Document ID: EPA-HQ-OAR-2010-1033-0001
Agency: epa
Document Type: Rule
Title: Determinations Concerning Need for Error Correction, Partial Approval and Partial Disapproval, and Federal Implementation Plan Regarding Texas Prevention of Significant Deterioration Program
Posted Date: 2010-12-30T05:00Z

[Federal Register Volume 75, Number 250 (Thursday, December 30, 2010)]
[Rules and Regulations]
[Pages 82430-82461]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32786]

[[Page 82429]]

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Part II

Environmental Protection Agency

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40 CFR Part 52

Determinations Concerning Need for Error Correction, Partial Approval 
and Partial Disapproval, and Federal Implementation Plan Regarding 
Texas Prevention of Significant Deterioration Program; Final Rule

  Federal Register / Vol. 75 , No. 250 / Thursday, December 30, 2010 / 
Rules and Regulations  

[[Page 82430]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-HQ-OAR-2010-1033; FRL-9245-2]
RIN 2060-AQ67

Determinations Concerning Need for Error Correction, Partial 
Approval and Partial Disapproval, and Federal Implementation Plan 
Regarding Texas Prevention of Significant Deterioration Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Interim Final rule.

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SUMMARY: EPA is correcting its previous full approval of Texas's Clean 
Air Act (CAA) Prevention of Significant Deterioration (PSD) program to 
be a partial approval and partial disapproval. The state did not 
address, or provide adequate legal authority for, the program's 
application to all pollutants that would become newly subject to 
regulation in the future, including non-National Ambient Air Quality 
Standard (NAAQS) pollutants, among them greenhouse gases (GHGs). 
Further, EPA is promulgating a federal implementation plan (FIP), as 
required following the partial disapproval, to establish a PSD 
permitting program in Texas for GHG-emitting sources. EPA is taking 
this action through interim final rulemaking, effective upon 
publication, to ensure the availability of a permitting authority--
EPA--in Texas for GHG-emitting sources when they become subject to PSD 
on January 2, 2011. This will allow those sources to proceed with plans 
to construct or expand. This rule will expire on April 30, 2011. EPA is 
also proposing a notice-and-comment rulemaking that mirrors this 
rulemaking.

DATES: This action is effective on December 30, 2010.

ADDRESSES: EPA has established a docket for this rulemaking under 
Docket ID No. EPA-HQ-OAR-2010-1033. All documents in the docket are 
listed in the http://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, will be publicly available only in hard copy. Publicly 
available docket materials are available either electronically in 
http://www.regulations.gov or in hard copy at the U.S. Environmental 
Protection Agency, Air Docket, EPA/DC, EPA West Building, Room 3334, 
1301 Constitution Ave., NW., Washington, DC. 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 Air Docket is (202) 
566-1742.

FOR FURTHER INFORMATION CONTACT: Mr. Peter Keller, Air Quality Policy 
Division, Office of Air Quality Planning and Standards (C504-03), 
Environmental Protection Agency, Research Triangle Park, NC 27711; 
telephone number: (919) 541-5339; fax number: (919) 541-5509; e-mail 
address: keller.peter@epa.gov.

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    The only governmental entity potentially affected by this rule is 
the State of Texas. Other entities potentially affected by this rule 
include sources in all industry groups within the State of Texas, which 
have a direct obligation under the CAA to obtain a PSD permit for GHGs 
for projects that meet the applicability thresholds set forth in the 
Tailoring Rule.\1\ This independent obligation on sources is specific 
to PSD and derives from CAA section 165(a). The majority of entities 
potentially affected by this action are expected to be in the following 
groups:
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    \1\ Prevention of Significant Deterioration and Title V 
Greenhouse Gas Tailoring Rule; Final Rule. 75 FR 31514 (June 3, 
2010). The Tailoring Rule is described in more detail later in this 
preamble.

------------------------------------------------------------------------
             Industry group                         NAICS \a\
------------------------------------------------------------------------
Utilities (electric, natural gas, other  2211, 2212, 2213.
 systems).
Manufacturing (food, beverages,          311, 312, 313, 314, 315, 316.
 tobacco, textiles, leather).
Wood product, paper manufacturing......  321, 322.
Petroleum and coal products              32411, 32412, 32419.
 manufacturing.
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              3271, 3272, 3273, 3274, 3279.
 manufacturing.
Primary and fabricated metal             3311, 3312, 3313, 3314, 3315,
 manufacturing.                           3321, 3322, 3323, 3324, 3325,
                                          3326, 3327, 3328, 3329.
Machinery manufacturing................  3331, 3332, 3333, 3334, 3335,
                                          3336, 3339.
Computer and electronic products         3341, 3342, 3343, 3344, 3345,
 manufacturing.                           4446.
Electrical equipment, appliance, and     3351, 3352, 3353, 3359.
 component manufacturing.
Transportation equipment manufacturing.  3361, 3362, 3363, 3364, 3365,
                                          3366, 3366, 3369.
Furniture and related product            3371, 3372, 3379.
 manufacturing.
Miscellaneous manufacturing............  3391, 3399.
Waste management and remediation.......  5622, 5629.
Hospitals/nursing and residential care   6221, 6231, 6232, 6233, 6239.
 facilities.
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 the preamble organized?

    The information presented in this preamble is organized as follows:

I. General Information
    A. Does this action apply to me?
    B. How is the preamble organized?
II. Overview of Interim Final Rule
    A. Brief Summary
    B. Detailed Overview
III. Background
    A. Legal Background

[[Page 82431]]

    1. Requirements for SIP Submittals and EPA Action
    2. General Requirements for the PSD Program
    3. SIP PSD Requirements
    B. Regulatory Background: Texas SIP and PSD Program
    1. Texas's Initial Attainment SIP Revision
    2. Texas's Initial PSD SIP Revision
    C. Regulatory Background: GHG Rules
    1. GHGs and Their Sources
    2. GHG Regulatory Actions
    3. Implementation of GHG PSD Requirements
    4. Summary of the Effect of EPA's Implementation Actions in 
States Other Than Texas
    5. EPA's Implementation Approach for Texas and Texas's Response
IV. Interim Final Action
    A. Determination That EPA's Previous Approval of Texas's PSD 
Program Was in Error
    1. Gaps in Texas's PSD Program Concerning Application of PSD to 
Pollutants Newly Subject to Regulation and Concerning Assurances of 
Legal Adequacy
    2. Flaws in PSD Program
    3. EPA's Error in Approving Texas's PSD Program
    B. Error Correction: Conversion of Previous Approval to Partial 
Approval and Partial Disapproval
    C. Reconsideration Under CAA Section 301, Other CAA Provisions, 
and Case Law
    D. Relationship of This Action to GHG PSD SIP Call
    E. Relationship of This Rulemaking to Other States
V. Federal Implementation Plan
    A. Authority To Promulgate a FIP
    B. Timing of FIP
    C. Substance of GHG PSD FIP
    1. Components of FIP
    2. Dual Permitting Authorities
    D. Period for GHG PSD FIP To Remain in Place
    E. Primacy of Texas's SIP Process
VI. Interim Final Rule, Good Cause Exception
VII. Statutory and Executive Order Reviews
    A. Executive Order 12866--Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform
    E. Executive Order 13132--Federalism
    F. Executive Order 13175--Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045--Protection of Children From 
Environmental Health Risks and Safety Risks
    H. Executive Order 13211--Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898--Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act
VIII. Judicial Review
IX. Statutory Authority

II. Overview of Interim Final Rule

A. Brief Summary

    This rulemaking is intended to assure that large GHG-emitting 
sources in Texas will be able to obtain preconstruction permits under 
the CAA New Source Review (NSR) PSD program, and do so when they become 
subject to PSD, which will occur on January 2, 2011. In this manner, 
this rulemaking will allow those sources to avoid delays in 
construction or modification.
    In this rulemaking, EPA is determining that it erred in fully 
approving Texas's PSD program in 1992 because at that time, the program 
had a gap, which recent statements by Texas have made particularly 
evident. The program did not address its application to, or provide 
assurances that it has adequate legal authority to apply to, all 
pollutants newly subject to regulation, including non-NAAQS pollutants, 
among them GHGs. As a result, EPA is correcting its previous full 
approval to be a partial approval and partial disapproval. EPA is 
taking this action through the error-correction mechanism provided 
under CAA section 110(k)(6). The partial disapproval requires EPA, 
under CAA section 110(c)(1)(B), to promulgate a FIP within 2 years, 
and, as part of this rulemaking, EPA is exercising its discretion to 
promulgate the FIP immediately. Under the FIP, EPA will become the 
permitting authority for, and apply federal PSD requirements to, large 
GHG-emitting sources in accordance with the thresholds established 
under what we call the Tailoring Rule, which EPA recently promulgated.
    By becoming the permitting authority, EPA will be able to process 
preconstruction PSD permit applications for GHG-emitting sources and 
thereby allow the affected sources to avoid delays in construction and 
modification.\2\ According to Texas, 167 GHG-emitting sources will 
require PSD permits during 2011. It is likely that some of these 
sources will become subject to PSD soon after January 2, 2011, and 
therefore will have a pressing need to have a permitting authority in 
place by that time. Although the CAA allows states to implement PSD, 
and Texas has been implementing an EPA-approved PSD program since 1992, 
Texas has recently informed EPA that it does not have the intention or 
the authority to apply PSD to GHG-emitting sources, and that it could 
very well maintain this position even if the DC Circuit upholds the GHG 
rules against legal challenges that Texas and other parties have 
recently brought. Texas's unwillingness to implement this aspect of the 
federal PSD program leaves EPA no choice but to resume its role as the 
permitting authority for this portion, in order to assure that 
businesses in Texas are not subject to delays or potential legal 
challenges and are able to move forward with planned construction and 
expansion projects that will create jobs and otherwise benefit the 
state's and the nation's economy. It bears emphasizing that it is 
incumbent on EPA to take action now so that there will be no period of 
time when sources are unable to obtain necessary PSD permits, beginning 
on January 2, 2011.
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    \2\ Texas will continue to be the permitting authority for 
sources of other pollutants. This split permitting process will also 
take place in the seven other states for which EPA is implementing a 
GHG PSD FIP.
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    In order to assure no gap in permitting, EPA is taking this action, 
including the FIP, through an interim final rule that is exempt from 
notice-and-comment due to the ``good cause'' exception of the 
Administrative Procedure Act. This interim final rule will remain in 
place until April 30, 2011. On a parallel track, EPA is also initiating 
a proposed rulemaking that mirrors this rulemaking, and that EPA 
intends to finalize and make effective by May 1, 2011.

B. Detailed Overview

    The CAA requires each state, including Texas, to adopt into its 
State Implementation Plan (SIP) a PSD program. CAA sections 
110(a)(2)(C), 110(a)(2)(J), 161. One of the PSD requirements is that 
PSD applies by operation of law to any pollutant as soon as that 
pollutant becomes subject to regulation under the CAA for the first 
time, and that includes non-NAAQS pollutants. CAA section 165(a)(1), 
169(1). EPA has consistently interpreted these CAA provisions in that 
manner. The CAA further requires that EPA-approved PSD programs must 
meet all CAA requirements, CAA section 110(k)(3), and this includes 
applying PSD to all pollutants newly subject to regulation, including 
non-NAAQS pollutants. In addition, the CAA requires each state to 
adhere to various requirements related to SIP adoption, including that 
the state ``provide * * * necessary assurances that the State * * * 
will have adequate * * * authority under State * * * law to carry out 
such implementation plan. * * *'' CAA section 110(a)(2)(E)(i). Once a 
state has made a SIP submittal, the CAA requires EPA to approve or 
disapprove the SIP revision in whole or in part,

[[Page 82432]]

depending on the extent to which the CAA requirements are met. CAA 
section 110(k)(3),(4). If EPA disapproves, it must promulgate a FIP 
that addresses the disapproved SIP or portion of the SIP at any time 
within two years of the disapproval. CAA section 110(c)(1)(B). In 
addition, the CAA authorizes EPA to ``determine [ ]'' if a previous 
action in approving a SIP revision was ``in error,'' and if so, to 
``revise such action as appropriate.'' CAA section 110(k)(6).
    In 1972, EPA approved Texas's initial SIP to attain and maintain 
the NAAQS. At that time, EPA approved the state's assurances of 
adequate legal authority. In the early 1980s, following the 1977 CAA 
Amendments that enacted the PSD program, EPA, which at that time 
administered PSD, delegated to Texas partial authority to implement the 
PSD program. During this time, EPA made clear to Texas that EPA's 
regulatory PSD program covers non-NAAQS pollutants.
    In 1985-88, Texas developed a PSD program and in a series of 
submittals, submitted it to EPA as a SIP revision. The Texas program 
incorporated by reference much of EPA's PSD regulations, 40 CFR part 
52, including the PSD applicability provisions in 40 CFR part 
52.21(b)(1)(i). Thus, the Texas PSD program by its terms applied to 
``any air pollutant regulated under the Clean Air Act.'' However, Texas 
state law imposed limits that precluded the Texas PSD program from 
applying automatically, as a matter of law, to each newly regulated 
pollutant. Rather, Texas's program applied only to pollutants that were 
subject to regulation at the time the state adopted the SIP revision 
establishing the PSD program, so that the state would need to take 
additional action to subject subsequently regulated pollutants to PSD, 
for example, an expeditious state law change that would be promptly 
submitted to EPA as a SIP revision to update the PSD program. Texas and 
EPA were both well aware of this limitation. In fact, while EPA was 
reviewing Texas's PSD SIP revision, EPA promulgated a national ambient 
air quality standard (NAAQS) for PM10, thereby subjecting 
that pollutant to PSD for the first time, and Texas updated its state 
PSD rule to apply to PM10 and submitted that as a SIP 
revision. Texas did not, however, explicitly recognize that after EPA 
approved its PSD program, EPA could well subject to PSD for the first 
time additional pollutants, and Texas did not address that situation in 
any manner. For example, Texas did not provide assurances that it would 
take action to apply its PSD program to all pollutants newly subject to 
regulation, including non-NAAQS pollutants; nor did Texas provide 
information as to the method or timing of such action.
    During the course of its consideration of Texas's proposed PSD SIP 
revision, EPA became concerned that Texas would not implement EPA's 
interpretation of the core PSD requirement that sources' implement best 
available control technology (BACT). As a result, EPA asked for written 
commitments that Texas would implement the PSD program in accordance 
with EPA interpretations. In a September 5, 1989, letter, which we call 
the Texas PSD Commitments Letter, Texas stated that it was ``committed 
to the implementation of EPA decisions regarding PSD program 
requirements.'' Separately, as for Texas's legal authority to carry out 
the PSD program, the state, in its various SIP submittals, made general 
references to its legal authority for adopting and submitting SIP 
revisions.
    In 1992, EPA fully approved Texas's PSD rules. In the preamble to 
this final approval, EPA did not specifically address the issue of how 
the PSD program would apply to pollutants newly subject to regulation, 
including non-NAAQS pollutants, or the state's legal authority for 
applying PSD to such pollutants. EPA did state that it was basing the 
approval on (among other things) the 1989 Texas PSD Commitments Letter. 
However, EPA acknowledged questions about the scope of these 
commitments and EPA made clear that even with that letter, Texas 
retained significant discretion in implementing the PSD program.
    Because the application of PSD to pollutants newly subject to 
regulation is a key component of the program, and because Texas's PSD 
program, unlike that of most states, did not automatically apply to 
such pollutants, it was important that Texas, in its SIP submittals, 
address how it would apply its program to such pollutants. This could 
include providing, for example, assurances that its program would apply 
to such pollutants or information as to the method and timing for 
applying its program to such pollutants. In addition, under CAA section 
110(a)(2)(E)(i), Texas was required to provide assurances that it had 
adequate legal authority to apply its program to such pollutants.
    However, as noted previously, there is no indication in the record 
of Texas's SIP submissions or EPA's action on them that Texas 
specifically addressed its program's application to pollutants newly 
subject to regulation. Texas did provide the 1989 Texas PSD Commitments 
Letter, in which it generally committed ``to implement EPA requirements 
relative to [PSD].'' But by its terms, this 1989 letter did not commit 
to apply PSD to such pollutants and in any event, EPA, in discussing 
this letter in the preamble to the final rule, acknowledged that Texas 
retained substantial discretion in implementing PSD.
    Thus, at the time that Texas submitted and EPA approved the state's 
PSD program, the program had important gaps. It did not address its 
application to, or provide the requisite assurance that it had legal 
authority to apply to, pollutants newly subject to regulation, 
including non-NAAQS pollutants.
    Texas has recently made statements that have made these gaps 
particularly evident.\3\ Texas has stated that it is not required to 
submit a SIP revision to apply PSD to non-NAAQS pollutants, including 
GHGs. Texas has explained that in its view, the CAA is clear, under the 
legal doctrine that we call Chevron step 1, described later, that the 
PSD program is limited to NAAQS pollutants and does not apply to non-
NAAQS pollutants. In addition, Texas has stated that it does not have 
the intention or the authority to apply PSD to GHG-emitting sources, 
and that it could very well maintain this position even if the D.C. 
Circuit upholds the GHG rules in the current litigation before that 
Court.
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    \3\ Texas made these statements in various letters to EPA in 
response to rulemakings and in court filings challenging those 
rulemakings, as discussed in detail later in this preamble.
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    Texas's recent statements highlight the gaps in its PSD program 
concerning the application of PSD, and the legal authority for applying 
PSD, to pollutants newly subject to regulation, including non-NAAQS 
pollutants, among them GHGs. What's more, Texas's recent statements are 
consistent with the view that the state's silence on this subject at 
the time it submitted and EPA approved its PSD SIP means that Texas did 
not, at that time, view itself as obligated to apply PSD to each 
pollutant newly subject to regulation, including non-NAAQS pollutants.
    Specifically, Texas's recent statement that the CAA PSD provisions 
are clear by their terms--which is what a Chevron step 1 interpretation 
means--that they do not apply to non-NAAQS pollutants, suggests that 
Texas would have interpreted the CAA PSD provisions the same way at the 
time Texas submitted its PSD program. But at the least, Texas's PSD 
program contained a gap because it failed to address this issue; and 
that gap is significant because it facilitates Texas, at this time, 
taking the position that PSD does not apply to non-NAAQS

[[Page 82433]]

pollutants.\4\ Texas's recent statement that it does not have the 
authority to apply PSD to GHG-emitting sources highlights that Texas's 
PSD program has a gap due to its failure to provide assurances of 
adequate legal authority. Specifically, Texas's direct statement that 
it does not have authority to apply PSD to GHGs casts doubt on whether 
Texas, at the time it submitted the PSD SIP submittals, would have 
viewed itself as having such authority. There seems to be a meaningful 
possibility that at the time Texas submitted and EPA approved the 
state's PSD program, during 1985-1992, Texas considered itself under 
some legal limit or constraint in applying PSD to all pollutants newly 
subject to regulation. At the least, it is apparent that at the time 
that Texas submitted its PSD program, Texas did not provide the 
``necessary assurances'' that it ``will have adequate * * * authority 
under State * * * law to carry out such implementation plan (and is not 
prohibited by any provision of * * * State law from carrying out such 
implementation plan or portion thereof),'' as required under CAA 
section 110(a)(2)(E)(i).
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    \4\ It should be noted that in the past, Texas has applied its 
PSD program to non-NAAQS pollutants. Even so, Texas's recent 
statements indicate very clearly that Texas does not consider itself 
obligated to update its PSD program to apply to all newly regulated 
non-NAAQS pollutants, but instead Texas may choose which non-NAAQS 
pollutants to which it will apply PSD.
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    The gaps in Texas's PSD SIP--its failure to address, or provide 
assurances of the requisite legal authority concerning, the application 
of PSD to all pollutants newly subject to regulation, including non-
NAAQS pollutants--means that the PSD SIP was flawed at the time that 
EPA reviewed it for action. EPA did not address those flaws and 
instead, issued a full approval of the SIP.
    In this rulemaking, therefore, EPA is ``determin[ing]'' that EPA's 
previous action fully approving Texas's PSD program was ``in error,'' 
under CAA section 110(k)(6). The key terms in this provision, as just 
quoted, confer broad discretion upon EPA to make decisions as to when 
it erred in approving a SIP revision. Thus, it is clear that under this 
provision, EPA erred in approving the Texas PSD program in light of 
that program's flaws.
    Once EPA determines that its previous approval of the Texas PSD SIP 
was in error, EPA, under CAA section 110(k)(6), ``may * * * revise [its 
previous full approval] as appropriate. * * *'' In this rulemaking, EPA 
is revising its previous full approval of Texas's PSD SIP to be (i) a 
partial approval, so that Texas's SIP remains approved to the extent of 
the pollutants that the PSD program already does cover; and (ii) a 
partial disapproval. The partial disapproval is based on the Texas PSD 
SIP's failure to apply PSD to each pollutant newly subject to 
regulation, including each non-NAAQS pollutant, among them GHGs. An 
alternative legal basis for this rulemaking is EPA's inherent 
administrative authority to reconsider a previous action.
    It should be noted that even if the general assurances that Texas 
provided in its 1989 PSD Commitments Letter or may have otherwise 
provided in the record of its PSD SIP submittal were read to indicate 
that Texas did provide assurances that it would implement, and had 
legal authority to implement, EPA's interpretation that PSD applies to 
each pollutant newly subject to regulation, including non-NAAQS 
pollutants, then Texas's recent statements to the contrary indicate 
that Texas now is not complying with those assurances. Under these 
circumstances, EPA would still be justified in determining that its 
prior approval was in error and should be converted to a partial 
approval and partial disapproval. This is because under these 
circumstances, EPA's prior approval should be considered to have been 
based on those assurances, so that Texas's explicitly stated intent to 
not act in accordance with those assurances would eliminate the basis 
for that prior approval.
    After promulgating the partial disapproval in this rulemaking, EPA 
is required to promulgate a FIP ``at any time within 2 years,'' under 
CAA section 110(c)(1). EPA is exercising its discretion to immediately 
promulgate the FIP, and is doing so as part of this rulemaking. The FIP 
consists of appropriate action to apply the PSD program to pollutants 
that are subject to the PSD program under the CAA, but that Texas has 
not made subject to Texas's PSD program. At present, Texas has stated 
that it has neither the intention nor the authority to apply its PSD 
program to GHG-emitting sources. Therefore, the FIP applies the EPA PSD 
regulatory program to the GHG portion of the PSD permit for GHG-
emitting sources in Texas, including the thresholds in what we call the 
Tailoring Rule that limit PSD to large sources. Further, the FIP 
commits EPA to take future action as appropriate with respect to any 
additional newly regulated pollutants. The FIP does not apply to any 
other currently regulated pollutants because at this point, Texas's PSD 
program addresses all other pollutants that are subject to regulation 
under the CAA. EPA is promulgating the FIP immediately, as opposed to a 
later time within the two-year period, because certain GHG-emitting 
sources in Texas will become subject to the PSD program as of January 
2, 2011. Immediate promulgation of the FIP will allow EPA to act as the 
permitting authority in Texas for these sources as of January 2, 2011, 
and thereby avoid delays in these sources' ability to construct or 
modify.
    It should be noted that EPA has recently taken another action 
concerning Texas's PSD program as that program relates to GHGs. In a 
final rule signed on December 1, 2010 and published by notice dated 
December 13, 2010, EPA issued what we call a SIP call, under CAA 
section 110(k)(5), requiring Texas and 12 other states whose SIP-
approved PSD programs do not apply to GHG-emitting sources to submit a 
corrective SIP revision; and EPA established a deadline for that SIP 
submittal for each state, which ranged from as early as December 22, 
2010 for seven of the states to December 1, 2011 for Texas. In 
addition, EPA stated that if Texas or any of the other states failed to 
submit its corrective SIP revision by its deadline, EPA intended to 
promulgate a FIP immediately thereafter.
    The timing of the SIP call was driven by the fact that the affected 
states did not have authority to issue PSD permits to GHG-emitting 
sources and, as a result, those sources could face delays in 
construction and modification when they become subject to PSD as early 
as January 2, 2011. EPA designed the SIP call to maximize the 
opportunity of each affected state to assure that its sources would 
have a permitting authority available as of that date. EPA did so by 
allowing each state flexibility for its SIP submittal deadline, and 
therefore for the date that EPA could put a FIP in place. Each of the 
affected states except Texas responded with a plan that would assure 
that its sources would not confront permitting delays. Texas did not 
submit such a plan and as a result, its sources--according to Texas, as 
many as 167 during 2011--do confront the possibility of permitting 
delays. In addition, it was in responding to the SIP call and related 
EPA rulemakings that Texas made the statements noted earlier in this 
preamble that made particularly evident the flaws in its PSD program.
    This is an important reason why EPA is proceeding with this error-
correction/partial-disapproval rulemaking at this time. This rulemaking 
allows EPA to put a FIP in place immediately, instead of waiting until 
December 1, 2011;

[[Page 82434]]

thereby act as the permitting authority in Texas beginning January 2, 
2011; and in that capacity, allow Texas sources to avoid delays in 
construction or modification.
    Although this rulemaking and the SIP call have similarities, EPA is 
authorized to proceed with each rulemaking with respect to Texas at 
this time, and it is both necessary and appropriate that we do so. EPA 
is authorized to proceed with the SIP call for reasons explained in 
that rule. Nothing in CAA section 110(k)(5), which authorizes the SIP 
call, precludes EPA from proceeding with this rulemaking, which, as 
noted earlier, is authorized under CAA section 110(k)(6). As we discuss 
below, it was Texas's response to the SIP call proposal, along with 
other statements Texas made around the same time, that focused 
attention on the underlying flaws in Texas PSD SIP, which led to this 
error-correction rulemaking. EPA is not, at this time, undertaking a 
similar error-correction rulemaking for any of the other states that 
are subject to the SIP call. EPA has discretion as to whether and when 
to undertake such a rulemaking, and each of the other states has chosen 
a course of action that at present appears to assure that its large 
GHG-emitting sources will have a permitting authority available when 
the sources need one, and therefore will not face delays in 
constructing or modifying. Moreover, none of these other states has 
made the type of recent statements that may have exposed flaws in its 
SIP, as Texas has done. As a result, EPA sees no need to inquire into 
whether any of these other states have flaws in their SIP PSD programs 
as Texas does.
    EPA is applying the ``good cause'' exemption from notice-and-
comment rulemaking, authorized under Administrative Procedure Act 
section 553(b)(3)(B) to promulgate this action as an interim final 
rulemaking that takes effect immediately upon publication in the 
Federal Register. As a result, this action, including the FIP, will 
take effect by January 2, 2011, when GHG-emitting sources become 
subject to the requirement to obtain a PSD preconstruction permit. The 
use of the ``good cause'' exemption is justified because the notice-
and-comment process would add delays in issuing the final rule and 
therefore is impractical and contrary to public interest. Unless and 
until EPA promulgates this rule, Texas sources will not have available 
a permitting authority to process their PSD permit applications and as 
a result, may face delays in construction and modification.
    Simultaneously with issuing this interim final rulemaking, EPA is 
proposing for notice-and-comment an error-correction/partial-
disapproval and FIP rule that mirrors this rule. EPA expects to 
complete final action on this notice-and-comment rule so that it takes 
effect by May 1, 2011. This interim final rule will stay in place until 
April 30, 2011, and then be replaced by the notice-and-comment rule.
    Although we recognize that Texas has indicated that the state does 
not intend to submit a SIP revision to apply its PSD program to GHG-
emitting sources, we emphasize that it is our preference that Texas 
assume responsibility for permitting GHG-emitting sources as soon as 
possible, and we are prepared to work with Texas to bring this about. 
Thus, we are prepared to work with the state to help it promptly 
develop and submit to us a SIP revision that extends its PSD program to 
GHG-emitting sources and if it does so, we intend to act on that SIP 
revision promptly. We also encourage Texas to accept a delegation of 
authority to implement the FIP, so that it will still be the state that 
processes the permit applications, albeit operating under federal law.

