## C OMMENTS OF THE 

## B AY 

## A REA 

## A IR 

## Q UALITY 

## M ANAGEMENT 

## D ISTRICT
ON 

## EPA P ROPOSED 

## R ULE 

## Proposed Revisions to 40 CFR 52.220 (Identification of Plan) Federal Register Notice Revisions to California State Implementation Plan; Bay Area Air Quality Management Dis trict; Stationary Sources Permits

80 FR 52236 (August 28, 2015)
Docket No. EPA

- R09

- OAR

- 2015

- 0280 November 12, 2015

This document provides comments of the Bay Area Air Quality Management District (Air District) on the proposal published by the Regional Admi nistrator of EPA Region IX for a limited approval and limited disapproval of the Air District’s New Source Review (NSR) rules (hereinafter, the “Proposal”)

. These rules are in Air District Regulation 2, Rules 1 and 2 (Regs. 2

- 1 and 2

- 2), as amended most r ecently in December 2012.
The Air District generally supports EPA’s proposal insofar as EPA proposes to approve the Air District’s NSR rules. T he District disagrees in some respects with EPA’s propos ed limited disapproval , however, for the reasons expla ined in these comments.
The Air District appreciates the opportunity to provide these comments and looks forward to working with EPA in moving to a final decision on its NSR rules. T he Air District also appreciates EPA’s agreement to provide an extended comment period, as well as EPA’s willingness to discuss EPA’s position on these issue s with Air District staff during the comment period

. EPA’s willingness to assist the Air District in this regard has been extremely helpful in providing the Air District with a better understanding of EPA’s position, which has helped the District better focus its comments on EPA’s areas of concern regarding these NSR rules.i 

### TABLE OF CONTENTS

I. The Air District’s Discretion In Developing A Regulatory Program To Satisfy The Federal NSR Requirements

................................ ................................ .............................. 1

Comment I : EPA Should Ensure That It Is According Appropriate Deference To The Air District’s Policy Cho ices On How To Implement Its NSR Program

................................ .................... 2



### II. 40 CFR Section 51.160’s Requirements To Prevent Construction of New Sources And Modifications That Would “Interfere With Attainment Or Maintenanc e Of A National Standard”

................................ ................................ ................................ ....................... 3

A. 40 CFR Section 51.160 Does Not Require States’ NSR Programs To Conduct A Source

- Specific Analysis of Each Individual Source’s Emissions And Their Potential Impac t On Ambient Air Quality

................................ ................................ ................... 4

Comment II.A.1. : The Requirement to Prevent “Interference With Attainment or Maintenance” Of The NAAQS Can Be Satisfied By Showing Non

- Interference With The Air Dist rict’s Regulatory Program That EPA Has Approved For Achieving Attainment And Maintenance of the NAAQS

................................ ................................ ................................ ............. 5
Comment II.A.2. : The “Interference With Attainment or Maintenance of the NAAQS” Standard Is Different From the “Cause Or Contribute To A Violation Of The NAAQS” Standard

................................ ................................ ................................ ................................ ........... 6
Comment II.A.3. : An Interpretation That 40 CFR Section 51.160 Requires A Source

- by

Source Evaluation Of Eac h Source’s Emissions and Ambient Air Quality Impacts Would Create New Substantive Requirements That Go Beyond What Is Authorized By The Clean Air Act

................................ ................................ ................................ ................................ ............... 8
Comment II.A.4. : Requiring A Demonstrat ion That New And Modified Sources Will Not Contribute To Any NAAQS Exceedance Is Highly Problematic For Areas Where Background Concentrations Already Exceed The NAAQS

................................ ................................ 9


### B. Even If 40 CFR Secti on 51.160 Did Require Source

- Specific Analyses of Individual Sources’ Emissions, District Regulation 2

- 2

- 308 Would Satisfy Such A Requirement Because It Requires An Analysis For All Air District NSR Permits (Above A Permissible De Minimis Threshold)

................................ ................................ ........... 10

Comment II.B.1. : The Federal NSR Program Allows States To Provide De Minimis Exemptions Of The Type Provided In Section 2

- 2

- 308 Under The Alabama Power Doctrine

......... 10
Comment II.B.2. : The Thresholds In Section 2

- 2

- 308 Use EPA’s Own De Minimis Thresholds That EPA Adopted for Use In NSR Permitting Under Alabama Power

......................... 11
Comm ent II.B.3. : The Air District Also Justified The Thresholds In Section 2

- 2

- 308 Through An Analysis Specific to Local Conditions In The San Francisco Bay Area.

........................ 13ii



### C. EPA’s Suggestion That The Air District Should Adopt A Requirement That A Source

Specific Air Quality Impact Analysis Will Be Required Based Solely On The Unfettered Discretion Of The APCO

................................ ................................ .......... 15

Comment II.C. : A Vague Ope n

- Ended Requirement Leaving The Decision Of When An Analysis Is Required Entirely Up To The APCO’S Sole Discretion Is Not Required, Not Appropriate, And Not Legally Supportable

................................ ................................ .................... 17


### D. Remaining Questions Regarding EPA’s Interpretation of 40 CFR Section 51.160

......... 17

Comment II.D. : EPA Should Clearly Specify What Is Required Under 40 CFR Section 51.160, How SIP Submittals Will Be Judged Against That Rule, and Why The Bay Area’s NSR P rogram Does or Does Not Satisfy That Rule

................................ ................................ ......... 18



### III. EPA’s Statement That The Air District’s Rules Do Not Satisfy The Requirements in 40 CFR Section 5 1.160 To Ensure Compliance With The Air District’s Control Strategy

........ 19

Comment III : District Regulations 2

- 1

- 304 and 2

- 1

- 321 Ensure That Any New Source Or Modification Will Comply With The Co ntrol Strategy

................................ ................................ .... 19



### IV. EPA’s Proposal to Require “Double

- Counting” Of The Amount Of Offsets Required To Offset A Facility’s Maximum Emissions Under The Worst

- Case Scenario

........................ 19

Comment IV.1 : The Clean Air Act Only Authorizes EPA To Require Offsets Sufficient To Ensure “Reasonable Further Progress”

– Which Does Not Allow EPA To Require The Air District To “Double

- Count” The Amount Of Offsets Required

................................ ........................ 22
Comment IV.2 : District Regulation 2

- 2

- 606.2 Is Consistent With 40 CFR Section 51.165(a)(3)(ii)(J) Under Any Reasonable Interpretation Of That Regulatory Provision

............... 24



### V. The Clean Air Act’s General Requirement To Ensure That Offsets Are Obtained Sufficient To Ensure “Reasonable Further Progress”

................................ ...................... 31

Comment V.1 : Clean Air Act Section 173(a)(1) Requires Local Permitting Authorities To Obtain Offsets Sufficient To Achieve RFP

– And Not More

................................ ............................ 31
Comment V.2 : EPA Should Confirm That The Air District Can Satisfy The Clean Air Act’s Offsets Requirements By Incorporating By Reference EPA’s Own Offsets Rule In EPA’s Federal NSR Program In 40 CFR Part 51, Appendix S

................................ ................................ ..... 3 1



### VI. EPA’s State ment That Offsets Requirements Apply To SO 2 

### As A PM 2.5 

### Precursor

............ 32

Comment VI : Non

- Attainment NSR Requirements Do Not Apply To SO 2 Because SO 2 Emissions “Do Not Contribute Significantly to PM 2.5 Levels Which Exceed The [NAAQS]”

............ 32iii



### VII. Providing Emission Reduction Credits For Shutdowns of Fully Offset Sources

................ 33

Comm ent VII : EPA Should Approve The Air District’s Rule For Establishing The Baseline For Determining The Amount Of ERCs Generated From Fully Offset Sources, Which EPA Has Approved In The Past And Which Is Authorized Under EPA’s NSR Regulations

...................... 35



### VIII. EPA’s Proposal To Disapprove The Air District’s Threshold For Conducting A Class I Area Visibility Impacts Analysis

................................ ................................ ..................... 37

Comment VIII.1

. : The Air District’s 100 km Threshold Is An Appropriate Way To Define What Sources “May Have An Impact On Visibility” In A Class I Area

................................ ............ 38
Comment VIII.2. : EPA Should Explain Its Interpretati on Of What Section 51.307(b)(2) Requires And How Much Discretion It Believes Local Permitting Authorities Have Under That Section

................................ ................................ ................................ ................................ ... 40



### IX. Legal Effect of Any “Limited Disapproval” on Federal En forceability of the Air District’s NSR Program Provisions

................................ ................................ ................................ 40

Comment IX : If EPA Finalizes a Limited Approval and Limited Disapproval, EPA Should Explain That The Air District’s NSR Regulations In Their Entirety Are Effective As Federally Enforceable NSR Requirements, Subject To A Requirement For The Air District To Submit Revisions To Address Any Deficiency Items

................................ ................................ .................... 41



### INCORPORATION BY REFERENCE OF CITED DOCUMENTS
The Air District incorporates by reference all of the supporting documents discussed herein in

conn ection with specific comments (including the March 15, 2012 and July 26, 2012 comments that EPA submitted during the Air Districts rule development process for the most recent version of the NSR rules, and all of the Air District’s responses to those comment s ). EPA already has copies of most of these documents through previous correspondence with the Air District, and any others are readily available on the internet. The Air Di strict is therefore not providing additional copies with these comments. If EPA would like copies of any of these materials, the Air District will be happy to provide them.1



## I. T HE 

## A IR 

## D ISTRICT 

## ’ S 

## D ISCRETION 

## I N 

## D EVELOPING 

## A R EGULATORY 

## P RO GRAM 

## T O 

## S ATISFY 

## T HE 

## F EDERAL 

## NSR R EQUIREMENTS

At the outset, the Air District wants to ensure that EPA recognizes the primary role that the Clean Air Act grants to local permitting authorities to design their own regulatory programs to implement the fede ral NSR program requirements. Under the Clean Air Act’s “cooperative federalism” approach, it is up to the states and their local permitting authorities in the first instance to decide on the most appropriate way to implement the federal NSR program. EPA ’s role is simply to determine whether the local permitting authority’s choices satisfy or do not satisfy the federal NSR program requirements. As long as the agency’s regulatory program satisfies the federal requirements, then EPA is required to approve it , even if EPA would choose to implement the requirements in a different

manner or believes that some alternative approach is preferable.

T his principle of state primacy in making policy choices regarding how to implement NSR has been affirmed repeated ly by the federal courts. As the Firth Circuit has recently explained:
The states have “ wide discretion ” in formulating their SIPs, Union Elec. Co. v. EPA , 427 U.S. 246, 250, 96 S. Ct. 2518, 49 L. Ed. 2d 474 (1976) , including the “ broad authority to deter mine the methods and particular control strategies they will use to achieve the statutory requirements. ” BCCA Appeal Grp ., 355 F.3d at 822 (citing Union Elec. Co ., 427 U.S. at 266 ( “ So long as national standards are met, the state may select whatever mix of control devices it desires. ” )). Once a state creates or revises a SIP, it is submi tted to the EPA for review. 42 U.S.C. §§ 7410(a)(1) , (k)(1)

- (2)

. The Act confines the EPA to the ministerial function of reviewing SIPs for consistency with the Act ’ s requirements. Id

. at § 7410(k)(3). The EPA must approve the plan in its entirety if it meets the applicable requirements of the Act. Id . at § 7410(k)(3) ; Fla. Power & Light Co. v. Costle , 650 F.2d 579, 587 (5th Cir. 1981)

. Luminant Generation Co. LLC v. United States EPA , 714 F.3d 841, 845

- 46 ( 5 th Cir. 2013) (emphasis added)

. Similarly, the Eleventh Circuit explained this framework as follows: The Clean Air Act thus provides a cooperative federalism approach to air quality regulation. See Fla. Po wer & Light Co. v. Costle , 650 F.2d 579, 581 (5th Cir. 1981) ( “ Congress chose a balanced sche me of state

- federal interaction to implement the goals of the [Clean Air] Act. ” ). Under this approach, states have “ primary responsibility for ensuring that the am bient air meets the NAAQS for the identified pollutants, ” Ky. Res. Council, Inc. v. EPA , 467 F.3d 986, 988 (6th Cir. 2006) , and “ so long as the ultimate effect of a State ’ s choice of emission limitations is compliance with the national standards for ambien t air, the State is at liberty to adopt whatever mix of emission limitations it deems best suit ed to its particular situation, ” Train v. NRDC, Inc ., 421 U.S. 60, 79, 95 S. Ct. 1470, 1482, 43 L. Ed. 2d 731 (1975)

. “ The great flexibility accorded the states under the Clean Air Act is . . . illustrated by the sharply contrasting, narrow role to be played by the EPA. ” Fla. Power & Light Co ., 650 F.2d at 587

. If the SIP revision meets the2

requirements in the Clean Air Act, the EPA must approve it. See 42 U.S.C. § 7410(k)(3) ( “ [T]he Administrator shall approve [a SIP or SIP revision] as a whole if it meets all of the applicabl e requirements of this chapter. ” (emphasis added)).
Alabama Envt ’ l Council v. United States EPA , 711 F.3d 1277, 1280 ( 11 th Cir. 2013) ( empha sis added; footnote omitted)

. EPA undoubtedly understands this principle as a matter of general practice. In some aspects, however, EPA’s P roposal seems based on a concern that the Air District’s rules do not implement certain federal NSR requirements in EPA’s preferred manner, rather than on a finding that they do not satisfy a federal NSR program requirement. For example, with respect to certain items in the proposal, EPA’s justification for its position (both in the published Proposal documents and in subsequent informal communication with EPA Region IX staff) has been based primarily on suggestions of a different way to implement a program element , rather than on an identification of what the federal NSR rules require and an explanation of why EPA bel ieves that the Air District’s rule does not satisfy that requirement.
The Air District is committed to complying with all federal NSR program requirements, and it realizes that its discretion to make policy choices about how to implement NSR is limited by the boundarie s of the federal requirements. 1 But in order to understand EPA’s position on what those boundaries are, EPA needs to make any disapproval decision based on a clear delineation of what the federal NSR rules require and why the Air District’ s program may be deficient. Moreover, if EPA finds that the Air District’s rules are deficient in some way, then EPA should provide a clear understanding of what the Air District needs to do to revise its rules

– and what standards EPA will use to judge w hether any subsequent revision satisfies t he federal program requirements

– in order for the Air District to make appropriate revisions. It is helpful for EPA to provide examples of approach es that EPA considers acceptable. But it is even more important for EPA to describe the parameters that define what EPA can and cannot approve under the federal NSR rules, so the District knows what specific standards it will have to meet when crafting a revised program for submission to EPA.



### Comment I : EPA Should Ensu re That It Is According Appropriate Deference To The Air District’s Policy Choices On How To Implement Its NSR Program

In making a final decision on the Proposal, EPA should ensure that it has considered the deference owed to the Air District in making po licy choices on how to implement its NSR program. EPA should ensure that any disapproval decisions are made only after carefully considering what the federal NSR requirement at issue is , and whether the Air District’s approach falls within the discretion that the District has to adopt its own policies, within the bounds of the federal requirements. Furthermore, the Air Distric t requests that any disapproval decisions be made based on (i) a clear explanation of what the federal regulation requires; (ii) a description of how specifically the Air District’s rule does not satisfy the

1 Indeed, one primary purpose of the Air District’s most recent NSR Amendments in 2012 was to better implement those federal requirements. EPA Region IX staff were extremely helpful during that amendment process in identifying a number of deficiencies, which allowed the Air District to strengthen its NSR rules accordingly. The Air District greatly appreciates this advice and input.3

federal requirement; and (iii) an outline of the standards under which EPA will judge any revised submission, in order that the Air District can understand how to craft a revised submittal that EPA will be able to approve. A final decision that contains such information will help to continue the cooperative approach to developing the Air District’s NSR rules in which EPA staff have provided in valuable insight and guidance over the past several years.



## II. 40 CFR S ECTION 

## 51. 160 ’ S 

## R EQUIREMENTS 

## T O 

## P REVENT 

## C ONSTRUCTION OF 

## N EW 

## S OURCES 

## A ND 

## M ODIFICATIONS 

## T HAT 

## W OULD 

## “ I NTERFERE 

## W ITH 

## A TTAINMENT 

## O R 

## M AINTENANCE 

## O F 

## A N ATIONAL 

## S TANDARD 

## ”

40 CFR Section 51. 160 requires that State NSR programs must c ontain procedures to enable the permitting agency (i) to determine whether construction of a new source or modification to an existing source will result in “ interference with attainment or maintenance of a nation standard ” ( § 51. 160(a)); and (ii) to preve nt such construction if “ [i]t will interfere with attainment or maintenance of a nation standard ” ( § 51. 160(b)).

