Document ID: EPA-HQ-OAR-2009-0517-19310
Agency: epa
Document Type: Supporting & Related Material
Title: 
Posted Date: 2012-07-12T04:00Z

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

Response to Comments 

                                       

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

                             Response to Comments

                          Air Quality Policy Division
                  Office of Air Quality Policy and Standards
                     U. S. Environmental Protection Agency
                       Research Triangle Park, NC  27711
                                       
                                       
                                       
                                   June 2012
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                               Table of Contents

List of Acronyms and Abbreviations	ii
1.0	Introduction	1
1.1	Background	1
1.2	The Commenters	1
1.3	Organization of This Document	2
2.0	Comments on Proposed Step 3 Thresholds	7
2.1	Comments Supporting the Proposal Not to Lower the GHG Thresholds	7
2.1.1	Comments Related to the Criteria for Lowering the Thresholds	7
2.1.2	Comments on the Burden Associated with Lower Thresholds	11
2.1.3	Comments Supporting Higher Thresholds	14
2.2	Comments Opposing the Proposal Not to Lower the GHG Thresholds	15
2.3	Other Comments Received on the Proposed Thresholds	48
2.3.1	Comments on a Permanent Exclusion for Small Sources	48
2.3.2	Comments on a Permanent Exclusion/Deferral for Biogenic Emissions	49
2.3.3	Comments on the Need to Analyze the Impact on Sources in Evaluating Thresholds	50
2.3.4	Comments on "GHG-Only" Sources	51
2.3.5	Other Comments	52
3.0	Comments on PALS for GHGs	56
3.1	Comments on GHG PALs in General	56
3.2	Comments on Options Related to GHG PALs	71
3.2.1	Comments on the Major Source Opt-In and Minor Source Approaches	71
3.2.2	Comments on the Basis for GHG PALs (Mass or CO2e)	78
3.2.3	Comments on Setting the Level of a GHG PAL	84
3.3	Other Comments on GHG PALs	87
4.0	Miscellaneous Comments	90
4.1	Impacts Analysis	90
4.2	GHG NSPS Standard  -  EGUs ("Carbon Pollution Rule")	92
4.3	Implementation Issues	92
4.4	Other	93

List of Acronyms and Abbreviations

§
Section (used in this document for sections of the CFR)
Act
Clean Air Act (42 U.S.C. 7401 - 7671q)
BACT
best available control technology
CAA
Clean Air Act (42 U.S.C. 7401 - 7671q)
CFR
Code of Federal Regulations
CO2e
carbon dioxide equivalent
D.C. Circuit
U.S. Court of Appeals for the District of Columbia Circuit
EGU
electric generating unit
EPA
U. S. Environmental Protection Agency
ESA
Endangered Species Act
FIP
Federal implementation plan
FR
Federal Register
FTE
full-time equivalent
GHG
greenhouse gas
MRR
Mandatory Reporting Rule
MSW
municipal solid waste
NAAQS
National Ambient Air Quality Standard
NESHAP
National Emission Standards For Hazardous Air Pollutants
NSPS
New Source Performance Standards
NSR
New Source Review
PAL
Plantwide applicability limitations
PSD
Prevention Of Significant Deterioration
RFA
Regulatory Flexibility Analysis
SIP
State implementation plan
Tpy
tons per year
U.S.C.
United States Code

Introduction

Background

	On March 8, 2012, the U. S. Environmental Protection Agency (EPA or "we") proposed a rulemaking titled Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3, GHG Plantwide Applicability Limitations and GHG Synthetic Minor Limitations.  The proposal concerned the third step (Step 3) in the phase-in process for the EPA's Tailoring Rule. The proposed rule would determine not to lower the applicability thresholds for purposes of Prevention of Significant Deterioration (PSD) and title V permitting for greenhouse gas (GHG)-emitting sources from the current levels. The EPA also proposed two streamlining approaches, which would improve the administration of the PSD and title V permitting programs for GHGs. The first streamlining approach in the proposal addressed the implementation of GHG plantwide applicability limitations (PALs). We proposed to allow permitting authorities to issue GHG PALs on either a mass-basis (tons per year [tpy]) or a carbon dioxide equivalent (CO2e) basis 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. The second streamlining approach in the proposal was to create the regulatory authority for the EPA to issue synthetic minor limitations for GHGs in areas subject to a GHG PSD Federal Implementation Plan (FIP). We also discussed our progress in evaluating the suitability of other streamlining approaches and solicited further comment.

	While a number of comments were submitted regarding the proposed issuance of synthetic minor limitations for GHGs in areas subject to a GHG PSD FIP and on various streamlining measures, we are not finalizing these proposed actions in this rulemaking. Therefore, we are not responding to such comments in this document. We appreciate the comments received on these issues and will consider them further as we continue to consider measures to further streamline PSD and title V permitting for GHG.

	This document, together with the preamble to the final rule titled: "Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule Step 3 and GHG Plantwide Applicability Limits," presents the responses of the EPA to public comments received on the notice of proposed rulemaking. All significant issues raised in timely public comments have been addressed. 

The Commenters

	The public comment period ended on April 20, 2012. In addition, a public hearing was held on March 20, 2012. We received comments from 57 commenters, including one mass comment campaign with comments from 81 individuals. This total counts each entity one time even if it submitted more than one comment letter and/or presented testimony at the public hearing. The commenters can be broken down by general type as follows: 34 industry and industry association commenters, 8 state/local and regional agencies, 2 environmental advocacy organization commenters (one of which included a group of several organizations), and 94 private citizens (includes 13 individual commenter letters and one mass comment campaign comprised of 81 individual comment letters). The comments are listed at the end of this section.

Organization of This Document

	After this introductory section, this document is divided into three additional sections.  The sections are as follows: 

   *          Section 2  -  Comments on the Proposed Step 3 Thresholds
   *          Section 3  -  Comments on PALs for GHGs
   *          Section 4  -  Miscellaneous Comments

                                 Document Id a
                          EPA-HQ-OAR-2009-0517-xxxxx
                                     Title
                                     19250
American Chemistry Council et al
                                     19251
G. Farr
                                     19252
J. Van Heusen
                                     19253
Lee R. Lemke, Exec. VP, Georgia Mining Association (GMA)
                                     19254
Anonymous public comment
                                     19255
G. A. Talbot
                                     19256
Don Smith, P.E., Manager, Air Quality Permits Section, Industrial Division, Minnesota Pollution Control Agency
                                     19257
Pamela F. Faggert, VP & CEO, Dominion Resources Services Inc.
                                     19258
Matthew Page, VP, Smith Aldridge, Inc.
                                     19259
William C. Herz, VP, Scientific Programs, The Fertilizer Institute (TFI)
                                     19260
Michael G. Dowd, Air Division Director, Virginia Department of Environmental Quality
                                     19262
Tim Serie, Counsel, Government Affairs and David Darling, Director, Environmental Affairs, American Coatings Association (ACA)
                                     19263
Susan Eckerly, Senior Vice President, Public Policy, National Federation of Independent Business (NFIB)
                                     19264
Misti Duvall, Staff Associate, National Association of Clean Air Agencies (NACAA)
                                     19265
Zeynep Erdal, Program Manager, California Wastewater Climate Change Group (CWCCG)
                                     19266
Mark R. Vickery, Executive Director, Texas Commission on Environmental Quality (TCEQ)
                                     19267
Alice Edwards, Director, Division of Air Quality, State of Alaska, Department of Environmental Conservation
                                     19268
Angus E. Crane, Executive Vice President, General Counsel, North American Insulation Manufacturers Association (NAMA)
                                     19269
Joseph Otis Minott, Executive Director, Clean Air Council
                                     19270
Robert A. Wyman, Counsel, Latham & Watkins LLP on behalf of National Climate Coalition (NCC)
                                     19271
Michael Bradley, Director, The Clean Energy Group
                                     19272
Patrick J. Hester, Associate General Counsel, Spectra Energy Corp
                                     19273
Thure Cannon, Executive Director, Texas Pipeline Association (TPA)
                                     19274
Susan Asmus, Sr. VP, Regulatory Affairs, National Association of Home Builders (NAHB)
                                     19275
Joel Visser, Sidley Austin, LLP on behalf of David P. Tenny, President and CEO, National Alliance of Forest Owners (NAFO)
                                     19276
Edward W. Repa, Director Environmental Programs, National Solid Wastes Management Association (NSWMA) and John H. Skinner, Executive Director and CEO, Solid Waste Association of North America (SWANA)
                                     19277
William C. Allison V, Director, Air Pollution Control Division, Colorado Department of Public Health and Environment
                                     19278
Robert D. Bessette, President, Council of Industrial Boiler Owners (CIBO)
                                     19279
Amy Banister, Senior Director, Air Programs and Kerry Kelly, Director, Federal Public Affairs, Waste Management (WM)
                                     19280
Mohsen Nazemi, P. E. Deputy Executive Officer, Engineering and Compliance; and Barbara Baird, District Counsel, Office of the District Counsel, South Coast Air Quality Management District (SCAQMD)
                                     19281
Christian Huebner, Trade Association Coalition on behalf of American Chemistry Council et al
                                     19282
Shannon S. Broome, Katten Muchin Rosenman LLP on behalf of the Association Coalition
                                     19283
Leslie Sue Ritts, Counsel, Ritts Law Group, PLLC on behalf of the National Environmental Development Association's Clean Air Project (NEDACAP)
                                     19284
Robert M. Dinneen, President, Renewable Fuels Association 
                                     19285
Allison D. Wood, Hunton & Williams LLP on behalf of Utility Air Regulatory Group (UARG)
                                     19286
Renee Lesjak Bashel, Chair, National Steering Committee, State Small Business Ombudsman/Small Business Environmental Assistance Programs
                                     19287
Tim Higgs, Corporate Environmental Engineer, Air Quality, Intel Corporation
                                     19288
Quinlan J. Shea, III, VP, Environment, Edison Electric Institute (EEI)
                                     19289
Angela D. Marconi, Project Manager, Delaware Solid Waste Authority (DSWA)
                                     19290
David Isaacs, VP, Government Policy, Semiconductor Industry Association (SIA)
                                     19291
Myra C. Reece, Chief, Bureau of Air Quality, Environmental Quality Control, South Carolina Department of Health and Environmental Control (DHEC)
                                     19292
Pamela A. Campos, Environmental Defense Fund, Center for Biological Diversity, Clean Air Task Force, Natural Resources Defense Council, and Sierra Club
                                     19293
Chris M. Hobson, Chief Environmental Officer and Sr. VP, Research & Environmental Affairs, Southern Company
                                     19294
Mass Comment Campaign sponsoring organization unknown (81)
                                     19295
M. Wozniak
                                     19296
M. Troutman
                                     19297
D. Plank
                                     19298
C. Evans
                                     19299
Dr. T. Jiunta
                                     19300
P. Karpich
                                     19301
M. Payan
                                     19302
R. Kisberg
                                     19303
Reed M. Content, Director, Global EHS & CSR, GLOBALFOUNDRIES, U.S. Inc.
                                     19304
Lawrence Kennedy, Chief, Bureau of Air Pollution Control, Division of Environmental Protection, Nevada Department of Conservation and Natural Resources
                                     19305
L. Wallach
                                     19306
William H. Lewis, Morgan, Lewis & Bockius LLP on behalf of Clean Air Implementation Project (CAIP)
                                     19307
Howard J. Feldman, Dir. Of Regulatory and Scientific Affairs, American Petroleum Institute (API)
[a] Document ID identifies written comments found in Docket No. EPA-HQ-OAR-2009-0517 by document number.

Comments on Proposed Step 3 Thresholds

Comments Supporting the Proposal Not to Lower the GHG Thresholds

Comment: 

	Many commenters, including many industry (19253, 19257, 19258, 19259, 19262, 19265, 19268, 19270, 19271, 19272, 19273, 19278, 19279, 19281, 19282, 19283, 19284, 19285, 19286, 19287, 19289, 19290, 19306, 19307) and state and local agency commenters (19260, 19264, 19267, 19277, 19280, 19291, 19304), expressed support for not lowering the GHG major source thresholds below the levels promulgated in Step 2 of the Tailoring Rule. These commenters typically agreed with one or more points in the rationale presented by the EPA in the proposal preamble, as detailed further in subsequent comments in this section. One of the industry commenters (19273) supported the EPA's proposal because it refrains from extending what the commenter believes is a largely untested program to even more sources. Although expressing support for the proposal, another industry commenter (19262) believes that the Tailoring Rule phase-in approach is flawed and will continue to create regulatory uncertainty. One industry commenter (19278) stated that EPA should not apply PSD to GHG-emitting sources that are smaller than the sources subject to PSD due to emissions of conventional pollutants.

Response:  

      We agree with the commenters that support the EPA's proposed determination not to lower the Tailoring Rule thresholds, for the reasons described in the preamble and this document. Because these reasons provide adequate support for not lowering the thresholds, it is not necessary to respond to comments suggesting other reasons, such as the approach of not applying PSD to GHG-emitting sources that are smaller than sources subject to PSD due to emissions of conventional pollutants.
      
2.1.1	Comments Related to the Criteria for Lowering the Thresholds

Comment: 

	Thirteen industry commenters (19257, 19259, 19262, 19270, 19271, 19281, 19282, 19283, 19285, 19287, 19290, 19306, 19307) and four state and local agency commenters (19260, 19266, 19280, 19304) agreed with the EPA that the capabilities or capacity of the state permitting authorities have not improved to the extent necessary for additional sources or an influx of permit applications to be brought into the system. Another industry commenter (19272) similarly stated that the proposed rule appears to be reasonable in that it allows the state permitting authorities the time to develop the required infrastructure for the potential increase in permit applications.

	One industry commenter (19259) noted that state budgets have decreased, which has led to a decrease in state environmental agency staff and longer permitting times. The commenter stated that lowering the thresholds would further add to permitting delays and tax state environmental agencies. The commenter reported that a recent letter from the National Association of Clean Air Agencies to the U.S. House of Representatives states that 80 percent of air agencies experienced a decline in staffing levels in the last 4 years, with an average staff loss of 16.7 percent for the period of 2008-2010. Therefore, according to the commenter, the EPA's second criterion for lowering the applicability (that states have had time to ramp up their permitting resources) has not been satisfied. 

	One local agency commenter (19280) stated that staffing and permitting resources at that agency continue to drop and another reduction of 7.6 percent is planned in order to meet budget constraints. This commenter also reported that changes in California law have made it more difficult for the agency to increase permit fees (i.e., the commenter cited Proposition 26 which provides that all charges imposed by a local government are taxes, unless they qualify for an enumerated exemption, which increases the likelihood of litigation challenging any fee increase). A state agency commenter (19260) indicated that if the GHG applicability threshold levels were reduced, increased resources would be required and additional pressure would be placed on already strained agency resources. Another state agency commenter (19266) similarly indicated that lowering the thresholds would require resources that are not available.

	One state agency commenter (19304) stated that a number of recent and ongoing federal rulemakings, including the publication of a number of new NESHAP, are demanding resources that would otherwise be employed to help address permitting requirements and the needs of the regulated community. As an example, the commenter noted that the February 2011 NESHAP for Gold Mine Ore Processing and Production Area Source Category (40 CFR Part 63, Subpart EEEEEE) made all affected sources subject to title V permitting, increasing Nevada's universe of title V sources by almost 50 percent. According to the commenter, this increase, coupled with the current title V applicability threshold of 100,000 tpy CO2e for existing sources, will increase Nevada's universe of title V sources by approximately 150 percent over the next few years. The commenter added that in addition to impacting the agency's permitting resources, this expansion of the title V universe would place an immense burden on Nevada's oversight responsibilities for compliance and enforcement.

	An industry commenter (19259) stated that the issuance of only 18 GHG PSD permits since the promulgation of the Tailoring Rule demonstrates that states do not yet possess the requisite expertise to promptly act on GHG PSD and title V permit applications at the current applicability thresholds. Therefore, according to the commenter, the EPA's third criterion for lowering the applicability thresholds (that states have the ability to issue timely permits) has not been met. A state agency commenter (19260) made a similar point, asserting that states are still on a learning curve with the initial GHG regulations and in the process of developing appropriate GHG requirements for permits.

