Document ID: EPA-R06-OAR-2005-TX-0025-0368
Agency: epa
Document Type: Rule
Title: TX031.369 Approval and Promulgation of Implementation Plans: Texas; Revisions to the New Source Review State Implementation Plan; Modification of Existing Qualified Facilities Program and General Definitions
Posted Date: 2010-04-14T04:00Z

[Federal Register: April 14, 2010 (Volume 75, Number 71)]
[Rules and Regulations]               
[Page 19467-19493]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14ap10-22]                         

[[Page 19467]]

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Part II

Environmental Protection Agency

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40 CFR Part 52

Approval and Promulgation of Implementation Plans; Texas; Revisions to 
the New Source Review (NSR) State Implementation Plan (SIP); 
Modification of Existing Qualified Facilities Program and General 
Definitions; Final Rule

[[Page 19468]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R06-OAR-2005-TX-0025; FRL-9135-7]

 
Approval and Promulgation of Implementation Plans; Texas; 
Revisions to the New Source Review (NSR) State Implementation Plan 
(SIP); Modification of Existing Qualified Facilities Program and 
General Definitions

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final Rule.

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SUMMARY: EPA is taking final action to disapprove revisions to the SIP 
submitted by the State of Texas that relate to the Modification of 
Existing Qualified Facilities (the Qualified Facilities Program or the 
Program). EPA is disapproving the Texas Qualified Facilities Program 
because it does not meet the Minor NSR SIP requirements nor does it 
meet the NSR SIP requirements for a substitute Major NSR SIP revision.
    EPA is also approving three definitions that are severable from the 
Qualified Facilities submittals. These three definitions we are 
approving are, ``grandfathered facility,'' ``maximum allowable emission 
rate table (MAERT),'' and ``new facility.'' Moreover, we are making an 
administrative correction to the SIP-approved definition of 
``facility.''
    We are taking this action under section 110, part C, and part D of 
the Federal Clean Air Act (the Act or CAA).

DATES: This rule is effective on May 14, 2010.

ADDRESSES: EPA has established a docket for this action under Docket ID 
No. EPA-R06-OAR-2005-TX-0025. All documents in the docket are listed on 
the http://www.regulations.gov Web site. Although listed in the index, 
some information is not publicly available, e.g., confidential business 
information or other information whose disclosure is restricted by 
statute. Certain other material, such as copyrighted material, is not 
placed on the Internet and will be publicly available only in hard copy 
form. Publicly available docket materials are available either 
electronically through http://www.regulations.gov or in hard copy at 
the Air Permits Section (6PD-R), Environmental Protection Agency, 1445 
Ross Avenue, Suite 700, Dallas, Texas 75202-2733. The file will be made 
available by appointment for public inspection in the Region 6 FOIA 
Review Room between the hours of 8:30 a.m. and 4:30 p.m. weekdays 
except for legal holidays. Contact the person listed in the FOR FURTHER 
INFORMATION CONTACT paragraph below to make an appointment. If 
possible, please make the appointment at least two working days in 
advance of your visit. There will be a 15 cent per page fee for making 
photocopies of documents. On the day of the visit, please check in at 
the EPA Region 6 reception area at 1445 Ross Avenue, Suite 700, Dallas, 
Texas.
    The State submittal, which is part of the EPA record, is also 
available for public inspection at the State Air Agency listed below 
during official business hours by appointment: Texas Commission on 
Environmental Quality, Office of Air Quality, 12124 Park 35 Circle, 
Austin, Texas 78753.

FOR FURTHER INFORMATION CONTACT: Mr. Stanley M. Spruiell, Air Permits 
Section (6PD-R), Environmental Protection Agency, Region 6, 1445 Ross 
Avenue, Suite 700, Dallas, Texas 75202-2733, telephone (214) 665-7212; 
fax number 214-665-7263; e-mail address spruiell.stanley@epa.gov.

SUPPLEMENTARY INFORMATION: Throughout this document, the following 
terms have the meanings described below:
     ``we,'' ``us,'' and ``our'' refer to EPA.
     ``Act'' or ``CAA'' means Federal Clean Air Act.
     ``40 CFR'' means Title 40 of the Code of Federal 
Regulations--Protection of Environment.
     ``SIP'' means State Implementation Plan as established 
under section 110 of the Act.
     ``NSR'' means new source review, a phrase intended to 
encompass the statutory and regulatory programs that regulate the 
construction and modification of stationary sources as provided under 
CAA section 110(a)(2)(C), CAA Title I, parts C and D, and 40 CFR 51.160 
through 51.166.
     ``Minor NSR'' means NSR established under section 110 of 
the Act and 40 CFR 51.160.
     ``Major NSR'' means any new or modified source that is 
subject to NNSR and/or PSD.
     ``NNSR'' means nonattainment NSR established under Title 
I, section 110 and part D of the Act and 40 CFR 51.165.
     ``PSD'' means prevention of significant deterioration of 
air quality established under Title I, section 110 and part C of the 
Act and 40 CFR 51.166.
     ``Program'' means the SIP revision submittals from the 
TCEQ concerning the Texas Qualified Facilities Program.
     ``NAAQS'' means any national ambient air quality standard 
established under 40 CFR part 50.

Table of Contents

I. What Action Is EPA Taking?
II. What Submittals Is EPA Taking No Action On?
    A. Subparagraph (F) under the definition of ``federally 
enforceable''
    B. Definition of ``best available control technology (BACT)''
    C. Subparagraphs (A) and (B) of the submitted definition of 
``modification of existing facility''
    D. Subparagraph (G) of the submitted definition of 
``modification of existing facility''
    E. Trading Provision in 30 TAC 116.116(f)
III. What Is the Background for This Action?
    A. Summary of Our Proposed Action
    B. Summary of the Submittals Addressed in this Final Action
    C. Other Relevant Actions on the Texas Permitting SIP Revision 
Submittals
IV. What Are the Grounds for This Disapproval Action of the Texas 
Qualified Facilities Program?
    A. Why the Qualified Facilities Program Submittal Is Unclear 
Whether It Is for a Major or Minor NSR SIP Revision
    B. Why the Submitted Texas Qualified Facilities Program Is Not 
Approvable as a Substitute Major NSR SIP Revision
    C. Why the Submitted Texas Qualified Facilities Program Is Not 
Approvable as a Minor NSR SIP Revision
    D. Definition of ``facility''
V. Response to Comments
    A. General Comments
    B. Comment That This Action Is Inconsistent With the CAA
    C. Comments Addressing Whether the Qualified Facilities Rules 
Allow Sources to ``Net Out'' of Major and Minor NSR Through Rules 
that Are Not Adequate To Protect the NAAQS and State Control 
Strategies
    D. Comments Addressing Whether the Qualified Facilities Rules 
Are Practically Enforceable
    E. Comments Addressing Whether the Qualified Facilities Rules 
Meet Federal Requirements for Major NSR
    F. Comments Addressing Whether the Qualified Facilities Rules 
Meet Federal Requirements for Minor NSR
    G. Comments Addressing Whether Existing Qualified Facilities 
Have Undergone an Air Quality Analysis
    H. Comments on the Definitions of ``Grandfathered Facility,'' 
``Maximum Allowable Emission Rate Table,'' and ``New Facility''
    I. Comments on the Definitions of ``Actual Emissions,'' 
``Allowable Emissions,'' ``Modification of Existing Facility'' at 
(E), and ``Qualified Facility''
    J. Comments on the Definition of ``Best Available Control 
Technology'' (``BACT'')
    K. Comments on Severable Portions of the Definition of 
``Modification of Existing Facility'' at 30 TAC 116.10(11)(A) and 
(B)
    L. Comments on the Definition of Severable Subsection of 
``Modification of

[[Page 19469]]

Existing Facility'' at 30 TAC 116.10(11)(G)
    M. Comments on the Reinstatement of the Previously Approved 
Definition of ``Facility''
    N. Comments on the Definition of the Term ``Air Quality Account 
Number''
    O. Comments on Whether the Qualified Facilities Rules Meet NSR 
Public Participation Requirements
VI. Final Action
VII. Statutory and Executive Order Reviews

I. What Action Is EPA Taking?

    EPA is taking final action to disapprove the Texas Qualified 
Facilities Program, as submitted by Texas on March 13, 1996, and July 
22, 1998, in Title 30 of the Texas Administrative Code (30 TAC) at 30 
TAC Chapter 116--Control of Air Pollution by Permits for New 
Construction or Modification. This includes the following regulations 
under Chapter 116: 30 TAC 116.116(e), 30 TAC 116.117, 30 TAC 116.118, 
and the following definitions under 30 TAC 116.10--General Definitions: 
30 TAC 116.10(1)--definition of ``actual emissions,'' 30 TAC 
116.10(2)--definition of ``allowable emissions,'' 30 TAC 116.10(11)(E) 
under the definition of ``modification of existing facility,'' and 30 
TAC 116.10(16)--definition of ``qualified facility.'' These regulations 
and definitions do not meet the requirements of the Act and EPA's NSR 
regulations. It is EPA's position that none of these identified 
elements for the submitted Qualified Facilities Program is severable 
from each other.
    Secondly, in an action separate from the above action on the 
submitted Texas Qualified Facilities Program, we are approving the 
following severable definitions: 30 TAC 116.10(8)--definition of 
``grandfathered facility,'' 30 TAC 116.10(10)--definition of ``maximum 
allowable emission rate table (MAERT),'' and 30 TAC 116.10(12)--
definition of ``new facility.'' It is EPA's position that these 
definitions are severable from those in the submitted Texas Qualified 
Facilities Program; moreover, each is severable from each other.
    EPA proposed the above actions on September 23, 2009 (74 FR 48450). 
We accepted comments from the public on this proposal from September 
23, 2009, until November 23, 2009. A summary of the comments received 
and our evaluation thereof is discussed in section V below. In the 
proposal and in the Technical Support Document (TSD), we described our 
basis for the actions identified above. The reader should refer to the 
proposal, the TSD, section IV of this preamble, and the Response to 
Comments in section V of this preamble for additional information 
relating to our final action.
    We are disapproving the submitted Texas Qualified Facilities 
Program as not meeting the requirements for a substitute Major NSR SIP 
revision. Our grounds for disapproval as a substitute Major NSR SIP 
revision include the following:
     It is not clearly limited to Minor NSR thereby allowing 
major modifications to occur without a Major NSR permit;
     It has no regulatory provisions clearly prohibiting the 
use of this Program from circumventing the Major NSR SIP requirements 
thereby allowing changes at existing facilities to avoid the 
requirement to obtain preconstruction permit authorizations for 
projects that would otherwise require a Major NSR preconstruction 
permit;
     It does not require that first an applicability 
determination be made whether the modification is subject to Major NSR 
thereby exempting new major stationary sources and major modifications 
from the EPA Major NSR SIP requirements;
     It does not include a demonstration from the TCEQ, as 
required by 40 CFR 51.166(a)(7)(iv), showing how the use of 
``modification'' is at least as stringent as the definition of 
``modification'' in the EPA Major NSR SIP program
     It does not include the requirement to make Major NSR 
applicability determinations based on actual emissions and on emissions 
increases and decreases (netting) that occur within a major stationary 
source;
     It fails to meet the statutory and regulatory requirements 
for a SIP revision;
     It is not consistent with applicable statutory and 
regulatory requirements as interpreted in EPA policy and guidance on 
SIP revisions; and
     EPA lacks sufficient available information to determine 
that the requested relaxation to the Texas Major NSR SIP will not 
interfere with any applicable requirement concerning attainment and 
reasonable further progress (RFP), or any other applicable requirement 
of the Act.
    In addition to the failures to protect Major NSR SIP requirements, 
EPA cannot find that the submitted Program, as an exemption to the 
State's Minor NSR SIP program, will ensure noninterference with NAAQS 
attainment, and there will not be a violation of applicable portions of 
a Texas SIP control strategy, as required by section 110(a)(2)(D) and 
40 CFR 51.160(a)-(b). EPA cannot approve the exempting of certain 
modifications from obtaining a Minor NSR SIP permit as part of the 
Texas Minor NSR SIP because the Act and EPA regulations are not met and 
the State has not shown that the sources will have only a de minimis 
effect. The Program fails to include legally enforceable procedures to 
ensure that the State will not permit a modification that will violate 
the control strategies or interfere with NAAQS attainment. Our grounds 
for disapproval as a Minor NSR SIP revision include the following:
     It is not clearly limited to Minor NSR thereby allowing 
major modifications to occur without a Major NSR permit;
     It has no regulatory provisions clearly prohibiting the 
use of this Program from circumventing the Major NSR SIP requirements 
thereby allowing sources to avoid the requirement to obtain 
preconstruction permit authorizations for projects that would otherwise 
require a Major NSR preconstruction permit;
     It does not require that first an applicability 
determination be made whether the modification is subject to Major NSR 
thereby exempting new major stationary sources and major modifications 
from the EPA Major NSR SIP requirements;
     It fails to meet the statutory and regulatory requirements 
for a SIP revision;
     It is not consistent with applicable statutory and 
regulatory requirements as interpreted in EPA policy and guidance on 
SIP revisions;
     It is not an enforceable Minor NSR permitting program;
     It lacks legally enforceable safeguards to ensure that the 
exempted changes will not violate a Texas control strategy and will not 
interfere with NAAQS attainment;
     EPA lacks sufficient available information to determine 
that the requested relaxation to the Texas Minor NSR SIP will not 
interfere with any applicable requirement concerning attainment and 
RFP, or any other applicable requirement of the Act.
    The provisions in these submittals relating to the Texas Qualified 
Facilities State Program that include the Chapter 116 regulatory 
provisions and the nonseverable definitions in the General Definitions 
were not submitted to meet a mandatory requirement of the Act. 
Therefore, this final action to disapprove the submitted Texas 
Qualified Facilities State Program does not trigger a sanctions or 
Federal Implementation Plan clock. See CAA section 179(a).

[[Page 19470]]

II. What Submittals Is EPA Taking No Action On?

A. Subparagraph (F) Under the Definition of ``Federally Enforceable''

    On September 18, 2002 (67 FR 58697), EPA approved the definition of 
``federally enforceable'' in 30 TAC 116.10(7), introductory paragraph 
and subparagraphs (A) through (E), as submitted July 22, 1998. We 
proposed to take no action on the submitted severable new subparagraph 
(F) under the SIP-approved definition of ``federally enforceable,'' 
submitted September 11, 2000, because it is outside the scope of the 
SIP. See 74 FR 48450, at 48466. EPA is not finalizing action today on 
the proposal concerning the submitted 30 TAC 116.10(7)(F). This 
subparagraph (F) is severable from the final rulemaking on the 
Qualified Facilities Program

B. Definition of ``Best Available Control Technology (BACT)''

    On September 23, 2009, EPA proposed to disapprove the definition 
``best available control technology (BACT)'' under 30 TAC 1161.10(3). 
74 FR 48450, at 48463-48464. EPA is still reviewing approvability of 
this definition; therefore, we are not taking final action on the 
proposal today. This definition is severable from the final rulemaking 
on the Qualified Facilities Program. We will take final action on the 
definition of BACT when we take action on Texas's submission concerning 
NSR Reform (Rule Project Number 2005-010-116-PR), which also addresses 
BACT. See 74 FR 48450, at 48472.\1\ Under the Consent Decree entered on 
January 21, 2010 in BCCA Appeal Group v. EPA, Case No. 3:08-cv-01491-N 
(N.D. Tex), EPA's final action concerning NSR Reform will be finalized 
by August 31, 2010.
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    \1\ EPA made this determination in a separate proposed action 
published at 74 FR 48467, September 23, 2009. This proposal relates 
to Prevention of Significant Deterioration (PSD), Nonattainment NSR 
(NNSR) for the 1997 8-Hour Ozone Standard, NSR Reform, and a 
Standard Permit.
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C. Subparagraphs (A) and (B) of the Submitted Definition of 
``Modification of Existing Facility''

    Also, on September 23, 2009, EPA proposed to disapprove 30 TAC 
116.10(11) subparagraphs (A) and (B) of the submitted definition of 
``modification of existing facility,'' which are severable from the 
other submissions addressed in this notice but not severable from each 
other. 74 FR 48450, at 48464-48465. EPA is not taking final action 
today on the proposed disapproval of these submitted subparagraphs 
under the submitted definition of ``modification of existing facility'' 
at 30 TAC 116.0(11)(A) and (B). We are still reviewing the proposed 
disapproval of these subparagraphs 30 TAC 116.10(11)(A) and (B) which 
relate to ``insignificant increases.'' These subparagraphs are 
severable from this final rulemaking on the Qualified Facilities 
Program. We will take final action on 30 TAC 116.10(11)(A) and (B) when 
we act on Texas's submission concerning Air Permits (SB 766) Phase II 
(Rule Project Number 99029B-116-A1). Under the Settlement Agreement in 
BCCA Appeal Group v. EPA, Case No. 3:08-cv-01491-N (N.D. Tex), that 
action will be finalized by December 31, 2012. Additionally, we have 
received petitions requesting EPA review of the State's implementation 
of Texas Commission on Environmental Quality's (TCEQ) permit by rule 
(PBR) program under Subchapter K (30 TAC Chapter 106).\2\ EPA intends 
to review TCEQ's PBR program and its implementation in response to 
those petitions.
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    \2\ Petitions, August 28, 2008, from the Environmental Integrity 
Project on behalf of the Galveston-Houston Association for Smog 
Prevention, Environmental Integrity Project, Texas Campaign for the 
Environment, Sierra Club, and Public Citizen; and January 5, 2009, 
supplementing the August 28, 2008, petition (the supplemental 
petition added the Environmental Defense Fund as an additional 
petitioner).
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D. Subparagraph (G) of the Submitted Definition of ``Modification of 
Existing Facility''

    On September 23, 2009, EPA proposed to disapprove the subparagraph 
(G) at 30 TAC 116.10(11) of the submitted definition of ``modification 
of existing facility.'' See 74 FR 48450, at 48465. EPA is not taking 
final action today on the proposed disapproval of the submitted 
subparagraph (G) of the definition of ``modification of existing 
facility.'' We are still reviewing the proposed disapproval of this 
definition. This subparagraph states that changes to certain natural 
gas processing, treating, or compression facilities are not 
modifications if the change does not result in an annual emissions rate 
of any air contaminant in excess of the volume emitted at the maximum 
design capacity for grandfathered facilities. This definition is 
severable from this rulemaking on the Qualified Facilities Program. See 
74 FR 48450, at 48452. We will take final action on 30 TAC 
116.10(11)(G) when we act on Texas's submission concerning Air Permits 
(SB 766) Phase II (Rule Project Number 99029B-116-A1). Under the 
Settlement Agreement in BCCA Appeal Group v. EPA, Case No. 3:08-cv-
01491-N (N.D. Tex), that action will be finalized by December 31, 2012.

E. Trading Provision in 30 TAC 116.116(f)

    EPA proposed to take no action on the submitted portion of 30 TAC 
116.116(f) that includes, among other things, a trading provision 
containing a cross-reference that is no longer in Texas's rules. See 74 
FR 48450, at 48465-48466. EPA is not taking final action today on this 
submitted portion because we are still reviewing approvability of the 
provision. This portion of the provision is severable from this 
rulemaking on the Qualified Facilities Program. We will take final 
action on 30 TAC 116.116(f) when we take action on Texas's submission 
concerning NSR Rules Revisions; 112(g) Revisions (Rule Project No. 
98001-116-AI). Under the Settlement Agreement in BCCA Appeal Group v. 
EPA, Case No. 3:08-cv-01491-N (N.D. Tex), that action will be finalized 
by October 31, 2011.

