# Final Summary of the Discretionary RFA Small Business Outreach

for EPA’s Proposed GHG Regulations

and their NSR and Title V Impacts

February 5, 20102 Final Summary of the RFA Small Business Outreach for EPA’s Proposed GHG Regulations and their NSR and Title V Impacts

INTRODUCTION T he Environmental Protection Agency (EPA) is currentl y developing a group of regulatory

actions for regulation of greenhouse gases (GHG). One of these actions is a rule which was proposed on October 27, 2 009, entitled the Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule (74 FR 55292), otherwise known as the Tailoring Rule. This regulation is intended to tailor the major source applicability thresholds for GHG emissions und er the Prevention of Significant Deterioration (PSD) and Title V programs of the Clean Air Act and to set a PSD significance level for GHG emissions. While this proposed rule does not have a Significant Impact on a Substantial Number of Small Entities (SI SNOSE) and therefore does not obligate EPA to convene a formal Small Business Advocacy

Review (SBAR) panel, EPA is aware that many small entities may

be interested in the various GHG rulemakings currently under development. As a result, in collaboratio n with the Small Business Administration (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 Off ice 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 the Office of Management and Budget (OMB), and the Office of Advocacy of the Small Business Administration. This summary

includes the following:  Background information on the proposed rule under development;  A summary

of the outreach meeting; and  The written comments and responses of the Small Entity Representatives (S ERs). Once completed, the final summary for this outreach meeting will be included in the rulemaking record for the Tailoring Rule. In light of the final summary , the Agency will make changes to the proposed rule where appropriate. This document includ es a summary of the advice and recommendations received from the SERs identified for the purposes of this process during the Outreach meeting. Written comments submitted by

the representatives are provided in Appendix B to the summary
. It is important to note that the findings and discussion in this summary are based on the information available at the time this summary was drafted. EPA is continuing to conduct anal ys es relevant to the proposed rule, and additional information may be developed or obta ined during the remainder of the rule development process and from public comments on the proposed rule.3

This summary

begins with a background section that describes the purpose of the rule and an y relevant regulatory history . The next section describ es the small entity Outreach conducted b y the EPA workgroup. The core of the summary collects the comments and recommendations received from the SERs.
BACKGROUND On April 2, 2007, the Supreme Court found that GHGs, including carbon dioxide, are air po llutants covered b y the CAA. Massachusetts v. EPA , 549 U.S. 497 (2007). The Supreme Court found that EPA was required to determine whether or not emissions of GHGs from new motor vehicles cause or contribute to air pollution which may reasonabl y be antic ipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision. In April 2009, EPA responded to the Court by proposing a finding that emissions of GHGs from new motor vehicles and engines contribute to air pollution that may reasonably be anticipated to endanger both public health and welfare. On December 7, 2009, the Administrator signed two distinct findings regarding GHG under section 202(a) of the Clean Air Act: Endangerment Finding: The Administrator fo und that the current and projected concentrations of the six key well
- mixed GHG
-- carbon dioxide (CO 2 ), methane (CH 4 ), nitrous oxide (N 2 O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF 6 )
-- in the atmosphere threaten the pub lic health and welfare of current and future generations. Cause or Contribute Finding: The Administrator found that the combined emissions of these well
- mixed GHG from new motor vehicles and new motor vehicle engines contribute to the greenhouse gas pollution which threatens public health and welfare. These findings , which were published December 15, 2009 (74 FR 66496), do not themselves impose an y requirements on industry or other entities. However, they are a prerequisite to finalizing the EPA’s propo sed greenhouse gas emission standards for light
- dut y vehicles , which were proposed by EPA in September 2009. Under the Agency ’s current interpretation of existing regulations, Clean Air Act permitting requirements under the PSD and title V programs for GH G emissions would be triggered upon finalization of the light
- dut y vehicle rule, and thus would be the first time GHGs emissions would be subject to either of these Clean Air Act permitting programs. As explained in the Tailoring Rule proposal, State pe rmitting authorities would be paral yz ed b y enormous numbers of permit applications from sources with GHG emissions if PSD and Title V requirements were applied at the applicability levels provided under the CAA. Without the Tailoring Rule, EPA estimates that permitting authorities would receive approximately

40,000 PSD permit applications each year ; currently , they receive approximately 300 . In addition, they

would be required to issue Title V permits for approximately six million sources ; currentl y, thei r Title V inventory is some 15,000 sources. These estimated permitting burdens are orders of magnitude greater than the current inventory of permits and would vastly4

exceed the current administrative resources of permitting authorities. In addition, EPA recognizes that under the applicability levels, an enormous number of new sources that have not previously

been subject to PSD or Title V would have to get permits due to their GHG emissions. This rulemaking proposed to raise the permitting thresholds for sources of GHG’s. Specificall y, EPA proposed that sources with the potential to emit less than 25,000 tons per year of CO 2 equivalent (CO 2 e) are not required to obtain a Title V permit or PSD permit for a period of at least five ye ars, during which ti me, EPA will condu c t a study of permitting burdens and possible streamlining methods. Under the proposed rule, EPA would revisit the appropriate applicability

thresholds after the sixth year. In the six 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 will be allowed to operate without the need for a title V permit, and 40 thousand new sources or modifying sources will n ot be subject to NSR requirements for GHGs. For this larger number of smaller sources, this rule alleviates the regulatory

burden associated with obtaining a title V or PSD permit or complying with NSR Best Available Control Technology ( BACT ) requirements . Therefore, this proposed action may be considered beneficial to these small entities as it provides relief from regulation that would otherwise be required. Given that these smaller sources of GHG account for only about 7 percent of the total GHG CO 2 e emissions in the United States, while representing over 95 percent of the total number of sources potentiall y requiring a PSD permit for GHGs emissions under the permitting thresholds contained in the CAA, the EPA believes the regulatory scheme proposed in the Tailoring Rule represents a prudent path forward in addressing GHG emissions under the Clean Air Act
. SMALL ENTITY REPRESENTATIVES The SERs that participated in this Outreach effort included the following: Small Entity