EPA stated in its Proposal that the Air District ’ s NSR Program satisfies these provisions through its permit application requirements, which require applicants to document that they will comply with all requirements of District regulations, and through its substantive permit requirements, which provide that the District will deny an Authority to Construct and Permit to Operate to any new source or modification that will not comply with all such requirements. Specifically, EPA stated that these requirements satisfy the requirements of 40 CFR Sections 51. 160(a) and 51. 150(b). As EPA stated:

Sections 2

- 1

- 402 and 2

- 2

- 401, both concerning permit ap plications, require applicants to provide the District with all information necessary to determine whether the application satisfies the requirements of Regulation 2, Rules 1 and 2. Section 2

- 1

- 301 prohibits the construction of any equipment that may cause emissions of air contaminants, without first obtaining an ATC from the APCO. The requirement to obtain a preconstruction permit (i.e., an ATC) allows the APCO to prevent construction of a new or modified source if it would

. . . interfere with attainment or maintenance of a NAAQS which satisfies the requirements of 40 CFR 51.160(b)

. (TSD § 7.4.1, p. 127 (emphasis added)

. 2 )
After confirming that the Air District ’ s rules comply with these requirements, h owever, the TSD makes a further

– and somewhat crypt ic

– statement , suggesting that these rules do not comply with 40 CFR Section 51. 160(b) because they do not require a source

- specific analysis of each source ’ s individual emissions and the impact they might have on ambient air quality. After explaining th at the District’s rules ensure no interference with attainment or maintenance under 40 CFR Section 51.160, EPA goes on

2 References to the “TSD” in this document refer to the Technical Support Document that EPA published with its Proposal. References to EPA’s F ederal Register notice for the P roposal are provided by referencing “80 FR . . .” and the relevant page and column number within the notice.4

to describe the Air District ’ s new “ NAAQS Protection R equirement ” in District Regulation 2

- 2

- 308 . E P A makes the following statement regar ding Section 2

- 2

- 308 :
Section 2

- 2

- 308 specifies that the District ’ s APCO shall not issue an ATC for a new or modified source or facility that will result in a “ significant net increase ” in emissions of any NAAQS pollutant unless the APCO determines that su ch increase will not cause or contribute to an exceedance of any NAAQS for that pollutant. This demonstration must be made using the air quality analysis procedures in Section 2

- 2

- 305. Because the prohibition on issuing an ATC only applies to new and modif ied sources that will result in

a “ significant net increase ” rather than all projects, this provision does not satisfy the requirements of 40 CFR 51.160(a) and is therefore deficient. (TSD § 7.4.1, p. 127 ) EPA goes on to repeat this passage later in the TSD in its “ Summary of EPA ’ s Action ” (TSD § 11, p. 134) and in its Federal Register notice (80 FR at p. 52239, col. 2

- 3). EPA adds in its

“ Summary of EPA ’ s Action ” that “ [t]his deficiency can be corrected by revising Section 2

- 2

- 308 so that the prohi bition applies to any ATC issued for new or modified units emitting any NAAQS. ” (TSD § 11, p. 134)
It is not entirely clear what EPA intends by these statements. Although the first passage quoted above states that the Air District’s rules satisfy Sectio n 51.160, the second quoted passage suggests that something else is required. Taking the second passage quoted above at face value, EPA seems to be taking a position that the federal NSR program requires local permitting authorities to undertake a PSD

sty le , source

- specific Air Quality Impact Analysis of the type required by Section 2

- 2

- 308 for every NSR permit issued for every new or modified source for every NAAQS pollutant it emits in any amount , no matter how small the source ’ s emissions. In subsequen t telephone conversations with EPA Region IX staff, staff suggested this may not in fact be EPA ’ s position. 3 But EPA has not provided any further explanation of exactly what it interprets 40 CFR Sections 51.160(a) and 51.160(b) to require in this
context

. The Air District has the following comments regarding EPA ’ s statement s on this issue . As outlined below, the Air District disagrees that there is any way in which its NSR rules are deficient with respect to 40 CFR §§ 51.160(a) and (b), either because of the requirements of Section 2

- 2

- 308 as written or for any other reason.



### A. 40 CF R Section 51. 160 Does Not Require States ’ NSR Programs To Conduct A Source

- Specific Analysis of Each Individual Source ’ s Emissions And Their Potential Impact On Ambient Air Qua lity

As an initial matter, the Air D istrict disagrees that 40 CFR Sections 51.160(a) and (b) require a local permitting authority to assess each source ’ s individual emissions and evaluate what their impacts on ambient air quality will be. This is what Sec tion 2

- 2

- 308 requires

– an analysis of the increase in

3 Teleconference between EPA Region IX staf f and BAAQMD staff (Aug. 27, 2015) ; Tele phone call between D. Coursen & A. Lyons, EPA, and A. Crockett, BAAQMD (Oct. 7, 2015).5

ambient pollutant concentrations that will result from the source, and a determination that this increase will not cause or contribute to ambient concentrations above the NAAQS

– and EPA ’ s comment sugg est s that type of analysis is required by 40 CFR Sections 51.160(a) and (b) for all new and modified sources in order to ensure that they will not “ interfere with attainment and maintenance of the NAAQS. ” The Air District disagrees for the following reaso ns.



### Comment II .A.1

. : The Requirement to Prevent “ Interference With Attainment or Maintenance ” Of The NAAQS Can Be Satisfied By Showing Non

- Interference With The Air District’s Regulat ory Program That EPA Has Approved For Achieving Attainment And Maintenanc e of the NAAQS

The Air District respectfully submits that EPA Region IX i s incorrect to the extent that it is suggesting that 40 CFR Section 51. 160 requires state plans to require a source

- specific analysis of the emissions of individual sources and their potential impact on NAAQS compliance

. There are other ways in which NSR programs c an ensure that sources will not “ interfere with the attainment or maintenance of a [NAAQS]. ” Specifically , each state ’ s SIP is required to contain enforceable “ measures, rules and regulations ” that are “ adequate to provide for the timely attainment and ma intenance of the [NAAQS]. ” ( 40 CFR § 51.112(a). ) Where a state has such measures , rules and regulations that EPA has approved as sufficient to attain and maintain the NAAQS , then as long as a source is implementing such measures

– i.e., it is consistent with all such measures and is not interfering with the ir implementation

– then by definition the source will not be “ interfering with the attainment and maintenance ” of t he NAAQS under the region ’ s EPA

- approved SIP program

.
The Air District ’ s NSR program satisfies 40 CFR Section s 51. 160 (a) and (b) in this manner. All NSR permit applicant s (for both major sources and minor sources) are required to demonstrate that they will comply with all Air District regulations. T he Air District evaluates all NSR permit applications to make sure that they comply, and it is prohibited from issuing NSR permits for any new or modified sources if they will not comply. By ensuring that all new and modified sources comply with the rules and regulations in the EPA

- approv ed SIP , which EPA has approved as being “ adequate to provide for the timely attainment and maintenance, ” the Air District satisfies the requirement in 40 CFR Section 51. 160(b) to ensure that new and modified sources will not “ interfere with the attainment and maintenance of a national standard. ”

This is the conclusion that EPA reached in the TSD , where it concluded that “[t] he requirement to obtain a preconstruction permit (i.e., an ATC) allows the APCO to prevent construction of a new or modified source if it would

. . . interfere with attainment or maintenance of a NAAQS which satisfies the requirements of 40 CFR 51.160(b). ” (TSD § 7.4.1, p. 127 ) The Air District requests that EPA approve its NSR rules under Section 51.160(a) and (b) on this basis. EPA cannot disapprove a state ’ s NSR program where it has found that the program satisfies the applicable federal NSR requirements, as discussed above in S e ction I.
Approving the Air District ’ s N SR rules on this basis would also be consistent with EPA ’ s recent approval of the San Joaquin Valley air d istrict ’ s exemptions for certain minor NSR sources as compliant6

with 40 CFR Section 51.160’s requirement p rohibi ti ng sources that will result in interference with attainment or mainten ance of the NAAQS. EPA e xplained that it was approval t hose exemptions based on th e fact that t he emissions from the sources at issue “would be consistent with regional planning efforts t o attain and maintain the NAAQS

. ” EPA determined that the San Joaquin Valley air district satisfies 40 CFR Section 51.160 in a llowing these minor sources b ased solely on their consistency with the district ’ s overall regulatory program t o attain and maintain the NAAQS

– without any requirement to evaluate individual sources and whether they would cause or contribute to a NAAQS exceedance. 4 The Air District submits that EPA should approve its N SR rules under 40 CFR Section 51.160 using the same type of analysis.



### Comment II .A.2

. : The “

Interference With Attainment or Maintenance of the NAAQS ” Standard Is Different From the “ Cause Or Contribute To A Violation Of The NAAQS ” Standard

It appears that EPA ’ s position may be based on confusion between two similar but substantively distinct regulatory phrase s used in the federal NSR regulations , (i) “ interference with the attainment or maintenance of the NAAQS , ” and (ii) “ causing or contributing to a n exceedance of any NAAQS. ” The f irst phrase is the one used in Section s 51.160 (a) and 51.160(b). I t reflects the language u sed in 40 CFR Part 51, Subpart G, regarding the regulatory program that each state must adopt to ensure that it will attain and maint ain the NAAQS

. 5 The second phr ase is the one used in the PSD regulations in 40 CFR Section 51.166 (k) and related PSD provisions. This phrase refers to the type of modeling analysis required for PSD permitting and the required demonstration that an individual source ’ s emissions will

no t result in impacts to ambient air concentrations such that the NAAQS will be exceeded.

The Air District’s NAAQS Protection Requirement in Section 2

- 2

- 308 is of the latter type, which is why the Air District purposefully used the “ causing or contributing to a n exceedance of any NAAQS ” language in that regulation . ( See Dist. Reg. 2

- 2

- 308, stating that the APCO must determine that any new or modified source “ will not cause or contribute to an exceedance of any [NAAQS] .

. . . ” ) It appears that EPA ’ s posit ion on Section 2

- 2

- 308 may be based on a confusion between this PSD

- type requirement, which requires an individualized assessment of the source ’ s emissions and potential ambient air impacts, and the type of analysis required under Section 51.160, which req uires an assurance that the new or modified source will comply with all of the SIP rules and r elated measures in order to ensure that it will not “ interfere with attainment or maintenance ” of the NAAQS.
This is apparent from the language that EPA uses through out the TSD, in which EPA refers to the deficiency it perceives with respect to Section 51.160 using the “ causing or contributing to a n exceedance of any NAAQS ” language. For example, EPA states in its Federal Register notice that the Air

4 S ee Approval and Promulgation of Implementation Plans, State of California, San Joaquin Valley Unified A i r P o llution Control District, New Source Review , Final Rule, 7 5 F R 26102, 26105 col. 1

- 3 (May 11, 2010)

.
5 See , e.g. , 40 CFR § 51.112(a) (SIP must contain rules and regulations adequate to provide for timely “attainment and maintenanc e”); 40 CFR § 51.100(n) (defining “control strategy” as the combination of regulatory measures designated to achieve “attainment and maintenance”).7

District ’ s NSR r ules do not satisfy Section 51. 160 because they do not prohibit iss uance of an Authority to Constru ct for “ any projects (i.e., both minor or major modifications) that would cause or contribute to a NAAQS violation

. . . . ” (80 FR at p. 52239, col. 2

- 3.) EPA similarly states that t he Air District ’ s “ rules mostly, but do not completely satisfy the regulatory requirements (e.g., preventing construction of all projects that will cause or contribute to an exceedance of any NAAQS pollutant in Section 2

- 2

- 308)

. ” (TSD § 8, p. 132.) And EPA further states that the Air District can cure this perceived deficiency by revising Section 2

- 2

- 308 so that every new and modified source will be required to demonstrate that it

“ will not cause or contribute to any exceedance of any NAAQS

. ” (TSD § 11, ¶ 2, p. 134.)
These statements suggest a misconception that 40 CFR Section 51. 160 requires a “cause or contribute” analysis of the type required under 40 CFR Section 51. 166. That is not the case. These are different regulatory requirements using different regulatory language

. If EPA ha d intended to require a PSD

- style source

- specific Air Quality Impact Analysis under Section 51.160, it would have used the “cause or contribute” language, it would have done so. The fact that EP A did not use that language demonstrates that it intended something different.
Furthermore, where EPA correctly applies the regulatory terminology that is actually used in Sections 51.160(a) and 51.160 (b), EPA recognizes that the Air District ’ s NSR rul es do in fact comply with
t hose requirements . As EPA states in the TSD, “ [t] he requirement to obtain a preconstruction permit (i.e., an ATC) allows the APCO to prevent construction of a new or modified source if it would

. . . interfere with attainment or mai ntenance of a NAAQS which satisfies the requirements of 40 CFR 51.160(b). ” (TSD § 7.4.1, p. 127 )

EPA should clearly explain its position on t his issue in its Final Decision. EPA should make clear that the requirements in Section 51. 160 (a) and 51.160(b) to ensure that new and modified sources do
not “ interfere with attainment or maintenance of the NAAQS ” do not mean the same thing as the P SD requirements to ensure that new and modified sources will not “ cause or contrib ute to a violation of the NAAQS. ” EPA should further make clear that Sections 51.160(a) and 51.160(b) do not require local permitting agencies to undertake a source

- specific analysis of each individual source ’ s emissions and their potential impacts on ambient air quality , which is the type of analysis required under the “cause or contribute” standard used in 40 CFR Section 51.166

. Furthermore, EPA should approve the Air District ’ s NSR rules on this issue, based on EPA ’ s correct statement in the TSD that the Air District ’ s NSR program “ allo ws the APCO to prevent construction of a new or modified source if it would

. . . interfere with attainment or maintenance of a NAAQS

. ” (TSD § 7.4.1, p. 127 ) It would be arbitrary and capricious to disapprove the Air District ’ s NSR rules under the “cause or contribute to a violation” standard where the appropriate regulatory standard is the “interference with attainment or maintenance” standard, and where EPA has agreed that the Air District’s rules satisfy that standard

.8



### Comment II .A.3

. : An Interpreta tion That 40 CFR Section 51. 160 Requires A Source

- by

Source Evaluation Of Each Source ’ s Emissions and Ambient Air Quality Impacts Would Create New Substantive Requirements That Go Beyond What Is Authorized By The Clean Air Act

The interpretation of Section s 51.160(a) and (b) expressed in the statements in EPA ’ s proposal is troubling in that it would create a n entire new source

- specific air quality impact analysis requirement for minor NSR. The Clean Air Act never envisioned requiring such analyses for sour ces and modifications below the “ major ” NSR thresholds, and EPA has never (to the Air District’s knowledge) held that such analyses are required. The interpretation expressed in EPA ’ s statement s in its Proposal would be an unprecedented expansion in the sc ope of the federal NSR program.
Perhaps even more troubling, this interpretation would also create a new source

- specific air quality impact analysis requirement for major Non

- Attainment NSR as well

. Section 51.160 applies to a local permitting authorit y ’ s entire NSR program, including NSR permitting for sources below the major

source thresholds in Sections 51.165 and 51.166 as well as for sources above those thresholds. 6 Any requirement that the permitting authority must conduct PSD

- style source

- specif ic air quality impact analyses under Section 51.160 would therefore apply to “ major ” NSR permitting as well . And a lthough such analyses are required for attainment pollutants under the PSD program, EPA has never required such analyse s as part of its M ajor Non

- Att ainment NSR program. The Air District is not aware of anything in the Clean Air Act that would authorize doing so

.
EPA should therefore make clear in its Final Decision that 40 CFR Sections 51.160(a) and 51.160(b) do not require a source

- specific air qu ality impact analysis . Such PSD

- style analyses of individual sources’ emissions are not required outside of the PSD program under 40 CFR Section 51.166. Specifically, th ey are not required in order to ensure that the new or modified source will not “inte rfere with attainment or maintenance” of the NAAQS under 40 CFR Sections 51.160(a) and 51.160(b)

.