III. What Is the Background?

A. Summary of Our Proposed Action

    Also on September 23, 2009 (74 FR 48450), EPA proposed to 
disapprove revisions to the SIP submitted by the State of Texas that 
relate to the Modification of Qualified Facilities. These affected 
provisions include regulatory provisions at 30 TAC 116.116(e) and 
definitions of ``actual emissions,'' ``allowable emissions,'' a 
nonseverable portion of the definition at subparagraph (E) of 
``modification of existing facility,'' and ``qualified facility'' under 
Texas's General Definitions in Chapter 116, Control of Air Pollution by 
Permits for New Construction or Modification. See 30 TAC 116.10(1), 
(2), (11)(E), and (16), respectively. EPA finds that these submitted 
provisions and definitions in the submittals affecting the Texas 
Qualified Facilities Program are not severable from each other.
    In the September 23, 2009, EPA also proposed to take action on 
revisions to the SIP submitted by Texas that relate to the General 
Definitions in Chapter 116. EPA proposed to approve three of these 
submitted definitions, ``grandfathered facility,'' ``maximum allowable 
emissions rate table (MAERT),'' and ``new facility'' at 30 TAC 
116.10(8), (10), and (12), respectively. These definitions are 
severable from the Qualified Facilities Program.
    EPA proposed to make an administrative correction to the severable 
submittal for the SIP-approved

[[Page 19471]]

definition of ``facility'' under 30 TAC 116.10(6). Consistent with our 
proposal, EPA is finalizing this administrative correction in today's 
action. Specifically, EPA corrects a typographical error at 72 FR 49198 
(August 28, 2007), to clarify that the definition of ``facility,'' as 
codified at 30 TAC 116.10(6), was approved as part of the Texas SIP in 
2006 and remains part of the Texas SIP. 74 FR 48450, at 48465.
    See Sections I and IV for further information on EPA's final action 
on the above submittals.
    Further, EPA proposed to disapprove the following severable 
definitions: (1) the submitted definition of ``best available control 
technology (BACT)'' and (2) subparagraphs (A) and (B) of the submitted 
definition of ``modification of existing facility,'' which are 
severable from the other submissions but not severable from each other, 
and (3) subparagraph (G) of the submitted definition of ``modification 
of existing facility.'' EPA proposed to take no action on the severable 
submitted subparagraph (F) for the SIP-approved severable definition of 
``federally enforceable'' under 30 TAC 116.10(7) because the submitted 
paragraph relates to a federal program that is implemented separately 
from the SIP. In addition, EPA proposed to take no action on the 
severable submitted portion of a provision at 30 TAC 116.116(f) that 
includes, among other things, a trading provision containing a cross-
reference that no longer is in Texas's rules. See Section II for 
further information on why EPA is not taking final action today on 
these submittals.

B. Summary of the Submittals Addressed in this Final Action

    Table 1 below summarizes the changes that are in the SIP revision 
submittals. A summary of EPA's evaluation of each section and the basis 
for this action is discussed in Sections IV through VI of this 
preamble. The Technical Support Document includes a detailed evaluation 
of the submittals.

                     Table 1--Summary of Each SIP Submittal That is Affected by This Action.
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                                                        Submittal
             Section                     Title            dates      Description of change     Proposed action
----------------------------------------------------------------------------------------------------------------
30 TAC 116.10...................  General Definitions
30 TAC 116.10(1)................  Definition of          3/13/1996  Added new definition...  Disapproval.
                                   ``actual
                                   emissions''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (1).
30 TAC 116.10(2)................  Definition of          3/13/1996  Added new definition...  Disapproval.
                                   ``allowable
                                   emissions''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (2).
                                                         9/11/2000  Revised paragraphs
                                                                     (2)(A) through (D).
30 TAC 116.10(6)................  Definition of          3/13/1996  Added new definition...  Administrative
                                   ``facility''.                                              correction to
                                                                                              clarify the
                                                                                              definition of
                                                                                              ``facility'' is in
                                                                                              the SIP.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (4).
                                                                     Approved 9/6/2006 (71
                                                                     FR 52698).
                                                          9/4/2002  Redesignated to
                                                                     paragraph (6).
                                                                     Inadvertently
                                                                     identified as non-SIP
                                                                     provision in 8/28/2007
                                                                     SIP revision.
30 TAC 116.10(8)................  Definition of          3/13/1996  Added new definition...  Approval.
                                   ``grandfathered
                                   facility''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (6).
                                                         7/31/2002  Revised definition.....
                                                          9/4/2002  Redesignated to
                                                                     paragraph (8).
30 TAC 116.10(10)...............  Definition of          3/13/1996  Added new definition...  Approval.
                                   ``maximum
                                   allowable emission
                                   rate table''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (8).
                                                          9/4/2002  Redesignated to
                                                                     paragraph (10).
30 TAC 116.10(11)...............  Definition of          3/13/1996  Added new definition...  Disapproval of
                                   ``modification of                                          subparagraph (E).
                                   existing
                                   facility''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (9).
                                                          9/4/2002  Redesignated to
                                                                     paragraph (11).
30 TAC 116.10(12)...............  Definition of ``new    3/13/1996  Added new definition...  Approval.
                                   facility''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (10).
                                                         9/04/2002  Redesignated to
                                                                     paragraph (12).
30 TAC 116.10(16)...............  Definition of          3/13/1996  Added new definition...  Disapproval.
                                   ``qualified
                                   facility''.
                                                         7/22/1998  Repealed and a new
                                                                     definition submitted
                                                                     as paragraph (14).
                                                          9/4/2002  Redesignated to
                                                                     paragraph (16).
30 TAC 116.116..................  Changes to             3/13/1996  Added subsection (e)...  Disapproval.
                                   Facilities.
                                                         7/22/1998  Repealed and a new       Disapproval.
                                                                     116.116(e) submitted.

[[Page 19472]]

30 TAC 116.117..................  Documentation and      3/13/1996  Added new section......  Disapproval.
                                   Notification of
                                   Changes to
                                   Qualified
                                   Facilities.
                                                         7/22/1998  Repealed and a new
                                                                     116.117 resubmitted.
30 TAC 116.118..................  Pre-Change             3/13/1996  Added new section......  Disapproval.
                                   Qualification.
                                                         7/22/1998  Repealed and a new
                                                                     116.118 submitted.
----------------------------------------------------------------------------------------------------------------

C. Other Proposed Relevant Actions on the Texas Permitting SIP Revision 
Submittals

    The Settlement Agreement in BCCA Appeal Group v. EPA, Case No. 
3:08-cv-01491-N (N.D. Tex), as amended, currently provides that EPA 
will take final action on the State's Public Participation SIP revision 
submittal on October 29, 2010. EPA intends to take final action on the 
submitted Texas Flexible Permits State Program by June 30, 2010, and 
the NSR SIP by August 31, 2010, as provided in the Consent Decree 
entered on January 21, 2010 in BCCA Appeal Group v. EPA, Case No. 3:08-
cv-01491-N (N.D. Tex).
    Additionally, EPA acknowledges and appreciates that TCEQ is 
developing a proposed rulemaking package to address EPA's concerns with 
the current Qualified Facilities rules. We will, of course, consider 
any rule changes if and when they are submitted to EPA for review. 
However, the rules before us today are those of the current Qualified 
Facilities program, and we have concluded that the current program is 
not approvable for the reasons set out in this notice.

IV. What Are the Grounds for This Disapproval Action of the Texas 
Qualified Facilities Program?

    EPA is disapproving revisions to the SIP submitted by the State of 
Texas that relate to the Modification of Qualified Facilities, 
identified in the above Table 1. Sources are reminded that they remain 
subject to the requirements of the Federally- approved Texas SIP and 
may be subject to enforcement actions for violations of the SIP. See 
EPA's Revised Guidance on Enforcement During Pending SIP Revisions, 
(March 1, 1991). However, because the Qualified Facilities Program is a 
permitting exemption, not a permit amendment, this final disapproval 
action does not affect Federal enforceability of Major and Minor NSR 
SIP permits.
    The provisions affected by this disapproval action include 
regulatory provisions at 30 TAC 116.116(e), 116.117, and 116.118; and 
definitions at 30 TAC 116.10(1), (2), (11)(E), and (16) under 30 TAC 
Chapter 116, Control of Air Pollution by Permits for New Construction 
or Modification. EPA finds that these submitted provisions and 
definitions in the submittals affecting the Texas Qualified Facilities 
Program are not severable from each other. Specifically, EPA is making 
the following findings and taking the following actions as described 
below:

A. Why the Qualified Facilities Program Submittal Is Unclear Whether it 
Is for a Major or Minor NSR SIP Revision

    While the TCEQ and other commenters asserted that the program was 
intended to be limited to Minor NSR, we continue to be concerned that 
the program is not explicitly limited to Minor NSR. Specifically, EPA 
finds that the submittals contain no applicability statement or 
regulatory provision that limits applicability to minor modifications. 
The Program is analogous to two other Minor NSR programs in Texas's SIP 
because although they do not exempt facilities from NSR, as does the 
Qualified Facilities Program, they do exempt facilities from obtaining 
source-specific (i.e., case-by-case) permits. However, both of the 
State's other Minor NSR programs include an applicability statement and 
a regulatory provision that expressly limits applicability to minor 
modifications.\3\ Moreover, the Texas Clean Air Act clearly prohibits 
the use of these two other Minor NSR programs for Major NSR. See Texas 
Health and Safety Code 382.05196 and .057. Therefore, the absence of 
these provisions in the Qualified Facilities rules creates an 
unacceptable ambiguity in the SIP. Without a clear statement of 
applicability of the Program, the Program as submitted is confusing to 
the public, regulated sources, government agencies, or a court, because 
it can be interpreted as an alternative to evaluating the new 
modification as a major modification under Major NSR requirements. 
Because of the overbroad nature of the regulatory language in the 
State's SIP revision submittal, we find that the State has failed to 
limit its submitted Program only to Minor NSR. See 74 FR 48450, at 
48456-48457 and Section V.E.1 below for further information.
---------------------------------------------------------------------------

    \3\ The Standard Permits rules require a Major NSR applicability 
determination at 30 TAC 116.610(b), and prohibit circumvention of 
Major NSR at 30 TAC 116.610(c). Likewise, the Permits by Rule 
provisions require a Major NSR applicability determination at 30 TAC 
106.4(a)(3), and prohibit circumvention of Major NSR at 30 TAC 
106.4(b).
---------------------------------------------------------------------------

    Consequently, we evaluated this submitted Program as being a 
substitute for the Texas Major NSR SIP. We also evaluated it for 
approvability as a Minor NSR SIP. Accordingly, we evaluated whether the 
submitted Program meets the requirements for a Major NSR SIP revision, 
the general requirements for regulating construction of any stationary 
sources contained in Section 110(a)(2)(C) of the CAA, and the 
applicable statutory and regulatory requirements for an approvable SIP 
revision. See 74 FR 48450, at 48457.

B. Why the Submitted Texas Qualified Facilities Program Is Not 
Approvable as a Substitute Major NSR SIP Revision

    EPA finds that the State failed to submit information sufficient to 
demonstrate that the submitted Program's regulatory text explicitly 
prevents the circumvention of Major NSR. Therefore, EPA is disapproving 
the Program as not meeting the Major NSR SIP requirements to prevent 
circumvention of Major NSR. See 74 FR 48450, at 48458; Sections V.C.2. 
and E. below for further information.
    EPA finds that that the State failed to submit information 
sufficient to demonstrate that the submitted Program's regulatory text 
requires an evaluation of Major Source NSR applicability before a 
change is exempted from permitting. Therefore, EPA is disapproving the 
Program as not meeting the Major NSR SIP requirements that require the 
Major NSR applicability requirements be met. See

[[Page 19473]]

74 FR 48450, at 48458; Section V.C.2 below for further information.
    We find that the Program is deficient for Major NSR netting for two 
main reasons. First, the Program may allow an emission increase to net 
out by taking into account emission decreases outside of the major 
stationary source and, in other circumstances, allow an evaluation of 
emissions of a subset of units at a major stationary source. Therefore, 
the Program does not meet the CAA's definition of ``modification'' and 
the Major NSR SIP requirements and is inconsistent with Alabama Power 
v. Costle, 636 F.2d 323, 401-403 (DC Cir. 1980) and Asarco v. EPA, 578 
F.2d 320 (DC Cir. 1978). 74 FR 48450, at 48458-48459; Section V.C.1 
below. Second, the Program authorizes existing allowable emissions, 
rather than actual emissions, to be used as a baseline to determine 
applicability. This use of allowables is inconsistent with the 
requirements of the Act for Major NSR and is contrary to New York v. 
EPA, 413 F.3d 3, 38-40 (DC Cir. 2005) (``New York I''). 74 FR 48450, at 
48459; Section V.C.1 below.
    EPA finds that it lacks sufficient available information to 
determine, pursuant to section 110(l) that the requested relaxation to 
the Texas NSR SIP would not interfere with any applicable requirement 
concerning attainment and RFP, or any other applicable CAA requirement. 
See 74 FR 48450, at 48459 for further information.

C. Why the Submitted Texas Qualified Facilities Program Is Not 
Approvable as a Minor NSR SIP Revision

    EPA finds that the Program is not clearly limited to Minor NSR. The 
submitted Program also does not prevent circumvention of the Major NSR 
SIP requirements. The Program lacks requirements necessary for 
enforcement of the applicable emissions limitations, including a permit 
application and issuance process. Overall, the Program fails to include 
sufficient legally enforceable safeguards to ensure that the NAAQS and 
control strategies are protected. Furthermore, the Program provides a 
de minimis exemption from the Texas Minor NSR SIP, and therefore, it is 
a SIP relaxation, which creates a risk of interference with NAAQS 
attainment, RFP, or any other requirement of the Act. EPA lacks 
sufficient information to determine that this SIP relaxation would not 
interfere with these requirements. 74 FR 48450, at 48463. Additionally, 
the legal test for whether a de minimis threshold can be approved is 
whether it is consistent with the need for a plan to include legally 
enforceable procedures to ensure that the State will not permit a 
source that will violate the control strategy or interfere with NAAQS 
attainment, as required by 40 CFR 51.160(a)-(b). 74 FR 48450, at 48460. 
The State failed to demonstrate that this exemption will not permit 
changes that will violate the Texas control strategies or interfere 
with NAAQS attainment. Therefore, we are disapproving the submitted 
Qualified Facilities Program as a Minor NSR SIP revision because it 
does not meet sections 110(a)(2)(C) and 110(l) of the Act and 40 CFR 
51.160.
    The Qualified Facilities Program does not ensure protection of the 
NAAQS and prevent violations of any State control strategy. First, the 
Program fails to ensure that all participating Qualified Facilities 
must have obtained a Texas NSR SIP permit. Without the assurance that 
all Qualified Facilities have obtained a Texas NSR SIP permit, EPA 
cannot determine that all Qualified Facilities must have Federally 
enforceable emission limitations based on the chosen control 
technology, and that the Qualified Facility will not interfere with 
attainment and maintenance of the NAAQS or violate any control 
strategy. Therefore, EPA finds that the Qualified Facilities Program is 
inadequate to ensure that all Qualified Facilities have an appropriate 
allowable limit to prevent interference with attainment and maintenance 
of the NAAQS or violations of any State control strategy that is 
required by the Texas NSR SIP. See Section V.G.1 for further 
information. In addition, the Program does not require the owner or 
operator to maintain the information and analysis showing how it 
concluded that there will be no adverse impact on ambient air quality 
before undertaking the change. Therefore, EPA finds that the Qualified 
Facilities Program is inadequate to ensure that all changes under the 
Program that are exempted from permitting will not prevent interference 
with attainment and maintenance of the NAAQS or violations of any State 
control strategy that is required by the Texas NSR SIP. 74 FR 48450, at 
48462; Section V.F.1.
    Regarding the State's use of minor source netting in the Qualified 
Facilities Program, EPA makes the following findings:
    The Qualified Facilities Program is inadequate because it fails to 
provide clear and enforceable requirements for a basic netting program. 
Therefore, this Program, as submitted, does not meet the fundamental 
requirements for an approvable Minor NSR netting program. To analyze 
the Program's Minor NSR netting for approvability, we used the 
fundamental principles of Major NSR and NSR netting because these 
principles are designed to ensure that there is no interference with 
the NAAQS and control strategies.\4\ The Major NSR netting program 
requires the following: (1) An identified contemporaneous period, (2) 
the reductions must be contemporaneous and creditable, (3) the 
reductions must be of the same pollutant as the change, (4) the 
reductions must be real, (5) the reductions must be permanent, and (6) 
the reductions must be quantifiable. See 40 CFR 51.165(a)(1)(vi) (the 
definition of ``net emissions increase''); 40 CFR 51.166(b)(3). To be 
considered creditable, the reduction's old level of emissions must 
exceed the new level of emissions, the reduction must be enforceable as 
a practical matter at and after the time the actual change begins, and 
the reduction must have approximately the same qualitative significance 
for public health and welfare as that attributed to the increase from 
the particular change. See 74 FR 48450, at 48461.
---------------------------------------------------------------------------

    \4\ However, our analysis of the netting provisions in the 
Qualified Facilities Program under Minor NSR is not intended to 
create a binding Agency position on evaluating the approvability of 
Minor NSR netting.
---------------------------------------------------------------------------

    As discussed below, the Program's netting provisions do not meet 
all of the requirements; therefore, the Qualified Facilities netting is 
disapproved as a Minor NSR netting program.
     The Program fails to define a contemporaneous or other 
period for the netting and that the emission reductions must occur 
within that specified period. 74 FR 48450, at 48461; Section V.C.1 
below.
     Emissions reductions under the Qualified Facilities 
program are not enforceable as a practical matter at and after the time 
of the actual change begins; and therefore, not sufficiently 
creditable. First, the Program fails to ensure a separate netting 
analysis is performed for each proposed change because the rules are 
not clear that reductions can only be relied upon once. Therefore, we 
find that the Program fails to prevent double counting; and 
consequently these types of reductions are not creditable. Second, the 
Program does not require that each Qualified Facility involved in the 
netting transaction must submit a permit application and obtain a 
permit revision reflecting all of the changes made to reduce emissions 
(relied upon in the netting analysis) as well as reflecting the change 
itself that increased emissions. As a result, emissions reductions are 
not enforceable; and therefore, not

[[Page 19474]]

sufficiently creditable. 74 FR 48450, at 48462; Section V.C.1.
     EPA proposed to find that the State's ``interchange'' 
methodology, submitted 30 TAC 116.116(e)(3), is consistent with the 
Federal requirement that reductions must be of the same pollutant as 
the change.\5\ 74 FR 48450, at 48461. However, after evaluation of 
received comments, EPA finds that the term ``sulfur compounds'' in 30 
TAC 116.116(e)(3)(F), is broad enough to include hydrogen sulfide. 
Hydrogen sulfide is a regulated NSR pollutant (see 40 CFR 
52.21(b)(23)(i) and 52.21(i)(5)(i)) and, in certain instances, may 
require separate analysis from sulfur oxides in a netting analysis. 
Therefore, the interchange methodology may not ensure the health 
impacts of all sulfur compounds will be equal. The State failed to 
demonstrate that such use of hydrogen sulfide would protect the sulfur 
dioxides NAAQS. Additionally, this provision allows PM-2.5 to be 
interchanged with PM-10. However, because PM-10 and PM-2.5 are two 
separate pollutants and the State failed to demonstrate that such use 
of PM-10 would protect the PM-2.5 NAAQS, this interchange is 
inappropriate. Therefore, this provision is unapprovable for the sulfur 
dioxides and PM NAAQS. Section V.C.1 below.
---------------------------------------------------------------------------

    \5\ See 40 CFR 51.165(a)(1)(vi)(A) and 51.166(b)(3)(i), which 
define net emissions increase ``with respect to any regulated NSR 
pollutant.'' Emphasis added.
---------------------------------------------------------------------------

     The Program also lacks any provisions that require the 
reductions to be permanent. Specifically, the submitted Program does 
not include provisions that either prohibit future increases at the 
Qualified Facility, or ensure that any future increase at a Qualified 
Facility at which a previous netting reduction occurred is analyzed in 
totality to assure that the NAAQS remains protected from the original 
increase. 74 FR 48450, at 48461; Section V.C.1 below.
    Section 30 TAC 116.117(b) lacks any provisions that require a 
permit application to be submitted to TCEQ for a change under the 
Program. There are no provisions in 30 TAC 116.117(b) that clearly 
indicate that TCEQ must issue a revised permit for the changes made by 
all of the participating Qualified Facilities. Thus, EPA finds that the 
Program is not approvable because it lacks this requirement and 
therefore is not enforceable. See 74 FR 48450, at 48462, Section V.D.1 
below.
    The Qualified Facilities SIP submittal is a relaxation under CAA 
section 110(l) because it provides an exemption from NSR permitting not 
previously available to facilities. As such, this revision creates a 
risk of interference with NAAQS attainment, RFP, or any other 
requirement of the Act. EPA lacks information sufficient to make a 
determination that the requested SIP revision relaxation does not 
interfere with any applicable requirements concerning attainment and 
RFP, or any other applicable requirement of the Act, as required by 
section 110(l). See 74 FR 48450, at 48463.
    For the reasons discussed above in this section and as further 
discussed below in Section V (Response to Comments), EPA is 
disapproving the submitted Qualified Facilities Program as not meeting 
section 110(a)(2)(C) and 110(l) of that Act and 40 CFR 51.160. See 74 
FR 48450, at 48462.

