Document ID: EPA-R09-OAR-2010-0062-0031
Agency: epa
Document Type: Rule
Title: Air Quality State Implementation Plans; Approvals and Promulgations: California, San Joaquin Valley Unified Air Pollution Control District, New Source Review
Posted Date: 2013-08-01T04:00Z

[Federal Register Volume 78, Number 148 (Thursday, August 1, 2013)]
[Rules and Regulations]
[Pages 46504-46514]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-18413]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2010-0062; FRL-9837-5]

Approval and Promulgation of Implementation Plans, State of 
California, San Joaquin Valley Unified Air Pollution Control District, 
New Source Review

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is taking final action to correct the May 2004 approval of 
a version of the New Source Review (NSR) rules for the San Joaquin 
Valley Unified Air Pollution Control District portion of the California 
State Implementation Plan, consistent with the relevant provisions of 
state law. Specifically, EPA is taking final action to correct the May 
2004 approval by limiting the approval, as it relates to agricultural 
sources, to apply the permitting requirements only to such sources with 
potential emissions at or above a major source applicability threshold 
and to such sources with actual emissions at or above 50 percent of a 
major source applicability threshold and to apply the emission offset 
requirement only to major agricultural sources and major modifications 
of such sources.

DATES: This rule is effective on September 3, 2013.

ADDRESSES: EPA has established docket number EPA-R09-OAR-2010-0062 for 
this action. The index to the docket is available electronically at 
www.regulations.gov and in hard copy at EPA Region IX, 75 Hawthorne 
Street, San Francisco, California. While all documents in the docket 
are listed in the index, some information may be publicly available 
only at the hard copy location (e.g., copyrighted material), and some 
may not be publicly available in either location (e.g., CBI). To 
inspect the hard copy materials, please schedule an appointment during 
normal business hours with the contact listed in the FOR FURTHER 
INFORMATION CONTACT section.

FOR FURTHER INFORMATION CONTACT: Laura Yannayon, Permits Office (AIR-
3), U.S. Environmental Protection Agency, Region IX, (415) 972-3534, 
yannayon.laura@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us'' and 
``our'' refer to EPA.

Table of Contents

I. Background for Today's Final Action
    A. Actions Proposed in January 29, 2010 Proposed Rule
    B. Background, Authority and Rationale for Proposed Error 
Correction
    C. Letters from the California Attorney General's Office
II. Public Comments and EPA's Responses
III. Final Action
IV. Statutory and Executive Order Reviews

I. Background for Today's Final Action

A. Actions Proposed in January 29, 2010 Proposed Rule

    On January 29, 2010 (75 FR 4745), under the Clean Air Act (CAA or 
``Act''), we proposed three actions in connection with the permitting 
rules for the San Joaquin Valley Unified Air Pollution Control District 
(``District'') portion of the California State Implementation Plan 
(SIP).\1\ Herein, we refer to our January 29, 2010 proposed rule as the 
``proposed rule.'' As discussed further below, we have already 
finalized the second and third actions included in our proposed rule, 
and are taking action today to finalize the first action.
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    \1\ The San Joaquin Valley includes all of San Joaquin, 
Stanislaus, Merced, Madera, Fresno, Kings and Tulare counties, and 
the western half of Kern County, in the State of California. The San 
Joaquin Valley is designated as a nonattainment area for the 1997 
and 2008 8-hour ozone national ambient air quality standards (NAAQS) 
and the 1997 (annual) and 2006 (24-hour) fine particulate matter 
(PM2.5) NAAQS and is designated as attainment or 
unclassifiable for the other NAAQS. See 40 CFR 81.305. The area is 
further classified as ``extreme'' for the now-revoked 1-hour ozone 
NAAQS, and the 1997 and 2008 8-hour ozone NAAQS.
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    First, in our proposed rule, we proposed to correct an error in our 
May 2004 final rule approving Rules 2020 (``Exemptions'') and 2201 
(``New and Modified Stationary Source Review Rule''), as amended by the 
District in December 2002, that establish the requirements and 
exemptions for review of new or modified stationary sources (``new 
source review'' or ``NSR''). Herein, we refer to District Rules 2020 
and 2201 as the ``District's NSR rules.'' In our proposed rule, we 
explained how our error arose from the failure, in light of information 
available at the time, to recognize that the District did not have the 
authority under state law to implement the District's NSR rules with 
respect to permitting of minor agricultural sources with actual 
emissions less than 50% of the applicable ``major source'' thresholds 
and with respect to the imposition of emissions offset requirements for 
minor agricultural sources.
    In addition to the error correction described above, our January 
2010 proposed rule also proposed two other actions: (a) a limited 
approval and limited disapproval of the District's NSR rules, as 
further amended in 2007 and

[[Page 46505]]

2008 and a full approval of amended District Rule 2530 (``Federally 
Enforceable Potential to Emit''); and (b) rescission of certain 
obsolete permitting requirements from the District portion of the 
California SIP.
    On May 11, 2010 (75 FR 26102), we finalized the proposed action on 
the 2007 and 2008 amendments to the District's NSR rules,\2\ District 
Rule 2530, and the proposed rescission of obsolete permitting 
requirements, but we deferred final action on the proposed error 
correction pending receipt from the California Attorney General of an 
interpretation of the District's legal authority with respect to 
agricultural sources under state law.
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    \2\ As discussed in more detail in our proposed rule, the 
amendments to the NSR rules that were adopted by the District in 
2007 and 2008, among other things, aligned the rules explicitly with 
the limitations on the District's authority under state law to 
permit minor agricultural sources and to require emissions offsets 
for such sources. 75 FR 4745, at 4749-4750 (January 29, 2010). Thus, 
as of the effective date of EPA approval of the 2007- and 2008-
amended District NSR rules at 75 FR 26102 (May 11, 2010), the SIP 
and State law is aligned with respect to permitting of agricultural 
sources (and imposition of the emissions offset requirement) in San 
Joaquin Valley. Today's final action thus affects the applicable 
California plan under 40 CFR part 52, subpart F during the period of 
time after the effective date of our May 2004 approval of the 2002-
amended District NSR rules (i.e., June 16, 2004) and the effective 
date of our May 2010 approval of the subsequently amended NSR rules 
(i.e., June 9, 2010). During this period, a number of CAA 
enforcement actions were brought against San Joaquin Valley 
agricultural sources for failure to secure permits and/or provide 
emissions offsets even though such requirements were beyond the 
authority of the District to impose under State law. For additional 
background on why EPA is taking today's action, please see our 
January 29, 2010 proposed rule at 75 FR 4745, at 4748.
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B. Background, Authority, and Rationale for Proposed Error Correction

