Document ID: EPA-HQ-OAR-2009-0517-19152
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2010-06-03T04:00Z

6560-50-P

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, 70, and 71

[EPA-HQ-OAR-2009-0517; FRL - _________]

RIN 2060-AP86

Prevention of Significant Deterioration and Title V Greenhouse Gas
Tailoring Rule

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Final Rule.

SUMMARY:  EPA is tailoring the applicability criteria that determine
which stationary sources and modification projects become subject to
permitting requirements for greenhouse gas (GHG) emissions under the
Prevention of Significant Deterioration (PSD) and title V programs of
the Clean Air Act (CAA or Act).  This rulemaking is necessary because
without it PSD and title V requirements would apply, as of January 2,
2011, at the 100 or 250 tons per year (tpy) levels provided under the
CAA, greatly increasing the number of required permits, overwhelming the
resources of permitting authorities, and severely impairing the
functioning of the programs.  EPA is relieving these resource burdens by
phasing-in the applicability of these programs to GHG sources  This rule
establishes two initial steps of the phase-in.  Step 1 begins on January
2, 2011, and covers only sources and modifications that would otherwise
undergo PSD or title V permitting based on emissions of non-GHG
pollutants.  Step 2 begins on July 1, 2011, and covers large sources of
GHG emissions that emit or have the potential to emit 100,000 tpy carbon
dioxide equivalent (CO2e) or more, and modifications at those sources
that increase net GHG emissions by 75,000 tpy CO2e or more, provided
those sources or modifications also have GHG mass emissions that exceed
the relevant mass-based applicability thresholds.  This rule also
requires EPA to promulgate by July 1, 2012, a step 3 rule that will
consider phasing-in additional sources.  EPA excludes from PSD and title
V permitting for GHG emissions, until at least    April 30, 2016,
sources that are not already subject and that emit less than 50,000 tpy
of CO2e, as well as modifications that do not increase net GHG emissions
by 50,000 tpy CO2e, or more.  EPA will use this time to streamline the
programs for those sources and must complete a study by April 30, 2015,
to assess improvements in administrability of the programs for such
sources, and must complete a rule by April 30, 2016, addressing
additional such sources based on this study.  EPA’s legal basis for
this tailoring rule is its interpretation of the PSD and title V
applicability provisions under the familiar Chevron two-step framework
for interpreting administrative statutes, taking account of the legal
doctrines authorizing agencies to apply statutory requirements in way
that avoids absurd results or administrative impossibility and
authorizing agencies to implement statutory requirements a step at a
time.

DATES:  This action is effective on [INSERT 60 DAY FROM DATE OF
PUBLICATION].

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

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

SUPPLEMENTARY INFORMATION:  

I.  General Information

A.  Does this action apply to me?

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

Industry Group	NAICSa

Agriculture, fishing, and hunting……………………….	

11

Mining………………………………………		21

Utilities (electric, natural gas, other
systems)………………………………………………..	

2211, 2212, 2213

Manufacturing (food, beverages, tobacco, textiles,
leather)…………………………….	

311, 312, 313, 314, 315, 316 

Wood product, paper
manufacturing…………………………………..	

321, 322 

Petroleum and coal products manufacturing…………………….	

32411, 32412, 32419

Chemical manufacturing………………………		

3251, 3252, 3253,3254, 3255, 3256,3259

Rubber product manufacturing…………………….	

3261, 3262

Miscellaneous chemical
products………………………………………………..	

32552, 32592, 32591, 325182, 32551

Nonmetallic mineral product manufacturing…………………….		

3271, 3272, 3273, 3274, 3279

Primary and fabricated metal manufacturing…….		

3311, 3312, 3313, 3314, 3315, 3321, 3322, 3323, 3324, 3325, 3326, 3327,
3328, 3329

Machinery manufacturing…………………….		

3331, 3332, 3333, 3334, 3335, 3336, 3339

Computer and electronic products manufacturing…………………….	

3341, 3342, 3343, 3344, 3345, 4446

Electrical equipment, appliance, and component
manufacturing…………………….		

3351, 3352, 3353, 3359

Transportation equipment manufacturing…………………….		

3361, 3362, 3363, 3364, 3365, 3366, 3366, 3369

Furniture and related product manufacturing…………………….		

3371, 3372, 3379

Miscellaneous manufacturing…………………….		

3391, 3399

Waste management and remediation…………………………		

5622, 5629

Hospitals/Nursing and residential care
facilities…………………………….		

6221, 6231, 6232,6233, 6239

Personal and laundry services………………………………….		

8122, 8123

Residential/private households…………………………….		

8141 

Non-Residential (Commercial)……………………….		

Not available.  Codes only exist for private households, construction,
and leasing/sales industries. 

a	North American Industry Classification System.

B.  How is this preamble organized?

	The information presented in this preamble is organized as follows:

Outline

I.  General Information

A.  Does this action apply to me?

B.  How is this preamble organized?

C.  Preamble Acronyms and Abbreviations

II.  Overview of the Final Rule 

III.  Background 

A.  What are greenhouse gases and their sources?

B.  Endangerment Finding and the Light-Duty Vehicle Rule

1.  Endangerment Finding

2.  Light-Duty Vehicle Rule

C.  What are the General Requirements of the PSD Program?

1.  Overview of the PSD Program

2.  General Requirements for PSD

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

1.  Overview of Title V

2.  Title V Permit Requirements

E.  The Interpretive Memorandum 

IV.  Summary of Final Actions  

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

1.  GHG Pollutant Defined as the Sum-of-Six Well-Mixed GHGs

2.  What GWP values should be used for calculating CO2e?

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

1.  What are the Step 1 thresholds, timing and calculation methodology?

2.  What are the Step 2 thresholds, timing and calculation methodology?

3.  What about Step 3?

4.  What about the proposed 6 year exclusion for smaller sources?  

5.  When and how will EPA take further action on smaller sources? 

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

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

E.  Other Actions and Issues 

1.  Timing for Permit Streamlining Techniques

2.  Guidance for Best Available Control Technology Determinations

3.  Requests for Higher Category-Specific Thresholds and Exemptions from
Applicability

4.  Transitional Issues including Requests for Grandfathering

V. What is the legal and policy rationale for the final actions? 

A. Rationale for our approach to calculating GHG emissions for PSD and
title V applicability purposes

1.  Grouping of GHGs into a Single Pollutant

2.  Identifying Which GHGs are Included in the Group

3.  Determining What GWP Values are to be Used 

4.  Use of Short Tons vs. Metric Tons 					 

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

	1.  Overview

2.  Data Concerning Costs to Sources and Administrative Burdens to
Permitting Authorities

3.  Legal Doctrines:  “Absurd Results,” “Administrative
Necessity,” and “Step-at-a-Time”

	4.  The PSD and Title V programs

5.  Application of the “Absurd results” Doctrine for the PSD Program

6.  Application of the “Absurd Results” Doctrine for the Title V
Program 

	7.  Additional Rulemaking for the PSD and Title V Programs

8.  Rationale for the Phase-in Schedule for Applying PSD and Title V to
GHG Sources

9.  “Administrative Necessity” Basis for PSD and Title V
Requirements in Tailoring Rule

	10.  “Step-at-a-Time” Basis for Tailoring Rule 

C.  Mechanisms for Implementing and Adopting the Tailoring Approach

1.  PSD Approach: Background and Proposal

2.  Rationale for Our Final Approach to Implementing PSD

3.  Other Mechanisms

4.  Codification of Interpretive Memo

5.  Delaying Limited Approvals and Request for Submission of Information
from States Implementing a SIP-Approved PSD Program

6.  Title V Programs

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

E.  Other Actions and Issues  

1.  Permit Streamlining Techniques

2.  Guidance for Best Available Control Technology Determinations 

3.  Requests for Higher Category-Specific Thresholds or Exemptions from
Applicability  

4.  Transitional Issues Including Requests for Grandfathering      

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

A.  What entities are affected by this final rule?

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

1.  What are annual estimated benefits or avoided burden costs for title
V permits? 

2.  What are annual benefits or avoided costs associated with NSR
permitting regulatory relief? 

	C.  What are the economic impacts of this rulemaking?

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

VII.  Comments on Statutory and Executive Orders Reviews 

VIII.  Statutory and Executive Orders Reviews 

XI.  Statutory Language

C.  Preamble Acronyms and Abbreviations

	The following are abbreviations of terms used in the preamble.

BACT				Best Available Control Technology

CAA or Act		Clean Air Act

CO2e				Carbon Dioxide Equivalent

GHG				Greenhouse Gases

PSD				Prevention of Significant Deterioration

SNPR				Supplemental Notice of Proposed Rulemaking

tpy				Tons Per Year

[COMPLETE LATER.]

II. Overview of the Final Rule 

EPA is relieving overwhelming permitting burdens that would, in the
absence of this rule, fall on permitting authorities and sources.  We
accomplish this by tailoring the applicability criteria that determine
which GHG emission sources become subject to the PSD and title V
programs of the CAA.  In particular, EPA is establishing with this
rulemaking a phase-in approach for PSD and title V applicability, and is
establishing the first two steps of the phase-in for the largest
emitters of GHGs.  We also commit to certain follow-up actions regarding
future steps beyond the first two, discussed in more detail below.  Our
legal basis for this rule is our interpretation of the PSD and title V
applicability provisions under the familiar Chevron two-step framework
for interpreting administrative statutes, taking account of three legal
doctrines, both separately and interdependently:  they are what we will
call (i) the “absurd results” doctrine, which authorizes agencies to
apply statutory requirements in way that avoids absurd results, (ii) the
“administrative necessity” doctrine, which authorizes agencies to
apply statutory requirements in a way that avoids impossible
administrative burdens; and (iii) the “step-at-a-time” doctrine,
which authorizes agencies to implement statutory requirements a step at
a time.  This legal basis justifies each of the actions we take with
this rule, both (i) as part of the overall tailoring approach and (ii)
independently of the other actions.

For the first step, which will begin on January 2, 2011, PSD or title V
requirements will apply to sources’ GHG emissions only if the sources
are subject to PSD or title V anyway due to their non-GHG conventional
pollutants.  Therefore, EPA will not require sources or modifications to
evaluate whether they are subject to PSD or title V requirements solely
on account of their GHG emissions.  Specifically, for PSD, Step 1
requires that as of January 2, 2011, the applicable requirements of PSD,
most notably, the best available control technology (BACT) requirement,
will apply to projects that increase net GHG emissions by at least
75,000 tpy CO2e, but only if the project also significantly increases
emissions of at least one non-GHG pollutant.  For the title V program,
only existing sources with, or new sources obtaining, title V permits
for non-GHG pollutants will be required to address GHGs during this
first step.  

The second step of the tailoring rule, beginning on July 1, 2011, will
phase-in additional large sources of GHG emissions.  New sources as well
as existing sources not already subject to title V that emit, or have
the potential to emit, at least 100,000 tpy CO2e will become subject to
the PSD and title V requirements.  In addition, sources that emit or
have the potential to emit at least 100,000 tpy CO2e and that undertake
a modification that increases net emissions of GHGs by at least 75,000
tpy CO2e will also be subject to PSD requirements.  For both steps, we
also note that if sources or modifications exceed these CO2e-adjusted
GHG triggers, they are not covered by permitting requirements unless
their GHG emissions also exceed the corresponding mass-based triggers
(i.e., unadjusted for CO2e.)  

EPA believes that the costs to the sources and the administrative
burdens to the permitting authorities of PSD and title V permitting will
be manageable at the levels in these initial two steps, and that it
would be administratively infeasible to subject additional sources to
PSD and title V requirements at those times.  However, we also intend to
issue a supplemental notice of proposed rulemaking (SNPR) in 2011, in
which we will propose or solicit comment on a third step of the phase-in
that would include more sources, beginning by July 1, 2013.  In the same
rulemaking, we may propose or solicit comment on a permanent exclusion
from permitting for some category of sources, based on the doctrine of
“absurd results,” within the Chevron framework.  We are establishing
an enforceable commitment that we will complete this rulemaking by July
1, 2012, which will allow for 1 year's notice before step 3 would take
effect.  

We are also including in this action a rule that no source with
emissions below 50,000 tpy CO2e, and no modification resulting in net
GHG increases of less than 50,000 tpy CO2e, will be subject to PSD or
title V permitting before at least 6 years from now, April 30, 2016. 
This is because we are able to conclude at this time that the
administrative burdens that would accompany permitting sources below
this level will be so great that, absent significant streamlining
actions that EPA will need time to develop and implement, or else absent
significant resource constraints that the permitting authorities will
need time to implement, it will be impossible to administer the permit
programs for these sources until at least 2016.  We commit to explore
streamlining techniques that may well make the permitting programs much
more efficient to administer for GHGs, and that therefore may allow
their expansion to smaller sources, but we expect that those techniques
will take several years to develop and implement.  

Further, we are establishing an enforceable commitment that we will (i)
complete a study by April 30, 2015, to evaluate the status of PSD and
title V permitting for GHG-emitting sources, including progress in
developing streamlining techniques; and (ii) complete further rulemaking
based on that study by April 30, 2016 to address the permitting of
smaller sources.  That rulemaking may also consider additional permanent
exclusions based on the “absurd results” doctrine, where applicable.

This rulemaking is necessary because without it, PSD and title V would
apply to all stationary sources that emit or have the potential to emit
more than 100 or 250 tons of GHGs per year beginning on January 2, 2011.
 This is the date when EPA’s recently promulgated Light Duty Vehicle
Rule (LDVR) takes effect, imposing control requirements for the first
time on CO2 and other GHGs.  If this January 2, 2011 date were to pass
without this rule being in effect, PSD and title V requirements would
apply at the 100/250 tpy applicability levels provided under a literal
reading of the CAA as of that date.  From that point forward, a source
owner proposing to construct any new major source that emits at or
higher than the applicability levels (and which therefore may be
referred to as a “major” source) or modify any existing major source
in a way that would increase GHG emissions would need to obtain a permit
under the PSD program that addresses these emissions before construction
or modification could begin.  Similarly, for title V, a new or existing
source exceeding the 100 tpy applicability level in the Act would be
required to get a title V permit, if it did not already have one.  

Under these circumstances, many small sources would be burdened by the
costs of the individualized PSD control technology requirements and
permit applications that the PSD provisions, absent streamlining,
require.  Additionally, state and local permitting authorities would be
burdened by the extraordinary number of these permit applications, which
are orders of magnitude greater than the current inventory of permits
and would vastly exceed the current administrative resources of the
permitting authorities.  Permit gridlock would result with the
permitting authorities able to issue only a tiny fraction of the permits
requested.  

These impacts – the costs to sources and administrative burdens to
permitting authorities – that would result from application of the PSD
and title V programs for GHG emissions at the statutory levels as of
January 2, 2011 are so severe that they bring the judicial doctrines of
“absurd results,” “administrative necessity,” and
“step-at-a-time” into the Chevron two-step analytical framework for
statutes administered by agencies.  Under Chevron, the agency must, at
step 1, determine whether Congress’s intent as to the specific matter
at issue is clear, and, if so, the agency must give effect to that
intent.  If congressional intent is not clear, then, at step 2, the
agency has discretion to fashion an interpretation that is a reasonable
construction of the statute.  To determine congressional intent, the
agency must first consider the words of the statutory requirements, and
if their plain meaning answers the question at hand, then, in most
cases, the agency must implement those requirements by their terms. 
However, under the “absurd results” doctrine, the plain meaning of
statutory requirements should not be considered to indicate
congressional intent if the plain meaning would produce a result that is
senseless or that is otherwise inconsistent with -- and especially one
that undermines -- underlying congressional purpose.  In these cases, if
congressional intent is clear, the agency should implement the statutory
requirements not in accordance with their plain meaning, but rather in a
manner that most closely effectuates congressional intent; and if
congressional intent is not clear, then an agency may select an
interpretation that is reasonable under the statute.  Similarly, under
the “administrative necessity” doctrine, Congress is presumed, at
Chevron step 1, not to have intended to have written statutory
requirements that are impossible to administer, but rather to have
intended that requirements be implemented in manner that is
administrable.  Therefore, under this doctrine, an agency may depart
from statutory requirements that, by their terms, are impossible to
administer, but the agency may depart no more than necessary to render
the requirements administrable.  Under the “step-at-a-time”
doctrine, Congress is presumed at Chevron step 1 to have intended to
allow the agency to administer the statutory requirements on a
step-by-step basis, as appropriate, when the agency remains on track to
iComplement the requirements as a whole.  Each of these doctrines
supports our action separately, but the three also are intertwined and
support our action in a comprehensive manner. 

Here, we have determined, through analysis of burden and emissions data
as well as consideration of extensive public comment, that the costs to
sources and administrative burdens to permitting authorities that would
result from application of the PSD and title V programs for GHG
emissions at the statutory levels as of January 2, 2011 should be
considered “absurd results.”  Therefore, we conclude that under the
“absurd results” doctrine, Congress could not have intended that the
statutory levels apply as of that date, and instead that Congress
intended some type of ameliorative alternative.  The “administrative
necessity” doctrine supports our conclusion as well because the
administrative burdens of attempting to comply with the statutory
thresholds as of January 2, 2011 would be impossible to bear, and for
this reason, too, Congress could not have intended that the statutory
levels apply as of that date.

Under these circumstances, congressional intent as to how to apply PSD
and title V to GHG sources may be considered to be unclear.  If so, EPA
has authority to develop an interpretation that is reasonable under the
statute, and the tailoring approach so qualifies.  In the alternative,
congressional intent may be considered to be clear – with the possible
exceptions described below – that PSD and title V requirements should
apply to GHG sources as closely to the statutory levels as possible, and
as quickly as possible, while assuring that affected sources and
permitting authorities can manage their permitting requirements.  The
tailoring rule is the approach that best effectuates this intent.  As a
result, the tailoring rule is valid under Chevron step 1, as informed by
the “absurd results,” “administrative necessity,” and
“step-at-a-time” doctrines.  Even so, we acknowledge that it may not
be clear whether Congress would have intended that PSD and title V apply
to the smallest GHG sources – those  at or near the statutory levels
-- and we intend to resolve this issue through future rulemaking.  In
addition, with respect to title V, we acknowledge that it may not be
clear whether Congress intended that large numbers of GHG sources be
required to hold permits that do not have applicable requirements –
which we will call “empty permits” – and we intend to resolve this
issue, too, in future rulemaking.  

The legal analysis just describes justifies each of the actions in this
rule.  The first two steps that we promulgate in this rule, which take
effect on January 2, 2011 and July 1, 2011, are  constitute the most
that permitting authorities can reasonably be expected to do by those
times.  Similarly, the 50,000 tpy floor that we promulgate through at
least April 30, 2016 is reasonable because the information we have
available now shows that it constitutes the most that permitting
authorities can reasonably be expected to do by that date.  Finally, the
study and two additional rulemakings – to take effect by July 1, 2013
and April 30, 2016 -- to which we commit in this rule establish a track
for acquiring additional information and for taking further steps to
address the application of PSD and title V more closely to the literal
statutory levels.  We intend to apply them as closely to those levels as
is consistent with congressional intent and administrative imperatives,
in light of the “absurd results,” “administrative necessity,”
and “step-at-a-time” doctrines, although, as noted above, we may
consider in future rulemaking whether to conclude that Congress did not
intend that the programs apply to the smallest sources or, for title V,
sources with empty permits.  

We are adopting regulatory language codifying our phase-in approach.  As
we will explain, many state, local and tribal area programs will likely
be able to immediately implement our approach without rule or statutory
changes for example, by, interpreting the term ”subject to
regulation” that is part of the applicability provisions for PSD and
title V.  We ask permitting authorities to confirm that they will follow
this implementation approach for their programs, and if they cannot,
then we will ask them to notify us so that we can take appropriate
follow-up action to narrow our federal approval of their programs before
GHGs become subject to regulation for PSD and title V programs on
January 2, 2011.  This will ensure that our approvals do not federally
obligate states to implement these programs for GHG until they
demonstrate that they have adequate resources to do so by undertaking
necessary programmatic, statutory, and/or regulatory changes at the
state, local or tribal level.

The thresholds we are establishing are based on CO2e for the aggregate
sum of six greenhouse gases that constitute the pollutant that will be
subject to regulation, which we refer to as GHGs.  These gases are: 
CO2, methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs), and sulfur hexafluoride (SF6).  Thus, in this
rule, we provide that PSD and title V applicability is based on the
quantity that results when the mass emissions of each of these gases is
multiplied by the Global Warming Potential (GWP) of that gas, and then
summed for all six gases.  However, we further provide that in order for
a source’s GHG emissions to trigger PSD or title V requirements, the
quantity of the GHGs must exceed both the applicability thresholds
established in this rulemaking on a CO2e basis and the statutory
thresholds of 100 or 250 tpy on a mass basis.  Similarly, in order for a
source to be subject to the PSD modification requirements, the
source’s net GHG emissions increase must exceed the applicable
significance level on a CO2e basis and must also result in a net mass
increase of the constituent gases combined. 

We are adopting this rule after careful consideration of numerous public
comments.  On October 27, 2009 (74 FR 55292), EPA proposed the GHG
tailoring rule.  EPA held two public hearings on the proposed rule, and
received over 400,000 written public comments.  The public comment
period ended on December 28, 2009.  The comments have provided detailed
information that has helped EPA understand better the issues and
potential impacts of this rule, and the final rule described in this
preamble incorporates many of the suggestions we received.  We respond
to many of these comments in explaining our rationale for the final
rule, which is described in section V.  The final rule adopts many
elements of the proposal but differs from the proposal in several
important respects.  We proposed to apply PSD and title V to GHG sources
that emit or have the potential to emit at least 25,000 tpy CO2e, and we
proposed a PSD significance level in a range between 10,000 and 25,000
tpy CO2e, but based on consideration of the additional information we
received and our further analysis, we are finalizing the threshold
levels on the schedule described previously.  In addition, the mechanism
for state, local and tribal program implementation has been
significantly changed to reflect the comments received that we needed to
develop an implementation approach that states could adopt under state
law more expeditiously.  

	The remainder of this notice describes our approach and rationale in
more detail.  Following this overview, section III of this preamble
provides background information on the nature of GHG emissions, recent
regulatory developments that affect when and how GHG emissions are
subject to stationary source permitting, and the general requirements of
the PSD and title V programs.  Section IV describes in detail the
summary of the key actions being taken in this rule, including the
determination of emissions, the thresholds and timing for the phase-in,
our approach to implementing the phase-in, and the additional future
actions we will take.  Section V provides a more detailed description of
each action, explaining the policy and legal rationale and responding to
comments received, beginning with our decisions on how to calculate the
mass-based and CO2e-based emissions used in the phase-in, followed by
our legal and policy rationale for the first two steps of the phase-in,
the 50,000 tpy floor, and the subsequent study and rulemakings to
determine whether and how smaller sources should be subject to
permitting.  This section then describes key implementation issues
including the approach to state adoption.  After describing our plans
for follow-up on title V fee programs, the section concludes by
describing permit streamlining techniques; guidance on BACT for the GHG
sources that are affected under the first two steps of the tailoring
rule phase-in; requests for exemptions; and transitional issues,
including grandfathering.  Finally, section VI describes the expected
impacts that will result from the phase-in approach (i.e, the narrower
application of PSD and title V requirements during the phase-in period)
and section VII addresses administrative requirements.

III. Background 

A.  What are greenhouse gases and their sources?

GHGs trap the Earth’s heat that would otherwise escape from the
atmosphere into space, and forms the greenhouse effect that helps keep
the Earth warm enough for life.  Greenhouse gases are naturally present
in the atmosphere and are also emitted by human activities.  Human
activities are intensifying the naturally occurring greenhouse effect by
increasing the amount of GHGs in the atmosphere, which is changing the
climate in a way that endangers human health, society, and the natural
environment.

Some GHGs such as CO2 are emitted to the atmosphere through natural
processes as well as human activities.  Other gases, such as fluorinated
gases, are created and emitted solely through human activities.  As
previously noted, the well-mixed GHGs of concern directly emitted by
human activities include CO2, CH4, N2O, HFCs, PFCs, and SF6.  These six
GHGs will, for the purposes of this final rule, be referred to
collectively as "the six well-mixed GHGs,” or, simply, GHGs. and
together constitute the “air pollutant” upon which the GHG
thresholds in this action are based.  These six gases remain in the
atmosphere for decades to centuries where they become well-mixed
globally in the atmosphere.  When they are emitted more quickly than
natural processes can remove them from the atmosphere, their
concentrations increase, thus increasing the greenhouse effect.  The
heating effect caused by the human-induced buildup of GHGs in the
atmosphere is very likely the cause of most of the observed global
warming over the last 50 years.  A detailed explanation of climate
change and its impact on health, society, and the environment is
included in EPA's technical support document for the endangerment
finding final rule (Docket ID No. EPA-HQ-OAR-2009-0472-11292).   

In the United States, the combustion of fossil fuels (e.g., coal, oil,
gas) is the largest source of CO2 emissions and accounts for 80 percent
of the total GHG emissions.  More than half of the energy related
emissions come from large stationary sources such as power plants, while
about a third come from transportation.  Of the six well-mixed GHGs,
four (CO2, CH4, N2O, and HFCs) are emitted by motor vehicles.  In the
United States industrial processes (such as the production of cement,
steel, and aluminum), agriculture, forestry, other land use, and waste
management are also important sources of GHGs.  

Different GHGs have different heat-trapping capacities.  The concept of
GWP was developed to compare the heat-trapping capacity and atmospheric
lifetime of one GHG to another.  The definition of a GWP for a
particular GHG is the ratio of heat trapped by one unit mass of the GHG
to that of one unit mass of CO2 over a specified time period.  When
quantities of the different GHGs are multiplied by their GWPs, the
different GHGs can be summed and compared on a CO2e basis.  For example,
CH4 has a GWP of 21, meaning each ton of CH4 emissions would have 21
times as much impact on global warming over a 100-year time horizon as 1
ton of CO2 emissions.  Thus, on the basis of heat-trapping capability, 1
ton of CH4 would equal 21 tons of CO2e.  The GWPs of the non CO2 GHGs
range from 21 (for CH4) up to 23,900 (for SF6).  Aggregating all GHGs on
a CO2e basis at the source level allows a facility to evaluate its total
GHG emissions contribution based on a single metric. 

B.  Endangerment Finding and the Light-Duty Vehicle Rule

1.  Endangerment Finding

On April 2, 2007, the United States Supreme Court found that GHGs are
air pollutants under CAA section 302(g).  Massachusetts v. EPA, 549 U.S.
497 (2007).  As a result, the Supreme Court found that EPA was required
to determine, under CAA section 202(a), whether (a) GHGs from new motor
vehicles cause or contribute to air pollution which may reasonably be
anticipated to endanger public health or welfare, or (b) the science is
too uncertain to make a reasoned decision.  After issuing a proposal and
receiving comment, on December 7, 2009, the Administrator signed two
distinct findings regarding GHGs under CAA section 202(a):

Endangerment Finding:  The Administrator found that the current and
projected atmospheric concentrations of the mix of six long-lived and
directly emitted GHGs—CO2, CH4, N2O, HFCs, PFCs, and SF6 (referred to
as “well-mixed greenhouse gases” in the endangerment finding)–are
reasonably anticipated to endanger the public health and welfare of
current and future generations.

Cause or Contribute Finding:  The Administrator found that the emissions
of the single air pollutant defined as the aggregate group of six
well-mixed greenhouses gases from new motor vehicles and new motor
vehicle engines contribute to the GHG air pollution that threatens
public health and welfare.  

These findings, which were published December 15, 2009 (74 FR 66496), do
not themselves impose any requirements on industry or other entities. 
However, they were a prerequisite to finalizing the GHG standards for
light-duty vehicles, described next.  

2.  Light-Duty Vehicle Rule

The light-duty vehicle rule, signed on April 1, 2010 is a joint rule
between EPA and the Department of Transportation’s National Highway
Traffic Safety Administration (NHTSA) that establishes a national
program consisting of new standards for light-duty vehicles that will
reduce greenhouse gas emissions and improve fuel economy.  EPA finalized
the national GHG emissions standards under the Act, and NHTSA finalized
Corporate Average Fuel Economy (CAFE) standards under the Energy Policy
and Conservation Act, as amended.  The new standards apply to new
passenger cars, light-duty trucks, and medium-duty passenger vehicles,
starting with model year 2012.  The EPA GHG standards are projected to
result in an estimated combined average emissions level of 250 grams of
CO2 per mile for model year 2016 vehicles.  The standards begin with the
2012 model year, with standards increasing in stringency through model
year 2016.  The standards are a fleet average for each manufacturer,
based on a footprint attribute curve, meaning that the actual target for
a vehicle will vary depending on the size of the vehicle.  Under the
footprint-based standards, each manufacturer will have a GHG standard
unique to its fleet, depending on the footprints of the vehicle models
produced by that manufacturer.  A manufacturer will have separate
footprint-based standards for cars and for trucks 

 The endangerment and contribution findings described above require EPA
to issue standards under section 202 (a) “applicable to emission” of
the air pollutant that EPA found causes or contributes to the air
pollution that endangers public health and welfare.  The final emissions
standards satisfy this requirement for GHGs from light-duty vehicles. 
Under section 202(a) the Administrator has significant discretion in how
to structure the standards that apply to the emission of the air
pollutant at issue here, the aggregate group of six GHGs.  EPA has the
discretion under section 202(a) to adopt separate standards for each
gas, a single composite standard covering various gases, or any
combination of these.  In the LDVR, EPA finalized separate standards for
nitrous oxide and methane, and a CO2 standard that provides for credits
based on reductions of HFCs, as the appropriate way to issue standards
applicable to emission of the single air pollutant, the aggregate group
of six GHGs.  EPA did not set any standards for PFCs or SF6, as they are
not emitted by motor vehicles. 

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

1. Overview of the PSD Program

The PSD program is a preconstruction review and permitting program
applicable to new major stationary sources and major modifications at
existing major stationary sources.  The PSD program applies in areas
that are designated “attainment” or “unclassifiable” for a
National Ambient Air Quality Standard (NAAQS).  The PSD program is
contained in part C of title I of the CAA.  The "nonattainment new
source review (NSR)" program applies in areas not in attainment for a
NAAQS or in the Ozone Transport Region and is implemented under the
requirements of part D of title I of the CAA.  Collectively, we commonly
refer to these two programs as the major NSR program.  The governing EPA
rules are contained in 40 CFR 51.165, 51.166, 52.21, 52.24, and part 51,
appendices S and W.  There is no NAAQS for CO2 or any of the other
well-mixed GHGs, nor has EPA proposed any such NAAQS; therefore, unless
and until we take further such action, we do not anticipate that the
"nonattainment" major NSR program will apply to GHGs.

The applicability of PSD to a particular source must be determined in
advance of construction or modification and is pollutant-specific.  The
primary criterion in determining PSD applicability for a proposed source
is whether the source is a “major emitting facility,”, based on its
predicted potential emissions of regulated pollutants, within the
meaning of CAA section 169(1) and either constructs or undertakes a
modification.  EPA has implemented these requirements in its
regulations, which use somewhat different terminology for determining
PSD applicability, which is whether the source is a “major stationary
source” or whether the proposed project is a “major modification.”

a. Major Stationary Source

Under PSD, a "major stationary source" is any source belonging to a
specified list of 28 source categories which emits or has a potential to
emit (PTE) of 100 tpy or more of any pollutant subject to regulation
under the CAA, or any other source type which emits or has the PTE such
pollutants in amounts equal to or greater than 250 tpy.  We refer to
these levels as the 100/250-tpy thresholds.  A new source with a PTE at
or above the applicable “major stationary source threshold" is subject
to major source NSR.  These limits originate from section 169 of the
CAA, which applies PSD to any “major emitting facility” and defines
the term to include any source that emits or has a PTE of 100 or 250
tpy, depending on the source category.  Note that the major source
definition incorporates the phrase “subject to regulation,” which,
as described later, will begin to include GHGs on January 2, 2011, under
our interpretation of that phrase discussed in the recent Interpretive
Memo notice.  75 FR 17004. 

b. Major Modifications

PSD also applies to existing sources that undertake a "major
modification," which occurs:  (1) when there is a physical change in, or
change in the method of operation of, a "major stationary source;" (2)
the change results in a "significant" emission increase of a pollutant
subject to regulation (equal to or above the significance level that EPA
has set for the pollutant in 40 CFR 52.21(b)(23)); and (3) there is a
“significant net emissions increase” of a pollutant subject to
regulation that is equal to or above the significance level (defined in
40 CFR 52.21(b)(23)).  Significance levels, which EPA has promulgated
for criteria pollutants and certain other pollutants, represent a de
minimis contribution to air quality problems.  When EPA has not set a
significance level for a regulated NSR pollutant, PSD applies to an
increase of the pollutant in any amount (that is, in effect, the
significance level is treated as zero).  

2.  General Requirements for PSD

This section provides a very brief summary of the main requirements of
the PSD program.  One principal requirement is that a new major source
or major modification must apply BACT, which is determined on a
case-by-case basis taking into account, among other factors, the cost
effectiveness of the control and energy and environmental impacts.  EPA
has developed a “top-down” approach for BACT review, which involves
a decision process that includes identification of all available control
technologies, elimination of technically infeasible options, ranking of
remaining options by control and cost effectiveness, and then selection
of BACT.  Under PSD, once a source is determined to be major for any
regulated NSR pollutant, a BACT review is performed for each attainment
pollutant that exceeds its PSD significance level as part of new
construction or for modification projects at the source, where there is
a significant increase and a significant net emissions increase of such
pollutant.

In addition to performing BACT, the source must analyze impacts on
ambient air quality to assure that no violation of any NAAQS or PSD
increments will result, and must analyze impacts on soil, vegetation,
and visibility.  In addition, sources or modifications that would impact
Class I areas (e.g., national parks) may be subject to additional
requirements to protect air quality related values (AQRVs) that have
been identified for such areas.  Under PSD, if a source proposes to
locate within 100 kilometers of a Class I area, the Federal Land Manager
is notified and is responsible for evaluating a source’s projected
impact on the AQRV’s and recommending either approval or disapproval
of the source’s permit application based on anticipated impacts. 
There are currently no NAAQS or PSD increments established for GHGs, and
therefore these PSD requirements would not apply for GHGs, even when PSD
is triggered for GHGs.  However, if PSD is triggered for a GHG emissions
source, all regulated NSR pollutants which the new source emits in
significant amounts would be subject to PSD requirements.  Therefore, if
a facility triggers review for regulated NSR pollutants that are non-GHG
pollutants for which there are established NAAQS or increments, the air
quality, additional impacts, and Class I requirements would apply to
those pollutants.

The permitting authority must provide notice of its preliminary decision
on a source's application for a PSD permit, and must provide an
opportunity for comment by the public, industry, and other interested
persons.  After considering and responding to comments, the permitting
authority must issue a final determination on the construction permit. 
Usually NSR permits are issued by state or local air pollution control
agencies, which have their own permit programs approved by EPA in their
SIP.  In some cases, EPA has delegated its authority to issue PSD
permits to the state or local agency.  In other areas, EPA issues the
permits under its own authority.

D. What are the general requirements of the Title V Operating Permits
Program?

1. Overview of Title V

The operating permit requirements under title V are intended to improve
sources' compliance with other CAA requirements.  The title V program is
implemented through regulations promulgated by EPA, 40 CFR part 70, for
programs implemented by state and local agencies and tribes, and 40 CFR
part 71, for programs generally implemented by EPA. 

In summary, the title V program requires major sources (defined and
interpreted by EPA to include sources that emit or have PTE of 100 tpy
of any pollutant subject to regulation) and certain other sources to
obtain operating permits.  Under EPA’s long-standing interpretation, a
pollutant, such as a GHG, is “subject to regulation” when it is
subject to a CAA requirement establishing actual control of emissions. 
Title V generally does not add new pollution control requirements, but
it does require that each permit contain all existing pollution control
requirements or “applicable requirements” required by the CAA (e.g.,
New Source Performance Standard (NSPS), and State Implementation Plan
(SIP) requirements, including PSD), and it requires that certain
procedural requirements be followed, especially with respect to
compliance with these requirements.  "Applicable requirements" for title
V purposes include stationary source requirements, but do not include
mobile source requirements.  Other procedural requirements include
providing review of permits by EPA, states, and the public, and
requiring permit holders to track, report, and annually certify their
compliance status with respect to their permit requirements.

2. Title V Permit Requirements

This section provides a brief summary of the requirements of the title V
program that are most relevant to this action.  A source generally must
apply for a title V permit within 1 year of first becoming subject to
permitting – for new sources, this is usually within 1 year of
commencing operation.  The application must include identifying
information, a description of emissions and other information necessary
to determine applicability of requirements and information concerning
compliance with those requirements.  The permitting authority uses this
information to develop the source's operating permit.

Title V permits generally contain the following elements:  (1) emissions
limitations and standards to assure compliance with all applicable
requirements; (2) monitoring, recordkeeping, and reporting requirements,
including submittal of a semiannual monitoring report and prompt
reporting of deviations from permit terms; (3) fee payment; and (4) an
annual certification of certification by a responsible official.  The
detailed requirements are set forth at 40 CFR 70.6.

In addition to the permit content requirements, there are procedural
requirements that must be followed in issuing title V permits, including
(1) application completeness determination; (2) public notice and a
30-day public comment period, including an opportunity for a public
hearing, on draft permits; (3) EPA and affected state review; and (4) a
statement of the legal and factual basis of the draft permit.  The
permitting authority must take final action (issue or deny) on the
permit applications within 18 months of receipt.  EPA also has 45 days
from receipt of a proposed permit to object to its issuance, and
citizens have 60 days after that to petition EPA to object to a permit. 
Permits may also need to be revised or reopened if new requirements come
into effect during the permit terms or if the source makes changes that
conflict with, or necessitate changes to, the current permit.  Permit
revisions and re-openings follow procedural requirements which vary
depending on the nature of the necessary change to the permit.

E.  The Interpretive Memorandum 

 On December 18, 2008, EPA issued a memorandum, "EPA's Interpretation of
Regulations that Determine Pollutants Covered by Federal Prevention of
Significant Deterioration (PSD) Permit Program" (known as the “Johnson
Memo” or the “PSD Interpretive Memo,” and referred to in this
preamble as the “Interpretive Memo”) that set forth EPA’s
interpretation regarding which EPA and state actions, with respect to a
previously unregulated pollutant, cause that pollutant to become
“subject to regulation” under the Act.  Whether a pollutant is
“subject to regulation” is important for the purposes of determining
whether it is covered under the federal PSD and title V permitting
programs.  The Interpretive Memo established that a pollutant is
“subject to regulation” only if it is subject to either a provision
in the CAA or regulation adopted by EPA under the CAA that requires
actual control of emissions of that pollutant (referred to as the
“actual control interpretation”).  On February 17, 2009, EPA granted
a petition for reconsideration on the Interpretive Memo, and announced
its intent to conduct a rulemaking to allow for public comment on the
issues raised in the memorandum and on related issues.  EPA also
clarified that the Interpretive Memo would remain in effect pending
reconsideration.

On March 29, 2010, EPA published a notice conveying its decision to
continue applying (with one limited refinement) the Interpretive
Memo’s interpretation of “subject to regulation”
(“Interpretation of Regulations that Determine Pollutants Covered by
Clean Air Act Permitting Programs“).  See 75 FR 17004.  EPA concluded
that the “actual control interpretation” is the most appropriate
interpretation to apply given the policy implications.  However, we
refined our interpretation in one respect: we established that PSD
permitting requirements apply to a newly regulated pollutant at the time
a regulatory requirement to control emissions of that pollutant “takes
effect” (rather than upon promulgation or the legal effective date of
the regulation containing such a requirement).  In addition, based on
the anticipated promulgation of the LDVR, we stated that the GHG
requirements of the vehicle rule would take effect on January 2, 2011,
because that is the earliest date that a 2012 model year vehicle may be
introduced into commerce.  In other words, the compliance obligation
under the LDVR does not occur until a manufacturer may introduce into
commerce vehicles that are required to comply with GHG standards, which
will begin with model year 2012 and will not occur before January 2,
2011.  We also reiterated EPA’s interpretation that the 100 tpy major
source threshold for title V is triggered only by pollutants “subject
to regulation” under the Act, and we defined and applied that term for
title V purposes in the same way that we did for PSD purposes.  That is,
we stated that a pollutant is “subject to regulation” if it is
subject to a CAA requirement establishing “actual control of
emissions;” that a pollutant is considered “subject to regulation”
for title V purposes when such a requirement “takes effect.”;”
and, based on the anticipated promulgation of the LDVR, that the GHG
requirements of the vehicle rule would take effect on January 2, 2011.

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

IV. Summary of Final Actions  

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

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

1.  GHG Pollutant Defined as the Sum-of-Six Well-Mixed GHGs

We are identifying the air pollutant for purposes of PSD and title V
applicability to be the pollutant subject to regulation, which is the
air pollutant for GHGs identified in EPA’s LDVR, as well as EPA’s
endangerment and contribution findings.  In the LDVR, EPA set emissions
standards under section 202(a) that were “applicable to emission” of
a single air pollutant defined as the aggregate sum of six greenhouses
gases.  The six GHGs, which are well-mixed gases in the atmosphere, are:
 CO2, CH4, N2O, HFCs, PFCs, and SF6.  Earlier, EPA made the contribution
finding for this single air pollutant.  

Furthermore, as proposed, we are using an emissions threshold that
allows all six constituent gases to be evaluated using a common metric
– CO2e.  Thus, to determine applicability, a source's GHG emissions
are calculated on a CO2e basis by multiplying the mass emissions of any
of the six GHGs that the source emits by that gas’s GWP and then
summing the CO2e for each GHG emitted by the source.  This sum,
expressed in terms of tpy CO2e, is then compared to the applicable
CO2e-based permitting threshold to determine whether the source is
subject to PSD and title V requirements.  

In addition, because we are implementing this phase-in through the term
“subject to regulation” the rule is structured such that the
statutory mass-based thresholds (i.e. 100/250 tpy) and 0 tpy for
modifications at a major stationary source apply and  stationary sources
or modifications that do not meet these thresholds are not subject to
permitting requirements.  While technically evaluation of the mass-based
thresholds is the second step in the applicability analysis, from a
practical standpoint most source are likely to treat this as an initial
screen and not evaluate emissions on a CO2 e basis if they would not
trigger PSD on a mass basis and we have treated it as such in our
descriptions below.  As applicable, a source would evaluate these
mass-based thresholds by summing each of the six GHGs it emits on a mass
basis (i.e., before applying GWP).  We expect that it will be very rare
for a new stationary source or modification to trigger permitting based
on CO2e and not also trigger based on mass alone.  

 Determining permit program applicability for the GHG “air
pollutant” by using the sum-of-six GHGs is based on EPA’s
interpretation that the PSD and title V requirements apply to each
“air pollutant” that is “subject to regulation” under another
provision of the CAA.  As discussed previously, the final LDVR for GHGs
makes it clear that the emissions standards EPA adopted are standards
applicable to emission of the single air pollutant defined as the
aggregate mix of these six well-mixed greenhouse gases.  See April 1,
2010 Preamble, II.A.2.c., pp 153-4., and 40 CFR §86.1818-12.  For
reasons explained in more detail in section V, we have determined it is
legally required, and preferable from a policy standpoint, for EPA to
use the same definition of the air pollutant for permitting purposes as
that used in the rule that establishes the control requirements for the
pollutant.  We also believe there are implementation advantages for
applying PSD and title V in this way.  Thus, this rule establishes that
a stationary source will use the group of six constituent gases for
permitting applicability, rather than treating each gas individually. 
Similarly, you will include all six constituent gases because that is
how the air pollutant is defined, even though motor vehicles only emit
four of the six. 

2.  What GWP values should be used for calculating CO2e?

We are requiring that wherever you perform an emissions calculations
involving CO2e for the purposes of determining the applicability of PSD
or title V requirements, you use the GWP values codified in the EPA’s
GHG mandatory reporting rule [Reference:  Table A-1 to Subpart A of Part
98 – Global Warming Potentials, FR, Vol.74, No. 209, p. 56395].  This
approach will assure consistency between the values required for
calculations under the mandatory reporting rule and for PSD or title V. 
In addition, because any changes to Table A-1 of the mandatory GHG
reporting rule regulatory text must go through a rulemaking, this
approach will assure that the values used for the permitting programs
will reflect the latest values adopted for usage by EPA after notice and
comment.

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

Overview

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

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

Through this process, we will implement the phase-in approach by
applying PSD and title V at threshold levels that are as close to the
statutory levels as possible, and do so as quickly as possible.  The
level and timing of the thresholds that we promulgate in future actions
will be based on our assessment of the resulting costs to sources and
burdens to permitting authorities, and that, in turn, will depend on
such variables as our progress in developing streamlining approaches and
on permitting authorities’ progress in developing permitting expertise
and acquiring more resources.  At this time, we cannot foresee exactly
when or in what manner those developments will occur.  Therefore, we
cannot promulgate more components of the tailoring approach beyond what
we promulgate in this action.  We can say only that we may continue the
phase-in process with further rulemaking after 2016.  Alternatively, we
may make a definitive determination in one of the future rulemaking
actions that, under the “absurd results” doctrine, PSD or title V
applies only to certain GHG sources, and does not apply to the remaining
GHG sources, and with that rulemaking, bring this tailoring process to a
close.

1.  What are the Step 1 thresholds, timing and calculation methodology?

a. PSD Permitting

Step 1 of the tailoring rule phase-in will begin on January 2, 2011. 
With respect to the PSD program, GHG sources will become subject to PSD
for their GHG emissions if they undergo PSD permitting anyway, either
for new construction or for modification projects, based on emissions of
non-GHG pollutants, in which case they will be subject to the PSD
requirements for GHG if they increase GHG emissions by 75,000 tpy CO2e
or more.  Under this step, only these sources, which we refer to as
“anyway” PSD sources, will become subject to PSD; no sources will
become major sources for PSD purposes or be treated as undertaking
modifications that trigger PSD based solely on their GHG emissions.  As
a result, no additional PSD permitting actions will be necessary solely
due to GHG emissions.  However, existing or newly-constructed sources
that are determined to be major sources based on non-GHG emissions are
required to conduct a BACT review for their GHG emissions (from new
construction) or emissions increases (from modifications), if they are
subject to PSD due to their non-GHG emissions from construction or
modification actions and each of the following conditions is met: 

1)  The GHG emissions (or net emissions increase) due to the new
construction (or modification) project, calculated as the sum of the six
well-mixed GHGs on a mass basis (no GWPs applied) exceed a value of 0
tpy; and

2)  The GHG emissions (or net emissions increase) due to the new
construction (or modification) project, calculated as the sum of the six
well-mixed GHGs on a CO2e basis (GWPs applied) equal or exceed a value
of 75,000 tpy CO2e.  

The purpose of the first condition is to determine whether the GHG
emissions or net emissions increase has resulted in an “increase in
the amount” of an air pollutant as required by the Act.  Because EPA
has not defined a mass-based regulatory significance level for GHGs,
that level, in effect, is treated as zero.  See 40 CFR §§ 52.21
(b)(23)(ii) and 51.166 (b)(23)(ii).  In practice, this means any amount
of new emissions or an emission increase will exceed the mass-based
limit.  We are not, at this time, establishing a significance level
based on mass emissions because we have established one based on CO2e
that addresses permitting burdens.  Thus, the mass-based step will be
used only to exclude sources that have no mass increase of GHGs.  At
this time, we are not establishing a significance level on a mass
emissions basis.

b. Title V Permitting

Under step 1, only sources required to have title V permits for non-GHG
pollutants (i.e., “anyway” title V sources) will be required to
address GHGs as part of their title V permitting.  That is, no sources
will become major for title V based solely on their GHG emissions.  Note
further, however, that the 75,000 tpy CO2e limit does not apply to title
V, so that anyway title V sources must apply any title V requirements to
their GHG emissions regardless of the amount of those emissions. 
Sources with title V permits must address GHG requirements when they
apply for, renew, or revise their permits.  These requirements will
include any GHG applicable requirements (e.g., GHG BACT requirements
from a PSD process) and associated monitoring, record-keeping and
reporting.  When a permit application is otherwise required, they will
also need to identify GHG emissions and other information in that
application to the extent required under 40 CFR §§ 70.5(c) and
71.5(c), including information necessary to determine applicable
requirements.

2.  What are the Step 2 thresholds, timing and calculation methodology?

a. PSD Permitting

Step 2 will begin July 1, 2011.  Under step 2, anyway PSD sources - that
is, sources already subject to PSD based on non-GHGs and covered under
step 1 above - will remain subject to PSD.  In addition, sources with
the potential to emit 100,000 tpy CO2e or more of GHG will be considered
major sources for PSD permitting purposes (provided that they also emit
GHGs or some other regulated NSR pollutant above the 100/250 tpy (mass
based) statutory thresholds.  Additionally, any physical change or
change in the method of operation at a major source (including one that
is only major due to GHGs) resulting in a net GHG emissions increase of
75,000 tpy CO2e or more will be subject to PSD review and requirements
with respect to GHGs (provided that it also results in an increase of
GHG emissions on a mass basis).   

  Specifically, for purposes of determining whether a GHG emission
source undertaking construction is considered a major source under PSD,
the following conditions must be met:

1)  The GHG emissions at a newly constructed source which is not major
for another pollutant, calculated as the sum-of- six well-mixed GHGs on
a mass basis (no GWPs applied):

equal or exceed 100 tpy (in actual emissions or potential to emit) for
sources in any of the 28 major emitting facility source categories
listed under PSD, or 

equal or exceed 250 tpy (in actual emissions or potential to emit) for
any other stationary source.   

2)  The GHG emissions at a newly constructed source, calculated as the
sum-of-six well-mixed GHGs on a mass basis (GWPs applied) equal or
exceed 100,000 tpy CO2e (on an actual or potential to emit basis).

For determining whether a modification project at a major stationary
source is subject to PSD review, the following conditions must be met:

1)  The net GHG emissions increase resulting from the project,
calculated as the sum of-six well-mixed GHGs on a mass basis (no GWPs
applied) equals or exceeds 0 tpy.    

2)  The net GHG emissions increase resulting from the project,
calculated as the sum-of-six well-mixed GHGs on a CO2e basis (GWPs
applied) equals or exceeds 75,000 tpy CO2e.  

The purpose of the first condition in both determinations above is to
confirm whether the GHG emissions or emissions increase have exceeded,
on a mass-basis, the statutory major source thresholds (where the source
is not otherwise major) and mass-based statutory significance level for
GHGs, which, as noted above, is 0 tpy.  See 40 CFR § 52.21 (b)(23)(ii)
and 51.166 (b)(23)(ii).  

As an example of how the mass-based test would apply, consider a
modification project that results in a 5 tpy increase of GHG emissions
on a mass basis, associated with a high-GWP GHG gas (for example, SF6,
with a GWP value of 23,900), but also results in a 100 tpy reduction in
CO2 emissions (assume no other contemporaneous increases or decreases of
GHG).  In this example, there would be a net decrease of GHG emissions
on a mass basis (5 tpy – 100 tpy = -95 tpy).  Because there is no
mass-based increase of GHG, this project does not trigger PSD, despite
the fact that the net GWP-adjusted emissions increase of SF6 in this
example would equal 119,500 tpy of CO2e and the project would thus
exceed 75,000 tpy CO2e.

b. Title V Permitting

Under step 2, “anyway” title V sources - that is, sources already
subject to title V based on non-GHGs and that are covered under step 1
above - will continue to be subject to title V.  In addition, GHG
emission sources that equal or exceed the 100,000 tpy CO2e threshold
will be required to obtain a title V permit if they do not already have
one.  It is important to note that the requirement to obtain a title V
permit will not, by itself, result in the triggering of additional
substantive requirements for control of GHG.  Rather, these new title V
permits will simply incorporate whatever applicable CAA requirements, if
any, apply to the source being permitted.  The following conditions need
to be met in order for title V to apply under step 2 to a GHG emission
source.

For determining whether a GHG emission source is subject to permitting
under title V:

1)  The GHG emissions at an existing or newly constructed source,
calculated as the sum of the six well-mixed GHGs on a mass basis (no
GWPs applied), equal or exceed 100 tpy (on an actual emission or PTE
basis).  

2)  The GHG emissions at an existing or newly constructed source,
calculated as the sum of the six well-mixed GHGs on a mass basis (GWPs
applied), equal or exceed a value of 100,000 tpy CO2e (on an actual
emission or PTE basis)

3.   What about Step 3?

In this rule, EPA establishes an enforceable commitment to complete
another rulemaking no later than July 1, 2012, in which we will propose
or solicit comment on a step 3 of the phase-in and may also consider
other approaches that may result in the permanent exclusion of a
category of sources from PSD or title V requirements, under the Chevron
framework, taking account of the “absurd results” doctrine.

Consistent with our phase-in approach, it is important for us to
consider whether, at some point during the implementation of step 2, it
will become possible to administer GHG permitting programs for
additional sources.  For example, if EPA is able to promulgate measures
that streamline programs to at least some extent, if permitting
authorities increase their resources, or if implementation experience
and more seasoned staff results in more effective use of scarce
permitting resources, then we expect that we will be able to phase-in
the application of PSD and title V to more sources by establishing step
3.  We do not have enough information now to establish a final step 3,
particularly because there will be significant transition occurring in
the GHG permitting programs during steps 1 and 2.  However, we believe
that it will be possible to develop a record on which to base step 3
sometime soon after we begin to implement step 2.  

Therefore, we plan to propose a rule in which we solicit comment on or
propose lower thresholds for PSD and title V applicability, and we
establish an enforceable commitment to finalize a rule in which we
address those matters by July 1, 2012.  In order to provide a year for
permitting authorities and sources to prepare for any additional GHG
permitting action in Step 3, we will establish that Step 3 would take
effect on July 1, 2013.  We also commit to explore between now and the
step 3 proposal, a wide range of streamlining options.  In the proposal,
we will take comment on streamlining approaches we think may be viable
(except to the extent we will have already issued guidance documents
concerning streamlining approaches), and we will address those options
in the final rule. 

In addition, as part of the step 3 action, we may solicit comment on a
permanent exclusion of certain sources from PSD, title V or both, based
on an “absurd results” rationale.  For example, we may make a final
determination that under the “absurd results” doctrine, PSD and/or
title V do not apply to a set of GHG sources that, although above the
statutory thresholds for those programs, are too small and relatively
inconsequential in terms of GHG contribution.  Another type of such
exclusion for the title V program could be for sources that would
otherwise be required to obtain an “empty permit,” that is, one that
would not contain any applicable requirements because there are none
that apply to the source or any applicable GHG requirements, depending
on the approach taken.  It is possible that in promulgating such an
exclusion, we may conclude that it brings into the PSD and title V
programs the full set of sources that would be consistent with
congressional intent, and, if so, we would find that such a rule brings
the tailoring process to a close.  The application of the “absurd
results” rationale for a permanent exclusion is discussed in more
detail in the next section.

