Page 1 of 41 6560 - 50 - P ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52 [EPA-HQ-OAR- 2010 - 0107 ; FRL-xxxx-x]

RIN- 2060 -AQ45 Action to Ensure Authority to Issue Permits under the Prevention of Significant Deterioration Program to Sources of Greenhouse

Gas Emissions: Federal Implementation Plan AGENCY: Environmental Protection Agency (EPA). ACTION: Proposed rule. SUMMARY : In this rulemaking, EPA is proposing a federal implementation plan (FIP) to apply in any state that is unable to submit, by its deadline, a corrective s tate implementation plan (SIP) revision to ensure that the state has authority to issue permits under the Clean Air Act ' s (CAA or Act ) New Source Review Prevention of Significant Deterioration (PSD) program for sources of greenhouse gases (GHGs). This proposal is a companion rulemaking to " Action to Ensure Authority to Issue Permits Under the Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP Call, " which is being signed and published on the same schedule . In that action, EPA is proposing to make a finding of substantial inadequacy and proposing to issue a SIP c all for 16 states on grounds thatPage 2 of 41

their SIPs do not appear to apply the PSD program to GHG emitting sources. DATES: C omments . Comments must be received on or before [INSERT DATE 3 0 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER] . Public Hearing : One public hearing concerning the proposed regulation will be held before the end of the comment period. The date, t ime and location will be announced separately. Please refer to SUPPLEMENTARY INFORMATION for additional information on the comment period and the public hearing. ADDRESSES: Submit your comments, identified by Docket ID No. EPA- HQ - OAR- 2010
- 0107 by one of the following methods:

 www.regulations.gov : Follow the on line instructions for submitting comments.

 E -mail : a - and- r - docket@epa.gov .
 Fax : ( 202 ) 566
- 9744

 Mail : Attenti on Docket ID No. EPA- HQ - OAR- 2010
- 0107 , U.S. Environmental Protection Agency, EPA West (Air Docket), 1200 Pennsylvania Avenue, NW, Mail code: 6102T, Washington, DC 20460. Please include a total of 2 copies.

 Hand Delivery : U.S. Environmental Protection Agency, EPA West (Air Docket), 1301 Constitution Avenue, Northwest, Room 3334 , Washington, DC 20004, Attention Docket ID No.Page 3 of 41

EPA- HQ - OAR- 2010
- 0107 . Such deliveries are only accepted during the Docket ' s normal hours of operation, and special arrangements shou ld be made for deliveries of boxed information. Instructions . Direct your comments to Docket ID No. EPA
- HQ - OAR2010
- 0107 . EPA ' s policy is that all comments received will be included in the public docket without change and may be made available online at www.regulations.gov , including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through www.regulations.gov or e -mail. The www.regulations.gov Web Site is an " an onymous access " system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e -mail comment directly to EPA without going through www .regulations.gov , your e -mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD
- ROM you submit. IfPage 4 of 41

EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Elec tronic files should avoid the use of special characters, avoid any form of encryption, and be free of any defects or viruses. For additional information about EPA ' s public docket , visit the EPA Docket Center homepage at www.epa.gov/epahome/dockets.htm . For additional instructions on submitting comments, go to section I. C of the SUPPLEMENTARY INFORMATION section of this document. Docket . All documents in the docket are listed in the www.regulations.gov index. Although listed in the index, some information is not publicly available, e.g. , CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, w ill be publicly available only in hard copy. Publicly available docket materials are available either electronically in www.regulations.gov or in hard copy at the U.S. Environmental Protection Agency, Air Docket, EPA/DC, EPA West Building, Room 3334 , 1301 Constitution Ave., NW, 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 Air Docket is (202) 566
- 1742.Page 5 of 41

FOR FURTHER INFORMATION CONTACT: Ms. Lisa Sutton , Air Quality Policy Division, Office of Air Quality Planning and Standards (C504
- 03), Environmental Protection Agency, Research Triangl e Park, NC 27711 ; telephone number: (919) 541
- 3450 ; fax number: (919) 541
- 5509 ; e -mail address: sutton.lisa@epa.gov . SUPPLEMENTARY INFORMATION: For questions relate d to a specific state, local, or tribal permitt ing authority, or to submit information requested in this action, plea s e contact the appropriate EPA regional office: EPA Regional office Contact for regional office

(person, mailing address, telephone number) Permitting authority I Dave Conroy, Chief, Ai r Programs Branch, EPA Region 1, 5 Post Office Square , Suite 100, Boston, MA 021 09
- 3912 , (617) 918
- 1661. Connecticut, Ma ssachusetts, Maine , New Hampshire, Rhode Island, and Vermont. II Raymond Werner, Chief, Air Programs Branch, EPA Region 2 , 290 Broadwa y, 25th Floor, New York, NY 10007
- 1866, (212) 637
- 3706 . New Jersey, New York, Puerto Rico, and Virgin Islands.
III Kathleen Anderson, Chief,

Permits and Technical Assessment Branch, EPA Region 3, 1650 Arch Street, Philadelphia, PA 19103
- 2029, (215) 814
- 2173 . District of Columbia, Delaware, Maryland, Pennsylvania, Virginia, and West Virginia.
IV Dick Schutt, Chief, Air Planning Branch, EPA Region 4, Atlanta Federal Center, 61 Forsyth Street, SW, Atlanta, GA 30303
- 3104, (404) 562
- 9 033 . Alabama, Florida, Georgia, Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee.Page 6 of 41

V J . Elmer Bortzer, Chief, Air Programs Branch (AR- 18J) , EPA Region 5, 77 West Jackson Boulevard, Chicago, IL 60604
- 3507, (312) 886
- 1430 . Illinois, Indiana, Michigan, Minneso ta, Ohio, and Wisconsin.
VI Jeff Robinson, Chief, Air Permits Section, EPA Region 6, Fountain Place 12th Floor, Suite 1200, 1445 Ross Avenue, Dallas, TX 75202
- 2733, (214) 665
- 6435 . Arkansas, Louisiana, New Mexico, Oklahoma, and Texas.

