
small sources using voluntary and energy efficiency approaches. 
Elsewhere, we have discussed EPA's interest in continuing to use 
regulatory and/or non-regulatory tools for reducing emissions from 
smaller GHG sources because we believe that these tools will likely 
result in more efficient and cost-effective regulation than would case-
by-case permitting.

E. What are the net benefits of this final rule?

    The net benefits of this GHG tailoring rule represent the 
difference between the benefits and costs of this rule to society. As 
discussed in this preamble, this rule is one of regulatory relief and 
the benefits to society are estimates the regulatory relief (avoided 
permit burden costs) to sources and permitting authorities for Steps 1 
and 2 of the phase-in period. The social costs of the rule are the 
foregone environmental benefits in the form of potential GHG emission 
reductions that could occur during the phase-in period and are 
discussed qualitatively.
    This rulemaking provides regulatory relief for a phase-in period to 
smaller sources of GHG by phasing in the statutory permitting threshold 
at levels above statutory requirements. This final rule establishes 
thresholds and PSD significance levels for Steps 1 and 2 of the phase-
in period (the 2.5 year period between January 2, 2011 and July 1, 
2013), commits to considering a further Step 3, and indicates floor 
title V and PSD threshold levels from July 1, 2013 through April 30, 
2016. The net benefits of the final rule for Steps 1 and 2 are 
$193,598+B-C million for the 2 and one-half year period where B denotes 
the unquantified benefits and C the quantified costs of this final 
rule. These unquantified benefits of this rule include the avoided PSD 
BACT costs for new and modifying sources. The unquantified costs 
previously discussed relate to the foregone environment benefits or GHG 
emission reductions that might be possible during the 2.5 year Step 1 
and 2 phase-in period. These estimates are subject to significant 
uncertainties that are discussed at length in the Regulatory Impact 
Analysis for the Prevention of Significant Deterioration and Title V 
GHG Tailoring Rule contained in the docket to this final rule. All 
dollar estimates shown are based upon 2007$.

 Table VI-4--Net Benefits of the Rule for Steps 1 and 2 of the Phase-in
                                 Period
------------------------------------------------------------------------
                                                     Final rule amounts
                                                     (millions of 2007$)
------------------------------------------------------------------------
Benefits--Regulatory Relief:
Sources
    Title V \1\...................................              $123,624
    PSD \2\.......................................               $13,567
                                                   ---------------------
        Total Source Regulatory Relief............              $137,190
Permitting Authority:

[[Page 31601]]

    Title V \1\...................................               $52,684
    PSD \2\.......................................                $3,724
        Total Permitting Authority................               $56,407
                                                   =====================
        Total Regulatory Relief...................            $193,598+B
Costs--Foregone GHG Emission Reductions
    Title V & PSD.................................                     C
Net Benefits \3\..................................          $193,598+B-C
------------------------------------------------------------------------
 Benefits represent regulatory relief for sources with the annual
  potential to emit below the thresholds shown.
 B--Unquantified benefits of the rule include regulatory relief from
  BACT requirements for PSD sources.
 C--Unquantified social costs of tailoring rule represents economic
  value of foregone environmental benefits (potential GHG emission
  reductions) during Step 1 and 2 of the phase-in period. Foregone GHG
  emission reductions are not known at this time.
\1\ Reflects estimates of regulatory relief or avoided permit burden
  costs for title V GHG sources and permitting authorities.
\2\ Shows estimates of regulatory relief or avoided permit burden costs
  for GHG PSD sources and permitting authorities.
\3\ Includes one-half year of Step 1 (anyway threshold), 2 years of Step
  2 (100,000 threshold).

VII. Comments on Statutory and Executive Order Reviews

    In this section, we provide responses to comments we received for 
various Executive Orders.

A. Comments on Executive Order 12866--Regulatory Planning and Review

    At proposal, EPA prepared an analysis of the potential costs and 
benefits associated with EPA's Tailoring Rule proposal in an RIA. 
Several commenters state that EPA's failure to estimate the full costs 
of the effects of its interpretation of PSD applicability in the 
proposed Tailoring Rule violates Executive Order 12866. Some of these 
commenters maintain that Executive Order 12866 directs EPA to submit to 
the Office of Management and Budget (OMB) new significant regulations 
under consideration by the EPA. These commenters assert that, in the 
section 202 rule, EPA failed to analyze the effect on stationary 
sources in the cost benefit analysis and there is no indication that 
EPA included these impacts in its submission to OMB. According to the 
commenters, in EPA's proposal for this rulemaking, EPA has similarly 
failed to analyze the costs and benefits of triggering PSD for 
stationary sources. The commenters assert that without this key 
information, OMB could not fully review the impacts of the proposed 
rule. The commenters believe that EPA's failure to account for known 
costs that will occur as a direct result of the promulgation of the 
proposed rule in conjunction with the section 202 rule violates several 
applicable requirements of Executive Order 12866, including sections 
6(B)(ii) and 6(C)(iii), which require assessments of the potential 
costs and benefits of the regulatory action and ``reasonably feasible 
alternatives to the planned regulation, identified by the Agencies or 
the public * * *'' thereby violating both the APA and CAA section 
307(d) because they deprive businesses and permitting authorities alike 
of a meaningful opportunity to comment on the rule.
    The EPA has prepared a revised RIA assessing the benefits and costs 
of the final Tailoring Rule to support this rulemaking in accordance 
with Executive Order 12866, as was done with the proposal for this 
rulemaking. Similarly, the RIA completed for this action is subject to 
review by an Inter-agency review panel that includes OMB, as was the 
case with the proposal RIA. Further, the RIA completed for this final 
rule fully assesses the known benefits and costs associated with the 
Tailoring Rule. This final rule is one of regulatory relief from 
statutory requirements in which a large number of sources of GHGs will 
be relieved of the burden of title V and PSD permitting for a period of 
at least 6 years. This final rule will provide relief from title V 
permitting to over 6 million sources of GHG in this country. Likewise 
tens of thousands of sources potentially subject to PSD permitting 
requirements for GHGs will have regulation postponed for a period of at 
least 6 years. While larger sources of GHG may still be required to 
obtain title V permits or modify existing permits and to comply with 
PSD requirements, these burdens result from existing statutory 
requirements, not from this final Tailoring Rule.

