Document ID: EPA-HQ-OAR-2009-0517-19308
Agency: epa
Document Type: Rule
Title: Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide Applicability Limits; Final Rule
Posted Date: 2012-07-12T04:00Z

[Federal Register Volume 77, Number 134 (Thursday, July 12, 2012)]
[Rules and Regulations]
[Pages 41051-41075]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16704]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-HQ-OAR-2009-0517; FRL-9690-1]
RIN 2060-AR10

Prevention of Significant Deterioration and Title V Greenhouse 
Gas Tailoring Rule Step 3 and GHG Plantwide Applicability Limits

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The EPA is promulgating the third step (Step 3) of our phase-
in approach to permitting sources of greenhouse gas (GHG) emissions 
that we committed to do in the GHG Tailoring Rule. This rule completes 
Step 3 by determining not to lower the current Prevention of 
Significant Deterioration (PSD) and title V applicability thresholds 
for GHG-emitting sources established in the Tailoring Rule for Steps 1 
and 2. We are also promulgating regulatory revisions for better 
implementation of the federal program for establishing plantwide 
applicability limitations (PALs) for GHG emissions, which will improve 
the administration of the GHG PSD permitting programs.

DATES: This action is effective on August 13, 2012.

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

FOR FURTHER INFORMATION CONTACT: Michael S. Brooks, Air Quality Policy 
Division, Office of Air Quality Planning and Standards (C504-05), 
Environmental Protection Agency, Research Triangle Park, North Carolina 
27711; telephone number (919) 541-3539; fax number (919) 541-5509; 
email address: brooks.michaels@epa.gov.

SUPPLEMENTARY INFORMATION: 

I. General Information

A. Executive Summary

1. Purpose of the Regulatory Action
    The purpose of this Step 3 rule is to continue the process of 
phasing in GHG permitting requirements under the PSD and title V 
programs begun in Steps 1 and 2 of the Tailoring Rule.\1\ As a result 
of actions to regulate GHGs under other Clean Air Act (CAA) programs, 
GHGs are required to be addressed under the major source permitting 
requirements of the Act's PSD and title V programs. The Tailoring Rule 
was necessary because the CAA applicability requirements that determine 
which sources are subject to permitting under these programs are based 
on annual potential emission rates of 100 or 250 tons per year (tpy). 
Implementing these requirements for GHG-emitting sources immediately 
after they became subject to PSD and title V requirements would have 
brought so many sources into those programs so as to overwhelm the 
capabilities of state and local (hereafter, referred to collectively as 
state) permitting authorities to issue permits, and as a result, would 
have impeded the ability of sources to construct, modify or operate 
their facilities.
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    \1\ ``Prevention of Significant Deterioration and Title V 
Greenhouse Gas Tailoring Rule; Final Rule,'' 75 FR 31514, June 3, 
2010 (the Tailoring Rule).
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    To prevent this outcome, the EPA promulgated the Tailoring Rule to 
tailor the PSD and title V applicability criteria that determine which 
GHG sources and modification projects become subject to the permitting 
programs. In the Tailoring Rule, we explained that the administrative 
burdens of immediate implementation of the PSD and title V requirements 
without tailoring ``are so severe that they bring the judicial 
doctrines of `absurd results,' `administrative necessity,' and `one-
step-at-a-time' into the Chevron two-

[[Page 41052]]

step analytical framework for statutes administered by agencies.'' 75 
FR 31517 June 3, 2010. We further explained that on the basis of this 
legal interpretation, we would phase in the applicability of PSD and 
title V to GHG-emitting sources so that those requirements would apply 
to at least the largest sources initially, and to as many more sources 
as promptly as possible, at least to a certain point. Id. In the 
Tailoring Rule, we went on to promulgate the first two steps of the 
phase-in program, which we call Step 1, which took effect on January 2, 
2011; and Step 2, which took effect on July 1, 2012, and incorporated 
Step 1. In these steps, we established the PSD and title V 
applicability thresholds at what we call the 100,000/75,000 levels, 
which refers to the number of tpy in carbon dioxide equivalent 
(CO2e) potential emissions.
    In addition, in the Tailoring Rule, we made regulatory commitments 
for subsequent action, including this Step 3. Specifically, we 
committed in Step 3 to propose or solicit comment on lowering the 
100,000/75,000 threshold on the basis of three criteria that concerned 
whether the permitting authorities had the necessary time to develop 
greater administrative capacity due to an increase in resources or 
permitting experience, as well as whether the EPA and the permitting 
authorities had developed ways to streamline permit issuance. We 
committed to complete the Step 3 action by July 1, 2012.
    In this rulemaking, we have evaluated whether it is now possible to 
lower the 100,000/75,000 threshold to bring additional sources into the 
PSD and title V permitting programs in light of the three criteria. In 
addition, we have continued our identification and evaluation of 
potential approaches to streamline permitting so as to enable 
permitting authorities to permit more GHG-emitting sources without 
undue burden.
2. Summary of Major Provisions
    The EPA is finalizing Step 3 by determining not to lower the 
current GHG applicability thresholds from the Step 1 and Step 2 levels 
at this time. We have found that the three criteria have not been met 
because state permitting authorities have not had sufficient time and 
opportunity to develop the necessary infrastructure and increase their 
GHG permitting expertise and capacity, and that we and the state 
permitting authorities have not had the opportunity to develop 
streamlining measures to improve permit implementation.
    We are also promulgating revisions to our regulations under 40 CFR 
part 52 for better implementation of the federal program for 
establishing PALs for GHG emissions. A PAL establishes a site-specific 
plantwide emission level for a pollutant that allows the source to make 
changes at the facility without triggering the requirements of the PSD 
program, provided that emissions do not exceed the PAL level. Under the 
EPA's interpretation of the federal PAL provisions, such PALs are 
already available under PSD for non-GHG pollutants and for GHGs on a 
mass basis, and we are revising the PAL regulations to allow for GHG 
PALs to be established on a CO2e basis as well. We are also 
revising the regulations to allow a GHG-only source \2\ to submit an 
application for a CO2e-based GHG PAL while also maintaining 
its minor source status. We believe that these actions could streamline 
PSD permitting programs by allowing sources and permitting authorities 
to address GHGs one time for a source and avoid repeated subsequent 
permitting actions for a 10-year period.
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    \2\ Consistent with the definition that the EPA is promulgating 
in 40 CFR 52.21(aa)(2)(xii) and the relevant GHG thresholds in 
effect at this time, a GHG-only source is an existing stationary 
source that emits 100,000 tpy CO2e or more, but does not 
emit or have the potential to emit any other regulated NSR pollutant 
at or above the applicable major source threshold.
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B. Does this action apply to me?

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

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             Industry group                         NAICS \a\
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Agriculture, fishing, and hunting......  11
Mining.................................  21
Utilities (electric, natural gas, other  2211, 2212, 2213
 systems).
Manufacturing (food, beverages,          311, 312, 313, 314, 315, 316
 tobacco, textiles, leather).
Wood product, paper manufacturing......  321, 322
Petroleum and coal products              32411, 32412, 32419
 manufacturing.
Chemical manufacturing.................  3251, 3252, 3253, 3254, 3255,
                                          3256, 3259
Rubber product manufacturing...........  3261, 3262
Miscellaneous chemical products........  32552, 32592, 32591, 325182,
                                          32551
Nonmetallic mineral product              3271, 3272, 3273, 3274, 3279
 manufacturing.
Primary and fabricated metal             3311, 3312, 3313, 3314, 3315,
 manufacturing.                           3321, 3322, 3323, 3324, 3325,
                                          3326, 3327, 3328, 3329
Machinery manufacturing................  3331, 3332, 3333, 3334, 3335,
                                          3336, 3339
Computer and electronic products         3341, 3342, 3343, 3344, 3345,
 manufacturing.                           4446
Electrical equipment, appliance, and     3351, 3352, 3353, 3359
 component manufacturing.
Transportation equipment manufacturing.  3361, 3362, 3363, 3364, 3365,
                                          3366, 3366, 3369
Furniture and related product            3371, 3372, 3379
 manufacturing.
Miscellaneous manufacturing............  3391, 3399
Waste management and remediation.......  5622, 5629
Hospitals/Nursing and residential care   6221, 6231, 6232, 6233, 6239
 facilities.
Personal and laundry services..........  8122, 8123
Residential/private households.........  8141
Non-Residential (Commercial)...........  Not available. Codes only exist
                                          for private households,
                                          construction and leasing/sales
                                          industries.
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\a\ North American Industry Classification System.

[[Page 41053]]

C. How is this preamble organized?

    The information in this SUPPLEMENTARY INFORMATION section of this 
preamble is organized as follows:

Outline

I. General Information
    A. Executive Summary
    1. Purpose of the Regulatory Action
    2. Summary of Major Provisions
    B. Does this action apply to me?
    C. How is this preamble organized?
    D. What acronyms, abbreviations and units are used in this 
preamble?
II. Overview of the Final Rule
III. Background
    A. Statutory and Regulatory Background for PSD and Title V
    B. How does the Tailoring Rule address GHG emissions under PSD 
and title V?
    C. In the Tailoring Rule, what commitments did the EPA make for 
Step 3 and subsequent action?
    D. In the Tailoring Rule, what plan did the EPA announce for 
developing streamlining measures, and what has the EPA done since 
then?
    E. What did the EPA propose in the Step 3 proposal?
IV. Summary of Final Actions
    A. Applicability Thresholds for GHGs
    B. Plantwide Applicability Limitations for GHGs
    C. Synthetic Minor Source Permitting Authority for GHGs and 
Other Streamlining Measures
V. What is the legal and policy rationale for determining not to 
lower the current thresholds in the final action?
    A. Overview
    B. Have states had adequate time to ramp up their resources?
    C. What is the ability of permitting authorities to issue timely 
permits?
    D. What progress has the EPA made in developing streamlining 
methods?
    E. What would be the effects on emissions of lowering the 
current thresholds?
    F. What is the effective date of this action?
    G. Conclusion
VI. What streamlining approach is the EPA finalizing with this 
action?
    A. What is the EPA finalizing?
    B. What is a PAL?
    C. Why is the EPA amending the regulations?
    D. Extending PALs to GHGs on a CO2e Basis and Using 
PALs To Determine Whether GHG Emissions Are ``Subject to 
Regulation''
    E. Can a GHG source that already has a mass-based GHG PAL obtain 
a CO2e-based PAL?
VII. Comment and Response
    A. Thresholds for GHGs
    1. Narrow Scope of Step 3
    2. The Three Criteria
    3. Disparity Between Estimated and Actual Numbers of Permits
    B. Plantwide Applicability Limitations for GHGs
VIII. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and 
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With 
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From 
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions That Significantly Affect 
Energy Supply, Distribution or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions To Address 
Environmental Justice in Minority Populations and Low-Income 
Populations
    K. Congressional Review Act
    L. Judicial Review
IX. Statutory Authority

D. What acronyms, abbreviations and units are used in this preamble?

     The following acronyms, abbreviations and units are used in this 
preamble:

APA Administrative Procedure Act
BACT Best Available Control Technology
CAA or Act Clean Air Act
CAAAC Clean Air Act Advisory Committee
CFR Code of Federal Regulations
CO2e Carbon Dioxide Equivalent
EPA U.S. Environmental Protection Agency
FIP Federal Implementation Plan
FR Federal Register
GHG Greenhouse Gas
NAAQS National Ambient Air Quality Standard
NACAA National Association of Clean Air Agencies
NSR New Source Review
NTTAA National Technology Transfer and Advancement Act
OMB Office of Management and Budget
PAL[s] Plantwide Applicability Limitation[s]
PSD Prevention of Significant Deterioration
SCAQMD South Coast Air Quality Management District
SIP State Implementation Plan
tpy Tons Per Year
UMRA Unfunded Mandates Reform Act

II. Overview of the Final Rule

     In the Tailoring Rule, we included an enforceable commitment to 
complete a rulemaking to propose or solicit comment on Step 3 of the 
phase-in approach to GHG permitting, and complete that action by July 
1, 2012. We stated in the Tailoring Rule that in Step 3, we would lower 
the applicability thresholds, and consequently increase the number of 
GHG sources required to obtain such permits, only if we determined that 
the states have had enough time to develop the necessary infrastructure 
and increase their GHG permitting expertise and capacity to efficiently 
manage the expected increase in administrative burden from such 
permitting, and only if we and the permitting authorities had the 
opportunity to expedite, or otherwise decrease the burdens of, GHG 
permitting through streamlining measures.
    We proposed Step 3 by notice dated March 8, 2012.\3\ In that 
notice, we proposed determining not to lower the current applicability 
thresholds for PSD and title V. We also proposed two streamlining 
approaches to improve permit implementation: (1) The use of GHG PALs on 
either a mass or CO2e basis, which includes the option to 
use the CO2e-based increases provided in the subject to 
regulation applicability thresholds in setting the PAL, and to allow 
PALs to be used as an alternative approach for determining whether a 
project is a major modification and whether GHG emissions are subject 
to regulation; and (2) regulatory authority for the EPA or a delegated 
state or local agency to issue synthetic minor limitations for GHG in 
areas subject to a Federal Implementation Plan (FIP) that imposes PSD 
permitting programs for GHGs.
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    \3\ ``Prevention of Significant Deterioration and Title V 
Greenhouse Gas Tailoring Rule Step 3, GHG Plantwide Applicability 
Limitations and GHG Synthetic Minor Limitations; Proposed Rule,'' 77 
FR 14226, March 8, 2012 (the Step 3 proposal).
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    In the short period of time since the EPA promulgated the Tailoring 
Rule, the EPA and the states have not made sufficient progress 
developing sufficient capacity or streamlining mechanisms to handle a 
larger number of permits than Steps 1 and 2 require. As a result, we 
are finalizing Step 3 by determining not to lower the current, 100,000/
75,000 applicability thresholds. In addition, we are finalizing a 
portion of the GHG PALs streamlining measure we proposed for Step 3. At 
this time we are not finalizing our proposed streamlining measure of 
providing regulatory authority for the EPA or a delegated agency to 
issue synthetic minor limitations for GHG in areas subject to a PSD FIP 
for GHGs or other streamlining measures.
    In section III of this preamble, we discuss background information, 
including how the Tailoring Rule addresses GHG emissions under PSD and 
title V, what commitments the EPA made for Step 3 and subsequent 
actions and what we said in the Step 3 proposal.

[[Page 41054]]

    In section IV, we describe this final action. In section V, we 
discuss our legal and policy rationale for determining not to lower the 
current 100,000/75,000 applicability requirements for GHG PSD and title 
V permitting. In section VI, we discuss our rationale for revising 
regulations for the better implementation of GHG PALs, which will 
improve the administration of GHG PSD permitting programs. In section 
VII, we briefly summarize some key comments received on the portions of 
the proposal that we are finalizing and we summarize our responses; in 
section VIII, we address the statutory and Executive Order reviews that 
are required for all rulemakings; and in section IX, we provide the 
statutory authority for the rulemaking.

III. Background

    This section describes key aspects of the background for this 
rulemaking. For other background information, such as a description of 
GHGs and their sources, the regulatory backdrop to the Tailoring Rule 
and the EPA's GHG PSD and title V programs, see the Tailoring Rule, the 
related actions that the EPA took shortly before finalizing the 
Tailoring Rule \4\ and the GHG PSD and title V implementation rules 
that the EPA promulgated shortly after the Tailoring Rule.\5\ For 
purposes of this rule, we assume that the reader is familiar with these 
materials. In the following paragraphs we provide a brief summary of 
key statutory and regulatory background for the PSD and title V 
permitting programs for purposes of this rulemaking.
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    \4\ ``Endangerment and Cause or Contribute Findings for 
Greenhouse Gases Under Section 202(a) of the Clean Air Act,'' 74 FR 
66496, December 15, 2009 (the Endangerment and Cause-or-Contribute 
Findings); ``Light-Duty Vehicle Greenhouse Gas Emission Standards 
and Corporate Average Fuel Economy Standards; Final Rule,'' 75 FR 
25324, May 7, 2010 (the Light-Duty Vehicle Rule); ``Interpretation 
of Regulations that Determine Pollutants Covered by Clean Air Act 
Permitting Programs,'' 75 FR 17004, April 2, 2010 (the Timing 
Decision or the Johnson Memo Reconsideration).
    \5\ ``Action to Ensure Authority to Issue Permits under the 
Prevention of Significant Deterioration Program to Sources of 
Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP 
Call--Final Rule,'' 75 FR 77698, December 13, 2010 (the GHG PSD SIP 
Call); ``Action to Ensure Authority to Issue Permits Under the 
Prevention of Significant Deterioration Program to Sources of 
Greenhouse Gas Emissions: Federal Implementation Plan; Final Rule,'' 
75 FR 82246, December 30, 2010 (the GHG PSD SIP Call FIP); 
``Limitation of Approval of Prevention of Significant Deterioration 
Provisions Concerning Greenhouse Gas Emitting Sources in State 
Implementation Plans; Final Rule,'' 75 FR 82535, December 30, 2010 
(the PSD Narrowing Rule); ``Action to Ensure Authority to Implement 
Title V Permitting Programs Under the Greenhouse Gas Tailoring Rule; 
Final Rule,'' 75 FR 82254, December 30, 2010 (the Title V Narrowing 
Rule).
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A. Statutory and Regulatory Background for PSD and Title V

    Under the CAA, PSD applies to any ``major emitting facility'' that 
commences construction or undertakes a ``modification.'' CAA section 
165(a), 169(2)(C). The Act defines the term ``major emitting facility'' 
as a stationary source that emits or has the potential to emit any air 
pollutant in the amount of at least 100 or 250 tpy, depending on the 
source category, on a mass basis. CAA section 169(1). The Act also 
defines ``modification'' as any physical or operational change that 
increases the amount of any air pollutant emitted by the source. CAA 
section 111(a)(4).
    Under the CAA, title V applies to, among other sources, a ``major 
source,'' which is defined to include any stationary source that is a 
``major stationary source'' under section 302 of the Act. CAA section 
501(2). Under section 302, a ``major stationary source'' is defined as 
any stationary facility or source of air pollutants which directly 
emits, or has the potential to emit, 100 tpy or more of any air 
pollutant. CAA section 302(j).
    The EPA's regulations implement these requirements. Under the 
regulations, PSD applies to any ``major stationary source'' that begins 
actual construction on a new facility or undertakes a ``major 
modification'' in an area designated as attainment or unclassifiable 
for a national ambient air quality standard (NAAQS). 40 CFR 
52.21(a)(2)(i)-(iii). The regulations define a ``major stationary 
source'' as a stationary source that emits, depending on the source 
category, at least 100 or 250 tpy, on a mass basis, of a ``regulated 
[new source review (NSR)] pollutant.'' 40 CFR 52.21(b)(1)(i)(a)-(b). A 
``regulated NSR pollutant'' is defined as any of the following: (1) In 
general, any pollutant subject to a NAAQS, (2) any pollutant subject to 
a new source standard of performance under CAA section 111, (3) any of 
a certain type of stratospheric ozone depleting substances, or (4) 
``[a]ny pollutant that otherwise is subject to regulation under the 
Act'' (with certain exceptions for hazardous air pollutants under CAA 
section 112). 40 CFR 52.21(b)(50)(i)-(iv). The title V regulations 
define a ``major source'' in 40 CFR 70.2.