    In our proposed rule, we provided a detailed background discussion 
regarding the District's NSR rules and related EPA SIP actions. See 
pages 4746-4747 of our proposed rule. In the following paragraphs, we 
provide a summary of this information. For more details, please see our 
proposed rule.
    EPA originally approved the District's NSR rules as part of the 
California SIP in 2001.\3\ See 66 FR 37587 (July 19, 2001). EPA's 2001 
action was a limited approval and limited disapproval reflecting our 
conclusion that the rules could not be fully approved as meeting all 
applicable requirements because, among other reasons, District Rule 
2020 exempted all agricultural sources from District permitting 
requirements. 66 FR at 37590. At that time, District Rule 2020, citing 
California Health & Safety Code (CH&SC) section 42310(e), included a 
permitting exclusion for ``any equipment used in agricultural 
operations in the growing of crops or the raising of fowl or animals,'' 
except for certain orchard and citrus grove heaters in the southern 
portion of the District. Our limited disapproval stated that the 
District could not exempt major stationary sources or major 
modifications at existing major sources from NSR requirements and be 
found to meet applicable CAA requirements.\4\
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    \3\ Rules 2020 and 2201 were adopted by the District to meet NSR 
requirements under the Clean Air Act, as amended in 1990, for areas 
that have not attained the National Ambient Air Quality Standards 
(NAAQS). District Rules 2020 and 2201 replaced existing NSR rules 
from the individual county air pollution control districts that were 
combined into the San Joaquin Valley Unified Air Pollution Control 
District (``District'') in 1991.
    \4\ District NSR permitting rules do not adopt the distinction 
between minor sources and major sources as set forth under the CAA. 
District Rules 2020 and 2201 generally apply to both federal minor 
and major stationary sources. Our limited approval and limited 
disapproval specified that the rule deficiency was exempting major 
agricultural sources and major modifications. See 65 FR 58252, at 
58254 (September 28, 2000).
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    To correct this deficiency, in December 2002, the District amended 
their NSR rules to eliminate the agricultural permitting exemption in 
its entirety, and, later that same month, the California Air Resources 
Board (CARB) submitted the District's amended NSR rules to EPA as a 
revision to the California SIP. Shortly thereafter, EPA proposed 
approval of the amended District NSR rules, see 68 FR 7330 (February 
13, 2003), even though we recognized that ``California Health & Safety 
Code 42310(e) continues to preclude the District, as well as all other 
districts in California, from permitting agricultural sources under 
either title I or title V of the CAA.'' See 68 FR 7330, at 7335. We did 
so in light of a proposed ``SIP Call'' that we issued on the same day 
as we proposed approval of the amended District NSR rules. See 68 FR 
7327 (February 13, 2003). The SIP Call was based on our finding that 
the California SIP was substantially inadequate by failing to provide 
the necessary assurances under CAA section 110(a)(2)(E) that the State 
had the legal authority to carry out its NSR permitting obligations 
under the CAA with respect to major agricultural sources. EPA finalized 
the SIP Call in mid-2003, and thereby required California to submit the 
necessary assurances of authority to support an affirmative finding by 
EPA under CAA section 110(a)(2)(E). 68 FR 37746 (June 25, 2003).
    Later in 2003, the California legislature enacted Senate Bill (SB) 
700, which the Governor of California signed on September 22, 2003. SB 
700 removed the wholesale exemption from permitting for agricultural 
sources provided under CH&SC section 42310(e) and subjected major 
agricultural sources to permit requirements. SB 700, however, retained 
a limited exemption for new source permitting at certain minor 
agricultural sources, and limited the ability of districts to require 
minor agricultural sources to obtain offsets.\5\ California notified 
EPA of the legislature's action by letter dated November 3, 2003 and 
enclosed a copy of SB 700.\6\
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    \5\ Specifically, under SB 700, minor agricultural sources with 
actual emissions below 50 percent of the major source threshold are 
exempt from permitting unless the District makes certain findings, 
while sources at or above 50 percent of the major source threshold 
are subject to permitting unless the District makes certain 
findings. See CH&SC section 42301.16(b) and (c). In addition, a 
district may not require an agricultural source to obtain emissions 
offsets for criteria pollutants for that source if emissions 
reductions from that source would not meet the criteria for real, 
permanent, quantifiable, and enforceable emission reductions. See 
CH&SC section 42301.18(c).
    \6\ See Letter from Bill Lockyer, Attorney General, California 
Office of the Attorney General, to Marianne Horinko, Acting 
Administrator, EPA, dated November 3, 2003.
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    On May 17, 2004, EPA took final action approving the District's NSR 
rules, as amended by the District and submitted by CARB in 2002. See 69 
FR 27837 (May 17, 2004). These rules, as approved by EPA, did not on 
their face exempt any agricultural sources from permitting or limit the 
applicability of offset requirements. EPA's final approval stated that 
the District had removed its exemption for agricultural sources and 
that the state had also ``removed a similar blanket exemption, thereby 
providing the District with authority to require air permits for 
agricultural sources, including federally required NSR permits.'' See 
69 FR 27837, at 27838. EPA's final approval cited SB 700 in a footnote, 
but did not note the limited scope of authority for permitting and 
offset requirements under SB 700, which allowed permitting of only 
certain minor agricultural sources and continued the exemption for 
other minor agricultural sources.
    In our proposed rule, under CAA section 110(k)(6), we found that 
(1) our May 2004 final full approval of District's NSR rules was in 
error in that our approval of the rules should have ensured that the 
authority in those rules was consistent with the authority granted by 
SB 700 and that (2) the District did not, as of May 2004, have the 
authority under SB 700 to require permits for new or modified minor 
agricultural sources with actual emissions less than 50 percent of the

[[Page 46506]]

major source threshold or to require new minor agricultural sources or 
minor modifications to agricultural sources to obtain emission 
reduction offsets, notwithstanding the absence of explicit exemptions 
in the District's NSR rules. Moreover, we noted in our proposed rule 
that California submitted a copy of SB 700 in November 2003, and thus 
we had information indicating that the District did not have the 
authority to implement the NSR rules to the extent that the language of 
the District's rule appeared to allow (i.e., to require permits and 
offsets from all new or modified agricultural sources, including those 
exempt under SB 700) prior to the time we took final action. In our 
proposed rule, we explained that we should have limited our approval of 
the District's NSR rules in May 2004 to conform with SB 700, and 
promulgated language in 40 CFR part 52 codifying that limitation on our 
approval.
    To correct this error, we proposed to limit our approval of the 
District's NSR rules to exclude applicability to agricultural sources 
exempt from new source permitting under SB 700 (i.e., minor sources 
with actual emissions less than 50 percent of the major source 
threshold). We also proposed to limit our approval to require offsets 
only for major agricultural sources, because at the time of our 2010 
proposed action, we believed that the District had not found emissions 
reductions from agricultural sources to meet the criteria for real, 
permanent, quantifiable, and enforceable emissions reductions and thus 
had not lifted the restriction otherwise provided in SB 700 (and 
codified in CH&SC section 42301.18(c)) on the imposition of the 
emissions offset requirement on new minor agricultural sources or minor 
modifications of agricultural sources.
    For more information about our proposed determination of error and 
our proposed correction, please see pages 4747-4748 of our proposed 
rule.

C. Letters From the California Attorney General's Office

    In response to our proposed rule, several comments were submitted 
that objected to our proposed error correction action and the 
interpretation of state law upon which it was based, and raised 
significant questions as to the extent of District authority with 
respect to agricultural sources under state law. Specifically, the 
commenters who objected to our proposed correction cited ``savings'' 
clauses in state law that they contend ratified the District's NSR 
rules that contain no permitting or offsets exemptions for agricultural 
sources notwithstanding other provisions in state law that would 
otherwise limit District authority over those sources.
    To ensure our final action would be informed by the State's 
interpretation of the relevant provisions of state law, we requested 
that CARB provide us with a legal interpretation from the California 
Attorney General of the extent of District authority with respect to 
agricultural sources under state law.\7\ More specifically, we 
requested that CARB provide us a legal interpretation from the 
California Attorney General of SB 700 as it applies to the District NSR 
rules adopted in December 2002 and approved by EPA in May 2004. By 
letters dated November 14, 2012 and March 18, 2013, the California 
Attorney General's Office has now provided us the requested 
interpretation of state law.\8\
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    \7\ See letters from Jared Blumenfeld, Regional Administrator, 
EPA Region IX, to Mary D. Nichols, Chairwoman, California Air 
Resources Board, dated April 12, 2010 and April 26, 2012.
    \8\ See letters dated November 14, 2012 and March 18, 2013 from 
Robert W. Byrne, Senior Assistant Attorney General, to Jared 
Blumenfeld, Regional Administrator, EPA Region IX.
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II. Public Comments and EPA's Responses