VII Mark Smith, Ch ief, Air

Permitting and Compliance Branch, EPA Region 7, 901 North 5th Street, Kansas City, KS 66101, (913) 551
- 7 876 . Iowa, Kansas, Missouri, and Nebraska.

VIII Carl Daly, Unit Leader, Air

Permitting, Monitoring & Modeling Unit, EPA Region 8, 1595 Wynkoop Street, Denver, CO 80202
- 1129, (303) 312
- 6 416 . Colorado, Montana, North Dakota, South Dakota, Utah, and Wyoming.
IX Gerardo Rios, Chief, Permits Office, EPA Region 9, 75 Hawthorne Street, San Francisco, CA 94105, (415) 9 72
- 3974 . Arizona ; California ; Hawaii and the Pacific Islands; Indian Country within Region 9 and Navajo Nation; and Nevada. X Nancy Helm, Manager, Federal and Delegated Air Programs Unit, EPA Region 10, 1200 Sixth Avenue, Suite 900, Se attle, WA 98101, (206) 553
- 6908 . Alaska, Idaho, Oregon, and Washington.

I. General Information A. Does this action apply to me? Entities potentially affected by this rule include states,Page 7 of 41

local permitting authorities, and tribal authorities. 1 Any SIP approved PSD air permitting regulation that is not st ructured such that it includes GHGs among pollutants subject to regulation under the Act will potentially be found substantially inadequate to meet CAA requirements, under CAA 110(k)(5), and the state will potentially be affected by this rule. For example , if a state ' s PSD regulation identifies its regulated NSR pollutants by specifically listing each individual pollutant and the list omits GHGs , then the regulation is inadequate. Entities potentially affected by this rule also include sources in all indus try groups , which have a direct obligation under the CAA to obtain a PSD pe rmit for GHGs for projects that meet the applicability thresholds set forth in the Tailoring Rule . 2 This independent obligation on sources is specific to PSD and derives from CAA 1 65(a). Any source that is subject to a state PSD air permitting regulation not structured to apply to GHG - emitting sources will potentially rely on this rule to

1 EPA respects the unique relationship between the U.S. government and tribal authorities and acknowledges that tribal concerns are not interchangeable with state concerns. However, for convenience, we refer to "states" in this rulemaking to collectively mean states, local permitting authorities, and tribal authorities. 2 Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule. 75 FR 31514 (June 3, 2010). The Tailoring Rule is described in more detail later in this preamble.Page 8 of 41

obtain a permit that contains emission limitations that conform to requirements under CAA 165( a) . The majority of e ntities potentially affected by this action are expected to be in the following groups: Industry Group NAICS a Utilities (electric, natural gas, other systems) 2211, 2212, 2213 Manufacturing (food, beverages, tobacco, textiles, leather) 311, 312, 313, 314, 315, 316 Wood product, paper manufacturing 321, 322 Petroleum and coal products manufacturing 32411, 32412, 32419 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 manufacturing 3271, 3272, 3273, 3274, 3279 Primary and fabricated metal manufacturing 3311, 3312, 3313, 3314, 3315, 3321, 3322, 3323, 3324, 3325, 3326, 3327, 3328, 3329 Machinery manufacturing 3331, 3332, 3333, 3334, 3335, 3336, 3339 Computer and electronic products manufacturing 3341, 3342, 3343, 3344, 3345, 4446 Electrical equipment, appliance, and component manufacturing 3351, 3352, 3353, 3359 Transportation equipment manufacturing 3361, 3362, 3363, 3364, 3365, 3366, 3366, 3369 Furniture and related product manufacturing 3371, 3372, 3379 Miscellaneous manufacturing 3391, 3399 Waste management and remediation 5622, 5629 Hospitals/nursing and residential care fac ilities 6221, 6231, 6232, 6233, 6239Page 9 of 41

Personal and laundry services 8122, 8123 Residential/private households 8141 Non - residential (c ommercial ) Not available. Codes only exist for private households, construction and leasing/sales industries. a North American Industry Classification System.
B. Where can I get a copy of this document and other related information? In addition to being available in the docket, an electronic copy of this proposal will also be available on the World Wide Web. Following s ignature by the EPA Administrator, a copy of this notice will be posted on the EPA ' s NSR Web S ite, under Regulations & Standards, at www.epa.gov/nsr . C. What should I consider as I prepare my comments for EPA? 1. Submitting CBI . Do not submit this information to EPA through www.regulations.gov or e -mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claime d as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the publicPage 10 of 41

docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. Send o r deliver information identified as CBI only to the following address: Roberto Morales, OAQPS Document Control Officer (C404
- 02), U.S. EPA, Research Triangle Park, NC 27711, Attention Docket ID No. EPA- HQ - OAR- 2010
- 0107 . 2. Tips for p reparing your c omments . When submitting comments, remember to:

 Identify the rulemaking by docket number and other identifying information (subject heading, Federal Register date and page number).