Representatives In Person Ben Brandes, National Mining Association (NMA) Shannon Crawford, National Solid Waste Association (NSWA) Bradford Frisb y, National Mining Association (NMA) Rhea Hale, American Forest and Paper Association (AFPA) Jeff Hannapel, American Foundry Societ y (AFS ) Rick Krouse, Farm Bureau (FB) Beth Milito, National Federation of Independent Business (NFIB) Susan Miller, The Brick Industry Association (BIA) Dan Moss, Sy

nthetic Organic Chemical Manufacturers Association (SOCMA) Theresa Pugh, American Public Power As sociation (APPA) Ed Repa, National Solid Waste Association (NSWA) Small Entity

Representatives Via Teleconference5

Sally Allen, Gary
- Williams Energy Cooperation and Small Business Refiners Leslie Bellas, National Lime Association (NLA) Jeff Brediger, City of Orville, OH Brian Brendle, National Association of Manufacturers (NAM) Terri Gerlach, Hartzell Hardwoods, Inc. John Hopewell, National Paint and Coatings Association (NPCA) Brittan y J ablonsky , National Farmers Union (NFU) Kathleen Lockhart, Sugar Cane Growers Cooperative (SCGC) Bob Neu feld, Wyoming Refining Company Karen Penafiel, Building Owners and Managers Association (BOMA) Steve Sherk , American Refining Group, Small Business Refiners Bill Wenhauf, National Rural Electric Cooperative Association (NRECA) OUTREACH MEETING The EPA, in collaboration with the SBA, conducted an outreach meeting designed to exchange information with small entities that may be affected b y various rulemakings that EPA is developing for GHGs. The meeting focused, in particu lar, on the proposed Tailoring Rule. Small entity

representatives participating in person and via conference call were briefed on the rulemaking proposal and given the opportunity to provide input that the EPA will consider as the rulemaking is further de veloped. The meeting took place in Arlington, Virginia on November 17, 2009, and included representatives from EPA, SBA, OMB, as well as the SERs listed above. Slides from the meeting are attached as Appendix A. EPA invited SERs to give their focused feedback on concerns that they may have regarding this rulemaking. The following questions were e
- mailed to each SER before the meeting and were discussed during this outreach meeting:

 Are you a small business that would exceed the proposed 25,000 CO 2 e threshold?  Can you provide data showing this? If you are in excess of the threshold, do you already have a title V or PSD permit due to other pollutants?  How man y other small entities in your industry would have to get a new permit? How many would have to revise an existing permit?  If we lowered the threshold, how would it affect your industry? What if we raised the threshold?  What would the economic impacts of the current threshold be on your business? For a higher or lower threshold? In additio n, EPA requested that an y written response to these questions be submitted by December 1, 2009 , which EPA later extended until December 4, 2009. The written responses that EPA received are provided in Appendix B. There were three respondents: The Americ an Forest and Paper Association, the American Public Power Association, and the Small Business Refiners.6

At the outreach meeting, EPA gave an overview of the suite of GHG rulemakings being considered b y EPA, followed b y more specific information regardin g the proposed Tailoring Rule. The slides from these presentations are included in Appendix A. After the presentations, EPA opened the meeting to a more general discussion of the questions presented above, as well as other general concerns regarding GHG regulation under the PSD program. Throughout the outreach meeting, the SERs present, both in person and via teleconference, openly discussed their comments and concerns with the EPA representatives. A summary of key comments from the outreach meeting, m any of which were made during discussions of EPA’s questions for the SERs, as well as preliminary responses from the EPA representatives present at the meeting, are provided below: Section 424 of the Interior Environment Appropriations Act

 The Farm Burea

u representative commented that Section 424 of the Interior Environment Appropriations Act states that, notwithstanding any other provision of law, none of the funds made available in this Act or an y other Act may be used to promulgate or implement any

regulation requiring the issuance of permits under Title V of the Clean Air Act for carbon dioxide, nitrous oxide, water vapor or methane emissions resulting from biological processes associated with livestock production. The Farm Bureau representative was c oncerned that the light dut y vehicle rule will trigger Title V permits for livestock operations involving biological processes. He asked how the enactment of this provision that has been signed into law will affect the promulgation of the L ight Dut y Vehic le Rule. The BIA representative also inquired as to whether Section 424 has any exceptions for biofuels. EPA responded that the EPA was aware of Section 424 of the Interior Environment Appropriations Act and that an internal EPA workgroup has been formed to evaluate what this provision will mean for various EPA rulemakings. EPA stated that it had not ye t reached a conclusion on what Section 424 will mean with regards to the Tailoring Rule or other EPA rulemakings. Timing of the PSD Reconsideration Rule with the Tailoring Rule

 The Farm Bureau representative commented that the Stephen Johnson PSD Applicability Reconsideration rulemaking comment period closes prior to the proposed Tailoring Rule. He expressed concern that, conceivably , the Stephen Johnson PSD Applicability Reconsideration rulemaking may become final before the Tailoring Rule. He expressed that if the EPA’s preferred option regarding PSD applicability is not maintained, such a gap could result in unintended small GHG emission sources being subject to PSD. The Farm Bureau representative requested that EPA consider finalizing these two rulemakings at the same time so this gap does not occur. The American Public Power Association representative further expressed that they considered requesti ng an extension of the comment period for the Tailoring Rule but that they did not want to increase that potential “gap.”7

EPA responded that it is aware of the gap concern that the Farm Bureau referred to and that the Administration and EPA have committ ed to sequencing the GHG rulemakings in a common sense way . Potential to Emit

 OMB clarified that the proposed Tailoring Rule thresholds were based on potential to emit and not actual emissions. This clarification is important because the GHG Mandatory

R eporting Rule thresholds and draft legislation in the Senate and House are based on actual emissions. OMB further stated that this means that a source that may not have to report under the GHG Mandatory Reporting Rule may

be subject to PSD and Title V due to its potential to emit. OMB requested whether EPA could provide an example as to how potential to emit is calculated. In response, an EPA representative stated that the docket provides support (in the Technical Support Document) for their potential to emit emissions thresholds selection. He explained that EPA looked at actual emissions, economic data, and operational information by

industry sector and made assumptions. EPA stated that, for example, for residential units, it is believed that most GHG emissions result from space and water heating and that most emissions will occur in colder months. Therefore, EPA calculated emissions and made adjustments to account for greater heating needs in colder months and made similar extrapolations for other sec tors.