D. Definition of ``Facility''

    EPA proposed to make an administrative correction to the severable 
submittal for the SIP-approved definition of ``facility'' under 30 TAC 
116.10(6). Consistent with our proposal, EPA is finalizing this 
administrative correction in today's action. Specifically, EPA corrects 
a typographical error at 72 FR 49198 to clarify that the definition of 
``facility,'' as codified at 30 TAC 116.10(6), was approved as part of 
the Texas SIP in 2006 and remains part of the Texas SIP. 74 FR 48450, 
at 48465.
    However, EPA wishes to note that each part of the Texas NSR program 
depends greatly upon the definition of ``facility'' that is applicable 
to it and upon how that definition is used in context within each part 
of the program. There are instances where a specific part of the Texas 
NSR program does not meet the Act and EPA regulations due to the 
definition of ``facility'' that applies to that part of the program. 
For example Texas's PSD non-PAL rules explicitly limit the definition 
of ``facility'' to ``emissions unit,'' but the NNSR non-PAL rules fail 
to include such a limitation. 74 FR 48450, at 48475; compare 30 TAC 
116.10(6) to 30 TAC 116.160(c)(3). TCEQ did not provide information to 
demonstrate that the lack of this explicit limitation in the NNSR SIP 
non-PALs revision is at least as stringent as the revised Major NSR SIP 
requirements. 74 FR 48450, at 48455; Section V.M. below.

V. Response to Comments

    In response to our September 23, 2009, proposal, we received 
comments from the following: Sierra Club--Houston Regional Group; 
Sierra Club Membership Services (including 2,062 individual comment 
letters); Harris County Public Health and Environmental Services; Texas 
Commission on Environmental Quality; Members of the Texas House of 
Representatives; Office of the Mayor--City of Houston, Texas; 
University of Texas at Austin School of Law--Environmental Clinic; 
Baker Botts, L.L.P., on behalf of BCCA Appeal Group; Baker Botts, 
L.L.P., on behalf of Texas Industrial Project; Bracewell & Guiliani, 
L.L.P., on behalf of the Electric Reliability Coordinating Council; 
Gulf Coast Lignite Coalition; Texas Chemical Council.

A. General Comments

1. Comments Generally Supporting Proposal
    Comment: Harris County Public Health & Environmental Services 
(HCPHES) acknowledges that EPA takes issue with the TCEQ regulations 
because of the lack of specificity regarding definitions and general 
lack of checks and balances to ensure that Federal requirements are met 
during the State's permitting processes, and because they do not meet 
the Minor NSR SIP and Major NSR SIP, including the Major NSR 
Nonattainment SIP requirements. Those concerns, currently unaddressed 
by the TCEQ, have ultimately resulted in EPA's proposed disapproval of 
portions of the TCEQ's most recent SIP submittal. HCPHES views a TCEQ 
program that meets the Federal requirements as being critical to 
ensuring that air quality in the Houston Galveston Brazoria (HGB) area 
returns to levels compliant with the NAAQS. HCPHES is very concerned 
that the TCEQ programs fall short of Federal requirements and 
encourages EPA to aggressively pursue the timely correction of these 
deficiencies to ensure the health, safety, and well being of the 
citizens of Harris County. HCPHES supports EPA's conclusion to 
disapprove portions of the SIP as proposed until such time as TCEQ 
addresses all of the specifics noted in the Federal Register.
    Comment: Several members of the Texas House of Representatives 
support EPA's proposed disapproval of the Qualified Facilities Program. 
While the Qualified Facilities Program was a legislative creation, 
these members of the Texas House recognize that the statutory language 
and associated regulations are inconsistent with current CAA 
requirements regarding modifications and public participation. 
Particular concerns are:
     Inadequate TCEQ oversight. The rules authorize many 
changes at facilities without any pre-approval by TCEQ or procedures 
for denial for

[[Page 19475]]

cause. These off-permit changes are difficult to track and enforce and 
may threaten ambient air quality.
     The lack of understandable and traceable permits. Texas 
industry, regulators, and the public should be able to obtain a permit, 
read it, and know what quantity of what pollutants the facility is 
authorized to emit. The off-permit changes authorized through the 
Qualified Facilities rules prevent such transparency.
    Comment: Houston Regional Group of the Sierra Club (Sierra Club) 
supports EPA's analysis and agrees that all of the September 23, 2009, 
proposals (including the Qualified Facilities Program) should be 
disapproved. The commenter generally supported EPA's proposed 
disapproval of the Qualified Facilities Program; Flexible Permits 
Program; and Texas Major and Minor NSR SIP for 1997 8-hour and 1-hour 
ozone NAAQS, Prevention of Significant Deterioration (PSD) SIP, and 
Standard Permit for Pollution Control Projects. The commenter provided 
additional comments on our proposed disapproval of the Flexible Permits 
Program, which EPA will address in its separate action on the Flexible 
Permits Program.
    Response: Generally, these comments support EPA's analysis of 
Texas's Qualified Facilities Program as discussed in detail at 74 FR 
48450, at 48455-48463, and further support EPA's action to disapprove 
the Qualified Facilities submission.
    Comment: The Sierra Club Membership Services (SCMS) sent numerous 
similar letters via e-mail that relate to this action. These comments 
include 1,789 identical letters (sent via e-mail), which included the 
following comments:
     The TCEQ is broken and the commenters applaud EPA's 
proposed ruling that major portions of the TCEQ air permitting program 
does not adhere to the CAA and should be thrown out;
     While agreeing that the proposed disapprovals are a good 
first step, the commenters state that EPA should take bold actions as 
follows:

--Halting any new air pollution permits being issued by TCEQ utilizing 
TCEQ's current illegal policy;
--Creating a moratorium on the operations of any new coal fired power 
plants in Texas until TCEQ cleans up its act by operating under the 
Federal CAA;
--Requiring coal companies clean up their old, dirty plants--no 
exceptions, no bailouts, and no special treatment--by reviewing all 
permits issued since TCEQ adopted its illegal policies and requiring 
that these entities resubmit their applications in accordance with the 
Federal CAA; and
--Put stronger rules in place in order to reduce global-warming 
emissions and to make sure new laws and rules do not allow existing 
coal plants to continue polluting with global warming emissions.

     The commenters further state that Texas: (1) Has more 
proposed coal and pet coke fired power plants than any other state in 
the nation; (2) Is number 1 in carbon emissions; and (3) Is on the list 
for the largest increase in emissions over the past five years.
     The commenters do not want coal to stand in the way of a 
clean energy future in Texas. Strong rules are needed to make sure the 
coal industry is held responsible for their mess and that no permits 
are issued under TCEQ's illegal permitting process. Strong regulations 
are vital to cleaning up the energy industry and putting Texas on a 
path to clean energy technology that boosts economic growth, creates 
jobs in Texas, and protects the air quality, health, and communities.
    In addition, SCMS sent 273 similar letters (sent via e-mail) that 
contained additional comments. These additional comments include the 
following:
     Commenters suggest that Texas rely on wind power, solar 
energy, and natural gas as clean alternatives to coal.
     Other comments expressed general concerns related to: 
Impacts on global warming, lack of commitment by TCEQ to protect air 
quality, the need for clean energy efficient growth, impacts of upon 
human health, endangerment of wildlife, impacts on creation of future 
jobs in Texas, plus numerous other similar concerns.
    Response: To the extent the SCMS letters comment on the proposed 
disapproval of the Qualified Facility program, they support EPA's 
action to disapprove the Qualified Facilities submission. The remaining 
comments are outside the scope of our proposed action relating to the 
Qualified Facilities Program.
    Comment: The Environmental Clinic, the University of Texas at 
Austin School of Law (UT Environmental Clinic) commented that EPA 
should disapprove several other sections of 30 TAC Chapter 116.
    Response: This final rulemaking only addresses the Qualified 
Facilities Program. Therefore, issues related to other portions of 
Texas's regulations are outside the scope of this rulemaking.
2. Comments Generally Opposing Proposal
    Comment: TCEQ provided several general comments on the proposal. 
The TCEQ commented that the Qualified Facilities Program was developed 
by the 74th Texas Legislature through Senate Bill (SB) 1126, which 
became effective May 19, 1995. SB 1126 amended the Texas Clean Air Act 
by revising the definition of ``modification of existing facility,'' 
which changed the factors used to determine whether a modification for 
State permitting (i.e. Minor NSR) has occurred. In 1996, 30 TAC Chapter 
116 was revised to incorporate this legislative directive. These 
changes provide that modifications may be made to existing facilities 
without triggering the State's Minor NSR requirements whenever: (1) The 
facility to be modified has received a permit, permit amendment, or has 
been exempted from permitting requirements no earlier than 120 months 
from when the change will occur; or (2) uses air pollution control 
methods that are at least as effective as the Minor NSR SIP best 
available control technology (BACT) that the Commission required 120 
months before the change will occur. Such facilities are designated as 
``qualified facilities.''
    TCEQ has always considered the Qualified Facilities Program to be 
applicable only to Minor NSR and not applicable to Major NSR, although 
this is not specifically stated in the rule. In summary, under the 
Qualified Facilities Program, TCEQ: (1) Determines Federal 
applicability as a first step in processing a Qualified Facilities 
request; and uses actual emissions, not allowable emission rates; (2) 
applies Federal NSR requirements when triggered; (3) does not 
circumvent Federal requirements applicable to major stationary sources 
or major modifications; (4) considers the use of ``modification'' to be 
separate and severable from the Federal definition of ``modification'' 
as reflected in the SIP-approved Major NSR Program; and (5) does not 
violate the approved SIP with regard to Major NSR or Minor NSR Program 
requirements.
    Comment: The Texas Chemical Council (TCC) comments that it would be 
short-cited to analyze the three programs (Qualified Facilities, 
Flexible Permits, and NSR Reform) apart from the dramatic improvements 
in the air quality in Texas in the past 15 years. TCC goes on to 
describe these improvements. TCC supports full approval of Qualified 
Facilities. The Qualified Facilities Program is not intended to shield 
a source from major NSR. The Program is a robust, Federally enforceable 
program. The Qualified

[[Page 19476]]

Facilities Program is authorized by the TCAA, promotes flexibility, and 
allows sources to make certain changes without triggering NSR. If Major 
NSR is triggered, a facility cannot be a Qualified Facility. The 
definition of a Qualified Facility makes it clear that a Qualified 
Facility is an existing facility. A Qualified Facility may make a 
physical change in or change the operation of that facility as long as 
the change does not result in a net increase in allowable emissions of 
any air contaminant and does not result in the emission of any air 
contaminant not previously emitted. Additionally, the facility must be 
using equipment at least as effective as the BACT required by TCEQ. TCC 
supports full approval of the three Texas air permitting program 
submittals. The SIP revisions submitted to EPA by TCEQ over the last 15 
years are critical components to Texas air permitting program. Texas 
should not be punished for EPA's failure to act within the statutory 
timeframe in the CAA. EPA offers little or no legal justification for 
proposing disapproval of these programs. EPA's proposed action will 
have an enormous impact on the country's largest industrial state. The 
SIP revision submittals for these programs are at least as stringent as 
the applicable Federal requirements and should be fully approved.
    Comment: Bracewell & Giuliani LLP, counsel to the Electric 
Reliability Coordinating Council (ERCC), commented that Qualified 
Facilities provides incentives to implement pollution reduction 
measures at existing facilities. EPA's proposed disapproval does not 
provide any evidence that this authorization is actually used for major 
modifications or in fact interferes with air quality improvements. 
Discontinuance of this program could deter or delay many pollution 
reduction measures because the cost and resources associated with a 
full notice and comment case-by-case permit would outweigh the economic 
benefits of the additional controls. EPA should determine that the 
Qualified Facilities Program satisfies the CAA requirements for a state 
minor source program and retract the SIP disapproval and approve this 
SIP revision. EPA should recognize the validity of permits issued under 
the Texas permitting program and refrain from taking enforcement 
actions to address EPA concerns.
    Comment: Jackson Walker, LLP, counsel to Gulf Coast Lignite 
Coalition GCLC, provided the following general comments on all three 
proposed disapprovals (Qualified Facilities, Flexible Permits, and NSR 
Reform): (1) Commenters disagree with all the proposed disapprovals 
because the SIP as implemented by TCEQ meets or exceeds CAA 
requirements and has met the goals of the CAA; (2) EPA has a history of 
focusing on results; so, EPA should look beyond immaterial differences 
in the rule provisions and focus on the positive results that Texas has 
achieved under the TCAA and the State's submittals; (3) Texas sources 
have relied on the submitted rules for as long as 15 years in some 
cases. To disapprove the submittals after so long puts too much burden 
on the regulated community, creates regulatory uncertainty, hurts the 
vulnerable economy by potentially increasing compliance costs, and may 
discourage future business expansion; and (4) GCLC requests that EPA 
work collaboratively, not combatively, with TCEQ to resolve any issues 
under the CAA.
    Comment: Baker Botts, LLP, counsel for Texas Industry Project (TIP) 
and Business Coalition for Clean Air (BCCA) provided the following 
comments. TIP and BCCA support full approval of Qualified Facilities 
because the submittal will strengthen Texas's permitting program. EPA 
should work expeditiously with TCEQ to approve the Qualified Facilities 
Program. Further, under Texas's integrated air permitting regime, air 
quality in the state is demonstrating strong, sustained improvement. 
Commenters describe the air quality improvements in Texas in the recent 
past. Finally, commenters describe their understanding of how the 
Qualified Facilities Program operates. Qualified Facilities is a Minor 
NSR applicability trigger that allows existing emissions facilities 
that employ BACT to make changes without Minor NSR review as long as 
the changes do not result in net emissions increases. The Qualified 
Facilities Program is authorized by the TCAA and applies only to 
existing facilities. The term ``facility'' is analogous to the Federal 
definition of ``emissions unit,'' under Texas's Title V program. See 30 
TAC 122.10(8). The Texas Legislature created the Qualified Facilities 
Program as an incentive for sites to implement BACT. To be 
``qualified,'' the source must (1) have a permit or permit amendment or 
exempt from pre-construction permit requirements no earlier than 120 
months before the change will occur, or (2) use air pollution control 
methods that are at least as effective as the BACT that was required or 
would have been required for the same class or type of facility by a 
permit issued 120 months before the change will occur. See 30 TAC 
116.116(e). A qualified facility may lose its status as ``qualified'' 
if its permit, exemption, or control method falls outside the 10-year 
window. See Texas Nat'l Res. Conservation Comm'n, Modification of 
Existing Facilities under Senate Bill 1126: Guidance for Air Quality, 
(April 1996), 5 [hereinafter Modification of Existing Facilities 
Guidance].
    Comment: Texas Oil & Gas Association (TxOGA) is encouraged that EPA 
is taking action to provide certainty in the regulatory process for 
businesses. TxOGA supports the ongoing goal of improved air quality; 
however, commenters do not believe that the proposed disapproval does 
anything to improve air quality in Texas. Further, the proposal may 
discourage future business expansion in Texas.
    Response: EPA understands TCEQ's explanation of the origination of 
the Program in SB 1126. Nonetheless, the Qualified Facilities Program 
must meet all Federal requirements under the CAA in order to be 
approvable. The fact that EPA failed to act on the Qualified Facilities 
Program SIP revision within the statutory timeframe does not dictate 
the action EPA must take on the Program at this time. We cannot approve 
a program that fails to meet the requirements of the CAA. As discussed 
throughout our proposal and this final notice, the current Qualified 
Facilities Program fails to meet all requirements. We disagree with 
commenters that the Qualified Facilities Program is exclusively a Minor 
NSR program, based upon the ambiguities in the Program's rules. 
Furthermore, EPA need not prove that the Program is actually used for 
major modifications. EPA is required to review a SIP revision 
submission for its compliance with the Act and EPA regulations. CAA 
110(k)(3); Natural Resources Defense Council, Inc. v. Browner, 57 F.3d 
1122, 1123 (DC Cir. 1995); American Cyanamid v. EPA, 810 F.2d 493, 495 
(5th Cir. 1987). This includes an analysis of the submitted regulations 
for their legal interpretation. The Program's rules are ambiguous and 
therefore do not adequately prohibit use under Major NSR. We recognize 
that TCEQ considers the Program to be a Minor NSR Program; however, the 
State admits that its rules are insufficient to limit the Program to 
Minor NSR. See 74 FR 48450, at 48456-48457; Section V.F. below for 
further information.
    EPA enforcement of Federal requirements in Texas is outside the 
scope of this rulemaking. Additionally, comments on the Flexible 
Permits Program and the NSR Reform submittal are outside the scope of 
this notice. EPA will address the comments on its

[[Page 19477]]

proposed disapprovals of Flexible Permits and NSR Reform in separate 
actions on these programs.

B. Comments That This Action Is Inconsistent With the CAA

    Comment: ERCC commented that EPA's proposed disapprovals are not 
rationally supported by case law and are inconsistent with the CAA. 
Congress placed primary responsibility for developing SIPs on the 
states, so permitting programs among states can vary greatly. EPA 
determines whether the state SIP satisfies the minimum requirements of 
the CAA. Union Electric Co. v. EPA, 427 U.S. 246 (1976), rehearing 
denied 429 U.S. 873 (1976); Train v. NRDC, 421 U.S. 60 (1975); Florida 
Power and Light Co. v. Costle, 650 F.2d 586 (5th Cir. 1979); 71 FR 
48696, 486700 (August 21, 2006) (Proposed rule to promulgate a FIP 
under the CAA for tribes in Indian country). The Fifth Circuit Court of 
Appeals recently stated that ``EPA has no authority to question the 
wisdom of a State's choice of emission limitations if they are part of 
a SIP that otherwise satisfies the standards set for in 42 U.S.C. 
7410(a)(2).'' Clean Coalition v. TXU Power, 536 F.3d 469 Fn.3 (5th Cir. 
Tex. 2008). Texas's permitting programs are based on the recognized 
Minor NSR flexibility and consistent with prior EPA approvals of other 
state SIPs. EPA must review other approved state programs to ensure 
that Texas's sources are not put at a competitive disadvantage. See 
Memorandum from John Seitz, Director, OAQPS, SIP Consistency Process 
(April 4, 10, 1996). EPA's proposed disapprovals could have dramatic 
impact on industries in Texas. EPA should solicit comments from all EPA 
regions on whether the proposed actions are inconsistent with other 
state SIPs and compare the stringency of the Texas programs to those of 
other states. ERCC is confident that EPA will realize that the Texas 
programs are consistent and possibly more stringent than other 
permitting programs throughout the country.
    Response: EPA continues to recognize that permitting programs among 
states can vary greatly and provide some flexibility for Minor NSR SIP 
programs. However, in order to be approved as part of the SIP, the 
Qualified Facilities Program must meet all applicable Federal 
requirements. Here, the commenter's reliance on the Fifth Circuit's 
dicta in Clean Coalition is misplaced because the Qualified Facilities 
Program does not meet the standard set in 42 U.S.C. 7410(a)(2)(C). 
Section 42 U.S.C. 7410(a)(2)(C) requires the State to have a permitting 
program that complies with PSD and Nonattainment New Source Review 
(NNSR) permit requirements (at 42 U.S.C. 7475 and 7503, respectively), 
as well as Minor NSR permit requirements. As part of the State's 
permitting program, the Qualified Facilities Program fails to meet 
these requirements of the Act. As discussed throughout our proposal and 
this final action, the submitted Program fails to meet all requirements 
for an approvable permitting program, including submitting information 
sufficient to demonstrate that the Program is restricted only to Minor 
NSR. Commenters argue that the Qualified Facilities Program is 
consistent with other SIP approved programs; however, they fail to cite 
any specific examples.