4.  What about the proposed 6 year exclusion for smaller sources?  

The tailoring proposal contemplated at least a six-year exclusion from
permitting for small sources.  This proposed exclusion was based on the
overwhelming numbers of permitting actions at small sources and the need
for time for permitting authorities to secure resources, hire and train
staff, and gain experience with GHG permitting for new types of sources
and technologies.  It was also based on the time needed for EPA to
develop, and for states to adopt, streamlining measures to reduce the
permitting burden (e.g., concerning PTE, presumptive BACT, or general
permits,).  We therefore proposed such an exclusion, and proposed that
it would last 6 years – 5 years to complete a required study
evaluating permitting burden and assessing the effect of streamlining
measures or techniques in reducing this burden, plus an additional year
to complete a final rulemaking that would phase in additional sources as
appropriate based on the study.  

	We are finalizing the six-year exclusion, and for reasons described
below, are establishing that in no event will sources below 50,000 tpy
CO2e be subject to PSD or title V permitting during the 6-year period,
nor will modifications be subject to PSD unless they increase emissions
by 50,000 tpy CO2e or more.  The exclusion will last until we take the
action described later to address smaller sources, which is required by
April 30, 2016.  The exclusion provides certainty that, before this
date, EPA will not act to cover sources and modifications below these
thresholds, including during the required step 3 rulemaking that will
occur in 2012.  In effect, this means that step 3 will establish a major
source threshold and significance level no lower than 50,000 tpy CO2e. 
This does not necessarily mean we will cover sources below this level on
April 30, 2016.  It simply means that the provision we are adopting
would assure that EPA does not cover such sources any sooner than that.

5.  When and how will EPA take further action on smaller sources? 

As we proposed, we are establishing an enforceable commitment to act
within 5 years to complete a study projecting the administrative burdens
that remain for small sources after permitting authorities have had time
to secure resources, hire and train staff, and gain experience with GHG
permitting for new types of sources and technologies, and after EPA has
had time to develop (and states have had time to adopt) streamlining
measures to reduce the permitting burden for such sources.  We will use
this study to serve as the basis for an additional rulemaking that would
take further action to address small sources.  Similar to the
enforceable commitment to act on step 3, we are making an enforceable
commitment to complete this rulemaking by April 30, 2016,

We cannot predict at this time what form that final action will take. 
It could function as a step 4, bringing in additional sources based on,
for example, streamlining actions, increased permitting authority
resources, and experienced and more efficient permitting staff; and it
could further indicate that we intend to follow-up with a step 5 to
bring in more sources.  Alternatively, it could also function as a final
step excluding certain sources permanently based on our application of
the Chevron framework, taking account of the “absurd results”
doctrine, and subjecting the remaining sources to permitting.  However,
whatever final action we take would explain any necessary changes to the
step 3 thresholds and would supersede the 6-year exclusion for sources
and modifications below 50,000 tpy CO2e.

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

We are finalizing our proposed approach to change the definition of
“major stationary source” in the PSD implementing regulations, and
the “major source” definition in the title V implementing
regulations to tailor the application of these permitting programs to
GHG emissions.  We also finalize a significance level for GHG emissions
for purposes of defining a major modification under the PSD program, and
add an exclusion from PSD and title V permitting for GHG emissions,
until we complete a rulemaking required by April 30, 2016, for any
sources that are not already subject to PSD and title V permitting and
that emit less than 50,000 tpy of CO2e.

	As explained earlier, we are adopting thresholds that phase in the
applicability of GHG permitting over a specified time period.  In
adopting regulatory changes to implement these thresholds, we follow an
approach that is substantively the same as the approach proposed, but
takes a slightly different form.  Specifically, we are explicitly
codifying the phrase “subject to regulation” in our implementing
regulations, instead of revising the “major stationary source” and
“major source” definitions by incorporating the tailoring rules
numerical thresholds directly into the definitions.  Under this
mechanism, we interpret the term “subject to regulation” so that GHG
emissions from sources above the threshold are treated as subject to
regulation, and therefore the sources that emit them are subject to PSD;
while GHG emissions from sources below the threshold are not treated as
subject to regulation, and therefore the sources that emit them are not
subject to PSD.  We are finalizing this alternative regulatory approach
to facilitate rapid adoption and implementation of the final rules by
states.  These states would be able to establish their interpretation of
“subject to regulation” by January 2, 2011, which is the date that
the tailoring rule would take effect, and thereby, at that time, exempt
sources below the threshold from PSD as a matter of both federal and
state law.  We are also finalizing this definition consistent with our
statements in our recent action “Reconsideration of Interpretation of
Regulations that Determine Pollutants Covered by Clean Air Act
Permitting Programs” (75 FR 17704) to better inform readers of our
existing interpretation of this phrase as it applies to all air
pollutants.  States may not need to undertake a regulatory or
legislative action before implementing the final rule.    

Because we finalize the rule in a manner that will allow most states to
rapidly adopt and implement the final rule, and because our recent
action on the Interpretive Memo allowed for a longer transition time
than we anticipated at proposal, we are delaying final action on our
proposal to issue limited approvals for SIP-approved PSD programs and
part 70 operating permit programs.  Instead, we are requesting that
states submit information to the appropriate Regional Administrator by
[INSERT DATE 60 DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER] so that
we may determine whether it is still necessary to finalize any of our
proposed limited approvals for any SIP-approved PSD and Part 70 title V
state programs.  In that letter, states should explain whether they will
adopt EPA’s regulatory interpretation of the term “subject to
regulation” in implementing both their PSD and part 70 title V
permitting programs, and if so, whether the state intends to adopt the
interpretation without undertaking a regulatory or legislative process. 
If a state must revise its statutes or regulations to implement the
interpretation, we ask states to provide an estimate of the time to
adopt final rules in its letter to the Regional Administrator.  If a
state chooses not to adopt our interpretation, the letter should address
whether the state has alternative authority to implement the final
rule’s tailoring approach or some other approach that is at least as
stringent, but which also addresses the expected shortfalls in personnel
and funding that would exist if the state carried out permitting at
thresholds lower than those in the final rules.  For any state that is
unable or unwilling to adopt the permitting thresholds in the final
rules, and otherwise is unable to demonstrate adequate personnel and
funding, or alternate authority to permit GHG emissions sources
consistent with the final rules, EPA will move forward with finalizing a
limited approval of the state’s permitting program.  By the same
token, if we do not receive a letter from a state in response to this
request by [date], we will be obliged to move forward with finalizing a
narrowing of our approval of the existing SIP.

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

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

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

E.  Other Actions and Issues 

This section describes other actions we intend to take in the future
related to GHG permitting in addition to the actions that we are
promulgating with this final rule.  This section also responds to
commenters’ suggestions that we undertake additional actions in this
rule, which we decline to do.

1.  Timing for Permit Streamlining Techniques

As described at proposal, we intend to develop a series of streamlining
approaches as an integral part of our phase-in approach.  The approaches
we described at proposal included:  (1) defining PTE for various source
categories, (2) establishing emission limits for various source
categories that constitute presumptive BACT, (3) establishing procedures
for use of general permits and permits-by-rule, (4) establishing
procedures for electronic permitting, and (5) applying lean techniques
to establish more efficient permitting processes.  Taken as a whole,
these techniques will obviate the applicability of PSD and title V
requirements for some GHG-emitting sources; promote more efficient
treatment of GHG-emitting sources that will already be subject to PSD
and title V; and allow the expeditious expansion of PSD and title V
applicability to more GHG-emitting sources while protecting those
sources and the permitting authorities from undue expenses.  

As a result, we fully intend to move forward expeditiously with these
approaches.  However, for reasons discussed in section VI.E, we do not
expect to develop and implement any of these approaches before step 2
begins.  Moreover, we generally expect that each of the first three –
which are the most far-reaching -- will take several years to implement
because we will need to undertake notice and comment rulemaking to
develop them, and then the permitting authorities will need to adopt
them through the appropriate state or local processes.  We commit to
explore a wide range of possible approaches before the step 3
rulemaking, and, in that rulemaking, to propose those that we think may
be viable once we have had time to gather and review key supporting
data, and once the states and we have key implementation experience that
can inform our thinking.  Because the streamlining approaches generally
carry uncertainty - as demonstrated by comments we received raising
legal and policy concerns, as discussed below, that we will have to
address - we are not committing with this action to adopt streamlining
actions on any particular schedule.  However, we intend to pursue all
streamlining options as expeditiously as possible, beginning immediately
and proceeding throughout the phase-in period, and we encourage
permitting authorities to do the same.

2.  Guidance for Best Available Control Technology Determinations

Through this final rule we are not amending our regulations or issuing
guidance on BACT for GHGs.  As described in our proposal, we recognize
the need to develop and issue technical and policy guidance for
permitting of GHGs, and we plan to accomplish it through a separate
effort that will involve stakeholder input.  This effort is already
underway; in addition to comments EPA received on the proposed Tailoring
Rule related to GHG BACT guidance and information needs, EPA received a
suite of recommendations from the Clean Air Act Advisory Committee
(CAAAC) to which EPA is actively responding.  This includes technical
guidance and database tools that EPA anticipates issuing by June 2010,
and policy guidance that will be issued by the end of 2010.  Thus, this
important information will be available to support permitting agencies
in their BACT determinations at the time that the GHGs become a
regulated NSR pollutant, once the light-duty vehicle rule takes effect
in January 2011.  EPA is confident that these measures will help support
a smooth transition to permitting emissions of GHGs.

3.  Requests for Higher Category-Specific Thresholds and Exemptions from
Applicability

   EPA has decided not to provide exemptions from applicability
determinations (major source and major modification) under title V and
PSD for certain GHG emission sources, emission activities, or types of
emissions at this time.  Commenters requested several applicability
exemptions with respect to GHGs from, for example, agricultural sources,
residential sources, small businesses, energy-intensive industrial
processes (e.g., aluminum, steel, cement, glass, and pulp and paper
manufacturers), lime production, semiconductor production, poultry
production, solid waste landfills, biomass combustion/biogenic
emissions, fugitive emissions, and pollution control projects.  For
reasons explained in section VI.E, we have decided to address the need
for tailoring through a uniform threshold-based approach, rather than
through a collection of various specific exclusions.  

4.  Transitional Issues including Requests for Grandfathering

For reasons explained in section V.E, EPA has determined that
transitional issues for pending applications and permitted sources are
adequately addressed by existing requirements and the amount of lead
time provided before permitting requirements apply to GHGs under this
rule and the April 2, 2010 final action regarding the Interpretive memo.
 This rule does not contain any additional exemptions or grandfathering
provisions addressing the transition to PSD and title V permitting for
GHGs.  

We are not promulgating an exemption for PSD permit applications that
are pending when step 1 of the permitting phase-in begins for those
sources that would otherwise need to obtain a PSD permit based on
emissions of pollutants other than greenhouse gases.  Any PSD permits
issued to Phase 1 sources on or after January 2, 2010 will need to
address GHGs.  This action makes no change to the position we expressed
on this issue on April 2, 2010.    

 	Final PSD permits issued before January 2, 2011 need not be reopened
or amended to incorporate requirements for GHGs that take effect after
the permit is issued.  A source that is authorized to construct under a
PSD permit but has not yet begun actual construction on January 2, 2011
may begin actual construction after that date without having to amend
the previously-issued PSD permit to incorporate GHG requirements,
provided the permit has not expired.   

Sources that are not subject to PSD permitting requirements until Step 2
need not obtain a PSD permit addressing GHGs in order to continue any
actual construction that begins before July 1, 2011, when such a source
was not a major stationary source required to obtain a PSD permit. 
However, Phase 2 sources that begin actual construction in phase 2 may
do so only after obtaining a PSD permit.   

The title V permitting regulations already include a robust set of
provisions to address the incorporation of new applicable requirements
and other transitional considerations.  A title V source applying for
the first time must submit its permit application within 12 months after
the source becomes subject to the operating permit program or an earlier
time at the discretion of the permitting authority.  Where a source is
required to obtain a PSD permit, the source must apply for a title V
permit or permit revision within 12 months of commencing operation or on
or before such earlier date as the permitting authority may establish. 
Where additional applicable requirements become applicable to a source
after it submits its permit application, but prior to release of a draft
permit, the source is obligated to supplement its application.  In
addition, where a source that already has a title V permit becomes
subject to additional applicable requirements, the permitting authority
is required to reopen the permit to add those applicable requirements if
the permit term has three or more years remaining and the applicable
requirements will be in effect prior to the date the permit is due to
expire.  

V.  What is the legal and policy rationale for the final actions? 

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

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

1.   Grouping of GHGs into a Single Pollutant

	In this section, we explain our treatment of the air pollutant at issue
for purposes of PSD and title V, such that sources that emit that
pollutant in the requisite quantities become subject to PSD and/or title
V requirements.  We explain our rationale for treating the GHG air
pollutant as a combined group of six greenhouse gases instead of six
separate air pollutants defined by each individual greenhouse gas, and
our rationale for including all six of the GHGs in that group.  We also
define the GHG metric to use for comparison to the applicability
thresholds.   

	We proposed to identify the air pollutant as the aggregate group of
these six GHGs, and to use a GHG metric for the applicability thresholds
based on CO2e.  The summed CO2e emissions would then be compared to the
applicable permitting threshold to determine whether the source is
subject to PSD and title V requirements.  Historically, the PSD and
title V regulatory provisions do not, in the first instance, define the
“air pollutant” to which they apply, but rather rely for the
definition of the pollutant on a cross-reference to the regulatory
provision under another part of the Act that establishes the emission
standards or limits for that pollutant that in turn causes the pollutant
to be subject to regulation under PSD and title V permitting.  As an
example, the pollutant ‘total reduced sulfur’ (TRS) is a pollutant
comprised of the sum of multiple compounds that was originally defined
under the NSPS, Subpart BB, Standards of Performance for Kraft Pulp
Mills, which then caused it to be subject to regulation under the PSD
program.  The actual compounds that define the pollutant TRS are
identified in the NSPS.  The PSD program regulations did not introduce
its own independent definition of TRS, but instead relied on the
definition as contained in the Kraft Pulp Mills NSPS. 

However, at the time of our proposal, the endangerment and cause or
contribute findings had not been completed and the LDVR for GHGs, had
not been finalized.  Thus there was no final agency action defining how
GHGs were to be considered “subject to regulation”.  Absent a
definition of “greenhouse gases” under another regulatory provision
that we could cross-reference, we proposed to define “greenhouse
gases” for permitting purposes as “the single air pollutant that is
comprised of the group of six GHGs, as proposed in the [CAA] section
202(a) endangerment and contribution findings.”  74 FR 55,329, col. 1.
 The six well-mixed GHGs identified in the proposed contribution finding
were: CO2, CH4, N2O, SF6, HFCs, and PFCs.   

 In the proposal, we further recognized that the LDVR for GHGs, as it
was proposed, would result in reductions of only four of the gases, not
all six, because only four are emitted by vehicles.  However, we
concluded that if the LDVR were finalized as proposed, then the air
pollutant for purposes of PSD and title V applicability would be a
single air pollutant that is the aggregate mix of the group of six GHGs
because –

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

74 FR 55,329 col. 1. 

 We also solicited comment on whether we should identify the GHG metric
in a different way, such as addressing each GHG constituent compound
individually or including (whether individually or as a group) only
those four GHG constituent compounds for which reductions would occur
through the emission standards or limits proposed in the LDVR.  

A majority of the proposal comments did not speak to or show a
preference for or against grouping the six well-mixed GHGs for the
purposes of determining applicability under the PSD and title V
programs.  Of those commenters that specifically support the combining
of the individual GHGs as one pollutant for purposes of determining
permitting applicability, they stated that it is not uncommon for EPA to
recognize ‘collective’ air pollutants comprised of many individual
compounds based upon shared threats to health and welfare, including
such EPA-created group pollutants as sulfur oxides, nitrogen oxides,
volatile organic compounds (VOCs), and particulate matter (PM).   

A smaller but significant number of commenters opposed the grouping of
the individual GHGs into one metric.  Some of these commenters argued
that grouping GHGs is not appropriate because GHGs are not like other
air pollutants that are comprised of numerous substances of concern
(e.g., VOCs and PM), individual GHGs do not interact or combine to
create a pollutant of concern, and EPA has not established a ‘GHG’
NAAQS that supports the definition of the pollutant as a group.  Some
were concerned that regulating as a group would increase the likelihood
that a source will trigger permitting requirements, adding that this is
unnecessary and would conflict with the “absurd results” and
“administrative necessity” doctrines because it would lead to larger
numbers of sources subject to permitting.  Some commenters opposing
grouping suggested that we should explore regulating each of the GHG
pollutants on an individual mass basis rather than collectively.  One
commenter added that, in their view, it is reasonable and feasible to
regulate and control emissions of each of the listed pollutants, other
than carbon dioxide, at the 100/250 tpy thresholds, or less if deemed
necessary, in accordance with the established mechanisms of the Act. 
Finally, some commenters argued that disaggregating the pollutants would
also allow for more appropriate technology review.

	After considering these comments, and taking into account other related
actions that have occurred since proposal, we have determined that PSD
and title V permitting program requirements will apply, as proposed, to
the “single air pollutant that is comprised of the group of six
GHGs.”  74 FR 55,329, col. 1.  We believe that this approach is both
compelled by the statute and reflects the preferable policy approach. 
As more fully discussed elsewhere in this package, under the plain
language of section 169(1) PSD a major emitting facility is one that
emits 100 or 250 tons of “any air pollutant.”  Through regulation we
have reasonably limited the scope to this provision to those tonnages of
any “regulated NSR pollutant,” which includes any pollutant that is
“subject to regulation under the Act.”  40 CFR 52.21(b)(50)(iv). 
This same limitation exists in the definition of major modification and
BACT.  See 52.21.(b)(2),(  ).  This regulatory limitation reflects the
statutory directive that BACT is required for “each pollutant subject
to regulation under this chapter.”  42 USC 7475 (a)(4).  

Based on these provisions, the sole question in determining what a BACT
analysis must cover is what pollutant is “subject to regulation.” 
This phrase caries with it no suggestion that the Agency may subdivide
or otherwise change a pollutant that is regulated elsewhere in the Act. 
Instead, it carries with it a dictate that BACT be applied to the air
pollutant which the Administrator has determined elsewhere to regulate. 
As described below, this air pollutant, in the cases of GHGs, is the
aggregate mix of the six constituent gases identified in the
contribution finding, which led to the promulgation of the LDVR, and is
the air pollutant that the various LDVR emission standards address. 
This same logic regarding the definition of a pollutant “subject to
regulation” applies to the determination of whether a source is a
major stationary source of a “regulated NSR pollutant.”  Thus, we
also read the definition of major emitting facility at CAA 169 to be
guided by the same requirement to defines the “regulated NSR
pollutant” that is “otherwise subject to regulation” to be the
same air pollutant that is actually regulated elsewhere under the Act. 
If, as here, that regulation considers the aggregate emissions of
several compounds to be a single air pollutant, the same single air
pollutant is a regulated NSR pollutant.  As noted above, the statutory
definition of major emitting facility covers “any pollutant.”  As
the LDVR and associated contribution finding have defined the aggregate
group of the six greenhouse gases to be the single “air pollutant”,
they must be considered as such in determining if “any pollutant” is
emitted above the provided thresholds. 

Since the time of our proposal, both the contribution finding and the
LDVR for GHGs have become final.  The final LDVR for GHGs specifies, in
the rule’s applicability provisions, the air pollutant subject to
control as the aggregate group of the six GHGs, including CO2, CH4, N2O,
SF6, HFCs, and PFCs.   The applicability provision in the LDVR now
provides us a clear reference to the definition of the single pollutant
comprised of the aggregate group of the six well-mixed GHGs and affirms
that PSD and title V applicability should use sum-of-6 GHG construct for
applicability.  Based upon the previous analysis, we must follow this
construct of the aggregate group of the six gases and do not have
discretion to interpret the GHG ‘air pollutant’ differently for the
purposes of PSD permitting.  

This construct of the pollutant as the aggregate group of the six gases
is also consistent with the definition of the air pollutant in the final
contribution finding for GHGs [see 74 FR 66496, 66499, 66536-7 (December
15, 2009)].  In the final contribution finding the Administrator defined
the air pollutant for contribution finding as the “aggregate group of
the same six… greenhouse gases” (see specifically, 74 FR 66536). 
The well-mixed greenhouse gases are defined under the final contribution
finding as these six greenhouse gases:  CO2, CH4, N2O, SF6, HFCs, and
PFCs.  Again, these six GHGs as a class comprise the air pollutant that
is the subject of the contribution finding and therefore are the single
air pollutant that is regulated by the LDVR through measures that
address the components of that air pollutant that are emitted from the
mobile sources.  For these reasons, the pollutant “subject to
regulation” is the aggregate group of the six and we feel compelled to
use this combined pollutant for purposes of regulation under the PSD
program.  

Similarly, for title V, "major stationary source" status under CAA
sections 501(2)(B) and 302(j) is triggered by the emissions of the
requisite amount of "any air pollutant . . . . ."  Further, as discussed
in more detail elsewhere in this rulemaking, EPA interprets this trigger
to apply to any air pollutant "subject to regulation."  See Johnson Memo
Reconsideration.  As noted above, EPA has treated the aggregate group of
six greenhouse as the "air pollutant" regulated under the Act.  Thus,
the aggregate group constitutes the "air pollutant" for title V
applicability purposes.

Moreover, even if we had discretion to approach the air pollutant
differently in the permitting programs, we would choose not to, for the
same reasons we adopted the single air pollutant approach in the
contribution finding, and for additional considerations noted below
specific to the permit programs.  Congress provided EPA broad discretion
to determine, as an initial matter, an appropriate combination of air
pollutant agents that should be treated as a single air pollutant.  As
noted in the contribution findings, the important common attributes
shared by the six greenhouse gases are that each (see 74 FR
66516-66518): 

Is directly emitted (not formed by secondary processes in the
atmosphere)

Is long-lived in the atmosphere after they are emitted 

Is sufficiently long-lived the greenhouse gas that it becomes
“well-mixed,” which means that its concentration is essentially
uniform in the atmosphere (as opposed to having significant
local/regional variation)

Has well understood atmospheric properties (e.g., radiative forcing)

In addition, grouping the six greenhouse gases is consistent with the
focus of climate science—their effects are considered as a group in
the Intergovernmental Panel on Climate Change (IPCC) reports (i.e., the
IPCC reports assess the climate change effects on health, society, and
the environment as a result of human-induced climate change driven by
the group of GHGs).  It is also consistent with the focus of climate
policy—the United Nations Framework Convention on Climate Change
(UNFCCC) requires reporting of these six gases; the commitments under
the UNFCCC and Kyoto Protocol are based on the combined emissions of
these six gases.  Finally, it is standard practice to compute the
“carbon dioxide (CO2) equivalency” of aggregate emissions using
GWPs.  All of these common attributes and factors are relevant to the
air pollution for which GHGs are agents—in other words, they are all
related to increased atmospheric concentrations of the mix of six GHGs
and climate change science and policy.  Thus, they are a reasonable
basis upon which to decide that it is appropriate to define the air
pollutant as the combination of these six GHGs that share these
attributes. 

We disagree with commenters who argued that grouping all six GHGs is not
appropriate because GHGs are not like other air pollutants that are
comprised of numerous substances of concern (e.g., VOCs and PM).  First,
as noted above, we are following the approach to a single air pollutant
comprised of the aggregate of the six greenhouse gases initially adopted
in the contribution finding and followed in the LDVR.  Many of these
same comments have already been addressed in the contribution finding
and response to comments document, which is included in the RTC for this
action, and those responses apply equally here.  

In addition to the reasons described in the endangerment and
contribution findings, there are CAA permitting programmatic and policy
advantages to using the GHG air pollutant for permitting applicability. 
We believe now, as we did at proposal, that the benefits in using the
cumulative group of GHGs outweigh any implementation advantages to using
an individual-GHG-based metric.  We recognize a number of advantages in
the use of aggregate construction of the GHG metric, including that it: 
(1) could allow significantly more flexibility to sources for designing
and implementing control strategies that maximize reductions across
multiple GHGs and would also likely align better with possible future
regulations that allow for such flexibility; (2) could more effectively
support possible future offsets or trading mechanisms that involve
different source categories and different compositions of GHG emissions;
 and (3) could better accommodate and harmonize with future regulations
by having one pollutant class that includes any of the components of
which may become subject to specific emission standards under future
regulatory efforts.  

We disagree with commenters who believe that by aggregating the GHGs
under one GHG metric for permitting applicability purposes would lead to
an excessive amount of source permitting activity.  This is because the
phase-in approach addresses overwhelming permitting burdens associated
with permitting of greenhouse gases.  It does so by designing our
applicability thresholds to allow for a manageable amount of new
permitting actions based on the emissions from sources using the
sum-of-6 metric.  If we based it on individual gases, (assuming we were
not compelled to follow the LDVR), we would still need to determine what
level of permitting is manageable and appropriate based on thresholds on
an individual gas basis and would expect that the final rule would
result in the same levels of remaining burden based on the
administrative necessity and the absurd results concepts.  Accordingly,
unless the permitting program were being implemented at the statutory
thresholds, the effect of a decision to aggregate or not aggregate would
not reduce workload; it would simply shift work from permitting
facilities that trigger based on combined GHGs to those that trigger
based on individual GHGs.  Although we acknowledge that this would
affect applicability for a particular source, we disagree with the
commenter that doing so would conflict with the absurd results or
administrative necessity doctrines.  In light of limited resources, by
using a consolidated and weighted measurement we are able to direct
these limited resources to those new sources and modifications with the
greatest impact on GHG emissions. 

We also believe that the additional flexibility resulting from the
sum-of-six GHG metric will provide substantially more opportunities for
sources to address emission increases of GHGs than they would have had
under an individual gas based metric, possibly reducing their permitting
burden through multi-gas mitigation strategies.  We disagree with the
comment that isolating control technology review on a single GHG leads
to better results than a combined review for all six gases.  To the
contrary, given that Congress built in considerations of energy,
environmental, and economic impacts into the BACT requirement, we think
that allowing consideration of those factors across six gases will
likely result in decisions that more appropriately account for those
impacts at the source.

2.  Identifying Which GHGs are Included in the Group

Most commenters did not raise any issues or propose alternatives to the
use of the proposed GHG metric as it relates to inclusion of all six
well-mixed GHGs.  We did receive some comments that explicitly supported
the inclusion of all six of the well-mixed GHGs identified in the GHG
metric for determining applicability.  Those in support of including all
six of the well-mixed GHGs in the threshold metric cite the same reasons
they provided in support of grouping the individual GHGs together: 
namely, the final contribution findings that identify the pollutant as
“the combined mix of six key, directly emitted, long-lived and
well-mixed greenhouse gases”.  See 74 FR, 66496, 66516, 66,536 (Dec.
15, 1990).  They also emphasize that EPA, in order to protect the
public, has to control all the greenhouse gases it has regulated and
reduce the overall impact of the mix of six greenhouse gases.

However, a substantial number of commenters, mainly from industry
sectors who also disagreed with grouping the GHGs together, contend that
only the constituent gases that are actually subject to controls under
the LDVR should be included in determining applicability under the
Tailoring Rule.  Some of these commenters believe that only the three
compounds (CO2, CH4, N2O) for which the LDVR contains emissions
standards or caps should be considered in the GHG metric for permitting,
while others would also add HFCs (which are included in a credit
flexibility arrangement under the LDVR) for a total of four GHGs.  Such
commenters argued that PSD is not triggered for all six GHGs by the LDVR
because under the proposed PSD interpretation in “EPA’s
Interpretation of Regulations that Determine Pollutants Covered by
Federal Prevention of Significant Deterioration (PSD) Permit Program”,
actual emission controls under the Act are required to trigger PSD
obligations for a given pollutant.  They also argued that including all
six would conflict with the “absurd results” and “administrative
necessity” doctrines because it would lead to larger numbers of
sources subject to permitting, increasing the harm that EPA says it
wants to avoid, and further asserted that the EPA cannot both widen the
scope of the applicability to six GHGs at its discretion and rely on
these judicial doctrines, which apply only where the EPA has availed
itself of all reasonable discretion to minimize the harm

There were a few comments on whether to include specific gases as part
of the sum-of-six grouping.  Several commenters representing sectors
that have significant SF6 usage specifically argue that SF6 should not
be included as a GHG, at least at this time, because there are no known
SF6 controls, it is not clear how PTE would be calculated from such
facilities, and EPA has not addressed the economic burden that
regulation of these facilities would create.  A solid waste industry
commenter asserts that the Tailoring Rule should confirm that CH4 and
N2O will not be regulated under PSD or title V because these pollutants
are only emitted in miniscule amounts from automobiles.  

	We disagree with commenters who suggest that the LDVR for GHGs
constrains EPA’s authority to regulate only the four individual GHGs
emitted by motor vehicles.  The fact that the LDVR standard for the
single air pollutant that is comprised of the aggregate of six
greenhouse gases consists of individual standards for particular
constituents of the single air pollutant -- emissions limits or caps for
three GHGs (CO2, CH4, and N2O) and an emission crediting option for one
GHG (HFCs) -- does not dictate that only those four compounds are
subject to regulation for permitting purposes.  Although the LDVR may
result in reductions only with respect to four specific GHGs, as a legal
matter the LDVR standard covers the entire set of GHGs that as a class
are the single “air pollutant” in the contribution finding.  Similar
to our rationale for addressing the group of six GHGs as one pollutant
for PSD and title V applicability purposes, we must adhere to the
definition of applicability, cited previously, in the final LDVR for
GHGs and include CO2, CH4, N2O, SF6, HFCs, and PFCs.  We do not have
discretion to select only a subset of these gases in defining our GHG
threshold metric for the permitting applicability purposes.  Also, see
discussion at III.B.2, and in EPA’s LDVR concerning its exercise of
discretion under section 202(a) in setting emissions standards
applicable to emission of the single air pollutant.  [April 1, 2010
Preamble, II.A.2.c, pp 153-4.]  

For the same reasons we disagree that this approach is inconsistent with
the Agency’s final action in “EPA’s Interpretation of Regulations
that Determine Pollutants Covered by Federal Prevention of Significant
Deterioration (PSD) Permit Program.”  While it is the case, that only
four constituent gasses are reduced by the LDVR, the pollutant that is
controlled, and thus “subject to regulation” is the group of six.   

We also disagree with commenters that suggested including all six GHGs
in determining permitting applicability would conflict with our
“absurd results” and “administrative necessity” bases for the
phase-in periods and applicability thresholds for GHGs.  Even if we did
have discretion to address a subset of the six well-mixed GHGs, we do
not believe that the exclusion of some gases is necessary to address
administrative necessity concerns or to avoid an absurd results
scenario.  For our final action, we are phasing-in applicability
thresholds based on the sum of all six well-mixed GHGs that are fully
consistent with both the administrative necessity and absurd results
arguments that we base our tailoring action on.  We have carefully
developed these thresholds based on a consistent definition of the
pollutant with the LDVR GHG and to avoid creating an overwhelming number
of permitting actions that would be unmanageable for permitting
authorities and sources.  Moreover, the solution offered by commenters
– regulating four rather than six gases – would make little
difference in addressing overwhelming permitting burdens.  The number of
additional permitting actions and amount of additional permitting burden
resulting from including all six GHGs, rather than four, in the
definition is minimal.  The administrative burden of GHG permitting is
dominated by CO2 and CH4 emission sources.  For example, with a major
source threshold set at 100,000 tpy CO2e, the combined population of
sources that would be major for N2O, HFCs, PFCs, and SF6 accounts for
fewer than two percent of the GHG sources that would remain covered.	

For similar reasons, we disagree with commenters who specifically
suggest SF6 emissions should not be included in the applicability metric
for GHGs.  As we have stated earlier in this section, our selection of
the GHG metric is driven by the definition of the air pollutant as
defined in the LDVR, and in consideration of the final GHG endangerment
finding.  SF6 is specifically included as one of the ‘well-mixed
greenhouse gases” in the definition of air pollutant in the
contribution finding, and is included in the definition of the air
pollutant in the LDVR for which that rule is applicable.  We cannot
identify different subsets of individual GHGs for different source
categories.  Moreover, including SF6 emissions based on the thresholds
finalized in this rulemaking does not add an excessive administrative
burden for permitting authorities; based on our threshold evaluation
study we estimate that less than 40 sources of SF6 nationwide would
exceed the 100,000 tpy CO2e threshold.  Furthermore, specifically with
respect to high GWP gases, as discussed elsewhere, we have included a
mass-based trigger that will likely have the effect of further reducing
this count.  We believe that the inclusion of these SF6 sources is
entirely consistent with the definition of the air pollutant subject to
regulation, as based on the LDVR definition for applicability and
described above, and there is no basis for exclusion of these sources
due to administrative necessity concerns or absurd result arguments. 
Similarly, we disagree with the commenters who suggest we include black
carbon and other short-lived climate forcers to the list of GHGs and
those asking for an exclusion of CH4 and N2O.  The definition of the air
pollutant, as cited in the LDVR, includes CH4 and N2O and does not
include black carbon or other short-lived gases.  

3. Determining What GWP Values are to be Used 

	Numerous commenters expressed concerns about the proposal to link the
calculation of CO2e for GHGs to GWP values in (see, e.g., proposed 40
CFR 51.166(b)(58)) EPA’s “Inventory of U.S. Greenhouse Gas Emissions
and Sinks” because that document may change from year to year. 
Representative comments include the following:

It is important to ensure that all permitting agencies are using the
same calculations for the determination of CO2e for GHGs.  Use of
EPA’s document, which is updated annually, should address this issue,
provided this information is provided in annual guidelines for
permitting agencies.

The EPA should follow the proper notice and comment procedures and the
requirements of the Information Quality Act (IQA) for the relevant
technical underpinnings of the proposal.  The EPA relies upon the GWPs
of the IPCC without providing the supporting data for review, and it is
inappropriate to use this as a basis for this rule without first making
all the raw data available for public inspection and comment.

The EPA cannot tie the definition of GWP to a non-regulatory document
that may be changed without notice and comment rulemaking.  Before EPA
uses a new GWP, that GWP must be subject to notice and comment to comply
with the requirements of CAA section 307 and the APA.

An annual update of GWP would create a moving target for sources
conducting applicability determinations and assessing compliance with
minor NSR and PSD emission limits.  The EPA needs to ensure that
applicability and compliance with limits continue to be based on the GWP
that existed when the determination was made or the limit was
established.

The EPA should freeze the GWP at the current values by incorporating
those values into the regulation.  The EPA could still revise the
“NSR” GWP, but would have to revise the regulation to do so.

We agree with commenters who suggested we should codify, either in the
tailoring rule or through reference to codified values in another
rulemaking, the GWP values to be used in permitting analyses so that
there is certainty as to which GWP values need to be used and permitting
authorities and sources can plan appropriately for possible changes in
the GWP values.  As mentioned in the comments, recommended GWP values
from IPCC can change over time.  While this is infrequent – the last
such changes were in 2007—when it occurs, there are generally
significant lag times in universal adoption of new values because of
inconsistencies that could be created in national inventories and
emission reporting mechanisms.  In a regulatory setting, such as in the
permitting programs, this could potentially create significant
implementation issues, such as when a GWP change occurs while a permit
in progress.  EPA also recognized similar potential implementation
issues in developing its final mandatory reporting rule for GHGs, and
codified in the regulatory text the GWPs values to be used in reporting
GHGs as part of that final rulemaking.

For this reason, we have decided to follow the approach in the mandatory
reporting rule and require that for PSD and title V permitting
requirements, wherever emissions calculations are performed, that
permitting authorities and sources use GWP values that are codified in
EPA rules.  For consistency with the mandatory reporting rule, we will
establish the GWP values for PSD and title V rules based on a
cross-reference to the values that are codified in the EPA’s GHG
mandatory reporting rule [Reference:  Table A-1 to Subpart A of Part 98
– Global Warming Potentials, FR, Vol.74, No. 209, p. 56395].  Any
changes to Table A-1 of the mandatory GHG reporting rule regulatory text
must go through a proposal and comment regulatory process.  In this
manner, the values used for the permitting programs will reflect the
latest values adopted for usage by EPA after a formal regulatory process
and will be consistent with those values used in the EPA’s GHG
mandatory reporting rule.  Furthermore, the lead time for adopting
changes to that rule will provide a transition time to address
implementation concerns raised by commenters.

4. Use of Short Tons vs. Metric Tons 

	We proposed that the GHG metric would be expressed in terms of English
(or short) tons, rather than metric (or long) tons.  Among those who
commented specifically on this topic, a few commenters support using
short tons for this purpose, but others prefer the use of metric tons. 
Most of the latter commenters note that the GHG Reporting Rule is based
on metric tons and believe that the Tailoring Rule should be consistent.
 These commenters believe that using different units in the two rules
would be confusing and could result in sources that are not subject to
the GHG Reporting Rule being subject to PSD.  Some of the commenters add
that various “cap and trade” legislative proposals also quantify
GHGs in metric tons.  A few other commenters recommend that EPA
harmonize the applicability thresholds established under the Tailoring
Rule and the GHG Reporting Rule without expressing a preference for
short or metric tons.

	Short tons are the standard unit of measure for both the PSD and title
V permitting programs and the basis for the threshold evaluation to
support this rulemaking.  Calculation inputs for PSD are typically
prepared in English units (e.g., lbs of fuel, MMBtu’s, etc.) which is
the common convention for all PSD analyses and the units of the
statutory thresholds under the Act.  We do recognize that the GHG
mandatory reporting rule uses metric tons.  However, we note that this
does not create an inconsistency between permitting programs and the
reporting rule, because the two rules already use different
applicability approaches.  Although we originally proposed 25,000 tpy as
the major source level for permitting programs, which was similar to the
threshold in the reporting rule, we decided to adopt substantially
higher thresholds in the final rule.  Furthermore, even if the numbers
were similar, the thresholds used for the permitting programs are based
on actual emissions, while the PSD and title V programs are based on
potential to emit.  Therefore, we are less persuaded by arguments for
consistency, and believe it is more important for ease of permit program
implementation to ensure that GHG emissions calculations for PSD and
title V will build on the same set of input variables used to develop
short-ton based estimates for non-GHG pollutants.  Thus, the use of
short tons should actually facilitate the development of the GHG
emission estimate.  It would likely be more confusing to require a
multi-pollutant PSD applicability analysis to present emissions
information using different units for different pollutants, as would be
the case if we required metric tons for GHG but continue to use short
tons for every other pollutant.  Finally, we do not expect this choice
to introduce additional complexity because the conversion between short
tons and metric tons is a very simple calculation.  Therefore, based on
these considerations we are requiring that short tons be used as the
basis for emission calculations used to meet PSD and title V permitting
requirements. 			

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

	In this subsection, we describe our legal and policy rationale for our
determinations concerning PSD and title V applicability to GHG emissions
sources, including the following parts:  (1) an overview of our
rationale; (2) data concerning costs to sources and administrative
burdens to permitting authorities; (3) a review of the Chevron legal
framework and the “absurd results,” “administrative necessity,”
and “step-at-a-time” doctrines, as well as a review of how those
doctrines fit into the Chevron framework; (4) an overview of the
relevant features of the PSD and title V programs; (5) our application
of the “absurd results” doctrine for tailoring the PSD requirements;
(6) our application of the “absurd results” doctrine for tailoring
the title V requirements; (7) our plans to issue further rulemaking that
will address the “absurd results” basis for both PSD and title V
requirements; (8) our rationale for the phase-in schedule for applying
PSD and title V to GHG sources; (9) our application of the
“administrative necessity” basis for tailoring the PSD and title V
requirements; and (10) our application of the “step-at-a-time” basis
for tailoring the PSD and title V requirements.

1.  Overview

Under the familiar Chevron two-step approach to construction of
agency-administered statutes, the agency must first, at step 1,
determine whether Congress's intent in a particular provision on a
specific question is clear; and if so, then the agency must follow that
intent.  If the intent of the provision is not clear, then the agency
may, under step 2, fashion a reasonable interpretation of the provision.
 The best indicator of congressional intent is the plain meaning of the
provision and generally, according to the caselaw, if the plain meaning
addresses the specific question, then the agency must follow the plain
meaning.  .. 

However, the courts have developed three doctrines relevant here that
authorize departure from a literal application of statutory provisions. 
The first is the “absurd results” doctrine, which authorizes such a
departure if it would produce a result that is inconsistent with
congressional intent, and particularly if it would undermine
congressional intent.  The judicial doctrine of “administrative
necessity” authorizes an agency to depart from statutory requirements
if the agency can demonstrate that the statutory requirements, as
written, are impossible to administer.  The “step-at-a-time”
doctrine authorizes an agency, under certain circumstances, to implement
a statutory requirement through a phased approach.  

Each of the three doctrines fits into the Chevron framework for
statutory construction because each of the three is designed to
effectuate congressional intent.  Moreover, each of the doctrines
generally points to similar conclusions.  For example, under the
“absurd results” doctrine, the agency may vary from the statutory
requirements only to the extent necessary, if congressional intent is
clearly expressed, to adhere to that intent, or if congressional intent
is not clearly expressed, to reasonably interpret the statute.  In the
case of the “administrative necessity” doctrine, the agency must
first attempt to mitigate administrative problems through techniques
consistent with the statutory requirements, and, if variance from the
statutory requirements nevertheless is necessary to allow
administrability, the variance must be limited as much as possible.  

To apply the statutory PSD and title V applicability thresholds to
sources of GHG emissions would bring tens of thousands of small sources
and modifications into the PSD program each year, and millions of small
sources into the title V program.  These extraordinary increases in the
scope of the permitting programs, coupled with the resulting burdens on
the small sources and on the permitting authorities, would be several
hundred-fold more than what Congress contemplated in enacting the PSD
and title V programs.  Moreover, the great majority of additional
sources brought into the PSD and title V programs would be small sources
that Congress did not expect would need to undergo permitting.  Further,
the administrative strains would lead to multi-year backlogs in the
issuance of PSD and title V permits, which would undermine the purposes
of those programs.  Sources of all types – whether they emit GHGs or
not – would face long delays in receiving PSD permits, which Congress
intended to allow construction or expansion.  Similarly, sources would
face long delays in receiving title V permits, which Congress intended
to promote enforceability.  For both programs, the addition of enormous
numbers of additional sources would provide little benefit.  In the case
of PSD, the large number of small sources that would be subject to
control constitute a relatively small part of the environmental problem.
 In the case of title V, a great many of the sources that would be newly
subject to permit requirements would have “empty” permits, that is,
permits that do not include any applicable requirements, and that
therefore serve little purpose.  For these reasons, the “absurd
results” doctrine applies to avoid a literal application of the
thresholds.  By the same token, the impossibility of administering the
permit programs brings into play the “administrative necessity”
doctrine.  This doctrine also justifies EPA to avoid a literal
application of the threshold provisions.  

The situation presented here is exactly the kind that the “absurd
results,” “administrative necessity,” and “step-at-a-time”
doctrines have been developed to address.  They authorize EPA to tailor
the PSD and title V applicability provisions through a phased program as
set forth in this rule, and to use the initial period of phase-in to
develop streamlining measures that would facilitate applying PSD and
title V on a broader scale without overburdening sources and permitting
authorities.  In this manner, the phased approach reconciles the
language of the statutory provisions with the results of their
application and with congressional intent.

2. Data Concerning Costs to Sources and Administrative Burdens to
Permitting Authorities

	This final action concerning applicability of PSD and title V to
GHG-emitting sources, including the decisions on timing for the selected
permitting thresholds, is based on our assessments of both the costs to
the regulated sources to comply with PSD and title V permitting
requirements and the administrative burdens to the permitting
authorities to process PSD and title V permit actions for GHG-emitting
sources.  This section provides a summary of our cost and administrative
burden assessments of permitting that would be required in the absence
of any tailoring as well as under various tailoring options.

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

	In the next section, concerning legal and policy rationale for our
actions, we discuss how these data on costs to the sources and
administrative burdens to the permitting authorities informed our 
decisions that PSD and title V requirements should not, at present, be
applied to GHG-emitting sources under the literal terms of the statutory
thresholds as well as our decisions concerning what thresholds to apply
for Steps 1 and 2 of the applicability phase-in approach and the
applicability floor of 50,000 tpy CO2e.  

a. Costs to sources 

	As we did at proposal, we have estimated costs to the sources of
complying with PSD and title V starting from the data in the ICR.  We
recognize that the sizes of the sources, as measured by their emissions,
that would be swept into the PSD and title V programs would vary
greatly, and that their permitting costs would vary as well.  For
example, their PSD permitting costs would depend on the amount and types
of their emissions and their control requirements.  Accordingly, we have
determined average costs, as described below.

For PSD, at proposal, we estimated that on average, an industrial source
would incur costs of $84,500 to prepare the PSD application and receive
the permit, and on average, a commercial or residential source would
incur costs of 20 percent that amount, or $16,900.  74 FR at 55,337 col.
3 to 55,339 col. 3.  For this action, we retain the same burden
estimates for an average industrial source:  This type of source would
need 866 hours, which would cost $84,500, to prepare the application and
the PSD permit.  However, based on comments received, we have determined
that a more accurate estimate for an average commercial or residential
source is 70 percent of that amount of time that an industrial source
would need, up from our proposal of 20 percent.  Thus, an average
commercial or residential source would need 606 hours, which would cost
$59,000, to prepare the PSD application and receive the permit.  We are
increasing this time over what we proposed because we now recognize that
virtually all commercial and residential will have no experience with
the PSD permitting process, and therefore will face a significant
learning curve that will entail more time to complete the application,
develop control recommendations, and take the other required steps.  We
believe this learning period could extend from two to possibly four
years or more from the date that the sources become subject to PSD
requirements, depending on the type and actual number of new sources
that come in for permitting.  In addition, we expect that in many cases,
draft PSD permits for GHGs will receive comments from various
stakeholders, from citizens groups to equipment vendors, who will seek
to participate in the permit process, and that all this could add to the
hours that the permittee will need to invest in the process.  The actual
costs to sources to install BACT controls, while still uncertain at this
point, would likely add additional costs across a variety of sources in
a sector not traditionally subject to such permitting requirements.

For title V, at proposal, we estimated that on average, an industrial
source would incur costs of approximately $46,400 to prepare the title V
application and receive the permit, and on average, a commercial or
residential source would incur costs of 10 percent that amount, or
almost $5,000.  74 FR at 55,338 col. 1 to 55,339 col. 3.  For this
action, we retain the same burden estimates for an average industrial
source:  This type of source would need 350 hours, which would cost
$46,400, to prepare the application and the title V permit.  However, we
have determined that a more accurate estimate for an average commercial
or residential source is 50 percent of that amount of time that an
industrial source would need, up from our proposal of 10%.  Thus, an
average commercial or residential source would need about 175 hours,
which would cost $23,200, to prepare the title V application and receive
the permit.  This increase is due to the same reasons as with the PSD
program just discussed:  we now recognize that virtually all commercial
and residential sources will have no experience with the title V
permitting process, and therefore will face a significant learning curve
that will entail more time to, for the first time, assess their GHG
emissions (because such sources are not covered by EPA’s mandatory
reporting rule) , complete the application, respond to permitting
authority comments, meet other title V administrative requirements, and
respond to interested stakeholders.  

 b. Administrative Burdens to Permitting Authorities

(1) Estimated Permitting Authority Burden at Proposal

As at proposal, we estimated the administrative burdens to the
permitting authorities at the various threshold levels for PSD or title
V applicability as follows:  First, for a particular threshold level, we
estimated the number of GHG-emitting sources that would be subject to
PSD requirements because they would undertake new construction or
modification, and the number of existing sources that would be subject
to title V requirements,  Second, we estimated the average additional
administrative burden and cost of each PSD permitting action and each
title V permitting action for the GHG- emitting sources.  Third, we
multiplied those two estimates, and the product is the additional
administrative burden at the particular threshold level.  We employed
the same methodology for this final rule, but, as discussed below, and
described in more detail in our final burden analysis,  we have updated
several key assumptions since the proposal as a result of our
consideration of comments received 

First, we present the administrative burdens at the statutory levels for
PSD and title V applicability.  At proposal, for the PSD program, we
estimated the administrative burdens that would result from applying PSD
at the 100/250 tpy major emitting facility threshold levels in two ways,
as described in this section.  We stated that at present, 280 sources
are subject to PSD each year, both for new construction and
modifications.  This figure served as the baseline from which to
calculate increases in administrative burdens due to permitting
GHG-emitting sources.

The first method that we used to calculate the administrative burdens to
the permitting authorities was in terms of workload hours, which we then
converted to monetary costs.  To make the workload calculation, we first
estimated the number of GHG-emitting sources that would become subject
to PSD through new construction and modification.  Based on our GHG
threshold data analysis, we estimated that almost 41,000 new and
modified sources per year would become subject to PSD review.  We first
calculated the number of new sources that would become subject to PSD. 
To do this, we estimated growth rates for the various sectors, and then
applied those growth rates to the numbers of sources in those sectors. 
We then calculated the number of modifications.  To do this, we first
assumed that each year, two percent of sources that meet or exceed the
threshold levels for PSD applicability due to their conventional
pollutants undertake modifications.  We then calculated the number of
sources that would meet or exceed the threshold levels for PSD
applicability due to their GHG emissions, and applied the same
assumption that two percent of them would undertake modifications.  In
this manner, we estimated the number of modifications of GHG-emitting
sources that would become subject to PSD.

  We noted that currently, 280 PSD permits are issued each year, but
that applying PSD to GHG-emitting sources at the 100/250 tpy statutory
threshold levels would cause an increase in permits of more than
140-fold.  The reason for the extraordinary increase in PSD
applicability lies simply in the fact that it takes a relatively large
source to generate emissions of conventional pollutants in the amounts
of 100/250 tpy or more, but many sources combust fossil fuels for heat
or electricity, and the combustion process for even small quantities of
fossil fuel produces quantities of CO2 that are far in excess of the
sources’ quantities of conventional pollutants and that, for even
small sources, equals or exceeds the 100/250 tpy levels. 

 Based on the 140-fold increase in permits, we then estimated the
per-permit burden on permitting authorities.  As we stated in the
proposal:

We estimated the number of workload hours and cost a permitting
authority would expend on each new source and each modification.  We
based these estimates on the workload hours and cost for processing
permits for new sources of non-GHG emissions, which we derived from
labor and cost information from the existing [Information Collection
Requests (“ICRs”)] for PSD programs.  The ICRs show that permitting
authorities expend 301 hours to permit a new or modified industrial
source….   

We then made assumptions for number of workload hours and costs for new
sources of GHG emissions.  We assumed that permitting new industrial GHG
sources that emit in excess of the 250-tpy threshold would be of
comparable complexity to permitting non-GHG emitting industrial sources
that are subject to PSD.  Thus, for these sources, we assumed that
permitting authorities would expend the same number of workload hours
and costs, on a per-permit basis, as they do for non-GHG emitting
industrial sources.  On the other hand, for commercial and residential
GHG sources that emit GHGs above the 250-tpy threshold (and as a result
would be subject to the requirements of the PSD permitting program at
this threshold level), we assumed that the workload hours and cost for
permitting these sources would be significantly less than—only 20
percent of—the hours and cost necessary to prepare and issue initial
PSD permits or permit modifications for industrial GHG sources.  This
20-percent estimate amounts to 60 hours of permitting authority time per
residential or commercial permit.

Based on these assumptions, the additional annual permitting burden for
permitting authorities, on a national basis, is estimated to be 3.3
million hours at a cost of $257 million to include all GHG emitters
above the 250-tpy threshold.  

74 FR at 55,301 col. 2.  Note that at the proposal, in calculating the
PSD administrative burdens that would occur each year due to GHG
emissions, we did not undertake separate calculations for the
administrative burdens associated with permitting obligations stemming
from the GHG emissions of the 280 sources already subject to PSD
permitting requirements due to their conventional pollutants.  In
effect, we treated these 280 sources are part of the over 40,000 sources
that would become subject to PSD due to their GHG emissions.

The second way that we evaluated the burden on permitting authorities
was by reviewing a study conducted by state and local air permitting
agencies.  As we said in the preamble:  

In addition to conducting our burden analysis, we also reviewed summary
information from state and local air permitting agencies regarding
additional resources and burden considerations if GHG sources that emit
above the 100/250-tpy thresholds were subjected to the PSD and title V
programs.  This information covered 43 state and local permitting
agencies, representing programs from different regions of the country
and various permitting program sizes (in terms of geographic and source
population coverage)….  This information showed significant burdens
projected by permitting agencies with adding sources of GHG emissions in
terms of staffing, budget, and other associated resource needs. 
Importantly, the agencies based their analysis on the assumption that,
for purposes of determining whether a source is major, its emissions
would be calculated on an actual emissions ("actuals") basis, and not on
a PTE basis.  On an actuals basis, the agencies estimated a 10-fold
increase in the number of permits.  

Specifically, the agencies estimated that:

Assuming, again, that number of permits was to increase by 10-fold
(based on actual emissions), the resulting workload would require an
average of 12 more FTEs per permitting authority at an estimated cost of
$1 million/year; 

Without the additional FTEs, the average processing time for a permit
would increase to 3 years, which is three times the current average
processing time;

Permitting authorities would need 2 years on average to add the
necessary staff;

Permitting authorities would also need, on average, eight additional
enforcement and judicial FTEs;

Ninety percent of the permitting agencies indicated that their staff
would need training in all aspects of permitting for sources of GHG
emissions.

A quarter of the permitting agencies reported that they were currently
under a hiring freeze.

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

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

74 FR at 55,301 col. 2-3.

In addition to PSD, we also estimated title V burdens at the statutory
threshold.  At proposal, for the title V program, we estimated the
administrative burdens that would result from applying title V
requirements at the 100 tpy major source threshold level in the same two
ways as for PSD, as follows:  The first method was to calculate the
administrative burdens in terms of workload hours, which we then
converted to monetary costs.  To make the workload calculation, we first
estimated the number of existing GHG-emitting sources that would become
subject to title V.  Based on our GHG threshold data analysis, we
estimated that approximately 6 million sources would become subject to
title V.  Compared to the 14,700 title V permits currently issued per
year, this would be an increase in permits of more than 400-fold.  We
noted, in addition, that most of the 14,700 sources already subject to
title V also emit GHGs and may be affected as well.