B. How does the Tailoring Rule address GHG emissions under PSD and 
title V? 6
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    \6\ We include this discussion of the Tailoring Rule for 
background purposes only. In our Step 3 proposal we did not re-open 
for comment any of the determinations made in the Tailoring Rule or 
subsequent related final rules or our rationale for finalizing such 
rules, and we do not re-open now.
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    In the Tailoring Rule, the EPA explained that the rulemaking was 
necessary because without it, the CAA PSD preconstruction review 
permitting program and the title V operating permit program would apply 
to all stationary sources that emit or have the potential to emit at 
least 100 or 250 tpy of GHGs beginning on January 2, 2011.
    In the Tailoring Rule, we explained that in light of the 
overwhelming administrative burdens that would result from applying PSD 
and title V at the 100/250 tpy statutory levels, we would exercise our 
legal authority to phase in the applicability of PSD and title V to 
GHG-emitting sources so that those requirements would apply ``at least 
to the largest sources initially, at least to as many more sources as 
possible and as promptly as possible over time * * * and at least to a 
certain point.'' 75 FR 31517 June 3, 2010. In the Tailoring Rule, we 
went on to promulgate the first two steps of the phase-in program, 
which we call Steps 1 and 2, and we made commitments for subsequent 
action.
    In selecting those thresholds, we closely reviewed the numbers of 
potential additional permitting actions for GHG-emitting sources, and 
the resulting administrative burdens, that could occur at various 
permitting thresholds. We further estimated that the combined 
additional PSD and title V permitting burdens due to Steps 1 and 2 
could, on an annual basis, mean a 42 percent increase in costs over the 
current PSD and title V program. 75 FR 31540, Table V-1 June 3, 2010.

C. In the Tailoring Rule, what commitments did the EPA make for Step 3 
and subsequent action?

    In the Tailoring Rule we committed to undertake Step 3 by proposing 
or soliciting comment on lowering the thresholds, so that more sources 
would be subject to PSD and title V requirements, but we did not commit 
to finalize lower thresholds. We committed to complete Step 3 by July 
1, 2012. We further stated that in light of the administrative burdens, 
we would not, in Step 3, lower the thresholds below the 50,000/50,000 
tpy CO2e levels. In addition, we committed to complete a 
study of the administrative burdens by April 30, 2015, and to complete 
Step 4 by April 30, 2016. 40 CFR 52.22(b); 40 CFR 70.12(b).

[[Page 41055]]

D. In the Tailoring Rule, what plan did the EPA announce for developing 
streamlining measures, and what has the EPA done since then?

    In the Tailoring Rule, we announced a plan to explore streamlining 
techniques that could make the permitting programs more efficient to 
administer for GHGs, and that therefore could allow expanding those 
programs to smaller sources. Streamlining techniques to be evaluated 
included: (1) Defining potential emissions to be closer to actual 
emissions for various source categories, (2) establishing emission 
limits for presumptive Best Available Control Technology (BACT) for 
various source categories, (3) encouraging use of general permits or 
permits-by-rule, (4) encouraging use of electronic permitting and (5) 
encouraging the application of more efficient techniques (which we call 
Lean techniques) to the permitting process for more efficient 
permitting of GHG sources. We believe that these techniques have the 
potential to streamline the PSD and title V permitting programs for 
GHGs to ``allow the expeditious expansion of PSD and title V 
applicability to more GHG-emitting sources while protecting those 
sources and the permitting authorities from undue expenses.'' 75 FR 
31526 June 3, 2010.
    While we intend to move forward to develop streamlining approaches, 
we also stated in the Tailoring Rule that we did not expect to develop 
and implement any of these prior to Step 3. We also stated in the rule 
that several of these streamlining approaches will take several years 
to develop, requiring separate rulemaking both at the federal level, 
and then through state and local processes. We, nonetheless, committed 
to explore a number of possible streamlining actions prior to the Step 
3 rulemaking.
    We are making progress in developing streamlining approaches. In 
addition to discussing and soliciting comment on streamlining measures 
in the Step 3 proposal, in April 2012, we convened what we call the GHG 
Permit Streamlining Workgroup (or the Workgroup). The Workgroup is 
formed under the Clean Air Act Advisory Committee (CAAAC): Permits, New 
Source Review and Toxics Subcommittee. The Workgroup is comprised of 
industrial, environmental, tribal and state and local representatives. 
It is tasked with exploring potential streamlining approaches that may 
make the administration of the CAA permitting programs more efficient 
for permitting authorities, and that may potentially reduce the 
permitting burden for smaller GHG-emitting sources if the programs are 
expanded to apply to these sources. The Workgroup meets regularly and 
is expected to complete a report by October 2012.

E. What did the EPA propose in the Step 3 proposal?

    In the Federal Register dated March 8, 2012, the EPA proposed Step 
3, proposing to determine not to lower the GHG PSD and title V 
threshold levels from the 100,000/75,000 tpy CO2e Step 2 
levels. 77 FR 14226 March 8, 2012. The EPA explained that the criteria 
it identified in the Tailoring Rule for evaluating whether to lower the 
thresholds in Step 3 did not, at the present time, point towards 
lowering them. The EPA further explained that the states generally had 
not had the time to increase their resources sufficiently or develop 
GHG-specific permitting expertise, and that we and the states had not 
had the opportunity to develop streamlining measures. 77 FR 14228 March 
8, 2012.
    In addition, we proposed to revise the PSD regulations to provide 
for GHG PALs. We stated that ``[w]e believe that this action will 
streamline PSD permitting programs by allowing sources and permitting 
authorities to address GHGs one time for a source and avoid repeated 
subsequent permitting actions.'' 77 FR 14228 March 8, 2012.
    In addition, we proposed regulatory provisions to allow for 
``synthetic minor'' permits for GHGs under the federal PSD program. We 
stated that ``[w]e believe that permitting synthetic minor GHG sources 
under these provisions will reduce the number of sources subject to PSD 
and title V, reducing the burden on state permitting authorities and 
the sources.'' 77 FR 14228 March 8, 2012.

IV. Summary of Final Actions

A. Applicability Thresholds for GHGs

    In this rule, consistent with the proposal, we are finalizing Step 
3 by determining not to lower the current 100,000/75,000 tpy 
CO2e PSD and title V applicability threshold levels. This 
action is based on our analysis of the three criteria--(1) the time 
that permitting authorities need to ramp up their resources, including 
developing permitting infrastructure as well as hiring and training 
staff, (2) sources' abilities to meet the requirements of the PSD 
program and permitting authorities' abilities to issue timely permits, 
including gaining experience with GHG permitting and (3) whether the 
EPA and the states could develop streamlining measures. 75 FR 31559 
June 3, 2010. Information currently available to the EPA indicates that 
these criteria have not been met.

B. Plantwide Applicability Limitations for GHGs

    We are finalizing the proposed streamlining measure that would 
revise the existing PAL permitting program to allow permitting 
authorities to issue GHG PALs on either a mass basis (tpy) or a 
CO2e basis, including the option to use the CO2e-
based increases provided in the subject to regulation thresholds in 
setting the PAL, and to allow such PALs to be used as an alternative 
approach for determining whether a project is a major modification and 
whether GHG emissions are subject to regulation. Within the GHG PAL 
proposal, we discussed the potential options of a Minor Source Approach 
and a Major Source Opt-in Approach for allowing sources that are not 
currently major sources to receive a PAL. After reviewing the comments 
received, we are finalizing the Minor Source Approach, which will allow 
permitting authorities to issue GHG PALs to GHG-only sources without 
requiring the source to undertake an action that would make GHGs 
``subject to regulation'' and bring the source into major stationary 
source status under the Tailoring Rule. Thus, GHG-only sources may 
obtain a GHG PAL and remain a ``minor source'' so long as their GHG 
emissions remain below the PAL.\7\ However, we are not finalizing the 
Major Source Opt-in Approach, since many public comments that supported 
the GHG PALs changes questioned the usefulness of this approach for 
providing real streamlining benefits.
---------------------------------------------------------------------------

    \7\ While we are not taking final action on the GHG synthetic 
minor permitting program described in the Step 3 proposal, that 
decision does not affect our authority to issue GHG PAL permits 
under the Minor Source Approach that we are finalizing in this 
action.
---------------------------------------------------------------------------

C. Synthetic Minor Source Permitting Authority for GHGs and Other 
Streamlining Measures

    In our Step 3 proposal, we also proposed creating the regulatory 
authority for the EPA to issue synthetic minor limitations for GHGs in 
areas subject to a GHG PSD FIP, and discussed our progress in 
evaluating the suitability of other streamlining measures and solicited 
further comment on those other streamlining measures. We are not 
finalizing the proposed synthetic minor streamlining measure for GHGs 
in areas subject to a GHG PSD FIP after considering public comments 
that suggest the program may not be

[[Page 41056]]

needed at this time. We also are not taking further action on the other 
streamlining measures at this time, as we consider the comments 
received. However, we continue to pursue streamlining options as 
expeditiously as possible, beginning immediately and proceeding 
throughout the phase-in period and encourage permitting authorities to 
do the same. We thank the commenters for their input, which we will 
consider as we move forward to develop effective streamlining measures 
to make the GHG permitting programs more efficient to administer. Any 
such action would provide for additional opportunity for stakeholder 
input and comment, as appropriate.

V. What is the legal and policy rationale for determining not to lower 
the current thresholds in the final action?

A. Overview

    This final rule fulfills our commitment in the Tailoring Rule to 
undertake Step 3 of the GHG PSD and title V phase-in process. At this 
time we conclude that while they have taken important initial steps to 
manage this new program, state permitting authorities have not had 
sufficient time and opportunity to develop the necessary infrastructure 
and increase their GHG permitting expertise and capacity, and that we 
and the state permitting authorities have not had the opportunity to 
develop streamlining measures. As a result, the criteria for lowering 
the applicability thresholds from their current Step 2 levels have not 
been met. Accordingly, we are determining not to lower the thresholds, 
so that they will remain at the 100,000/75,000 levels.
    In the Tailoring Rule, we committed to undertake future rulemaking, 
including this Step 3 rulemaking, to examine whether we could lower the 
thresholds to as low as 50,000/50,000 tpy CO2e, and thereby 
apply PSD and title V to more sources. We recognized that lowering the 
thresholds would add more administrative costs on top of those added by 
Steps 1 and 2, and as a result, we stated that whether and when we 
would lower the thresholds would depend on three criteria: (1) The time 
that permitting authorities need to ramp up their resources, including 
developing permitting infrastructure as well as hiring and training 
staff, (2) sources' abilities to meet the requirements of the PSD 
program and permitting authorities' abilities to issue timely permits, 
including gaining experience with GHG permitting and (3) whether the 
EPA and the states could develop streamlining measures.
    As described in the following sub-sections, the states and the EPA 
have made some progress in these areas. For example, the states have 
issued some GHG PSD permits and we will be finalizing one streamlining 
measure in this final rulemaking. However, neither the states nor the 
EPA have had the opportunity to make significant progress in these 
areas. First, the states generally have made little progress in 
developing their GHG permitting infrastructure--e.g., hiring additional 
personnel and establishing policies and conducting outreach programs to 
sources unfamiliar with the permitting process--largely because their 
permitting resources have not increased. In fact, some states indicate 
that their permitting resources have decreased, and some indicate that 
their resources may decrease further in the near future. Second, the 
states have had only limited experience in GHG PSD permitting and 
therefore have not had the opportunity to develop significant 
expertise. The main reasons for this are the unexpectedly low amount of 
PSD permitting to date and the short amount of time since GHG 
permitting began. Similarly, for title V, applications for title V 
permits are generally not due until a year after title V becomes 
applicable to a source. Thus, for Step 2 title V sources, permit 
applications were generally not due until July 1, 2012. As a result, 
states would only start reviewing such applications by this date, and 
accordingly they would not have gained much experience permitting such 
sources under title V by July 1, 2012. Finally, the states and we have 
not had the opportunity to develop significant streamlining approaches. 
This is largely because, as we stated in the Tailoring Rule, certain 
streamlining approaches require a longer process to develop, including 
significant data collection activities, notice and comment rulemaking 
to obtain specific authority and, in some cases, the development of 
necessary implementation tools. Because of these criteria, we are not 
lowering the thresholds from their current levels.
    The following discusses these criteria, and notes the states' and 
our experience with GHG permitting to date under the current Step 1 and 
Step 2 applicability thresholds. We also address the environmental 
benefits potentially associated with any further reduction in the GHG 
PSD permitting thresholds.

B. Have states had adequate time to ramp up their resources?

    One criterion that we described in the Tailoring Rule for whether 
to lower the thresholds in Step 3 was whether the permitting 
authorities could increase their resources. Specifically, we described 
this criterion as ``the time that permitting authorities need to ramp 
up their resources in an orderly and efficient manner to manage the 
additional workload.'' 75 FR 31559 June 3, 2010. We explained that we 
expected Steps 1 and 2 to result in an increase in the numbers of PSD 
permits for new construction and modifications and in the numbers of 
title V permits; and we expected that some increase in state permitting 
resources would be needed to accommodate, at least in part, those new 
demands.
    In fact, all indications are that the states have not had the 
opportunity to obtain the necessary resources and to develop their 
infrastructure to accommodate the level of permitting expected in Steps 
1 and 2. Instead, in many cases, reductions in state environmental 
agency budgets have occurred, which is fully consistent with the 
overall reductions in state budgets that have been recently seen across 
the nation.
    In the proposal, we noted several indications that state permitting 
resources have decreased in the past several years. For example, an 
August 2010 report by the Environmental Council of the States concluded 
that state budgets decreased by an average of approximately $21 million 
per state from 2009 to 2011.\8\ In addition, a June 28, 2011 letter 
from the National Association of Clean Air Agencies (NACAA) to the U.S. 
House of Representatives detailing the status of 40 state and local air 
quality agencies \9\ indicated that 80 percent of air agencies 
experienced a decline in staffing levels in the preceding 4 years. 
According to the letter, over the years 2008-2010, the average loss of 
staff per agency was 16.7 percent. In addition to staffing losses, 48 
percent of air agencies experienced furloughs, and the majority faced 
significant declines in budgets. These cutbacks resulted in curtailing 
core air program activities including permit issuance, as well as 
education and outreach programs. Further, we also noted in the proposal 
that we had consulted informally with some states, and many confirmed 
that they have seen

[[Page 41057]]

their budgets and staffs reduced in recent years as the states have 
responded to the economic downturn and budget shortfalls.
---------------------------------------------------------------------------

    \8\ S. Brown, A. Fishman, ``The Status of State Environmental 
Agency Budgets, 2009-2011.''
    \9\ Letter from S. William Becker, NACAA, to Honorable Michael 
Simpson and Honorable James Moran, U.S. House of Representatives.
---------------------------------------------------------------------------

    In light of these developments, we noted in the Step 3 proposal:

* * * States have not been able to develop their GHG permitting 
infrastructure--e.g., hiring additional personnel, establishing 
policies and conducting outreach programs to sources unfamiliar with 
the permitting process--largely because their permitting resources 
have not increased and, in fact, in some cases have decreased and 
may decrease further in the near future.

77 FR 14235 March 8, 2012. We received comments from states and 
localities supporting those statements, and providing confirmation that 
their resources for GHG permitting were falling, in part because of 
lower overall resources. For example, the South Coast Air Quality 
Management District (SCAQMD) stated, ``* * * SCAQMD's overall staffing, 
as well as permitting resources, continue to drop.'' 10 11
---------------------------------------------------------------------------

    \10\ The SCAQMD comments are located in the docket for this 
rulemaking, Docket No. EPA-HQ-OAR-2009-0517-19280.
    \11\ One environmental advocacy organization commented that in 
its view, its home state of Pennsylvania underfunded the state 
environmental agency. The commenter emphasized that such 
underfunding should not be taken as an indication of a lack of GHG 
permitting capacity. Another environmental advocacy organization 
made a comparable point more generally. We have applied this 
criteria on a nationwide basis, and we have found that many states 
are confronting decreased resources, including states, such as some 
of the ones in the Regional Greenhouse Gas Initiative, that have 
taken action to regulate GHGs.
---------------------------------------------------------------------------

    These recent reductions in state permitting resources have 
undermined the states' ability to build their GHG permitting 
infrastructure through hiring and training of staff and through 
education and outreach programs to the affected sources.\12\ These 
reductions point away from lowering the Step 1 and 2 thresholds at this 
time. In the Tailoring Rule, we estimated that lowering the thresholds 
to 60,000/60,000 tpy CO2e would increase administrative 
burdens by 20 percent above the total burdens at the Step 2 levels (and 
40 percent above the pre-GHG permitting burdens); and that lowering 
them to 50,000/50,000 tpy CO2e would increase administrative 
burdens by 40 percent above the total burdens at the Step 2 levels (and 
99 percent above the pre-GHG permitting burdens). Also, as a result of 
a large increase in the number of GHG sources required to get permits, 
permitting agencies will need to conduct education and outreach 
programs to small business and the public who have not typically been 
subject to air quality permitting requirements in the past to raise 
awareness and understanding of the regulatory requirements for these 
smaller sources. Absent this outreach effort, we believe that many 
sources will not understand, and perhaps may not even be aware of, the 
new regulatory obligations.
---------------------------------------------------------------------------

    \12\ As we noted in the Step 3 proposal, some states have also 
been obliged to devote resources to developing and submitting for 
EPA approval SIP revisions and title V program revisions authorizing 
GHG permitting, instead of using those resources to build GHG 
permitting infrastructure. 77 FR 14236 March 8, 2012.
---------------------------------------------------------------------------

    It is important to recognize that to this point, states have not 
been confronted with the amount of GHG permit activity that we 
estimated in the Tailoring Rule for Steps 1 and 2. Environmental 
advocacy organizations emphasized this point in commenting on the 
proposal, and one of these organizations concluded that the EPA should 
lower the thresholds. We respond to these comments in more detail 
below, but in brief, although we recognize the disparity in actual 
permitting activity compared to our estimates, this disparity does not 
serve as a basis for lowering the thresholds in this Step 3 rulemaking. 
As we discuss below, there is some indication that at least part of 
this disparity may be temporary, due to the recent economic downturn 
and slow recovery, as well as other factors. Moreover, in the Tailoring 
Rule, we based the level of the thresholds on overall administrative 
burden that we determined based on several sets of data and a complex, 
multi-component methodology. The number of GHG permits is an important 
component of overall burden, but there are other components as well, 
including (1) the per-permit processing costs and (2) other 
administrative burdens, including training and enforcement expenses, 
public education and outreach expenses, and the expenses of additional 
synthetic minor source permitting for GHG sources seeking to avoid PSD 
and title V applicability. At this time, with just the first year of 
implementation of the Step 2 thresholds having been completed on June 
30, 2012, we do not have enough new information about the data sets and 
methodology to merit revising the administrative burden estimates or, 
therefore, the thresholds. In particular, we note some indications that 
in the Tailoring Rule, we may have underestimated the administrative 
burdens in certain respects by, for example, not fully accounting for 
the additional synthetic minor permitting activity, that is, sources 
taking synthetic minor limitations on their GHG emissions so as to 
avoid becoming subject to PSD or title V due to those emissions. As a 
result, contrary to the commenters, we do not consider the unexpectedly 
smaller number of GHG permits to indicate that states have greater 
permitting capacity.
    For the previously described reasons, states have not had the 
opportunity to build capacity and resources to handle GHG permitting. 
Accordingly, this criterion of state resources supports determining not 
to lower the current thresholds.