C. Comments Addressing Whether the Qualified Facilities Rules Allow 
Sources to ``Net Out'' of Major and Minor NSR Through Rules That Are 
Not Adequate To Protect the NAAQS and State Control Strategies

1. Comments Generally Supporting Proposal
    Comment: UT Environmental Clinic commented that the Qualified 
Facilities Program fails to meet the netting requirements for several 
reasons. The commenter notes that the Qualified Facilities Program 
netting calculations can be based on allowable emissions. Allowables 
netting violates Major NSR because it is inconsistent with State of New 
York v. EPA, 413 F.3d 3, 40 (DC Cir. 2005) and violates the CAA; it 
violates Minor NSR because it fails to require an evaluation of the 
actual emissions impacts on maintenance of the NAAQS.
    Response: Generally, these comments support EPA's analysis of 
Texas's Qualified Facilities Program as a substitute for a Major NSR 
SIP program as discussed in detail at 74 FR 48450, at 48459, and 
further support EPA's action to disapprove the Qualified Facilities 
submission.
    We find that the Program authorizes existing allowable, rather than 
actual emissions, to be used as a baseline to determine applicability. 
This use of allowables violates the Act for Major NSR SIP requirements 
and is contrary to New York v. EPA, 413 F.3d 3, 38-40 (DC Cir. 2005) 
(``New York I''). 74 FR 48450, at 48459. Under the submitted Program, 
the project's increases in emissions are calculated based upon its 
projected allowable emissions. The baseline uses the permitted 
allowable emission rate (lowered by any applicable state or Federal 
requirement) if the facility ``qualified'' under 30 TAC 
116.10(11)(E)(i). If the facility ``qualified'' under 30 TAC 
116.10(11)(E)(ii), the baseline uses the actual emission rate (minus 
any applicable state or Federal requirement). In the applicability 
netting analysis, the baseline for all the other participating minor 
and major existing Qualified Facilities is calculated in the same way. 
The emission reductions are calculated similarly, i.e., reductions 
beyond the permitted allowable or actual emission rates (minus the 
applicable state and Federal requirements). Thus, this submitted 
Program allows an evaluation using allowable, not actual emissions, as 
the baseline to calculate the project's proposed emission increase and 
for many of the netting emission reductions, thereby in many cases 
possibly circumventing the major modification applicability 
requirements under the Major NSR rules. Therefore, the Program fails to 
meet the CAA and Major NSR requirements to use baseline actual 
emissions for major source netting as the starting point from which the 
amount of creditable emission increases or decreases is determined. 74 
FR 48450, at 48459.
    EPA agrees that the reductions in the Program's netting are not 
based on actual emissions. Such netting may be permissible for a Minor 
NSR Program; provided that the netting provisions assure protection of 
the NAAQS and the SIP control strategies as required by section 
110(a)(2)(C) of the CAA. Allowables netting is acceptable because CAA 
section 110(a)(2)(c) does not explicitly prohibit the use of allowables 
netting for Minor NSR programs. However, Texas failed to submit 
sufficient information to demonstrate that the use of allowable 
emissions in a Minor NSR netting program continues to protect the NAAQS 
and control strategies; therefore, EPA cannot determine if this 
requirement is met. Today's rulemaking disapproves netting under the 
Qualified Facilities Program as a Minor NSR program, in part because 
the Program fails to ensure that ambient air is protected in 
consideration of all changes in the netting.
    Comment: UT Environmental Clinic commented that the definitions in 
section 116.10 do not adequately specify how to calculate emissions 
reductions for purposes of the netting analysis. For example, the Texas 
definition of actual emissions is the ``highest rate'' actually 
achieved within the past 10 years. It is unclear whether this is the 
highest emission rate achieved at a single point in time or averaged 
over some period.
    Response: We disagree that the reductions are not quantifiable. The

[[Page 19478]]

netting is based on the most stringent of the permitted emissions rate 
(which includes the highest achievable actual emission rate) or any 
applicable state or Federal rule. Nothing in the State's definition of 
``actual emissions'' implies at all that there is any averaging 
involved in the calculations. The reduction is based upon the highest 
rate the facility achieved at a single point in time, looking back the 
past 10 years.
    While we proposed to find that the reductions were quantifiable, we 
requested comments on two aspects of the Program as it relates to this 
principle. 74 FR 48450, at 48461-48462. First, we requested comment on 
whether the regulatory provisions at 30 TAC 116.10(1) and (2) provide 
clear direction on the appropriate calculation procedures sufficient to 
ensure the reductions are quantifiable. As stated above, we disagree 
with the commenter's argument that the definitions in section 116.10 do 
not adequately specify how to calculate emissions reductions for 
purposes of the netting analysis.
    Second, the submitted rules provide that a Qualified Facility nets 
its emissions increase on the same basis as its allowable emissions 
limitation. 30 TAC 116.116(e)(3)(A). We requested comment on whether 
netting on such a basis is sufficiently quantifiable, and whether any 
additional provisions are necessary to ensure that the entire emissions 
increase is properly netted against reductions from the other Qualified 
Facility. We did not receive any comments on this second aspect of 
quantifiability under the Program. Because no comments were submitted 
showing the basis was not sufficiently quantifiable, we continue to 
believe that netting for a Minor NSR SIP program on the adequacy of the 
Program's netting of emissions increases on the same basis as its 
allowable emissions limitation, is sufficiently quantifiable.
    Comment: UT Environmental Clinic commented that the Qualified 
Facilities rules allow all emission reductions at the same account 
number to be considered in the net emission calculation. In fact, the 
rules could be read to allow the ``offsetting'' of emissions above 
allowables by decreases in emissions at any ``different facility.'' 30 
TAC 116.110(3). Because an account number can include multiple sources, 
the Texas rules allow consideration of emission decreases from outside 
the major stationary source in violation of 42 U.S.C. 7411(a).
    Response: Generally, these comments support EPA's analysis of 
Texas's Qualified Facilities Program as a substitute for a Major NSR 
SIP program as discussed in detail at 74 FR 48450, at 48458-48459, and 
further support EPA's action to disapprove the Qualified Facilities 
submission.
    We find the Program is deficient for Major NSR netting because it 
may allow an emission increase to net out by taking into account 
emission decreases outside of the major stationary source \6\ and, in 
other circumstances, allow an evaluation of emissions of a subset of 
units at a major stationary source.\7\ The State failed to submit 
information sufficient to demonstrate that the Program includes the 
necessary replicability and accountability to prevent such 
circumvention. Therefore, the Program does not meet the CAA's 
definition of ``modification'' and the Major NSR SIP requirements and 
is inconsistent with Alabama Power v. Costle, 636 F.2d 323, 401-403 (DC 
Cir. 1980) and Asarco v. EPA, 578 F.2d 320 (DC Cir. 1978). 74 FR 48450, 
at 48458-48459.
---------------------------------------------------------------------------

    \6\ The Texas SIP defines an ``account'' to include an entire 
company site, which could include more than one plant and certainly 
more than one major stationary source. SIP rule 30 TAC 101.1(1), 
second sentence.
    \7\ Under the submitted Program, not all emission points, units, 
facilities, major stationary sources, or minor modifications at the 
site or their increases in emissions are required to be evaluated in 
the applicability netting analysis. So the Program fails to require 
the evaluation of emissions changes at the entire major stationary 
source correctly as required by the Major NSR SIP regulations. 74 FR 
48459.
---------------------------------------------------------------------------

    Comment: UT Environmental Clinic commented that the Qualified 
Facilities netting rules only allow consideration of the increase in 
allowable emissions from the Qualified Facility undergoing a change, 
but consider the decreases from any other Qualified Facilities at the 
same account number. There is no consideration of all the emission 
increases so there is no adequate impacts analysis from the source.
    Response: Generally, these comments support EPA's analysis of 
Texas's Qualified Facilities Program as a substitute for a Major NSR 
SIP program as discussed in detail at 74 FR 48450, at 48458-48459, and 
further support EPA's action to disapprove the Qualified Facilities 
submission.
    Major NSR netting is based upon all contemporaneous increases and 
decreases at the same major stationary source that occur within a 
reasonable period that the states must define in their approved SIPs. 
The submitted Program's netting is not based upon all contemporaneous 
increases at the same major stationary source and not all decreases at 
the same major stationary source. However, the State contends that the 
Program is not intended to apply for Major NSR netting but only for 
Minor NSR netting. Moreover, the Program is not intended to allow 
contemporaneous netting. Instead, one looks to the increases from the 
proposed change and to decreases made at the same time as the proposed 
change. Such an approach, if fully delineated in the State's Program 
rules, would satisfy the minimum requirements for an approvable Minor 
NSR netting program provided that the ambient air is protected in 
consideration of all changes in the netting. Today's rulemaking 
disapproves netting under the Qualified Facilities Program as a Minor 
NSR program, in part because the Program fails to ensure that ambient 
air is protected.
    Comment: UT Environmental Clinic commented that the Qualified 
Facilities rules do not define a contemporaneous period nor require 
that emission reductions occur within a specified period. EPA notes in 
the Federal Register that Texas intended that any relied-upon 
reductions occur simultaneously with the increase. However, the 
commenter argues that nothing in the rule requires this.
    Response: We agree with the comment insofar as it asserts that the 
Program fails to define a contemporaneous period or require that 
emission reductions occur within a specified period. EPA finds that, 
while Texas intended that any relied-upon reductions occur 
simultaneously at the time of the increase,\8\ the Program is deficient 
because it does not expressly define the applicable period in which the 
reductions must occur. See our response to the previous comment. 74 FR 
48450, at 48461.
---------------------------------------------------------------------------

    \8\ See 21 Tex. Reg. 1573 (February 27, 1996).
---------------------------------------------------------------------------

    Comment: UT Environmental Clinic commented that because the 
Qualified Facilities rules allow reductions to be based upon allowable 
emissions, they do not ensure that reductions are real.
    Response: We disagree that just because the reductions are based 
upon allowable emissions, these reductions are not real. For example, 
reviewing authority may presume that source-specific allowable 
emissions may be equivalent to the actual emissions. See 40 CFR 
51.165(a)(1)(xii)(C) and 51.166(b)(21)(iii). The commenter fails to 
discuss why the use of allowable emissions makes the reductions not 
real.
    Comment: The UT Environmental Clinic commented that the rules fail 
to ensure that netted reductions are permanent.
    Response: We agree with the commenter that the Program lacks any 
provisions that require that the

[[Page 19479]]

reductions are permanent. For reductions to meet the netting 
requirement to be permanent, the rules must include a prohibition 
against future increases at the Qualified Facility, or include 
regulatory language that assures that any future increase at a 
Qualified Facility at which a previous netting reduction occurred is 
analyzed in totality to assure that the NAAQS remains protected from 
the original increase. However, the submitted Program does not include 
such provisions. Consequently, the Qualified Facilities rules are 
inadequate because they fail to ensure that the reductions are 
permanent.
    Comment: UT Environmental Clinic commented that the rules do not 
prevent double counting of emission reductions.
    Response: For an additional separate project, it appears that the 
state intended that the reductions must occur at the time of that 
additional project that will need to obtain additional reductions to 
net out. If the regulatory text was consistent with this approach, this 
limitation would prevent double counting of the netting reductions. The 
State's intent is that the holder of the permit is required to perform 
a new, separate netting analysis and rely upon reductions not relied 
upon in the first netting analysis. See 74 FR 48450, at 48461 (citing 
21 Tex. Reg. 1573 (February 27, 1996); page 154 of the 1996 SIP 
revision submittal). We agree that the rules are not clear that a 
subsequent change at a Qualified Facility that previously relied upon 
netting must conduct a separate netting analysis that relies upon 
reductions that were not relied upon in the first netting analysis. EPA 
cannot find any provisions in the Program to ensure a separate netting 
analysis performed for each proposed change. Therefore, the Program 
fails to prevent double counting; and consequently these types of 
netting reductions are not enforceable as a practical matter at and 
after the time of the actual change begins; and therefore, not 
sufficiently creditable. 74 FR 48450, at 48461.
    Comment: UT Environmental Clinic commented that the Qualified 
Facilities rules fail to ensure that the emission reductions are 
enforceable. Facilities provide notice of changes to Qualified 
Facilities on Form PI-E, which is not enforceable, and Qualified 
Facility changes that affect permitted facilities are not required to 
be incorporated into a permit until renewal or amendment. TCEQ noted in 
its Qualified Facility guidance that the form is not Federally 
enforceable ``but is simply a form to provide information to 
demonstrate that the change meets qualified facility flexibility.'' 
Consequently, Qualified Facility reductions are allowed to remain 
unenforceable for years. Further, Texas rules make it unclear whether 
emission reductions are ever made enforceable because a portion of the 
definition of ``allowable emissions'' states that ``[t]he allowable 
emissions for a qualified facility shall not be adjusted by the 
voluntary installation of controls.'' 30 TAC 116.10(2)(F). This portion 
of the definition of ``allowable emissions'' states that ``[t]he 
allowable emissions for a qualified facility shall not be adjusted by 
the voluntary installation of controls.'' Additionally, there are no 
monitoring requirements in the Qualified Facilities rules to track 
compliance with commitments to reduce emissions of limitations on 
emissions increases.
    Response: We agree that the Qualified Facilities rules fail to 
ensure that the emission reductions relied upon in a netting analysis 
are enforceable. We noted at 74 FR 48450, at 48462 that the rules do 
not require permits for these relied-upon reductions. We also agree 
that the Program does not require monitoring because no permit is 
required for each change. See Section V.D.1 below.
    We disagree that 30 TAC 116.10(2)(F) makes the rules vague as to 
enforceability. This provision of the rule is defining how to calculate 
the baseline from which reductions occur. When calculating the 
allowable emissions for a Qualified Facility participating in the 
Program, one cannot count any reductions occurring as a result of the 
voluntary installation of controls. However, a facility can become 
``qualified'' to use the Program by voluntarily installing controls. 
The reductions achieved by this voluntary installation of controls are 
not counted in the Qualified Facility's allowable emissions.
    Comment: UT Environmental Clinic states that the Qualified 
Facilities rules do not ensure that emission reductions have the same 
health and welfare effects as the emission increase. Because the 
program allows the emission increase to be offset inside and outside 
the facility, it allows for emission increases close to the fence line, 
potentially affecting health and welfare of the surrounding community.
    Moreover, the Qualified Facilities Program allows Qualified 
Facilities to offset emissions increases of one pollutant with emission 
decreases of another pollutant, as long as the pollutants are in the 
same ``air contaminant category.'' The interchange methodology 
established by TCEQ \9\ to ensure that compounds within the VOCs air 
contaminant category, as interchanged, will have an equivalent impact 
on air quality, is not included in the Texas rules or statute. The rule 
merely defines an ``air contaminant category'' as a group of related 
compounds, such as volatile organic compounds, particulate matter, 
nitrogen oxides, and sulfur compounds. 30 TAC 116.116(e)(3)(F). Clearly 
emissions of all sulfur compounds, say sulfur dioxide and hydrogen 
sulfide, are not equal in terms of health impacts. Likewise, the health 
impacts of fine PM emissions are of significantly greater concern than 
the impacts of larger particles.
---------------------------------------------------------------------------

    \9\ See 74 FR 48455, n.3.
---------------------------------------------------------------------------

    Response: With regard to VOCs and nitrogen oxides, EPA disagrees 
with the comment above that the Program is deficient because the 
State's rules allow an offset of an emission increase pollutant with 
emission decrease of another pollutant, as long as the pollutants are 
in the same ``air contaminant category.'' The State's interchange 
methodology goes beyond the fundamental principle to determine whether 
the interchange of different compounds within the same air contaminant 
category will result in an equivalent decrease in emissions; e.g., one 
VOC for another VOC; for VOCs and nitrogen oxides. See 74 FR 48450, at 
48461.
    On the other hand, the term ``sulfur compounds'' in 30 TAC 
116.116(e)(3)(F), is broad enough to include hydrogen sulfide. The 
State failed to demonstrate that use of hydrogen sulfide would protect 
the sulfur dioxides NAAQS. Therefore, we agree with the commenter that 
the interchange methodology does not ensure the health impacts of all 
sulfur compounds will be equal. With regard to the comment concerning 
particulate matter, the definition of ``air contaminant category'' 
allows PM-2.5 to be interchanged with PM-10. However, because PM-10 and 
PM-2.5 are two separate pollutants and the State failed to demonstrate 
that such use of PM-10 would protect the PM-2.5 NAAQS, this interchange 
is inappropriate. Therefore, we agree that the interchange methodology 
does not ensure the health impacts of all particulate matter will be 
equal.
    We, however, disagree with the comment above that the Program fails 
to ensure that emission reductions have the same health and welfare 
effects as the emission increases. The State has established a 
methodology to use whenever there is a different location of emissions 
because of the intraplant

[[Page 19480]]

trading. For example, where the netting has the effect of moving 
emissions closer to the plant property line than the Qualified Facility 
to be changed, the State uses this methodology to analyze whether there 
could be an increase in off-site impacts. See 30 TAC 116.117(b)(5). We 
continue to believe that this will ensure the reductions have 
approximately the same qualitative significance for public health and 
welfare, which is required to ensure the reductions are creditable. 
Nevertheless, as stated above, we are disapproving the Qualified 
Facilities netting program as a substitute for a Major NSR SIP program 
and as a Minor NSR SIP program because the Program is inadequate to 
protect ambient air quality.
    Comment: The UT Environmental Clinic commented that the Qualified 
Facilities netting Program does not adequately protect air quality 
under Minor NSR. Specifically, the Qualified Facilities netting 
provisions do not meet Federal netting standards, which are in place 
precisely to ensure that air quality is protected. The Program's 
failure to meet almost all of those basic netting requirements renders 
the rules inadequate.
    Response: Generally, these comments support EPA's analysis of 
Texas's Qualified Facilities Program as a Minor NSR SIP program as 
discussed in detail at 74 FR 48450, at 48460-48462, and further support 
EPA's action to disapprove the Qualified Facilities submission.
    Comment: The UT Environmental Clinic commented that the Program is 
clearly inadequate to ensure protection of the NAAQS and to prevent 
violations of control strategies. The rules cannot be approved as an 
exemption from Minor NSR permitting because they in no way ensure that 
the emission increases authorized pursuant to the rules will have a de 
minimis impact on air quality.
    Response: We agree with the commenter that the Program is 
inadequate to ensure protection of the NAAQS for several reasons. As 
discussed below in Section V.G.1, we find that the Qualified Facilities 
rules are not clear that all Qualified Facilities must have obtained a 
Texas NSR SIP permit. Without the assurance that all Qualified 
Facilities have obtained a Texas NSR SIP permit, EPA cannot make the 
finding that each permit for a Qualified Facility includes an emission 
limitation based on the chosen control technology, with a determination 
that the Qualified Facility will not interfere with attainment and 
maintenance of the NAAQS or violate any control strategy. Therefore, 
the Program fails to ensure that all Qualified Facilities can operate 
up to a permitted allowable limit such that they do not interfere with 
attainment and maintenance of the NAAQS and do not violate any State 
control strategy, as required by the Texas NSR SIP.
    Additionally, the Program fails to ensure that the NAAQS are 
protected because 30 TAC 116.117 lacks language requiring the owner or 
operator to maintain the information and analysis showing how it 
concluded that there will be no adverse impact on ambient air quality 
before undertaking the change.
    We agree with the commenter that the Program does not qualify as a 
de minimis exemption from Minor NSR. The State has not provided 
sufficient information to demonstrate that the exempted changes from 
the Minor NSR requirements will have only a de minimis effect. See 
Section V.D.1 below for more information.
2. Comments Generally Opposing Proposal
    Comment: TCEQ commented that the Qualified Facilities Program can 
only be used if a physical or operational change complies with Federal 
NSR requirements. In order to make a physical or operational change to 
a Qualified Facility, an owner or operator must demonstrate that the 
change does not result in a net increase in allowable emissions of any 
air contaminant previously authorized under state minor source review. 
30 TAC 116.116(e)(1). Keeping in mind the State definition of 
``facility,'' 30 TAC 116.116(e)(2) and (3) allow a Qualified Facility 
to demonstrate that a state modification has not occurred by comparing 
allowable emissions to allowable emissions before and after a proposed 
change. Allowable emissions (both hourly and annual rates) are one of 
the criteria to provide ``state qualified'' flexibility because the 
facilities must exist and be authorized, and thereby have undergone 
appropriate permit review. In addition, no existing level of control 
can be reduced. 30 TAC 116.116(e)(8). The commenter states that for 
major sources, in addition to State requirements, the evaluation of 
emissions related to physical and/or operational changes is conducted 
on a baseline actual to either a projected actual or potential to emit 
base if applicable. 30 TAC 116.116(e)(4). This comparison is used to 
determine if an emission increase above the appropriate significance 
threshold for a particular Federal permitting program has occurred. 
From the Federal NSR standpoint, if a proposed physical or operational 
change would result in an emissions increase that exceeds a 
significance threshold, the appropriate analysis (netting) is 
triggered. If the results of the netting analysis indicate that a major 
modification has occurred, the appropriate Federal program(s) is 
triggered and Federal authorization must be obtained. In such a case, 
the Qualified Facilities Program would not be an applicable 
authorization pathway, and a State Minor NSR amendment must be 
obtained, along with the appropriate Federal NSR authorization. The 
exemption from the definition of ``modification of an existing 
facility'' under the Qualified Facilities Program does not relieve an 
owner or operator from conducting an evaluation to determine if a 
Federal major modification has occurred. TCEQ states that from the 
Federal standpoint, only the project's emission increases are evaluated 
(without consideration of emission decreases) to determine if a Federal 
applicability analysis (netting) has been triggered. If the project 
increases equal or exceed the netting threshold for the pollutant and 
this program, then a full contemporaneous netting exercise is conducted 
in an effort to determine if the modification is a major modification. 
If the project is a major modification, then the appropriate Federal 
NSR program, either PSD or nonattainment review, is triggered. A permit 
holder cannot use the ``no net emissions increase'' concept that is 
described in the Qualified Facilities Program rules as a mechanism to 
avoid a Federal NSR applicability analysis (netting).
    Comment: TxOGA commented that the Qualified Facilities Program 
establishes an allowables-based trigger and has no effect on a permit 
holder's compliance obligations under Federal requirements. Texas rules 
clearly require compliance with Federal requirements. 30 TAC 
116.117(a)(4) and (d). This interpretation is also supported by TCEQ 
guidance.
    Comment: The TCC commented in response to EPA's assertion that a 
Major NSR applicability determination must be based on actual 
emissions, not allowables. TCC argues that the Qualified Facilities 
rules do not circumvent any Federal requirements for major stationary 
sources. TCC reiterates that a qualified facility must demonstrate that 
the change does not result in a net increase in allowables, the source 
must follow notification requirements, and the source cannot relax 
controls at the qualified facility.
    Response: We acknowledge TCEQ's description of how the State 
intends to implement the Qualified Facilities Program; however, we have 
determined