We then described the type of work that the permitting authorities would
need to do for these GHG-emitting sources – the six million that would
become newly subject to title V and most of the 14,700 that are already
subject to title V – as follows.  Note at the outset that the
permitting authorities’ workload is greater for sources newly subject
to title V than for existing sources that seek a revised or renewed
permit.  As EPA noted in the preamble:

[T]he[] permits [for the six million new sources] would need to include
any requirements for non-GHGs that may apply to the source, such as
provisions of an applicable State Implementation Plan (SIP).  For any
such requirements, permitting authorities would also need to develop
terms addressing the various compliance assurance requirements of title
V, including monitoring, deviation reporting, six-month monitoring
reports, and annual compliance certifications.

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

74 FR at 55,302 cols. 2-3.

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

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

74 FR at 55,302 col. 3.

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

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

The resulting workload would require an average of 57 more FTEs per
permitting agency at an estimated cost of $4.6 million/year; 

Without the additional FTEs, the average processing time for a permit
would increase to almost 10 years, which is 20 times the current average
permit processing time;

Permitting authorities would need 2 years on average to add the
necessary staff;

On average, permitting authorities would need 29 additional enforcement
and judicial staff;

Eighty percent of the permitting authorities indicated that their staff
would need training in all aspects of permitting for sources of GHG
emission.

A quarter of the permitting agencies reported that they were currently
under a hiring freeze.  

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

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

74 FR at 55,302 col. 3 – 55,303 col. 1.

(2)  Revisions to Proposal Estimates of Permitting Authority Burden

We received numerous comments from state and local authorities pointing
out how EPA had underestimated the administrative burden on the
permitting authorities in the proposal.  State and local authorities
stated that in particular, EPA underestimated the number of
modifications and the amount of time it would take permitting
authorities to process permits, particularly for commercial and
residential sources.  Based on the comments and additional analysis that
we have conducted, we are revising in several respects our estimates of
the administrative burdens for applying PSD and title V at the statutory
threshold levels.

First we present revisions to our analysis regarding the burdens at the
statutory levels.  Before we present those changes, we want to note a
revision to our methodology that affected our estimate of the number of
permits currently issued under existing programs.  We are revising
upwards the number of sources that are already subject to PSD permitting
requirements anyway for their conventional pollutants (“anyway”
sources).  This revision has implications both for (i) the number of
sources that would become subject to PSD due to their GHG emissions; and
also (ii) the baseline number of sources already subject to PSD, which
we use to compare the amount of increases in administrative burden due
to permitting GHG sources.  At proposal, we stated that 280 sources each
year are subject to PSD due to their new construction or modifications. 
However, upon further analysis, we have realized that this figure is too
low because it includes only sources that have emissions of one or more
NAAQS pollutants at the 100/250 tpy thresholds and that are located in
areas of the country that are designated attainment or unclassifiable
for all of those pollutants, and thus are not designated nonattainment
for any of those NAAQS pollutants.  We estimate that another 520 sources
have emissions of one or more NAAQS pollutants at the 100/250 tpy
thresholds and are located in areas of the country that are
nonattainment for at least one of those NAAQS pollutants.  Some of these
520 sources may also emit one or more pollutants at the 100/250 tpy
level for which their area is designated attainment or unclassifiable,
and therefore may be subject to PSD for those pollutants.  Accordingly,
the correct number of “anyway” sources subject to PSD each year is
the 280 sources that are located in areas that are attainment or
unclassifiable for each pollutant that the sources emits at the 100/250
tpy level, plus at least some of the 520 sources that are located in
areas that are nonattainment for at least one of the NAAQS pollutants
that the sources emit at or above the 100/250 tpy threshold.  In the
absence of data on the number of nonattainment NSR permits that do not
have a PSD component, and because we expect this to be a small number,
we have assumed for purposes of this action, that each of the 520
sources is subject to PSD for at least one pollutant, so that we will
consider all 800 sources as subject to PSD.  Of this number, we estimate
that 80 percent, or 688 sources, would become subject to additional
requirements due to their GHG emissions because those sources have
combustion-related activities that would likely emit GHGs in the
requisite quantities.  Our estimate of 80 percent of permitting
activities significantly involving combustion activities is based on a
review of a random sample of PSD permits.

We should also note that in this rulemaking we are justifying our
conclusions about permitting authority administrative burdens on the
basis of their PSD and title V cost as calculated on both a separate
basis and a combined basis.  That is, we believe that the administrative
burdens of the PSD program justify our tailoring approach for the PSD
requirements, and the administrative burdens of the title V program
justify our tailoring approach for the title V requirements, but
addition, the administrative burdens of both programs on a combined
basis justify the tailoring approaches.  Viewing the administrative
burdens on a combined basis provides a useful perspective because most
permitting authorities have a single organizational unit that is
responsible for both the PSD program and the title V program, and in
many cases, the same employees work on both programs.  In addition, in
some jurisdictions, permitting authorities issue a single, merged permit
that includes both PSD and title V requirements.  For these reasons,
considering administrative burdens on a combined PSD and title V basis,
offers a more accurate picture of the issues these agencies will face in
transitioning to GHG permitting. 

Turning to the revisions to our burden estimates that we made as a
result of public comment, we begin by noting that many commenters
believed that we significantly underestimated the administrative burdens
associated with the proposed thresholds or that the administrative
burden under the proposed thresholds would still overwhelm the states
and result in significant permitting delays and uncertainty for sources.
 Many of these commenters indicate that our estimate of the number of
sources that would be subject to permitting is too low, and some add
that we have underestimated the per-permit effort required.  (More
detail on these comments is given elsewhere on the methodology used in
the analysis.)  Several state and local agencies provided estimates of
the increased number of permits and/or staff that would be required
under the thresholds we proposed that were higher than our original
estimates.  Specifically, commenters recommended that we increase the
estimated administrative burdens for PSD permits from 100 percent to
over 2,000 percent; and that we increase the burdens for title V permits
from 29 percent to 240 percent.  Many commenters indicated that EPA has
not adequately accounted for “synthetic minor” sources or
modification projects, stating that many such sources and projects will
not be able to keep GHGs below the proposed thresholds, and those who
could do so may not be able to establish enforceable synthetic minor
limits.  Numerous commenters also stated that the EPA has underestimated
the rate of major modifications for GHGs under PSD.  Some commenters
assert that we underestimated the number of permits required for
specific industry sectors, including the oil and gas production
industry, the natural gas transmission industry, the semiconductor
industry, the wood products industry, the brick industry, and landfills.
 Some of the state and local commenters also believe that we have
overestimated their ability to hire and train sufficient staff to
administer GHG permitting.  

We are persuaded by the data and arguments provided by the many
commenters who believe EPA underestimated the number of permitting
actions and the burdens of each action, and thus the overall
administrative burdens associated with permitting GHG sources. 
Accordingly, we have reevaluated our assessment of these administrative
burdens, for both the PSD and title V programs.  In conducting this
re-evaluation, we considered arguments made by the commenters, as well
as any actual data they provided, and then we determined whether and how
to modify various aspects of our detailed assessment of the burdens. 
Based on this consideration we have substantially revised upwards our
estimate of administrative burdens, based on the analysis included in
the final docket for this rulemaking,  The revisions affect two elements
of our analysis:  (1) a substantial increase the number of PSD and title
V permits that will occur at the statutory thresholds, and (2) an
increase in the average burden estimate for each such permit.  

	Regarding the increase in our estimate of the number of projects that
will occur, we estimated an increase in both PSD and title V permit
actions, though the greatest changes were for PSD.  At proposal, we
estimated that, were PSD requirements to apply to GHG sources at the
100/250 tpy statutory levels, 40,496 projects -- consisting of 3,299
projects at industrial sources and 37,197 projects at commercial or
residential sources -- would need PSD permits each year.  Some of these
projects involve the construction of an entirely new source, but the
majority of these are modifications.  We now estimate that at the
100/250 tpy levels, 81,598 projects would become subject to PSD each
year.  These projects include 26,089 actions at industrial sources and
55,509 at commercial and residential sources.  We describe our
calculation of this 81,598 amount in a technical support document.  The
great majority of these 81,598 projects that would become subject to PSD
are modifications.  We base these estimates on the assumption that the
significance levels would be 100 tpy regardless of category.  

Our estimate of the number of PSD modifications is where we made our
most significant upward revisions from our proposal, based on comments. 
Our doubling of the estimated PSD permitting actions – from 40,496 at
proposal to 81,598 -- results from three separate adjustments we made to
our estimates at proposal of the number of permit actions that would
result from applying PSD to GHG sources.  Two of these increased the
number of major modifications, and one of these increased the number of
major sources and modifications.  The most significant adjustment, and
one that was raised by multiple commenters, was that we undercounted the
number of major modification projects at existing major sources because
we did not include the existing projects that avoid major PSD review by
either taking “synthetic minor” limits or by netting out for
conventional pollutants, but that would not be able to avoid PSD through
those mechanisms for GHGs.  The ability and procedures for sources to
achieve reductions, or minimize increases, due to GHGs through adoption
of enforceable limits or through netting out have not be well
established at this point. We believe that there will numerous
instances, particularly for combustion-related projects, where it will
not be possible for sources to achieve the same level of reductions for
CO2 emissions as they do for NOx emissions, for example, simply because
there are not as many proven control techniques that can reduce CO2
emissions to the same degree as NOx.  Also, more research will be
necessary in the type of emission units and processes resulting in GHG
emissions, and how they operate over a wide range of utilization
patterns at a variety of source categories, before permitting
authorities will be able to establish procedures and rules for
developing minor source permit limitations.  Therefore, we adjusted our
count of major modification permits under PSD upward to account for
this.  

The second change to the number of permits concerns the general
modification rate of 2 percent that we applied at proposal, based on
historical experience across all pollutant types.  Commenters provided
information [should cite RTC document in the docket that shows comments
regarding modifications estimate)] that suggest that this 2 percent
figure is an underestimate for GHG sources because their emissions of
CO2 are high and accumulate quickly from various changes involving
combustion units.  Therefore, a greater percentage of their physical or
operational changes will result in GHG emissions in excess of the
significance levels that we identified at proposal.  In light of these
comments, we reviewed the source populations and pollutant mix within
the various populations, and determined that we should revise our
general modification rate to 4 percent for GHG sources.  This 4% rate
was obtained by dividing the current annual major NSR permit actions
involving modifications by the 14,700 existing sources.  We have revised
our burden analysis accordingly.  Again, the burden analysis in the
docket describes our basis for these calculations in more detail.  

The third adjustment to the number of permits involves our estimate of
the number of sources with potential to emit that is greater than the
various thresholds considered.  This affects the number of major sources
at the statutory thresholds, which we used to estimate the number of PSD
and title V major sources, but also has an effect on the number of major
modifications because the number of modifications depends on the size of
the population of major sources.  Commenters provided evidence that our
estimates of capacity utilization (which, as described above, we use for
estimating potential-to-emit based on data for actual emissions) for the
general manufacturing source category (referred to as “unspecified
stationary combustion” in our analysis) and for the oil and gas
industry were not accurate.  In our proposal, our estimated range for
capacity utilization for ‘unspecified stationary combustion” varied
from 70 to 90 percent depending on manufacturing category.  For the oil
and gas industry, our estimate was 90 percent.  We received comments
indicating that these utilization rates are higher than what is normally
achieved in real-world conditions, particularly for smaller
manufacturing type facilities.  Accordingly, in this action, we are
using a 50 percent capacity utilization rate for both of these source
categories, which better reflects what can be deemed reasonable
operation under normal conditions for facilities in these source
categories.  This adjustment increased the overall number of affected
facilities at various threshold levels and we have revised our burden
analysis accordingly.

	A few commenters asserted that we underestimated the number of
residential homes, commercial buildings, and retail stores that would be
subject to permitting requirements because these commenters believed the
estimate in EPA’s TSD was based on actual emissions from space heating
equipment rather than PTE.  We wish to clarify that our threshold
analysis estimates for the number of residential and commercial sources
(as well as all other sources) did use a PTE basis.  To calculate the
PTE amount for these sources, we extrapolated from the actual emissions
data for the residential and commercial sources.  Specifically, we
assumed that a typical residential facility operates its fuel combustion
sources at only 10 percent of its capacity and a typical commercial
facility operates at only 15 percent of its capacity.  Based on these
assumptions, we multiplied residential actual emissions by a factor of
10, and commercial actual emissions by a factor of 6.6 to obtain
PTE-based estimates.  There is very little information available on the
capacity utilization rates of fuel combustion equipment at different
types of residential and commercial facilities, but we believe our
methodology was reasonable for these types of sources and we did not
adjust it in response to this comment.  Information on the development
of these estimates is provided in our Technical Support Document for
Greenhouse Gas Emissions Thresholds Evaluation. 

 The second source of upward revisions to our administrative burden
estimate is that we are increasing the estimated average cost to
permitting authorities of issuing each PSD and title V permit at the
statutory thresholds.  At proposal, we estimated that for PSD permits,
permitting authorities would expend, on average, 301 hours to permit an
industrial source of GHG emissions, and 20 percent of that time, or 60
hours to permit a commercial or residential source.  After estimating
that amount of workload, we went on to estimate the monetary cost to
permitting authorities of that workload.  Similarly, for title V
permits, we estimated at proposal that permitting authorities would
expend 10 percent of the number of hours needed to process an industrial
permit in order to process a commercial or residential permit for GHG
sources.

We received comments from both permitting authorities and sources
asserting that our methodology underestimated the administrative burden
on grounds that (1) our methodology fails to recognize that when a
source triggers PSD for conventional pollutants, additional labor hours
would be required to issue BACT for GHGs; (2) our estimate of 60 hours
(versus 301 hours) to issue PSD permits to commercial and residential
sources of GHGs is unrealistically low; (3) our estimate failed to
account for the increase in the complexity of permits for criteria
pollutants due to (i) increases in criteria pollutant emissions becoming
newly subject to BACT at sources that are major only for GHGs, which
will result in increased permitting and (ii) BACT controls for criteria
pollutants (e.g., an oxidizer for VOC) may result in significant GHG
emissions, triggering an additional BACT determination.; and (4) our
methodology failed to account for the significant additional PSD and
title V burdens due to sources that obtain federally enforceable permit
limits on GHGs in order to become “synthetic minors” and thereby
avoid PSD (and possibly also title V).

	Based on these comments and our own reassessment of permitting actions
created by the addition of GHGs, we have revised upwards in several ways
our estimate of the additional per-permit costs of applying PSD and
title V to GHG sources, including the following:  First we have added an
estimate of the additional permitting cost for adding a GHG component to
“anyway” PSD and title V permitting actions for conventional
pollutants.  We estimated this burden based on information in the
comments together with our own judgment about how to adjust the burden
numbers contained in the current supporting statements for our approved
permitting Information Collection Requests (ICR’s).  These adjustments
are found in our revised burden estimate document 

Second, we have raised the per-permit burden hours for commercial and
residential sources for PSD and title V.  At proposal, our estimates
were based on the fact that many of these permits will be technically
simpler due to such factors as a lower number of emissions points,
simpler processes, and less required modeling.  However, commenters
pointed out that, until EPA streamlines its permitting procedures, there
are many permitting activities that represent a fixed cost, such as
public notice, hearing, and response to comment activities.  In
addition, we agree, as commenters pointed out, that many of these
sources will need significantly more permitting-authority staff time to
assist them in the permit application and preparation process because of
their lack of experience with these requirements.  In addition,
permitting authorities will have little, if any, experience in
permitting commercial and residential sources, and therefore will face a
learning curve that will entail more time to take permitting action.  
In addition, we expect that in many cases PSD and title V permit
applications for GHGs will receive comments from various stakeholders,
from citizens groups to equipment vendors, who will seek to participate
in the permit process, and responding and revising permits accordingly
will add to the hours that the permitting authority will spend.  

As a result, we raised the PSD per-permit hours for various steps in the
permitting process, as described in the burden estimate document. While
we continue to estimate that permitting authorities will expend, on
average, 301 hours to issue a PSD permit to an industrial source, and
that this would cost $23,243, we now recognize that a permitting
authority would expend 70 percent of that time or 210 hours, to permit a
commercial or residential source, which would cost $16,216.  Similarly,
for title V, while we continue to estimate that permitting authorities
will expend, on average, 428 hours to issue a title V permit to an
industrial source, and that this would cost $19,678, we now recognize
that a permitting authority would expend 50 percent of the time, or 214
hours, to permit a commercial or residential source, which would cost
$9,839.

We disagree with commenters who suggested that by basing our estimates
on the numbers of newly constructing and modifying sources with high
enough emissions to qualify as major emitting facilities, we failed to
account for the costs of sources that seek “synthetic minor” permits
to avoid PSD, and possibly title V, requirements.  In fact, our
methodology includes sources that might take such limits as newly-major
sources for their GHG emissions; and therefore we count the full
administrative burden associated with a PSD permit and a title V permit
for those sources.  In effect, we assume that such sources would go
through PSD or title V permitting, rather than take “synthetic
minor” limits. We take this approach because although we suspect that
there may, in fact, be significant synthetic minor activity, we do not
have data that would allow us to determine whether, and how many of,
these sources will be able to adopt “synthetic minor” limits or
restrict their operations to obtain minor source permitting status.  Nor
do we have data on the amount of the administrative burden that would
fall on any particular permitting authority to establish a “synthetic
minor” limit, except that we understand that the amount varies widely
across states.  As a result, we opted to include these sources in our
analysis as sources receiving a PSD or title V permit.  Therefore, to
the extent that synthetic minor activity occurs, our estimate would
already have included the burden for that activity.  In fact, our
estimate would have overestimated the burden to the extent that a
permitting authority would have less administrative costs to issuing a
“synthetic minor” permit, as compared to a PSD or title V permit. 

(3)  Revised Burden Estimates at Statutory Thresholds

Based on the revisions just described, we estimate that in all, if
sources that emit GHGs become subject to PSD at the 100/250 tpy levels,
permitting authorities across the country would face over $1.5 billion
in additional PSD permitting costs each year.  This would represent an
increase of 130 times the current annual burden hours under the NSR
major source program for permitting authorities.  The permitting
authorities would need a total of almost 10,000 new full time employees
(FTEs) to process PSD permits for GHG emissions.  

In addition, we estimate that in all, if sources that emit GHGs become
subject to title V at the 100 tpy level, permitting authorities across
the country would incur about 1.4 billion additional work hours, which
would cost $63 billion.  We estimate that most of this work would be
done over a three year period, which would amount to 458 million in
additional work hours, and $21 billion in additional costs, on an annual
basis over that 3-year period.

We also note that the survey of state and local permitting authorities
described in the proposed rulemaking continues to shed light on the
extent of the administrative burdens, including staffing, budget, and
other associated resource needs, as projected by the permitting
authorities.  As noted above, that survey concluded that application of
the PSD requirements to GHG-emitting sources at the level of 100/250 tpy
or more of actual emissions would, without additional FTEs, increase the
average processing time for a PSD permit from one to three years.  The
survey further concluded that application of the title V requirements to
GHG-emitting sources at the level of 100 tpy or more of actual emissions
would, without additional FTEs, increase the average processing time for
a title V permit from six months to 10 years.  As we noted at proposal,
this survey assumed a ten-fold increase in the number of PSD permits and
a 40-fold increase in the number of title V permits due to GHG-emitting
sources, but those assumptions were severely underestimated because
based on actual emissions.  At proposal, our calculations, which were
based on potential emissions, indicated a 140-fold increase in PSD
permits and a more than 400-fold increase in title V permits.  In this
rulemaking, we recognize that even our estimates at proposal were
severely underestimated.  We now recognize that the number of PSD
permits will be about twice what we estimated at proposal, and the
average processing time for both PSD and title V permits will be two or
three times greater than what we estimated at proposal.  The survey of
state and local permitting authorities provided other useful information
as well, including the fact that it would take the permitting
authorities two years, on average, to hire the staff necessary to handle
a ten-fold increase in PSD permits and a 40-fold increase in title V
permits, and that 90 percent of their staff would need additional
training in all aspects of permitting for GHG sources.  

(4)  Revised Estimates of Administrative Burdens at Various Threshold
Levels

In order to determine the appropriate PSD and title V applicability
level for GHG sources, we not only estimated the burden at the statutory
thresholds, as described above, but we also estimated the number of
sources, number of permitting actions, and amount of administrative
burden at various applicability levels for both PSD and title V, based
on the revised methodology described above, that we used to estimate the
administrative burdens of applying PSD and title V at the statutory
levels.  This information is summarized in Table VI.-1, below.  Note
that Table VI-1 also includes, in the last column, the administrative
burdens, described above, associated with the 100/250 tpy
thresholds.Table 1 Coverage and Burden Information

	Current program

	“Anyway” Source Approach 75k Major Mod

	100k Major Source

100k Major Mod.	100k Major Source

75k Major 

Mod 	100k Major Source

50k Major 

Mod	50k Major

 Source

50 k Major 

Mod	25k Major Source 

25k Major 

Mod	100/

250 

Major, 

100

 Mod

Number of  major sources	15,000	15,000	15,550         	15,550         
15,550         	18,500     

	22,500         	6,118,252

Number of newly major GHG sources	N/A	0	550	550	550	3,500	7,500
6,105,913

Number of PSD new construction actions	240	240	242	242	242	243	250
19,889

Number of PSD modification actions at covered major sources	448	448	468
1,363	2,257	2,354	9,645	62,284

Permitting Authority Cost to Run PSD programs	$12M/yr.	$15M/yr.	$15M/yr.
$36M/yr.	$57M/yr.	$59M/yr.	$229M/yr.	$1.5B/yr

Permitting Authority Work Hours to Run PSD programs	

150,795	

185,195	

192,055	

461,450	

730,544	

764,781	

2.97 M	

19.7 M

Permitting Authority Cost to Run Title V Programs	$62M/yr. 	$63M/yr.
$67M/yr. 	$69M/yr. 	$70M/yr. 	$88M/yr. 	$126M/yr. 	$21 B/yr

Permitting Authority Work Hours to Run Title V Programs 	1.35 M	1.38 M
1.46 M	1.49 M	1.53 M	1.92 M	2.74 M	460 M

Annual Total Cost to Run PSD and Title V Programs and % increase in cost
over current program 

	$74M/yr.	$78M/yr.       

5% increase (once states adopt)	$82M/yr.  

11% increase	$105M/yr   

42% increase	$127M/yr       

 72% increase	$147M/yr.   

 99% increase	$355M/yr.   

380% increase	$22.5 B/yr

28,278% increase

% GHG emissions covered	-0-	65%	67%	67%	67%	70%	75%	78%

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

The first threshold Table 1 describes – and which, as discussed below,
we are adopting for Step 1 – is the “anyway” source approach. 
Under this approach, (i) PSD applies to the GHG emissions from projects
that are subject to PSD anyway as new sources or major modifications due
to their emissions of non-GHG pollutants and that result in an increase
(or, in the case of modifications, a net increase) of at least 75,000
tpy CO2e; and (ii) title V applies to what we will call “anyway”
title V sources, that is, sources that are subject to title V anyway due
to their emissions of non-GHG pollutants.  Under this approach, the
number of sources subject to PSD each year – including new
construction and modifications -- is the same as under the current
program, but the permitting authorities will need to address GHG
emissions as part of those permitting actions each year and, to do so,
will require, each year, 34,400 additional workload hours costing an
additional $3 million.  For title V, we estimate that the number of
title V sources that require permitting actions will, on average, be the
same each year, but permitting authorities will need to address GHG
requirements for some of them; as a result, permitting authorities will
need, each year, 27,468 additional work hours costing $1 million in
additional funding.

	Another threshold described in Table VI-1 is the one we are adopting
under Step 2, as described below, under which  (i) sources will be
subject to PSD on account of their GHG emissions if they newly construct
and emit at least 100,000 tpy CO2e, or if they are existing sources that
emit at least 100,000 tpy CO2e of GHGs and make a modification that
results in a net emissions increase of at least 75,000 tpy CO2e; and
(ii) existing sources will be subject to title V due to their GHG
emissions if they emit 100,000 tpy CO2e in GHG emissions.  Under this
approach, which we will call the 100,000/75,000 approach, we estimate
that each year, the permitting authorities will need to issue GHG
permits to two additional sources that newly construct and 915 that
undertake modifications above current permitting levels.  Doing so will
require 310,655 additional workload hours costing an additional $24
million, compared to the current program.  For title V, an additional
180 sources will require new title V permits each year, and the
permitting authorities’ associated costs will be 160,572 work hours
and $7 million more than the current program.  

The last approach we will describe here may be called the 50,000/50,000
approach, which, as discussed below, we adopt as the floor for
thresholds during the first 6 years after promulgation.  Under this
approach, (i) sources will be subject to PSD on account of their GHG
emissions if they newly construct and emit at least 50,000 tpy CO2e, or
if they are existing sources that emit at least 50,000 tpy CO2e of GHGs
and make a modification that results in a net emissions increase of at
least 50,000 tpy CO2e; and (ii) existing sources will be subject to
title V on account of their GHG emissions if they emit 50,000 tpy CO2e
in GHG emissions.  Under this approach, each year, the permitting
authorities will need to issue GHG permits to 3 additional sources that
newly construct and 1,900 that undertake modifications above current
permitting levels.  Doing so will require 613,986 additional workload
hours costing $47 million, compared to the current program.  For title
V, an additional 1,189 sources will require new title V permits each
year and the permitting authorities’ associated costs will be 568,017
work hours and $26 million more than the current program.  

We present the remaining entries in the table to illustrate how the cost
and burden estimates vary with increasing or decreasing thresholds
relative to those selected in this rule.  These variations are important
in understanding how alternative thresholds would compare to the ones
selected.  We also include entries reflecting the baseline (current
program without GHG permitting) and the burdens if we immediately
implemented the full statutory thresholds on January 2, 2011 without
tailoring or streamlining.

3.  The Chevron framework and the “absurd results,”
“administrative necessity,” and “step-at-a-time” legal doctrines

a. Introduction and summary

Having described the factual underpinnings of our action, which are the
costs to sources and administrative burdens to permitting authorities,
we now describe the legal underpinnings, which are Chevron framework,
taking account of the “absurd results,” “administrative
necessity,” and “step-at-a-time” doctrines.  We believe that each
of these doctrines provides independent support for our action, but in
addition, the three doctrines are directly intertwined and can be
considered in a comprehensive and interconnected manner.  Moreover,
although the three doctrines may pre-date Chevron U.S.A. Inc. v. NRDC,
467 U.S. 837, 842-43 (1984), in which the U.S. Supreme Court established
the framework for construing agency-administered statutes, each of the
three doctrines fits appropriately into the Chevron framework.

To reiterate, for convenience, the statutory provisions at issue: 
Congress, through the definition of “major emitting facility,”
applied the PSD program to include “any … source[ that] emit[s], or
ha[s] the potential to emit, one hundred [or, depending on the source
category two hundred fifty] tons per year or more or more of any air
pollutant.”  CAA §§ 165(a), 169(1).  Similarly, Congress, through
the definition of “major source,” specified that the title V program
includes “any stationary facility or source of air pollutants which
directly emits, or has the potential to emit, one hundred tons per year
or more of any air pollutant.”  CAA §§ 502(a), 501(2)(B), 302(j). 
EPA, through long-established regulatory action, in the case of PSD, and
long-established interpretation, in the case of title V, has narrowed
these definitions so that they apply only with respect to air pollutants
that are subject to regulation under the CAA.  

Applying these definitions by their terms, as narrowed by EPA, to
greenhouse gas sources at the present time would mean that the PSD and
title V programs would apply to an extraordinarily large number of small
sources, the sources would incur unduly high compliance costs, and
permitting authorities would face overwhelming administrative burdens. 
As a result, we decline to follow this literal reading, and instead,
with this action, we chart a course for tailoring the applicability
provisions of the PSD program and the title V program by phasing them in
over time to the prescribed extent.

For our authority to take this action, we rely on the “absurd
results” doctrine, which applies because applying the PSD and title V
requirements literally (as previously narrowed by EPA) would not only be
inconsistent with congressional intent concerning the applicability of
the PSD and title V programs, but in fact would severely undermine
congressional purpose for those programs.  We also rely on the
“administrative necessity” doctrine, which applies because
construing the PSD and title V requirements literally (as previously
narrowed by EPA) would render it impossible for permitting authorities
to administer the PSD provisions.  The tailoring approach we promulgate
in this action is consistent with both doctrines.  It is also consistent
with a third doctrine, the “step-at-a-time” doctrine, which
authorizes administrative agencies under certain circumstances to
address mandates through phased action.

	Our discussion of the legal bases for this rule is organized as
follows:  In this section V.B.3, we provide an overview of three
doctrines and describe how they fit into the Chevron framework for
statutory construction.  In section V.B.4, we discuss the PSD and title
V programs, including each program’s relevant statutory provisions,
legislative history, and regulatory history.  In sections V.B.5 and
V.B.6 we discuss the “absurd results” approach for PSD and title V,
respectively, that we are finalizing in our action.  In section V.B.7,
we discuss the legal and policy rationale for the phase-in schedule that
we are adopting for applying PSD and title V to GHG sources.  In section
V.B.8 we discuss the “administrative necessity” approach for PSD and
title V, respectively.  In section V.B.9, we discuss the third legal
basis for our action, the “step-at-a-time” doctrine.  

a. The “absurd results” Doctrine

Turning first to the “absurd results” doctrine, we note at the
outset that we discussed the doctrine at length in the notice of
proposed rulemaking, and we incorporate by reference that discussion. 
The starting point for EPA's interpretation of the PSD and title V
applicability provisions and reliance on the “absurd results”
doctrine is the familiar Chevron two-step analysis.  We discuss this
analysis in greater detail below, but in brief, in interpreting a
statutory provision, an agency must, under Chevron step 1, determine
whether Congress's intent on a particular question is clear; if so, then
the agency must follow that intent.  If the intent of the provision is
not clear, then the agency may, under step 2, fashion a reasonable
interpretation of the provision.  Chevron U.S.A. Inc. v. NRDC, 467 U.S.
837, 842-43 (1984).  

The courts consider the best indicator of congressional intent to be the
plain meaning of the statute.  However, the U.S. Supreme Court has held
that the plain meaning of a statutory provision is not conclusive “in
the ‘rare cases [in which] the literal application of a statute will
produce a result demonstrably at odds with the intentions of the
drafters’ … [in which case] the intention of the drafters, rather
than the strict language, controls.”  United States v. Ron Pair
Enterprises, 489 U.S. 235, 242 (1989).  This doctrine of statutory
interpretation may be termed the “absurd results” doctrine.

Although, as just noted, the U.S. Supreme Court has described the
“absurd results” cases as “rare,” in that case the Court seemed
to be referring to the small percentage of statutory-construction cases
that are decided on the basis of the doctrine.  The D.C. Circuit, in
surveying the doctrine over more than a century of jurisprudence,
characterized the body of law in absolute numbers as comprising
“legions of court decisions.”   In re Franklyn C. Nofziger, 925 F.2d
428, 434 (D.C. Cir. 1991).  Indeed, there are dozens of cases, dating
from within the past several years to well into the 19th century, in
which the U.S. Supreme Court has applied the “absurd results”
doctrine to avoid the literal application of a statute, or if not so
holding, has nevertheless clearly acknowledged the validity of the
doctrine.  Some of the more recent of these cases include:  Logan v.
United States, 552 U.S. 23, 36-37 (2007) ( “[s]tatutory terms, we have
held, may be interpreted against their literal meaning where the words
‘could not conceivably have been intended to apply’ to the case at
hand [citation omitted]”); Nixon v. Missouri Municipal League, 541
U.S. 125, 132-33 (2004)  TA \l "Nixon v. Missouri Municipal League, 541
U.S. 125 (2004)" \s "Nixon v. Missouri Municipal League, 541 U.S. 125
(2004)" \c 1   (“any entity” includes private but not public
entities); Raygor v. Regents of Univ. of Minn., 534 U.S. 533, 542-45
(2002)  TA \l "Raygor v. Regents of Univ. of Minn., 534 U.S. 533, 542-45
(2002)" \s "Raygor v. Regents of Univ. of Minn., 534 U.S. 533, 542-45
(2002)" \c 1    (“implying a narrow interpretation of … ‘any claim
asserted’ so as to exclude certain claims dismissed on Eleventh
Amendment grounds”); United States v. X-Citement Video, Inc., 513 U.S.
64, 69 (1994) (rejecting a literal interpretation of the statutory term
“knowingly” on grounds that Congress could not have intended the
“positively absurd” results that some applications of such an
interpretation would produce, “[f]or instance, a retail druggist who
returns an uninspected roll of developed film to a customer “knowingly
distributes” a visual depiction and would be criminally liable if it
were later discovered that the visual depiction contained images of
children engaged in sexually explicit conduct”); and Rowland v. Cal.
Men’s Colony, 506 U.S. 194, 200 (1993) (finding that an artificial
entity such as an association is not a “person” under the statute,
and describing the absurdity doctrine as a “common mandate of
statutory construction”). Other cases are included, for reference, in
section V.B.10.

	The D.C. Circuit has also handed down numerous decisions that applied
the absurd results doctrine to avoid a literal interpretation or
application of statutory provisions, or that have acknowledged the
doctrine.  Some of the most recent ones include:  Arkansas Dairy
Cooperative Ass’n, Inc., v. U.S. Dep’t of Agriculture, 573 F.3d 815
(D.C. Cir. 2009) (rejecting the canon of construction that presumes that
Congress is aware of existing law pertinent to the legislation that it
enacts, when in this case, the presumption that Congress was aware of
the Departments definition of “hearing” would lead to “the absurd
result that Congress intended to impose a requirement with which the
Secretary could not comply;” stating: “Courts, ‘in interpreting
the words of a statute, [have] some scope for adopting a restricted
rather than a literal or usual meaning of its words where acceptance of
that meaning would lead to absurd results . . . or would thwart the
obvious purpose of the statute . . . .’” (quoting In re Trans Alaska
Pipeline Rate Cases, 436 U.S. 631, (1978));   Buffalo Crushed Stone,
Inc. v. Surface Transportation Board, 194 F.3d 125, 129-30 (D.C. Cir.
1999) (regulation of Surface Transportation Board providing that if a
notice of exemption “contains false or misleading information, the use
of the exemption is void ab initio” does not apply to a notice
containing false information when declaring the notice void ab initio
would undermine the goals of the governing statute; a conflict between
the “literal application of statutory language” and maintaining the
integrity of the regulatory scheme should be resolved by construing the
text in accordance with its purpose);  Mova Pharm. Corp. v. Shalala, 140
F.3d 1060, 1068 (D.C. Cir. 1998); U.S. v. Stewart, 104 F.3d 1377, 1388
(D.C. Cir. 1997) Environmental Defense Fund v. EPA, 82 F.3d 451, 468-69 
(D.C. Cir. 1996) (although Act requires that a federal action conform to
the state implementation plan that is currently in place, EPA may
instead require conformity to a revised implementation plan that state
commits to develop; “[t]his is one of those rare cases * ** [that]
requires a more flexible, purpose-oriented interpretation if we are to
avoid ‘absurd or futile results.’”); American Water Works Ass’n
v. EPA, 40 F.3d 1266, 1271 (D.C. Cir. 1994) (holding that EPA’s
interpretation of the term “feasible” so as to require a treatment
technique instead of an MCL for lead is reasonable; the court stated:
“Indeed, where a literal reading of a statutory term would lead to
absurd results, the term simply ‘has no plain meaning . . . and is the
proper subject of construction by the EPA and the courts.’  If the
meaning of ‘feasible’ suggested by the NRDC is indeed its plain
meaning, then this is such a case; for it could lead to a result
squarely at odds with the purpose of the Safe Drinking Water Act.”)
(quoting Chem. Mfrs. Ass’n v. Natural Res. Def. Council, Inc., 470
U.S. 116, 126 (1985)) (citation omitted); In re Nofziger, 925 F.2d 428,
434-35 (D.C. Cir. 1991) (provision authorizing payment of attorney fees
to the subject of an investigation conducted by an independent counsel
of the Department of Justice only if “no indictment is brought”
against such individual does not preclude payment of attorney fees when
an indictment is brought but is determined to be invalid). 

b. The “administrative necessity” doctrine

In the proposed rulemaking, we also described in detail the
“administrative necessity” doctrine, 74 FR 55311 col. 3 to 55318
col. 3, and we incorporate that discussion by reference into this
notice.  Under this doctrine, if a statutory provision, however clear on
its face, is impossible for the agency to administer, then the agency is
not required to follow the literal requirements, and instead, the agency
may adjust the requirements in as refined a manner as possible to assure
that the requirements are administrable, while still achieving
Congress's overall intent.  The D.C. Circuit set out the doctrine of
"administrative necessity" in a line of cases that most prominently
includes Alabama Power v. Costle, 636 F.2d 323 (D.C. Cir. 1980).  The
Court cited the doctrine most recently in New York v. EPA, 443 F.3d 880,
884, 888 (D.C. Cir. 2006).

In addition, as we stated in the proposed rulemaking, “We believe that
the administrative necessity case law establishes a three-step process
under which an administrative agency may, under the appropriate
circumstances, in effect revise statutory requirements that the agency
demonstrates are impossible to administer so that they are
administrable.”  74 FR 55315 col. 1.  Specifically:

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

74 FR 55315 cols. 1-2.

	It should also be noted that we believe the administrative burdens
encountered by the state and local permitting authorities are fully
relevant under the “administrative necessity” doctrine.  Although
the caselaw that discusses the doctrine focuses on federal agencies, see
74 FR 55312-14, under the CAA, state and local agencies are EPA’s
partners in implementing provisions of the CAA, and have primary
responsibility for implementing the PSD program.  They generally adopt
EPA’s PSD requirements in their SIPs, which EPA approves.  They
generally adopt EPA’s title V requirements in their title V programs,
which EPA approves.  They issue the PSD and title V permits and are
responsible in the first instance for enforcing the terms of the
permits.  In all these respects, the law that the state and local
permitting authorities administer is both federal and state law.  Under
certain circumstances, EPA may become responsible for permit issuance
and enforcement in the first instance, but even then, EPA may, and
frequently has, delegated those duties to a state, in which case, the
state implements federal law directly.  Thus, although the PSD and title
V programs are federal requirements, for the most part, it is the states
that implement those programs.  For this reason, the administrative
burdens that the states face in implementing the programs are relevant
in determining the applicability of the “administrative necessity”
doctrine.

c. “Step-at-a-time” doctrine

In addition to the “absurd results” and “administrative
necessity” doctrines, another judicial doctrine supports at least part
of EPA’s tailoring rule, and that is the doctrine that agencies may
implement statutory mandates one step at a time, which we will call the
“step-at-a-time” doctrine.  In the notice of proposed rulemaking, we
also described this doctrine and recent case law that set it forth.  74
FR 55,319 col. 1-3.  There, we noted that the U.S. Supreme Court
recently described the doctrine in Massachusetts v. EPA, 549 U.S. 497,
524 (2007), as follows: “Agencies, like legislatures, do not generally
resolve massive problems in one fell regulatory swoop;” and instead
they may permissibly implement such regulatory programs over time,
“refining their preferred approach as circumstances change and as they
develop a more nuanced understanding of how best to proceed.”   We
also described two recent D.C. Circuit cases that upheld partial agency
compliance with a statutory dictate “if [such partial compliance] were
a first step towards a complete solution.”  City of Las Vegas v.
Nevada Dev. Comm’n, 891 F.3d 927, 935 (D.C. Cir. 1989); see Grand
Canyon Air Tour Coalition v. F.A.A., 154 F.3d 455, 477-78 (D.C. Cir.
1998) (statute required agency to develop plan to implement statutory
requirements within 120 days after enactment, and report to Congress
within two years after the date of the plan as to the plan’s success;
Court upheld partial agency plan promulgated 10 years after enactment
when agency intended to develop rest of plan within another 10 years).

d. Consistency with Chevron Framework

Although the “absurd results,” “administrative necessity,” and
“step-at-a-time” doctrines generally pre-date the Chevron two-step
analysis for construing statutes that Congress has authorized an agency
to administer, we believe that the doctrines can be considered very much
a part of that analysis.  Under Chevron step 1, an agency must
determine whether “Congress has directly spoken to the precise
question at issue.”  If so, “the court, as well as the agency, must
give effect to the unambiguously expressed intent of Congress.” 
However, if “the statute is silent or ambiguous with respect to the
specific issue, the question for the court is whether the agency’s
answer is based on a permissible construction of the statute.”  

Chevron U.S.A. Inc. v.NRDC, 467 U.S. 837, 842-42 (1984).

Thus, step 1 under Chevron is to determine congressional intent for the
relevant statutory directive on the specific issue presented .  To
determine Congress’s intent, the agency must look first to the
statutory terms in question, and generally interpret them according to
their plain meaning, within the overall statutory context, and perhaps
with reference to the legislative history.  If the plain meaning of the
statutory requirements is clear then, absent indications to the
contrary, the agency must take it to indicate congressional intent and
must implement it.  Even if the plain meaning of the statutory
requirements is not clear, if the agency can otherwise find indications
of clear congressional intent, such as in the legislative history, then
the agency must implement that congressional intent.

The D.C. Circuit has indicated that the “absurd results” doctrine
fits into the Chevron step 1 analysis in the following way:  Recall that
in the cases in which the courts have invoked this doctrine, the plain
meaning of the statutory requirements has been clear, but has led to
absurd results.  This can occur when the plain meaning, when applied to
the specific question, conflicts with other statutory provisions,
contradicts congressional purpose as found in the legislative history
– and, in particular, undermines congressional purpose – or
otherwise produces results so illogical or otherwise contrary to
sensible public policy as to be beyond anything Congress would
reasonably have intended.  See United States v. Ron Pair Enterprises,
489 U.S. 235, 242-43 (1989); Griffin v. Oceanic Contractors, Inc., 458
U.S. 564, 571 (1982).

Under these circumstances, the agency must not take the plain meaning to
indicate congressional intent.  As the D.C. Circuit has explained,
“where a literal reading of a statutory term would lead to absurd
results, the term ‘simply has no plain meaning . . . and is the proper
subject of construction by the EPA and the court.’”  American Water
Works Assn v. EPA, 40 F.3d 1266, 1271 (D.C. Cir. 1994) (quoting Chemical
Manufacturers’ Association v. NRDC, 470 U.S. 116, 126 (1985)).  Under
these circumstances, if the agency can find other indications  of clear
congressional intent, then the agency must implement that intent.  See
United States v. Ron Pair Enterprises, 489 U.S. 235, 242-43 (1989). 
This may mean implementing the statutory terms, albeit not in accordance
with their literal meaning, in a way that achieves a result that is as
close as possible to congressional intent.  As the D.C. Circuit said in
Mova Pharm. Corp. v. Shalala, 140 F.3d 1060 (D.C. Cir. 1998):

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

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

The “administrative necessity” doctrine is not as well developed as
the “absurd results” doctrine, so that the courts have not had
occasion to explicitly describe how the doctrine fits into the Chevron
analytical framework.  However, we think that a reasonable approach, in
line with the D.C. Circuit’s approach to the “absurd results”
doctrine as just described, is as follows:  Recall that under the
“administrative necessity” doctrine, a agency is not required to
implement a statutory provision in accordance with the literal
requirements when doing so would be impossible, but the agency must
nevertheless implement the provision as fully as possible.  Placed in
the context of the Chevron framework, we think that that the
“administrative necessity” doctrine is based on the premise that
inherent in the statutory design is the presumption that Congress does
not intend to impose an impossible burden on an administrative agency. 
See Alabama Power v. Costle, 636 F.2d 323, 357 (D.C. Cir. 1980)
(describing the “administrative necessity” approach as one of the
“limited grounds for the creation of exemptions [that] are inherent in
the administrative process, and their unavailability under a statutory
scheme should not be presumed, save in the face of the most unambiguous
demonstration of congressional intent to foreclose them”). 

Therefore, if the plain meaning of a statutory directive would impose on
an agency an impossible administrative burden, then either the statutory
directive should not be considered to have that plain meaning, or that
plain meaning should not be considered to be indicative of congressional
intent.  Rather, in this case, congressional intent should be considered
to be to achieve as much of the statutory directive as possible.  As a
result, the agency must adopt an approach that implements the statutory
directive as fully as possible.  This is consistent with the D.C.
Circuit’s holding in Mova Pharm. Corp that if congressional intent is
clear, but the plain meaning of a statute does not express that intent,
then the agency must, under Chevron step 1, select an interpretation
that most closely approximates congressional intent.  Mova Pharm. Corp,
140 F.3d at 1068.

	The “step-at-a-time” doctrine fits into the Chevron framework in
much the same manner that the “administrative necessity” doctrine
does.  That is, inherent in the statutory design is the presumption that
Congress intended an agency to implement that statutory requirements in
a  step-at-a-time fashion, as long as the agency stays on a path towards
full implementation.  

Under all of the circumstances described above, congressional intent is
clear – whether it is indicated by the plain language or otherwise –
and as a result, the agency must follow that  intent under Chevron step
1.  On the other hand, the agency may determine that congressional
intent on the specific issue is not clear.  In these cases, the agencies
should proceed to Chevron step 2 and select an interpretation or an
application that is a permissible construction of the statute.  This
situation generally occurs when the statutory provisions are ambiguous
or silent as to the specific issue, and there are no other indications
of clear congressional intent.  Under these circumstances, the agency is
authorized to develop and implement a construction of the statute that
the courts will uphold as long as it is reasonable.

As noted above, the D.C. Circuit, has pointed out that this situation
may also occur when the plain language leads to an absurd result, and,
in attempting to implement congressional intent, the agency is “able
to show that there are multiple ways of avoiding a statutory anomaly,
all equally consistent with the intentions of the statute’s drafters .
. . . In such a case, we would move to the second stage of the Chevron
analysis, and ask whether the agency’s choice between these options
was ‘based on a permissible construction of the statute.’”  Mova
Pharm. Corp, 140 F.3d at 1068.  As the U.S. Supreme Court has recently
said, although in a context different than “absurd results,” “ In
the end, the interpretation applied by EPA "governs if it is a
reasonable interpretation of the statute -- not necessarily the only
possible . . . interpretation, nor even the interpretation deemed most
reasonable by the courts."  Entergy Corp. v. Riverkeeper, Inc., 129
S.Ct. 1498. 1505 (2009).  

e. Interconnectedness of the Legal Doctrines

Although we believe that each of the “absurd results,”
“administrative necessity,” and “step-at-a-time” doctrine
provides independent support for our action, we also believe that in
this case, the three doctrines are intertwined and form a comprehensive
basis for EPA’s tailoring approach.  As just discussed, each of the
three doctrines is tied into Chevron analytical framework because each
is designed to give effect to underlying intent.  Each of the three
doctrines comes into play in this case because a literal reading of the
PSD and title V applicability provisions results in insurmountable
administrative burdens.  Those administrative burdens -- along with the
undue costs to sources -- must be considered “absurd results” that
would undermine congressional purpose for the PSD and title V programs. 
Under the “absurd results” doctrine, EPA is authorized not to
implement the applicability provisions literally, but instead to tailor
them in a manner consistent with congressional intent.  By the same
token, the insurmountable administrative burdens bring into play the
“administrative necessity” doctrine, which also supports the
tailoring approach.  Finally, the “step-at-a-time” doctrine provides
further support for the tailoring approach.

f. Application of Chevron approach

The Chevron analytical approach, and the three legal doctrines at issue
here, apply to this action in the following manner:  To reiterate, for
convenience, the statutory provisions at issue:  Congress, through the
definition of “major emitting facility,” applied the PSD program to
include “any … stationary sources of air pollutants which emit or
have the potential to emit, one hundred  tons per year or more or more
of any air pollutant…. [or] any other source with the potential to
emit two hundred fifty tons per year or more of any air pollutant.” 
CAA §§ 165(a), 169(1).  Similarly, Congress, through the definition of
“major source,” specified that the title V program includes “any
stationary facility or source of air pollutants which directly emits, or
has the potential to emit, one hundred tons per year or more of any air
pollutant.”  CAA §§ 502(a), 501(2)(B), 302(j).  EPA, through
long-established regulatory action, in the case of PSD, and
long-established interpretation, in the case of title V, has interpreted
these definitions so that they apply only with respect to air pollutants
that are subject to regulation under the CAA.  

For each of these two applicability provisions, the approach under
Chevron is as follows:  Under Chevron step 1, we must determine whether
Congress expressed an intention on the specific question, which is
whether the PSD or T-V applicability provisions apply to GHG sources. 
Said differently, the specific question is whether, in the case of PSD,
Congress intended that the definition of major emitting facility applies
to GHG sources that emit at least 250 CO2e; and, in the case of title V,
whether,  the definition of “major source” applies to GHG sources
that emit at least 100 tpy or more CO2e.

To determine intent, we must first examine the terms of the statute in
light of their plain meaning.  Here, the plain reading of each provision
covers GHG sources.  For PSD, a GHG source that emits at least 250 tpy
CO2e plainly qualifies as “any … other source with the potential to
emit two hundred fifty tons per year or more of any air pollutant
[subject to regulation under the CAA].”  CAA § 169(1).  Similarly,
for title V, a GHG source that emits at least 100 tpy CO2e plainly
qualifies as “any stationary facility or source of air pollutants
which directly emits, or has the potential to emit, one hundred tons per
year or more of any air pollutant [subject to regulation under the
CAA].”  CAA §§ 502(a), 501(2)(B), 302(j).  

However, applying each definition in accordance with its plain meaning
to GHG sources at the specified levels of emissions and at the present
time (i) would produce absurd results, that is, results that are not
consistent with other provisions of the PSD and title V requirements and
that are inconsistent with – and, indeed, undermine – congressional
purposes for the PSD and title V provisions; and (ii) would create
impossible administrative burdens for the permitting authorities. 
Accordingly, under the “absurd results” doctrine, neither the PSD
nor the title V definitions of “major emitting facility” or “major
source,” should be considered to have a plain meaning with respect to
their application to GHG sources.

In parsing the provisions of each definition more closely, we believe
that each has three terms, any one of which could be considered not to
have its plain meaning, in this respect.  Specifically, each provision
includes (i) the term “any … source,” and that term could be
considered not to refer literally to all of the GHG sources; (ii) the
term “two hundred fifty tons per year” or “100 tons per year,”
and those terms could be considered not to refer literally to the
tonnage amount of emissions from all of the GHG sources; and (iii) the
term “any air pollutant [subject to regulation under the CAA],” and
that term could be considered not to refer literally to the emissions
from all of the GHG sources.  As long as any one of those three terms
should be considered not to have its plain meaning as applied to GHG
sources, then the definition as a whole – again, for PSD, the term
“major emitting facility,” and for title V, the term “major
source” – cannot be considered to apply to GHG sources.  Because we
read the terms together, as integral parts of each definition as a
whole, we do not think that the choice of which of those three terms
within each definition cannot be considered to apply literally to GHG
sources has substantive legal effect.  In other words, we believe that
any one of the three terms, or all three together as part of each
definition as a whole, should be considered not to apply literally in
the case of GHG sources.

Having determined that each definition does not have a plain meaning on
the specific question of whether PSD or title V applies to GHG sources,
we must next inquire as to whether Congress has nevertheless expressed
an intent on that question through other means.  We believe that there
are two possible views about congressional intent.  The first is that
Congress did express an intent, and that was that if a type of source
– such as GHG sources – cannot be included in the PSD program or
title V program in accordance with the literal terms of the
applicability provisions, then, nevertheless, as many of those sources
should be included in the programs at as close to the statutory
thresholds as possible, and as quickly as possible.  This view about
congressional intent could be considered to be a logical inference from
the fact that Congress wrote the applicability provisions broadly.  

Under this first view, EPA would be required at Chevron step 1 to adopt
the Tailoring Rule because it most closely gives effect to Congress’s
intent that PSD and title V each apply to GHG sources at emission levels
as close to the statutory thresholds as possible and as quickly as
possible.  Even so, EPA is authorized to exercise its expert judgment as
to the best approach for phasing in the application of PSD and title V
to GHG sources.  In addition, even under this view, we believe there may
be uncertainty as to whether congressional intent to apply PSD and title
V to GHG sources extends to very small GHG sources, that is, those at or
near the statutory thresholds or whether congressional intent to apply
title V to GHG sources extends to GHG sources that would have empty
permits.

The second possible view is that Congress did not express an intent as
to the applicability of PSD and title V to GHG sources.  The lack of
plain meaning in the definitional provisions, and silence elsewhere in
the statutory provisions and legislative history, could be considered to
support this conclusion.  Under this second view, EPA has the discretion
at Chevron step 2 to adopt the Tailoring Rule because it is a reasonable
interpretation of the statutory requirements.  Here, too, EPA is
authorized to exercise its expert judgment as to the best approach for
phasing in the application of PSD and title V to GHG sources.

We do not believe it necessary to choose between these two differing
views as to congressional intent.  Although each leads to a different
analytical approach under Chevron, each also supports the Tailoring
Rule.  It should also be noted that although EPA has concluded that
applying the PSD and title V applicability provisions literally in the
case of GHG sources would produce “absurd results” and therefore is
not required, this conclusion has no relevance for applying other CAA
requirements – such as the requirements concerning endangerment and
contribution findings  under CAA section 202(a) (1) or emission
standards for new motor vehicles or new motor vehicle engines under CAA
section 202 -- to GHGs or GHG sources.  EPA’s conclusions with respect
to the PSD and title V applicability requirements are based on the
specific terms of those requirements, other relevant PSD and title V
provisions, and the legislative history of the PSD and title V programs.

Within the context of the Chevron framework, the “administrative
necessity” doctrine applies as follows:  Under the doctrine, Congress
is presumed to intend that the PSD and title V applicability
requirements  be administrable.  Here, those applicability requirements,
if applied to GHG sources in accordance with their plain meaning, would
be impossible to administer.  Accordingly, under Chevron step 1, it is
consistent with congressional intent that EPA and the permitting
authorities be authorized to implement the applicability requirements in
a manner that is administrable, that is, through the tailoring approach.
  The “step-at-a-time” doctrine applies within the Chevron framework
in much the same manner as the “administrative necessity” doctrine. 
That is, Congress is presumed to intend that EPA and the permitting
authorities may administer the PSD and title V applicability
requirements to GHG sources on a step-by-step basis, as appropriate.  . 