	Two industry commenters (19278, 19281) opined that the EPA should not interpret the lack of GHG or PSD permits related to GHG emissions as an indication that there is not a problem at the current GHG thresholds. The commenters stated that a number of permit actions were expedited to occur before the Tailoring Rule became effective, and that facilities are not pursuing other projects because of the permitting costs and challenges. Another industry commenter (19307) asserted that the discrepancy between the EPA's projection of GHG permit activity and the actual permit activity to date cannot be due simply to "the economy." Instead, the commenter believes that the GHG PSD requirements have caused businesses to delay investment and expansions, almost certainly with a resulting adverse impact on jobs.

	Another industry commenter (19279) agreed that current permit activity levels are not representative of the regulatory burden expected from current PSD and title V GHG permitting requirements. The commenter opined that the burden caused by implementation of multiple NAAQS changes in rapid succession, and the dramatic increase in air emissions modeling triggered by them, is delaying the development and submission of permit applications. The commenter reported that many sources are still evaluating the EPA's 1-hour SO2 and NO2 modeling guidance and the EPA has not yet issued implementation guidance for the new NAAQS.

	Two industry commenters (19281, 19283) alleged that there is currently a backlog of GHG-related PSD permits in EPA Region 6, where only one GHG-related PSD permit had been issued and approximately 20 other permit applications were pending. The commenter added that the additional backlog associated with GHG permitting is an addition to backlogs caused by non-GHG permitting requirements, citing as an example a recent study which found that less than one-third of all title V permit renewals are issued within the federally mandated 18-month window [U.S. EPA, Timely Issuance of Permit Renewals and Significant Permit Modifications Under Title V: An Evaluation of the Permit Issuance Process (February 2007), at ES-1, available at http://1.usa.gov/IASe4Y (last visited April 12, 2012)]. The commenter (19281) argued that the EPA's confidence that increased GHG permit applications will make things easier, not harder, is misplaced. 

Response:  
      
      We appreciate these comments. Because they generally agree with our proposal, it is not necessary to evaluate each one. We appreciate the information that commenters provided about state budgets, the development by the states of permitting expertise, and possible explanations for the disparity between actual and expected numbers of GHG permitting actions, and we have incorporated this information, as appropriate, into our rationale for this action.   
      
      To the extent that any comments  -  such as the comment that the EPA's confidence that increased GHG permit applications will make things easier, not harder is misplaced -- could be construed as calling into question the validity of any of the three criteria, we respond that those criteria were established in the Tailoring Rule and we are not re-opening them in this Step 3 rulemaking, so that we are not responding to such comments in this rulemaking. For the sake of completeness, if these comments concerning increased GHG permit applications were relevant to this Step 3 rulemaking, our response is that we determined in the Tailoring Rule that permitting authorities could, at present, accommodate a certain level of PSD and title V permitting, and whether they could accommodate a greater level of such permitting in the future would depend, in part, on whether they had developed expertise in such permitting.

Comment: 

	Three industry commenters (19262, 19273, 19282) asserted that a prerequisite to lowering the thresholds is the establishment of meaningful streamlining techniques, which has not yet occurred. Another industry commenter (19290) stated simply that more streamlining is needed before a reduction in thresholds is adopted.

Response:  

      We appreciate these comments and note that they are consistent with our rationale for this action.

Comment: 

	Three industry commenters (19282, 19284, 19285) asserted that, while they believe the EPA reached the correct conclusion in deciding not to lower the applicability thresholds, its analysis fails to consider a critical criterion  -  whether sources are able to meet the requirements of the PSD program for GHGs. One of the commenters (19282) argued that the EPA must ensure that it evaluates the original criteria promulgated in the final Tailoring Rule (absent a new notice-and-comment rulemaking to change the criteria) when evaluating whether to lower the thresholds, and that the EPA cannot meet this criterion simply by evaluating the length of time it takes permitting authorities to issue permits (as the commenter alleges that the EPA claimed in footnote 30 of the Step 3 proposal preamble). Another of the commenters (19285) asserted that, had the EPA examined whether sources were able to meet the requirements of the PSD program, the analysis would have further supported its determination that the thresholds should not be lowered. 

	One industry commenter (19282) stated that sources do not presently have the ability to meet PSD or title V permitting program requirements below the 100,000 tpy CO2e level for GHGs. The commenter contended that, for the small increment of additional GHG emissions brought into the PSD program, a huge number of additional sources that have no familiarity with PSD would be brought into the program. The commenter asserted that smaller sources will be unable to manage these requirements if suddenly brought within the PSD program, and added that the ability to meet requirements includes the ability to understand the provisions themselves in addition to meeting the permit application requirements. The commenter added that even for sources that would be part of the program at 100,000 tpy CO2e, the costs are high. 

Response:   

      We appreciate these comments. 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." Tailoring Rule, 75 FR 31559. We stated in the Tailoring Rule 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." Tailoring Rule Step 3 proposal, 77 FR 14232/col. 3. The commenters take issue with this statement, and assert 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.  
       
2.1.2	Comments on the Burden Associated with Lower Thresholds

Comment: 

	Five industry commenters (19253, 19258, 19262, 19281, 19306) and three state and local agency commenters (19266, 19280, 19304) asserted that lowering of the PSD applicability thresholds would impose a tremendous burden on state and local permitting agencies and the regulated community, without achieving any meaningful environmental benefit. In a similar vein, another state agency commenter (19291) indicated that at the current levels, small sources and state and local agencies will not be unnecessarily burdened with permit applications that result in very little, if any, environmental benefits. Similarly, an industry commenter (19272) indicated that lowering the thresholds to 75,000 would unduly burden the natural gas pipeline industry.  Furthermore, another industry commenter (19274) stated that lowering the thresholds would unduly burden the housing industry.

	One of the industry commenters (19281) opined that the additional emissions coverage (such as 1 percent) the EPA could achieve by decreasing the thresholds does not justify the significant additional burden to sources and the already-stressed state and local permitting authority resources. The commenter added that further lowering of GHG emissions thresholds would impact trade-sensitive industry sectors such as petroleum, manufacturing and chemical industries, which would create "leakage" of both jobs and carbon emissions overseas.

	One local agency commenter (19280) quoted the EPA's analysis to say that reducing the threshold to 50,000 tpy would almost double the number of permits issued (with a 540 percent increase in PSD permits) for a mere 3 percent increase in covered emissions. The commenter asserted that the EPA has previously estimated that an increase of 550 PSD permit actions would be administratively infeasible; therefore, an anticipated increase of 3,000 permit actions (with only an incremental benefit) would be overwhelming to permitting authorities. 

	One industry commenter (19253) opined that the lead time required to apply for and obtain a PSD permit is already an impediment to economic activity, and that further burdening of the permitting infrastructure with additional applications by reducing the applicability thresholds would only exacerbate the problem. 

      One industry commenter (19283) stated that the EPA underestimated permitting burdens because EPA apparently did not include biogenic CO2 emissions in its analyses.
      
	One industry commenter (19276) stated that the EPA required itself to propose or solicit comment on including, in Step 3, a permanent exemption for small sources on grounds of absurd results, and expressed concern that in light of the EPA's continued focus on streamlining measures, the EPA instead appears to be moving in the direction of ultimately lowering the thresholds to the statutory levels.

Response:  

      We appreciate the commenters' comments. Because we agree that the thresholds should not be lowered, and because we have sufficient support for that determination, based on our interpretation and application of the three criteria, it is not necessary to respond specifically to each of these comments, so that it is not necessary to evaluate each of the reasons they provide for not lowering the thresholds. We agree that at this time, the trade-off between the numbers of additional sources and the amount of emissions that would become subject to permitting requirements if the thresholds were lowered supports the reasonableness of our determination not to lower the thresholds. We also agree that due to the lack of progress made on the three criteria, lowering the thresholds could lead to an increase in the lead time required to obtain a PSD or title V permit.

      The comment concerning the EPA's treatment of biogenic emissions in the burden analysis is not relevant for present purposes because, again, the EPA is not lowering the thresholds.  In addition, as noted below, the EPA has in place a process for determining how to account for biogenic CO2 emissions.

	The EPA did not commit to propose or solicit comment on including, in Step 3, a permanent exemption for small sources on grounds of absurd results, but instead stated that the EPA may propose or solicit comment on that matter. 75 FR 31524/col. 2. The EPA did not, in fact, propose or solicit comment on such an exemption in the proposal, and so is not taking further action, or further considering comments, on such an exemption at this time. The EPA makes no additional statements in this rulemaking on whether it will propose or solicit comment on such an exemption in the future. The EPA does not believe its focus on streamlining measures provides any indication as to whether the EPA will or will not propose or solicit comment on such an exemption in the future.

Comment: 

	Three industry commenters (19262, 19278, 19286) expressed concern that lowering the thresholds would unduly burden small sources and small businesses. One local agency commenter (19280) believes that Congress never intended for PSD and title V to apply to sources smaller than some reasonable threshold, and consequently, the EPA is not required to reduce the Tailoring Rule threshold.

	One of the industry commenters (19262) stated that the EPA should maintain existing permitting thresholds at current levels until the EPA can provide adequate assurance that smaller sources will remain outside the regulations in the foreseeable future. The commenter suggested that the EPA set a minimum floor for the permitting requirements.

	One of the industry commenters (19286) stated that lowering of the applicability thresholds would cause more small sources to be drawn into the requirements and place additional burdens on these facilities. The commenter recommended applicability thresholds that continue to minimize the impact on small businesses.

	Another industry commenter (19278) similarly stated that, as the EPA lowers the thresholds, more and more sources are swept out of state permitting structures and into the federal permitting process, and that these are generally smaller facilities with less access to resources. According to the commenter, small businesses are not equipped to accommodate the substantial additional PSD burden and are not in a position to net out or avoid PSD. The commenter asserted that this inhibits small businesses' ability to make improvements needed to remain competitive. The commenter added that even larger facilities with substantial resources are having difficulty obtaining PSD permits today.

	The industry commenter (19278) argued that, in order for the EPA to analyze the true impact of GHG Tailoring Rule changes, a more accurate analysis is needed, which would include an assessment of minor source permitting. The commenter indicated that the EPA should survey states to determine how many minor permit actions are completed annually that increase emissions at a facility by more than significance thresholds in order to evaluate the increased burden on PSD permitting associated with the current approach which, according to the commenter, federalizes state permitting actions. This commenter requested that the EPA not lower the threshold below the current level now or in the future.

Response:   
      
      We appreciate the commenters' concerns about the burden that smaller sources would face if we implemented lower thresholds. Because we are able to justify our decision not to lower the thresholds on our analysis of the three criteria, as we interpret and apply those criteria, it is not necessary to address, at this time, the impact of lowering the thresholds on smaller sources. As we noted in the Tailoring Rule, in no event will EPA apply PSD or title V to sources below the 50,000 tpy CO2e levels prior to April 2016. In addition, the EPA has committed to conduct a study, to be concluded by April 30, 2015, evaluating the status of PSD and title V applicability to GHG sources, and, based on the study, to complete a rulemaking by April 30, 2016 that addresses another round of a phase-in approach. It is not necessary to decide at this time whether to permanently exempt some sources, based on size, from the PSD or title V requirements that would otherwise apply. We appreciate the comment concerning collecting more information from the states  -  including information about minor source permitting -- to obtain a more accurate burden analysis. We discuss in the preamble steps we intend to take to gather more information.
      
Comment: 

	One industry commenter (19274) stated that the EPA appears to be heading toward lowering the emission thresholds in the future and expressed concern about how that will affect the housing sector. The commenter noted that the EPA has cited residential housing as a source category in several of its TSDs, and the commenter believes that this implies that the EPA intends to eventually include housing as a stationary source in its GHG regulatory framework under the Act. The commenter reported that this could result in the regulation of approximately 137,000 existing multifamily buildings and 6,400 new buildings, and at least 45,350 existing family homes and 515 new single family homes annually. 

Response:  

      We appreciate the comments received on the housing sector. At this time, we are not lowering the thresholds and will review the need to lower the threshold during the 5 year study. However, in no event will EPA apply PSD or title V to sources below the 50,000 tpy CO2e levels prior to April 2016. In addition, the EPA committed to conduct a study, to be concluded by April 30, 2015, evaluating the status of PSD and title V applicability to GHG sources, and, based on the study, complete a rulemaking by April 30, 2016 that addresses another round of phase-in.

2.1.3	Comments Supporting Higher Thresholds

Comment: 

	Three industry commenters (19279, 19281, 19307) not only agreed that the thresholds should not be lowered, but recommended that the EPA increase the Tailoring Rule applicability thresholds.

	One industry commenter (19279) stated that municipal solid waste (MSW) landfills, while emitting only 2 percent of total anthropogenic U.S. GHG emissions, are disproportionately impacted by the Tailoring Rule. The commenter contended that closed landfills are particularly disadvantaged by a low applicability threshold. The commenter reiterated recommendations made in comments on the Tailoring Rule that the EPA tailor the PSD and title V applicability thresholds for landfills to reduce the disproportionate burden. The commenter recommended that the EPA consider the following PSD and title V applicability thresholds for GHGs:
    *       A PSD applicability threshold of 820,000 tpy CO2e; and
    *       A title V applicability major source threshold of 320,000 tpy CO2e (or 160,000 tpy CO2e for landfills based on the Landfill NSPS).

	Two industry commenters (19279, 19281) opined that the emissions data that the EPA has received pursuant to the GHG Reporting Rule will show that significantly more facilities and GHG emissions are covered at the current thresholds than the EPA believed when it promulgated the Tailoring Rule. The commenter stated that an analysis of the data would show that the EPA could substantially increase the thresholds for new PSD sources, major modifications and title V sources and still cover the same amount of GHG emissions under the PSD and title V programs, while at the same time significantly reducing the number of facilities actually subject to those programs. The commenters added that raising the thresholds would assure a closer match between sources subject to PSD due to their emissions of conventional pollutants and sources subject to PSD due to their emissions of GHGs.
	
	Another industry commenter (19307) suggested that the EPA consider raising the GHG thresholds to 250,000 tpy. The commenter believes that this threshold for GHGs would be more consistent with sources that are subject to the thresholds for criteria pollutants.

Response:  

      The purpose of today's rulemaking is to determine whether, based on the three criteria, the thresholds should be lowered. We are not considering whether to increase the thresholds.  Accordingly, at this time, we are not taking action on the commenters' requests to raise the thresholds, and we are not responding to their comments seeking higher thresholds.
      
      Although we are not responding to their comments, for the sake of completeness, we note that we that responded to comments concerning the MSW landfills and other requests for higher thresholds or industry-specific exemptions in the Tailoring Rule. See 75 FR 31589 (Tailoring Rule). In addition, we note that in the preamble and below, we address the issue of whether to consider, in Step 3, revising the data sets and methodology used as the basis for the Tailoring Rule, and steps we intend to take in the future to collect more information and take further action. Particularly with respect to the comment about reviewing the data that the EPA is receiving from the GHG Reporting Rule, it is not appropriate for the EPA, in this Step 3 rulemaking, to re-open and review components of the data sets and methodology that form the basis of the permitting burden estimates. However, the EPA expects to collect additional data concerning permitting activity from the states and evaluate this information during the five-year study. At the same time  -  during the five-year study  -  the EPA expects to evaluate data received through the GHG Reporting Rule.

Comments Opposing the Proposal Not to Lower the GHG Thresholds

Comment:

      One environmental advocacy organization commenter (19292)  -  a group of organizations that filed a joint comment -- opined that in order for the EPA to justify maintaining 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. The commenter stressed that the actual number of permit applications 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." As a result, the commenter asserted that in the Step 3 proposal, "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." The commenter added 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."

      Elaborating, the environmental advocacy organization commenter (19292) stated that the EPA, in the Tailoring Rule, conceded that it was authorized to temporarily raise the statutory thresholds for PSD and title V applicability only, according to the commenter, "to the extent necessary to avoid administrative impossibility, and [EPA further conceded] that its burden of proving the existence of that impossibility was extremely high." The commenter added that "EPA also acknowledged that it must move towards implementing these programs as closely to their statutory thresholds and as quickly as administratively possible; EPA committed to issue, as Step 3 of the Tailoring Rule, a determination of whether the thresholds could be lowered by 2013 to bring additional sources into the permitting programs without overwhelming permitting authorities." According to the commenter, "[i]n other words, to justify maintaining current tailoring thresholds in Step 3, EPA must provide data demonstrating that lowering thresholds would create administrative impossibilities."