 Follow directions
- The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations (CFR) part or section number.

 Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

 Describe any assumptions and provide any technical information and/or data that you used.

 If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

 Provide specific examples to illustrate your concerns, and suggest alternatives.Page 11 of 41

 Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

 Make sure to submit your comments by the comment period deadline identified. D. How can I find information about the public hearing? The EPA will hold one public he aring on this proposal. The date, time, and location of the public hearing will be announced separately. The EPA encourages commenters to provide written versions of their oral testimonies either electronically or in paper copy. If you would like to pre sent oral testimony at the public hearing, please notify Ms. Pamela S. Long, New Source Review Group, Air Quality Policy Division (C504
- 03), U.S. EPA, Research Triangle Park, NC 27711, telephone number (919) 541
- 0641 , or email: long.pam@epa.gov . Persons interested in presenting oral testimony should notify Ms. Long at least 2 days in advance of the public hearing. Persons interested in attending the public hearing should also contact Ms. Long to verify the time, da te, and location of the hearing. The public hearing will provide interested parties the opportunity to present data, views, or arguments concerning the proposed rule. E. How is the preamble organized? The information presented in this preamble is organize d as follows:Page 12 of 41

I. General Information A. Does this action apply to me? B. Where can I get a copy of this document and other related information? C. What should I consider as I prepare my comments for EPA? D. How can I find information about the public hearing? E. How is the preamble organized? II. Background and Context of Proposed Rule A. Introduction B. CAA and Regula tory Context C. SIP Inadequacy and Corrective Action; Federal Implementation Plans D. States that Do Not Apply the PSD Program to GHG Sources; PSD GHG SIP Call III. Proposed Federal Implementation Plan A. Timing for FIP B. Substance of FIP IV. Statutory and Executive Order Reviews A. Executive Order 12866

– Regulatory Planning and Review B. Paperwork Reduction Act C. Regulatory Flexibility Act D. Unfunded Mandates Reform E. Executive Order 13132

– Federalism F. Executive Order 13175

– Consultation and Coordination with Indian Tribal Governments G. Executive Order 13045

– Protection of Children from Environmental Health Risks and Safety Risks H. Executive Order 13211

– Actions Concerning Regulations that Significantly Affect Energy Supply, Distribution, or Us e 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. Determination under Section 307(d) V. Statutory Authority II. Background and Context of Proposed Rule A. Introduction In this rulemaking under the CAA , EPA is proposing a FIP for 16 states for which, in a companion action, EPA is proposingPage 13 of 41

a finding of SIP substantial inadequacy and is proposing to issue a SIP Call because the states ' PSD SIP programs do not appear to apply to sources of GHGs . " Action to Ensure Authority to Issue Permits Under the Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP Call " (the " PSD GHG SIP Call " or " SIP Call " ). These two rulemakings address states whose permitting regulations and SIPs appear to fail to apply the PSD program to sources of GHGs in those states . As a result, larger GHG - emitting sources in those states

—which under EPA ' s " Tailoring Rule " (discussed elsewhere in this preamble ) are the only ones subject to PSD for their GHG emissions in the near future

—unable to obtain a PSD permit that covers GHG emissions and therefore potentially unable to undertake
con struction or modification projects on and afte r January 2, 2011. The states for which we are proposing a FIP are listed in table II - 1, "States with SIPs that Do Not Appear to Apply PSD to GHG Sources (Presumptive SIP Call List)." If any of these states are not in a position to submit to EPA a corrective SIP revision by its deadline, EPA will promulgate a FIP that will apply the PSD program to the appropriate GHG sources in the state, thereby allowing them to apply for PSD permits for theirPage 14 of 41

GHG emissions that will authorize their construction and modifications.Page 15 of 41

Table II - 1. States with SIPs that Do Not Appear to Apply PSD to

GHG Sources (Presumptive SIP Call List) State (or Area) EPA Region Alaska X Arizona: Pinal County IX Arkansas VI California: Sac ramento Metropolitan AQMD IX Connecticut I Florida IV Idaho X Louisiana VI Maine I Montana VIII Nevada: Clark County IX New Hampshire I Oklahoma VI Oregon X Texas VI Utah VIIIPage 16 of 41

The rest of the states with approved SIP PSD programs (meaning ea ch of those not listed in table II
- 1) are listed in table II - 2, "States with SIPs that Appear to Apply PSD to GHG Sources (Presumptive Adequacy List)." For each of the states listed in table II
- 2 (as well as for any states with approved SIP PSD programs that we may have inadvertently omitted from table II - 2), EPA is soliciting comment in the SIP Call companion notice on whether their SIPs do or do not apply the PSD program to GHG - emitting sources. We are not at this time proposing a FIP for the states lis ted in table II
- 2. However, if EPA concludes, on the basis of information EPA receives, that such a state ' s SIP does not apply the PSD program to GHG - emitting sources, then EPA will p roceed to issue for that state a finding of substantial inadequacy and a SIP Call on the same schedule as for the states listed in table II
- 1 (the presumptive SIP Call list). If a state that receives a SIP Call is not able to submit to EPA, by the deadline required in the SIP Call, a corrective SIP revision that applies the P SD program to GHG sources, then EPA will, without further notice and comment, promulgate a FIP that will apply the PSD program to GHG sources in the state, so that sources can apply for PSD permits that will authorize their construction and modifications. Accordingly, interested parties in a state for which we, in thePage 17 of 41

companion SIP Call rulemaking, solicit comment on the adequacy of its SIP to apply PSD to GHG
- emitting sources should consider the comment period for the present notice to be their opportunit y to comment on the FIP that EPA would implement in their state ( should EPA ultimately determine to issue a SIP C all for their state in EPA ' s final action on the companion SIP Call rulemaking ) .Page 18 of 41