4.  The PSD and Title V programs

Having discussed both the factual underpinnings and, immediately above,
the legal underpinnings for our tailoring approach, we now discuss the
PSD and title V programs themselves, including, for each program, the
key statutory provisions, their legislative history, and the relevant
regulations and guidance documents through which EPA has implemented the
provisions.  We start with the PSD program.

a. The PSD program

(1)  PSD provisions

Several PSD provisions are relevant for present purposes because of the
specific requirements that they establish and the window that they
provide into congressional intent.  These provisions start with the
applicability provisions, found in CAA sections 165(a) and 169(1), which
identify the new sources subject to PSD, and CAA §111(a)(4), which
describes the modifications of existing sources that are subject to PSD.
 CAA §165(a) provides:

	No major emitting facility on which construction is commenced after
August 7, 1977, may be constructed in any area to which this part
applies unless—

	(1) a permit has been issued for such proposed facility in accordance
with this part setting forth emission limitations for such facility
which conform to the requirements of this part;

	(2) the proposed permit has been subject to a review in accordance with
this section * * *, and a public hearing has been held with opportunity
for interested persons including representatives of the Administrator to
appear and submit written or oral presentations on the air quality
impact of such source, alternatives thereto, control technology
requirements, and other appropriate considerations;

* * *

	(4) the proposed facility is subject to the best available control
technology for each pollutant subject to regulation under this chapter
emitted from, or which results from, such facility * * * *.  

The term "major emitting facility" is defined, under CAA §169(1) to
include:

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

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

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

As interpreted by EPA regulations, these provisions, taken together,
provide that new stationary sources are subject to PSD if they emit at
the 100/250-tpy thresholds air pollutants that are subject to EPA
regulation, and that existing stationary sources that emit such air
pollutants at the 100/250-tpy thresholds are subject to PSD if they
undertake a physical or operational change that increases their
emissions of such air pollutants by any amount.

Other provisions of particular relevance are the requirements for timely
issuance of permits.  The permitting authority must “grant[] or den[y]
[any completed permit application] not later than one year after the
date of filing of such completed application.”  CAA §165(c). 

In addition, the PSD provisions articulate ‘the purposes of [the PSD
program],” which are to balance environmental protection and growth. 
CAA §160.  One of the purposes, in subsection (1), is specifically
“to protect public health and welfare,” and another, in subsection
(3), is “to insure that economic growth will occur in a manner
consistent with the preservations of existing clean air resources.”  

The PSD provisions also include detailed procedures for implementation. 
Most relevant for sources of GHG are the provisions that the proposed
permit for each source must be the subject of a public hearing with
opportunity for interested persons to comment, CAA §165(a)(2), and each
source must be subject to best available control technology, as
determined by the permitting authority on a source-by-source basis, CAA
§165(a)(4), 169(3). 

(2)  PSD legislative history

The legislative history of the PSD provisions, enacted in the 1977 Clean
Air Act Amendments, makes clear that Congress was focused on sources of
criteria pollutants: primarily sulfur dioxide (SO2), particulate matter,
nitrogen oxides (NOx), and carbon monoxide (CO).  This focus stems from
the basic purpose of the PSD program, which is to safeguard maintenance
of the national ambient air quality standards (NAAQS), combined with the
limited awareness at that time of the problem of climate change.  See S
95-127 (95th Cong., 1st Sess.), at 27.

	Congress designed the PSD provisions to impose significant regulatory
requirements, on a source-by-source basis, to identify and implement
BACT and, for criteria pollutant, to also undertake certain studies. 
Congress was well aware that because these requirements are
individualized to the source, they are expensive.  Accordingly, Congress
designed the applicability provisions to apply these requirements to
industrial sources of a certain type and a certain size – sources
within 28 specified source categories and that emit at least 100 tpy --
as well as all other sources that emit at least 250 tpy, and, by the
same token, to exempt other sources from these requirements.  

	Although Congress required that CAA requirements generally apply to
“major emitting facilities,” defined as any source that emits or has
the potential to emit 100 tpy of any pollutant, Congress applied PSD to
only sources at 100 tpy or higher in 28 specified industrial source
categories, and at 250 tpy or more in all other source categories.  This
distinction was deliberate:  According to Sen. McClure, Congress
selected the 28 source categories after reviewing an EPA study
describing 190 industrial source categories.  122 Cong. Rec. 24521 (July
29, 1976) (statement by Sen. McClure).

	Congress also relied on an EPA memorandum that identified the range of
industrial categories that EPA regulated under its regulations that
constituted the precursor to the statutory PSD program, and listed both
the estimated number of new sources constructing each year and the
amount of pollution emitted by the “typical plant” in the category. 
The memorandum was prepared by B.J. Steigerwald, Director of the Office
of Air Quality Planning and Standards and Roger Strelow, EPA’s
Assistant Administrator for Air and Waste Management
(“Steigerwald-Strelow  memorandum).  The Steigerwald-Strelow
memorandum makes clear that the 100 tpy cut-off for the 28 listed
sources categories, and the 250 tpy cut-off for all other sources, was
meaningful; that is, there were a large number of sources below those
cut-offs that Congress explicitly contemplated would not be included in
PSD.  Id. at 24548-50.

Consistent with this, the legislative history on the Senate side also
specifically identified certain source categories that Senators believed
should not be covered by PSD.  The Senate bill language limited PSD to
sources of 100 tpy or more in 28 listed source categories, and to any
other categories that the Administrator might add.  Sen. Muskie stated
that the Senate bill excluded “houses, dairies, farms, highways,
hospitals, schools, grocery stores, and other such sources.”  123
Cong. Rec. 18021 (June 8, 1977) (statement of Sen. Muskie).  Sen.
McLure’s list of excluded source categories were ”[a] small gasoline
jobber, or a heating plant at a community college, [which] could have
the potential to emit 100 tons pf pollution annually.”  122 Cong. Rec.
24548-49 (July 29, 1976) (statement of Sen. McClure).  The Senate
Committee Report included a comparable list, and in describing it,
concisely articulated the cost-conscious basis for the line-drawing:
“[the PSD] procedure … must include an effective review-and-permit
process.  Such a process is reasonable and necessary for very large
sources, such as new electrical generating plants or new steel mills. 
But the procedure would prove costly and potentially unreasonable if
imposed on construction of storage facilities for a small gasoline
jobber or on the construction of a new heating plant at a junior
college, each of which may have the potential to emit 100 tons of
pollution annually.”  S. Rpt. 95-127 at 96-97.

The enacted legislation differs from the Senate bill by replacing the
authorization to EPA to include by regulation source categories in
addition to the listed 28 source categories with an inclusion of all
other sources if they exceed 250 tpy, and with an authorization for the
states to exempt hospitals and educational institutions.   But
Congress’s overall intention remains clear, as the D.C. Circuit
described in Alabama Power:.  "Congress's intention was to identify
facilities which, due to their size, are financially able to bear the
substantial regulatory costs imposed by the PSD provisions and which, as
a group, are primarily responsible for emissions of the deleterious
pollutants that befoul our nation's air….[With respect to] the heating
plant operating in a large high school or in a small community college .
. . [w]e have no reason to believe that Congress intended to define such
obviously minor sources as 'major' for the purposes of the PSD
provision."  636 F.2d at 353-54.  

	A particularly important indication of congressional intent to limit
PSD to larger sources comes in considering the emissions profile of the
small-sized boilers.  Congress focused closely on identifying which
sources with emissions in excess of 100 tpy should not be subject to PSD
even though they are subject to Clean Air Act requirements generally. 
But Congress viewed a large set of sources as emitting below 100 tpy and
therefore not included in the PSD program and, indeed, not even subject
to debate as to whether they should be included in the PSD program. 
Chief among these sources, in terms of absolute numbers of sources, were
small boilers.  The Steigerwald-Strelow memorandum identified two
categories of these boilers, differentiated by size.  The first ranges
in size from 10 to 250 x 106 Btu/hr, and has a “typical plant” size
of 107 Btu/hr, with “BACT emissions from typical plant” of 53 tpy,
and a total of 1,446 sources in the category.  The second category
ranges in size from 0.3 to 10 x 106 Btu/hr, and has a “typical
plant” size of 1.3 x x 106 Btu/hr, with “BACT emissions from typical
plant” of 2 tpy, and a total of 11,215 sources in the category.  The
memorandum discusses these two categories in the context of explaining
which source categories exceed a size of 100 tpy -- and therefore would
be subject to PSD if a 100 tpy threshold were set -- by stating,
“Fortunately, most truly small boilers and typical space heating
operations would not be covered.”  122 Cong. Rec. 24549 (July 29,
1976).  

	 The legislative history also provides a window into the scope of the
program that Congress anticipated and related administrability concerns.
 According to the Steigerwald-Strelow memorandum, the number of new
sources each year whose “BACT emissions from typical plant” exceed
100 for the 28 listed source categories and 250 for all other source
categories is less than 100 per year.  Although the Steigerwald-Strelow
memorandum does not attempt to estimate the number of modifications, it
appears that based on this information, Congress had reason to expect
the total size of the PSD program to be measured in the hundreds of
permits each year.  A program of this size would be manageable by EPA
and the permitting authorities.  

	For convenience, the Steigerwald-Strelow memorandum is included in the
docket as docket number ______.

(3)  PSD regulatory history:  Regulations concerning the definition of
“major stationary source”

EPA’s initial rulemaking implementing the PSD program was proposed and
finalized in 1977-1978, immediately after enactment of the PSD program. 
This rulemaking made explicit that the entire PSD program – including
the permitting component (with air quality review) – applied to only
pollutants regulated under the Act.  EPA accomplished this by requiring
each “major stationary source” to obtain a PSD permit, and by
defining a “major stationary source” as a source that is included in
a specified source category or that is of a specified size and that
emits at least a specified amount of “any air pollutant regulated
under the Clean Air Act.”  43 FR 26,380, 26,403/3, 26,406 (June 19,
1978) (promulgating 40 CFR 51.21(b)(1)(i) ).  See 42 FR 57,479, 57,480,
57,483 (Nov. 3, 1977) (proposing 40 CFR 51.21(b)(1)(i)).  Similarly, the
regulations required each “major stationary source” to apply “best
available control technology”  for “each pollutant subject to
regulation under the act.” 43 FR at 26,406 (promulgating 40 CFR
51.21(j), 52.21(b)(10)).  EPA acknowledged that for regulatory purposes,
it was replacing the term that appears in the statute –  “major
emitting facility,” CAA § 169(l) – with the term “major
stationary source,” and explained that it was doing so in order “to
reflect current EPA terminology.”  42 FR at 57,480 (Nov. 3, 1977). 
EPA did not discuss that the statutory term “major emitting
facility” – which refers to “any air pollutant” – differs from
EPA’s regulatory term “major stationary source” – which refers
more narrowly to “any air pollutant regulated under the [CAA].”  In
the preamble to the final rule, EPA did not indicate that it had
received any comments on the issue.  See 43 FR 26,388 (June 19, 1978). 

In 1979-1980, EPA revised the PSD program to conform to Alabama Power v.
Costle, 636 F.2d 323 (D.C. Cir. 1980).  44 FR 51,924 (Sept. 5, 1979)
(proposed rule); 45 FR 52,676 (Aug. 7, 1980) (final rule).  In this
rulemaking, EPA did not disturb the pre-existing provisions (including
the definitions of “major stationary source” and BACT) that limited
the applicability of the PSD program to regulated air pollutants.  In
addition, EPA did not discuss – or indicate that commenters had raised
– any issues concerning the difference between the narrower definition
of “major stationary source” in the regulations and the statutory
definition that could be broader under a literal reading.

In 1996 EPA proposed, and in 2002 finalized, a set of amendments to the
PSD (and nonattainment NSR) provisions that included revisions to
conform with the 1990 Act Amendments, which, in relevant part, exempted
hazardous air pollutants from PSD, under CAA § 112(b)(6).  See 61 FR
38,250 (July 23, 1996), 67 FR 80,186 (Dec. 31, 2002).  In the preamble
to the final rule, EPA noted that based on a request from a commenter,
EPA was amending the regulations to “clarify which pollutants are
covered under the PSD program.”  EPA accomplished this by promulgating
a definition for “regulated NSR pollutant,” which listed categories
of pollutants regulated under the Act, and by substituting that defined
term for the  phrase “pollutants regulated under the Act” that was
previously used in various parts of the PSD regulations.   67 FR at
80,240.    The definition of “regulated NSR pollutant” includes
several categories of pollutants (including, in general, NAAQS
pollutants and precursors, pollutants regulated under CAA §111 new
source performance standards, Class I or II substances regulated under
CAA title VI) and a catch-all category, “[a]ny pollutant that
otherwise is subject to regulation under the Act.”  E.g., 40 CFR
52.21(b)(50).  EPA again did not address the difference between the
definition of “major emitting facility” and its regulatory approach
or indicate that it had received comments on this issue.

b. Title V program

Having reviewed the key statutory provisions, their legislative history,
and the relevant administrative interpretations for the PSD program, we
now do the same for the title V program.  

i. Title V provisions

The key title V provisions for present purposes start with the
applicability provisions, which are found in CAA §§502(a), 501(2)(B),
and 302(j).  These provisions provide that it is unlawful for any person
to operate a "major source" without a title V permit, §502(a), and
define a "major source" to include "any major stationary facility or
source of air pollutants which directly emits, or has the potential to
emit, one hundred tons per year or more of any air pollutant."  CAA
§501(2)(B) and §302(j).  As noted elsewhere, these provisions, taken
together and as interpreted by EPA, provide that stationary sources are
subject to title V if they emit at the 100-tpy threshold air pollutants
that are subject to EPA regulation.

In addition, although title V does not have a set of provisions
describing its purpose, it is clear from its provisions and its
legislative history, discussed below, that its key goal is to gather
into one permitting mechanism the Clean Air Act requirements applicable
to a source and impose conditions necessary to assure compliance with
such requirements, and thereby promote the enforceability of CAA
requirements applicable to the covered sources.  CAA §503(b)(1)
requires that the source’s permit application contain a compliance
plan describing how the source will ”comply with all applicable
requirements” of the CAA, and §504(a) requires that “[e]ach permit
issued under [title V] shall include  * * *  such * * * conditions as
are necessary to assure compliance with applicable requirements of [the
Clean Air Act].”  See H.R. Rep. No. 101–490, at 351 (1990) (‘‘It
should be emphasized that the operating permit to be issued under this
title is intended by the Administration to be the single document or
source of all of the requirements under the Act applicable to the
source.’’).

Importantly, title V is replete with provisions designed to make the
permitting process as efficient and smooth-running as possible,
including the expeditious processing of permit applications and the
timely issuance of permits.  CAA §503(c) requires that “the
permitting authority shall approve or disapprove a completed application
* * * and shall issue or deny the permit, within 18 months after the
date of receipt thereof * * * *”  CAA §502(b)(6) requires the
permitting authority to develop “adequate, streamlined, and reasonable
procedures for expeditiously determining when applications are complete,
for processing such applications, for public notice * * * and for
expeditious review of permit actions, including * * * judicial review in
State court of the final permit action by [specified persons].”  CAA
§502(b)(7)  

includes a “hammer” provision designed to reinforce timely permit
issuance, which is that the permitting authority’s program must
include:

To ensure against unreasonable delay by the permitting authority,
adequate authority and procedures to provide that a failure of such
permitting authority to act on a permit application or permit renewal
application (in accordance with the time periods specified in [CAA
§503] * * *) shall be treated as a final permit action solely for
purposes of obtaining judicial review in State court of an action
brought by any person referred to in paragraph (6) to require that
action be taken by the permitting authority on such application without
additional delay.

CAA §502(b)(8) requires the permit program to include “[a]uthority
and reasonable procedures consistent with the need for expeditious
action by the permitting authority on permit applications and related
matters, to make available to the public [certain permit-related
documents]”. CAA §502(b)(9) requires a permit revision to incorporate
requirements promulgated after issuance of the permit, but only if the
permit is for a major source and has a term of three or more years
remaining.  In addition, the revision must occur “as expeditiously as
practicable.”  CAA §502(b)(10) requires the permit program to include
operational flexibility provisions that “allow changes within a
permitted facility . . . without requiring a permit revision, if the
changes are not modifications . . . and . . . do not exceed the
emissions allowable under the permit. . . .”

In addition, title V includes a comprehensive and finely detailed
implementation schedule that mandates timely issuance of permits while
building in EPA and affected state review, public participation, and
timely compliance by the source with reporting requirements.  Following
the date that sources become subject to title V, they have one year to
submit their permit applications.  CAA §503(c).  As noted above, the
permitting authority then has 18 months to issue or deny the permit. 
CAA §503(c).  Permitting authorities must provide an opportunity for
public comment and a hearing.  CAA §502(b)(6).  If the permitting
authority proposes to issue the permit, the permitting authority must
submit the permit to EPA, and notify affected states, for review.  CAA
§505(a)(1).  EPA then has 45 days to review the permit and, if EPA
deems it appropriate, to object to the permit. CAA §505(b)(1).  If EPA
does object, then the permitting authority must, within 90 days, revise
it to meet the objections, or else EPA becomes required to issue or deny
the permit.  CAA §505(c).  If EPA does not object, then, within 60 days
of the close of the 45-day review period, any person may petition EPA to
object, and EPA must grant or deny the petition within 60 days.  CAA
§505(b)(2).  If a permit is issued, it must include a permit compliance
plan, under which the permittee must “submit progress reports to the
permitting authority no less frequently than every 6 months,” and must
“periodically (but no less frequently than annually) certify that the
facility is in compliance with any applicable requirements of the
permit, and [] promptly report any deviations from permit requirements
to the permitting authority.”  CAA §503(b).

ii.. Title V legislative history

(I). Scope of title V

The legislative history of title V, enacted by Congress in the 1990 CAA
Amendments, indicates the scope of the program that Congress expected: 
Congress expected the program to cover some tens of thousands of
sources, which would approximate the scope of the permit program under
the Clean Water Act.  The Senate Committee on Environment and Public
Works stated:

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

S. Rep. 101–228, at 353 (1990).   Sen. Mitchell, the Senate Majority
Leader, stated that he expected “over 10,000 permits [to] . . . be
issued under this program.” 136 Cong. Rec. S3233-03 (March 27, 1990). 
Others in Congress had similar estimates.  See, e.g., 136 Cong. Rec.
S3162-04 (“thousands and thousands of permit applications … will be
required to be submitted”) (statement of Sen. Nickles)..

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

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

House Committee Report, H.R. 101-590, at 354.  In this manner, the House
Committee Report made clear that it expected “millions of … small
businesses” -- including “furniture makers, dry cleaners” and many
others -- to benefit from the CAA section 507 small source/small
business program, but Congress did not expect them to become subject to
the operating permit requirements of title V because their emissions
fell below 100 tpy, which is, in general, the threshold for title V
applicability.

The legislative history of title V confirms that Congress viewed a
principal purpose of title V as providing a vehicle to compile the
requirements applicable to the source.  As the report of the House
Committee on Energy and Commerce (“House Committee Report”) stated,
‘‘It should be emphasized that the operating permit to be issued
under this title is intended by the Administration to be the single
document or source of all of the requirements under the Act  applicable
to the source.” H.R. Rep. No. 101–490, at 351 (1990).  Combined with
the source’s reporting requirements, this compilation of applicable
requirements would facilitate public awareness of a source’s
obligations and compliance and would facilitate compliance and
enforcement.

On the Senate side, Sen. Chafee, one of the floor managers of the bill,
made a similar point:

The permits will serve the very useful function of gathering and
reciting in one place -- the permit document itself -- all of the duties
imposed by the Clean Air Act upon the source that holds the permit. This
would clearly be an improvement over the present system, where both the
source and EPA must search through numerous provisions of state
implementation plans and regulations to assemble a complete list of
requirements that apply to any particular plant….

Once these permits are in place, plant managers will be better able to
understand and to follow the requirements of the Clean Air Act. At the
same time, EPA will be better able to monitor how well each plant is
complying with those requirements. This is a highly sensible approach
for all concerned.

136 Cong. Rec. S2030-02 (March 5, 1990) (statement of Sen. Chafee). 
Sen. Lieberman made a similar statement.  136 Cong. Rec. 3162-04 (March
26, 1990) (statement of Sen. Lieberman).  Thus, a central purpose of the
title V permit program is to compile all the requirements applicable to
the source into a single place, the permit.  Implicit in this purpose is
that the sources subject to title V will have applicable requirements to
be compiled.  As Sen. Chafee directly stated, “[T]he vast majority of
these permit applications will … , in all likelihood, only codify the
existing requirements of the applicable State implementation plan.”
136 Cong. Rec. S2715-04 (March 20, 1990) (statement of Sen. Chafee).  

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

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

136 Cong. Rec. H12883 (Oct. 26, 1990) (statement of Rep. Wyden).  See
e.g., 136 Cong. Rec.  H2511-02 (May 212, 1990) (statement of Rep. Wyden)
(discussing need to “help small businesses through the air permit
labyrinth”).

	The legislative history also indicates that Congress was deeply
concerned both about the need not to burden sources with undue costs and
to assure the administrability of the title V program, and as a result,
was determined to make the program as smooth-running as possible.  These
goals are reflected in many of the title V requirements, as discussed
above.  See, e.g., 

CAA §502(b)(6) (requiring “adequate, streamlined, and reasonable
procedures for expeditiously determining when applications are complete,
for processing such applications, for public notice * * * and for
expeditious review of permit actions); CAA §502(b)(7) (includes a
“hammer” provision designed to reinforce timely permit issuance);
CAA §502(b)(9)-(10) (limiting circumstances under which permit revision
is required; requiring revision to occur “as expeditiously as
practicable;” including operational flexibility provisions).  

The legislative history confirms that these provisions were designed to
reduce costs to sources and promote administrability.  The
“Chafee-Baucus Statement of Senate Managers” for the bill  explained
the purpose of the CAA section 502(b)(6) requirement for “[a]dequate,
streamlined, and reasonable procedures for expeditious[]” permit
actions as follows:  

[M]uch concern has been expressed that this new permitting process will
unduly delay the proper functioning of many sources, and we intend to
mitigate any delay by directing that the process be expeditious.

 In addition to this general directive for expeditious processing, we
mandate in new section 503 that permitting authorities approve or reject
permit applications within certain specified time periods following
filing. In this fashion, we have taken explicit steps to protect against
undue delays.

136 Cong. Rec. S16895-01 [S16938?] (statement of Sen. Chafee).  The same
statement explained that the permit revision procedures of CAA section
502(b)(9) reflect a –

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

136 Cong. Rec. 16895-01 (Oct. 27, 1990) (Chafee-Baucus statement of
Senate Managers) (statement of Sen. Chafee).

	In addition, these concerns were at the bottom of the following
statement by Sen. Chafee, in which he described how the bill’s
drafters had revised it in response to a concern by industry that an
earlier version of the bill would have put undue costs on industry:  

We have also heard concerns from industry that S. 1630 would burden
sources unduly by requiring them to submit-along with their permit
applications-plans explaining how they intend to comply with all
requirements of the Clean Air Act that apply to them.

But, Mr. President, we emphatically do not intend to burden industry
with preparation and submission of unnecessary compliance plans. The
substitute clarifies that any compliance plans would address only those
matters by which the sources would comply with new requirements imposed
by this act as it is finally signed into law. These plans would not need
to address compliance with any existing Clean Air Act requirements,
unless the source is in violation of those requirements.

136 Cong. Rec. S2030-02 (March 5, 1990) (statement of Sen. Chafee).  

As another indication of congressional concern over administrability,
Congress recognized that at the beginning of the program, large numbers
of permit applications might overwhelm the permitting authorities.  To
protect against this, Congress included in CAA section 503(c) a phase-in
schedule for permitting authorities to act on the initial set of permit
applications.  Under 503(c), permitting authorities were not required to
act on the initial set of permit applications within 18 months after it
received the application, but rather could act on one-third of them on
an annual basis over a three-year period.  Sen. Chafee, in describing an
early version of this provision – which would have allowed permitting
authorities to phase-in the submission of permit applications –
explained that its purpose was “to avoid a logjam of permit
applications[,] … ensure that [regulatory] gridlock can be avoided,
and [ensure] that the permitting process will work with a minimum of
disruption and delay.”  136 Cong. Rec.,S2106 (March 5, 1990)
(statement of Sen. Chafee).

 

(3)  Title V regulatory history 

	Congress enacted title V as part of the 1990 Clean Air Act Amendments. 
Under its applicability provisions, as discussed above, title V applies
to any “major source,” defined, as relevant here, under CAA sections
501(2)(B) and 302(j), as “any stationary facility or source of air
pollutants which directly emits, or has the potential to emit, one
hundred tons per year or more of any air pollutant....”  

	EPA’s regulations mirror the CAA definitional provisions.  The
regulations provide that a title V program must provide for permitting
“[a]ny major source,” 40 CFR 70.3(a), defined, as relevant here, as
“[a] major stationary source of air pollutants, as defined in section
302 of the Act, that directly emits or has the potential to emit, 100
tpy or more of any air pollutant….” 40 CFR 70.2.

	However, since 1993, EPA has interpreted the applicability provisions
more narrowly.  At that time, shortly after title V was enacted, EPA
issued a guidance document making clear that it interprets this
requirement to apply to sources of pollutants “subject to
regulation” under the Act.  EPA previously articulated its
interpretation that this title V permitting requirement applies to
“pollutants subject to regulation” in a 1993 memorandum from EPA’s
air program.  Memorandum from Lydia N. Wegman, Deputy Director, Office
of Air Quality Planning and Standards, U.S. EPA, “Definition of
Regulated Air Pollutant for Purposes of Title V” (Apr. 26, 1993)
(Wegman Memorandum).  The interpretation in this memorandum was based
on: (1) EPA’s reading of the definitional chain for “major source”
under title V, including the definition of “air pollutant” under
section 302(g) and the definition of “major source” under 302(j);
(2) the view that Congress did not intend to require a variety of
sources to obtain title V permits if they are not otherwise regulated
under the Act (see also CAA section 504(a), providing that title V
permits are to include and assure compliance with applicable
requirements under the Act); and (3) consistency with the approach under
the PSD program.  

While the specific narrow interpretation in the Wegman Memorandum of the
definition of “air pollutant” in CAA section 302(g) is in question
in light of the holding in the Massachusetts case (finding this
definition to be “sweeping”), EPA believes the core rationale for
its interpretation of the applicability of title V remains sound.  EPA
continues to maintain its interpretation, consistent with CAA sections
302(j), 501, 502 and 504(a), that the provisions governing title V
applicability for “a major stationary source” can only be triggered
by emissions of pollutants subject to regulation.  This interpretation
is based primarily on the purpose of title V to collect all regulatory
requirements applicable to a source and to assure compliance with such
requirements, see, e.g., CAA section 504(a), and on the desire to
promote consistency with the approach under the PSD program.

	In the Tailoring Rule notice of proposed rulemaking, EPA acknowledged
the Wegman Memorandum and affirmed the memorandum’s continued
viability, stating that “EPA continues to maintain this
interpretation.”  74 Fed. Reg. 55,300, col. 3, fn. 8; see also 75 Fed.
Reg. at 17022-23 (Interpretive Memorandum Reconsideration).

5.   Application of the “absurd results” doctrine for the PSD
program

Having reviewed the factual background, legal doctrines, and the key
components of the PSD and title V programs, we now turn towards
interpreting the PSD and title V requirements in accordance with the
Chevron framework, accounting for the applicable legal doctrines.  We
begin with the “absurd results” doctrine, and apply it first to the
PSD requirements.

In this action, we finalize, with some refinements, the “absurd
results” basis we proposed.  Specifically, we are revising our
regulations to limit PSD applicability to GHG emitting sources by
revising the regulatory term, “major stationary source,” and
although our revised regulations do not accord with a literal reading of
the statutory provisions for PSD applicability, which are incorporated
into the definition of “major emitting facility,” we have concluded
that based on the “absurd results” doctrine, a literal adherence to
the terms of this definition is not required.  A literal adherence would
not reflect congressional intent for PSD applicability.  Instead, we may
limit PSD applicability for GHG emitting sources through the tailoring
approach because that either best reflects or at least reasonably
reflects congressional intent.

a. Congressional Intent for PSD Program

To reiterate, for convenience, CAA §169(1) defines a “major emitting
facility” to include “any … source[] [that] emit[s], or ha[s] the
potential to emit, [depending on the source category], one hundred [or
two hundred fifty] tons per year or more or more of any air
pollutant.”  CAA § 169(1).  We also reiterate that, as discussed
above, beginning with our initial rulemaking in 1977-1978 to implement
the PSD program we have narrowed this definition by reading into it the
limitation that a source is subject to PSD only if the air pollutants in
question are subject to regulation under another Clean Air Act
provision.  We have maintained this approach to the present time through
several additional rulemaking actions, albeit with refinements not here
relevant, and in all the various rulemakings, our approach has never
been seriously questioned by stakeholders.  As the U.S. Supreme Court
recently stated in upholding an EPA approach in another context: 
“While not conclusive, it surely tends to show that the EPA’s
current practice is a reasonable and hence legitimate exercise of its
discretion . . . that the agency has been proceeding in essentially this
fashion for over 30 years.”  Entergy Corp. v. Riverkeeper, Inc., 129
S.Ct. 1498, 1509 (2009) (citations omitted).  Under the current
regulations, PSD applies to a “major stationary source” (a term that
EPA employed as  the regulatory implementation of the statutory term,
“major emitting facility”), which is defined as a source that, in
general “emits, or has the potential to emit, [depending on the source
category], 100 [or 250] tons per year or more of any regulated NSR
pollutant,” 51.166(b)(1)(i)(a)-(b); and the term  “regulated NSR
pollutant” includes, in general, pollutants regulated under the NAAQS,
the NSPS, and title VI, as well as “[a]ny pollutant that is …
subject to regulation under the Act.” 51.166(b)(49)(iv).   EPA is not
re-opening this regulation or its interpretation in this action.

Under the current interpretation of the PSD applicability provision,
EPA’s recent promulgation of the light-duty vehicle rule will trigger
the applicability of PSD for GHG sources at the 100/250 tpy threshold
levels as of January 2, 2011.  This is because PSD applicability hinges
on the definition of “major emitting facility,” which, under EPA’s
long-standing narrowing interpretation, but absent further tailoring,
applies PSD to sources of any air pollutant subject that is subject to
regulation under another provision of the CAA.  EPA’s promulgation of
the light-duty vehicle rule means that GHGs will become subject to
regulation on the date that the rule takes effect, which will be January
2, 2011. 

But absent tailoring, the January 2, 2011 trigger date for GHG PSD
applicability will subject an extraordinarily large number of sources,
more than 81,000, to PSD each year, an increase of almost 300-fold.  And
the great majority of these new sources will be small commercial or
residential sources. We believe that for many reasons, this result is
anathema to congressional intent for the PSD program, and in fact would
severely undermine what Congress sought to accomplish with the program. 
As a result, under our Chevron analysis, accounting for the “absurd
results” doctrine, the statutory definition for “major emitting
facility” (as narrowed to include “subject to regulation”) should
not be read to apply to all GHG sources at or above the 100/250 tpy
threshold as of the January 2, 2011 date.  Rather, the definition of
“major emitting facility” should be tailored so that it applies to
GHG sources on a phased-in basis, with the largest sources first, as we
describe in this rule.

As explained above, Chevron  step 1 calls for a determination of
congressional intent, and the courts consider the best indicator of
congressional intent to be the plain meaning of the statute.  However,
the U.S. Supreme Court has held that the plain meaning of a statutory
provision is not conclusive “in the ‘rare cases [in which] the
literal application of a statute will produce a result demonstrably at
odds with the intentions of the drafters’ … [in which case] the
intention of the drafters, rather than the strict language, controls.”
United States v. Ron Pair Enterprises, 489 U.S. 235, 242 (1989).  To
determine whether “the intentions of the . . . drafters” differ from
the result produced from “literal application” of the statutory
provisions in question, the courts may examine the overall context of
the statutory provisions, including whether there are related statutory
provisions that either conflict or are consistent with that
interpretation, and including whether there is legislative history that
exposes what the legislature meant by the terms in question.  In
addition, the courts may examine whether a literal application of the
provisions produces a result that the courts characterize variously as
absurd, futile, strange, or indeterminate, and therefore so illogical or
otherwise contrary to sensible public policy as to be beyond anything
Congress would reasonably have intended. In such cases, the literal
languge cannot be said to reflect the intention of the drafters, and
therefore does not control.  See United States v. Ron Pair Enterprises,
489 U.S. 235, 242-43 (1989); Griffin v. Oceanic Contractors, Inc., 458
U.S. 564, 571 (1982). 

	Here, applying the definition of “major emitting facility” without
tailoring – that is, applying PSD to GHG sources at the 100/250 tpy
level without tailoring -- would be contrary to congressional intent as
found in the statutory provisions and legislative history, especially as
those provisions and history are viewed in light of the results that
would occur from applying PSD to those sources.   Congress established
the PSD program in large measure because it was concerned that around
the country, industrial development, which was confronting barriers
locating in nonattainment areas (that is, areas that do not meet the
NAAQS), would attempt to locate in clean air areas (that is, attainment
areas or unclassifiable areas), but that as a consequence, the clean air
areas would see their air quality deteriorate to the point where they,
too, would no longer meet the NAAQS.  The end result would be the spread
of environmental and health problems to those formerly clean air areas,
as well as more barriers to further industrial development.  With these
concerns in mind, Congress designed the PSD program to have a primary
focus of requiring newly constructing or modifying sources in areas with
air quality that meets the NAAQS (or that is unclassifiable) to analyze
their emissions of NAAQS pollutants and to implement controls as needed
to assure that those emissions do not significantly deteriorate air
quality.  Many of the PSD requirements, and much of the discussion in
the legislative history, reflect these aspects of the PSD program. 
E.g., CAA sections 162, 163, 164, 165(a)(3), 165(d)(2), 165(e), 166; see
generally H. Rep. 95-294, 95th Cong., 1st Sess. (1977)  103-78.

Congress also designed the PSD program to impose controls on non-NAAQS
pollutants, through the requirement under CAA section 165(a)(4) that the
source be “subject to the best available control technology
[(“BACT”)]for each pollutant subject to regulation under this
chapter emitted from, or which results from, such facility.”  For
example, when Congress enacted the PSD provisions in 1977, sources
emitting hazardous air pollutants (“HAPs”) were required to
implement BACT for those pollutants, although in the 1990 Clean Air Act
Amendments, Congress redesigned CAA section 112, which includes the
requirements for HAPs, and excluded HAPs from PSD.  CAA § 112(b)(6).

Congress was keenly aware that the PSD program needed to serve two
purposes:  protect the environment and promote economic growth. 
Congress explicitly identified these two goals in the “purposes”
section of the PSD provision, CAA § 160, and various PSD requirements
clearly reflect them.  For example, to protect economic growth, the PSD
program includes a one-year limitation on the time that the permitting
authority has act on permit applications.  To protect the environment,
in addition including many provisions that focus on NAAQS pollutants,
the PSD program requires that the preconstruction permit impose emission
limits that reflect best available control technology (“BACT”) for
each pollutant subject to regulation under another CAA provision
implement.  CAA section 165(a)(4).  This BACT provision also makes
clear, by its terms, that although Congress designed the PSD program
primarily with NAAQS pollutants in mind, Congress also intended that
sources subject to PSD to control the emissions of their other
pollutants.  The D.C. Circuit has recognized the twin goals of
environmental protection and economic development that underlie PSD, and
has upheld EPA interpretations of the PSD program that reflect a
balancing of those goals.  See, e.g., New York v. EPA, 413 F.3d 3, 27
(D.C. Cir.), rehearing en banc den. 2005 U.S. App. LEXIS 27103, (2005). 

Congress was also keenly aware that the PSD analyses and controls that
it was mandating had to be implemented on a source-by-source basis, and
that this process would be expensive for sources.  As a result, Congress
intended to limit the PSD program to large industrial sources because it
was those sources that were the primary cause of the pollution problems
in question and because those sources would have the resources to comply
with the PSD requirements.  Congress’s mechanism for limiting PSD was
the 100/250 tpy threshold limitations.  Focused as it was primarily on
NAAQS pollutants, Congress considered sources that emit NAAQS pollutants
in those quantities generally to be the large industrial sources to
which it intended PSD be limited.

That Congress paid careful attention to the types and sizes of sources
that would be subject to the PSD program and designed the thresholds
deliberately to limit the program’s scope is evident from the
legislative history.  The Senate side saw floor statements and
discussion on several occasions, as well as discussion in the Committee
Report, all of which were clear in their insistence that PSD should
apply to small sources, particularly commercial and residential sources:
 As discussed below, Congress scrutinized information that EPA provided
as to types and sizes of sources, found largely in the
Steigerwald-Strelow memorandum.  Sen. Muskie stated that the Senate bill
excluded “houses, dairies, farms, highways, hospitals, schools,
grocery stores, and other such sources.”  123 Cong. Rec. 18021 (June
8, 1977) (statement of Sen. Muskie).  Sen. McLure stated that PSD shuld
be limited to “industrial plants of significant impact,” and should
exclude ”[a] small gasoline jobber, or a heating plant at a community
college, [which] could have the potential to emit 100 tons pf pollution
annually.”  122 Cong. Rec. 24548-49 (July 29, 1976) (statement of Sen.
McClure).  The Senate Committee Report mirrored Sen. McClure’s
statement, and concisely articulated the cost-conscious basis for the
line-drawing: “[the PSD] procedure … must include an effective
review-and-permit process.  Such a process is reasonable and necessary
for very large sources, such as new electrical generating plants or new
steel mills.  But the procedure would prove costly and potentially
unreasonable if imposed on construction of storage facilities for a
small gasoline jobber or on the construction of a new heating plant at a
junior college, each of which may have the potential to emit 100 tons of
pollution annually.”  S. Rpt. 95-127 at 96-97.

The D.C. Circuit had occasion, in Alabama Power, to acknowledge this
legislative history:  "Congress's intention was to identify facilities
which, due to their size, are financially able to bear the substantial
regulatory costs imposed by the PSD provisions and which, as a group,
are primarily responsible for emissions of the deleterious pollutants
that befoul our nation's air." Alabama Power, 636 F.2d at 353.  The
Court added, “Though the costs of compliance with [the PSD]
requirements are substantial, they can reasonably be borne by facilities
that actually emit, or would actually emit when operating at full
capacity, the large tonnage thresholds specified in section 169(1).”. 
Id. at 354.

It is not too much to say that applying PSD requirements to GHG sources
without tailoring the definition of “major emitting facility” would
result in a program that would have been unrecognizable to the Congress
that designed PSD.  Congress intended that PSD be limited to a
relatively small number of large industrial sources.  Without tailoring
– that is, without phasing in PSD and title V applicability to GHG
sources so as to allow the development of streamlining methods and
increases in permitting authority resources -- the PSD program would
expand by January 2, 2011 from the current 280 sources per year to
almost 82,000 sources, all of which would be smaller than the sources
currently in the PSD program and most of which would be small commercial
and residential sources.  Until EPA could develop streamlining methods,
all of the sources that would become newly subject to PSD – whether
larger or smaller sources, whether industrial or commercial/residential
sources -- would have to undergo source-specific BACT determinations for
their GHG emissions, as well as their emissions of conventional
pollutants in amounts in excess of the significance levels.  We estimate
that the commercial and residential sources would incur, on average,
almost $60,000 in PSD permitting expenses.  This result would be
anathema to Congress’s careful efforts to confine PSD to large
industrial sources.

	A closer look at the legislative history confirms the view that
sweeping in large numbers of small commercial and residential sources is
precisely what Congress thought it was avoiding by establishing the
100/250 tpy thresholds.  As noted above, Congress relied on an EPA
memorandum – the Steigerwald-Strelow memorandum -- that identified the
range of industrial categories that EPA regulated under its program that
constituted the precursor to the statutory PSD program, and listed both
the estimated number of new sources constructing each year and the
amount of pollution emitted by the “typical plant” in the category. 
The Steigerwald-Strelow memorandum makes clear that the 100 tpy cut-off
for the 28 listed sources categories, and the 250 tpy cut-off for all
other sources, would exclude from PSD a large number of sources.  122
Cong. Rec. 24548-50 (July 29, 1976).  However, virtually all of these
sources in the 28 source categories emit carbon dioxide in quantities
that equal or exceed the 100/250 tpy thresholds, and therefore would be
swept into PSD through application of the “major emitting facility”
definition, without tailoring.  For example, we estimate that over
700,000 commercial facilities and 180,000 residential facilities would
exceed a PTE emission level for CO2 of 250 tpy.

Most telling, in this regard, is the small-sized boilers.  The
Steigerwald-Strelow memorandum identified two categories of these
boilers, differentiated by size.  The first ranges in size from 10 to
250 x 106 Btu/hr, and has a “typical plant” size of 107 Btu/hr, with
“BACT emissions from typical plant” of 53 tpy, and a total of 1,446
sources in the category.  The second category ranges in size from 0.3 to
10 x 106 Btu/hr, and has a “typical plant” size of 1.3 x x 106
Btu/hr, with “BACT emissions from typical plant” of 2 tpy, and a
total of 11,215 sources in the category.  The memorandum discusses these
two categories in the context of explaining which source categories
exceed a size of 100 tpy -- and therefore would be subject to PSD if a
100 tpy threshold were set -- by stating, “Fortunately, most truly
small boilers and typical space heating operations would not be
covered.”  122 Cong. Rec. 24549 (July 29, 1976).  However, these data
and conclusions were all based on emissions of NAAQS pollutants, the
amounts of which placed these boilers well below the PSD threshold
limitations.  In general, most boilers of these small sizes are fired
with natural gas, and a natural gas boiler greater than 0.5 x 106 Btu/hr
emits at least 250 tpy CO2.  If the CO2 emissions of these small boilers
are considered – as would occur by applying the definition of “major
emitting facility” without tailoring -- then most of them would in
fact be subject to PSD.  Again, this result would directly contravene
Congress’s intention to limit PSD to “industrial plants of
significant impact.”  122 Cong. Rec. 24548-49 (statement of Sen.
McClure).  Industry raised significant concerns about the cost of PSD
permitting if the statutory threshold were to apply for GHG emissions. 
One commenter estimated a cost of over $5 billion and the dedication of
over 17,000 FTEs to this effort.  

	Perhaps the most compelling reason why applying the PSD program to GHG
sources without tailoring, and before the development of streamlining
methods, would be inconsistent with congressional intent, is that the
resulting program would prove unadministrable.  Although the legislative
history of the PSD program does not reveal explicit congressional
concern about administrability issues, the Steigerwald-Strelow
Memorandum, which identifies the source categories and numbers of
sources that were before Congress as it considered PSD, suggests that
the program that Congress fashioned could be expected to cover at most a
few thousand sources each year.  Moreover, the Alabama Power court
acknowledged the importance of administrability concerns:  The Court
based its holding that potential-to-emit for purposes of the
applicability thresholds should be defined as emissions at full capacity
with implementation of control equipment, in part on its view that with
this definition, the number of sources subject to PSD would be
manageable:

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

Alabama Power, 636 F.2d at 354.  

	However, applying PSD to GHG sources without tailoring would increase
the size of the PSD program at least an order of magnitude beyond what
Congress could have had any reason to expect, which would have been far
beyond the “administrative capability” that Alabama Power described
EPA as having.

Beyond this disconnect with congressional expectations, what is most
important is that the extraordinarily large number of permit
applications would overwhelm permitting authorities and slow their
ability to process permit applications to a crawl.  Our best estimate at
present is that permitting authorities would need to process almost
82,000 permit applications per year, compared to, at most, 800 in the
current PSD program.  The total additional workload, in workhours, for
PSD permits would be more than 19.5 million more work hours, compared to
150,795 work hours for the current PSD program, and the total additional
costs for would be over $1.5 billion, compared with $12 million for the
current PSD program.

At proposal, we noted that the states had estimated that the influx of
permit applications that would result from applying the 250 tpy
threshold at actual emissions would, without additional resources,
result in permitting delays of three years.  In fact, as we noted at
proposal, a literal reading of the PSD requirements would require their
application at the 250 potential to emit level, which would result in
ten times more permit applications than were assumed when the States
made the three-year estimate.  Further, our current estimates of the
numbers of sources that would be subject to PSD requirements are about
twice what we estimated at proposal, as described elsewhere.  Moreover,
our estimate of  the number of hours that permitting authorities would
need to process a permit application from a source in the commercial or
residential sector – which is, by far, the largest single sector –
is three and one-half times as long as we estimated at proposal.   And
under a literal reading of the statutory provisions, the permitting
authorities would be required to implement a program of this size
beginning on January 2, 2011, less than nine months from now.

In light of these burdens, it is difficult to overstate the impact that
applying PSD requirements  literally to GHG sources as of January 2,
2011, without tailoring, would have on permitting authorities, on the
PSD program, and, more broadly, on economic development.  The number of
permits that would be required from such an approach is so far beyond
what has ever been seen that it is difficult to develop a meaningful
picture of what the permitting program would look like, except to say
that throughout the country, PSD permit issuance would be unable to keep
up with the flood of incoming applications, resulting in delays that
would only grow worse over time, as far into the future as the eye can
see.  Because PSD is a preconstruction program, during this time, tens
of thousands of sources each year would be prevented from constructing
or modifying.  In fact, it is reasonable to assume that many of those
sources will be forced altogether to abandon plans to construct or
modify.  This can be expected to be true for virtually all PSD
applicants, from the small commercial and residential sources to the
large industrial sources.  As a result, a literal application of the PSD
applicability provisions to GHG sources would have the effect of a
virtual nationwide construction ban extending for years, with all of the
adverse effects that this would have on economic development.  

The only possible remedies for this dismal scenario would be for
permitting authorities to increase their PSD funding by over 100-fold,
from $12 million to over $1.5 billion, or the development by EPA and the
permitting authorities of streamlining techniques.  But it is simply
inconceivable that permitting authorities could increase their funding
to those levels or anything close to them in the foreseeable future,
partly because of the sheer magnitude of those levels and partly because
of the financial challenges that States currently face.  And, for the
reasons discussed below, streamlining offers genuine promise to improve
the manageability of the PSD workload, but not in the very near term and
not to an extent that has yet come into focus.  

So clear are at least the broad outlines of this picture that EPA did
not receive any substantive comments arguing that permitting authorities
could in fact administer the PSD program with the applicability
requirements applied literally to GHG sources beginning in the very near
future.  Every permitting authority that addressed this issue in their
comments on the proposed GHG Tailoring Rule stated unequivocally that it
could not administer the PSD program at the statutory levels.  For
example, NACAA, which represents air pollution control agencies in 53
states and territories, provided comments on the proposed GHG tailoring
rule that stated it “…agrees with the EPA that immediately
attempting to implement the PSD and title V programs using the statutory
thresholds meets the test for invoking the administrative necessity and
absurd results doctrines.”  Similarly, the California Air Resources
Board in their comments on the  proposed tailoring rule stated that it
“…concurs with the U.S. EPA that if more appropriate applicability
thresholds [as opposed to the statutory thresholds] are not set for GHG
it will not be administratively possible to implement these [the PSD and
tile V] permitting programs”.   All other state and local permitting
agencies that commented on the proposed tailoring provided similar
comments that they would not have the adequate staff capacity or
resources to be able to successively administer their permitting
programs with the addition of GHG emission sources at the statutory
thresholds for PSD and title V.  

It is the many-year delays in permit issuance and the consequent
chilling of economic development that provide perhaps the clearest
indication that applying the PSD applicability provisions to GHG sources
without tailoring produces absurd results.  These effects would
undermine one of Congress’s central purposes in establishing the PSD
program, which was to promote development in clean air areas by large
industrial sources (as long as they included environmental safeguards). 
As discussed above, this goal is manifest in the structure of the PSD
provisions, and Congress even went so far as to make this goal explicit
in the purposes section of the PSD provisions.  But even if Congress had
not been so clear, it is simply inconceivable that Congress could have
intended the PSD program to be applied in a way that would cause such
damage to the national economy.  

Moreover, at the present time, there is little environmental benefit in
subjecting large numbers of small GHG sources to PSD permitting
requirements.  They represent a relatively small share of the GHG
inventory and the control options available to them, at present, are
limited.  As a result, approaches other than source-by-source permitting
presently offer more promise for generating emissions reductions in an
efficient manner.  These approaches, which ,may be developed through
both Federal and State efforts, include requirements, incentives, and
educational outreach to promote efficiency improvements to boilers and
furnaces and energy efficient operations, including, for example,
weatherization programs.   

	For all these reasons, interpreting the definition of “major emitting
facility” literally -- that is, as EPA has narrowed it, but without
tailoring – would produce results that are not be consonant with, and,
in fact, would severely undermine, congressional intent for the PSD
program.  These results may fairly be characterized as the type of
absurd results that supports our view that the literal terms of the PSD
applicability provisions do not indicate congressional intent for how
those provisions should applied to GHG sources.

b. EPA’s reconciliation of applicability provisions with congressional
intent

EPA may tailor the definition of “major emitting facility” as
applied to GHG sources because doing so best effectuates congressional
intent, or at least, constitutes a reasonable construct of the statutory
provisions.  This tailoring will allow a window of time for EPA and the
permitting authorities to develop methods to streamline PSD requirements
and to ramp up permitting authority resources, which will allow for an
orderly expansion of the PSD program to cover more GHG sources over time
in a way that is manageable for both source and permitting authority.

(1) Congressional intent as applied to PSD applicability to GHG sources

To determine how the PSD program should apply to GHG sources, it is
important first to ascertain what would be congressional intent for
applying the program to GHG sources.    Congress wrote the applicability
provisions broadly, so that by their terms they would sweep in sources
of many types of pollutants, but most of the PSD provisions and the
legislative history indicate that Congress was primarily focused on
NAAQS pollutants.  Even so, nothing in statutory provisions provide
conclusively that GHG emissions -- or other non-NAAQS pollutants –
when emitted in the appropriate quantity may never trigger PSD
applicability, and nothing in the legislative history indicates that
Congress intended such a result.  In addition, it is clear that Congress
expected PSD to be limited to large industrial sources – which are the
sources whose emissions are most important for air quality purposes --
but no provision explicitly imposes that limitation.  Congress’s
reasoning was that large industrial sources are best suited to handle
the resource-intensive analyses required by the PSD program, but it is
conceivable that under certain circumstances, other sources could manage
the PSD requirements as well.  Finally, it is reasonable to read into
Congress’s intent that the PSD program be limited to a size that
permitting authorities would be able to administer, but the permitting
authorities could take certain steps – including adoption of
streamlining measures and ramping up resources – that would allow them
to handle a higher volume of permitting.

Accordingly, at present, we believe that congressional intent may be
characterized as applying PSD to sources of any pollutants that are
subject to regulation as long as those sources can reasonably be
expected to manage PSD’s requirements and as long as the resulting
numbers of permits can be reasonably accommodated by permitting
authorities.  As a result, for reasons described above, we believe that
it is not consonant with congressional intent to apply the PSD program
to GHG sources at the 100/250 tpy level as soon as January 2, 2011, when
GHGs become subject to regulation through the light-duty vehicle rule. 
However, it is consonant with congressional intent to apply the PSD
program to GHG sources on a schedule that begins with the largest GHG
sources and gradually includes smaller sources over time.  Thus, under
this view, the tailoring approach is justified under Chevron step 1. 
However, even under this view of congressional intent, we are not
certain at present whether congressional intent can be said to be clear
that the smallest of the GHG sources – those emitting at or near the
statutory thresholds – should be included in the PSD program.  As
noted elsewhere, we may explore this issue further in subsequent
rulemaking.

On the other hand, we recognize that it may also be concluded that
congressional intent with respect to applying PSD to the entire universe
of GHG sources is unclear.  Under these circumstances, the tailoring
approach is justifiable under Chevron step 2 as a reasonable
interpretation of the statutory requirments.  

(2) Criteria for establishing phase-in schedule

The phase-in schedule will depend on several things.  The first is our
progress in developing streamlining methods that will render the
permitting authority workload more manageable by taking some sources off
the table (through regulations or guidance interpreting “potential to
emit”), and by allowing for more efficient permit processing (through
general permits and presumptive BACT).  At the same time, streamlining
techniques will lower permitting costs to sources or even eliminate some
sources’ obligations to obtain permits altogether.  The second is the
time that permitting authorities need to ramp up their resources in an
orderly and efficient manner to manage the additional workload.  The
third is information we have as to the sources’ abilities to meet the
requirements of the PSD program and the permitting authorities’
ability to process permits in a timely fashion.  That information will
be based on the real-world experience the permitting authorities will
accumulate as they proceed to process permit application for the larger
GHG sources.  

Thus, under our present approach, we will develop streamlining
techniques, we expect the permitting authorities to ramp up resources,
and we will gather real world- information about the GHG permitting
process; and based on all that, we will expand the PSD program in a
step-by-step fashion to include more sources over time.  We intend to
follow this process to establish both the PSD applicability thresholds
and, as we describe next, the significance levels.  

(3)  Criteria for establishing significance levels

	The criteria for establishing the significance levels are the same as
for establishing the major emitting facility thresholds.  As noted
above, under the applicable CAA sections, any physical or operational
change at a stationary source that “increases the amount of any air
pollutant emitted by such source” or that results in the emission of a
new pollutant is treated as a “modification” that is subject to PSD
requirements.  Although the CAA, by its terms, treats as an
“increase[]” any amount of emissions that is greater than zero, the
D.C. Circuit held in Alabama Power v. Costle that EPA may establish a
threshold – called the significance level – on de minimis grounds
for the amount of any particular pollutant that may be increased. 636
F.2d at 400. EPA has established significance levels for various
pollutants and has generally established a de minimis basis for them. 
See, e.g., 45 Fed. Reg. 52,676, 52,705 – 52,710 (August 7, 1980)   In
addition, the Court in Alabama Power authorized EPA to use an
“administrative necessity” basis for establishing significance
levels. 636 F.2d. at 400.

To this point, we have not attempted to determine de minimis levels for
GHGs.  Instead, in today’s rulemaking, EPA is establishing a phase-in
schedule for significance levels based on the “absurd results”
doctrine or, alternatively, as discussed below, the “administrative
necessity” doctrine.  It is not necessary to establish a permanent de
minimis level in today’s rulemaking, and attempting to do so would
give rise to administrability problems.  This is because we are
considering establishing the major emitting facility threshold for step
3 as low as the 50,000 tpy CO2e level, as discussed elsewhere, and of
course, we could eventually establish a lower level.  Our present view
is that we do not have the authority to establish the de minimis level
higher than the major emitting facility threshold.  Accordingly, at
present if we were to establish a permanent significance level on a de
minimis basis,that level would be relatively low and would result in too
many small sources submitting permit applications while the phase-in is
occurring.  This would give rise to the same problems concerning undue
costs to the sources and administrative burdens for the permitting
authorities for which we are fashioning a remedy.  Accordingly, the
significance levels we establish with this action are the lowest levels
that sources and permitting authorities can reasonably be expected to
implement at the present time in light of the costs to the sources and
the administrative burdens to the permitting authorities.  