      The environmental advocacy organization commenter (19292) went on to state that "[r]elevant case law tightly limits [the EPA's] ability to phase in rather than fully implement clear statutory mandates to circumstances of clear administrative impossibility," which the agency carries the burden of proving, and cited Alabama Power Co. v. Costle, 636 F.2d 323, 358 (D.C. Cir. 1979). The commenter added that "[l]ater decisions confirm the limited scope of "administrative necessity" exemptions and the heavy burden EPA bears in advancing this justification for departure from statutory requirements," and cited Environmental Defense Fund v EPA, 636 F.2d 1267 (D.C. Cir. 1980) and Sierra Club v. EPA, 719 F.2d 436, 463 (D.C. Cir. 1983). The commenter added that the agency's burden of proving administrative impossibility "is even heavier when the Agency is looking ahead to the prospect of administrative difficulties, as opposed to asserting an existing inability to implement regulations," and cited Sierra Club v. EPA, 719 F.2d 436, 462-63 (D.C. Cir. 1983). The commenter added that "the doctrine does not allow an agency to deviate from the statute any more than the minimum extent necessary," and cited Pub. Citizen v. FTC, 869 F.2d 1541, 1556 (D.C. Cir. 1998) and, generally, Mova Pharm. Corp., 140 F.3d at 1069.

      Turning to the basis for the Step 3 proposal, the environmental advocacy organization commenter (19292) stated that in the Tailoring Rule, the EPA estimated that at the 100,000/75,000 level, permitting authorities would be required to issue 1,605 annual additional PSD permits and 190 annual additional title V permits (or 1,795 annual permits in total), and that this workload was manageable. The commenter emphasized that in the Tailoring Rule, the EPA was compelled to rely on estimates of demand for GHG permitting, but that the EPA now has data as to actual permitting during the first year of the phase-in.  
      
      However, the environmental advocacy organization commenter (19292) went on to point out that "the agencies' experience with the PSD permitting for GHGs differed greatly from what EPA estimated. Between January 1, 2011 (the commencement of Step 1) and December 1, 2011 (the date of the study it undertook to determine whether the 100,000/75,000 threshold could be lowered in Step 3), the EPA and state permitting authorities issued only 18 PSD permits to sources emitting GHGs at or above the Step 1 and 2 thresholds.... Only 50 additional permits were in process at that time." The commenter stated, "That reality necessarily displaces EPA's original projections, and must inform whatever revised estimates EPA may make of permitting burdens in the next few years," and added, "But EPA has not adjusted its predictions downwards. EPA's Step 3 permitting burden estimates contradict its real-world experience, and that of state permitting authorities. In light of the true 2011 permitting workload, the proposed rulemaking clearly does not meet the burden of demonstrating impossibility." The commenter reiterated that "[t]his gulf between reality and estimate must be thoroughly addressed in assessing future expected demand on permitting agencies, but EPA has not provided any new assessment here."
      
      The environmental advocacy organization commenter (19292) added that the EPA must also update its estimates about the actual costs incurred on a per-permit basis, in light of the experience of the permitting agencies in issuing the 18 permits, and concluded, "Without engaging in this effort, EPA cannot meet its burden of demonstrating that lowering the thresholds in 2013 remains impossible."
      
      The environmental advocacy organization commenter (19292) added  -  

      that the increase in workload due to GHG PSD permitting activity of a scale seen in 2011 is well within the increased workload that EPA determined was manageable in the initial Tailoring Rule. At that time, EPA determined that permitting authorities would be able to accommodate an annual increase of 1,605 additional PSD permits (plus another 190 Title V permits), or an annual increase of 133% in PSD permitting alone. Actual experience shows the permitting volume, at 18, to have been two orders of magnitude less than the estimated amount of 1605 permits. Based on the current record, EPA cannot maintain that its predictions remain accurate or that they continue to demonstrate it is impossible to lower the thresholds set in the Tailoring Rule by 2013.
      
      The environmental advocacy organization commenter (19292) then turned to the EPA's explanation for the limited permit activity, stating that although the EPA explains the difference between its projections and actual permitting as due to economic fluctuations, the EPA "includes no evidence in the record indicating how PSD permitting levels have varied with economic changes in the past or demonstrating that an increase from tens to thousands of permits per year is consistent with either past experience or credible forecasts of future activity." The commenter also stated that a review of permitting levels recorded in the RACT/BACT/LAER Clearinghouse indicated that the amount of variability in permitting activity would be limited.

      The environmental advocacy organization commenter (19292) then took issue with what it described as the EPA's assertion that the EPA's "proposed decision not to lower the thresholds is justified because doing so would bring a "very small" amount of additional greenhouse gas emissions within permitting programs." The commenter stated -- 

      though an assessment of environmental benefits may be pertinent to questions of how to tailor in the face of demonstrated administrative necessity; it is not relevant to a determination of whether administrative demands reach the very high levels necessary to justify departure from statutory text. EPA must show that it remains impossible to fold additional sources into the program as the statute requires; the size of the emissions controlled  -  i.e., the benefits of the undertaking  -  may not be considered as part of this inquiry. 
      
      The environmental advocacy organization commenter (19292) then took issue with the the EPA's three criteria for evaluating the thresholds, asserting that they "are pertinent only in the face of evidence that the permitting demand continues to exceed capacity by a significant amount. They may be considered only after showing that the permitting agencies are already running at capacity  -  established under the Tailoring Rule as 1,605 PSD permits per year  -  and that any additions beyond that level would exceed administrative capacity. EPA's current record does not so demonstrate."
      
      Continuing to respond to the EPA's criteria for evaluating the thresholds, the environmental advocacy organization commenter (19292) stated that the EPA "introduces a new rationale for continued tailoring  -  lack of experience by state and local permitting agencies."  The commenter pointed out that many of the over 200 state and local permitting programs will not receive a single PSD permit application for years, and then asserted, "EPA's argument that each of these permitting authorities must have actual GHG permitting experience at the current thresholds before it will consider lowering the thresholds is untenable.... [M]ere lack of experience cannot be used as evidence that an administrative impossibility exists...."  
      
      The environmental advocacy organization commenter (19292) also cautioned against what it described as the "EPA['s] attempt to rely on a decision by one or more state legislatures to underfund CAA programs as evidence of `administrative necessity.'"  
 
      The environmental advocacy organization commenter (19292) concluded by asserting that the "EPA misapprehends the burden it must meet in other instances as well. For instance, the necessary inquiry for the Step 3 analysis is not whether permitting agencies have the capacity to "efficiently manage" the permitting program...; whether expanding the program would "add more burden,"... ; or whether the EPA can justify lowering the thresholds.... Rather, to retain the Tailoring Rule thresholds, the EPA must demonstrate that thresholds below Steps 1 and 2 exceed administrative capacity; that the additional burden would do the same; and that it can justify retaining, rather than lowering, the thresholds."  

      Another environmental advocacy organization commenter (19269) asserted that the EPA does not meet the requirements of "administrative necessity" to avoid lowering the Step 3 thresholds. The commenter argues that, while the EPA committed in the Tailoring Rule to not lower the GHG PSD applicability threshold below 50,000 tpy CO2e until 2016, it has not met the requirements of "administrative necessity" to avoid lowering the threshold from 75,000 tpy CO2e in Step 3. 

      The environmental advocacy organization commenter (19269) further argued that the EPA must lower the Step 3 thresholds under the three criteria the EPA committed to follow when determining whether to lower the GHG thresholds under Step 3. According to the commenter, each of these criterion is either not required to have been met, or has been met, primarily because the number of GHG permits have been fewer than expected. Specifically, streamlining measures have not been necessary, permitting authorities do not need time to ramp up their resources, and permitting authorities are able to issue timely permits, all because of the limited amount of permitting activity. With respect to permitting authority resources, the commenter pointed out that in Pennsylvania, Governor Corbett proposed an additional 5% budget cut for the Department of Environmental Protection (DEP) this year (after 5 years of budget cuts for the DEP). The commenter asserted that states cannot choose to make a decision to slash budgets for environmental programs and then rely on a lack of resources to avoid proper permitting of GHGs. With respect to the ability of sources in the regulated community to meet the requirements of the PSD program, the commenter pointed out that the EPA issued guidance in March of 2011 to assist sources in meeting the requirements (PSD and Title V Permitting Guidance for Greenhouse Gases ("Guidance")); that the Guidance provided a list of GHG control measure resources in Appendix J of the Guidance along with several examples of BACT analysis, and that, as of December 1, 2011, 68 GHG PSD permit applications had been received by state agencies from a variety of sources and areas. The commenter argued that the EPA cannot rely on speculation that the permitting burden may increase to avoid lowering the thresholds and complying with the requirements of the CAA as expeditiously as possible.

      The environmental advocacy organization commenter (19269) went on to emphasize that "GHG [e]missions [c]ontinue to [r]ise and [e]xacerbate [c]limate [c]hange and [m]ust be [r]egulated as [e]xpeditiously as [p]ossible."

      An estimated eighty-nine public citizen commenters (19294, et al) argued that, while the rule suggests that state agencies cannot handle implementing stricter emission levels, states like Pennsylvania have made a political choice to slash their environmental budget and cannot now be allowed to use this as a justification for avoiding implementation of the Tailoring Rule. These commenters also argued that, in order for the EPA to avoid further reducing the GHG permitting applicability thresholds under Step 3 of the Tailoring Rule, the EPA must be able to prove that lower thresholds would be virtually impossible for the agencies to administer.

Response:

I. Showing of Administrative Impossibility

      The EPA disagrees with commenters' views that in Step 3, the EPA must justify maintaining the current thresholds on grounds of administrative necessity. 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 promulgation of the Tailoring Rule if certain specific events were to happen. Those events are reflected in the three criteria the EPA articulated as the basis for Step 3, i.e., permitting authorities increase their capacity for permitting, whether through increased resources or the development of expertise; or permitting efficiency becomes improved through streamlining measures. 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 five-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 five-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.

A. The structure, regulatory provisions, and preamble discussion of the phase-in process: Background

      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:		Step 2 Title V permit applications are due.
July 1, 2012:		EPA completes Step 3.
July 1, 2013:		Step 3 takes effect.
April 30, 2015: 	EPA completes five year study.
April 30, 2016: 	EPA completes Step 4.

      The EPA established Step 3, the five year study, and Step 4 in the Tailoring Rule-promulgated regulations, as follows. 40 CFR 52.22(b) provides:
      
      	(b) Further action to regulate GHGs under the PSD program.
      	(1) Near term Action on GHGs. The Administrator shall solicit comment, under section 307(b) of the Act, on promulgating lower GHGs thresholds for PSD applicability. Such action shall be finalized by July 1, 2012 and become effective July 1, 2013.   
      	(2) Further Study and Action on GHGs.
      	(i) No later than April 30, 2015 the Administrator shall complete a study projecting the administrative burdens that remain with respect to stationary sources for which GHGs do not constitute a regulated NSR pollutant. Such study shall account, among other things, for permitting authorities ability to secure resources, hire and train staff; experiences associated with GHG permitting for new types of sources and technologies; and, the success of streamlining measures developed by EPA (and adopted by the states) for reducing the permitting burden associated with such stationary sources.  
      	(ii) Based on the results of the study described in paragraph (b)(2)(i) of this section, the Administrator shall propose a rule addressing the permitting obligations of such stationary sources under §52.21 and §51.166 of this chapter. The Administrator shall take final action on such a rule no later than April 30, 2016.
      (iii) Before completing the rule described in paragraph (b)(2)(ii) of this section, the Administrator shall take no action to make the pollutant GHGs subject to regulation at stationary sources that emit or have the potential to emit less than 50,000 tpy CO2e, or for physical changes or changes in the method of operations at stationary sources that result in an emissions increase of less than 50,000 tpy CO2e (as determined using the methodology described in §52.21(b)(49)(ii)).

For similar provisions under the title V regulations, see 40 CFR 70.12(b), 71.13(b).

      In the Tailoring Rule preamble, the EPA explained the phase-in process as follows:

Our final action reflects a multi-step process that we believe will facilitate a manageable expansion of PSD and title V applicability, as appropriate, to GHG-emitting sources. In our final action, we have established the initial two steps of a multi-step phase-in of lower threshold applicability with a commitment to take further regulatory activity to consider adopting lower thresholds. We believe this process will provide substantial opportunity for permitting authorities and sources to establish enough experience and information, and to provide significant real-world feedback to EPA, so as to better inform decisions on future phase-in steps. 
      With this overall phase-in approach in mind, in this final rule, EPA includes an enforceable commitment to undertake a notice-and-comment rulemaking that would begin with an SNPR that we expect to be issued in 2011 and that we commit will be finalized in 2012. The notice will propose or solicit comment on further reductions in the applicability levels. This rulemaking will take effect by July 1, 2013 and therefore, in effect, constitute Step 3. In this 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. While committing to future action, we do not decide in this rule when the phase-in process will ultimately end, or at what threshold level, because all that depends on uncertain variables such as our progress in developing streamlining approaches and on permitting authorities' progress in developing permitting expertise and acquiring more resources. We may continue the phase-in process with further rulemaking(s) after 2016. Alternatively, we may make a final determination through future rulemaking that, under a Chevron analysis, accounting for the "absurd results" doctrine, PSD and/or title V do not apply to GHG sources that, while small and relatively inconsequential in terms of GHG contribution, are above the statutory tonnage thresholds for these programs, and thereby end the phase-in process. 
      In addition, in this action, we are determining that in no event  -  whether through Step 3 or a subsequent step  -  will we apply PSD or title V to sources at the 50,000/50,000 tpy CO - 2e level or lower prior to May 1, 2016....  
      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 31572/col. 1; 31573/col. 3.

B. The structure, regulatory provisions, and preamble discussion of the phase-in process: Discussion

      The EPA designed Step 3 narrowly as an opportunity to lower the thresholds very soon after finalizing the Tailoring Rule, if PSD implementation for GHGs was on track and if events were unfolding in a way that allowed permitting at a lower level without straining administrative resources. Under these circumstances, it would not have been appropriate to wait several years, until EPA completed the five-year study and then promulgated Step 4, before lowering the thresholds.  

      The EPA scheduled Step 3 to be promulgated on the same day, July 1, 2012, as the completion of the first full year of Step 2. Of course, this means that the EPA would have had to begun the Step 3 rulemaking well before Step 2 had been implemented for even a single year, and as a practical matter, even before Step 1 had completed its first year. With so little time having passed for implementation of Steps 1 and 2, little information would be available to the EPA at the time of Step 3 about many aspects of the implementation process.

      Even so, in designing Step 3, the EPA recognized that it was possible that certain events could unfold in way that would point towards lowering the thresholds even during the very early stages of implementing Step 2. These events, which the EPA incorporated in the three criteria for lowering the thresholds, were if state permitting resources had increased, state expertise in GHG permitting had developed, or streamlining methods had been developed. The EPA recognized that if these events were to occur, it would be appropriate to lower the thresholds, even at that early date, rather than waiting until several years later. To reiterate, the three criteria reflected new developments that the EPA expected could possibly occur. It may well be that the possibility was not particularly high that the key events would unfold in a way that would allow a lowering of the thresholds  -  and if not, then the thresholds would remain at the Step 2 levels -- but the exercise was worthwhile because that possibility existed.

      It must be emphasized that the EPA never intended in Step 3 to conduct another administrative necessity determination to justify either retaining the Step 2 levels or lowering them. This is evident from the timing of Step 3, so soon after the Tailoring Rule, which included Steps 1 and 2. In promulgating Steps 1 and 2, the EPA had undertaken a robust analysis of administrative necessity. Key components of this analysis were the EPA's gathering of data and development of methodology to estimate the administrative burden  -  in terms of numbers of permitting actions and amount of time spent processing permits  -  at the various thresholds for PSD and title V applicability. This data and methodology are described in detail below, but to briefly summarize: In general, the methodology was designed to identify the various types of GHG permits, determine the number of each type of permit, determine the administrative costs of issuing each permit, calculate the overall administrative burden, and then compare those amounts to the current, non-GHG permitting burden, to determine the amount of the increase associated with GHG permitting. The methodology was necessarily complex due to the different types of permits: new construction and modifications; different industry types; and the fact that some sources were "anyway sources," that is, already required to get a PSD permit due to their conventional pollutants, while others were GHG-only sources, that is, subject to the permitting programs solely due to the GHG emissions. Because the methodology was complex, it required extensive information.