Table II - 2. States with SIPs that Appear to Apply PSD to GHG

Sources (Presumptive Adequacy List) State (or Area) EPA Region Alabama: Jefferson County; Huntsville; Rest of State IV Arizona: Rest of State (Excludes Pinal County and Indian Country) VIII California: Monterey Bay Unified APCD; North Coast Unified AQMD; Northern Sonoma County APCD IX
Colorado VIII Delaware III Georgia IV Indiana V Iowa VII Kansas VII Kentucky: Jefferson County; Rest of State IV Maryland III Michigan V Mississippi IV Missouri VII Nebraska: Lincoln Lancaster; Omaha; Rest of State VII New Mexico: Albuquerque; Rest of State VI North Carolina: Forsythe County; Mecklenburg; Western NC; Rest of State IV North Dakota VIII Ohio V Pennsylvania: All except Allegheny County III Rhode Island I South Carolina IV South Dakota VIII Tennessee: Chattanooga; Nashville; Knoxville; Memphis; Rest of State IV Vermont I Virginia III West Virginia III Wisconsin V Wyoming VIIIPage 19 of 41

The background and context for this proposed rule is the same as for the proposed PSD GHG SIP Call and other actions
cross - referenced in that action. Familiarity with the proposed PSD GHG SIP Call is presumed. As a result, the background and context for this rule will be only briefly summarized here. B. CAA and Regulatory Context 1. SIP PSD Requirements Under the CAA PSD requirements, a new or existing source that emits or has the potential to emit " any air pollutant " in specified quantities cannot construct or modify unless it first obtains a PSD permit that, among other things, imposes emission limitation s that qualify as best available control technology (BACT). CAA 165( a)(1), 165(a)(4), 169(1). Long standing EPA regulations have interpreted the term " any air pollutant " narrowly so that only emissions of any " regulated NSR pollutant " trigger PSD. 40 CFR 52.21(j)(2), (b)(50 ) (iv). The term

" regulated NSR pollutant " is defined to include the following f our classes of air pollutants: (i) any pollutant for which a NAAQS has been promulgated; (ii) any pollutant subject to an NSPS promulgated under CAA 111; (iii) any pollutant subject to a standard promulgated under CAA title VI; andPage 20 of 41

(iv) " any pollutant that otherwise is subject to regulation under the Act " (excluding HAPs listed under CAA 112). The CAA contemplates that the PSD program be implemented in the first instance by the states. States are required to include PSD requirements in their SIPs . CAA 110(a)(2)(C). Most
s tates have PSD programs that have been approved into their SIPs, and these states implement their PSD program and act as the permitting authority. For the most part, these approved SIPs mirror EPA regulatory requirements, as found in 40 CFR 51.166 (except for the recently added revisions from the Tailoring Rule). As a result, most SIPs include the applicability requirement that PSD app ly to sources that construct or modify and thereby increase their emissions of any

" regulated NSR pollutant. " A number of states do not have PSD programs approved into their SIPs ; i n tho se states, EPA ' s regulations at 40 CFR 52.21 govern, and either EPA o r the state as EPA ' s delegatee acts as the permitting authority. 2. Recent EPA Regulatory Action s Concerning PSD Requirements for GHG - emitting Sources Beginning on January 2, 2011, certain stationary sources that construct or undertake modifications will become subject to the CAA requirement to obtain a PSD permit for their GHG emissions. This is because of the following EPA regulatoryPage 21 of 41

actions. By notice dated December 15, 2009, pursuant to CAA 202(a), EPA issued, in a single final action, two findings 3 regarding GHGs that are commonly referred to as the "Endangerment Finding" and the "Cause or Contribute Finding." In the E ndangerment F inding , EPA found that six long
- lived and directly emitted GHGs

—carbon dioxide (CO 2 ), methane (CH 4 ), nitrous oxide (N 2 O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF 6 )

—may reasonably be anticipated to endanger public health and welfare. In the Cause or Contribute Finding, the Administrator "define[d] the air pollutant as the aggregate group of the same six * * * greenhouse gases," 74 FR 66536, and found that the combined emissions of this air pollutant from new motor vehicles and new motor vehicle engines contribute to the GHG air pollution that endangers public health and welfare. By no tice dated May 7, 2010, EPA published what is commonly known as the " Light - Duty Vehicle Rule " (LDVR), 4 which for the first time established federal controls on GHGs , those emitted from light
- duty vehicles. This rule specifies, in its applicability provisi ons, the air pollutant subject to control