Our rationale for the implementation schedule is based on the combined
burdens for both PSD and Title permitting purposes.  As a result, we
discuss our rationale below, after first describing the “absurd
results” basis for our action concerning title V applicability to GHG
sources.

c. Other possible approaches to reconciling literal reading of PSD
applicability provisions and congressional intent

In addition, we recognize that commenters have suggested other
approaches to reconciling the inconsistency between the definition of
“major emitting facility” and congressional intent.  For example,
some commenters urged that the “major emitting facility” definition
should be applied so that only sources that emit NAAQS pollutants in the
requisite quantities would be subject to PSD, and sources would not be
subject to PSD based solely on their emissions of non-NAAQS pollutants. 
Some commenters argue that this approach is mandated by several of the
PSD provisions, read together, or at least that the relevant statutory
provisions are ambiguous and that this approach is a reasonable reading
of them.  Under this approach, we would not need to phase in the
application of PSD by lowering the applicability threshold for GHG
emitters.  

Specifically, many commenters questioned whether EPA has the authority
to regulate GHGs under the PSD provisions. Although the specific lines
of reasoning varied somewhat from one commenter to another, in general,
they based their arguments largely on CAA sections 161 and 165(a). 
Under CAA section 161:

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

Commenters point out that section 107 applies only to NAAQS pollutants
and directs that areas be designated as attainment, nonattainment, or
unclassifiable on a pollutant-by-pollutant basis.

Under CAA section 165(a), a “major emitting facility” cannot be
constructed “in any area to which this part applies” unless it meets
certain requirements.  According to some commenters, these provisions,
read together, limit PSD to being triggered only for NAAQS pollutants
that are emitted from sources in areas that are designated attainment or
unclassifiable for those pollutants.  

Some commenters go on to take the position that NAAQS pollutants for
which the area is designated attainment or unclassifiable are the only
pollutants that can be regulated under any provision of PSD; while
others take the position that once PSD is triggered for a source, then
other, non-NAAQS, pollutants may be regulated under other PSD
provisions, in particular, the BACT provision under CAA section
165(a)(4).  These commenters agree, however, that emissions of GHGs, by
themselves, cannot trigger PSD applicability.   Finally, some commenters
state that even if the PSD provisions cannot be read by their terms to
preclude GHGs from triggering PSD, then they can be read to authorize
EPA to determine that GHG emissions should not trigger PSD.

We recognize, as we have said elsewhere, that a primary purpose of the
PSD provisions is to regulate emissions of NAAQS pollutants in an area
that is designated attainment or unclassifiable for those pollutants. 
However, we do not read CAA sections 161 and 165(a), read in context
with the PSD applicability provisions, as limiting PSD applicability to
those pollutants.  The key PSD applicability provision is found in
section 165(a), which states, “No major emitting facility on which
construction is commenced after August 7, 1977, may be constructed in
any area to which this part applies unless [certain requirements are
met].  A “major emitting facility” is defined, under CAA section
169()(1), as “any … stationary source[] which emit[s], or ha[s] the
potential to emit, one hundred [or, depending on the source category,
250] tons per year or more of any air pollutant.”  As discussed
elsewhere, EPA has long interpreted the term “any air pollutant” to
refer to “any air pollutant subject to regulation under the CAA,”
and for present purposes, will continue to read the “subject to
regulation” phrase into that term.

Although section 165(a) makes clear that the PSD requirements apply only
to sources located in areas designated attainment or unclassifiable, it
does not, by its terms, state that the PSD requirements apply only to
pollutants for which the area is designated attainment or
unclassifiable.  Rather, 165(a) applies, by its terms, more broadly to
any pollutant that is subject to regulation.  Moreover, two other
requirements in CAA section 165(a) apply to pollutants broadly.  Under
CAA section 165(a)(3), one of the requirements for securing a
preconstruction permit is to demonstrate that the source’s emissions
“will not cause, or contribute to, air pollution in excess of any (A)
[NAAQS increment to which the PSD requirements apply], (B) [NAAQS] in
any air quality control region, or (C) any other applicable emission
standard or standard of performance under this chapter.”  Subparagraph
(B), by its terms, applies to NAAQS pollutants for which the area is
designated nonattainment, and therefore are outside of the PSD program. 
Most importantly, subparagraph (C), by its terms and its differentiation
from NAAQS pollutants under subparagraph (C), clearly applies to
non-NAAQS pollutants.  For example, by its terms this provision requires
a demonstration that a landfill seeking a PSD permit will comply with
emission limitations for “municipal solid waste landfill emissions.”
 

In addition, CAA section 163(a)(4) includes as a PSD requirement that
“the proposed facility is subject to the best available control
technology for each pollutant subject to regulation under this chapter
emitted from, or which results from, such facility.  Section
163(a)(4)’s broad reference to  “each pollutant subject to
regulation under this chapter” strongly indicates that it applies to
non-NAAQS pollutants, as long as they are regulated under other
provisions of the Act.  Indeed, the very existence of this provision
makes clear that Congress knew how to limited the scope of “any air
pollutant” when it intended to do so.

To return to sections 161 and 165(a), which commenters rely on as the
cornerstone of their argument, commenters in effect take the position
that Congress intended the geographic references in these provisions –
that is, the references to areas designated as attainment or
unclassifiable – to limit the scope of the permitting provisions.  We
think it unpersuasive that Congress would have taken such an indirect,
and silently implied, route to limit the scope of the permitting
provisions, which, as noted above, apply broadly by their terms.  Had
Congress intended to limit PSD permitting in the manner urged by
commenters, it certainly could have done so directly, such as by
limiting PSD permitting to “any pollutant for which an area is
designated attainment or unclassifiable.”  Indeed, in other sections
of the CAA, Congress did directly limit the scope of pollutant
applicability by specifiying which pollutants are or are not subject to
the provision.  See, e.g., 111(d) (performance standards for existing
sources apply only to pollutants other than NAAQs or hazardous air
pollutants), 112(a)(1) (applying air toxics requirements in section 112
to sources that emit above the specified tonnage thresholds of
“hazardous air pollutants”).

In addition, although section 161 requires that SIPs contain emission
limitations and other measures as necessary to prevent significant
deterioration in areas designated as attainment or unclassifiable, it
does not limit SIPs to only those measures.  Moreover, section 161
should be read in conjunction with section 110(a)(2)(C), which
establishes the basic requirement that SIPs include PSD requirements. 
Section 110(a)(2)(C) provides that each SIP shall --

Include a program to provide for the enforcement of the measures
described in subparagraph (A), and regulation of the modification and
construction of any stationary source within the areas covered by the
plan as necessary to assure that [NAAQS] are achieve, including a permit
program as required in parts C and D of this subchapter. 

Subparagraph (A), in turn, requires SIPs to include “enforceable
emission limitations and other control measures, means, or techniques
… as may be necessary or appropriate to meet the applicable
requirements of this chapter”.  It is clear from subparagraph (C) of
section 110(a)(2), read in conjunction with subparagraph (A), that SIPs
may contain provisions to meet requirements other than those related to
the NAAQS (that is, subparagraph (A) requires control measures “to
meet the applicable requirements of this chapter”), and that SIPs must
include “a permit program as required in part[] C.”  That permit
program, in turn, must include the requirements in section 165(a)(3)(C)
and (4) that, by their terms, apply to non-NAAQS pollutants.

A further indication that the PSD requirements apply to non-NAAQS
pollutants may be found in Congress’s addition in the 1990 CAA
Amendments of the limitation in section 112(b)(6) that “The provisions
of part C of this subchapter (prevention of significant deterioration)
shall not apply to pollutants listed under this section,” that is,
hazardous air pollutants.  By adding this provision, Congress clearly
recognized that hazardous air pollutants had been subject to the PSD
provisions.  The D.C. Circuit, in Alabama Power v. Costle, 636 F.2d 323,
361 n.90 (D.C. Cir. 1980) indicated that PSD applies to hazardous air
pollutants.

In addition, it should not be overlooked that we have applied PSD to
non-NAAQS pollutants since the inception of the program over 30 years
ago.  For example, prior to the 1990 CAA Amendments, PSD applied to
hazardous air pollutants regulated under CAA section 112; and over the
years, EPA has established significance levels for fluorides, sulfuric
acid mist, hydrogen sulfide, total reduced sulfur, reduced sulfur
compounds, municipal waste combustor organics, municipal waste combustor
metals, municipal waste combustor acid gases, and municipal solid waste
landfill emissions, see 40 CFR 51.166(b)(23)(i); and EPA has proposed a
significance level for ozone depleting substances.  See 61 Fed. Reg.
38,307/2 (July 23, 1996). Of course, the basis for all these actions is
PSD’s applicability to these non-NAAQS air pollutants.  We are not
aware that EPA’s actions in establishing significance levels for these
pollutants gave rise to challenges on grounds that the PSD provisions do
not apply to them.  

Accordingly, we reject the argument that section 165 must be, or may
reasonably be, limited in scope to pollutants for which an area has been
designated as attainment or unclassifiable.  Rather, the PSD
applicability provision – the definition of “major emitting
facility” in CAA section 169(1) – applies by its terms (as we have
narrowed them through regulation) to sources emitting any air pollutant
subject to regulation, and is not limited to any NAAQS air pollutant.  
Our research has not disclosed any explicit statements in the
legislative history that Congress intended to limit PSD applicability to
sources of NAAQS pollutants.

We recognize, as we discuss at length elsewhere in today’s notice,
that applying the PSD applicability provisions literally to GHG sources
is not consistent with, and in fact would undermine, congressional
intent.  We further believe that the tailoring approach we adopt in this
rulemaking most closely gives effect to congressional intent and
therefore best reconciles the statutory provisions with congressional
intent.

In any event, we did not include the NAAQS approach as advocated by
commenters in our notice of proposed rulemaking, and so we could not
proceed to adopt it in today’s final action.  However, we are not
inclined to reject the possibility that some approach other than the
phase-in approach that we adopt today could merit further exploration
under the “absurd results” doctrine.  Therefore, while we will
proceed to implement the approach described in today’s rulemaking, we
intend to publish a supplemental notice of proposed rulemaking in the
near future, in which we solicit additional comment on whether we have
authority to adopt some other approach under the “absurd results”
doctrine on grounds of consistency with congressional intent.  If we
decide to change our approach, that could have important ramifications
for whether we will promulgate lower thresholds in step 3 or
subsequently.  

6.  Application of the “absurd results” doctrine for the title V
program 

	Having discussed the application of the Chevron framework, taking
account of the “absurd results” doctrine, for the PSD applicability
requirements, we now turn towards applying the same approach to the
title V applicability requirements.  Because of the parallels between
the PSD and Title applicability provisions, much of the discussion below
parallels the discussion above of PSD.  As with PSD, we finalize, with
some refinements, the “absurd results” basis we proposed. 
Specifically, we are revising our regulations to limit title V
applicability to GHG emitting sources by revising the regulatory term,
“major source,” and although our revised regulations do not accord
with a literal reading of the statutory provisions for title V
applicability, which are incorporated into the statutory definition of
“major source,” we have concluded that based on the “absurd
results” doctrine, a literal adherence to the terms of this definition
is not required.  A literal adherence would not reflect congressional
intent for title V applicability.  Instead, we may limit title V
applicability for GHG emitting sources in a way that is reasonably
reflective of congressional intent.

	To reiterate, for convenience, the title V applicability provisions
provide that after the effective date of a title V program, it is
unlawful for any person to operate a "major source" without a title V
permit, §502(a), and define a "major source" to include "any major
stationary facility or source of air pollutants which directly emits, or
has the potential to emit, one hundred tons per year or more of any air
pollutant."  CAA §501(2)(B) and §302(j).

Under the current interpretation of the title V applicability provision,
EPA’s recent promulgation of the light-duty vehicle rule will trigger
the applicability of title V for GHG sources at the 100 tpy threshold
levels as of Jan. 2, 2011.  This is because title V applicability hinges
on the definition of “major source,” which, under EPA’s
long-standing narrowing interpretation, but absent further tailoring,
applies title V to sources of any air pollutant that is subject to
regulation under another provision of the CAA.  EPA’s promulgation of
the light-duty vehicle rule means that GHGs will become subject to
regulation on the date that the rule takes effect, which will be January
2, 2011. 

But absent tailoring, the January 2, 2011 trigger date for GHG PSD
applicability will see an extraordinarily large number of sources --
some 6.1 million --  become subject to title V, an increase of over
400-fold over the 14,700 sources that currently are subject to title V
each year.  The great majority of these new sources will be small
commercial or residential sources.

We believe that for many reasons, this result is anathema to
congressional intent for the title V program, and in fact would severely
undermine what Congress sought to accomplish with the program.  As a
result, under Chevron, accounting for the “absurd results” doctrine,
the statutory definition for “major source” (as EPA has already
narrowed it to refer to any air pollutant “subject to regulation”)
should not be read to apply to all GHG sources at or above the 100 tpy
threshold as of the January 2, 2011 date.  Rather, the definition of
“major source” should be tailored so that it applies to GHG sources
on a phased-in basis, with the largest sources first, as we describe in
today’s rule.

a. Congressional Intent for Title V Program 

Applying the definition of “major source” without tailoring – that
is, applying title V to GHG sources at the 100 tpy level without
tailoring -- would be contrary to congressional intent as found in the
statutory provisions and legislative history, especially as those
provisions and history are viewed in light of the results that would
occur from applying title V to those sources. 

As we said, above, in a similar circumstance involving the PSD program,
applying title V requirements to GHG sources without tailoring the
definition of “major source” – and, as discussed below, without
streamlining the title V requirements or allowing for time for
permitting authorities to ramp up resources -- would result in a program
unrecognizable to the program that Congress intended, and one that would
be flatly unadministrable.  Without tailoring, the PSD program would
expand from the current 14,700 sources to some 6.1 million, with the
great majority of the sources being small commercial and residential
sources that not only have never been permitted before, but that in many
cases have no applicable requirements under the Clean Air Act to include
in the permit.  In the next several sections, we will walk through some
of the specific ways that this literal application of title V would not
only differ from, but would undermine, congressional intent.  But the
big picture is readily drawn:  The influx of millions of permit
applications would do nothing less than overwhelm the program Congress
finely crafted for thousands of sources, with its multi-step deadlines
measured in days and months, its multiple mandates for expeditious
permit processing, its nuanced limitations on the need for permit
revisions, its efforts to save smaller sources permit fees.  Regulatory
gridlock, precisely what Congress strove to avoid, would result.

	Most visibly, interpreting the applicability provisions literally to
include GHG sources at the 100/250 tpy levels would revise the program
from what Congress envisioned in three major ways, each of which was
discussed above:  

It would expand the program to cover several-hundred-fold more sources
than Congress anticipated

It would expand the program to cover very small sources that Congress
expected would not be included in the program

It would expand the program so that the large majority of sources have
empty permits, that is, permits without applicable requirements.

Revising the program in this way through a literal interpretation of the
applicability 

provisions – without tailoring the applicability requirements and
without streamlining of program requirements -- is clearly inconsistent
with Congress’s conception of the program’s scope, and these
inconsistencies are nothing less than foundational.  Most importantly,
the program that would result would be unduly costly to sources and
impossible for permitting authorities to implement, and therefore would
frustrate the purposes that Congress intended to achieve with the
program that it did design.

As discussed above, Congress was fully aware that with the title V
program, it was subjecting sources and permitting authorities to
additional costs and administrative burdens, and it was fully aware of
concerns that absent careful design, the program could become a formula
for regulatory gridlock.   Determined to make the program workable,
Congress crafted the provisions to be efficient and workable.  

However, if title V were to apply to GHG sources at the 100 tpy level,
until EPA could develop streamlining methods, all of these sources newly
subject to title V would need to apply for permits.  We estimate that
the commercial and residential sources would incur, on average, expenses
of $23,370, while an industrial source would incur expenses of $46,350,
to prepare a permit application and receive a permit.  The great
majority of these sources would be small commercial and residential
sources of the type that Congress did not expect would be included in
title V, and we estimate that the great majority of them would not have
applicable Clean Air Act requirements to include in their permits.  The
overall cost to all 6.1 million sources would be a staggering $49
billion.  Imposing burdens of this magnitude on these sources –
individually and in total – would of course be contrary to
Congress’s efforts to minimize the expenses of title V, especially to
small sources.  The magnitude of the costs is, in a sense, heightened
because a great many of these sources will not have applicable
requirements to include in their permits; therefore, much of the costs
will produce little benefit.  

	Yet, the most important reason why applying the title V program to GHG
sources without tailoring, and before the development of streamlining
methods, would be inconsistent with congressional intent, is that the
resulting program would prove unadministrable.  Adding some 6.1 million
permit applications to the 14,700 that permitting authorities now handle
would completely overwhelm permitting authorities, and for all practical
purposes, bring the title V permitting process to a standstill.

	The costs to permitting authorities of this multi-million-source
program would again be staggering.  On average, and without
streamlining, a permitting authority would expend 214 hours, which would
cost $9,844, to issue a permit to a commercial or residential source;
and 428 hours, which would cost $19,688, to issue a permit to an
industrial source.  In all, permitting authorities would face over $21
billion in additional permitting costs each year due to GHGs, compared
to the current program cost of $62 million each year.

Beyond this disconnect with congressional expectations as to scope of
the program, what is most important is that the extraordinarily large
number of permit applications would overwhelm permitting authorities and
slow their ability to process permit applications to a crawl.  As
described at proposal, the survey of permitting authorities found that a
literal application of the title V applicability provisions to GHG
sources would result in permitting delays of some ten years.  However,
as we further noted at proposal, this estimate was based on the
assumption that the applicability threshold would be 100 tpy actual
emissions; in fact, the applicability threshold would be 100 tpy in
potential to emit, which would sweep in many more sources.  Moreover, as
stated elsewhere, we currently estimate the amount of per-permit work
hours for permitting authorities in processing title V permit
applications to be several times higher than what we estimated at
proposal.  As with PSD, such a program is so far beyond anything within
our experience that it is difficult to give a meaningful estimate for
how long the permitting process would take for each permit on average,
but it is clear that the period would be many years.

More specifically, applying title V to GHG sources without tailoring
would be in tension with a specific CAA requirement, that of CAA §
503(c), which imposes a time limit of 18 months from the date of receipt
of the completed permit application for the permitting authority to
issue or deny the permit.  It would be flatly impossible for permitting
authorities to meet this statutory requirement if their workload
increases from some 14,700 permits to 6.1 million.  Instead, as just
noted, permit applications would face multi-year delays in obtaining
their permits.

Moreover, these delays would undermine the overall statutory design that
promotes the smooth-running of the permitting process, and the very
purpose of the title V program itself.  As noted elsewhere, Congress
intended through title V to facilitate compliance by establishing an
operating permit program that requires the source to combine all of its
CAA requirements, and explain how it will assure compliance with such
requirements.  Congress established a comprehensive process to implement
the operating permit program. Through this process, following the date
that sources become subject to title V, they have one year to submit
their permit applications.  CAA §503(c).  As noted, the permitting
authority then has 18 months to issue or deny the permit.  CAA §503(c).
 Permitting authorities must provide an opportunity for public comment
and a hearing.  CAA §502(b)(6).  If the permitting authority proposes
to issue the permit, the permitting authority must submit the permit to
EPA, and notify affected states, for review.  CAA §505(a)(1).  EPA then
has 45 days to review the permit and, if EPA deems it appropriate, to
object to the permit. CAA §503(b)(1).  If EPA does object, then the
permitting authority must, within 90 days, revise it to meet the
objections, or else EPA becomes required to issue or deny the permit. 
CAA §503(c).  If EPA does not object, then, within 60 days of the close
of the 45-day review period, any person may petition EPA to object, and
EPA must grant or deny the petition within 60 days.  CAA §505(b)(2).
This set of applicant, permitting authority, and EPA actions and
deadlines establishes the process for the prompt and efficient issuance
of operating permits for the appropriate universe of sources.

In addition, only a small fraction of these millions  of sources will be
subject to any CAA requirements due to their GHG emissions, and we
suspect that the majority will not be subject to any CAA requirements at
all, so that although they would need to apply for and receive a permit,
there would be no applicable requirements to include in the permit and
thus the exercise would not improve compliance.  But at least for an
initial period, until resources could be ramped up and streamlining
methods could be developed, the extraordinary numbers of these sources
would sweep aside Congress’s carefully constructed program, and
instead, backlog the permit authorities.  The large numbers involved
mean that this initial period would last for many years because it would
take that long to raise the requisite funds and hire and train the
necessary employees, as well as, as discussed elsewhere, develop and
apply streamlining measures.  Therefore, multi-year delays in issuance
of all permits would ensue, for both the sources that have applicable
requirements and that Congress clearly intended the program to cover,
and for the millions of sources that may not be subject to any
applicable requirements.  Thus, a literal interpretation of the title V
threshold provisions would apply title V to millions of sources that
Congress did not intend be covered, and the ensuing administrative
burdens – at least initially -- would impede the issuance of permits
to the thousands of sources that Congress did intend be covered.  This
result is the type of “absurd results” from a literal application of
statutory provisions that the courts have held should be avoided.  And
even beyond all that, the sheer magnitude of the numbers involved–
millions of permits requiring thousands of FTEs at a cost to the
permitting authorities of billions of dollars, all occurring at the time
that GHGs become subject to regulation – makes clear that this, the
result of a literal application of the PSD provisions to GHG sources is
not what Congress in fact intended or could conceivably have intended.

b.  EPA’s reconciliation of applicability provisions with
congressional intent

EPA has concluded that the impacts of applying the literal definition of
“major source” to GHG sources are inconsistent with, and in fact
undermine, congressional intent for the applicability of the title V
program.  Therefore, under the Chevron framework, accounting for the
“absurd results” doctrine, EPA may tailor the definition of the
program to be more consistent with congressional intent.  This section
explains the principles and approach EPA is using to accomplish that
tailoring so as to be consistent with congressional intent and to
respond to other approaches to reconciling that were suggested by
commenters.

This final rule reconciles the definition of “major source” – as
narrowed through EPA interpretation -- with congressional intent by
applying the definition to include as many of the sources that would be
included under the terms of the definition as promptly as possible,
consistent with the intent of the statute as illuminated by the
legislative history.  This means that we intend to phase in title V
applicability to sources, based on their size, over time.  The specific
schedule will depend on information we have as to the permitting
authorities’ ability to process permits in a timely fashion.  That
information will be based on the real-world experience the permitting
authorities will accumulate as they proceed to process permit
application for the larger GHG sources, coupled with the size of their
resources.  In addition, we intend to vigorously pursue streamlining
methods, so as to make title V more accessible for more sources moving
down the size scale.  

Thus, under our present approach, we will gather information about the
permitting authorities’ ability to process permits, and we will
develop streamlining techniques, and, based on that information, expand
the title V program in a step-by-step fashion to include more sources
over time.  Each step will be based on our assessment of the permitting
authorities’ and sources’ ability to comply with their respective
obligations under the title V program.

	We recognize that the availability of permit fees to support title V
permit actions creates a potentially important source of resources, and
that this has implications for the permitting authorities’ ability to
implement the title V program for sources of GHGs.  At least in theory,
permitting authorities could assess and collect sufficient fees to
support hiring and training sufficient personnel so that they could
expand their programs to match the expansion in the number of sources
covered by the program.

Even so, title V fees cannot be considered a panacea that will resolve
all resource problems that permitting authorities will have, for several
reasons.  Permitting authorities will likely be constrained as to the
rate in which they can increase fees in light of the costs to sources. 
As indicated elsewhere, at least at the outset of the program before
streamlining techniques have been developed, a literal application of
the title V applicability provisions to GHG sources would, on average,
cost each industrial source $46,400 and each commercial or residential
source $23,200 to complete the permit application and take other
associated actions, and it would cost each permitting authority, on
average, $19,678 to process the industrial source permit and $9,839 to
process the commercial or residential source permit.  Particularly in
light of the high costs to sources of applying for a permit, it is not
likely that permitting authorities would be able to pass on to the
sources in the form of fees the permitting authorities’ own high costs
for processing those permits, at least not right away.  Even if it were
possible to raise permit fees, permitting authorities would have to
undergo a process to assess and impose  those fees, then collection of
those fees, and then the hiring and training of personnel.  The survey
from the state and local agencies described above forecast a two-year
period for hiring and training, without counting time for the process of
assessing and imposing fees.  For these reasons, we do not believe that
the authorization for fees will allow the permitting authorities either
to accelerate Steps 1 or 2 of the tailoring schedule or to permit a
larger number of sources at those steps.  Step 1 will take effect on
January 2, 2011, step 2 will take effect on July 1, 2011, and the
process for determining and collecting fees, and then hiring and
training personnel will take at least several years after July 1, 2011. 

Moreover, we do not believe that the authorization for fees means that
permitting authorities can reasonably be expected to permit title V
sources at levels below 50,000 tpy CO2e before 2016.  The next level
below 50,000 tpy CO2e for which we have data is 25,000 tpy CO2e, and the
costs to permitting authorities to run their programs at that level
($126 million) is more than double their current costs ($62 million). 
We do not consider it reasonable to expect permitting authorities to
more than double their program within the first six years of  title V
applicability to GHG sources.  That it is not reasonable to expect that
is made even clearer when the permitting authorities’ burdens in
implementing their PSD programs are considered.  The ability of
permitting authorities to impose fees may have more important
implications for subsequent steps, and as we address those subsequent
steps, we will consider the fees.  EPA’s approach to fees in this
rulemaking is discussed elsewhere.

c. Other possible approaches to reconciling literal reading of title V
applicability provisions and congressional intent

Having described how the Chevron framework, accounting for the ”absurd
results” doctrine applies to title V requirements in this case and why
it supports this tailoring rule -- under which we expect to apply title
V to more sources, in a step-by-step fashion, over time -- we turn to
the last part of our discussion of this doctrine.  Here, we address
other possible approaches that commenters have suggested for reconciling
the inconsistency between a literal reading of the applicability
provisions and congressional intent.  

In particular, commenters have argued that EPA should apply the title V
program only to sources that are subject to applicable requirements, so
that sources should not be required to hold empty permits (i.e., permits
issued to a source that is not subject to any applicable requirement for
any pollutant).  To the extent that commenters argue that the statute
requires EPA to adopt a “no-empty –permits” theory, we disagree. 
We believe that although various provisions of title V indicate that one
of title V’s purposes is to gather a source’s applicable
requirements into a single permit, see CAA §§ 503(b)(1), 504(a), we do
not read those provisions as expressly limiting title V to sources with
applicable requirements.  We also note that to date, we have issued
permits to sources without applicable requirements, albeit on rare
occasions.  We believe that the tailoring approach we adopt in this
rulemaking best reconciles the statutory provisions with congressional
intent.

7.  Additional rulemaking for the PSD and title V programs

	The previous sections 5 and 6 discussed our application of the Chevron
framework, accounting for the the “absurd results” doctrine, to the
PSD and title V applicability requirements, respectively.  As another
point in this regard, which is relevant for both PSD and title V
purposes, we also commit to subsequent rulemakings in which we may
further address the “absurd results” doctrine.  

Specifically, we will propose or solicit comment on establishing a
further phase-in, that is, a step 3, that would apply PSD and title V to
additional sources, effective July 1, 2013, and on which we commit to
take final action, as supported by the record, by no later than July 1,
2012.

We further commit to completing another round of rulemaking addressing
smaller sources by April 30, 2016.   Our action in that rulemaking would
address permitting requirements for smaller sources, taking into account
the severity of the remaining problems associated with permitting
authority burden and source costs.

While committing to future action, we do not decide in this rule when
the phase-in process will ultimately end, or at what threshold level,
because all that depends on uncertain variables such as our progress in
developing streamlining approaches and on permitting authorities’
progress in developing permitting expertise and acquiring more
resources.  . We may continue the phase-in process with further
rulemaking(s) after 2016.  Alternatively, we may make a final
determination through future rulemaking that, under the “absurd
results” doctrine, PSD and/or title V do not apply to GHG sources
that, while small and relatively inconsequential in terms of GHG
contribution, are above the statutory tonnage thresholds for these
programs., and thereby end the phase-in process.  In addition, we may
consider whether to limit title V applicability to GHG sources in order
to minimize the number of GHG sources with “empty” permits. 

8. Rationale for the phase-in schedule for applying PSD and Title V to
GHG sources.

	Having discussed in sections V.B.5, V.B.6, and V.B.7 above the
compelling reasons for tailoring the PSD and title V programs, we now
describe our rationale for selecting the phase-in schedule in today’s
rule for applying PSD and title V to GHG-emitting sources.  To reiterate
for convenience,  under Step 1 of this schedule, which begins on January
2, 2011, (i) PSD applies to the GHG emissions of “anyway” PSD
sources, that is, sources that are subject to PSD anyway due to their
emissions of conventional pollutants and that undertake a modification
that results in an increase of at least 75,000 tpy CO2e; and (ii) title
V applies to “anyway” title V sources, that is, sources that are
subject to title V anyway due to their emissions of conventional
pollutants.  Under Step 2, which begins on July 1, 2011, (a) sources
will be subject to PSD on account of their GHG emissions if they newly
construct and emit at least 100,000 tpy CO2e, or if they are existing
sources that emit at least 100,000 tpy CO2e of GHGs and make a
modification that results in the emission of at least 75,000 tpy CO2e;
and (b) existing and new sources will be subject to title V on account
of their GHG emissions if they emit 100,000 tpy CO2e in GHG emissions. 
In addition, EPA intends to begin another round of rulemaking – Step 3
– in 2011 and commits to complete it by July 1, 2012.  In that
rulemaking, we will propose or solicit comment on a further phase-in of
GHG sources for PSD and title V applicability, and we may propose or
solicit comment on another application of the “absurd results”
doctrine that excludes categories of sources from PSD or title V. 
However, under today’s rule, in no event will EPA apply PSD or title V
to sources below the 50,000 tpy CO2e levels in step 3, or any other step
we might promulgate prior to April 2016.  In addition, EPA commits to
conduct a study, to be concluded by April 30, 2015, evaluating the
status of PSD and title V applicability to GHG sources, and, based on
the study, complete a rulemaking by April 30, 2016 that promulgates
another round of a phase-in.  

a. Rationale for Step 1

	In Step 1 of our tailoring approach, which begins on January 2, 2011,
PSD and title V requirements will apply to only those sources that are
subject to PSD or title V requirements anyway due to their conventional
pollutants (“anyway” sources) and that, in the case of PSD, make
modifications that result in an increase in GHG emissions of at least
75,000 tpy CO2e.   No sources would become major for PSD or title V
under this step based on their GHG emissions alone.  This section
describes our proposal, comments on the proposal and our response to
those comments, and our rationale for Step 1.

(1) Proposal

In our proposal, we proposed (i) the application of PSD and title V
requirements to sources that emit at least 25,000 tpy CO2e, (ii) a PSD
significance level of between 10,000 and 25,000 tpy CO2e, and (iii) a
commitment to undertake a study to be following by further rulemaking
after six years.  In addition we solicited comment on the alternative of
limiting PSD and title V applicability to “anyway” sources for at
least the first six years.  Under this approach, PSD and title V
applicability would be determined based on non-GHG pollutants without
regard to GHGs, but those sources subject to PSD would also be subject
to BACT requirements for GHGs if their GHG emissions exceeded the
significance level established in the final rule, and those sources
subject to title V would be required to include any applicable
requirements for GHGs in their permits.

(2) Comments

Many commenters supported this “anyway”-source approach, and offered
 a variety of reasons:  According to the commenters, (i) this approach
is a better reading of Congress’s intent in the Act and is consistent
with Alabama Power v. Costle, .636 F.2d 323 (D.C. Cir. 1980): (ii) this 
approach would reduce the permitting workload on sources currently
considered minor and focus PSD and title V requirements on large sources
of non-GHG pollutants, as intended by Congress; (iii) it is appropriate
to base PSD and title V applicability on non-GHG emissions until data on
GHG emissions are available from the GHG Reporting Rule; (iv) in the
initial phase, this approach would be more straightforward to
administer, would provide a more predictable permitting workload, and
would prevent a flood of newly regulated sources from overburdening
state agencies; (v) this approach would provide permitting agencies time
to develop experience handling GHG sources and requirements under the
PSD and title V programs; (vi) this approach would provide EPA and the
permitting agencies the time needed to develop streamlining techniques;
(vii) this approach is consistent with the “absurd results” and
“administrative necessity” doctrines because the scope of the
permitting programs would remain consistent with both Congressional
intent and current administrative practice, but EPA and State agencies
would still be allowed  to begin regulating GHG emissions from existing
PSD and title V sources; and (viii)  sources already required to obtain
PSD permits are best equipped to work through BACT issues with
permitting authorities.

Commenters added that if BACT is applied for GHG due to permit actions
involving non-GHG pollutants, EPA would need to set a significance
threshold for the application of BACT, without which BACT could apply to
very small (e.g., 1 ton) GHG increases associated with project that
otherwise triggered PSD for increases of non-GHG.  

(3) Determination as to Step 1, PSD and title V applicability and PSD
significance level

After considering the administrative burdens from increased permitting
actions and the need for permitting authorities to have sufficient time
to develop necessary expertise and staffing resources to address that
burden, we have decided in this final action to establish the
“anyway” source approach as Step 1.  Beginning on January 2, 2011,
sources subject to PSD requirements for their conventional pollutants
anyway will be required to apply BACT to their GHG emissions if they
construct or modify and in so doing, emit at least 75,000 tpy CO2e in
GHGs.  Similarly, sources subject to title V requirements anyway due to
their conventional pollutants will be required to meet certain
requirements for their GHGs, as described elsewhere. These requirements
at Step 1 for PSD and title V will not expire.  On July 1, 2011, a
further phase-in of PSD and title V applicability – Step 2 – will
kick in.  

The “anyway” source approach has particular appeal during this, the
first step of the phase-in approach because it begins to apply key PSD
and title V program requirements as soon as January 2, 2011 to large
sources of emissions, but because it applies only to sources that are
already regulated under the CAA for other pollutants, it can be
implemented efficiently and with an administrative burden that is
manageable in the next eight months.    Under this approach, the sources
and permitting authorities will still face substantial additional work
due to the GHG emissions. In addition to the activities discussed
elsewhere, there are significant and complex policy questions about how
BACT will be implemented for GHGs that must be resolved.  These issues
include how to determine BACT for GHGs, how to do netting, and other
similar issues.  Even with EPA guidance, many case-specific policy
issues arise and must be resolved by the permitting authority in the
context of a specific permit application.  Nevertheless, with the
“anyway” source approach, this work will be manageable because the
associated permitting burden will be limited to adding a GHG component
to each existing permit action for which it will be required, and will
avoid the significantly greater burdens associated with large numbers of
new permit actions that would be required for sources and modifications
that would be subject to PSD for the first time.  Instead, this approach
allows permitting authorities sufficient time to develop necessary
expertise and staffing resources to address GHG BACT.

We agree with commenters that the establishment of a significance level
– which, in effect, is a BACT threshold -- is appropriate, and we have
decided to establish this level at 75,000 tpy CO2e because, for reasons
discussed below, that is the level that will apply during step 2.  At
this level, the administrative burdens, described below, will be
manageable.  Importantly, we believe a consistent significance level
between Steps 1 and 2, as opposed to a lower significance level in Step
1, will provide for a smoother transition and avoid the problems that
would arise if PSD applied to modifications during Step 1 that PSD would
not apply to in Step 2.  Otherwise, we would create a perverse incentive
for companies to delay such projects until Step 2 to avoid BACT.   

We estimate that Step 1 will result in a 23% increase in permitting
authority work hours and a $3 million increase – which amounts to a
25% increase from the current program cost of $12 million -- in their
annual costs for running PSD programs.  This is primarily due to the
BACT review requirements.   For title V programs, we estimate a 2%
increase in permitting authority work hours and a $1 million increase in
the title V annual program costs for permitting authorities under Step 1
as compared to the current program cost of $62 million for the title V
program.   These work hours and costs will be needed primarily to review
GHG emissions information, add any GHG-related requirements to title V
revisions and renewal actions that would otherwise be occurring, respond
to comments and petitions from the public, as well as develop fee
requirements and make fee determinations associated with issuing new or
revised title V permits that add GHG-related information.  For both the
PSD and title V programs on a combined basis, the additional costs for
Step 1 will be $4 million, which amounts to a 5% increase in the current
combined program cost of $74 million.

During Step 1, in addition to these workload and monetary costs,
permitting authorities will confront additional burdens before and
during Step 1 and that we have not attempted to quantify.  One of the
most significant of these is training staff in the PSD-related areas of
GHG emissions calculations and BACT evaluations.  In addition,
permitting staff will need to build staff expertise and capacity for
addressing GHG requirements in preparation for Step 2, which will begin
only six months after Step 1; and in communicating and providing
outreach to sources addressing GHG emissions for the first time.  Based
on comments we received on the proposal from permitting authorities, we
believe these additional training and outreach requirements – for both
the PSD and title V programs -- will add significantly to the permitting
authorities’ burden during the initial six-month period under Step 1. 
 

	We believe that these administrative burdens are substantial but
manageable.  Following today’s action, permitting authorities will
have only eight months to prepare for Step 1, when they will need to
increase their resources by 5% for both the PSD and title V programs
combined, and be able to implement BACT requirements for GHG sources.
During Step 1, they will need to prepare for Step 2, when, as discussed
below, they will need to process over 900 additional PSD permits each
year and begin to process over 2,600 additional title V permit actions. 

We have decided to limit Step 1 to the “anyway” source approach, and
not apply PSD or title V to sources based on their GHG emissions, for
several reasons.  First, we believe that the administrative burdens
described above are the most that the permitting authorities can
reasonably be expected to manage before and during Step 1.  Tighter PSD
and title V applicability requirements would mean greater administrative
burdens.  

Second, we believe that the costs of GHG permitting to the sources, as
described above, are substantial and as a result, necessitate that we
wait for the permitting authorities to develop the PSD and title V
programs for GHG sources during the first six months of 2011 before
subjecting sources to PSD and title V requirements on account of their
GHG emissions.  By July 1, 2011, when Step 2 takes effect, the PSD and
title V programs will be better developed.  For example, the permitting
authorities will have more experience making BACT determinations.  In
addition, by that time, sources will have had more time to prepare for
the permitting processes.  In addition, as suggested by one commenter,
the additional time will allow sources and permitting authorities to
address the current uncertainty surrounding how to measure high-GWP
gases.  

Third, we estimate that “anyway” sources account for approximately
65 percent of total national stationary source GHG emissions.  As a
result, limiting Step 1 to these sources will still capture a large
portion of the GHG inventory.

A large number of commenters urged us to leave this “anyway” source
approach in place until such time as we complete an assessment and
conduct further rulemaking, which we proposed would be six years from
now.  We are not taking this action; rather, for the reasons discussed
next, we believe it is reasonable to use GHG thresholds to begin to
phase in PSD and title V applicability to additional sources in Step 2. 

b. Rationale for Step 2

(1)  Proposal

We proposed to establish the applicability level for PSD and title V to
GHG sources at 25,000 tpy CO2e, and we proposed a PSD significance level
in the range of 10,000 to 25,000 tpy CO2e.  Our burden estimates at
proposal led us to conclude that at those threshold levels, for the PSD
program, “approximately 400 additional new or modified facilities
would be subject to PSD review in a given year.  These include
approximately 130 new facilities and approximately 270
modifications….” 74 FR 55,331, col. 1.  We estimated that processing
these numbers of additional permits, along with doing the additional
work associated with GHG emissions from sources subject to PSD anyway
due to their conventional emissions, would increase permitting authority
burdens by “approximately 112,000 staff hours at an additional cost of
approximately $8 million.  This workload amount represents an increase
of about 1.3 times, or 32 percent, in the current burden for permitting
authorities on a nationwide basis.”  Id. col. 3.  We concluded that
“this additional burden is manageable,” but that “any threshold
lower than 25,000 tpy CO2e, would create undue administrative
burdens.”  Id.  

	For the title V program, we estimated at a 25,000-tpy CO2e permitting
threshold, “about 13,600 existing facilities” would become subject
to title V, and that to manage the additional workload associated with
permitting those sources and with the other permit revisions and
modifications that would result from the 25,000 tpy CO2e threshold,
permitting authorities would require an additional 492 FTEs, which would
be an estimated 50 percent increase over current title V staffing
levels.  74 Fed. Reg. 55,335, cols. 1-2.

(2)  Comments

We received a significant number of comments from both permitting
authorities and industry representatives that our proposed GHG threshold
of 25,000 tpy CO2e for major source applicability was too low and would
result in an unmanageable amount of permitting actions in the near term.
 Many offered evidence that we severely underestimated both the number
of permitting actions and the per-permit administrative burden, for both
PSD and title V programs.  

	Commenters also asserted that the proposed 25,000 tpy threshold is too
low because it will subject small sources (including many small
businesses) to PSD and title V, which is not in keeping with
Congress’s intent to limit PSD and title V to large sources when
Congress set the 100/250 tpy thresholds for the permitting programs. 
EPA, in collaboration with the Small Business Administration (SBA),
conducted an outreach meeting designed to exchange information with
small entities that may be interested in these regulations.  The EPA
took this small business outreach effort into account when finalizing
this rule.  Many commenters from this outreach effort said that there
were many more small businesses that would subject to PSD and title V
due to the proposed permitting thresholds than EPA estimated at
proposal.

Many commenters recommended specific major source thresholds for PSD and
title V, including levels of 25,000 (as proposed), 40,000, 50,000,
100,000, 150,000, 250,000, and 1,000,000 tpy CO2e.  A majority of the
commenters recommended major source thresholds of 100,000 tpy CO2e,
including both industry and state agency commenters.  However, several
state agency commenters recommended thresholds of 50,000 tpy CO2e. 
Other commenters recommended sector-specific thresholds.  For example,
solid waste industry commenters suggested thresholds of 820,000 tpy CO2e
for PSD (which they calculate to be equivalent to the existing PSD
threshold for “municipal solid waste landfill emissions,” i.e., 250
tpy NMOC) and 320,000 tpy CO2e for title V (calculated to be equivalent
to the existing major source applicability threshold of 100 tpy NMOC).  
 Other commenters urged EPA to set the GHG thresholds at levels that
correspond to emissions of conventional pollutants at the 100/250 tpy
level.

Many of the commenters that recommended increasing the thresholds cited
EPA’s estimates that a particular threshold would significantly reduce
the number of sources subject to the rule while causing only a slight
reduction in the percentage of GHGs captured.  Several of these
commenters noted that Table VIII-2 in the proposal preamble indicates
that shifting the major source threshold for PSD from 25,000 to 100,000
tpy CO2e would reduce the number of major sources from 13,661 to 4,850
while reducing the coverage of U.S. stationary source GHG emissions by
only about 4 percent.  Other commenters referred to the RIA for the GHG
Reporting Rule to conclude that raising the threshold from 25,000 to
100,000 tpy CO2e would exclude thousands of entities that, on a combined
basis, emit only one percent of the nation’s GHG emissions.  See the
Response to Comments document for this final rulemaking for more
detailed description of comments received on our proposed burden
assessment.   

	Many commenters also recommended specific PSD GHG significance
thresholds, including levels of 10,000 (as proposed), 15,000 (within the
proposed range), 25,000 (also as proposed), 40,000, 50,000, and 100,000,
and 150,000 tpy CO2e, as well as suggesting sector-specific thresholds. 
These recommendations were based on the view that we had underestimated
the number of modifications and that the burden of permitting at the
proposed levels would therefore be much worse than we projected.  A
number of the commenters argued that the significance threshold should
be no less than the major source threshold, at whatever level that is
set.  The largest number of commenters recommended a PSD significance
threshold of 100,000 tpy CO2e, although significant numbers also support
25,000 and 50,000 tpy CO2e. 

iii. Rationale for step 2

	Based on these comments, we reassessed our original burden estimates
from our proposal.  This reassessment is discussed at the beginning of
this section.  We decided that, once this adjustment is taken into
account, the burdens at the proposed 25,000 threshold and the proposed
10,000-25,000 significance levels would be unmanageable.  We therefore
evaluated higher thresholds ranging from a 25,000 tpy CO2e major source
applicability level for PSD and title V to a 50,000, 75,000, or 100,000
tpy CO2e level, with associated PSD GHG significance levels of equal or
lesser magnitude; and we selected the 100,000/75,000 tpy CO2e level.
Central to our decision to promulgate higher thresholds than what we
proposed is our recognition, based on comments and further analysis,
that applying PSD to GHG sources at the statutory or any other threshold
level or significance level that we have considered would result in (i)
a greater number of sources, and significantly greater number of
modifications than we first estimated becoming subject to those
programs; and (ii) a greater per-permit cost than we first estimated to
the permitting authority of processing those permit actions.  We
discussed our revised estimates and reasoning at the beginning of this
section.

We now estimate that the 25,000/25,000 tpy level would result in 250
additional PSD permit actions for new construction (either for GHG-only
sources or additions to otherwise occurring permits) and an additional
9,200 PSD permits for modifications each year (compared to our estimate
at proposal of 130 for new construction and 270 for modifications). 
This level of permitting would require an additional 2,815,927 work
hours, or 1,400 FTEs (compared to our estimate at proposal of 112,000
[additional?] work hours, or 57 FTEs); and would cost an additional $217
million each year (compared to our estimate at proposal of an additional
$8 million).  See 74 FR 55,331 (proposal).  This $217 amount represents
approximately a 1,800% increase over current permitting authority annual
cost of $12 million for the major NSR programs   

	For title V, under our final burden analysis at a 25,000 tpy CO2e
threshold, we estimate a $64 million annual increase in program costs to
permitting authorities to add GHG emission sources, which reflects a
greater than 100% increase over current programs costs of $62 million. 
We estimate that this increased burden would result in the need for
almost 700 new FTEs nationwide at permitting authorities (compared to
our estimate at proposal of 492 additional FTEs, or about a 50% increase
in existing program size). This increase in burden is due to an
estimated annual increase of 2,500 new title V permits, over 9,500
permit revisions, and over 2,500 permit renewal actions due to GHG
emission sources.   These additional title V actions compare to current
annual program actions of approximately 50 new title V permits, 1,394
significant revisions, and 3,267 permit renewals.   

	Based on this information, we have decided not to finalize our proposal
to apply a 25,000 tpy CO2e applicability threshold to GHG sources at the
time that PSD and title V take effect.  At that level, too many sources
– many more than we thought at proposal – would be subject to high
permitting costs.  In addition, permitting at that level and at that
time would not be administratively feasible.  The resulting increase in
the number of PSD and title V permitting actions and workload would
create insurmountable resource demands for permitting agencies in the
near term, which would jeopardize the functioning of these permitting
programs.  We are mindful that not only would the permitting programs
have to bear the costs that our estimates are able to monetize, but they
would also incur burdens associated with hiring and training staff to
make and implement GHG BACT determinations, GHG emissions evaluations,
and other evaluations required under the PSD program for a wide variety
of formerly unpermitted sources, including significant numbers and types
of small manufacturing and commercial or residential establishments. 
They would also incur burdens associated with reviewing applications,
citizen comment and petitions, and the need to communicate and provide
outreach to new categories of sources, including, again, significant
numbers and types of small manufacturing and commercial or residential
sources.  Thus, the increased administrative burdens at the
25,000/25,000 tpy CO2e levels are so great that we have concluded that
they would not be consistent with the goals of avoiding absurd results
that contravene Congressional intent or avoiding a permitting burden
that would overwhelm the capacity of permitting authorities to
effectively implement their programs.  

Based on our revised burden analysis, in today’s final action, we have
decided to establish a multi-step, phase-in approach that contains a
significantly higher initial threshold level:  We have determined that a
100,000 tpy CO2e major source threshold level for PSD and title V
purposes, and a 75,000 tpy CO2 significance level, produce a level of
permitting activity that would certainly be an increase over current
workload, but that would be administratively feasible by July 1, 2011. 
As a result, we have decided to finalize these thresholds as Step 2.

In reaching this conclusion, we needed to consider the permitting
authorities’ capacity to address newly-major sources as expeditiously
as possible.  Note that our Step 1 approach does not cover newly-major
sources, so the step 2 threshold and timing has to be established in a
way that takes into account permitting authority challenges in
addressing many sources and categories that would be subject to major
source permitting for the first time.  

	We considered the various PSD and title V threshold applicability and
significance level options in our final burden analysis, summarized in
Table VI-1, including levels at 50,000 CO2e, and 100,000 CO2e.  As Table
VI-1 indicates, we estimate that a 100,000 tpy CO2e major source
applicability threshold would result in approximately 550 sources
becoming newly classified as major sources for PSD based on their GHG
emissions, while a 50,000 tpy CO2e threshold would result in 3,500 newly
classified major sources.  

	We then considered the impact on both PSD and title V programs of
different PSD significance level options for GHGs.   The choice of a PSD
significance level has a direct impact on title V burdens because PSD
permit requirements resulting from modification activities will result
in a required title V permit revisions.  We developed PSD and title V
burden estimates based on significance levels of 50,000 tpy, 75, 000 tpy
and 100,000 tpy CO2e, combined with a major source applicability level
of 100,000 tpy CO2e.    At a 50,000 tpy CO2e significance level, we
estimated an annual increase of approximately 1,800 PSD permitting
actions and almost 2,000 additional title V permitting actions, as
compared to Step 1.   At a 75,000 tpy CO2e significance level, we
estimated an annual increase of approximately 900 PSD permitting actions
and just over 1,000 additional title V permitting actions as compared to
Step 1.  At a 100,000 tpy CO2e significance level we estimated an annual
increase of approximately 25 PSD permitting actions and 210 additional
title V permitting actions as compared to Step 1.   For title V, under
these different scenarios, the major source applicability level of
100,000 tpy CO2e results in approximately 200 new permits annually, but,
as noted, the choice of significance levels affects the number of
required permit revisions. 

	Based on this information, we have decided to set our final Step 2
thresholds at 100,000 tpy CO2e for major source applicability under PSD
and title V and at a 75,000 tpy CO2 significance level for PSD. 
Overall, we estimate that the almost 900 additional PSD permitting
actions (virtually all of which would be modifications) per year at
these levels will result in an approximately $21 million increase (from
Step 1) in states’ annual costs for running PSD programs.  In
addition, we estimate that the 1,000 additional title V permit actions
will cause the total title V burden for permitting authorities to
increase by $6 million annually from Step 1.  This total increase in
permit program burdens of $27 million represents a 34% increase over the
$78 million in total cost of PSD and title V programs at Step 1.  We
consider this a substantial increase, particularly because Step 2’s
start date of July 1, 2011 is only six months after Step 1’s start
date of January 2, 2011.  What’s more, Step 1 will entail a
substantial increase in permitting authority obligations, so that adding
the costs of Step 1 and Step 2 together -- $31 million – means that
permitting authorities will be required to increase their permitting
resources by approximately 42% between now and Step 2.  In addition to
the administrative burdens we have been able to monetize, we must be
mindful that permitting authorities will incur other burdens, including
the significant support and outreach activities by permitting staff for
the many newly permitted sources.  We believe that any lower thresholds
in this timeframe, whether in the PSD and title V applicability levels
or in the significance level, would give rise to administrative burdens
that are not manageable by the permitting authorities.  

Although the burdens at the 100,000 tpy CO2e/75,000 tpy CO2e levels are
steep, we consider them manageable  Step 2 permitting for GHGs will
mostly involve source categories in which some sources have
traditionally been subject to permitting, which should render applying
even the new GHG requirements more manageable.  These source categories
include fossil fuel-fired power plants, petroleum refineries, cement
plants, iron and steel plants, and petroleum refineries, in addition to
other large industrial type source categories.  A full description of
the type of sources that we expect will have GHG emissions that exceed
the 100,000 tpy CO2 threshold is provided in the “Technical Support
Document for Greenhouse Gas Emissions Thresholds Evaluation” located
in the public docket for this rulemaking.  In addition, because Step 2
does not begin until July 1, 2011, permitting authorities have about 14
months to prepare for it.   

	In addition, we believe that the sources that will become subject to
PSD and title V requirements at the 100,000/75,000 tpy CO2 levels will
be able to accommodate the additional costs of permitting.  For the most
part, these sources will be of a comparable size and activity level as
those sources that are already subject to those requirements.

	Because the administrative burdens at the 100,000/75,000 level are as
heavy as the permitting authorities can reasonably be expected to carry,
adopting these threshold levels is consistent with our legal basis under
the “absurd results” doctrine.  Under this basis, we are reconciling
the statutory levels with congressional intent by requiring that the PSD
and title V requirements be applied to GHG sources at levels as close as
possible to the statutory thresholds, and as quickly as possible, in
light of costs to sources and administrative burdens.   

	Because the administrative burdens at the 100,000/75,000 level are
manageable, we do not believe that higher threshold levels are
justifiable for Step 2.  Specifically, at the 100,000/100,000 level –
which would entail a 100,000 tpy CO2e significance level, rather than a
75,000 tpy CO2e level – permitting sources would need to handle only
20 additional modifications beyond current levels, and thus would not
incur substantial additional costs.  By the same token, we disagree with
commenters who suggested that we needed to set permanent GHG permitting
thresholds for major sources at a rate equivalent to the amount of GHG
that would be emitted by conventional pollutants at the 100 and 250 tpy
level in order to meet the legal bases of the “absurd results” and
“administrative necessity” doctrines.  These levels would likely be
well above 300,000 tpy CO2e, depending on fuel types and assumptions
regarding the relative emissions of GHGs compared to the conventional
pollutants.  Our data show that none of the levels above 100,000/75,000
would result in significant increases in administrative burdens.  As a
result, establishing these levels would not apply PSD or title V
requirements to GHG sources as quickly as possible, and thus would not
be consistent with the “absurd results” doctrine.   