III. Background

    EPA described the relevant background information in the preambles 
for several proposed and final rulemakings that implement the PSD GHG 
permitting program. These include the Tailoring Rule,\5\ 75 FR at 
31518-21, and the GHG PSD SIP call,\6\ 75 FR at 53896-98 (September 7, 
2010) (proposal), or, simply, the SIP call. Knowledge of this 
background information is presumed and will be only briefly summarized 
here.
---------------------------------------------------------------------------

    \5\ Prevention of Significant Deterioration and Title V 
Greenhouse Gas Tailoring Rule; Proposed Rule.'' 74 FR 55,292 (Oct. 
27, 2009) (proposed Tailoring Rule).
    \6\ ``Action To Ensure Authority To Issue Permits Under the 
Prevention of Significant Deterioration Program to Sources of 
Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP 
Call; Final Rule,'' 75 FR 77698 (Dec. 13, 2010) (final SIP call); 
``Action To Ensure Authority To Issue Permits Under the Prevention 
of Significant Deterioration Program to Sources of Greenhouse Gas 
Emissions: Finding of Substantial Inadequacy and SIP Call; Proposed 
Rule,'' 75 FR 53,892 (proposed SIP call).
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A. Legal Background

1. Requirements for SIP Submittals and EPA Action
    This section reviews background information concerning the CAA 
requirements for what SIPs must include, the process for state 
submittals of SIPs, requirements for EPA action on SIPs and SIP 
revisions, and FIPs.
a. Requirements for What SIPs Must Include
    Congress enacted the NAAQS and SIP requirements in the 1970 CAA 
Amendments. CAA section 110(a)(1) requires that states adopt and submit 
to EPA for approval SIPs that implement the NAAQS. CAA section 
110(a)(2) contains a detailed list of requirements that all SIPs must 
include to be approvable by EPA.
    Of particular relevance for this action, subparagraph (E)(i) of CAA 
section 110(a)(2) provides that SIPs must ``provide * * * necessary 
assurances that the state * * * will have adequate personnel, funding, 
and authority under State * * * law to carry out such implementation 
plan. * * *'' As applicable to PSD programs, this provision means that 
EPA may approve the SIP PSD provisions only if EPA is satisfied that 
the state will have adequate legal authority under state law.
b. EPA Action on SIP Submittals
    After a SIP or SIP revision has been submitted, EPA is authorized 
to act on it under CAA section 110(k)(3)-(4). Those provisions 
authorize a full approval or, if the SIP or SIP revision meets some but 
not all of the applicable requirements, a conditional approval, a 
partial approval and disapproval, or a full disapproval. If EPA 
disapproves a required SIP or SIP revision, then EPA must promulgate a 
FIP at any time within two years after the disapproval, unless the 
state corrects the deficiency within that period of time by submitting 
a SIP revision that EPA approves. CAA Sec.  110(c)(1).\7\
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    \7\ States are subject to sanctions for failure to submit, or 
for EPA disapproval of, SIPs for nonattainment areas, under CAA 
section 179. These sanctions provisions are not relevant for this 
rule because they do not apply to PSD SIPs.
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c. SIP Call
    The CAA provides a mechanism for the correction of SIPs with 
certain types of inadequacies, under CAA section 110(k)(5), which 
provides:
(5) Calls for Plan Revisions
    Whenever the Administrator finds that the applicable 
implementation plan for any area is substantially inadequate to * * 
* comply with any requirement of this Act, the Administrator shall 
require the State to revise the plan as necessary to correct such 
inadequacies. The Administrator shall notify the State of the 
inadequacies and may establish reasonable deadlines (not to exceed 
18 months after the date of such notice) for the submission of such 
plan revisions.

This provision by its terms authorizes the Administrator to ``find[] 
that [a SIP] * * * is substantially inadequate to

[[Page 82435]]

* * * comply with any requirement of this Act,'' and, based on that 
finding, to ``require the State to revise the [SIP] * * * to correct 
such inadequacies.'' This latter action is commonly referred to as a 
``SIP call.'' In addition, this provision authorizes EPA to establish a 
``reasonable deadline (not to exceed 18 months after the date of such 
notice)'' for the submission of the corrective SIP revision.
    If EPA does not receive the corrective SIP revision by the 
deadline, CAA section 110(c) authorizes EPA to ``find[ ] that [the] 
State has failed to make a required submission.'' CAA section 
110(c)(1)(A). Once EPA makes that finding, CAA section 110(c)(1) 
requires EPA to ``promulgate a Federal implementation plan at any time 
within 2 years after the [finding] * * * unless the State corrects the 
deficiency, and [EPA] approves the plan or plan revision, before [EPA] 
promulgates such [FIP].''
    CAA section 110(k)(5), by its terms--specifically, the use of the 
term ``[w]henever''--authorizes, but does not require, EPA to make the 
specified finding and does not impose any time constraints for EPA to 
do so. As a result, EPA has discretion in determining whether and when 
to make the specified finding. See New York Public Interest Research 
Group v. Whitman, 321 F.3d 316, 330-31 (2d Cir. 2003) (opening phrase 
``Whenever the Administrator makes a determination'' in CAA section 
502(i)(1) grants EPA ``discretion whether to make a determination''); 
Her Majesty the Queen in Right of Ontario v. EPA, 912 F.2d 1525, 1533 
(DC Cir. 1990) (``whenever'' in CAA section 115(a) ``impl[ied] a degree 
of discretion'' in whether EPA had to make a finding).
d. Authority for EPA To Revise Previous Action on SIPs
    EPA has authority to revise its previous action concerning SIP 
submittals. Two mechanisms are available to EPA: The error correction 
mechanism provided under CAA section 110(k)(6), and EPA's general 
administrative authority to reconsider its own actions under CAA 
sections 110 and 301(a), in light of case law.
(i). Error Correction Under CAA Section 110(k)(6)
    CAA section 110(k)(6) provides as follows:

    Whenever the Administrator determines that the Administrator's 
action approving, disapproving, or promulgating any plan or plan 
revision (or part thereof), area designation, redesignation, 
classification, or reclassification 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 for present purposes are that the Administrator has 
the authority to ``determine ;'' when a SIP approval was ``in error,'' 
and when she does so, she may then revise the SIP approval ``as 
appropriate,'' in the same manner as the approval, and without 
requiring any further submission from the state.

    As quoted previously, CAA section 110(k)(6) provides EPA with the 
authority to correct its own ``error,'' but nowhere does this provision 
or any other provision in the CAA define what qualifies as ``error.'' 
Thus, the term should be given its plain language, everyday meaning, 
which includes all unintentional, incorrect or wrong actions or 
mistakes.
    The legislative history of CAA section 110(k)(6) is silent 
regarding the definition of error, but the timing of the enactment of 
the provision suggests a broad interpretation. The provision was 
enacted shortly after the Third Circuit decision in Concerned Citizens 
of Bridesburg v. U.S. EPA, 836 F.2d 777 (1987). In Bridesburg, the 
court adopted a narrow interpretation of EPA's authority to 
unilaterally correct errors. The court stated that such authority was 
limited to typographical and other similar errors, and stated that any 
other change to a SIP must be accomplished through a SIP revision. Id. 
at 786. In Bridesburg, EPA determined that it lacked authority to 
include odor regulations as part of a SIP unless the odor regulations 
had a significant relationship to achieving a NAAQS, and so directly 
acted to remove 13-year-old odor provisions from the Pennsylvania SIP. 
Id. at 779-80. EPA found the previous approval of the provisions to 
have been an inadvertent error, and so used its ``inherent authority to 
correct an inadvertent mistake'' to withdraw its prior approval of the 
odor regulations without seeking approval of the change from 
Pennsylvania. Id. at 779-80, 785. After noting that Congress had not 
contemplated the need for revision on the grounds cited by EPA, Id. at 
780, the court found that EPA's ``inherent authority to correct an 
inadvertent mistake'' was limited to corrections such as 
``typographical errors,'' and that instead EPA was required to use the 
SIP revision process to remove the odor provision from the SIP. Id. at 
785-86.
    When the court made its determination in Bridesburg in 1987, there 
was no provision explicitly addressing EPA's error correction authority 
under the CAA. In 1990, Congress passed CAA section 110(k)(6), 
apparently for the purpose of overturning the Bridesburg opinion. This 
is apparent because CAA section 110(k)(6) both (i) authorizes EPA to 
correct SIP approvals and other actions that were ``in error,'' which, 
as noted previously, broadly covers any mistake, and thereby contrasts 
with the holding in Bridesburg that EPA's pre-section 110(k)(6) 
authority was limited to correction of typographical or similar 
mistakes; and (ii) provides that the error correction need not be 
accomplished via the SIP revision or SIP call process, which contrasts 
with the holding of Bridesburg requiring a SIP revision. Because 
Congress apparently intended CAA section 110(k)(6) to overturn 
Bridesburg, the definition of ``error'' in that provision should be 
sufficiently broad to encompass the error that EPA asserted it made in 
its approval action at issue in Bridesburg, which goes well beyond 
typographical or other similar mistakes.
    EPA has used CAA section 110(k)(6) in the past to correct errors of 
a non-technical nature. For example, EPA has used CAA section 110(k)(6) 
as authority to make substantive corrections to remove a variety of 
provisions from federally approved SIPs that are not related to the 
attainment or maintenance of NAAQS or any other CAA requirement. See, 
e.g., ``Approval and Promulgation of Implementation Plans; Kentucky: 
Approval of Revisions to the State Implementation Plan,'' 75 FR 2440 
(Jan. 15, 2010) (correcting the SIP by removing a provision, approved 
in 1982, used to address hazardous or toxic air pollutants); ``Approval 
and Promulgation of Implementation Plans; New York,'' 73 FR 21,546 
(April 22, 2008) (issuing a direct final rule to correct a prior SIP 
correction from 1998 that removed general duties from the SIP but 
neglected to remove a reference to ``odor'' in the definition of ``air 
contaminant or air pollutant''); ``Approval and Promulgation of 
Implementation Plans; New York,'' 63 FR 65557 (Nov. 27, 1998) (issuing 
direct final rule to correct SIP by removing a general duty ``nuisance 
provision'' that had been approved in 1984); ``Correction of 
Implementation Plans; American Samoa, Arizona, California, Hawaii, and 
Nevada State Implementation Plans,'' 63 FR 34,641 (June 27, 1997) 
(correcting five SIPs by deleting a variety of administrative 
provisions concerning variances, hearing board procedures, and fees 
that had been approved during the 1970s).

[[Page 82436]]

    CAA section 110(k)(6), by its terms--specifically, the use of the 
terms ``[w]henever'' and ``may'' and the lack of any time constraints--
authorizes, but does not require, EPA to make the specified finding. As 
a result, EPA has discretion in determining whether and when to make 
the specified finding. See New York Public Interest Research Group v. 
Whitman, 321 F.3d 316, 330-31 (2d Cir. 2003) (opening phrase ``Whenever 
the Administrator makes a determination'' in CAA section 502(i)(1) 
grants EPA ``discretion whether to make a determination''); Her Majesty 
the Queen in Right of Ontario v. EPA, 912 F.2d 1525, 1533 (D.C. Cir. 
1990) (``whenever'' in CAA section 115(a) ``impl[ied] a degree of 
discretion'' in whether EPA had to make a finding).

(ii) Inherent Authority To Reconsider

    The provisions in CAA section 110 that authorize EPA to take action 
on a SIP revision inherently authorize EPA to, on its own initiative, 
reconsider and revise that action as appropriate. The courts have found 
that an administrative agency has the inherent authority to reconsider 
its decisions, unless Congress specifically proscribes the agency's 
discretion to do so. See, e.g., Gun South, Inc. v. Brady, 877 F.2d 858, 
862 (11th Cir. 1989) (holding that agencies have implied authority to 
reconsider and rectify errors even though the applicable statute and 
regulations do not provide expressly for such reconsideration); 
Trujillo v. General Electric Co., 621 F.2d 1084, 1086 (10th Cir. 1980) 
(``Administrative agencies have an inherent authority to reconsider 
their own decisions, since the power to decide in the first instance 
carries with it the power to reconsider''); see also New Jersey v. EPA, 
517 F.3d 574 (DC Cir. 2008) (holding that an agency normally can change 
its position and reverse a prior decision but that Congress limited 
EPA's ability to remove sources from the list of hazardous air 
pollutant source categories, once listed, by requiring EPA to follow 
the specific delisting process at CAA section 112(c)(9)).\8\
---------------------------------------------------------------------------

    \8\ For additional case law, see Belville Mining Co. v. United 
States, 999 F.2d 989, 997 (6th Cir. 1993); Dun & Bradstreet Corp. v. 
United States Postal Service, 946 F.2d 189, 193 (2d Cir. 1991); Iowa 
Power & Light Co. v. United States, 712 F.2d 1292 (8th Cir. 1983).
---------------------------------------------------------------------------

    Section 301(a) of the CAA, read in conjunction with CAA section 110 
and the case law just described, provides further statutory authority 
for EPA to reconsider its actions under CAA section 110. CAA section 
301(a) authorizes EPA ``to prescribe such regulations as are necessary 
to carry out [EPA's] functions'' under the CAA. Reconsidering prior 
rulemakings, when necessary, is part of ``[EPA's] functions'' under the 
CAA--in light of EPA's inherent authority as recognized under the case 
law to do so--and as a result, CAA section 301(a) confers such 
authority upon EPA.
    EPA finds further support for its authority to narrow its approvals 
in APA section 553(e), which requires EPA to give interested persons 
``the right to petition for the issuance, amendment, or repeal of a 
rule,'' and CAA section 307(b)(1), which expressly contemplates that 
persons may file a petition for reconsideration under certain 
circumstances (at the same time that a rule is under judicial review). 
These authorizations for other persons to petition EPA to amend or 
repeal a rule suggest that EPA has inherent authority, on its own, to 
issue such amendment or repeal. This is because EPA may grant a 
petition from another person for an amendment to or repeal of a rule 
only if justified under the CAA, and if such an amendment or repeal is 
justified under the CAA, then EPA should be considered as having 
inherent authority to initiate the process on its own, even without a 
petition from another person.
    EPA recently used its authority to reconsider prior actions and 
limit its prior approval of a SIP in connection with California 
conformity SIPs. See, e.g., 68 FR 15720, 15723 (discussing prior action 
taken to limit approvals); 67 FR 69139 (taking final action to amend 
prior approvals to limit their duration); 67 FR 46618 (proposing to 
amend prior approvals to limit their duration, based on CAA sections 
110(k) and 301(a)). EPA had previously approved SIPs with emissions 
budgets based on a mobile source model that was current at the time of 
EPA's approval. Later, EPA updated the mobile source model. But, even 
though the model had been updated, emissions budgets would continue to 
be based on the older, previously approved model in the SIPs, rather 
than the updated model. To rectify this problem, EPA conducted a 
rulemaking that revised the previous SIP approvals so that the 
approvals of the emissions budgets would expire early, when the new 
ones were submitted by states and found adequate, rather than when a 
SIP revision was approved. This helped California more quickly adjust 
its regulations to incorporate the newer model. EPA is using its 
authority to reconsider and limit its prior approval of SIPs generally 
in the same manner as it did in connection with California conformity 
SIPs.
f. FIPs
    As noted previously, if the state fails to submit a required SIP 
revision, or does so but EPA then disapproves that SIP revision, then 
the CAA requires EPA to promulgate a FIP and thereby, in effect, 
federalize the part of the air pollution control requirements for which 
the state, through the required SIP revision, would otherwise have been 
responsible. Specifically, under CAA section 110(c)(1), EPA is required 
to--

promulgate a [FIP] at any time within 2 years after the 
Administrator (A) finds that a State has failed to make a required 
submission * * *, or (B) disapproves a [SIP] submission in whole or 
in part, unless the State corrects the deficiency, and the 
Administrator approves the plan or plan revision, before the 
Administrator promulgates such [FIP].

Although this provision, by its terms, mandates that EPA promulgate a 
FIP under the specified circumstances, and mandates that EPA do so 
within two years of when those circumstances occur, the provision gives 
EPA discretion to promulgate the FIP ``at any time within [that] 2 year 
[ ]'' period. Thus, EPA is authorized to promulgate a FIP immediately 
after either the specified state failure to submit or EPA disapproval.
    However, CAA section 110(c)(1), as quoted earlier, further provides 
that if EPA delays promulgating a FIP until later in the 2-year period, 
and, in the meantime, the state corrects the deficiency by submitting 
an approval SIP revision that EPA approves, then EPA is precluded from 
promulgating the FIP. Similarly, once EPA promulgates a FIP, it stays 
on the books until the state submits an approvable SIP that EPA then 
approves.
2. General Requirements for the PSD Program
    The PSD program is a preconstruction review and permitting program 
applicable, under EPA rules, to large new stationary sources and, in 
general, expansions of existing sources. The PSD program applies in 
areas that are designated ``attainment'' or ``unclassifiable'' for a 
NAAQS, and is contained in part C of title I of the CAA.\9\
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    \9\ In contrast, the ``nonattainment new source review (NSR)'' 
program applies in areas not in attainment of a NAAQS and in the 
Ozone Transport Region and is implemented under the requirements of 
part D of title I of the CAA. We commonly refer to the PSD program 
and the nonattainment NSR program together as the major NSR program. 
The EPA rules governing both programs 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, the nonattainment NSR program does not 
apply to GHGs.

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[[Page 82437]]

    The applicability of PSD to a particular source must be determined 
in advance of construction or modification and is pollutant-specific. 
Sources subject to PSD cannot construct or modify unless they first 
obtain a PSD permit that, among other things, includes emission 
limitations that qualify as BACT (discussed later). CAA sections 
165(a)(1), 165(a)(4), 169(1).
    Under the CAA, PSD applies to a stationary source that qualifies as 
a ``major emitting facility,'' and that newly constructs or undertakes 
a modification. A source is a ``major emitting facility'' if it emits 
or has the potential to emit 100 or 250 tpy, depending on the source 
category, of ``any air pollutant.'' CAA section 165(a)(1), 169(1). We 
refer to these levels as the 100/250-tpy thresholds. EPA has 
implemented these requirements in its regulations, which, as discussed 
next, use somewhat different terminology for determining PSD 
applicability and which have interpreted the term ``any air pollutant'' 
more narrowly so that only emissions of any pollutant subject to 
regulation under the CAA trigger PSD.
    Specifically, under EPA's regulations, PSD applies to a ``major 
stationary source'' that newly constructs or that undertakes a ``major 
modification.'' 40 CFR 52.166(a)(7), (b)(1)(i), (b)(2)(i). A ``major 
stationary source'' is any source that emits or has the potential to 
emit 100 or 250 tpy or more, depending on the source category, of any 
``regulated NSR pollutant.'' 40 CFR 51.166(b)(1)(i)(a). The regulations 
define that term to include four classes of air pollutants, including, 
as a catch-all, ``any pollutant that otherwise is subject to regulation 
under the Act.'' 40 CFR 51.166(b)(49)(iv). As discussed below, the 
phrase ``subject to regulation'' will begin to include GHGs on January 
2, 2011, under our interpretation of that phrase as described in the 
Tailoring Rule, 75 FR at 31,580/3, and what we call the ``Johnson Memo 
Reconsideration'' (or the ``Timing Decision'').\10\
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    \10\ ``Interpretation of Regulations that Determine Pollutants 
Covered by Clean Air Act Permitting Programs.'' 75 FR 17,004 (April 
2, 2010). This action finalizes EPA's response to a petition for 
reconsideration of ``EPA's Interpretation of Regulations that 
Determine Pollutants Covered by Federal Prevention of Significant 
Deterioration (PSD) Permit Program'' (commonly referred to as the 
``Johnson Memo''), December 18, 2008.
---------------------------------------------------------------------------

    One principal PSD requirement is that a new major source or major 
modification must meet emissions limitations based on application of 
BACT, which must be determined on a case-by-case basis taking into 
account energy, environmental, and economic impacts, among other 
factors. To ensure that these criteria are satisfied, EPA has developed 
and recommends that permitting authorities apply a ``top-down'' 
approach for BACT review, a decision process that includes 
identification of all available control technologies, elimination of 
technically infeasible options, ranking of remaining options by control 
and effectiveness; evaluation (and possible elimination) of controls 
based on economic, environmental or energy impacts; and then selection 
of the remaining top-ranked option as BACT. When PSD applies to a 
source because of its emissions of a particular pollutant, then BACT 
(and other PSD requirements) apply for other pollutants that are 
subject to regulation and that exceed specified levels.
3. SIP PSD Requirements
    The CAA contemplates that the PSD program be implemented by the 
states through their SIPs. CAA section 110(a)(2)(C) requires that:

    Each implementation plan * * * shall * * * include a program to 
provide for * * * regulation of the modification and construction of 
any stationary source within the areas covered by the plan as 
necessary to assure that national ambient air quality standards are 
achieved, including a permit program as required in part [ ] C * * * 
of this subchapter.

    CAA section 110(a)(2)(J) requires that:

    Each implementation plan * * * shall * * * meet the applicable 
requirements of * * * part C of this subchapter (relating to 
significant deterioration of air quality and visibility protection).

    CAA section 161 provides that:

    Each applicable implementation plan shall contain emission 
limitations and such other measures as may be necessary, as 
determined under regulations promulgated under this part [C], to 
prevent significant deterioration of air quality for such region * * 
* designated * * * as attainment or unclassifiable.

    These provisions, read in conjunction with the PSD applicability 
provisions, CAA section 165(a)(1), 169(1), mandate that SIPs include 
PSD programs that are applicable to any air pollutant that is subject 
to regulation under the CAA, including, as discussed later in this 
preamble, GHGs as of January 2, 2011.\11\
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    \11\ In the Tailoring Rule, we noted that commenters argued, 
with some variations, that the PSD provisions applied only to NAAQS 
pollutants, and not GHGs, and we responded that the PSD provisions 
apply to all pollutants subject to regulation, including GHGs. See 
75 FR 31560-62; ``Prevention of Significant Deterioration and Title 
V GHG Tailoring Rule: EPA's Response to Public Comments,'' May 2010, 
pp. 38-41. We are not reopening that issue in this rulemaking.
---------------------------------------------------------------------------

    Most states have EPA-approved SIP PSD programs, and as a result, in 
those states, PSD permits are issued by state or local air pollution 
control agencies. In states that do not have EPA-approved SIP PSD 
programs, EPA issues PSD permits under its own authority, although in 
some cases, EPA has delegated such authority to the state or local 
agency.