6 Although EPA generally refers to the requirements in Sections 51.160 through 51.164 as the “Minor NSR” pro gram as if it were a separate regulatory program, in substance there is no such distinction in the regulations. There are no exclusions in Sections 51.160

- 51. 164 stating that the requirements in those sections do not apply to construction of sources or mo difications that exceed the “major” thresholds in Sections 51.165 and 51.166. To the contrary, those provisions apply to all permits issued under the NSR program adopted under 40 CFR Part 51, Subpart I (which includes Sections 51.160

- 51. 164 and Sections 5 1.165 and 51. 166). Moreover, many of the requirements in Sections 51.160 through 51.164 clearly apply to “major” NSR, such as the public notice requirements in Section 51.161. There are no independent public notice provisions required under Section 51.165, and so if Section 51.161 did not apply to permitting of major new sources and major modifications, then there would be no public notice requirements whatsoever applicable to major non

- attainment NSR permitting. For all of these reasons, Subpart I is clear that whatever requirements in Section 51.160 apply to “Minor NSR” must also apply to “Major NSR.” Section 51.160 applies to all NSR permitting.9



### Comment II.A.4

. : Requiring A Demonstration That New And Modified Sources Will Not Contribute To Any NAAQS Exceedance Is Highly Problematic For Areas Where Background Concentrations Already Exceed The NAAQS

Furthermore , EPA’s implication that 40 CFR Sections 51.160(a) and 51.160(b) require an analysis of each new or modified source’ s emissions and their impact on NAAQS compliance would be very troubling in areas where background concentrations are already in violation of the NAAQS. Such an interpretation would create a de facto prohibition on permitting minor sources in those areas

. 7

In area w here background concentrations are already above the NAAQS, any new emissions, even small emissions from minor sources, will be contributing to the existing NAAQS exceedance to some extent

. A requirement that local permitting authorities must analyze all such emissions , and must prohibit construction where they wo uld contribute to an existing violation , would therefore effectively create a moratorium on permitting any new minor sources in such areas

. The NSR program was clearly not designed to i mpose such a prohibition. To the contrary, it was always intended to allow a certain amount of growth from new and modified minor sources , even in

non

- attainment areas. That is why the language used in Section 51.160(a) and 51.160(b) refers to “interfere with attainment and maintenance of the NAAQS” rather than “cause or contribute to a violation of the NAAQS.”
During discussions with EPA Region IX staff, it was suggested that m inor sources could potentially avoid this result by providing offsetting emission reductions so that there is no net increase in overall regional emissions as a resul t of the new or modified source. B ut this would effectively be importing the major NSR offsets requirements into minor NSR permitting , which is not what the Clean Air Act or EPA ’ s NSR regulations intended or allow for. The Clean Air A ct is clear that offsets can be required for major sources and major modifications only.
For all of these reasons, EPA should clear ly state in its Final Decision that 40 CFR Sections 51.160(a) and 51.160(b) do not require a PSD

- style air quality impact an alysis that examines each individual new and modified source ’ s emissions and what impacts those emissions may hav e on NAAQS compliance

. EPA should make clear that this is not required in order to ensure that the source will not

“ interfere with attainment or maintenance ” of the NAAQS , and that it is not a practicable approach to evaluating new and modified sources in non

- attainment areas

.

7 There are no such areas in the San Francisco Bay Area, as we have “clean data” demonstrating compliance with all NAAQS as a factual matter, even though the region is still administratively designated as “non

- attainment” for the 8

- hour ozone standard and the 24

- hour PM 2.5 standard. See footnote 2 2 below. Many other areas of California and the rest of the countr y do have background concentrations above the NAAQS, however. If EPA is suggesting that it will require individualized analyses of each new or modified source’s emissions and their impacts on NAAQS compliance, presumably EPA is intending to apply the same interpretation to other areas in the same

manner.10



### B. Even If 40 CFR Section 51.160 Did Require Source

- Specific Analyses of Individual Sources ’ Emissions , District Regulat ion 2

- 2

- 308 Would Satisfy Such A Requirement Because It Requires An Analysis For All Air District NSR Permits (Above A Permissible De Minimis Threshold)

The Air District ’ s NSR rules are premised on an assumption that 40 CFR Section 51. 160 is satisfied by r equiring all new and modified sources to comply with all of the District ’ s rules and regulations in its EPA

- approved SIP program for ensuring attainment and maintenance of the NAAQS. As explained in the Air District ’ s Staff Report for the 2012 Amendments, the District adopted the NAAQS Protection Requirement in Section 2

- 2

- 308 in order to go above and beyond this minimum requirement of the federal NSR program. 8 The Air District submits that a PSD

- type source

- specific analysis requirement of the type speci fied in Section 2

- 2

- 308 is not required under 40 CFR Section 51.160, for all of the reasons outlined in Section II.A. above.
To the extent that such an analysis were required by 40 CFR Section 51.160, however, the NAAQS Protection Requirement in Section 2

- 2

- 308 wou ld satisfy any such requirement . EPA should therefore approve the Air District ’ s NSR program as satisfying 40 CFR Section 51.160 even if it disagrees with the comments discussed above in Section II.A, for a number of reasons. The Air District submits the following comments to explain the reasons why in more detail.



### Comment II .B .1

. : The Federal NSR Program Allows States To Provide De Minimis Exemptions Of The Type Provided In Section 2

- 2

- 308 Under The Alabama Power Doctrine

EPA ’ s stated objecti on as to why the NAAQS Protection Requirement in Section 2

- 2

- 308 does
not satisfy 40 CFR Section 51.160 is that it applies only for new and modified sources above the de minimis net emissions increase threshold s specified in the District ’ s rules (the “sign ificant net increase” thresholds) . EPA states that in order to satisfy Section 51.160 (under EPA ’ s stated interpretation), it must apply to “ any ” project . EPA ’ s stated position is that this requirement needs to be applied for all NSR permits, and can mak e no exceptions for de minimis emissions increases. (80 FR at p. 52239, col. 2

- 3; TSD § 11, p. 134)
This position is incorrect as a matter of law. It has been well

- settled for many years that the Clean Air Act allows states to include de minimis excepti ons from NSR permitting requirements . This has been repeatedly confirmed by the federal courts, initially in the seminal case of Alabama Power Co. v. Costle , 636 F.2d 323, 360

- 361 (D.C. Cir. 1979) , and in any number of subsequent cases. EPA ’ s policy also clearly reflects this understanding, as the agency has stated many times. For example, as EPA has stated in two recent Federal Register notices: [S] tates may exempt from minor new source review certain categories of changes based

on de minimis or admini strative necessity grounds in accordance with the criteria set

8 See Final Staff Report, Updates to BAAQMD New Source Review and Title V Permitting Programs, Regulation 2, Rules 1, 2, 4 & 6 (September 26, 2012) (hereinafter, “Staff Report”), § IV.B.3.a., pp. 83

- 84.11

out in Alabama Power Co. v. Costle , 636 F.2d 323, 360

- 361 ( D.C. Cir. 1979). De minimis sources are presumed not to have an impact and their emissions would not prevent or interfere with attainm ent of the NAAQS, even within nonattainment areas. ” 9
There is simply no way to support a position that there can be any NSR requirements that must be applied to “ all ” new and modified sources, with no exemption for de minimis sources.

Furthermore, EPA itself advised the Air District during the development o f the District ’ s NSR rule revisions in 2012 that it could exclude de minimis sources from the ambient air quality impact analysis requirement that was eventually adopted in Section 2

- 2

- 308. As EPA st ated then, if the Air District were to choose to adopt such a requirement to satisfy EPA ’ s interpretation of 40 CF R Section 51.160, it should require modeling for “ new and modified sources that will result in a significant net increase in emissions

. . . . ” 10 EPA has now apparently reversed its position, as it is proposing to disapprove the Air District ’ s NSR rules “ [b] ecause the prohibition on issuing an ATC only applies to new and modified sources that will result in a ‘ significant net increase ’ rather th an all projects

. . . . ” There is no basis for this reversal.

The Air District submits that EPA should make clear in its final decision on the Proposal that the requirements of 40 CFR Section 51.160 do contemplate de minimis thresholds

– and the exempt ion of sources below such thresholds

– consistent with Alabama Power and EPA polic y

. The Air District further requests that, with respect to EPA ’ s statements that the Air District must apply Section 2

- 1

- 308 to all sources, EPA clarify that this is not con sistent with the federal NS R program, and that 40 CFR Section 51.160, like the rest of EPA ’ s NSR regulations, allow states to exclude de minimis sources from their NSR programs (for both minor and major NSR).



### Comment II.B.2

. : The Thresholds In Section 2

- 2

- 308 Use EPA ’ s Own De Minimis Thresholds That EPA Adopted for Use In NSR Permitting Under Alabama Power

After confirming that the federal NSR program allows states to exempt de minimis sources from requirements of their NSR programs under Alabama Power , EP A should further confirm that Section 2

- 2

- 308 is approvable because it uses the very same de minimis thresholds that EPA adopted for the federal NSR program in the wake of the Alabama Power decision.
As explained in the Staff Report for the NSR rules cur rently under review, Section 2

- 2

- 308 requires that every NSR permit for any new or modified source must include an air quality impact analysis for every NAAQS pollutant , with the only exception being for permits involving de minimis net emissions increases . Section 2

- 2

- 308 establishes this de minimis exemption at the levels approved by

9 Approval and Promulgation of Air Quality Implementation Plans; Utah; Revisions to UAC Rule 401

– Permit: New and Modified Sources, Proposed Rule , 77 FR 37859, 37861 (June 25, 2012); Approval and Promulgation of Air Quality Implementation Plans; Montana; Rev isions to the Administrative Rules of Montana

– Air Quality, Subchapter 7, Exclusion for De Minimis Changes, Proposed Rule , 76 FR 59338, 59340 (Sept. 26, 2011).

10 See EPA Region 9 Comments on the DRAFT Revisions to BAAQMD Regulation 2, Rules 1 & 2, Attachmen t to Letter from G. Rios, EPA, to C. Lee, BAAQMD (July 26, 2012) , at p. 8 (emphasis added).12

EPA as being sufficiently small that the potential benefits from modeling their impacts on NAAQS compliance would not be warranted given the administrative burdens that woul d be involved. 11
EPA adopted these de minimis threshold levels

– which are also referred to as the NSR

“ significance ” levels

– in the wake of the D.C. Circuit ’ s decision in Alabama Power , which held that de minimis exemptions from NSR requirements are app ropriate, but remanded the issue to EPA to determine what levels would be appropriate based on a technical analysis

. EPA did so, and adopted the NSR “ significance ” levels based on that analysis and the principles laid out by the court in Alabama Power as explained in detail in the Federal Register and supporting documentation

. 12 T he se significance levels are appropriate exemption threshold s for the NAAQS compliance modeling requirement in Section 2

- 2

- 308 for the same reasons that EPA found that they were a ppropriate de minimis exemption levels for its federal NSR program

. Moreover, EPA uses these de minimis thresholds specifically for NSR permitting in the Bay Area. These are the thresholds that apply under EPA’s federal PSD program that applies to major sources in the Bay Area under 40 CFR Section 52.21, and these are the thresholds that EPA requires the Air District to use in permitting such sources under EPA’s Delegation Agreement with the Air District. 13 These are also the thresholds that EPA applies for major PM 2.5 sources in the Bay Area under its federal Non

Attainment NSR permitting program set forth in 40 CFR Part 51, Appendix S. 14 It would be arbitrary and capricious for EPA to determine that these thresholds are not appropriate for the Air Distr ict to use for its NSR program in the Bay Area, where EPA has determined that they are appropriate for use under the federal NSR program in the Bay Area.

11 See Staff Report, supra note 8 , § IV.B.3.a., pp. 81

- 86.

12 Requirements for Preparation, Adoption, and Submittal of State Plans; Approval and Promulgation of Imple mentation Plans , Final Rule, 45 FR 52 676, Section XI (“ De Minimis Exemptions”) (Aug. 7, 1980). Although EPA’s “significance” thresholds were adopted in 1980, EPA has continued to reaffirm their appropriateness and to rely on them as de minimis exemption l evels under the Alabama Power principle. This point is highlighted both by the fact that EPA has not found it necessary to revisit these thresholds since their adoption, as well as EPA’s recent statements continuing to treat them as de minimis for NSR pur poses. When EPA adopted a de minimis “significance” threshold for PM 2.5 in 2008, for example, it explained that “EPA considers such lower emissions increases [i.e., below the “significance” thresholds] to be de minimis

. . . .” Implementation of the New Source Review (NSR) Program for Particulate Matter Less Than 2.5 Micrometers (PM 2.5 ), Final Rule , 73 FR 28321, 28 332 (May 16, 2008). EPA also noted this fact in 2010 in addressing greenhouse gases under the NSR program, stating that “EPA has established s ignificance levels for various pollutants, generally relying on a de minimis basis.” Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule, Final Rule , 75 FR 31514, 31 560 (June 3, 2010) (citing August 7, 1980, rulemaking adopti ng “significance” thresholds). Relying on EPA’s “significance” levels as the thresholds for the NAAQS protection requirement in proposed Section 2

- 2

- 308 therefore continues to be consistent with EPA’s approach to modeling emissions impacts for purposes of evaluating potential NAAQS exceedances.

13 See Agreement for Partial Delegation of the Federal Prevention of Significant Deterioration (PSD) Program Set Forth in 40 C.F.R. Section 51.21 by the United States Environmental Protection Agency, Region 9, t o the Bay Area Air Quality Manag ement District (March 8, 2011).

14 See 40 CFR Part 51, Appendix S, § II.A.10.i. EPA’s federal program under Appendix S applies for PM 2.5 in the Bay Area until EPA approves the Air District’s own PM 2.5 regulations into the SI P.13

Using these de minimis thresholds is also consistent with how EPA characterizes them in its Proposal

. For example, EPA stated in the TSD that “ [t]hese [NSR] significance levels, which EPA has promulgated for criteria pollutants and certain other pollutants, represent a threshold for a de minimis contribution to air quality problems

. ” (TSD § 4.1, p. 4.) Similarly, EPA stated that “ [t] hese threshold levels are the same as the NSR significant threshold levels in 40 CFR 51.165(a)(1)(x) and 51.166(b)(23) which EPA has established as de minimis

. ” (TSD § 7.4.6, p. 129.) The Air District agrees with these
stat ements, and submits that these NSR significance thresholds are appropriate de minimis thresholds for use in an NSR program for the same reasons that EPA has concluded that they are appropriate de minimis thresholds.

The Air District also notes that if E PA requires the Air District to use lower de minimis threshold s under 40 CFR Section 51.160 than E PA requires for the federal PSD requirements under 40 CFR Section 51.166, that would set up two different standards that apply to major sources. Section 51.160 applies to all NSR permit ting, including permitting of major sources of attainment /unclassifiable pollutants subject to Section 51.166, 15 and so such major sources would be subject to any analysis requirements of Section 51.160 as well as the PSD source impact analysis requirements in Section 51.166(k). Holding that Section 51.160 requires a lower de minimis threshold than the significance thresholds that apply under 51.166 (k) would be nonsensical, as it would make the major NSR requirements less stringent than the minor NSR requir ements.
For all of these reasons, EPA should make clear in its Final Decision that these thresholds are appropriate for the Air District to use in its NSR program , including any requirements that may apply under 40 CFR Section s 51.160(a) and 51.160(b) . Fu rthermore, to the extent that EPA believes that Sections 51.160(a) and 51.160(b) require a source

- specific ambient air quality analysis, EPA should approve the District ’ s NSR program based on District Regulation 2

- 2

- 308 because that regulation ’ s de minimis exemption thresholds are appropriate and justified. EPA should explain that the fact that Section 2

- 2

- 308 applies only for permits with “ significant ” net increases is not a deficiency in the Air District ’ s NSR rules.



### Comment II.B.3

. : The Air District Al so Justifi ed The Thresholds In Section 2

- 2

- 308 Through An Analysis Specific to Local Conditions In The San Francisco Bay Area.

EPA should also confirm that the de minimis thresholds used in Section 2

- 2

- 308 are justified by the analysis that the Air Distric t undertook to determine the extent of the emissions increase s that would be exempted from the requirement using thresholds set at these levels.
As the Air District explained in its 2012 Staff Report, 16 the Air District conducted a review of all NSR permi ts it has issued over the past 20 years to identify the total amount of emissions that would be exempt ed under these de minimis thresholds. The District then compared the amount of such exempt emissions to the Bay Area ’ s total annual emissions. The Distric t conducted this comparison for each

15 See discussion above in footnote 6

. 16 Staff Report , supra note 8 , § IV.B.3.a., p. 86.14

criteria pollutant to determine the percentage emissions increase that would be authorized each year under these de minimis exemption levels without having to do a Section 2

- 2

- 308 NAAQS compliance analysis. The amount of such exempt emissions varies depending on the pollutant involved and the year reviewed, but the bottom line is that the total emissions increases from all of the NSR permits issued each year that will be eligible for this de minimis exemption will amoun t to only 0.02% to 0.34% of the region ’ s total emissions inventory. 17 Conducting a full modeling analysis to demonstrate NAAQS compliance for each of these de minimis permits would not be warranted, given the small overall addition to the region ’ s emission s inventory and the administrative burdens that would be involved. This analysis further supports exempting these permits from the Section 2

- 2

- 308 requirement under Alabama Power v. Costle.