B. Comments on the Paperwork Reduction Act

    At proposal, we stated in the preamble that we did not believe that 
the proposal would impose any new information collection burden. We 
concluded that the proposed action would reduce costs incurred by 
sources and permitting authorities relative to the costs that would be 
incurred if EPA did not revise the rule and provided estimates of those 
reduced costs. Further, we stated that, despite our estimated burden 
reductions, it was unnecessary for us to submit a new ICR to the OMB 
because the ICR contained in the existing regulations for PSD (see, 
e.g., 40 CFR 52.21) and title V (see 40 CFR parts 70 and 71) had 
already been approved under the provisions of the Paperwork Reduction 
Act, 44 U.S.C. 3501 et seq. and was assigned OMB control number 2060-
0003 and OMB control number 2060-0336, respectively.
    However, several commenters disagree that it was unnecessary for us 
to submit a new ICR for the proposed action. These commenters believe 
that (1) prior approval of an ICR for the PSD and title V programs 
ignores the fact that there would be an increase in the paperwork 
burden as a result of applying PSD and title V permitting requirements; 
and (2) unless EPA resubmits the information collection approval 
request to OMB with a proper and fully-inclusive analysis, EPA will 
lack authority to collect information from stationary sources for PSD 
and title V GHG emissions permitting.
    As we stated in the proposal, this is a burden relief rule and as 
such it does not impose any new requirements for the NSR or title V 
programs that are not currently required. For that reason, we concluded 
that for purposes of this rule it was unnecessary for us to submit a 
new ICR to the OMB and that the ICR contained in the existing 
regulations for PSD (see, e.g., 40 CFR 52.21) and title V (see 40 CFR 
parts 70 and 71) that had already been approved under the provisions of 
the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and was assigned 
OMB control number 2060-0003 and OMB control number 2060-0336, 
respectively, still applies.

[[Page 31602]]

    Nevertheless, we understand that once GHGs are regulated under the 
PSD and title V programs, there might be an increase in the overall 
paperwork burden for these programs. EPA will have to assess this 
possible burden during the normal course of 3-year renewal ICR process.

C. Comments on the RFA

    At proposal, EPA certified that the proposed rule would not have a 
significant impact on a substantial number of small entities and 
therefore we are not obligated to convene a formal Small Business 
Advocacy Review (SBAR) panel. This certification was based upon the 
fact that the proposed action would relieve the regulatory burden 
associated with the major PSD and title V operating permits programs 
for new or modified major sources that emit GHGs, including small 
businesses. Nevertheless, EPA was aware at proposal that many small 
entities would be interested in the various GHG rulemakings currently 
under development and might have concerns about the potential impacts 
of the statutory imposition of PSD requirements that may occur as a 
result of the group of EPA actions, notwithstanding the relief provided 
to small businesses by the Tailoring Rule. For these reasons, and in 
collaboration with the SBA, EPA conducted an outreach meeting designed 
to exchange information with small entities that may be interested in 
these regulations. The outreach effort was organized and led by 
representatives from EPA's Office of Air Quality Planning and Standards 
within the Office of Air and Radiation, EPA's Office of Policy 
Economics and Innovation, the Office of Information and Regulatory 
Affairs within OMB, and the Office of Advocacy of the SBA. This meeting 
was conducted on November 17, 2009 in Arlington, VA, and documentation 
of this meeting, which includes a summary of the advice and 
recommendations received from the small entity representatives 
identified for the purposes of this process, can be obtained in the 
docket for this rulemaking. (See Docket No. EPA-HQ-OAR-2009-0517-
19130.)
    During the comment period, several commenters alleged that EPA 
inappropriately limited its RIA and RFA/SBREFA analysis, and that had 
we done a comprehensive analysis, we would not have been able to 
certify that any of the proposed rules will not have a significant 
economic impact on a ``substantial number of small entities.'' Thus 
they conclude that EPA failed to prepare and publicize an initial 
regulatory flexibility analysis (IRFA). Additional commenters stated 
that EPA's failure to conduct an IRFA to assess the full costs of the 
effects of its interpretation of PSD applicability in the proposed 
Tailoring Rule violates a host of statutes and Executive Orders 
requiring analysis and public review of regulatory burdens. These 
commenters conclude that EPA should have convened one or more SBAR 
Panels.
    We are not persuaded that we should have taken into account effects 
beyond those caused by the Tailoring Rule when we made our 
certification of no significant economic impact on a substantial number 
of small entities for this rule. No permitting requirements are imposed 
by this final Tailoring Rule. Instead, this final Tailoring Rule offers 
regulatory relief to over an estimated six million sources of GHG 
emissions that would otherwise be required to obtain a title V permit 
and tens of thousands of sources of GHG emissions subject to PSD 
permitting requirements that would otherwise be required statutorily to 
obtain permit. The RFA does not require that an agency complete a 
regulatory flexibility analysis or conduct an SBAR panel where the rule 
does not have any negative impact on small entities. For more 
discussion of RFA issues, please see the RTC document.

D. Comments on the Unfunded Mandates Reform Act

    At proposal, EPA asserted that the Tailoring Rule does not impose 
unfunded mandates on any entities including sources and permitting 
authorities. Since the proposed Tailoring Rule is one of regulatory 
relief, it alleviates the burden of adhering to statutorily required 
permitting thresholds and does not impose regulatory requirements.
    Some commenters on the proposed rule assert that EPA has failed to 
comply with the requirements of the Unfunded Mandates Reform Act 
(UMRA), pursuant to which EPA must assess the effects of the proposed 
rule on state, local, and tribal governments and the private sector. 
Specifically, these commenters state that section 202 of the UMRA 
requires EPA to prepare a written statement, including a cost-benefit 
analysis, for proposed rules with ``federal mandates'' that may result 
in expenditures to state, local, and tribal governments, in the 
aggregate, or to the private sector, of $100 million or more in any 1 
year. According to the commenters, in concluding that ``the revisions 
would ultimately reduce the PSD and title V program administrative 
burden that would otherwise occur in the absence of this rulemaking,'' 
EPA did not account for the billions of dollars that permitting 
authorities and stationary sources will soon be required to spend once 
PSD is triggered for GHGs. Additionally, a few commenters contend that 
the EPA underestimated the impacts to public utilities which are owned/
operated by local governments and also to state regulatory agencies.
    The EPA has carefully considered the comments on unfunded mandates 
expressed by commenters to the proposed rule. The EPA did complete a 
RIA for the final rule assessing the benefits and costs of the 
Tailoring Rule, including any unfunded mandates. As previously 
discussed, the Tailoring Rule is one of regulatory relief because it 
increases the GHG emissions threshold for NSR and title V permitting 
substantially above otherwise statutory requirements. As such, the EPA 
has determined that this Tailoring Rule does not impose unfunded 
mandates on any entities. This RIA of the final rule incorporates the 
extensive changes made in this final rule, including increased 
threshold levels for title V and PSD above those contained in the 
proposed rule. While we also incorporated improved estimates of the 
costs for sources to obtain permits and for permitting authorities to 
process permits, they do not change our conclusion that this final rule 
does not impose unfunded mandates on any entities.