      The EPA scheduled Step 3 too soon after promulgation of Steps 1 and 2 to allow for the generation or processing of much new data or other information relevant to the methodology. As noted, the EPA began the Step 3 rulemaking in the fall-winter of 2011, a time before Step 1 had completed its first year and only just after Step 2 had begun. At the present time, as the EPA is completing the Step 3 rulemaking, Step 1 has approached the half-way mark of its second year and Step 2 is completing its first year. This schedule leaves no meaningful opportunity for the EPA, before promulgating Step 3, to gather and assess the wealth of information about permitting activity and permitting authority actions during Steps 1 and 2 that would be required to, if necessary, revise the data and re-evaluate the complex and information-intensive methodology. This schedule further supports our interpretation of Step 3 that it was not designed to include a broader review of the administrative-necessity basis of the thresholds.

      The narrowness of Step 3 is also clear from the description of the step in the regulatory provisions that promulgate it. The regulations establish Step 3 in a paragraph entitled, "Near term Action on GHG," and describe it simply as an action in which the EPA "shall solicit comment ... on promulgating lower GHGs thresholds for PSD applicability;" and go on to establish the finalization date of July 1, 2012 and the effective date of July 1, 2013.  40 CFR 51.22(b)(1). The Tailoring Rule preamble describes Step 3 in similar terms. 75 FR 31572/col.1. The EPA interprets these provisions that schedule Step 3 so soon after the implementation of Steps 1 and 2 and that tersely and narrowly define Step 3, to establish that the scope of Step 3 is as described above. It should also be noted that the above-described interpretation of the EPA's own regulations should be accorded the highest of deference. Auer v. Robbins, 519 U.S. 452, 461 (1997).

      The EPA's interpretation of these provisions for Step 3 finds support by contrasting them with the provisions and timing for Step 4, along with the five-year study. The regulations establish Step 4 in a paragraph entitled, "Further Study and Action on GHGs." 40 CFR 51.22(b)(2). Importantly, the regulations make clear that Step 4 is to be preceded by, and must be based on, the five-year study, which in turn is to be completed by April 30, 2015. That study is to be wide-ranging:  the regulations describe that study as "a study projecting the administrative burdens" of regulating sources below the then-existing thresholds. 40 CFR 52.122(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 to establish the finalization date of April 30, 2016. 40 CFR 52.122(b)(2)(ii). 

      These provisions, along with the timing of Step 4, make clear that Step 4 has a broader scope than Step 3. By the time of the five-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 information concerning this implementation, as well as the data and methodology that EPA relied on to establish the permitting thresholds. The EPA must undertake the five-year study, in which it evaluates that information as appropriate and "project[s] ... administrative burdens." The EPA must then conduct the Step 4 rulemaking based on the study. By virtue of the timing and description of Step 4, it is clear that Step 4 provides a greater opportunity for evaluating administrative necessity, as appropriate, in contrast to Step 3. 

      Step 3 must be understood as a part of the overall process the EPA set forth to phase in PSD and title V applicability, as established in the EPA's regulations. Step 3 has the scope that is appropriate in that context and that the EPA's regulations give to it. 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.  

      This narrow scope of Step 3 may be further illuminated by hypothesizing two alternative  -  and, in a sense, opposite  -  approaches for Step 3: First, consider a hypothetical approach in which the EPA drafted the Tailoring Rule so as to require Step 3 on a somewhat later  schedule than presently, and to further provide that as of the date that Step 3 was to be completed, the Steps 1 and 2 thresholds would automatically "sunset," that is, expire of their own accord, without the EPA rulemaking, so that absent further action, the statutory 100/250 thresholds would become applicable. Under these circumstances, if the EPA sought to continue limiting PSD and Title V applicability to larger sources, and not at the statutory 100/250 thresholds, the EPA would have to use Step 3 to promulgate new thresholds. Under these circumstances, if the EPA were to promulgate the new thresholds in Step 3 as the same levels as the thresholds in Steps 1 and 2, then the EPA arguably would need to support that hypothetical Step 3 rule with a new showing of administrative impossibility. In contrast, in the Tailoring Rule, the EPA did not in fact "sunset" the Tailoring Rule thresholds, but instead set up a different approach, and the scope of Step 3 should be ascertained by reference to that approach, as noted above, which was to limit Step 3 to lowering the thresholds if certain criteria were met. Considering this hypothetical approach for the Tailoring Rule makes clear that the commenters' argument that the EPA must support maintaining the current thresholds with a new showing of administrative necessity would have been valid if the Tailoring Rule approach had been to "sunset" the Steps 1 and 2 thresholds, but is not valid under the approach the Tailoring Rule actually took.  

      Second, consider the opposite:  a hypothetical approach in which the EPA drafted the Tailoring Rule so as not to require any rulemaking at all by July 1, 2012 (what we now call Step 3), and instead require only the five-year study in 2015 followed by rulemaking in 2016 (what we  now call Step 4). Under these circumstances, because there would be no rulemaking by July 1, 2012, there would be no requirement for the EPA to undertake any new administrative necessity analysis by that date. Considering this hypothetical scenario makes clear that while in actuality, in the Tailoring Rule the EPA did establish a Step 3 and therefore must address the thresholds, the scope of Step 3 depends on its context and regulatory provisions.  

      The importance of the structure of the phase-in process and the terms of the regulatory provisions themselves in determining the scope of Step 3 is made further 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 level before April 30, 2016. 40 CFR 52.22(b)(2)(iii), 40 CFR 71.13(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 remains a genuine constraint on whatever action the EPA may take in Step 3. The presence of this limit in the regulation clarifies the importance of the regulatory provisions in narrowing the scope of Step 3 by making clear that just as the EPA narrowed Step 3 by establishing the 50,000/50,000 floor, the EPA also narrowed Step 3 in other ways, described above. In addition, the presence of this limit contradicts commenters' argument that the EPA should be required to make a new evaluation of administrative burdens and a new showing of administrative impossibility in Step 3. That would be illogical 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 level.

      With respect to the type of information on which to base our action in Step 3, we note that hand-in-hand with the narrow scope of Step 3  -  that the EPA implements the step by applying the 3 criteria concerning, in general, state resources, state experience, and streamlining  -  is that the EPA must be able to determine that those criteria have been met in order to lower the Tailoring Rule thresholds. If the EPA does not have sufficient information to determine that those criteria have been met, then the EPA would not lower the thresholds.

      Accordingly, we disagree with the environmental advocacy organization commenter's (19292) assertion that  - 

      EPA misapprehends the burden it must meet in other instances as well. For instance, the necessary inquiry for the Step 3 analysis is not whether permitting agencies have the capacity to "efficiently manage" the permitting program...; whether expanding the program would "add more burden,"... ; or whether EPA can justify lowering the thresholds.... Rather, to retain the Tailoring Rule thresholds, EPA must demonstrate that thresholds below Steps 1 and 2 exceed administrative capacity; that the additional burden would do the same; and that it can justify retaining, rather than lowering, the thresholds.

We disagree with this comment because as discussed above, Step 3 has a narrower scope than the commenter describes and authorizes the EPA to lower the thresholds only if the EPA can obtain sufficient information to demonstrate that the criteria are met.   

      We wish to emphasize that we fully recognize the imperatives of the administrative necessity doctrine. We discussed the 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 levels, at least to a certain point. But we are authorized to structure the phase-in process as having multiple steps, and in so doing, we may design a particular step (such as Step 3) in a particular manner to serve a particular purpose, all of which may be different than for another step (such as Step 4). As noted, the narrow purpose of Step 3 is consistent with, and helps assure the success of, the overall phase-in process. Commenters in effect seek to take Step 3 out of the EPA's regulatory design and ascribe to it a different meaning that the EPA did not intend.  

II. Comments on Specific Criteria for Step 3

      The EPA disagrees with various comments by the environmental advocacy organization commenters (19292, 19269) concerning the 3 criteria for lowering the Tailoring Rule thresholds.

      One environmental advocacy organization commenter (19292) stated that the three criteria should not be considered to be pertinent because the permitting agencies were not "running at capacity -- established under the Tailoring Rule as 1,605 PSD permits per year" -- in light of the fewer permitting actions actually taken. The second environmental advocacy organization commenter (19269) stated that due to the fewer permitting actions, the three criteria should be considered either as (i) not having been required to have been met or (ii) having been met. 

      We disagree with these comments. In establishing the three criteria in the Tailoring Rule, the EPA did not premise them on the permitting agencies "running at capacity." Rather, the three criteria may be applied by their terms regardless of the fact that the actual number of permits is less than the expected number of permits. For the same reason, the three criteria cannot be considered to have been met, or be considered to no longer be required, due to the lower-than-expected number of permits. Thus, we disagree with the commenters' attempts to read into the three criteria a premise that actual permitting activity achieve the levels expected in the Tailoring Rule, or to construe the three criteria in light of actual permitting activity, because those attempts have the effect of marginalizing the three criteria, and replacing them with a different criterion based on actual permitting levels. In addition, for the reasons stated below, even if the disparity between the levels of actual and expected permitting activity could be relevant, it is premature to discard or attempt to revise the data and methodology for determining administrative burdens; and we believe that to at least some extent, the unexpectedly lower number of permitting actions may be temporary.

      With respect to the first criterion (generally, state resources), the environmental advocacy organization commenter (19292) also cautioned against what it described as  -  

      EPA[`s] attempt to rely on a decision by one or more state legislatures to underfund CAA programs as evidence of "administrative necessity." EPA's original Tailoring Rule argument was to provide state and local permitting authorities the time needed to develop the necessary permitting capacity. While some deference to recent economic conditions may be appropriate, we cannot support a decision on threshold levels based on the failure of permitting authorities to use the time provided in the agency's earlier decision.

      The second environmental advocacy organization commenter (19269) made a similar comment, pointing out that in its home state of Pennsylvania, the state environmental agency has seen 5 years of budget cuts and is proposed to have an additional 5% cut this year, and asserting that states cannot choose to make a decision to slash budgets for environmental programs and then rely on a lack of resources to avoid proper permitting of GHGs. Private citizen commenters (19294, et al) made similar comments.

      We appreciate these comments and acknowledge the commenters' concern as to whether a state could in effect manipulate the first criterion in the manner they suggest by underfunding the environmental agency. However, we apply the first criteria 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, 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, such as some of the eastern states in the Regional Greenhouse Gas Initiative. See Environmental Council of States, "ECOS Green Report: The Status of State Environmental Agency Budgets, 2009-2011 (2010); Letter from S. William Becker, NACAA, to Honorable Michael Simpson and Honorable James Moran, U.S. House of Representatives (June 28, 2011). Applying this criterion on a nationwide basis minimizes concerns about a particular state seeking to underfund the environmental agency.

      With respect to the second criterion (generally, state permitting implementation experience), the environmental advocacy organization commenter (19292) stated that in the Step 3 proposal, the "EPA introduces a new rationale for continued tailoring  -  lack of experience by state and local permitting agencies." The commenter asserts that "[s]uch a rationale cannot be lawfully used to justify departure from statutory requirements" and points out that "[t]here are over 200 state and local permitting programs," many of which may see few or even no permit applications for many years. The commenter concludes that the "EPA's argument that each of these permitting authorities must have actual GHG permitting experience at the current thresholds before it will consider lowering the thresholds is untenable."  

      The commenter has misconstrued the Step 3 proposal. The proposal described the second criterion as follows:

      The second criterion we address is whether permitting authorities have the ability to issue timely permits based on efficiencies resulting from GHG permitting implementation experience. 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 staff. This would allow them to achieve efficiencies that, in turn, would create capacity for processing more GHG permit applications.

      The proposal goes on to note that "[a]s of December 1, 2011, the EPA and state permitting authorities have issued only 18 GHG PSD permits ... [which] have been spread among 11 states and the EPA.... This activity has simply been too limited to allow States to ... build up their GHG permitting infrastructure."  77 FR 14236/col. 3  -  14237/col. 1 (footnote omitted). As this discussion makes clear, contrary to the comment, the permitting authorities' "experience" is not "a new rationale," but rather is part and parcel of the second criterion. In addition, contrary to the comment, our proposal did not suggest that "each of these permitting authorities must have actual GHG permitting experience...." Rather, our proposal reviewed state experience on a nationwide basis and concluded that the overall level of state experience was limited. Nowhere did we assert that this criterion called for each of the state or local permitting authorities to have experience.

III. Disparity between numbers of actual permits and expected permits. 

      One environmental advocacy organization commenter (19292) emphasized that in the Tailoring Rule, the EPA estimated that at the 100,000/75,000 thresholds, permitting authorities would have a workload of 1,605 GHG PSD permits on an annual basis, but that in the Step 3 proposal, the EPA acknowledged that in actuality, as of December 1, 2011, only 18 GHG PSD permits had been issued and 50 applications had been submitted. The commenter emphasized "[t]his gulf between reality and estimate" and argued that the "EPA must [check the accuracy of the Tailoring Rule cost assumptions and] adjust the expected agency costs... or provide a reason why the actual experience does not warrant an adjustment. Without engaging in this effort, the EPA cannot meet its burden of demonstrating that lowering the thresholds in 2013 remains impossible." The commenter suggested that the EPA consider issuing a supplemental notice of proposed rulemaking. The second environmental advocacy organization commenter (19269) similarly emphasized the disparity between estimated and actual permit activity, but stated that in light of that disparity, the EPA is required to lower the thresholds. Private citizen commenters (19294, et al) made similar comments.

      With this comment, the first environmental advocacy organization commenter explicitly took the position that in light of the disparity, the EPA must review and, as needed, revise the data and methodology set forth in the Tailoring Rule, by which the EPA estimated the number of GHG-related permits and per-permit administrative costs. The second environmental advocacy organization commenter at least implicitly took the same position by urging the EPA to lower the thresholds because that data and methodology are the means by which the EPA determines the appropriate threshold. Private citizen commenters (19294, et al) took similar positions.

      We disagree with these comments, for the reasons discussed next.

A. Step 3 is not designed to reconsider the methodology

      We recognize the disparity that the commenters stress between the estimated and actual permitting. However, we disagree that this disparity obliges us to reconsider the Tailoring Rule methodology during Step 3. For the reasons described above, Step 3 has a narrow scope: it is limited to the three criteria described elsewhere, and as a result, it does not entail a review of the underlying methodology. 

B. In Step 3, EPA has not re-opened the methodology.

      It should be noted that in the Step 3 proposal, the EPA did not re-open the underlying methodology. Instead, as the EPA stated in the preamble to the proposal:

      To support this Step 3 rulemaking, the EPA has gathered additional information on the impact that GHG permitting is having on permitting authorities at the current threshold levels and the potential impact that would result from a reduction in the GHG permitting thresholds to levels as low as 50,000 tpy CO2e. [This includes information concerning] the actual permitting that has occurred since January 1, 2011[, and] ... information gathered through preliminary consultations with eight state PSD permitting authorities, as well as, experience garnered from the EPA regional offices that are the PSD permitting authorities for certain states.... [In addition,] EPA carried out an analysis to estimate the number of facilities that would exceed different GHG emissions threshold levels. This analysis built upon analysis the EPA included in the Tailoring Rule to support the threshold decisions in that action. In the Tailoring Rule analysis, the EPA evaluated eight different PTE thresholds between 100 and 100,000 tpy CO2e, including 50,000 tons per year. For this Step 3 analysis, the EPA evaluated nine additional thresholds between 50,000 and 100,000 tpy CO2e in 5,000 tpy increments (that is, 55,000 through 95,000 tpy CO2e).

77 FR 14233/col. 2, 14234/col. 1 (footnotes omitted). In addition, in the proposal, the EPA asked the states a set of questions concerning their permitting activity and permitting programs, which questions were "structured to help the EPA best assess the status of GHG permitting programs based on the three criteria outlined in the Tailoring Rule, which forms [sic: form] the basis for [Step 3]." 77 FR 14255/col. 3. Indeed, in the proposal, we specifically stated, 

      We note that in this rulemaking, we are not re-opening or soliciting comment on the Tailoring Rule's decision to phase in the thresholds, to begin with the Steps 1 and 2 levels, or the legal or policy basis for the Tailoring Rule. By the same token, as noted previously in section V, in 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/col. 3. Our views have not changed in our action today.

C. Lack of sufficient information concerning the data and methodology to conclude that it should be revised

1. Summary

      Although we are not re-opening the data and methodology, we note that even if we were prepared to do so, 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. Thus, it is premature to discard or attempt to revise the Tailoring Rule data sets or methodology for determining administrative burdens. 

      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 sources 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 of permitting all these types of sources, we had to rely on several different sources of data concerning the amounts of PSD and title V permitting activity. The most important of these was the 2008 information collection request (ICR) for the New Source Review (NSR) program (the NSR ICR), which indicated the numbers of minor source and major source permits issued annually on a nationwide basis.  In addition, we had to develop a complex and multi-component methodology, with numerous assumptions and estimates concerning, among other things, what percentages of different populations of sources would meet certain criteria or engage in certain activities. 

