1 MEMORANDUM

SUBJECT: Information Gathering Exer cise for Tailoring Rule Step 3

FROM: Michael S. Brooks, Environmen tal Protection Specialist, EPA

TO: Project Docket [Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3, GHG Plantwide Applicability Limitations and GHG Synthetic Minor Limitations. Docket ID No. EPA– HQ–OAR–2009–0517]

This memorandum explains the process EPA undertook to gather information from permitting authorities to help inform our an alysis on the feasibility of reducing the GHG permitting applicability thresholds for Step 3 of the Tailoring Rule. To gain an understanding of the states’ progress in th e implementation of Steps 1 and 2 of the Tailoring Rule and the potential impact of re ducing the GHG thresholds in Step 3 on state permitting capacity, we consulted with the state permitting agencies with the most GHG permitting experience. We identified eight states: Iowa, Louisiana, Michigan, New Jersey, North Carolina, Pennsylvania, South Da kota, and Utah. In addition, we reviewed the experience of the EPA Regional offices that act as PSD permitting authorities in state jurisdictions: Region 4, which issues PSD permits for GHG emissions in Florida and for all regulated pollutant emissions from oute r continental shelf sources in the eastern portion of the Gulf of Mexico; Region 6, which issues PSD permits for GHG emissions in Arkansas and Texas; and Region 9, wh ich issues PSD permits for all regulated pollutants in many of the lo cal air quality management districts in California.

I. Background

In the Tailoring Rule, we indicated that fu rther phase-in of GHG applicability would depend on three criteria: (i) whether the EPA could develop streamlining measures, (ii) the time that permitting authorities need to ramp up their resources, and (iii) sources’ abilities to meet the requirements of the PSD program and permitting authorities’ abilities to issue timely permits. To predict the burden that would be created by further lowering the thresholds, we analyzed which types and number of source categories would emit

GHGs at several different thre sholds. However, this gave us no indication as to the current burdens placed on the states due to GHG permitting or an indication of the level of resources available, at state permitting authorities, to process GHG permitting actions. While we were able to identify the number of PSD permits issued for GHGs and the number of applications permitting authoritie s are currently processing, it provided no

indication of the number of actions that were occurring to avoi d PSD through processes like synthetic minor permitting and gave us no indication of the infrastructure established or the resource constraints brought on by th e need to handle these types of permitting actions. To gather additional information to aide our decision-making based on the three criteria, we consulted with the identified permitting agencies.2 II. Identification of Appropriate States to Survey

In consultation with EPA Regional Offices we identified states with the most greenhouse gas permitting experience while considering all aspects of permitting that might be affected by GHGs, not just PSD permitting.

After careful consideration of the Regions ' feedback, we selected 8 states (Iowa, Louisiana, Michigan, New Jersey, North Ca rolina, Pennsylvania, South Dakota, and Utah) and worked with the Regions to distribut e a short list of questions to the identified

states.

III. Questions for Consultation with the States

The questions were designed to help us be tter understand the st ates’ progress in GHG permitting. The questions focused on issues such as: have states had the time that permitting authorities need to ramp up thei r resources, and do they have the ability (through FTE and infrastructure) to issue timely permits. Below are the consultation questions we provided to the permitting au thorities, followed by a summary of the

responses.

General Existing Permitting Burden/Resources

1. Does your state currently ha ve the necessary resources (funding and staff) to run the PSD and title V permitting program as they exist today?

a. If your state is strained for resources , what are the reasons for it? Please list all that apply and provide a short description of the problem.

i. GHG Permitting

ii. Other Permitting Issues (SO2, NO2, etc)

iii. Budget cuts

iv. Lack of personnel

v. Other (please specify)

2. Has your state agency expe rienced any impact from state budget cuts during 2009-

2011?

a. If so, what percentage of your ove rall budget does this represent?

b. Were there specific cuts to the permitting program?

c. What effect, if any, has this had on your ability to issue permits?

d. In particular, what changes have you noticed in processing times for permits?

3. Is your state expecting next year’s budget to be the same, improve, or decline?

a. If your budget were to remain constant or decline next year, how would that impact your ability to perm it additional sources added to the permitting programs because of GHG emissions?