E. Comments on Executive Order 13132--Federalism

    Some comments received on the proposed rule assert that federalism 
concerns were ignored, in violation of Executive Order 13132. According 
to the commenters, EPA cannot maintain that the Tailoring Rule ``will 
not have a substantial direct effect on the states, on the relationship 
between the national government and the states, or on the distribution 
of power and responsibilities between various levels of government,'' 
such that Executive Order 13132 does not apply. Some of these 
commenters assert that the proposed rulemaking would require radical 
changes in state laws, interjects GHGs into permit programs never once 
conceived for that purpose (any more than was EPA's), requires massive 
staff hiring at state agencies, and rewrites SIPs in place for years or 
even decades.
    As we stated previously, this is a burden relief rule and as such 
it does not impose any requirements for the NSR or title V programs 
that are not currently required. In addition, this action does not 
interject GHGs into the permit programs, nor does it change state laws 
or SIPs to impose any new permitting requirements. Instead, this

[[Page 31603]]

action will significantly reduce the burden and costs incurred by 
sources and permitting authorities relative to the burden and costs 
that would be incurred if EPA did not revise the permitting provisions 
to account for higher applicability thresholds for GHG emissions.
    However, since this rule finalizes burden reducing thresholds that 
will not otherwise apply to the PSD and title V programs, we are aware 
that a few states may have to amend their SIPs to incorporate these new 
thresholds if they do not incorporate federal rules by reference and 
cannot adopt our approach through interpretation. Executive Order 13132 
is still not implicated by this rule because it finalizes burden 
reducing thresholds that would not otherwise apply to the PSD and title 
V programs.

F. Comments on Executive Order 13175--Consultation and Coordination 
With Indian Tribal Governments

    The National Tribal Air Association (NTAA) supports EPA's proposed 
rule but requests that tribal air grant funding be increased to reflect 
the air quality-related needs of tribes across the nation, and to allow 
these tribes the opportunity to implement the CAA's PSD and title V 
programs. The NTAA states that, not only are tribes eligible for 
section 103 grant funding to conduct air quality monitoring, emissions 
inventories, and other studies and assessments, but they may also 
obtain section 105 grant funding to implement CAA regulatory programs. 
According to the NTAA, tribes are facing many of the same air-related 
issues that neighboring state and local jurisdictions are facing, but 
are significantly underfunded to address such issues.
    The Agency is aware and concerned about the resource needs for the 
tribal air program and we are working to see how grant funding might be 
increased in the future. Nevertheless and for the purpose of the 
permitting programs, we want to clarify that tribes that develop Tribal 
Implementation Plans (TIPs) can charge for permits and tribes with 
delegation or authorization would develop permit fee programs under 
their authority (e.g., Navajo's permit fee program for their delegated 
title V permit program) to fund both the NSR and title V programs. For 
these reasons, there are a number of ways we would like to work with 
tribes to address the funding concern, including encouraging delegation 
or authorization of permitting programs and having model codes 
available for tribes that want to do TIPs for NSR and title V 
permitting.

G. Comments on Executive Order 13211--Actions That Significantly Affect 
Energy Supply, Distribution, or Use

    Other commenters assert that EPA's analysis under Executive Order 
13211 is insufficient because it addresses only smaller sources. These 
commenters contend that EPA has not meaningfully examined the energy 
implications of its proposed actions and interpretations of the CAA. 
The commenters disagree with EPA's conclusion that the imposition of 
costly PSD obligations on power plants would have no impact on power 
supply, distribution, or use, when those plants will have had no time 
to prepare for compliance and no idea what BACT may be for GHG 
emissions. Other commenters opine that the adoption of BACT for some 
industries newly-subject to PSD permitting requirements for GHGs could 
involve fuel-switching, and increased energy costs (due to the need for 
a source to convert from coal to natural gas to meet BACT).
    Again, this action is a burden relief rule and as such it does not 
create any new requirements for sources in the energy supply, 
distribution, or use sectors. For the purpose of the BACT 
determinations for GHGs, the long-standing top-down BACT selection 
process still applies. Under the CAA and EPA's implementing 
regulations, BACT is still an emission limitation based on the maximum 
degree of emission reduction achievable through application of 
production processes and available methods, systems, and techniques 
that considers energy, environmental, and economic impacts. In other 
words, BACT determinations for GHGs will still have to consider energy, 
environmental and economic feasibility for the various control 
technologies under consideration before selecting a particular 
technology as BACT for a specific source. For that reason, what BACT 
may be for GHG emissions will vary by source, and the technology that 
is ultimately selected has to be one that is feasible based on the 
current energy, environmental and economic impacts that the planned 
technology might have. Thus, we do not believe that this action is 
likely to have a significant adverse effect on the supply, 
distribution, or use of energy.

VIII. Statutory and Executive Order Reviews

A. Executive Order 12866--Regulatory Planning and Review

    Under section 3(f)(1) of Executive Order 12866 (58 FR 51735, 
October 4, 1993), this action is an ``economically significant 
regulatory action'' because it is likely to have an annual effect on 
the economy of $100 million or more. Accordingly, EPA submitted this 
action to the OMB for review under Executive Order 12866 and any 
changes made in response to OMB recommendations have been documented in 
the docket for this action.
    In addition, EPA prepared an analysis of the potential costs and 
benefits associated with this action. This analysis is contained in the 
RIA for this final rule. A copy of the analysis is available in the 
docket for this action and the analysis is briefly summarized in 
section VII of this preamble.
    This rule uses a phased-in approach for requiring larger sources of 
GHG emissions to comply with title V operating permit and PSD statutory 
requirements, essentially lifting this burden for a period of at least 
6 years for a large number of sources of GHG. Thus, this rule provides 
regulatory relief rather than regulatory requirements for these GHG 
sources. For sources of GHG that will be required to obtain title V 
permits and/or comply with PSD requirements, there are no direct 
economic burdens or costs as a result of this final rule, because these 
requirements are not imposed as a result of this rulemaking. Statutory 
requirements to obtain a title V operating permit or to adhere to PSD 
requirements are already mandated by the CAA and by existing rules, not 
by this rule. As a result, this Tailoring Rule annual effect on the 
economy will be positive because it will result in billions of dollars 
of regulatory relief during the phase-in period.