 The American Public Power Association representative stated that most of their equipment is designed to have far greater potential to emit than actual emissions and that equipment is often not run at full capacity , and that therefore, EPA has unde restimated the regulatory

impact of some ty

pes of combustion equipment. She opined that she is sure that they

are not the only

industry sector whose operations do not run at full capacity (e.g., batch chemical manufacturers, small refiners). APPA is not sure what their recommendation might be to EPA (e.g., it may be to base applicabilit y emissions thresholds calculations on the number of hours equipment is run or they may suggest the addition of some rule clarification). As proposed, the APPA representati ve stated that even a 12 MW boiler that does not run more than 600 hours per ye ar would not get below the PSD/Title V threshold because of emissions thresholds being based on potential to emit. Legal Basis of the Rule

 The National Federation of Independe nt Business representative inquired whether there were other rules where the “absurd results” and “administrative necessity” arguments were used to support a rulemaking and whether they were challenged. The Farm Bureau representative commented that in th e “administrative necessity” discussion, the court did not rule in favor of those seeking to apply the doctrine in any of the cases cited. EPA stated that there is an extensive discussion in the preamble to the proposed Tailoring Rule regarding previous use of and court decisions about these arguments.8

Carbon Neutrality of Biomass

 The American Forest and Paper Association representative commented that the difference between EPA’s proposed Tailoring Rule and the Mandatory Reporting Rule and other EPA ru lemakings is that the Tailoring Rule does not uphold the principle of carbon neutrality of biomass and does not differentiate between biogenic emissions and fossil fuel emissions when calculating whether a source would be major under this rule. She expres sed that this is against all EPA precedent. The AFPA representative inquired whether EPA’s calculations included biogenic emissions or just biofuel emissions (which is the usual case), and whether there was a deliberate consideration to include biogenic e missions in this case when EPA has not previously . The AFPA representative stated that an example of biogenic emissions would be the combustion of wood residuals. She explained that international and Federal principles have upheld that emissions calculat ions were to include all fossil fuel emissions but that biogenic emissions (i.e., combustion of wood residuals) did not need to be included. The AFPA representative explained that her association represents less than 50 percent of her industry sector and proportionatel y larger businesses and that she imagined that there are a lot of smaller wood products facilities that would be subject to PSD/title V under the proposed rulemaking. She estimated that about 5 mills would be subject to PSD/title V under the proposed rule if EPA did not require the inclusion of biogenic emissions and about 150 mills if EPA did require the inclusion of biogenic emissions. An EPA representative responded that he did not know whether biogenic emissions were included in the calc ulations. He added that EPA did not look at distinct source categories at the proposed threshold level as EPA’s goal was to establish the level at which the administrative burden that would result from the triggering of PSD/Title V with the promulgation o f the Light Duty Vehicle rule would be manageable. EPA encouraged the AFPA to provide written comments and directed her to the docket for the proposed rulemaking for the technical support document that details the emissions anal ys is/calculations.

 The Ame rican Public Power Association representative agreed with AFPA regarding the need to exclude biogenic emissions from PSD/Title V emissions calculations for purposes of applicability . She reported that man y utilities have added biomass as a way of meeting state renewable electrical/energy standards and that she would not be surprised if Congress were to adopt national standards. Based on her read, an electric utility facility that is a completely

renewable facility

that burns biomass could trigger PSD/Titl e V permitting requirements. She represents a 70 MW power plant that has no fossil generation at the plant except for emergency storm management and, if it needed to increase operations to meet load requirements, would trigger PSD and Title V permit requi rements for CO 2 , and possibly NO x , if biogenic emissions are included in the final PSD and Title V GHG Tailoring Rule applicability emissions threshold calculations. Trying to meet renewable standards in the Southeast is limited to the use of biomass. Sh e suggested that EPA make further BACT or Tailoring Rule decisions that would exclude the CO 2 content from biomass usage.9

 A representative from AFPA added that, from a heating value perspective, fossil fuel is more efficient. If fossil fuel and biomass are treated equall y under the proposed Tailoring Rule, there would not be any reason for industry

to use biomass over fossil fuel. She opined that this is contrary to National Climate Change Policy which encourages the use of renewable fuels, and internati onal policy , which is universally accepted. Process Emissions

 The National Lime Association representative inquired whether EPA took into account process emissions in its emissions analy sis. The NLA representative stated that the lime production industry

is comprised mostly

of small businesses, and the major modification proposed PSD threshold level may prevent or delay

facilities from doing energy efficiency projects. She explained that half of the emissions from lime production are inherent in the process of manufacturing lime. Many facilities engage in energy efficiency programs to reduce fuel consumption but allow them to increase production which could possibly

cause an increase in CO 2 that could trigger PSD. She explained that making lime is don e by heating limestone to a very high temperature which causes a release of CO 2 . For eight years they have been part of Climate VI SI ON 1 to improve energy efficiency . She requested that there be some kind of exemption for those process emissions, as there would be no Best Available Control Technology (BACT) for that and if they are required to go through PSD review every time they

do an energy

efficiency project, it would substantially burden small businesses. In response, an EPA representative stated that all of the industry specific comments have been useful. He reiterated the purpose of the proposed rulemaking and stated that all comments will be taken into consideration. Differences between Mandatory Reporting Rule and Tailoring Rule Metrics

 The BIA representative commented that there are three differences between the GHG Mandatory

Reporting Rule and EPA’s proposed Tailoring Rule. The first difference is that the Reporting Rule requires emissions calculations to be based on actual emissions and the Tailoring Rule requires emissions calculations to be based on potential to emit. The BIA representative stated that though her industry would like their actual emissions and potential emissions to be closer together (reflecting operations closer to ca pacity) this is not where they

are now, given the econom y. The second difference is that the proposed Tailoring Rule emissions measurement is in short tons versus metric tons. She explained that when a source is close to the threshold line, that 10 perce nt is important. The third difference is that their industry , under the Mandatory Reporting Rule, only needs to include combustion emissions where the proposed Tailoring Rule would require all of their emissions when determining whether they are a major s ource.