3 " Endangerment and Cause or Contribute Findings for Greenhouse Gases Under Section 202(a) of the Clean Air Act ." 74 FR 66496. 4 " Light
- Duty Vehicle Greenhouse Gas Emission Standards and Corporate Average Fuel Economy Standards; Final Rule ," 75 FR 25324 (May 7, 2010).Page 22 of 41

as the aggregate group of the six GHGs, including CO 2 , CH 4 , N 2 O, HFCs, PFCs, and SF 6 . 75 FR 25686 ( 40 CFR 86.1818
- 12(a) ) . By notice dated April 2, 2010, EPA promulgated what is commonly known as the Johnson Memo Reconsideration. 5 The Johnson Memo Reconsideration i nterpreted one of the regulatory triggers for PSD applicability

—the term " subject to regulation "

—and concluded that promulgation of the LDVR would render GHGs

" subject to regulation " and thereby trigger P SD applicability for GHG - emitting sources on January 2, 2011, which according to EPA is the da te upon which the LDVR takes effect. By notice dated June 3, 2010, EPA published what is commonly known as the " Tailoring Rule, " 6 which limits the applicability o f PSD to certain GHG
- emitting sources through a multi
- step phase - in approach. In the Tailoring Rule, EPA established the first two steps of the phase
- in approach as follows: For the first step of this Tailoring Rule, which will begin on January 2, 2011, PSD * * * requirements will apply to sources ' GHG emission only if the

5 "Interpretation of Regulations that Determine Pollutants Covered by Clean Air Act Permitting Programs" (April 2, 2010) (finalizing EPA response to petition for reconsideration of "EPA's Interpretation of Regulations that Determine Pollutants Covered by Federal Prevention of Significant Deterioration (PSD) Permit Program" (commonly known as the "Johnson Memo"), December 18, 2008). 6 "Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule; Final Rule," 75 FR 31514.Page 23 of 41

sources are subject to PSD * * * anyway due to their non - GHG pollutants. [We call these sources " anyway sources. " ] Therefore, EPA will not require sources or modifications to evaluate whether they are subject to PSD * * * 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 ( CO 2 e ) but only if the project also significantly increase emissions of at least one non - GHG pollutant . The second step * * * beginning o n July 1, 2011, will phase in additional large sources of GHG emissions. New sources * * * that emit, or have the potential to emit, at least 100,000 tpy CO 2 e will become subject to the PSD * * * requirements. In addition, sources that emit or have the p otential to emit at least 100,000 tpy CO 2 e and that undertake a modification that increases net emissions of GHGs by at least 75,000 tpy CO 2 e will also be subject to PSD requirements. [We call this the 100,000/75,000 threshold.] For both steps, we note that if sources or modification s exceed these CO 2 e - 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 CO 2 e . ) 75 FR 31516. In the Tailoring Rule, EPA codified the Johnson Memo Reconsideration interpretation of the term " subject to regulation " and added a further interpretation of that term designed to expedite the adoption of the phase
- in approach by the states into their SIPs. In addition, in the Tailoring Rule, EPA identified the air pollutant as the aggregate of the six GHGs, again, CO 2 , CH 4 , N 2 O, HFCs, PFCs, and SF 6 . The Tailoring Rule further provided that for purposes of determining whetherPage 24 of 41

the amount of GHG emissions exceeds specifie d thresholds and therefore trigger s the application of PSD, the amount of emissions must be calculated on both a mass basis and, as alluded to above, a carbon dioxide equivalent (CO 2 e) basis. With respect to the latter, according to the rule, " PSD * * *
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. " 75 FR 31518. Further information on the applicable CAA provisions, the Endangerment and Cause or Contribute Findings, the LDRV, the Johnson Memo Reconsideration, and the Tailoring Rule is contained in the Tailoring Rule and the proposed PSD GHG SIP Call . C . SIP Inadequacy and Corrective Action; Federal Implementation P lans The CAA provides a mechanism for the correction of SIPs that are inadequate, under CAA 110(k)(5), which provides: (5) Calls for plan revisions Whenever the Administrator finds that the applicable implementation plan for any area is substantially inadequate to * * * comply with any requirement of this Act, the Administrator shall require the State to revise the plan as necessary to correct such inadequacies. The Administrator shall notify the State of the inadequacies and may establish rea sonable deadlines (not to exceed 18 months afterPage 25 of 41

the date of such notice) for the submission of such plan revisions. This provision by its terms authorizes the Administrator to

" find[] that [a SIP] * * * is substantially inadequate to * * * comply with an y requirement of this Act, " and, based on that finding, " require the State to revise the [SIP] * * * to correct such inadequacies. " This latter action is commonly known as a

" SIP c all. " In addition, this provision provides that EPA must notify the state of the inadequacies and authorizes EPA to establish a " reasonable deadline[] (not to exceed 18 months after the date of such notice) " for the submission of the corrective SIP revision. If the state fails to submit the corrective SIP revision by the deadli ne, CAA 110(c) authorizes EPA to " find[] that [the] State has failed to make a required submission. " CAA 110(c)(1)(A). Once EPA makes that finding, CAA 110(c)(1) requires EPA to " promulgate a Federal implementation plan at any time with 2 years after the [finding] * * * unless the State corrects the deficiency, and [EPA] approves the plan or plan revision, before [EPA] promulgates such [FIP]. " D . States that Do Not Appear to Apply the PSD Program to GHG Sources; PSD GHG SIP Call A number of s tates do not have an approved PSD SIP; as aPage 26 of 41