B. Paperwork Reduction Act

    This action does not impose any new information collection burden. 
Instead, this action will significantly reduce costs incurred by 
sources and permitting authorities relative to the costs that would be 
incurred if EPA did not revise the rule. Based on our revised GHG 
threshold data analysis, we estimate that over 80,000 new and modified 
facilities per year would be subject to PSD review based on applying a 
GHG emissions threshold of 100/250 tpy using a CO2e metric. 
This is compared to 280 PSD permits currently issued per year, which is 
an increase of more than 280-fold. Similarly, for title V, we estimate 
that over six million new sources would be affected at the 100-tpy 
threshold for GHGs using the CO2e metric. By increasing the 
volume of permits by over 400 times, the administrative burden would be 
unmanageable without this rule.
    However, OMB has previously approved the information collection

[[Page 31604]]

requirements contained in the existing regulations for PSD (see, e.g., 
40 CFR 52.21) and title V (see 40 CFR parts 70 and 71) under the 
provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and 
has assigned OMB control number 2060-0003 and OMB control number 2060-
0336. The OMB control numbers for EPA's regulations in 40 CFR are 
listed in 40 CFR part 9.

C. Regulatory Flexibility Act

    The RFA generally requires an agency to prepare a regulatory 
flexibility analysis of any rule subject to notice and comment 
rulemaking requirements under the APA or any other statute unless the 
agency certifies that the rule will not have a significant economic 
impact on a substantial number of small entities. Small entities 
include small businesses, small organizations, and small governmental 
jurisdictions.
    For purposes of assessing the impacts of this final action on small 
entities, small entity is defined as: (1) A small business that is a 
small industrial entity as defined in the U.S. SBA size standards (see 
13 CFR 121.201); (2) a small governmental jurisdiction that is a 
government of a city, county, town, school district, or special 
district with a population of less than 50,000; or (3) a small 
organization that is any not-for-profit enterprise that is 
independently owned and operated and is not dominant in its field.
    After considering the economic impacts of this final rule on small 
entities, I certify that this final action will not have a significant 
economic impact on a substantial number of small entities. In 
determining whether a rule has a significant economic impact on a 
substantial number of small entities, the impact of concern is any 
significant adverse economic impact on small entities, since the 
primary purpose of the regulatory flexibility analyses is to identify 
and address regulatory alternatives ``which minimize any significant 
economic impact of the rule on small entities.'' 5 U.S.C. 603 and 604. 
Thus, an agency may certify that a rule will not have a significant 
economic impact on a substantial number of small entities if the rule 
relieves regulatory burden, or otherwise has a positive economic effect 
on all of the small entities subject to the rule.
    We have therefore concluded that this final rule will relieve the 
regulatory burden for most affected small entities associated with the 
major PSD and title V operating permits programs for new or modified 
major sources that emit GHGs, including small businesses. This is 
because this rule raises the major source applicability thresholds for 
these programs for the sources that emit GHGs. As a result, the program 
changes provided in this rule are not expected to result in a 
significant economic impact on a substantial number of small entities.

D. Unfunded Mandates Reform Act

    This rule does not contain a federal mandate that may result in 
expenditures of $100 million or more for state, local, and tribal 
governments, in the aggregate, or the private sector in any 1 year. 
Only those few states whose permitting authorities do not implement the 
federal PSD and title V rules by reference in their SIPs will have a 
small increase in burden. These states will have to amend their 
corresponding SIPs to incorporate the new applicability thresholds, 
since the burden reducing thresholds that we are finalizing with this 
rule will not otherwise apply to the PSD and title V programs. Thus, 
this rule is not subject to the requirements of sections 202 or 205 of 
UMRA.
    This rule is also not subject to the requirements of section 203 of 
UMRA because it contains no regulatory requirements that might 
significantly or uniquely affect small governments. As discussed 
earlier, this rule is expected to result in cost savings and an 
administrative burden reduction for all permitting authorities and 
permittees, including small governments.

E. Executive Order 13132--Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132. These final amendments will 
ultimately simplify and reduce the burden on state and local agencies 
associated with implementing the PSD and title V operating permits 
programs, by providing that a source whose GHG emissions are below the 
proposed levels will not have to obtain a PSD permit or title V permit. 
Thus, Executive Order 13132 does not apply to this action.
    In the spirit of Executive Order 13132, and consistent with EPA 
policy to promote communications between EPA and state and local 
governments, EPA specifically solicited comment on the proposed rule 
from state and local officials.

F. Executive Order 13175--Consultation and Coordination With Indian 
Tribal Governments

    Subject to the Executive Order 13175 (65 FR 67249, November 9, 
2000) EPA may not issue a regulation that has tribal implications, that 
imposes substantial direct compliance costs, and that is not required 
by statute, unless the federal government provides the funds necessary 
to pay the direct compliance costs incurred by tribal governments, or 
EPA consults with tribal officials early in the process of developing 
the proposed regulation and develops a tribal summary impact statement.
    EPA has concluded that this action may have tribal implications. 
However, it will neither impose substantial direct compliance costs on 
tribal governments, nor preempt tribal law. There are no tribal 
authorities, currently issuing major NSR permits; however, this may 
change in the future.
    EPA consulted with tribal officials early in the process of 
developing this regulation to allow them to have meaningful and timely 
input into its development by publishing an ANPR that included GHG 
tailoring options for regulating GHGs under the CAA. (73 FR 44354, July 
30, 2008) As a result of the ANPR, EPA received several comments from 
tribal officials on differing GHG tailoring options presented in the 
ANPR which were considered in the proposal and this final rule. 
Additionally, we also specifically solicited comment from tribal 
officials on the proposed rule (74 FR 55292, October 27, 2009).