EPA discussed this analysis in its TSD and agreed with its conc lusions. As EPA explained : [T]he District conducted an analysis of the contribution of sources below these de minimis levels in comparison to the Bay Area ’ s overall emissions of criteria pollutants and found that these sources have historically account ed for only 0.02 to 0.34 percent of the Bay Area ’ s total annual emissions (from all sources). The amount of emissions from all new and modified permitted sources is only a very small part of the District ’ s emission inventory .

. . . ( TSD § 7.4.6, p. 129 (addressing public notice requirements under Section 51.161). ) EPA was discussing the Air District ’ s analysis in the context of the District ’ s de minimis exemption thresholds for its public notice requirements under 40 CFR Section 51.161, but the same con clusions apply for the de minimis exemption thresholds for the Section 2

- 2

- 308 NAAQS Protection Requirement. If EPA is going to interpret 40 CFR Section 51.160 to require something like the NAAQS Protection Requirement, then it should approve the Section 2

- 2

- 308 exemption thresholds under 40 CFR Section 51.160 for the same reasons it approved the exemption thresholds for the public notice requirements under 40 CFR Section 51.161.
Furthermore, EPA has itself adopted Minor NSR de minimis exemption thresho lds involving much larg er percentages. In EPA’s 2011 federal NSR rule for Indian Country , the agency adopted applicability thresholds that would allow up to 1% of total emissions to avoid all Minor NSR requirements

– including the requirements to ensure t hat new and modified sources will not interfere with attainment or maintenance of the NAAQS. 18 The Air District’s thresholds allowing only 0.02% to 0.34% are even more stringent than that, and there is no reason wh y EPA cannot approve them

.
For the s e add itional reason s , EPA should explain in its Final Decision that the fact that Section 2

- 2

- 308 applies only for permits with net increases above the applicable de minimis exemption thresholds is not a deficiency in the Air District ’ s NSR rules. The Air Dist rict has provided more than ample

17 See C. Lee, BAAQMD, Analysis of Compliance with 40 C.F.R. Section 51.160(a) & (b) (Aug. 2012).

18 Review of New Sources and Modifications in Indian Country , Final R ule, 76 FR 38748, 38758 (July 1, 2011). EPA also noted that many States have exemption thresholds involving even higher thresholds, which EPA has also approved.15

justification for why the de minimis levels it has adopted are justified for use as applicability thresholds for the federal Minor NSR program elements

.


### C. EPA ’ s Suggestion That The Air District Should Adopt A Requirement Tha t A Source

- Specific Air Quality Impact Analysis Will Be Required Based Solely On The Unfettered Discretion Of The APCO

In further discussions of the 40 CFR Section 51.160 requirements after EPA issued its Proposal , EPA Region IX staff pointed to regulato ry requirements adopted by other agencies that simply state that emissions from new and modified sources may not interfere with attainment or maintena nce of any NAAQS, and then leave it entirely up to the permitting agency ’ s discretion to determine whether or not an analysis of a source ’ s emissions should be conducted for any particular permit application. 19 EPA Region IX staff suggested that this is how the Air District should address any concerns about excluding de minimis sources from the NAAQS complianc e analysis requirement , instead of establishing a bright

- line de minimis exemption threshold as the Air District has done in Section 2

- 2

- 308.
EPA Region IX staff expressed a view in these discussions that the federal NSR program requires local permitting agencies to have a pr ovision requiring a determination that there will be no NAAQS exceedance that is nomi nally applicable to all sources. B ut they stated that agencies can specify that applicants do not actually need to do any analysis to support such a determination in case s where the source does not give the agency reason for “ concern. ” EPA Region IX staff suggested that the decision of when such an analysis is required can appropriate be left to the sole discretion of the permitting authority (in the case of our agency, t he APCO). EPA Region IX staff stated that it is not possible to develop a bright

- line threshold as to when such a source

- specific analysis will be required and whe n it will not be required. T hey stated that the permitting agency will “ just know ” when a s ource presents a

“ concern ” and needs to be specifically analyzed , and when a source does not present any concern and does not require such an analysis. EPA Region IX staff suggested that the Air District should consider adopting this approach to implement S e ction 51.160.
The Air District does not find any reason why such an approach is required by Sections 51.160(a) and (b). As explained above, the federal NSR program clearly allows for de minimis situations to be exempted from NSR requirements. Moreover, it clearly allows for the establishment of bright

- line de minimis exemption thresholds, and EPA itself has adopted such bright

- line threshold s – which are exactly the thresholds that the Air District uses in Section 2

- 2

- 308. The Air District disagrees that its approach of using bright

- line thresholds is not allowed by Section 51.160, and disagrees that Section 51.160 requires that exemption thresholds be left to the absolute discretion of the permitting authority to be decided on a case

- by

- case basis.
Moreover, the Air Distric t disagrees that such an approach is appropriate from a regulatory standpoint. A vague , ope n

- ended requirement like this , which does not specify the applicable standard

19 Teleconference between EPA Region IX staff and BAAQMD staff (Aug. 27, 2015); Telephone conv ersation between A. Lyons, EPA Region IX, and A. Crockett, BAAQMD (Sept. 18, 2015).16

for decision on when an analysis is required and when it is not, will be difficult to implement for all concerned. Regulatory requirements that are not clear on what they requir e lead to disagreements on whether or not they apply in specific situations, which are time

- consuming to resolve and can even result in litigation. For example, if the APCO believes that an air quality impacts analysis is required under a vague provision like this, and the applicant does not, the APCO will have no clear legal basis to rely on as to why the analysis is required in that particular situation. Conversely, if the APCO believes that an analysis is not required for a particular situation, and me mbers of the community think one should be required, the APCO will have no clear standard in the regulation to point to supporting the Air District ’ s decision exempting an applicant from the requirement . Such vague and undefined requirements are an impedi ment to efficient and effective regulation , and the Air District disfavors them

. Furthermore, regulatory provisions such as th ose that EPA Region IX staff are contemplating are not legally valid. It is not permissible to have a requirement to conduct a source

- specific air quality impact analysis that is entirely up to the discretion of the permitting authority, with no rules or guidelines on how that discretion will be exercised. The type of regulation that EPA Region IX staff proposed

– where the per mitting authority will “ just know ” when an analysis is required and when one is not required

– is impermissibly vague and does provide the certainty required for an enforceable legal mandate. Such a standard does not allow permit applicants or interested members of the public to know what is required and when, and it does not allow a reviewing body ( i.e., a court or hearing board) to judge whether the permitting authority has properly decided on a permit application

. The courts have made clear that regul atory requirements of this type are not appropriate or valid. Indeed, the First Circuit rejected a standard identical to the type that EPA Region IX staff have suggested, where the permitting authority simply requires that a source may not interfere with attainment or maintenance of the NAAQS but does not specify how that requirement will be applied to determine whether to approve or disapprove a specific permit application. As the court stated:
We are concerned

. . . by the standardlessness of subsec tion (d). The clause permits denial of a permit unless the functionary passing on such requests decides that the facility “ will not interfere with the attainment or maintenance of applicable Federal air quality standards . . . . ” This

. . . may mean anyt hing the permit

- giver decides. The regulation does not indicate how “ interference ” is to be judged, nor does it state who must bear the burden of showing noninterference. The prospective applicant for a permit is utterly without guidance as to what he mus t prove, and how. And the standard is so vague that it invites arbitrary and unequal application. South Terminal Corp. v. EPA , 504 F.2d 646, 670 ( 1 st Cir. 1974)

.17



### Comment II.C

. : A Vague Open

- Ended Requirement Leaving The Decision Of When An Analysis Is Required Entirely Up To The APCO ’S Sole Discretion Is Not Required, Not Appropriate

, And Not Legally Supportable

For all of these reasons, EPA should specify in its Final Decision that vague requirements such as these

– which simply state that new and mod ified sources must not interfere with attainment and maintenance of the NAAQS , a nd do not specify how that determination will be made (or leave it entirely up to the permitting authority ’ s unfettered discretion as to how that determination will be made)

– a re not required by 40 CFR Sections 51.165(a) and (b)

. EPA should specify that it is appropriate to adopt requirements aimed at preventing interference with attainment and maintenance that incorporate bright

- line numerical exemption thresholds. EPA should specify that such de minimis exemptions do not have to be written such that the decision on whether a particular application is subject to the requirement or exempt from the requirement is based entirely on the permitting authority ’ s discretion.

Consisten t with the South Terminal Corp. case, EPA should also specify that permitting requirements which simply say that “ new and modified sources may not interfere with attainment or maintenance of any NAAQS, ” without specifying how the determination of interfere nce will be made, are impermissibly vague and not specific enough to be legally appropriate

.


### D. Remaining Questions Regarding EPA’s I nterpretation of 40 CFR Section 51.160

The Air District is concerned that EPA has not explained what it believes is requ ired under 40 CFR Sections 51. 160(a) and (b) with sufficient clarity . Furthermore, t he Air District is concerned that EPA’s Proposal does not provide sufficient guidance as to what EPA believes is required under these provisions , and what a local permitti ng authority such as the Air District needs to do to satisfy them. Specifically, the Air District is concerned that EPA’s Proposal leaves open the following important questions:

• Why is the District ’ s approach of ensuring that new and modified sources will not “interfere with attainment and maintenance” by requiring compliance with the Dis t rict’s rules and regulations that EPA has approved as being sufficient to demonstrate attainment and maintenance not an allowable approach to implementing Sections 51.160 (a) and (b)? EPA has stated that local agencies enjoy significant discretion in how they will comply with minor NSR requirements (i.e., the requirements in Sections 51.160 through 51.164). EPA has also stated that the District’s current approach “allows the APCO to prevent construction of a new or modified source if it would .

. . interfere with attainment or maintenance of a NAAQS .

. . .” What restricts the Air District ’ s discretion to comply with 51.160(a) and (b) through its current approach? What

r equirements in the Clean Air Act (or in EPA’s implementing regulations ) mandate a different approach? What policy or guidance documents does EPA have to support its position on these issues?

• If the District ’ s approach is insufficient, what are the rules f or determining what approaches are approvable ? If the District ’ s approach is outside the District ’ s discretion in determining how it18

will implement Sections 51.160(a) and (b), what are the limits to the District ’ s discretion that prohibit exercising that discretion in this way? What rules are there in the federal NSR program that specify what types of approaches are approvable? Is a NAAQS Compliance Analysis approach like the one specified in Section 2

- 2

- 308 an allowable approach? Is a vague approach li ke the one described above in Section II.C. an allowable (or mandated) approach? What are the rules for determining whether a local permitting authority ’ s approach satisfies the federal NSR program? What are the rules governing how EPA will decide whethe r to approve or disapprove the approach the authority has chosen?

• Do the federal NSR rules allow for de minimis exemptions consistent with Alabama Power ? If so (and we presume that EPA will agree that they do), can local permitting agencies use EPA ’ s own de minimis thresholds that EPA adopted in the wake of the Alabama Power decision (i.e., the NSR “ significance ” thresholds)? If not, why are local permitting agencies prohibited from using these de minimis thresholds, when EPA uses them itself when imp lementing the federal NSR
program , both nationally and specifically with in the San Francisco Bay Area ? And if local permitting agencies cannot use these EPA thresholds, what rules apply if they will have to adopt their own thresholds? If EPA disagrees th at the analysis that the Air District undertook for the de minimis thresholds that apply for purposes of Section 2

- 2

- 308, why is that analysis unacceptable? What are the rules that govern how such an analysis must be undertaken, and what about the Air Dis trict ’ s analysis failed to satisfy those rules?



### Comment II.D

. : EPA Should Clearly Specify What Is Required Under 40 CFR Section 51.160, How SIP Submittals Will Be Judged Against That Rule, and Why The Bay Area’s NSR P rogram Does or Does Not Satisfy That Rul e

The Air District submits that EPA should make the answers to the questions outlined above clear in its Final D ecision , for several reasons

. First of all, EPA n eeds to explain what the federal NSR program requires for a local agency’s SIP submission, a nd how the Air District’s rules satisfy do or do not satisfy those requirements, in order to make any Final Decision legally supportable. Any determination by EPA to approve or disapprove a state program will by definition be arbitrary and capricious if E PA cannot specify the rule of decision that governs the determination and how it applied that rule in the particular case under review

. Furthermore, to the extent that EPA is going to disapprove any elements of the Air District program, the District will need to know the rules governing such determinations if it is going to have to revise its NSR program in order to re

- submit a program that EPA will be able to approve. The Air District is committed to ensuring that its NSR program meets or exceeds all fe deral NSR program requirements. In order to do that, however, the Air District needs to understand what exactly EPA believes the federal NSR program requires. Without a clear articulation of the applicable requirements, the Air District will not know wit h any certainty how it can revise its NSR rules in order to gain EPA approval.19



## III. EPA ’ S 

## S TATEMENT 

## T HAT 

## T HE 

## A IR 

## D ISTRICT 

## ’ S 

## R ULES 

## D O 

## N OT 

## S ATISFY 

## T HE 

## R EQUIREMENTS
IN 

## 40 CFR S ECTION 

## 51. 160 T O 

## E NSURE 

## C OMPLIANCE 

## W ITH 

## T HE 

## A IR 

## D ISTRICT 

## ’ S 

## C ONTROL 

## S TRATEGY

In the sa me discussion of the requirements of 40 CFR Sections 51. 160(a) and 51. 160(b) addressed above in Section II , EPA also suggested that the Air District ’ s NSR rules do not satisfy the requirements to ensure that all new and modified sources will comply with al l applicable requirements of the Air District ’ s control strategy. As EPA stated, “ [i] n addition, the rule does not contain a prohibition on the issuance of an ATC if the project does not meet all applicable requirements of the control strategy, therefore the rule is deficient in this regard as well. ” (TSD § 7.4.1, p. 127 ) EPA made a substantively identical statement in its Federal Register notice. ( 80 FR at p. 52239, co l . 3 .)
In subsequent discussions, EPA has stated that it has reviewed Air District R egulation s 2

- 1

- 304 and 2

- 1

- 321 , and that is now satisfied that these rules comply with 40 CFR Section 51. 160. Regulation 2

- 1

- 304 provides that the APCO will deny an Authority to Construct and Permit to Operate for a new or modified source that will not co mply with any requirement of any District regulation (or other applicable regulatory requirement) . Regulation 2

- 1

- 321 further provides that issuance of an NSR permit does not relieve the permit

- holder from compliance with all applicable regulatory provisi ons. EPA acknowledged that these requirements ensure that all new and modified sources will comply with the Air District ’ s control strategy, stating that “ [w]e agree that it appears the rules are not deficient as cited in the TSD based on the provision i n Rule 2

- 1

- 304, as well as the provision in Rule 2

- 1

- 321. ” 20



### Comment III : District Regulation s 2

- 1

- 304 and 2

- 1

- 321 Ensure That Any New Source Or Modification Will Comply With The Control Strategy

EPA s hould clarify in its Final Decision that the Air Distri ct ’ s NSR rules are not deficient with respect to this issue, for the reasons outlined above. The Air District appreciates that EPA has indicated that it has revise d its position in informal communications, as noted above. It is important that the Final D ecision correct the inaccurate statements in the Proposal , however, to ensure that the situation is clear for any future interested parties who may be reviewing the record provided in the Federal Register.



## IV. EPA ’ S 

## P ROPOSAL TO 

## R EQUIRE 

## “ D OUBLE 

## - C OUNTING 

## ” O F 

## T HE 

## A MOUNT 

## O F 

## O FFSETS 

## R EQUIRED 

## T O 

## O FFSET 

## A F ACILITY 

## ’ S 

## M AXIMUM 

## E MISSIONS 

## U NDER 

## T HE 

## W ORST 

## - C ASE 

## S CENARIO

EPA has proposed a limited disapproval of the Air District ’ s NSR rules with respect to the calculation procedures for the amount of offsets required unde r District Regulations 2

- 2

- 302 (offsets for

20 Email from A. Lyons, EPA Region IX, to A. Crockett, BAAQMD (Aug. 31, 2015).20

NOx and VOC) and 2

- 2

- 303 (offsets for SO 2 , PM 2.5 , and PM 10 ). Specifically, EPA has proposed to disapprove the way the Air District calculates the amount of additional offsets that need to be provided where a sou rce has already provided offset s for its maximum permitted emissions

– i.e., its full potential to emit (PTE) , or what EPA calls the source’s “allowable emissions

. ” (80 FR at 52241, col. 2

- 3 ; TSD § 6.2.6, pp. 68

- 69, § 7.3.22, pp. 117

- 120, and p. 137, Defi ciency Item #13. )

The Air District ’ s rules require that whenever a new source is built or an existing source is modified, the applicant must ensure that offsets have been provided for full amount of the source ’ s

“ cumulative increase. ” The source’s “cu mula tive increase” is defined as its full PTE

– i.e., its allowable emissions

– less any “ grandfathered ” emissions that were being emitted before the offsets requirements came into effect , based on an actual emissions baseline at the time the source first came into the offsets program . This mechanism ensures that all emissions increases from new and modified sources above a historical actual emissions baseline will be offset by corresponding actual emission reductions , which ensures that overall regional emiss ions from these sources do not increase in a manner that would jeopardize the Bay Area ’ s efforts to attain and maintain the NAAQS

. By tying the offsets requirements to the full amount each source’s maximum allowable emissions, this “cumulative increase” a pproach ensures that all of a source’s emissions are offset, even under the worst

- case, maximum emissions scenario.