B. Regulatory Background: Texas SIP and PSD Program

1. Texas's Initial Attainment SIP Revision
    In 1972, shortly after the enactment of the 1970 CAA Amendments, 
Texas submitted to EPA its SIP to attain and maintain the NAAQS that 
EPA had promulgated by that time. As part of that SIP revision, Texas 
provided assurances that it had legal authority to carry out the SIP, 
in accordance with the predecessor to CAA section 110(a)(2)(E)(i). EPA 
approved Texas's SIP, including the assurances of legal authority, by 
notice dated May 31, 1972. 37 FR 10842.
2. Texas Initial PSD SIP Revision
    In the 1977 CAA Amendments, Congress enacted the PSD program. In 
the immediate aftermath, EPA acted as the PSD permitting authority in 
the states, but EPA began to delegate to various state authorities all 
or part of EPA's authority to issue PSD permits. In addition, at this 
time, EPA revised its pre-existing regulations, which had established a 
preconstruction permitting program, to conform to the 1977 CAA 
requirements. Each state was required to adopt a PSD program and submit 
it for approval as a SIP revision, and if the PSD program met CAA 
requirements, EPA approved the program, and the state then became the 
PSD permitting authority.
    This process occurred for most of the states in the Nation, 
including Texas. A brief history of Texas's initial PSD SIP approval 
follows:\12\
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    \12\ This history is described in ``Approval and Promulgation of 
Implementation Plan, State of Texas; Prevention of Significant 
Deterioration--Final rulemaking, 57 FR 28,093, 28,094 (June 24, 
1992); ``Approval and Promulgation of Implementation Plan, State of 
Texas; Prevention of Significant Deterioration--Proposed rulemaking, 
54 FR 52,823, 52,824 (December 22, 1989).
---------------------------------------------------------------------------

a. Texas's Receipt of Delegation Authority for the PSD Program
    Beginning in 1980, when EPA was still the permitting authority for 
federally required PSD permits in Texas, the state requested delegation 
of certain

[[Page 82438]]

aspects of the Federal PSD program, and in a series of actions, EPA 
granted that authority.\13\ During this time, Texas also revised its 
state--i.e., Texas Air Control Board (TACB)--PSD regulations. EPA 
commented on an early set of proposed revisions to TACB regulations by 
letter dated December 23, 1980 and made clear that PSD applies to non-
NAAQS pollutants.\14\ EPA reiterated these statements to Texas in 
1983.\15\
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    \13\ See, e.g., 48 FR 6023 (February 9, 1983).
    \14\ Letter from Jack S. Divita, U.S EPA, Region 6, to Roger 
Wallis, Texas Air Control Board (December 23, 1980), p. 2. In that 
letter, EPA objected to Texas's proposed definitions of the terms 
``major facility/stationary source'' and ``major modification'' on 
grounds they are not equivalent to the definition of those terms in 
EPA's PSD and nonattainment NSR regulations because Texas's proposed 
definitions--include only those stationary sources and modifications 
with emissions of air contaminants for which a [NAAQS] has been 
issued. Under the PSD and [nonattainment] NSR requirements, 
[Texas's] definitions must include sources with emissions of ``any 
air pollutant subject to regulation under the Act.'' * * * Since the 
proposed definitions would exclude PSD and [nonattainment] NSR 
coverage for those sources emitting pollutants subject to 
regulations under the Act, but for which a NAAQS has not been 
issued, they are not equivalent to the federal definitions of 
``major stationary source'' and ``major modification.''
    Id. (emphasis omitted).
    \15\ Environmental Protection Agency--Region 6, ``EPA Review of 
Texas Revisions to the General Rules and Regulations VI,'' p. 4 
(August 1983), cited in 48 FR 55483/1 & n.1 (December 13, 1983).
---------------------------------------------------------------------------

b. Texas's SIP PSD Program
    During 1985-1988, Texas submitted a series of SIP revisions 
comprising its PSD program to EPA for approval. In these SIP revisions, 
Texas established key components of its PSD rules by incorporating by 
reference EPA's PSD rules found in 40 CFR 52.21. Of most importance for 
present purposes, Texas incorporated by reference (IBR'd) EPA's PSD 
applicability regulations in 52.21.\16\ Under EPA's regulations, as 
then written, PSD applied to ``any pollutant subject to regulation 
under the [Clean Air] Act.'' 40 CFR 52.21(b)(1)(i)) (1985-1988). It 
bears emphasis that this provision, by its terms, applied PSD to each 
and every air pollutant subject to regulation under the CAA, which, as 
discussed elsewhere, has been EPA's consistent interpretation of the 
CAA requirements for PSD applicability. CAA section 165(a)(1), 
169(1).\17\
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    \16\ For convenience, we will use the acronym ``IBR'' for the 
various grammatical usages of incorporate by reference, including 
the noun form, i.e., IBR, for incorporation by reference; as well as 
the verb form, e.g., IBR'd, for incorporated by reference.
    \17\ As also discussed elsewhere, this is a narrowing 
interpretation of the PSD applicability requirements in CAA section 
169(1), which, read literally, apply PSD to ``any air pollutant.''
---------------------------------------------------------------------------

(i). Incorporation by Reference
    In adopting a particular SIP revision that IBR'ed EPA's 
regulations, however, Texas intended that IBR to apply to only the EPA 
regulations as they read as of the date that Texas adopted the SIP 
revision. Texas did not intend that IBR in that SIP revision to apply 
to subsequent revisions to those regulations. This became readily 
apparent during the course of EPA's review of Texas's SIP revisions. 
The TACB adopted the first SIP revision on July 26, 1985.\18\ This SIP 
revision consisted, in relevant part, of a revision to TACB Regulation 
VI--Sec.  116.3.(a) to add subparagraph (13), which read, in relevant 
part,
---------------------------------------------------------------------------

    \18\ TACB Board Order No. 85-7 (July 26, 1985).

    (13) The proposed facility shall comply with the Prevention of 
Significant Deterioration of Air Quality regulations promulgated by 
the [EPA] in the Code of Federal Regulations at 40 CFR 52.21 as 
amended * * *, hereby incorporated by reference, except for [certain 
identified] paragraphs [not here relevant].\19\
---------------------------------------------------------------------------

    \19\ Id.

    The TACB submitted this SIP revision to EPA on December 11, 
1985.\20\ EPA responded with a letter to Texas, dated July 3, 1986, 
commenting on several aspects of the SIP revision, including inquiring 
whether the state had authority to IBR Federal rules prospectively, 
asking for ``legal clarification'' on the subject, and recommending 
that if the TACB did not have such authority, then the TACB should 
clarify the IBR by ``referencing the appropriate date.'' \21\
---------------------------------------------------------------------------

    \20\ Letter from Mark White, Governor of Texas, to Lee M. 
Thomas, Administrator of U.S. EPA, December 11, 1985.
    \21\ Letter from William B. Hathaway, Director, Air, Pesticides 
and Toxics Division, EPA Region 6, to Allen Eli Bell, Executive 
Director, TACB (July 3, 1986). Specifically, EPA stated-- State's 
authority to IBR Federal rules prospectively--The Board approved and 
signed the incorporation of the PSD regulations on July 26, 1985, An 
amendment to the Federal PSD regulations [40 CFR 52.21(o)(3), p(1) 
and p(3)] occurred on July 12, 1985. However, the TACB proposed to 
adopt the Federal regulations and carried out the public 
participation process before the July 12, 1985, promulgation date of 
the amendments. We need a legal analysis from the state concerning 
the TACB's legal authority to incorporate by reference the Federal 
rules prospectively. We recognize that the proposed Federal rules 
were unchanged on the final promulgation; however, the Texas Water 
Commission believes that the State can not adopt prospective Federal 
rules under the State laws. We would appreciate a legal 
clarification on this subject. If the State did not intend 
prospective adoption, the rules should be clarified by referencing 
the appropriate date. Id. p. 2 and Enclosure p. 5.
---------------------------------------------------------------------------

    Texas responded with a letter dated October 24, 1986,\22\ in which 
it stated:
---------------------------------------------------------------------------

    \22\ Letter from to Steve Spaw, Deputy Executive Director, TACB, 
to William B. Hathaway, Director, Air, Pesticides and Toxics 
Division, EPA Region 6 (October 24, 1986).

    An issue of concern * * * is whether the [TACB] intended to 
incorporate by reference federal rules prospectively in the PSD rule 
Sec.  116.3(a)(13) and in the stack height rule Sec.  116.3(a)(14). 
[A]lthough our intention was not prospective rulemaking and we do 
not believe the rule language implies such, we have no specific 
objection to including the date of federal adoption of any federal 
material adopted by reference by the TACB in future SIP revisions 
(including the proposed PSD and stack height revisions). By 
initiating the public hearing process for PSD rules again (to 
incorporate requested revisions), federal PSD regulations amended on 
July 12, 1985 will be subject to the state public participation 
process. This should eliminate the concern expressed in your July 3, 
1986 letter.\23\
---------------------------------------------------------------------------

    \23\ Id. 1-2.

Accordingly, on July 17, 1987, the TACB adopted a revision to its PSD 
rule, Sec.  116.3(a)(13), so that the rule continued to IBR EPA's PSD 
regulatory requirements at 40 CFR 52.21, but referenced the date of 
November 7, 1986.\24\ Texas submitted that as a SIP revision to EPA on 
October 26, 1987.\25\
---------------------------------------------------------------------------

    \24\ TACB Board Order No. 87-09 (July 17, 1987). See 12 Tex. 
Reg. 2575/2 (August 7, 1987) (discussing revision to section 
116.3(a)(13) in response to request from U.S. EPA).
    \25\ Letter from William P. Clements, Jr., Governor of Texas, to 
Lee M. Thomas, Administrator of U.S. EPA (October 26, 1987).
---------------------------------------------------------------------------

    However, some eight months later, by notice published on July 1, 
1987, EPA adopted the PM10 NAAQS,\26\ and thereby subjected 
to PSD sources emitting PM10. Recognizing this, the TACB, on 
July 15, 1988, adopted still another revision to its PSD rule to change 
the referenced date to August 1, 1987, and thereby incorporated EPA's 
application of PSD to PM10-emitting sources into Texas's PSD 
program.\27\ Texas submitted that revised rule to EPA as a SIP revision 
on September 29, 1988.\28\ As so revised, the Texas PSD rule (again, 
Sec.  116.3(a)(13)) read, in relevant part, as follows:
---------------------------------------------------------------------------

    \26\ 52 FR 24634 (July 1, 1987).
    \27\ TACB Board Order No. 88-08 (July 15, 1988).
    \28\ Letter from Letter from William P. Clements, Jr., Governor 
of Texas, to Lee M. Thomas, Administrator of U.S. EPA (September 29, 
1988).

    (13) The proposed facility shall comply with the Prevention of 
Significant Deterioration (PSD) of Air Quality regulations 
promulgated by the Environmental Protection Agency (EPA) in the Code 
of Federal Regulations at 40 CFR 52.21 as amended August 1, 1987 * * 
*, except for [certain identified] paragraphs [not here 
---------------------------------------------------------------------------
relevant].\29\

    \29\ TACB Board Order No. 88-08 (July 15, 1988).

EPA proposed to approve this SIP revision, with this iteration of the 
Texas PSD rule, by notice dated December 22,

[[Page 82439]]

1989,\30\ and EPA issued a final approval by notice dated June 24, 
1992.\31\ In the preambles to the proposed and final rule, and in 
supporting documents, EPA recounted part of this history of Texas 
revising its regulations to IBR the current EPA regulatory 
requirements.\32\
---------------------------------------------------------------------------

    \30\ 54 FR 52823.
    \31\ 57 FR 28093.
    \32\ 57 FR 28093, 28094/2 (June 24, 1992) (final rule); 54 FR 
52823, 52824/1 (December 22, 1989) (proposed rule); Technical 
Support Document: Texas State Implementation Plan for Prevention of 
Significant Deterioration, U.S. Environmental Protection Agency, 4 
(November 28, 1988). Moreover, Texas submitted another SIP revision 
on February 18, 1991 to change the date in section 116.3(a)(13) from 
``August 1, 1987'' to ``October 17, 1988'' to reflect the amendments 
to 40 CFR 52.21 as promulgated in the Federal Register on October 
17, 1988 (53 FR 40656) (Nitrogen Oxides PSD increments). EPA did not 
act on this SIP revision when it approved the Texas PSD program on 
June 24, 1992, but did approve this SIP revision later, on September 
9, 1994 (59 FR 46556). See 62 FR 44084/2.
---------------------------------------------------------------------------

    This history shows that both EPA and Texas were well aware that 
Texas's method of IBR'ing EPA's regulatory requirements into Texas's 
PSD rule was not prospective, and that as a result, Texas would need to 
take further action, such as a SIP revision, to update its PSD rules 
whenever EPA newly subjected another pollutant to PSD. In fact, Texas 
did so--to apply PSD to PM10--during the time that EPA was 
reviewing its PSD SIP. However, after stating simply that it does not 
intend prospective IBR, Texas did not explicitly address this issue. 
That is, Texas did not acknowledge that following approval of Texas's 
PSD program, EPA could well subject to regulation additional 
pollutants--whether through a revised NAAQS or regulation under another 
CAA provision--and Texas did not discuss how it would respond.\33\
---------------------------------------------------------------------------

    \33\ Following EPA approval of Texas's PSD program, Texas has 
occasionally submitted SIP revisions to update its PSD program to 
accommodate further EPA regulatory revisions. See, e.g., 69 FR 
43752, 43753 (July 22, 2004).
---------------------------------------------------------------------------

    (ii). Legal Authority
    The record of Texas's PSD program includes limited references to, 
or discussion of, legal authority that may be relevant to whether Texas 
provided assurances that it had adequate legal authority to apply PSD 
to pollutants newly subject to regulation. The following merit review:
    First, in adopting and submitting the PSD SIP revisions, the TACB--
the agency charged with taking that action--relied on its general legal 
authority to adopt and submit the SIP revisions. The TACB adopted 
regulatory amendments through ``Board Orders,'' and then submitted 
those Board Orders to EPA as SIP revisions. The Board Orders typically 
cited general authority under the Texas CAA. One example is TACB Board 
Order No. 88-08 (July 15, 1988), which revised the Texas PSD rule to 
provide a later date for IBR'ing EPA's PSD program, and which comprised 
one of the SIP revisions that formed the basis for the Texas PSD 
program that EPA approved by notice dated June 24, 1992 (57 FR 28093). 
This Board Order provides, in relevant part, ``Section 3.09(a) of the 
Texas CAA gives the Board authority to make rules and regulations 
consistent with the general intent and purposes of the Act and to amend 
any rule or regulation it makes'' and ``the Board hereby certifies that 
the amendments as adopted have been reviewed by legal counsel and found 
to be a valid exercise of the Board's legal authority.'' Board Order 
No. 88-08, page 2.
    Second, the 1990 CAA Amendments amended CAA section 169(1) to add 
another type of source that was subject to PSD: Large municipal 
combustors. Shortly after the 1990 amendments, and before issuing final 
approval for the Texas PSD program, EPA asked Texas for assurances that 
its PSD program would apply to large municipal waste combustors. In a 
March 30, 1992 letter, EPA stated the following:

    Since we proposed approval of this SIP before enactment of the 
1990 Clean Air Act Amendments (CAAA), it is necessary that we 
address several issues in the final approval notice in order to be 
in conformance with the CAAA.
* * * * *
    ``Municipal Waste Combustion--Section 169(1) is amended by 
expanding the list of major emitting facilities that are subject to 
PSD requirements if they emit or have the potential to emit 100 tons 
per year or more of any regulated pollutant. This list now includes 
municipal incinerators capable of charging more than fifty tons of 
refuse per day. This requirement has been effective since November 
15, 1990, for all applicable PSD sources. In the conference call 
[with EPA Region 6], the * * * TACB * * * legal representative said 
that the TACB has the existing legal authority, and can and will be 
reviewing such sources for PSD applicability and permitting.'' \34\

    \34\ Letter from A. Stanley Meiburg, Director, Air, Pesticides & 
Toxics Division, EPA Region 6, to Steve Spaw, Executive Director, 
TACB (March 30, 1992).

Thus, according to this letter, Texas provided oral statements in a 
conference call with EPA Region 6 that Texas has legal authority to 
apply its state PSD rules to large municipal waste combustors.
    Texas responded in a letter dated April 17, 1992:

    We understand that you need confirmation in several areas to 
conform with the requirements of the 1990 Federal Clean Air Act 
Amendment * * * before the final delegation will be made.
* * * * *
    We will address as a major source subject to PSD review, 
municipal waste combustors capable of changing more than 50 tons of 
refuse per day as one of the sources subject to PSD review if they 
emit or have the potential to emit 100 tons per year or more of any 
regulated pollutant.\35\

    \35\ Letter from Steve Spaw, Executive Director, TACB, to A. 
Stanley Meiburg, Director, Air, Pesticides and Toxics Division, EPA 
Region 6 (April 17, 1992).

    Although the TACB Board Order referred to the TACB's general legal 
authority, the record reveals no discussion or assurances that this 
legal authority was adequate to apply PSD to pollutants newly subject 
to regulation. Similarly, the oral assurance that the TACB apparently 
provided that it had legal authority to apply PSD to large municipal 
combustors, as required under the then-newly enacted 1990 CAA 
Amendments, does not address whether Texas had adequate authority to 
apply PSD to each pollutant that EPA newly subjects to regulation.
(iii). Texas's Commitments
    The rulemaking record of EPA's approval of Texas's PSD SIP shows 
that Texas provided two commitments that are relevant for present 
purposes:

(I). 1987 Texas PSD Commitments Statement

    The TACB adopted revisions to TACB Regulation VI on July 17, 1987, 
which the Governor submitted on October 27, 1987. Those revisions 
included the following statement, which we call the 1987 Texas PSD 
Commitments Statement:

    Revision To The Texas State Implementation Plan For Prevention 
Of Significant Deterioration Of Air Quality

The Texas Air Control Board (TACB) will implement and enforce the 
federal requirements for Prevention of Significant Deterioration of 
Air Quality (PSD) as specified in 40 CFR 51.166(a) by requiring all 
new major stationary sources and major modifications to obtain air 
quality permits as provided in TACB regulation VI, Control of Air 
Pollution by Permits for New Construction and Modification. In 
addition, the TACB will adhere to the following conditions in the 
implementation of the PSD program:
* * * * *

4. Plan assessment

    The TACB will review the adequacy of the Texas PSD plan on an 
annual basis and within 60 days of the time information becomes 
available that an applicable increment may be violated. If the TACB 
determines that an increment is being

[[Page 82440]]

exceeded due to the violation of a permit condition, appropriate 
enforcement action will be taken to stop the violation. If an 
increment is being exceeded due to a deficiency in the state PSD 
plan, the plan will be revised and the revisions will be subject to 
public hearing.

    This 1987 Texas PSD Commitments Statement does not specifically 
address the application of PSD to pollutants newly subject to 
regulation. The first paragraph, as quoted above, commits TACB to 
require ``all new major stationary sources and major modifications to 
obtain air quality permits as provided in TACB regulation VI * * *,'' 
but this does not commit TACB to address pollutants newly subject to 
regulation. Instead, this limits the TACB requirement to application of 
PSD to sources ``as provided in TACB regulation VI,'' and that 
regulation VI does not automatically update. As for ``4, Plan 
assessment,'' although the first sentence calls for the TACB to review 
the adequacy of the Texas PSD plan on an annual basis, and although the 
rest of the provision requires a plan revision if an increment 
violation is determined to result from a deficiency in the plan, this 
does not address what happens when a new pollutant becomes subject to 
regulation and does not require a plan revision to apply to the new 
pollutant. The fact that Texas agreed to revise the plan if the plan is 
found to be deficient and that deficiency results in an increment being 
exceeded serves to highlight the lack of any comparable focus on how 
the plan would deal with pollutants newly subject to regulation.
    EPA's technical support document supporting its proposed approval 
stated, with respect to this 1987 Texas PSD Commitments Statement:

    The ``Revision to Texas State Implementation Plan for Prevention 
of Significant Deterioration of Air Quality'' specifies how the TACB 
will fulfill the requirements of 40 CFR 51.166(a), plan revisions, 
and plan assessment. The EPA has reviewed the State's commitment and 
has determined that the TACB has addressed the continuous plan 
revisions and assessments adequately.\36\

    \36\ Technical Support Document: Texas State Implementation Plan 
for Prevention of Significant Deterioration, U.S. Environmental 
Protection Agency, 6 (November 28, 1988).

This general discussion by EPA does not indicate that EPA considered 
the Texas statement to apply to pollutants newly subject to regulation.
(II). 1989 Texas Commitment Letter
    In 1989, as EPA considered Texas's SIP revision submittal, EPA 
became concerned that a Texas official had made statements that lead 
EPA to question whether Texas would adhere to EPA's interpretation that 
BACT must be implemented through the Top-Down process.\37\ Accordingly, 
EPA advised Texas that EPA would not approve Texas's PSD program unless 
Texas provided a letter assuring EPA that Texas would follow EPA 
requirements in general, and particularly with respect to the 
interpretation of BACT. Texas provided this letter, which we call the 
Texas PSD Commitments Letter, on September 5, 1989.\38\ In this letter, 
Texas acknowledged EPA's concern that a Texas official had--
---------------------------------------------------------------------------

    \37\ Letter from Allen Eli Bell, Executive Director, Texas Air 
Control Board to Robert Layton Jr., Regional Administrator, U.S. EPA 
(September 5, 1989) 1 (Texas's Commitments Letter).
    \38\ Texas's 1989 Commitments Letter, p. 1.

    indicated a lack of intent to follow federal interpretations of 
the Clean Air Act and Environmental Protection Agency (EPA) 
operating policies, most specifically, the ``Top-Down'' approach for 
Best Available Control Technology (BACT) analysis in reviewing PSD 
---------------------------------------------------------------------------
permit applications.

Texas went on to state:

    [Y]ou may be assured that the position of the [Texas Air Control 
Board (TACB)] is, and will continue to be, to implement EPA 
requirements relative to programs for which we have received State 
Implementation Plan approval, and to do so as effectively as 
possible.* * * Again, the TACB is committed to the implementation of 
EPA decisions regarding PSD program requirements. We look forward 
\39\ approval of the PSD revisions and believe EPA will find the 
management of that program in Texas to be capable and effective.\40\
---------------------------------------------------------------------------

    \39\ Sic: the word ``to'' should be in between ``forward'' and 
``approval''
    \40\ Texas's 1989 Commitments Letter, p. 1.

    By notice dated December 22, 1989, EPA proposed to fully approve 
Texas's PSD program.\41\ In this proposal, EPA focused on the issue of 
how EPA's current and future interpretations of PSD statutory 
requirements would be reflected in the state-implemented program. EPA 
stated:
---------------------------------------------------------------------------

    \41\ 54 FR 52823.

    In adopting the Clean Air Act, Congress designated EPA as the 
agency primarily responsible for interpreting the statutory 
provisions and overseeing their implementation by the states. The 
EPA must approve state programs that meet the requirements of 40 CFR 
51.166. Conversely, EPA cannot approve programs that do not meet 
those requirements. However, PSD is by nature a very complex and 
dynamic program. It would be administratively impracticable to 
include all statutory interpretations in the EPA regulations and the 
SIPs of the various states, or to amend the regulations and SIPs 
every time EPA interprets the statute or regulations or issues 
guidance regarding the proper implementation of the PSD program, and 
the Act does not require EPA to do so. Rather, action by the EPA to 
approve this PSD program as part of the SIP will have the effect of 
requiring the state to follow EPA's current and future 
interpretations of the Act's PSD provisions and EPA regulations, as 
well as EPA's operating policies and guidance (but only to the 
extent that such policies are intended to guide the implementation 
of approved state PSD programs). Similarly, EPA approval also will 
have the effect of negating any interpretations or policies that the 
state might otherwise follow to the extent they are at variance with 
EPA's interpretation and applicable policies. Of course, any 
fundamental changes in the administration of PSD would have to be 
accomplished through amendments to the regulations in 40 CFR 52.21 
---------------------------------------------------------------------------
and 51.166, and subsequent SIP revisions.

54 FR 52,824/2-3.

    EPA went on to state that it was basing its proposed approval of 
Texas's PSD program on Texas's agreement, as contained in the September 
5, 1989, letter, that Texas would ``implement that PSD SIP approved 
program in compliance with all of the EPA's statutory interpretations 
and operating policies.'' 54 FR 82,825/2. EPA stated--

    * * * EPA's approval of the Texas PSD SIP requires the state to 
follow EPA's statutory interpretations and applicable policies[], 
including those concerning [BACT].* * *
    In support of the discussion above, the Executive Director of 
the TACB has submitted a letter, dated September 5, 1989, which 
commits the TACB to implement the PSD SIP approval program in 
compliance with all of the EPA's statutory interpretations and 
operating policies. Specifically, the TACB's letter states that (1) 
``* * * you may be assured that the position of the agency is, and 
will continue to be, to implement EPA requirements relative to 
programs for which we have received [SIP] approval, and to do as 
effectively as possible * * *'', and (2) ``* * * the TACB is 
committed to the implementation of the EPA decisions regarding PSD 
program requirements * * *''. The EPA has evaluated the content of 
this letter and has determined that the letter sufficiently commits 
the TACB to carry out the PSD program in accordance with the Federal 
requirements as set forth in the [CAA] applicable regulations, and 
as further clarified in the EPA's statutory and regulatory 
interpretations, including the proper conduct of BACT analyses. The 
EPA also interprets this letter as committing the TACB to follow 
applicable EPA policies such as the ``Top-Down'' approach. This 
letter will be incorporated into the SIP upon the final approval 
action.

54 FR 52,825/1-2.

    EPA issued a final rule to give full approval to the program by 
notice dated June 24, 1992, 57 FR 28,093. In the final rule, EPA 
indicated that it had received adverse comments concerning its 
statements in the proposal that Texas was required to adopt all of 
EPA's

[[Page 82441]]

interpretations of the PSD requirements. Accordingly, EPA refined its 
views. EPA stated:

    Comment 1: The commenters expressed concern with the preamble 
language in the proposal notice, suggesting that final approval 
would require that the State follow EPA's current and future 
interpretations of the Act's PSD provisions and EPA regulations as 
well as EPA's operating policies and guidance. The commenter 
contended that such a condition would be unlawful * * * and would 
improperly limit the State's flexibility. * * *
    Response 1: The EPA did not intend to suggest that Texas is 
required to follow EPA's interpretations and guidance issued under 
the Act in the sense that those pronouncements have independent 
status as enforceable provisions of the Texas PSD SIP, such that 
mere failure to follow such pronouncements, standing alone, would 
constitute a violation of the Act. As clarified herein, EPA's intent 
is merely to place the State and the public on notice of EPA's 
longstanding views that the Agency must continue to oversee the 
State's implementation of the PSD SIP.* * *
    * * * Texas and other states [have] considerable discretion to 
implement the PSD program as they see fit.
    * * * PSD-SIP approved states remain free to follow their own 
course, provided that state action is consistent with the letter and 
spirit of the SIP, when read in conjunction with the applicable 
statutory and regulatory provisions.
* * * * *
    Comment 4: One commenter noted that the TACB's letter, dated 
September 5, 1989, cannot reasonably be interpreted as a legal 
requirement that the State follow the EPA's present and future new 
source review interpretations, policies and guidance, including the 
BACT ``Top-Down'' approach, because it only commits Texas to 
implement properly established EPA requirements and legally-binding 
EPA decisions. The commenter said that the Clean Air Act 
specifically requires that, if at all, any such change in EPA policy 
for BACT determinations be accomplished through notice and comment 
rulemaking, and that the EPA first prepare an economic impact 
assessment.
    Response 4: In certain circumstances, EPA's approval of a SIP 
revision through notice-and-comment rulemaking procedures can serve 
to adopt specific interpretations or decisions of the Agency. For 
example, a state may commit in writing to follow particular EPA 
interpretations or decisions in administering the PSD program. As 
part of the SIP revision process, EPA may incorporate that State's 
commitment into the SIP by reference. This process has been followed 
in today's action. Of course, EPA agrees with the commenter that the 
Agency must act reasonably in construing the terms of a commitment 
letter, so as to avoid approving it in a manner that would 
contravene the state's intent in issuing the letter in the first 
place. Moreover, the State commitment must be consistent with the 
plain language of the applicable statutory or regulatory provisions 
at issue. Similarly, EPA cannot unilaterally change the clear 
meaning of any approved SIP provision by later guidance or policy. 
Rather, as stated in the proposed approval notice, such fundamental 
change must be accomplished through the SIP revision process.
    Consistent with the terms of the TACB letter dated September 5, 
1989, EPA views that letter as a commitment on the part of the TACB 
to ``implement EPA program requirements * * * as effectively as 
possible,'' and as a commitment ``to the implementation of the EPA 
decisions regarding PSD program requirements.'' EPA agrees, however, 
that the TACB letter need not be interpreted as a specific 
commitment by the State to follow a ``Top-Down'' approach to BACT 
determinations.