[[Page 19481]]

that TCEQ's current rules are insufficient to prevent circumvention of 
Major NSR. EPA disagrees with the comments from TxOGA and TCC. The 
submitted Program lacks specific requirements that would require an 
owner or operator who proposes a change under the Qualified Facilities 
program to first conduct a Major NSR applicability analysis (netting) 
prior to receiving (or asserting) authorization under the Qualified 
Facilities Program.
    Comment: TCEQ commented that for facilities undergoing an 
intraplant trade, where the allowable emissions at one facility are 
increased while allowable emissions at another facility are reduced an 
allowable-to-allowable comparison is used only to determine if a new 
emissions increase has occurred for State purposes. The emissions are 
reviewed simultaneously, which is more stringent than the Federal 
requirement that only requires contemporaneous emissions. If a net 
emissions increase has occurred, an owner or operator cannot use the 
Qualified Facilities Program to authorize the proposed project, and 
must find another State mechanism to obtain proper authorization. In 
addition, the commenter states that the owner or operator must submit 
pre-change notification if the intraplant trade moves emissions from 
the interior of a plant site closer to a property line. This gives TCEQ 
staff the ability to evaluate public protectiveness and evaluate any 
potential changes in off property impacts as they relate to all 
contaminants and pollutants with national standards, i.e. the NAAQS. 
This intraplant trade capability only exists to the extent that the 
project is a Minor NSR action, and does not apply if a major 
modification has been triggered under Federal NSR requirements.
    Response: EPA disagrees with the commenter that under the Texas 
rules the Program's intraplant trading does not apply if a major 
modification has been triggered. As stated above, the program fails to 
require a Major NSR applicability analysis and is insufficient to 
prevent circumvention of Major NSR. Intraplant trading based on 
allowables to allowables netting is prohibited under Major NSR. See 
State of New York et al., v. EPA, 413 F.3d 3, 40 (DC Cir. 2005). 
However, such netting may be permissible for a Minor NSR program, 
provided that the netting provisions assure protection of the NAAQS. 
See 74 FR 48450, at 48462. As discussed above, Texas's Qualified 
Facilities Program does not meet this requirement. EPA also finds that 
the Program does not adequately define a contemporaneous (or 
simultaneous) period or require that emission reductions occur within a 
specified period. As discussed above, we find that the Program fails to 
meet the Minor NSR netting requirement for a defined period in which 
the reductions must occur.
    Comment: TIP and BCCA commented that the Qualified Facilities 
program exceeds Federal benchmarks for allowable-based Minor NSR 
triggers. This program is one of the mechanisms that EPA encouraged in 
its Flexible Air Permitting Rule (FAP) (74 FR 51418, 15423). Further, 
the program is more stringent than the Federal FAP Program because it 
requires up-to-date BACT. The Qualified Facilities Program is also 
comparable to the proposed allowables-based minor NSR trigger in EPA's 
proposed Indian Country rule, in which EPA allows the use of allowables 
to allowables netting. To justify the use of an allowables test, EPA 
distinguished the definition of ``modification'' under Minor NSR from 
that used for Major NSR. 71 FR 48696, 48701 (citing State of New York, 
et al., v. EPA (DC Cir. Jun. 24, 2005)). The Qualified Facilities rules 
meet these criteria and are more stringent than the Federal model 
because it only extends this flexibility to well-controlled facilities.
    The commenter reiterates that the Qualified Facilities Program does 
not effect a permit holder's obligation to comply with Federal 
requirements. An allowables-based trigger is permissible because the 
CAA and Federal regulations do not mandate a method for determining 
minor NSR. The Environmental Appeals Board confirmed that there is no 
mandated methodology for the emissions test used for minor NSR. In re 
Tennessee Valley Authority, 9 EAD 357, 461 (EAB September 15, 2000). 
Again, EPA employed an allowables-to-allowables test in its proposed 
Indian Country rule. States have great flexibility to determine 
applicability for Minor NSR and that includes the authority to use an 
allowables-based trigger. TCEQ rules articulate an overriding 
obligation to comply with Federal requirements. 30 TAC 116.117(a)(4) 
and (d). Therefore, the current Qualified Facilities rules prevent 
circumvention of Major NSR.
    Response: EPA disagrees with the commenter. This rulemaking 
disapproves netting under the Qualified Facilities Program for Major 
NSR, in part because the Program fails to first require a Major NSR 
applicability demonstration to show that a proposed change does not 
trigger Major NSR before the source can take advantage of the Program. 
In contrast to the Qualified Facilities Program, under the proposed 
Indian Country rule, 40 CFR 49.153 would explicitly require the 
proposed new source or modification to determine applicability to Major 
NSR before taking advantage of the program. The source could only use 
allowables netting under the proposed Indian County rule after a Major 
NSR applicability determination. See 71 FR 48696, at 48705, 48728-
48729. The Qualified Facilities rules are deficient because they lack 
such a requirement. Further, as described above, the Program fails to 
meet several other netting requirements for an approvable Minor NSR 
netting program.
    EPA's FAP rule is an Operating permit under Title V, not Title I. 
74 FR 51418, 51419. While the FAP rule recognizes the use of advance 
approval programs under Minor NSR, the use of such programs must ensure 
environmental protection and compliance with applicable laws. ``[FAPs] 
cannot circumvent, modify, or contravene any applicable requirement 
and, instead, by their design must assure compliance with each one as 
it would become applicable to any authorized changes.'' See 74 FR 
51418, 51422. Further, advance approval under the FAP must be made at 
the time of permit issuance, and consider the alternate operating 
scenarios for air quality impacts, control technology, compliances with 
applicable requirements, etc. Under Major and Minor NSR, advance 
approval must ensure compliance with control strategy and non-
interference with attainment and maintenance of NAAQS for each 
operating scenario as required by 40 CFR 51.160. We do not see how the 
Texas Qualified Facility Rule meets these requirements.

D. Comments Addressing Whether the Qualified Facilities Rules Are 
Practically Enforceable

1. Comments Generally Supporting Proposal
    Comment: The UT Environmental Clinic commented that the rules fail 
to ensure that netted reductions are enforceable.
    Response: We agree with the commenter that the Program is 
unenforceable because it fails to explicitly require that a permit 
application must be submitted for the change and for any relied-upon 
emissions reductions in the netting analysis. Because the Program is an 
exemption from a preconstruction permit, and does not require a permit, 
the Program must qualify as a de minimis exemption to be approvable. We 
find that the Program does not

[[Page 19482]]

qualify as a de minimis exemption from Minor NSR. The legal test for 
whether a de minimis threshold can be approved is whether it is 
consistent with the need for a plan to include legally enforceable 
procedures to ensure that the State will not permit a source that will 
violate the control strategy or interfere with NAAQS attainment, as 
required by 40 CFR 51.160(a)-b). 74 FR 48450, at 48460. The State 
failed to demonstrate that this exemption will not permit changes that 
will violate the Texas control strategies or interfere with NAAQS 
attainment. Therefore all of the requirements under 40 CFR 51.160(a)-
(b) apply to the Program.
    Additionally, the Program allows too long of a lag time before a 
revised permit is issued in certain circumstances that can lead to a 
violation of a NAAQS, RFP, or control strategy without the TCEQ 
becoming aware of it in a timely manner. We proposed that the lag time 
for reporting a change under the Program should be no longer than six 
months, rather than a year, but we requested comment on whether six 
months is an acceptable lapse of time to ensure noninterference with 
the NAAQS and control strategies. 74 FR 48450, at 48462. We received no 
comments on this issue except that TCEQ stated they will consider this 
change during rulemaking. Therefore, we find that the Program allows 
too long of a lag time before reporting ``qualified'' changes.
    Comment: The UT Environmental Clinic commented that the Program is 
clearly inadequate to ensure protection of the NAAQS and PSD increments 
and to prevent violations of control strategies.
    Response: EPA agrees a Minor NSR SIP must include legally 
enforceable procedures enabling the State to determine whether 
construction or modification would violate a control strategy or 
interfere with attainment or maintenance of the NAAQS. 40 CFR 
51.160(a)-(b). Furthermore, any Minor NSR SIP revision submittal that 
is a SIP relaxation, such as this Qualified Facilities Program, must 
meet section 110(l). The Qualified Facilities SIP submittal is a 
relaxation under CAA section 110(l) because it provides an exemption 
from NSR permitting not previously available to sources. This SIP 
relaxation creates a risk of interference with NAAQS attainment, RFP, 
or any other requirement of the Act. EPA lacks sufficient available 
information to determine that this SIP relaxation would not interfere 
with any applicable requirement concerning attainment and RFP, or any 
other requirement of the Act. See 74 FR 48450, at 48463.
2. Comments Generally Opposing Proposal
    Comment: ERCC commented that the Qualified Facilities Program is 
enforceable for several reasons. The program's regulations include 
enforceable registration and recordkeeping requirements. Documentation 
must be maintained for all Qualified Facility changes that describes 
the change and demonstrates compliance with the Qualified Facility 
Program as well as state and Federal law. See 30 TAC 116.117(a). TCEQ 
regulations also require that, at a minimum, an annual submission is 
made to the agency documenting any qualified facility changes not 
incorporated into a facility permit. See 30 TAC 116.117(b). Pre-change 
qualification and approval are required for certain changes including: 
changes that affect BACT or where MAERT is not available (30 TAC 
116.118); certain intraplant trading (30 TAC 116.117(4)); or if the 
change will affect compliance with a permit condition (30 TAC 
116.117(3)). EPA's general comments questioning the proper permit 
application or registration for qualified facility authorization are 
unclear given the minor source nature of the program and its function 
as an exemption from a preconstruction permit. See 74 FR 48450, at 
48462. The Program adequately imposes recordkeeping, reporting, 
notification and approval regulations to satisfy the minor NSR 
enforceability requirements.
    Comment: TIP and BCCA also commented in response to EPA's argument 
that the Qualified Facilities Program is not enforceable because 
changes are not reflected in a permit. The program is a minor NSR 
triggering program. Instead of permit revision, a facility qualified to 
invoke the program must notify TCEQ of changes under the Qualified 
Facilities rules. 30 TAC 116.118. The commenters explain the scenarios 
when notification is required and the requirements for effective 
notification under the rules. Commenters also state that if a change 
implicates a permit special condition, the permit holder must revise 
its permit special condition using the procedures specified in Chapter 
116, New Source Review. 30 TAC 116.116(b)(3).
    Comment: The TxOGA commented that the Qualified Facilities Program 
is a minor NSR triggering provision that requires facilities to retain 
documentation and notify TCEQ of changes under the program. A facility 
must be qualified at the time the change is to occur. The program is 
enforceable because the rules contain notification and recordkeeping 
requirements.
    Response: EPA disagrees with the commenters. The Program does not 
meet the Federal requirements for practical enforceability. To be 
approvable, a Minor NSR program must include enforceable emissions 
limits. See 74 FR 48450, at 48462. The Program is not clear that each 
Qualified Facility involved in the netting transaction must submit a 
permit application and obtain a permit revision reflecting all of the 
changes made to reduce emissions (relied upon in the netting analysis) 
as well as reflecting the change itself that increased emissions. See 
74 FR 48450, at 48462. Therefore, the Program is unenforceable. 
Additionally, the Program allows too long of a lag time before a 
revised permit is issued in certain circumstances that can lead to a 
violation of a NAAQS, RFP, or control strategy without the TCEQ 
becoming aware of it in a timely manner. Because the Program is an 
exemption from a preconstruction permit, and does not require a permit, 
the Program must qualify as a de minimis exemption to be approvable. We 
find that the Program does not qualify as an approvable de minimis 
exemption from Minor NSR. See 74 FR 48450, at 48462; Section V.D.1. 
above. Therefore all of the requirements under 40 CFR 51.160(a)-(b) 
apply to the Program. As described throughout this notice, the 
Qualified Facilities Program fails to meet all of these requirements. 
See 74 FR 48450, at 48460. As stated above, the Program fails to 
require a permit that reflects all of the changes that occurred in the 
netting process and provides enforceable emissions limits. The 
notification and recordkeeping requirements, while beneficial, are not 
sufficient under Federal requirements to ensure enforceability.

E. Comments Addressing Whether the Qualified Facilities Rules Meet 
Federal Requirements for Major New Source Review

1. Comments Generally Supporting Proposal
    Comment: The UT Environmental Clinic comments that nothing in the 
Qualified Facility statute or rules limits applicability to minor 
modifications. The rules require documentation at the plant site 
sufficient to comply with Nonattainment NSR and PSD, but do not clarify 
that changes that constitute a major modification cannot be made 
through a Qualified Facility change.
    The commenter further stated that because the Qualified Facilities 
rules can be used to authorize major

[[Page 19483]]

modifications, the rules fail to meet the substantive requirements of 
Nonattainment NSR and PSD. For emission increases associated with PSD, 
the Qualified Facilities rules fail to require: (1) Best Available 
Control Technology; (2) an air quality analysis of impacts on the NAAQS 
and PSD increments; and (3) additional impact analysis associated with 
the implementation of the new source or modification. For emission 
increases associated with Nonattainment NSR, the Qualified Facilities 
rules fail to require: (1) Lowest Achievable Emission Rate; (2) 
emission offsets; and (3) demonstration of compliance by other 
facilities in the State.
    Response: These comments are consistent with EPA's analysis 
concluding that Texas's Qualified Facilities Program does not meet 
Major NSR Substantive requirements as discussed at 74 FR 48450, at 
48458-48459.
    EPA agrees that the Program is deficient because it lacks 
provisions that require a Major NSR applicability determination for a 
change at a Qualified Facility before it is exempted from the 
permitting requirements. The Program's regulations do not contain any 
emission limitations, applicability statement, or regulatory provision 
restricting the change to Minor NSR. This lack of such express 
provisions distinguishes the Qualified Facilities Program from the 
Texas Minor NSR SIP rules for Permits by Rule in Chapter 106 and 
Standard Permits in Chapter 116, Subchapter F. The Standard Permits 
rules require a Major NSR applicability determination at 30 TAC 
116.610(b), and prohibit circumvention of Major NSR at 30 TAC 
116.610(c). Likewise, the Permits by Rule provisions require a Major 
NSR applicability determination at 30 TAC 106.4(a)(3), and prohibit 
circumvention of Major NSR at 30 TAC 106.4(b). The absence of these 
provisions in the Qualified Facilities rules creates an unacceptable 
ambiguity in the SIP. Therefore, the Program could allow circumvention 
of Major NSR. See 74 FR 48450, at 48456-48458.
    EPA also agrees that the Program fails to address the required air 
quality impacts analysis. The comments concerning BACT, LAER, emissions 
offsets and a demonstration of compliance by other facilities in the 
State go beyond EPA's analysis in the proposal and are outside the 
scope of this rulemaking.
    Additionally, section 110(l) of the Act prohibits EPA from 
approving any revision of a SIP if the revision would interfere with 
any requirement concerning attainment and RFP, or any other requirement 
of the Act. There is not sufficient available information to enable EPA 
to determine that the submitted Program would not interfere with any 
requirement concerning attainment and RFP, or any other requirement of 
the Act. See 74 FR 48450, at 48459; and response above.
    Comment: The Office of the Mayor, City of Houston, Texas, 
recognizes that the Qualified Facilities Program has no regulatory 
provisions that clearly prevent the Program from circumventing Major 
NSR SIP requirements thereby allowing changes at existing facilities to 
avoid the requirement to obtain preconstruction authorizations. 
Therefore, major sources of emissions are making major modifications to 
their facilities without going through the permitting process. The 
commenter states that this is a fatal flaw in the program, it is 
inconsistent with the CAA and should not be included in the SIP.
    Response: The comments by the Office of the Mayor, City of Houston, 
Texas, are consistent with EPA's conclusions as discussed at 74 FR 
48450, at 48456-48457 and response above.
2. Comments Generally Opposing Proposal
    Comment: The TCC comments that Qualified Facilities is a Minor NSR 
Program because TCEQ's rules clearly require sources making changes 
under the Program to submit specific documentation, including 
``sufficient information as necessary to show that the project will 
comply with 40 CFR 116.150 and 116.151 of this title (relating to 
Nonattainment Review) and 40 CFR 116.160-116.163 of this title 
(relating to Prevention of Significant Deterioration Review) and with 
Subchapter C of this Chapter 116 (relating to Hazardous Air Pollutants: 
Regulations Governing Constructed or Reconstructed Major Sources (CAA 
112(g), 40 CFR Part 63)).'' 30 TAC 116.117(a)(4).\10\
---------------------------------------------------------------------------

    \10\ In a separate SIP submittal dated February 1, 2006, Texas 
recodified the provisions of Subchapter C into Subchapter E. TCEQ's 
rules also state that nothing in the rules governing the Program 
shall limit the applicability of any Federal requirement. 30 TAC 
116.117(d).
---------------------------------------------------------------------------

    Response: As stated in the above, TCEQ's rules for Qualified 
Facilities are insufficient to prevent circumvention of major NSR. See 
74 FR 48450, at 48456-48458.
    Comment: ERCC commented that the Qualified Facilities Program is 
limited to Minor NSR. Qualified Facilities mandates compliance with 40 
CFR 51.165 and 51.166, by clearly stating that any change authorized by 
Qualified Facilities shall not ``limit the application of otherwise 
applicable state or Federal requirements.'' TCAA 382.0512(c). TCEQ 
regulations require that Qualified Facilities changes must be 
documented minor source modifications. See 30 TAC 116.117(a)(4); 30 TAC 
116.117(d). EPA's dismissal of Section 116.117(a)(4) as a recordkeeping 
provision is unjustified. 74 FR 48450, at 48457. This Qualified 
Facilities regulatory reference to the PSD and NNSR programs requires 
the regulated entity to document that the change is in compliance with 
the Federal major source permitting programs and in compliance with 
state and Federal law.
    Response: As stated above, the Qualified Facilities rules are 
insufficient to prevent circumvention of Major NSR. 74 FR 48450, at 
48456-48458.
    Although there are recordkeeping requirements in the Program at 
submitted 40 TAC 116.117(a)(4) requiring owners and operators to 
maintain documentation containing sufficient information as may be 
necessary to demonstrate that the project will comply with the Federal 
CAA, Title I, parts C and D, these are the same general provisions as 
those in the SIP at 30 TAC 116.111(a)(2)(H) and (I) for Minor and Major 
NSR SIP permits. These recordkeeping requirements, although necessary 
for NSR SIP approvability, cannot substitute for clear and enforceable 
provisions, consistent with Texas's other Minor NSR programs, that 
limit applicability in the submitted Program to Minor NSR only. 74 FR 
48450, at 48456-48457.
    Comment: TIP and BCCA comment that sources cannot use the Qualified 
Facilities Program to circumvent Major NSR. 30 TAC 116.117(a)(4) and 
(d); Modification of Existing Facilities Guidance, at 2. Senate Bill 
1126, which authorized the Qualified Facilities program, does not 
supersede any Federal requirements. Further, ``[i]f a change made under 
the qualified facility flexibility would result in the violation of a 
permit special condition, the permit holder must revise the permit 
special conditions to stay in compliance with the permit,'' through 
either the permit alteration process under 30 TAC 116.116(c) or the 
notification process of 30 TAC 116.117(d). Modification of Existing 
Facilities Guidance, at 9. Therefore, any changes to a facility must 
comply with Federal NSR and PSD rules. To further show that the current 
Qualified Facilities rules are sufficient to prevent circumvention, 
commenter cites to EPA's proposed Indian Country rule and recently 
approved state SIPs that do not contain explicit language

[[Page 19484]]

calling for a major NSR applicability determination before use of the 
minor NSR tools. Alaska Admin. Code tit. 18, Sec.  50.502, approved 72 
FR 45378 (August 14, 2007); 7 Del. Code Regs. Sec.  1102, 65 FR 2048 
(January 13, 2000) (granting limited approval based on EPA's concerns 
about public participation provisions). Further, no Federal requirement 
mandates such language. Therefore, it is arbitrary for EPA to require 
Texas to include additional language. CleanCoalition v. TXU Power, 536 
F.3d 469, 472 (5th Cir. 2008).
    Response: As stated above, EPA finds that the Qualified Facilities 
regulatory provisions are inadequate to prevent circumvention of Major 
NSR and limit the Program to minor modifications. TCEQ's rules and 
guidance are not clear on their face that circumvention of Major NSR 
requirements is prohibited. EPA does not understand how the permit 
alteration and notification requirements are relevant to the issue of 
circumvention of Major NSR. EPA disagrees with the commenter's analogy 
to the proposed Indian Country Minor NSR rule. Today's rulemaking 
disapproves the Qualified Facility Program for Major NSR, in part 
because the Program fails to first require a Major NSR applicability 
demonstration to show that a proposed change does not trigger Major NSR 
before the source can take advantage of the Program. In contrast, under 
the proposed Indian Country rule, 40 CFR 49.153 would explicitly 
require the proposed new source or modification to determine 
applicability to Major NSR before taking advantage of the program. 71 
FR 48696, at 48705, 48728-48729. The source could only use allowables 
netting under the proposed Indian Country rule after it determined that 
Major NSR does not apply to the project. The Qualified Facilities rules 
are deficient because they lack such a requirement, i.e., that Major 
NSR does not apply to the change.
    Comment: The ERCC commented that EPA sent a comment letter on the 
Qualified Facilities proposed rule and agreed that it ``adequately 
addresses the applicability of major sources and major modifications 
with respect to PSD and NA permitting requirements.'' 21 Tex. Reg. 1569 
(February 27, 1996).
    Response: We acknowledge our 1995 comment letter stating that Texas 
adequately satisfied our concern that the Qualified Facilities Program, 
as proposed, would not circumvent or supersede any Major NSR SIP 
requirements. Since we sent that letter, however, the Texas Legislature 
has revised the Texas Clean Air Act significantly. Specifically, in 
1999, the Texas legislature added an explicit statutory prohibition 
against the use of an Exemption or Permit by Rule or a Standard Permit 
for major modifications. See Texas Health and Safety Code 382.05196 and 
.057. These 1999 legislative actions required a new legal review of the 
statutory definition for ``modification of existing facility'' to see 
if it was still limited to minor modifications. It is EPA's 
interpretation that the 1999 legislative changes made this statutory 
definition ambiguous. 74 FR 48450, at 48456-48457.