result, in these s tates 7 the applicable regulatory authority is EPA ' s regulations, found in 40 CFR 52 .21 , which constitute a FIP. For sources in these s tates, either the EPA Regional Office or the s tate acting as EPA ' s delegatee is the permitting authority. In these states, EPA ' s regulations apply directly . As a result , the regulations apply the PSD program to any constructing or modifying source that emits the requisite quantity of any " regulated NSR pollutant, " 40 CFR 52. 21(b)(50), which includes any " pollutant subject to regulation, " which, in turn, as discussed earlier in this preamble , will cover GHG emissions on January 2, 2011. All of the other states administer their PSD programs through an approved SIP and, as a result, they or their local entities are the PSD permitting authority. Of these s tates, most appear to have SIP PSD applicability provisions that parallel EPA ' s regulatory PSD applicability provisions and therefore apply PSD to any stationary source that emits the
7 In the following listed state or local jurisdictions, as well as in all Indian country, EPA is the PSD permitting authority, implementing the federal PSD regulation at 40 CFR 52.21: American Samoa; Arizona (some areas); California (most areas); District of Columbia; Guam; Massachusetts; New Jersey; New York; Northern Mariana Islands; Puerto Rico; Trus t Territories; and the Virgin Islands. In a smaller number of areas, listed as follows, the state or local permitting authority is delegated at least partial authority by EPA to implement the federal PSD regulation: Arizona (some areas); California (some areas); Hawaii; Illinois; Minnesota; Nevada (most areas); Pennsylvania (some areas); and Washington.Page 27 of 41

requisite amount of any air pollutant " subject to regulation. " As a result, and absent any other provision under state law that limits the applicability of these provisions, these PSD SIPs will cover GHG sources, just as the current FIPs do , in these
s tates, on and after January 2, 2011. Therefore, these s tates or local authorities will be able to act as the permitting authority for GHG sources in their s tates. As discussed in the PSD GHG SIP Call , it appears, on the basis of preliminary research and information received that for 16 of the states with approved PSD SIPs, the PSD programs do not apply to GHG - emitting sources. In many of these SIPs, the PSD applicability provisions do not mirror EPA ' s regulatory provisions by applying PSD requiremen ts to sources of any air pollutant " subject to regulation. " Instead, the applicability provisions specifically list the air pollutants to which the PSD program applies and do not include GHGs on that list. Although, as discussed in the proposed PSD GHG S IP C all, these SIPs may have other provisions that provide the state with general authority to issue permits that meet CAA requirements, until EPA receives more information, we will proceed on the basis that these SIPs do not apply their PSD programs to GHG sources. Also as discussed in the proposed SIP C all, the state of Connecticut explicitly excludes GHGs from the state PSD program. InPage 28 of 41

addition, as discussed in the proposed SIP Call, some states with SIP PSD applicability provisions that do mirror EPA ' s regulatory provisions by applying PSD requirements to sources of any air pollutant "subject to regulation" nevertheless do not appear to apply PSD to GHG - emitting sources because these states have other state law constraints against applying state law or SIP requirements without specific state action authorizing such application of law. In the SIP C all, EPA propose d to find the SIPs for these 16 state s to be substantially inadequate, and EPA propose d a SIP Call under CAA 110(k)(5). EPA stated that it int ends to finalize the finding of substantial inadequacy and the SIP Call by December 1, 2010. EPA further stated that it would allow states 12 months from the date of signing the finding and the SIP C all for states to submit their corrective SIP revisions, but that states could indicate to EPA that they do not object to a shorter deadline , and in that event EPA would impose that shorter deadline . In the proposed SIP C all, EPA also solicited comment on
whether the approved SIPs for those other states (list ed in table II - 2 of this preamble , for which EPA was not proposing a SIP C all ) do or do not apply their PSD programs to GHG
- emitting
sources . EPA asked the other states to review their SIPs and ,Page 29 of 41

if their SIPs fail to apply PSD to GHG
- emitting sources, adv ise EPA by the end of the comment period of the state ' s inadequacy and also inform EPA if they do not object to a shorter deadline for submittal of the required corrective SIP revision. In the proposed SIP Call , we stated that the required corrective SIP revision could constitute a simple addition of GHGs to the list of pollutants subject to PSD applicability, with GHGs defined as the aggregate of six pollutants

—CO 2 , CH 4 , N 2 O, HFCs, PFCs, and SF 6 . III . Proposed Federal Implementation Plan In this rulemaki ng, we propose a FIP , under CAA 110(c)(1)(A), for any stat e—if ultimately there is any—for which we issue a finding of failure to submit a SIP submission required under the PSD GHG SIP Call . A. Timing for FIP If any of the states for which we issue the S IP Call does not meet its SIP submittal deadline, we will immediately issue a finding of failure to submit a required SIP submission, under CAA 110(c)(1)(A) , and immediately thereafter promulgate a FIP for the state . This timing for FIP promulgation is au thorized under CAA 110(c)(1), which authorizes us to promulgate a FIP " at any time within 2 years after " finding a failure to submit a required SIP submission. We intend to take these actionsPage 30 of 41