The Air District ’ s regulations implement this system by calculating the cu mulative increase as follows. When a new source is built, or the first time an existing source is modified after the offsets requirement comes into effect, the source must provide offsets for the difference between its actual emissions before construction and its full maximum PTE (i.e., its maximum allowable emissi ons) after construction

. For new sources, t his means the source ’ s full PTE. F or modifications to existing sources , this means the full PTE less the source ’ s grandfathered actual emissions. These calculations are provided in Section 2

- 2

- 606.1 and 2

- 2

- 606 .3, and EPA indicated in its Proposal that it has no objection to these provisions. (TSD at p. 118.)
For any subsequent modifications after offsets have been provided for the source ’ s full PTE under these provisions, additional offsets need to be provide d only for any additional increases in PTE. 21 Once offsets have been provided for the source ’ s PTE, then even if the source operates at its maximum emissions rate, all of those emissions will be offset by the emission reduction credits already provided. T he only way additional emission reductions could be necessary to offset the facility ’ s maximum allowable emissions would be if the PTE increased. The Air D istrict ’ s regulations therefore define the

source ’ s “ cumulative increase ” to include only additional increases in PTE in this scenario (i.e., only additional increases in allowable emissions) . This calculation in provided in Section 2

- 2

- 606.2.

21 EPA states in its proposal that this provi sion applies for “fully offset sources.” “Fully offset source” is a term that has a specific regulatory definition under Air District regulation 2

- 2

- 213, and it is not the terminology used in Section 2

- 2

- 606.2. To the contrary, Section 2

- 2

- 606.2 refers t o sources for which “offsets have previously been provided.” EPA’s TSD indicates that EPA is u sing “fully offset” to have this meaning, and not the meaning specified in Section 2

- 2

- 213. (TSD at p. 118.)21

EPA has proposed to find this calculation for modifications to sources for which offsets have already been pr ovided as set forth in Section 2

- 2

- 606.2 to be deficient (at least with respect to federal major new sources and major modifications)

. EPA stated that the calculation of how many additional offsets are required in such a situation cannot be limited to inc reases in PTE. EPA stated that under 40 CFR Section 51.165(a)(3)(ii)(J), the amount of additional offsets that need to b e provided in a case where offsets have already been provided for the source’s full PTE must be the difference between the

source ’ s act ual emissions level before the modification and its PTE (“allowable emissions”) after the modification. (80 FR at p. 52241, col. 2

- 3; TSD § 7.3.22, pp. 117

- 120, § 11, p. 137.)
This interpretation is problematic because would require facilities to provid e additional offsets even if they have alr eady provided offsets for the full amount of their maximum possible emissions, based on the difference between their actual emissions before they implement a modification and their potential emissions after they im plement the modification. Such an interpretation would require sources to provide far more offsets than they could ever actually emit, even under the worst

- case scenario.
An example helps illustrate this point. Take a “ peaker ” power plant that is used t o address short

- term “ peaks ” in electricity demand (e.g., on hot summer afternoons when air conditioning use is heavy). Such facilities are normally operated at less than their full annual maximum capacity. If such a peaker plant has maximum annual allow able emissions of 100 tons per year of a non

- attainment pollutant, it would be required to provide 100 tons per year of offsets when it is first permitted (or more, if an offset ratio of greater than 1:1 is required) . But as a peaker plant, its actual emi ssions may only be 10 tons per year when it is built and operated. If the facility undertakes a modification to change its equipment in a way that will not increase its overall capacity or its maximum annual emissions of 100 tons per year, EPA ’ s interpret ation would require the facility to provide an additional 90 tpy of offsets (the difference between its 10 tpy actual emissions rate at the time the modification is made and its 100 tpy maximum allowable emissions)

– even though the facility has already pr ovided offsets for the entire 100 tons that it could possibly emit in one year. The facility will have now provided 190 tpy of offsets, even though it can never emit more than 100 tpy itself. Furthermore, if the facility mak e s additional modifications of this type in the future, it would be required to provide additional tons of offsets each time it d oes so , even if its PTE never increases above 100 tpy . The facility could therefore end up being required to provide offsets in an amount many times the max imum amount of emissions it could legally emit. The Air District refers to this as “ double

- counting ” the amount of offsets required, as sources could be required to offset their emissions two (or three or more) times over by providing two (or three or mor e) times as much actual emission reduction credits as the maximum amount of emissions they could ever possibly emit.
The Air District disagrees with this interpretation of how the Clean Air Act requires S tates to im plement the Act’s offsets requirements. The Air District submits the following specific comments on this issue.22



### Comment IV

. 1 : The Clean Air Act Only Authorizes EPA To Require Offsets Sufficient To Ensure “ Reasonable Further Progress ”

– Which Does Not Allow EPA To Require The Air District To “

Double

- Count ” The Amount Of Offsets Required

The Clean Air Act sets forth the statutory requirements governing the offsets provi sions that must be included in S tate NSR permitting programs in Section 173(a)(1). Section 173(a)(1) states that the permitti ng authority must obtain sufficient offsets from each source being permitted “ such that total allowable emissions from existing sources in the region, from new or modified sources which are not major emitting facilities, and from the proposed source will b e sufficient ly less than total emissions from existing sources .

. . so as to represent .

. . reasonable further progress (as defined in [CAA S ection 171] ). ” “ Reasonable further prog ress ” is defined in Section 171 (1) as such “ annual incremental reductions in emissions .

. . as are required by this part or may reasonably be required by the administrator for the purpose of ensuring attainment of the applicable national ambient air quality standard by the applicable date. ”
These provisions specifically deli neate what the Clean Air Act requires for the offsets provisions in an NSR permitt ing program. The Act requires S tates to ensure that they obtain su fficient offsets from permitted sources subject to the offsets requirement as are necessary to ensure Reaso nable Further Progress (RFP) towards attainment . The Act does not require S tates to do any more than this, and it doe s not authorize EPA to require S tates to do anything more than this. As the federal courts have made clear, the Clean Air Act “ confines t he EPA to the ministerial function of reviewing SI Ps for consistency with the Act ’ s requirements. The EPA must approve the plan

. . . if it meets the applicable requirements of the Act. ” ( Luminant Generation Co. LLC v. United States EPA , 714 F.3d 841, 846 ( 5 th Cir. 2013) (citing CAA § 110(k)

. ) “ If the SIP revision meets the requirements in the Clean Air Act, the EPA must approve it. ” ( Alabama Envt ’ l Council v. United States EPA , 711 F.3d 1277, 1280 ( 11 th Cir. 2013) (citing CAA § 110(k))

. )

The Air D istrict ’ s calculation methodology indisputably satisfies the Clean Air Act ’ s requirement to obtain sufficient offset to ensure that new and modified sources will not interfere with RFP , for several reasons . First of all, the ambient air quality throughout the Bay Area is in attainment of the NAAQS for all pollutants , even for the two standards where the region is still administratively classified

as non

- attainment (8

- hour ozone standard and 24 hour PM 2.5 standard )

. 22 By definition, therefore, the Bay Area does not need to obtain further “ annual incremental reductions in emissions .

. . for the purpose of ensuring attainment of the applicable national ambient air quality standard by the applicable date ” (the definition of RFP under CAA Section 171 )

. The Bay Area has already achieved sufficient reductions from the total regional emissions inventory to bring ambient concentr ations back below the

22 Determination of Attainment for the San Francisco Bay Area Nonattainment Area for the 2006 Fine Particle Standard; California; Determination Regarding Applicability of Clean Air Act Requirements , Final Rule, 78 FR 1760 (Jan. 9, 2013); Determinations of Attainment by the Attainment Date, Extensions of the Attainment Date, and Reclassification of Several Areas Classified as Marginal for the 2008 Ozone National Ambient Air Quality Standards , Proposed Rule, 80 FR 51992, 51994 (Aug. 27, 2015). As explained in these documents, the ambient air quality in the Ba y Area satisfies the NAAQS as a factual matter, even though the region has not yet been administratively re

designated to “attainment” as a matter of law.23

NAAQS , and no additional “annual incremental reductions in emissions” are necessary to ensure attainment . The Air D istrict is still committed to requiring offsets from all sources that exceed the District ’ s offsets thresholds, for a number of reasons, and it will continue to do so. But EPA cannot claim that requiring more offsets than the Air District does under its c urrent regulations is necessary to achieve RFP towards attainment of the NAAQS, where the ambient air quality in the Bay Area already meets the NAAQS. The Clean Air Act does not require anything more with respect to the amount of offsets required

.
Furth ermore , even if the Bay Area did have ambient concentrations exceeding the NAAQS, the Air District ’ s offset program ensures that the full amount of the allowable emissions from new or modified sources subject to the offsets requirements will in fact be ful ly offset by real, actual emission reductions from other sources , by at least a 1:1 ratio and in some cases by a ratio of more than 1:1

. This requirement ensures that there will be no emissions from these sources that will add any incremental
net increase to the region ’ s total emissions inventory. By ensuring that there will be no net increase from such sources , the Air District ’ s offsets program as written ensures that sufficient offsetting emission reductions are provided “ so as to represent .

. . reaso nable further progress ” as required by Section 173(a)(1). There is no need to do any more than this to ensure that RFP is met , and certainly no need to require more offsets from a source that it could ever actually emit

.
EPA itself has recognized this re ality in its own statements in the TSD

. As EPA states : [R] egarding the amount of offsets that are necessary to show noninterference with RFP, EPA presumes that so long as a new source obtains offsets in an amount equal to or greater than the amount speci fied in the applicable offset ratio (or, where the statute does not specify an offset ratio, in an amount equal or greater than 1:1), the new sou rce will not interfere with RFP

. Regulation 2, Rule 2 Sections 302 and 303 provide the ratios for federal offs ets purposes, which are all e qual to or greater than 1:1 for nonattainment pollutants. These offset ratio requirements ensure that the program for permitting of new or modified major sources will not interfere with RFP. These provisions satisfy the statuto ry requirement [of CAA Section 173(a)(1)(A)]

. ( TSD at p. 102 (emphasis added)

. ) This is a correct statement of how the offsets requirement works under CAA Section 173(a)(1) , and a correct conclusion about how the Air District’s offsets provisions satisfy the statutory requirement

. If a new or modified source provide s actual emission reductions that offset its maximum worst

- case emissions at a 1:1 ratio or more, then the emissions from that source will not by definition be interfering with RFP. Implementi ng the offsets requirements in this manner therefore satisfies the Clean Air Act ’ s offsets requirements as specified in Section 173, and so EPA “ must approve ” the District ’ s program on this basis. ( Luminant Generation , 714 F.3d at 846 ; Alabama Envt ’ l Coun cil , 711 F.3d at 1280

. )
Beyond the passage quoted in the previous paragraph, EPA does not address the applicable Clean Air Act authority for determining the amount of offsets that need to be required in its Proposal

. Instead of discussing the provision i n CAA Section 173(a)(1) specifying the amount of offsets that a S tate needs to require , EPA instead cites the provision in CAA Section 173(c)(1) that specifies the criteria for24

determining what emission reductions qualify for us e in providing the offsets

. Section 173(a)(1) is the provision that specifies the amount of “ offsetting emissions reductions [that] have [to be] obtained

. . . , ” whereas Section 173(c)(1) specifies how “ [t]he owner or operator of a new or modified major stationary source may comply with any offset requirement in effect under this part .

. . . ” That is, Section 173(a)(1) specifies how to calculate the amount of offsets required

– which is the calculation addressed in District Regulation 2

- 2

- 606.2

– whereas Section 173(c)(1) addresse s a different issue, which is what emission reductions can be used to satisfy the requirement once the amount of offsets is established under Regulation 2

- 2

- 606.2

EPA thus quotes the language in Section 173(c)(1) specifying that the permitting authority “ shall assure that the total tonnage of increase d emissions of the air pollutant from the new or modified source shall be offset by an equal or greater reduction, as applicable, in the actual emissions of such air pollutant .

. . . ” (TSD at p. 118 (emphas is added by EPA).) But this language does not support EPA ’ s position that sources have to provide more offsets than the maximum amount they could ever actually emit. It simply specifies that where offsets are required, the emission reductions provided ne ed to reflect actual emissions that were being emitted into the atmosphere by other sources, but have now been removed through shutdown or curtailment of those other sources. Furthermore, by stressing that what matters under CAA Section 173 is what is act ually being emitted (or not emitted) into the atmosphere, this language in fact supports the Air District ’ s interpretation that offsets need to be provided only for the full amount of the total emissions that a new or modified source could actually

e mit un der a worst

- case scenario . As this provision makes clear, such emissions are to “be offset by an equal or greater reduction” in actual emissions from other sources

– not a reduction that is two or three or more times the maximum amount that the source cou ld actually emit

. For all of these reasons, the Air District ’ s offset calculations provision in Section 2

- 2

- 606.2 satisfies the requirements of CAA Section 173(a)(1) to require sufficient offsets to ensure that RFP is achieved. As EPA has concluded, the Air District’s offsets requirements “ensure that [its] program for permitting of new or modified major sources will not interfere with RFP [and therefore] satisfy[ies] the statutory requirement” under the CAA offsets provision in Section 173(a)(1). ( TSD a t p. 102 .) EPA should therefore approve this provision under CAA Section 110(k)(3) as meeting the Clean Air Act ’ s requirements . CAA Section 173(a)(1) does not authorize EPA to r equir e the Air District to obtain more offsets than necessary to ensure that RFP is achieved . Disapproving Section 2

- 2

- 606.2 because it does not require such additional offsets would be arbitrary and capricious and would violate Section 110(k) (3)

.


### Comment IV

. 2 : District Regulation 2

- 2

- 606.2 Is Consistent With 40 CFR Section 51. 165(a)(3)(ii)(J) Under Any Reasonable Interpretation Of That Regulatory Provision

In addition to the statutory limitations on EPA disapproving the Air District ’ s NSR rules on this issue as discussed above, the Air District also submits that EPA is incorrec t in its interpretation of 40 CFR Section 51.165(a)(3)(ii)(J). The only reasonable interpretation of that regulation is that it requires offsets for a source ’ s maximum potential emissions less any historical actual emissions baseline , consistent with25

CAA Section 173(a)(1) as discussed above. The Air District submits that EPA should apply such an interpretation, and not the interpretation stated in EPA’s proposed limited disapproval on this issue

. EPA is of course prohibited from applying anything in 40 CF R Section 51.165(a)(3)(ii)(J) to the extent that it is contrary to the requirements of the Clean Air Act. An agency ’ s regulations can never be applied to contravene the provisions of the governing statute. ( Touche Ross & Co. v. Redington , 442 U.S. 560, 5 77 n.18 (1979) ( “ [ T ] he language of the statute and not the rules must control. ” ) .) And as outlined above, the Clean Air Act does not provide EPA with any authority to require the Air District to require more offsets that are actually necessary to ensure that RFP is met . EPA should approve the Air District ’ s offsets calculation methodology in the first instance under the express language of CAA Section 173(a)(1) , as discussed in the previous comment. But even without this statutory basis , EPA should also approve the Air District ’ s methodology based on the only reasonable interpretation of 40 CFR Section 51.165(a)(3)(ii)(J). That section should not be interpreted to require double

- counting of the amount of offsets that are required from modified source s , any more than CAA Section 173(a)(1) does.
There are multiple reasons why EPA should not interpret 40 CFR Section 51.165(a)(3)(ii)(J) to require “double

- counting” of the amount of offsets required when a source is modified . The following discussion addr esses each one in turn.

First , the plain language of Section 51.165(a)(3)(ii)(J) supports the Air District’s position on how this provision should be interpreted.