G. Executive Order 13045--Protection of Children From Environmental 
Health and Safety Risks

    EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) 
as applying only to those regulatory actions that concern health or 
safety risks, such that the analysis required under section 5-501 of 
the Executive Order has the potential to influence the regulation. This 
action is not subject to Executive Order 13045 because it does not 
establish an environmental standard intended to mitigate health or 
safety risks.

H. Executive Order 13211--Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    This action is not a ``significant energy action'' as defined in 
Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not 
likely to have a significant adverse effect on the supply, 
distribution, or use of energy. Further, we have concluded that this 
rule is not likely to have any adverse energy effects

[[Page 31605]]

because this action would not create any new requirements for sources 
in the energy supply, distribution, or use sectors.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law No. 104-113, 12(d) (15 U.S.C. 272 
note) directs EPA to use voluntary consensus standards in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical. Voluntary consensus standards 
are technical standards (e.g., materials specifications, test methods, 
sampling procedures, and business practices) that are developed or 
adopted by voluntary consensus standards bodies. The NTTAA directs EPA 
to provide Congress, through OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    This action does not involve technical standards. Therefore, EPA 
did not consider the use of any voluntary consensus standards.

J. Executive Order 12898--Federal Actions To Address Environmental 
Justice in Minority Populations and Low-Income Populations

    Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes 
federal executive policy on environmental justice. Its main provision 
directs federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the United States.
    EPA has concluded that it is not practicable to determine whether 
there would be disproportionately high and adverse human health or 
environmental effects on minority and/or low income populations from 
this rule. This rule is necessary in order to allow for the continued 
implementation of permitting requirements established in the statute. 
Specifically, without this rule, the CAA permitting programs (PSD and 
title V) would become overwhelmed and unmanageable by the millions of 
GHG sources that would become newly subject to them. This would result 
in severe impairment of the functioning of these programs with 
potentially adverse human health and environmental effects nationwide. 
Under this rule and the legal doctrines of ``absurd results,'' 
administrative necessity, and one-step-at-a-time, EPA is ensuring that 
the CAA permitting programs continue to operate by limiting their 
applicability to the maximum number of sources the programs can 
possibly handle. This approach is consistent with congressional intent 
as it allows PSD applicability to at least the largest sources 
initially, at least to as many more sources as possible, and as 
promptly as possible over time. By doing so, this rule allows for the 
maximum degree of environmental protection possible while providing 
regulatory relief for the unmanageable burden that would otherwise 
exist. Therefore, we believe it is not practicable to identify and 
address disproportionately high and adverse human health or 
environmental effects on minority populations and low income 
populations in the United States under this final rule.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by 
SBREFA, generally provides that before a rule may take effect, the 
agency promulgating the rule must submit a rule report, which includes 
a copy of the rule, to each House of the Congress and to the 
Comptroller General of the United States. EPA will submit a report 
containing this rule and other required information to the U.S. Senate, 
the U.S. House of Representatives, and the Comptroller General of the 
United States prior to publication of the rule in the Federal Register. 
A major rule cannot take effect until 60 days after it is published in 
the Federal Register. This action is a ``major rule'' as defined by 5 
U.S.C. 804(2). This rule will be effective August 2, 2010.

L. Judicial Review

    Under section 307(b)(1) of the Act, petitions for judicial review 
of this action must be filed in the United States Court of Appeals for 
the District of Columbia Circuit by August 2, 2010. Any such judicial 
review is limited to only those objections that are raised with 
reasonable specificity in timely comments. Filing a petition for 
reconsideration by the Administrator of this final rule does not affect 
the finality of this rule for the purposes of judicial review nor does 
it extend the time within which a petition for judicial review may be 
filed, and shall not postpone the effectiveness of such rule or action. 
Under section 307(b)(2) of the Act, the requirements of this final 
action may not be challenged later in civil or criminal proceedings 
brought by us to enforce these requirements. Pursuant to section 
307(d)(1)(V) of the Act, the Administrator determines that this action 
is subject to the provisions of section 307(d). Section 307(d)(1)(V) 
provides that the provisions of section 307(d) apply to ``such other 
actions as the Administrator may determine.'' This action finalizes 
some, but not all, elements of a previous proposed action--the 
Prevention of Significant Deterioration and Title V Greenhouse Gas 
Tailoring Rule Proposed Rule (74 FR 55292, October 27, 2009).

IX. Statutory Authority

    The statutory authority for this action is provided by sections 
307(d)(7)(B), 101, 111, 114, 116, and 301 of the CAA as amended (42 
U.S.C. 7401, 7411, 7414, 7416, and 7601). This action is also subject 
to section 307(d) of the CAA (42 U.S.C. 7407(d)).

List of Subjects

40 CFR Part 51

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Carbon dioxide, Carbon dioxide equivalents, 
Greenhouse gases, Hydrofluorocarbons, Intergovernmental relations, 
Methane, Nitrous oxide, Perfluorocarbons, Reporting and recordkeeping 
requirements, Sulfur hexafluoride.

40 CFR Part 52

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Carbon dioxide, Carbon dioxide equivalents, 
Greenhouse gases, Hydrofluorocarbons, Intergovernmental relations, 
Methane, Nitrous oxide, Perfluorocarbons, Reporting and recordkeeping 
requirements, Sulfur hexafluoride.

40 CFR Part 70

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Carbon dioxide, Carbon dioxide equivalents, 
Greenhouse gases, Hydrofluorocarbons, Intergovernmental relations, 
Methane, Nitrous oxide, Perfluorocarbons, Reporting and recordkeeping 
requirements, Sulfur hexafluoride.

40 CFR Part 71

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Carbon dioxide, Carbon dioxide equivalents, 
Greenhouse gases, Hydrofluorocarbons, Methane, Nitrous oxide, 
Perfluorocarbons, Reporting and recordkeeping requirements, Sulfur 
hexafluoride.

[[Page 31606]]

    Dated: May 13, 2010.
Lisa P. Jackson,
Administrator.

0
For reasons stated in the preamble, title 40, chapter I of the Code of 
Federal Regulations is amended as set forth below.

PART 51--[AMENDED]

0
1. The authority citation for part 51 continues to read as follows:

    Authority:  23 U.S.C. 101; 42 U.S.C. 7401-7671q.