    Our proposed rule (75 FR 4745) provided for a 30-day comment 
period. During that period, we received adverse comments from three 
groups: (1) Greenberg-Glusker law firm, on behalf of Dairy Cares, a 
coalition of California's dairy producer and processor associations 
(referred to herein as ``Dairy Cares''), by letter dated March 1, 2010; 
(2) Earthjustice, by letter dated March 1, 2010; and (3) the Center on 
Race, Poverty & the Environment, on behalf of the Association of 
Irritated Residents and other community and environmental groups 
(referred to herein as ``AIR''), by letter dated March 1, 2010. AIR 
joins in the comments from Earthjustice, but also adds comments of its 
own.
    All three comment letters cited above included comments on one or 
more aspects of our proposed rule (e.g., on our proposed limited 
approval and limited disapproval of the District's NSR rules, as 
further amended in 2007 and 2008) in addition to comments on the 
proposed error correction. With respect to the comments germane to the 
other aspects of our proposed rule, we provided responses in our final 
action published on May 11, 2010 (75 FR 26102) and do not reopen those 
issues through today's final action.\9\ Rather, in the following 
paragraphs, we summarize the significant comments that relate to the 
proposed error correction that we are taking final action on today, and 
provide our responses.
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    \9\ In its March 1, 2010 comment letter, AIR also provided 
comments germane to a separate EPA rulemaking also proposed on 
January 29, 2010 (``Approval and Promulgation of Implementation 
Plans: State of California; Legal Authority,'' and published at 75 
FR 4742. We responded to AIR's comments germane to that separate 
rulemaking in a final rule published at 75 FR 27938 (May 19, 2010) 
and do not reopen those issues through today's final action.
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    Earthjustice Comment #1: EPA has incorrectly interpreted State law 
in proposing the error correction, and EPA should ask the State to 
provide the necessary assurances that the District has the authority 
under State law to permit all sources covered by Rule 2201.
    Response to Earthjustice Comment #1: EPA requested that the 
California Attorney General provide an interpretation of SB 700 as 
applied to the District's NSR rules, as amended by the District in 
December 2002, and as noted above, the California Attorney General's 
Office has responded to EPA's request in the form of two letters, one 
dated November 14, 2012 and one dated March 18, 2013. EPA has taken the 
State's interpretation into account in responding to comments on our 
proposed error correction and in taking today's final action.
    Earthjustice Comment #2: The District's authority to permit 
agricultural sources under the Clean Air Act is not limited to sources 
above 50 percent of any applicable major source threshold. EPA reads 
CH&SC section 42301.16(a) as only authorizing permits for major 
agricultural sources. Nothing in section 42301.16(a) refers to 
``major'' sources or limits the CAA provisions referenced to ``major 
source'' requirements. To the contrary, the language refers to permits 
required for ``any'' source and instead of referring only to part D of 
Title I, as EPA suggests, refers to all of Title I beginning with 
section 101 of the Act. EPA's interpretation cannot be reconciled with 
the plain language of the CH&SC.
    Response to Earthjustice Comment #2: Earthjustice is correct that 
our proposed error correction is predicated in part on the 
interpretation that CH&SC section 42301.16(a) refers to ``major 
sources'' as defined under the CAA, i.e., sources that emit or have the 
potential to emit at or above the major source threshold, 
notwithstanding the fact that an explicit reference to ``major 
sources'' is not found in CH&SC section 42301.16(a). See footnote 
7 on page 4747 in the proposed rule.
    CH&SC section 42301.16(a) provides: ``In addition to complying with 
the requirements of this chapter, a permit system established by a 
district

[[Page 46507]]

pursuant to Section 42300 shall ensure that any agricultural source 
that is required to obtain a permit pursuant to Title I . . . or Title 
V . . . of the federal Clean Air Act is required by district regulation 
to obtain a permit in a manner that is consistent with the federal 
requirements.'' In proposing the error correction, we interpreted the 
reference to permits required under Title I as meaning permits for 
major sources covered under parts C or D of Title I, and not minor 
sources. This is because, under the relevant SIP content provisions 
under Title I [section 110(a)(2)(C)], while SIPs must provide for the 
``regulation of the modification and construction of any stationary 
source,'' i.e., including minor sources, the only explicit permitting 
requirement is for a ``permit program as required in part C and D'' of 
Title I. Thus, under Title I, a permit program is only explicitly 
required for sources covered under parts C and D, and the sources 
covered under parts C and D are major sources.
    Moreover, a State must identify the types and sizes of minor 
stationary sources which will be subject to review [see 40 CFR 
51.160(e)]. As such, States are authorized to exempt certain minor 
stationary sources from such review. No such exemptions are allowed for 
review of new or modified major sources. Thus, permits for ``major 
sources'' can be considered to be ``required'' in a way that permits 
for minor sources are not.
    In addition, our interpretation of CH&SC section 42301.16(a) is 
consistent with the fact that the California legislature adopted SB 700 
in part in an effort to avoid sanctions that were set in motion by 
EPA's final determination that the California SIP was ``substantially 
inadequate'' because State law did not provide the legal authority 
allowing State and local permitting agencies to meet the permitting 
obligations under parts C and D of title I with respect to major 
agricultural sources. Lastly, we note that our interpretation of CH&SC 
section 42301.16(a) is consistent with California's interpretation. See 
the memorandum from James N. Goldstene, Executive Director, CARB, to 
Air Pollution Control Officers, dated September 3, 2008; and the letter 
from Robert W. Byrne, Acting Senior Assistant Attorney General, to 
Jared Blumenfeld, dated November 14, 2012. For the reasons given above, 
therefore, we continue to interpret CH&SC section 423016(a) as 
referring to major sources under Titles I and V of the CAA.
    Earthjustice Comment #3: Even if one were to accept EPA's 
interpretation of CH&SC section 42301.16(a) as being limited to title I 
part D requirements, permitting of minor agricultural sources in the 
District would still be authorized because Rule 2201 relies on non-
major source permitting to fulfill the requirements of part D. The 
District has chosen not to impose Part D requirements on major sources 
and has claimed instead (with EPA's approval) that its permitting of 
non-major sources can be credited to show that in the aggregate Rule 
2201 is ``equivalent'' to the program required under part D for major 
sources. By relying on credit from its permitting of non-major sources 
to meet federal NSR requirements, the District has eliminated any lines 
between what portion of Rule 2201 is meant to comply with major source 
permit requirements and what part is not derived from or in 
satisfaction of the part D major source provisions. The same is true 
for agricultural sources. It is only by permitting both major and minor 
sources that the District can claim to satisfy part D. Having allowed 
this demonstration of compliance with major source requirements ``in 
the aggregate,'' EPA cannot now claim that the permitting of certain 
non-major source is not authorized under Title I.
    Response to Earthjustice Comment #3: Earthjustice is correct that 
EPA has approved an equivalency tracking system that the District uses 
to assess overall equivalency of its NSR program with CAA nonattainment 
NSR (i.e., part D) requirements on an annual basis. 69 FR 27837 (May 
17, 2004). The requirements for the tracking system are set forth in 
District Rule 2201, section 7.0 (``Annual Offset Equivalency 
Demonstration and Pre-Baseline ERC Cap Tracking System''). The goal of 
the tracking system is to show that, notwithstanding certain 
differences between the District and Federal NSR program, the 
District's NSR rules would require offsets that are, in the aggregate, 
equivalent to offsets required under the Federal program. 68 FR 7330, 
at 7332 (February 13, 2003).
    To make the equivalency demonstration, the District can use, among 
other sources of emissions reductions, emission reductions used to meet 
offset requirements imposed on minor sources. However, the fact that 
the District can rely, and has relied, on minor source offsets to 
demonstrate equivalency does not mean that permits for new or modified 
minor agricultural sources are required under part D of Title I and 
therefore subject to District permitting authority under CH&SC section 
42301.16(a). The District has demonstrated equivalency each year since 
the tracking system was approved and has never relied on offsets from 
new minor agricultural sources or minor modifications of agricultural 
sources to do so. Thus, we disagree with Earthjustice's contention that 
the District's reliance on minor source (non-agricultural source) 
offsets to demonstrate equivalency of the District's NSR program with 
Federal NSR requirements makes all minor source permits, including 
minor source permits for agricultural sources, required under part D of 
Title I and thus ``required'' for the purposes of CH&SC section 
42301.16(a).
    Earthjustice Comment #4: EPA's interpretation of State law 
regarding District permitting authority over agricultural sources fails 
to reconcile and give meaning to CH&SC section 39011.5. Under 
paragraphs (b) and (c) of CH&SC section 39011.5, the authority to 
permit any agricultural source under the terms of Rule 2201 as it was 
revised in December 2002 is expressly preserved and made applicable to 
agricultural sources. There is no dispute that, under the terms of Rule 
2201, the District had jurisdiction over the permitting of all 
agricultural sources on January 1, 2003, and there is no dispute that 
Rule 2201 was adopted and submitted for EPA approval to satisfy the 
requirements of the CAA. Nothing in the language of CH&SC section 
39011.5(b) and (c) suggests that the permitting authority conferred by 
these preserved regulations is subject to the limitations in CH&SC 
section 42301.16(c) \10\ or elsewhere. To the contrary, the CH&SC uses 
broad language making ``any'' existing district regulation applicable 
to agricultural sources and ensuring that ``nothing'' limits existing 
district authority. If the District truly lacked authority to regulate 
sources with actual emission less than 50 percent of a major source 
threshold, there would be no need for these sections preserving the 
authority of existing regulations. State law could have been silent and 
allowed the permitting of these sources only to the extent authorized 
by SB 700. The only way to reconcile these provisions is to limit the 
effect of CH&SC section 42301.16(c) to future regulation (i.e., post 
enactment of SB 700) of these sources.
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    \10\ As noted in footnote 5 of this document, under 
CH&SC section 42301.16(b) and (c), minor agricultural sources with 
emissions below 50 percent of the major source threshold are exempt 
from permitting unless the District makes certain findings, while 
sources at or above 50 percent of the major source threshold are 
subject to permitting unless the District makes certain findings.
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    Response to Earthjustice Comment #4: We disagree with the 
contention that, under the terms of Rule 2201, the District had 
jurisdiction over the