      The sources of data were the best available, and the assumptions in the methodology were reasonable. Importantly, the data sources and methodology were fully vetted through the Tailoring Rule process. At proposal, no one commented that the methodology over-estimated the amount of permitting burden. Following promulgation of the Tailoring Rule, no one sought administrative reconsideration of the methodology and no one challenged it in court. In addition, EPA has completed the triennial renewal of the NSR ICR, through the mandated Federal Register notice processes. The renewed NSR ICR has essentially the same estimates, for present purposes, of the numbers of permits as in the 2008 NSR ICR (which, in turn, formed the basis for the data sets in the Tailoring Rule), and no one commented on those estimates.

      In this Step 3 rulemaking, although environmental advocacy organization commenters have pointed out the disparity between the total number of expected annual GHG permit actions, based on the EPA's methodology, and the actual number to date, these commenters did not provide any specific information that casts doubt on any particular aspect of this data and methodology.  

      In the absence of such information, there are several possible explanations for the disparity between expected and actual permits. It is possible that the unexpectedly small number of permits is at least in part a temporary phenomenon due to a combination of macro-economic conditions; prospective permittees having accelerated their applications to 2010 to avoid GHG PSD requirements; as industry suggests, companies adopting a wait-and-see approach; or under-reporting, particularly by smaller companies, due to lack of awareness.

      Even so, we recognize that it is also possible that various aspects of this complex set of data and methodology  -  again, with numerous assumptions and estimates  -  do contain inaccuracies that yield an over-estimation of the number of GHG permits. However, our purpose is to estimate overall GHG permitting burden, which entails not only the number of GHG permits, but also the amount of per-permit processing costs and other components of permitting administration, which in turn include minor source permitting, hiring and training, education and outreach, and enforcement. Moreover, it must be borne in mind that the ultimate purpose of determining permitting burden is to determine the applicable thresholds. 

      Viewed in this context, it is clear that even if we were to conclude, based on the actual data, that our estimates of the number of GHG permits were over-estimates, we are not in a position at present to attempt to revise the applicability thresholds, as one of the environmental advocacy organization commenter urged. There are several reasons:

      First, the information concerning numbers of permits tells only part of the overall administrative-burden story. Other information indicates that our data sets and methodology may not account for certain components of permitting administration, which would point towards an under-estimate of permitting burden. For example, states face additional expenses in permitting synthetic minor sources due to efforts to avoid GHG requirements. In addition, as we acknowledged in the Tailoring Rule, we did not include additional costs of staff training, public education and outreach (as opposed to support provided to individual sources seeking permits), see 75 FR 31568/col. 2; 31571/col. 1 (Tailoring Rule) and enforcement associated with GHG permitting.

      Second, we have little information as to the amount of the possible overestimate, in light of the fact that at least some of it may be due to macro-economic conditions and other factors. Moreover, the data concerning the actual number of GHG permits issued provides little information as to which of the many data points or assumptions and estimates in the methodology may have lead to the overestimate. This lack of information would confound any effort to adjust the estimates of overall permitting burden and, based on that, the applicable thresholds.

      Third, and more broadly, we expect to receive more information over time that may shed light on the accuracy of various aspects of our data sets and methodology. This is true not only for the numbers of permits that we estimate, but also for the estimates of the per-permit costs to the permitting authorities and the other components of permitting administration. For example, affected 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 information concerning actual numbers of title V permits or other aspects of title V permitting.  
      
      This information may point towards adjustments in overall permitting burden and, ultimately, in the applicable thresholds, but at the present time  -  when we are required by our regulations to complete Step 3 - 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 information concerning numbers of GHG permits would amount to a piecemeal approach, one that 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. A piecemeal approach 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. 

      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." Instead, we consider it reasonable at this time to finalize the Step 3 rulemaking as proposed, thereby determining not to lower the thresholds. This is consistent with the schedule for action already established in the Tailoring Rule regulations. These regulations obligate the EPA to undertake a 5-year assessment (to be completed by April 30, 2015), followed by Step 4 (to be promulgated by April 30, 2016).

      This regulatory schedule accommodates very well the gathering and analyzing of additional information to review and, as needed, revise the data and methodology. We intend to take steps to gather information from the permitting authorities concerning permitting activity. Because GHG permitting is a new addition to the PSD program, we believe that it is important that we acquire information concerning two full years of implementation of Step 2, after the initial, "start-up" year. That two-year period is July 1, 2012 to June 30, 2014. Importantly, this regulatory schedule will also accommodate the development of GHG permitting under title V, including the collection and analysis of information concerning progress. 

      We see little value to issuing a supplemental notice of proposed rulemaking at this time.  Continuing with the schedule prescribed in the Tailoring Rule regulations, as just described, will accommodate any needed review and revision of our data and methodology and, based on those, of the thresholds. Maintaining the regulatory schedule will avoid uncertainty concerning the timing of when the EPA may revise the thresholds.

2. Data and methodology 

a. Background

      We described in the Tailoring Rule and supporting documents the data and methodology that formed the basis of the Tailoring Rule estimates of administrative burden. For convenience, we describe the key components, for purposes of this rulemaking, of those data sets and methodology, in a supplement to this Response to Comments Document (Step 3 RTC Supplement).

      Note that in the Tailoring Rule, our methodology indicated 1,607 permit actions per year at the 100,000/75,000 Step 2 thresholds. This includes 242 newly constructed sources and 1,365 modifications. The modifications included 448 "anyway" sources and 917 "GHG-only" sources.  Tailoring Rule Step 3 proposal, 77 FR 14234/col. 3.

      The Tailoring Rule supporting documents and the Step 3 RTC Supplement describe the NSR ICR, which serves as the primary source of data sets for the burden estimates. It should be noted that in the Tailoring Rule, the EPA relied in information in the version of the NSR ICR that had been approved in 2008. The EPA is currently in the process of renewing the NSR ICR. In this renewal, the EPA identified the number of permit applications, minor sources, and time spent as the same as the 2008 ICR, except that the EPA increased the number of permit applications to account for tribal and GHG permitting. The EPA published the two Federal Register notices containing the NSR ICR on November 25, 2011 (76 FR 72700-72702) and April 17, 2012 (74 FR 22779-22780), and allowed 30-day comment periods for each notice. The EPA did not receive any comments on the NSR ICRs during those comment periods. Thus, no one has contested the amounts of permitting activity, including the numbers of minor sources, and the permitting authority time spent on processing permits.

      For purposes of responding to comments, we note that in the 1990 Clean Air Act Amendments, Congress established the RACT-BACT-LAER Clearinghouse (RBLC) in CAA §108(h):
      
      (h) RACT/BACT/LAER Clearinghouse
      
      The Administrator shall make information regarding emission control technology available to the States and to the general public through a central database.  Such information shall include all control technology information received pursuant to State plan provisions requiring permits for sources, including operating permits for existing sources.

At the same time, Congress provided, in CAA section 173(d):

      The State shall provide that control technology information from permits issued under this section [i.e. nonattainment NSR permits] will be promptly submitted to the Administrator for purposes of making such information available through the RACT/BACT/LAER clearinghouse to other States and to the general public.
      
      The RBLC is intended to be a repository for data concerning the reasonably available control technology (RACT) requirements of the CAA general nonattainment provisions (e.g., CAA §172(c)(1)), the best available control technology (BACT) requirements of the PSD provisions (CAA §165(a)(4)), and the lowest achievable emission reduction (LAER) requirement of the nonattainment NSR provisions (e.g., CAA §173(a)(2)). Specifically, the EPA describes its purpose as follows:

      EPA established the RACT/BACT/LAER Clearinghouse, or RBLC, to provide a central data base of air pollution technology information (including past RACT, BACT, and LAER decisions contained in NSR permits) to promote the sharing of information among permitting agencies and to aid in future case-by-case determinations.
      
http://www.epa.gov/ttn/catc/rblc/htm/welcome_eg.html.  

The RBLC is focused on types of control technology that form the basis for emission limits in the general nonattainment, PSD, and nonattainment NSR requirements. The RBLC is not designed to track all PSD or all nonattainment NSR permitting actions. In addition, participation by states in the RBLC for PSD information is voluntary. Overall, participation by states in the RBLC varies. For example, the State of North Carolina recently declined a request by the EPA that the state provide information for all major permitting actions, and informed the EPA that instead it would provide information to the RBLC only "when a state BACT/LAER determination involves the setting of a limit based on a technology currently not included in the RBLC database." As a result, we are aware that the information in the RBLC is partial, but of course we do not know what information states do not submit. Because of our lack of information concerning the robustness of the RBLC as a database, we did not rely on it in estimating permit burdens in the Tailoring Rule.

      It should also be noted that starting in 2011, The EPA regional officials have tracked the progress of permitting authority action on GHG permit applications through informal communications with state officials. The information that the EPA has compiled in this manner is the source of our knowledge about numbers of GHG permits, which we cite in this rulemaking.  

b. Actual permits

      In the Step 3 proposal, we estimated that as of December 1, 2011, the state permitting authorities and the EPA (in its capacity as permitting authority in several states) had issued 18 GHG permits. As of May 21, 2012, the number of GHG permits issued has increased to 44. We base these numbers on an ongoing informal survey of State permitting activity conducted by the EPA regions.

c. Evaluation of Methodology

i. Numbers of expected GHG permits and actual GHG permits

      From the Tailoring Rule Summary of Methodology, the EPA estimated that Step 1 alone would result in 688 GHG permitting actions on an annual basis, 75 FR  31540 (Table V-1), and that Step 2 (which included all the GHG permitting actions under Step 1) would result in a total of 1,607 GHG permitting actions on an annual basis. The 1,607 sources that the EPA estimated would seek permits each year, once Step 2 had been in place for a full year, included 242 for new sources (almost all of which were from "anyway" sources, that is, "Newly Constructed Major Sources  -  Add Additional GHG"), and 1,365 from modifications (about two-thirds of which were "Minor Modifications Becoming Newly Major" and most of the rest of which were from "anyway" modifications, that is, "Current Modifications  -  Add Additional GHG"). Tailoring Rule Summary of Methodology, at 5, Table 2-1.

      Under this methodology, by December 1, 2011, the expected number of permits was 1,013. As the EPA noted in the Step 3 proposal, 18 GHG permits were issued by that date.

      The EPA's information indicates that by May 21, 2012, 43 permits were issued, although the total number of expected permits had also increased by that time.

      As commenters have observed, there is a disparity between the total number of annual permits that, based on the EPA's methodology, were expected, and the total number actually issued. However, as discussed below, no specific information is available that casts doubt on any particular aspect of the data sets or methodology that are the basis of the expected number of permits.  

ii. Full consideration of, and lack of challenges to, the data and methodology during or after the Tailoring Rule.
 
      During the Tailoring Rule rulemaking and the ensuring litigation, no one adversely commented on, sought reconsideration on, or challenged in court any aspect of the EPA's data or methodology on grounds of overstating the numbers of permits or the per-permit costs in time and money to the permitting authorities. On the contrary, during the comment period following the proposed rulemaking, 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. 

      Specifically, in the Tailoring Rule proposal, the EPA recognized that the 282 annual PSD permitting actions (as identified in the NSR ICR) would generally require GHG permitting, but following the proposal, based upon further analysis, recognized that most of the 519 nonattainment annual NSR permitting actions (as identified in the NSR ICR) generally would also require GHG permitting. Accordingly, in the final action, the EPA increased the expected number of annual GHG permitting actions to include nonattainment annual NSR permitting actions. 75 FR 31537/col. 1 (final Tailoring Rule). Most significantly, commenters pointed out that the Tailoring Rule proposal failed to account for the state minor source permitting actions that include GHG emissions, many of which would be expected to become subject to GHG permitting requirements. The information available to the EPA indicated that those sources numbered in the thousands. The EPA agreed with commenters and, in the final action, adjusted the permitting actions that required a higher threshold (100,000/75,000) compared to what we had proposed (25,000/25,000). 75 FR 31537/col. 2  -  31538/col. 1 (final Tailoring Rule). In addition, commenters pointed out that in the Tailoring Rule proposal, EPA underestimated the amount of time needed for permitting authorities to process commercial and residential GHG permits. In the final rule, the EPA agreed and more than tripled the amount of time. Tailoring Rule Summary of Methodology, at 11. Following promulgation of the Tailoring Rule, as noted, no one petitioned the EPA to reconsider these increases or sought judicial review of this data or methodology.   

iii. Basis of permit-burden estimates on best data available and on reasonable assumptions and estimates in methodology that were unchallenged

      In the Tailoring Rule, the EPA's permit burden estimates were based on data sets that were the best available and a methodology that incorporated estimates and assumptions that are reasonable. In addition, the public had the opportunity to comment on the data sets and methodology and no one challenged them as leading to overstatements in the number of GHG permitting actions or in the burden estimates in any other way. 

      Central to the permit burden estimates is the underlying data concerning the numbers of permitting actions and the time and cost to permitting authorities in processing permit applications. For most components of the burden estimates, the EPA relied on the data contained in the NSR ICR; and for some components, on data contained in the title V ICR and the GHG MRR. In 2009-2010, when the EPA developed and promulgated the Tailoring Rule, the EPA had available the 2008 NSR ICR, which provided the numbers of annual PSD and nonattainment permitting actions as well as minor source permitting actions, and the per-permit processing time by the permitting authorities, that the EPA relied on in the Tailoring Rule. In 2011, the EPA began the process to renew this NSR ICR, and increased estimates in the number of permitting actions to account for, among other things, GHG and tribal permitting. Public comment was solicited on the renewal through two Federal Register notices, with the most recent comment period closing on May 17, 2012, which was shortly after the comment period closed in this Tailoring Rule Step 3 rulemaking. No one commented on this renewal, including on those estimated number of permitting actions. 

      The environmental advocacy organization commenters on the Tailoring Rule Step 3 proposal did not provide any information specifically to suggest any errors in the underlying data used in the Tailoring Rule concerning the numbers of permitting actions or the per-permit processing time for the permitting authorities. Similarly, these commenters did not specifically call into question any of the various assumptions or estimates in the Tailoring Rule methodology. The state and industry commenters generally were supportive of the EPA's step 3 proposal and also did not submit any information that would specifically call into question any aspect of the Tailoring Rule data sets or methodology.
      
      Moreover, aside from the disparity between the numbers of actual GHG permit actions, the EPA does not have available any other source of information that would call into question any particular aspect of the data or methodology. The EPA does not have any other reliable source of information concerning permitting activity. The RACT-BACT-LAER Clearinghouse includes certain information about PSD and nonattainment permits issued, but it is incomplete and therefore cannot be used to estimate the amount of permitting activity. 

iv. Possibility that unexpectedly low numbers of permits are temporary, at least in substantial part

      In the absence of information calling into question any particular aspect of the underlying data or methodology, there are several possible explanations for the disparity between expected and actual GHG permits. It is possible that the unexpectedly small number of GHG permits is at least in substantial part a temporary phenomenon due to one or more of the following: First, as discussed in the proposal, it is possible that prospective permittees and some permitting authorities accelerated permitting activity to 2010 to avoid the GHG PSD requirements that took effect as of January 2, 2011. Industry commenters on the Step 3 proposal stated that such accelerated permitting activity occurred.

      Second, it is possible that the economic downturn and slow recovery that the nation has experienced in the past several years have reduced the amount of permitting activity. This is made clear by a review of three of the key economic indicators tracked by the Federal Reserve Board: industrial production, capacity, and capacity utilization. Industrial production and capacity measure both actual and potential output in real terms. Capacity utilization is reported as the percent of capacity used. The most recent report, issued May 16, 2012, includes a chart showing all three indicators from 1966 through the present.  

Figure 1. Industrial Production and Capacity

Source: Federal Reserve Board, 2012.
Note: The shaded areas are periods of business recession as defined by the National Bureau of Economic Research (NBER).	

Figure 2. Capacity Utilization

Source: Federal Reserve Board, 2012.
Note: The shaded areas are periods of business recession as defined by the National Bureau of Economic Research (NBER).	

      While available capacity remained relatively stable through the current recession, industrial production decreased dramatically beginning in 2008 and has yet to return to pre-recession levels. Similarly, in 2009, utilization reached the lowest rate in the period presented and has yet to fully recover. 