57 FR 28095/1-2; 28096/1.

    As for the fact that Texas's PSD program was limited to pollutants 
that were regulated as of the date Texas adopted the program as a SIP 
revision, but did not automatically apply to newly regulated 
pollutants, the preamble to the final rule alluded to this limitation:

    The State's regulation VI requires review and control of air 
pollution from new facility construction and modification and allows 
the TACB to issue permits for stationary sources subject to this 
regulation. Section 116.3(a)(13) of the TACB Regulation VI 
incorporates by reference the Federal PSD regulations (40 CFR 52.21) 
as they existed on August 1, 1987, which include revisions 
associated with the July 1, 1987, promulgation of revised National 
Ambient Air Quality Standards for particulate matter (52 FR 24872) 
and the visibility NSR requirements noted above.

57 FR 28094.

    However, there is no indication in the preamble for the final rule 
that (i) Texas specifically addressed the requirement that its PSD 
program apply to pollutants newly subject to PSD, including non-NAAQS 
pollutants, or (ii) Texas provided assurances that it had adequate 
authority under State law to carry out the PSD program, including 
applying PSD to pollutants newly subject to regulation, among them non-
NAAQS pollutants. Nor is there any indication that EPA asked Texas to 
do so.\42\
---------------------------------------------------------------------------

    \42\ See ``Technical Support Document (TSD): State of Texas 
State Implementation Plan for Prevention of Significant 
Deterioration'' (November 28, 1988).
---------------------------------------------------------------------------

    As discussed later, in 1996 EPA proposed, and in 2002 finalized, 
what we call the NSR Reform Rule,\43\ which included a set of 
amendments to the PSD provisions that included revisions to conform to 
the 1990 CAA Amendments. See 61 FR 38250 (July 23, 1996), 67 FR 80186 
(December 31, 2002). The NSR Reform Rule revised the terminology for 
PSD applicability. In 2006, Texas submitted a SIP revision to 
incorporate the NSR Reform Rule into its PSD program, including 
revising its applicability provisions. EPA disapproved this SIP 
revision by notice dated September 15, 2010.\44\ Accordingly, the 
applicable Texas PSD applicability provisions remain the ones in the 
state's currently approved SIP.
---------------------------------------------------------------------------

    \43\ ``Prevention of Significant Deterioration (PSD) and 
Nonattainment New Source Review (NNSR): Baseline Emissions 
Determination, Actual-to-Future-Actual Methodology, Plantwide 
Applicability Limitations, Clean Units, Pollution Control Projects--
Final Rule,'' 67 FR 80186 (December 31, 2002) (NSR Reform rule).
    \44\ 75 FR 56,424 (September 15, 2010).
---------------------------------------------------------------------------

C. Regulatory Background: GHG Rules

1. GHGs and Their Sources
    Greenhouse gases trap the Earth's heat that would otherwise escape 
from the atmosphere into space, and form 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 carbon dioxide (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, 
methane (CH4), nitrous oxide (N2O), 
hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur 
hexafluoride (SF6). These six GHGs, for the purposes of this 
final rule, are referred to collectively as ``the six well-mixed 
GHGs,'' or, simply, GHGs, and together constitute the ``air pollutant'' 
upon which the GHG thresholds in the Tailoring Rule 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 greenhouse gases, climate change and its impact on 
health, society, and the environment is

[[Page 82442]]

included in EPA's technical support document (TSD) 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. Anthropogenic 
CO2 emissions released from a variety of sources, including 
fossil fuel combustion and industrial manufacturing processes that rely 
on geologically stored carbon (e.g., coal, oil, and natural gas) that 
is hundreds of millions of years old, as well as anthropogenic 
CO2 emissions from land-use changes such as deforestation, 
all perturb the atmospheric concentration of CO2 and cause 
readjustments in the distribution of carbon within different 
reservoirs. More than half of the energy-related emissions come from 
large stationary sources such as power plants, while about a third 
comes 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 Global Warning Potential 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.
2. GHG Regulatory Actions
    Over the past year, EPA has completed four distinct actions related 
to greenhouse gases under the CAA. The result of these rules, in 
conjunction with the operation of the CAA, has been to trigger PSD 
applicability for GHG sources on and after January 2, 2011, but to 
limit the scope of PSD for those sources. These actions include, as 
they are commonly called, the ``Endangerment Finding'' and ``Cause or 
Contribute Finding,'' which we issued in a single final action; \45\ 
the Johnson Memo Reconsideration, noted previously; the ``Light-Duty 
Vehicle Rule'' (LDVR or Vehicle Rule); \46\ and the ``Tailoring Rule,'' 
also noted previously.
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    \45\ ``Endangerment and Cause or Contribute Findings for 
Greenhouse Gases Under Section 202(a) of the Clean Air Act.'' 74 FR 
66,496 (December 15, 2009).
    \46\ ``Light-Duty Vehicle Greenhouse Gas Emission Standards and 
Corporate Average Fuel Economy Standards; Final Rule.'' 75 FR 25,324 
(May 7, 2010).
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a. Endangerment Finding, Vehicle Rule, Johnson Memo Reconsideration
    In the Endangerment Finding, which is governed by CAA section 
202(a), the Administrator exercised her judgment, based on an 
exhaustive review and analysis of the science, to conclude that ``six 
greenhouse gases taken in combination endanger both the public health 
and the public welfare of current and future generations.'' 74 FR at 
66,496. The Administrator also found ``that the combined emissions of 
these greenhouse gases from new motor vehicles and new motor vehicle 
engines contribute to the greenhouse gas air pollution that endangers 
public health and welfare under CAA section 202(a).'' Id.
    The Endangerment Finding led directly to promulgation of the 
Vehicle Rule, also governed by CAA Sec.  202(a), in which EPA set 
standards for the emission of greenhouse gases for new motor vehicles 
built for model years 2012-2016. 75 FR 25,324. The Vehicle Rule 
established the first controls for GHGs under the CAA.
    The Johnson Memo Reconsideration--as well as the Tailoring Rule, 
which we discuss later--is governed by the PSD and Title V provisions 
in the CAA. It was issued to address the automatic statutory triggering 
of the PSD and Title V programs for GHGs due to the Vehicle Rule 
establishing controls for GHGs. The Johnson Memo Reconsideration 
provided EPA's interpretation of a pre-existing definition in its PSD 
regulations delineating the ``pollutants'' that are taken into account 
in determining whether a source must obtain a PSD permit and the 
pollutants each permit must control. The Johnson Memo Reconsideration 
stated that when the Vehicle Rule takes effect on January 2, 2011, it 
will, in conjunction with the applicable CAA requirements, trigger the 
application of PSD to GHG-emitting sources. 75 FR 17,004.
b. Tailoring Rule
    In the Tailoring Rule, EPA limited PSD applicability, at the 
outset, to only the largest GHG-emitting sources, and to phase-in PSD 
applicability, as appropriate, to smaller sources over time. 75 FR 
31,514. In the Tailoring Rule, EPA identified the air pollutant that, 
if emitted or potentially emitted by the source in excess of specified 
thresholds, would subject the source to PSD requirements, as the 
aggregate of six GHGs: CO2, CH4, N2O, 
HFCs, PFCs, and SF6. EPA based this identification on the 
Vehicle Rule, which included applicability provisions specifying that 
the rule ``contains standards and other regulations applicable to the 
emissions of those six greenhouse gases.'' 75 FR at 25686 (promulgating 
40 CFR 86.1818-12(a)). The Tailoring Rule noted that it was because the 
Vehicle Rule subjected to regulation the pollutant that comprises the 
six GHGs, that PSD was triggered for that pollutant and that, as a 
result, the pollutant must be defined for PSD purposes in the same way 
as it is identified in the Vehicle Rule. 75 FR 31,527. The Vehicle Rule 
identified the pollutant as the aggregate of the six gases because in 
the Endangerment Finding, the Administrator found that those six 
gases--which she described as long-lived and directly emitted GHGs-- 
may reasonably be anticipated to endanger public health and welfare.
c. Scope of PSD Applicability
    In the Tailoring Rule and subsequent rulemakings, commenters raised 
an issue concerning the applicability of PSD to non-NAAQS pollutants. A 
discussion of this issue is useful background information for the 
present action, including what we call the automatic-updating nature of 
PSD requirements under the CAA, that is, that as soon as a pollutant 
becomes subject to regulation under another CAA provision, it becomes 
subject to PSD.
i. Applicability of PSD to Non-NAAQS Pollutants
    In the Tailoring Rule, EPA responded to a set of comments that PSD 
applies only to NAAQS pollutants, and not non-NAAQS pollutants such as 
GHGs. In brief, several commenters advanced the argument that primarily 
because the PSD provisions in CAA sections 161 and 165(a) limit PSD 
applicability to sources located in attainment or unclassifiable areas, 
PSD applicability should be limited to the NAAQS pollutants for which 
the area in which the source is located is attainment or 
unclassifiable. On the basis of this interpretation, the commenters 
urged

[[Page 82443]]

EPA to conclude that PSD does not apply to GHGs. 75 FR 31,560/2-3.
    EPA disagreed with these comments and reiterated its long-held view 
that PSD applies to ``any pollutant subject to regulation under the 
CAA,'' and that includes non-NAAQS pollutants. 75 FR 31,560/3. EPA 
explained--

    We recognize, as we have said elsewhere, that a major 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 the ``in 
any area to which this part applies'' clause in 165(a), in the 
context of the PSD applicability provisions, as limiting PSD 
applicability to those pollutants. The key PSD applicability 
provisions are found in sections 165(a) and 169(1). Section 165(a) 
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, two hundred fifty] 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, section 165(a) 
explicitly states that the PSD requirements apply more broadly to 
any pollutant that is subject to regulation.

Id.
    EPA went on to discuss the statements by the D.C. Circuit 
concerning the PSD applicability provisions--which, again, according to 
their literal terms, apply PSD to ``any air pollutant,'' CAA section 
165(a)(1), 169(1)--in the seminal case interpreting the PSD 
requirements: Alabama Power v. Costle, 636 F.2d 323 (DC Cir. 1980). 
There, the DC Circuit noted that these PSD applicability provisions 
must be read to apply PSD quite broadly; indeed, the Court indicated 
they could apply even to air pollutants not yet regulated under other 
provisions of the Act. 636 F.2d at 352-53 & n. 60.\47\
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    \47\ ``Prevention of Significant Deterioration and Title V GHG 
Tailoring Rule: EPA's Response to Public Comments,'' p. 39.
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    EPA also emphasized that EPA's long-standing regulations have 
interpreted this provision broadly enough to capture non-NAAQS 
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 HAPs regulated under CAA section 112; and over the years, 
EPA has established significance levels for fluorides, sulfuric acid 
mist, hydrogen sulfide, TRS, 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) * * *. 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. 
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).

75 FR 31,581/3 to 31,582/1
    To this, it may be added that the regulatory history of the PSD 
applicability provisions supports their broad application: EPA's 
initial, 1977-78 rulemaking implementing the PSD program made explicit 
that the PSD program applied to ``any pollutant regulated under the 
Clean Air Act.'' 43 FR 26380, 26403, 26406 (June 19, 1978) 
(promulgating 40 CFR 51.21(b)(1)(i)). In 1979-1980, EPA revised the PSD 
program to conform to Alabama Power v. Costle, 636 F.2d 323 (DC Cir. 
1980). 44 FR 51924 (September 5, 1979) (proposed rule); 45 FR 52676 
(August 7, 1980) (final rule). In this rulemaking, EPA did not disturb 
the pre-existing provisions that applied the PSD program to regulated 
air pollutants. In October 1990, EPA prepared the ``New Source Review 
Workshop Manual--Prevention of Significant Deterioration and 
Nonattainment Area Permitting'' (draft NSR Manual), which although in 
draft form, and not a binding rule, has often been referenced as a 
reflection of EPA's thinking on PSD permitting issues. See, Alaska 
Dept. of Conservation v. EPA, 540 U.S. 461, 476 n. 7 (2004); In re: 
Indeck-Elwood, LLC, 13 E.A.D. 133 n. 13 (EAB Sept. 27, 2006); In re: 
Prairie State Generating Company, 13 E.A.D. 6 n. 2 (EAB Aug 24, 2006). 
This manual states that PSD applies to ``each pollutant regulated by 
the Act,'' including ``criteria and * * * noncriteria'' pollutants. 
Draft NSR Manual, pp. A.18. See id. at A.28, A.30. In 1996 EPA 
proposed, and in 2002 finalized what we call the NSR Reform Rule,\48\ 
which included a set of amendments to the PSD provisions that included 
revisions to conform to the 1990 CAA Amendments. See 61 FR 38250 (July 
23, 1996), 67 FR 80186 (December 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,'' and by substituting that 
defined term for the phrase ``pollutant regulated under the Act'' that 
was previously used in various parts of the PSD regulations. 67 FR 
80240. The definition of ``regulated NSR pollutant'' includes several 
categories of pollutants, including, in general, NAAQS pollutants and 
precursors, pollutants regulated under CAA section 111 NSPS, 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). The explicit inclusion of Class I or 
II substances regulated under CAA title VI confirms that PSD applies to 
non-NAAQS pollutants. 75 FR 31,561/3 to 31,562/1.
---------------------------------------------------------------------------

    \48\ ``Prevention of Significant Deterioration (PSD) and 
Nonattainment New Source Review (NNSR): Baseline Emissions 
Determination, Actual-to-Future-Actual Methodology, Plantwide 
Applicability Limitations, Clean Units, Pollution Control Projects--
Final Rule,'' 67 FR 80186 (December 31, 2002) (NSR Reform rule).
---------------------------------------------------------------------------

    In the Tailoring Rule, EPA went on to discuss other PSD and CAA 
provisions, including their legislative history and interpretation in 
the case law, that all support applying PSD to any pollutant this is 
subject to regulation, including non-NAAQS pollutants. Id. 31,560/2 to 
31,562/2.\49\
---------------------------------------------------------------------------

    \49\ EPA gave additional reasons why it does not agree that PSD 
applies only to NAAQS pollutants in the record for the Tailoring 
Rule, ``Prevention of Significant Deterioration and Title V GHG 
Tailoring Rule: EPA's Response to Public Comments,'' May 2010, 
pp.38-41; and in EPA's court filings in defense of challenges to the 
Tailoring Rule. ``EPA's Response To Motions To Stay'' 47-59 
Coalition for Responsible Regulation v. EPA, No. 09-1322 (and 
consolidated cases) (DC Cir. 2010), Coalition for Responsible 
Regulation v. EPA, No. 09-1073 (and consolidated cases) (DC Cir. 
2010), Coalition for Responsible Regulation v. EPA, No. 09-1092 (and 
consolidated cases) (DC Cir. 2010), Coalition for Responsible 
Regulation v. EPA, No. 09-1131 (and consolidated cases) (DC Cir. 
2010) (hereafter, Coalition for Responsible Regulation v. EPA, No. 
09-1322 (and consolidated cases)).
---------------------------------------------------------------------------

ii. Automatic Application of PSD to Newly Regulated Pollutants
    Under the PSD applicability requirements, PSD applies to sources 
automatically, that is, by operation of law, as soon as their emissions 
of pollutants become subject to regulation

[[Page 82444]]

under the CAA. This is because CAA section 165(a)(1) prohibits ``major 
emitting facilit[ies]'' from constructing or modifying without 
obtaining a permit that meets the PSD requirements, and CAA section 
169(1) defines a ``major emitting facility'' as a source that emits a 
specified quantity of ``any air pollutant,'' which, as noted earlier, 
EPA has long interpreted as any pollutant subject to regulation. 
Whenever EPA promulgates control requirements for a pollutant for the 
first time, that pollutant becomes subject to regulation, and any 
stationary source that emits that pollutant in sufficient quantities 
becomes a ``major emitting facility'' that, when it constructs or 
modifies, becomes subject to PSD without any further action from EPA or 
a state or local government.
    EPA regulations have long codified automatic PSD applicability. See 
43 FR 26380, 26403/3, 26406 (June 19, 1978) (promulgating 40 CFR 
51.21(b)(1)(i)) and 42 FR 57479, 57480, 57483 (November 3, 1977) 
(proposing 40 CFR 51.21(b)(1)(i)) (applying PSD requirements to a 
``major stationary source'' and defining that term to include sources 
that emit specified quantities of ``any air pollutant regulated under 
the Clean Air Act''). Most recently, in the 2002 NSR Reform Rule, noted 
previously, EPA reiterated these requirements, although changing the 
terminology to ``any regulated NSR pollutant.'' 67 FR 80,186. EPA 
stated in the preamble: ``The PSD program applies automatically to 
newly regulated NSR pollutants, which would include final promulgation 
of an NSPS applicable to a previously unregulated pollutant.'' 67 FR at 
80240/1.
    In most states with approved PSD programs, PSD does apply 
automatically. However, in a minority of states with approved PSD 
programs, it does not.\50\ Instead, each time EPA subjects a previously 
unregulated air pollutant to regulation, these states must submit a SIP 
revision incorporating that pollutant into its program. Despite the 
time needed for the state to submit a SIP revision and EPA to approve 
it, the pollutant-emitting sources in the state become subject to PSD 
under the CAA as soon as EPA first subjects that pollutant to control. 
Because under CAA section 165(a)(1) and 169(1), as interpreted by EPA, 
a source that emits specified quantities of any air pollutant subject 
to regulation cannot construct or modify unless it first receives a PSD 
permit, as a practical matter, in a state with an approved PSD program 
that does not automatically update and that has not been revised to 
include the newly regulated pollutant, the sources may find themselves 
subject to the CAA requirement to obtain a permit, but without a 
permitting authority to issue that permit. As discussed later, this 
action is needed because GHG-emitting sources in Texas would otherwise 
confront that situation.
---------------------------------------------------------------------------

    \50\ 75 FR at 53,897/3 (proposed GHG PSD SIP call).
---------------------------------------------------------------------------

    In a recent decision, the 7th Circuit, mistakenly citing to PSD 
provisions when the issue before the court involved the separate and 
different non-attainment provisions of CAA sections 171-193, concluded 
that sources could continue to abide by permitting requirements in an 
existing SIP until amended, even if that SIP does not comport with the 
law. United States v. Cinergy Corp., No. 09-3344, 2010 WL 4009180 (7th 
Cir. Oct. 12, 2010). In stark contrast to the nonattainment provisions 
actually at issue in Cinergy--which are not self-executing and must 
therefore be implemented through a SIP-PSD is self-executing; it is the 
statute (CAA section 165), not just the SIP, that prohibits a source 
from constructing a project without a permit issued in accordance with 
the Act.
3. Implementation of GHG PSD Requirements
    Because PSD is implemented through the SIP system, EPA has taken a 
series of actions to address the obligations of states (including 
localities and other jurisdictions, as appropriate) to implement PSD 
requirements for GHG-emitting sources. EPA has taken these actions 
through the Tailoring Rule and a series of subsequent actions.\51\
---------------------------------------------------------------------------

    \51\ A detailed description of EPA's implementation efforts, and 
the status of state compliance with those efforts, is included in 
Declaration of Regina McCarthy, Coalition for Responsible Regulation 
v. EPA, DC Cir. No. 09-1322 (and consolidated cases) (McCarthy 
Declaration), including Attachment 1 (Tables 1, 2, and 3), which can 
be found in the docket for this rulemaking.
---------------------------------------------------------------------------

a. Tailoring Rule
    EPA proposed the Tailoring Rule by notice dated October 27, 2009, 
74 FR 55292. In that action, EPA proposed to phase in PSD 
applicability, for GHGs, starting with a threshold of 25,000 tpy on a 
CO2e basis. This threshold was above the statutory 
thresholds of 100 or 250 tpy on a mass basis, depending on the source 
category, for new construction).\52\
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    \52\ Even so, EPA recognized that many SIPs with approved PSD 
programs would continue to require PSD permitting of GHG-emitting 
sources at the statutory thresholds because these SIPs would remain 
in place even after EPA finalized the Tailoring Rule. Until the 
states revised those SIPs, sources in those states would remain 
subject to those thresholds as a matter of both state and federal 
law. This would result in the same problems of overwhelming 
administrative burdens and costs that EPA designed the Tailoring 
Rule to address. To solve these problems, EPA encouraged each 
affected state to submit a SIP revision that EPA would approve to 
raise the thresholds to conform to the Tailoring Rule. EPA 
recognized that it would take time for the states to develop and 
submit for approval such SIP revisions, and for EPA to approve them. 
Accordingly, as an interim measure, EPA proposed, as part of the 
proposed Tailoring Rule, to narrow its approval of the existing EPA-
approved SIPs so that those SIPs would remain approved only to the 
extent they regulate GHG emissions at or above the Tailoring Rule 
thresholds. Specifically, EPA proposed to rescind its approval of 
the SIP permitting threshold provisions to the extent they required 
PSD permits for sources whose GHG emissions fall below the proposed 
Tailoring Rule thresholds. 74 FR at 55,340/3 to 55,343/3 (proposed 
Tailoring Rule).
---------------------------------------------------------------------------

    EPA finalized the Tailoring Rule by notice dated June 3, 2010. 75 
FR 31514. Comments on the proposed rule had persuaded EPA that the 
proposed GHG-applicability threshold was too low to avoid undue 
administrative burdens. Accordingly, in the final Tailoring Rule, EPA 
raised those threshold levels to, depending on the circumstances, 
75,000 and/or 100,000 tpy on a CO2e basis, while retaining 
the approach of a phase-in. EPA established the initial levels in the 
first two steps of the phase-in schedule, committed the agency to take 
future steps addressing smaller sources, and excluded the smallest 
sources from PSD permitting for GHG emissions until at least April 30, 
2016.
    In addition, in the Final Tailoring Rule, EPA incorporated the PSD 
thresholds for GHGs in the definition of the term ``subject to 
regulation.'' As noted previously, under EPA's PSD regulations, PSD 
applies to a ``major stationary source;'' a ``major stationary source'' 
is defined as a source that emits 100/250 tpy on a mass basis of a 
``regulated NSR pollutant;'' and a ``regulated NSR pollutant,'' in 
turn, is defined as, among other things, a pollutant that is ``subject 
to regulation'' under the CAA.\53\ In the Tailoring Rule, EPA added a 
limitation to the term ``subject to regulation'' so that the only GHG 
emissions that would be treated as ``subject to regulation'' (and 
therefore subject to PSD) are those emitted at or above specified 
thresholds of, depending on the circumstances, 75,000 and/or 100,000 
tpy on a CO2e basis.\54\
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    \53\ 40 CFR 51.166(a)(7)(i), (b)(1)(i)(a), (b)(49).
    \54\ Specifically, under the revised definition of ``subject to 
regulation,'' sources that emit at least the 75,000 and/or 100,000 
tpy CO2e threshold amount of GHGs are subject to PSD as 
long as the amount of GHG emissions also exceeds, in general, 100/
250 tpy on a mass basis for new sources and zero tpy on a mass basis 
for modifications of existing sources. 40 CFR 51.166(b)(48), 75 FR 
at 31,606; see EPA Office of Air Quality Planning and Standards, 
``PSD and Title V Permitting Guidance for Greenhouse Gases (November 
2010).