The regulation states that the amount of offsets must be based on the difference betwee n the

source ’ s future “ allowable emissions ” (i.e., its potential to emit) and its “ actual emissions ” baseline “ as defined in paragraph (a)( 1)(xii) of this section ” (emphasis added). P aragraph (a)(1)(xii) explicitly states that “[t]he reviewing authority may presume that s ource

- specific allowable emissions for the unit are equivalent to the actual emission emissions of the unit.” (40 CFR § 51.165(a)(1)(xii)(C).) Th e s e regulatory p rovisions unambiguously allow permitting authorities to look only at increases in the preexisti ng PTE

– i.e., the difference between future “allowable emissions” and past “allowable emissions,” which can be presumed to be equivalent to past “actual emissions” under paragraph (a)(1)(xii)

– when determini ng the amount of additional offsets that are required in connection with a modifi cation

. This language provides EPA with a clear and direct way to adopt the more reasonable interpretation of Section 51.165(a)(3)(ii)(J)

. EPA’s own regulations specifically authoriz e the use of the source’s fully offset PTE as its baseline “actual emis sions” in appropriate c ircumstances , which is exactly what the Air District’s calculation methodology does.
Furthermore, even if the Air District were not explicitly allowed to presume that a source’s actual emissions and its PTE are equivalent for purposes of applying Section 51.165(a)(3)(ii)(J) , t he District ’ s approach to calculating offsets would still satisfy the plain language of the regulation . The Air District’s regulations require that a source ’ s full “ cumulative increase ” must be offset , which is calcu lated is based on the difference between (i) the source ’ s allowable emissions ( PTE ) after the modification is implemented and (ii) its actual emissions baseline based on its past operations before26

the source came into the offsets program. This actual emis sions baseline used in determining the amount of the “ cumulative increase ” falls squarely within the regulatory language requiring the use of the “ actual emissions before the modification. ” There is nothing in the regulatory language that specifies exactl y when “ before the modification ” the emissions must be measured, and there is nothing that prevents the use of the source ’ s actual emissions at the point when it first became subject to the offsets requirements as its baseline “ actual emissions. ” Indeed, given the way that the offsets requirements work, that is the only reasonable way to calculate the baseline “actual emissions” for purposes of Section 51.165(a)(3)(ii)(J) , because any other approach leads to a highly problematic and statutorily impermissib le “double counting” requirement.
Simply put, the Air District ’ s calculation methodology does use the source’s “ actual emissions before the modification ” as the basis for determining the amount of offsets required for a modification. It uses the source’s actual emissions at the time it first came into the offsets program, which establish the actual emissions baseline that determine the source’s “ cumulative increase ” for all future permitting going forward . E very time the source is modified from that point forward , the applicant must ensure that offsets have been provided for the full “ cumulative increase ” going back to this actual emissions baseline. This approach easily fits within the regulatory language in Section 51.165(a)(3)(ii)(J) requiring the use of the “actual emissions before the modification,” even without the overlay of Section 51.165(a)(1)(xii)(C)’s explicit language that a permitting agency can use the source’s “allowable emission” for this purpose in appropriate situations

. This approach is certainly not an un r easonable interpretation of the regulatory language Section 51.165(a)(3)(ii)(J), a nd given all of the other circumstances surrounding how the offsets requirements are supposed to work under CAA Section 173, the Air District submits tha t this is the only reasonable interpretation.
A final observation on the interpretation of this regulatory language: I t appears that EPA’s reluctance to adopt the more reasonable interpretation urged by the Air District comes down to the language of the regulation and a belief that EPA’s hands are tied because that language compels it to require a “double

- counting” approach. EPA has certainly never suggested any compelling policy reason why requiring more offsets than the total amount of emissions a sou rce could potentially emit under
worst

- case conditions is necessary to demonstrate RFP or to ensure that the NAAQS are maintained and attained. To the contrary, in discussions on this issue EPA has always simply pointed to the regulatory language as the b asis for why it feels that it has no alternative but to disapprove the Air District’s program on this issue. But as the previous paragraphs make clear, that is absolutely not the case. There are several compelling reasons why EPA can and should conclude that the language in subsection (a)(3)(ii)(J) does not require double

- counting of the amount of offsets required. At the very least, this language gives EPA sufficient interpretive leeway to adopt the Air District’s interpretation , which is the only reasonable interpr etation for all of the additional reasons outlined below.

Second , the Air District’s more reasonable interpretation is compelled by the statutory provision the regulation was adopted to implement. As explained in detail above, CAA Section 173 requires a
p ermitting authority to require offsets in an amount sufficient to ensure that RFP is achieved. Section 51.165(a)(3)(ii)(J) must be interpreted to give effect to this statutory mandate. The Air District ’ s interpretation is the only interpretation that doe s so. EPA ’ s interpretation would require many more27

offsets than are necessary to ensure that RFP is maintained, and so it cannot be the correct one. To the extent that EPA intended this regulation to be applied in such a manner, the regulation would be v oid and unenforceable. ( See Touche Ross , 442 U.S. at 577, n.18.)

Third , the regulatory history behind Section 51.165(a)(3)(ii)(J) shows that EPA never intended that provision to be applied as EPA has interpreted it in this Proposal

. In fact, the regulat ory history supports the Air District ’ s interpretation

. Subsection (a)(3)(ii)(J) was added to Section 51.165 as part of EPA ’ s “ NSR Reform ” regulations in 2002, in which EPA revised the way in which emissions increases are measured for purposes of determi ning whether NSR requirements are triggered. 23 EPA adopted a new approach for NSR applicability that uses an “ actual

- to

- projected

- actual ” calculation to determine whether there is a

“ significant ” net emiss ions increase that triggers major NSR requirements. An issue arose as to whether this actual

- to

- projected

- actual methodology would apply to substantive NSR requirements such as offsets, in addition to being used in the threshold applicability determinatio n. This was an important issue for the offsets requirements, because applying the new NSR reform methodology there would mean that a source would not necessarily have to offset its full PTE. Using the NSR reform methodology would require the source to off set only its future projected actual emissions, not its maximum permitted emissions (which is what the Air District’s regulations require)

. Subsection (a)(3)(ii)(J) was adopted to answer this question, and to make clear that the rule continues to be that t he full PTE must be offset, not just projected actual emissions. EPA addressed this point in the Federal Register notice supporting the NSR Reform rule in a discussion headlined “ Am I Able To Apply Today ’ s Changes for Calculating The Baseline Actual Emiss ions to Other Major NSR Requirements? ” EPA answered that question by explaining that “ any determination of the amount of emissions offset that must be obtained by a major modification subject to the nonattainment NSR requirements under § 51.165(a) should be based on calculations using the existing definitions of ‘ actual emissions ’ and ‘ allowable emissions. ’ See new § 51.165(a)(3)(ii)(H) [sic]. ” 24
This context shows that Subsection (a)(3)(ii)(J) was adopted simply to make clear that the

source ’ s full PTE must be offset, and not just its projected actual emissions. There is nothing to suggest that it was intended to require additional offsets over and above the source ’ s full PTE. And that obviously could not have been EPA ’ s intent, as that would be incons istent with the statutory mandate in CAA Section 173, as discussed above.
Furthermore, this regulatory history is fully consistent with interpreting the “ actual emissions before the modification ” as being the source ’ s baseline actual emissions before it c ame into the offsets

23 See Prevention of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR): Baseline Emissions Determination, Actual

- to

- Future

- Actual Methodology, Plantwide Applicability Limitations, Clean Units, Pollution Control Projects , Final Rule, 67 F R 80 186, 80 196 col. 1

- 2 (Dec. 31, 2002).

24 Ibid

. ; see also generally discussions in Se ctions II.A. and II.C.8. in that docum ent. Note also that t his reference to Subsection “(a)(3)(ii)(H)” in EPA’s Federal Register notice was incorrect. This provision is actually codified in Subsection (a)(3)(ii)(J).28

program, which is how the Air District ’ s “ cumulative increase ” calculations work. There is nothing in this regulatory history to suggest that such an interpretation is inconsistent with how EPA intended Subsection (a)(3)(ii)(J) to be applied.

Fourth , the Air District ’ s interpretation is supported by EPA ’ s own rules governing the amount of offsets EPA requires when it does federal N on

- Attainment NSR permitting. In general, w here EPA implements Non

- Attainment NSR permitting (for exampl e, in the interim period between a non

attainment designation and the S tate ’ s adoption of its own SIP

- approved non

- attainment NSR program), EPA does so under 40 CFR Part 51, Appendix S. And the offsets requirement in Appendix S does not require double

- cou nting of the amount of offsets required.

The federal offsets requirement is in Section IV.A. of Appendix S, Condition 3, and it simply provides that offsets “ are required such that there will be reasonable further progress towards attainment of the NAAQS

. ” There is no provision requiring additional offsets beyond what is necessary to ensure that RFP is achieved, and certainly no provision requiring double

- counting of the amount of offsets needed to ensure that a source ’ s maximum emissions under the worst

- case scenario are offset. EPA should interpret Subsection (a)(3)(ii)(J) in the context of this other EPA regulation addressing the same issue.
Similarly, EPA has also adopted a specific Federal Implementation Plan (“FIP”) for the Tri

- Cities Landfill in the Salt River Pima

- Maricopa Indian Community that uses the same rule. As that EPA rule
states: By the time the project is to commence operation, the owner or operator of the project must have obtained sufficient reductions in actual emissions from exist ing facilities within the same nonattainment area which satisfy the requirements of section 173 of the Clean Air A ct to offset the potential to emit of the project

. 25
EPA explicitly does not require offsets beyond what is required by CAA Section 173 . Consi stent with Section 173, all that is required are sufficient offsets to offset the project’s potential to emit

– and no

more

. The most reasonable interpretation of Subsection (a)(3)(ii)(J) is that it has to be read consistently with these regulations th at EPA itself uses to implement the NSR program federally. I t would be unreasonable to read Subsection (a)(3)(ii)(J) to apply a different rule to state permitting programs than EPA follows under its federal program. And it would be arbitrary and capricio us to disapprove the Air District’s rule where EPA has concluded that a similar approach satisfied the federal NSR requirements for purposes of its own NSR program.

Fifth , the Air District ’ s interpretation is supported by the relevant polic y consideratio ns underlying the offsets requirements

. The purpose of the offsets requirements is to ensure that growth from new major sources and major modifications does not increase emissions in the region in such a

25 Federal implementation plan for Tri

- Cities landfill, Salt River Pima

- Mari copa Indian Community, 40 CF R § 49.22(d)(1)(i).29

manner as to undermine all of the region ’ s other ef forts to reduce emissions and bring air quality back below the NAAQS. Providing offsetting emission reductions for the maximum amount that a source could possibly emit achieves that purpose. There is no reason why additional emission reductions need to b e obtained to offset the same emissions over and over again, which is what EPA ’ s interpretation would require.
EPA even conceded during the rule development process for the Air District ’ s 2012 NSR Rule

a mendments that the Air District ’ s interpretation wa s an “ appropriate and reasonable ” approach to requiring offsets , although EPA commented that the District should only allow previously

- provided offsets to be relied on for a period of 5 years

. 26 EPA ’ s comment was that after 5 years, a source should have to provide offsets again for the same PTE that had been previously offset. There is, of course, no such 5

- year limit applicable under CAA Section 173 or 40 CFR Section 51. 165, and EPA has subsequently abandoned its position that any such time limit should b e required. But EPA was correct in its recognition that allowing sources to offset their PTE once, and then rely to on those previously

- provided offsets for future permitting for their existing PTE , was appropriate and reasonable. This observation furthe r supports the Air District ’ s interpretation. Certainly, EPA has not provided any policy reason s why the interpretation stated in the Proposal is reasonable.

Sixth , EPA ’ s interpretation is inconsistent with how EPA has interpreted the offsets requiremen ts with respect to California air districts in the past. The Bay Area Air District ’ s rules have always calculated offsets this way, and EPA has had no problem approving them in the past. Moreover , most if not all of the other air d istricts in California calculate their offsets requirements the same way, and EPA has approved their NSR rules as well.

EPA discusses two of these other air districts ( the San Joaquin Valley and Sacramento districts ) in its TSD for the current Proposal. B ut both of those dist ricts have rule s similar to the Bay Area Air District’s that do not require additional offsets in cases where a source’s PTE has already been offset

. With respect to the Sacramento district, EPA stated that “most” of the sources permitted under that dist rict’s rules would have to provide offsets consistent with EPA’s interpretation. (TSD § 7.3.22, p. 120.) But “most” is not “all.” This point concedes the Sacramento district’s rules use the same approach as the Bay Area Air District’s rules in at least some cases. Moreover, it shows that EPA still found it appropriate to approve that district’s rules knowing that they would use an approach like the Bay Area Air District uses here in at least some cases

– and that EPA concluded that those situations

were approvable as consistent with the federal NSR program requirements. The Air District submits that EPA should reach the same conclusion here with respect to its program, for the same reasons that EPA concluded that it could approve the situations arising under the Sacramento district’s NSR program where a similar rule is used.
With respect to the Sa n Joaquin Valley district, EPA correctly points out that it state d in its approval documents that approval was conditioned on the district making an “ equiva lency

26 EPA Region 9 Comments on the DRAFT Revisions to BAAQMD Regulation 2, Rules 1 & 2, Attachment to Letter from G. Rios, EPA, to C. Lee, BAAQMD (July 26, 2012).30

determination ” to show that it is obtaining more offsets from non

- major sources than EPA would require from major sources under its “ double

- counting ” interpretation

. But i t is not clear whether EPA ’ s interpretation in this approval document is consi stent with how EPA has been interpreting the offsets requirements throughout the rest of California and the nation, or whether it is an outlier representing a

new and inconsistent policy direction.
Furthermore, there are other California air districts for which EPA has recently approve d NSR rules that allow major sources to be permitted without requiring “ double counting ” of offsets in at least some cases. For example, after the Air District submitted its current rules to EPA for revie w in 2013, EPA approved the NSR rules for the Placer County and Feather Riv er d istricts, both of which allow the use of a PTE baseline for determining the amount of additional offsets required when a source undergoes a major modification in certain situations. 27 EPA does not address these recent examples in its TSD for the current Proposal, but they cast serious dou bt on EPA ’ s a ssertions that it has consistently interpreted the federal N SR program to require “ double counting ” in other areas of California.
The Air District submits that if EPA wants to base a Final Decision on an explanati on that its interpretation is consistent with how it has interpreted the offsets requirement in the past, it should undertake a comprehensive review of all of the NSR rule approvals it has promulgated

– as well as any federal Major Non

- Attainment NSR permi ts it has issued under Appendix S

– to provide a full picture of exactly how EPA has applied this requirement in other situations. Based on information available to the Air District, it appears that the vast majority

– if not all

– of the NSR programs tha t EPA has approved use approaches similar to the one the Air District h as adopted here. The two examples cited in EPA’s TSD are not sufficient to provide a complete picture of how EPA has addressed this issue in the past.

* * * * *

For all of these reasons, EPA should approve Section 2

- 2

- 606.2 as being consistent with 40 CFR Section 165(a)(3)(ii)(J), as a further reason for approval in addition to the fact that it satisfies CAA Section 173 (a)(1)

. The Air District ’ s rule satisfies Section 165(a)(3)(i i)(J) under the most reasonable interpretation of that provision. EPA ’ s proposed interpretation to the contrary is not a reasonable reading of the regulatory language, and EPA is not required to adopt such an interpretation. Furthermore, even if EPA ’ s in terpretation of Section 165(a)(3)(ii)(J) were the only possible way to read the regulation, then EPA would be prohibited from applying it in a situation like this because it is contrary to the statutory requirements in Section 173(a)(1).

27 See, e.g. , Placer County Rule 502, Section 227 .2 (sources do not have to provided additional offsets based on an actual

- to

- potential calculation where (i) offsets have been provided for the source’s PTE within the past 5 years and/or (ii) where baseline actual emissions are at least 80% of the source’ s PTE); and Feather River Rule 10.1, § F.2.b. (sources do not have to provide additional offsets based on an actual

- to

- potential calculation where baseline actual emissions are at least 80% of the source’s PTE). EPA had no problem approving the se rules in 2013, while it was developing the current Proposal, even though they allow major modifications to be permitted witho ut requiring offsets based on an actual

- to

- potential c alculation

. See Revision of Air Quality Implementation Plan; California; Placer County Air Pollution Control District and Feather River Air Pollutio n Control District; Stationary Source Permits , Final Rule, 78 F R 58460 (Sept. 24, 2013).31



## V. T HE 

## C LEAN 

## A IR 

## A CT 

## ’ S 

## G ENERAL 

## R EQUIREMENT 

## T O 

## E NSURE 

## T HAT 

## O FFSETS 

## A RE 

## O BTAINED 

## S UFFICIENT 

## T O 

## E NSURE 

## “R EASONABLE 

## F URTHER 

## P ROGRESS 

## ”

As explained in detail in the previous section, Clean Air Act Section 173(a)(1) specifies that local permitting authorities need to require off sets only in an amount necessary to ensure that RFP is achieved. This principle applies generally to all aspects the offsets requirements, not just to the procedures for calculating the amount of additional offsets necessary when a source is modified
spec ifically addressed in the discussion in Section IV above.