Subpart I--[Amended]

0
2. Section 51.166 is amended:
0
a. By adding paragraph (b)(48);
0
b. By revising paragraph (b)(49)(iv); and
0
c. By adding paragraph (b)(49)(v).
    The revisions and additions read as follows:

Sec.  51.166  Prevention of significant deterioration of air quality.

* * * * *
    (b) * * *
    (48) Subject to regulation means, for any air pollutant, that the 
pollutant is subject to either a provision in the Clean Air Act, or a 
nationally-applicable regulation codified by the Administrator in 
subchapter C of this chapter, that requires actual control of the 
quantity of emissions of that pollutant, and that such a control 
requirement has taken effect and is operative to control, limit or 
restrict the quantity of emissions of that pollutant released from the 
regulated activity. Except that:
    (i) Greenhouse gases (GHGs), the air pollutant defined in Sec.  
86.1818-12(a) of this chapter as the aggregate group of six greenhouse 
gases: Carbon dioxide, nitrous oxide, methane, hydrofluorocarbons, 
perfluorocarbons, and sulfur hexafluoride, shall not be subject to 
regulation except as provided in paragraphs (b)(48)(iv) through (v) of 
this section.
    (ii) For purposes of paragraphs (b)(48)(iii) through (v) of this 
section, the term tpy CO2 equivalent emissions 
(CO2e) shall represent an amount of GHGs emitted, and shall 
be computed as follows:
    (a) Multiplying the mass amount of emissions (tpy), for each of the 
six greenhouse gases in the pollutant GHGs, by the gas's associated 
global warming potential published at Table A-1 to subpart A of part 98 
of this chapter--Global Warming Potentials.
    (b) Sum the resultant value from paragraph (b)(48)(ii)(a) of this 
section for each gas to compute a tpy CO2e.
    (iii) The term emissions increase as used in paragraphs (b)(48)(iv) 
through (v) of this section shall mean that both a significant 
emissions increase (as calculated using the procedures in (a)(7)(iv) of 
this section) and a significant net emissions increase (as defined in 
paragraphs (b)(3) and (b)(23) of this section) occur. For the pollutant 
GHGs, an emissions increase shall be based on tpy CO2e, and 
shall be calculated assuming the pollutant GHGs is a regulated NSR 
pollutant, and ``significant'' is defined as 75,000 tpy CO2e 
instead of applying the value in paragraph (b)(23)(ii) of this section.
    (iv) Beginning January 2, 2011, the pollutant GHGs is subject to 
regulation if:
    (a) The stationary source is a new major stationary source for a 
regulated NSR pollutant that is not GHGs, and also will emit or will 
have the potential to emit 75,000 tpy CO2e or more; or
    (b) The stationary source is an existing major stationary source 
for a regulated NSR pollutant that is not GHGs, and also will have an 
emissions increase of a regulated NSR pollutant, and an emissions 
increase of 75,000 tpy CO2e or more; and,
    (v) Beginning July 1, 2011, in addition to the provisions in 
paragraph (b)(48)(iv) of this section, the pollutant GHGs shall also be 
subject to regulation:
    (a) At a new stationary source that will emit or have the potential 
to emit 100,000 tpy CO2e; or
    (b) At an existing stationary source that emits or has the 
potential to emit 100,000 tpy CO2e, when such stationary 
source undertakes a physical change or change in the method of 
operation that will result in an emissions increase of 75,000 tpy 
CO2e or more.
    (49) * * *
    (iv) Any pollutant that otherwise is subject to regulation under 
the Act as defined in paragraph (b)(48) of this section.
    (v) Notwithstanding paragraphs (b)(49)(i) through (iv) of this 
section, the term regulated NSR pollutant shall not include any or all 
hazardous air pollutants either listed in section 112 of the Act, or 
added to the list pursuant to section 112(b)(2) of the Act, and which 
have not been delisted pursuant to section 112(b)(3) of the Act, unless 
the listed hazardous air pollutant is also regulated as a constituent 
or precursor of a general pollutant listed under section 108 of the 
Act.
* * * * *

PART 52--[AMENDED]

0
3. The authority citation for part 52 continues to read as follows:

    Authority:  42 U.S.C. 7401, et seq.

Subpart A--[Amended]

0
4. Section 52.21 is amended:
0
a. By adding paragraph (b)(49);
0
b. By revising paragraph (b)(50)(iv); and
0
c. By adding paragraph (b)(50)(v).
    The revisions and additions read as follows:

Sec.  52.21  Prevention of significant deterioration of air quality.

* * * * *
    (b) * * *
    (49) Subject to regulation means, for any air pollutant, that the 
pollutant is subject to either a provision in the Clean Air Act, or a 
nationally-applicable regulation codified by the Administrator in 
subchapter C of this chapter, that requires actual control of the 
quantity of emissions of that pollutant, and that such a control 
requirement has taken effect and is operative to control, limit or 
restrict the quantity of emissions of that pollutant released from the 
regulated activity. Except that:
    (i) Greenhouse gases (GHGs), the air pollutant defined in Sec.  
86.1818-12(a) of this chapter as the aggregate group of six greenhouse 
gases: Carbon dioxide, nitrous oxide, methane, hydrofluorocarbons, 
perfluorocarbons, and sulfur hexafluoride, shall not be subject to 
regulation except as provided in paragraphs (b)(49)(iv) through (v) of 
this section.
    (ii) For purposes of paragraphs (b)(49)(iii) through (v) of this 
section, the term tpy CO2 equivalent emissions 
(CO2e) shall represent an amount of GHGs emitted, and shall 
be computed as follows:
    (a) Multiplying the mass amount of emissions (tpy), for each of the 
six greenhouse gases in the pollutant GHGs, by the gas's associated 
global warming potential published at Table A-1 to subpart A of part 98 
of this chapter--Global Warming Potentials.
    (b) Sum the resultant value from paragraph (b)(49)(ii)(a) of this 
section for each gas to compute a tpy CO2e.
    (iii) The term emissions increase as used in paragraphs (b)(49)(iv) 
through (v) of this section shall mean that both a significant 
emissions increase (as calculated using the procedures in paragraph 
(a)(2)(iv) of this section) and a significant net emissions increase 
(as defined in paragraphs (b)(3) and (b)(23) of this section) occur. 
For the pollutant GHGs, an emissions increase shall be based on tpy 
CO2e, and shall be calculated assuming the pollutant GHGs is 
a regulated NSR pollutant, and ``significant'' is defined as 75,000 tpy 
CO2e instead of applying the value in paragraph (b)(23)(ii) 
of this section.