We estimate that facilities meeting the Step 2 major source
applicability thresholds account for approximately 67 percent of total
national stationary source GHG emissions. Many commenters felt that this
should be an important basis for our selection of a threshold, stating
that there is no significant loss in GHG emissions coverage of source
categories at the 100,000 tpy CO2 threshold, and in some cases arguing
that as a result, we should set the level even higher.  We agree that it
is important that the coverage in step 2 represents 86 percent of the
coverage at full implementation of the statutory 100/250 thresholds. 

c. Rationale for EPA’s plan beyond Step 2

	EPA commits that after Step 2, EPA will begin another rulemaking in
2011 and complete it by July 1, 2012, and in that rulemaking take
comment on a further phase-in of GHG sources for PSD and title V
applicability (Step 3).  However, under today’s rule, in no event will
EPA apply PSD or title V to sources below the 50,000 tpy CO2e levels
prior to 2016.  In addition, EPA commits to conduct a study, to be
concluded by April 30, 2015, evaluating the status of PSD and title V
applicability to GHG sources, and, based on the study, complete a
rulemaking by April 30, 2016 that promulgates another round of a
phase-in.  

(1)  Proposal

In our proposal, we noted that following implementation of the first
phase of PSD and title V applicability to GHG sources, generally at the
25,000 tpy CO2e threshold, additional action would be required over time
to assure full compliance with the statute.  We did not establish more
steps in the schedule, but we did commit to conduct a study, to be
completed by five years after promulgation, evaluating the status of PSD
and title V applicability to GHG sources, and, based on the study,
complete a rulemaking by six years after promulgation that established
an additional step of the phase-in. 

(2)  Comments

	A number of commenters supported the proposal’s overall approach to
phase in the permitting of GHGs, mainly because this approach will allow
permitting of the largest sources of GHGs immediately while collecting
more information about smaller sources and more fully considering
streamlining options for subsequent phases.  Many of these commenters
made clear that they do not support implementation of the statutory
100/250 tpy thresholds, even through a phase-in approach. On the other
hand, one commenter asserted that EPA has failed to demonstrate that it
needs six years to study and implement NSR and title V for sources
emitting less than 25,000 tpy.  The commenter contends that EPA has not
analyzed, among other things, what combined effect the full
implementation of its streamlining proposals in the 15 months before the
due-date for title V permit applications would do to reduce the cost,
complexity, and number of title V permit applications that would have to
be submitted.

(3)  Rationale for further steps

We agree with commenters who support a phased-in approach to the GHG
tailoring rule.  Our final action reflects a multi-step process that we
believe will create a manageable expansion of PSD and title V
applicability to GHG-emitting sources.  In our final action, we have
established the initial two steps of a multi-step phase-in of lower
threshold applicability with a commitment to take further regulatory
activity to consider adopting lower thresholds.  We believe this process
will provide substantial opportunity for permitting authorities and
sources to establish enough experience and information, and to provide
significant real-world feedback to EPA, so as to better inform decisions
on future phase-in steps. 

With this overall phase-in approach in mind, in today’s final rule,
EPA includes an enforceable commitment to undertake a notice-and-comment
rulemaking that would begin with a supplemental notice of proposed
rulemaking that we expect to be issued in 2011 and that we commit will
be finalized in 2012.  The notice will propose or solicit comment on
further reductions in the applicability levels.  This rulemaking will
take effect by July 1, 2013 and therefore, in effect, constitute Step 3.
 In today’s action, we are committing to a rulemaking for Step 3, but
are not promulgating Step 3, is because it is important to allow EPA and
the permitting authorities to gain experience permitting sources under
Steps 1 and 2, and to allow time to develop streamlining methods, before
attempting to determine what would be the next phase-in levels for PSD
and title V applicability.  While committing to future action, we do not
decide in this rule when the phase-in process will ultimately end, or at
what threshold level, because all that depends on uncertain variables
such as our progress in developing streamlining approaches and on
permitting authorities’ progress in developing permitting expertise
and acquiring more resources.  . We may continue the phase-in process
with further rulemaking(s) after 2016.  Alternatively, we may make a
final determination through future rulemaking  that, under the “absurd
results” doctrine, PSD and/or title V do not apply to GHG sources
that, while small and relatively inconsequential in terms of GHG
contribution, are above the statutory tonnage thresholds for these
programs., and thereby end the phase-in process.

In addition, in today’s action, we are determining that in no event
– whether through Step 3 or a subsequent step – will we apply PSD or
title V to sources at the 50,000/50,000 level or lower prior to May 1,
2016.   We have several reasons for making this determination at this
time.  Most importantly, our examination of the expected burdens to the
permitting authorities of applying PSD and title V to GHG sources
convinces us that extending the permitting programs to sources at or
below the 50,000/50,000 level within six years of promulgation would
result in prohibitively heavy burdens.  This threshold option would
result in close to 2,000 additional annual PSD permitting actions per
year over the current program and more than 1,000 over Step 2, including
both new construction and modifications.   For title V, we estimated an
increase of over 1,000 new title V permits (all newly permitted sources
because of GHG emissions) and over 2,000 permit revisions per year over
the current program, and about 980 new title V permits and 900 permit
revisions more than the Step 2 amounts. 

These increases, which could occur between 2013 and 2016 under our
approach depending on the outcome of the step 3 rulemaking, represent
very substantial additions to the permitting program.  In terms of cost,
we estimate that these additional actions would result in a $73 million
per year increase in joint PSD and title V program costs over the
current programs – which is almost a doubling of costs – and $42
million annual cost increase over Step 2 for the current programs.   We
believe that it would take permitting authorities some time to adjust to
this workload.  This is particularly true because at the 50,000/50,000
tpy CO2e level, smaller sources – including ones not previously
subject to permitting requirements – will become subject to PSD and
title V.  It will take some time for both the permitting authorities and
the sources to absorb these new obligations. 

Importantly, the next lower cut-off – below 50,000 for the major
threshold level – is the 25,000/25,000 level.   For the reasons
discussed above, this level is clearly not manageable within the first
six years after today’s action.  This applicability level would bring
in over 7,000 sources that would be newly subject to title V permitting
and result in close to 10,000 new PSD permitting actions.  This would
result in a 380% increase over current program costs for PSD and title V
to run these programs.  Based on comments we received from state and
local permitting agencies on our proposed tailoring rule, these levels
of permitting activities would far exceed the administrative
capabilities of the permitting agencies for at least the near future. 
Thus, the six year exclusion is necessary to provide these agencies and
their permittees certainty that this will not occur.   

We recognize that at present, we do not have data that would allow us to
compile administrative burden estimates for specific levels between the
50,000/50,000 and 25,000/25,000 tpy CO2e levels we assessed.  However,
it is clear that the burdens begin to rise sharply below the
50,000/50,000 level.  To reiterate, the combined PSD and title V
administrative burdens at the 50,000/50,000 tpy CO2e level cost almost
twice as much as the current programs, but the burdens at the
25,000/25,000 level cost almost four times as much as the current
programs.  As a result, we conclude that dropping the level below
50,000/50,000 too soon would quickly expose the permitting authorities
to unacceptably high burdens.  

As a further reason for concluding that we will not reduce thresholds
beyond 50,000/50,000 tpy CO2e during the first six years, we recognize
that the PSD permitting process in particular is a high stakes endeavor
for the permitting authorities and the affected sources, and we wish to
tread cautiously as a result.  If we have underestimated the permitting
burden or the ability of states to respond to their additional workload,
then permitting backlogs will result, and PSD permit issuance will be
delayed.  Because PSD is a preconstruction program, during this time
sources seeking a PSD permit could not construct or modify.  If this
were to happen on a large enough scale, it could have potentially
serious consequences for the national economy.  

Moreover, we need to be mindful that the best information we currently
have as to permitting authority burdens represents a national average,
as described above.  Our information at the individual state and level,
which is where the hard work of permitting occurs, is not as robust. 
Accordingly, we recognize that a particular State may encounter
permitting costs that are higher than average, and this may result in
permitting backlogs in that State, with the consequence that sources in
that State will face long delays in constructing or modifying. 
Similarly, even if a particular State’s costs are in line with the
national average, that State may not be able to find the additional
resources to cover those costs as readily as other States.  For this
reason, too, sources in that State could face long delays in
constructing or modifying.

Beyond the administrative burdens to permitting authorities, we
recognize that the costs of PSD and title V permitting to sources may be
high, and we are not inclined to  impose them at this time on sources
smaller than the 50,000/50,000 tpy CO2e threshold.  At that level, the
permitting programs will apply to a significant number of newly
permitted sources, including a variety of small manufacturing,
commercial and residential categories.   The next level that we have
analyzed is the 25,000/25,00 tpy CO2e threshold.  At that level, more
than 7,000 more sources would become subject to PSD each year – almost
all due to modifications – and another 4,000 sources would become
subject to title V each year.  These sources would be even smaller than
those that already will have become subject to PSD and title V due to
their GHG emissions.  We do not think it reasonable to subject more of
those types of sources, and smaller ones, to permitting costs within the
next six years.  

Finally, we note that moving from a 50,000 tpy CO2e threshold to 25,000
tpy CO2e will increase the emissions coverage of GHG stationary sources
from 70% to 75% nationwide, which we consider to be a relatively small
amount.  

 We recognize that our progress in developing streamlining methods will
be a key determinant to the ability of permitting authorities to
administer, and sources to comply with, PSD and title V at GHG emission
levels below 50,000/50,000.  Although we commit to pursue streamlining,
we cannot predict our progress.  This uncertainty may be problematic for
stakeholders, primarily permitting authorities and industry.  That is,
permitting authorities will face uncertainty in planning the scope of
their programs over the next few years, and industry will face
uncertainty as to what new construction projects and modifications will
be subject to PSD for GHGs.  By determining now that for the next six
years we will not impose PSD requirements below a floor at the
50,000/50,000 level, we add a measure of needed certainty.  

We also recognize that selecting a level that is too low or keeping a
level for too long means that some sources may construct or modify
without implementing BACT level controls, and this could result in
additional emissions of GHGs.  We need to be vigilant and to protect
against this outcome.  Even so, all things considered, we believe that
our determination not to apply the PSD or title V permitting
requirements to sources below the 50,000/50,000 tpy CO2e level for the
first six years also represents a reasonable balancing of protection of
the environment with promotion of economic development.  This type of
balancing is consistent with our authority under the PSD provisions.

We also raised the issue of “hollow” or “empty” permits in
discussing our rationale for why it may make sense to delay title V
permitting under our proposal.  We were concerned that many title V
permits for GHG sources would contain no applicable requirements, and
their issuance would therefore be of little value and would not be the
best use of scarce resources.  Several commenters agreed that
implementing title V for GHG will, at least initially, require empty
permits to be issued to GHG sources because such sources will not be
subject to “substantive” requirements, and that this would not be
the best use of scarce resources.  

 	In the proposal, we noted that the ”absurd results” doctrine does
not directly consider whether the statutory requirements lead to actions
that agencies or commenters may consider wasteful.  However, we do
believe that the amount of resources that would be spent and the limited
value that would result does warrant consideration under an absurd
results rationale.  Therefore, we are still actively considering the
role of empty permits as we apply the absurd results rationale to GHG
permitting in future steps.  However we believe it has limited relevance
to the first two steps of the phase in that we are promulgating today. 
During step 1, permitting for GHGs is only required if the source is
otherwise subject to permitting for its emissions of non-GHGs, meaning
that those sources will be subject to existing substantive applicable
requirements for non-GHG (e.g., NSPS, MACT, and SIP requirements,
including PSD).  Thus, there should be few, if any, empty permits, at
least with respect to applicable requirements for non-GHG during step 1.
 For step 2, it is possible that sources that become subject to title V
requirements for GHG emissions may not be subject to other requirements,
but our assessment suggests that this will be rare.  We estimate that
virtually all of the 550 newly-major sources in step 2 will be subject
to applicable requirements under the CAA because they are from
categories that have been traditionally subject to regulations, such as
smaller industrial sources from already regulated categories, large
landfills, and oil/gas/coal production.  Even the approximately 50
newly-subject commercial sources in step 2, which we estimate to be
comprised of very large hospitals, are likely to be covered by standards
for medical waste incinerators.  Thus, we project few, if any, empty
permits during step 2.

In later stages of implementation (e.g., prospective step 3) or in the
event that we permit smaller, non-traditional sources of GHGs that have
never otherwise been subject to major source permitting, there would be
a greater potential for empty permits to be issued under title V.  
Cognizant of this, we intend to further explore in the SNPR empty permit
theories under the absurd results rationale that may serve to
permanently narrow the scope of title V to exclude sources that would
potentially be required to obtain an empty permit due to GHG emissions. 

In today’s action, EPA is also finalizing its proposal to commit to
conduct an assessment of the threshold levels – to be completed in
2015, five years after today’s action -- that will examine the
permitting authorities’ progress in implementing the PSD and title V
programs for GHG sources as well as EPA’s and the permitting
authorities’ progress in developing streamlining methods.  We further
commit to undertake another round of rulemaking -- beginning after the
assessment is done, and to be completed by April 30, 2016 – to address
smaller sources. 

We disagree with the commenter who asserted that we do not need six
years to study and implement NSR and title V for smaller sources. As we
discussed in the proposal, and reiterate in this final action, we do not
have sufficient information at this time to determine the applicability
and effectiveness of the various permitting streamlining techniques. 
For reasons discussed in more detail in section V.E.1 regarding
streamlining, we are not now able to determine how such techniques will
be implemented or whether they will prove viable or effective.  We agree
with the commenter that these measures may reduce the scope, cost, and
complexity of these programs, but there is considerable uncertainty as
to the extent of this effect.   We do commit in this action to fully
investigate, propose, and evaluate these permit streamlining techniques
to determine where they may have applications, how they would be
applied, and whether they can withstand legal challenge. Even for those
techniques that may ultimately deemed viable there is a significant time
period necessary for rulemaking on these techniques and state adoption,
which could take up to three years or more. We also note that we will be
required to complete our study of the effectiveness of these techniques
within 5 years, meaning that, in order to complete it in time, we will
essentially need to begin the study as soon as relevant data are
starting to become available.  Finally, the sixth year, in which EPA
must complete rulemaking, requires proposal and promulgation of a rule
within one year, which is an ambitious schedule.  Therefore we believe
that 6 years is an ambitious schedule, and appropriate for this type of
effort.  We also have received a substantial numbers of comments from
permitting authorities that agreed with our 5-year timeframe, or a
greater timeframe, to get more prepared for permitting smaller sources.

d. Other comments on “absurd results” doctrine.

	We received other comments on our application of the “absurd
results” doctrine, which we respond to in the Response to Comments
document.  One comment was overarching, and so we respond to it here: 
Some commenters argued that the “absurd results” doctrine could not
be applied because EPA had other approaches for resolving the problems
raised by applying PSD to GHG sources.  In particular, the commenters
insisted that we were not obligated to issue the light-duty vehicle
rule, and had we not done so, we would not have triggered PSD; or at the
least, we could have delayed issuing the light-duty vehicle rule for
some period of time, during which we could develop streamlining measures
and permitting authorities could ramp up resources and thereby minimize
the need for tailoring when we did promulgate the light-duty vehicle
rule.

	These commenters also commented during the light-duty vehicle
rulemaking that we were not obligated to conduct that rulemaking, or to
conduct it at the time that we did.  We believe that our response there
suffices for here, as well:

	Some of the comments relating to the stationary source permitting
issues suggested that EPA should defer setting GHG standards for new
motor vehicles to avoid … [adverse] stationary source permitting
impacts. EPA is issuing these final GHG standards for light-duty
vehicles as part of its efforts to expeditiously respond to the Supreme
Court’s nearly three year old ruling in Massachusetts v. EPA, 549 U.S.
497 (2007). In that case, the Court held that greenhouse gases fit
within the definition of air pollutant in the Clean Air Act, and that
EPA is therefore compelled to respond to the rulemaking petition under
section 202(a) by determining whether or not emissions from new motor
vehicles cause or contribute to air pollution which may reasonably be
anticipated to endanger public health or welfare, or whether the science
is too uncertain to make a reasoned decision. 

	The Court further ruled that, in making these decisions, the EPA
Administrator is required to follow the language of section 202(a) of
the CAA. The Court stated that under section 202(a), "[i]f EPA makes
[the endangerment and cause or contribute findings], the Clean Air Act
requires the agency to regulate emissions of the deleterious pollutant."
549 U.S. at 534. As discussed above, EPA has made the two findings on
contribution and endangerment. 74 FR 66496 (December 15, 2009). Thus,
EPA is required to issue standards applicable to emissions of this air
pollutant from new motor vehicles. 

	The Court properly noted that EPA retained "significant latitude" as to
the "timing ... and coordination of its regulations with those of other
agencies" (id.). However it has now been nearly three years since the
Court issued its opinion, and the time for delay has passed. In the
absence of these final standards, there would be three separate federal
and state regimes independently regulating light-duty vehicles to
increase fuel economy and reduce GHG emissions: NHTSA’s CAFE
standards, EPA’s GHG standards, and the GHG standards applicable in
California and other states adopting the California standards. This
joint EPA-NHTSA program will allow automakers to meet all of these
requirements with a single national fleet because California has
indicated that it will accept compliance with EPA’s GHG standards as
compliance with California's GHG standards. 74 FR at 49460. California
has not indicated that it would accept NHTSA’s CAFE standards by
themselves. Without EPA’s vehicle GHG standards, the states will not
offer the federal program as an alternative compliance option to
automakers and the benefits of a harmonized national program will be
lost. California and several other states have expressed strong concern
that, without comparable federal vehicle GHG standards, the states will
not offer the federal program as an alternative compliance option to
automakers. Letter dated February 23, 2010 from Commissioners of
California, Maine, New Mexico, Oregon and Washington to Senators Harry
Reid and Mitch McConnell (Docket EPA-HQ-OAR-2009-0472-11400). The
automobile industry also strongly supports issuance of these rules to
allow implementation of the national program and avoid “a myriad of
problems for the auto industry in terms of product planning, vehicle
distribution, adverse economic impacts and, most importantly, adverse
consequences for their dealers and customers.” Letter dated March 17,
2010 from Alliance of Automobile Manufacturers to Senators Harry Reid
and Mitch McConnell, and Representatives Nancy Pelosi and John Boehner
(Docket EPA-HQ-OAR-2009-0472-11368). Thus, without EPA’s GHG standards
as part of a federal harmonized program, important GHG reductions as
well as benefits to the automakers and to consumers would be lost.165 In
addition, delaying the rule would impose significant burdens and
uncertainty on automakers, who are already well into planning for
production of MY 2012 vehicles, relying on the ability to produce a
single national fleet. Delaying the issuance of this final rule would
very seriously disrupt the industry’s plans 

Instead of delaying the LDV rule and losing the benefits of this rule
and the harmonized national program, EPA is directly addressing concerns
about stationary source permitting in other actions that EPA is taking
with regard to such permitting. That is the proper approach to address
the issue of stationary source permitting, as compared to delaying the
issuance of this rule for some undefined, indefinite time period. 

75 FR____ (April__, 2010) (footnote omitted).

9.  “Administrative necessity” basis for PSD and Title V
requirements in Tailoring Rule

EPA believes that the “administrative necessity” doctrine, within
the Chevron  framework, also justifies today’s rulemaking.  Applying
the applicability requirements of the PSD and title V programs according
to a literal reading of their terms (as EPA has narrowed them in the
past through interpretation) to GHG sources beginning on the January 2,
2011 date that regulation of GHGs takes effect would sweep so many
sources into those programs as to render the programs impossible for the
permitting authorities to administer.  Although streamlining the PSD and
title V programs offers some promise to improve the administrability of
the programs, given the time needed to implement such streamlining, the
step-by-step expansion of PSD and title V requirements to GHG sources
that we are promulgating today is the most that the permitting
authorities can reasonably be expected to administer.

This section discusses the application of the “administrative
necessity” doctrine.  Our views concerning this doctrine remain
similar to what we said at proposal, with adjustments for the new
analysis we have conducted and information we have received since
proposal, as well as the revisions we made to the tailoring approach. 
This analysis and information have already been presented above, in the
discussion of the “absurd results” basis.  It is not necessary to
reiterate the lengthy discussion of the doctrine that we included in the
proposal or the factual data presented above; as a result, this section
is briefer and highlights the conclusions we have reached about the
application of this doctrine..

	As noted above, under the current interpretation of the PSD
applicability provision, EPA’s recent promulgation of the light-duty
vehicle rule will trigger the applicability of PSD for GHG sources at
the 100/250 tpy threshold levels as of January 2, 2011.  This is because
PSD applicability hinges on the definition of “major emitting
facility,” which, under EPA’s long-standing narrowing
interpretation, and absent further tailoring, applies PSD to sources of
any air pollutant that is subject to regulation under another provision
of the CAA.  EPA’s promulgation of the light-duty vehicle rule means
that GHGs will become subject to regulation on the date that the rule
takes effect, which will be January 2, 2011.

	Absent tailoring, the January 2, 2011 trigger date for GHG PSD
applicability will see an extraordinarily large number of PSD permitting
actions – we estimate more than 81,000 per year –  representing an
increase of almost 300-fold over the current 280 PSD permitting actions
each year.  In addition, over 6 million sources will become subject to
title V, an increase of more than 400-fold over the 14,700 sources that
currently are subject to title V.

	Under the three-step approach that we read the caselaw to establish for
implementing the “administrative necessity” doctrine, as described
above, see 74 Fed. Reg. 55,315 col. 1 to 55,316 col. 3, an agency is not
required to adhere to literal statutory requirements if the agency, as
the first step, makes every effort to adjust the requirements within the
statutory constraints, but concludes with justification – at the
second step – that it would be impossible to comply with the literal
reading of the statute.  Under those circumstances, the agency may –
at the third step – develop what is in effect a compliance schedule
with the statutory requirements, under which the agency will implement
the statute as much as administratively possible and as quickly as
administratively possible.

a. First step of the “administrative necessity” analysis: 
streamlining

	In the proposed rulemaking, EPA discussed at length the prospect of
streamlining both PSD and title V.  EPA described “several potentially
useful tools available in the streamlining toolbox for the PSD
permitting threshold level, the PSD significance level, and the title V
permitting threshold,” specifically –

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

74 FR 55,315 col. 2-3.

	At proposal we stated that we would, and we still commit to, vigorously
pursue development of these streamlining measures, and, as indicated in
our discussion of streamlining methods in section V.E.1 and in response
to comments, we have already begun developing those measures.  For
example, as described elsewhere, we have done much work – both with
stakeholders and in-house -- to begin to develop recommendations for
what controls would qualify as BACT for various industries.  This work
is important as a foundation for developing presumptive BACT, which is a
potentially quite efficient streamlining measure.  

	However, it is not possible for us or the State and local permitting
authorities to develop and implement streamlining techniques by the time
that PSD and title V are triggered for sources emitting GHGs – January
2, 2011 -- or shortly thereafter.  Developing streamlining methods would
entail acquiring more information about the affected industry, may
entail rulemaking, and would likely entail some type of public review of
proposals for streamlining even if not done through rulemaking.  As
discussed in section VI.E, we do not expect that we could complete all
those steps for meaningful streamlining measures within two years.

b. Second step of the “administrative necessity” analysis: 
demonstration of administrative impossibility.

	With no streamlining measures available at the time that PSD and title
V would apply to sources of GHGs or shortly thereafter, under the second
step of the “administrative necessity” analysis, we must determine
whether implementation of the statutory requirements at that time would
be administratively impossible for the permitting authorities.  We are
mindful that the D.C. Circuit has cautioned that this showing is a high
hurdle, and that in none of the “administrative necessity” decisions
was an administrative agency successful in making such a showing, as we
recognized in the proposal.  See 74 Fed. Reg. at __.

	Even so, we believe there is no question that a literal application of
the PSD and title V programs to GHG sources as of January 2, 2011 would
be flatly impossible for the State and local permitting authorities to
administer for at least an initial period of time.   The key facts have
been recounted above, and no more than a brief recitation is necessary
here.  Although the PSD and title V programs are best seen as a joint
program, it is useful to separate them to show how stark the
administrative problems are:  On the PSD side, annual permit
applications would increase by over 300-fold, from 280 to 80,000; costs
to the permitting authorities would increase more than 100-fold, from
$12 million to $1.5 billion; and the permitting authorities would need
to hire, train, and manage 9,772 FTEs .   For title V, total permit
applications would increase by over 400-fold, from 14,700 to 6.1
million; costs to the permitting authorities would increase by about the
same amount, from $62 million to $21 billion; and the permitting
authorities would need to hire, train, and manage 229,118 FTEs.

	We have elaborated upon these burdens elsewhere in today’s notice. 
It is clear that they justify our conclusion that they bespeak an
impossible administrative task.  It is not hyperbole to say that if
these administrative responsibilities are not considered impossible
within the meaning of the “administrative necessity” doctrine, then
it is difficult to imagine what would be considered impossible.  

c.  Third step of the “administrative necessity” analysis: 
tailoring

	Under the third step of the “administrative necessity” analysis, we
must demonstrate that the steps we intend to take towards implementation
of the statutory requirements are the most that can be done during the
indicated time frames, in light of administrative resources.  See 74 FR
___.  This amounts to establishing a schedule for phasing in PSD and
title V applicability to GHG sources.  

	Because this step is based on the administrative resources of the
permitting authorities, our analysis is similar, and leads to the same
conclusions, as we described under the “absurd results” basis.

10. “Step-at-a-time” basis for tailoring rule 

	In addition to the “absurd results” and “administrative
necessity” doctrines, the “step-at-a-time” judicial doctrine,
within the Chevron framework, supports at least part of EPA’s
tailoring rule.  The caselaw, described above, indicates that courts
will accept an initial step towards full compliance with a statutory
mandate, as long as the agency is headed towards full compliance, and we
believe that the doctrine is applicable here. EPA intends to require
full compliance with the CAA applicability provisions of the PSD and
title V programs, but we believe that in the case of GHG-emitting
sources, by application of the “absurd results” doctrine or the
“administrative necessity” doctrine, full compliance with the
applicability provisions does not necessarily mean full compliance with
the literal terms of those provisions.  Rather, as we have explained
elsewhere, in the case of GHG sources, full compliance may mean
compliance with higher levels that are consistent with congressional
intent, under the “absurd results” doctrine, or that are within the
reach of permitting authorities in light of their administrative
constraints, under the “administrative necessity” doctrine. 
Today’s rulemaking constitutes a package of initial steps towards that
full compliance, and, seen in that light, is supported by the
“step-at-a-time” doctrine.

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

C.  Mechanisms for implementing and adopting the tailoring approach

In this section, we discuss three issues related to adoption of the
tailoring approach within our regulations and by permitting agencies.
The first is the regulatory mechanism for implementing the tailoring
approach, and our rationale for the specific way we are revising the PSD
and title V applicability provisions to incorporate the tailoring
approach.  The second is the process by which state or local permitting
authorities may incorporate the tailoring approach into their PSD SIP
and title V permit programs.  Finally, we discuss our reasons for
delaying action on our limited approval of both SIP-approved PSD
programs and titleV programs, and request further information from
States on both programs.  

In brief, we proposed to exempt sources emitting GHGs below certain
threshold levels from the definition of “major stationary source”
and “major modification” in PSD programs and the definition of
“major source” in title V programs. We further proposed to
effectuate this change in SIP-approved PSD programs and Part 70 title V
programs by limiting our prior approval of those programs to the revised
applicability thresholds for GHGs.  While these changes would have the
effect of putting the lower thresholds in place in states as a matter of
federal law, state commenters expressed concern that they would not be
able to adopt the tailoring rule under state laws on an expeditious
basis.  To address this, our final action differs from our proposed rule
in the way we incorporate the limitations promulgated in this tailoring
rule into the “major stationary source,” “major modification”
and “major source” definitions.  This approach relies on further
defining the term “subject to regulation” and is not substantively
different in effect from the proposed rule, but this mechanism will
facilitate more rapid adoption and implementation of the limitations in
this final rule by states through interpretation of language in existing
state regulations.  We are also delaying action on our proposed limited
approval of SIP-approved PSDprograms and Part 70 title programs to
determine how each State will implement the final rules.  

1.  PSD Approach: Background and Proposal

Under CAA §165(a), no “major emitting facility” may construct or
modify unless it receives a preconstruction permit that meets the
requirements of the PSD program.  CAA §169(1) defines a major emitting
facility as “any … source[]” in one of 28 specified source
categories that “emit[s], or ha[s] the potential to emit, one hundred
tons per year or more of any air pollutant;” or “any other source
with the potential to emit two hundred and fifty tons per year or more
of any air pollutant.”  EPA’s regulations replace the term “major
emitting facility” with the term “major stationary source,” and
defines the term as “[a]ny of … [28 types of] stationary sources of
air pollutants which emits, or has the potential to emit, 100 tons per
year or more of any regulated NSR pollutant” or “any stationary
source which emits, or has the potential to emit 250 tons per year or
more of a regulated NSR pollutant.” 40 CFR 51.166(b)(1)(i)(a)-(b). 
The term “regulated NSR pollutant” is defined to include, among
other things, “any … air pollutant that otherwise is subject to
regulation under the Clean Air Act.”  40 CFR 51.166(b)(50).  Note that
the regulatory definition in effect narrows the statutory definition to
read “one hundred tons per year or more” or “two hundred and fifty
tons per year or more of any air pollutant subject to regulation under
the Clean Air Act” (emphasis added).   

Similarly, under the statute, a modification occurs if there is a
physical change or change in the method of operation “which increases
the amount of any air pollutant emitted . . .” Section 111(a)(4).  As
with the major stationary source definition, we have limited coverage of
the modification provision to physical changes or changes in the method
of operation that result in a significant increase, and a significant
net emissions increase of a “regulated NSR pollutant.”  40 CFR
51.166(b)(2)(i).  

Our proposed rule revised the definition of “major stationary source
to 1) exempt GHG from the regulated NSR pollutants that, if emitted by a
source in the 100 or 250 tpy quantities, would cause the source to
qualify as a “major stationary source;” and 2) add a specific
threshold at which a source that emits a specified quantity of GHGs (at
proposal, that quantity was 25,000 tpy CO2e) would qualify as a “major
stationary source.”  74 FR 55,351, proposed 40 CFR 51.166(b)(1)(i)(a),
(b), (d).  We also proposed a significance threshold, the amount of an
increase needed to trigger PSD for a modifications or require BACT for a
new source, of 25,000 tpy CO2e.  74 FR 55351 40 C.F.R 51.166(b)(23)(i). 
Additionally, we recognized that it may take some time before States
could change their SIP-approved PSD programs and that, absent additional
action on our part, GHG-emitting sources would remain subject to the 100
or 250 tpy thresholds, and subject to a zero significance threshold for
major modifications as a matter of Federal law.  To address this issue,
we proposed to narrow our previous approval of those SIPs, under the
authority of the Administrative Procedures Act and the general authority
of CAA section 301. Our limited approval would revise existing
SIP-approved programs to authorize permitting under the Clean Air Act
only for GHG sources at the appropriate levels. 

In response to our proposed approach, we received numerous comments from
State and local permitting agencies expressing concern that our proposed
approach in the Tailoring Rule could meet its objectives to avoid
applying PSD requirements to small sources under federal law, but would
not succeed in avoiding the application of PSD requirements to those
small sources under state law. The commenters explained that, although
EPA was changing federal PSD applicability thresholds for GHG-emitting
sources to incorporate the tailoring approach, and limiting the scope of
SIPs consistent with these thresholds state rules containing the
originally- approved SIP thresholds would continue to apply as a matter
of state law.  As a result, states would be faced with the same
administrative difficulties recognized in the proposed rule in
implementing existing State law.  Rather, as commenters explained, for
the most part, the laws and regulations states adopt to implement
federal PSD programs mirror EPA’s regulations, so that the state laws,
in addition to the federally approved SIPs, apply PSD to sources that
emit air pollutants subject to regulation at the 100/250 tpy threshold. 
Commenters reasoned that, until the States can change their state laws,
the 100/250 tpy thresholds will continue to apply as a matter of state
law, even though the higher thresholds apply as a matter of federal law.
  Importantly, these commenters emphasized that their State process
requires that they incorporate the higher thresholds for GHG sources in
their SIPs only through a rulemaking or, in some cases, through a
legislative change. These processes would require many months and in
some cases as long as two years.  As a result, sources that emit GHGs
below the federally established levels in the final rule, but above the
100/250 tpy levels in state laws and rules, would still be required to
obtain PSD permits under state law.  Commenters emphasized that this
situation was untenable.  

In addition to the State comments just described, we received comments
that took issue with our description of our legal mechanism as an
application of the numerical thresholds.  They asserted that in fact,
our mechanism consisted of interpreting the term “any source” to
exclude small GHG-emitting sources.  Other commenters objected to our
proposed mechanism of narrowing our previous SIP approval, arguing that
this mechanism was without legal basis.  

2.  Rationale for Our Final Approach to Implementing PSD

In response to these concerns, we are adding another mechanism to
implement the tailoring approach for PSD by interpreting the phrase
“subject to regulation” that is used within the phrase “any
regulated NSR pollutant ” that is part of the definitions of “major
stationary source”  and “major modification.”  To implement this
mechanism, we are codifying an interpretation of “subject to
regulation” so that the GHGs emitted by sources that fall below the
thresholds or scope established in Steps 1 and 2  are not treated as
“subject to regulation,” and therefore do not trigger PSD for the
sources that emit them. . 

To understand this approach, it is useful to return to the definition of
“major stationary source,” which, again, is central to PSD
applicability.  The definition, quoted above, employs the term
“regulated NSR pollutant,” which is a defined term.  The definition
incorporates many other elements as well (e.g., the 100/250 threshold
requirements), but for convenience, we shorthand it as follows:  a
“major stationary source” is “[a]ny … source[] of air
pollutants, which emits, or has the potential to emit, [depending on the
source category, either] 100 [or 250] tons per year or more of any air
pollutant that is subject to regulation under the Clean Air Act.”   A
similar construct exists for the “major modification” definition. 
Returning to our shorthand above and applying our definition of
“subject to regulation, the definition would now read  A “major
stationary source” is “[a]ny … source[] of air pollutants, which
emits, or has the potential to emit, [depending on the source category,
either] 100 [or 250] tons per year or more of any air pollutant subject
to regulation under the Clean Air Act,  [but GHGs are not subject to
regulation under the Clean Air Act if emitted by sources below the
thresholds established in steps 1 and 2 .]”    Similarly, major
modification now means “any physical change or change in the method of
operation that would result in:  a significant emissions increase . . .
. of a regulated NSR pollutant . . but GHG are not subject to regulation
under the Clean Air Act if emitted by sources below the thresholds
established in steps 1 and 2 and result in an increase less than the
amounts specified therein.”

Although EPA is codifying its interpretation of “subject to
regulation”, states may be able to follow EPA’s approach to
tailoring for GHG permitting without having to undertake a rulemaking
action to revise regulations that are included in their SIPs or without
requiring an act of the State legislature.  EPA believes this can be
accomplished through interpretation by the states if the state has taken
the position, or determines now, that the state’s definition of
“subject to regulation,” “regulated NSR pollutant” and/or
“major stationary source” is intended to be interpreted in a way
that tracks the meanings that EPA has assigned to these phrases.  As a
result, these States can adopt the meaning of subject to regulation
established by EPA and apply it by interpretation before January 2,
2011, and thereby avoid the situation in which, as a matter of State
law, GHG-emitting sources above the 100 or 250 tpy thresholds become
subject to PSD by that date.  We believe that States can adopt this
regulatory approach through an interpretation, rather than by a
rulemaking action or state legislative process, because we view the
phrase “regulated NSR pollutant” as open-ended, and therefore
subject to interpretation, as the following discussion demonstrates.  

On December 18, 2008, EPA issued an interpretive memorandum establishing
EPA’s interpretation of the definition “regulated NSR pollutant”
found at 40 C.F.R. 52.21(b)(50)).. Id. EPA intended this memo to resolve
any ambiguity in subpart (vi) of this definition which includes “any
pollutant that otherwise is subject to regulation under the Act.” 
Specifically, the memo stated that EPA will interpret the definition of
“regulated NSR pollutant” to exclude pollutants for which EPA
regulations only require monitoring or reporting but to include each
pollutant subject to either a provision in the Clean Air Act or
regulation adopted by EPA under the Clean Air Act that requires actual
control of emissions of that pollutant.  

	After reconsidering this interpretation through a formal notice and
comment process, EPA refined its interpretation to establish that the
PSD permitting requirements will not apply to a newly regulated
pollutant until a regulatory requirement to control emissions of that
pollutant “takes effect.” 75 FR 17704.  Importantly, as stated
above, since the term “regulated NSR pollutant” is embedded within
the definition of “major stationary source” this interpretation
effectively defines which major stationary sources are subject to PSD
permitting.  As a result, for example, EPA explained that PSD and title
V permitting requirements for GHGs will not apply to GHGs until at least
January 2, 2011 - following the anticipated promulgation of EPA
regulations requiring control of GHG emissions under Title II of the
CAA. Id.  Nonetheless, because this final rule tailors the application
of GHG permitting, GHG emissions at certain thresholds will not be
“subject to regulation” as we interpret that term within the
“regulated NSR pollutant” definition. 

	In the Response to Comment document for EPA’s reconsideration of the
PSD interpretative memorandum, we stated that,  

Absent a unique requirement of state law, EPA believes that state laws
that use the same language that is contained in EPA’s PSD program
regulations at 52.21(b)(50) and 51.166(b)(50) are sufficiently
open-ended to incorporate greenhouse gases as a regulated NSR pollutant
at the appropriate time consistent with EPA’s interpretation of these
regulations (cite docket #).  

	Historically, EPA has interpreted certain state approved-SIP programs
as sufficiently open-ended such that the rules provide for the
“automatic assumption for the responsibility for review” of new
pollutants before the general deadline for states to revise their PSD
programs.  See e.g. 52 FR at 24682. Conversely, we have also read
federal rules and state SIPs to provide for the automatic removal of a
pollutant when such pollutant is no longer “subject to regulation.” 
For example, the 1990 CAA amendments exempted hazardous air pollutants
listed in Section 112(b)(1) from the PSD requirements.  See CAA Section
112(b)(6).  Following passage of the amendments, EPA issued “New
Source Review (NSR) Program Transitional Guidance“,, a memorandum from
John S. Seitz, Director Office of Air Quality Planning and Standards to
Regional Air Division Directors on March 11, 1991.  In that guidance,
EPA interpreted its regulations to automatically cease to apply to
listed HAPs (with some noted exceptions.), and implicitly stated that a
State with an open-ended SIP-approved rule could also automatically
cease to regulate HAPs.  

	After reviewing these past practices in the PSD permitting program, and
EPA’s prior statements regarding pollutants subject to the PSD
program, we conclude that State rules that contain the same language as
used in the 40 C.F.R. Section 52.21(b)(50) or 40 C.F.R. Section
51.166(b)(49), or who otherwise have sufficiently open-ended NSR
regulations, would be able to implement our tailoring rule approach to
permitting of GHG sources without the need for a SIP revision if they
establish that the state intended to apply the same meaning as EPA when
it incorporated the term “subject to regulation” in its PSD program
regulations.  If states adopt this reading of their regulations, GHG
sources falling below the specified cutoffs would not be emitting
pollutants “subject to regulation” within the definition of
“regulated NSR pollutant” and therefore would not be subject to PSD
permitting as a major stationary source.  

During our consideration of this action, we participated in
teleconferences with several permitting authorities (6 states and 1
local agency) to discuss this issue of whether they could implement the
proposed rule without the need for state law or regulations changes or a
revision of the provisions of state law that are a part of the SIP.
[Placeholder: docket # for meeting summary] We specifically discussed
whether defining the phrase “subject to regulation”  would better
facilitate state incorporation of the limitations in this final rule. 
The state and local agencies participating in the calls generally agreed
that defining the phrase “subject to regulation” that is used within
the definition of “regulated NSR pollutant” would, compared to our
proposed approach, better facilitate state  incorporation of the
limitations in the final rule in states with regulations that mirror the
existing  federal rules, or in states whose rules are otherwise
sufficiently open-ended to incorporate the limitations in the final rule
by interpretation.  Participants from each agency also indicated that it
is likely that their rules were sufficiently open-ended to do so because
they contain the term “subject to regulation” and that term has not
been previously interpreted in ways that would preclude adoption of
EPA’s meaning of the term by interpretation (although some indicated
they may elect to pursue rulemaking in addition to interpretation). 
Accordingly, we selected the “subject to regulation” regulatory
approach as the mechanism for codifying the final rule.  

3. Other mechanisms

The mechanism for implementing the terms of this tailoring rule
described above has the same substantive effect as the mechanism we
considered in the proposed rule.  Defining the term “subject to
regulation”, has the effect of modifying the meaning of the regulatory
terms “major stationary source” and “major modification” –
again, the keys to PSD applicability – to exclude GHG-emitting sources
below the thresholds established in Steps 1 and 2, and our action should
be interpreted to rely on any of several legal mechanisms to accomplish
this interpretation.   The thrust of this rulemaking is to apply the PSD
definition of “major stationary source” – which embodies the
statutory term, “major emitting facility” -- to GHG sources by
treating only GHG sources that emit at levels above the steps 1 and 2
thresholds as meeting that definition.  Our action may reasonably be
construed to have the effect of revising the meaning of several terms in
these definitions, including: (i) the numerical thresholds, as we
proposed; (ii) the term, “any source,” which some commenters
identified as the most relevant term for purposes of our proposal; or
(iii) the term, “subject to regulation,” which, as discussed above,
our regulations attach to the definition of “major stationary
source” and “major modification.”  The specific choice of which
term constitutes the mechanism does not have a substantive legal effect
because each mechanism involves one or another of the components of the
regulatory term “major stationary source” and it is that term that
we are defining to exclude the indicated GHG-emitting sources. Thus,
while the “subject to regulation” mechanism facilitates expeditious
implementation by states, and we are therefore revising our regulations
to adopt this approach, there is no substantive difference in effect
between the alternative mechanisms we may use to finalize the proposed
rule.  

Similarly, with respect to “major modification” although our final
action revises our regulations to incorporate the “subject to
regulation” mechanism, we believe that our final action should be
construed as interpreting the definition of the regulatory term 
“major modification”—which embodies the statutory term
“modification”--– to exclude GHG-emitting sources below the
thresholds established in Steps 1 and 2, and that our action should be
interpreted to rely on any of the several mechanisms noted above to
accomplish this interpretation.  Further, we believe that our action may
reasonably be construed to revise any of several terms in that
definition,  – including (i) the numerical thresholds (zero for
modifications under the statute), as we proposed; (ii) the term, “a
stationary source,” which parallels the “any source” theory
identified by commenters with respect to “major stationary source”;
or (iii) the term, “subject to regulation,” which, as discussed
above, that our regulations attach to the definition of “major
modification.”  We believe that the specific choice of which term
constitutes the mechanism does not have a substantive legal effect
because each mechanism involves one or another of the components of the
regulatory term “major modification” and it is that term that we are
interpreting to exclude the indicated GHG-emitting sources. Thus, while
the “subject to regulation” mechanism facilitates expeditious
implementation by states, and we are therefore revising our regulations
to adopt this approach, we otherwise find no substantive difference
between the alternative mechanisms we may use to finalize the proposed
rule.   

4.  Codification of Interpretive Memo

Notably, we recently affirmed our interpretation of the term “subject
to regulation” as it applies broadly to the PSD program through a
formal notice and comment process. [placeholder cite Johnson}.  In the
response to comments for that action, we indicated that we may opt to
codify our interpretation of the term in the GHG final tailoring rule. 
Accordingly, our final rule adopts this interpretation to bring
additional clarity to our rules.  Specifically, we add a new paragraph
to the definitions “subject to regulation” that contains our
existing interpretation of that term.  We also moved existing exceptions
(e.g. Section 112 hazardous air pollutants) to a new paragraph with in
the definition of "subject to regulation".   Movement of these
regulations is not intended to effect any change in how those
regulations are implemented, but merely simplify the regulations clearly
delineating different terms and concepts.

We do not believe that codification of this interpretation from the
Interpretive Memo is necessary to continue the effectiveness of the
interpretation, nor do we believe that our action disturbs States’
existing authority to adopt the definition through interpretation of
their existing rules.  Our decision to codify our existing
interpretation is based solely on a desire to better inform readers of
the existing interpretation. 

  

5. Delaying Limited Approvals and Request for Submission of Information
from States implementing a SIP-approved PSD program

Because we now anticipate that many states will be able to implement the
final rules through interpretation without the need to revise their
SIPs, we are delaying further action on our proposal to limit approved
SIPs until we better understand how permitting authorities will
implement our final rule.  For this purpose, we ask each State to submit
a letter to the appropriate Regional Administrator no later than [insert
date 60 days after promulgation].  In that letter, states should explain
whether they will apply EPA’s meaning of the term “subject to
regulation” and if so, whether the state intends to incorporate that
meaning of the term without undertaking a regulatory or legislative
process.  If a State must revise its regulations to apply EPA’s
meaning of the term “subject to regulation” we ask States to provide
an estimate of the time to adopt final rules in its letter to the
Regional Administrator.  If a state chooses not to adopt EPA’s meaning
by interpretation, the letter should address whether the State has
alternative authority to implement today’s phase-in approach or some
other approach that is at least as stringent, but which also addresses
the expected shortfalls in personnel and funding that would exist if the
state to carried out PSD permitting under its existing program
thresholds.  

For any State that is unable or unwilling to adopt the limitations  in
the final rules by January 2, 2011, and who otherwise are unable to
demonstrate adequate personnel and funding, EPA will move forward with
finalizing a limited approval of the existing SIP.  Although we received
comments questioning EPA’s authority to undertake a limited approval
using our general rulemaking and 110(k)(6) authorities, we are not
responding to those comments at this time.  We will address these
comments in any final action we take to implement a limited approval.

In our proposed rule, we also noted that a handful of EPA-approved SIPs
fail to include provisions that would subject GHG emissions to their PSD
requirements when regulations that EPA promulgates to regulate GHGs take
effect and thereby trigger the applicability of PSD for sources that
remain covered under today’s rule.  This is generally because these
SIPs specifically list the pollutants subject to the SIP program
requirements, rather than including a definition of NSR regulated
pollutant that mirrors the federal rule, or because a state otherwise
interprets its regulations to limit which pollutants the state may
regulate.  At proposal, we indicated that we intended to take separate
action to identify these SIPs, and to take regulatory action to correct
this SIP deficiency.  We ask any state or local permitting agency that
does not believe its existing SIP provides authority to issue PSD
permits to GHG sources consistent with the final rule to notify the
Regional Administrator by letter (which should be done no later than the
previously described letter regarding adoption of the tailoring rule). 
This letter should inform the Regional Administrator whether the state
intends to undertake rulemaking to revise their rules to the handle GHG
sources that will be covered under the applicability thresholds in this
rulemaking, or alternatively, whether the state believes it has adequate
authority through other means to issue federally-enforceable PSD permits
to GHG sources consistent with the final rule.  For any State that lacks
the ability to issue PSD permits for GHGs consistent with the final
rule, we will undertake a separate action to call the SIP.  As
appropriate, we will also move quickly to impose a FIP through 40 C.F.R.
Section 52.21 to ensure that GHG sources will be regulated consistent
with the final rule.

6.  Title V programs

	Our final action also differs from the proposal in the specific
regulatory mechanism by which we tailor the definition of “major
source” for title V permit programs, but is a logical outgrowth of our
proposed rule.  EPA proposed to implement tailoring for GHGs under title
V by excluding sources of GHGs from the general definition of “major
source” under 40 C.F.R. sections 70.2 and 71.2, and adding a separate
definition of “major source” with tailored thresholds for sources of
GHGs.  In response to comments, particularly from states concerned with
implementation of the proposed approach under state law, EPA is adopting
an approach in the final rule that 1) amends the definition of “major
source” by codifying EPA’s long-standing interpretation that
applicability for a “major stationary source” under CAA sections
501(2)(B), and 302(j) and 40 C.F.R. section 70.2 and 71.2 is triggered
by sources of pollutants “subject to regulation,” and 2) adding a
definition of “subject to regulation.”   Further, we are delaying
our action to move forward with a limited approval of existing state
Part 70 programs.

	We finalize this alternative approach to address concerns similar to
those we received with respect to State implementation of SIP-approved
PSD programs.  Specifically, we received comments that the mechanism we
proposed would not address the significant administrative and
programmatic considerations associated with permitting GHGs under title
V, because the 100 tpy threshold would continue to apply as a matter of
State law.  Commenters stated that states would need to undertake a
regulatory and/or legislative process to change the threshold in their
state laws which they could not complete before the laws would otherwise
require issuance of operating permits to GHGs sources.  After
considering the commenters’ concerns, we are finalizing an approach
designed to address the state law concerns for states, and also now find
that it may be unnecessary to move forward with our proposed approach to
limit approval of existing Part 70 programs in many States.  

	EPA’s approach  involves the interrelationship of terms within the
Part 70 definition of “major source” in title V and EPA’s
implementing regulations, and EPA’s historical practice of
interpreting the term “any air pollutant” in the “major stationary
source” component of that definition.  EPA believes the approach in
the final rule will allow many states to adopt the final rule through
interpretation of existing state laws.  Specifically, paragraph (3)
within the definition of “major source” found in 40 CFR sections
70.2 and 71.2 defines a major source as a “a major stationary source
of air pollutants, as defined in section 302 of the Act, that directly
emits or has the potential to emit, 100 tpy or more of any air
pollutant…”  The EPA previously articulated the Agency’s
interpretation that the regulatory and statutory definitions of “major
source” under title V, including the term “any air pollutant,
applies to pollutants “subject to regulation.” Memorandum from Lydia
N.Wegman, Deputy Director, Office of Air Quality Planning and Standards,
U.S. EPA, to Air Division Directors, “Definition of Regulated Air
Pollutant for Purposes of Title V” (Apr.26, 1993)(Wegman Memo).  EPA
recently re-affirmed this position in EPA’s Reconsideration of
Interpretation of Regulations that Determine Pollutants Covered by Clean
Air Act Permitting Programs. 75 FR 17704, 17022-23 (April 2,
2010)(Interpretive Memorandum Reconsideration Final Action).  

	Accordingly, under our long-established policy, States historically
have interpreted the term “any air pollutant” under the title V
definition of “major source,” to mean any pollutant “subject to
regulation” under the Act.  Thus, as a matter of established
interpretation, EPA and States effectively read the definition of
“major source” under title V to include a source “…that directly
emits or has the potential to emit, 100 tpy or more of any air pollutant
subject to regulation under the Act.” [emphasis added].By amending our
regulations to expressly include and define “subject to regulation”
to implement our tailoring for GHGs under title V, we are seeking to
enable States to adopt and implement this approach through a continued
interpretation of the phrase “any air pollutant” within the “major
source” definition, without the need for changes to state regulations
or statutes.  States may be able to track EPA’s approach to tailoring
for GHG permitting without regulatory or statutory changes, for example,
where a state has taken the position, or determines now, that the
state’s interpretation of “major source,” “subject to
regulation” and/or “any air pollutant” is intended to track
EPA’s interpretation. 

	Thus, EPA is adding the phrase “subject to regulation” to the
definition of “major source” under 40 C.F.R section 70.2 and 71.2. 
EPA is also adding to these regulations a definition of “subject to
regulation.”  Under the part 70 and part 71 regulatory changes adopted
today, the term “subject to regulation,” for purposes of the
definition of “major source,” has two components.  The first
component codifies the general approach EPA recently articulated in the
“Reconsideration of Interpretation of Regulations That Determine
Pollutants Covered by Clean Air Act Permitting.” 75 FR 17704.  Under
this first component, a pollutant “subject to regulation” is defined
to mean a pollutant subject to either a provision in the CAA or
regulation adopted by EPA under the CAA that requires actual control of
emissions of that pollutant and that has taken effect under the CAA. 
See id. at 17022-23; Wegman Memo at 4-5.  To address tailoring for GHGs,
EPA includes a second component of the definition of “subject to
regulation,” specifying that GHGs, are not subject to regulation for
purposes of defining a major source, unless as of July 1, 2011, the
emissions of GHGs are from a source emitting or having the potential to
emit 100,000 tpy of GHGs on a CO2e basis.

	As explained above, we find no substantive difference between the
alternative mechanisms for implementing GHG tailoring in the final rule.
 Whether we add GHG thresholds directly to the definition of “major
source,” (as we proposed), or alternatively, expressly add and define
the term “subject to regulation,” both approaches revise the
definition of “major source” to implement the GHG tailoring rule. 
Accordingly, we adopt the later approach to facilitate State
implementation of the final rule through an interpretation of existing
State Part 70 programs.  Similar to our explanation above for PSD, while
we adopt the “subject to regulation” mechanism for implementing GHG
tailoring in the final rule, the thrust of our rulemaking today is to
apply the title V definition of “major source” – which includes
the statutory term, “major stationary source” -- to GHG sources by
treating only GHG sources that emit at levels above the steps 1 and 2
thresholds as meeting that definition.  Further, we believe that our
action may reasonably be construed to revise any of several terms in
that definition, including (i) the numerical thresholds, as we proposed;
(ii) the term “any air pollutant,” or (iii) the term “subject to
regulation,” which, as discussed above, our regulations graft into the
definition of “major source.”  We believe that the specific choice
of which term constitutes the legal mechanism does not have a
substantive legal effect because each mechanism involves one of the
components of the regulatory term “major source,” and it is that
term that we are interpreting to tailor title V applicability for
GHG-emitting sources.  Thus, while the “subject to regulation”
mechanism facilitates expeditious implementation by states, and we are
therefore revising our regulations to adopt this approach, we otherwise
find no substantive difference between the alternative mechanisms we may
use to finalize the proposed rule.