[[Page 46508]]

permitting of all agricultural sources on January 1, 2003. At that 
time, State law excluded all agricultural sources from District 
permitting authority. The absence of an exemption in Rule 2201 as 
adopted by the District in December 2002 did not imbue the District 
with authority otherwise denied under State law. In the following 
paragraphs, we explain how our interpretation of District permitting 
authority over agricultural sources can be reconciled with CH&SC 
section 39011.5. We also find further support for our view in the 
California Attorney General office's interpretation of the relevant 
sections of SB 700.
    CH&SC section 39011.5(a) defines ``agricultural source of 
pollution'' and ``agricultural source'' for the purposes of Division 26 
(``Air Resources'') of the CH&SC. As noted in our proposed rule (75 FR 
at 4752), California law defines ``agricultural source'' as a source of 
air pollution or group of sources used in the production of crops or 
the raising of fowl or animals located on contiguous property under 
common ownership or control that is a confined animal facility (e.g., 
barn, corral, coop); is an internal combustion engine used in the 
production of crops or the raising of fowl or animals (e.g., irrigation 
pumps, but excluding nonroad vehicles such as tractors); or is a title 
V source or is a source that is otherwise subject to regulation by a 
district or the federal Clean Air Act. See CH&SC section 39011.5(a). As 
such, agricultural sources include both combustion sources (such as, 
internal combustion engines and boilers) and non-combustion sources 
[e.g., confined animal facilities and on- and off-field vehicular 
activity (e.g., tilling and harvesting)]. Among the non-combustion 
agricultural sources, some by their nature generate fugitive emissions 
such as tilling, harvesting, and vehicle travel over unpaved farm 
roads.
    CH&SC section 39011.5(b) provides that: ``Any district rule or 
regulation affecting stationary sources on agricultural operations 
adopted on or before January 1, 2004, is applicable to an agricultural 
source.'' In proposing the error correction, we were aware of CH&SC 
section 39011.5(b) but did not interpret that statutory provision as 
conferring authority to the District to require permits for all new or 
modified agricultural sources on January 1, 2004 (i.e., the effective 
date of SB 700).
    Under our interpretation, the savings clause in CH&SC section 
39011.5(b) preserves general prohibitory and permitting rules affecting 
agricultural sources and adopted prior to the effective date of SB 700 
(i.e., January 1, 2004) but does not authorize the application of 
District permitting requirements inconsistent with the limited 
exemptions set forth in other sections of SB 700 [specifically, CH&SC 
section 42301.16(c) and 42301.18(c)]. That is, CH&SC section 39011.5(b) 
simply preserves District rules affecting agricultural sources that 
were adopted prior to SB 700 and avoids the need to re-adopt such rules 
after the effective date of SB 700. Under this view, CH&SC section 
39011.5(b) preserved the ability of the District to administer its NSR 
rules and apply them to agricultural sources consistent with SB 700 
upon the effective date of SB 700 notwithstanding the fact that the NSR 
rules were adopted prior to the effective date of SB 700 and thus could 
not be applied to agricultural sources (because of the preclusion from 
District permitting for agricultural sources in then-current CH&SC 
section 42310(e)) at the time the District adopted them.
    The California Attorney General's office shares this view:

    ``. . . . Although California before SB 700's enactment exempted 
agricultural sources from New Source Review permitting requirements, 
California law did not preclude districts from adopting emissions-
reduction rules of general application (independent of the New 
Source Review process) that would apply to agricultural stationary 
sources. Some districts had such rules and, following SB 700's 
enactment, section 39011.5, subdivision (b) preserved them. For 
example, where air pollution control districts had regulated 
stationary diesel engines or generators, those regulations were not 
limited or diminished by SB 700 merely because the regulated 
equipment happened to be located on or involved in what SB 700 now 
termed `agricultural sources.' Therefore, section 39011.5, 
subdivision (b) has a limited and distinct purpose; it preserves and 
validates those existing equipment-governing regulations of general 
application, that, without such a savings clause, might be construed 
as invalid because the regulated equipment was included as part of 
SB 700's `agricultural sources.' Subdivision (b) does not authorize 
district New Source Review rules that conflict with the sections of 
SB 700 that address the New Source Review permitting process.'' \11\
---------------------------------------------------------------------------

    \11\ See California Attorney General Office's Letter, November 
14, 2013, page 4.

Thus, EPA's interpretation of CH&SC section 39011.5(b) is consistent 
with that expressed by the California Attorney General's office. 
Moreover, in the excerpt provided above, the California Attorney 
General's office explains the need for the savings clause.
    CH&SC section 39011.5(c) provides in relevant part: ``Nothing in 
this section limits the authority of a district to regulate a source, 
including, but not limited to, a stationary source that is an 
agricultural source, over which it otherwise has jurisdiction pursuant 
to this division, or pursuant to the federal Clean Air Act (42 U.S.C. 
Sec. 7401 et seq.) or any rules or regulations adopted pursuant to that 
act that were in effect on or before January 1, 2003, or . . . .''
    Similar to CH&SC section 39011.5(b), EPA did not view CH&SC section 
39011.5(c) as validating the application of District permitting 
requirements to all new or modified agricultural sources inconsistent 
with the limited exemptions found in other sections of SB 700 
[specifically, CH&SC section 42301.16(c) and 42301.18(c)]. Under our 
view, the phrase ``nothing in this section'' limits the reach of CH&SC 
section 39011.5(c) to the other provisions in CH&SC section 39011.5, 
i.e., the definition of ``agricultural source'' in CH&SC section 
39011.5(a) and the savings clause in CH&SC section 39011.5(b), 
discussed above. As such, we view CH&SC section 39011.5(c) as ensuring 
that the definition of ``agricultural source'' and the savings clause 
in paragraph (b) does not inadvertently limit the authority of 
districts to regulate sources, including agricultural sources, over 
which the districts otherwise have jurisdiction pursuant to rules 
adopted before January 1, 2003, and does not inform our interpretation 
of other sections of SB 700, such as CH&SC section 42301.16(c) and 
42301.18(c). Thus, CH&SC 39011.5(c) in no way undermines our 
determination in the proposed rule that the District's authority to 
permit agricultural sources and to impose emissions offset requirements 
on such sources was limited under State law notwithstanding the absence 
of such limiting language in the District's NSR rules as adopted in 
December 2002 and approved by EPA in May 2004.
    The California Attorney General's office agrees that CH&SC section 
39011.5(c) does not authorize NSR rules that conflict with other 
sections of SB 700 that expressly address the NSR permitting process. 
The California Attorney General's office explains:

    ``Likewise, [CH&SC section 39011.5(c)] does not authorize 
district New Source Review rules that conflict with SB 700's 
provisions concerning the New Source Review process. Subdivision (c) 
provides that nothing in that section limits a district's authority 
to regulate a source over which it otherwise has jurisdiction under 
the Clean Air Act or any Clean Air Act rules or regulations that 
were in effect on or before January 1, 2003. That is, subdivision 
(c) clarifies that section 39011.5 itself does not