immediately in order to minimize any period of time during which larger - emitting sources may be under an obligation to obtain PSD permits for their GHGs when they construct or modify, but no permitting authority is authorized to issue those permits. After we have promulgated a FIP, it must remain in place until the s t ate submits a SIP revision and we approve that SIP revision. CAA 110(c)(1). Under the present circumstances, we will act on a SIP revision to apply the PSD program to GHG sources as quickly as possible . Upon request of the state, we will parallel
-proces s the SIP submittal . That is, if the state submits to us the draft SIP submittal for which the state intends to hold a hearing, we will propose the draft SIP submittal for approval and open a comment period during the same time as the state hearing . I f the SIP submittal that the s ta te ultimately submits to us is substantially similar to the draft SIP submittal, we will proceed to take final action without a further proposal or comment period. If we approve such a SIP revision, we will at the same time re scind the FIP. B. Substance of FIP The proposed FIP constitutes the EPA regulations found in 40 CFR 52.21, including the PSD applicability provision s, with a limitation to assure that , strictly for purposes of this rulemaking, the FIP applies only to GHG s . Under the PSDPage 31 of 41

applicability provisions in 40 CFR 52.21 (b)(50), the PSD program appl ies to sources that emit the requisite amounts of any

" regulated NSR pollutant[s], " including any air pollutant

" subject to regulation. " However, in states for which EPA would promulgate a FIP to apply PSD to GHG - emitting pollutants, the approved SIP already applies PSD to other air pollutants. To appropriately limit the scope of the FIP, EPA propos es in this action to amend 40 CFR 52.21 (b)(50 ) to limit the applicabilit y provision to GHGs . We propose this FIP because it would , to the greatest extent possible, mirror EPA regulations (as well as those of most of the states). In addition, this FIP would readily incorporate the phase
- in approach for PSD applicability to GHG sources that EPA has developed in the Tailoring Rule and expect s to develop further through additional rulemaking. As explained in the Tailoring Rule, incorporating this phase
- in approach

— including Steps 1 and 2 of the phase
- in as promulgated in the Tai loring Rule

—can be most readily accomplished through interpretation of the terms in the definition " regulated NSR pollutant, " including the term " subject to regulation. " In accordance with the Tailoring Rule, as described above, the FIP would apply in S t ep 1 of the phase
- in approach only to

" anyway sources " (that is, sources undertaking construction orPage 32 of 41

modification projects that are required to apply for PSD permits anyway due to their non - GHG emissions and that emit GHGs in the amount of at least 75,000 tpy on a CO 2 e basis ) and would apply in S tep 2 of the phase
- in approach to both " anyway sources " and sources that meet the 100,000/75,000
- tpy threshold (that is, (i) sources that newly construct and would not be subject to PSD on account of their non
- GHG emissions, but that emit GHGs in the amount of at least 100,000 tpy CO 2 e, and (ii) existing sources that emit GHGs in the amount of at least 100,000 tpy CO 2 e, that undertake modifications that would not trigger PSD on the basis of their non - GHG emissions, but that increase GHGs by at least 75,000 tpy CO 2 e) . Under the FIP, with respect to permits for " anyway sources, " EPA will be responsible for acting on permit applications for only the GHG portion of the permit , and the state will retain responsibility fo r the rest of the permit. Likewise, with respect to permits for sources that meet the 100,000/75,000
- tpy threshold, our preferred approach

—for reasons of consistency

—is that EPA will be responsible for acting on permit applications for only the GHG portio n of the permit , that the state permitting authorities will be responsible for the
non - GHG portion of the permit, and EPA will coordinate with the state permitting authority as needed in order to fully cover anyPage 33 of 41

non - GHG emissions that, for example, are sub ject to BACT because they exceed the significance levels . We recognize that questions may arise as to whether the state permitting authorities have authority to permit non
- GHG emissions; as a result, we solicit comment on whether EPA should also be the pe rmitting authority for the non
- GHG portion of the permit for these latter sources. We propose that the FIP consist of the regulatory provisions included in 40 CFR 52.21 , except that the applicability provision would include a limitation so that it applies for purposes of this rulemaking only to GHGs . IV . Statutory and Executive Order Reviews A. Executive Order 12866
- Regulatory Planning and Review Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this action is a "significant regulatory acti on" because it raises novel legal or policy issues. Accordingly, EPA submitted this action to the Office of Management and Budget (OMB) for review under EO 12866 and any changes made in response to OMB recommendations have been documented in the docket fo r this action. B. Paperwork Reduction Act This action does not impose any new information collection burden. This proposed action would establish EPA as thePage 34 of 41

permitting authority in certain states for PSD GHG permits. The OMB has previously approved the i nformation collection requirements contained in the existing regulations for PSD ( see, e.g. , 40 CFR 52.21) and title V ( see 40 CFR parts 70 and 71) under the provisions of the Paperwork Reduction Act , 44 U.S.C. 3501 et seq . and has assigned OMB control number 2060
- 0003 and OMB control number 2060
- 0336 respectively. The OMB control numbers for EPA ' s regulations in 40 CFR are listed in 40 CFR part 9. C. Regulatory Flexibility Act The Regulatory Flexibility Act (RFA) generally requires an agency to prepare a regulatory flexibility analysis of any rule subject to notice and comment rulemaking requirements under the Administrative Procedure Act or any other statute unless the agency certifies that the rule will not have a significant economic impact on a substantial number of small entities. Small entities include small businesses, small organizations, and small governmental jurisdictions. For purposes of assessing the impacts of this notice on small entities, small entity is defined as: (1) a small business that is a small industrial entity as defined in the U.S. Small Business Administration (SBA) size standards ( see 13 CFR 121.201); (2) a small governmental jurisdiction that is aPage 35 of 41