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[[Page 82445]]

    Some states advised EPA that it is likely they would be able to 
implement the Tailoring Rule thresholds by interpreting the term 
``subject to regulation'' in their SIPs, and without having to take 
further action. A state's ability to take this approach would have 
implications for how EPA needed to implement the Tailoring Rule.\55\ 
Accordingly, in the Tailoring Rule, EPA began a process to gather more 
information about how states would implement permitting for GHG-
emitting sources.
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    \55\ Specifically, a state's implementation of the Tailoring 
Rule in this manner prior to January 2, 2011 would obviate the need 
for EPA to narrow its approval of that state's SIP, as EPA had 
proposed in the proposed Tailoring Rule. Thus, in the Final 
Tailoring Rule, EPA delayed final action on its narrowing proposal 
so that EPA could gather information about the process and time-line 
for states to implement the Tailoring Rule.
---------------------------------------------------------------------------

b. 60-Day Letters
    To gather this information, EPA, in the Tailoring Rule, asked 
states to submit letters within 60 days of publication of the Tailoring 
Rule, which we refer to as the 60-day letters, concerning the status of 
their PSD program and their legal authority for applying PSD program to 
GHG-emitting sources. This information would help clarify, for each 
state, the two central issues for PSD applicability to GHG-emitting 
sources: (i) Whether the state has an approved PSD program that applies 
to GHG-emitting sources; and (ii) if so, what action the state would 
take to limit the applicability of its PSD program to GHG-emitting 
sources at or above the Tailoring Rule thresholds.\56\ This information 
would assist EPA to determine what, if any, action it needed to take 
with respect to the states.
---------------------------------------------------------------------------

    \56\ Alternatively, a state could choose to apply its PSD 
program to sources below the Tailoring Rule thresholds and acquire 
sufficient resources to implement the program as expanded, but no 
state had indicated an intention to proceed in this manner.
---------------------------------------------------------------------------

    Almost all states submitted 60-day letters, generally by August 4, 
2010. The letters, along with other information EPA received through 
review of state requirements and further communications with state 
officials, indicate that the states, localities, and other 
jurisdictions may be divided into three categories, described below, 
for purposes of EPA's implementation of the PSD program to GHG-emitting 
sources.
c. The Three Categories of States and EPA's Implementation Process
    The first category, which includes 7 states, 35 subsections of 
states, the District of Columbia, American Samoa, Guam, Puerto Rico, 
the U.S. Virgin Islands, and Indian Territory, does not have an 
approved SIP PSD permitting program. Instead, federal requirements 
apply. Thus, implementation of PSD for GHG-emitting sources in these 
jurisdictions is the simplest of all the states: GHG-emitting sources 
will become subject to PSD and the thresholds in the Tailoring Rule 
will apply as of January 2, 2011 without further action.\57\
---------------------------------------------------------------------------

    \57\ McCarthy Declaration, paragraphs 28-33, page 8, and 
Attachment 1, Table 1.
---------------------------------------------------------------------------

    The second category includes 14 states and a number of districts 
within states that have approved PSD SIPs, but those SIPs do not apply 
the PSD program to GHG-emitting sources. This group includes Texas, 
which is the focus of this action. The implementation process for this 
category is discussed later.\58\
---------------------------------------------------------------------------

    \58\ Id., paragraphs 34-55, pages 8-12, and Attachment 1, Table 
2.
---------------------------------------------------------------------------

    The third category includes the remaining states, which have an 
approved SIP PSD program that applies to GHG-emitting sources. As for 
the implementation process for this category, some of these states have 
indicated that they are able to interpret their SIPs to apply PSD only 
to GHG emissions at or above the Tailoring Rule thresholds, and they do 
not need to revise their SIPs to do so. However, most indicated that 
they would need to submit SIP revisions to EPA in order to incorporate 
the Tailoring Rule thresholds. This means that in these states, until 
they do submit their SIP revisions and EPA approves them, sources 
emitting GHGs at or above the 100/250 tpy levels will be subject to PSD 
requirements as of January 2, 2011 if they construct or modify. EPA has 
encouraged these states to submit SIP revisions adopting the Tailoring 
Rule thresholds as soon as possible and some of these states have 
already done so. Moreover, almost all of these states are proceeding to 
revise their state law to reflect the Tailoring Rule thresholds and 
will do so by January 2, 2011 or very soon thereafter. In the meantime, 
EPA has finalized the Narrowing Rule so that as of January 2, 2011, at 
least for federal purposes, PSD will apply to GHG-emitting sources only 
at the Tailoring Rule thresholds or higher.\59\ As a result of these 
state actions and EPA's Narrowing Rule, by January 2, 2011 or shortly 
thereafter, in all or almost all of these states, only GHG-emitting 
sources at or above the Tailoring Rule thresholds will be subject to 
PSD requirements.\60\
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    \59\ Specifically, for these states, EPA has stated that it 
intends to finalize its proposal in the Tailoring Rule to narrow its 
approval of their PSD applicability provisions to only the extent 
they apply PSD to GHG-emitting sources at or above the Tailoring 
Rule thresholds, which we call the Narrowing Rule. Id. paragraph 90, 
page 19. In addition, recognizing that GHG-emitting sources also 
have permitting obligations under state law, EPA has strongly 
encouraged states to revise their state law as promptly as possible 
to eliminate the state PSD obligations of sources below the 
Tailoring Rule thresholds. Id. paragraph 92, page 19.
    \60\ Id. paragraphs 62-94, pages 13-20, and Attachment 1, Table 
3.
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d. SIP Call States, Including Texas
    As just noted, the second category, which includes Texas, includes 
14 states and some districts within states whose SIPs have an approved 
PSD program but do not have the authority to apply that program to GHG-
emitting sources. For most of these states, including Texas, the reason 
is that their PSD applicability provision applies to any ``pollutant 
subject to regulation'' under the CAA (or a similar term), but other 
provisions of state law preclude automatic updating. As a result, this 
applicability provision covers only pollutants--not including GHGs--
that were subject to regulation at the time the state adopted the 
applicability provision.
    After proposing action by notice dated September 2, 2010,\61\ EPA 
promulgated the final SIP call for 13 states, including Texas, by 
notice signed on December 1, 2010, and published on December 13, 2010, 
75 FR 77,698, which we call the GHG PSD SIP Call or, simply, the SIP 
call.\62\ In this action, consistent with the requirements of CAA 
section 110(k)(5), EPA (i) issued a finding that the SIPs for 13 states 
(comprising 15 state and local programs) are ``substantially inadequate 
to * * * comply with any requirement of this Act'' because their PSD 
programs do not apply to GHG-emitting sources as of January 2, 2011; 
(ii) issued a SIP call requiring submission of a corrective SIP 
revision; and (iii) established a ``reasonable deadline[] (not to 
exceed 18 months after the date of such notice)'' for the submission of 
the corrective SIP revision. This deadline ranges, for different 
states, from 3 weeks to 12

[[Page 82446]]

months after the date of the final SIP call, as discussed below.
---------------------------------------------------------------------------

    \61\ ``Action to Ensure Authority to Issue Permits under the 
Prevention of Significant Deterioration Program to Sources of 
Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP 
Call--Proposed Rule,'' 75 FR 53892 (September 2, 2010); ``Action to 
Ensure Authority to Issue Permits under the Prevention of 
Significant Deterioration Program to Sources of Greenhouse Gas 
Emissions: Federal Implementation Plan--Proposed Rule,'' 75 FR 53883 
(September 2, 2010).
    \62\ ``Action to Ensure Authority to Issue Permits under the 
Prevention of Significant Deterioration Program to Sources of 
Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP 
Call--Final Rule,'' 75 FR 77,698 (December 13, 2010).
---------------------------------------------------------------------------

    EPA justified its finding that the affected SIPs are 
``substantially inadequate'' to comply with CAA requirements on grounds 
that (i) the CAA requires that PSD requirements apply to any stationary 
source that emits specified quantities of any air pollutant subject to 
regulation under the CAA, and those PSD requirements must be included 
in the approved SIPs; (ii) as of January 2, 2011, GHG-emitting sources 
will become subject to PSD; (iii) as a result, the CAA requires PSD 
programs to apply to GHG-emitting sources; and (iv) accordingly, the 
failure of any SIP PSD applicability provisions to apply to GHG-
emitting sources means that the SIP fails to comply with these CAA 
requirements.
    In the SIP call proposal, EPA discussed in some detail the SIP 
submittal deadline under CAA section 110(k)(5). Under this provision, 
in issuing a SIP call, EPA ``may establish reasonable deadlines (not to 
exceed 18 months after the date of such notice) for the submission of 
such plan revisions.'' EPA proposed to allow each of the affected 
states up to 12 months from the date of signature of the final finding 
of substantial inadequacy and SIP call within which to submit the SIP 
revision, unless, during the comment period, the state expressly 
advised that it would not object to a shorter period--as short as 3 
weeks from the date of signature of the final rule--in which case EPA 
would establish the shorter period as the deadline. EPA stated that, 
assuming that EPA were to finalize the SIP call on or about December 1, 
2010, as EPA said it intended to do in the proposal, then the earliest 
possible SIP submittal deadline would be December 22, 2010.
    EPA made clear that the purpose of establishing the shorter period 
as the deadline for any interested state is to accommodate states that 
wish to ensure that a FIP is in effect as a backstop to avoid any gap 
in PSD permitting. EPA also made clear that if a state did not advise 
EPA that it does not object to a shorter deadline, then the 12-month 
deadline would apply. EPA emphasized that for any state that receives a 
deadline after January 2, 2011, the affected GHG-emitting sources in 
that state may be delayed in their ability to receive a federally 
approved permit authorizing construction or modification. This is 
because after January 2, 2011, these sources may not have available a 
permitting authority to review their permit applications until the date 
that EPA either approves the SIP submittal or promulgates a FIP.
    EPA asked that each of the affected states write EPA a letter 
during the comment period to identify the deadline for SIP submission 
to which the state would not object if EPA established. We call these 
the 30-day letters. Each affected state wrote a 30-day letter to EPA, 
as requested. Except for Texas, each state identified a SIP submittal 
deadline, which differed among the states, and which ranged from three 
weeks to 12 months. In the final SIP call, EPA established SIP 
submittal deadlines identified by the states, except that EPA 
established a deadline of 12 months for Texas, in accordance with EPA's 
proposal. Except for Texas, each state explained in its 30-day letter 
and in subsequent communications with EPA, that it was planning on 
either receiving a FIP or adopting a SIP and that it chose a deadline 
that would result in having either the FIP or an approved SIP, as 
appropriate, in place by January 2, 2011 or soon enough thereafter so 
as to avoid any hardship to its sources. In the final SIP call, EPA 
justified approving this three-week-to-12-month time period, although 
expeditious, as meeting the CAA section 110(k)(5) requirement to be a 
``reasonable'' deadline in light of: (i) The SIP development and 
submission process; (ii) the preference of the state; and (iii) the 
imperative to minimize the period when sources will be subject to PSD 
but will not have available a PSD permitting authority to act on their 
permit application and therefore may face delays in constructing or 
modifying.
    In the final SIP call, based on the states' 30-day letters and 
other communications, EPA established a SIP submittal deadline of 
December 22, 2010 for seven states. Each of the states indicated that 
it did not expect to submit a SIP revision by that date and instead 
expected to receive a FIP. On December 23, 2010, for each of the seven 
states, EPA issued a finding of failure to submit its corrective SIP 
revision by that deadline, and EPA promulgated a FIP.
    Except for Texas, EPA expects each of the other states subject to 
the SIP call to adopt a SIP revision and receive EPA approval of it, or 
receive a FIP, within the first half of 2011, and, in most cases, 
substantially sooner. Although none of these states will have a 
permitting authority in place as of January 2, 2011, none of these 
states expects that gap to pose meaningful difficulties for sources 
because, depending on the state, the gap is brief, the state does not 
expect any sources to seek a permit during the gap, or even if the 
state were the permitting authority during the gap, it could not 
complete processing the permits during that time.\63\
---------------------------------------------------------------------------

    \63\ McCarthy Declaration, p. 12, paragraph 55.
---------------------------------------------------------------------------

    As discussed later, Texas has responded to the SIP call differently 
than the other states. As a result, its GHG-emitting sources do face 
the prospect of permitting delays. This rulemaking action addresses 
that situation.
4. Summary of the Effect of EPA's Implementation Actions in States 
Other Than Texas
    EPA recently summarized the status of its implementation efforts, 
for all three categories of sources, as follows:

    Overall, EPA has received information about the status of 99 
jurisdictions (49 states,\64\ 4 territories, 45 localities, and the 
District of Columbia), and included that information in Attachment 
1. Of these jurisdictions, 94 will have, for Federal law purposes, a 
PSD permitting program for GHG emissions at the Tailoring Rule 
thresholds on Jan. 2, 2011. Of these 94 entities, 84 will have made 
any necessary amendments to state or local law to ensure that state 
or local permits are not required for GHG emissions below Tailoring 
Rule thresholds. By the end of the first quarter of 2011, only one 
jurisdiction will not have authority to permit GHG sources, and that 
jurisdiction will obtain authority by July 1, 2011 and in the 
meantime, does not expect large sources seeking permits for their 
GHGs. In addition, by the end of the first quarter of 2011, all but 
one more state will have made any necessary amendments to state or 
local law to ensure that permits are not required for GHG emissions 
below Tailoring Rule levels. 1 program with GHG permitting authority 
at the lower statutory levels has not yet determined how, and on 
which timeline, it will incorporate the Tailoring Rule thresholds 
into its state law.\65\
---------------------------------------------------------------------------

    \64\ In California's PSD program is administered in its entirety 
by local jurisdictions.
    \65\ McCarthy Declaration, p. 20, paragraph 98. There have been 
a few changes in the status of individual states since this time, 
but the overall picture remains the same. In no small part, the 
current state of EPA's implementation effort is attributable to the 
fact that EPA has been in close communication with almost every 
state and many other jurisdictions, along with multi-state 
organizations such as the National Association of Clean Air Agencies 
(NACAA). In addition to the letters that states have sent responding 
to the Tailoring Rule (the 60-day letters) and proposed SIP Call 
(the 30-day letters), EPA officials, primarily through the Regional 
offices, have had numerous communications with their state 
counterparts.

    Thus, under EPA's implementation program, (i) in every state, (a) 
only sources at or above the Tailoring Rule thresholds will be subject 
under federal law to obtain a PSD permit when they construct or modify 
as of January 2, 2011, and (b) only those same sources will be subject 
under state law to obtain a PSD permit when they construct or modify as 
of January 2, 2011 or very

[[Page 82447]]

soon thereafter; and (ii) in every state, except for Texas, as of 
January 2, 2011 or very soon thereafter, GHG sources that construct or 
modify will be able to receive permits when they need them, so that the 
sources will not face obstacles to constructing and modifying. Again, 
Texas has responded to EPA's implementation program in a manner that 
has resulted in its sources facing obstacles to constructing and 
modifying, as discussed next, which this rulemaking addresses.
5. EPA's Implementation Approach for Texas and Texas's Response
    The following describes the progress to date of implementing PSD 
for GHG emissions in Texas, based on extensive communications between 
EPA and TCEQ. It should be borne in mind, as noted earlier, that Texas 
is in the second of the three categories of states, that is, it has an 
approved PSD program that does not apply to GHGs-emitting sources.
a. Texas's 60-Day Letter
    Texas's 60-day letter provides the state's clearest articulation of 
its response to EPA's efforts to implement PSD for GHG-emitting sources 
at the Tailoring Rule thresholds beginning January 2, 2011. As noted 
previously, in the preamble to the final Tailoring Rule, EPA asked each 
state to send EPA a letter within 60 days to identify which category 
the state was in and what action the state intended to take. 
Specifically, with regard to sources in Category 2, EPA stated:

    In our proposed rule, we also noted that a handful of EPA-
approved SIPs fail to include provisions that would apply PSD to GHG 
sources at the appropriate time. This is generally because these 
SIPs specifically list the pollutants subject to the SIP PSD program 
requirements, and do not include GHGs in that list, rather than 
include a definition of NSR regulated pollutant that mirrors the 
federal rule, or because the 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 to notify the EPA Regional Administrator by letter, and 
to do so no later than August 2, 2010. This letter should indicate 
whether the state intends to undertake rulemaking to revise its 
rules to apply PSD to the 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 this final rule. For any state that lacks the 
ability to issue PSD permits for GHG sources consistent with this 
final rule, we intend to undertake a separate action to issue a SIP 
call, under CAA section 110(k)(5). As appropriate, we may also 
impose a FIP through 40 CFR 52.21 to ensure that GHG sources will be 
permitted consistent with this final rule.

75 FR 31582/3.
    With regard to states in category 3, EPA requested that in the 
states' 60-day letter,

The state should explain whether it 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 through interpretation, and 
without undertaking a regulatory or legislative process. If a state 
must undertake a regulatory or legislative process, then the letter 
should provide an estimate of the time needed to adopt the final 
rules. If a state chooses not to adopt EPA's meaning by 
interpretation, the letter should address whether the state has 
alternative authority to implement either our tailoring approach or 
some other approach that is at least as stringent, whether the state 
intends to use that authority. If the state does not intend to 
interpret or revise its SIP to adopt the tailoring approach or such 
other approach, then the letter should address the expected 
shortfalls in personnel and funding that will arise if the state 
attempts to carry out PSD permitting for GHG sources under the 
existing SIP and interpretation.
    For any state that is unable or unwilling to adopt the tailoring 
approach by January 2, 2011, and that otherwise is unable to 
demonstrate adequate personnel and funding, we will move forward 
with finalizing our proposal to limit our approval of the existing 
SIP.

75 FR 31582/3.
    On August 2, 2010, Texas submitted its 60-day letter, signed by the 
Texas Attorney General and the Chairman of the Texas Commission on 
Environmental Quality.\66\ In that letter, Texas responded specifically 
to EPA's request that ``any state * * * that does not believe its 
existing SIP provides authority to issue PSD permits to GHG sources to 
notify [EPA and] * * * indicate whether the state intends to * * * to 
revise its rules to apply PSD to * * * GHG sources'' by stating: 
``Texas has neither the authority nor the intention of interpreting, 
ignoring, or amending its laws in order to compel the permitting of 
greenhouse gas emission.'' Id. p. 1. Texas offered several explanations 
for this position. First, Texas noted:
---------------------------------------------------------------------------

    \66\ Letter from Bryan W. Shaw, Chairman, Texas Commission on 
Environmental Quality, and Greg Abbott, Attorney General of Texas, 
to Hon. Lisa Jackson, Administrator, U.S. Environmental Protection 
Agency, and Dr. Alfredo ``Al'' Armendariz, Regional Administrator, 
U.S. Environmental Protection Agency, Region 6 (August 2, 2010) 
(Texas's 60-day letter), included in the docket for this rulemaking.

    Texas' stationary source permitting program encompasses all 
``federally regulated new source review pollutants,'' including, 
``any pollutant that otherwise is subject to regulation under the 
[federal Clean Air Act].'' 30 Tex. Admin. Code Sec.  116.12(14)(D). 
The rules of the Texas Commission on Environmental Quality (TCEQ), 
like the EPA's rules, do not define the phrase ``subject to 
---------------------------------------------------------------------------
regulation.''

Id. p. 2. Texas then explained that it had several objections to 
interpreting the phrase ``subject to regulation'' to allow regulation 
of GHGs. For one thing, according to Texas, long-standing state case 
law precluded the term--and the PSD applicability provisions 
generally--from automatically incorporating newly regulated pollutants. 
Specifically, Texas said: \67\
---------------------------------------------------------------------------

    \67\ In this explanation, Texas was referring to the PSD 
applicability provision that Texas adopted under State law in 2006, 
which differed slightly from the applicability provision approved 
into the SIP in 1993.

* * *Texas' stationary source permitting program encompasses all 
``federally regulated new source review pollutants,'' including 
``any pollutant that otherwise is subject to regulation under the 
[federal Clean air Act].'' 30 Tex. Admin. Code Sec.  116.12(14)(D). 
This delegation of legislative authority to the EPA is limited 
solely to those pollutants regulated when Texas Rule 116.12 was 
adopted (1993) and last amended (2006). As the Texas Supreme Court 
has explained, ``The general rule is that when a statute is adopted 
by a specific descriptive reference, the adoption takes the statute 
as it exists at that time, and the subsequent amendment thereof 
would not be within the terms of the adopting act.'' Trimmer v. 
Carlton, 296 S.W. 1070 (1927). Thus, in order for Texas Rule 116.12 
to pass constitutional muster, it must be limited to adopting by 
reference the definition of ``subject to regulation'' in existence 
when Rule 116.12 was last amended in 2006. In other words, Texas 
Rule 116.12 cannot delegate authority to the EPA to define ``subject 
to regulation'' in 2010 to include pollutants that were not 
---------------------------------------------------------------------------
``subject to regulation'' in 2006.

Id. at 4.
    Secondly, Texas took the position that PSD applies only to NAAQS 
pollutants, and not non-NAAQS pollutants. Texas stated:

    The only sensible interpretation of the Clean Air Act is one 
that requires the EPA to promulgate a National Ambient Air Quality 
Standard (NAAQS) for greenhouse gases before the EPA can require PSD 
permitting of greenhouse gases.* * * EPA, however, has not developed 
a NAAQS for greenhouse gases. * * *

Id. at 4-5.

    Texas provided a more detailed exposition of its view that PSD 
applies

[[Page 82448]]

only to NAAQS pollutants in its challenges before the D.C. Circuit to 
EPA's GHG actions, where Texas moved to stay the Endangerment Finding, 
the Vehicle Rule, and the Johnson Memo Reconsideration (Texas's Motion 
to Stay Three GHG Actions).\68\ (In a separate motion, Texas also moved 
to stay the Tailoring Rule.\69\) There, Texas reiterated arguments 
based on the text of some of the CAA PSD provisions that, in Texas's 
view, lead to the conclusion that the CAA precludes applying PSD to 
non-NAAQS. As noted previously, these arguments were raised by 
commenters to the Tailoring Rule. Texas concluded that EPA's efforts to 
apply PSD to GHGs--
---------------------------------------------------------------------------

    \68\ ``State of Texas's Motion For A Stay Of EPA's Endangerment 
Finding, Timing Rule, and Tailpipe Rule,'' Coalition for Responsible 
Regulation v. EPA, No. 09-1322 (and consolidated cases) (September 
15, 2010). On December 10, 2010, the DC Circuit denied Texas's, and 
other parties', motions to stay. Order, Coalition for Responsible 
Regulation v. EPA, No. 09-1322 (and consolidated cases) (December 
10, 2010).
    \69\ ``State of Texas's Motion For A Stay Of EPA's Greenhouse 
Gas Tailoring Rule,'' Coalition for Responsible Regulation v. EPA, 
No. 09-1322 (and consolidated cases) (September 15, 2010) (Texas's 
Motion to Stay the Tailoring Rule).

Thus violates the CAA. Moreover, [EPA's] interpretation of the CAA 
is not entitled to deference because the text of the statute is 
unambiguous. Chevron, U.S.A. v. NRDC, 467 U.S. 837, 842 (1984) (the 
Agency must give effect to the unambiguously expressed intent of 
Congress). Accordingly, EPA's attempt to short cut the CAA's NAAQS 
process in order to regulate GHG emissions from stationary sources 
through PSD and Title V must fail.\70\
---------------------------------------------------------------------------

    \70\ Texas's Motion to Stay Three GHG Actions, at 27.

    At the close of its 60-day letter, Texas added, ``In the event a 
court concludes EPA's actions comport with the law, Texas specifically 
reserves and does not waive any rights under the federal Clean Air Act 
or other law with respect to the issues raised herein.'' \71\
---------------------------------------------------------------------------

    \71\ Id. at 5.
---------------------------------------------------------------------------

b. Texas's 30-Day Letter
    As noted previously, in the GHG PSD SIP call proposal, EPA proposed 
to establish, for each affected state, a deadline of 12 months from the 
date of signature of the final SIP call for submitting the corrective 
SIP revision, unless the state expressly advised EPA in its 30-day 
letter that it would not object to a shorter period. Texas submitted a 
30-day letter on October 4, 2010,\72\ and in that letter, voiced 
various objections to the proposed SIP call. Texas reiterated its view 
that PSD is limited to NAAQS pollutants, and therefore cannot apply to 
GHGs, and added that the SIP call is ``based on an impermissible 
interpretation of the [Clean Air Act]. EPA cannot * * * impose 
permitting through [the PSD] program without first setting a NAAQS. * * 
* '' Texas 30-day letter p. 2, 4. EPA responded to those objections in 
the final SIP call.\73\
---------------------------------------------------------------------------

    \72\ ``Texas Commission on Environmental Quality Comments on 
Actions to Ensure Authority to Issue Permits Under the Prevention of 
Significant Deterioration Program to Sources of Greenhouse Gas 
Emissions, Finding of Substantial Inadequacy and SIP Call, Docket ID 
No. EPA-HQ-OAR-2010-0107, FRL-9190-7 Federal Implementation Plan 
(FIP), Docket ID No EPA-HQ-OAR-2010-0107, FRL-9190-8 (October 4, 
2010) (Texas 30-day letter).
    \73\ Final SIP Call, 75 FR at 77706/2-3 and n. 18.
---------------------------------------------------------------------------

    In its 30-day letter, Texas went on to discuss the SIP submission 
schedule and FIP that EPA proposed, but Texas declined EPA's invitation 
to identify a specific deadline for the state's SIP submission. As a 
result, in the final SIP call, EPA was obliged to establish the default 
SIP submission deadline for Texas of December 1, 2011, in accordance 
with EPA's proposal. Because Texas has clearly stated that it does not 
intend, and, in its view, does not have the authority, to adopt a SIP 
revision to apply PSD to GHG-emitting sources, EPA expects to 
promulgate a FIP to do so. But, again, because Texas did not identify 
an earlier deadline for its SIP submittal, the earliest that EPA could 
promulgate such a FIP would be December 2, 2011. Under this approach, 
due to the position Texas has taken, absent further action, sources in 
Texas could not expect to have a permitting authority with authority to 
issue preconstruction permits for their GHG emissions until that 
December 2, 2011 date. As a result, absent further action, sources in 
Texas would face obstacles in constructing or modifying before that 
date.
    Texas's 30-day letter indicates that Texas was well aware of the 
consequences of its decision not to identify a specific deadline for 
its SIP submission, but had several reasons for making that decision. 
These included its view, again, that PSD applies only to NAAQS 
pollutants, and also that EPA was required to employ a different 
process for requiring a SIP revision, one that would have provided the 
state with more time to adopt a SIP revision. Texas 30-day letter at 4-
5. In addition, Texas asserted that there is no reason to allow EPA to 
promulgate an early FIP for the benefit of Texas's sources because, in 
Texas's view, for practical reasons, EPA could not issue those permits 
for the ``foreseeable future'' anyway. Specifically, Texas explained 
that EPA had not issued guidance for determining BACT, the key element 
of a PSD permit for a GHG source. Texas added that even after EPA 
issued that guidance, BACT will, in Texas's view, remain uncertain and 
contentious, and the guidance will be of limited usefulness until the 
control technology is proven. Id. at 5. Texas added that ``[i]ndustry 
should be particularly concerned about EPA's lack of resources and 
experience to issue these permits * * *.'' Id. at 6. Texas concluded, 
``The result of all this is that, even under a FIP, it is unlikely that 
construction of new major GHG sources or major modifications will 
commence in the foreseeable future.'' Id. at 6.
    It should be noted that Texas stated in filings before the D.C. 
Circuit in which it challenged the Tailoring Rule that it believed 167 
projects in Texas would be affected by the lack of a permitting 
authority during 2011.\74\
---------------------------------------------------------------------------

    \74\ Texas's Motion to Stay the Tailoring Rule, pp. 2, 16.
---------------------------------------------------------------------------

IV. Interim Final Action

    In this action, EPA is taking the following actions on an interim 
final basis to ensure that the PSD program in Texas complies with the 
CAA. First, EPA is determining that the Administrator's action 
approving the Texas SIP PSD program was in error under CAA section 
110(k)(6).
    Second, EPA, in the same manner as its action to approve the Texas 
SIP PSD program, is revising such action as appropriate without 
requiring any further submission from Texas. Id. The appropriate 
revision is to convert the previous approval to a partial approval and 
a partial disapproval. The partial approval applies to the extent that 
Texas's PSD program actually covers pollutants that are required to be 
included in PSD. The partial disapproval applies to the extent that 
Texas failed to address or to include assurances of adequate legal 
authority (required under CAA section 110(a)(2)(E)(i)) for the 
application of PSD to each newly regulated pollutant, including non-
NAAQS pollutants, under the CAA. Note that as an alternative basis to 
CAA section 110(k)(6) for taking these first two steps, EPA relies on 
its inherent administrative authority to reconsider its previous 
action.
    Third, in this rulemaking, EPA is promulgating a FIP to apply 
appropriate measures to assure that EPA's PSD regulatory requirements 
will apply to non-NAAQS pollutants that are newly subject to regulation 
under the CAA that the Texas PSD program does not already cover. At 
present, the only such pollutant is GHGs. Therefore, EPA's FIP will at 
present apply the EPA regulatory PSD program in the GHG portion of PSD

[[Page 82449]]

permits for GHG-emitting sources in Texas, and EPA commits to take 
whatever steps are appropriate if, in the future, Texas fails to apply 
PSD to another newly regulated non-NAAQS pollutant.
    In light of the immediate need of Texas's GHG-emitting sources for 
a permitting authority to process their permit applications for GHGs, 
EPA is promulgating this action immediately though an interim final 
rule, in reliance on the good cause exemption from notice-and-comment 
rulemaking under section 553(b)(3)(B) of the Administrative Procedures 
Act. This action will remain in effect until April 30, 2011. At the 
same time, EPA is initiating a notice-and-comment rulemaking that 
mirrors this one and that EPA expects to replace this one.