      As long as significant capacity remains unutilized, companies have the ability to expand production within existing facilities. This will reduce the demand for construction of new facilities or expansion of existing facilities and, thus, limit the applications for PSD permits for new construction or modifications. Additionally, during a period of uncertain recovery, companies may be hesitant to make significant investments in new facilities, causing capacity growth to lag production increases. In the Annual Capital Expenditures Survey, the U.S. Census Bureau reports a significant drop in capital spending (i.e., spending on structures and equipment) for the manufacturing sector between 2008 and 2009. Early reports of 2010 capital spending show similar levels as in 2009.

      With the exception of periods of stagnation following the early-2000s and most recent recessions, capacity has grown consistently over the more than 40-year period presented in the Federal Reserve report. Although future projections are inherently uncertain, these historical trends indicate that future permitting activity will increase as the economy continues to recover from the slowdown.  

	With respect to an environmental advocacy organization commenter's (19292) comment that EPA "includes no evidence in the record indicating how PSD permitting levels have varied with economic changes in the past," we note first that because, as discussed above, Step 3 is a narrowly based action that does not depend on the amount of permitting activity (but rather, depends on the three criteria, including the development of permitting authority expertise), such information is not relevant and therefore it is not necessary for us to include it. Even if such information were relevant, the fact remains that we simply do not have such information.  That is, our data is limited to the data in the current and prior versions of the NSR ICR, which generally shows permitting activity at similar levels to what the current ICR shows, and we do not have data concerning year-to-year PSD permitting levels in the past. As a result, it is impossible to determine whether and how they have varied with economic changes.

	With respect to the same commenter's comment that the EPA "includes no evidence in the record ... demonstrating that an increase from tens to thousands of permits per year is consistent with either past experience or credible forecasts of future activity," we acknowledge, again, that our data is limited to the NSR ICR data, so that we do not have year-to-year data concerning past PSD permitting levels, and therefore that we cannot determine "past experience" concerning increases in PSD permitting levels. By the same token, the lack of data about year-to-year past permitting levels and how they may have varied with economic activity renders it problematic to develop "credible forecasts of future activity." The EPA believes that in the absence of that data, the best that can be done is to point to the several factors  -  of which macro-economic conditions are an important one, but not the only one  -  that indicate that the unexpectedly lower amounts of permitting may, at least in part, be temporary.  

	The same commenter added the following comment based on information in the RACT-BACT-LAER Clearinghouse:

      A review of the permitting data contained in EPA's RACT/BACT/LAER Clearinghouse ("RBLC") confirms that while fewer PSD permits were issued in 2011 than in earlier years, the difference is not sufficient to establish the administrative impossibility of a lower threshold under EPA's analysis of administrative burdens. The RBLC lists 114 permits in 2007 and 39 in 2011. Over a ten-year average, approximately 140 permits are issued ear [sic: each] year. Assuming similar variability between 2011 and 2013, a reasonable estimate for the number of GHG PSD permits would fall between 50-150. As discussed above, EPA has determined that an additional workload significantly higher than this figure is feasible. 

The commenter adds that "The RBLC is generally understood to under-report the number of actual permits by approximately 50 percent."

      We appreciate the commenter's careful analysis of the information in the RBLC, but because the RBLC is focused on information about technology, and not numbers of permitting actions; and because participation for PSD permitting activity is voluntary with the states, we do not believe that the RBLC can provide credible evidence about the variability of permitting levels over time. We see no basis to the commenters' assertion that the RBLC "under-report[s] the number of actual permits by approximately 50 percent." The RBLC is useful as a qualitative indication that permitting levels have dipped in recent years along with the economic downturn and slow recovery, but not as a quantitative indication of amount of permitting activity variability over time.

      Third, industry commenters have stated that this initial stage of GHG permitting has created uncertainty within the regulated community that has lead to reduced permitting activity.  

      Fourth, it is possible 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. These smaller sources constitute some 57% of the sources subject to GHG permitting. They are the Step 2 sources, that is, the GHG-only sources, which generally are industrial or manufacturing sources that are too small to trigger PSD for their conventional pollutants, and that, as a result, in the past, have not been subject to PSD permitting requirements. It is possible that at this early stage of GHG permitting, lack of familiarity with the PSD program has lead to some degree of under-reporting among these sources. For example, in its comments, the State of Colorado (19277) responded to the EPA's inquiry as to states' outreach efforts for small sources by stating:

      The Division has engaged in an active in an active outreach effort to inform sources of the requirements of the PSD and Title V programs for GHG.  However, the Division has still not identified all nontraditional sources that might have GHG emissions above the 100,000 tpy CO2e threshold...

      Our view that the disparity between expected and actual amount of permitting activity is at least in part temporary is confirmed by, as we noted in the Tailoring Rule Step 3 proposal, officials in several states, who have stated that they thought the pace of GHG permitting would increase above the pace observed in 2011:

      These states ... confirm that they have not yet experienced the increase in the number of major source permitting actions that was predicted to result from the implementation of Step 1 and Step 1.  They generally do not believe that 2011 has been representative of the permitting burdens that they expect will ultimately occur under the current Tailoring Rule.

77 FR 14233/col. 3  -  14234/col. 1. 

      For all these reasons, although we acknowledge the disparity between expected and actual numbers of permitting actions, because there is a meaningful possibility that at least a substantial part of the disparity is temporary, the disparity does not, at this time, lead us to conclude that our data sets or methodology are erroneous and must be revised. 
      
v. Reasons why at this time, any over-estimates in permitting activity do not provide basis for revising overall permitting burden 

      Even so, we recognize that it is possible that part of the reason for the disparity between expected and actual numbers of GHG permits is that our estimates of GHG permits in the Tailoring Rule will turn out to be over-estimates. Even if this is the case, however, we are not in a position, during this Step 3, to attempt to revise the Steps 1 and 2 applicability thresholds on the basis of a new determination of permitting burden, as one of the environmental advocacy organizations (19269) has suggested. To understand why, it must be borne in mind that in order for us to determine overall GHG permitting burden, we must determine not only the amount of GHG permits, but also the amount of per-permit processing costs and the amount of the costs of other components of permitting administration. Moreover, this calculation requires determining those amounts with as much specificity as possible.

      Viewed in this context, the following reasons prevent us from being able, at this time, to revise our estimates of permitting burden and, on that basis, lower the applicability thresholds:

(a). Possibility of under-estimates of part of permitting burden

      First, we must recognize that in certain respects, our data sets and methodology under-estimated permitting burden by not accounting for certain costs. In part, we acknowledged this in the Tailoring Rule.

      As noted, states face increases in their permitting expenses due to an increase in synthetic minor source permit applications from sources seeking to avoid GHG requirements. This permitting activity concerns minor sources that would become major, and therefore would be in need of a PSD permit, solely because of their GHG emissions. However, many of these sources will be able to apply to their state or local permitting authority for a permit limit that restricts their GHG emissions to a level below the Tailoring Rule thresholds, so that they would remain minor sources and not become subject to PSD or, title V. We call sources that take such a permit limit "synthetic minor sources." Permitting authorities' issuance of synthetic minor permits for GHG sources constitutes a GHG administrative burden because those sources would not need synthetic minor permits if PSD and title V did not apply to GHG sources. At the time of the Tailoring Rule and presently, we have not had information that would allow us to estimate the number of these synthetic minor permits or, as a result, their cost to the permitting authorities.

      In addition, in the Tailoring Rule, we noted that we expected permitting authorities to incur certain administrative costs that were difficult to monetize and therefore that we did not include in our estimates of administrative burden. We stated that those administrative costs included, at least before and during Step 1, costs for hiring and training additional staff to handle the influx of GHG permits as well as public education and outreach for affected sources:

      In addition to [the] workload and monetary costs [that EPA quantified], permitting authorities will confront additional burdens before and during Step 1, which we have not attempted to quantify. One of the most significant of these is training staff in the PSD-related areas of GHG emissions calculations and BACT evaluations. In addition, permitting staff will need to build staff expertise and capacity for addressing GHG requirements in preparation for Step 2....; and in communicating and providing outreach to sources addressing GHG emissions for the first time. Based on comments we received on the proposal from permitting authorities, we believe these additional training and outreach requirements  -  for both the PSD and title V programs  -  will add significantly to the permitting authorities' burden during the initial 6-month period under Step 1.
      
Tailoring Rule, 75 FR 31568/col. 2. It is apparent that many permitting authorities did not incur those costs before and during Step 1 due to budget limitations and the unexpectedly limited GHG permitting activity. Thus, the permitting authorities may be expected to incur those costs going forward, as permitting activity increases. In addition, we explained in the Tailoring Rule that we expected some of these costs to be ongoing.  See Tailoring Rule, 75 FR 31571/col. 1 ("In addition to the administrative burdens we have been able to monetize, we must be mindful that permitting authorities will incur other burdens, including the significant support and outreach activities by permitting staff for the many newly permitted sources."). Similarly, permitting authorities can be expected to incur costs for additional enforcement work associated with GHG permitting, but we did not attempt to account for those costs in our estimates of administrative burdens either.

      These unaccounted for costs create the risk that if we were to attempt to lower the thresholds at this time, permitting authorities might face administrative burdens higher than what we would expect, which would give rise to risks that permitting authorities could incur unexpectedly high administrative burdens that could delay PSD and title V permitting.  

(b). Lack of information or alternative methodology to determine different estimates for GHG permits or thresholds 

      A second reason why we would not lower applicability thresholds at this time even if we concluded that we had overestimated the numbers of GHG permits is that we would face significant information gaps, as well as a lack of any alternative methodology, which would preclude us from determining the appropriate thresholds at this time. For one thing, we do not have a clear idea as to the amount of the possible overestimate of GHG permits, in light of the fact that at least some of amount appears to be due to the recent economic downturn and slow recovery, as well as the other factors described above. Moreover, the actual number of GHG permits issued provides little information as to which of the many data points or assumptions and estimates in the methodology had inaccuracies and thereby led to the possible overestimate. Nor has any commenter suggested an alternative methodology that could make use of the data in a manner that leads to a reasonable determination of the threshold. 

      In essence, the EPA's methodology is a type of a model that cannot mirror the real world perfectly. In the Tailoring Rule, the EPA acknowledged that many steps in its methodology carried uncertainty. See Tailoring Rule Summary of Methodology at 6 (noting uncertainty of "accurately predicting which of the 519 nonattainment actions might also coincide with a PSD action related to GHG emissions..."); 9 (noting necessity to make assumptions concerning how many formerly minor modification projects would be subject to major PSD review at the different GHG significance levels options "in the absence of experience and quantitative information from commenters"); 13 (noting "some level of uncertainty" in applying the same modification rate to GHG-only sources as to conventional sources). Inaccuracies in any one or more of the many assumptions in the methodology, depending on what those inaccuracies are, could result in over-estimates in the number of permits. By the same token, inaccuracies in the underlying data, such as the estimates of permit activity in the NSR ICR, could also result in over-estimates in the amount of GHG permitting activity.

      However, even if we were to conclude that the fewer than expected number of GHG permits to date means that the data sets or methodology do contain inaccuracies that are the cause for at least part of an over-estimate, little information is available that would allow identifying which data points or assumptions are inaccurate, measuring the extent of those inaccuracies or, as a result, determining more accurate estimates. That is, the EPA has little basis for correcting its data sets and methodology. By the same token, no commenter has suggested any alternative methodology that could make use of the information available (and, in light of the extensive process we employed for developing our methodology, we would not expect any alternative to be readily available). As a result, if, for example, the EPA were to conclude that in fact the number of "anyway" PSD and nonattainment GHG permits at the 100,000/75,000 threshold level is fewer than the EPA's methodology estimates, the EPA has little basis for estimating what the number of those permits actually is at those thresholds, or what the number of those permits would be at lower thresholds. The same is true, as another example, for minor modifications becoming newly major. Accordingly, the current state of our information renders it impossible, based on our current methodology, to determine more accurate numbers of GHG permits and, again, we have no other methodology with which to make that determination.

      As a result, if we were to attempt to lower the thresholds at this time, as an environmental advocacy organization commenter urges, we would risk negative consequences. At such lower thresholds, permitting authorities might face administrative burdens higher than what we would expect. This is because lowering the thresholds without a methodology that we can rely on could result in more than the expected numbers of new construction and modifications becoming subject to PSD and more than the expected numbers of sources becoming subject to title V. In addition, as noted, lowering the thresholds could well increase permitting authority administrative expenses for hiring, training, education, and outreach; and again as noted, we have not accounted for those expenses in determining overall permitting burden. Thus, attempting to lower the thresholds at this time would give rise to risks that permitting authorities could incur unexpectedly high administrative burdens that could delay PSD and title V permitting.

(c). Expectation of receiving additional information over time

      A third reason why we would not lower applicability thresholds at this time even if we concluded that we had over-estimated numbers of GHG permits is that we expect to receive more information over time that may shed light on the accuracy of various aspects of our data sets and methodology, and that therefore will facilitate, as necessary, determining more accurate burden estimates and more accurate applicability thresholds.  

      An important set of new data will cover Step 2 title V permits. Sources that were already subject to title V due to their non-GHG pollutants have been subject to requirements for their GHG emissions since January 2, 2011, but to this point, no more than a very low level of permitting activity has resulted from those obligations. As a result, we have little actual information concerning numbers of title V permits or other aspects of title V permitting. The level of title V permitting is expected to increase sharply beginning July 1, 2012 because title V permit applications for sources not otherwise subject to title V are due at that time. These sources became subject to title V requirements under Tailoring Rule Step 2 as of July 1, 2011, and under CAA section 503(c), must submit their permit application within 12 months of that date. Information we receive about title V permitting activity will be important for assessing the accuracy of both the title V and PSD applicability thresholds because, as we noted in the Tailoring Rule, many permitting authorities administer PSD and Title V with the same resources:

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

75 FR 31537/col. 2.

      In addition, as noted, we have reason to expect to see greater numbers of GHG permits in the future. That will yield more information about permitting activity. 

It should also be recalled that the permitting authority's administrative burdens depend not only on the numbers of permit applications, but also on the time needed to process the applications. Although the EPA's methodology includes estimates for that time, which varies depending on the permitting activity, to this point, no information has been provided to the EPA to verify or call into question those estimates. In addition, as noted, permitting authorities have other administrative expenses  -  hiring and training of staff, public education and outreach for the regulated community, enforcement  -  that are part of their administrative burdens but that we did not attempt to quantify in the Tailoring Rule. We expect that we may well receive information over time about these components of GHG permitting, which could lead to adjustments to the thresholds. 

      Below we discuss in more detail our upcoming efforts to collect more information about permitting activity, our timeline, and how that relates to the rest of the phase-in process established in the Tailoring Rule. Here, it is important to emphasize that this new information may point towards adjustments in overall permitting burden and, ultimately, in the applicable thresholds, but 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 information concerning numbers of GHG permits would amount to a piecemeal approach, one that would lead to calls for the EPA to continue to revise the data sets, methodology, permitting burdens, and thresholds 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.   

      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. 

D. State capacity
      Another reason why we disagree with the comment from the environmental advocacy organization commenter (19269) that thresholds should be reduced at this time is that state permitting resources do not appear to be higher, and in many cases could well be lower, than what they were at the time we finalized the Tailoring Rule in June, 2010. 75 FR 31514 (June 3, 2010). This reduction in permitting resources offsets to at least some extent the fact that, at the present time, permitting authorities have less of an increase in GHG permitting burden than we estimated in the Tailoring Rule. In addition, this reduction leads us to be cautious in considering increasing GHG permitting burdens by lowering the applicability thresholds.

      As 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/col.2. We did not receive any comments to the contrary.  Some states or localities provided information that their resources for GHG permitting were falling, either because of lower overall resources or because of other regulatory demands. The South Coast Air Quality Management District (SCAQMD) (19280) stated:

      ... SCAQMD's overall staffing, as well as permitting resources, continue to drop.  Between the years 2011-2012 and 2016-2017, SCAQMD plans to reduce its total authorized staffing from 817 to 755, a reduction of about 7.6%. (Moreover, SCAQMD has already reduced its authorized staff from over one thousand positions in the early 1990s.) While it is unknown exactly which positions will be eliminated, it is reasonable to expect that a proportionate share of permit processing staff positions will be eliminated. These staff reductions are necessary in order for SCAQMD to ultimately achieve a balanced budget by 2015.... 

      The State of Nevada (19304) stated:

      .... Nevada's universe of Title V sources will increase by approximately 150% over the next few years. In addition to impacting our permitting resources, this expansion of the Title V universe will place an immense burden on Nevada's oversight resopnsibilities for compliance and enforcement. 