F. Comments Addressing Whether the Qualified Facilities Rules Meet 
Federal Requirements for Minor New Source Review

1. Comments Generally Supporting Proposal
    Comment: The UT Environmental Clinic commented that the CAA 
requires SIPs to include a program for ``regulation of the modification 
and construction of any stationary source.'' 42 U.S.C. 110(a)(2)(C). 
The program must prohibit any sources, including minor sources, from 
emitting pollution in amounts that contribute significantly to 
nonattainment and maintenance of the NAAQS or interfere with measures 
included in the SIP. 42 U.S.C. 110(a)(2)(D)(i)(I)-(II). EPA has 
recognized the valuable role that Minor NSR programs play in ensuring 
that air quality is protected from emissions that are not subject to 
Major NSR. Technical Support Document for the Prevention of Significant 
Deterioration and Nonattainment Area New Source Review Regulations, 
U.S. EPA, Nov. 2002, at I-5-I-12. The Qualified Facilities Program is 
deficient as a Minor NSR program because:
     The Qualified Facility rules do not require enforceable 
limits. Qualified Facilities provide notification of ``qualified'' 
changes on form PI-E,\11\ which TCEQ acknowledges is not enforceable. 
Texas Commission on Environmental Quality Guidance for Air Quality, 
Qualified Changes Under Senate Bill 1126 (Dec. 2000), 27 [hereinafter 
Qualified Facilities Guidance]. Without enforceable limits, facilities 
can use emission reductions as part of a netting analysis and 
subsequently increase those emissions or rely on these reductions to 
offset other increases. Some Qualified Facility representations are 
consolidated into a preexisting permit upon revision or renewal at the 
discretion of the source. Even if representations in the PI-E were 
enforceable, there are no monitoring or reporting requirements to 
demonstrate compliance. 30 TAC 116.117(a). See 74 FR 48450 (Sept. 23, 
2009), Docket, Technical Support Document, pg. 22.
---------------------------------------------------------------------------

    \11\ 30 TAC Sec.  116.117(b). See regulation text on pages 23-24 
of the TSD for this action, which refer to 30 TAC 116.117(b)(2) and 
(4).
---------------------------------------------------------------------------

     The Qualified Facility Rules do not include a pre-approval 
mechanism for all authorized emission increases. The rules have no 
mechanism that prevents implementation of Qualified Facility changes 
that may violate a control strategy or interfere with attainment or 
maintenance of the NAAQS. The Program only requires Qualified 
Facilities to obtain pre-approval of a Qualified Facility change if it 
involves interplant \12\ trading above a ``reportable limit.'' 30 TAC 
116.117(b)(4). Facilities that do not rely on interplant trading are 
only required to report their changes on an annual basis. 30 TAC 
116.117(b)(1).
---------------------------------------------------------------------------

    \12\ Although the commenter refers to ``interplant'' trading, 
the Texas rules referred to by the commenter relates to 
``intraplant'' trading.
---------------------------------------------------------------------------

    Response: As stated above at Section V.D.1, EPA agrees with the 
first point that the submitted rules are practically unenforceable 
because the reductions are not incorporated into a permit. 74 FR 48450, 
at 48462.
    EPA agrees with the commenter that the Program does not include a 
pre-approval mechanism for all authorized emission increases. Under 
section 110(a)(2)(A) and (C) of the Act, a Minor NSR SIP must require 
enforceable emission limits for all minor modifications. The Texas 
Program is not clear that for each Qualified Facility involved in the 
netting transaction, the owner or operator must submit a permit 
application and obtain a permit revision reflecting all of the changes 
made to reduce emissions (relied upon in the netting analysis) as well 
as reflecting the change itself that increased emissions. Furthermore, 
the Program's rules at 30 TAC 116.116(e)(4) and 116.117(b)(1)-(4) are 
not clear that the PI-E form is a permit application or registration 
that must be submitted and that a revised permit must be issued by TCEQ 
to reflect the changes made by all of the participating Qualified 
Facilities. There is no discussion of when TCEQ issues the revised 
permit. See the submittals at 30 TAC 116.117(b); 74 FR 48450, at 48462.
2. Comments Generally Opposing Proposal
    Comment: The TCEQ commented that it has always considered the 
Qualified Facilities Program to be a Minor NSR Program although it is 
not stated in the rule. The rule requires the person making a change to 
maintain sufficient documentation to demonstrate that the

[[Page 19485]]

project will comply with 30 TAC 116.150 and 116.161 (Nonattainment 
NSR), 116.160-116.163 (Prevention of Significant Deterioration Review), 
and Chapter 116, Subchapter C (relating to implementing section 112(g) 
of the Act. 30 TAC 116.117(a)(4). A major modification may not occur 
without going through nonattainment or PSD review. If a project is 
determined to be a major modification, under PSD and/or nonattainment 
rules,\13\ the owner/operator must obtain a Federal NSR permit/major 
modification. Then Qualified Facilities Program does not impair TCEQ's 
authority to control air pollution and take action to control a 
condition of air pollution if TCEQ finds that such a condition exists. 
Texas Water Code section 5.514. TCEQ commits to work with EPA to 
improve and clarify the rule language to ensure that the Qualified 
Facilities Program is specifically limited to Minor NSR changes. Texas 
comments that it does not apply the Qualified Facilities program to 
projects that are subject to Major NSR or subject to section 112(g) of 
the Act.
---------------------------------------------------------------------------

    \13\ 40 CFR 51.165(a)(1)(v).
---------------------------------------------------------------------------

    Response: We appreciate TCEQ's willingness to work with EPA to 
improve and clarify its rules to ensure that the Qualified Facilities 
Program does not apply to projects that are subject to Major NSR or 
subject to section 112(g). However, the Program is deficient because it 
fails to include specific provisions in its rules that assure that the 
Qualified Facilities Program does not apply to projects that are 
subject to Major NSR or subject to section 112(g). See 74 FR 48450, at 
48456-48457.
    Comment: ERCC commented that EPA has failed to demonstrate the 
proposed revisions interfere with Texas's ability to achieve the NAAQS. 
Specifically:
     Texas requires all air emissions from stationary sources 
(including minor sources) receive authorization from the State. Texas 
has developed an extensive program to meet the permitting and resource 
challenges of this requirement and the State's numerous and varied 
emission sources. States have discretion under the CAA to implement the 
state minor source program as long as it does not ``interfere with 
attainment of the NAAQS. Aside from this requirement, which is stated 
in broad terms, the Act includes no specifics regarding the structure 
or functioning of minor NSR programs * * * as a result, SIP-approved 
minor NSR programs can vary quite widely from State to State.'' 
Operating Permit Programs; Flexible Air Permitting Rule; Final Rule, 74 
FR 51,418 at 51,421 (Oct. 6, 2009). Therefore, ERCC requests that EPA 
re-evaluate and withdraw the proposed disapprovals. Texas air quality 
has shown dramatic improvement because of the three submitted programs. 
EPA fails to recognize that these programs are similar to other 
approved state minor NSR programs.
     EPA's proposed disapprovals do not meet Congress' or the 
Courts' documented standards for SIP disapproval. The CAA grants EPA 
authority to disapprove a SIP revision if such revision would interfere 
with the state's SIP. A revision interferes with the SIP if it impedes 
the state's ability to achieve the NAAQS. 42 U.S.C. 7410(l); S. Rep. 
No. 101-228, at 9, 1990 U.S.C.C.A.N. 3385, 3395; and Train v. NRDC, 421 
U.S. 60, 79 (1975). The commenter argues that EPA has the burden to 
demonstrate that the submittals interfere with the NAAQS, but EPA's 
proposals shift this burden to Texas. See Hall v. EPA, 273 F.3d 1146, 
1161 (9th Cir. Cal. 2001) (citing Train, 421 U.S. at 93 and Ober v. 
Whitman, 243 F.3d 1190, 1195 (9th Cir. 2001)) (requiring EPA's analysis 
to ``rationally connect'' approval of a revision to an area's 
likelihood of meeting the NAAQS).
     Since their submittal to EPA, the State's implementation 
of these rules has significantly reduced statewide emissions. These 
improvements can be demonstrated by reviewing both the records of 
emissions reductions and the reductions measured by Texas ambient air 
quality monitors.
    ERCC further commented that Qualified Facilities is protective of 
air quality by limiting the use of this authorization under 30 TAC 
116.116(e) and 30 TAC 116.10 (11)(E) and providing incentives to 
implement emission reductions. Like the Qualified Facilities Program, 
EPA's proposed Indian Country Minor NSR program is based upon an 
increase of allowable and not actual emissions. 71 FR 48696, at 48701. 
The EPA-developed Minor NSR program also utilizes emission rates in 
lieu of air quality impacts to determine exemptions from the Minor NSR 
definition of modification because ``applicability determinations based 
on projected air quality impacts would be excessively complex and 
resource intensive.'' Id. at 48701.
    Response: We agree that states have great flexibility to create 
their own Minor NSR SIP programs. However, at a minimum, those Minor 
NSR SIP programs must meet all of the Federal requirements. Likewise, 
the Qualified Facilities Program must meet all Federal requirements 
under the CAA in order to be approvable. Section V.C.1-2. As discussed 
throughout our proposal and this final notice, the current Qualified 
Facilities Program fails to meet all requirements. Moreover, the 
Qualified Facilities Program would be an exemption from the Texas Minor 
NSR SIP. The Program does not provide an alternative Minor NSR permit 
authorization process but instead exempts facilities from obtaining a 
NSR permit for changes. The State failed to demonstrate that this 
exemption is de minimis and thus that the exempted changes will not 
violate the Texas control strategies or interfere with NAAQS 
attainment, as required by section 110(a)(2)(c) and 40 CFR 51.160. 74 
FR 48450, at 48460; see also Section V.C.1-2, D.1, and G. of this 
Response to Comments. Additionally, EPA lacks sufficient available 
information to determine that the requested SIP revision relaxation 
does not interfere with any applicable requirements concerning 
attainment and RFP, or any other applicable requirement of the Act, as 
required by section 110(l) of the Act. 74 FR 48450, at 48463; see also 
Section V.D.1.
    EPA disagrees with the commenter's analogy to the proposed Indian 
Country Minor NSR rule. Today's rulemaking disapproves netting under 
the Qualified Facilities Program for Minor NSR, in part because the 
Program fails to first require a Major NSR applicability demonstration 
to show that a proposed change does not trigger Major NSR before the 
Qualified Facility can take advantage of the Program. The proposed 
Indian Country rule would explicitly require the proposed new source or 
modification first determine applicability to Major NSR before taking 
advantage of the program. 71 FR 48696, at 48705, 48728-48729. The 
source could only use allowables netting under the proposed Indian 
Country rule after it determined that Major NSR does not apply to the 
project. The Qualified Facilities rules are deficient because they lack 
the requirement for a Major NSR applicability determination, not 
because the Program allows allowables netting under Minor NSR. Further, 
while the commenter is correct that the proposed Indian Country rule 
would allow the use of emissions rates in lieu of air quality impacts, 
the use of emissions rates is only to establish applicability under 
Minor NSR. Such an approach is acceptable as long as the program 
assures protection of the NAAQS. 71 FR 48696, at 48701.
    Comment: TIP and BCCA commented that SIP revisions are approvable 
if they do not interfere with the NAAQS. States have the primary 
responsibility for

[[Page 19486]]

developing plans for attainment and maintenance of the NAAQS. See 
CleanCOALition v. TXU Power, 536 F.3d 469, 472 n.3 (5th Cir. 2008) 
(stating that ``EPA has no authority to question the wisdom of a 
State's choices of emissions limitations if they are part of a SIP that 
otherwise satisfies the standards set forth in 42 U.S.C. 7401(a)(2)''). 
The last ten years have seen unprecedented improvement in Texas air 
quality, and Texas has been implementing the Qualified Facilities 
program during that time. The submittal does not raise interference 
concerns because it strengthens the existing SIP; therefore the 
Qualified Facilities program should be fully approvable. The proposal 
states that Qualified Facilities lacks safeguards to prevent 
interference with attainment and maintenance of the NAAQS. The 
commenters correlate this deficiency with EPA's comments on two facets 
of the submittal that EPA proposed to find approvable as long as 
ambient air is protected in the trading: (1) netting is not based on 
contemporaneous trading; and (2) the Program's netting is not based 
totally on changes in actual emissions. TIP states that the existing 
Qualified Facilities rules contain adequate safeguards of the NAAQS. 
Additionally, changes are sufficiently documented and quantified to 
ensure that a decrease at a facility will only be used in one netting 
analysis. The provision requires that sources must document compliance 
with Federal requirements safeguards the NAAQS. Commenter states that 
Qualified Facilities could be viewed as an exemption to Minor NSR 
requirements; however, the rules prevent changes that will violate the 
Texas control strategies or interfere with NAAQS attainment. Qualified 
Facilities flexibility is only allowed where the change will not result 
in a net increase above existing BACT, and BACT limits were set to 
protect the NAAQS. Qualified Facilities incorporates Texas's control 
strategies, and therefore, safeguards the NAAQS.
    Response: As stated above, in order to be approved as part of the 
SIP, the Qualified Facilities Program must meet all applicable Federal 
requirements. Here, the commenter's argument is not supported by the 
Fifth Circuit's language in CleanCOALition, 536 F.3d at 472 n.3, 
because the Qualified Facilities Program does not meet 42 U.S.C. 
7410(a)(2)(C). EPA agrees with the commenter that the Qualified 
Facilities Program is an exemption to the Texas Minor NSR SIP (and can 
be construed to be an exemption to the Texas Major NSR SIP). A 
requirement for approval of an exemption to a Minor NSR SIP is a 
demonstration that the exemption will not permit changes that will 
violate a state's control strategies or interfere with NAAQS 
attainment. Texas failed to submit such a demonstration. In addition, 
EPA lacks sufficient available information to determine that this SIP 
relaxation would not interfere with NAAQS attainment, RFP, or any other 
requirement of the Act. See Section V.D.1 above. Furthermore, EPA 
cannot find any provisions in the Program that require a separate 
netting analysis be performed for each such change. See 74 FR 48450, at 
48461-48462. We also find that the Program does not prohibit future 
increases at a Qualified Facility, or include regulatory language that 
assures that any future increase at a Qualified Facility at which a 
previous netting reduction occurred is analyzed in totality to assure 
that the NAAQS are protected. The Qualified Facilities rules are 
deficient to protect the NAAQS for the reasons stated above, not 
because the Program allows allowables netting under Minor NSR. The 
commenter asserts that these safeguards exist in the Qualified 
Facilities Program but provides no citation or other basis to support 
its assertion. Finally, EPA finds that the Texas rules do not 
specifically require maintenance of information and analysis showing 
how a source concluded that there will be no adverse impact on air 
quality. 74 FR 48450, at 48462. The commenter provides no citation or 
other basis to show how the Qualified Facilities Program meets this 
requirement.
    Comment: TxOGA commented that the documentation and notification 
requirements of 30 TAC 116.117 provide safeguards to ensure that 
changes will not violate the control strategy or interfere with 
attainment and maintenance of the NAAQS. Also, Qualified Facilities 
flexibility is only available where the change will not result in a net 
increase above BACT levels at well controlled facilities.
    Response: As stated above, there is not sufficient available 
information to enable EPA to make a determination pursuant to section 
110(l) that the Qualified Facilities Program, as a whole, would not 
interfere with any applicable requirement concerning attainment and RFP 
or any other requirement of the Act. Additionally, as required by 
section 110(a)(2)(C) and 40 CFR 51.160, the State failed to submit 
information to demonstrate that the Program, as an exemption from the 
Texas Minor NSR SIP, would not permit a source that will violate the 
control strategy or interfere with NAAQS attainment. See Section V.D.1 
above for more information.