### Comment V

.1 : Clean Air Act Section 173(a )(1) Requires Local Permitting Authorities To Obtain Offsets Sufficient To Achieve RFP

– And Not More

EPA should clarify generally that with respect to a ll of the offsets requirements in the federal NSR regulations, local permitting authorities must implement these requirements in order to ensure that RFP is maintained. This is what the Clean Air Act requires under Section 173, as EPA h as itself recognized. 28 Furthermore, this is what EPA requir es in its own Non

- Attainment NSR permitting regulations that it implements when it is the permitting authority under 40 CFR Part 51, Appendix S. 29 Requiring local permitting authorities to implement their offsets provisions in a manner that goes beyond thi s mandate is not contemplated or authorized under the Clean Air Act. EPA should clarify that this principle is inherent in all of its approval/disapproval determinations in its Final Decision on the Air District’s NSR rules. EPA should further clarify th at any revised Air District submittal will not be required to implement any offsets requirements beyond what is required t o a chieve RFP

.


### Comment V.2 : EPA Should Confirm That The Air District Can Satisfy The Clean Air Act’s Offsets Requirements By Incorporating By Reference EPA’s Own Offsets Rule In EPA’s Federal NSR Program In 40 CFR Part 51, Appendix S

To the extent that EPA finds any aspect of the Air Dis trict ’ s offsets requirements deficient with respect to satisfying the federal NSR p rogram ’ s requirements, EPA should clarify that the Air District can address any such deficiencies by incorporating EPA ’ s own offsets requirement in Appendix S by reference. Incorporating elements of EPA ’ s own r egulations that E PA uses to implement the Clean Air Act ’ s NSR requirements when it does permitting at the federal level is an appropriate me thod for state agencies to impl ement their own NSR programs at the state level , and EPA has repea te dly a pproved SIP

28 See Requirements for Implementation Plans; Air Quality New Source Review , Final Rule, 54 FR 27286, § II.D.4. (June 28, 1989) ( “[T]he essence of the offset program is to ensure that additional emissions from a new source will be offset by corresponding reductions elsewhere so as to result in RFP toward attainment .” )

. 29 See 40 CFR Part 51, Appendix S, § IV.A., Condition 3 (“Emission reductions ( offsets ) from existing sources in the area of the proposed source (whether or not under the same ownership) are required such tha t there will be reasonable further progress toward attainment of the applicable NAAQS.” (footnotes omitted ; emphasis in original )).32

rule s utilizing this appr o ach

. 30 EPA should confirm that the Air District can use the same approach for satisfyin g the federal NSR program ’ s offsets requirements

– i. e., by incorporating by reference the requirement in Condition 3 of S e ction I V .A. of Appendix S, which provides that offsets must be provided

“ such tha t there will be reasonable further progress toward attainment of the applicable NAAQS.”



## VI. EPA ’ S 

## S TATEMENT 

## T HAT 

## O FFSETS 

## R EQUIREMENTS 

## A PPLY 

## T O 

## SO 2 

## A S 

## A PM 2.5 

## P RECURSOR

With respect to EPA ’ s proposed limit ed disapproval of the Bay Area ’ s NSR rules for failure to satisfy the NSR offsets requirements, EPA indicated that it believes that these requirements apply to SO 2 as a PM 2.5 precursor. As EPA stated, “ o ffsets must be addressed for PM 2.5 and the PM 2.5 pre cursors ( NOx and SO 2 ) .

. . . ” ( 80 FR at p. 52241 , col. 3 ; TSD at p. 65). The Air District has the following comments on this issue.



### Comment V

I : Non

- Attainment NSR Requirements Do Not Apply To SO 2 

### Because SO 2 

### Emissions “

Do Not Contribute Significant ly to PM 2.5 

### Levels Which Exceed The [ NAAQS ] ”

EPA cannot require the Bay Area to include offsets provisions for SO 2 under the federal Non

Attainment NSR program. The Bay Area is not designated as non

- attainment for SO 2 , and so the offsets requirements do not apply to SO 2 directly as a non

- attainment pollutant. The only way that SO 2 can be subject to any Non

- A ttainment NSR requirements such as offsets is through CAA Section 189(e), which requires that PM 2.5 precursors be subject to the same Non

- Attainment NSR requirements as directly

emitted PM 2.5 . 31 But Section 189(e) states explicitly that this requirement does not apply to sources of
precursors “ that do not contribute significantly to [PM 2.5 ] levels which exceed the standard in the area. ” ( CAA § 189(e), 42 USC § 7513a(e). ) And SO 2 emissions in the Bay Area by definition cannot contribute significantly to any PM 2.5 levels exceeding the PM 2.5 NAAQS, because there are no areas anywhere within the region with levels exceeding the PM 2.5 NAAQS.

EPA itself agrees with this analysis, as EPA explained in the TSD. Specifically, EPA stated: In 2013 EPA designated the BAAQMD as an attainment area for the annual PM 2.5 NAAQS, and in 2013 determined through the issuance of a clean data determination that the region ’ s PM 2.5 l e vels do not currently exceed the 24

- hour PM 2.5 standard. Because the Bay Area is currently meeting the PM 2.5 NAAQS, it follows that there are no sources of PM 2.5 p recursors that currently contribute significantly to any PM 2.5 levels that exceed the standar ds in the area.

30 The incorporation

- by

- reference of EPA ’ s federal PSD requirements in 40 CFR Section 52.21, which EPA has recently approved for many California air districts, is a good example of this approach.

31 EPA provides a more detailed explanation of how Section 189(e) applies to PM 2.5 precursors in Section 7.3.28 of the TSD (pp. 122

- 23), including an explanation of the D.C Circuit ’ s opinion interpreting that section in Natural Resources Defense Council v. EPA , 706 F.3d 428 (D.C. Cir. 2013).33

( TSD § 7.3.28, p. 125 (citing 78 FR 1760 (Jan. 9, 2013) .)
The Air District does appreciate that EPA ’ s analysis quoted above was specifically addressed at one particular precursor, ammonia , and that EPA also looked to other reasons specifi c to that particular
precursor that EPA cited as additional support for the conclusion that ammonia cannot be making a significant contribution to any PM 2.5 levels that exceed the NAAQS in the Bay Area. But EPA ’ s analysis in the quoted passage , standing a lone , is sufficient to support the same conclusion for all PM 2.5 precursors

– not just ammonia . As EPA correctly noted, if there are no PM 2.5 levels that currently exceed the NAAQS, then by definition there can be no sources of any PM 2.5 precursors that c ontribute significant to any PM 2.5 levels that exceed the NAAQS . This conclusion is just as true for NOx and SO 2 as it is for ammonia. There is nothing about EPA ’ s statement in this regard that is specific to ammonia.

EPA should therefore make clear that any additional offsets requirements that the Bay Area ’ s NSR rules may need in order to satisfy the federal NSR program apply to directly

- emitted PM 2.5 only, and not to SO 2 as a PM 2.5 precursor

. 32 There is no way that EPA can find that there are any major sources of SO 2 that can contribute significantly to any PM 2.5 levels in excess of the PM 2.5 standard in the Bay Area, where it has determined that there are in fact no PM 2.5 levels in the Bay Area that exceed the standard. It would be arbitrary and capric ious to reach such a conclusion, where EPA has concluded that

“ [b]ecause the Bay Area is currently meeting the PM 2.5 NAAQS, it follows that there are no sources of PM 2.5 precursors that currently contribute significantly to any PM 2.5 levels that exceed the standards in the area. ”
EPA should also make clear that this same conclusion applies to NOx as a PM 2.5 precursor. For the same reasons as SO 2 , EPA cannot require th at the Air District to regulate NOx under the federal Non

Attainment NSR program as a PM 2.5 precursor. This conclusion m akes less of a substantive difference in how NOx is regulated, as NOx is regulated independently as an ozone precursor regardless of its status as a PM 2.5 precursor

. But EPA should nevertheless make clear that NOx is reg ulated only as a ozone precursor, and is not subject to Section 189(e) for the reasons outlined above, in order that the EPA ’ s legal basis for its final decision is clear and based on a correct legal foundation

.



## VII. P ROVIDING 

## E MISSION 

## R EDUCTION 

## C REDITS 

## F O R 

## S HUTDOWNS OF 

## F ULLY 

## O FFSET 

## S OURCES

For “fully offset” sources, the Air District’s NSR rules provide that a source can claim Emission Reduction Credits (ERCs) when it is shut down or curtailed based on the full amount of its pre

- shutdown

32 EPA has made clear that precursors that satisfy Section 189(e)’s requirements for exclusion from regulati on “can be excluded from control requirements for major sources including NNSR permitting .” ( See generally Fine Particulate Matter National Ambient Air Quality Standards: State Implementation Plan Requirements , Proposed Rule, 80 FR 15340 , 15353

- 54 (March 23, 2015) (emphasis added).) EPA’s TSD for the current Proposal correctly reflects this position , explaining that SO 2 (and other precursors) must be included in the Non

- Attainment NSR requirements “except where the Administrator determines that emissions of these pollutants emitted from major sources do not contribute significantly to PM2.5 levels that exceed the PM2.5 ambient standards in the area.” (TSD § 7.3.28, p. 122.)34

PTE. This provisi on is in the baseline emissions calculation provisions in District Regulation 2

- 2

- 605, which provide that the baseline used for calculating the amount of ERCs generated by the shutdown or curtailment of a fully offset source is the source’s pre

- shutdown po tential to emit. 33 A “fully offset” source is defined as a source for which offsets have been provided for the full amount of the source’s maximum permitted emissions (i.e., its PTE). 34

In a nutshell, this rule allows a facility that provides ERCs for th e full amount of a source’s PTE when the source is built to get all of those ERCs back when the source is subsequently shut down. Such a rule is appropriate from an air quality perspective because it returns the situation to where it was before the source was ever built: there are no longer any emissions from the source, which was the situation before it was built; and the ERCs that were provided go back to the facility, which was the situation before the source was built. Allowing the facility to recover the full amount of the ERCs that were provided when the source was first constructed restores the status quo in the same manner as if the source had never been constructed in the first place. 35

The Air District has followed the same substantive approach f or many years in determining the amount of ERCs available from shutting down a source for which offsets have been provided, and it is incorporated into the most recent version of the District’s NSR rules that EPA has approved into the SIP. Specifically, t he 1994 version of the Air District’s rules that EPA approved in 1999 utilizes this approach in Section 2

- 2

- 605, which allows for the use of “the annual emission rate for which offsets have been provided”

– i.e., the source’s fully offset permitted emissio ns – as the baseline for determining the amount of ERCs available. 36

EPA has now objected to this approach on the basis that it uses maximum permitted emissions (PTE) as the baseline for calculating the amount of ERCs available from a fully offset source , instead of using an actual emissions baseline. EPA points to the provision in 40 CFR Section 51.165(a)(3) specifying the circumstances under which PTE can be used as the baseline for calculating ERCs and the circumstances under which actual emissions mu st be used as the baseline. EPA claims that Section 51.165(a)(3) requires the Air District to use actual emissions as the baseline for all ERC calculations,

33 This provision is in Section 2

- 2

- 605.2(i) of the December 2012 NSR rules that a re the subject of EPA’s Proposal. The pre

- December

- 2012 version contains a substantively identical provision in Section 2

- 2

- 605.4.

34 The “fully offset” source definition is in Section 2

- 2

- 213 of the December 2012 NSR rules. The pre

- December

2012 versio n contains a substantively identical provision in Section 2

- 2

- 245.

35 This situation applies only in the case of fully offset sources, and the Air District’s ERC calculation rules allow the PTE baseline to be used only for fully offset sources. In situatio ns where offsets have not been provided for the source’s full PTE, the Air District’s rules require the use of an actual emissions baseline.

36 Subsection 2

- 2

- 605.1 in the 1994 version provides the procedure for a shutdown of a source, and subsection 2

- 2

- 60 5.2 provides the procedure for controlling or curtailing emissions from a source using identical language. EPA approved the 1994 version of Regulation 2

- 2 on January 26, 1999. ( See Final Approval and Promulgation of Implementation Plans; California State Implementation Plan Revision, Bay Area Air Quality Management District , Final Rule, 64 F R 3850 (Jan. 26, 1999).)35

including calculations for fully offset sources. EPA is proposing a limited disapproval based on this issue. (80 FR at p. 52241, col. 2 ; TSD at pp. 113

- 14. 37 )



### Comment V

II : EPA Should Approve The Air District’s Rule For Establishing The Baseline For Determining The Amount Of ERCs Generated From Fully Offset Sources, Which EPA Has Approved In The Pas t And Which Is Authorized Under EPA’s NSR Regulations

The Air District disagrees that allowing the use of a PTE baseline for fully offset sources is not approvable under EPA’s federal NSR regulations. The Air District submits that EPA should approve the A ir District’s approach for calculating the amount of ERCs available when a fully offset is shut down or curtailed, for the following reasons.

EPA should approve the Air District’s provision allowing fully offset sources to use a PTE baseline for the same reasons that EPA approved the District’s earlier version of this same provision in 1999. As explained above, the prior 1994 version of the District’s ERC calculation baseline provision used the same approach, and EPA approved it as satisfying the require ments of 40 CFR Section 51.165(a)(3). The Air District has continued to follow this approach since that time, relying on EPA’s approval that this approach satisfies the applicable federal NSR requirements, and it developed the current version of Section 2

- 2

- 605 accordingly. EPA has not provided any explanation as to why this approach is no longer consistent with the requirements of the federal NSR program, where EPA has never had any problem approving it historically. EPA should find the Air District’s a pproach approvable in 2015 for the same reasons that EPA has found it to be approvable in the past.

Furthermore, turning to EPA’s NSR regulation governing this issue in 40 CFR Section 51.165(a)(3), the language of that regulation explicitly authorize s the Air District to use permitted emissions as the baseline for determining the amount of ERCs available for fully offset sources in the Bay Area. Section 51.165(a)(3) provides that the default requirement for setting the baseline for calculating ERCs i s to use the source’s PTE. 38 That section clearly states that an actual emissions baseline is required

37 EPA also references this issue in Section 7.3.22 of the TSD (at p. 120) in connection with the provision in District Regulation 2

- 2

- 6 07.2 specifying how contemporaneous onsite ERCs can be used in satisfying the applicable offsets requirements for permitting new and modified sources. District Regulation 2

- 2

- 607.2 implicates this issue because it specifies that the amount of contemporane ous onsite ERCs available for use is determined by the ERC calculation provisions in District Regulation 2

- 2

- 605. The Air District directs this comment to EPA’s assertions in Section 7.3.22 of the TSD as well as to its assertions in Section 7.3.13 of the TSD directed specifically to District Regulation 2

- 2

- 605.

38 Technically speaking, the default rule is to use the lower of either (i) the emissions limitation in effect under the applicable SIP in effect at the time of the permit application or (ii) the sou rce’s potential to emit. This two

- part test arises from 40 CFR Section 51.165(a)(3)(i), which says to use the applicable SIP limitation (unless one of the exceptions in subparagraphs (A) and (B) applies), and 40 CFR Section 51.165(a)(3)(ii)(A), which says to use the source’s PTE if it is lower than the applicable SIP limitation. But the practical effect of this two

- part test is simply to provide that the source’s PTE should be used as the default rule. This is because a limitation on the capacity of the source to emit an air pollutant is incorporated into the source’s PTE where the limitation is federally enforceable (40 CFR Section 51.165(a)(1)(iii)), and all emissions limitations in the SIP are by definition federally enforceable. Put another way, a SI P limitation creates a legal limit on the source’s potential emissions and therefore defines its36

only in two specific circumstances: (i) where the demonstration of reasonable further progress (RFP) and attainment is based upon the actual emissions of sources in the area; 39 and (ii) where there is no emissions limitation in the SIP for a particular source or source category. 40 Neither of those circumstances applies to the Bay Area’s NSR program, and so the default rule applies instead

– that is, the amo unt of ERCs available may be based on the source’s PTE.