[[Page 46509]]

limit a district's existing authority, but subdivision (c) does not 
concern whether some other provision of SB 700 might limit a 
district's authority. Therefore, the only effect of subdivision (c) 
is to assure that section 39011.5, by defining the term 
`agricultural source,' did not inadvertently limit the validity or 
reach of any existing district rules. Subdivision (c) does not grant 
authority, and does not authorize New Source Review rules that 
conflict with other sections of SB 700 that expressly address the 
New Source Review permitting process.'' \12\

    \12\ See California Attorney General Office's Letter, November 
14, 2013, pages 4 and 5.
---------------------------------------------------------------------------

    Thus, we continue to read the savings clauses of CH&SC section 
39011.5(b) and (c) as not validating the application of District 
permitting requirements to all new or modified agricultural sources 
inconsistent with the limited exemptions found in other sections of SB 
700, and as consistent with our finding in the proposed rule that the 
absence of the limited exemptions in SB 700 for agricultural sources in 
the District's NSR rules resulted in a mismatch between the SIP and the 
District's authority under State law when we approved the District's 
NSR rules in May 2004.
    Earthjustice Comment #5: There is no requirement that the District 
make specific findings before requiring offsets from agricultural 
sources. First, EPA's interpretation of CH&SC section 42301.18(c) has 
no basis in the language of that section. There is nothing in CH&SC 
section 42301.18(c) that requires some ``finding'' by the District 
before imposing offsets. Second, EPA's interpretation is inconsistent 
with CARB's explanation that the issue in CH&SC 42301.18(c) is 
``whether the emissions reductions meet the generic criteria that the 
U.S. EPA and the ARB and air district have, since 1976, required of 
sources in order for the reductions to `count' for purposes of 
attaining ambient standards'' and ``[t]he existence of a District rule 
allowing such offsets to be generated is not germane. . . .'' \13\
---------------------------------------------------------------------------

    \13\ Earthjustice cites a letter from W. Thomas Jennings, Chief 
Counsel, CARB, to Brent Newell, Center on Race, Poverty and the 
Environment, May 30, 2007.
---------------------------------------------------------------------------

    Response to Earthjustice Comment #5: We start with the words of 
CH&SC section 42301.18(c): ``A district may not require an agricultural 
source to obtain emissions offsets for criteria pollutants for that 
source if emissions reductions from that source would not meet the 
criteria for real, permanent, quantifiable, and enforceable emission 
reductions.'' Earthjustice is correct that EPA did read CH&SC section 
42301.18(c) as exempting new minor agricultural sources or minor 
modifications of existing agricultural sources from the emissions 
offset requirement pending a determination on the part of the District. 
Based on that understanding, EPA proposed to limit the Agency's prior 
approval in such a way as to give effect to the absence of such a 
determination during the period in which the relevant version of 
District's NSR rules were in effect as part of the SIP, i.e., mid-2004 
through mid-2010.
    In response to this comment, we reviewed again the language of 
CH&SC section 42301.18(c) and acknowledge that it does not specify any 
particular process for determining when the criteria, that would 
authorize imposition by a District of the emission offset requirement 
for a new or modified minor agricultural source, have been met for the 
given minor agricultural source. We also reviewed the CARB reference 
cited above in Earthjustice Comment 5, and agree that it does 
not support EPA's understanding that a determination by the District is 
a prerequisite to the District's authority to impose the emissions 
offset requirement to new or modified minor agricultural sources under 
CH&SC section 42301.18(c), to the extent that the ``determination'' 
consists of a regulatory protocol or District rule allowing such 
offsets to be generated. In the CARB reference cited by Earthjustice, 
CARB writes:

    ``With respect to our interpretation of [CH&SC section 
42301.18(c)], we believe that section 42301.18(c) does not ask 
whether or not the District has a regulatory protocol to verify 
whether ERC's offered by agricultural source are creditable, but 
rather sets forth the objective, generic criteria that must be 
satisfied by an agricultural source seeking credits for its emission 
reductions. If the proffered reductions were real (i.e., surplus to 
required reductions), quantifiable, and enforceable, then the source 
would be able to use (or bank) them as credits and the District may, 
therefore, require the source to provide offsets. The use of the 
subjective ``would not meet'' is critical in interpreting this 
provision; it focuses the inquiry on whether the emissions 
reductions meet the generic criteria that the U.S. EPA and the ARB 
and air districts have, since 1976, required of sources in order for 
the reductions to ``count'' for purposes of attaining ambient 
standards and to qualify for use as offsets. The existence of a 
District rule allowing offsets to be generated is not germane to 
determining whether emission reductions from a given agricultural 
source ``would'' meet the criteria for real, permanent, 
quantifiable, and enforceable.''

    However, whether emissions reductions from a given agricultural 
source meet the relevant criteria is not self-evident or self-
implementing. Some determination is necessary. For instance, the 
District is the agency responsible for allowing the emissions 
reductions from a given agricultural source to be banked or used for 
the purpose of offsetting emissions increases from new or modified 
stationary sources that are subject to the offset requirement under an 
approved NSR program. If the District allowed emission reductions to be 
banked or used for offsetting emission increases, then the District 
would thereby be determining that the emissions reductions are ``real, 
permanent, quantifiable, and enforceable'' since those are the basic 
criteria for judging the creditability of emission reductions for use 
as NSR offsets. The District's authority to impose the offset 
requirement on new or modified minor agricultural sources would vest as 
to those agricultural sources for which it has allowed banking or use 
of emission reductions for NSR offset purposes. Thus, while no protocol 
or District rule specifically directed at agricultural sources need be 
adopted for the offset authority to vest, some determination is 
necessary. Because no such determination was made during the relevant 
period between the effective date of EPA's 2004 approval of the 
previous version of District NSR rules and the effective date of EPA's 
2010 approval of District NSR rules that align such rules with SB 700, 
EPA continues to believe that limiting its approval to exempt new minor 
agricultural sources and minor modifications to existing agricultural 
sources from the offset requirement is warranted.
    EPA's position is supported by the California Attorney General's 
Office. In its March 2013 letter, the California Attorney General's 
Office writes: ``It is our understanding that currently emissions 
reductions from minor agricultural sources do not meet the criteria for 
real, permanent, quantifiable and enforceable emission reductions. On 
these facts, the plain language of [CH&SC section 42301.18(c)] serves 
to suspend the duty of a minor agricultural source to offset emissions 
from that source.'' \14\ If emission reductions from

[[Page 46510]]

minor agricultural sources do not meet the criteria in March 2013, then 
they certainly did not meet the criteria during the relevant period 
affected by today's error correction action (mid-2004 through mid-
2010).
---------------------------------------------------------------------------

    \14\ See letter from the California Attorney General's office, 
dated March 18, 2013. We recognize that the California Attorney 
General's Office's November 2012 letter states that CH&SC section 
42301.18(c) ``does not create an exemption'' but merely 
``disqualifies any offsets that do not meet the offset criteria and 
forbids the district from requiring these deficient offsets.'' We 
find this statement difficult to reconcile with that Office's March 
2013 letter that states that CH&SC section 42301.18(c) serves to 
``suspend the duty of a minor agricultural source to offset 
emissions from that source.'' We believe that ``exemption'' and 
``suspend the duty'' are essentially the same, and thus both 
statements cannot be correct, but we place greater weight on the 
March 2013 statement because it was prepared specifically to respond 
to the relevant issue addressed herein, i.e., the application of 
CH&SC section 42301.18(c) to minor agricultural sources.
---------------------------------------------------------------------------

    The California Attorney General's Office, in its March 2013 letter, 
maintains that its reading of CH&SC section 42301.18(c) is consistent 
with CARB's letter to the California Air Pollution Control Officers, 
dated September 3, 2008, which was included as an attachment to the 
California Attorney General office's letter, dated March 18, 2013, and 
which provides the following guidance with respect to CH&SC section 
42301.18(c):

    ``This limited exemption from the offset requirement means that 
agricultural sources that are not amenable to District prohibitory 
rules or control measures that would qualify for SIP credit--or that 
are unable to generate emission reductions that would qualify as 
offsets--because they fail to meet one or more of the basic criteria 
for a creditable rule or for offset credit cannot be required to 
provide offsets.
    We believe this exemption is based upon considerations of 
equity. If a source cannot get credit for its emission reductions in 
the SIP or cannot quantify its surplus emission reductions for 
banking and later use as offsets, it should not be required to 
provide offsets. This exemption should be narrowly applied, and in 
any event, cannot be used to exempt major federal sources from 
offset requirements.'' \15\
---------------------------------------------------------------------------

    \15\ See letter from James N. Goldstene, Executive Officer, 
CARB, to ``Air Pollution Control Officers,'' September 3, 2008, page 
4. CARB draws a distinction between SIP credit and NSR offset 
credit, a distinction that we also draw. Some prohibitory rules or 
control measures are credited in the SIP, particularly those related 
to mobile sources and non-traditional stationary sources, that do 
not necessarily qualify for NSR offset credit. For example, a 
programmatic level of documentation may be acceptable to support 
quantification of emissions reductions from mobile sources and non-
traditional stationary sources for general SIP attainment 
demonstration purposes, but that same documentation may be 
insufficient to validate ERCs for owners or operators of individual 
mobile sources or individual non-traditional stationary sources for 
NSR offset purposes.