[[Page 31607]]

    (iv) Beginning January 2, 2011, the pollutant GHGs is subject to 
regulation if:
    (a) The stationary source is a new major stationary source for a 
regulated NSR pollutant that is not GHGs, and also will emit or will 
have the potential to emit 75,000 tpy CO2e or more; or
    (b) The stationary source is an existing major stationary source 
for a regulated NSR pollutant that is not GHGs, and also will have an 
emissions increase of a regulated NSR pollutant, and an emissions 
increase of 75,000 tpy CO2e or more; and,
    (v) Beginning July 1, 2011, in addition to the provisions in 
paragraph (b)(49)(iv) of this section, the pollutant GHGs shall also be 
subject to regulation
    (a) At a new stationary source that will emit or have the potential 
to emit 100,000 tpy CO2e; or
    (b) At an existing stationary source that emits or has the 
potential to emit 100,000 tpy CO2e, when such stationary 
source undertakes a physical change or change in the method of 
operation that will result in an emissions increase of 75,000 tpy 
CO2e or more.
    (50) * * *
    (iv) Any pollutant that otherwise is subject to regulation under 
the Act as defined in paragraph (b)(49) of this section.
    (v) Notwithstanding paragraphs (b)(50)(i) through (iv) of this 
section, the term regulated NSR pollutant shall not include any or all 
hazardous air pollutants either listed in section 112 of the Act, or 
added to the list pursuant to section 112(b)(2) of the Act, and which 
have not been delisted pursuant to section 112(b)(3) of the Act, unless 
the listed hazardous air pollutant is also regulated as a constituent 
or precursor of a general pollutant listed under section 108 of the 
Act.
* * * * *

0
5. A new Sec.  52.22 is added to read as follows:

Sec.  52.22  Enforceable commitments for further actions addressing the 
pollutant greenhouse gases (GHGs).

    (a) Definitions.
    (1) Greenhouse Gases (GHGs) means the air pollutant as defined in 
Sec.  86.1818-12(a) of this chapter as the aggregate group of six 
greenhouse gases: Carbon dioxide, nitrous oxide, methane, 
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.
    (2) All other terms used in this section shall have the meaning 
given in Sec.  52.21.
    (b) Further action to regulate GHGs under the PSD program.
    (1) Near term action on GHGs. The Administrator shall solicit 
comment, under section 307(b) of the Act, on promulgating lower GHGs 
thresholds for PSD applicability. Such action shall be finalized by 
July 1, 2012 and become effective July 1, 2013.
    (2) Further study and action on GHGs.
    (i) No later than April 30, 2015 the Administrator shall complete a 
study projecting the administrative burdens that remain with respect to 
stationary sources for which GHGs do not constitute a regulated NSR 
pollutant. Such study shall account, among other things, for permitting 
authorities ability to secure resources, hire and train staff; 
experiences associated with GHG permitting for new types of sources and 
technologies; and, the success of streamlining measures developed by 
EPA (and adopted by the states) for reducing the permitting burden 
associated with such stationary sources.
    (ii) Based on the results of the study described in paragraph 
(b)(2)(i) of this section, the Administrator shall propose a rule 
addressing the permitting obligations of such stationary sources under 
Sec.  52.21 and Sec.  51.166 of this chapter. The Administrator shall 
take final action on such a rule no later than April 30, 2016.
    (iii) Before completing the rule described in paragraph (b)(2)(ii) 
of this section, the Administrator shall take no action to make the 
pollutant GHGs subject to regulation at stationary sources that emit or 
have the potential to emit less than 50,000 tpy CO2e, or for 
physical changes or changes in the method of operations at stationary 
sources that result in an emissions increase of less than 50,000 tpy 
CO2e (as determined using the methodology described in Sec.  
52.21(b)(49)(ii).)

PART 70--[AMENDED]

0
6. The authority citation for part 70 continues to read as follows:

    Authority:  42 U.S.C. 7401, et seq.

0
7. Section 70.2 is amended:
0
a. By revising the introductory text of paragraph (2) of the definition 
for ``major source''; and
0
b. By adding a definition for ``Subject to regulation'' in alphabetical 
order.
    The revision and addition read as follows:

Sec.  70.2  Definitions.

* * * * *
    Major source * * *
    (2) A major stationary source of air pollutants, as defined in 
section 302 of the Act, that directly emits, or has the potential to 
emit, 100 tpy or more of any air pollutant subject to regulation 
(including any major source of fugitive emissions of any such 
pollutant, as determined by rule by the Administrator). The fugitive 
emissions of a stationary source shall not be considered in determining 
whether it is a major stationary source for the purposes of section 
302(j) of the Act, unless the source belongs to one of the following 
categories of stationary source:
* * * * *
    Subject to regulation means, for any air pollutant, that the 
pollutant is subject to either a provision in the Clean Air Act, or a 
nationally-applicable regulation codified by the Administrator in 
subchapter C of this chapter, that requires actual control of the 
quantity of emissions of that pollutant, and that such a control 
requirement has taken effect and is operative to control, limit or 
restrict the quantity of emissions of that pollutant released from the 
regulated activity. Except that:
    (1) Greenhouse gases (GHGs), the air pollutant defined in Sec.  
86.1818-12(a) of this chapter as the aggregate group of six greenhouse 
gases: carbon dioxide, nitrous oxide, methane, hydrofluorocarbons, 
perfluorocarbons, and sulfur hexafluoride, shall not be subject to 
regulation unless, as of July 1, 2011, the GHG emissions are at a 
stationary source emitting or having the potential to emit 100,000 tpy 
CO2 equivalent emissions.
    (2) The term tpy CO2 equivalent emissions 
(CO2e) shall represent an amount of GHGs emitted, and shall 
be computed by multiplying the mass amount of emissions (tpy), for each 
of the six greenhouse gases in the pollutant GHGs, by the gas's 
associated global warming potential published at Table A-1 to subpart A 
of part 98 of this chapter--Global Warming Potentials, and summing the 
resultant value for each to compute a tpy CO2e.
* * * * *

0
8. A new Sec.  70.12 is added to read as follows:

Sec.  70.12  Enforceable commitments for further actions addressing 
greenhouse gases (GHGs).