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 proposed rule on small entities, I c ertify that this action will not have a significant economic impact on a substantial number of small entities. Although this rule would lead to federal permitting requirements for certain sources, those sources are large emitters of GHGs and tend to be la rge sources. We continue to be interested in the potential impacts of the proposed rule on small entities and welcome comments on issues related to such impacts. D. Unfunded Mandates Reform Act This action contains no federal mandates under the provisions of Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, 2 U.S.C. 1531
- 1538) for state, local or tribal governments or the private section. The action imposes no enforceable duty on any state, local or tribal governments or the private sector. Thi s action merely prescribes EPA's action for states that do not meet their existing obligation for PSD SIP submittal. Thus, this proposed rule is not subject to thePage 36 of 41

requirements of sections 202 or 205 of UMRA. This action 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. This action merely prescribes EPA's action for states that do not meet their existing obligation for PSD SIP submitt al. 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 s tates , or on the distribution of power and responsibilities among the various levels of government, as specified in Executive Order 13132 . This action merely prescribes EPA ' s action for states that do not meet their existing obligation for PSD SIP submittal. In the spirit of Executive Order 1313 2, and consistent with EPA policy to promote communications between EPA and state and local governments, EPA specifically solicits comment on this proposed rule from state and local officials. F. Executive Order 13175
- Consultation and Coordination with I ndian Tribal Governments This action does not have tribal implications, as specifiedPage 37 of 41

in Executive Order 13175 (65 FR 67249, November 9, 2000) . This action does not impose a FIP in any tribal area. Thus, Executive Order 13175 does not apply to this action . Although Executive Order 13175 does not apply to this proposed rule, EPA specifically solicits additional comment on this proposed action from tribal officials. G. Executive Order 13045
- Protection of Children from Environmental Health Risks and Sa fety Risks EPA interprets EO 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 EO has the potential to influence the regulation. This action is not subject to EO 13045 because it merely prescribes EPA ' s action for states that do not meet their existing obligation for PSD SIP submittal. H. Executive Order 13211
- Actions Concerning Regulations 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. This action merely prescribes EPA ' s action for states that do not meet their existing obligation for PSD SIP submittal.Page 38 of 41

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. NTTAA directs EPA to provide Congress, through OMB, explanations when the Agency decides not to use available and applicable voluntary consensus standards. This proposed rulemaking does not involve technical standards. Therefore, EPA is not considering the use of any voluntary consensus standards. J. Executive Order 12898
- Fede ral Actions to Address Environmental Justice in Minority Populations and Low
- Income Populations Executive Order 12898 (59 FR 7629, February 16, 1994) establishes federal executive policy on environmental justice. Its main provision directs federal agencie s, to the greatest extent practicable and permitted by law, to make environmental justice part of their mission by identifying and addressing, asPage 39 of 41

appropriate, disproportionately high and adverse human health or environmental effects of their programs, poli cies, and activities on minority populations and low
- income populations in the U.S. EPA has determined that this proposed rule will not have disproportionately high and adverse human health or environmental effects on minority or low
- income populations bec ause it does not affect the level of protection provided to human health or the environment. This proposed rule merely prescribes EPA ' s action for states that do not meet their existing obligation for PSD SIP submittal. K. Determination under Section 307( d) Pursuant to sections 307(d)(1)( B ) of the CAA, this action is subject to the provisions of section 307(d). Section 307(d)(1)( B ) provides that the provisi ons of section 307(d) apply to " the promulgation or revision of an implementation plan by the Admini strator under section 110(c) of this Act ." V . 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)).Page 40 of 41

Page 40 of 41 – Action to Ensure Authority to Issue Permits under the Prevention of Significant Deterioration Program to Sources of Greenhouse Gas Emissions: Federal Implementation Plan List of Subjects in 40 CFR Part 52 Air pollution control, Carbon dioxide, Carbon dioxide equivalents, Carbon monoxide, Environmental protection, Greenhouse gases, Hydrofluorocarbons, Intergovernmental relations, Lead, Methane, Nitrogen di oxide, Nitrous oxide, Ozone, Particulate matter, Perfluorocarbons, Reporting and recordkeeping requirements, Sulfur hexafluoride, Sulfur oxides, Volatile organic compounds.

________________________ Dated:

_________________________ Lisa P. Ja ckson, Administrator.Page 41 of 41

For the reasons set out in the preamble, title 40, chapter I of the Code of Federal Regulations is proposed to be amended as follows: PART 52
- [Amended] Each of the appropriate s ubparts of p art 52, which are the
s ubparts for the states for which EPA proposes the FIP, will include the following provision in the appropriate place among the subpart’s PSD requirements : §52. [ XXX ] The requirements of sections 160 through 165 of the Clean Air Act are not met to the extent the [name of state] plan, as approved, does not apply with respect to GHG emissions from certain stationary sources. Therefore, the provisions of §52.21 except paragraph (a)(1) are hereby incorporated by reference and made a part of the [name of state] plan for: (a ) beginning January 2, 2011, the pollutant GHG s from stationary sources described in §52.21(b)(49)(iv), and (b ) beginning July 1, 2011, in addition to the pollutant described under subsection (a), [Alternative 1] the pollutant GHG s f rom stationary sources described in §52.21(b)(49)(v) [Alternative 2] beginning July 1, 2011, stationary sources described in §52.21(b)(49)(iv).