1 Climate VISION (Voluntary Innovative Sector Initiatives: Opportunities Now) is a voluntary public
- private partnership initiative to improve energy efficiency and GHG intensity in energy
- intensiv e industrial sectors, by accelerating the transition to technologies, practices, and processes that are cleaner, more efficient, and capable of reducing, capturing or sequestering GHGs. http://www.climatevision.gov10

State Laws in conflict with Tailoring Rule

 The Farm Bureau representative raised a concern regarding state laws. He stated that though the Tailoring Rule will meet Federal requirements, sources will still be subject to state laws. States will likely not address changes to their laws until the Tailoring Rule is final and there may

be a gap in coverage between the lower and the proposed higher thresholds for GHGs. The Farm Bureau representative inquired whether EPA has a list of States that need to change their laws and regulations and what they need to change to be consistent with the Tailoring Rule. He added that such a list would be helpful when engaging States to change either their statutes or regulations. The Farm Bureau representative co mmented that, until the state law issue is addressed, there will be no impact from the proposed Tailoring Rule. EPA acknowledged that some States may need to change their regulations and laws to be consistent with EPA’s proposed rule. An agency represe ntative reported that EPA has been speaking to a number of States and are encouraging States to move forward now rather than later, and that some States are already t aking action on this. Burden Estimates

 Referring to slide 15 of EPA’s presentation, the National Farm Union representative inquired whether EPA has estimated the cost associated with those sources that would still be subject to PSD and Title V under the proposed Tailoring Rule thresholds and requested that, if possible, she receive a follow
- u p e - mail referring her to this information. The National Farm Union also inquired how EPA was defining small entity
. An EPA representative stated that the presentation was focused on burden reduction as a result of the proposed rule, but that the Regulat ory Impacts Assessment (RIA) developed for the proposed Tailoring Rule includes the costs that would still be incurred by sources subject to PSD and Title V under the proposed Tailoring Rule. He added that there is uncertaint y in data and information, and that data on agricultural operations were scarce and that the EPA would welcome more data to be submitted with any written comments on the proposed rule and/or as part of this outreach. EPA responded to the “small entity” question by

clarifying that a sm all entity differs depending on industry sector, and explained that when he referred to “small” entities, he meant small with regards to their emissions profile.

 The National Federation of Independent Business expressed that slide 14 (2 nd bullet) states that facilities proposed for exclusion comprise only 7 percent but that EPA stated that those entities were covered elsewhere. EPA responded b y referring to slide 23 and explained that when you move from a threshold of 25,000 CO 2 e to 100/250 CO 2 e, which would be the threshold that would apply in absence of the proposed rule, there is an incremental change in emissions that would be subject to PSD of about 7 percent (i.e., if the proposal is finalized, only 711

percent of GHG emissions would be excluded from PSD applicability , though the number of facilities excluded could be in the millions). EPA also clarified that those emissions may

be covered under voluntary programs or energy

efficiency

programs but not under another Federal permitting program.

 The r epresentative from the American Foundry Society asserted that there would be a huge burden associated with the permitting requirements and, depending on BACT (e.g., switching fuels), this burden would be even more significant. He also asserted that he bel ieved EPA’s estimate of $45,000 to obtain a Title V permit is low and that he believes the costs are doubled. Additionally , he commented that the cost of permitting authorities per permit, where States need to go to a fee program, will be an added cost fo r facilities.

 The American Public Power Association representative requested that EPA, when conducting its impacts analy sis, do a more thorough job accounting for the economic downturn over the last 12 months (utilities have lost 20 percent industrial/commercial load in the last year) and the economic fragility . She asserted that, without consideration of these economic times, entities will likely move offshore.

 The NLA representative commented that impact considerations include more than applying for a permit, and could include the burden of the permitting agency needing to review applicability

determinations filed with these agencies to ensure they are not going to be subject to PSD or open to enforcement action.

 The American Foundry Society representative stated that the cost of controls and the cumulative effect of these regulations are both big issues for small businesses. He commented that their industry uses fuels to heat metals and requiring that their industry switch fuels could result in signif icant impacts. New Permits Needed Because of Regulation of GHGs

 The NLA representative responded that most of their facilities already have Title V permits and the most significant issue for her industry is the PSD significance level for modifications. She reiterated that a number of energy efficiency

programs would be triggered for CO 2 but not for other regulated pollutants.

 The City

of Orrville, Ohio representative responded that, of the approximately 60 members, all have Title V permits but that they shared a similar concern as the NLA representative regarding the proposed modification significant level, which might inhibit any kind of improvements.

 The representative from the American Foundry Society responded that there are many large GHG emitter s in his industry that were small businesses, even more if applicability emissions thresholds are based on potential to emit versus actual emissions. He noted that 400
- 500 facilities in the metal casting industry, that would meet the definition of small b usiness, would exceed the 25,000 CO 2 e proposed threshold. The American Foundry Societ y representative clarified that his numbers were based on the criteria given12

in the Reporting Rule and that these numbers would need to be adjusted based on the criteria for the Tailoring Rule, and that the adjusted numbers would be provided to EPA. It was also noted that most of these sources are area sources where EPA has previously
determined it was not appropriate for these facilities to have to obtain a Title V permi t, though all have some ty

pe of air/operating permit. Under the proposed thresholds, these facilities would be subject to Title V for the first time, and some would be subject to PSD.