C. What is the ability of permitting authorities to issue timely 
permits?

    Another criterion identified in the Tailoring rule is whether 
permitting authorities have the ability to issue timely permits \13\ 
based on efficiencies resulting from GHG permitting implementation 
experience.\14\ In describing this criterion in the Tailoring Rule, we 
expected that permitting authorities, by acting on the anticipated 
volume of GHG PSD permit actions, would have the opportunity to 
establish efficient methods for resolving issues and processing 
permits, including developing expertise within their staffs. This would 
allow them to achieve efficiencies that, in turn, would create capacity 
for processing more GHG

[[Page 41058]]

permit applications. Thus, with this criterion, we based our commitment 
to complete the Step 3 rulemaking in part on the assumption that Steps 
1 and 2 would provide us with the necessary information to determine 
whether and when it has become possible for states to administer GHG 
permitting programs for additional sources. However, as events have 
transpired, states have not yet had the opportunity to make this 
progress.
---------------------------------------------------------------------------

    \13\ This criterion may be measured by the period of time 
permitting authorities need to issue permits.
    \14\ In the Tailoring Rule, we described this criterion as 
``information we have as to the sources' abilities to meet the 
requirements of the PSD program and the permitting authorities' 
ability to process permits in a timely fashion.'' 75 FR 31,559 June 
3, 2010. An issue arises as to the meaning of this reference to 
sources. We stated in the Step 3 proposal: ``We note that in the 
Tailoring Rule, we made clear that sources' abilities to meet the 
requirements of the PSD and title V programs depend at least in part 
on the ability of the states to develop, as part of the state 
programs, outreach and educational efforts to facilitate source 
compliance. Accordingly, for present purposes, we think this 
component concerning sources may be examined by a review of the 
states' progress in developing state GHG permitting programs.'' 77 
FR 14232 March 8, 2012. Industry commenters took issue with this 
statement, and asserted that this criterion requires an examination 
of sources' abilities to meet PSD requirements that is independent 
of the permitting authorities' ability to process permits in a 
timely fashion. We do not find it necessary in this rulemaking to 
resolve this issue as to the meaning of the reference to sources. 
This is because for purposes of this rulemaking, the information we 
have about permitting authorities leads us to conclude that this 
criterion points towards determining not to lower the thresholds. 
Even if the sources were to be treated as a separate component of 
this criterion, no commenter suggested that information about the 
sources would lead us to conclude anything differently about this 
criterion. Because, in this rulemaking, information about sources 
does not play a role in assessing this criterion, it is not 
necessary to resolve the issue of the meaning of the sources' 
abilities to comply with GHG permitting requirements, and whether 
sources' abilities to comply should be considered independently from 
the permitting authorities' ability to administer GHG permitting.
---------------------------------------------------------------------------

    In our Step 3 proposal, we showed that as of December 1, 2011, the 
EPA and permitting authorities had issued 18 GHG PSD permits. We noted 
that these 18 permit actions had been spread among 11 states, almost 
all of which had issued only one GHG permit. We concluded: ``This 
activity has simply been too limited to allow States to build internal 
capacity to handle GHG permitting for a diverse set of sources, to 
develop more efficient techniques for permitting any particular source 
category, or to develop streamlining approaches to address GHG 
permitting.'' 77 FR 14237 March 8, 2012.
    Since then, the pace of permitting has remained too low for states 
to build their GHG permitting capacity. As of May 21, 2012, the EPA and 
permitting authorities have issued a total of 44 GHG PSD permits. 
Importantly, states have seen little if any title V permitting activity 
to this point; indeed, applications for title V permits from Step 2 (or 
``GHG-only'') sources were generally not due until July 1, 2012 (i.e., 
1 year after the effective date of Step 2, when GHG-only sources could 
have first become subject to title V).
    Therefore, the conclusions we drew at proposal remain valid. The 
GHG permitting activity has simply been too limited to allow states to 
build internal capacity to handle GHG permitting for a diverse set of 
sources, to develop more efficient techniques for permitting any 
particular source category or to develop streamlining approaches to 
address GHG permitting. In sum, the states' experiences to date do not 
provide a basis for us to conclude that permitting authorities in fact 
have the ability to issue timely permits for a larger set of actions 
based on GHG permitting experience. Therefore, this criterion points 
towards determining not to lower the current thresholds.

D. What progress has the EPA made in developing streamlining methods?

    In the Tailoring Rule, we indicated that the criterion of 
implementation of permit streamlining measures would assist permitting 
authorities by removing some sources from the permit program, or 
allowing more efficient processing of permit applications. 
Specifically, we described this criterion as ``our progress in 
developing streamlining methods that will render the permitting 
authority workload more manageable by taking some sources off the table 
(through regulations or guidance interpreting `potential to emit'), and 
by allowing for more efficient permit processing (through general 
permits and presumptive BACT).'' 75 FR 31559 June 3, 2010. We further 
stated, however, that some streamlining methods would take several 
years for the EPA to develop, and for states to gain authority to 
implement. Thus, we did not anticipate that streamlining approaches 
would necessarily be available by the time of the Step 3 rulemaking. We 
also noted that in consultations with the states, they reported that 
they had made little progress in implementing streamlining measures, 
and none had adopted streamlining measures specifically to address 
GHGs.
    The states and we continue to make progress in streamlining. The 
revision to the PALs regulations that we promulgate in this action is a 
step in that direction. In addition, as noted, we recently convened the 
CAAAC GHG Permit Streamlining Workgroup to explore potential 
streamlining approaches. The Workgroup meets regularly and is expected 
to issue a report by this October with suggestions for specific 
approaches. Even so, to this point, neither we nor the states have been 
able to develop or implement sufficient streamlining actions to 
meaningfully reduce permitting administrative burdens. Accordingly, 
this criterion points towards determining not to lower the current 
thresholds.\15\
---------------------------------------------------------------------------

    \15\ Environmental advocacy organization commenters stated that 
in light of the less-than-expected amount of GHG permitting 
activity, the three criteria should be considered either to be 
irrelevant or to have been met. We respond to this comment below 
and, in more detail, in the Response to Comments document.
---------------------------------------------------------------------------

E. What would be the effects on emissions of lowering the current 
thresholds?

    The fact that the PSD program would apply to a large percentage of 
the national inventory of stationary source GHG emissions at the 
100,000/75,000 tpy CO2e levels of the Tailoring Rule, while 
increasing the number of sources subject to permitting by only a modest 
amount, supported the reasonableness of our decision to establish the 
thresholds at those levels. For the current rulemaking, we have 
conducted further analysis, which shows that reducing the thresholds in 
Step 3 to as low as 60,000/60,000 tpy CO2e would bring 
within the potential sphere of the PSD program less than an additional 
1 percent of all GHG emissions from all stationary sources nationally 
while potentially subjecting over 2,000 additional sources to the 
permitting program. Our analysis shows that as the thresholds go lower, 
the number of sources increases dramatically, but the volume of GHG 
emissions emitted by each additional source gets smaller and smaller. 
Lowering the thresholds to 50,000/50,000 tpy CO2e would 
bring within the sphere of PSD an additional 3 percent of the national 
inventory of GHG emissions while potentially subjecting over 4,500 
additional sources to the permitting programs. Of course, in any year, 
only a fraction of national GHG stationary source emissions would 
actually become subject to PSD controls because only a fraction of 
sources would undertake modifications or new construction that trigger 
BACT controls. Thus, the additional reductions in GHG emissions from 
lowering the thresholds in Step 3 would be small under any 
circumstances even if the thresholds were lowered to 50,000/50,000 tpy 
CO2e. This small amount of incremental environmental benefit 
from lowering the thresholds, coupled with the additional burden 
associated with permitting these sources (in light of the lack of 
increase in state resources and experience as well as the lack of 
streamlining measures), supports the reasonableness of our 
determination not to lower the thresholds in Step 3.

F. What is the effective date of this action?

    The effective date of this action is August 13, 2012. In the 
Tailoring Rule, we provided that Step 3 would take effect by July 1, 
2013.\16\ We selected this date because it would provide a 1-year delay 
following the required, July 1, 2012 date of promulgation of Step 3. 
The purpose of the delay would be to allow states sufficient time to 
incorporate any lower thresholds into their state implementation plans 
(SIPs), and submit a SIP revision for EPA approval. However, because 
the EPA is determining not to lower the thresholds, SIP revisions are 
not necessary and, as

[[Page 41059]]

a result no delay in the effective date is necessary.
---------------------------------------------------------------------------

    \16\ The Tailoring Rule regulations provide that Step 3 ``shall 
become effective July 1, 2013.'' 40 CFR 52.22(b)(1), 70.12(b)(1), 
71.13(b)(1), which we read to mean effective by July 1, 2013, 
consistent with the accompanying discussion in the preamble. 75 FR 
31516 June 3, 2010 (describing Step 3 as possibly including more 
sources ``beginning by July 1, 2013'').
---------------------------------------------------------------------------

G. Conclusion

    In the Tailoring Rule, we recognized that the Step 1 and 2 
thresholds we promulgated would create significant administrative 
burdens on permitting authorities. We stated that we would lower the 
thresholds, and thereby create additional administrative burdens, based 
on consideration of three criteria concerning state resources and 
experience as well as EPA and state efforts to streamline the 
permitting process. In this rulemaking, on the basis of these criteria 
and the public comments received, we determine not to lower the 
thresholds at this time. Permitting authorities need additional time to 
secure resources, hire and train staff, and gain experience with GHG 
permitting, and additional time is required to develop streamlining 
measures to expedite permit program administration, before we move 
toward fuller implementation of the program. We note that determining 
not to lower the current PSD and title V thresholds for Step 3 does not 
have implications for whether we will lower the thresholds in Step 4 or 
afterwards. Our actions in Step 4 will depend on our evaluation of the 
appropriate factors at the time of that rulemaking. If those factors 
point in the direction of lowering the thresholds, we will act 
accordingly.
    As noted, we recognize the concerns expressed by environmental 
advocacy organization commenters concerning the disparity between 
expected number of permits and actual number of permits. We intend to 
track permitting activity to provide a sufficient base of information 
to assure that the 5-year study (required to be completed by April 30, 
2015) is robust, and to facilitate appropriate action concerning the 
thresholds in Step 4 (required to be completed by April 30, 2016). We 
discuss these plans below in our response to these commenters.

VI. What streamlining approach is the EPA finalizing with this action?

    In the Tailoring Rule, the EPA committed to explore streamlining 
measures as an integral part of the phase-in approach to permitting 
requirements for GHG emissions under PSD and title V. Streamlining 
techniques would allow permitting authorities to be more efficient in 
administering their GHG permit programs by reducing the overall 
resources required to administer these programs now and in the future. 
By implementing effective streamlining techniques, permitting, 
authorities could move more rapidly toward regulating a larger set of 
GHG sources at lower thresholds. In the Tailoring Rule, we identified 
potential streamlining options. We also acknowledged that it will take 
us several years to develop, and for states to gain authority to 
implement, effective streamlining methods. We committed to continue to 
explore the identified options, and to request comment on these and any 
additional streamlining approaches in the Step 3 rulemaking.
    This final rule provides a mechanism to streamline the GHG PSD 
permit program by expanding the existing PSD PAL provisions to better 
implement PALs for GHGs. The expanded PAL provisions (1) allow 
permitting authorities to establish GHG PALs on either a mass basis 
(tpy) or a CO2e basis, (2) include the option to use the 
CO2e-based increase provided in the subject to regulation 
thresholds in setting the CO2e PAL, (3) include the option 
to issue a GHG PAL (issued on a mass basis or CO2e basis) to 
GHG-only sources that have the potential to become major sources under 
the Tailoring Rule and (4) allow GHG PALs (issued on a mass basis or 
CO2e basis) to be used as an alternative approach for 
determining both whether a project is a major modification and whether 
GHG emissions are subject to regulation. Accordingly, permitting 
authorities implementing the federal PSD program will be able to use 
the authority provided to them under 40 CFR 52.21, including the 
changes finalized in this rule, and corresponding permitting procedures 
(such as those in 40 CFR part 124) to issue PAL permits for GHGs in a 
manner consistent with PAL permits issued for regulated NSR pollutants 
other than GHGs.
    In the Tailoring Rule, we did not identify PALs as a viable 
streamlining technique for GHG sources. However, since we finalized the 
Tailoring Rule, we have recognized that PALs could be designed in a way 
that could be useful for easing the administration of GHG permitting, 
and we proposed changes to the existing PAL rules in our Step 3 
proposal to address the unique PSD applicability aspects associated 
with GHGs. In the final rule, we have amended the existing PAL 
regulations to recognize the unique applicability characteristics of 
GHGs and to provide GHG sources with greater operational flexibility, 
while making application of the PAL rules to GHGs more consistent with 
the outcome achieved when those rules are applied to other regulated 
NSR pollutants. We believe the approach to PALs in the final rule will 
provide air quality benefits by encouraging sources to control GHG 
emissions through efficiency improvements or the use of other emission 
reduction procedures, processes or equipment before such sources are 
subject to PSD permitting for GHGs, and may encourage sources 
potentially subject to PSD to limit their emissions without triggering 
major modification permitting procedures or related administrative 
processes necessary to revise title V permits to reflect such major 
modifications.
    Accordingly, this final rule amends the PSD regulations at 40 CFR 
52.21 to create authority for permitting authorities applying the 
federal PSD permitting program to issue PALs on either a mass basis or 
a CO2e basis to major sources and GHG-only sources that have 
the potential to become major sources, including the option to use the 
CO2e-based applicability thresholds provided in the 
``subject to regulation'' definition in setting the PAL limit for a 
CO2e-based PAL, and also to allow such PALs to be used as an 
alternative approach for determining whether a project is a major 
modification and subject to regulation for GHGs. We are also making 
small changes to a number of the existing provisions in order to ensure 
that those provisions can be implemented in light of the GHG-based 
changes described above. In so doing, we did not seek comment on or re-
open the entire PAL program. Instead, the request for comment was 
limited to the specific changes we are making with respect to GHGs 
(non-GHG PAL-related issues are outside the scope of this rulemaking). 
The following discussion outlines our approach to PALs for GHGs.

A. What is the EPA finalizing?

    As noted, we are finalizing revisions to the federal PAL 
regulations to allow permitting authorities to establish GHG PALs on 
either a mass basis (tpy) or a CO2e basis, including the 
option to use the CO2e-based applicability thresholds for 
GHGs provided in the subject to regulation definition in setting the 
PAL on a CO2e basis and to issue a GHG PAL to GHG-only 
sources that have the potential to become major sources under the 
Tailoring Rule (Minor Source Approach), and to allow GHG PALs to be 
used as an alternative approach for determining both whether a project 
is a major modification and whether GHG emissions are subject to 
regulation.

B. What is a PAL?

    Under the EPA's existing regulations, a PAL is an emissions 
limitation for a single pollutant expressed in tpy that is enforceable 
as a practical matter and is established source-wide in accordance

[[Page 41060]]

with specific criteria. 40 CFR 52.21(aa)(2)(v). Such PALs are voluntary 
in the sense that sources may, but are not required to, apply for a 
PAL, and the decision to issue a PAL to particular source is at the 
discretion of the permitting authority. These PALs offer an alternative 
method for determining major NSR applicability. If a source can 
maintain its overall emissions of the PAL pollutant below the PAL 
level, the source can make a change without triggering PSD review. This 
allows sources to make the changes necessary to respond rapidly to 
market conditions, while generally assuring the environment is 
protected from adverse impacts from the change. A PAL also results in 
significant environmental benefit by providing the community with an 
understanding of the long-term emissions impact from a facility, by 
preventing emissions creep (i.e., a series of unrelated individual 
emissions increases that are below major NSR applicability thresholds) 
and by requiring enhanced monitoring, recordkeeping and reporting 
provisions to demonstrate compliance with the PAL.