A. Determination That EPA's Previous Approval of Texas's PSD Program 
Was in Error

    In applying CAA section 110(k)(6), EPA must first ``determine[] 
that the Administrator's action approving * * * [the Texas PSD program] 
was in error * * *.'' EPA has determined that the Texas PSD program had 
flaws at the time Texas submitted it and EPA approved it, so that EPA's 
approval was in error.
1. Gaps in Texas's PSD Program Concerning Application of PSD to 
Pollutants Newly Subject to Regulation and Concerning Assurances of 
Legal Adequacy
    Texas's PSD program, although approved by EPA, contained important 
gaps concerning the application of PSD to pollutants newly subject to 
regulation, including non-NAAQS pollutants, and Texas's legal authority 
for doing so.
    a. Gaps in Texas's PSD Program at the Time of EPA Approval
    The application of the PSD program to pollutants newly subject to 
regulation, including non-NAAQS pollutants, is a key component of the 
program. As noted earlier, it is EPA's long-standing position that PSD 
applies to all such pollutants, and most of the states' PSD programs do 
apply to such pollutants automatically, as soon as those pollutants 
become subject to regulation.
    In particular, as noted previously, EPA had previously made clear 
to Texas, during 1980 and again during 1983, that PSD applies to non-
NAAQS pollutants. Because Texas's PSD program, unlike that of most 
states, did not automatically apply to such pollutants, it was 
important that during the time when Texas submitted SIP revisions and 
EPA acted on them, 1985-1992, that Texas address the application of PSD 
to pollutants newly subject to regulation.
    It is clear from the record that both Texas and EPA were well aware 
that the Texas PSD rules' IBR of EPA PSD regulatory requirements did 
not automatically update. Indeed, when EPA promulgated the NAAQS for 
PM10, a previously unregulated pollutant, and thereby 
subjected that pollutant to PSD for the first time, Texas revised its 
PSD rules to update the IBR and thereby assure that the state PSD 
program applied to PM10.
    Had Texas recognized that following approval of its PSD program, 
EPA would likely continue to subject previously unregulated pollutants 
to regulation, and therefore to PSD for the first time, Texas could 
have addressed how it would handle that situation. Texas could have 
provided both assurances that the state would apply PSD to such 
pollutants and information as to the method and timing for doing so. 
The most likely method would be through a separate SIP revision. The 
timing would most likely relate to the time necessary to adopt and 
submit a SIP revision. This timing issue is important because the 
sources emitting pollutants are subject to PSD under the CAA as soon as 
the pollutants become subject to regulation, but if the SIP PSD program 
does not automatically apply to the sources, then the state does not 
have authority to issue permits to the sources as soon as the sources 
become required to obtain the permits. By comparison, as noted earlier 
in this preamble, Texas committed to submit a SIP revision if a SIP 
inadequacy led to an increments violation.
    However, there is no indication in the record of Texas's SIP 
submissions that Texas specifically addressed this issue of the 
treatment of pollutants that would newly become subject to PSD after 
Texas's PSD SIP was approved, or that Texas provided any such 
information as to method or timing. Nor is there any indication in the 
record that during this 1985-92 period, EPA identified this issue and 
sought such information from Texas.
    Texas did provide the 1987 Texas PSD Commitments Statement, in 
which Texas agreed to ``implement and enforce the federal requirements 
for [PSD] as specified in [EPA regulations] by requiring all new major 
stationary sources and major modifications to obtain air quality 
permits as provided in TACB regulation VI, Control of Air Pollution by 
Permits for New Construction and Modification.'' However, this 1987 
statement does not specifically address the application of PSD to 
pollutants newly subject to regulation. It commits TACB to require 
``all new major stationary sources and major modifications to obtain 
air quality permits as provided in TACB regulation VI * * * '', but 
that regulation VI does not automatically update.
    Texas also provided the 1989 Texas PSD Commitments Letter, in which 
Texas generally committed ``to implement EPA requirements relative to 
[PSD].'' However, as quoted previously, this letter was phrased 
generally and did not specifically commit to apply PSD to pollutants 
newly subject to regulation, including non-NAAQS pollutants; nor did 
the letter identify the method and timing for doing so. Accordingly, we 
do not read this letter as a commitment by Texas to apply PSD to each 
newly regulated pollutant, including non-NAAQS pollutants, whether 
through a SIP revision or some other method, or on any particular time-
table. Moreover, although EPA approved the Texas PSD program in 
reliance on the letter, EPA indicated, in the final approval preamble, 
that the scope and binding impact of the letter were limited and that 
Texas retained discretion in implementing the PSD program.
    In addition, the rulemaking record for Texas's PSD program does not 
indicate that Texas provided, as required under CAA Sec.  
110(a)(2)(E)(i), assurances that Texas had adequate legal authority to 
carry out the PSD program, including, insofar as relevant for this 
rulemaking, applying PSD to pollutants newly subject to regulation, 
among them non-NAAQS pollutants. Some 15 years previously, in Texas's 
1972 submission of its original SIP, the state had provided assurances 
of legal authority to carry out the SIP, and EPA had approved those 
assurances. But the record for the PSD SIP submission does not indicate 
whether, or how, that legal authority applied to PSD applicability to 
such pollutants. In submitting the PSD SIP program, the TACB provided 
general references to legal authority, but the TACB did not indicate 
whether PSD applies to such pollutants either. Nor did the Texas PSD 
Commitments Letter specifically identify legal authority to apply PSD 
to such pollutants. Nor did the assurance of legal authority to apply 
the Texas PSD program to large municipal waste combustors, as required 
by the 1990 CAA Amendments, which assurances Texas apparently made in a 
1992 conference call with EPA Region 6 officials, address legal 
authority to apply PSD to pollutants that newly become subject to PSD 
as a result of EPA regulation.
    Therefore, the Texas PSD SIP submittal contained gaps: It did not

[[Page 82450]]

address the application of PSD to pollutants newly subject to 
regulation, including non-NAAQS pollutants; and it did not include any 
information concerning Texas's methods or timing for doing so. Nor did 
the program provide assurances that the state had adequate legal 
authority to apply PSD to such pollutants.
b. Recent Statements by Texas That Confirm the Gaps in Texas's PSD 
Program
    Texas has recently made several statements that confirm that at the 
time EPA approved the state's PSD program, that program had gaps.\75\
---------------------------------------------------------------------------

    \75\ As noted previously, Texas has also recently confirmed, in 
Texas' 60-day letter, that its PSD program does not automatically 
apply to pollutants newly subject to regulation.
---------------------------------------------------------------------------

(i). Gap Concerning Application of PSD to All Pollutants Newly Subject 
to Regulation, Including Non-NAAQS Pollutants
    First, Texas has made clear that it is not required to apply PSD to 
non-NAAQS pollutants that are newly subject to regulation, including 
GHGs. Specifically, in its August 2, 2010 60-day letter, Texas stated 
that it interprets the CAA PSD applicability provisions to apply to 
only NAAQS pollutants, and therefore to not include non-NAAQS 
pollutants, among them GHGs. Texas asserted that ``the only sensible 
interpretation of the CAA'' is that PSD applies to only NAAQS 
pollutants. Texas 60-day letter, p. 4. Similarly, in its court 
challenge to EPA's four GHG rules, Texas stated that its interpretation 
is mandated under Chevron step 1. There, Texas stated that EPA's 
``interpretation of the CAA [that PSD applies to non-NAAQS pollutants] 
is not entitled to deference because the text of the statute is 
unambiguous. Chevron, U.S.A. v. NRDC, 467 U.S. 837, 842 (1984) (the 
Agency must give effect to the unambiguously expressed intent of 
Congress).'' \76\ As noted previously, EPA responded at length to this 
argument in the Tailoring Rule and in EPA's response in the court 
challenge to EPA's GHG rules. EPA asserts that the CAA mandates that 
PSD apply to non-NAAQS pollutants, including GHGs, once they become 
subject to regulation; and EPA is not reopening this issue on the 
merits in this rulemaking.
---------------------------------------------------------------------------

    \76\ See Texas ``Motion to Stay Three GHG Actions'' 27, 
Coalition for Responsible Regulation v. EPA, No. 09-1322 (and 
consolidated cases).
---------------------------------------------------------------------------

    For present purposes, however, what is important is that Texas 
takes the position that under a Chevron step 1 reading of the CAA, the 
PSD program does not apply to non-NAAQS pollutants. This position has 
important ramifications for how Texas must interpret EPA's PSD 
applicability regulations and for the meaning of Texas's SIP PSD 
applicability provisions. As noted previously, under EPA's current 
regulations, PSD applies to ``any pollutant that otherwise is subject 
to regulation under the [CAA].'' 52.166(b)(49)(iv). These regulations 
have read this way since they were revised in EPA's 2002 NSR Reform 
Rule, and the regulations that predated them were phrased in much the 
same way: They applied PSD to ``any air pollutant regulated under the 
Clean Air Act.'' \77\ These regulations are based on the CAA PSD 
applicability requirements, and as a result, cannot apply PSD to any 
pollutants that the CAA does not itself subject to PSD. Accordingly, 
although Texas did not specifically address the meaning of EPA's 
regulations in its 60-day letter or court filings, it must be that in 
Texas's view, these EPA regulations may lawfully apply PSD to only 
NAAQS pollutants.
---------------------------------------------------------------------------

    \77\ See 43 FR 26380, 26403/3, 26406 (June 19, 1978) 
(promulgating 40 CFR 51.21(b)(1)(i)) and 42 FR 57479, 57480, 57483 
(November 3, 1977) (proposing 40 CFR 51.21(b)(1)(i)) (applying PSD 
requirements to a ``major stationary source'' and defining that term 
to include sources that emit specified quantities of ``any air 
pollutant regulated under the Clean Air Act'').
---------------------------------------------------------------------------

    Texas's SIP PSD applicability provisions, in turn, mirror EPA's. As 
quoted earlier, Texas's EPA-approved PSD applicability provisions apply 
PSD to ``any air pollutant subject to regulation under the [Clean Air] 
Act.'' Although these Texas provisions mirror EPA's regulatory 
applicability provisions--which, again, Texas appears to interpret as 
limited to applying PSD only to NAAQS pollutants--Texas is authorized 
to apply them more expansively than the EPA regulations. This is 
because a state must comply with CAA requirements as a minimum, but 
retains authority to impose additional or more stringent requirements. 
CAA section 116. Therefore, it is in accordance with Texas's view that 
the CAA and EPA regulatory requirements for PSD applicability be 
limited to NAAQS pollutants, that Texas would nevertheless consider 
itself authorized--but not required--to apply its PSD program to 
particular non-NAAQS pollutants. This position would allow Texas, in 
effect, to choose which non-NAAQS pollutants to subject to PSD.
    In fact, Texas has clearly stated that it does not consider itself 
required to apply its PSD program to one non-NAAQS pollutant in 
particular: GHGs. In its 60-day letter, Texas stated: ``Texas has 
neither the authority nor the intention of interpreting, ignoring, or 
amending its laws in order to compel the permitting of greenhouse gas 
emissions.'' Texas 60-day letter, at 1. Texas's letter went on to 
provide numerous reasons for why it did not believe EPA lawfully 
subjected GHGs to PSD; why, in any event, EPA was required to allow 
states more time before PSD would apply to GHG-emitting sources; and, 
as noted previously, why, in any event, Texas' SIP does not 
automatically update to apply PSD to newly regulated pollutants. Texas 
added, ``[i]n the event a court concludes EPA's actions comport with 
the law, Texas specifically reserves and does not waive any rights 
under the federal Clean Air Act or other law with respect to the issues 
raised here.'' Texas 60-day letter, p. 5. With this statement, Texas 
intimated that it may not consider itself obligated to apply PSD to 
GHGs even if a Court dismissed all of Texas's arguments and upheld all 
of EPA's actions that lead to the requirement to apply PSD to GHGs.
    With these two statements--that (i) ``Texas has neither the 
authority nor the intention of interpreting, ignoring, or amending its 
laws in order to compel the permitting of greenhouse gas emissions,'' 
and (ii) Texas would not necessarily consider itself bound by EPA 
requirements even if those requirements are upheld in Court--Texas has 
made clear that it does not view itself as obligated to apply PSD to 
GHGs under the CAA. Thus, these statements confirm Texas's view that it 
is not obligated to apply PSD to each newly regulated non-NAAQS, 
including, of course, GHGs.\78\
---------------------------------------------------------------------------

    \78\ It should be noted that Texas has applied its PSD program 
to non-NAAQS pollutants because Texas has IBR'd EPA's PSD regulatory 
requirements and those requirements apply to non-NAAQS pollutants. 
However, as noted earlier, Texas has made clear that it has no 
intention of submitting a SIP revision to apply PSD to GHGs. All 
this is consistent with the view described previously that Texas 
interprets its PSD applicability provision to authorize it to apply 
PSD to non-NAAQS pollutants at Texas's discretion, but that Texas 
does not view itself as required to apply PSD to non-NAAQS 
pollutants.
---------------------------------------------------------------------------

    These statements from Texas are significant because they confirm 
that Texas's PSD program, as approved by EPA, had an important gap: 
Texas did not address the applicability of its PSD program to 
pollutants newly subject to regulation, including non-NAAQS pollutants, 
such as by providing assurances that Texas would take action to apply 
PSD to such pollutants or describing the methods (such as SIP revision) 
and timing for doing so.

[[Page 82451]]

Moreover, Texas's recent statements are consistent with the view that 
Texas's silence on the subject at the time of the PSD SIP action means 
that Texas did not, at that time, view itself as obligated to apply PSD 
to each pollutant.\79\
---------------------------------------------------------------------------

    \79\ By the same token, we see nothing in these recent 
statements to indicate that Texas views itself as rescinding any 
pre-existing understanding that it would apply PSD to each such 
pollutant.
---------------------------------------------------------------------------

    In particular, Texas's recent statement that the CAA PSD provisions 
are clear by their terms, as a matter of Chevron step 1, that they do 
not apply to non-NAAQS pollutants, suggests that Texas would have 
viewed the CAA PSD provisions the same way at the time Texas submitted 
its PSD program. As noted earlier, the Texas Attorney General and the 
Chairman of the Texas Commission on Environmental Quality, who are the 
joint signatories of Texas's 60-day letter, are of the view that 
``[t]he only sensible interpretation of the Clean Act'' is that PSD 
applies only to NAAQS pollutants, and not non-NAAQS pollutants. Texas 
60-day letter, p. 4. Texas has confirmed its reading--and clarified 
that it is based on a Chevron step 1 interpretation--in filings before 
the D.C. Circuit. The fact that these high state officials view this 
reading of the CAA as, again, ``[t]he only sensible reading,'' 
indicates that in the past, Texas is less likely to have adopted the 
opposite reading, which would be that the CAA mandates that PSD applies 
to non-NAAQS pollutants. Statutory provisions whose meaning is clear on 
their face, at least to a particular reader, would not be expected to 
have had a different or uncertain meaning to that same reader at an 
earlier point in time. By the same token, Texas's insistence, noted 
previously, that it does not have the intention or authority to apply 
PSD to one non-NAAQS in particular, GHGs, suggests that Texas could 
well have expressed the same view, had the issue arisen, at the time 
EPA approved Texas's PSD program.
    We further note that Texas itself appears to take the position that 
an agency's present interpretation of its regulations should be 
presumed to have been the agency's past interpretation of those 
regulations, so that Texas's current interpretation that its PSD 
program does not apply to at least one non-NAAQS, GHGs, should be 
presumed to be Texas's interpretation of its PSD program in the past, 
including at the time Texas submitted its program as a SIP revision to 
EPA and EPA approved it. Specifically, in its 60-day letter, Texas 
noted that in the Tailoring Rule, EPA asked states to consider whether 
their SIPs that include the term ``subject to regulation'' can be 
interpreted to incorporate the Tailoring Rule thresholds on grounds 
that the state interprets that term as being sufficiently open-ended. 
75 FR 51,581/2. Texas stated,

    In the Tailoring Rule you have asked TCEQ to report to you by 
August 2, 2010, whether it would ``interpret'' the undefined phrase 
``subject to regulation'' in TCEQ Rule 116.12 consistent with the 
newly promulgated definition in EPA Rule 51.166, in all its 
specifics and particulars. That is, you have effectively requested 
that Texas agree to regulate greenhouse gases in the exact manner 
and method proscribed by the EPA.
    In other words, you have asked Texas to agree that when it 
promulgated its air quality permitting program rules for pollutants 
``subject to regulation'' in 1993, that Texas really meant to define 
the term ``subject to regulation'' as set forth in the dozens of 
paragraphs and subparagraphs of EPA Rule 51.166, first promulgated 
in 2010.

Texas 60-day letter, p. 3. In these statements, Texas appears to reveal 
Texas's own understanding of the circumstances under which Texas can be 
said to give the term ``subject to regulation'' a particular 
interpretation, and that is if Texas interpreted that term that same 
way at the time that Texas first promulgated the term in 1993. By that 
same logic, Texas's position, as stated in its 60-day letter, that it 
``has neither the authority nor the intention of interpreting, 
ignoring, or amending its laws in order to compel the permitting of 
greenhouse gas emissions'' would have applied to ``its laws''--
including the SIP PSD requirements--at the time that Texas adopted 
those rules. Therefore, it seems reasonable to conclude that just as 
Texas does not currently view its PSD program as applying to all newly 
regulated non-NAAQS pollutants, Texas did not, at the time it submitted 
and EPA approved its PSD program, view its PSD program as applying to 
all newly regulated non-NAAQS pollutants.

    By the same token, Texas's recent statements also confirm that the 
assurances Texas provided in its 1989 Texas PSD Commitments Letter 
cannot be interpreted as having committed Texas to apply PSD to all 
pollutants newly subject to regulation, including non-NAAQS pollutants. 
The assurances, by their terms, were phrased generally and did not 
address the application of PSD to such pollutants; and EPA, in the 
preamble for the final approval of Texas's PSD SIP, indicated that the 
scope and binding impact of the assurances were limited.\80\ Texas's 
recent direct statements that PSD does not cover non-NAAQS pollutants 
indicates that the generally phrased assurances in the letter, whatever 
they meant, did not mean that Texas would apply PSD to each newly 
regulated pollutant, including non-NAAQS pollutants.
---------------------------------------------------------------------------

    \80\ 57 FR at 28095/2, 28096/1.
---------------------------------------------------------------------------

    As a result, it stands to reason that at the time Texas submitted 
its PSD program, Texas did not view the CAA as mandating the 
application of PSD to at least certain pollutants newly subject to 
regulation, non-NAAQS pollutants. But at a minimum, it can be said that 
Texas's PSD program contained a gap: EPA required that PSD apply to 
each pollutant newly subject to regulation, including non-NAAQS 
pollutants; Texas's program applied only to pollutants already subject 
to regulation at the time Texas adopted its program, not to 
subsequently regulated pollutants, including non-NAAQS; and Texas did 
not address its program's applicability to such pollutants, including 
how or when its program would do so. This gap is significant because it 
facilitates Texas's current position, with which EPA disagrees, that 
PSD does not apply to non-NAAQS pollutants.
(ii). Gap Concerning Assurances of Adequate Legal Authority
    Texas's recent statement that it does not have the authority to 
apply PSD to GHG-emitting sources also highlights that Texas's PSD 
program had a gap in its failure to provide ``necessary assurances'' of 
adequate legal authority to carry out the PSD program. Although Texas's 
letter described obstacles to applying PSD to GHG-emitting sources 
without first adopting a SIP revision, and did not describe obstacles 
that precluded Texas from adopting a SIP revision if it chose to do so, 
Texas's direct statement that it does not have authority to apply PSD 
to GHGs at least casts doubt on whether Texas has such authority under 
any circumstances. Moreover, Texas has never indicated that there has 
been a recent change that places new limits on its legal authority to 
carry out the CAA.
    Accordingly, it is possible that at the time that Texas submitted 
its PSD program, Texas considered itself under limits in its legal 
authority to apply PSD to each non-NAAQS pollutant. At a minimum, in 
light of Texas's recent statement that it does not have authority to 
apply PSD to at least one newly regulated, non-NAAQS, GHGs, it is 
apparent that at the time that Texas submitted its PSD program, Texas 
did not provide the ``necessary assurances'' that it ``will have 
adequate * * * authority under State * * * law to carry out such 
implementation plan (and is

[[Page 82452]]

not prohibited by any provision of * * * State law from carrying out 
such implementation plan or portion thereof).'' CAA section 
110(a)(2)(E)(i) (emphasis added). ``[C]arrying out such implementation 
plan'' includes meeting all CAA requirements applicable to the plan 
and, in the case of a PSD SIP program, that includes applying PSD to 
each pollutant newly subject to regulation, including non-NAAQS 
pollutants.
2. Flaws in PSD Program
    The Texas PSD program's gaps--which are, again, that Texas did not 
address the applicability of PSD to all pollutants newly subject to 
regulation, including non-NAAQS pollutants; and Texas did not provide 
assurances of adequate legal authority to do so--mean that the state's 
PSD program has flaws. These flaws were present at the time that EPA 
approved Texas's PSD program. Moreover, these flaws are significant. 
They have figured prominently into the present situation in which EPA 
takes the position that Texas is obligated under the CAA and EPA 
regulations to apply its PSD program to a newly regulated pollutant--
GHGs--but Texas takes the opposite position.
3. EPA's Error in Approving Texas's PSD Program
    In this rulemaking, EPA is ``determin[ing]'' that EPA's action 
fully approving Texas's PSD program was ``in error'' within the meaning 
of CAA section 110(k)(6). This section contains EPA's basis for that 
determination.
a. CAA Section 110(k)(6) Error Correction
    Under the familiar Chevron two-step framework for interpreting 
administrative statutes, an agency must, under Chevron step 1, 
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, under Chevron step 2, 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, 842-43 
(1984).
    As noted previously, the term ``error'' in CAA section 110(k)(6) is 
not defined and, as a result, should be given its ordinary, everyday 
meaning. The dictionary definition of ``error'' is ``a mistake'' or 
``the state or condition of being wrong in conduct or judgment,'' 
Oxford American College Dictionary 467 (2d ed. 2007); or ``(1) an act, 
assertion, or belief that unintentionally deviates from what is 
correct, right or true (2) the state of having false knowledge * * * 
(4) a mistake * * * .'' Webster's II New Riverside University 
Dictionary 442 (Houghton Mifflin Co. 1988). These definitions are 
broad, and include all unintentional, incorrect or wrong actions or 
mistakes.
    Moreover, CAA section 110(k)(6) authorizes EPA to ``determine[]'' 
that its action was in error, and does not direct or constrain that 
determination in any manner. That is, the provision does not identify 
any factors that EPA must, or may not, consider in making the 
determination. This further indicates that this provision confers broad 
discretion upon EPA.
b. Gaps in Texas PSD Program
    As previously discussed, the Texas SIP PSD program was flawed 
because it contained gaps: Texas did not address the applicability of 
PSD to all pollutants newly subject to regulation, including non-NAAQS 
pollutants; and Texas did not provide assurances of adequate legal 
authority to do so. EPA did not address these gaps in its action on 
Texas SIP PSD program and instead, EPA fully approved the PSD program.
    Therefore, EPA's action in fully approving Texas's SIP PSD program 
in the face of these flaws was ``in error'' under CAA section 
110(k)(6), in accordance with Chevron step 1. ``[E]rror'' should be 
defined broadly to include any mistake, and approval of a flawed SIP is 
a mistake. Moreover, this flaw is significant because it affects the 
applicability of the PSD program to a pollutant and, as a result, to an 
entire set of sources.
    Even if the term ``error'' is not considered unambiguously to 
encompass, under Chevron step 1, the mistake that EPA made in approving 
the Texas PSD SIP, and instead is considered ambiguous on this 
question, then under Chevron step 2 EPA has sufficient discretion to 
determine that its approval action meets the definition of ``error.'' 
That is, under CAA section 110(k)(6), the breadth of the term ``error'' 
and of the authorization for EPA to ``determine[]'' when it made an 
error, mean that EPA has sufficient discretion to identify the gaps in 
Texas's PSD program as flawed and to identify EPA's action in approving 
Texas's PSD SIP in the face of those flaws as an error.
c. Alternative Basis for Error Correction
    As explained previously, we view Texas's recent statements that the 
CAA does not apply to non-NAAQS pollutants and that Texas has neither 
the authority nor the intention to apply PSD to GHGs as an indication 
that at the time Texas submitted its PSD program, Texas did not address 
the applicability its program to pollutants newly subject to regulation 
or provide assurances that it legal authority to do so. Absent specific 
evidence to the contrary, we are not inclined to conclude that at the 
time EPA approved the Texas PSD program in 1992, Texas in fact had 
filled those gaps--by, for example, providing assurances that it would 
apply PSD to each newly regulated non-NAAQS pollutants and had the 
legal authority to do so--but that more recently, Texas has failed to 
comply with those assurances. The CAA is based on a partnership between 
the states and the federal government, and we think it more consonant 
with the principles of that partnership to interpret the evidence as 
indicating that Texas never addressed the gap or provided the requisite 
assurances.
    However, in the alternative, if one were to conclude that during 
the course of Texas's submittal of, and EPA's action on, the state's 
PSD program, Texas did in fact provide the requisite assurances--in 
particular, that the 1989 Texas PSD Commitment Letter provided adequate 
assurances that Texas would apply PSD to pollutants newly subject to 
regulation, including non-NAAQS--so that no gaps in Texas's PSD program 
existed at that time, then Texas's recent statements would amount to 
failing to comply with, or even rescinding, those assurances. Under 
these circumstances, EPA would still consider its previous approval of 
Texas's PSD SIP to have been in error. This is because if one assumes 
that Texas provided the appropriate assurances, then one should also 
assume that EPA's approval would have been based on those assurances. 
In fact, EPA stated in approving the Texas PSD program that EPA was 
relying on the Commitments Letter. Rescinding or failing to comply with 
those assurances--if that is what Texas is considered to have done--
would eliminate the basis for EPA's approval. Compare CAA section 
110(k)(4) (authorizing EPA to approve a SIP revision based on a 
commitment by the state to adopt certain measures by a date certain, 
but if the state does not do so, then the conditional approval is 
treated as a disapproval).