 The Brick Industry

Association representative responded that one to two - thirds of their facilities have Title V permits because of hazardous air pollutants, but that she did not believe there are an y that are subject to the PSD program. She stated that, using AP
- 42 emission factors, they

have as man y as 8 out of approximately 180 plants that could be major for PSD, and that there may be one or two existing PSD avoidance permits out there. The BIA representative clarified that including all emissions (e.g., including biogenic emissions), over 100 plants would be major base d on CO 2 . L ooking at significance levels, the brick industry would most likely

be hit for fluorides and particulate matter, and possibly CO 2 . She noted that, again, this industry has never had to undergo this kind of PSD review. Of the 70 member compan ies, she estimated that only 6 are considered large with the remaining companies being small. The BIA representative stated that she would provide EPA with data.

 The Farm Bureau representative responded that approximately 500 dairy

operations (25 percent of all milk production), 100 pork operations (25 percent of all pork production), and 200 beef operations (60 percent of all beef feed operations) would be subject to Title V under a 25,000 CO 2 e threshold. He reported that they were unsure about poultry operations, but that it was about 50 or 60 operations under the Mandatory Reporting Rule. The Farm Bureau representative stated that a good percentage of farm operations would likely

get out of the PSD program under the proposed 25,000 CO 2 e threshold. In response to a question from EPA regarding whether an y of the operations that would be subject to Title V would be small, the Farm Bureau representative responded that the way they calculate greenhouse gas emissions estimates for livestock operations come from USDA 1605(b) (Greenhouse Gas Registry Guidelines), where it is estimated that dairy cows emit approximately 4 tons per year (tpy) GHGs, beef cows emit approximately 2 tpy GHGs, and hogs emit approximately 0.5 tpy GHGs (based on methane). He stated th at he would get the numbers to EPA.

 The American Public Power Association representative commented that her association represents an estimated 2,000 State and Municipal electric utilities, 95 percent of which qualify as small businesses under the Small Business Regulatory Fairness Act (SBREFA) and 100 percent of which are subject to the Unfunded Mandate Reduction Act (UMRA). The UMRA’s goal is to reduce regulatory requirements to State and L ocal governments, where costs would be directly passed through to consumers. The APPA representative reported that there are an estimated 325 electric utilities that currently have Title V operating permits, and she thinks there is one existing PSD permit in Delaware. The vast majority of their members have no PSD p ermitting experience. She opined that EPA underestimated the regulatory impacts and costs to the electrical utility industry with13

regards to PSD because of the triggering of other pollutants. She noted that one EPA presentation slide indicated that there were about 160 electric utilities that would get relief from the proposed rule, but she believed that those facilities are likely manufacturing cogeneration facilities and not the kind of electric generation utility that yo u would call up when the lights go out and that she does not believe that there would be an y change for the kind of electric generation facility that provides service to the community
. Fees

 The American Public Power Association expressed concern regarding the $43/ton Title V permit f ee that States might want. Some S tate s cap these fees at $4,000 per boiler or provide a facility

cap, but that some States do not. This money would be money

that would not be going back to the city , which points to the Unfunded Mandates issue. The APPA representative explained that this money funds fire, policy , emergency response personnel, and in some cases, teachers’ salaries. Regarding Title V permit fees, an EPA representative expla ined that S tates are not re quired to charge a minimum of $43/ton an d that they are required to make a determination of the funding need ed to run their Title V program , which must be approved b y the EPA in order to collect fees , and that funds from permit fees cannot be used for other purposes
. He acknowledged APPA’s conc ern but explained that there are provisions in the regulations that will minimize any abuse of Title V fees in the program and noted that where abuses have been identified in the past (i.e., Title V money used for other programs, such as transportation), E PA has required return of the money
.
 The American Public Power Association representative requested that EPA reissue the John Seitz memorandum on Title V operating permits to remind States about the use of Title V fees.

 The Farm Bureau representative inq uired whether the use of Title V fees to administer a State’s Title V permit program negates the “administrative necessity” argument set out in the preamble. EPA responded to the Farm Bureau representative by stating that a State can administer their perm itting program under the existing applicability thresholds (e.g., because of a small number of sources),and collect fees to do so if they can demonstrate to EPA that they can adequatel y administer the program. Under such a scenario, EPA can approve an alte rnative threshold limit to what EPA is proposing and part of that could include State collection of fees. SISNOSE for Mines

 The National Mining Association representative commented that his association looked at EPA’s Technical Support Document for the p roposed rule under the coal mining section and were concerned that there may be a SI SNOSE on underground coal mines in the14

industry . He further stated that they are talking with The Mine Safet y and Health Administration (MSHA) to retrieve updated informat ion (acknowledging that EPA obtained their numbers from MSHA) which has reported that the number of facilities that are considered gass y is about 148. The NMA representative stated that they are waiting for a list of these facilities that breaks out the n umber of employees and will share that information with EPA. He requested that EPA look at these facilities further as, for their industry , a small business is one that is based on 500 or less employ ees. Based on EPA’s RIA, he stated that about 98 percent of their industry is small, with 15 facilities above the proposed threshold, and the other 600 to 800 facilities falling below the threshold. The NMA representative also commented that EPA’s analy sis assumes that no new underground coal mines will be bu ilt, reporting that though there may be some shrinkage of mines because of the economy , new mines are opening all the time. He further commented on EPA data that indicates that 103 coal mine sources would exceed the 25,000 CO 2 e threshold for methane as no t indicating whether those 103 sources are small or not. He requested that EPA evaluate these 103 sources to discern whether they are small businesses. The RFA for the Suite of GHG Regulations

 The NMA representative commented that the proposed Tailoring Rule was certified as having no SISNOSE because the proposal is relieving the regulatory burden. He inquired that, while he understood that perspective, does that mean the Regulatory Flexibility Analy sis (RFA) will be done in the Li ght Dut y Vehicle Rule , and, if not, where will it be done? He further inquired, that if it is not going to be done, how does the Small Business Administration Advoc ac y Group feel about that? EPA responded b y stating that the Light Dut y Vehicle Rule had also been certified as not having a SI SNOSE because it does not directly impact an y small entities
. An SBA representative responded to NMA’s inquiry on this point by

stating that they

had requested an RFA in the form of a panel and it did not happen, and that they are in the process of preparing a comment letter that addresses that issue. He explained that though the outreach meeting is part of an effort to educate small entities, in SBA’s opinion it is not the same thing as having a panel.