Further, similar to our revised approach for addressing State
SIP-approved PSD programs, we are delaying our action to issue limited
approvals for State part 70 operating permit programs.  In our proposed
rule, we explained our concern that states lack adequate personnel and
resources to carry out part 70 operating permit programs for GHG sources
that emit or have the potential to emit 100 tpy of GHGs.   Accordingly,
we proposed to use our general rulemaking authority under Section 301(a)
of the CAA and APA section 553 to limit our prior approval of State
operating permit programs. This limited approval action would have had
the effect of applying Clean Air Act permitting requirements only to
sources that exceed the permitting thresholds established in this rule
for the phase in, because only those sources would be covered by the
federally approved part 70 programs. 74 FR at 55345.  As discussed
above, we are proceeding with a slightly revised approach to address
concerns similar to those raised with our proposed approach for
addressing SIP-approved PSD permit programs.  Because we now recognize
that, like the PSD program, many States will be able to implement the
final rules without the need to revise their existing Part 70 operating
permit programs, we are delaying further action on our proposal to limit
approval of existing Part 70 programs until we better understand how
permitting authorities will implement our final rule.  In addition to
the information requested above on SIP-approved PSD permit programs, we
ask each State to submit a letter to the appropriate Regional
Administrator no later than [insert date 60 days after promulgation]
detailing the state’s  plan for permitting of GHG sources under the
state’s part 70 program.  In that letter, states should explain
whether they will adopt an interpretation of the terms “major
source,” “any air pollutant” or “subject to regulation” that
is consistent with EPA’s regulatory interpretation of the these terms
as codified  at 40 C.F.R. section 70.2, and whether the State intends to
adopt the interpretation without undertaking a regulatory or legislative
process. This approach may be available, for example, where a state has
taken the position, or determines now, that the state’s interpretation
of “major source,” “subject to regulation” and/or “any air
pollutant” is intended to track EPA’s interpretation, resulting in
title V permitting for sources of GHGs as described in EPA’s
regulations adopted today.  If a State must revise its title V
regulations or statutes to implement the interpretation, we ask States
to provide an estimate of the time to adopt final rules or statutes in
its letter to the Regional Administrator.  If a State chooses not to (or
cannot) adopt our interpretation, the letter should address whether the
State has alternative authority to implement the GHG tailoring approach
or some other approach that is at least as stringent, but which also
addresses the expected shortfalls in personnel and funding that would
exist if the state to carried out permitting under Part 70 program
thresholds lower than those adopted by EPA in this final rule.  For any
State that is unable or unwilling to adopt the permitting thresholds in
the final rules, and otherwise is unable to demonstrate adequate
personnel and funding, EPA will move forward with finalizing a limited
approval of the state’s existing part 70 program.  

In our proposed rule, we also noted that a handful of Part 70 operating
permit programs may include provisions that would not require operating
permits for any source of GHG emissions because, for example, the
programs may apply only to pollutants specifically identified in the
program provisions.  States may be unable to interpret their regulatory
provisions to interpret the term “any pollutant” to include
pollutants “subject to regulation.”  We indicated that we intended
to take separate action to identify these programs, and to take
regulatory action to correct this deficiency.  Accordingly, we ask any
State or local permitting agency that does not believe its existing part
70 regulations convey authority to issue title V permits to GHG sources
consistent with the final rule to notify the Regional Administrator by
letter as to whether the state intends to undertake rulemaking to revise
their rules consistent with today’s applicability thresholds.  This
notification should be done no later than the previously described
letter regarding adoption of the tailoring rule, and could be combined
with similar notifications we request regarding the PSD program.  We
will undertake a separate regulatory action to address part 70 programs
that lack the ability to issue operating permits for GHG sources
consistent with the final rule.  We will use our federal title V
authority to ensure that GHG sources will be permitted consistent with
the final rule.

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

The title V program requires permitting authorities to collect fees
“sufficient to cover all reasonable (direct and indirect) costs
required to develop and administer [title V] programs.”   To meet this
requirement, permitting authorities either collect an amount not less
than a minimum amount specified in our rules (known as the
“presumptive minimum”), or may collect a different amount (usually
less than the presumptive minimum).  We did not propose to change the
title V fee regulations in our notice of proposed rulemaking for this
action, nor did we propose to require new fee demonstrations when title
V programs begin to address GHGs.  However, we did recommend that each
state, local or tribal program review its resource needs for GHG and
determine if the existing fee approaches will be adequate.  If those
approaches will not be adequate, we suggested that states should be
proactive in raising fees to cover the direct and indirect costs of the
program or develop other alternative approaches to meet the shortfall. 
We are retaining this proposed approach, and are not changing our fee
regulations as part of today’s final action establishing steps 1 and 2
of the phase-in.  However, we are offering some additional clarification
of our fee approach during these steps in response to comments we
received on this issue.  Additional discussion of fees will be included
as part of subsequent actions establishing step 3 and beyond. 

A few state commenters suggested that EPA should modify part 70 to adopt
a presumptive minimum fee (or range for such fee) for GHGs, some of whom
suggested that current fees may be insufficient to cover the costs of
their program.  It is important to clarify that altering the presumptive
minimum would only affect those states that chose to charge the
presumptive minimum fee to sources.  Most states – including some of
the commenters asking EPA to raise the presumptive minimum -- collect a
lower amount that is not based on the presumptive minimum, but rather,
relies on another fee schedule that it developed and EPA approved as
adequate to cover costs.  Therefore, it is useful to first discuss our
approach to programs that have fee schedules resulting in a different
amount before discussing our approach to the presumptive minimum.

Because of the added GHG title V permitting workload described elsewhere
in this notice, any state that will not, under its current fee
structure, collect fees adequate to fund the permitting of GHG sources
must alter its fee structure in order to meet the requirement that fees
be adequate to cover costs.  Changes may not be required in every
instance; circumstances will vary from state to state.  For example a
state may see increases in revenue from newly-covered sources (based on
emissions of pollutants already subject to fees) that fully cover the
state’s increased costs, or a state may be over-collecting fees now
and could use the surplus to offset the increased costs.  Nonetheless,
in many cases, we think states will need to adjust their fee structures
to cover the costs of GHG permitting in order to meet the requirements
of the Act and our regulations. 

For this reason, although we are not calling for new fee demonstrations
at this time, we plan to closely monitor state title V programs during
the first two steps of the Tailoring Rule to ensure that the added
workload from incorporating GHGs into the permit program does not result
in fee shortfalls that imperil operating permit program implementation
and enforcement, whatever the basis of the states’ fee schedule.  As
described in the proposal, such fee oversight by EPA may involve fee
audits under the authority of §70.9(b)(5) to ensure that adequate fees
are collected in the aggregate to cover program costs, with emphasis on
whether the additional GHG workload is being appropriately funded. 
Also, EPA retains the ability to initiate a program revision under
§70.4(i)(3) or issue a notice of deficiency under the process described
in §70.10(b) to address fee adequacy issues, which may be uncovered
during a fee audit.  By relying on existing oversight measures, we are
ensuring that the fee requirements are met with a minimum of disruption
to existing programs at a time when they will already be facing
significant challenges related to GHG permitting.

Turning to the minority of states that do use the presumptive minimum,
we did not propose to change the presumptive minimum calculation method
to account for GHG.  Currently under the statute and our rules, the
presumptive minimum is based on a subset of air pollutants (i.e., VOC,
NAAQS pollutants except for CO, and pollutants regulated under the NSPS
and MACT standards promulgated under sections 111 and 112 of the Act,
respectively) that does not include GHGs.  The amount is specified on a
per-ton basis and changes with inflation (it is currently set at
$43.75/ton), but does not apply to emissions over 4,000 tpy of a given
pollutant from a given source.  We noted several difficulties in
applying the presumptive minimum to GHG, including the large amounts of
GHG emissions relative to other pollutants and the need for better data
to establish a GHG-specific amount.  Noting that GHGs are not currently
included in the Act’s list of pollutants to which the presumptive fee
applies, we also invited comment on whether we should raise the fee for
listed pollutants to cover the added cost of GHG permitting.

A few state commenters asked us to set a presumptive fee for GHGs, which
we take to mean we should add GHGs to the list of pollutants to which a
presumptive fee would apply.  However, many commenters noted that the
current presumptive minimum fee is unreasonable for GHGs because GHGs
are emitted in greater quantities than the pollutants currently subject
to presumptive fees, which would result in excessive fees.  These
commenters believe that EPA needs to limit the fees that states can
charge for GHGs.  Moreover, one commenter read the statute to prohibit
us from listing GHGs in the presumptive fee calculation in the first
place.  Several commenters disagreed with the idea of instead increasing
the presumptive fee for other pollutants to cover the cost of regulating
GHGs, some of whom believed that this would unfairly punish existing
sources or would bring in no new revenue from sources triggering title V
for the first time.

After considering these comments, we remain disinclined, as we were at
proposal, to change the presumptive fee calculation regulations.  While
there is some support for changing the regulations, the comments confirm
the challenges in doing so.  While we expressly rejected charging the
full presumptive cost per ton amount for GHG, we also did not propose
language to establish a different amount just for GHG, to establish
whether a different tpy cap would apply, or to assess whether GHGs could
even be added to the list.  Thus, many commenters were very concerned
about whether the full $43.75 or the 4000 tpy cap would apply to GHG if
we listed it as a regulated pollutant for fee purposes.  Furthermore, we
noted at proposal, and commenters did not disagree, that more data would
be needed to establish the appropriate basis for the GHG presumptive
minimum.  We are not taking a final position today on whether the
statute is amenable to including GHG in the presumptive fee calculation
currently, but these comments illustrate some of the difficulties of
such an approach.  

At the same time, we are not increasing the presumptive minimum for
other pollutants already included in the fee calculation.  We disagree
with the commenter who said such an approach would bring in no new
revenue from newly-subject sources.  Many of the newly subject sources
would emit already-included pollutants.  If new revenue from these
pollutants were insufficient, and because the Act does not specify how
the shortfall must be addressed, the amount of any projected shortfall
could be made up by increasing fees on these pollutants.  In fact, the
projected shortfall could be addressed without having to inventory GHG
emissions from title V sources, since the emissions of already-included
pollutants are well-known.  We also note that, although some commenters
are concerned that failing to assess fees for GHGs directly would be
unfair, the statute does not provide that the presumptive fee be
proportional to each type of pollutant or be proportionally allocated to
all sources. Rather, the presumptive fee approach provides a backstop
for states that do not wish to adopt a more tailored approach. 
Nonetheless, we have decided not to increase the presumptive fee amounts
for other pollutants because we lack information about the extent to
which shortfalls exist due to GHG permitting, and which mix of sources
and fees is appropriate for addressing any such shortfall in a state.
This approach also provides greater flexibility to states and minimizes
disruption to existing programs. 

We note that, contrary to the statements of some commenters, the CAA
provisions allowing for a presumptive fee calculation do not override
the basic requirement that fees be adequate to cover costs. As noted
above, we expect states to see a revenue increase from emissions of
listed pollutants at newly-major sources for GHG, and it is also
possible that the presumptive minimum may currently be resulting in
over-collection of fees in a state.  Thus, a state continuing to use the
presumptive minimum may not have a shortfall.  However, if states using
the presumptive minimum approach do have a revenue shortfall due to GHG
permitting, the statute requires the shortfall to be addressed.  The EPA
has had, and will continue to have, the ability to require states that
use the presumptive minimum to increase their fees if the presumptive
minimum results in a revenue shortfall that imperils operating permit
program implementation and enforcement.  Thus, although we are not
changing the presumptive minimum in our regulations, we plan to follow
the same oversight approach for states using the presumptive minimum as
for those collecting less based on a resource demonstration.  As
described above, this approach may involve fee audits with emphasis on
whether the additional GHG workload is being appropriately funded, and
other appropriate follow-up. 

Consistent with our proposal, EPA is not modifying its own part 71 fee
structure (which closely mirrors the presumptive minimum) in order to
charge an additional fee for GHG.  EPA must revise its fee schedule if
the schedule does not reflect the costs of program administration.  We
have not determined that the existing fee structure will be inadequate
to fund the part 71 programs costs during the first two phases of
permitting GHGs as set forth in this action.  However, we are required
to review the fee schedule every two years, and make changes to the fee
schedule as necessary to reflect permit program costs.  40 CFR section
71.9(n)(2).  Thus we will continue to examine the increases in part 71
burden due to GHG permitting, the current revenue collection, and the
increases in revenue from newly-subject part 71 sources, and will adjust
the part 71 fee approach accordingly.

Finally, several state and industry commenters asked EPA to provide
guidance and recommendations for an appropriate GHG fee structure.  We
note that title V grants permitting authorities considerable discretion
in charging fees to sources for title V purposes and does not require or
prohibit fees specifically for GHGs, provided the states collect fees in
the aggregate that are sufficient to cover all the direct and indirect
program costs.  In responding to requests for guidance, we do not wish
to limit state discretion.  For example, some commenters suggest that
EPA prohibit emissions-based fees for GHG or cap the amount that can be
collected, while others suggest we provide a range of acceptable fees. 
We are concerned that, given the wide variety of fee approaches that
states now take, providing specific guidance may be disruptive, rather
than helpful, to states.

On the other hand, we recognize that it will initially be difficult for
states to establish an appropriate emissions fee for GHG.  As noted
above, there are currently limited data available for establishing such
a fee, and, due to the large quantities of GHG emissions, such a fee may
only amount to a few cents per ton.  At the same time, as noted in the
proposal, a number similar to that used for other pollutants (e.g., the
presumptive minimum of $45/ton of GHG) would be inappropriate because it
would likely result in huge over-collection.  Because of this challenge,
we note that §70.9(b)(3) allows the state to charge fees to individual
sources on any basis (e.g., emission fee, application fee, service-based
fees, or others, in any combination).  While most states use
emissions-based fees, there is merit to considering all the available
fee bases to address increased GHG workload, including approaches that
do not require a GHG emissions inventory for fee purposes.  For example,
where it is possible to estimate a revenue shortfall as a percentage of
fee revenue, it may be appropriate to simply attach a percentage-based
surcharge to each source’s fee to match that shortfall.  Similarly,
where the shortfall could be estimated as a total dollar amount, a flat
surcharge could be added to each source’s fee to address the
shortfall.  

These suggestions should not be read to indicate that EPA prefers any
particular approach, or that EPA rejects a cost per ton approach. 
Rather, they illustrate that it is possible to address a revenue
shortfall without establishing a GHG per-ton fee.  While the EPA is
declining to recommend specific approaches in this preamble, we are
committed to assisting states in implementing the fee requirements for
GHG.  Therefore, we will work with any state that requests assistance
from EPA in developing a workable fee approach.

E.    Other Actions and Issues  

1.  Permit Streamlining Techniques

In our proposal, we stated that while we were phasing-in permitting
requirements, we would make a concerted effort to assess and implement
streamlining options, tools, and guidance to reduce the costs to sources
and permitting authorities of GHG permitting.  We recognized that the
development and implementation of these techniques should be an integral
part of our strategy during the phase-in period, and we stated that we
would undertake as many of these streamlining actions as possible as
quickly as possible.   We discussed several streamlining techniques in
particular, including (1) defining potential to emit (“PTE”) for
various source categories, (2) establishing emission limits for various
source categories that constitute presumptive BACT, (3) establishing
procedures for use of general permits and permits-by-rule, (4)
establishing procedures for electronic permitting, and (5) establishing
“lean” techniques for permit process improvements.   The first three
of these approaches have the potential to have the greatest impact in
reducing the numbers of sources subject to PSD or title V (the
definition of PTE) or of reducing permitting costs (presumptive BACT and
general permits or permits-by-rule).

In our proposal, we also described the timing for development and
implementation of these streamlining techniques.  We explained that each
of the first three techniques would generally take 3-4 years to develop
and implement, and therefore would be of limited use in the near-term. 
This time frame is necessary because EPA will first need to collect and
analyze small source data that we do not currently have – because
these are sources that EPA has not traditionally regulated --  in order
to assess which of these techniques are viable or effective for such
sources.  In general, EPA will then need to conduct notice-and-comment
rulemaking to establish the approaches, and that rulemaking will need to
address various legal and policy aspects of these approaches.  After
that, the permitting authorities will need some time to adopt the
streamlining techniques as part of their permitting programs.

We received several comments on streamlining techniques.  In general,
the comments indicate widespread support for our pursuit of streamlining
approaches, but some commenters were concerned that one or more of
EPA’s identified streamlining options were complex, vague,
ineffective, and questionable legally.   Noting our proposal to phase-in
permitting, in part to allow more time to develop streamlining options
for smaller sources, some commenters suggested that we should delay
permitting for larger sources for the same reasons.  We disagree.  Such
a delay is not justified under the legal doctrines of “absurd
results” and “administrative necessity.”  While implementation of
steps 1 and 2 – which will cover larger sources -- will pose
implementation challenges, and some of the streamlining tools could
assist with meeting these challenges, we have assessed the burdens
associated with GHG permitting and have established a phase-in schedule
that represents a manageable workload, even in the absence of
streamlining techniques.  On the other hand, we do agree with these
commenters that, absent streamlining, applying PSD and title V
requirements to the much large number of small sources would lead to
absurd results and administrative impossibility.  The sources for whom
the phase-in delays applicability are precisely the sources that have
the greatest need for streamlining measures, and thus the greatest need
for a deferral while we develop and implement streamlining options.

In addition, commenters generally echoed many of our concerns about why
it will take time to put these measures in place, and no commenter
presented any information to suggest that our 3-4 year estimate for the
PTE, presumptive BACT, and general permit measures was invalid.  

For these three techniques, we continue to believe that as we noted at
proposal, we will require collection of significant category-specific
data for source and emission unit types that have heretofore generally
not been regulated by the CAA (e.g., furnaces, water heaters, etc.),
which could take up to one year.  Moreover, commenters had differences
of opinion as to whether and how we should move forward on these
approaches, and some raised policy and legal issues that we would likely
want to explore through a notice and comment process.   Even if a
rulemaking were done expeditiously, it would likely require one year. 
Finally, unlike lean and electronic permitting, these approaches, once
finalized by EPA, will likely require additional time of up to two years
for states to adopt.  Thus, it is clear that these approaches will not
be in place in time to ease any burden prior to the planned rulemaking
for step 3.

Some commenters did observe that the fourth and fifth techniques, lean
and electronic permitting, could, at least theoretically, become
available sooner.  However, these commenters also noted that successful
design and implementation of these approaches will require
implementation experience with GHG permitting that is not now available.
 We expect that for the lean and electronic permitting techniques, at
least one year of implementation experience (of the type that we will
gain starting in 2011) would be required, plus at least an additional
year to extrapolate that experience to small sources and put these
approaches into effect for small source permitting.  Thus, we do not
think the lean and electronic permitting would be in place before the
beginning of 2013.  Moreover, a handful of commenters questioned whether
lean and/or electronic permitting would alleviate significant burden. 
Thus we are not able, at this time, to presume that these approaches
will ease any burden prior to the planned rulemaking for step 3.

	It is also important to note that, as a practical matter, while these
efforts to streamline the program for small sources are underway, EPA
and states will also be devoting a significant amount of their
permitting resources and expertise to implementing the PSD and title V
programs for the GHG-emitting sources covered under Steps 1 and 2.   We
have established these steps in a manner that they will be feasible for
EPA and state/local/tribal authorities, but even so, they will not only
consume current permitting authority resources, but they will also
require substantial additional resources.  As a result, the efforts to
develop and implement streamlining techniques will have to compete with
the work necessary to administer existing programs.  For example, during
the remainder of 2010, as described elsewhere in this notice, EPA
permitting program resources will, in addition to continuing to
administer programs for non-GHG pollutants, be used to conduct at least
the following GHG-related activities in addition to streamlining: (1)
develop BACT and other information and guidance for implementing
programs for sources covered by Step 1, followed by additional guidance
and information for sources covered by Step 2; (2) review and act on
information we receive regarding state adoption of GHG permitting
requirements, which may entail  narrowing of previous SIP approvals or
processing of other programmatic revisions; and (3) propose and finalize
measures to address programs with deficiencies in GHG coverage.  As the
beginning of step 2 nears, we will also begin to receive and process the
first applications for permits that will incorporate GHG requirements
(i.e., those that will be issued after January 2, 2011).  States seeking
to implement streamlining approaches will face similar competition for
permitting resources.

	These time frames and resource considerations for streamlining confirm
the approach to phase-in that we are taking in today’s rule.  First
and foremost, they make clear that it will not be possible to have
streamlining measures in place in time for either Step 1 or Step 2. 
Therefore our selection of threshold for those steps is not built on
assumptions that streamlining will remove some or all of the burden
during those steps.  

	Second, they make clear that, while no significant streamlining can be
in place by the time we must begin to develop the step 3 rule (i.e.,
latter half of 2011, to promulgate by July 2012, effective July 2013),
it is likely that by that time EPA and states will have had an
opportunity to gain implementation experience that could serve as the
basis for beginning to implement streamlining techniques that do not
require rulemaking or state adoption (e.g., lean and electronic
permitting).  It is also likely that we will have had an opportunity to
gather technical information – which we have already begun to gather
--for certain source and emissions unit categories that would be
necessary to support proposal of PTE or presumptive BACT approaches for
those categories.  We expect that the step 3 rulemaking will provide an
opportunity for us to use that experience and data to begin to propose
streamlining approaches that need notice and comment rulemaking.  We can
also begin to take into account any burden reductions from possible
early streamlining efforts – that is, through lean and electronic
permitting -- in the establishment of step 3.    

	Third, it is clear that the potential availability of streamlining
measures does not call into question our decision today that in no event
will we broaden PSD and title V applicability to cover GHG-emitting
sources below the 50,000 tpy CO2e level prior to July 2016, as discussed
elsewhere.  EPA cannot now predict the resources that will be required
to implement PSD and title V programs for GHG-emitting sources once
various streamlining techniques are ultimately completed.  This is
uncertain not only because we need data and implementation experience
with GHG permitting during steps 1, 2, and 3 that we can apply to
estimates for small sources, but also because, as comments indicate,
there is a broad range of legal and policy issues to consider in
crafting the streamlining approaches we ultimately adopt.  We have
presented an initial assessment of options and obtained views of
commenters both supporting and opposing them, and it is the result of
these future actions, whose outcomes are uncertain at this time, that
will ultimately determine the extent to which streamlining approaches
will allow for the administration of PSD and title V programs for
numerous small sources.  Thus, while we are optimistic that we can craft
workable, common-sense solutions, we nonetheless, believe it is
important to preserve our small source exclusion until we have not only
had time to put the streamlining approaches in place, but also have had
time to assess the burdens that remain, before we bring in additional
sources below the 50,000 tpy levels.   We believe that the six-year
timeframe will require a sustained intensive effort by EPA and states to
develop, adopt, and implement streamlining techniques, and will require
EPA to then evaluate those techniques and complete a rulemaking
concerning PSD and title V applicability to small-sources based on that
evaluation.  In this manner, the six-year period will give us the
necessary time to make the best decisions about the actions we should
take beyond step 3.

While comments make clear that there are issues to be addressed, nothing
in the comments has persuaded us that we should abandon our streamlining
efforts.  To the contrary, the strong support for these efforts shown by
many commenters reinforces our intention, as stated at proposal, to move
forward with these approaches as an integral part of our phase-in
approach.  Moreover, notwithstanding the competition for GHG permitting
resources and expertise, we believe it is critical that we move forward
expeditiously.  As noted above, we are already taking a first step by
initiating permitting for larger sources, beginning January 2011, that
will begin to provide valuable implementation experience.  This
experience can be useful in allowing states to begin implementing early
streamlining measures, like lean and electronic permitting, which do not
require EPA action.  We have also already begun, and will continue,
developing data necessary to support rulemakings addressing approaches
such as PTE, presumptive BACT, and general permits. We expect to be able
to use these data to support rulemakings on these topics, as
appropriate, at about the same time as our step 3 rulemaking.  Because
of the uncertainty surrounding such approaches, we are not today
committing to finalize rules on any particular approach, but we do plan
to pursue all streamlining options as expeditiously as possible,
beginning immediately and proceeding throughout the phase-in period, and
we encourage permitting authorities to do the same.  We commit to
consider a wide array of possible streamlining measures, and we commit
to propose and take comment on, in the step 3 rulemaking, a set of those
measures that we determine are viable to pursue further.

2.   Guidance for Best Available Control Technology Determinations 

The CAA requires that a PSD permit contain, among other things,
emissions limits based on the best available control technology (BACT)
for each pollutant subject to regulation under the Act emitted from the
source that triggers PSD.  42 U.S.C. § 7475(a)(4); 42 U.S.C. §
7479(3).  BACT is defined as follows:

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

42 U.S.C. § 7479(3).  

Thus, the BACT process is designed to determine the most effective
control strategies achievable in each instance, considering energy,
environmental, and economic impacts.  However, the case-by-case nature
of BACT, together with the range of factors and technologies that must
be considered, presents a challenge in determining BACT for newly
regulated pollutants.  When a new pollutant is regulated, the first
permit applicants and permitting authorities that are faced with
determining BACT for a new pollutant will likely need to invest more
time and resources in gathering and analyzing information necessary to
make an assessment of BACT under the statutory criteria.  Once the PSD
permitting program matures with respect to the new pollutant, successive
BACT analyses will establish precedents that can inform subsequent BACT
determinations.  While the BACT provisions clearly contemplate that the
permitting authority evaluate control strategies on a case-by-case
basis, EPA recognizes the need to develop and share policy guidance and
technical information for sources and permitting authorities as they
begin to permit sources for newly regulated pollutants, such as of GHGs.
 When applied in a practical manner, this additional EPA guidance and
technical information should reduce time and resource needs when
evaluating BACT for newly regulated pollutants.

As described in the proposed GHG Tailoring Rule, EPA intends to compile
and make available technical and background information on GHG emission
factors, control technologies and measures, and measurement and
monitoring methodologies for key GHG source categories.  We expressed
our intent to work closely with stakeholders in developing this
supporting information and to ensure this information is available in
sufficient time to assist permitting agencies in their BACT
determinations.  The proposal took comment on what other types of
support or assistance EPA can provide to initially help air pollution
control agencies with the permitting of GHGs.

Commenters on the proposed GHG Tailoring Rule generally supported EPA
providing technical information and policy guidance for sources of GHGs.
 Several commenters specifically requested guidance to clarify
GHG-related issues, such as how to compute CO2eq emissions, how to
evaluate emissions of CO2 from biomass fuel, and whether an air quality
analysis will be required for GHGs.  Additionally, commenters requested
that EPA issue “white papers” and other tools that would provide
information on a range of control technologies and measures for major
stationary source categories, such as power plants, cement kilns, glass
furnaces, and other sources.  Many of these commenters further requested
that EPA provide an opportunity for stakeholder input on the guidance,
and a few commenters insisted that permitting for sources of GHGs should
not begin prior to issuing final guidance. 

Consistent with our commitment at proposal to involve all stakeholders
in our guidance development, EPA called upon the CAAAC in September
2009, to provide assistance and recommendations for what types of
guidance and technical information would be helpful.  Specifically, our
charge to the CAAAC was “… to discuss and identify the major issues
and potential barriers to implementing the PSD Program under the CAA for
greenhouse gases … [and] focus initially on the BACT requirement,
including information and guidance that would be useful for EPA to
provide concerning the technical, economic, and environmental
performance characteristics of potential BACT options.”  This charge
also requested the CAAAC to “identify and discuss approaches to enable
state and local permitting authorities to apply the BACT criteria in a
consistent, practical and efficient manner.”

At its October 6, 2009, meeting, the CAAAC established a Climate Change
Work Group, made up of 35 representatives from a variety of industries,
state and local governments, and environmental and public health
non-profit organizations, organized under CAAAC’s Permits, New Source
Review and Toxics Subcommittee.  The Work Group initially focused its
attention on the procedure for evaluating BACT and decided  that the
process and criteria for determining BACT for criteria pollutants
represented a workable and acceptable framework for GHGs.  The Work
Group also recommended a second phase, in which the Work Group would
consider member proposals regarding possible alternative or
supplementary approaches to applying the PSD program to GHG sources. 

In February 2010, the CAAAC completed work on the first phase of their
effort and sent EPA a list of recommendations that highlighted areas of
the BACT determination process that are in need of technical and policy
guidance.  For more information, see the Interim Phase I Report on
Issues related to Best Available Control Technology (BACT) for
Greenhouse Gases (GHGs), February 3, 2010 that is located in the public
docket for this rulemaking and at   HYPERLINK
"http://www.epa.gov/air/caaac/climate/2010_02_InterimPhaseIReport.pdf" 
http://www.epa.gov/air/caaac/climate/2010_02_InterimPhaseIReport.pdf . 
In response we are working on a number of fronts to develop technical
information, guidance and training to assist states in permitting large
stationary sources of GHGs, including identifying GHG control measures
for different industries.  EPA is currently working with States on
technical information and data needs related to BACT determinations for
GHGs.  This includes developing the EPA Office of Research and
Development GHG Mitigation Strategies Database, enhancing the
RACT/BACT/LAER Clearinghouse to include GHG-specific fields, and
preparing technical information on sector-based GHG control measures. 
Also, EPA is actively developing BACT policy guidance for GHGs that will
undergo notice and comment and will culminate in training courses for
State, local and tribal permitting authorities.  The results of all of
these efforts will roll out over the remainder of 2010.  EPA currently
awaits the Work Group’s recommendations from its second phase of
deliberations, which is underway as of the date of this notice.

EPA does not agree with some commenters’ suggestion that EPA should
delay permitting any sources until final BACT guidance is issued.  As
discussed in the final action on reconsideration of the Interpretive
Memo, delaying the application of BACT to enable the development of
guidance or control strategies is not consistent with the BACT
requirements.  63 FR at 17008.  Furthermore, as just described, EPA
expects such a delay to be unnecessary because EPA will soon begin
providing technical information to inform BACT decisions, and will
continue to provide additional guidance prior to the date that GHG
permitting begins.  However, even in the absence of such guidance, a
delay would not be justified under the legal doctrines of absurd results
and administrative necessity.  While implementation of the BACT
requirement during steps 1 and 2 will pose implementation challenges,
EPA has assessed the burden associated with GHG permitting with
consideration given to these challenges, and has established a phase-in
schedule that represents a manageable workload.  

Thus, while BACT will remain a case-by-case assessment, as it always has
been under the PSD program, EPA is confident that this guidance
development effort will help support a smooth transition to permitting
emissions of GHGs.  Furthermore, EPA will continue to work to provide
the most updated information and support tools to allow permitting
authorities to share and access the most updated information on GHG BACT
determinations as they are made once permitting of GHGs begins.  EPA
remains committed to involving stakeholders in the upcoming efforts to
develop guidance to help to permitting authorities in making BACT
determinations for sources of GHGs.  

3.    Requests for Higher Category-Specific Thresholds or Exemptions
from Applicability  

Although we did not propose any categorical exemptions, many commenters
requested exemptions from major source and major modification
applicability determinations under title V and PSD for certain types of
GHG-emitting sources or certain types of GHG emissions as follows: 

Source Categories.  Many also commenters requested various exemptions or
exclusions from source applicability for GHGs under both PSD and title V
permitting, either during the phase-in period or permanently, citing
anticipated burdens, societal costs, and differences in emission
characteristics.  Many non-traditional sources or source categories
(sources that have not historically been required to get permits)
requested exemptions from permitting based on GHG emissions, including
agricultural, residential, and small businesses.  In general, these
non-traditional sources sometimes, but not always cited absurd results
and administrative necessity arguments in their exemption requests.   

Several commenters from sectors that consume a great deal of energy in
their industrial processes and that are subject to international
competitiveness, such as aluminum, steel, cement, glass, pulp and paper,
and other manufacturers, requested that they be exempt from permitting
under this final rule.  These commenters opine that EPA has not
carefully considered the environmental and economic consequences of this
action because if we had, we would have exempted them for several
reasons, including that other countries typically exempt similar sources
from GHG cap and trade programs because the industries are making
significant energy efficiency improvements absent GHG regulation, and
because permitting such sources may cause many facilities to move to
countries that have less regulation or no regulation for GHGs.  

Other industry groups cited unique characteristics of their emissions,
or the quantities in which they are emitted, that they argued should
justify exclusion or unique thresholds. Semiconductor production
facilities asked for exemptions, arguing that combustion-related GHG
emissions are different from their GHG emissions, which result from the
use of high-GWP industrial gases, such as PFCs, with higher GWP values
that are more likely to trigger permitting requirements at relatively
low tpy values.  One lime production commenter stated that EPA could
encourage energy efficiency projects at their plants by excluding
calcination and other process emissions, arguing that these emissions
are a relatively small portion of the national inventory that will have
no material effect on air quality and global warming.  Another commenter
requested that EPA exclude emissions from poultry production (natural
bird respiration) from permitting consideration because the IPCC
excludes them from their GHG emission estimates. Representatives of the
landfill industry pointed to the relationship between current statutory
thresholds that apply to their regulated emissions, primarily
non-methane organic emissions (NMOC), and the equivalent amount of GHG
emissions this corresponds to.  They argued for a source-category
specific threshold that is at least equivalent to their current NMOC
threshold, or roughly 750,000 tpy CO2e according to their estimate.     

Although the proposal for the tailoring rule did generally discuss how
the statutory requirements for major source applicability (100/250
thresholds) could be phased-in in ways that would offer relief to
traditional and non-traditional sources, such as residences, farms,
small business, and semiconductor manufacturers, it did so through the
proposed establishment of relatively high CO2e thresholds during the
early implementation period and lowering the thresholds over time as
streamlining mechanisms become available to reduce administrative
burdens.  We did not propose any permanent exemptions of any kind.  
Also note that the proposal discussed energy efficiency, process
efficiency improvements, recovery and beneficial use of process gasses,
and certain raw material and product changes in the context of
short-term, low-cost means of achieving GHG emission reductions for
small-scale stationary sources, but not in the context of exemptions.  

As discussed above, we are still considering whether permanent
exemptions from the statute are justified for GHG permitting based on an
absurd results theory.  However, similar to our conclusion for the
suggested biomass exclusion below, we have determined that we do not
have sufficient basis to create any of the suggested exclusions.  We did
not propose any sort of permanent exclusion based on an interpretation
of the statutory provisions of PSD or title V.  Regardless of any
arguments about the legality and advisability from a policy or economic
standpoint of such exclusions, we would need to propose a PSD and/or
title V specific legal and policy rationale that fits within the Clean
Air Act, to specify details regarding our implementation approach, and
to provide an opportunity for public comment before adopting any such
exclusion.  Therefore we are not doing so here.  We note, however, that
nothing in today’s rule forecloses the opportunities we may have to
explore such options in the future. 

The remaining option for creating such exclusions in this rule is to
find that such an exclusion is necessary to avoid administrative
necessity or absurd results.  We did solicit comment on alternative
approaches to the proposed phase-in for permitting.  Some commenters
suggested that the administrative necessity or absurd results rationale
could be used to create at least temporary exclusions that would allow
more sources to escape permitting than would already be excluded under
step 1, step 2, and the small source exclusion until 2016.  We
considered each of these requests in the context of the overwhelming
permitting burdens and the options for reducing such burdens, and
ultimately decided that, given our threshold-based approach to the phase
in, it is not appropriate to also adopt such exclusions to address the
same burdens.  We have finalized steps 1 and 2 using the threshold-based
approach, which applies administrative necessity and absurd results
arguments in a way that effectively exempts all small sources during
this part of the phase-in.  The suggested exclusions alone would not
address the overwhelming permitting burdens, and the threshold-based
approach would still be necessary.  Moreover, once the threshold
approach is applied as described, we do not see that the remaining
burdens would be so overwhelming as to lead to absurd results or
administrative impossibility.   While we could have crafted specific
exemptions of the kind suggested as an alternative means of tailoring
the programs, our approach achieves the same result and does so in a way
that will be simpler to administer.   Furthermore, specifically with
respect to high GWP, gases as discussed above, we have included a
mass-based trigger that addresses comments regarding the inclusion of
those gases.  Therefore, we are not finalizing any such exclusions in
today’s rule. 

Concerning the comment that we did not take appropriate economic and
environmental considerations into account for this rulemaking action, we
disagree.  The approach we finalize today for steps 1 and 2 minimizes
economic burdens by limiting permitting to the largest GHG emission
sources.  We further note that the PSD program as applied to the sources
that are covered in steps 1 and 2 contains an express requirement to
take energy, environmental, and economic considerations into account
when making control technology (i.e., BACT) decisions and accordingly
many of the concerns about control costs will be able to be accounted
for in that analysis.

Biomass Combustion/Biogenic Emissions.  Several commenters request that
EPA exempt emissions from biogenic activities or biomass combustion or
oxidation activities, including solid waste landfills, waste-to-energy
projects, fermentation processes, combustion of renewable fuels, ethanol
manufacturing, biodiesel production, and other alternative energy
production that use biomass feedstocks (e.g., crops, or trees).  For
example, commenters urged that EPA exclude emissions from biomass
combustion in determining the applicability of PSD to GHGs based on the
notion that such combustion is “carbon neutral” (i.e., that
combustion or oxidation of such materials would cause no net increase in
GHG emissions on a lifecycle basis).  Other commenters oppose the
exemption of biogenic activities because they opine that carbon
neutrality of biomass combustion is an incorrect assumption that stems
from a “critical accounting error” in the Kyoto protocols.  These
commenters oppose the exemption of biogenic/biomass activities, citing
the lack of a valid scientific basis for treating these GHG emissions
differently than other GHG emissions.

The proposed Tailoring Rule did not address this issue of exemptions for
biomass combustion or biogenic emissions.  We discussed biogenic
emissions in the context of discussing voluntary efforts underway for
emission reduction of certain high-GWP gasses but there was no
discussion of any exemptions from applicability for GHGs derived from
biogenic activities or biofuels combustion.  We are mindful of the role
that biomass or biogenic fuels and feedstocks could play in reducing
GHG, and we do not dispute the commenters’ observations that state,
federal, and international rules and policies recognize
carbon-neutrality in various ways.  However, we have determined that we
do not have sufficient basis to create an exclusion from the permitting
applicability provisions for biomass combustion or biogenic fuels and
feedstocks.  Such an exclusion alone while reducing burdens for some
sources, would not address the overwhelming permitting burdens described
above, and a threshold-based approach would still be needed.  Once we
adopt a threshold-based approach, we do not have information regarding
the administrative burden of permitting projects that specifically
involve these source types, nor did the commenters provide any that
demonstrate an overwhelming permitting burden would still exist that
justifies a temporary exclusion for biomass sources.  

At the same time, we did not propose any sort of permanent exclusion
basis based on an interpretation of the statutory provisions of PSD or
title V.  Regardless of any arguments about the legality and
advisability of such an exclusion, we would need to propose a PSD and/or
title V specific legal and policy rationale and specify details
regarding our implementation approach (e.g. an approach to carbon
accounting), and would need to provide an opportunity for public comment
before adopting any such exclusion.  Therefore we are not able to
finalize such an approach here.  We note, however, that nothing in
today’s rule forecloses the opportunities we may have to explore such
options in the future.

We further note that, while we are not promulgating an applicability
exclusion for biogenic emissions and biomass fuels or feedstocks, there
is flexibility to apply the existing regulations and policies regarding
BACT in ways that take into account their lifecycle effects on GHG
concentrations.  This topic has already been explored by the CAAAC
workgroup on BACT issues related to GHGs that recently provided
recommendations to EPA [DAVE S. provide a reference to report and docket
it] While that group was unable to come to a consensus on how
biomass-based emissions should be treated, it provided us with
information that we will consider as we issue guidance on BACT.  As
previously discussed, we plan to issue BACT guidance later this year,
but are not doing so as part of this rulemaking.    This issue warrants
further exploration in that context, and we plan to fully explore it and
take action as appropriate.  

Fugitive Emissions.  Numerous commenters believe that fugitive GHG
emissions should be excluded from major source determinations, citing
difficulties in measuring or estimating such emissions.  Others believe
EPA did not address fugitive emissions in the proposal and they ask for
clarification of the treatment of fugitive GHGs in applicability
determinations under PSD and title V.  Some of these commenters state
that EPA has not undertaken a rulemaking under section 302(j) for any
source category of fugitive GHGs, so they should not be included.
Several commenters representing the solid waste disposal industry
requested exemptions for fugitive emissions for landfills and
waste-to-energy projects, pointing out that current practice under PSD
is for fugitive emissions from certain landfills to not be counted
toward major source determinations.  

In the proposal, EPA did not offer any specific guidance or discuss
exemptions for fugitive emissions of GHGs.  Commenters did not suggest
that a fugitive exemption would address the overwhelming permitting
burdens described above, or that it was necessary to specifically tailor
GHG applicability through the use of a fugitive emissions exclusion for
categories that would otherwise be required to include them.  We do
agree with commenters' stating that we should clarify how to count
fugitives in determining applicability under this rule.  In response, we
note that we are not finalizing any special rules for fugitive emissions
related to GHG.  Thus, EPA's rules related to the treatment of fugitives
would apply. Regarding the comment that a 302(j) rulemaking is required
before fugitive emissions may be counted, we disagree.  As we read
302(j), once EPA has established by rule that fugitive emissions are to
be counted for a specific source category, nothing in section 302(j)
requires EPA to conduct new rulemaking to allow for the counting of
additional pollutants from that category. We read 302(j) as imposing an
obligation to determine if fugitive emission generally should be counted
from a source or source category and not requiring that EPA list both
source categories and relevant pollutants. Indeed, our practice in
listing categories has not been to limit the pollutants to which the
listing applies.  Therefore, we are applying our existing rules and
policies for fugitive emissions for GHG as we would any other pollutant.

Pollution Control Projects.  Other commenters request exemptions for
pollution control projects from PSD major modification requirements,
particularly projects that increase the efficiency or thermal
performance of a unit or facility, resulting in emission reductions on a
pounds/megawatt-hour or production basis.  The current PSD rules do not
exclude pollution control projects from being considered a physical
change or change in the method of operation that would – if it
resulted in a significant net emissions increase -- constitute a major
modification, nor does case law suggest that we could adopt a permanent
exclusion in the future.  We also do not believe we should adopt an
exclusion for pollution control projects that relies solely on absurd
results or administrative necessity for reasons similar to those
described above for other requested exclusions.  Although such an
exclusion may have positive features, it would not address the
overwhelming permitting burdens that justify the tailoring approach.  

4.    Transitional Issues including Requests for Grandfathering      

In the tailoring rule proposal, we did not discuss or specifically ask
for comment on any provisions to address the transition from a
permitting regime that does not incorporate greenhouse gases to one that
does, such as “grandfathering” provisions or similar approaches that
would exempt previously issued permits or pending applications from
having to incorporate requirements for greenhouse gases.   We
nonetheless received several public comments that addressed a variety of
transitional issues.   One group of comments addresses situations prior
to permit issuance where a PSD or title V application is either
administratively complete or more generally being processed prior to the
trigger date for GHG permitting (“in process” applications).  
Another group of comments addresses situations where a PSD or title V
permit is issued prior to the GHG trigger date and the commenters
request that the application and/or permit be exempt from any
requirements for updates related to GHGs after permit issuance.  

With respect to PSD, many commenters requested that we adopt a
“grandfathering” approach to applicability to exempt projects that
have administratively complete PSD or minor NSR permit applications
pending when the GHG permitting requirements go into effect.  Several
commenters urged us to promulgate transition provisions (without
specifically using the term “grandfathering”), pointing out that we
have provided transition periods for revising pending PSD permits, in
the past, when new PSD rules were issued (e.g., in late 1970s and 1980).
 These commenters assert that GHG requirements will cause more
disruption than those previous rule changes.  Several commenters asked
that PSD applications be evaluated on the basis of the PSD requirements
effective when the application is submitted and if submitted prior to
the trigger date, then the application and permit would not need to
address GHGs.  Several commenters also asked that PSD sources with a
valid permit that commences construction within 18 months of the trigger
date not be required to seek a revised PSD permit for GHGs.  Similarly,
several commenters asked that PSD permits issued prior to the GHG
trigger date not be required to be reopened only for the purpose of
addressing GHG emissions. Additional commenters asked that we clarify
that sources or projects not be required to obtain PSD permits if they
obtained a determination that PSD did not apply (a
“non-applicability” determination) prior to the GHG trigger date. 
Finally, many commenters also requested “grandfathering” for title V
so that existing title V applications and permits do not need to be
amended, revised, or resubmitted to address GHGs after they become
“subject to regulation”.   Other commenters asked that transition
provisions for title V be provided in the final action that would be
similar to those requested for PSD.  

 We partially addressed transitional issues for PSD permitting in our
April 2, 2010 final action on reconsideration of the Interpretive Memo. 
75 Fed. Reg. at 17021.  This action addressed the applicability of PSD
permitting requirements for greenhouse gases to pending PSD permit
applications  that were (or will be) submitted  prior to January 2, 2011
based on  emissions of pollutants other than greenhouse gases.  However,
we have not yet addressed the questions raised by public comments
concerning sources that obtain PSD permits, minor NSR permits, or
determinations that no such permits are needed prior to the step 1
period set forth in this rule.    We have also not yet addressed
questions about the applicability of PSD permitting requirements for
sources that are not currently required to submit an application for a
PSD permit but that could be required to do so in step 2 of the phase-in
established in this action.  In addition, our April 2, 2010 action did
not address transitional issues concerning the application of the title
V provisions to greenhouse gases.

a.  Transition for PSD Permit Applications Pending When Step 1 Begins

In its action on April 2, 2010, EPA explained that the Agency did not
see grounds to establish a transition provision for pending PSD permit
applications because we had determined that PSD permitting requirements
would not apply the greenhouse gases for another nine months.   We
explained that permit applications submitted prior to April 2, 2010
should in most cases be issued prior to January 2, 2011 and, thus,
effectively have a transition period of nine months to complete
processing before PSD requirements become applicable to greenhouse
gases.   We also observed that, in the case of any PSD permit
application review that cannot otherwise be completed within the next
nine months based on the requirements for pollutants other than GHGs, it
should be feasible for permitting authorities to begin incorporating GHG
considerations into permit reviews in parallel with the completion of
work on other pollutants without adding delay to permit processing.  
Additional discussion of EPA’s reasons for not developing transition
provisions for PSD permit applications that are pending on January 2,
2011 are provided in the April 2, 2010 notice.  75 FR 17021-22.   

For these same reasons, we continue to feel that a transition period is
not warranted to incorporate GHG requirements into any PSD permit
applications that are pending when step 1 of the permitting phase-in
begins for those sources that would otherwise need to obtain a PSD
permit based on emissions of pollutants other than greenhouse gases.  
Thus, this action makes no change to the position we expressed on this
particular issue in the April 2, 2010 notice.    In this final rule on
tailoring the PSD program to address GHGs, we have determined that the
additional burden of incorporating GHG requirements into PSD permits for
the sources already required to obtain such permits is manageable in the
step 1 period.  Thus, this rule has added no additional requirements or
limitations that would justify deferring the establishment of pollution
controls for this category of GHG sources once PSD permitting
requirements are initially triggered for GHGs.

b.  PSD Permits Issued Prior to Step 1	

EPA has not historically required PSD permits to be updated or reopened
after they are issued in the absence of an action by the applicant to
change the physical or operational characteristics of the source
described in the permit application.  EPA’s PSD permitting regulations
contain no provisions that address the modification or amendment of a
PSD permit or require a PSD permit to be reopened or modified on the
basis of new PSD permitting requirements that take effect after the
final permit is issued.   Since PSD permits are construction permits,
EPA has not required updates to PSD permits in the same manner as is
typically required for operating permits that incorporate a variety of
applicable requirements (such as title V permits and NDPES permits under
the Clean Water Act).  In addition, unlike operating permits, PSD
permits are not required to be renewed.   However, if construction under
a PSD permit is not commenced in a timely manner or is discontinued for
an extended period, a PSD permit may expire if an extension is not
requested or justified.  See, 40 C.F.R. 52.21(r)(2); 40 C.F.R. 124.5(g)

With respect to the application of PSD permitting requirements for GHGs
beginning on January 2, 2011, we do not see any cause to deviate from
our historical practice of not requiring PSD permits to be reopened or
amended to incorporate requirements that take effect after the permit is
issued.   Thus, we are not promulgating any new rules or requirements
pertaining to PSD permits issued prior to Step 1 of the phase-in
described in this rule.  There is no mandatory requirement to reopen a
previously issued PSD permit to incorporate GHG requirements that were
not applicable at the time the permit was issued.  

A major source that obtains a PSD permit prior to January 2, 2011 will
not be required under EPA regulations to reopen or revise the PSD permit
to address greenhouse gases in order for such a source to begin or
continue construction authorized under the permit.   Our current PSD
permitting regulations provide that “[n]o new major stationary source
or major modification to which the requirements of paragraphs (j)
through (r)(5) of this section apply shall begin actual construction
without a permit that states the major stationary source or major
modification will meet those requirements.”  40 C.F.R. §
51.166(a)(7)(iii); 40 C.F.R. § 52.21(a)(2)(iii).   The term “begin
actual construction” generally means “initiation of physical onsite
construction activities on an emissions unit which are of a permanent
nature” and includes activities such as “installation of building
supports and foundations, laying underground pipework and construction
of permanent storage structures.”  40 C.F.R. § 51.166(b)(11); 40
C.F.R. § 52.21(b)(11).   A source that begins actual construction
authorized under a PSD permit prior to January 2, 2011 will not be in
violation of the prohibition described above if it continues
construction after that date.  This portion of the regulation precludes
only beginning construction without the appropriate preconstruction
permit and does not require a permit to be updated to continue actual
construction that has already begun.  

Furthermore, a source that is authorized to construct under a PSD permit
but has not yet begun actual construction on January 2, 2011 may still
begin actual construction after that date without having to amend the
previously-issued PSD permit to incorporate GHG requirements.   Sections
51.166(a)(7)(iii) and 52.21(a)(2)(iii) require “a permit that states
the major stationary source or major modification will meet those
requirement,” which refers to the “requirements in paragraphs (j)
through (r)(5)” referenced earlier in those provisions.    EPA
construes this language to describe a permit that meets the requirements
of paragraph (j) through (r)(5) that are in effect at the time the
permit is issued.  Permitting and licensing decisions of regulatory
agencies must generally reflect the law in effect at the time the agency
makes a final determination on a pending application.  See Ziffrin v.
United States, 318 U.S. 73, 78 (1943); State of Alabama v. EPA, 557 F.2d
1101, 1110 (5th Cir. 1977); In re: Dominion Energy Brayton Point, LLC,
12 E.A.D. 490, 614-616 (EAB 2006); In re Phelps Dodge Corp., 10 E.A.D.
460, 478 n. 10 (EAB 2002).  

  Thus, a source may begin actual construction on or after January 2,
2011 under a PSD permit that authorized construction to begin prior to
January 2, 2011 because such a permit states that the source will meet
the requirements of paragraphs (j) through (r)(5) of these regulations
(or state equivalents) that were in effect at the time the permit was
issued.   However, this would not be the case if the permit has expired
because the applicant has discontinued construction or failed to
commence construction by the necessary date.   See, 40 C.F.R.
52.21(r)(2). 

This approach is consistent with EPA’s practice when the
preconstruction permitting requirements change by virtue of the
designation of an area as a nonattainment area after a PSD permit is in
issued.  In transitional guidance issued by EPA in 1991, EPA explained
that “the area designation in effect on the date of permit issuance by
the reviewing agency determines which regulations (Part C or D) apply to
that permit.”   Memorandum from John S. Seitz, Director OAQPS, New
Source Review (NSR) Program Transitional Guidance, page 6 (Mar. 11,
1991).  This memorandum explained further that “where a source
receives a PSD or other permit prior to the date the area is designated
as nonattainment, the permit remains in effect” as long as the sources
meets the conditions necessary to prevent the permit from expiring.   
Id. at 6. 

 This approach does not apply if the source engages in a major
modification after January 2, 2011 that is not authorized by the
previously issued permit.   Once step 1 of the phase-in begins, if the
PSD requirements for GHGs are applicable to a previously-permitted
source that engages in a major modification not covered by the permit,
such a source will need obtain a new PSD permit to authorize the
modification and that permit may need to include GHG requirements
depending on the level of increase in GHGs that results from the
modification. 

c.   Additional Sources for Which PSD Applies in Step 2

In light of the terms of existing PSD regulations and the lead time
provided in this action for sources that will first become subject to
PSD permitting in Step 2, we do not believe there is presently a need to
establish transition provisions for sources that will be required to
obtain PSD permits for the first time in Step 2 of the phase-in.   As
described above, under our current PSD permitting regulations, a new
major stationary source or major modification may not begin actual
construction without a PSD permit that meets the applicable
preconstruction permitting requirements.   40 C.F.R. §
51.166(a)(7)(iii); 40 C.F.R. § 52.21(a)(2)(iii).   

Since a permit must be obtained before a major source may begin actual
construction, the major source preconstruction permitting requirements
in sections 51.166 and 52.21 of the regulation do not generally apply to
sources that begins actual construction at a time when it was not a
major source required to obtain a PSD permit.  One exception, however,
is the unique circumstance when a source becomes a major source solely
by virtue of the relaxation of an enforceable limitation on the
source’s potential to emit.   40 C.F.R. §51.166(r)(2); 40 C.F.R. §
52.21(r)(4).  But absent these circumstances, PSD preconstruction
permitting requirements do not generally preclude a source from
continuing actual construction that began before the source was a source
required to obtain a PSD permit.  Thus, a source that began actual
construction under the authorization of any previously required minor
source or state construction permit is not required to meet any PSD
preconstruction permitting requirement that becomes applicable after
actual construction begins unless the source engages in a major
modification after PSD permitting requirements are applicable. 
Likewise, a PSD permit is not required after a source begins actual
construction based on a valid determination (by the source or the
permitting authority) that the source need not obtain either a major PSD
permitting requirements or and minor NSR permit.   Based on these
provisions in existing regulations, EPA will not require any sources to
which PSD permitting requirements begin to apply in step 2 to obtain a
PSD permit to continue construction that actually begins before step 2
begins.   

However, we will expect Phase 2 sources that begin actual construction
in phase 2 (i.e., beginning July 1, 2011) to do so only after obtaining
a PSD permit in accordance with sections 52.21, 51.166, or any
applicable state regulation that meets the requirements of section
51.166.   We recognize the potential for the triggering of step 2 to
result in a change in status where a project may legally have begun
actual construction before step 2 but did not do so and would then need
a PSD permit.  However we also note that we are providing over a year of
lead time before PSD permitting requirements become applicable to step 2
sources.  If projects would be adversely affected by this change in
status, this lead time affords an opportunity for sources planning such
projects to secure appropriate minor NSR permits (which generally take
less than a year to issue), non-applicability determinations, etc  in
time to avoid such a change in status. If a new or modified source that
would become newly subject to PSD in step 2 plans to begin actual
construction before step 2, it has more than a year to obtain the
applicable preconstruction approvals and begin actual construction. 
Likewise, a step 2 source that does not anticipate the ability to begin
actual construction before step 2 begins should have enough lead time to
submit a PSD permit application and obtain the necessary permit without
significantly delaying the project further.  Therefore, we do not think
it is necessary or appropriate to promulgate a transition provision that
would exempt step 2 sources from PSD permitting requirements that will
apply based on construction that begins after step 2 takes effect.