C. Why is the EPA amending the regulations?

    We are revising the existing PAL regulations because the EPA 
interprets the existing regulations under 40 CFR 52.21 for the federal 
PAL and PSD programs to allow permitting authorities to issue GHG PALs 
only on a mass basis.\17\ In addition, our interpretation of the 
existing regulations did not provide for the use of the 
CO2e-based subject to regulation thresholds in setting the 
PAL limit, only allowed GHG PALs to be issued to existing major 
stationary sources [40 CFR 52.21(aa)(1)] and did not allow compliance 
with a PAL to be considered for the purpose of determining whether GHG 
emissions are ``subject to regulation.''
---------------------------------------------------------------------------

    \17\See EPA guidance ``Establishing a Plantwide Applicability 
Limitation for Sources of GHGs'' April 19, 2011, located at http://www.epa.gov/nsr/ghgdocs/ghgissuepal.pdf.
---------------------------------------------------------------------------

    The PSD provisions generally define a ``major stationary source'' 
as a stationary source which emits or has the potential to emit 100 or 
250 tpy or more of a regulated NSR pollutant, depending on the type of 
source. 40 CFR 52.21(b)(1)(i)(a)-(b). A ``GHG-only source'' is an 
existing stationary source that emits or has the potential to emit 100/
250 tpy of GHGs on a mass basis, and emits or has the potential to emit 
CO2e in amounts equal to or more than the GHG subject to 
regulation threshold for new sources (currently 100,000 tpy of 
CO2e or more), but does not emit or have the potential to 
emit any other regulated NSR pollutant at or above the applicable major 
source threshold. Regardless of the amount of GHGs currently emitted, a 
GHG-only source that has avoided PSD applicability for GHG under Step 1 
or 2 of the Tailoring Rule would be a minor source for purposes of PSD, 
and could only become major for PSD when it proposes to undertake a 
change that increases GHG emissions by at least 75,000 tpy 
CO2e, the amount of increase needed under the current 
Tailoring Rule thresholds.\18\ 40 CFR 52.21(b)(49)(v)(b). Because the 
existing PAL provisions are only available to existing major stationary 
sources, permitting authorities issuing a PAL under the federal PAL 
program can only issue a PAL to a GHG-only source when the source 
proposes to undertake a change that would make it an existing major 
stationary source.\19\ 40 CFR 52.21(aa)(1). As a result, GHG-only 
sources may not currently use PALs as an alternative mechanism for 
determining major NSR applicability in the same way that existing major 
stationary sources of non-GHG regulated NSR pollutants may. Instead, 
because the Tailoring Rule applicability determinations depend on the 
GHG emissions related to a particular action on the part of the source, 
GHG-only sources must currently wait to obtain a PAL until they 
actually propose to make a change that qualifies the source as a major 
stationary source under the PSD program. Moreover, as we read the 
current federal regulations in 40 CFR 52.21, any GHG PALs issued under 
those regulations can only be mass-based. This requirement is due to 
the fact that PALs were originally designed to be an alternative method 
for determining PSD applicability for regulated air pollutants, and 
such pollutants only have mass-based applicability triggers for PSD, 
which the PAL provisions reference. For example, setting an actuals PAL 
level under 40 CFR 52.21(aa)(6) of the existing regulations requires 
reliance on the mass-based baseline actual emissions under 40 CFR 
52.21(b)(48) and mass-based significant levels under 40 CFR 
52.21(b)(23).
---------------------------------------------------------------------------

    \18\ This is a consequence of the wording used to implement the 
Tailoring Rule Step 1 and 2 thresholds through the definition of 
``subject to regulation.''
    \19\ While the changes we are finalizing in this rulemaking will 
allow minor sources that are also GHG-only sources to obtain a PAL 
for their GHG emissions only under the federal PAL program, the 
revisions in this rulemaking will not allow any other minor sources 
to obtain a PAL for any pollutants and do not otherwise disturb the 
settled requirement that a source seeking to obtain a PAL for non-
GHG pollutants must be a major stationary source.
---------------------------------------------------------------------------

    On the other hand, PSD applicability for GHG emissions from 
existing sources under the Tailoring Rule relies on CO2e 
thresholds for determining whether the GHG emissions from any 
particular action are ``subject to regulation,'' which in turn informs 
the determination of whether a source is a major modification. Thus, 
under the current regulations, there is a mismatch between the mass-
based PAL and the CO2e-based portions of the PSD 
applicability thresholds, such that the existing PAL regulations do not 
provide an effective alternative applicability determination mechanism 
for GHG sources.
    We believe changing the PAL regulations to provide for 
CO2e-based PALs will provide GHG sources with additional 
operational flexibility, and could reduce GHG workload burdens on 
permitting authorities by decreasing the number of PSD permit 
applications that permitting authorities must process for these sources 
over the long term. Being able to establish a PAL on a CO2e 
basis will provide planning certainty to GHG sources, and will relieve 
the current time pressure to issue a PAL permit concurrent with 
authorization for a planned major modification which could potentially 
delay that project. We also believe that, regardless of which metric is 
specified to measure GHG emissions in a PAL, compliance with a GHG PAL 
generally assures that the environment remains protected from adverse 
air impacts resulting from changes a source undertakes in compliance 
with such a PAL, because emissions cannot exceed this pre-established 
level without further review. A PAL also provides an incentive for a 
source to minimize GHG emissions increases from future projects in 
order to stay under the PAL and avoid triggering major modification 
permitting requirements.
    These regulatory changes that allow sources to establish a PAL on a 
CO2e basis also make PALs for GHGs function similarly to 
PALs for non-GHGs. A significant emissions rate, as specified in 40 CFR 
52.21(b)(23), is a threshold used to determine when PSD applies to 
modifications at existing major stationary sources, and only 
modifications that result in net emissions increases above the 
significant rate trigger major PSD permitting requirements. Unless a 
specific significant emissions rate has been established, the federal 
regulations specify that the significant rate is effectively zero, 
i.e., any increase in emissions would trigger PSD. Under the

[[Page 41061]]

current PAL provisions, a permitting authority establishes the PAL 
level for a pollutant at a particular source by adding the applicable 
significant rate found in 40 CFR 52.21(b)(23) to the baseline actual 
emissions of that pollutant at the source.
    The EPA did not promulgate a significant emissions rate for GHG 
emissions in 40 CFR 52.21(b)(23) in the final Tailoring Rule. Thus, if 
a permitting authority establishes a mass-based GHG PAL under the 
existing federal regulations, the PAL level included in the permit may 
not include any margin above the baseline actual emissions to account 
for emissions growth. Absent this margin, a GHG PAL would usually 
provide less flexibility to a source when compared to PALs for other 
regulated NSR pollutants.
    This final rule revises the PAL and ``subject to regulation'' 
provisions in 40 CFR 52.21 to provide GHG sources with the same kind of 
flexibility sources currently have for other regulated NSR pollutants 
by allowing sources the option to establish a CO2e-based PAL 
using the CO2e-based emission increase provided in the 
subject to regulation thresholds in 40 CFR 52.21(b)(49). Thus, under 
the final rule, a permitting authority issuing a CO2e-based 
PAL under the current Tailoring Rule thresholds may add 75,000 tpy 
CO2e to a source's CO2e baseline actual emissions 
to establish the PAL level, because the Tailoring Rule established 
75,000 tpy CO2e as the appropriate rate of emissions 
increase for the GHG subject to regulation applicability threshold for 
existing sources. In the Tailoring Rule, the EPA revised the definition 
of ``subject to regulation'' to establish a threshold level of GHG 
emissions that a source must meet, on both a source and project basis, 
before GHGs are considered a regulated NSR pollutant for PSD permitting 
purposes. However, the EPA also made clear that its action had the same 
substantive effect and should be treated as if the EPA had revised 
other components of the definition of ``major stationary source'' to 
achieve the same effect. Thus, in addressing PALs for GHGs in this 
rule, the EPA is continuing to focus on the thresholds incorporated 
into the ``subject to regulation'' provision, consistent with the 
approach in the Tailoring Rule.
    The PAL revisions in this final rule will also have the effect of 
streamlining future major NSR applicability determinations for sources 
that choose a GHG PAL. The revisions eliminate the need to evaluate GHG 
emissions for major NSR applicability as long as the source is 
complying with the GHG PAL, because a GHG PAL can function to assure 
not only that a change is not considered a major modification, but also 
that GHG emissions from the source undertaking that change are not 
subject to regulation. Since the PSD regulations, including the 
Tailoring Rule, require an existing source to determine (1) whether a 
specific action would increase the GHG emissions by a certain 
CO2e amount that would make them subject to regulation for 
PSD permitting purposes, and if so, (2) whether the GHG emissions 
increase is also significant on a mass basis to qualify the change as a 
major modification, the rule changes that allow for setting a GHG PAL 
at a level that either includes the CO2e-based increase 
identified in the Tailoring Rule thresholds or the mass-based 
significant emissions rate will insure that the source does not exceed 
that amount and thus will not emit GHGs in amounts that would trigger 
PSD permitting obligations. In sum, we believe that the existing 
federal PAL regulations do not generally provide an effective means of 
achieving burden reductions for permitting authorities and GHG sources 
when compared to the operational flexibility provided by PALs for 
regulated NSR pollutants other than GHGs, and therefore are overly 
restrictive with respect to GHG sources. Accordingly, in this final 
rule we are revising the PSD rules for PALs to allow permitting 
authorities to: (1) Issue effective PALs to GHG-only sources; (2) issue 
either a mass-based (tpy) or a CO2e-based PAL to a 
particular source; (3) allow CO2e-based PALs to include the 
CO2e-based emission increases provided in the subject to 
regulation thresholds; and (4) allow compliance with a GHG PAL to be 
used as an alternative applicability approach for determining both 
whether a project is a major modification and is subject to regulation 
for GHGs. Provided a source complies with a GHG PAL that meets the 
requirements in 40 CFR 52.21(aa)(1) through (15), GHG emissions at the 
source will not be ``subject to regulation,'' and a project at the 
source will not result in a major modification for GHG purposes.
    The Minor Source Approach discussed in the proposal for Step 3 
allows a GHG-only source to remain a minor source for PSD purposes and 
still obtain a GHG PAL.\20\ In this way permitting authorities can 
issue a GHG PAL to a GHG-only source that would only cover GHG 
emissions without requiring the source to trigger PSD permitting 
requirements as a prerequisite.
---------------------------------------------------------------------------

    \20\ A source may be major for title V but minor for PSD because 
of the difference in applicability thresholds (e.g., title V major 
source status may be 100 tpy on a mass basis for a particular 
regulated air pollutant but 250 tpy on a mass basis under PSD for 
the same pollutant) and/or for other reasons (e.g., a source that 
did not trigger PSD when it commenced construction and that did not 
subsequently increase its emissions above any major modification 
threshold but still has emissions over 100 tpy on a mass basis). In 
such cases, the title V permit may be an available mechanism to 
issue such PALs. 40 CFR 52.21(aa)(2)(ix).
---------------------------------------------------------------------------

    We are providing for the Minor Source Approach for GHG PALs in this 
final rule by revising the PAL regulations to allow a GHG-only source 
to submit an application for a GHG PAL while maintaining its minor 
source status. We also define a number of terms when used for the 
specific purpose of imposing a GHG PAL for a minor source. A GHG-only 
source that complies with its GHG PAL will not trigger PSD permitting 
requirements for GHGs, but could still trigger PSD for other regulated 
NSR pollutants if it undertakes a change that increases emissions by an 
amount at or above the major source threshold for any non-GHG regulated 
NSR pollutant. 40 CFR 52.21(b)(1)(i)(c).
    Moreover, under the Tailoring Rule, GHG-only sources must determine 
whether any project will result in GHG emissions that are subject to 
regulation (on a CO2e basis) and correspondingly will also 
result in a major modification (on a mass basis). Because GHG-only 
sources must undertake these determinations for any change, even those 
that would not lead to emissions at or above the applicable thresholds 
for GHGs, the regulatory revisions we are finalizing clarify that GHGs 
will not be ``subject to regulation'' under 40 CFR 52.21(b)(49) at such 
sources, as long as the source is complying with a GHG PAL that meets 
the requirements in 40 CFR 52.21(aa)(1) through (15). We believe that 
extension of the PAL program to these sources through the Minor Source 
Approach is consistent with the purposes and design of the PAL 
program--to allow use of a PAL as an alternative PSD applicability 
approach for existing sources.
    Issuing GHG PALs to GHG-only sources that remain minor sources does 
not conflict with the basis for the existing PAL rules. When we 
promulgated the existing PAL rules in 2002 (67 FR 80186), we limited 
the application of the PAL provisions to existing major stationary 
sources only. We included this provision based on our decision to limit 
PALs to sources that had historical emissions through which the 
permitting authority could establish a baseline actual emissions level. 
New major stationary sources do

[[Page 41062]]

not have historical actual emissions from which a permitting authority 
can establish an actuals PAL, and so we declined to include these 
sources in the actuals PAL program. By contrast, because GHG-only 
sources are existing sources, specific sources could already have 
sufficient historical actual emissions data to provide the GHG 
information necessary to set the actuals PAL for GHGs or may be 
collecting data now that would allow them to establish a GHG PAL in the 
future. However, permitting authorities retain discretion to determine, 
on a case-by-case basis, whether the historical actual emissions data 
available for a particular source is sufficient to establish a GHG PAL.
    When we originally promulgated the PAL rules, we also chose not to 
extend the PAL program to minor source NSR permit programs, because the 
PAL rules provide an alternative PSD applicability provision to 
determine whether a project results in a major modification, and we did 
not believe the program would be useful to minor sources. At that time, 
the rules generally required only existing major stationary sources to 
undertake a major modification applicability analysis to determine 
whether a change triggers PSD review. Given the unique ``subject to 
regulation'' PSD applicability requirement for GHGs, wherein an 
existing source that emits major amounts of GHGs is a major stationary 
source only at the time it proposes to undertake a project that will 
result in an emissions increase that equals or exceeds the subject to 
regulation thresholds, we do not believe that extending the PAL 
provisions to allow GHG-only sources to get GHG PALs runs afoul of the 
reasoning we provided when initially limiting the PAL program to 
existing major stationary sources.
    Because the GHG-only source must be a minor source when it applies 
for its GHG PAL and will remain a minor source under this Minor Source 
Approach (absent any other PSD-triggering change), and will not be 
expected to trigger a major modification applicability analysis for 
future increases in non-GHG regulated NSR pollutants, we believe it is 
unnecessary to extend the PAL authority under this approach to other 
pollutants. Moreover, we recognize that extending the PAL program in 
that way could place a burden on permitting authorities and redirect 
resources needed to issue permits to other stationary sources that 
trigger PSD requirements for GHGs.
    The Minor Source Approach of the final rule is consistent with the 
CAA in that it regulates sources that, but for the Tailoring Rule, 
would be major stationary sources based on the mass of their GHG 
emissions. This approach is also consistent with our Tailoring Rule 
principles, since we expect that the GHG PALs established under this 
rule would be established at levels very close to relevant GHG 
applicability thresholds in the Tailoring Rule. Because of the unique 
nature of GHG emissions, the EPA has determined that the scope of the 
regulatory revisions that it is finalizing to implement this Minor 
Source Approach for PALs is available only for a source's GHG emissions 
and not for non-GHG pollutants. As mentioned above, the Minor Source 
Approach for GHG PALs also fulfills our streamlining goals by allowing 
applicability determinations for PSD to occur through an alternative 
mechanism that helps to manage permitting authorities' long term 
permitting burdens.
    These regulatory revisions are also consistent with our permitting 
authority under the CAA. As we explained in the Step 3 proposal, in the 
context of the Tailoring Rule, we interpret sections 165, 169 and 301 
of the CAA to provide authority to issue preconstruction permits to GHG 
sources that do not qualify as major sources under the Tailoring Rule, 
but that emit or have the potential to emit GHGs at or above the 
statutory major source thresholds and that, without the Tailoring Rule, 
would qualify as ``major emitting facilities'' under the CAA. As 
explained in the Tailoring Rule, because the administrative burden 
associated with immediately implementing the PSD permitting program at 
statutory levels for GHGs would have crippled the program, we tailored 
the program and phased in the permitting requirements to ensure that 
the program would be administrable for GHGs. Under the Minor Source 
Approach that we are finalizing in this action, qualifying sources emit 
or have the potential to emit GHGs in levels above, and in many cases 
much higher than, the statutory thresholds. But for the Tailoring Rule, 
such sources would qualify as ``major emitting facilities'' under CAA 
section 169 and would be subject to PSD permitting requirements. 
Because the PAL provisions finalized today could also help to ensure 
that the PSD permitting program can be administered in an effective and 
efficient manner for GHGs, we interpret CAA sections 165 and 169 to 
convey to permitting authorities, including the EPA, the legal 
authority to issue GHG PAL permits to sources that qualify under the 
Minor Source Approach. Similarly, we interpret CAA section 301(a)(1) to 
provide additional authority to issue PAL permits to such sources. 
Accordingly, the EPA interprets sections 165, 169 and 301 of the CAA to 
provide the authority to issue GHG PAL permits under the Minor Source 
Approach as finalized in this action.

D. Extending PALs to GHGs on a CO2e Basis and Using PALs To 
Determine Whether GHG Emissions Are ``Subject to Regulation''

    In this action, we are allowing permitting authorities to establish 
a CO2e-based GHG PAL, and in so doing, allowing them to add 
up to an amount equal to the emissions increase contained in the 
``subject to regulation'' applicability threshold (currently 75,000 tpy 
CO2e for an existing source) to the source's baseline actual 
emissions to set the actuals PAL level for GHGs. We are also allowing 
GHG PALs, either on a mass basis or a CO2e basis, to serve 
as an alternative approach for determining whether GHG emissions are 
subject to regulation. That is, rather than applying the emissions 
increase tests currently contained in the ``subject to regulation'' 
definition, a source could demonstrate that GHG emissions are not 
``subject to regulation'' by complying with a GHG PAL. Thus, compliance 
with a GHG PAL would be used as an alternative approach for determining 
that a project neither causes GHG emissions to be subject to 
regulation, nor causes the source to have a major modification.
    With respect to the subject to regulation determination, we believe 
that it is necessary to allow GHG PALs to be used as an alternative 
provision for making this determination, because failing to do so would 
negate the flexibility we wish to achieve by revising GHG PALs. This is 
because without these regulatory revisions, sources would still be 
required to monitor individual emissions changes using the procedures 
in 40 CFR 52.21(b)(49) to determine whether a project causes GHG 
emissions to be ``subject to regulation.'' If we do not allow GHG PALs 
to be used to determine whether GHGs are subject to regulation, these 
determinations would use procedures that rely on an emissions-unit-by-
emissions-unit analysis and a shorter contemporaneous period to 
evaluate net emissions changes, neither of which are required under a 
PAL. This would undermine the very benefits the PAL is intended to 
provide, such as clarity, regulatory certainty and operational 
flexibility. We believe that the enhanced recordkeeping, reporting and 
monitoring associated with a PAL, and the environmental benefits 
resulting

[[Page 41063]]

from a PAL, warrant extension of the alternative applicability 
provisions to ``subject to regulation'' determinations to assure that 
the GHG PAL provides the intended flexibility to sources.
    With respect to extending the PAL regulations to allow GHG limits 
to be set on a CO2e basis, we also believe these changes 
provide PALs to be used for GHGs in a manner consistent with the 
Tailoring Rule and the purpose of the PAL program. When we originally 
proposed the Tailoring Rule, we proposed to include applicability 
thresholds within the definitions of major stationary source and major 
modification, based on emissions of CO2e. We also originally 
proposed to establish a CO2e-based significant emissions 
rate. However, in the final rule, we changed our regulatory approach 
and instead included these applicability thresholds within the 
``subject to regulation'' definition, and we did not revise the 
definition of significant to include a CO2e-based emissions 
rate. We did so, in part, because we intended this change in regulatory 
structure to facilitate more rapid adoption of the rules by permitting 
authorities. Nonetheless, we also explained that we intended the 
definition of ``subject to regulation'' to function in tandem with the 
definitions of ``major stationary source'' and ``major modification'' 
to determine whether a given project triggers PSD preconstruction 
permit requirements. 75 FR 31582 June 3, 2010. That is, if a source 
emits GHG emissions at a level that causes the emissions to become 
``subject to regulation,'' that same level of emissions increase will 
likely cause the source to be a major stationary source and to trigger 
PSD requirements as a major modification. Since the PAL program for 
non-GHG pollutants allows actuals PAL levels to be set by adding up to 
the amount of the emissions that would be allowed before a project 
triggered PSD requirements as a major modification, we think the PAL 
program for GHGs should apply similarly. Accordingly, since the 
CO2e-based emission increase contained in the second part of 
the ``subject to regulation'' definition works in tandem with the 
``major modification'' provision to determine whether PSD applies, we 
are amending the regulations so that a CO2e-based GHG PAL 
can be established by adding up to an amount equal to the 
CO2e emissions increase defined as ``significant'' for the 
purposes of 40 CFR 52.21(b)(49)(iii) at the time the PAL permit is 
being issued (currently, 75,000 tpy CO2e) to the source's 
baseline actual emissions.
    In our proposed Tailoring Rule, we noted that, in rare instances, 
there may be an exception to the general principle that a GHG source 
exceeding the proposed 75,000 tpy CO2e significant emissions 
threshold for major modification applicability would also exceed the 
statutory mass applicability thresholds for PSD, namely if a source 
emits very small amounts of a particular GHG that carries a very large 
global warming potential. 74 FR 55330 October 27, 2009. We noted our 
concern that the proposed rule could cause such sources, whose mass 
emissions do not meet the major stationary source tpy threshold, to 
nonetheless be regulated under the permit programs. When we finalized 
the Tailoring Rule using the subject to regulation approach, we 
resolved this concern by retaining both a mass-based threshold and a 
CO2e-based threshold. Our intent in retaining both 
thresholds was to assure that there was no source with GHG emissions 
that were subject to PSD that would not otherwise meet the statutory 
criteria for treatment as a major stationary source.
    This same regulatory structure can create the opposite effect for 
sources operating under a GHG PAL. Instead of providing GHG PAL sources 
with the ability to use either threshold to show that they are not 
undertaking a major modification and that major NSR does not apply, 
sources must monitor both thresholds to prove this outcome under the 
current rules. This is because a mass-based GHG PAL cannot assure that 
there is no increase in CO2e tpy GHG. Since the Tailoring 
Rule requires a source to determine whether a specific action would 
increase the GHG emissions by a certain amount that would make them 
subject to regulation for PSD permitting purposes, setting a 
CO2e-based GHG PAL based on the increase identified in the 
Tailoring Rule thresholds will require that the source does not exceed 
that amount and thus will insure that changes at the source would not 
cause an increase in GHGs emissions in an amount that would be subject 
to regulation and thus insures that they are not subject to PSD 
permitting. In addition, since the Tailoring Rule and the existing PSD 
regulations require similar calculation of a source's emissions to 
determine whether a major modification triggers PSD permitting 
requirements for GHGs, compliance with a mass-based PAL, which as 
explained earlier will not allow any increase above baseline and thus 
does not result in a significant emissions increase, will also insure 
that a source with a mass-based GHG PAL does not trigger those 
requirements. Expanding the GHG PAL program to allow GHG PALs to be 
used as an alternative method of assuring that any changes at the 
source are neither ``subject to regulation'' nor major modifications 
resolves this issue, making GHG PALs function more like PALs for non-
GHG pollutants.