 The Farm Bureau representative agreed that the impacts of Title V and PSD should be addressed before going forward, and though he agreed that it should have been done under the Li ght Dut y Vehicle Rule , he also believed that it could be argued as necessary under this proposed rulemaking. BACT for CO2

 The BIA representative asked what the controls for CO 2 are, other than energy efficiency
. EPA responded that the GHG BACT Work Group (a subgroup of the Clean Air Act Advisory Committee) has been tasked b y the Agency to look at this issue for individual15

source categories and the Work Group’s goal is to complete this effort b y M arch, when the light duty

vehicle rule is scheduled to be finalized.

 The American Public Power Association representative commented that she was at EPA a couple of wee ks prior to this meeting where EPA invited electric utilities to discuss and discern what is potentially BACT for the electric utility industry with about 35 EPA staffers and contractors. The thinking at the meeting was that it would be geologic sequestration to meet something parallel to a natural gas standard. She explained that the concept presented to them was that a power plant could retrofit to meet a natural gas equivalent standard b y gasifying coal or by doing geological sequestration of CO 2 . She asserted that, although carbon sequestration has been commercially demonstrated by

the oil and gas industry , it is not commerciall y demonstrated in the U.S. or the world for power plants (that neither have the infrastructure or operations to make carbon s equestration a feasible option). For most industries, BACT over the next 25 years for CO 2 will entail energy

efficiency

or switching to natural gas, nuclear power, renewable, or some combination of these. The American Public Power Association represent ative stated that in the electric utility industry , they

want to keep coal as one of their options along with other options to maximize choices in fuel. Even if carbon sequestration is commercially demonstrated for power plants in the next ten years, she opined that it would take ten to fifteen years to obtain the proper Water Permits as it is a completely different process than controlling air pollutants. The American Public Power Association representative offered EPA more information on this issue.

 The BIA representative added that their industry is also being hit by

additional Maximum Achievable Control Technology standards and are having difficulty addressing how to deal will all these regulations in a bad econom y. She reported that, for her indus try , there is no offshore option.16 Appendix A Slides from the Outreach Meeting17

Slide 1


### EPA Climate Change Regulatory Activity

November 17, 2009

Slide 2

2 

## Massachusetts v. EPA and Resulting

Rulemakings

 Massachusetts v. EPA

– April 2007  Proposed Endangerment Finding

– Published April 24, 2009 - 74 FR 18886

– Public comment period closed June 23, 2009  Proposed Light Duty

V ehicle Rule

– Published September 28, 2009 - 74 FR 49454

– Public comment period closes November 27, 2009  Proposed PSD/Title V Tailoring Rule

– Published October 30, 2009

– 74 FR 55292

– Public comment period closes 60 days following publication18

Slide 3

3 

## Related GHG Rulemakings

 Reconsideration of PSD Interpretive Memo

– Published October 7, 2009

– 74 FR 51535

– Public comment period closes December 7, 2009  Final GHG Reporting Rule

– Published October 30, 2009

– 74 FR 5626019

Slide 1


# GHG Regulations and

their NSR/Title V Impacts Small Entity Outreach Meeting November 17, 2009

Slide 2

2



## Goal  Outreach to small entities to exchange information about the suite of GHG regulations and how they may impact the PSD and Title V permitting of small entities.20

Slide 3

3



## Types of Federal Air Permits  Construction Permit  Permit must be issued before the source can start construction  Applies to major sources  Major source program is known as New Source Review Construction Permit Program  Operating Permit  Permit must be issued before the source can begin operating  Applies to major sources  Program is the Title V Operating Permits Program

Slide 4

4



## What is New Source Review (NSR)?
 Requires facilities to install modern pollution control equipment when:  they are built or

 when making a change that increases emissions significantly21

Slide 5

5



## What is an NSR permit?

 An enforceable legal document that a facility must comply with. It restricts:  What construction is allowed  What air emission limits must be met  How the source can be operated  To assure compliance, a permit must contain monitoring, recordkeeping, and reporting requirements  Public review of the proposed permit is required.  Generally

t akes about a year to get the permit

Slide 6

6



## Which facilities are regulated?

 Facilities are known as sources under the program.  The major NSR program applies to major sources.  Major sources are facilities that have the potential to emit pollutants in large amounts (that is, equal to or greater than certain emissions limits under the program, usually 100 or 250 tons per year for new major sources and 40 tons per ye ar or less for changes at existing sources).22

Slide 7

7



## Who Needs a Title V Permit?
 All major sources, which are:  Any source that emits at least 10 tons per year of any toxic air pollutant or 25 tons per y ear of all toxic air pollutants  Any other source that emits at least 100 tons per year  Some non
- ma

jor sources (a few area sources and hazardous waste incinerators)  Around 15,000 major sources nationwide  In cludes around 300 sources on Tribal land

Slide 8

8



## Title V Operating Permits  The Title V Operating Permit must include all requirements that apply to the source under the Federal Clean Air Act.  This includes the NSR permit requirements.  Italso includes any

other federal control technology requirements, testing, monitoring, recordkeeping, and reporting requirements that apply to the source.  Requires sources to report their com pliance status with all of the requirements.  Requires an opportunity for public review of and comment on the proposed permit23