    During the relevant time period, EPA approved several District 
rules affecting agricultural sources, and several District air quality 
plans that reflect emissions reductions from implementation of those 
rules. For example, EPA approved District Rule 4550 (``Conservation 
Management Practices'') and its associated List of Conservation 
Management Practices at 71 FR 7683 (February 14, 2006), District Rule 
4570 (``Confined Animal Facilities'') at 75 FR 2079 (January 14, 2010), 
the 2003 San Joaquin Valley PM10 Plan at 69 FR 30006 (May 
26, 2004), the 2004 San Joaquin Valley Extreme Ozone Attainment 
Demonstration Plan at 75 FR 10420 (March 8, 2010), and the 2007 San 
Joaquin Valley PM10 Maintenance Plan and Redesignation 
Request at 73 FR 66759 (November 12, 2008).
    However, the use of the conjunction ``or'' by CARB in its 
discussion of CH&SC section 42301.18(c), quoted above, means that, 
under CARB's interpretation, even if SIP credit were approved for 
prohibitory rules or control measures, new or modified minor 
agricultural sources could not be required to provide emissions offsets 
if they are unable to generate emission reductions that would qualify 
as offsets. Thus, we find that CARB's interpretation of CH&SC section 
42301.18(c) supports EPA's limitation on its May 2004 approval to 
exempt new minor agricultural sources and minor modifications of 
existing agricultural sources from the emissions offset requirement 
because, under that provision of State law, the District did not have 
the authority to require such sources to provide emissions offsets 
because such sources were unable to generate emissions reductions that 
qualify as offsets during the relevant time period.
    Earthjustice Comment #6: EPA's use of section 110(k)(6) to correct 
this error is unlawful. EPA cannot use section 110(k)(6) to achieve a 
result that EPA could not have achieved if it had acted ``correctly'' 
at the outset. EPA can point to no authority that allows EPA to adopt 
such a limitation when acting on this or any other SIP approval. To the 
contrary, such attempts to rewrite the rule submitted to EPA for 
approval violate well-established prohibitions against piecemeal 
approval of rule submittals. See Bethlehem Steel Corp. v. Gorsuch, 742 
F.2d 1028 (7th Cir. 1984).
    Section 110(k)(6) does not allow EPA to revise the rule itself, 
only the action used to approve the rule. The ``actions'' on a SIP 
submittal are outlined in section 110(k)(3) and include full and 
partial approval or disapproval. First, there should be little question 
that EPA could not have partially approved the District's NSR rules as 
submitted in 2002. The other option theoretically available to EPA at 
the time of the 2004 action was the ``limited approval/limited 
disapproval,'' but EPA guidance cautions against use of that option to 
approve any rule that is unenforceable for all situations.\16\ None of 
the options available to EPA when acting on a SIP submittal allow EPA 
to do what it is proposing to do here. EPA cannot ``limit'' the 
approval by rewriting the applicability of the rule as submitted. 
Section 110(k)(6) does not create new options for EPA to act on SIP 
submittals and cannot be used to circumvent the limitations on EPA 
actions provided by the plain language of section 110(k)(3).
---------------------------------------------------------------------------

    \16\ Earthjustice cites EPA guidance memorandum titled 
``Processing of State Implementation Plan (SIP) Submittals,'' dated 
July 9, 1992, from John Calcagni, Director, Air Quality Management 
Division, EPA Office of Air Quality Planning and Standards.
---------------------------------------------------------------------------

    Response to Earthjustice Comment #6: First of all, we agree that we 
cannot use section 110(k)(6) to revise the District's NSR rules that we 
previously approved, but we are not doing so in this action. Our action 
to limit our approval would in no way change the language of the 
District NSR rules that we approved in May 2004. Instead, it would 
revise the scope of our approval in such a way as to align our approval 
with the limits of District permitting authority under State law at the 
time we initially approved the rules and thus does not conflict with 
the decision in Bethlehem Steel.
    In doing so, our action amounts to a revision to the approved 
California SIP that was applicable between June 2004 and June 2010.\17\ 
EPA is not changing the District rule component of the SIP. We believe 
that our action finalized today is the appropriate revision to make to 
the California SIP under CAA section 110(k)(6) to address the error 
that we made in our May 2004 final action.
---------------------------------------------------------------------------

    \17\ As discussed in more detail in our proposed rule, the 
District amended the NSR rules in 2007 and 2008 to, among other 
things, align the rules explicitly with the District's authority to 
permit minor agricultural sources and to require emissions offsets 
for such sources. 75 FR 4745, at 4749-4750 (January 29, 2010). EPA 
approved the amended NSR rules in May 2010, effective June 10, 2010. 
75 FR 26102 (May 11, 2010). Thus, our action today need only correct 
the mismatch between the District NSR rules and the District's 
authority with respect to minor agricultural sources under SB 700 
from the effective date of our May 2004 approval of the 2002-amended 
District NSR rules (i.e., June 16, 2004) through June 9, 2010.
---------------------------------------------------------------------------

    Second, we agree that there are significant obstacles to correcting 
our May 2004 action on the District's NSR rules by revising the action 
from a full approval to a ``partial approval/partial disapproval'' or 
``limited approval/limited disapproval.'' For instance, a ``partial 
approval/partial disapproval'' action is problematic in this instance 
because, as a general matter, NSR rules are not separable. Correcting 
our action from a full approval action to a ``limited approval/limited 
disapproval'' action is problematic in that it would incorporate the 
entire rule into the California SIP, and thus would not remedy the 
problem of the mismatch between the District

[[Page 46511]]

NSR rules in the SIP and the District's authority with respect to 
agricultural sources under SB 700.
    We disagree, however, that we could not have limited our approval 
in May 2004 under section 110(k)(3) in the same manner as we are doing 
today, but in any event, for today's action, we are relying on section 
110(k)(6), not on section 110(k)(3). We believe that the action we 
proposed to limit our previous approval and that we are finalizing 
today is authorized under the broad discretionary language of CAA 
section 110(k)(6):

    ``Whenever the Administrator determines that the Administrator's 
action approving, disapproving, or promulgating any plan or plan 
revision (or part thereof), . . . was in error, the Administrator 
may in the same manner as the approval, disapproval, or promulgation 
revise such action as appropriate without requiring any further 
submission from the State. Such determination and the basis thereof 
shall be provided to the State and public.''