      We recognize that on a nationwide basis, state budget pressures have resulted from recent macro-economic 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.

E. Future data collection and response to commenters' suggestion for a supplemental proposal

      In the preamble, we describe our intentions to collect additional information about permitting activity, and we respond to environmental advocacy organization (19292) commenters' suggestion that instead of finalizing Step 3 at this time, we issue a supplemental notice of proposed rulemaking.

Other Comments Received on the Proposed Thresholds

2.3.1	Comments on a Permanent Exclusion for Small Sources

Comment: 

	Two industry commenters (19265, 19276) asserted that the EPA has fallen short by not addressing a permanent exclusion for smaller sources as discussed for Step 3 in the final Tailoring Rule. The commenters asserted that the clear intent of Congress for the PSD and title V programs is that these programs apply only to major sources and that a GHG major source threshold for combustion, comparable to criteria pollutant major sources, would be between 100,000 to over 700,000 tpy CO2e. The commenters acknowledged that the EPA has discretion to fashion an interpretation that is a reasonable construction of the statute when Congressional intent is unclear, but they stated that it is hard to imagine that Congress ever envisioned PSD or title V programs addressing GHG emissions.

Response:  

      Nothing in the Tailoring Rule  -  its regulations or preamble discussion  -  obligated the EPA to take action during Step 3 to address a permanent exclusion for smaller sources. See 75 FR 31572 (Tailoring Rule). The EPA did not include such an exclusion in its Step 3 proposal, and we are not taking final action on such an exclusion in this rulemaking. Accordingly, we are not further addressing these comments.
      
      For the sake of completeness, if we were required to address such an exclusion in this Step 3 action, we add that it is too soon in the phase-in process to consider a permanent exclusion for smaller sources. This is because, among other things, we have not had the opportunity to develop and evaluate the effectiveness of certain streamlining techniques that may be available with respect to smaller sources. As a result, we cannot at present determine whether, and to what extent, the burdens associated with permitting smaller sources can be mitigated.

2.3.2	Comments on a Permanent Exclusion/Deferral for Biogenic Emissions

Comment:

	Five industry commenters (19265, 19275, 19276, 19279, 19289) advocated for a permanent deferral or exclusion for biogenic CO2 emissions.

	Two of these industry commenters (19265, 19289) requested that the EPA discuss the biogenic deferral and provide a perspective on what will occur if this deferral becomes permanent. The commenters supported a permanent deferral for biogenic CO2 from the Tailoring Rule.

	Another of the commenters (19275) also expressed strong support for continued exclusion of biogenic CO2 emissions in the final rule. The commenter requested that the EPA explain in the preamble to the final rule that, as a result of the deferral rule, biogenic CO2 emissions are not subject to Step 3 of the Tailoring Rule.

	Highlighting the allowance for the 3-year deferral of biogenic emissions and EPA's Step 3 proposal analysis of the permitting burden that appears to exclude biogenic CO2 emissions from waste sector sources, specifically MSW landfills and waste-to-energy facilities, one industry commenter (19276) requested that the EPA expeditiously promulgate an exclusion of biogenic CO2 emissions.

	One industry commenter (19279) requested that the EPA promulgate a final rule to replace its temporary 3-year biogenic CO2 deferral with a permanent exclusion. The commenter stated that regulation of biogenic GHG emissions (1) conflicts with international, federal, and state GHG policies and initiatives; (2) is counterproductive to growth in renewable energy sources; and (3) will create significant and complex permitting burdens. In addition, the commenter asserted that recovery of energy from MSW biomass (in the case of MSW landfills) does not pose land use or carbon stock changes and results in net GHG reductions. The commenter suggested that the EPA establish a categorical exemption for biogenic CO2 emissions from landfills and associated beneficial use projects.

Response:  

      The EPA appreciates the commenter's views. The EPA is using the time under the Deferral for CO2 Emissions from Bioenergy and Other Biogenic Sources under the Prevention of Significant Deterioration (PSD) and title V Programs to study the science surrounding biogenic CO2 emissions and is developing an accounting framework to assist permitting programs and sources. Specific issues related to the merits (or consequences) of making the deferral permanent are premature pending the EPA's examination of the science associated with biogenic CO2 emissions from stationary sources and related issues, as well as beyond the scope of this rulemaking. Following its examination of the science, the EPA plans to conduct a subsequent rulemaking to determine how biogenic emissions of CO2 should be treated under the PSD and title V programs.

2.3.3	Comments on the Need to Analyze the Impact on Sources in Evaluating Thresholds

Comment:

	One industry commenter (19281) alleged that the EPA has avoided conducting any analysis of the economic burden of interpreting the CAA as requiring PSD and title V permitting for GHG emissions by claiming that the Tailoring Rule is a "relief" rule. The commenter stated that Step 3 of the Tailoring Rule involves reconsidering of the thresholds that are in place, therefore, the EPA is now in the position of determining what the regulatory burdens on GHG sources going forward will be and the scope of such sources that would be burdened by such regulations. In determining those burdens, according to the commenter, the EPA is obligated to consider the economic impact of its actions and cannot proceed ignorant of those impacts. 

	Another industry commenter (19278) stated that regulating GHGs under the CAA and PSD is making smaller sources subject to federal permitting rather than state permitting for modifications. The commenter asserted that this inhibits small businesses' ability to compete effectively in the marketplace. The commenter argued that, in order for the EPA to analyze the true impact of GHG Tailoring Rule changes, a more accurate analysis is needed, which would include an assessment of minor source permitting. 

	One industry commenter (19262) stated that the EPA should consider impacts on stationary sources when determining whether to lower the permitting thresholds in the future. The commenter further stated that the EPA needs to place a greater emphasis on the direct and indirect effects on regulated entities that will result if, and when, the EPA decides to lower the permitting thresholds. The industry commenter (19262) asserted that the EPA must consider the current uncertainty and impact that lowering the permitting thresholds will have on regulated entities. The commenter requested that the EPA provide greater assurance that the applicability thresholds will not be lowered beyond 2016. Along with considering the impacts of a lower threshold on regulated entities, the commenter requested that the EPA explain whether it intends to require permits for lower thresholds in the future, and if so, when and at what levels.

Response:  

      With respect to the comments by industry commenter (19281), as discussed in the proposal, this 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 to issue such permits. Furthermore, the proposed provisions for GHG PALs would have the effect of reducing permitting burden on entities, including small entities, 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. We have therefore concluded that this rule will be neutral or relieve the regulatory burden for all affected small entities. 

      With respect to the comments by industry commenter (19278), as noted above, the methodology in the Tailoring Rule did take into account the administrative burdens associated with modifications by sources that would be minor sources based solely on their non-GHG emissions, but that become subject to PSD by virtue of their GHGs.  In any event, for the reasons discussed, we are not reviewing the Tailoring Rule methodology in this Step 3, but we intend to track permitting activity in the states to facilitate any such review, to the extent appropriate, in the upcoming five-year study and Step 4. 

	With respect to the comments by industry commenter (19262), we appreciate these comments. They are not relevant to the Step 3 rulemaking because (i) as noted, the three criteria as the EPA interprets and applies them point towards determining not to lower the thresholds, and as a result, it is not necessary to consider impacts on sources; and (ii) it is not necessary in this action to determine the course of future rulemaking, including the extent to which to consider impacts on sources in future rulemaking.

2.3.4	Comments on "GHG-Only" Sources 

Comment:

	Two industry commenters (19278, 19281) asserted that the current threshold of 100,000 tpy CO2e makes facilities major for PSD that would not be major for PSD based on conventional pollutants and the EPA should not increase this burden (i.e., the EPA should not lower the GHG threshold below 100,000 tpy in any future step). The commenters provided examples of facilities that would be major emitting facilities for GHG emissions but not for conventional regulated pollutants under PSD (i.e., minor for all pollutants other than CO2e at the Tailoring Rule level threshold). Industry commenter (19281) argued that triggering PSD for GHG emissions at well-controlled units is a significant road block to clean energy projects such as combined cycle power plants and inside-the-fence-cogeneration, which would be in direct opposition to the EPA's GHG policy.

	One industry commenter (19287) reported that the Tailoring Rule resulted in a number of its sites becoming "major" for GHG emissions and subject to title V and PSD rules for the first time, and that it is still in the process of applying for its title V permits. The commenter believes that, as such, regulatory agencies are just now beginning to see the impact of the new GHG rules to complex sources such as semiconductor fabrication facilities. Another industry commenter (19290) also reported that the semiconductor industry is just now addressing the operating permit requirements of the Step 2 rule, and that, in the semiconductor industry, a number of facilities are being brought into the title V permitting program for the first time based solely on their GHG emissions. 

	One industry commenter (19272) presented an overview of information gathered on projects implemented by the company over the past 5 years. The commenter included a table illustrating that no energy project undertaken by the company in the last 5 years triggered PSD for currently-regulated pollutants, but 8 out of 10 new facility construction projects would have triggered PSD for CO2e, and 3 out of 5 projects would have constituted PSD modifications for CO2e.

Response:   

      The EPA appreciates these comments and the data they provide. The EPA believes these comments are consistent with our determination that the thresholds should not be lowered at this time. It is not necessary to respond specifically to these comments in this rulemaking because, on the basis of the three criteria, we are determining not to lower the thresholds. In addition, as noted, in this rulemaking, we are not required to, and we did not propose to, establish any permanent exclusions.
      
2.3.5  Other Comments

Comment:

	Industry commenters (19270, 19273, 19278, 19281, 19282, 19285, 19306) reiterated comments that they made during the Tailoring Rule and litigation over the Tailoring Rule that PSD does not apply to GHGs or that it applies in a limited way, such as only if the source is subject to PSD due to its emissions of NAAQS pollutants. An industry commenter (19306) added that the EPA should respond to pending petitions to reconsider the Tailoring Rule that raised these points.

Response:

	The EPA addressed the issue of the applicability of PSD to GHGs in the Tailoring Rule and is not re-opening that issue in this Step 3 rulemaking. For the sake of completeness, if these comments were relevant to this Step 3 rulemaking, the EPA's response would be the same as the EPA stated in the Tailoring Rule, 75 FR 31560/col. 2  -  31562/col. 2, the related sections in the Tailoring Rule Response to Comment document, and the EPA's merits brief in the challenge to the Tailoring Rule in the D.C. Circuit. The EPA's timing for responding to the pending petitions to reconsider the Tailoring Rule is also not relevant to this rulemaking.

Comment:

	An industry commenter (19285) stated that the Tailoring Rule cannot be justified under the administrative necessity or one-step-at-a-time doctrines.

Response:

	The EPA addressed the issue of the applicability of the administrative necessity and one-step-at-a-time doctrines in the Tailoring Rule, and is not re-opening that issue in this Step 3 rulemaking. For the sake of completeness, if this comment were relevant to this Step 3 rulemaking, the EPA's response would be the same as the EPA stated in the Tailoring Rule, 75 FR 31541/col. 2  -  31579/col. 2; the related sections in the Tailoring Rule Response to Comment; and the EPA's merits brief in the challenge to the Tailoring Rule in the D.C. Circuit..

Comment:

	An industry commenter (19282) stated that the EPA must ensure that in any future action that revises the PSD or title V thresholds that those thresholds do not become applicable before the standard statutory periods for SIP and Title V program revision under Section 110 and title V, respectively.

Response:

	This comment is not relevant to this rulemaking. As a result, we do not respond to it here.

Comment:

	An industry commenter (19282) advised the EPA, beyond confirming the thresholds, to terminate this rulemaking and process the SIP and title V backlog as well as approve what it called SIP "sunsetting" provisions concerning GHG permitting requirements.

Response:

	Because these comments are not relevant to this rulemaking, we do not respond to them here. 

Comment:

	An industry commenter (19281) stated that the EPA unlawfully included six GHGs as subject to PSD permitting requirements in the Tailoring Rule, even though only four GHGs were made "subject to regulation" by the Tailpipe Rule.

Response:

	The EPA addressed the issue of which pollutants were subject to PSD and title V in the Tailoring Rule, and is not re-opening that issue in this Step 3 rulemaking. Thus, this comment is not relevant to this rulemaking. For the sake of completeness, if this comment were relevant to this Step 3 rulemaking, the EPA's response would be the same as the EPA stated in the Tailoring Rule, 75 FR 31527/col. 1  -  31530/col. 1; the related sections in the Tailoring Rule Response to Comment; and the EPA's Tailoring Rule merits briefs.

Comment:

	An industry commenter (19281) stated that the EPA imposed the Tailoring Rule upon the states through their SIPs in an unlawful manner, failed to conduct an analysis of the economic burdens imposed by the Tailoring Rule, and violated the CAA's express command that the EPA may not exempt any source from title V permitting requirements.

Response:

	The EPA addressed these issues in the Tailoring Rule, and is not re-opening these issues in this Step 3 rulemaking. Thus, this comment is not relevant to this rulemaking. For the sake of completeness, if these comments were relevant to this Step 3 rulemaking, the EPA's responses would be the same as the EPA stated in the Tailoring Rule, the related sections in the Tailoring Rule Response to Comment, and the EPA's Tailoring Rule merits briefs.

Comment:

	Virtually all of the state, industry, and environmental advocacy organization commenters provided comments on streamlining measures other than PALs, including the EPA's proposal concerning synthetic minors as well as the other streamlining measures on which the EPA solicited comment. In addition, one industry commenter (19281) commented requiring consideration of carbon capture and sequestration (CCS) technology as part of the BACT analysis is time-consuming and costly, and that because CCS is not commercially available, its analysis should not be required part of any BACT analysis.

Response:

	We appreciate these comments. As discussed, we are carefully analyzing possible streamlining methods and are working with a Clean Air Act Advisory Committee workgroup that is focused on streamlining methods. The information, insights, and perspective that these commenters offer is valuable. In this Step 3 rulemaking, we are not taking action on any streamlining method other than PALs, and as a result, we will not respond to these comments now, but will consider them as we continue to analyze and develop streamlining methods. The comment concerning the treatment of CCS in determining BACT is not relevant to this rulemaking and as a result, we will not respond to that comment now.

Comment:

	An industry commenter (19283) urged the EPA to confirm that GHG-only sources are not subject to PSD review for non-GHG pollutants.

Response:

	This comment is beyond the scope of this rulemaking, and, accordingly, we are not responding to it here. We refer the commenter to a question-and-answer document we issued on March 15, 2011, entitled "Triggering PSD at Non-Anyway Sources and Modifications," which has information relevant to this comment.  

http://www.epa.gov/nsr/ghgdocs/TriggeringPSDatnonAnywaySourcesandMods.pdf.

Comment:

	An industry commenter (19270) stated that the EPA should focus its resources primarily on the development of a cost-effective NSPS program that can, by stages, satisfy and displace the use of individual permitting to address GHG emissions.

Response:

	This comment is beyond the scope of this rulemaking, and, accordingly, we are not responding to it here.

Comment:

	An industry commenter (19278) stated that the EPA should defer action on Step 3 until after the D.C. Circuit hands down its decisions on the Tailoring Rule and other GHG cases.

Response:

	The EPA is respectful of the Court's processes and recognizes that the Court's decisions, depending on what they are, could impact this Step 3 rulemaking. The EPA believes it preferable to maintain the schedule for Step 3 action provided under the Tailoring Rule regulations because that approach provides greater certainty for stakeholders. If the Court's decisions may require revisions to the Step 3 rulemaking, the EPA will consider those revisions as appropriate.
      

Comments on PALS for GHGs

      The comments and response in this section concern the EPA's proposal to revise the PSD regulations for Plantwide Applicability Limitations (PALs) for GHG emissions, so that GHG PALs provide sources with the same kind of operational flexibility as PALs provide for other pollutants and as a way to streamline PSD applicability determinations for GHGs.  

Comments on GHG PALs in General

Comment: 

	Fifteen industry commenters (19253, 19258, 19259, 19262, 19265, 19270, 19271, 19273, 19276, 19279, 19285, 19287, 19288, 19290, 19303), six state and local agency commenters (19260, 19264, 19266, 19267, 19280, 19291), and one state solid waste authority (19289) expressed general support for the concept of GHG PALs, although some had misgivings about some aspect(s) of the proposal. Supporting commenters generally indicated that GHG PALs can streamline PSD permitting and reduce administrative burden for some sources. Two commenters (19259, 19291) stated that PALs should be available for GHGs to be consistent with the treatment of other regulated NSR pollutants. Three supporting commenters (19262, 19287, 19290) noted that PALs provide increased flexibility, certainty, and the ability to respond rapidly to changing market conditions. One of these commenters (19290) listed the benefits of PALs, including creating an incentive to minimize emissions to create room for expansions, providing planning certainty, streamlining modifications, lowering permitting workload overall, and enhanced emissions reporting and availability of information to the public. Two industry commenters (19287, 19290) and one state agency commenter (19291) stated that the PAL provisions should be finalized as soon as possible based on the proposal. The state agency commenter (19291) asserted that this is necessary so existing PAL permit holders can utilize the flexibility afforded by PALs under their current permits.
      