Slide 9

9



## How do Title V Permits Get Issued?  Sources must apply to state or local agency  Permitting agency negotiates terms and drafts permit  Draft permit is reviewed by public  Public hearing may be requested  Final permit is issued  Public may petition the Administrator to object to the final permit

Slide 10

10



### Massachusetts v

. EP A and Resulting Rulemakings
 Massachusetts v

. EP A  April 2007  Proposed Endangerment Finding  Pu blished April 24, 2009
- 74 FR 18886  Pu blic comment period closed June 23, 2009  Proposed Light Duty

V ehicle Rule  Pu blished September 28, 2009
- 74 FR 49454  Pu blic comment period closes November 27, 2009  Proposed PSD/Title V T ailoring Rule  Signed September 30, 2009

– FR publication forthcoming  Pu blic comment period will close 60 days following publication24

Slide 11

11



## Big burden, little gain

 Small businesses raised concerns over applying permit programs to such small sources if the thresholds remain at 100/250 tons. Some hypothetical examples of sources that may exceed 250 ton threshold:  A 60 horsepower internal combustion engine (the vast majority of stationary engines nationwide).  A new 100,000 sq. ft. hotel or 50,000 sq. ft. restaurant.  A large commercial property that spends (or could potentially spend) an average of $5,000/month on its natural gas bill.  A major source that adds a gas furnace or space heater (assuming zero significance level).  A boiler/furnace serving a multi
- family residential building with more than 20 occupied units.  State agencies and EP A raised concerns about the administrative burden of running the permit programs for such small sources due to the very large numbers.  In light of potentially enormous burdens but relatively little environmental im pact, tailoring these programs for large numbers of small sources is necessary to provide a common sense approach to GHG regulation.

Slide 12

12



## Why the Tailoring Rule is needed

 By rule/policy, PSD and Title V permitting programs under the Clean Air Act apply to major sources and modifications of “regulated NSR pollutants.”  GHG are not now “regulated” and thus are not covered by these programs now  Th ere are concerns about how we would administer these programs if GHG become “regulated”  Th e first “regulation” of GHG will likely be with Light Duty vehicle rule promulgation in March 2010.  Specifically the concerns about regulation of GHG stem from the fact that:  By statute, for Title V, the major source threshold is 100 tons/year.  By statute, for PSD, the threshold is 250 tons/year (100 tons/year for some categories).  For PSD modifications, any change at a major source that results in “any increase” of GHGs would trigger PSD unless we establish a “significance level” that excludes smaller modifications.  GHGs (especially CO2) are emitted in much greater mass than conventional pollutants, so very small sources exceed the 100/250 ton per year levels.25

Slide 13

13



### Why the Tailoring Rule is needed (continued)  For title V, millions of smaller sources would be newly classified as major for GHG.  About 15,000 major sources now  For PSD, tens of thousands of smaller new sources and modifications each year would be newly classified as major for GHG.  About 300 new major sources/modifications per year now  The administrative burdens of permitting large numbers of newly
- subject sources would cause severe disruption to the existing programs.  Many of these sources are in commercial/residential categories that have no experience with CAA permitting  Tailoring these programs to address large numbers of small sources is necessary to provide a common sense approach to GHG regulation.

Slide 14

14



### How would the Tailoring Rule Address This?
 Proposes to raise the “major source” thresholds and PSD “significance levels”  PSD and Title V: major source size raised to 25,000 tons/year CO2e (sum of 6 gases)  PSD significance level: raised to a number within the range of 10,000
- 25,000 tons/year CO2e (sum of 6 gases)  Proposal takes comment on other levels.  Proposal also takes comment on use of CO2e metric/6 gases  Use of CO2e (sum of six gases) improves source flexibility, simplicity, and consistency with GHG control regulations/climate endpoint.  Facilities above these levels would still be required to obtain permits.  Facilities that remain covered are responsible for nearly 70 percent of stationary source GHG emissions.  Facilities proposed for exclusion comprise only 7 percent.  Based on our calculations, small farms, restaurants, office buildings, etc. would not need to get permits.26

Slide 15

15



### What are the small entities that will need to get a PSD permit?
 We estimate approximately 14,000 sources will need to get a permit based on their GHG emissions with the proposed threshold.  However, we estimate that the vast majority of these already hold a permit.  Some exceptions are:  Landfills  Some commercial sources  Larger, multi
- family

residential sources.

Slide 16

16



## Summary of Impacts of Rule

 Major benefit of rule is regulatory relief to small sources of GHG.  Regulatory relief also means foregoing environmental benefits (costs) of regulation under title V and NSR for these sources.  Other approaches such as voluntary measures and efficiency measures will be pursued in other forums to reduce GHG emissions from the affected smaller sources.27

Slide 17

17

Estimated Number of Entities Avoiding Costs as a Result of Rule 1

Category Tit le V

Sources New PSD

Sources 2 EGU 161 20 Industrial 156,545 303 Ener gy 3,644 35 Wa ste Tr eatment 1,431 0 Agriculture 37,351 299 Commercial 1,354,760 12,034 Residential 4,535,340 6,912 To tal 6,089,232 19,603

1 Represents approximately 95% of the potential sources requiring an operating permit or PSD permits for GHG emissions and less than 10% of GHG emissions from stationary sources. 2 Number of sources does not include modifying PSD Sources. Slide 18

18



### Avoided Costs for Affected Entities

– Title V 1,2
Affected Entities Number of Permits Av oided Per Permit Cost

(2007$) To tal Cost Av oided

(millions 2007$) Source In dustrial 195,895 46,350 9,079.7 Residential/ Commercial 5,956,513 4,986 29,699.2 Permitting Authority In dustrial 195,895 219,688 3,856.8 Residential/ Commercial 5,956,513 1,978 11,781.9 To tal Cost 54,417.6

1 Avoided costs represent the initial ICR costs inv olved in permitting sources of GHG. Title V operating permits are required to be renewed ev ery 5 years. 2 Number of permits differs from affected title V sources on slide 6 because new NSR sources will also be required to obtain an operating permit.28