B. Error Correction: Conversion of Previous Approval to Partial 
Approval and Partial Disapproval

    Under CAA section 110(k)(6), once EPA determines that its previous 
action approving a SIP revision was in error, EPA ``may * * * revise 
such action as

[[Page 82453]]

appropriate without requiring any further submission from the State. * 
* *'' Under this provision, EPA may revise its previous full approval 
of Texas's PSD program as appropriate, without requiring any submission 
from Texas.
    This provision offers EPA a great deal of discretion in revising 
its previous action. Indeed, the use of the term ``may'' means that 
this provision simply authorizes, and does not require, EPA to revise 
its previous action even after EPA has determined the error, and that, 
in turn, implies that EPA has discretion in determining how to revise 
its previous action. Moreover, if EPA does decide to revise its 
previous action, EPA may do so in any way that is ``appropriate.'' The 
term ``appropriate'' offers EPA significant latitude in deciding what 
type of revision to do.
    Here, EPA is revising its previous full approval of Texas's PSD 
program to be a partial approval and a partial disapproval. 
Specifically, EPA is retaining the approval of Texas's PSD program to 
the extent of the pollutants that the PSD program already does cover. 
This amounts to a partial approval. In addition, EPA is disapproving 
the Texas PSD program because it has not provided assurances that its 
PSD program will apply to each pollutant newly subject to regulation, 
including non-NAAQS pollutants, and because it has not provided 
assurances of adequate legal authority to do so.

C. Reconsideration Under CAA Section 301, Other CAA Provisions, and 
Case Law

    As an alternative to the error correction provision of CAA section 
110(k)(6), EPA is using its inherent administrative authority to 
reconsider its prior approval actions as a basis for revising its 
previous full approval of the Texas PSD program to a partial approval 
and partial disapproval. This authority lies in CAA section 301(a), 
read in conjunction with CAA section 110 and case law holding that an 
agency has inherent authority to reconsider its prior actions.
    As noted earlier, EPA approved the Texas PSD program by notice 
dated June 24, 1992, 57 FR 28,093, under the authority of CAA section 
110(k)(3)-(4). These provisions authorize EPA to approve a SIP 
submittal ``as a whole,'' ``approve [the SIP submittal] in part and 
disapprove [it] in part,'' or issue a ``conditional approval'' of a SIP 
submittal. CAA section 110(k)(3)-(4). EPA issued a full approval under 
CAA section 110(k)(3).
    In its approval action under that provision, EPA retained inherent 
authority to revise that action. The courts have found that an 
administrative agency has the inherent authority to reconsider its 
decisions, unless Congress specifically proscribes the agency's 
discretion to do so. See, e.g., Gun South, Inc. v. Brady, 877 F.2d 858, 
862 (11th Cir. 1989) (holding that agencies have implied authority to 
reconsider and rectify errors even though the applicable statute and 
regulations do not provide expressly for such reconsideration); 
Trujillo v. General Electric Co., 621 F.2d 1084, 1086 (10th Cir. 1980) 
(``Administrative agencies have an inherent authority to reconsider 
their own decisions, since the power to decide in the first instance 
carries with it the power to reconsider'').
    Section 301(a) of the CAA, read in conjunction with CAA section 
110(k)(3) and the case law just described, provides statutory authority 
for EPA's reconsideration action in this rulemaking. Section 301(a) 
authorizes EPA ``to prescribe such regulations as are necessary to 
carry out [EPA's] functions'' under the CAA. Reconsidering prior 
rulemakings, when necessary, is part of ``[EPA's] functions'' under the 
CAA--in light of EPA's inherent authority as recognized under the case 
law to do so--and as a result, CAA section 301(a) confers authority 
upon EPA to undertake this rulemaking.
    EPA finds further support for its authority to narrow its approval 
in APA section 553(e), which requires EPA to give interested persons 
``the right to petition for the issuance, amendment, or repeal of a 
rule;'' and CAA section 307(b)(1), which expressly contemplates that 
persons may file a petition for reconsideration under certain 
circumstances (at the same time that a rule is under judicial review). 
These authorizations for other persons to petition EPA to amend or 
repeal a rule suggest that EPA has inherent authority, on its own, to 
issue such amendment or repeal. This is because EPA may grant a 
petition from another person for an amendment to or repeal of a rule 
only if justified under the CAA, and if such an amendment or repeal is 
justified under the CAA, then EPA should be considered as having 
inherent authority to initiate the process on its own, even without a 
petition from another person.
    EPA recently used its authority to reconsider prior actions and 
limit its prior approval of a SIP in connection with California 
conformity SIPs. See, e.g., 68 FR 15720, 15723 (discussing prior action 
taken to limit approvals); 67 FR 69139 (taking final action to amend 
prior approvals to limit their duration); 67 FR 46618 (proposing to 
amend prior approvals to limit their duration, based on CAA sections 
110(k) and 301(a)). EPA had previously approved SIPs with emissions 
budgets based on a mobile source model that was current at the time of 
EPA's approval. Later, EPA updated the mobile source model. But, even 
though the model had been updated, emissions budgets would continue to 
be based on the older, previously approved model in the SIPs, rather 
than the updated model. To rectify this problem, EPA conducted a 
rulemaking that revised the previous SIP approvals so that the 
approvals of the emissions budgets would expire early, when the new 
ones were submitted by states and found adequate, rather than when a 
SIP revision was approved. This helped California more quickly adjust 
its regulations to incorporate the newer model. In this rule, EPA is 
using its authority to reconsider and limit its prior approval of SIPs 
generally in the same manner as it did in connection with California 
conformity SIPs.
    EPA is relying, in the alternative, on this inherent authority to 
convert its previous approval of Texas's PSD program to a partial 
approval and partial disapproval for the same reasons discussed 
previously in connection with the ``error'' correction provision of CAA 
section 110(k)(6). That is, EPA approved Texas's PSD program even 
though that program had significant flaws because Texas did not provide 
the requisite assurances that it would apply PSD to all pollutants 
newly subject to regulation, including non-NAAQS, and that Texas had 
adequate legal authority to do so.
    EPA's inherent authority to reconsider its previous action also 
supports revising its previous action in the same manner, and for the 
same reasons, as under CAA section 110(k)(6), as described earlier. 
That is, in light of the flaws in the Texas PSD program, EPA is 
revising EPA's previous full approval to be a partial approval (to the 
extent of the pollutants regulated under the CAA that are subject to 
Texas's PSD program) and a partial disapproval (to the extent Texas's 
program does not provide assurances that it will apply to pollutants 
newly subject to regulation, including non-NAAQS pollutants).
D. Relationship of This Action to GHG PSD SIP Call
    As noted previously, EPA has recently taken another action 
concerning Texas's PSD program as that program relates to GHGs: the GHG 
PSD SIP call, which we published by notice dated December 13, 2010, 75 
FR 77698 (December 13, 2010). This section describes the relationship 
of this error-correction/partial-

[[Page 82454]]

disapproval/FIP action to the SIP call. For convenience, the background 
for the SIP call, although described in detail earlier in this 
preamble, is reiterated here.
    EPA promulgated the SIP call under CAA section 110(k)(5), which 
provides:

    Whenever the Administrator finds that the applicable 
implementation plan for any area is substantially inadequate to * * 
* comply with any requirement of [the CAA], the Administrator shall 
require the State to revise the plan as necessary to correct such 
inadequacies. The Administrator * * * may establish reasonable 
deadlines (not to exceed 18 months after [notifying the state of the 
inadequacies] for the submission of such plan revisions.

In the SIP call, EPA made a finding that the PSD SIPs of each of 13 
states, including Texas, do not apply to GHG-emitting sources and 
therefore are ``substantially inadequate to * * * comply with [the PSD 
applicability] requirement[s]'' of the CAA. Accordingly, EPA required 
each state, including Texas, to submit a corrective SIP revision. EPA 
established a deadline for the SIP submittal for each state as 12 
months from the date of the SIP call, or December 1, 2011, unless the 
state indicated in its 30-day letter that it did not object to an 
earlier deadline. Each state for which EPA would finalize the SIP call 
submitted a 30-day letter, and each, except for Texas, indicated a date 
sooner than December 1, 2011. Texas did not indicate any particular 
date and, as a result, EPA established December 1, 2011 as Texas's 
deadline. In addition, EPA stated that if Texas or any of the other 
states failed to submit its corrective SIP revision by its deadline, 
EPA intended to promulgate a FIP immediately thereafter.
    The timing of the SIP call--both the time that EPA promulgated the 
SIP call and the deadlines it established for SIP submittal--was driven 
by the fact that the affected states did not have authority to issue 
PSD permits to GHG-emitting sources and as a result, those sources 
could face delays in construction and modification when they became 
subject to PSD as early as January 2, 2011. EPA designed the SIP call 
to maximize the opportunity of each affected state to assure that its 
sources would have a permitting authority available as of that date or 
a later date, if the state concluded that a later date would not leave 
its sources facing delays. EPA did so by allowing each state 
flexibility for its SIP submittal deadline.
    Each of the affected states except Texas responded with a plan that 
would assure that its sources would not confront permitting delays. 
Most states--seven of the 13--indicated they would not object to EPA's 
establishing a SIP submittal date of December 22, 2010, recognizing 
that as a practical matter, that meant that EPA would promulgate a FIP 
on December 23, 2010. The other five states indicated a later date, and 
again, one indicated a date as late as July 1, 2011. This means that 
purely as a legal matter, there will be no permitting authority in 
place in those states to issue GHG permits on January 2, 2011, when 
GHG-emitting sources become subject to PSD. Even so, the later dates 
were acceptable to each of the five states because (i) they intended to 
submit a SIP revision by their date, and (ii) they did not expect the 
lack of a permitting authority during the period before their deadline 
to place their sources at risk for delays in construction or expansion.
    Texas responded differently than the other states. In its 30-day 
letter, Texas did not indicate a particular date for its SIP submittal, 
and as a result, EPA, as we had proposed, established Texas's deadline 
at December 1, 2011. But shortly before submitting its 30-day letter, 
Texas stated, in its 60-day letter, that ``Texas has neither the 
authority nor the intention of interpreting, ignoring, or amending its 
laws in order to compel the permitting of greenhouse gas emission.'' 
\81\ Texas has never qualified this statement, and as a result, EPA 
reads this statement to indicate that Texas does not intend to submit a 
SIP revision as required under the SIP call.
---------------------------------------------------------------------------

    \81\ Texas's 60-day letter, p. 1.
---------------------------------------------------------------------------

    This means that a permitting authority for GHG-emitting sources 
would not be in place until EPA promulgated a FIP, no earlier than 
December 2, 2011. Importantly, Texas has indicated that this one-year 
delay in the availability of a permitting authority would, in fact, 
mean that under EPA's interpretation of the CAA, Texas's sources would 
face delays in constructing and modifying.\82\ Moreover, Texas 
indicated that during 2011, some 167 construction or modification 
projects would be affected,\83\ which are significantly more sources 
than any other state.
---------------------------------------------------------------------------

    \82\ Texas 30-day letter, at 5, 6; Texas ``Motion to Stay Three 
GHG Actions'' 40-41, Coalition for Responsible Regulation v. EPA, 
No. 09-1322 (and consolidated cases).
    \83\ See Texas ``Motion to Stay Three GHG Actions'' 41, 
Coalition for Responsible Regulation v. EPA, No. 09-1322 (and 
consolidated cases).
---------------------------------------------------------------------------

    Moreover, Texas's indication that it does not intend to submit a 
SIP revision, and that it does not consider its PSD program as being 
required to apply to non-NAAQS pollutants, including GHGs, have cast a 
spotlight on underlying flaws in Texas's fully approved PSD SIP, and 
that, in turn, has brought into play the error-correction provision in 
CAA section 110(k)(6). All this is discussed in detail earlier in this 
preamble, but to reiterate for convenience: CAA section 110(k)(6) 
provides, ``Whenever the Administrator determines that the 
Administrator's action approving * * * any [SIP] * * * was in error, 
the Administrator may * * * revise such action as appropriate.* * *'' 
Here, the Texas SIP was flawed at the time EPA approved it because it 
did not address, or assure adequate legal authority for, application of 
the PSD program to pollutants newly subject to regulation, including 
non-NAAQS pollutants. As a result, EPA has the authority to determine 
that its full approval of the SIP was ``in error'' and to convert that 
action to a partial approval/partial disapproval; and as a result of 
that, EPA is authorized to promulgate a FIP immediately.
    This is an important reason why EPA is proceeding with this error-
correction/partial-disapproval rulemaking at this time. By allowing EPA 
to implement a FIP immediately, instead of waiting until December, 
2011; EPA may act as the permitting authority in Texas beginning 
January 2, 2011, and in that capacity, allow Texas sources to avoid 
delays in construction or modification.
    With the present rulemaking, EPA has both (i) promulgated a SIP 
call and established a SIP deadline of December 1, 2011 for Texas, 
under CAA section 110(k)(5); and (ii) corrected its error in previous 
fully approving Texas's PSD program by converting that action to a 
partial approval and partial disapproval, under CAA section 110(k)(6), 
and then promulgating a FIP immediately under CAA section 110(c)(1)(B). 
For the reasons just discussed, each of these actions is fully 
justified under the applicable CAA provisions.
    Moreover, there is no preclusion against taking both of these 
actions with respect to Texas at this time, for the following reasons: 
First, the two actions are based on CAA provisions--CAA section 
110(k)(5) (SIP call), and section 110(k)(6) (error correction)--that 
overlap, so that it is to be expected that circumstances may arise in 
which both apply. If EPA approves a flawed SIP, then circumstances 
could well arise under which EPA has a basis for concluding both that 
(i) the SIP is ``substantially inadequate'' to meet a CAA requirement, 
under CAA section 110(k)(5); and (ii) EPA's action in approving the SIP 
was ``in error,'' under CAA section 110(k)(6). The same flaw in

[[Page 82455]]

the SIP would be the basis for each of those actions.\84\
---------------------------------------------------------------------------

    \84\ In contrast, situations could also arise in which EPA has a 
basis for imposing a SIP call but not issuing an error correction 
because the SIP currently has a substantial inadequacy but was not 
flawed at the time of its submittal and approval.
---------------------------------------------------------------------------

    This is case with EPA's two actions concerning Texas. As EPA stated 
in the SIP call, the basis for the finding of ``substantial 
inadequacy'' was the failure of Texas's approved SIP PSD program to 
apply to GHGs, which was rooted in the program's failure to apply 
pollutants newly subject to regulation. As EPA stated earlier in this 
preamble, the basis for the determination that EPA's previous full 
approval of Texas's SIP was ``in error'' was the gap in the SIP due to 
the SIP's failure to address, or assure that it has adequate legal 
authority for, the application to pollutants newly subject to 
regulation.\85\
---------------------------------------------------------------------------

    \85\ In this case, the substantial inadequacy for which EPA 
issued the SIP call, which was the PSD program's failure to apply to 
GHGs, is narrower than the flaw in the SIP for which EPA is issuing 
the error correction, which is the PSD program's failure to address, 
or assure legal authority for, application of PSD to all pollutants 
newly subject to regulation. In another case, it is conceivable that 
the opposite would be true, that the substantial inadequacy would be 
broader than the flaw in the SIP for which EPA issues the error 
correction. In that case, if EPA imposed a FIP after the deadline 
for SIP submittal related to the SIP call, the FIP would be broader 
than the FIP imposed after the disapproval related to the error 
correction.
---------------------------------------------------------------------------

    Second, each provision, by its terms, is discretionary to EPA, and 
neither provision precludes the application of the other. CAA section 
110(k)(5) applies ``[w]henever the Administrator finds'' that the SIP 
is substantially inadequate. CAA section 110(k)(6) applies ``[w]henever 
the Administrator determines'' that her previous action was in error. 
Neither provision references the other. Neither provision includes any 
requirement or limitation that constrains the application of the other 
at any time.
    Third, each provision serves a different purpose and when applied 
to this case--including in conjunction with the FIP provision in CAA 
section 110(c)(1)--leads to a different outcome, but each outcome is 
neither dependent on, or compromised by, the other outcome. CAA section 
110(k)(5), as applied in the current case, is focused on a present 
problem with the SIP, that is, a ``substantial [ ] inadequacy'' that 
presently exists. This provision mandates that EPA require a corrective 
SIP revision to address that inadequacy, but further provides that EPA 
must allow a reasonable deadline for the state to submit the SIP 
revision. In the GHG PSD SIP call, EPA allowed states to, in effect, 
choose within a range of deadlines. But if the state fails to submit 
the required SIP revision by its deadline, then EPA is required to 
promulgate a FIP under CAA section 110(c)(1)(A). CAA section 110(k)(6), 
as it applies in the current case, is focused on a past problem with 
SIP, that is, a flaw that existed at the time EPA approved the SIP, so 
that EPA's approval was ``in error.'' This provision authorizes EPA to 
convert the approval to a disapproval, but does not mandate that the 
State submit a new SIP revision. This is because the state has already 
submitted a SIP revision, the one that is flawed, and EPA has acted on 
it. Instead, EPA is required to promulgate a FIP under CAA section 
110(c)(1)(B), and EPA may do so immediately.
    Viewing the two provisions as applied here together: (i) CAA 
section 110(k)(5) allows EPA to exercise its discretion to make a 
finding that Texas's SIP is ``substantially inadequate,'' and then to 
establish a SIP submittal schedule for Texas, one that is consistent 
with whatever choice as to deadline Texas had available to it; and (ii) 
CAA section 110(k)(6) allows EPA to exercise its discretion to convert 
its previous approval of Texas's SIP, which EPA made ``in error,'' to a 
disapproval, and then to promulgate a FIP immediately. The requirement 
that Texas submit a corrective SIP revision and do so by a date 
certain--a date that Texas exercised some control over--serves the 
useful function of establishing a mechanism and a timeframe for Texas 
to address the substantial inadequacy in its PSD SIP.\86\ The immediate 
promulgation of a FIP serves the useful purpose of assuring the 
availability of a permitting authority as of January 2, 2011, so that 
Texas sources will not face delays in their plans to construct or 
modify. Importantly, the immediate promulgation of a FIP through this 
rulemaking does not compromise in any manner the SIP submittal deadline 
established for Texas through the SIP call. After EPA's promulgation of 
the FIP, Texas remains obligated to submit the corrective SIP revision 
by December 1, 2011. As soon as Texas does submit that SIP revision and 
EPA approves it, EPA will rescind the FIP. It is always the case that 
when EPA has promulgated a FIP of any type in a particular state, the 
state remains obligated to adopt a SIP revision. Nothing about a FIP 
impedes the state from doing so; and when the state does so and EPA 
approves the SIP revision, then EPA rescinds the FIP.
---------------------------------------------------------------------------

    \86\ We recognize that Texas has indicated that it does not 
intend to submit a SIP revision, but this does not eliminate the 
utility of establishing a SIP submittal schedule.
---------------------------------------------------------------------------

    It is true that one of the purposes of the SIP call, as applied 
here, is to allow states to in effect select an early FIP--by selecting 
an early SIP submittal date and then not submitting a SIP by that 
date--so as to assure the availability of a permitting authority for 
their sources by that early date. And it is further true that Texas, in 
its 30-day letter, chose not to select such an early date and, on the 
contrary, stated its opposition to a FIP; yet, in this present 
rulemaking, EPA is promulgating an immediate FIP for Texas. But this 
does not mean that the present rulemaking has compromised the SIP call 
or any choices made available to Texas in the SIP call. The focus of 
the SIP call, as it related to Texas, was the finding of a substantial 
inadequacy in Texas's PSD program, the imposition of a requirement for 
Texas to submit a corrective SIP revision, and--based on Texas's 
choice--the establishment of a deadline of December 1, 2011 for Texas 
to do so. The promulgation of an immediate FIP through the present 
rulemaking does not disturb that. Texas remains subject to the December 
1, 2011, SIP submittal schedule that EPA established for it, based on 
Texas's decision not to respond directly to EPA's request that Texas 
itself identify a deadline.\87\ Texas's expressed opposition to a FIP 
does not preclude EPA from imposing one as justified through the 
present rulemaking.
---------------------------------------------------------------------------

    \87\ In any event, to conclude that the promulgation of a FIP 
under this error-correction rulemaking compromised the SIP call 
rulemaking would be tantamount to concluding that the SIP call 
should somehow take priority over this error correction. There would 
be no basis for taking that position. Each action is fully 
justifiable in its own right. The process of completing one before 
the other does not give the first one a priority simply because it 
is first any more than that process would give the second a priority 
because the latter is more recent.
---------------------------------------------------------------------------

    It is also true that, as EPA stated in the SIP call, ``federalism 
principles * * * underlie the SIP call process and the SIP system as a 
whole,'' and that means that ``in the first instance, it is to the 
state to whom falls the responsibility of developing pollution controls 
through an implementation plan.'' 75 FR 77710/2. And it is further true 
that the immediate promulgation of a FIP through the present error-
correction action means that a FIP will be in place in Texas before the 
December 1, 2011 deadline established under the SIP call for Texas to 
adopt its SIP. However, imposition of the FIP is fully justified under 
this error-correction action, as discussed previously, and is essential 
to assure that Texas sources will not face delays

[[Page 82456]]

in construction or modification, a risk that Texas acknowledges will 
occur under EPA's interpretation of the applicable CAA requirements. In 
any event, Texas's statement that ``Texas has neither the authority nor 
the intention of interpreting, ignoring, or amending its laws in order 
to compel the permitting of greenhouse gas emission,'' \88\ as we read 
it, is tantamount to a direct statement that it does not intend to 
submit a GHG PSD SIP revision, and is a direct statement that it does 
not intend to require its sources to obtain permits for their GHG 
emissions. Accordingly, it is difficult to see how it could 
meaningfully be claimed that an early FIP, promulgated through this 
rulemaking, could displace any prerogatives Texas may have under the 
SIP call to develop its own SIP revision before the imposition of a FIP 
or to exercise control over the permitting of GHG emissions of its 
sources. Similarly, Texas has stated that it does not believe that 
EPA's FIP will be effective because, according to Texas, EPA will be 
unable to issue permits for a lengthy period due to uncertain over how 
to apply PSD requirements to GHG-emitting sources.\89\ Accordingly, it 
is difficult to see how it could meaningfully be claimed that a FIP, 
which Texas considers ineffective, could adversely affect Texas's 
interests.
---------------------------------------------------------------------------

    \88\ Texas 60-day letter, p. 1.
    \89\ Texas 30-day letter.
---------------------------------------------------------------------------

    It is also true that under the principles of federalism that 
underlie the SIP system, states exercise some discretion over controls 
for their industry, so that a state may impose more stringent controls 
than minimum CAA requirements. CAA section 116. But this discretion 
does not mean that Texas is authorized to create the circumstances 
under which its sources face delays in constructing or modifying and 
EPA is precluded from promulgating a FIP--when justified under this 
rulemaking--for the purpose of protecting those sources against such 
delays. Absent this action, Texas sources would face delays in 
construction and modification resulting from Texas's decision during 
the course of the SIP call to neither adopt a SIP promptly nor 
facilitate an early FIP. Those delays do not result from Texas's 
decision to impose more stringent controls than the CAA requires. On 
the contrary, Texas's action is inconsistent with one of the purposes 
of the PSD provisions, which is ``to insure that economic growth will 
occur in a manner consistent with the preservation of clean air 
resources.'' CAA section 160(3). EPA is justified in interpreting and 
applying CAA section 110(k)(6) to correct errors related to Texas's SIP 
PSD program in order to effectuate this purpose of PSD. The D.C. 
Circuit has held that the terms of the PSD provisions should be 
interpreted with the PSD purposes in mind, New York v. EPA, 413 F.3d 3, 
23 (DC Cir.), rehearing en banc den., 431 F.3d 801 (2005), and the same 
should be true of CAA section 110(k)(5) as applied to PSD requirements.

E. Relationship of This Rulemaking to Other States

    EPA is not, at this time, undertaking a similar error-correction 
rulemaking for any of the other states that are subject to the SIP 
call. EPA has discretion as to whether and when to undertake such a 
rulemaking, and each of the other states has chosen a course of action 
that at present appears to assure that its large GHG-emitting sources 
will have a permitting authority available when the sources need one, 
and therefore will not face delays in constructing or modifying. As a 
result, EPA has not inquired into whether any of these other states 
have flaws in their SIP PSD programs as Texas does.

V. Federal Implementation Plan

A. Authority To Promulgate a FIP

    In this rulemaking, EPA is promulgating a FIP to apply EPA's PSD 
regulatory program to GHG-emitting sources in Texas and to commit to 
take action as appropriate with respect to pollutants that become newly 
subject to regulation.
    The CAA authority for EPA to promulgate a FIP is found in CAA 
section 110(c)(1), which provides--

    The Administrator shall promulgate a Federal implementation plan 
at any time within 2 years after the Administrator * * * (B) 
disapproves a State implementation plan submission in whole or in 
part, unless the State corrects the deficiency, and the 
Administrator approves the plan or plan revision, before the 
Administrator promulgates such [FIP].