    (a) Definitions.
    (1) Greenhouse Gases (GHGs) means the air pollutant as defined in 
Sec.  86.1818-12(a) of this chapter as the aggregate group of six 
greenhouse gases: carbon dioxide, nitrous oxide, methane, 
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.
    (2) All other terms used in this section shall have the meaning 
given in Sec.  70.2.
    (b) Further action to regulate GHGs under the title V program.
    (1) Near term action on GHGs. The Administrator shall solicit 
comment,

[[Page 31608]]

under section 307(b) of the Act, on promulgating lower GHGs thresholds 
for applicability under Sec.  70.2. Such action shall be finalized by 
July 1, 2012 and become effective July 1, 2013.
    (2) Further study and action on GHGs.
    (i) No later than April 30, 2015 the Administrator shall complete a 
study projecting the administrative burdens that remain with respect to 
stationary sources for which GHGs do not constitute a pollutant subject 
to regulation. Such study shall account, among other things, for 
permitting authorities ability to secure resources, hire and train 
staff; experiences associated with GHG permitting for new types of 
sources and technologies; and, the success of streamlining measures 
developed by EPA (and adopted by the states) for reducing the 
permitting burden associated with such stationary sources.
    (ii) Based on the results of the study described in paragraph 
(b)(2)(i) of this section, the Administrator shall propose a rule 
addressing the permitting obligations of such stationary sources under 
Sec.  70.2. The Administrator shall take final action on such a rule no 
later than April 30, 2016.
    (iii) Before completing the rule described in paragraph (b)(2)(ii) 
of this section, the Administrator shall take no action to make the 
pollutant GHGs subject to regulation at stationary sources that emit or 
have the potential to emit less than 50,000 tpy CO2e (as 
determined using the methodology described in Sec.  70.2.)

PART 71--[AMENDED]

0
9. The authority citation for part 71 continues to read as follows:

    Authority:  42 U.S.C. 7401, et seq.

Subpart A--[AMENDED]

0
10. Section 71.2 is amended:
0
a. By revising the introductory text of paragraph (2) of the definition 
for ``major source''; and
0
b. By adding a definition for ``Subject to regulation'' in alphabetical 
order.
    The revision and addition read as follows:

Sec.  71.2  Definitions.

* * * * *
    Major source * * *
    (2) A major stationary source of air pollutants, as defined in 
section 302 of the Act, that directly emits or has the potential to 
emit, 100 tpy or more of any air pollutant subject to regulation 
(including any major source of fugitive emissions of any such 
pollutant, as determined by rule by the Administrator). The fugitive 
emissions of a stationary source shall not be considered in determining 
whether it is a major stationary source for the purposes of section 
302(j) of the Act, unless the source belongs to one of the following 
categories of stationary source:
* * * * *
    Subject to regulation means, for any air pollutant, that the 
pollutant is subject to either a provision in the Clean Air Act, or a 
nationally-applicable regulation codified by the Administrator in 
subchapter C of this chapter, that requires actual control of the 
quantity of emissions of that pollutant, and that such a control 
requirement has taken effect and is operative to control, limit or 
restrict the quantity of emissions of that pollutant released from the 
regulated activity. Except that:
    (1) Greenhouse gases (GHGs), the air pollutant defined in Sec.  
86.1818-12(a) of this chapter as the aggregate group of six greenhouse 
gases: carbon dioxide, nitrous oxide, methane, hydrofluorocarbons, 
perfluorocarbons, and sulfur hexafluoride, shall not be subject to 
regulation unless, as of July 1, 2011, the GHG emissions are at a 
stationary source emitting or having the potential to emit 100,000 tpy 
CO2 equivalent emissions.
    (2) The term tpy CO2 equivalent emissions 
(CO2e) shall represent an amount of GHGs emitted, and shall 
be computed by multiplying the mass amount of emissions (tpy), for each 
of the six greenhouse gases in the pollutant GHGs, by the gas's 
associated global warming potential published at Table A-1 to subpart A 
of part 98 of this chapter--Global Warming Potentials, and summing the 
resultant value for each to compute a tpy CO2e.

0
11. A new Sec.  71.13 is added to subpart A to read as follows:

Sec.  71.13  Enforceable commitments for further actions addressing 
Greenhouse Gases (GHGs)

    (a) Definitions.
    (1) Greenhouse Gases (GHGs) means the air pollutant as defined in 
Sec.  86.1818-12(a) of this chapter as the aggregate group of six 
greenhouse gases: carbon dioxide, nitrous oxide, methane, 
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.
    (2) All other terms used in this section shall have the meaning 
given in Sec.  71.2.
    (b) Further action to regulate GHGs under the title V program.
    (1) Near term action on GHGs. The Administrator shall solicit 
comment, under section 307(b) of the Act, on promulgating lower GHGs 
thresholds for applicability under Sec.  71.2. Such action shall be 
finalized by July 1, 2012 and become effective July 1, 2013.
    (2) Further study and action on GHGs.
    (i) No later than April 30, 2015, the Administrator shall complete 
a study projecting the administrative burdens that remain with respect 
to stationary sources for which GHGs do not constitute a pollutant 
subject to regulation. Such study shall account, among other things, 
for permitting authorities ability to secure resources, hire and train 
staff; experiences associated with GHG permitting for new types of 
sources and technologies; and, the success of streamlining measures 
developed by EPA (and adopted by the states) for reducing the 
permitting burden associated with such stationary sources.
    (ii) Based on the results of the study described in paragraph 
(b)(2)(i) of this section, the Administrator shall propose a rule 
addressing the permitting obligations of such stationary sources under 
Sec.  71.2. The Administrator shall take final action on such a rule no 
later than April 30, 2016.
    (iii) Before completing the rule described in paragraph (b)(2)(ii) 
of this section, the Administrator shall take no action to make the 
pollutant GHGs subject to regulation at stationary sources that emit or 
have the potential to emit less than 50,000 tpy CO2e, (as 
determined using the methodology described in Sec.  71.2.)

[FR Doc. 2010-11974 Filed 6-2-10; 8:45 am]
BILLING CODE 6560-50-P
```