The key provisions are that the Administrator has the authority to 
``determine[ ]'' when a SIP approval was in ``error,'' and when he does 
so, he may then revise the SIP approval ``as appropriate,'' in the same 
manner as the approval, and without requiring any further submission 
from the state.
    With this action, EPA is determining that its action approving the 
District's NSR rules in May 2004 was ``in error'' due to the mismatch 
between the facial applicability in the NSR rules of the permitting and 
emission offset requirements to minor agricultural sources and the 
limits on District authority under State law applicable at the time of 
our SIP approval. Given the mismatch between the exclusions and 
exemptions apparent from the words of the District NSR rules and the 
limits under State law, EPA was in error in fully approving the NSR 
rules because the SIP and SIP revisions must be supported by necessary 
assurances by the State that, in this context, the District will have 
adequate authority under State law to carry out such SIP or SIP 
revisions and the State of California could not have provided such 
necessary assurances in May 2004 with respect to minor agricultural 
sources because of the limits on District authority at the time 
manifest in SB 700. See CAA section 110(a)(2)(E) and our January 29, 
2010 proposed rule at pages 4747-4748.
    EPA is further determining that the appropriate action EPA can 
take--in light of the broad discretion conferred by the phrase, 
``revise such action as appropriate,''--is to limit our previous 
approval of the District's NSR rules, as it relates to agricultural 
sources, (1) to the extent that the permit requirements apply to 
agricultural sources with potential emissions at or above a major 
source applicability threshold and to agricultural sources with actual 
emissions at or above 50 percent of a major source applicability 
threshold; and (2) to the extent that the offset requirements apply to 
major agricultural sources and major modifications of such sources. We 
have also conducted this limiting of our prior approval through notice-
and-comment rulemaking, which is the same manner as EPA conducted the 
prior approval.
    In limiting our previous approval in this manner, we are taking an 
approach analogous to the one EPA took with respect to the Agency's 
previous SIP approvals of certain State programs for the Prevention of 
Significant Determination (PSD) to the extent those programs applied 
PSD to greenhouse gas (GHG) emitting sources below the thresholds in 
the final ``Tailoring Rule'' published at 75 FR 31514 on June 3, 2010. 
See our final rule, ``Limitation of Approval of Prevention of 
Significant Deterioration Provisions Concerning Greenhouse Gas 
Emitting-Sources in State Implementation Plans,'' referred to as the 
PSD SIP ``Narrowing Rule,'' at 75 FR 82536 (December 30, 2010). In the 
case of the previous approvals of State PSD programs, EPA determined 
that its action approving the PSD SIP provisions was ``in error'' due 
to the mismatch between the PSD applicability provisions and the 
state's ``necessary assurances'' under CAA section 110(a)(2)(E) of 
adequate resources and further determined that the ``appropriate 
action'' to correct the error was to narrow its approval of the PSD 
programs to the extent they applied PSD to GHG-emitting sources below 
the Tailoring Rule threshold.
    Here, in this action, EPA is determining that its action approving 
the District's NSR rules was ``in error'' due to the mismatch between 
the applicability provisions of the District NSR rules and the state's 
``necessary assurance'' under CAA section 110(a)(2)(E) of adequate 
legal authority and is further determining that the ``appropriate 
action'' to correct the error is to limit its previous approval of the 
District's NSR rules in May 2004 to align the permitting applicability 
and offset requirement in the approved SIP to the authority granted the 
District under State law. EPA's PSD SIP ``Narrowing Rule'' contains a 
detailed discussion (see pages 82543-82545) justifying the reliance on 
CAA section 110(k)(6) to narrow previous SIP approvals and we 
incorporate that discussion herein.
    Lastly, Earthjustice would agree that EPA could have disapproved 
the District's NSR rules as submitted in December 2002, and thus would 
agree that we could now, under section 110(k)(6), change our former 
``approval'' to ``disapproval,'' but such an action would have the 
deleterious effect of removing the December 2002 version of the NSR 
rules from the SIP entirely notwithstanding the significant 
strengthening they represented relative to the then-existing SIP 
District NSR rules approved in 2001 (66 FR 37587, July 19, 2001) that 
included a blanket exemption for agricultural sources. Our action to 
limit our approval is narrowly tailored to retain the strengthening 
aspects of the December 2002 version of the NSR rules while still 
addressing the mismatch between the language of the NSR rules and the 
District's authority under State law. Our purpose in doing so is to 
align the SIP approved by EPA in May 2004 with the intent of both EPA 
and the State of California to address the deficiencies in the 
District's NSR rules, including the previous blanket exemption for 
agricultural sources as it applied to major agricultural sources. The 
mismatch created in the applicable California SIP between the NSR rules 
and the authority vested in the District under State law with respect 
to minor agricultural sources was inadvertent, and section 110(k)(6) 
provides EPA with the broad discretionary authority to take action to 
fix the problem caused by the Agency's previous erroneous SIP action.
    CRP&E Comment #1: The proposed rule conflicts with Safe Air for 
Everyone v. EPA, 488 F.3d 1088 (9th Cir. 2007) (``Safe Air''). The SIP 
means exactly that which the December 2002 version of District's NSR 
rules say it means, and EPA made no statement of administrative intent 
that would contradict that plain meaning. As such, the purported 
exemption in SB 700 cannot, as a matter of law, be part of the EPA-
approved SIP.
    Response to CRP&E Comment #1: We agree that we cannot simply 
interpret the California SIP to include statutory limitations not 
manifest in the SIP itself nor manifest in EPA's expressed intent or 
understanding at the time we conducted rulemaking to approve the 
December 2002 version of the District's NSR rules. However, agreement 
on this point simply highlights the need for EPA to take the action it 
is finalizing today. We have conducted this error correction action 
through a notice-and-comment rulemaking and have made our 
administrative intent manifest through that process. Also, we want to 
make clear that we are not changing the language of the District's NSR 
rules that

[[Page 46512]]

we approved in May 2004. Instead, our action will revise the scope of 
our approval in such a way as to align our approval with the limits of 
District permitting authority under State law at the time we approved 
the rules. In doing so, our action amounts to a revision to the 
California SIP applicable between June 2004 and June 2010. EPA is not 
changing the District rule component of the SIP. We believe that our 
action finalized today is the appropriate revision to make to the 
California SIP under CAA section 110(k)(6) to address the error that we 
made in our May 2004 final action.
    CRP&E Comment #2: EPA lacks the power to amend the SIP to conform 
to EPA's interpretation of the District's state law permitting 
authority. Nothing in the CAA authorizes EPA to substantively amend a 
SIP or SIP revision, so EPA cannot accomplish that through a 
``correction'' under section 110(k)(6).
    Response to CRP&E Comment #2: Please see EPA's Response to 
Earthjustice Comment 6.
    CRP&E Comment #3: Even if EPA could make an end-around Safe Air and 
could amend the SIP, SB 700 itself gives the District the authority to 
implement and enforce the December 2002 version of the District's NSR 
rules. EPA rationalizes its correction on the ground that the District 
lacked statutory authority to implement and enforce the December 2002 
version of the District's NSR rules. EPA, however, fails to recognize 
the authority given to the District by CH&SC sections 39011.5(b) and 
(c).
    Response to CRP&E Comment #3: Please see EPA's Response to 
Earthjustice Comment 4.
    Dairy Cares Comment #1: Dairy Cares agrees that EPA erred in 
failing to expressly acknowledge the limitations imposed on the 
District's authority pursuant to SB 700, because the SB 700 exemptions 
plainly limited the District's permitting authority over agricultural 
sources and agrees that EPA's SIP correction is appropriate under 
section 110(k)(6) of the CAA. Dairy Cares, however, believes that 
because EPA's 2004 SIP action implicitly and necessarily included all 
of the expansion and limitation of District authority contained in SB 
700, including the exemptions, the SIP, as it currently exists, should 
be read to include the exemptions.
    Response to Dairy Cares Comment #1: EPA notes that the argument 
that limitations on authority under State law implicitly and 
necessarily determine the applicability of rules and regulations 
approved by EPA as part of a SIP, even if those statutory limitations 
are not also approved as part of the SIP, is not supported by case law. 
In Safe Air for Everyone v. EPA (488 F.3d 1088 (9th Cir. 2007), the 
Ninth Circuit held that ``SIPs are interpreted based on their plain 
meaning when such a meaning is apparent, not absurd, and not 
contradicted by the manifest intent of EPA, as expressed in the 
promulgating documents available to the public.'' Id. at 1100. In this 
instance, the absence of limited exemptions for minor agricultural 
sources with respect to permitting and offsets in the version of the 
District's NSR rules approved in 2004 is plain, not absurd, nor 
contradicted by EPA in taking the action in 2004 to approve the rules. 
Moreover, SB 700 itself is not approved into the California SIP. Thus, 
we continue to believe that is appropriate to correct our previous 
approval of the District's NSR rules to reconcile that approval with 
the limitations on District authority that were established by the 
California legislature in SB 700.