E. Can a GHG source that already has a mass-based GHG PAL obtain a 
CO2e-based PAL?

    In the Step 3 proposal, we proposed to add transition provisions to 
the PAL regulations that would allow a GHG source that has a mass-based 
GHG PAL to convert to a CO2e-based GHG PAL once, at the 
source's option, and if agreed to by the permitting authority. However, 
public comments indicate that there is no pressing need for such a 
transition provision at this time. As a result, we are not finalizing 
that segment of the proposal at this time. We are also not aware of any 
mass-based PALs that have been issued or are being reviewed by any 
permitting authorities that may need such transition provisions. If the 
need for such a transition provision arises in the future; we can 
address it as part of our future streamlining actions. Streamlining 
continues to be a key element to our phased-in approach to GHG 
permitting and we fully intend to move forward expeditiously with 
developing additional streamlining approaches.

VII. Comment and Response

    In this section, we briefly summarize and respond to some key 
comments we received during the comment period. We describe in detail 
these and other comments as well as our responses in the Response to 
Comments document to this rule, which can be found in the docket for 
this rulemaking under Docket No. EPA-HQ-OAR-2009-0517.

A. Thresholds for GHGs

    We received dozens of comments, including 90 from individual 
citizens, on the proposed Step 3 rulemaking. The majority of the 
commenters other than individual citizens were from industry, and most 
of these comments supported the proposal not to lower the GHG 
thresholds. Some of these commenters made clear that they supported 
maintaining these applicability thresholds only if the DC Circuit 
upholds the Tailoring Rule against the current legal challenges and 
only as long as the EPA requires GHG permitting under PSD. Reasons 
supporting not lowering the Step 1 and 2 thresholds included the lack 
of permitting authorities' ability to fully implement the program at 
(or closer to)

[[Page 41064]]

statutory applicability thresholds, the lack of implementation of 
effective permit streamlining measures at this time and the inability 
of sources to cope with regulatory burdens. In addition, several state 
and local agency commenters supported the current thresholds, citing 
the need for increased resources, a large learning curve and little 
incremental air quality benefit in the control of GHGs. We appreciate 
these comments, and in some cases they provided additional information 
concerning state permitting administration and possible reasons for the 
less-than-expected numbers of permit applications that we have 
incorporated into our rationale. Two environmental advocacy 
organization commenters, one of which consisted of a group of national 
organizations, opposed the proposal, and we discuss their comments in 
detail immediately below.
    Environmental advocacy organization commenters stated that for the 
EPA to justify not lowering the current Tailoring Rule thresholds, 
``the doctrine of administrative necessity requires that EPA provide 
evidence of continuing administrative impossibility,'' and therefore 
the EPA must provide data demonstrating that lowering thresholds would 
create administrative impossibilities. In addition, these commenters 
raised concerns about some of the specific aspects of the three 
criteria. For example, with respect to the criterion of whether states 
have had the time to increase their permitting resources, the 
commenters cautioned that the EPA should not ``attempt to rely on a 
decision by one or more state legislatures to underfund CAA programs as 
evidence of `administrative necessity.' ''
    In addition, the environmental advocacy organization commenters 
stressed that the actual permitting activity has been much less than 
the EPA's methodology estimated, and stated, ``[w]here estimates of 
permitting burdens conflict with actual experience, the agency must 
update its methods for assessing administrative loads based on the 
actual experience of permitting agencies to date.'' The commenters 
stated that the EPA's claims that macro-economic fluctuations were the 
cause of the unexpectedly low level of permitting could not be 
supported. One of the commenters further stated that the EPA could not 
rely on the three criteria it identified to justify maintaining the 
thresholds because ``[t]hese criteria are pertinent only in the face of 
evidence that the permitting demand continues to exceed capacity by a 
significant amount * * * EPA's current record does not so 
demonstrate.'' This commenter asserted that in the Step 3 proposal, the 
``EPA has not provided sufficient justification for its conclusion that 
the permitting load faced by permitting agencies warrants maintenance 
of the current thresholds for the period covered by Step 3. While 
maintenance of the current applicability thresholds for GHG emissions 
may be justified by a record demonstrating continued administrative 
necessity, the EPA has not yet provided sufficient evidence in its 
proposed action.'' This commenter concluded that the EPA ``may wish to 
consider a supplementary proposal or notice of data availability that 
ensures adequate and transparent notice to stakeholders with adequate 
opportunity to comment.'' The other commenter asserted that the limited 
amount of actual permitting means that the three criteria either are 
not required to have been met or in fact have been met. This other 
commenter concluded that the EPA was required to lower the thresholds.
1. Narrow Scope of Step 3
a. Summary
    The EPA disagrees with the environmental advocacy organization 
commenters' views that in Step 3, the EPA must justify maintaining the 
current thresholds on grounds of administrative necessity. In brief, 
the structure of the Tailoring Rule's multi-step phase-in process makes 
clear that Step 3 is a narrow action designed to afford the EPA the 
opportunity to lower the Tailoring Rule thresholds shortly after 
promulgating the Tailoring Rule if certain specific events were to 
happen. Those events, which are reflected in the three criteria the EPA 
articulated as the basis for Step 3, concern improvement in state 
resources and expertise as well as the development of streamlining 
methods. Under these circumstances, it would not have been appropriate 
to wait several years, until the EPA completed the 5-year study and 
then promulgated Step 4, before lowering the thresholds. Importantly, 
Step 3 occurs too soon after the Tailoring Rule to permit a more 
fundamental review of the data and methodology underlying the EPA's 
estimates of permitting burdens. That more fundamental review, to the 
extent needed, could occur during the 5-year study and Step 4 that are 
required several years later, in 2015 and 2016, respectively. The terms 
of the Tailoring Rule regulatory provisions and the discussion in the 
rule's preamble concerning this phase-in approach--Step 3, the 5-year 
study and Step 4--as interpreted by the EPA, confirm the narrowness of 
Step 3. As a result, the EPA is authorized to proceed with Step 3 as we 
do in this rulemaking, which is by applying the three criteria to 
determine whether to lower the thresholds.
b. Discussion
    Step 3 can be best understood when viewed in the overall context of 
the phase-in process. The following is the schedule that the EPA 
established in the Tailoring Rule for the phase-in process, including 
Step 3 and subsequent action:

June 3, 2010: Tailoring Rule is published in the Federal Register.
January 2, 2011: Step 1 takes effect.
July 1, 2011: Step 2 takes effect.
July 1, 2012: Title V permit applications are due for sources that 
become subject to Step 2.
July 1, 2012: The EPA completes Step 3.
July 1, 2013: Step 3 takes effect.
April 30, 2015: The EPA completes 5-year study.
April 30, 2016: The EPA completes Step 4.

40 CFR 52.22(b).

    In the first instance, Step 3's narrowness is clear from its 
timing, so soon after Steps 1 and 2. In promulgating the Tailoring 
Rule, which included Steps 1 and 2, the EPA undertook a robust analysis 
of administrative necessity. This analysis included compiling several 
sets of data and developing a complex, multi-component methodology, all 
of which were fully vetted through the Tailoring Rule process.
    The EPA scheduled Step 3 shortly after the promulgation of Steps 1 
and 2. Under this schedule, the EPA would promulgate Step 3 on the same 
day as the close of the first full year that Step 2 would have been in 
effect. As noted, Step 3's purpose was to provide a vehicle for the 
prompt lowering of the thresholds if certain events occurred by that 
time--state resources or expertise increased significantly, or the EPA 
was able to streamline permitting--so as to avoid a delay of some 4 
years until the promulgation of Step 4 before lowering the thresholds. 
The EPA never intended that Step 3 entail a broad review of the 
underlying data sets and methodology for assessing permitting burden. 
Step 3 is simply too soon after the promulgation of the Tailoring Rule, 
and too soon after Step 2, for the EPA to have acquired and evaluated 
sufficient information to be able to review and revise the data and 
methodology.
    The narrowness of Step 3 is also clear from the EPA's description 
of it in the Tailoring Rule regulations and preamble. The regulations 
establish Step 3 in a paragraph entitled, ``Near-term

[[Page 41065]]

Action on GHGs,'' and describe it as follows: ``The Administrator shall 
solicit comment, under section 307(b) of the Act, on promulgating lower 
GHGs thresholds for PSD applicability.'' 40 CFR 52.22(b)(1). The 
Tailoring Rule preamble elaborated as follows:

[The] EPA includes an enforceable commitment to undertake a notice-
and-comment rulemaking that would begin with [a supplemental notice 
of proposed rulemaking] that we expect to be issued in 2011 and that 
we commit will be finalized in 2012. The notice will propose or 
solicit comment on further reductions in the applicability levels. 
This rulemaking will take effect by July 1, 2013 and therefore, in 
effect, constitute [sic: constitutes] Step 3. In this [Tailoring 
Rule] action, we are committing to a rulemaking for Step 3, but are 
not promulgating Step 3, because it is important to allow EPA and 
the permitting authorities to gain experience permitting sources 
under Steps 1 and 2, and to allow time to develop streamlining 
methods, before attempting to determine what would be the next 
phase-in levels for PSD and title V applicability.

75 FR 31572 June 3, 2010. As noted above, the preamble went on to 
explicitly identify three criteria for the EPA to evaluate in Step 3 to 
determine whether to lower the thresholds, which concerned progress in 
permitting authorities' acquiring resources and developing expertise, 
as well as the EPA's and the permitting authorities' progress in 
developing streamlining measures. 75 FR 31559 June 3, 2010. The EPA 
interprets these regulations and preamble discussion to make clear that 
the EPA designed Step 3 narrowly as an opportunity to lower the 
thresholds very soon after finalizing the Tailoring Rule, if PSD and 
title V implementation for GHGs was on track and if certain events were 
unfolding in a way that allowed permitting at a lower threshold. We 
note that courts grant an administrative agency the highest level of 
deference in interpreting the agency's own regulations. Auer v. 
Robbins, 519 U.S. 452, 461 (1997).
    Our interpretation of the Step 3 provisions finds support by 
contrasting them with the provisions for Step 4. The regulations 
establish Step 4 in a paragraph titled, ``Further Study and Action on 
GHGs.'' 40 CFR 51.22(b)(2), 40 CFR 70.12(b)(2). Importantly, the 
regulations make clear that Step 4 is to be preceded by, and must be 
based on, an assessment--which we call the 5-year study--that must be 
completed by April 30, 2015. That study is to be wide-ranging: The 
regulations describe it as ``a study projecting the administrative 
burdens'' of regulating sources below the then-existing thresholds. 40 
CFR 52.22(b)(2)(i), 40 CFR 70.12(b)(2)(i). The regulations go on to 
describe Step 4 as a rule that is ``[b]ased on the results of the 
study'' and ``address[es] the permitting obligations of such sources,'' 
and that must be finalized by April 30, 2016. 40 CFR 52.22(b)(2)(ii), 
40 CFR 70.12(b)(2)(ii).
    Step 4's provisions, along with its timing, make clear that it has 
a broader scope than Step 3. By the time of the 5-year study, several 
years of implementation of GHG permitting will have occurred, and as a 
result, the EPA will have a more robust set of data concerning various 
aspects of implementation and the EPA's methodology. As noted, in the 
study, the EPA must evaluate that data as appropriate and ``project[] * 
* * administrative burdens.'' The EPA must then conduct the Step 4 
rulemaking based on the study. All this makes clear that Step 4 
provides a greater opportunity for evaluating administrative necessity, 
as appropriate, but Step 3, in contrast, is designed more narrowly.
    That Step 3 has a narrow scope is further made clear by reference 
to the separate provision in the Tailoring Rule regulations that under 
no circumstances will the EPA lower the thresholds below the 50,000/
50,000 tpy CO2e level before April 30, 2016. 40 CFR 
52.22(b)(2)(iii), 40 CFR 70.12(b)(2)(iii). This provision means that 
the EPA would not lower the thresholds below those levels during Step 
3. The environmental advocacy organization commenters did not comment 
that the EPA was free to disregard this limit in Step 3, and as a 
result, those commenters appeared at least implicitly to accept that 
this limit does constrain whatever action the EPA may take in Step 3. 
It is the EPA's interpretation that just as the EPA narrowed Step 3 by 
establishing the 50,000/50,000 tpy CO2e floor, the EPA also 
narrowed the scope of Step 3 to be limited to the three criteria, 
described above. In addition, the presence of this 50,000/50,000 tpy 
CO2e limit contradicts commenters' argument that the EPA 
should be required to make a new showing of administrative 
impossibility in Step 3. It would be illogical for the EPA to be 
required to conduct a new evaluation of administrative burdens and a 
new showing of administrative impossibility in Step 3 if the EPA had 
already decided that no matter what the evaluation of administrative 
burdens revealed, Step 3 could not result in thresholds below the 
50,000/50,000 tpy CO2e level.
    The environmental advocacy organization commenters emphasize the 
imperatives of the administrative necessity doctrine, and we fully 
recognize those imperatives. We discussed the administrative necessity 
doctrine at length in the proposed and final Tailoring Rule preambles, 
and we concluded that the doctrine authorized us to promulgate the 
Tailoring Rule only on the basis that we would phase in the PSD and 
title V applicability thresholds as quickly as possible and as closely 
as possible to the statutory 100/250 tpy levels. But we are authorized 
to create a structure for this phase-in process to achieve the overall 
goal, and in doing so, we may design a particular step to achieve a 
particular effect. We designed Step 3 narrowly to provide an 
opportunity to adjust the thresholds soon after promulgating them if 
certain events transpired. This is consistent with, and could help 
assure the success of, the overall phase-in process. Contrary to the 
environmental advocacy organization commenters' comments, Step 3 does 
not necessarily entail a re-analysis of administrative burdens or a new 
showing of administrative impossibility simply because Step 3 is an 
action that the EPA is taking within an overall context that involves 
the administrative necessity doctrine.
2. The Three Criteria
    The EPA disagrees with various comments by the environmental 
advocacy organization commenters concerning the specifics of the three 
criteria for lowering the Tailoring Rule thresholds. With respect to 
their comment on the criterion of state resources, we acknowledge their 
concern as to whether a state could in effect manipulate the first 
criterion in the manner they suggest by underfunding the state 
environmental agency. However, we apply this criterion on a nationwide 
basis, so that we examine whether the states taken as a whole have 
increased their resources. At proposal, we noted evidence that because 
of the recent economic downturn and slow recovery, state environmental 
agencies across the country have generally seen budget reductions. This 
includes agencies in states that have moved forward to regulate GHGs in 
other ways. Applying this criterion on a nationwide basis minimizes 
concerns about a particular state seeking to underfund its 
environmental agency.\21\
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    \21\ We recognize that on a nationwide basis, state budget 
pressures have resulted from recent macroeconomic conditions, and 
that with ongoing economic growth, state budgets may be expected to 
increase. But at present, we remain concerned that on a nationwide 
basis, the capacity of state and local permitting authorities for 
GHG permitting may be less than what we expected at the time of the 
Tailoring Rule, and that possible diminution of capacity at least 
partly offsets the less-than-expected number of permitting actions.

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[[Page 41066]]

3. Disparity Between Estimated and Actual Numbers of Permits
    We recognize the disparity that the environmental advocacy 
organization commenters stress between the estimated and actual 
permitting. However, we disagree that this disparity obliges us to 
reconsider the Tailoring Rule data and methodology during Step 3. For 
the reasons described above, Step 3 has a narrow scope: it is limited 
to the three criteria and as a result, it does not entail a review of 
the underlying data and methodology.
a. No Re-Opening of Methodology
    In addition, we made clear in the Step 3 proposal that we would not 
re-open the methodology in this rulemaking:

[I]n this rulemaking, we are relying on the same methodology used in 
the Tailoring Rule to calculate administrative burdens, and we are 
not re-opening that methodology or soliciting comment on it. We are 
simply proposing action and soliciting comment on Step 3 of the 
phase-in approach.