    As indicated earlier in this notice, EPA is partially disapproving 
Texas's PSD program by correcting EPA's previous full approval to be a 
partial approval and disapproval. Accordingly, under CAA section 
110(c)(1)(B), EPA is required to promulgate a PSD FIP for Texas.
    The FIP must be designed to address the flaws in Texas's PSD 
program. As discussed earlier in this preamble, the Texas PSD program 
contains significant gaps: It does not address, or provide assurances 
of adequate legal authority for, application to pollutants newly 
subject to regulation, including non-NAAQS pollutants. As a practical 
matter, at present, the only pollutant the program does not address is 
GHGs. Accordingly, the FIP applies the EPA regulatory PSD program to 
GHGs. In addition, the FIP commits to address pollutants that become 
newly subject to regulation, as appropriate.

B. Timing of FIP

    EPA is promulgating the FIP in this rulemaking, so that it takes 
effect immediately upon the partial disapproval. This timing for FIP 
promulgation is authorized under CAA section 110(c)(1), which 
authorizes us to promulgate a FIP ``at any time within 2 years after'' 
EPA disapproves a SIP submission in whole or in part. The quoted 
phrase, by its terms, establishes a two-year period within which EPA 
must promulgate the FIP, and provides no further constraints on timing. 
Accordingly, this provision gives EPA discretion to promulgate the FIP 
at any point in time within that two-year period, and in this 
rulemaking, EPA is promulgating the FIP immediately.
    The reason why we are exercising our discretion to promulgate the 
FIP immediately is to minimize any period of time during which larger-
emitting sources in Texas may be under an obligation to obtain PSD 
permits for their GHGs when they construct or modify, but no permitting 
authority is authorized to issue those permits. We believe that acting 
immediately is in the best interests of the regulated community. Note 
that for similar reasons, in EPA's recently promulgated SIP call, EPA 
stated that if a state failed to submit its required SIP revision by 
its deadline, EPA would immediately make a finding of failure to submit 
and immediately thereafter promulgate a FIP. 75 FR 53889/2.
    The lack of constraints in CAA section 110(c)(1)(B) stands in 
contrast to other CAA provisions that do impose requirements for the 
timing of proposals. See CAA sections 109(a)(1)(A), 111(b)(1)(B). In 
light of the lack of constraints, EPA was free to promulgate the FIP 
concurrently with the disapproval action.

C. Substance of GHG PSD FIP

1. Components of FIP
    The FIP consists of two components. The first mirrors the GHG PSD 
FIP that EPA is promulgating for seven states for which EPA issued the 
PSD GHG SIP call and, subsequently, issued a finding of failure to 
submit a required SIP submittal. Thus, this component of the FIP 
constitutes the EPA regulations found in 40 CFR 52.21, including the

[[Page 82457]]

PSD applicability provisions, with a limitation to assure that, 
strictly for purposes of this rulemaking, the FIP applies only to GHGs. 
Under the PSD applicability provisions in 40 CFR 52.21(b)(50), the PSD 
program applies to sources that emit the requisite amounts of any 
``regulated NSR pollutant[s],'' including any air pollutant ``subject 
to regulation.'' However, Texas's partially approved SIP already 
applies PSD to other air pollutants. To appropriately limit the scope 
of the FIP, EPA amends 40 CFR 52.21(b)(50), as incorporated into the 
Texas FIP, to limit the applicability provision to GHGs.
    We adopt this FIP because, as we stated in the proposed GHG PSD 
FIP--

It would, to the greatest extent possible, mirror EPA regulations 
(as well as those of most of the states). In addition, this FIP 
would readily incorporate the phase-in approach for PSD 
applicability to GHG sources that EPA has developed in the Tailoring 
Rule and expects to develop further through additional rulemaking. 
As explained in the Tailoring Rule, incorporating this phase-in 
approach--including Steps 1 and 2 of the phase-in as promulgated in 
the Tailoring Rule--can be most readily accomplished through 
interpretation of the terms in the definition ``regulated NSR 
pollutant,'' including the term ``subject to regulation.''
    In accordance with the Tailoring Rule, * * * the FIP would apply 
in Step 1 of the phase-in approach only to ``anyway sources'' (that 
is, sources undertaking construction or modification projects that 
are required to apply for PSD permits anyway due to their non-GHG 
emissions and that emit GHGs in the amount of at least 75,000 tpy on 
a CO2e basis) and would apply in Step 2 of the phase-in 
approach to both ``anyway sources'' and sources that meet the 
100,000/75,000-tpy threshold (that is, (i) sources that newly 
construct and would not be subject to PSD on account of their non-
GHG emissions, but that emit GHGs in the amount of at least 100,000 
tpy CO2e, and (ii) existing sources that emit GHGs in the 
amount of at least 100,000 tpy CO2e, that undertake 
modifications that would not trigger PSD on the basis of their non-
GHG emissions, but that increase GHGs by at least 75,000 tpy 
CO2e).
    Under the FIP, with respect to permits for ``anyway sources,'' 
EPA will be responsible for acting on permit applications for only 
the GHG portion of the permit, and the state will retain 
responsibility for the rest of the permit. Likewise, with respect to 
permits for sources that meet the 100,000/75,000-tpy threshold, our 
preferred approach--for reasons of consistency--is that EPA will be 
responsible for acting on permit applications for only the GHG 
portion of the permit, that the state permitting authorities will be 
responsible for the non-GHG portion of the permit, and EPA will 
coordinate with the state permitting authority as needed in order to 
fully cover any non-GHG emissions that, for example, are subject to 
BACT because they exceed the significance levels.

75 FR 53889/3 to 53,890/1.

    This formulation of the FIP is authorized because it is part of the 
``appropriate'' action EPA is authorized to take as part of EPA's 
correction of its previous, erroneous full approval, under CAA section 
110(k)(6).
    The second component of the FIP consists of a commitment that EPA 
will take such action as is appropriate to ensure that pollutants that 
become newly subject to regulation are subject to the FIP. If a 
pollutant becomes newly subject to regulation in the future, and if 
Texas does not take steps to subject it to its PSD program, then EPA 
will take the appropriate action.
2. Dual Permitting Authorities
    In the GHG PSD FIP proposal, commenters raised concerns about how 
having EPA issue the GHG portions of a permit while allowing states 
under a FIP to continue to be responsible for issuing the non-GHG 
portions of a PSD permit will work in practice. Commenters specifically 
identified the potential for a source to be faced with conflicting 
requirements and the need to mediate among permit engineers making BACT 
decisions.
    We well recognize that dividing permitting responsibilities between 
two authorities--EPA for GHGs and the state for all other pollutants--
will require close coordination between the two authorities to avoid 
duplication, conflicting determinations, and delays. We note that this 
situation is not without precedent. In many instances, EPA has been the 
PSD permitting authority but the state has accepted a delegation for 
parts of the PSD program, so that a source has had to go to both the 
state and EPA for its permit. In addition, all nonattainment areas in 
the nation are in attainment or are unclassifiable for at least one 
pollutant, so that every nonattainment area is also a PSD area. In some 
of these areas, the state is the permitting authority for nonattainment 
NSR and EPA is the permitting authority for PSD. As a result, there are 
instances in which a new or modifying source in such an area has needed 
a nonattainment NSR permit from the state and a PSD permit from EPA.
    EPA is working expeditiously to develop recommended approaches for 
EPA regions and affected states to use in addressing the shared 
responsibility of issuing PSD permits for GHG-emitting sources.
    In addition, we note that the concern over dual permitting 
authorities would become moot if Texas were either to submit and EPA 
approve a SIP revision that applies PSD to GHGs or request a delegation 
of permitting responsibility. If it did request and receive a 
delegation, it would be responsible for issuing both the GHG part and 
the non-GHG part of the permit, and that would moot concerns about 
split-permitting.

D. Period for GHG PSD FIP To Remain in Place

    In the FIP proposal, we stated our intention to leave any 
promulgated FIP in place for as short a period as possible, and to 
process any corrective SIP revision submitted by the state to fulfill 
the requirements of the SIP call as expeditiously as possible. 
Specifically, we stated:

    After we have promulgated a FIP, it must remain in place until 
the state submits a SIP revision and we approve that SIP revision. 
CAA section 110(c)(1). Under the present circumstances, we will act 
on a SIP revision to apply the PSD program to GHG sources as quickly 
as possible. Upon request of the state, we will parallel-process the 
SIP submittal. That is, if the state submits to us the draft SIP 
submittal for which the state intends to hold a hearing, we will 
propose the draft SIP submittal for approval and open a comment 
period during the same time as the state hearing. If the SIP 
submittal that the state ultimately submits to us is substantially 
similar to the draft SIP submittal, we will proceed to take final 
action without a further proposal or comment period. If we approve 
such a SIP revision, we will at the same time rescind the FIP.

75 FR 53889/2-3.

    We continue to have these same intentions. Thus, we reaffirm our 
intention to leave the GHG PSD FIP in place only as long as is 
necessary for the state to submit and for EPA to approve a SIP revision 
that includes PSD permitting for GHG-emitting sources. As discussed in 
more detail later in this preamble, EPA continues to believe that the 
states should remain the primary permitting authority.
    Specifically, EPA will rescind the FIP, in full or in part, if (i) 
Texas submits, and EPA approves, a SIP revision to apply Texas's PSD 
program to GHG-emitting sources, (ii) Texas provides assurances that in 
the future, it will apply its PSD program to all pollutants newly 
subject to regulation, including non-NAAQS pollutants, and (iii) Texas 
provides ``necessary assurances'' under CAA section 110(a)(2)(E)(ii) 
that it ``will have adequate * * * authority under State law'' to apply 
its PSD program to such pollutants.

E. Primacy of Texas's SIP process

    This action to partially approve and partially disapprove Texas's 
SIP PSD

[[Page 82458]]

program and to promulgate a FIP is secondary to our overarching goal, 
which is to assure that it will be Texas that will be the permitting 
authority. EPA continues to recognize that Texas is best suited to the 
task of permitting because the state and its sources have experience 
working together in the state PSD program to process permit 
applications. EPA seeks to remain solely in its primary role of 
providing guidance and acting as a resource for Texas as it makes the 
various required permitting decisions for GHG emissions.
    Accordingly, we are prepared to work closely with Texas to help it 
promptly develop and submit to us a SIP revision that extends its PSD 
program to GHG-emitting sources and that assures that the program will 
apply to each pollutant newly subject to regulation in the future. If 
Texas submits such a SIP revision, we intend to promptly act on it, and 
if we approve it, then we intend to rescind the FIP immediately. Again, 
EPA's goal is to have in place in Texas the necessary permitting 
authority by the time businesses seeking construction permits need to 
have their applications processed and the permits issued--and to 
achieve that outcome by means of engaging with Texas directly through a 
concerted process of consultation and support.
    EPA is taking up the additional task of partially disapproving 
Texas's PSD program and promulgating the FIP at this time only because 
the Agency believes it is compelled to do so by the need to assure 
businesses, to the maximum extent possible and as promptly as possible, 
that a permitting authority is available to process PSD permit 
applications for GHG-emitting sources once they become subject to PSD 
requirements on January 2, 2011. At the same time, we invite Texas to 
accept a delegation of authority to implement the FIP, so that it will 
still be the state that processes the permit applications, albeit 
operating under federal law.

VI. Interim Final Rule, Good Cause Exception

    EPA is issuing this action as an interim final rule. As an interim 
final rule, this action is time-limited. It will be effective from the 
date of signature until the earlier of April 30, 2011 or the date that 
EPA promulgates final rules on its proposals for (i) a partial approval 
and partial disapproval of Texas's PSD SIP and (ii) a FIP for Texas's 
PSD program and those final rules take effect.
    The present rule is effective upon publication, without first 
undergoing notice and comment. Under APA section 553, a federal agency 
generally must provide for public notice and comment prior to 
finalizing an agency rule. However, this obligation is excused, under 
APA section 553(b)(3)(B), ``when the agency for good cause finds (and 
incorporates the finding and a brief statement of reasons therefore in 
the rules issued) that notice and public procedure thereon are 
impracticable, unnecessary, or contrary to the public interest.'' While 
the good cause exception is to be narrowly construed, Utility Solid 
Waste Activities Group v. Environmental Protection Agency, 236 F.3d 
749, 754 (DC Cir. 2001), it is also ``an important safety valve to be 
used where delay would do real harm.'' U.S. Steel Corp. v. U.S. 
Environmental Protection Agency, 595 F.2d 207, 214 (5th Cir. 1979). 
Notice and comment is impracticable where ``an agency finds that due 
and timely execution of its functions would be impeded by the notice 
otherwise required.'' Utility Solid Waste Activities Group, 236 F.3d at 
754. Notice and comment is contrary to the public interest where ``the 
interest of the public would be defeated by any requirement of advance 
notice.'' Id. at 755.
    Notice and comment here would be contrary to the public interest. 
As discussed previously, major stationary sources of GHG emissions will 
be subject to PSD permitting requirements as of January 2, 2011, a date 
which is rapidly approaching. As of that date, no major stationary 
source emitting GHG at or above the levels set in the Tailoring Rule 
will be able to construct or modify without first obtaining a permit 
for its GHG emissions. In the absence of this rule, such sources will 
have no permitting authority from which to obtain such a permit. 
Without a permitting authority in place, sources would be subject to 
delays in construction or modification, causing economic harm to those 
sources and to others secondarily affected.
    Specifically, the State of Texas has estimated that 167 sources 
will require GHG permits in 2011.\90\ This is a substantial number of 
entities and the economic harm that they face as a result of permitting 
delays could affect a substantial number of related entities, 
employees, shareholders, and the public.
---------------------------------------------------------------------------

    \90\ ``State Of Texas's Motion for Stay of EPA's Endangerment 
Finding, Time Rule and Tailpipe Rule,'' Coalition for Responsible 
Regulation v. EPA, No. 09-1322 (and consolidated cases) at 41.
---------------------------------------------------------------------------

    This rule serves the necessary function of ensuring that a 
permitting authority is available to issue permits for these sources, 
and thus that large sources in Texas do not face a long delay in their 
ability to construct or modify. The public interest would certainly be 
hindered if EPA did not act now to ensure that economic progress is not 
impeded by a lack of access to an authorized permitting authority.
    The good cause exception also applies here because of the 
impracticability of notice and comment. EPA only recently became aware 
that no GHG PSD permitting authority would be authorized to issue 
permits to Texas sources on January 2, 2011, and thus had insufficient 
time to seek public comment before acting. As discussed previously, 
Texas submitted its 60-day letter to EPA on August 2, 2010; it 
submitted its Motion to Stay Three GHG Actions on September 15, 2010; 
and it submitted its 30-day letter to EPA on October 4, 2010. It was 
only after having received and analyzed all of these recent documents 
that it became clear that, due to underlying flaws in the Texas SIP PSD 
program and to Texas's position regarding amending its SIP or seeking a 
FIP, all as described earlier, no permitting authority had authority to 
issue GHG PSD permits as of January 2, 2011, and that there was no 
other way besides this rulemaking action to ameliorate that situation 
in a timely manner. The EPA's agency functions would be compromised if 
it must impose legal obligations on sources when sources have no legal 
means to fulfill those obligations. In light of the limited time frame 
and the harmful effects on sources if this action is delayed, notice 
and comment is impracticable.
    In addition, the public has had and will have some opportunity to 
comment. The public was given the opportunity to comment on some of the 
issues in this action in response to proposals for the Tailoring Rule 
and the GHG PSD SIP call. This rule is also only an interim rule; the 
public will be given full opportunity to comment on the permanent rule 
that EPA is concurrently proposing, which mirrors this rule. By issuing 
this rule as an interim final rule, paired with a comment period on the 
proposal for more permanent action, EPA is providing as much 
opportunity for notice and comment as possible on the issues presented 
by this rule, and is striving to replace this rule with a rule 
encompassing that further comment as soon as is reasonably possible.
    For the same reasons cited earlier, EPA finds that there is good 
cause for this rule to take immediate effect. In addition, since this 
is not a major rule under the Congressional Review Act, the 60-day 
delay in effective date

[[Page 82459]]

required for major rules under the CRA does not apply.
    EPA is taking this action to do an error correction under CAA 
section 110(k)(6) ``in the same manner as [EPA's previous] approval'' 
of the Texas PSD program. The term ``in the same manner'' is not 
defined by statute, and it therefore takes on its ordinary, everyday 
meaning. It is a broad term, and thus undergoing any proper type of 
rulemaking process should be considered to be ``in the same manner'' as 
undergoing a proper rulemaking process of any other type. Both the 
original approval of Texas's SIP and this action are rulemakings, 
conducted in accordance with the rulemaking process. It is immaterial 
that the original approval underwent notice and comment, and this 
action is subject to the good cause exception, since both of these 
processes are provided for by the prescribed agency rulemaking process.

VII. Statutory and Executive Order 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.

B. Paperwork Reduction Act

    This action does not impose any new information collection burden. 
The OMB has previously approved the information collection requirements 
contained in the existing regulations for PSD (see, e.g., 40 CFR 52.21) 
under the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et 
seq. and has assigned OMB control number 2060-0003. The OMB control 
numbers for EPA's regulations in 40 CFR are listed in 40 CFR part 9.

C. Regulatory Flexibility Act

    This interim final rule is not subject to the Regulatory 
Flexibility Act (RFA) which generally requires an agency to prepare a 
regulatory flexibility analysis for any rule that will have a 
significant economic impact on a substantial number of small entities. 
The RFA applies only to rules subject to notice-and-comment rulemaking 
requirements under the APA or any other statute. This rule is not 
subject to notice-and-comment requirements under the APA or any other 
statute because, although the rule is subject to the APA, the agency 
has invoked the ``good cause'' exemption under 5 U.S.C. 553(b); 
therefore, it is not subject to the notice and comment requirement.
    Notwithstanding the previous conclusion, EPA is publishing a 
proposed rule in this Federal Register that mirrors this interim final 
rule, and the applicability of the RFA is addressed further in that 
proposed rule.

D. Unfunded Mandates Reform Act

    This action contains no federal mandates under the provisions of 
Title II of the Unfunded Mandates Reform Act of 1995 (UMRA, 2 U.S.C. 
1531-1538) for state, local or tribal governments or the private 
section. The action imposes no enforceable duty on any state, local or 
tribal governments or the private sector. With this action, EPA is only 
revising its previous approval of the Texas PSD SIP to be a partial 
approval and partial disapproval and promulgating a FIP to address the 
deficiencies as authorized by the CAA. Thus, this rule is not subject 
to the requirements of sections 202 or 205 of UMRA.
    This action 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.

E. Executive Order 13132--Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on Texas, on the relationship between the 
national government and Texas, or on the distribution of power and 
responsibilities among the various levels of government, as specified 
in Executive Order 13132. With this action, EPA is only revising its 
previous approval of the Texas PSD SIP to be a partial approval and 
partial disapproval and promulgating a FIP to address the deficiencies 
as authorized by the CAA. 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 is specifically soliciting comment on the proposed 
rule also published in this Federal Register that mirrors this interim 
final rule.

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

    This action does not have tribal implications, as specified in 
Executive Order 13175 (65 FR 67249, November 9, 2000). In this action, 
EPA is not addressing any tribal implementation plans. This action is 
limited to Texas's PSD SIP. Thus, Executive Order 13175 does not apply 
to this action.

G. Executive Order 13045--Protection of Children From Environmental 
Health Risks 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 EPA is only revising its previous approval of the Texas 
PSD SIP to be a partial approval and partial disapproval and 
promulgating a FIP to address the deficiencies as authorized by the 
CAA.

H. Executive Order 13211--Actions Concerning Regulations 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. With this action, EPA is only revising 
its previous approval of the Texas PSD SIP to be a partial approval and 
partial disapproval and promulgating a FIP to address the deficiencies 
as authorized by the CAA.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law 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. NTTAA directs EPA to provide 
Congress, through OMB, explanations when the Agency decides not to use 
available and applicable voluntary consensus standards.
    This rulemaking does not involve technical standards. Therefore, 
EPA is not considering the use of any voluntary consensus standards.

[[Page 82460]]

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

    Executive Order 12898 (59 FR 7629, February 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 U.S.
    EPA has determined that this interim final rule will not have 
disproportionately high and adverse human health or environmental 
effects on minority or low-income populations because it does not 
affect the level of protection provided to human health or the 
environment. With this action, EPA is only revising its previous 
approval of the Texas PSD SIP to be a partial approval and partial 
disapproval and promulgating a FIP to address the deficiencies as 
authorized by the CAA.

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. Section 808 allows the issuing agency to 
make a rule effective sooner than otherwise provided by the CRA if the 
agency makes a good cause finding that notice and public procedure is 
impracticable, unnecessary, or contrary to the public interest. This 
determination must be supported by a brief statement, 5 U.S.C. 808(2). 
As stated previously, EPA has made such a good cause finding, including 
the reasons therefore, and established an effective date of December 
30, 2010. EPA will submit a report containing this rule and other 
required information to the United States Senate, the United States 
House of Representatives, and the Comptroller General of the United 
States prior to publication of the rule in the Federal Register. This 
action is not a ``major rule'' as defined by 5 U.S.C. 804(2).

VIII. Judicial Review

    Section 307(b)(1) of the CAA specifies which Federal Courts of 
Appeal have jurisdiction to hear petitions for review of which final 
actions by EPA. This section provides, in part, that petitions for 
review must be filed in the Court of Appeals for the District of 
Columbia Circuit: (i) When the agency action consists of ``nationally 
applicable regulations promulgated, or final actions taken, by the 
Administrator,'' or (ii) when such action is locally or regionally 
applicable, if ``such action is based on a determination of nationwide 
scope or effect and if in taking such action the Administrator finds 
and publishes that such action is based on such a determination.''
    This rule is based on a determination of nationwide scope or 
effect. Texas's response to the SIP call--including Texas's statements 
that it does not intend to submit a SIP revision and its decision not 
to identify a SIP submittal deadline, which have placed its sources at 
risk for delays in construction or modification--led us to determine 
that we should examine whether there may be a flaw in Texas's SIP that 
was present at the time of our approval. We then conducted a closer 
inquiry and on the basis of that, we are concluding that in fact a flaw 
was present. As a result, we are authorized to undertake an error 
correction, as we are doing in this rulemaking. For all other states 
subject to the SIP call, their response to the SIP call--which did not 
raise the concerns Texas's did and which assured that their sources 
would not be at risk for delays in construction or modification--lead 
us to determine that it was not necessary to examine further whether 
their SIPs were flawed at the time we approved them. That 
determination--whether to examine the SIPs further--is a determination 
of nationwide scope or effect because it affected Texas and the 12 
other states subject to the SIP call. Further indication that this 
determination of nationwide scope or effect is that EPA is making it as 
part of the complex of rules EPA has promulgated to implement the GHG 
PSD program for each of the states in the nation. Those rules include 
(i) the Tailoring Rule and the Johnson Memo Reconsideration, which 
revise EPA regulations to incorporate the Tailoring Rule thresholds, 
and which apply in each state that does not have an approved SIP PSD 
program, and therefore operates under EPA's regulations; (ii) the SIP 
call, which applies in each state that has an EPA-approved SIP PSD 
program but does not apply that program to GHG-emitting sources; and 
(iii) the PSD Narrowing rule, which applies in each state that has an 
EPA-approved SIP PSD program that does apply to GHG-emitting sources.
    Thus, under section 307(b)(1) of the Act, judicial review of this 
final action is available by filing of a petition for review in the 
U.S. Court of Appeals for the District of Columbia Circuit by February 
28, 2011.

IX. Statutory Authority

    The statutory authority for this action is provided by sections 
101, 110, 114, 116, 160-169, and 301 of the CAA as amended (42 U.S.C. 
7401, 7410, 7414, 7416, 7470-7479, and 7601).

List of Subjects in 40 CFR Part 52

    Air pollution control, Carbon dioxide, Carbon dioxide equivalents, 
Carbon monoxide, Environmental protection, Greenhouse gases, 
Hydrofluorocarbons, Incorporation by reference, Intergovernmental 
relations, Lead, Methane, Nitrogen dioxide, Nitrous oxide, Ozone, 
Particulate matter, Perfluorocarbons, Reporting and recordkeeping 
requirements, Sulfur hexafluoride, Sulfur oxides, Volatile organic 
compounds.

    Dated: December 23, 2010.
Lisa P. Jackson,
Administrator.

0
For the reasons set out in the preamble, title 40, chapter I of the 
Code of Federal Regulations is amended as follows:

PART 52--[AMENDED]

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

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

0
2. Section 52.2303 is amended by adding paragragh (d) to read as 
follows:

Sec.  52.2303  Significant deterioration of air quality.

* * * * *
    (d)(1) The Texas PSD SIP is partially disapproved as of December 
30, 2010 because the Texas PSD SIP fails to apply to pollutants newly 
subject to regulation, including the pollutant greenhouse gases (GHGs) 
from stationary sources described in Sec.  52.21(b)(49)(iv).
    (2) The requirements of sections 160 through 165 of the Clean Air 
Act are not met to the extent the plan, as approved, does not apply 
with respect to emissions of pollutants subject to regulation under the 
Clean Air Act, including the pollutant GHGs from certain stationary 
sources as of January 2, 2011. Therefore, from January 2, 2011 through 
April 30, 2011, the provisions of Sec.  52.21 except paragraph (a)(1) 
are hereby made a part of the plan for the

[[Page 82461]]

pollutant GHGs from stationary sources described in Sec.  
52.21(b)(49)(iv). In addition, the United States Environmental 
Protection Agency shall take such action as is appropriate to assure 
the application of PSD requirements to any other pollutants that become 
subject to regulation under the federal Clean Air Act for the first 
time after January 2, 2011.
    (3) For purposes of this section, the ``pollutant GHGs'' refers to 
the pollutant GHGs, as described in Sec.  52.21(b)(49)(i).

[FR Doc. 2010-32786 Filed 12-29-10; 8:45 am]
BILLING CODE 6560-50-P