4. Did your state experience a change in the number of permitting actions during the last 12 months compared to normal permitting levels? If so, please specific if there was an increase, decrease, and estimate by how much (percentage).3 GHG Specific Permitting Burden Questions

1. Has GHG permitting added burden to the permitting process in your state?

a. Increased number of source meetings?

b. Increased number of daily permitting questions?

c. Increased number of incomplete permit applications?

d. Increased training for permitting staff to understand the GHG permitting process?

e. Is your staff unsure of how and when to permit GHG sources?

2. Do you think 2011 has been representative of the permitting burdens you expect under the current tailoring ru le? If not, why? Please select all that apply.

a. Sources accelerated permitting actio ns prior to GHG trigger dates

b. Sources took synthetic minor limits to avoid GHG permitting

c. Economic Cycle Impacts on number of projects

d. Legal uncertainty related to GHG permitting

e. Other (please specify)

3. For states where PSD permits for GHG have been issued, how was the burden (monetary and man-hours) compared to a typical non-GHG permit?

4. Did you see an increase in major source modifications prior to the January 2011 Step 1 deadline?

a. If so, by what amount?

5. Did you see an increase in minor source modi fications prior to the July 2011 Step

2 deadline?

a. If so, by what amount?

6. How many minor source actions has your st ate processed for sources trying to avoid major source permitting for PSD?

7. Does your state have an ac tive outreach initia tive and the resour ces necessary to reach out to smaller sources that may not be aware of their ob ligation to apply for TV or PSD permits due to GHGs?

8. Have the GHG requirements created or adde d to a backlog of unissued permits?

a. If so, by what amount?

9. Are your current resources adequate to meet the additional challenges that you face because of GHG permitting requirements?

a. If not, what additional resources would you need?

10. If the levels were to be re duced to 50,000 tpy CO2e (the lowest we said we would go in the Tailoring Rule), bringing in an additional 3,000 newly major sources on a national basis, what resources would you need? Please prov ide quantities where possible (both monetary and staffing).

11. What new challenges have been added solely because of GHG requirements?

12. If the threshold levels lowered for step 3, do you foresee an increase in permitting actions before step 3 kicks in (July 2013)?

13. Has your state modified its title V fees to cover GHG permitting needs? If not, would your state need to do so if additional sources were added to the permitting programs as a result of lowered thresholds?4 Streamlining Specific Questions

1. Is your state processing applications through any electronic permitting measures? If not do you plan on implementing a type of electronic permitting?

2. Has your state implemented LEAN tec hniques to streamline the permitting process? If so, how has this improved th e efficiency for permitting actions? If not, do you plan on doing this in the future?

3. Is your state considering any other permitting streamlining technique to help improve the efficiency and reduce the burden associated with permitting of GHG sources? Please list all streamlining t echniques under consideration and the expected implementation timelines.

IV. Summary of State Responses

The following table presents a summary of th e information received from state permitting authorities. Generally, the responses show that even at today’s lower than expected permitting activity levels, only about 50% of the respondents have adequate resources to conduct permitting at current GHG thresholds. Also, at the current GHG thresholds,

there is a decline in the level of resources with additional reductions expected and an increased permitting burden.

All respondents agreed that if the threshol ds were lowered to 50,000 tpy, thus adding about 3,000 additional sources, they would need additional resources to be able to handle

the workload.5State/RegionGeneralExistingBurden/ResourcesGHGSpecificBurden/ResourcesCurrentresourcesadequate?Budgetcutsin09‐11?Expectingfurthercuts?Has2011beenrepresentativeintermsofpermittingburdenexpected?AddedburdenduetoGHG?IncreasedperpermitburdenduetoGHGs?Ifthresholdswerelowered,adequateresources?ModifiedTVFeesforGHG?IANoYesYesNoYesYesNoNoPAYesYesNoNoYesYesNoNoMINoYesYesNoNoYesNoNoSDYesYesNoYesNoNoUTYesNoYesNoYesYesNoNoNCNoNoNoNoNJYesYesNoNoNoNoLANoYesNoNoNoR4YesYesYesNoYesYesR6NoNoYesNoNoR9YesNoNoYesYesNo