This approach for Step 2 sources that have obtained a minor source
construction permit or non-applicability determination differs from the
approach described above for source that obtained a PSD permit prior to
Step 1.   As described above, a Step 1 source that is authorized to
begin actual construction before January 2, 2011 under a
previously-issued PSD permit may begin actual construction under that
permit after January 2, 2011 without modifying the PSD permit to address
GHGs.   However, a Step 2 source that was not required to obtain a PSD
permit before Step 2 begins would need to obtain a PSD permit addressing
GHGs if it has not yet begun actual construction prior to Step 2, even
if the source had obtained any preconstruction approvals that were
necessary to authorize construction prior to Step 2.   This is because
such a Step 2 source that begins actual construction after Step 2 would
likely be doing so without having any permit meeting the requirements of
paragraphs (j) through (r)(5) of section 52.21, 51.166, or a state
equivalent.  A source that has obtained only a minor source permit prior
to Step 2 but that begins actual construction after July 1, 2011 would
violate the requirements of section 52.21(a)(2)(iii), 51.166(a)(7)(iii),
or a state equivalent ,unless the source took care to ensure that it was
authorized to construct under a PSD permit or could demonstrate that the
source’s minor source construction permit makes clear that requirement
of paragraphs (j) through (r)(5) of sections 52.21, 51.166, or a state
equivalent would be met by the source even though such a permit was not
nominally a PSD permit.  This difference in approach for non-PSD sources
is driven by the terms of sections 52.21(a)(2)(iii) and
51.166(a)(7)(iii).  Since we have not provided any prior notice that we
might be considering revisions to sections 52.21 and 51.166 to address
this topic, we are unable to revise the regulations in this action to
achieve the same result for non-PSD sources as for PSD sources. 
Furthermore, this difference in approach is not unreasonable since
non-PSD sources will not trigger permitting for GHG until step 2  (only
anyway PSD source trigger in step 1).  Thus sources will have until July
1, 2010, an additional 6 months of lead time, to prepare for the
transition described here.  

EPA has previously promulgated exemptions that have authorized some
sources that were not previously subject to the PSD regulations to
commence construction on the basis of minor source permits after the
date new PSD requirements have took effect in 1978 and 1980.   See e.g.
40 C.F.R. 52.21(i)(1)(iv)-(v).   There is a notable distinction between
these provisions, which use the term “commence construction,” and
the terms of sections 52.21(a)(2)(iii) and 51.166(a)(7)(iii), which use
the term “begin actual construction.’   Commerce construction is
defined more broadly than begin actual construction to include obtaining
all necessarily preconstruction approvals and either beginning actual
on-site construction or entering into binding contracts to undertake a
program of actual construction.    40 C.F.R. 52.21(b)(9); 40 C.F.R.
51.166(b)(9).   The term commence construction is also defined in the
Clean Air Act.  42 U.S.C. 7479(2)(A).   Among other purposes, the term
“commence construction” is generally used in the Act and EPA
regulations to distinguish construction activities that are exempt from
new PSD permitting requirements from those that are not.  See e.g. 42
U.S.C. 7475(a); 40 C.F.R. 52.21(i)(1)(i)-(v).   In the absence an
explicit exemption in the Clean Air Act or the PSD regulations that uses
the term “commence construction,” we do not believe we can use the
date a source “commences construction” under a minor source
construction permit approval as a demarcation point for Step 2 sources
that may continue ongoing construction activities without having to
obtain a PSD permit based on emissions of GHGs.  Since we did not
provide prior notice of an intention to adopt transition provisions
applicable to this situation, we are unable to adopt such an exemption
in this action that applies the term commence construction in this
context.   Consequently, the approach described above applies the term
“begin actual construction” based on the language in sections
52.21(a)(2)(iii) and 51.166(a)(7)(iii).

d.  Transitional Issues for Title V Permitting

Since the title V permitting regulations already include a robust set of
provisions to address the incorporation of new applicable requirements
and other transitional considerations, we do not see grounds to
establish unique transition or grandfathering provisions for GHGs in
this action.  Furthermore, since the purpose of title V is to collect
all regulatory requirements applicable to a source and ensure
compliance, we do not believe special exemptions for GHG requirements
are likely to be justified.   The existing title V rules do not provide
any exemptions that relieve the obligation to incorporate all applicable
requirements into a title V permit.  However, the title V regulations
contain numerous provisions that allow a reasonable period of time for
incorporating new applicable requirements or applying for a title V
permit that was not previously required.  Transitional issues for
incorporation of GHG requirements into title V permitting generally
involve questions in the following categories:  (1) permit application
requirements for sources not previously subject to title V that will
become subject to title V requirements in step 2 of the phase-in; (2)
the need for updates or amendments to title V permit applications that
are pending when GHGs become subject to regulation in Step 1 of the
phase-in; and (3) the incorporation of new applicable requirements for
GHGs into existing permits for sources currently subject to title V.  

With respect to the first category, a title V source applying for the
first time must submit its permit application within 12 months after the
source “becomes subject to the [operating] permit program” or such
earlier time that the permitting authority may require (see
§70.5(a)(1)).  Sources not otherwise subject to title V can become
major sources subject to title V due to emissions of GHG no sooner than
July 1, 2011.  If a source becomes “subject to the [operating] permit
program” on July 1, 2011, then its permit application under the title
V operating permit program would typically have to be submitted no later
than July 1, 2012.  

There are also existing regulations relevant for the second category of
GHG transition issues, where sources currently subject to title V have
title V permit applications pending with a permitting authority as of
January 2, 2011.  Where additional applicable requirements become
applicable to a source after it submits its application, but prior to
release of a draft permit, the source is obligated to supplement its
permit application.  See 40 CFR §§ 70.5(b); 71.5(b).  Furthermore,
title V permits are generally required to contain provisions to assure
compliance with all applicable requirements at the time of permit
issuance.  See CAA section 504(a); 40 CFR §§ 70.6(a)(1); 71.6(a)(1). 
If a permitting authority determines that additional information is
necessary to evaluate or take final action on an application (e.g.
because of uncertainty over whether a draft permit assures compliance
with all applicable requirements), it may, and should, request
additional information from the source in writing and set a reasonable
deadline for a response.  See 40 CFR §§ 70.5(a)(2); 71.5(a)(2).  

Likewise, the existing title V regulations provide sufficient transition
for the third category of issues, where a source has additional
GHG-related applicable requirements (such as the terms of a PSD permit)
that must be incorporated into its existing title V permit.  Where a
source is required to obtain a PSD permit, the source must apply for a
title V permit or permit revision within 12 months of commencing
operation or on or before such earlier date as the permitting authority
may establish (or prior to commencing operation if an existing title V
permit would prohibit the construction or change in operation).  See 40
C.F.R. §§ 70.5(a)(1)(ii); 71.5(a)(1)(ii); see also §§70.7(d) and
(e); 71.7(d) and (e) (permit modifications).  In addition, where a
source becomes subject to additional applicable requirements, the
permitting authority is required to reopen the permit to add those
applicable requirements if the permit term has three or more years
remaining and the applicable requirements will be in effect prior to the
date the permit is due to expire.   See  40 C.F.R. §§ 70.7(f)(1)(i);
71.7(f)(1)(i).  

Finally, EPA notes that the existing title V regulations require sources
to furnish permitting authorities, within a reasonable time, any
information the permitting authority may request in writing to determine
whether cause exists for modifying, revoking, and reissuing, or
terminating the permit, and for other reasons, and further provide that
permitting authorities shall reopen and revise permits if EPA or the
permitting authority determine that the permit must be revised or
revoked to assure compliance with applicable requirements.  See
§§70.6(a)(6)(v);71.6(a)(6)(v) and §§ 70.7(f)(1)(iv); 71.7(f)(1)(iv).

Thus, EPA believes that the existing title V regulations provide an
adequate regulatory framework for managing the transition to
incorporating GHG requirements in title V permits and additional
specific exemptions or transition rules for title V are not currently
warranted.

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

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

The regulatory impact analysis (RIA) conducted for this final rule
provides details of the benefits or regulatory relief that smaller GHG
sources will experience in terms of costs avoided as a result of this
final rule and the potential for social costs in terms of foregone
environmental benefits during this 6-year period.  Complete details of
the regulatory impact analysis conducted for this final rule may be
found in the document "Regulatory Impact Analysis for the Final
Greenhouse Gas Tailoring Rule," in the docket for this rulemaking.

This rulemaking provides permitting thresholds for sources of GHG that
exceed levels contained in the CAA and these levels are phased in steps
based upon application of the administrative necessity and absurd
results doctrines as explained in section V.B.   For step 1 that is
effective from January 2, 2011 through June 30, 2011, only sources
required to undergo title V or PSD permitting based upon non-GHG air
pollutants are required to obtain an operating permit or PSD permit to
include GHG emissions.  Step 2, effective from July 1, 2011 until such
time as EPA acts on a rule to amend it (which for reasons described
above, we assume is June 30, 2013 for the purposes of this analysis),
requires larger sources emitting GHG above 100,000 CO2e tpy to obtain a
title V permit (if they do not already have one) and to comply with PSD
requirements when they are newly constructed or modify in a way that
increases emissions by more than a 75,000 CO2e tpy significance level.  
Thereafter, EPA makes an enforceable commitment to consider a possible
step 3 to further lower thresholds below 100,000 CO2e tpy and/or
permanently exclude some sources from the program(s), but only after a
regulatory process is conducted addressing administrative necessity and
absurd results considerations based upon the actual permitting
experiences in the first two steps of the phase-in. In addition, EPA
provides a deferral of permitting until we take required action in April
2016 for sources and modifications that emit below 50,000 CO2e tpy.  The
deferral will end when a required study is conducted of the permitting
process for sources of GHG and EPA acts, based on the study, to
promulgate a rule that describes the additional GHG permitting
requirements beyond 2016.  In the 6 years following promulgation of this
rule, the EPA estimates that compared to baseline estimates that do not
include the effects of this rule, over six million sources of GHG
emissions in total will be allowed to continue to operate without a
title V operating permit.  During this period, tens of thousands of new
sources or modifying sources each year will not be subject to PSD
requirements for GHG.  For this large number of smaller sources, this
rule alleviates the regulatory burden associated with obtaining an
operating or PSD permit or complying with NSR BACT requirements. 
Therefore, this final action may be considered beneficial to these small
sources because it provides relief from regulation that would otherwise
be required.  

This decision does potentially have environmental consequences in the
form of higher emissions during the 6-year period of time (generally
because emissions increases would have been lower if BACT were applied).
 These consequences are limited due to the fact that sources between
100/250 and 100,000 CO2e tpy account for an estimated 11 percent of the
six directly emitted GHG nationally from industrial, commercial, and
residential source categories, while representing over 95 percent of the
total number of sources potentially requiring an operating or PSD permit
for GHG under current permitting thresholds in the CAA.  Moreover,
requiring such a large number of small sources to obtain permits for the
first time would overtax the permitting authorities' abilities to
process new permits and would therefore interfere with any such benefits
actually being achieved.  Moreover, reductions from these small sources
will still be occurring, notwithstanding the fact that permitting
requirements would not apply to them.  These smaller sources of GHG will
be the focus of voluntary emission reduction programs and energy
efficiency measures that lead to reductions in GHG.  We will also
reevaluate this decision after a 6-year period and complete a study of
the implications for those sources and permitting authorities of
permitting smaller GHG sources beyond 2016.

In reaching the preceding decisions for this final rule, we carefully
considered comments received on the tailoring rule proposal.  We
received several comments specifically on our description of the impacts
of this rule.  Most of these comments disagreed with our assertion that
the rule is a “relief” rule. Others assert that we should have
prepared a more comprehensive RIA than prepared for the rule proposal.
Those commenting contend: (1) we understated the burdens of the rule
while overstating its relief at proposal; (2) we erroneously omitted the
impacts for “larger sources” of GHG  from the proposal RIA and
should have recognized the burden to “larger sources” due to other
GHG actions; (3) the economic impacts the rule will have on industry and
the U.S. economy society in general will be burdensome, especially given
the current state of the economy; and (4) we need to propose a full RIA
or a complete estimation of impacts to comply with CAA section 307(d)
and the Administrative Procedure Act.   

	EPA has carefully considered the comments addressing the issue of
whether the tailoring rule is a regulatory “relief rule”, and we are
not persuaded that we erred in concluding that the effect of the
tailoring rule is to provide regulatory relief to a large number of
sources of GHG for a period of up to six years.  This final rule will
provide relief from title V permitting to over 6 million sources of GHG
in this country.  Likewise tens of thousands of sources potentially
subject to PSD permitting requirements annually for GHG will have
regulation postponed for a period of up to 6 years under this rule,
followed by an additional required rule addressing the period beyond 6
years.  While larger sources of GHG may be required to obtain title V
permits or modify existing permits and to comply with PSD requirements,
these burdens result not from the tailoring rule but rather from the CAA
requirement to apply PSD to each pollutant subject to regulation, which
is triggered when the LDVR takes effect.  To clearly illustrate this,
consider what would occur if EPA did not complete the tailoring rule. 
Sources would not be relieved of the requirement to obtain permits
addressing each pollutant subject to regulation when they construct or
modify, nor would they be relieved of their obligation to obtain title V
permits.  Instead, these requirements would simply apply to a much
larger population of sources and modifications, and would lead to the
absurd results and severe impairment to program implementation that this
rule is designed to address.

In response to comments asserting that the RIA completed for proposal of
this rulemaking: (1) understated the burdens of the rule and overstated
the benefits, (2) did not fully recognize the rule will be burdensome,
especially given the current state of the economy; and (3) does not
consider a complete estimation of impacts to comply with the
Administrative Procedure Act and CAA section 307(d) and needs to correct
flawed or erroneous assumptions, EPA did make improvements and
modifications to the RIA completed for this final rule.  Based upon
comments, EPA modified estimates of the number of sources affected at
various threshold levels upward.  EPA also improved the burden estimates
associated with obtaining permits for sources and permitting
authorities.  After consideration of the burden imposed by the proposed
rule with these improved estimates for affected sources, the EPA
modified the steps of the phase-in period to include two initial steps,
described in section V, that are higher, and therefore cover fewer
sources and are less burdensome than the proposal threshold of 25,000
CO2e tpy emissions.  EPA also increased the threshold below which
permitting would not apply for six years from 25,000 to 50,000 tpy CO2e.
 After the initial two step period, EPA has committed to consider lower
thresholds but only down to 50,000 tpy CO2e, and only after a regulatory
process that uses information gathered on actual permitting activity
during the first two steps of the phase-in period.  The RIA conducted
for the final rule also incorporates improvements in our estimates of
the number of sources affected at alternative thresholds and improved
estimates of the costs of obtaining permits by sources and processing
permits by permitting authorities. The EPA acknowledges that the
regulatory relief associated with the control costs due to BACT
requirements for PSD new and modifying sources is not included in the
RIA for the final rule due to the lack of sufficient data about the
nature of those requirements.  However, it is the case that, as it
relates to burden, those estimates would simply increase the amount of
regulatory relief associated with this final rule.  	

Finally, with regard to comments that the RIA should have been a more
comprehensive analysis to include the larger sources of GHG that will be
required to obtain permits when GHG are regulated, the EPA maintains as
previously explained that there are no direct economic burdens or costs
as a result of this rule for these sources. Requirements for larger GHG
sources to obtain title V or PSD permits are already mandated by the Act
and by existing rules and are not imposed as a result of the tailoring
rule.  Thus the economic impacts for larger sources of GHG do not occur
because of this tailoring rule.  To include these larger sources in the
RIA would actually be an inaccurate assessment of how this rule affects
sources and would ignore the fact that this rule is regulatory relief.

A. What entities are affected by this final rule?

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

Table VI-1. Estimated Number of Affected Sources Experiencing Regulatory
Relief1,2

	Number of Sources Experiencing Regulatory Relief

	Non-GHG Based	<100,000 tpy

Sector	Title V	New PSD	Title V	New PSD

Electricity	285	93	285	33

Industrial	170,910	604	170,654	599

Energy	2,588	48	2,536	44

Waste Treatment	3,358	2	3,165	1

Agriculture	37,351	299	37,351	299

Commercial	1,355,921	12,041	1,355,870	12,039

Residential 	4,535,500	6,915	4,535,500	6,915

Totals	6,105,913	20,002	6,105,361	19,930

% Emissions Covered3 	

13%	

11%

Notes: (1) Number of sources is determined on a potential to emit basis.
Estimates for title V are the total number of sources expected to
experience regulatory relief.  PSD sources are annual estimates of newly
constructed facilities and do not include modifications at existing
facilities that may also be subject to PSD requirements. (2) See
Appendices to ‘Regulatory Impact Analysis of the Final Greenhouse Gas
Tailoring Rule’ for more details of how thresholds and sources
affected are developed. (3) Percentage of emissions covered represent
estimated actual emissions from sources expected to experience
regulatory relief as a percentage of total stationary source GHG
emissions.

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

EPA estimated the annual benefits (avoided costs) to sources of GHG
emissions and permitting authorities anticipated from this final rule. 
In addition, an accounting of the benefits from this action as measured
by avoided permit processing costs for state, local, and tribal
permitting authorities is provided.  These benefits or avoided costs
relate specifically to information collection costs or burden costs
postponed for smaller sources of GHG emissions otherwise required to
obtain an operating permit under title V or required to modify an
existing permit to address GHG emissions.  Avoided costs shown also
include information collection requirements for additional PSD permits
postponed for new or modifying smaller sources of GHG, as well as the
avoided costs to state, local and tribal permitting authorities.  These
estimates do not consider avoided emission control costs associated with
PSD requirements for potential BACT requirements.  Estimates for BACT
are unavailable at this time because of the difficulty predicting the
results of the BACT process as it would be applied to new pollutants and
classes of sources for which there is no previous BACT experience on
which to rely. 

1.  What are annual estimated benefits or avoided burden costs for title
V permits? 

Table VI-2 shows that the estimated annual title V benefits to sources
and to permitting authorities in terms of avoided information collection
cost resulting from this final action to be approximately $70,524.3
million under step 1 of the phase-in, the non-GHG based requirements
threshold.  These avoided costs become $70,517.1 million annually under
step 2 of the phase-in where permitting is required for sources at or
above the 100,000 tpy CO2e threshold.  Under the non-GHG based phase-in
step 1, approximately $49,457.3 million in regulatory relief will accrue
to sources and approximately $21,067 million to permitting authorities
annually in the form of avoided permit processing costs.  With the
<100,000 tpy CO2e threshold for phase-in step 2, these annual regulatory
relief benefits are expected to be quite similar at $49,455.4 million
for sources of GHG emissions and $21,061.7 million for permitting
authorities.  Industrial sources permitting costs are estimated to be
$46.4 thousand per permit for a new permit and $1.7 thousand for a
permit revision.  The EPA estimates that over tens of thousands of
industrial sources per year will avoid incurring these permitting costs
under steps 1 and 2 of the phase-in period.  The cost for a permit for
new commercial and residential sources is estimated to be $23.2 thousand
per permit with approximately 2 million of these permits avoided
annually.

State, local, and tribal permitting authorities will also benefit in
terms of avoided permitting administrative costs of over $21 billion as
a result of the decisions final in this action.  For industrial sources,
the cost for permitting authorities to process a new industrial title V 

Table VI-2.  Annual Title V Regulatory Relief for Sources and Permitting
Authorities1, 2 

 	 	Step One 

Non-GHG Based	Step Two 

<100,000 tpy CO2e

Activity	Cost per Permit (2007$)	Number of Permits	Avoided Costs
(millions 2007$)	Number of Permits	Avoided Costs (millions 2007$)

Sources

	 

New Industrial	$46,350	71,829	$3,329.3	71,829	$3,329.3

New Commercial/Residential	$23,175	1,985,948	$46,024.3	1,985,930
$46,023.9

Permit revisions due to GHG	$1,677	61,836	$103.7	60,921	$102.2

Source Total	 	2,119,613	$49,457.3	2,118,508	$49,455.4

Permitting Authority

	 

New Industrial	$19,678	71,829	$1,413.5	71,829	$1,410.1

New Commercial/Residential	$9,839	1,985,948	$19,539.7	1,985,930
$19,539.6

Permit revisions due to GHG	$1,840	61,836	$113.8	60,921	$112.1

Permitting Authority Total	 	2,119,613	$21,067.0	2,118,508	$21,061.7

 

	 

Total Title V Regulatory Relief	$70,524.3	 	$70,517.1

Note  (1) Annual title V avoided costs estimates represent information
collection costs for one third of the total number of title V sources
obtaining regulatory relief shown in Table VI-1 potentially requiring
permits or permit revisions for GHG. 

 (2) More details on these estimated regulatory relief benefits are
available in the Appendices to the “Regulatory Impact Analysis for the
Final Greenhouse Gas Tailoring Rule”.

permit is approximately $19.7 thousand per permit and $1.8 thousand for
a permit revision.  Similar permitting authority avoided permit
processing costs are approximately $9.8 thousand per permit for a new
commercial or residential title V permit.  All estimates are stated in
2007 dollars.   

2.	What are annual benefits or avoided costs associated with NSR
permitting regulatory relief? 

Table VI-3 summarizes the estimated annual information collection costs
avoided by sources and permitting authorities for PSD permitting due to
this tailoring rule. The benefits associated with avoided cost of
compliance for BACT for these sources is not included in these estimates
due to a lack of available data.  The estimated avoided burden or
reporting and recordkeeping cost that would occur absent this rule for
new industrial sources to obtain permits is estimated to be $84.5
thousand for a modifying PSD industrial source and $59.2 thousand for a
modifying commercial or multi-family residential source.  New PSD
sources will also be required to obtain a title V permit increasing
these costs to $130.9 thousand per permit for new industrial sources and
to $82.3 thousand per permit for new commercial or multi-family
residential sources.  (Note the title V costs for these new PSD sources
have been included in title V estimates shown in Table VI-2.)  New and
modifying sources avoid approximately $5.5 billion annually in PSD
permitting costs with this rule under the phase-in step 1, non-GHG based
threshold.  Under the phase-in step 2, <100,000 CO2e tpy threshold and
<75,000 tpy CO2e significance level, this avoided PSD permitting cost
estimate becomes $5.4 billion annually.  State, local, and tribal
permitting authorities are expected to avoid about $1.51 billion
annually in administrative expenditures associated with postponing PSD
program requirements for these GHG sources under step 1 and $1.49
billion under step 2.  All estimates are shown in 2007 dollars.  

Table VI-3.  Annual PSD Regulatory Relief for Sources and Permitting
Authorities1,2

 	 	Step One

Non-GHG Based	Step Two

<100,000 tpy Threshold, <75,000 Significance Level

Activity	Cost per Permit (2007$)	Number of Permits	Avoided Costs
(millions 2007$)	Number of Permits	Avoided Costs (millions 2007$)

Sources

	 

New Industrial	$84,530	26,089	$2,205.3	25174	$2,128.0

New Commercial/Residential	$59,152	55,509	$3,283.5	55505	$3,283.2

Source Total	 	81,598	$5,488.8	80679	$5,411.2

Permitting Authority

	0

New Industrial	$23,243	26,089	$606.4	25174	$585.1

New Commercial/Residential	$16,216	55,509	$900.1	55505	$900.1

Permitting Authority Total	 	 81,598	$1,506.5	80679	$1,485.2

 

	 

Total Title V Regulatory Relief	 	$6,995.3	 	$6,896.4

Note: (1) All estimates are based upon potential to emit.  Regulatory
relief shown represents annual estimates of PSD permitting costs avoided
under steps 1 and 2 of the phase-in period. 

(2) More details on these estimated regulatory relief benefits are
available in the Appendices to the “Regulatory Impact Analysis for the
Final Greenhouse Gas Tailoring Rule”.

C.  What are the economic impacts of this rulemaking?

This final rulemaking does not impose economic burdens or costs on any
sources or permitting authorities, but should be viewed as regulatory
relief for smaller GHG emission sources and for permitting authorities. 
Although sources above the thresholds set in this rule will become
subject to permitting on January 2, 2011, those impacts are not
attributable to the present rulemaking.  Rather they are mandated by the
CAA and existing regulations and automatically take effect independent
of this action. 

In addition to considering the regulatory relief expected for affected
entities as a result of this final rule, the EPA considered the impact
of this rulemaking to small entities (small businesses, governments and
non-profit organizations) as required by RFA and SBREFA.  For
informational purposes, the RIA includes the Small Business
Administration (SBA) definition of small entities by industry categories
for stationary sources of GHG and potential regulatory relief from title
V and NSR permitting programs for small sources of GHG.  Since this rule
does not impose regulatory requirements but rather lessens the
regulatory burden of the CAA requirements to smaller sources of GHG, no
economic costs are imposed upon small sources of GHG as a result of this
final rule.  Rather this action provides regulatory relief for small
sources. These avoided costs or benefits accrue because small sources of
GHG are not required to obtain a title V permit and new or modifying
small sources of GHG are not required to meet PSD requirements.  Some of
the small sources benefitting from this action are small entities, and
these entities will benefit from the regulatory relief finalized by this
rule. For discussion of comments received and EPA responses regarding
small entities impacts, see section VIII. of this preamble.

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

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

	For PSD, the primary social cost imposed by the tailoring rule stems
from the foregone benefit of applying BACT to the tens of thousands of
small new sources and modifications that will be below our final
thresholds during the first steps of the phase-in.  This social cost
potentially weighs against the cost savings described above that stem
(in part) from avoiding the administrative and control costs of applying
BACT to these sources.  The BACT requirement assures that new and
modified sources, when they increase their emissions are using
state-of-the-art emission controls and affords the public an opportunity
to comment on the control decision.  It does not prohibit increases but
it assures that such controls are applied.  Delaying the BACT
requirement for numerous small sources during the first steps of the
phase-in for this final rule could allow increases from these smaller
sources that are greater than they would be if BACT were applied.  A
detailed analysis of this difference is beyond the scope of this rule,
because we do not have detailed information on the universe of these
tens of thousands of small PSD actions, the candidate BACT technologies
for each of them, how permitting authorities would make the BACT
decisions, and how the BACT limit would compare to what would otherwise
be installed absent BACT.

It is not possible at this time to quantify the social costs of avoided
BACT.  However we note that the universe of possible emissions that
would be regulated by sources excluded under the tailoring rule is small
compared to those that would remain subject to PSD.  The sources
excluded in these first two steps of the phase-in plan of this action
comprise only 11 percent of total stationary source GHG emissions, while
67 percent remain subject to regulation.  Furthermore, we expect the
emissions differences due to BACT controls for such sources to be
relatively small due to the lack of available capture and control
technologies for GHG at such sources that are akin to those that exist
for conventional pollutants and sources, as well as the likelihood that
even in the absence of BACT such sources would already be installing
relatively efficient GHG technologies to save on fuel costs.  Thus,
while potential benefits would be foregone by excluding smaller sources
from the permitting programs, these benefits are likely to be small. 
Under the tailoring rule, we will be working during the 6-year period to
greatly improve our understanding of both the administrative costs of
regulating and the social costs of not regulating smaller sources under
PSD and title V, and we will be relying on that information to support
our future threshold analyses called for under the action.   

In reaching the decisions for this GHG tailoring rule, the EPA
recognizes that GHG emissions can remain in the atmosphere for decades
to centuries, meaning that their concentrations become well-mixed
throughout the global atmosphere regardless of emission origin, and
their effects on climate are long lasting and significant.  A detailed
explanation of climate change and its impact on health, society, and the
environment is included in EPA's technical support document for the
endangerment finding action (Docket ID No. EPA-HQ-OAR-2009-0171).  The
EPA recognizes the importance of reducing climate change emissions for
all sources of GHG emissions including those sources afforded regulatory
relief in this rule and plans to address potential emission reductions
from these small sources using voluntary and energy efficiency
approaches.  Elsewhere, we have discussed EPA's interest in continuing
to use regulatory and/or non-regulatory tools for reducing emissions
from smaller GHG sources because we believe that these tools will likely
result in more efficient and cost-effective regulation than would
case-by-case permitting.

VII.   Comments on Statutory and Executive Orders Reviews 

A.  Comments and Response on Statutory and Executive Orders Section in
the Proposed Rule 

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

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

At proposal, EPA prepared an analysis of the potential costs and
benefits associated with EPA’s tailoring rule proposal in an RIA. 
Several commenters state that EPA’s failure to estimate the full costs
of the effects of its interpretation of PSD applicability in the
proposed Tailoring Rule violates EO 12866.  Some of these commenters
maintain that EO 12866 directs EPA to submit to OMB new significant
regulations under consideration by the EPA.  These commenters assert
that, in the section 202 rule, EPA failed to analyze the effect on
stationary sources in the cost benefit analysis and there is no
indication that EPA included these impacts in its submission to OMB. 
According to the commenters, in EPA’s proposal for this rulemaking,
EPA has similarly failed to analyze the costs and benefits of triggering
PSD for stationary sources.  The commenters assert that without this key
information, OMB could not fully review the impacts of the proposed
rule.  The commenters believe that EPA’s failure to account for known
costs that will occur as a direct result of the promulgation of the
proposed rule in conjunction with the section 202 rule violates several
applicable requirements of EO 12866, including sections 6(B)(ii) and
6(C)(iii), which require assessments of the potential costs and benefits
of the regulatory action and “reasonably feasible alternatives to the
planned regulation, identified by the Agencies or the public . . .”
thereby violating both the Administrative Procedures Act and CAA section
307(d) because they deprive businesses and permitting authorities alike
of a meaningful opportunity to comment on the rule.

	The EPA has prepared a revised RIA assessing the benefits and costs of
the final tailoring rule to support this rulemaking in accordance with
E.O. 12866 as was done with the proposal for this rulemaking.  Similarly
the RIA completed for this action is subject to review by an
Inter-agency review panel that includes the President’s Office of
Management and Budget as was the case with the proposal RIA.  Further,
the RIA completed for this final rule fully assesses the known benefits
and costs associated with the tailoring rulemaking.  This final rule is
one of regulatory relief from statutory requirements in which a large
number of sources of GHGs will be relieved of the burden of title V and
PSD permitting for a period of at least six years.  This final rule will
provide relief from title V permitting to over 6 million sources of GHG
in this country.  Likewise tens of thousands of sources potentially
subject to PSD permitting requirements for GHGs will have regulation
postponed for a period of at least 6 years.  While larger sources of GHG
may still be required to obtain title V permits or modify existing
permits and to comply with PSD requirements, these burdens result from
existing statutory requirements, not from this final tailoring rule.

B.  Comments on Paperwork Reduction Act

At proposal, we stated in the preamble that we did not believe that the
proposal would impose any new information collection burden.  We
concluded that the proposed action would reduce costs incurred by
sources and permitting authorities relative to the costs that would be
incurred if EPA did not revise the rule and provided estimates of those
reduced costs.  Further, we stated that, despite our estimated burden
reductions, it was unnecessary for us to submit a new ICR to the OMB
because the ICR contained in the existing regulations for PSD (see,
e.g., 40 CFR 52.21) and title V (see 40 CFR parts 70 and 71) had already
been approved under the provisions of the Paperwork Reduction Act, 44
U.S.C. 3501 et seq. and has assigned OMB control number 2060–0003 and
OMB control number 2060–0336, respectively.

However, several commenters disagree that it was unnecessary for us to
submit a new ICR for the proposed action.  These commenters believe that
(1) prior approval of an ICR for the PSD and title V programs ignores
the fact that there would be an increase in the paperwork burden as a
result of applying PSD and title V permitting requirements; and (2)
unless EPA resubmits the information collection approval request to OMB
with a proper and fully-inclusive analysis, EPA will lack authority to
collect information from stationary sources for PSD and title V GHG
emissions permitting.

As we stated in the proposal, this is a burden relief rule and as such
it does not impose any new requirements for the NSR or title V programs
that are not currently required.  For that reason, we concluded that for
purposes of this rule it was unnecessary for us to submit a new ICR to
the OMB and that the ICR contained in the existing regulations for PSD
(see, e.g., 40 CFR 52.21) and title V (see 40 CFR parts 70 and 71) that
had already been approved under the provisions of the Paperwork
Reduction Act, 44 U.S.C. 3501 et seq. and was assigned OMB control
number 2060–0003 and OMB control number 2060–0336, respectively,
still applies.

Nevertheless, we understand that once GHGs are regulated under the PSD
and title V programs, there might be an increase in the paperwork burden
and EPA will have to access this possible burden. We plan to do so once
the 3 year review period of the current ICR expires, which will be in
early 2011. 

C.  Comments on Regulatory Flexibility Act

At proposal, EPA certified that the proposed rule would not have a
significant impact on a substantial number of small entities and
therefore we are not obligated to convene a formal Small Business
Advocacy Review (SBAR) panel.  This certification was based upon the
fact that the proposed action would relieve the regulatory burden
associated with the major PSD and title V operating permits programs for
new or modified major sources that emit GHGs, including small
businesses. Nevertheless, EPA was aware at proposal that many small
entities would be interested in the various GHG rulemakings currently
under development and might have concerns about the potential impacts of
the statutory imposition of PSD requirements that may occur as a result
of the group of EPA actions, notwithstanding the relief provided to
small businesses by the tailoring rule.  For these reasons, and in
collaboration with the Small Business Administration (SBA), EPA
conducted an outreach meeting designed to exchange information with
small entities that may be interested in these regulations.  The
outreach effort was organized and led by representatives from EPA’s
Office of Air Quality Planning and Standards within the Office of Air
and Radiation, EPA’s Office of Policy Economics and Innovation, the
Office of Information and Regulatory Affairs within the Office of
Management and Budget (OMB), and the Office of Advocacy of the Small
Business Administration.  This meeting was conducted on November 17,
2009 in Arlington, VA and documentation of this meeting, which includes
a summary of the advice and recommendations received from the small
entity representatives (SERs) identified for the purposes of this
process, can be obtained in the docket for this rulemaking.  (See Docket
No. EPA-HQ-OAR-2009-0517-19130).  

During the comment period, several commenters alleged that EPA
inappropriately limited its RIA and RFA/SBREFA analysis, and that had we
done a comprehensive analysis, we would not have been able to certify
that any of the proposed rules will not have a significant economic
impact on a “substantial number of small entities.”  Thus they
conclude that EPA failed to prepare and publicize an initial regulatory
flexibility analysis (IRFA).  Additional commenters stated that EPA’s
failure to conduct an IRFA to assess the full costs of the effects of
its interpretation of PSD applicability in the Proposed Tailoring Rule
violates a host of statutes and Executive Orders requiring analysis and
public review of regulatory burdens. These commenters conclude that EPA
should have convened one or more Small Business Advocacy Review (SBAR)
Panels.  

	EPA is not persuaded that EPA should have taken into account effects
beyond those caused by the tailoring rule when we made our certification
of no significant economic impact on a substantial number of small
entities for this rule.  No permitting requirements are imposed by this
final tailoring rule. Instead, this final tailoring rule offers
regulatory relief to over an estimated six million sources of GHG
emissions that would otherwise be required to obtain a title V permit
and tens of thousands of sources of GHG emissions subject to PSD
permitting requirements that would otherwise be required statutorily to
obtain permit. The RFA does not require that an agency complete a
regulatory flexibility analysis or conduct an SBAR panel where the rule
does not have any negative impact on small entities. For more discussion
of RFA issues, please see the RTC document.

The EPA completed an RIA to assess the economic benefits of regulatory
relief and the environmental benefits afforded by this final rule. The
EPA believes that the RIA completed for this final rule adequately
addresses economic issues associated with this tailoring rule.

D.  Comments on Unfunded Mandates Reform Act

At proposal, EPA asserted that the tailoring rule does not impose
unfunded mandates on any entities including sources and permitting
authorities.  Since the proposed tailoring rule is one of regulatory
relief, it alleviates the burden of adhering to statutorily required
permitting thresholds and does not impose regulatory requirements. 

Some commenters on the proposed rule assert that EPA has failed to
comply with the requirements of UMRA, pursuant to which EPA must assess
the effects of the Proposed Rule on state, local, and tribal governments
and the private sector.  Specifically, these commenters state that
section 202 of the UMRA requires EPA to prepare a written statement,
including a cost-benefit analysis, for proposed rules with “federal
mandates” that may result in expenditures to state, local, and tribal
governments, in the aggregate, or to the private sector, of $100 million
or more in any one year.  According to the commenters, in concluding
that “the revisions would ultimately reduce the PSD and title V
program administrative burden that would otherwise occur in the absence
of this rulemaking,” EPA did not account for the billions of dollars
that permitting authorities and stationary sources will soon be required
to spend once PSD is triggered for GHGs.  Additionally, a few commenters
contend that the EPA underestimated the impacts to public utilities
which are owned/operated by local governments and also to state
regulatory agencies.  

The EPA has carefully considered the comments on unfunded mandates
expressed by commenters to the proposed rule.  The EPA did complete a
RIA for the final rule assessing the benefits and costs of the tailoring
rule, including any unfunded mandates. As previously discussed, the
tailoring rule is one of regulatory relief because it increases the GHG
emissions threshold for NSR and title V permitting substantially above
otherwise statutory requirements.  As such, the EPA asserts this
tailoring rule does not impose unfunded mandates on any entities. This
RIA of the final rule incorporates the extensive changes made in this
final rule, including increased threshold levels for title V and PSD
above those contained in the proposed rule.  While we also incorporated
improved estimates of the costs for sources to obtain permits and for
permitting authorities to process permits, they do not change our
conclusion that this final rule does not impose unfunded mandates on any
entities.  

E.  Comments on Executive Order 13132 – Federalism

Some comments received on the proposed rule assert that federalism
concerns were ignored, in violation of Executive Order No. 13132. 
According to the commenters, EPA cannot maintain that the Tailoring Rule
"will not have a substantial direct effect on the states, on the
relationship between the national government and the states, or on the
distribution of power and responsibilities between various levels of
government," such that Executive Order No. 13132 does not apply.  Some
of these commenters assert that the proposed rulemaking would require
radical changes in state laws, interjects GHGs into permit programs
never once conceived for that purpose (any more than was EPA's),
requires massive staff hiring at state agencies, and rewrites SIPs in
place for years or even decades.

As we stated previously, this is a burden relief rule and as such it
does not impose any requirements for the NSR or title V programs that
are not currently required.  In addition, this action does not interject
GHGs into the permit programs, nor does it change state laws or SIPs to
impose any new permitting requirements.  Instead, this action will
significantly reduce the burden and costs incurred by sources and
permitting authorities relative to the burden and costs that would be
incurred if EPA did not revise the permitting provisions to account for
higher applicability thresholds for GHG emissions.  	

However, since this rule finalizes burden reducing thresholds that will
not otherwise apply to the PSD and title V programs, we are aware that a
few states will have to amend their SIPs to incorporate these new
thresholds.  These states will be the ones whose permitting authorities
do not implement the Federal PSD and title V rules by reference in their
SIPs.    

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

The National Tribal Air Association (NTAA) supports EPA’s proposed
rule but requests that tribal air grant funding be increased to reflect
the air quality-related needs of tribes across the nation, and to allow
these tribes the opportunity to implement the CAA’s PSD and title V
programs.  The NTAA states that, not only are Tribes eligible for
section 103 grant funding to conduct air quality monitoring, emissions
inventories, and other studies and assessments, but they may also obtain
section 105 grant funding to implement CAA regulatory programs. 
According to the NTAA, Tribes are facing many of the same air-related
issues that neighboring state and local jurisdictions are facing, but
are significantly underfunded to address such issues.

	The Agency is aware and concerned about the resource needs for the
Tribal air program and we are working to see how grant funding might be
increased in the future.  Nevertheless and for the purpose of the
permitting programs, we want to clarify that tribes that develop Tribal
Implementation Plans (TIPs) can charge for permits and Tribes with
delegation can develop permit fee programs under their authority (e.g.,
Navajo’s permit fee program for their delegated title V permit
program)to fund both the NSR and title V programs.  For these reasons,
there are a number of ways we would like to work to address the funding
concern, includingencouraging delegation of permitting programs and
having model codes available for Tribes that want to do TIPs for NSR and
title V permitting.

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

Other commenters assert that EPA’s analysis under Executive Order
13211 is insufficient because it addresses only smaller sources.  These
commenters contend that EPA has not meaningfully examined the energy
implications of its proposed actions and interpretations of the CAA. 
The commenters disagree with EPA’s conclusion that the imposition of
costly PSD obligations on power plants would have no impact on power
supply, distribution, or use, when those plants will have had no time to
prepare for compliance and no idea what BACT may be for GHG emissions. 
Other commenters opine that the adoption of BACT for some industries
newly-subject to PSD permitting requirements for GHGs could involve
fuel-switching, and increased energy costs (due to the need for a source
to convert from coal to natural gas to meet BACT).

Again, this action is a burden relief rule and as such it does not
create any new requirements for sources in the energy supply,
distribution, or use sectors.  For the purpose of the BACT
determinations for GHGs, the long-standing top-down BACT selection
process still applies.  Under the CAA and EPA’s implementing
regulations, BACT is still an emission limitation based on the maximum
degree of emission reduction achievable through application of
production processes and available methods, systems, and techniques that
considers energy, environmental, and economic impacts. In other words,
BACT determinations for GHGs will still have to consider energy,
environmental and economic feasibility for the various control
technologies under consideration before selecting a particular
technology as BACT for a particular source.  For that reason, what BACT
may be for GHG emissions will vary by source, and the technology that is
ultimately selected has to be one that is feasible based on the current
energy, environmental and economic impacts that the planned technology
might have.  Thus, we do not believe that this action is likely to have
a significant adverse effect on the supply, distribution, or use of
energy.

VIII.   Statutory and Executive Orders Reviews 

A.  Executive Order 12866 - Regulatory Planning and Review

Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this
action is a "significant regulatory action" because it raises novel
legal or policy issues.  Accordingly, EPA submitted this action to the
Office of Management and Budget (OMB) for review under EO 12866 and any
changes made in response to OMB recommendations have been documented in
the docket for this action.

In addition, EPA prepared an analysis of the potential costs and
benefits associated with this action.  This analysis is contained in the
RIA for this final rule.  A copy of the analysis is available in the
docket for this action and the analysis is briefly summarized in section
VIII of this preamble. 

B.  Paperwork Reduction Act

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

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

C.  Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the Administrative Procedures
Act (APA) or any other statute unless the agency certifies that the rule
will not have a significant economic impact on a substantial number of
small entities.  Small entities include small businesses, small
organizations, and small governmental jurisdictions.

For purposes of assessing the impacts of this final action on small
entities, small entity is defined as: (1) a small business that is a
small industrial entity as defined in the U.S. Small Business
Administration (SBA) size standards (see 13 CFR 121.201); (2) a small
governmental jurisdiction that is a government of a city, county, town,
school district, or special district with a population of less than
50,000; or (3) a small organization that is any not-for-profit
enterprise that is independently owned and operated and is not dominant
in its field.

After considering the economic impacts of this final rule on small
entities, I certify that this final action will not have a significant
economic impact on a substantial number of small entities.  In
determining whether a rule has a significant economic impact on a
substantial number of small entities, the impact of concern is any
significant adverse economic impact on small entities, since the primary
purpose of the regulatory flexibility analyses is to identify and
address regulatory alternatives “which minimize any significant
economic impact of the rule on small entities.”  5 USC 603 and 604.
Thus, an agency may certify that a rule will not have a significant
economic impact on a substantial number of small entities if the rule
relieves regulatory burden, or otherwise has a positive economic effect
on all of the small entities subject to the rule.  

We have therefore concluded that this final rule will relieve the
regulatory burden for most affected small entities associated with the
major PSD and title V operating permits programs for new or modified
major sources that emit GHGs, including small businesses.  This is
because this rule raises the major source applicability thresholds for
these programs for the sources that emit GHGs.  As a result, the program
changes provided in this rule are not expected to result in a
significant economic impact on a substantial number of small entities.  

D.  Unfunded Mandates Reform Act

This rule does not contain a federal mandate that may result in
expenditures of $100 million or more for state, local, and tribal
governments, in the aggregate, or the private sector in any 1 year. 
Only those few states whose permitting authorities do not implement the
Federal PSD and title V rules by reference in their SIPs will have a
small increase in burden.  These states will have to amend their
corresponding SIPs to incorporate the new applicability thresholds,
since the burden reducing thresholds that we are finalizing with this
rule will not otherwise apply to the PSD and title V programs.  Thus,
this rule is not subject to the requirements of sections 202 or 205 of
UMRA.

	This rule is also not subject to the requirements of section 203 of
UMRA because it contains no regulatory requirements that might
significantly or uniquely affect small governments.  As discussed
earlier, this rule is expected to result in cost savings and an
administrative burden reduction for all permitting authorities and
permittees, including small governments.

E.  Executive Order 13132 – Federalism

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

In the spirit of Executive Order 13132, and consistent with EPA policy
to promote communications between EPA and state and local governments,
EPA specifically solicited comment on the proposed rule from state and
local officials.

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

Subject to the Executive Order 13175 (65 FR 67249, November 9, 2000) EPA
may not issue a regulation that has tribal implications, that imposes
substantial direct compliance costs, and that is not required by
statute, unless the federal government provides the funds necessary to
pay the direct compliance costs incurred by tribal governments, or EPA
consults with tribal officials early in the process of developing the
proposed regulation and develops a tribal summary impact statement.  

EPA has concluded that this action may have tribal implications. 
However, it will neither impose substantial direct compliance costs on
tribal governments, nor preempt Tribal law.  There are no tribal
authorities currently issuing major NSR permits; therefore, it will not
currently impose direct compliance costs on tribal governments. 

EPA consulted with tribal officials early in the process of developing
this regulation to permit them to have meaningful and timely input into
its development by publishing an ANPR that included PSD GHG tailoring
options for regulating GHGs under the CAA.  (73 FR 44354, July 30, 2008)
 As a result of the ANPR, EPA received several comments from tribal
officials on differing PSD GHG tailoring options presented in the ANPR
which were considered in the proposal and this final rule. 
Additionally, we also specifically solicited comment from tribal
officials on the proposed rule (74 FR 55292, October 27, 2009).  

As required by section 7(a) of Executive Order 13175, EPA’s Tribal
Consultation Official has certified that the requirements of the
Executive Order have been met in a meaningful and timely manner.  A copy
of the certification is included in the docket for this action.

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

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

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

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

I.  National Technology Transfer and Advancement Act

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

This action does not involve technical standards.  Therefore, EPA did
not consider the use of any voluntary consensus standards.

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

	Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal
executive policy on environmental justice.  Its main provision directs
federal agencies, to the greatest extent practicable and permitted by
law, to make environmental justice part of their mission by identifying
and addressing, as appropriate, disproportionately high and adverse
human health or environmental effects of their programs, policies, and
activities on minority populations and low-income populations in the
United States.  

		EPA has determined that this final rule will not have
disproportionately high and adverse human health or environmental
effects on minority or low-income populations because it increases the
level of environmental protection for all affected populations without
having any disproportionately high and adverse human health or
environmental effects on any population, including any minority or
low-income population. Any impact that this final rule will have will be
global in nature and will increase the level of protection provided to
all human health and the environment. 

K.  Congressional Review Act

The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the
Small Business Regulatory Enforcement Fairness Act of 1996, generally
provides that before a rule may take effect, the agency promulgating the
rule must submit a rule report, which includes a copy of the rule, to
each House of the Congress and to the Comptroller General of the United
States. EPA will submit a report containing this rule and other required
information to the U.S. Senate, the U.S. House of Representatives, and
the Comptroller General of the United States prior to publication of the
rule in the Federal Register. A Major rule cannot take effect until 60
days after it is published in the Federal Register.  This action is a
“major rule” as defined by 5 U.S.C. 804(2). This rule will be
effective [INSERT DATE 60 DAYS FROM PUBLICATION IN THE FEDERAL
REGISTER].

L.  Judicial Review

Under section 307(b)(1) of the Act, petitions for judicial review of
this action must be filed in the United States Court of Appeals for the
District of Columbia Circuit by [INSERT DATE 60 DAYS FROM DATE OF
PUBLICATION IN THE FEDERAL REGISTER].  Any such judicial review is
limited to only those objections that are raised with reasonable
specificity in timely comments. Filing a petition for reconsideration by
the Administrator of this final rule does not affect the finality of
this rule for the purposes of judicial review nor does it extend the
time within which a petition for judicial review may be filed, and shall
not postpone the effectiveness of such rule or action. Under section
307(b)(2) of the Act, the requirements of this final action may not be
challenged later in civil or criminal proceedings brought by us to
enforce these requirements. Pursuant to section 307(d)(1)(V) of the Act,
the Administrator determines that this action is subject to the
provisions of section 307(d). Section 307(d)(1)(V) provides that the
provisions of section 307(d) apply to “such other actions as the
Administrator may determine.”  This action finalizes some, but not
all, elements of a previous proposed action – the Prevention of
Significant Deterioration and Title V Greenhouse Gas Tailoring Rule
Proposed Rule (74 FR 55292, October 27, 2009). 

IX. Statutory Authority

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

List of Subjects

40 CFR Part 51  

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

40 CFR Part 52 

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

40 CFR Part 70

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

40 CFR Part 71

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

___________________________________________ 

Dated: 

___________________________________________ 

Lisa P. Jackson, 

Administrator.

 The term “greenhouse gases” is commonly used to refer generally to
gases that have heat-trapping properties.  However, in this notice,
unless noted otherwise, we use it to refer to specifically to the
pollutant regulated in the LDVR.

 The relevant thresholds are 100 tpy for title V, and 250 tpy for PSD
except for 28 categories listed in EPA regulations for which the PSD
threshold is 100 tpy.

 This rule has not yet been published in the Federal Register.  The
signed version of the rule is available at   HYPERLINK
"http://epa.gov/otaq/climate/regulations.htm" 
http://epa.gov/otaq/climate/regulations.htm  [update when published]

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

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

 A source need not meet the 100/250 thresholds for GHGs if it is already
a major stationary source as a result of emissions of another regulated
NSR pollutant.

 §86.1818-12 (a) (“Applicability. This section contains standards and
other regulations applicable to the emission of the air pollutant
defined as the aggregate group of six greenhouse gases:  carbon dioxide,
nitrous oxide, methane, hydrofluorocarbons, perfluorocarbons, and sulfur
hexafluoride”).

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

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

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

 See §86.1818-12(a)   Greenhouse gas emission standards for light-duty
vehicles, light-duty trucks, and medium-duty passenger vehicles. 
(“Applicability.  This section contains standards and other
regulations applicable to the emission of the air pollutant defined as
the aggregate group of six greenhouse gases: carbon dioxide, nitrous
oxide, methane, hydrofluorocarbons, perfluorocarbons, and sulfur
hexafluoride.”).

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

 “Summary of ICR-based Data Used to Estimate Avoided Burden and
Evaluate Resource Requirements at Alternative GHG Permitting
Thresholds;” Prepared by EPA Staff; August 2009.

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

 “Summary of Methodology and Data Used to Estimate Burden Relief and
Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG)
Permitting Thresholds;” Prepared by EPA Staff; March 2010

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

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

 “Summary of Methodology and Data Used to Estimate Burden Relief and
Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG)
Permitting Thresholds;” Prepared by EPA Staff; March 2010

 “Summary of Methodology and Data Used to Estimate Burden Relief and
Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG)
Permitting Thresholds;” Prepared by EPA Staff; March 2010

 “Summary of Methodology and Data Used to Estimate Burden Relief and
Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG)
Permitting Thresholds;” Prepared by EPA Staff; March 2010

  As explained in the preamble, "current program" figures for PSD
permits also reflect NSR permits in nonattainment areas that we assume
include a PSD component for at least one pollutant.

 Number of FTEs may be calculated as work hours divided by 2,000 hours.

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

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

 The initial PSD program that EPA established in 1973-74, and which EPA
built on in promulgating the PSD program necessary to implement the 1977
CAA Amendments had an even narrower focus.  In that initial program, in
response to a court order to ensure that state implementation plans
(SIPs) prevent significant deterioration of air quality, EPA imposed
both a technology-based requirement and an air-quality-review
requirement, which, in keeping with the focus on SIPs, were both limited
to national ambient air quality standards (NAAQS) pollutants.  This
program did not cover hazardous air pollutants that were regulated under
CAA section 112, much less air pollutants not regulated under any CAA
provision.  See 38 FR 18,986 (July 16, 1973) (proposed rule), 39 FR
31,000 (Aug. 27, 1974) (proposed rule), 39 FR 42,510 (Dec. 5, 1974)
(final rule).

 As noted elsewhere in today’s notice, in Alabama Power, the D.C.
Circuit noted that the definition of “major emitting facility” under
CAA section 169(1) could apply to air pollutants not regulated under
other provisions of the Act, and discussed  the contrast of this broad
definition to the narrower application of the BACT provisions.  636 F.2d
at 352-53 & n. 60.  In its rulemaking notices responding to Alabama
Power, EPA discussed at length certain issues, such as the applicability
of NSR to pollutants emitted below the “major” thresholds, that are
based on the reference in “major emitting facility” to “any air
pollutant.” However, throughout its discussion, EPA interpreted that
reference as “any regulated air pollutant,” again without
specifically acknowledging the difference or without acknowledging the
above-noted statements in Alabama Power.  See 45 FR at 52,710 –
52,711.  EPA did not indicate that it had received comments on this
issue. 

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

 That GHG will become subject to regulation moots, so far as GHGs are
concerned, any issue as to the validity of EPA’s narrowing the term
“any air pollutant” in the definition of “major emitting
facility” by reading into the term “subject to regulation under the
Clean Air Act.”  

 EPA did receive comments that asserted in conclusory fashion that
permitting authorities could administer the 100/250 tpy levels.

 This tailoring, which is the subject of today’s rulemaking, is in
effect a further narrowing of the definition, as applied to GHG sources,
beyond what EPA accomplished in promulgating the regulatory definition
that includes the “subject to regulation” limitation.

  Indeed, as discussed elsewhere, by not limiting the applicability
provisions  to pollutants subject to regulation, Congress wrote them
overly broadly.

 Commenters raise additional arguments, including that PSD is limited to
pollutants (1) that cause only local effects, or (2) for which a source
has been subject to an NSPS.  We address these arguments in the RTC.  

 We find no support for the proposition raised by some commenters that
this provision is limited to “NAAQs” pollutants.  To the contrary,
“under this chapter” unambiguous signals an intent to cover any
pollutant regulated under the Act.  Had Congress intended a narrower
focus,  they would have specified “any NAAQs pollutant” or any
pollutant subject to regulation under this Part (PSD)”

 That GHG will become subject to regulation moots, so far as GHGs are
concerned, any issue as to the validity of EPA’s narrowing the term
“any air pollutant” in the definition of “major source” by
reading into the term “subject to regulation” under the Clean Air
Act.  

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

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

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

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

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

 The fee provisions are set forth in CAA Section 502(b)(3) and in our
regulations at 40 CFR 70.9 and 71.9

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

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

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

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