G. Comments Addressing Whether Existing Qualified Facilities Have 
Undergone an Air Quality Analysis

    Comment: The UT Environmental Clinic disagrees with EPA's statement 
in the proposal that any Qualified Facility will have a Major or Minor 
NSR SIP permit, will have been subject to an air quality analysis, and 
will have demonstrated that its emissions have no adverse air quality 
impact. 74 FR 48450, at 48560 (Sept. 23, 2009). A facility can qualify 
as a Qualified Facility if it uses technology at least as effective as 
10-year old BACT, ``regardless of whether the facility has received a 
preconstruction permit or permit amendment or has been exempted under 
the TCCA, 382.057.'' 30 TAC 116.11(E)(ii). Likewise, the Qualified 
Facility rules specifically provide for preapproval of Qualified Status 
of those facilities that do not have an allowable emissions limit in a 
permit, PI-8 or PI-E form.
    The commenter further states that, while Texas rules generally 
require emissions to have some sort of authorization, the rules do 
exempt some increases from the definition of ``modification,'' thereby 
allowing these emissions to avoid any review. 30 TAC 116.10(11). For 
emissions that must be permitted, TCEQ's rules allow the use of various 
permitting mechanism that do not assure protection of the NAAQS and 
control strategy requirements. 30 TAC 116.110(a).
    The commenter states that the rules additionally provide that 
unless one ``facility'' at an account has been subject to public notice 
under the Chapter 116 permitting or renewal provisions, total emissions 
from all facilities permitted by rules at an account shall not exceed 
the limits referenced in 30 TAC 106(a)(4). Because it is rare that at 
least one facility at an account has not been through public notice, 
companies are allowed to use multiple permits-by-rule to authorize 
emissions at a source. See UT Environmental Clinic Comment Letter, 
Attachment 5: Chart of facility PBR authorizations. TCEQ does not 
analyze the cumulative air quality impact of these multiple 
authorizations. TCEQ rules require permits-by-rule and standard permits 
to be ``incorporated' into the facility's permit after the permit is 
renewed or amended; and there are no rules regarding procedures or 
modeling for such ``incorporation.''
    Finally, the commenter stated that TCEQ has issued guidance that 
requires standard permits and PBRs that ``directly affect the emissions 
of

[[Page 19487]]

permitted facilities'' to be ``consolidated by reference'' at renewal 
or amendment. Texas Commission on Environmental Quality, Permit by Rule 
and Standard Permit Consolidation Into Permits (Sept 1, 2006), 3. Any 
PBRs and standard permits that do not affect emissions permitted 
facilities can be incorporated at the discretion of the permittee. Id 
at 4. The TCEQ guidance requires such PBRs and standard permits that 
are consolidated by incorporation to undergo an impacts review. Because 
these permits are renewed every ten years, this review may not occur 
for many years. Furthermore, PBRs do not require Texas BACT.
    Response: We agree with the commenter's assertion that the 
submitted regulations do not explicitly require an air quality impacts 
analysis whenever a facility uses technology at least as effective as 
10-year old Minor NSR BACT, ``regardless of whether the facility has 
received a preconstruction permit or permit amendment or has been 
exempted under the TCCA 382.057.'' Further, facilities ``qualified'' 
using technology at least as effective as 10-year old Minor NSR BACT, 
must use actual emissions as a baseline. See 30 TAC 116.10(2) and 
116.116(e)(2)(C). Presumably, this provision exists because facilities 
``qualified'' under 30 TAC 116.10(11)(E)(ii), would not have a 
permitted allowable emissions limit because they lack an underlying 
permit. If a facility could be ``qualified'' without having a pre-
construction permit, then the facility could net-out of permit 
requirements without ever having an air quality analysis of the 
baseline allowables limit. TCEQ's comments, which are summarized below, 
imply that State law requires all sources in Texas to get an underlying 
permit, and therefore, receive an air quality impact analysis. However, 
we view the State's comment to be vague as to whether a permit is a 
pre-requisite under the Program itself. Therefore, the Qualified 
Facilities rules are deficient because they fail to require an 
underlying Texas NSR SIP permit and air quality impact analysis in 
order to be ``qualified'' under the Program.
    Comments concerning the State's permit-by-rule and standard permit 
programs are outside the scope of this rulemaking.
    Comment: TCEQ commented that the Texas Legislature created the 
Qualified Facilities Program to provide flexibility to permitted 
facilities and to provide a means by which grandfathered facilities 
could apply control technology and become ``qualified'' grandfathered 
facilities without triggering Federal NSR. Subsequently, in 2001, the 
legislature required all grandfathered facilities to obtain 
authorization or shutdown. The program remains in effect as emissions 
are controlled, no new emissions above existing allowable limits are 
allowed, and Federal requirements are considered and met.
    In summary, the Program reinforced the TCEQ's duties under the 
Texas Clean Air Act to protect air quality and control air contaminant 
emissions by practical and economically feasible methods. Tex. Health & 
Safety Code 382.002, 382.003(9)(e). Therefore, the environment has 
benefitted from the Program because emissions were controlled prior to 
the Texas Legislature mandating shut down or obtaining authorization; 
air quality benefitted as demonstrated by monitoring which measured 
continued improvement; regulated entities benefitted because they were 
given flexibility; and the State benefitted by reasonable regulation 
that encourages responsible economic development.
    TCEQ also commented that allowable emissions (both hourly and 
annual rates) are one of the criteria used to provide ``state 
qualified'' flexibility because the facilities must exist and be 
authorized, and thereby undergone appropriate permit review.
    Response: As stated above, we find that the Qualified Facilities 
rules fail to explicitly require a permit before a facility can be 
``qualified'' under the Program. While TCEQ asserts that to become a 
Qualified Facility, a facility must undergo permit review and be 
authorized, the State does not cite to any regulatory provision in the 
Program that explicitly requires such permitting authorization. EPA 
recognizes that State legislation subsequent to the Qualified 
Facilities Program required grandfathered facilities to obtain permit 
authorizations or shut down. There is nothing sufficiently explicit, 
however, in the Qualified Facilities Rules that ensures all Qualified 
Facilities received an air quality impacts analysis through an initial 
permit application review process. It is commendable that TCEQ intends 
to implement its Qualified Facilities Program in a manner that may 
benefit the environment, but Texas failed to incorporate these 
procedures into its regulations; therefore, these procedures are not 
Federally enforceable.

H. Comments on the Definitions of ``Grandfathered Facility,'' ``Maximum 
Allowable Emission Rate Table,'' and ``New Facility''

    Comment: TCEQ and TCC agree with EPA's proposal to approve the 
definitions of ``grandfathered facility,'' ``maximum allowable emission 
rate table,'' and ``new facility.'' The TCEQ urges EPA to take final 
action to approve these definitions.
    Response: These comments further support EPA's action to approve 
these definitions.

I. Comments on the Definitions of ``Actual Emissions,'' ``Allowable 
Emissions,'' ``Modification of Existing Facility'' at (E), and 
``Qualified Facility''

    Comment: TCEQ confirmed that Senate Bill 1126 amended the Texas 
Clean Air Act by revising the definition of ``modification of existing 
facility,'' which changed the factors used to determine whether a 
modification for State permitting (i.e. Minor NSR) has occurred. In 
1996, 30 TAC Chapter 116 was revised to incorporate this legislative 
directive. These changes provide that modifications may be made to 
existing facilities without triggering the State's Minor NSR 
requirements whenever:
     Authorization for the facility to be modified was issued a 
permit, permit amendment, or was exempted from permitting requirements 
within 120 months from when the change will occur; or
     Uses air pollution control methods that are at least as 
effective as the BACT that was required within 120 months from when the 
change will occur.
    Such facilities are designated as ``qualified facilities.'' TCEQ 
considers the use of ``modification'' to be separate and severable from 
the Federal definition of ``modification'' as reflected in the SIP-
approved Major NSR Program.
    TCEQ further asserts that the definitions of ``actual emissions,'' 
``allowable emissions,'' ``modification of existing facility'' at (E) 
``qualified facility,'' respectively at 30 TAC 116.10(1), (2), (11)(E), 
and (16), meet Federal requirements.
    Response: We are disapproving these definitions because they are 
not severable from the Qualified Facilities Program, and the State 
failed to submit information sufficient to demonstrate how these 
definitions meet Federal requirements. The definitions of ``actual 
emissions'' and ``allowable emissions'' include a statement that limits 
these definitions only when determining whether there has been a net 
increase in allowable emissions under 30 TAC 116.116(e), which 
implements the Qualified Facilities Program, and thus makes these 
definitions not severable from the Program. Subsection (E) of the 
definition of ``modification of existing facility'' only applies to 
changes that do not result in a net increase in allowable

[[Page 19488]]

emissions, which implements the Qualified Facilities Program, and thus 
makes this subsection not severable from the Program. The definition of 
``qualified facility'' defines a term that is used in the Qualified 
Facilities Program, which makes it not severable from the Qualified 
Facilities Program.
    Furthermore, the State did not provide sufficient information to 
demonstrate how these definitions meet Federal requirements. 
Additionally, State legislative actions in 1999 made the statutory 
definition of ``modification of existing facility'' ambiguous as to 
whether the definition is still limited to minor modifications. The 
State did not submit any legal support for TCEQ's assertion that the 
use of ``modification'' in the Texas Clean Air Act is for Minor NSR 
only; and therefore separate and severable from the definition of 
``modification'' in the Texas Major NSR SIP. See 74 FR 48450, at 48456-
48457 and Section V.E.2 above for further information.

J. Comments on the Definition of ``Best Available Control Technology'' 
(``BACT'')

    Comment: The UT Environmental Clinic, TCC, TIP, BCCA, TxOGA, GCLC, 
and TCEQ provided comments on EPA's proposed disapproval of TCEQ's 
definition of BACT.
    Response: We are not taking final action on the definition of BACT 
in today's rulemaking; therefore, these comments are outside the scope 
of our rulemaking. They will be considered, however, in our final 
action on this definition.

K. Comments on Severable Portions of the Definition of ``Modification 
of Existing Facility'' at 30 TAC 116.10(11)(A) & (B)

    Comment: The UT Environmental Clinic, TxOGA, TIP, BCCA, and TCEQ 
provided comments on EPA's proposed disapproval of TCEQ's changes to 
the definition of ``modification of existing facility'' at 30 TAC 
116.10(11)(A) and (B) regarding insignificant increases.
    Response: We are not taking final action on 30 TAC 116.10(11)(A) 
and (B) of the definition of ``modification of existing facility'' in 
today's rulemaking; therefore, these comments are outside the scope of 
our rulemaking. They, however, will be considered in our final agency 
action on these two definitions.

L. Comments on the Definition of Severable Subsection of ``Modification 
of Existing Facility'' at 30 TAC 116.10(11)(G)

    Comment: The UT Environmental Clinic and TCEQ provided comments on 
the proposed disapproval of 30 TAC 116.10(11)(G) of the definition of 
``modification of existing facility.''
    Response: We are not taking final action on 30 TAC 116.10(11)(G) of 
the definition of ``modification of existing facility'' in today's 
rulemaking; therefore, these comments are outside the scope of our 
rulemaking. They will be considered, however, in our final agency 
action on this definition.

M. Comments on the Reinstatement of the Previously Approved Definition 
of ``Facility''

    Comment: The TCEQ acknowledges that EPA proposes to correct a 
typographical error in 72 FR 49198 to clarify that the definition of 
``facility,'' as codified at 30 TAC 116.10(6), was approved as part of 
the Texas SIP in 2006 and remains part of the Texas SIP. 74 FR 48450, 
at 48455 at n.6.
    Response: EPA thanks TCEQ for its acknowledgement that the 
definition of ``facility'' at 30 TAC 116.10(6) was approved as part of 
the Texas SIP in 2006 and remains part of the Texas SIP. We are making 
the administrative change to correct the typographical error in the 
Code of Federal Regulations.
    In our proposed rule notice, we requested comments on the State's 
legal meaning of the term ``facility.'' See 30 TAC 116.10(6). We stated 
that the interpretation of this term is critical to our understanding 
of the Texas Permitting Program. We received the following comments on 
this issue:
1. Comments Generally Supporting Proposal
    Comment: The UT Environmental Clinic understands that EPA's 
proposal is only to correct a typographical error that inadvertently 
removed the definition of ``facility'' from the SIP. The commenter 
notes, however, that Texas's use of this term is problematic because of 
its dual definitions and broad meanings. The commenter compares Texas's 
definition of ``facility'' in 30 TAC 116.10 with the definition of 
``stationary source'' in 30 TAC 116.12 and the definition of 
``building, structure, facility, or installation'' in 30 TAC 116.12 and 
conclude that these definitions are quite similar. The commenters 
acknowledge that this argument assumes that one can rely on the 
Nonattainment NSR rules to interpret the general definitions. If one 
cannot use the Nonattainment NSR definitions to interpret the general 
definition of ``facility,'' then one must resort to the definition of 
``source'' in 30 TAC 116.10(17), which is defined as ``a point of 
origin of air contaminants, whether privately or publicly owned or 
operated.'' Pursuant to this reading, a facility is more like a Federal 
``emissions unit.'' 40 CFR 51.165(a)(1)(vii). ```Emissions unit' means 
any part of a stationary source that emits or would have the potential 
to emit any regulated NSR pollutant [hellip]'' At least in the 
Qualified Facility rules, it appears that TCEQ use of the definition of 
``facility'' is more like a Federal ``emissions unit.'' The circular 
nature of these definitions, and the existence of two different 
definitions of ``facility'' without clear description of their 
applicability, makes Texas's rules, including the Qualified Facility 
rules, vague. Commenters urge EPA to require Texas to clarify its 
definition of ``facility'' and to ensure that its use of the term 
throughout the rules is consistent with that definition.
2. Comments Generally Opposing Proposal
    Comment: TCEQ responded to EPA's request concerning its 
interpretation of Texas law and the Texas SIP with respect to the term 
``facility.'' The definition of ``facility'' is the cornerstone of the 
Texas Permitting Program under the Texas Clean Air Act. In addition, to 
provide clarity and consistency, TCEQ also provides similar comments in 
regard to Docket ID No. EPA-R06-OAR-2005-TX-0032 and EPA-R06-OAR-2006-
0133. EPA believes that the State uses a ``dual definition'' for the 
term facility. Under the TCAA and TCEQ rule, ``facility'' is defined as 
``a discrete or identifiable structure, device, item, equipment, or 
enclosure that constitutes or contains a stationary source, including 
appurtenances other than emission control equipment. Tex. Health & 
Safety Code 382.003(6); 30 TAC 116.10(6). A mine, quarry, well test, or 
road is not considered to be a facility.'' A facility may contain a 
stationary source--point of origin of a contaminant. Tex. Health & 
Safety Code 382.003(12). As a discrete point, a facility can constitute 
but cannot contain a major stationary source as defined by Federal law. 
A facility is subject to Major and Minor NSR requirements, depending on 
the facts of the specific application. Under Major NSR, EPA uses the 
term ``emissions unit'' (generally) when referring to a part of a 
``stationary source,'' TCEQ translates ``emissions unit'' to mean 
``facility,'' \14\ which is at least as stringent as Federal rule. TCEQ 
and its predecessor agencies have consistently interpreted facility to 
preclude inclusion of more than one stationary source, in contrast to 
EPA's stated understanding. Likewise, TCEQ

[[Page 19489]]

does not interpret facility to include ``every emissions point on a 
company site, even if limiting these emission points to only those 
belonging to the same industrial grouping (SIC Code).'' The Federal 
definition of ``major stationary source'' is not equivalent to the 
state definition of ``source.'' 40 CFR 51.166(b)(1)(a). A ``major 
stationary source'' \15\ can include more than one ``facility'' as 
defined under Texas law--which is consistent with EPA's interpretation 
of a ``major stationary source'' including more than one emissions 
unit. The above interpretation of ``facility'' has been consistently 
applied by TCEQ and its predecessor agencies for more than 30 years. 
The TCEQ's interpretation of Texas statutes enacted by the Texas 
Legislature is addressed by the Texas Code Construction Act. More 
specifically, words and phrases that have acquired a technical or 
particular meaning, whether by legislative definition or otherwise, 
shall be construed accordingly. Tex. Gov't Code 311.011(b). While Texas 
law does not directly refer to the two steps allowing deference 
enunciated in Chevron U.S.A., Inc. v. Natural Resources Defense 
Council, Inc., Texas law and judicial interpretation recognize Chevron 
\16\ and follow similar analysis as discussed below. The Texas 
Legislature intends an agency created to centralize expertise in a 
certain regulatory area ``be given a large degree of latitude in the 
methods it uses to accomplish its regulatory function.'' Phillips 
Petroleum Co. v. Comm'n on Envtl. Quality, 121 S.W.3d 502, 508 
(Tex.App.--Austin 2003, no pet.), which cites Chevron to support the 
following: ``Our task is to determine whether an agency's decision is 
based upon a permissible interpretation of its statutory scheme.'' 
Further, Texas courts construe the test of an administrative rule under 
the same principles as if it were a statute. Texas Gen. Indem. Co. v. 
Finance Comm'n, 36 S.W.3d 635,641 (Tex.App.--Austin 2000, no pet.). 
Texas Administrative agencies have the power to interpret their own 
rules, and their interpretation is entitled to great weight and 
deference. Id. The agency's construction of its rule is controlling 
unless it is plainly erroneous or inconsistent. Id. ``When the 
construction of an administrative regulation rather than a statute is 
at issue, deference is even more clearly in order.'' Udall v. Tallman, 
380 U.S. 1, 17 (1965). This is particularly true when the rule involves 
complex subject matter. See Equitable Trust Co. v. Finance Comm'n, 99 
S.W.3d 384, 387 (Tex.App.--Austin 2003, no pet.). Texas courts 
recognize that the legislature intends an agency created to centralize 
expertise in a certain regulatory area ``be given a large degree of 
latitude in the methods it uses to accomplish its regulatory 
function.'' Reliant Energy, Inc. v. Public Util. Comm'n, 62 S.W.3d 
833,838 (Tex.App.--Austin 2001, no pet.)(citing State v. Public Util. 
Comm'n, 883 S.W.2d 190, 197 (Tex. 1994). In summary, TCEQ translates 
``emissions unit'' to mean ``facility.'' Just as an ``emissions unit'' 
under Federal law is construed by EPA as part of a major stationary 
source, a ``facility'' under Texas law can be a part of a major 
stationary source. However, a facility cannot include more than one 
stationary source as defined under Texas law.
---------------------------------------------------------------------------

    \14\ The term ``facility'' shall replace the words ``emissions 
unit'' in the referenced sections of the CFR. 30 TAC 116.160(c)(3).
    \15\ Tex. Health & Safety Code Sec.  382.003(12).
    \16\ Chevron U.S.A., Inc. v. Natural Resources Defense Council, 
Inc., 467 U.S. 387, 842-43 (1984). ``When a court reviews an 
agency's construction of the statute which it administers, it is 
confronted with two questions. First, always is the question whether 
Congress has directly spoken to the precise question at issue. If 
the intent of Congress is clear, that is the end of the matter, for 
the court, as well as the agency, must give effect to the 
unambiguously express intent of Congress. If, however, the court 
determines Congress has not directly addressed the precise question 
at issue, the court does not simply impose its own construction on 
the statute, as would be necessary in the absence of an 
administrative interpretation. Rather, 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.''
---------------------------------------------------------------------------

    Comment: TCC, BCCA, TIP, and TxOGA commented that Texas rules are 
clear that ``facility,'' as defined in 30 TAC 116.10(6) is equivalent 
to the TCEQ term ``emissions unit.''\17\ TCC also stated that the 
definition of ``facility'' is so broad that it requires every possible 
source of air contaminants to obtain some type of approval from TCEQ.
---------------------------------------------------------------------------

    \17\ Additionally, the definition of ``facility'' is similar to 
the definition of ``emission unit'' in Texas's Title V rules. 30 TAC 
122.10(8).
---------------------------------------------------------------------------

    Response: We have determined that Texas's use of this term 
``facility,'' as it applies to the State's Qualified Facilities 
Program, is overly vague, and therefore, unenforceable. TCEQ comments 
that it translates ``emissions unit'' to mean ``facility.'' Yet, 
Texas's PSD non-PAL rules explicitly limit the definition of 
``facility'' to ``emissions unit,'' but the Qualified Facilities rules 
fail to make such a limitation. 74 FR 48450, at 48475; compare 30 TAC 
116.10(6) to 30 TAC 116.160(c)(3). The State clearly thought the 
prudent legal course was to limit ``facility'' explicitly to 
``emissions unit'' in its PSD SIP non-PALs revision. However, TCEQ did 
not submit information sufficient to demonstrate that the lack of this 
explicit limitation in the submitted Qualified Facilities revisions is 
at least as stringent as the revised definition in the PSD non-PALs 
definition.
    We recognize that TCEQ should be accorded a level of deference to 
interpret the State's statutes and regulations; however, such 
interpretations must meet applicable requirements of the Act and 
implementing regulations under 40 CFR part 51 to be approvable into the 
SIP as Federally enforceable requirements. The State has failed to 
provide any case law or SIP citation that confirms TCEQ's 
interpretation for ``facility'' under the Qualified Facilities Program 
that would ensure Federal enforceability.
    Nevertheless, as stated above, the definition of ``facility'' at 30 
TAC 116.10(6) was approved as part of the Texas SIP in 2006 and remains 
part of the Texas SIP. Therefore, EPA is obligated to correct the 
typographical error and reinstate the definition of ``facility'' into 
the Code of Federal Regulations.
    However, today's final disapproval of the Qualified Facilities 
Program is based in part on the lack of clarity of the definition of 
``facility'' as it applies specifically to this Program. Additionally, 
EPA has proposed disapproval of the State's Flexible Permit Program and 
NSR Reform SIP submittals partially based on the need for clarity of 
the definition of ``facility'' as it applies to those programs.