III. Final Action

    After due consideration of the comments submitted on our proposed 
action, and in light of California's interpretation of SB 700 as it 
applies to the District's NSR rules, we are taking final action under 
CAA section 110(k)(6) to correct our erroneous approval in May 2004 of 
San Joaquin Valley District NSR rules, Rule 2020 (``Exemptions'') and 
Rule 2210 (``New and Modified Stationary Source Review Rule''), as 
amended by the District in December 2002. In doing so, we are 
determining that such previous approval was in error for the purposes 
of CAA section 110(k)(6) because we failed to recognize that the State 
could not provide the necessary assurances under CAA section 
110(a)(2)(E) that the District had the authority to implement its 
amended NSR rules as those rules applied to agricultural sources given 
that the District's NSR rules, as adopted in 2002, did not reflect the 
qualified permitting and emissions offset exemptions provided in SB 700 
with respect to minor agricultural sources.
    To correct this error, we are revising our previous action by 
limiting our previous approval, as it relates to agricultural sources, 
to the extent that the permit requirements apply (1) to agricultural 
sources with potential emissions at or above a major source 
applicability threshold and (2) to agricultural sources with actual 
emissions at or above 50 percent of a major source applicability 
threshold. We are also limiting our previous approval, as it relates to 
agricultural sources, to the extent that the emission offset 
requirements apply to major agricultural sources and major 
modifications of such sources.
    To codify the new limitation on our previous approval, we are 
adding a new section to 40 CFR part 52 (``Approval and promulgation of 
implementation plans''), subpart F (``California''). The new section is 
40 CFR 52.245 (``New Source Review Rules'').

IV. Statutory and Executive Order Reviews

A. Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) has exempted this 
regulatory action from Executive Order 12866, entitled ``Regulatory 
Planning and Review.''

B. Paperwork Reduction Act

    This action does not impose an information collection burden under 
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. 
Burden is defined at 5 CFR 1320.3(b).

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements 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 not-for-profit enterprises, and small governmental 
jurisdictions.
    This rule will not have a significant impact on a substantial 
number of small entities because error correction actions under section 
110(k)(6) of the Clean Air Act do not create any new requirements but 
simply approve requirements that the State is already imposing. 
Therefore, because this error correction action does not create any new 
requirements, I certify that this action will not have a significant 
economic impact on a substantial number of small entities.
    Moreover, due to the nature of the Federal-State relationship under 
the Clean Air Act, preparation of flexibility analysis would constitute 
Federal inquiry into the economic reasonableness of State action. The 
Clean Air Act forbids EPA to base its actions concerning SIPs on such 
grounds. Union Electric Co., v. U.S. EPA, 427 U.S. 246, 255-66 (1976); 
42 U.S.C. 7410(a)(2).

D. Unfunded Mandates Reform Act

    Under section 202 of the Unfunded Mandates Reform Act of 1995 
(``Unfunded Mandates Act''), signed

[[Page 46513]]

into law on March 22, 1995, EPA must prepare a budgetary impact 
statement to accompany any proposed or final rule that includes a 
Federal mandate that may result in estimated costs to State, local, or 
tribal governments in the aggregate; or to the private sector, of $100 
million or more. Under section 205, EPA must select the most cost-
effective and least burdensome alternative that achieves the objectives 
of the rule and is consistent with statutory requirements. Section 203 
requires EPA to establish a plan for informing and advising any small 
governments that may be significantly or uniquely impacted by the rule.
    EPA has determined that the error correction action promulgated 
today does not include a Federal mandate that may result in estimated 
costs of $100 million or more to either State, local, or tribal 
governments in the aggregate, or to the private sector. This Federal 
action aligns requirements under Federal law with those under state and 
local law, and imposes no new requirements. Accordingly, no additional 
costs to State, local, or tribal governments, or to the private sector, 
result from this action.

E. Executive Order 13132, Federalism

    Executive Order 13132, Federalism, (64 FR 43255, August 10, 1999) 
revokes and replaces Executive Orders 12612 (Federalism) and 12875 
(Enhancing the Intergovernmental Partnership). Executive Order 13132 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by State and local officials in the development of 
regulatory policies that have federalism implications.'' ``Policies 
that have federalism implications'' is defined in the Executive Order 
to include regulations that 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.'' Under Executive Order 13132, EPA may 
not issue a regulation that has federalism 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 State and local 
governments, or EPA consults with State and local officials early in 
the process of developing the proposed regulation. EPA also may not 
issue a regulation that has federalism implications and that preempts 
State law unless the Agency consults with State and local officials 
early in the process of developing the proposed regulation.
    This rule 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, because it 
merely corrects an error in a previous EPA rulemaking, and does not 
alter the relationship or the distribution of power and 
responsibilities established in the Clean Air Act. Thus, the 
requirements of section 6 of the Executive Order do not apply to this 
rule.

F. Executive Order 13175, Coordination With Indian Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.'' This rule does not have 
tribal implications, as specified in Executive Order 13175. It will not 
have substantial direct effects on tribal governments, on the 
relationship between the Federal government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
government and Indian tribes. Thus, Executive Order 13175 does not 
apply to this rule.

G. Executive Order 13045, Protection of Children From Environmental 
Health Risks and Safety Risks

    EPA interprets Executive Order 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 Executive Order has the potential to influence the regulation. This 
rule is not subject to Executive Order 13045, because it corrects a 
previous EPA approval of a State rule implementing a Federal standard.

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

    This rule is not subject to Executive Order 13211, ``Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use'' (66 FR 28355, May 22, 2001) because it is not a 
significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act

    Section 12 of the National Technology Transfer and Advancement Act 
(NTTAA) of 1995 requires Federal agencies to evaluate existing 
technical standards when developing a new regulation. To comply with 
NTTAA, EPA must consider and use ``voluntary consensus standards'' 
(VCS) if available and applicable when developing programs and policies 
unless doing so would be inconsistent with applicable law or otherwise 
impractical.
    The EPA believes that VCS are inapplicable to this action. Today's 
action does not require the public to perform activities conducive to 
the use of VCS.

J. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. section 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 not a ``major rule'' as defined by 5 U.S.C. 
section 804(2).

K. Petitions for Review of This Action

    Under section 307(b)(1) of the Clean Air Act, petitions for 
judicial review of this action must be filed in the United States Court 
of Appeals for the appropriate circuit by September 30, 2013. 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. This action may not be challenged later in proceedings 
to enforce its requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by 
reference, Intergovernmental relations, Oxides of nitrogen, Ozone, 
Reporting and recordkeeping requirements, Volatile organic compounds.

[[Page 46514]]

    Dated: July 12, 2013.
Alexis Strauss,
Acting Regional Administrator, Region IX.

    Part 52, Chapter I, Title 40 of the Code of Federal Regulations is 
amended as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

0
1. The authority citation for part 52 continues to read as follows:

    Authority: 42 U.S.C. 7401 et seq.

Subpart F--California

0
2. Section 52.245 is added to read as follows:

Sec. 52.245  New Source Review rules.

    (a) Approval of the New Source Review rules for the San Joaquin 
Valley Unified Air Pollution Control District Rules 2020 and 2201 as 
approved on May 17, 2004 in Sec.  52.220(c)(311)(i)(B)(1), and in 
effect for Federal purposes from June 16, 2004 through June 10, 2010, 
is limited, as it relates to agricultural sources, to the extent that 
the permit requirements apply:
    (1) To agricultural sources with potential emissions at or above a 
major source applicability threshold; and
    (2) To agricultural sources with actual emissions at or above 50 
percent of a major source applicability threshold.
    (b) Approval of the New Source Review rules for the San Joaquin 
Valley Unified Air Pollution Control District Rules 2020 and 2201 as 
approved on May 17, 2004 in Sec.  52.220(c)(311)(i)(B)(1), and in 
effect for Federal purposes from June 16, 2004 through June 10, 2010, 
is limited, as it relates to agricultural sources, to the extent that 
the emission offset requirements apply to major agricultural sources 
and major modifications of such sources.

[FR Doc. 2013-18413 Filed 7-31-13; 8:45 am]
BILLING CODE 6560-50-P