77 FR 14255 March 8, 2012. We affirm here that we are not re-opening 
the data and methodology.
b. Reasons for Not Reconsidering Data Sets and Methodology
    Although we are not re-opening the data and methodology, for the 
sake of completeness, we will respond directly to concerns expressed by 
the commenters. Even if we were prepared to re-open the data and 
methodology, we would conclude that notwithstanding the disparity 
commenters emphasize, they have not provided, and we do not have, 
sufficient information to be able to conduct a review and revision of 
the data and methodology at this time.
(1) Summary
    In the Tailoring Rule, our analysis of administrative burden was 
rendered complex by the need to account for many different types of 
permitting activity. We had to rely on several different sources of 
data and we had to develop a complex and multi-component methodology, 
with numerous assumptions and estimates. The sources of data were the 
best available, the assumptions in the methodology were reasonable and, 
importantly, all were fully vetted through the Tailoring Rule process. 
No one commented that the data and methodology over-estimated the 
amount of permitting burden, and no one brought such a challenge after 
promulgation.
    In this Step 3 rulemaking, environmental advocacy organization 
commenters pointed out the disparity between the expected and actual 
number of GHG permit actions, but they did not challenge any specific 
aspects of this data and methodology. Thus, it remains possible that at 
least part of the disparity is temporary, due to macro-economic 
conditions and other factors. Even if the disparity has occurred 
because the data and methodology do contain inaccuracies that yield an 
over-estimate of the number of GHG permits, such inaccuracies must be 
considered in the context of the overall administrative burden due to 
GHG permitting. This burden also entails the amount of per-permit 
processing costs and other components of permitting administration, 
such as minor source permitting. Therefore, even if we were to conclude 
that actual data show an overestimate in the number of GHG permits, we 
are not in a position at present to attempt to lower the applicability 
thresholds.
    We have little information as to the amount of any overestimate in 
actual permits. Other information may suggest that we have not 
accounted for certain other components of permitting administration--
such as additional synthetic minor source permitting--which points 
towards an under-estimate of GHG-related permitting burden. And most 
broadly, we may well receive new information over time concerning other 
aspects of our data sets and methodology that may point towards 
adjustments in overall permitting burden and, ultimately, in the 
applicable thresholds, even though at present, we cannot predict the 
direction and extent of those adjustments. As a result, attempting to 
make an adjustment at this time to permitting thresholds based on the 
current information concerning numbers of GHG permits would amount to a 
piecemeal approach that would create significant uncertainty for the 
permitting authorities and regulated community, and we decline to adopt 
it. For all these reasons, it would be premature to attempt to lower 
the permitting thresholds based on the partial information we have 
concerning numbers of GHG permits.
(2) Discussion
    At the outset, it must be emphasized that in the Tailoring Rule, 
our analysis of administrative burden was rendered complex by the fact 
that there are many different types of sources (that is, many different 
types of industrial sources as well as commercial and residential 
sources), many different sizes of sources (that is, minor and major 
sources, and many sizes of major sources), two types of activity that 
trigger PSD (that is, new construction and modifications), two types of 
sources based on their association with the PSD and title V programs 
(that is, ``anyway'' sources that are subject to PSD and title V anyway 
due to their non-GHG emissions, and GHG-only sources for whom the PSD 
or title V requirements are triggered solely because of their GHG 
emissions) and two permitting programs (that is, PSD and title V). To 
estimate the administrative burdens associated with the full range of 
GHG permitting activity, we had to rely on several different sources of 
data concerning the amounts of PSD and title V permitting activity and 
a complex and multi-component methodology, which in turn included many 
assumptions and estimates. The data sets and methodology were fully 
vetted through the Tailoring Rule process. At proposal, no one 
commented that the data and methodology overestimated the amount of GHG 
permitting burden. On the contrary, stakeholders commented that the EPA 
had significantly underestimated the numbers of permits and per-permit 
costs. Based on those comments and the EPA's further analysis, the EPA 
revised its methodology to substantially increase the expected number 
of GHG permitting actions and the amount of time the permitting 
authorities would need to process some of them. Following promulgation 
of the Tailoring Rule, no one sought administrative reconsideration or 
a court challenge of the data and methodology.
    Although environmental advocacy organization commenters have 
pointed out the disparity between the total number of expected annual 
permits, based on the EPA's methodology, and the total actual number, 
these commenters did not provide any specific information that casts 
doubt on any particular aspect of the data and methodology.
    In the absence of such information, there are several possible 
explanations for the disparity. It is possible that the unexpectedly 
small amount of permit activity is at least in part a temporary 
phenomenon due, as discussed in the proposal, to prospective permittees 
having accelerated their applications to 2010 to avoid GHG PSD 
requirements, or, as noted above, to recent macro-economic conditions. 
In addition, industry commenters have stated because GHG permitting is 
still in its initial stage, some sources have taken a

[[Page 41067]]

wait-and-see approach before undertaking new construction or 
modifications, and that has resulted in fewer permit applications. 
Another factor is the possibility that some of the smaller sources that 
have never before been subject to the PSD program, but that are now 
subject to GHG PSD permitting requirements, are unaware of their 
permitting obligations. Most generally, as we noted in the Step 3 
proposal, some officials in several states have stated that they 
thought the pace of GHG permitting would increase above the pace 
observed in 2011. Even so, we recognize that it is also possible that 
some aspects of the data sets and methodology do contain inaccuracies 
that may point towards overestimation of the number of GHG permits. 
During the Tailoring Rule, we did acknowledge uncertainties in many 
aspects of the methodology, which were discussed in the primary 
technical support document that described the methodology.\22\
---------------------------------------------------------------------------

    \22\ ``Summary of Methodology and Data Used to Estimate Burden 
Relief and Evaluate Resource Requirements at Alternative Greenhouse 
Gas (GHG) Permitting Thresholds'' (March 2010), included as 
Attachment C to the ``Regulatory Impact Analysis for the Final 
Prevention of Significant Deterioration and Title V Greenhouse Gas 
Tailoring Rule: Final Report'' (May 2010), Docket No. EPA-HQ-OAR-
2009-0517-19161.
---------------------------------------------------------------------------

    However, the possibility that we over-estimated numbers of GHG 
permits due to inaccuracies in the data or methodology must be 
considered in the context of the overall administrative burden due to 
GHG permitting. This burden entails not only (1) the number of GHG 
permits; but also (2) the amount of per-permit processing costs; and 
(3) other components of GHG permitting administration, which include 
minor source permitting, hiring and training, outreach and education as 
well as enforcement actions. Viewed in this context, it is clear that 
even if we were to conclude that actual data shows an overestimate in 
the number of GHG permits, we are not in a position at present to 
attempt to lower the applicability thresholds, as an environmental 
advocacy organization commenter urged.
    There are several reasons: First, we do not know the amount of any 
overestimate, in light of the fact that at least some of it may be due 
to macro-economic conditions and other factors; and in addition, the 
information that we have concerning the number of GHG permits actually 
issued provides little insight into which of the many data points or 
assumptions and estimates in the methodology may have led to the 
overestimate. This means we do not have enough information to adjust 
the estimates of overall permitting burden or the applicable 
thresholds.
    Second, the information concerning numbers of permits tells only 
part of the overall administrative-burden story. Over time, we may well 
receive other information that may suggest that our data sets and 
methodology do not account for certain components of permitting 
administration, which point towards an under-estimate of permitting 
burden. For example, our methodology does not account for the 
permitting burdens resulting from permitting synthetic minor sources 
that seek to avoid GHG requirements, staff hiring and training, public 
education and outreach to sources and enforcement. 75 FR 31571 June 3, 
2010.
    Third and most broadly, we must recognize that we may receive more 
information over time that may shed light on the accuracy of various 
aspects of our methodology. This is true not only for the numbers of 
permits that we estimate and other components of the GHG permitting 
program, but also for the estimates of the per-permit costs to the 
permitting authorities. For example, GHG-only sources have not been 
required to submit their Step 2 title V permit applications until July 
1, 2012, and as a result, we have little actual information concerning 
numbers of title V permits or other aspects of title V permitting. As 
noted, to this point, little information has been provided to the EPA 
to specifically verify or call into question the many data sets or 
estimates and assumptions in the methodology. As a result, even if the 
EPA had sufficient information to conclude that specific aspects of its 
methodology contained inaccuracies that pointed in the direction of 
over-estimating administrative permit burden, that information would 
affect only part of overall administrative burden, and it would be 
premature to attempt to adjust the permitting thresholds based solely 
on that partial information. Soon thereafter, the EPA could acquire 
additional information indicating that other aspects of its methodology 
were also inaccurate, and that information would lead to calls for the 
EPA to continue to revise the data sets and methodology whenever 
additional information became available that pointed towards a 
different burden estimate and therefore a different threshold. Such a 
piecemeal approach would create significant uncertainty for the 
permitting authorities and regulated community, and we decline to adopt 
it.
    We also disagree with another environmental advocacy organization's 
comment that the EPA should consider issuing ``a supplemental notice of 
proposed rulemaking or notice of data availability that ensures 
adequate and transparent notice to stakeholders with adequate 
opportunity to comment,'' in lieu of finalizing Step 3 at this time. 
Even if there is a basis to believe that the methodology for estimating 
PSD GHG permitting burden may be inaccurate, it is reasonable for the 
EPA to finalize at this time the Step 3 rulemaking as proposed, thereby 
determining not to lower the thresholds. This will maintain the 
schedule for action already established in the regulations promulgated 
during the Tailoring Rule. In particular, the EPA is already obligated 
to undertake the 5-year study, to be followed by Step 4, which will 
afford the opportunity to review and revise the data sets and 
methodology, as appropriate, on a schedule that can accommodate any 
need to gather and analyze data. Importantly, this schedule will also 
accommodate the development of GHG permitting under title V, including 
the collection and analysis of information concerning progress. This 
approach of conducting any necessary review during the 5-year study and 
Step 4 will avoid uncertainty concerning the timing of when the EPA may 
lower the thresholds.
    The key to our decision to proceed at this juncture is the fact 
that under the regulations we promulgated during the Tailoring Rule, we 
are already obligated to undertake the 5-year study by April 30, 2015 
and to finalize Step 4 by April 30, 2016. In the Tailoring Rule 
regulations, we described the study as ``a study projecting the 
administrative burdens'' of regulating sources below the then-existing 
thresholds, 40 CFR 52.22(b)(2)(i), and in the Tailoring Rule preamble 
we added to that description the following:

    In this action, EPA is also finalizing its proposal to commit to 
conduct an assessment of the threshold levels--to be completed in 
2015, 5 years after this action--that will examine the permitting 
authorities' progress in implementing the PSD and title V programs 
for GHG sources as well as EPA's and the permitting authorities' 
progress in developing streamlining methods. We further commit to 
undertake another round of rulemaking--beginning after the 
assessment is done, and to be completed by April 30, 2016--to 
address smaller sources.

75 FR 31573 June 3, 2010. We went on to point out that the timing of 
the 5-year study and Step 4 was consistent with our development of 
streamlining methods, some of which would require rulemaking, and 
therefore would take several years. 75 FR 31573 June 3, 2010.

    This schedule for the 5-year study and Step 4 rulemaking will also 
facilitate a

[[Page 41068]]

robust collection and review of data, as appropriate. In the Tailoring 
Rule, the EPA calculated the administrative burdens of GHG permitting 
based on data for (1) the numbers and types of PSD and title V GHG 
permitting actions--e.g., new construction and modifications, 
``anyway'' sources and GHG-only sources--and (2) the expected 
processing time for the different types of GHG permits. The sets of 
data that were available to us at the time of the Tailoring Rule--which 
remain the only data available to us--were the foundation for our 
calculations. If the reason why permit activity to this point has been 
lower than expected is due to inaccuracies in those data, then we will 
need to correct the data based on the actual experience of the 
permitting authorities.
    Because GHG permitting is a new addition to the PSD program, we 
believe that we would need 2 full years (July 1, 2012 to June 30, 2014) 
of the above-described data about the GHG permitting, after the 
initial, ``start-up'' year (July 1, 2011 to June 30, 2012). Data from 
the initial year would be valuable, but because GHG permitting is new, 
the initial year may well have involved some inefficiencies and a 
learning curve. As a result, the initial year may not be considered to 
be representative of a permitting authority's normal administration of 
the permitting program. Moreover, we believe that 2 full years of data 
are necessary to accurately reflect representative operations, 
particularly since the program is new. For example, if we were to 
select the number of permits issued as a measure of permitting 
activity, that number may vary widely over a several-month period, and 
that could skew the total for a particular year, but that variability 
would have less of an impact over a 2-year period. We would expect to 
be able to collect this data from the 2-year period in time to complete 
the 5-year study that is due by April 30, 2015. Following the study, we 
would be able to conduct the Step 4 rulemaking by the required April 
30, 2016 completion date.
    We disagree with the suggestion from the environmental advocacy 
organization commenter that we consider issuing a supplemental notice 
of proposed rulemaking at this time, instead of finalizing Step 3. The 
commenter did not describe what information it expected could be 
obtained through a supplemental notice of proposed rulemaking. We see 
little value to such an action at this time. If the reason for the 
unexpectedly low level of permit activity is inaccuracies in our data 
sets or methodology, as the commenter suggests, then the best way to 
address that is through the 5-year study, as described. That process 
allows a robust review. If the problem turns out to be inaccuracies in 
the data set or methodology, we believe it is better to have the 
opportunity to collect a comprehensive set of data.
    Another reason why we decline commenter's suggestion to delay 
completing Step 3 and issue a supplemental notice of proposed 
rulemaking is that any such delay would put pressure on the time frame 
for the 5-year study and Step 4, in light of how quickly they follow 
Step 3, and that would create uncertainty for sources and state or 
local permitting authorities. We note that delaying completion of Step 
3 and the final action we take on Step 3 in this rulemaking both have 
the same effect, which is to leave in place the Step 2 thresholds. 
Completing Step 3 now allows us to remain on track for the 5-year study 
and Step 4, as prescribed in the regulations. We think it is unlikely 
that delaying completion of Step 3, as commenters suggest, would lead 
to a lowering of thresholds sooner than Step 4 because we do not 
believe the information collected could be sufficiently robust to serve 
as the basis of lowering the thresholds.
    In summary, we recognize the environmental advocacy organization 
commenters' concerns that there is a disparity between the estimates of 
permits issued and the actual numbers of permits issued to date. If 
this disparity persists, it will deepen concerns about whether the 
Tailoring Rule data sets or methodology overestimated permitting 
burden. However, we also recognize other indications that suggest that 
our methodology may have under-estimated permitting burden in other 
respects, and we also recognize that to this point, with the first full 
year of Step 2 only just now concluding, we do not have any more 
information than we had when we promulgated the Tailoring Rule about 
many aspects of our data sets and methodology that we have acknowledged 
entail uncertainty. By the same token, the great majority of title V 
permitting activity is only now just about to begin, and therefore we 
have little information about it. Title V permitting activity is 
important for purposes of not just title V permitting burdens but also 
PSD permitting burdens because permitting authorities generally 
administer the two programs in close relation to each other.
    Accordingly, we intend to collect information concerning recent, 
current and future permitting activity in the states. We also intend to 
review information available to us from other sources, such as the 
Greenhouse Gas Mandatory Reporting Rule. Our goal would be to collect 
data that would help us analyze how the various estimates in our 
methodology vary from actual experience and how we can refine our 
analysis. With this approach, as we conduct the 5-year study (due to be 
completed by April 30, 2015), we would have data concerning permitting 
activity over both (1) the 2-year period when Step 2 will have been in 
full swing (July 1, 2012 to June 30, 2014), as well as (2) the earlier 
start-up period (January 2, 2011 to June 30, 2012).
    If we find that a significant disparity between estimated and 
actual numbers of permit actions has persisted, or if significant 
disparities have become apparent between other aspects of our 
methodology and actual permitting experience, we would expect to 
address those disparities and the relevant aspects of our methodology 
in the 5-year study. In this event, in Step 4, we would review and 
revise our data and methodology as appropriate. Based on that review 
and revision, we would review and revise, as appropriate, the 
administrative burden estimates and the applicability thresholds that 
are based on those burden estimates.

B. Plantwide Applicability Limitations for GHGs

    We received dozens of comments, including many from the regulated 
community and individual permitting authorities, on the proposed 
changes to the PALs provisions to better address GHGs. As explained 
above, we are providing a general summary of those comments, as well as 
providing responses to a few key comments in this section. We discuss 
the comments received and our responses in more detail in the Response 
to Comments document that appears in the docket for this final rule.
    As a general matter, many commenters on the proposal expressed 
general support for the concept of GHG PALs, although some had 
misgivings about some aspects of the proposal. Supporters indicated 
that GHG PALs can streamline PSD permitting and reduce administrative 
burden for some sources, and most thought that the Minor Source 
Approach would be more beneficial and less burdensome than the Major 
Source Opt-In Approach. Some comments stated that GHG PALs will have 
advantages, including leading sources to minimize emissions to create 
room for later expansion, providing certainty for planning purposes, 
helping address changing market conditions and