In the case of PM 2.5 , this is the situation because the Air District has never submitted a demonstration of RFP or attainment, is it has never been required to. Instead, the Air District requested
t hat EPA approve a “Clean Data Determination” for the Bay Area, which suspends the RFP and attainment demonstration requirements. EPA agreed and approved the Clean Data Determination, 41 and as a result the Bay Area has never had an RFP or attainment demonst ration for PM 2.5 because none has ever been required. Given this situation, the Bay Area by definition cannot trigger the requirement to use an actual emissions baseline for PM 2.5 because it has an RFP/attainment demonstration that is based on actual emis sions. The Bay Area does not have an RFP/attainment demonstration for PM 2.5 at all, and so EPA cannot find that it has a demonstration based on actual emissions. There is therefore no way that the exception requiring the use of an actual emissions baseli ne can apply for PM 2.5 . 42

The situation is the same for ozone precursors (NOx and VOC). Although the Air District has submitted attainment/RFP demonstrations in the past, is currently using ambient air quality monitoring data, not on an “actual emission s” inventory, to determine the Bay Area’s ozone NAAQS attainment and RFP. EPA has in fact proposed to determine that the Bay Area is in attainment of the ozone NAAQS based on this information, which EPA describes as “based on complete, quality

- assured and certified

PTE (to the extent that there is nothing else restricting emissions to even lower levels). As a result, the PTE concept effectively incorporates both parts of the two

- part test in 40 CFR Section 51.165(a)(3)’s default baseline rule. Furthermore, the Air District’s ERC calculation rules provide that the PTE baseline must be adjusted downwards to take account of any applicable SIP limitations. ( See Dist. Reg. 2

- 2

- 605.2(i).) Accordingly , even if the PTE baseline did not already incorporate such SIP limitations, they would still be taken into account in the ERC calculation procedures, and ERC credit would be allowed only up to the level of the applicable SIP lim itation. This is an additional reason why the Air District’s PTE baseline for fully offset sources is consistent with both elements of the two

- part test of the default baseline rule set forth in 40 CFR Section 51.165(a)(3).

39 40 CFR Section 51.165(a)(3)( i)(A).

40 40 CFR Section 51.165(a)(3)(i)(B).

41 See Determination of Attainment for the San Francisco Bay Area Nonattainment Area for the 2006 Fine Particle Standard; California; Determination Regarding Applicability of Clean Air Act Requirements , Final Rule , 78 FR 1760 (Jan. 9, 2013)

.
42 The exception in 40 CFR Section 51.165(a)(3)(i)(B) for situations where there is no emissions limitation in the SIP for a source or source category is not implicated in the Bay Area either. Given the comprehensive nature of the Air District’s regulatory program, it is highly unlikely that there could ever be a major source for which there is no emissions limitation in the SIP for that source or source category. To the extent that EPA is concerned that there could hypothetica lly be such a source, the Air District could consider adopting a “backstop” provision requiring an actual emissions baseline for fully offset sources for which there is no emissions limitation in the SIP for that source or source category.37

ozone monitoring data for 2012

- 2014”

– not on an actual emissions inventory. 43 This is the current demonstration that EPA itself is using for regulatory purposes for implementing the NAAQS in the Bay Area, and it is not based on actual emissions . There is therefore no way in which the Bay Area can trigger the exception requiring the use of an actual emissions baseline for NOx and VOC either.

In light of this situation, the Air District submits that EPA should reconsider its analysis and

con clusion that an actual emissions baseline must be used for calculating the amount of ERCs available for the shutdown and curtailment of fully offset sources in the Bay Area. EPA should continue to approve the Air District’s use of the PTE baseline for ful ly offset sources, consistent with EPA’s longstanding practice of allowing the Air District to use this approach for many years. In particular, EPA should reconsider its analysis of the regulatory language in 40 CFR Section 51.165(a)(3) that establishes
t he default rule to use the source’s PTE, except where there is an RFP/attainment demonstration that is based on an actual emissions inventory. EPA cannot invoke this exception where there is no RFP/attainment demonstration at all, which is the case for PM 2.5 . And EPA cannot invoke this exception where the current demonstration is based on ambient monitoring data and not on an actual emission inventory, which is the case for NOx and VOC. For all of these reasons, EPA should approve the Air District’s ERC calculation provisions in Section 2

- 2

- 605.



## VIII. EPA ’ S 

## P ROPOSAL 

## T O 

## D ISAPPROVE 

## T HE 

## A IR 

## D ISTRICT 

## ’ S 

## T HRESHOLD 

## F OR 

## C ONDUCTING 

## A C LASS 

## I A REA 

## V ISIBILITY 

## I MPACTS 

## A NALYSIS

EPA ’ s visibility regulations provide that S tate NSR programs must require an analysis of visibi lity impacts on Class I areas for projects that “ may have an impact on visibility ” in a Class I area. (40 CFR § 51.307(b).) For any new major source or major modification that “may have an impact on visibility” in a Class I Area, the applicant is require d to prepare a visibility impact analysis, and the permitting authority is then required to forward a copy of that analysis to the Federal Land Manager for the Class I Area to begin a consultative process to evaluate whe the r there will in fact be any adverse impacts to any air quality related values in the Class I Area. The regulations do not specify how S tates need to define what projects “ may have an impact ” for the purpose of triggering this requirement , however

. EPA has adopted a policy that this “ may have an impact ” language means that any facility within 100 km of a Class I area is subject to this requirement. This policy is stated on EPA Region IX ’ s web pages addressing the visibilit y impact analysis requirements, among other places

. As the website says,

“ 40 CFR Section 51.307 requires the operator of any new major stationary source or major modification located within 100 kilometers of a Class I area to contact the Federal Land Managers f or that area (to coordinate the visibility impact analysis process). ” 44 Based on t his guidance, the Air District revised its

43 Determination s of Attainment by the Attainment Date, Extensions of the Attainment Date, and Reclassification of Several Areas Classified as Marginal for the 2008 Ozone National Ambient Air Quality Standards , P roposed Rule, 80 FR 51992 (Aug. 27, 2015)

.
44 See www.epa.gov/region9/air/maps/r9_clss1.html ; see also www.epa.gov/region9/air/maps/flm.html (stating same 100 km threshold)

.38

Class I Area visibility protection requirement in Section 2

- 2

- 401.4 in its NSR rules to provide that any new major source or major modification located within 100 km of any Class I Area must prepare an analysis of potential visibility impacts in that Class I Area for consideration by the Area ’ s Federal Land Manager.
EPA now proposes to disapprove this requirement because of the 100 km threshold for when the analysis is required. EPA states that this does not satisfy the requirement in Section 51.307(b)(2) to require an analysis for any source that “ may have an impact on visibility in any mandatory Class I Federal

area. ” ( See 80 FR at p. 52241, col. 1; TSD § 6.2.4, p. 60, § 7.3.9, pp. 111

- 112, and p. 136, Deficiency Item #9.)



### Comment V

I I I.1

. : The Air District’s 100 km Threshold Is An Appropriate Way To Define What Sources “

May Have An Impact On Visibility ” In A Class I Area

EPA ha s not specified any basis for finding that the Air District cannot use its 1 00 km threshold for determining when a source “ may have an impact on visibility in any mandatory Class I Federal area ” such that a Class I visibility analysis is required. EPA’s o nly explanation for its proposed disapproval is to state the following:

W hile the 100 km distance from a source to a Class I area is specified in the PSD program as the distance at which a visibility analysis must be performed, limiting the required analy sis to sources within this distance does not satisfy 40 CFR 51.307(b)(2) which requires an additiona l analysis for any source that “ may have an impact on visibility in any mandatory Cla ss I Federal Area.” (TSD at p. 112

- 13.) This is a circular analysis that simply cites its conclusi on as the basis for its premise. It merely s tates that the Air District’s threshold for determining what sources “may have an impact on visibility” under 40 CFR 51.307(b)(2) does not satisfy the regulation’s requirement s b ecause it does not

e n compass all sources that “may have an impact on visibility.” It does not explain why the 100 km threshold is not an appropriate way to define what sources “ may have an impact on visibility. ” EPA cannot disapprove the Air District’s 100 km threshold on this basis.
Moreover, the Air District’s 100 km threshold is fully supported as an appropriate means through which to implement Section 51.307(b)’s “may have an impact on visibility” requirement. Local permitting authorities enjoy the discretion to implement EPA ’ s regulatory requirements in the manner that they find most appropriate, as long as they satisfy applicable regulatory requirem ents. The 100 km threshold is clearly an appropriate way to define what sources “ may have an impact , ” as this is the very rule that EPA uses, as specified on Region IX ’ s website and in related policy guidance documents. EPA cannot disapprove the Air Dis trict’s program for using a threshold that EPA itself has found to be appropriate under Section 51.307(b).
EPA has suggested in some of its guidance documents that in some cases it may be appropriate to include additional facilities that are more than 100 km from any Class I area. But EPA has never articulated any requirement for doing so, and it has never specified any rule for determining when or39

how such additional facilities should be subject to the requirement. The only specific policy that EPA has ever provided in any EPA guidance document is the 100 km threshold that the Air District uses in Section 2

- 2

- 401.4. EPA cannot find the Air District ’ s rule deficient for failing to u se a different standard where EPA has never articulated one in any of its guidance documents

– let alone mandated it for use under 40 CFR Section 51.307(b).
EPA did make a passing reference in its TSD to unspecified guidance issued by F eder al L and M anagers. D uring subsequent discussions with EPA Region IX staff during the comm ent period, EPA provided a document from the Federal Land Managers ’ Air Quality Related Values Working Group ( “ FLAG ” ) , which cites a test for including additional facilities if their emissions (in tons per year) divided by their distance from the Class I area (in k m) exceeds 10 tons per year per km. 45 EPA has not indicated why this guidance from the Department of the Interior is a required approach for implementing the

“ may have an impact ” language in EPA’s visibility regulations in Section 51.307(b), however

– espe cially where EPA itself has published a different policy. N or has EPA specified how this document limits a local permitting authority ’ s discretion in determining how to implement Section 51.307(b). There is no indication from this document that 100 km is not also an appropriate threshold that can be use d as an alternative if a state prefers it , given EPA ’ s guidance specifying the 100 km limit.
Furthermore, it is clear that EPA has not other California air districts to use the FLAG guid ance document ’ s approach , w hich shows that it cannot in fact be a required a pproach. For example, during the rule development process, EPA suggested t hat the Air District should look to Rule 1303 of the South Coast Air Quality Management District as an example of an approvable threshold for implementing 51.307(b). 46 That rule spe cifies distances of 28 km to 32 km (depending on the Class I Area). The fact that EPA approved a South Coast rule that uses a different approach than the one provided in the F LAG guidance document demonstrates that that guidance cannot be mandatory or required in order to satisfy Section 51.307(b). 47
The Air District submits that EPA should approve the Air District ’ s 100 km threshold as a reasonable and appropriate manner to determine what sources “ may have an impact ” on visibility in Cl ass I Areas pursuant to Section 51.307(b)(2). This approach is consistent with the 100 km test stated on EPA ’ s website, and EPA has not provided any reason why a different rule is required under the regulation. EPA should approve the Air District ’ s rule as within the District ’ s discretion to interpret this requirement in its NSR rules.

45 See National Park Service , U.S. Department of the Interior , Federal Land Managers’ Air Quality Related Values Work Group (FLAG) Phase I Report

- Revised , Natural Resource Center Report No. NPS/NRPC/NRR

— 2010/232 (Oct. 2010) , provided with email from A. Lyons (EPA Region IX) to A. Crockett (BAAQMD) (Aug. 31, 2015) . As an example, this threshold would require a source emitting 1500 tpy to conduct a visibility impacts analysis if it is within 150 km from a Class I Area, as 1500 tpy divided by 150 km equals 10 tpy/km. Simil arly, source emitting 2000 tpy would have to conduct the analysis if it is within 200 km from a Class I area.

46 EPA’s Preliminary Comments

- Draft BAAQMD rules as of January 25, 2012 (March 15, 2012).

47 EPA has also approved the Placer County APCD’s rule, which does not require any analysis for any sources beyond 20 miles from a Class I Area. See Placer County APCD Rule 502 (New Source Review), Section 304.3 (Potential Visibility Impacts).40



### Comment V

I I I .2

. : EPA Should Explain Its Interpretation Of What Section 51.307(b)(2) Requires And How Much Discretion It Believes Local Permitting Authorities Have Under Th at Section

To the extent that EPA continues to believe that the Air District ’ s 100 km threshold is not approvable under Section 51.307(b)(2), then EPA should at the very least (i) explain what exactly Section 51.307(b)(2) requires, in EPA ’ s interpretation; (i i) provide a legal justification for that interpretation , based on the applicable statutory and regulatory provisions and other appropriate authorities; (iii) explain with specifi ci ty why the Air District ’ s rule does not satisfy the requirement ; and (iv ) explain the standard under which EPA will evaluate a ny revised approach in a future submittal

. 48 The Air District wants to ensure that its NSR rules satisfy all applicable federal NSR requirements, including the visibility requirements. But in order to d esign a visibility protection rule that will satisfy those requirements, the Air District needs to know what they are. If EPA is going to interpret the “ may have an impact on visibility ” language in Section 51.307(b)(2) to require something other than the 100 km threshold provided on EPA Region IX ’ s website and in its guidance documents, it should clearly explain what is required and how it will evaluate any future rule submission for compliance or non

- compliance with that requirement.



## IX. L EGAL 

## E FFECT OF 

## A N Y 

## “ L IMITED 

## D ISAPPROVAL 

## ” ON 

## F EDERAL 

## E NFORCEABILITY OF THE 

## A IR 

## D ISTRICT 

## ’ S 

## NSR P ROGRAM 

## P ROVISIONS

EPA describes the action it is proposing as a “ limited approval and limited disapproval ” of the Air District’s NSR rules. If EPA takes final action as proposed , t he Air District understands this to mean that the Air District’s NSR rules (District R egulations 2

- 1 and 2

- 2 ) would become effective in their entirety as federally

- enforceable SIP rules. The Air District understands that the proposed “ limited disapprov al” would not mean that certain specific p rovisions in the District ’ s regulations would not be federally

enforceable SIP rules, even though EPA may find that they reflect a deficienc y for the reasons stated in the Proposal. The Air District understands that the effect of any “ limited disapproval” would be to
approve R egulations 2

- 1 and 2

- 2 in their entirety, but to require the Air District to adopt revisions to certain provisions to address any identified deficiencies and submit them for approval by EPA by a stated deadline. ( See 80 FR at p. 52243 , col. 1

- 2.)

It is important that any final action by EPA take effect as outlined in the preceding paragraph

. The Air District’s NSR rules function as a comprehensive whole, and each individual provision is

48 E

. g. , is the FLAG approach required as the only permissible approach to determining what sources “ may have an impact on visibility ” ? If so, why is that the only way that Section 51.307(b)(2) can be satisfied? Can permitting authorities use a “ bright

- line ” test specifying a certain distance from a Class I Area within which the analysis is required, as the South Co ast air district h as done in it s Rule 1303? If so, what are the limitations on an agency ’ s discretion to establish a “ bright line ” threshold distance?41

necessary for the overall p ermitting system to operate properly. 49 If EPA were to approve the rules in a manner that made most of them federally enforceable but left a few specific provisions not federally enforceable because of an identified deficiency, it would be virtually imposs ible to determine what parts of a permit issued under the rules are federally enforceable

– or even whether the permit is enforceable at all under the Clean Air Act. Such a result would lead to chaos in trying to implement or enforce NSR permits from a fe deral perspective. The Air District therefore strongly supports the approach outlined in the preceding paragraph

.


### Comment IX

: If EPA Finalizes a Limited Approval and Limited Disapproval, EPA Should Explain That The Air District’s NSR Regulations In Their Entirety Are Effective As Federally Enforceable NSR Requirements, Subject To A Requirement For The Air District To Submit Revisions To Address Any Deficiency Items

If EPA finalizes a limited approval and limited disapproval, it should make clear that t he legal effect of such an action is to make the Air District’s NSR rules as a whole part of the California SIP and federally enforceable under the Clean Air Act. EPA should make clear that any limited disapproval

means only that the Air District must re

- submit revised rules addressing any identified deficiencies. EPA should make clear that any limited disapproval does not carve out any specific provisions in the Air District’s NSR rules and exclude them from the Bay Area’s approved SIP NSR program or fro m federal enforceability under the Clean Air Act , which we believe is EPA ’ s intent if it finalizes a limited approval and limited disapproval as proposed

.

49 It is possible in some cases for the Air District to create sp ecific elements of its rules that it does not intend to submit to EPA for approval into the SIP. Indeed, such an approach may be necessary where the Air District wants to adopt an element in its NSR program that EPA cannot ap prove into the SIP for some reason. Where the Air District does adopt such provisions, however, it crafts them carefully so that they are severable and that the rules that are submitted into the SIP function properly as a complete regulatory program. The Air District has not drafted its current NSR rule with an intention to create any such severable provisions. T o the contrary, t he Air District’s NSR rules are intended to work together in their entirety, and it is important that EPA’s method of approval makes them federally enforceable in their entirely as a complete regulatory package.