Slide 19

19



## Legal Basis for Proposal

 Al though the rule departs from statutory thresholds it is permissible to do so under two separate legal bases:  “Absurd results”  Courts have held that a statutory requirement need not be applied literally if doing so would produce “absurd results” that would be inconsistent with congressional intent.  Applying the PSD and Title V statutory thresholds literally would be a classic case of an “absurd result” because it would sweep into the two permitting programs unprecedented numbers of small sources that Congress did not intend be included, and the resulting administrative burdens wo uld prevent the State permitting authorities from permitting the larger sources that Congress did intend be included.  “Administrative necessity”  Courts have held that a statutory requirement need not be applied literally if it would be impossible for the agency to administer it.  Applying the PSD and Title V statutory thresholds literally would create impossible administrative burdens for the State permitting agencies.

Slide 20

20



### Selection of Proposed Levels

 Selection driven by what is necessary to meet congressional intent as closely as possibly, and what is administratively feasible.  Must choose lowest level that we judge possible to administer  25,000 tons per year CO2e (and 10,000
- 25,000 tons per year CO2e for modifications) is proposed as the lowest level at which the program could be administered for the next six years, because:  Going lower (we evaluated 1,000, 5,000, and 10,000 tpy) starts to rapidly increase commercial and residential source applicability.  Going higher (we evaluated 50,000 and 100,000) is likely harder to justify with administrative necessity because coverage is less than we have now.29

Slide 21

21



### Selection of Proposed Levels (continued)

 At proposed levels, GHG regulation would add workload to permitting authorities, but proposal suggests it would not overwhelm them:  About 3,000 sources to Title V’s current universe of 15,000 sources.  Fewer than 100 sources and modifications per year to PSD’s current universe of 300 permits per year.  Most of the added sources are large municipal solid waste landfills with major amounts of methane.  A large share (but not all) of existing major source population will also be major for GHG.  Promotes coverage of nearly 70% of GHG emissions (see next slide). Lower thresholds yield small increases in coverage but significant increases in burden.

Slide 22

22

Additional Information About 25,000 ton/year Level

25,000 level excludes all but the largest commercial and multi
- fa mily residential sources 25,000 is consistent with GHG reporting rule Existing Facilitie s Exce ed ing GHG Perm it ting T hresholds

(By Sector based on PTE)

0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000

5,000 10,000 25,000 50, 000

Permitting Threshold (tons C O2-eq/yr)# of Existing Facilities Electricity Generation In dustrial Oil/Gas/Coal Production Wa st e Com mercial Res idential30

Slide 23

23 -At 25,000 tpy level, 68% of CO2e (87% of CO2) emissions are still covered by the permit programs.

- For comparison, 72% of NOx is covered at the 250 tpy level.

Existing Facility and GHG Emissions Coverage by Permitting

Threshold

13,661 7,245 4,850 1,058,296

278,340
52,888 26, 898 64% 75% 73% 71% 70% 68% 65%

0 200, 000 400, 000 600, 000 800, 000 1,000,000 1,200,000

250 1000 5000 10,000 25,000 50,000 100, 000 Threshold in tons/yr CO2-eq# Facilities Covered

50% 55% 60% 65% 70% 75% 80% 85% 90%% of National Stationary Source GHGEmissions Covered

Facilities Covered Emissions Covered

Slide 24

24



## Additional Elements of Proposal

 EPA identifies measures it will consider for streamlining permitting over the next several years.  For example, general permits.  After 5 years, EPA will evaluate whether to change threshold, and if so, will do a rulemaking.  Streamlined approach to get rule in place in States.  Does not address how to set BACT for sources left in program, but commits to separate process to assist with this.  Also separately

n otes that, while it makes sense to remove smaller sources from permitting, there may b e other cost effective way s to address their emissions.31

Slide 25

25



## Implementation Issues

 Getting the Tailoring rule in place in States:  Will require somewhat novel approach of “narrowing” our existing approvals of permit programs to clarify that our approval does not include sources below 25,000 tons/year CO2e or modifications below 10,000 tons/year CO2e.  States can provide SIP revision for EPA approval should they seek to establish lower thresholds.  For smaller sources that are deferred due to Tailoring rule:  Proposal signals intent to identify cost
- effective and implementable opportunities for reductions from these sources through means other than PSD during the deferral period (e.g ., energy efficiency measures, renewable grants, etc .)  For larger sources that do not get deferred ( i.e., that remain subject to permit programs because they emit more than 25,000 tpy):  Proposal indicates intent to separately assist with challenges of determining BACT for new GHG pollutants by developing control
- related information to aid in making such determinations.  Proposal acknowledges that Title V programs will have more workload and will need to collect adequate fee revenue, but this rule is not the forum for proposing changes to fee provisions and does not make findings of inadequate fee provisions in State programs.

Slide 26

26



## For more information
 Pream ble and proposed regulatory text available at www.regulations.gov after publication in the Federal Register  Instructions for submitting written com ments found in preamble:  www.regulations.gov  Additional information: www.epa.gov/nsr  Juan Santiago, AQPD: 919
- 541
- 1084  Email: santiago.juan@epa.gov32

Slide 27

27



## Questions for SERS
 Are you a small business that would exceed the proposed 25,000 CO2
- eq threshold?  Can you provide data showing this? If you are in excess of the threshold, do you already h ave a title V or PSD permit due to other pollutants?  How many

other small entities in your industry would have to get a new permit? How many w ould have to revise an existing permit?  If we lowered the threshold, how would it affect y our industry? What if we raised the threshold?  What would the economic impacts of the current threshold be on your business? For a higher or lower threshold?

Slide 28

28



## Estimating Your Emissions
 AP
- 42: www.epa.gov/ttn/chief/ap42/  www.epa.gov/climateleaders/resources/index.html33 Appendix B Written Responses to EPA’s Questions