[[Page 41069]]

reducing overall workload over the term of the permit. Several 
commenters stated that PALs for GHGs would be consistent with the 
treatment of other regulated NSR pollutants in the PSD programs. Other 
commenters indicated that using GHG PALs as an alternative for 
determining whether GHGs are subject to regulation and whether a 
project is a major modification for purposes of permitting is 
appropriate, and one elaborated that use of PALs will provide assurance 
that GHGs are not subject to regulation and will not trigger a major 
modification. On the other hand, several commenters generally opposed 
the GHG PAL proposal, stating that they do not believe that the EPA had 
provided an appropriate basis for changing the existing PAL program to 
address GHGs or that such changes were necessary. One commenter stated 
that the GHG PAL proposal offers little streamlining and only 
complicates permitting.
    While we did not identify PALs as a viable streamlining technique 
for GHG sources in the Tailoring Rule, since we finalized that rule, we 
have recognized that plant-wide limitations could be designed in a way 
that would be useful for easing administration of GHG permitting and 
are adopting changes to the existing PAL regulations to address the 
unique PSD applicability issues associated with GHGs. After reviewing 
the comments received, we believe finalization of the changes to allow 
permitting of GHG PALs using the Minor Source Approach and on a 
CO2e basis, including the option to use the CO2e-
based applicability thresholds provided in the subject to regulation 
definition in setting the PAL, will provide for better implementation 
of PALs for GHGs, is consistent with the approach to GHG permitting 
described in the Tailoring Rule and thus can play a relevant role in 
our strategy for developing streamlining options for permitting 
authorities to help ease the administrative burdens associated with GHG 
permitting for sources and permitting authorities alike. To the extent 
that some commenters oppose the use of PALs generally, we note that use 
of PALs as an alternative NSR applicability mechanism and the basic 
elements of PAL permits have already been upheld. New York v. EPA, 413 
F.3d 3, 36-38 (D.C. Cir. 2005). The changes the EPA is finalizing to 
make implementation of that mechanism more useful as applied to GHGs 
are consistent with that decision, as well as the Tailoring Rule. Aside 
from the specific GHG-based revisions to the PAL provisions that the 
EPA is promulgating in this action, the EPA did not seek comment on, or 
otherwise re-open the existing PAL provisions, so any comments on non-
GHG PAL-related issues are outside the scope of this rulemaking.
    Many commenters (including commenters that both supported and 
opposed GHG PALs) stated that specific regulatory text for GHG PALs 
must be made available to allow for effective and meaningful comment on 
the proposal. Many of these commenters indicated that proposed GHG PAL 
language must be subject to notice and comment rulemaking before the 
EPA can finalize the GHG-specific changes to the PAL provisions, and 
some stated that the description in the proposal was insufficient to 
provide notice of the intended changes to the PAL regulations. 
Commenters stated that the EPA should issue a re-proposal for the GHG 
PAL revisions and include proposed regulatory text for public notice 
and comment. Other commenters, however, indicated that the PAL 
provisions should be finalized as soon as possible.
    The EPA disagrees with the comments arguing that the EPA must 
provide notice-and-comment of specific regulatory text for its proposed 
GHG PALs changes before taking final action. The EPA notes that the CAA 
provisions contained in section 307, which govern rulemakings such as 
this, do not explicitly require the Agency to propose specific 
regulatory text as part of that process. In addition, the 
Administrative Procedure Act (APA) requires simply that ``either the 
terms or substance of the proposed rule or a description of the 
subjects and issues involved'' be included in a notice of proposed 
rulemaking. We believe that the notice and opportunity for comment 
provided for the GHG PALs proposal was sufficient to satisfy the 
requirements of the APA and CAA, and as explained below, we believe 
that we have provided adequate notice of the changes we are making to 
the PAL provisions to give a meaningful opportunity for comment on 
those changes.
    In the Step 3 proposal, we described the various changes we were 
proposing in detail (including a description of the Minor Source 
Approach that we are finalizing today), and included a description of 
how we intended to extend PALs to GHGs on a CO2e basis and a 
description of how we proposed to allow the use of PALs to determine 
whether GHG emissions are subject to regulation. 77 FR 14239 March 8, 
2012. The Step 3 proposal also gave notice that we would revise a 
number of existing regulatory provisions to implement the approach 
selected. 77 FR 14244 March 8, 2012. In addition, we highlighted 
specific provisions of the PALs that we proposed to change and 
explained how we proposed to change those provisions. 77 FR 14244 March 
8, 2012. For instance, we explained that for the Minor Source Approach, 
we proposed to revise the PAL applicability provisions in 40 CFR 
52.21(aa)(1) to include GHG-only sources. Id. We further explained that 
we proposed to change the ``subject to regulation'' definition at 40 
CFR 52.21(b)(49) and the PAL applicability section in 40 CFR 
52.21(aa)(1) to indicate that a source that complies with a GHG PAL 
will not be ``subject to regulation'' for GHGs. Id. In addition, we 
explained that we proposed to revise 40 CFR 52.21(aa)(6) to allow PALs 
issued on a CO2e basis to include the 75,000 tpy 
CO2e emissions increase from the applicability thresholds, 
so that amount could be added to baseline actual emissions in setting 
the level of the PAL. Id. While we are making GHG-specific revisions to 
a number of other regulatory provisions in the PAL regulations, these 
changes simply implement the same regulatory revisions that we 
described repeatedly in the proposal--i.e., making GHG PALs available 
on a CO2e and mass basis, allowing a CO2e-based 
PAL to include an emissions increase based on Tailoring Rule thresholds 
and the Minor Source Approach. Although the proposal did not list every 
specific provision we are revising in this final rule, each of these 
changes has the effect of implementing the GHG PAL approach described 
in the proposal and many of those changes are fairly small (for 
example, inserting ``GHG-only source'' to provisions that currently 
list only ``major stationary source''). Accordingly, our proposal 
provided sufficient information on the regulatory changes that we are 
finalizing in this action that allowed for public notice and comment.
    We further note that the comments raising concerns about the 
adequacy of the notice for the GHG PAL revisions did not identify any 
particular aspect of the revisions that we are finalizing in this 
action that were not adequately explained in the proposal to allow for 
comment. In fact, despite the general notice concerns raised by 
commenters, many commenters did provide detailed comments on our 
proposed changes to the PAL provisions. We also note that while one 
comment indicated that the description of the proposed conversion from 
a mass-based PAL to a CO2e-based PAL was too opaque for 
meaningful comment, that comment is not relevant

[[Page 41070]]

to this final action because we are not taking action on that proposed 
change.
    For these reasons, we believe that we have provided sufficient 
notice and opportunity for comment on the revisions to the regulatory 
provisions for GHG PALs that we are adopting in this action.
    A number of commenters also requested that the EPA provide 
clarification that the proposed changes to address GHG PALs in the 
federal regulations would not impact existing state authority to issue 
PAL permits for GHG emissions or existing GHG PAL permits that might 
have already been issued. In this action, we are finalizing revisions 
to certain sections of the federal regulations governing the issuance 
of permits pursuant to federal authority at 40 CFR 52.21, in particular 
the provisions relating to PALs at 40 CFR 52.21(aa) and provisions 
relating to the definition of ``subject to regulation'' at 40 CFR 
52.21(b)(49). These provisions govern permits issued pursuant to 
federal authority, and, accordingly, these changes would only affect 
permits issued under federal authority (i.e., those issued by the EPA 
or a delegated state or local agency). We do not intend these changes 
to 40 CFR 52.21 to affect existing state authority to issue PAL 
permits, and nothing in this action would require permitting 
authorities to take any action with respect to their existing PAL 
regulations or any existing PAL permits. We also note that these 
revisions are not minimum program requirements that must be adopted by 
states into their EPA-approved SIP PSD permitting programs. 
Accordingly, this final rule does not adopt these changes into the 
existing PAL provisions contained in 40 CFR 51.166, but nothing in this 
action is intended to restrict states from adopting these, or similar, 
changes into their SIP-approved PAL program if they choose to do so. 
Moreover, to the extent that states with existing PAL permitting 
programs have interpreted their PAL provisions to allow PAL permits to 
be issued on a CO2e basis and for a PAL to be set at a level 
that reflects baseline actual emissions plus a 75,000 tpy 
CO2e emissions increase, the changes that the EPA is making 
to the PAL regulations in 40 CFR 52.21 are not intended to change those 
existing state interpretations. Accordingly, the changes that the EPA 
is finalizing to address GHG PALs in the federal regulations do not, as 
a general matter, impact existing state authority to issue PAL permits 
for GHG emissions or existing GHG PAL permits that might have already 
been issued.

VIII. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This action is not a ``significant regulatory action'' under the 
terms of Executive Order 12866 (58 FR 51735, October 4, 1993) and is 
therefore not subject to review under Executive Orders 12866 and 13563 
(76 FR 3821, January 21, 2011).

B. Paperwork Reduction Act

    This action does not impose any new information collection burden. 
The final rule will not change the existing GHG permitting thresholds, 
and therefore will not impose any additional burden on sources to 
obtain PSD or title V permits or on permitting authorities to issue 
such permits. The provisions for GHG PALs, which have previously been 
approved by OMB, will have the effect of reducing permitting burden in 
that the burden associated with obtaining or issuing a PAL permit will 
be more than offset through avoiding subsequent PSD permitting actions 
with greater associated burden. In addition, the OMB has previously 
approved the information collection requirements contained in the 
existing regulations for the NSR and title V programs under the 
provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and 
has assigned OMB control number 2060-0003 to the NSR program and OMB 
control numbers 2060-0243 and 2060-0336 to the title V program (40 CFR 
part 70 and part 71 components, respectively). The OMB control numbers 
for the EPA's regulations in 40 CFR are listed in 40 CFR part 9.

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act generally requires an agency to 
prepare a regulatory flexibility analysis of any rule subject to notice 
and comment rulemaking requirements under the Administrative Procedures 
Act or any other statute unless the agency certifies that the rule will 
not have a significant economic impact on a substantial number of small 
entities. Small entities include small businesses, small organizations 
and small governmental jurisdictions.
    For purposes of assessing the impacts of today's rule on small 
entities, small entity is defined as: (1) A small business that is a 
small industrial entity as defined in the U.S. Small Business 
Administration size standards (see 13 CFR 121.201); (2) a small 
governmental jurisdiction that is a government of a city, county, town, 
school district or special district with a population of less than 
50,000; or (3) a small organization that is any not-for-profit 
enterprise that is independently owned and operated and is not dominant 
in its field.
    After considering the economic impacts of today's final rule on 
small entities, I certify that this final action will not have a 
significant economic impact on a substantial number of small entities. 
In determining whether a rule has a significant economic impact on a 
substantial number of small entities, the impact of concern is any 
significant adverse economic impact on small entities, since the 
primary purpose of the regulatory flexibility analysis is to identify 
and address regulatory alternatives ``which minimize any significant 
economic impact of the rule on small entities.'' 5 U.S.C. 603 and 604. 
Thus, an agency may certify that a rule will not have a significant 
economic impact on a substantial number of small entities if the rule 
relieves regulatory burden, or otherwise has a positive economic 
effect, on all of the small entities subject to the rule.
    The final rule would not change the existing GHG permitting 
thresholds, and therefore would not impose any additional burden on any 
sources (including small entities) to obtain PSD or title V permits or 
on any permitting authorities (including small entities, if any) to 
issue such permits. The final provisions for GHG PALs could have the 
effect of reducing permitting burden on all entities, including small 
entities, in that the burden associated with obtaining or issuing a PAL 
permit could be more than offset through avoiding subsequent PSD 
permitting actions with greater associated burden. Moreover, the 
decision of any source (including small entities) to request a GHG PAL 
and the decision of any permitting authority (including small entities) 
to either adopt the GHG PAL regulations or issue a GHG PAL are 
completely voluntary. No source is required to seek a PAL and no 
permitting authority is required to issue a PAL, so there is no 
requirement for any entity (including a small entity) to use these 
rules if it believes the GHG PAL would not relieve burden. We have 
therefore concluded that today's final rule will relieve regulatory 
burden for all affected small entities.

D. Unfunded Mandates Reform Act

    This rule does not contain a federal mandate that may result in 
expenditures of $100 million or more for state, local and tribal 
governments, in the aggregate, or the private sector in any 1 year. The 
final rule will not change the existing GHG permitting thresholds, and

[[Page 41071]]

therefore will not impose any additional burden on sources to obtain 
PSD or title V permits or on permitting authorities to issue such 
permits. Moreover, the decisions of state, local and tribal governments 
to adopt the GHG PAL provisions generally and to issue a GHG PAL to any 
specific permitting action are completely voluntary. Thus, this rule is 
not subject to the requirements of sections 202 or 205 of the Unfunded 
Mandates Reform Act (UMRA).
    This rule is also not subject to the requirements of section 203 of 
UMRA because it contains no regulatory requirements that might 
significantly or uniquely affect small governments. As noted 
previously, the effect of the final rule would be neutral or relieve 
regulatory burden.

E. Executive Order 13132: Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states or on the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132. This final rule would maintain the 
existing structure of the PSD and title V programs and would not, 
therefore, affect the relationship between the national government and 
the states or the distribution of power and responsibilities among the 
various levels of government. In addition, the final rule would not 
change the existing GHG permitting thresholds, and therefore would not 
impose any additional burden on state permitting authorities to issue 
PSD or title V permits or such permits. The provisions for GHG PALs 
will have the effect of reducing permitting burden in that the burden 
associated with issuing a PAL permit would be more than offset through 
avoiding subsequent PSD permitting actions with greater associated 
burden. Thus, Executive Order 13132 does not apply to this rule.

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

    This action does not have tribal implications, as specified in 
Executive Order 13175 (65 FR 67249, November 9, 2000). There are no 
tribal authorities currently issuing major NSR permits, one tribe is 
implementing a title V program based on a delegation agreement under 40 
CFR part 71 and one tribe has recently obtained approval of title V 
program under 40 CFR part 70. However, the final rule would not change 
the existing GHG permitting thresholds, and therefore will not impose 
any additional burden on sources to obtain PSD or title V permits or on 
permitting authorities to issue such permits. The provisions for GHG 
PALs will have the effect of reducing permitting burden in that the 
burden associated with obtaining or issuing a PAL permit would be more 
than offset through avoiding subsequent PSD permitting actions with 
greater associated burden. Thus, Executive Order 13175 does not apply 
to this action.

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

    The 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 does not 
establish an environmental standard intended to mitigate health or 
safety risks.

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

    This action is not 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 104-113, 12(d) (15 U.S.C. 272 note) 
directs the EPA to use voluntary consensus standards in its regulatory 
activities unless to do so would be inconsistent with applicable law or 
otherwise impractical. Voluntary consensus standards are technical 
standards (e.g., materials specifications, test methods, sampling 
procedures and business practices) that are developed or adopted by 
voluntary consensus standards bodies. The NTTAA directs the EPA to 
provide Congress, through the OMB, explanations when the Agency decides 
not to use available and applicable voluntary consensus standards.
    This rulemaking does not involve technical standards. Therefore, 
the EPA did not consider the use of any voluntary consensus standards.

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

    Executive Order 12898 (59 FR 7629, 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.
    The EPA has determined that this final rule will not have 
disproportionately high and adverse human health or environmental 
effects on minority or low-income populations because it does not 
affect the level of protection provided to human health or the 
environment. The final rule would not change the existing GHG 
permitting thresholds, and therefore would not affect the universe of 
sources subject to permitting.

K. Congressional Review Act

    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. The EPA will submit a report containing this rule and 
other required information to the U.S. Senate, the U.S. House of 
Representatives and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. A Major rule cannot 
take effect until 60 days after it is published in the Federal 
Register. This action is not a ``major rule'' as defined by 5 U.S.C. 
804(2). This action is effective on August 13, 2012.

L. Judicial Review

    Under section 307(b)(1) of the Act, petitions for judicial review 
of this action must be filed in the United States Court of Appeals for 
the District of Columbia Circuit by September 10, 2012. 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

[[Page 41072]]

postpone the effectiveness of such rule or action. Under section 
307(b)(2) of the Act, the requirements of this final action may not be 
challenged later in civil or criminal proceedings brought by us to 
enforce these requirements.
    Section 307(d)(1)(J) specifies that the provisions of section 
307(d) apply to ``promulgation or revision of regulations under [part] 
C of title I (pertaining to prevention of significant deterioration of 
air quality and protection of visibility).'' This section clearly 
subjects the portions of this action that pertain to PSD to the 
provisions of section 307(d). Section 307(d)(1)(V) provides that the 
provisions of section 307(d) apply to ``such other actions as the 
Administrator may determine.'' Pursuant to this section, the 
Administrator determines that this entire action is subject to the 
provisions of section 307(d). This determination allows for uniform 
treatment for all aspects of this action.
    Section 307(b)(1) of the CAA indicates which Federal Courts of 
Appeal have venue for petitions of review of final actions by the EPA. 
This section provides, in part, that petitions for review must be filed 
in the Court of Appeals for the District of Columbia Circuit: (1) When 
the agency action consists of ``nationally applicable regulations 
promulgated, or final actions taken, by the Administrator,'' or (2) 
when such action is locally or regionally applicable, if ``such action 
is based on a determination of nationwide scope or effect and if in 
taking such action the Administrator finds and publishes that such 
action is based on such a determination.''
    This rule is ``nationally applicable'' within the meaning of 
section 307(b)(1). This rule promulgates PSD regulations that are 
applicable in every state in which the EPA is the PSD permitting 
authority, and takes final action that is relevant for EPA-approved SIP 
PSD programs in the rest of the states, as well as EPA-approved title V 
programs in all states. For the same reasons, the Administrator also is 
determining that this action is of nationwide scope and effect for the 
purposes of section 307(b)(1). This is particularly appropriate 
because, in the report on the 1977 Amendments that revised section 
307(b)(1) of the CAA, Congress noted that the Administrator's 
determination that an action is of ``nationwide scope or effect'' would 
be appropriate for any action that has a scope or effect beyond a 
single judicial circuit. H.R. Rep. No. 95-294 at 323, 324, reprinted in 
1977 U.S.C.C.A.N. 1402-03. Here, the scope and effect of this 
rulemaking extends to all judicial circuits because PSD and/or title V 
programs in all areas across the country are affected by today's final 
action. In these circumstances, section 307(b)(1) and its legislative 
history call for the Administrator to find the rule to be of 
``nationwide scope or effect'' and for venue to be in the D.C. Circuit.
    Thus, any petitions for review of this rule must be filed in the 
Court of Appeals for the District of Columbia Circuit within 60 days 
from the date final action is published in the Federal Register.

IX. Statutory Authority

    The statutory authority for this action is provided by sections 
101, 114, 165, 169, 301, 501 and 502 of the CAA as amended (42 U.S.C. 
7401, 7414, 7475, 7579, 7601, 7661 and 7661a).

List of Subjects in 40 CFR Part 52

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

    Dated: June 29, 2012.
Lisa P. Jackson,
Administrator.

    For the reasons stated in the preamble, title 40, Chapter I of the 
Code of Federal Regulations is amended as set forth below.

PART 52--[AMENDED]

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

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

Subpart A--[Amended]

0
2. Section 52.21 is amended by:
0
a. Revising paragraph (b)(49)(i);
0
b. Revising paragraph (aa)(1)(i);
0
c. Revising paragraph (aa)(1)(ii) introductory text;
0
d. Revising paragraphs (aa)(1)(ii)(b) and (c);
0
e. Adding paragraph (aa)(1)(ii)(d);
0
f. Revising paragraph (aa)(1)(iii);
0
g. Revising paragraphs (aa)(2)(i) and (iii);
0
h. Adding paragraph (aa)(2)(iv)(c);
0
i. Revising paragraphs (aa)(2)(v), (viii), (ix), (x) and (xi);
0
j. Adding paragraphs (aa)(2)(xii), (xiii), (xiv) and (xv);
0
k. Revising paragraph (aa)(3) introductory text;
0
l. Adding paragraph (aa)(3)(iv);
0
m. Revising paragraph (aa)(4)(i) introductory text;
0
n. Revising paragraphs (aa)(4)(i)(a), (d) and (g);
0
o. Revising paragraph (aa)(5);
0
p. Revising the first sentence of paragraph (aa)(6)(i);
0
q. Adding paragraph (aa)(6)(iii);
0
r. Revising paragraph (aa)(7) introductory text;
0
s. Revising paragraphs (aa)(7)(i), (iii), (v), (vi) and (vii);
0
t. Adding paragraph (aa)(7)(xi);
0
u. Revising paragraph (aa)(8)(ii)(b)(2);
0
v. Revising paragraph (aa)(9)(i)(a);
0
w. Revising paragraphs (aa)(9)(iv) and (v);
0
x. Revising paragraphs (aa)(10)(i) and (ii);
0
y. Revising paragraphs (aa)(10)(iv)(c)(1) and (2);
0
z. Revising paragraph (aa)(11)(i) introductory text;
0
aa. Revising paragraphs (aa)(11)(i)(a) and (b);
0
bb. Revising paragraph (aa)(12)(i)(a);
0
cc. Revising paragraphs (aa)(14)(i)(b) and (d); and
0
dd. Revising paragraph (aa)(14)(ii) introductory text.
    The revisions and additions read as follows:

Sec.  52.21  Prevention of significant deterioration of air quality.