N. Comments on the Definition of the Term ``Air Quality Account 
Number''

    Comment: The TCEQ commented that it no longer uses the term ``air 
quality account number'' and now uses the term ``account,'' which is a 
SIP-approved definition.\18\ Administrative changes to the Qualified 
Facilities Program are planned to reflect the change in terms.
---------------------------------------------------------------------------

    \18\ 30 TAC 101.1(1) Account--For those sources required to be 
permitted under Chapter 122 of this title * * *, all sources that 
are aggregated as a site. For all other sources, any combination of 
sources under common ownership or control and located on one or more 
contiguous properties, or properties contiguous except for 
intervening roads, railways, rights-of-way, waterways, or similar 
divisions. Approved as part of the Texas SIP at 70 FR 16129 (March 
30, 2005).
---------------------------------------------------------------------------

    Response: EPA's evaluation of ``account'' and ``air quality account 
number'' were based upon the SIP-approved definition of ``account.'' 74 
FR 48450, at 48455, n.7. The State's comment that it no longer uses 
``air quality account number'' but uses ``account'' does not change 
EPA's final decision to disapprove the Qualified Facilities Program SIP 
revision submittal. In fact, the State's using a different definition 
that is not in the Qualified Facilities Program's rules

[[Page 19490]]

provides additional grounds for disapproval. The Qualified Facilities 
Program's rules must be clear about which sources on a site can 
participate in the netting process. This goes to the heart of whether 
the changes are made outside a major stationary source. If TCEQ makes 
the planned changes noted in the comment letter, the changes must be 
adopted and submitted to EPA for approval as a SIP revision. Upon 
receipt, we would review the regulatory changes and evaluate whether 
they meet the Act and EPA regulations.
    The Texas SIP defines an ``account'' to include an entire company 
site, which could include more than one plant and more than one major 
stationary source. SIP rule 30 TAC 101.1(1), second sentence. It does 
not limit the combination of sources to a SIC code. As stated above, 
EPA interprets the Program to allow an emission increase to net out by 
taking into account emission decreases outside of the major stationary 
source. Therefore, the Program does not meet the CAA's definition of 
``modification'' and the Major NSR SIP requirements and is inconsistent 
with Asarco v. EPA, 578 F.2d 320 (DC Cir. 1978). 74 FR 48450, at 48458-
48459; Section IV.B. above.

O. Comments on Whether the Qualified Facilities Rules Meet New Source 
Review Public Participation Requirements

1. Comments Generally Supporting Proposal
    Comment: HCPHES commented that the State's public participation 
rules are not user friendly with regards to timeliness of initial 
notification and the time restrictions for public comment. 
Specifically, it is not uncommon for a permit modification or amendment 
notification to be delayed on occasion, which results in a shorter 
period for citizens as well as HCPHES to respond. These situations have 
unduly limited the opportunities for the public and affected agencies 
to be able to provide meaningful reviews and submit appropriate 
comments. The commenter supports EPA's conclusion to disapprove 
portions of the SIP as proposed until such time as TCEQ addresses all 
of the specifics noted in the Federal Register. In addition, HCPHES 
strongly supports strengthening public participation rules such that 
Texas citizens are able to participate meaningfully in the process.
    Comment: Several members of the Texas House commented that while 
the Qualified Facilities Program was a legislative creation, these 
members of the Texas House recognize that the statutory language and 
associated regulations are inconsistent with current CAA requirements 
regarding modifications and public participation. A particular concern 
is inadequate public participation.
    Comment: HCPHES strongly supports strengthening public 
participation rules such that Texas citizens are able to participate 
meaningfully in the process.
    Response: General comments on Texas's public participation 
requirements are outside the scope of this rulemaking. However, in a 
separate action, EPA has proposed a limited approval/limited 
disapproval of Texas's SIP submittal for public participation (73 FR 
72001 (Nov. 26, 2008)). In addition, TCEQ has proposed revisions to 
these rules and EPA is working with TCEQ to strengthen its rules for 
public participation to ensure the State's rules comply with all 
Federal requirements.
2. Comments Generally Opposing Proposal
    Comment: The UT Environmental Clinic commented that the Qualified 
Facilities Rules allow industrial plants to make changes that can 
affect neighboring residents with absolutely no notice or opportunity 
for participation. These rules allow modifications without meeting the 
Federal public participation requirements that are applicable to 
Nonattainment NSR and PSD permits under the Act, 40 CFR 51.161, and 40 
CFR 51.166(q). TCEQ's Qualified Facilities guidance specifically states 
that the qualified facility notification process may be used instead of 
the alteration process to change permit special conditions. Qualified 
Facilities Guidance, at 14.
    Response: EPA agrees with the commenter that the Qualified 
Facilities rules do not meet the Federal public participation 
requirements for each individual change, either for a Major or Minor 
NSR SIP revision. As discussed in more detail in Section V.D.1 above, 
the Program does not clearly require a permit for each change. 
Therefore, the Program does not provide an opportunity for public 
review, which circumvents public participation requirements in 40 CFR 
51.161. See 74 FR 48450, at 48459-48460.
    Comment: The UT Environmental Clinic comments that the Texas rules 
also allow sources to amend terms and conditions of a Major NSR or 
Minor NSR permit without public participation. EPA has already 
expressed concerns to Texas about using methods other than permit 
amendment for making changes to individual NSR permits. Letter to Dan 
Eden, TCEQ, Deputy Director, from Carl Edlund, EPA, Region 6, Director, 
Multimedia Planning and Permitting Division (March 12, 2008), p. 8. 
Letter to Richard Hyde, TCEQ, Director Air Permits Division from Jeff 
Robinson, EPA, Chief, Air Permits Section (May 21, 2008), p. 6.
    Response: The comments that TCEQ's rules allow sources to amend 
terms and conditions of a Major NSR or Minor NSR permit without public 
participation and the use of methods other than permit amendments are 
outside the scope of this rulemaking.
    Comment: GCLC provided comments on Texas's public participation 
program because the public participation issues are implicated 
throughout the three Federal Register notices (Qualified Facilities, 
Flexible Permits, and NSR Reform). GCLC considers these comments timely 
and appropriate because EPA's proposal directs the public to read the 
three pending notices and the November 2008 public participation 
proposal ``in conjunction'' with each other.
    Response: We recognize the need to read the notices in conjunction 
with each other because the permits issued under these State programs 
are the vehicles for regulating a significant universe of the air 
emissions from sources in Texas and thus directly impact the ability of 
the State to achieve and maintain attainment of the NAAQS and to 
protect the health of the communities where these sources are located. 
74 FR 48450, at 48453. However, this final rulemaking only addresses 
the Qualified Facilities Program. Therefore, specific issues related to 
the public participation submittal package are outside the scope of 
this rulemaking.
    Comment: The ERCC commented that public review requirements have 
been met because the implementing regulations for Qualified Facilities 
were subject to notice and comment. Proposed on 20 Tex. Reg. 8308 
(October 10, 1995) finalized on 21 Tex. Reg. 1569 (February 27, 1996).
    Response: EPA agrees with the commenter that the Qualified 
Facilities rules met the public participation requirements for SIP 
revision submittals. EPA, however, disagrees with the commenter that 
the permit application public participation requirements of this 
submitted Qualified Facilities program meets the NSR public 
participation requirements for individual permit applications. Where 
the adopted State rules fail to provide for the minimum public 
participation required under Federal law for individual permit 
applications,

[[Page 19491]]

Federal public participation requirements cannot be considered met just 
because the deficient State rules were adopted after public notice and 
comment. Please see our comments above.

VI. Final Action

    EPA is disapproving revisions to the SIP submitted by the State of 
Texas that relate to the Modification of Qualified Facilities, 
identified in the Table in section III.B of this action. These affected 
provisions include the following regulations under Chapter 116: 30 TAC 
116.116(e), 30 TAC 116.117, 30 TAC 116.118, and the following 
definitions under 30 TAC 116.10--General Definitions: 30 TAC 
116.10(1)--definition of ``actual emissions,'' 30 TAC 116.10(2)--
definition of ``allowable emissions,'' 30 TAC 116.10(11)(E) under the 
definition of ``modification of existing facility,'' and 30 TAC 
116.10(16)--definition of ``qualified facility.'' EPA finds that these 
submitted provisions and definitions in the submitted Texas Qualified 
Facilities Program are not severable from each other.
    EPA is disapproving the submitted Texas Qualified Facilities 
Program as a substitute Major NSR SIP revision because it does not meet 
the Act and EPA's regulations. We are also disapproving the submitted 
Qualified Facilities Program as a Minor NSR SIP revision because it 
does not meet the Act and EPA's regulations.
    The Qualified Facilities Program submittals do not meet the 
requirements for a substitute Major NSR SIP revisions because (1) the 
Program does not prevent circumvention of Major NSR; (2) the State 
failed to submit information sufficient to demonstrate that the 
Program's regulatory text requires an evaluation of Major NSR 
applicability before a change is exempted from permitting; (3) the 
Program is deficient for Major NSR netting because (a) it authorizes 
the use of allowable, rather than actual emissions, to be used as a 
baseline to determine applicability. This use of allowables violates 
the Act and Major NSR SIP requirements and is contrary to New York v. 
EPA, 413 F.3d 3, 38-40 (DC Cir. 2005) (``New York I'') and (b) it could 
allow an emission increase to net out by taking into account emission 
decreases outside of the major stationary source and, in other 
circumstances, allow an evaluation of emissions of a subset of units at 
a major stationary source; and (4) there is not sufficient available 
information to enable EPA to make a determination that the requested 
SIP revision relaxation would not interfere with any applicable 
requirements concerning attainment, RFP, or any other applicable CAA 
requirement, as required by section 110(l).
    The Qualified Facilities Program submittals do not meet the 
requirements for a Minor NSR SIP revision. The submitted Program (1) 
fails to ensure that the Major NSR SIP requirements continue to be met; 
(2) is not limited only to Minor NSR; (3) fails to include sufficient 
legally enforceable safeguards to ensure that the NAAQS and control 
strategies are protected; (4) the State failed to demonstrate that the 
Program's exemption from the Texas Minor NSR SIP includes legally 
enforceable procedures to ensure that the State will not permit a 
source that will violate the NAAQS or the State's control strategies, 
(5) the submitted Program does not provide clear and enforceable 
requirements for a basic Minor NSR netting program; and (6) EPA lacks 
sufficient information to make a determination that the requested SIP 
revision relaxation does not interfere with any applicable requirements 
concerning attainment and RFP, or any other applicable requirement of 
the Act, as required by section 110(l). Therefore, we are disapproving 
the submitted Qualified Facilities Program as a Minor NSR SIP revision 
because it does not meet sections 110(a)(2)(C) and 110(l) of the Act 
and 40 CFR 51.160.
    EPA is approving the submitted definitions for ``grandfathered 
facility,'' ``maximum allowable emissions rate table (MAERT),'' and 
``new facility.'' Finally, EPA is finalizing an administrative 
correction in today's action by specifically correcting a typographical 
error at 72 FR 49198 to clarify that the definition of ``facility'' as 
codified at 30 TAC 116.10(6) was approved as part of the Texas SIP in 
2006 and remains part of the Texas SIP.

VII. Statutory and Executive Order Reviews

A. Executive Order 12866, Regulatory Planning and Review

    This final action has been determined not to be a ``significant 
regulatory action'' subject to review by the Office of Management and 
Budget under Executive Order 12866 (58 FR 51735, October 4, 1993).

B. Paperwork Reduction Act

    This action does not impose an information collection burden under 
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq., 
because this SIP disapproval under section 110 and subchapter I, part D 
of the Clean Air Act will not in-and-of itself create any new 
information collection burdens but simply disapproves certain State 
requirements for inclusion into the SIP. Burden is defined at 5 CFR 
1320.3(b). Because this final action does not impose an information 
collection burden, the Paperwork Reduction Act does not apply.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. Small entities include small 
businesses, small not-for-profit enterprises, and small governmental 
jurisdictions. For purposes of assessing the impacts of today's rule on 
small entities, small entity is defined as: (1) A small business as 
defined by the Small Business Administration's (SBA) regulations at 13 
CFR 121.201; (2) a small governmental jurisdiction that is a government 
of a city, county, town, school district or special district with a 
population of less than 50,000; and (3) a small organization that is 
any not-for-profit enterprise which is independently owned and operated 
and is not dominant in its field. This rule will not have a significant 
impact on a substantial number of small entities because SIP approvals 
and disapprovals under section 110 and part D of the Clean Air Act do 
not create any new requirements but simply approve or disapprove 
requirements that the States are already imposing.
    Furthermore, as explained in this action, the submissions do not 
meet the requirements of the Act and EPA cannot approve the 
submissions. The final disapproval will not affect any existing State 
requirements applicable to small entities in the State of Texas. 
Federal disapproval of a State submittal does not affect its State 
enforceability. After considering the economic impacts of today's 
rulemaking on small entities, and because the Federal SIP disapproval 
does not create any new requirements or impact a substantial number of 
small entities, I certify that this action will not have a significant 
economic impact on a substantial number of small entities. Moreover, 
due to the nature of the Federal-State relationship under the Clean Air 
Act, preparation of flexibility analysis would constitute Federal 
inquiry into the economic reasonableness of state action. The Clean Air 
Act forbids EPA to base its actions concerning SIPs on such

[[Page 19492]]

grounds. Union Electric Co., v. U.S. EPA, 427 U.S. 246, 255-66 (1976); 
42 7410(a)(2).

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 
sector.'' EPA has determined that the disapproval action does not 
include a Federal mandate that may result in estimated costs of $100 
million or more to either State, local, or tribal governments in the 
aggregate, or to the private sector. This Federal action determines 
that pre-existing requirements under State or local law should not be 
approved as part of the Federally approved SIP. It imposes no new 
requirements. Accordingly, no additional costs to State, local, or 
tribal governments, or to the private sector, result from this action.

E. Executive Order 13132, Federalism

    Executive Order 13132, entitled ``Federalism'' (64 FR 43255, August 
10, 1999), requires EPA to develop an accountable process to ensure 
``meaningful and timely input by State and local officials in the 
development of regulatory policies that have Federalism implications.'' 
``Policies that have Federalism implications'' is defined in the 
Executive Order to include regulations that have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''
    This action does not have Federalism implications. It will not have 
substantial direct effects on the States, on the relationship between 
the national government and the States, or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132, because it merely disapproves 
certain State requirements for inclusion into the SIP and does not 
alter the relationship or the distribution of power and 
responsibilities established in the Clean Air Act. Thus, Executive 
Order 13132 does not apply to this action.

F. Executive Order 13175, Coordination With Indian Tribal Governments

    This action does not have tribal implications, as specified in 
Executive Order 13175 (59 FR 22951, November 9, 2000), because the SIP 
EPA is disapproving would not apply in Indian country located in the 
State, and EPA notes that it will not impose substantial direct costs 
on tribal governments or preempt tribal law. This final rule does not 
have tribal implications, as specified in Executive Order 13175. It 
will not have substantial direct effects on tribal governments, on the 
relationship between the Federal government and Indian tribes, or on 
the distribution of power and responsibilities between the Federal 
government and Indian tribes. This action does not involve or impose 
any requirements that affect Indian Tribes. 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 Executive Order 13045 (62 FR 19885, April 23, 1997) 
as applying only to those regulatory actions that concern health or 
safety risks, such that the analysis required under section 5-501 of 
the Executive Order has the potential to influence the regulation. This 
action is not subject to Executive Order 13045 because it is not an 
economically significant regulatory action based on health or safety 
risks subject to Executive Order 13045 (62 FR 19885, April 23, 1997). 
This SIP disapproval under section 110 and subchapter I, part D of the 
Clean Air Act will not in-and-of itself create any new regulations but 
simply disapproves certain State requirements for inclusion into the 
SIP.

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

    This rule is not subject to Executive Order 13211 (66 FR 28355, May 
22, 2001) because it is not a significant regulatory action under 
Executive Order 12866.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (``NTTAA''), Public Law No. 104-113, section 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 the Office of Management and Budget, 
explanations when the Agency decides not to use available and 
applicable voluntary consensus standards.
    The EPA believes that this action is not subject to requirements of 
Section 12(d) of NTTAA because application of those requirements would 
be inconsistent with the Clean Air Act. Today's action does not require 
the public to perform activities conducive to the use of VCS.

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 United States.
    EPA lacks the discretionary authority to address environmental 
justice in this action. In reviewing SIP submissions, EPA's role is to 
approve or disapprove state choices, based on the criteria of the Clean 
Air Act. Accordingly, this action merely disapproves certain State 
requirements for inclusion into the SIP under section 110 and 
subchapter I, part D of the Clean Air Act and will not in-and-of itself 
create any new requirements. Accordingly, it does not provide EPA with 
the discretionary authority to address, as appropriate, 
disproportionate human health or environmental effects, using 
practicable and legally permissible methods, under Executive Order 
12898.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. section 801 et seq., as 
added by the Small Business Regulatory Enforcement Fairness Act of 
1996, generally provides that before a rule may take effect, the agency 
promulgating the rule must submit a rule report, which includes a copy 
of the rule, to each House of the Congress and to the Comptroller 
General of the United States. EPA will submit a report containing this 
rule and other required information to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United States 
prior to publication of the rule in the Federal Register. A major rule 
cannot take effect until 60 days after it is published in the Federal 
Register.

[[Page 19493]]

This action is not a ``major rule'' as defined by 5 U.S.C. 804(2).

L. Petitions for Judicial Review

    Under section 307(b)(1) of the Clean Air Act, petitions for 
judicial review of this action must be filed in the United States Court 
of Appeals for the appropriate circuit by June 14, 2010. Filing a 
petition for reconsideration by the Administrator of this final rule 
does not affect the finality of this rule for the purposes of judicial 
review nor does it extend the time within which a petition for judicial 
review may be filed, and shall not postpone the effectiveness of such 
rule or action. This action may not be challenged later in proceedings 
to enforce its requirements. See section 307(b)(2).

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Carbon Monoxide, 
Incorporation by reference, Intergovernmental relations, Lead, Nitrogen 
dioxide, Ozone, Particulate matter, Reporting and recordkeeping 
requirements, Sulfur oxides, Volatile organic compounds.

    Dated: March 31, 2010.
Al Armendariz,
Regional Administrator, Region 6.

0
40 CFR part 52 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. 7410 et seq.

Subpart SS--Texas

0
2. The table in Sec.  52.2270(c) entitled ``EPA-Approved Regulations in 
the Texas SIP'' is amended by revising the entry for section 116.10 to 
read as follows:

Sec.  52.2270  Identification of plan.

* * * * *
    (c) * * *

                                    EPA-Approved Regulations in the Texas SIP
----------------------------------------------------------------------------------------------------------------
                                                   State approval/
        State citation            Title/subject    submittal date     EPA approval date         Explanation
----------------------------------------------------------------------------------------------------------------

                                                  * * * * * * *
          Chapter 116 (Reg 6)--Control of Air Pollution by Permits for New Construction or Modification
----------------------------------------------------------------------------------------------------------------
                                            Subchapter A--Definitions
----------------------------------------------------------------------------------------------------------------
Section 116.10................  General                 8/21/2002  4/14/2010 [Insert FR    The SIP does not
                                 Definitions.                       page number where       include paragraphs
                                                                    document begins].       (1), (2), (3),
                                                                                            (7)(F), (11), and
                                                                                            (16).

                                                  * * * * * * *
----------------------------------------------------------------------------------------------------------------

0
3. Section 52.2273 is amended by designating the existing text as 
paragraph (a) and by adding a new paragraph (b) to read as follows:

Sec.  52.2273  Approval status.

* * * * *
    (b) EPA is disapproving the Texas SIP revision submittals as 
follows:
    (1) The following definitions in 30 TAC 116.10--General 
Definitions:
    (i) Definition of ``actual emissions'' in 30 TAC 116.10(1), 
submitted March 13, 1996 and repealed and re-adopted June 17, 1998 and 
submitted July 22, 1998;
    (ii) Definition of ``allowable emissions'' in 30 TAC 116.10(2), 
submitted March 13, 1996; repealed and re-adopted June 17, 1998 and 
submitted July 22, 1998; and submitted September 11, 2000;
    (iii) Portion of the definition of ``modification of existing 
facility'' in 30 TAC 116.10(11)(E), submitted March 13, 1996; repealed 
and re-adopted June 17, 1998 and submitted July 22, 1998; and submitted 
September 4, 2002; and
    (iv) Definition of ``qualified facility'' in 30 TAC 116.10(16), 
submitted March 13, 1996; repealed and re-adopted June 17, 1998 and 
submitted July 22, 1998; and submitted September 4, 2002;
    (2) 30 TAC 116.116(e)--Changes at Qualified Facilities--submitted 
March 13, 1996 and repealed and re-adopted June 17, 1998 and submitted 
July 22, 1998;
    (3) 30 TAC 116.117--Documentation and Notification of Changes to 
Qualified Facilities--submitted March 13, 1996 and repealed and re-
adopted June 17, 1998 and submitted July 22, 1998;
    (4) 30 TAC 116.118--Pre-Change Qualification--submitted March 13, 
1996 and repealed and re-adopted June 17, 1998 and submitted July 22, 
1998.

[FR Doc. 2010-8019 Filed 4-13-10; 8:45 am]
BILLING CODE 6560-50-P