* * * * *
    (b) * * *
    (49) * * *
    (i) Greenhouse gases (GHGs), the air pollutant defined in Sec.  
86.1818-12(a) of this chapter as the aggregate group of six greenhouse 
gases: Carbon dioxide, nitrous oxide, methane, hydrofluorocarbons, 
perfluorocarbons, and sulfur hexafluoride, shall not be subject to 
regulation except as provided in paragraphs (b)(49)(iv) through (v) of 
this section and shall not be subject to regulation if the stationary 
source maintains its total source-wide emissions below the GHG PAL 
level, meets the requirements in paragraphs (aa)(1) through (15) of 
this section, and complies with the PAL permit containing the GHG PAL.
* * * * *
    (aa) * * *
    (1) * * *
    (i) The Administrator may approve the use of an actuals PAL, 
including for GHGs on either a mass basis or a CO2e basis, 
for any existing major stationary source or any existing GHG-only 
source if the PAL meets the requirements in paragraphs (aa)(1) through 
(15) of this section. The term ``PAL'' shall mean ``actuals PAL'' 
throughout paragraph (aa) of this section.
    (ii) Any physical change in or change in the method of operation of 
a major stationary source or a GHG-only source that maintains its total 
source-wide emissions below the PAL level, meets

[[Page 41073]]

the requirements in paragraphs (aa)(1) through (15) of this section, 
and complies with the PAL permit:
* * * * *
    (b) Does not have to be approved through the PSD program;
    (c) Is not subject to the provisions in paragraph (r)(4) of this 
section (restrictions on relaxing enforceable emission limitations that 
the major stationary source used to avoid applicability of the major 
NSR program); and
    (d) Does not make GHGs subject to regulation as defined by 
paragraph (b)(49) of this section.
    (iii) Except as provided under paragraph (aa)(1)(ii)(c) of this 
section, a major stationary source or a GHG-only source shall continue 
to comply with all applicable Federal or State requirements, emission 
limitations, and work practice requirements that were established prior 
to the effective date of the PAL.
    (2) * * *
    (i) Actuals PAL for a major stationary source means a PAL based on 
the baseline actual emissions (as defined in paragraph (b)(48) of this 
section) of all emissions units (as defined in paragraph (b)(7) of this 
section) at the source, that emit or have the potential to emit the PAL 
pollutant. For a GHG-only source, actuals PAL means a PAL based on the 
baseline actual emissions (as defined in paragraph (aa)(2)(xiii) of 
this section) of all emissions units (as defined in paragraph 
(aa)(2)(xiv) of this section) at the source, that emit or have the 
potential to emit GHGs.
* * * * *
    (iii) Small emissions unit means an emissions unit that emits or 
has the potential to emit the PAL pollutant in an amount less than the 
significant level for that PAL pollutant, as defined in paragraph 
(b)(23) of this section or in the Act, whichever is lower. For a GHG 
PAL issued on a CO2e basis, small emissions unit means an 
emissions unit that emits or has the potential to emit less than the 
amount of GHGs on a CO2e basis defined as ``significant'' 
for the purposes of paragraph (b)(49)(iii) of this section at the time 
the PAL permit is being issued.
    (iv) * * *
    (c) For a GHG PAL issued on a CO2e basis, any emissions 
unit that emits or has the potential to emit equal to or greater than 
the amount of GHGs on a CO2e basis that would be sufficient 
for a new source to trigger permitting requirements under paragraph 
(b)(49) of this section at the time the PAL permit is being issued.
    (v) Plantwide applicability limitation (PAL) means an emission 
limitation expressed on a mass basis in tons per year, or expressed in 
tons per year CO2e for a CO2e-based GHG emission 
limitation, for a pollutant at a major stationary source or GHG-only 
source, that is enforceable as a practical matter and established 
source-wide in accordance with paragraphs (aa)(1) through (15) of this 
section.
* * * * *
    (viii) PAL major modification means, notwithstanding paragraphs 
(b)(2), (b)(3), and (b)(49) of this section (the definitions for major 
modification, net emissions increase, and subject to regulation), any 
physical change in or change in the method of operation of the PAL 
source that causes it to emit the PAL pollutant at a level equal to or 
greater than the PAL.
    (ix) PAL permit means the major NSR permit, the minor NSR permit, 
or the State operating permit under a program that is approved into the 
State Implementation Plan, or the title V permit issued by the 
Administrator that establishes a PAL for a major stationary source or a 
GHG-only source.
    (x) PAL pollutant means the pollutant for which a PAL is 
established at a major stationary source or a GHG-only source. For a 
GHG-only source, the only available PAL pollutant is greenhouse gases.
    (xi) Significant emissions unit means an emissions unit that emits 
or has the potential to emit a PAL pollutant in an amount that is equal 
to or greater than the significant level (as defined in paragraph 
(b)(23) of this section or in the Act, whichever is lower) for that PAL 
pollutant, but less than the amount that would qualify the unit as a 
major emissions unit as defined in paragraph (aa)(2)(iv) of this 
section. For a GHG PAL issued on a CO2e basis, significant 
emissions unit means any emissions unit that emits or has the potential 
to emit GHGs on a CO2e basis in amounts equal to or greater 
than the amount that would qualify the unit as small emissions unit as 
defined in paragraph (aa)(2)(iii) of this section, but less than the 
amount that would qualify the unit as a major emissions unit as defined 
in paragraph (aa)(2)(iv)(c) of this section.
    (xii) GHG-only source means any existing stationary source that 
emits or has the potential to emit GHGs in the amount equal to or 
greater than the amount of GHGs on a mass basis that would be 
sufficient for a new source to trigger permitting requirements for GHGs 
under paragraph (b)(1) of this section and the amount of GHGs on a 
CO2e basis that would be sufficient for a new source to 
trigger permitting requirements for GHGs under paragraph (b)(49) of 
this section at the time the PAL permit is being issued, but does not 
emit or have the potential to emit any other non-GHG regulated NSR 
pollutant at or above the applicable major source threshold. A GHG-only 
source may only obtain a PAL for GHG emissions under paragraph (aa) of 
this section.
    (xiii) Baseline actual emissions for a GHG PAL means the average 
rate, in tons per year CO2e or tons per year GHG, as 
applicable, at which the emissions unit actually emitted GHGs during 
any consecutive 24-month period selected by the owner or operator 
within the 10-year period immediately preceding either the date the 
owner or operator begins actual construction of the project, or the 
date a complete permit application is received by the Administrator for 
a permit required under this section or by the permitting authority for 
a permit required by a plan, whichever is earlier. For any existing 
electric utility steam generating unit, baseline actual emissions for a 
GHG PAL means the average rate, in tons per year CO2e or 
tons per year GHG, as applicable, at which the emissions unit actually 
emitted the GHGs during any consecutive 24-month period selected by the 
owner or operator within the 5-year period immediately preceding either 
the date the owner or operator begins actual construction of the 
project, except that the Administrator shall allow the use of a 
different time period upon a determination that it is more 
representative of normal source operation.
    (a) The average rate shall include fugitive emissions to the extent 
quantifiable, and emissions associated with startups, shutdowns, and 
malfunctions.
    (b) The average rate shall be adjusted downward to exclude any non-
compliant emissions that occurred while the source was operating above 
an emission limitation that was legally enforceable during the 
consecutive 24-month period.
    (c) The average rate shall be adjusted downward to exclude any 
emissions that would have exceeded an emission limitation with which 
the stationary source must currently comply, had such stationary source 
been required to comply with such limitations during the consecutive 
24-month period.
    (d) The average rate shall not be based on any consecutive 24-month 
period for which there is inadequate information for determining annual 
GHG emissions and for adjusting this amount if required by paragraphs 
(aa)(2)(xiii)(b) and (c) of this section.

[[Page 41074]]

    (xiv) Emissions unit with respect to GHGs means any part of a 
stationary source that emits or has the potential to emit GHGs. For 
purposes of this section, there are two types of emissions units as 
described in the following:
    (a) A new emissions unit is any emissions unit that is (or will be) 
newly constructed and that has existed for less than 2 years from the 
date such emissions unit first operated.
    (b) An existing emissions unit is any emissions unit that does not 
meet the requirements in paragraph (aa)(2)(xiv)(a) of this section.
    (xv) Minor source means any stationary source that does not meet 
the definition of major stationary source in paragraph (b)(1) of this 
section for any pollutant at the time the PAL is issued.
    (3) Permit application requirements. As part of a permit 
application requesting a PAL, the owner or operator of a major 
stationary source or a GHG-only source shall submit the following 
information to the Administrator for approval:
* * * * *
    (iv) As part of a permit application requesting a GHG PAL, the 
owner or operator of a major stationary source or a GHG-only source 
shall submit a statement by the source owner or operator that clarifies 
whether the source is an existing major source as defined in paragraph 
(b)(1)(i)(a) and (b) of this section or a GHG-only source as defined in 
paragraph (aa)(2)(xii) of this section.
    (4) General requirements for establishing PALs. (i) The 
Administrator is allowed to establish a PAL at a major stationary 
source or a GHG-only source, provided that at a minimum, the 
requirements in paragraphs (aa)(4)(i)(a) through (g) of this section 
are met.
    (a) The PAL shall impose an annual emission limitation expressed on 
a mass basis in tons per year, or expressed in tons per year 
CO2e, that is enforceable as a practical matter, for the 
entire major stationary source or GHG-only source. For each month 
during the PAL effective period after the first 12 months of 
establishing a PAL, the major stationary source or GHG-only source 
owner or operator shall show that the sum of the monthly emissions from 
each emissions unit under the PAL for the previous 12 consecutive 
months is less than the PAL (a 12-month average, rolled monthly). For 
each month during the first 11 months from the PAL effective date, the 
major stationary source or GHG-only source owner or operator shall show 
that the sum of the preceding monthly emissions from the PAL effective 
date for each emissions unit under the PAL is less than the PAL.
* * * * *
    (d) The PAL shall include fugitive emissions, to the extent 
quantifiable, from all emissions units that emit or have the potential 
to emit the PAL pollutant at the major stationary source or GHG-only 
source.
* * * * *
    (g) The owner or operator of the major stationary source or GHG-
only source with a PAL shall comply with the monitoring, recordkeeping, 
and reporting requirements provided in paragraphs (aa)(12) through (14) 
of this section for each emissions unit under the PAL through the PAL 
effective period.
* * * * *
    (5) Public participation requirements for PALs. PALs for existing 
major stationary sources or GHG-only sources shall be established, 
renewed, or increased through a procedure that is consistent with 
Sec. Sec.  51.160 and 51.161 of this chapter. This includes the 
requirement that the Administrator provide the public with notice of 
the proposed approval of a PAL permit and at least a 30-day period for 
submittal of public comment. The Administrator must address all 
material comments before taking final action on the permit.
    (6) * * *
    (i) Except as provided in paragraph (aa)(6)(ii) and (iii) of this 
section, the plan shall provide that the actuals PAL level for a major 
stationary source or a GHG-only source shall be established as the sum 
of the baseline actual emissions (as defined in paragraph (b)(48) of 
this section or, for GHGs, paragraph (aa)(2)(xiii) of this section) of 
the PAL pollutant for each emissions unit at the source; plus an amount 
equal to the applicable significant level for the PAL pollutant under 
paragraph (b)(23) of this section or under the Act, whichever is lower. 
* * *
* * * * *
    (iii) For CO2e based GHG PAL, the actuals PAL level 
shall be established as the sum of the GHGs baseline actual emissions 
(as defined in paragraph (aa)(2)(xiii) of this section) of GHGs for 
each emissions unit at the source, plus an amount equal to the amount 
defined as ``significant'' on a CO2e basis for the purposes 
of paragraph (b)(49)(iii) at the time the PAL permit is being issued. 
When establishing the actuals PAL level for a CO2e-based 
PAL, only one consecutive 24-month period must be used to determine the 
baseline actual emissions for all existing emissions units. Emissions 
associated with units that were permanently shut down after this 24-
month period must be subtracted from the PAL level. The reviewing 
authority shall specify a reduced PAL level (in tons per year 
CO2e) in the PAL permit to become effective on the future 
compliance date(s) of any applicable Federal or state regulatory 
requirement(s) that the reviewing authority is aware of prior to 
issuance of the PAL permit.
    (7) Contents of the PAL permit. The PAL permit must contain, at a 
minimum, the information in paragraphs (aa)(7)(i) through (xi) of this 
section.
    (i) The PAL pollutant and the applicable source-wide emission 
limitation in tons per year or tons per year CO2e.
* * * * *
    (iii) Specification in the PAL permit that if a major stationary 
source or a GHG-only source owner or operator applies to renew a PAL in 
accordance with paragraph (aa)(10) of this section before the end of 
the PAL effective period, then the PAL shall not expire at the end of 
the PAL effective period. It shall remain in effect until a revised PAL 
permit is issued by a reviewing authority.
* * * * *
    (v) A requirement that, once the PAL expires, the major stationary 
source or GHG-only source is subject to the requirements of paragraph 
(aa)(9) of this section.
    (vi) The calculation procedures that the major stationary source or 
GHG-only source owner or operator shall use to convert the monitoring 
system data to monthly emissions and annual emissions based on a 12-
month rolling total as required by paragraph (aa)(13)(i) of this 
section.
    (vii) A requirement that the major stationary source or GHG-only 
source owner or operator monitor all emissions units in accordance with 
the provisions under paragraph (aa)(12) of this section.
* * * * *
    (xi) A permit for a GHG PAL issued to a GHG-only source shall also 
include a statement denoting that GHG emissions at the source will not 
be subject to regulation under paragraph (b)(49) of this section as 
long as the source complies with the PAL.
    (8) * * *
    (ii) * * *
    (b) * * *
    (2) Reduce the PAL consistent with any other requirement, that is 
enforceable as a practical matter, and that the State may impose on the 
major stationary source or GHG-only source under the State 
Implementation Plan; and

[[Page 41075]]

    (9) * * *
    (i) * * *
    (a) Within the time frame specified for PAL renewals in paragraph 
(aa)(10)(ii) of this section, the major stationary source or GHG-only 
source shall submit a proposed allowable emission limitation for each 
emissions unit (or each group of emissions units, if such a 
distribution is more appropriate as decided by the Administrator) by 
distributing the PAL allowable emissions for the major stationary 
source or GHG-only source among each of the emissions units that 
existed under the PAL. If the PAL had not yet been adjusted for an 
applicable requirement that became effective during the PAL effective 
period, as required under paragraph (aa)(10)(v) of this section, such 
distribution shall be made as if the PAL had been adjusted.
* * * * *
    (iv) Any physical change or change in the method of operation at 
the major stationary source or GHG-only source will be subject to major 
NSR requirements if such change meets the definition of major 
modification in paragraph (b)(2) of this section.
    (v) The major stationary source or GHG-only source owner or 
operator shall continue to comply with any State or Federal applicable 
requirements (BACT, RACT, NSPS, etc.) that may have applied either 
during the PAL effective period or prior to the PAL effective period 
except for those emission limitations that had been established 
pursuant to paragraph (r)(4) of this section, but were eliminated by 
the PAL in accordance with the provisions in paragraph (aa)(1)(ii)(c) 
of this section.
    (10) * * *
    (i) The Administrator shall follow the procedures specified in 
paragraph (aa)(5) of this section in approving any request to renew a 
PAL for a major stationary source or a GHG-only source, and shall 
provide both the proposed PAL level and a written rationale for the 
proposed PAL level to the public for review and comment. During such 
public review, any person may propose a PAL level for the source for 
consideration by the Administrator.
    (ii) Application deadline. A major stationary source or GHG-only 
source owner or operator shall submit a timely application to the 
Administrator to request renewal of a PAL. A timely application is one 
that is submitted at least 6 months prior to, but not earlier than 18 
months from, the date of permit expiration. This deadline for 
application submittal is to ensure that the permit will not expire 
before the permit is renewed. If the owner or operator of a major 
stationary source or GHG-only source submits a complete application to 
renew the PAL within this time period, then the PAL shall continue to 
be effective until the revised permit with the renewed PAL is issued.
* * * * *
    (iv) * * *
    (c) * * *
    (1) If the potential to emit of the major stationary source or GHG-
only source is less than the PAL, the Administrator shall adjust the 
PAL to a level no greater than the potential to emit of the source; and
    (2) The Administrator shall not approve a renewed PAL level higher 
than the current PAL, unless the major stationary source or GHG-only 
source has complied with the provisions of paragraph (aa)(11) of this 
section (increasing a PAL).
* * * * *
    (11) * * *
    (i) The Administrator may increase a PAL emission limitation only 
if the major stationary source or GHG-only source complies with the 
provisions in paragraphs (aa)(11)(i)(a) through (d) of this section.
    (a) The owner or operator of the major stationary source or GHG-
only source shall submit a complete application to request an increase 
in the PAL limit for a PAL major modification. Such application shall 
identify the emissions unit(s) contributing to the increase in 
emissions so as to cause the major stationary or GHG-only source's 
emissions to equal or exceed its PAL.
    (b) As part of this application, the major stationary source or 
GHG-only source owner or operator shall demonstrate that the sum of the 
baseline actual emissions of the small emissions units, plus the sum of 
the baseline actual emissions of the significant and major emissions 
units assuming application of BACT equivalent controls, plus the sum of 
the allowable emissions of the new or modified emissions unit(s) 
exceeds the PAL. The level of control that would result from BACT 
equivalent controls on each significant or major emissions unit shall 
be determined by conducting a new BACT analysis at the time the 
application is submitted, unless the emissions unit is currently 
required to comply with a BACT or LAER requirement that was established 
within the preceding 10 years. In such a case, the assumed control 
level for that emissions unit shall be equal to the level of BACT or 
LAER with which that emissions unit must currently comply.
* * * * *
    (12) * * *
    (i) * * *
    (a) Each PAL permit must contain enforceable requirements for the 
monitoring system that accurately determines plantwide emissions of the 
PAL pollutant in terms of mass per unit of time or CO2e per 
unit of time. Any monitoring system authorized for use in the PAL 
permit must be based on sound science and meet generally acceptable 
scientific procedures for data quality and manipulation. Additionally, 
the information generated by such system must meet minimum legal 
requirements for admissibility in a judicial proceeding to enforce the 
PAL permit.
* * * * *
    (14) * * *
    (i) * * *
    (b) Total annual emissions (expressed on a mass-basis in tons per 
year, or expressed in tons per year CO2e) based on a 12-
month rolling total for each month in the reporting period recorded 
pursuant to paragraph (aa)(13)(i) of this section.
* * * * *
    (d) A list of any emissions units modified or added to the major 
stationary source or GHG-only source during the preceding 6-month 
period.
* * * * *
    (ii) Deviation report. The major stationary source or GHG-only 
source owner or operator shall promptly submit reports of any 
deviations or exceedance of the PAL requirements, including periods 
where no monitoring is available. A report submitted pursuant to Sec.  
70.6(a)(3)(iii)(B) of this chapter shall satisfy this reporting 
requirement. The deviation reports shall be submitted within the time 
limits prescribed by the applicable program implementing Sec.  
70.6(a)(3)(iii)(B) of this chapter. The reports shall contain the 
following information:
* * * * *
[FR Doc. 2012-16704 Filed 7-11-12; 8:45 am]
BILLING CODE 6560-50-P