      Five industry commenters (19262, 19270, 19273, 19285, 19288) and one local agency commenter (19280) specifically expressed support for the proposal to allow GHG PALs to be used as an alternative approach for determining whether GHG emissions are subject to regulation and whether a project is a major modification for purposes of permitting. One industry commenter (19262) elaborated that PALs provide sources with operational flexibility and add certainty to the process by providing assurance that a source's GHG emissions are not subject to regulation and will not trigger a major modification. 

	Five industry commenters (19278, 19281, 19282, 19284, 19306) and two environmental advocacy group commenters (19269, 19292) generally oppose GHG PALs as proposed. The opposing industry commenters generally indicated that the proposed PALs offer little in the way of streamlining and seem to complicate processes already put in place by states to limit emissions of pollutants. One of the industry commenters (19278) added that PALs are complex instruments to negotiate and the fact that they expire after a fixed period of time leaves businesses with significant uncertainty about future operations. One commenter (19278) thinks the proposal did not adequately explain why GHG PALs are the EPA's preferred streamlining approach or why PALs are needed. One environmental advocacy agency commenter (19269) opposes GHG PALs because they will be used to avoid installation of new pollution controls, and they will reduce the opportunities for agency oversight and public input because permitting reviews would be less frequent. Many of these commenters prefaced their comments on the Step 3 proposal by stating that they do not believe that the EPA's regulation of GHGs under the Act is appropriate or legal. These commenters often made clear that they were not conceding this point by providing comments on the GHG PAL proposal.

Response:
      
      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 plantwide limitations could be designed in a way that would be useful for easing the administration of GHG permitting. In the EPA's March 8, 2012 notice proposing Step 3, the EPA proposed to revise the PSD regulations for GHG PALs. The EPA stated, "We 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 at 14,228/col. 2. We considered changes to the existing PAL rules to address the unique PSD applicability aspects associated with GHGs and to provide greater operational flexibility, while making application of PAL rules to GHGs more consistent with the outcome achieved when those rules are applied to regulated NSR pollutants other than GHG.   
      
      We are finalizing the proposed streamlining measure that would revise the 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 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. The changes in this final rule will provide for better implementation of PALs for GHGs, which are 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.  
      
      Similar to some of the commenters, we believe that GHG PALs can provide certain environmental and permitting benefits, and that GHG PALs should work more like PALs for other pollutants and should provide assurance that a source's GHG emissions are not subject to regulation and will not trigger a major modification. Accordingly, this rulemaking allows GHG PALs to provide sources increased operational flexibility and regulatory certainty, as well as streamlining GHG PSD applicability determinations, because it will allow GHG PALs to be used to determine whether a project is a major modification and whether GHG emissions are subject to regulation. Thus, during the PAL term, a source may make modifications without triggering PSD applicability and PSD permitting obligations for GHGs, as long as it complies with its GHG PAL. If the source complies with its PAL, it need not separately analyze whether its GHGs are subject to regulation or whether the change is a major modification for GHGs.  This certainty could help sources with planning or with the ability to respond to rapidly changing markets, by reducing potential delays from permitting. The fact that PALs expire after 10 years does not lessen the certainty provided during those 10 years, and a PAL may be renewed at the end of the PAL term consistent with the PAL regulations to provide ongoing certainty to sources.  In addition, GHG PALs could also 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.
      
      While we anticipate that GHG PALs over the long run will result in a lessening of permitting burdens and will be accounted for in determining the viability of lowering the thresholds at Step 4, it will take time for permitting authorities and the regulated community to gain experience with GHG PALs. Even though we do believe that GHG PALs are a valuable tool for streamlining the permitting process for GHGs, we do not anticipate a significant reduction in permitting burdens in the short term as a result of their implementation.  In the overall structure of the Tailoring Rule phase in process, however, the long term benefits could ultimately free up resources to be able to more fully implement the program.
      
      Moreover, we believe the approach to PALs in the final rule will provide air quality benefits by encouraging sources to reduce 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 GHG, and may encourage sources potentially subject to PSD to minimize their emissions to stay under the PAL and avoid triggering major modification permitting requirements. We also believe that 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 results in 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. 
      
      In response to the comments that PALs do not offer significant streamlining and seem to complicate existing state mechanisms for limiting emissions, the EPA notes that, as explained above, PALs may offer streamlining of GHG PSD applicability determinations and permitting.  The decision of any source to request a GHG PAL and the decision of any permitting authority to either adopt the GHG PAL regulations or issue a GHG PAL are completely voluntary. There is no requirement for sources and permitting authorities to use these rules if they believe that a GHG PAL would not streamline the permitting process. We received comments indicating that some sources and permitting authorities do believe they offer streamlining benefits, so we have decided to finalize those changes.  Likewise, any source that feels that a PAL is too complex to negotiate and/or does not provide enough certainty about future operations can choose other permitting options as appropriate for their operations and as provided for under existing federal law and/or the SIP-approved permitting programs in their area.

      However, the fact that the EPA is moving forward with these GHG revisions to the federal PAL permitting program in 40 CFR 52.21 is not intended to limit the availability of other processes put into place by states, as consistent with the applicable EPA-approved state implementation plans (SIPs).  Moreover, the EPA intends to continue to evaluate other streamlining options for GHG permitting, including through further evaluation of streamlining comments on this proposal and the forthcoming recommendations of a recently established Clean Air Act Advisory Committee on this subject.     
      
      In response to the comment that GHG PALs will be used to avoid installation of pollution controls and will reduce the opportunities for agency and public oversight, the EPA notes that, as explained above, a GHG PAL imposes an overall limitation on GHG emissions from the plant that remains in place for 10 years, providing the public and permitting authorities with an understanding of the long-term GHG emissions impact of the source. The PAL regulations contain public participation requirements to ensure that the public has the opportunity to be involved in the PAL permitting process and provide input. As to agency oversight, the PAL regulations (and the regulations generally governing the CAA permits in which those limits will be contained) provide for oversight of the permit to ensure that violations of the PAL can be detected and handled appropriately, including stringent record-keeping, monitoring, and reporting requirements and CAA enforcement mechanisms.  
      
      In response to the commenters opposing the EPA's regulation of GHGs under the Act, the EPA notes that the EPA has explained this authority to regulate GHGs in prior actions, including the original Tailoring Rule, and the revision of the PAL regulations to better accommodate GHG emissions does not reopen those prior determinations. Thus, this comment is beyond the scope of the present rulemaking.       
      
      Accordingly, the final Step 3 rule amends the PSD regulations at 40 CFR 52.21 to create authority for reviewing authorities applying the federal PSD permitting program to issue PALs to major and potentially-major GHG stationary sources recognize the unique applicability characteristics of GHGs and provide GHG sources with greater operational flexibility. 

Comment:  
      Five industry commenters (19278, 19281, 19282, 19284, 19306) believe that the proposed GHG PALs do not offer significant streamlining opportunities. One of the commenters (19284) noted that PALs are resource-intensive permits to obtain as a general matter and permitting authorities have limited resources to devote to them. Another industry commenter (19306) similarly stated that GHG PALs for minor sources would require significant resource investment by regulators and sources, adding that the EPA has not justified adoption of their proposals for PALs. A third industry commenter (19282) asserted that the implementation of GHG PALs for criteria-pollutant-major-sources or GHG-only sources will not provide meaningful streamlining, and even if they could, the timeline for developing the regulatory authority and then implementing such PALs is daunting given that the EPA has not proposed regulatory language for any of the PAL provisions. Another industry commenter (19281) concluded that the EPA's efforts may best be prioritized towards other streamlining measures. One commenter (19278) stated that the EPA does not explain why emission monitoring under 40 CFR 52.21(a)(2)(iv) to determine whether the source triggers the `subject to regulation' definition," is disfavored as a matter of law or policy, or how a PAL can provide for superior outcomes.

	Three of the industry commenters (19278, 19282, 19306) urged the EPA to recognize that approaches currently employed by states to limit the potential-to-emit of pollutants (such as synthetic minor limitations, cap-based permits, and flexible permits) may be used to limit GHGs, so in most cases the EPA's proposed PAL approaches are unnecessary. One of the commenters (19278) questioned whether sources would need or want to obtain PALs because these simpler approaches are available. Another industry commenter (19282) asserted that states have issued cap-based permits for years under their minor NSR programs and even pursuant to major NSR. This commenter does not believe that the EPA intended to limit flexibility that might be afforded in a SIP or state title V program that would remove sources from the PSD program for GHGs or would otherwise provide streamlining. The commenter added that it is important for the EPA to recognize that these permitting approaches exist in evaluating the need for and likelihood of use for additional regulatory programs that may serve the same purpose.

      One environmental advocacy agency commenter (19292) is concerned that whether a PAL program could reduce permitting burdens since (a) thresholds must be reduced as far as possible as soon as possible; (b) PALs must be cancelled or amended as soon as thresholds are reduced, and (c) the EPA believes any benefits from PALs would not accrue for at least 3 years, 77 FR 14237. Also, this commenter asserted that the EPA's PAL proposal is not justified by the administrative impossibility rationale or particular evidence that it would be impossible to administer the programs considering the structure of PALs in the Step 3 proposal. 

Response: 

      In the Tailoring Rule, we explained that the impacts of requiring PSD and title V permitting for GHGs at the applicability thresholds set forth in the Act were so severe that they bring the judicial doctrines of "absurd results," "administrative necessity," and "one-step-at-a-time" into the Chevron two-step analytical framework for statutes administered by agencies. On this basis, we promulgated the phase-in of 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." However, we did not indicate that every subsequent action under the Tailoring Rule would need to be separately justified under these judicial doctrines. Because the GHG PAL actions finalized today are meant to provide additional easing of burdens identified in the Tailoring Rule, and are not separate deviations from statutory requirements addressed in the Tailoring Rule, the EPA does not believe that these revisions need to be separately justified under the administrative necessity doctrine. (See also Responses provided in Section 2.2 above, addressing comments that the Step 3 proposal required separate justification.) Use of GHG PALs as finalized in this action is consistent with the Tailoring Rule justification and provides an alternative mechanism for determining whether GHGs are subject to regulation at a source based on Tailoring Rule thresholds.        
      
      In the Tailoring Rule, we explained that we would lower the applicability thresholds, and consequently increase the number of GHG sources required to obtain such permits, only after 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 after we had the opportunity to expedite or otherwise decrease the burdens of GHG permitting through development of various streamlining measures. We stated that streamlining options to be evaluated included: 1) defining PTE for various source categories, 2) establishing source category emission limits for presumptive BACT, 3) establishing general permits and permits-by-rule, 4) establishing a process for electronic permitting, and 5) establishing a process for lean techniques for more efficient permitting processes. [75 FR 31526.]  
      
      While we intend to move forward and develop additional streamlining approaches in the future, we also stated in the Tailoring 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. 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 plant-wide limitations could be designed in a way that would be useful for easing administration of GHG permitting, as explained in the response above. Thus, this rulemaking on GHG PALs is part of EPA's larger effort to develop streamlining mechanisms for GHG permitting. It is reasonable to move forward with GHG PALs at this point because these revisions may encourage sources that are currently subject to PSD permitting, or could be subject to PSD permitting because they are close to applicability thresholds, to apply for and receive a GHG PALs instead of a GHG PSD permit. Because a PAL provides an alternative PSD applicability compliance mechanism, this could help ease the overall permitting burden for permitting authorities that issue permits under authority of 40 CFR 52.21, since it may lead to fewer permitting actions in the future, even if initial establishment of the PAL requires significant permitting resources. Furthermore, because EPA is making specific, targeted revisions to address GHGs in the existing PAL provisions, the EPA has been able to finalize this regulatory authority promptly, and permitting authorities should be able to use the changes quickly, since they will take effect 30 days after publication of this rule and can be used as part of permitting program that permitting authorities should be familiar with as a generally matter.  
      
      The EPA has provided ample justification for revising the existing PAL provisions to better address GHGs. We are revising the existing PAL regulations because we read the existing federal regulations for the PAL and PSD programs in 40 CFR 52.21 to only allow permitting authorities to issue GHG PALs on a mass basis without use of the CO2e-based increases provided in the subject to regulation thresholds in setting the PAL, and to only allow GHG PALs to be issued to existing major stationary sources,  [40 CFR 52.21(aa)(1)] and because the existing regulations do not allow compliance with a PAL to be considered for the purpose of determining whether GHG emissions are "subject to regulation." 
      
      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 a source that emits or has the potential to emit 100/250 tpy GHG on a mass basis, and emits or has the potential to emit 100,000 tons per year 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 would be a minor source for purposes of PSD, and would 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 change needed under the current Tailoring Rule thresholds ... Currently, 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. 40 CFR 52.21(b)(49)(v)(b). As a result, GHG-only sources may not currently use PALs as an alternate mechanism for determining major NSR applicability in the same way that existing major stationary source of other non-GHG regulated NSR pollutants may. Instead, because the Tailoring Rule applicability determinations are triggered only by the GHG emissions related to a particular action on the part of the source, and not on the source's general GHG emissions, GHG-only sources must 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, any GHG PALs issued under the existing federal 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. On the other hand, GHG applicability for PSD 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 applicability thresholds that trigger PSD for GHG, such that the existing PAL regulations do not provide an effective alternative applicability determination mechanism for GHG sources. 
      
      Given these limitations identified for implementing the existing PAL provisions for GHG emissions, changing the PAL regulations to provide for the authority to issue CO2e-based PALs and to issue PALs to GHG-only sources will provide GHG sources with additional operational flexibility, and 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. Providing an option that allows a source to use PALs designed to take into account the unique characteristics of GHG applicability under the Tailoring Rule, as we provide in this final rule, will help streamline the major NSR permitting program and provide more operational flexibility for GHG sources. Being able to issue PALs to GHG-only sources and to establish a PAL on a CO2e basis will provide planning certainty to sources of GHG emissions, 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. 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  -  whether a current PSD major source or a source with the potential GHG emissions to become such a major 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 GHG-only sources to establish a PAL are consistent with the Clean Air Act (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 PALs established under this rule would be established at levels very close to relevant GHG applicability thresholds in the Tailoring Rule, and it 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 changes that allow sources to establish a PAL on a CO2e basis also make PALs for GHGs function similar 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 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 current PAL provisions, a permitting authority establish the PAL level for a pollutant at a particular source by adding the applicable significant rate in 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 provide less flexibility to a source when compared to PALs for other regulated NSR pollutants.
      
       This final rule revises the PAL provisions of PSD to provide GHG sources with the same kind of flexibility sources currently have for other regulated NSR pollutants by allowing sources to establish a CO2e-based PAL using the CO2e-based emission increases 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 an NSR regulated 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 CO2e-based PAL, by eliminating the need to evaluate GHG emissions on a mass basis for major NSR applicability as long as the source is complying with the CO2e PAL, because a CO2e 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 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 PAL based on the increase identified in the Tailoring Rule thresholds will insure that the source does not exceed that amount and thus will not emit GHGs in amounts that would be subject to regulation. In addition, since the Tailoring Rule requires the same calculation to determine whether a major modification triggers PSD permitting requirements for GHGs, such a PAL limit will also insure that a source does not trigger those requirements. In sum, we believe that the existing 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-only 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. 
      
	The EPA recognizes that states may have other approaches to limiting the potential-to-emit of pollutants (such as synthetic minor limitations, cap-based permits, and flexible permits), but we do not believe this renders the changes the EPA is finalizing for issuance of GHG PALs unnecessary. Certainly states may continue to utilize any such permitting approaches that are approved in their federally approved programs to the extent those programs are available for GHGs. Still, we believe sources and permitting authorities alike could ultimately benefit from the availability of GHG PALs as explained above as another option that could limit burdens of permitting GHGs under PSD. We additionally note that the EPA has not historically had a minor source permitting program (though it has recently issued one for tribal lands) and has not developed the same array of alternative permitting approaches as some states have. While the existing applicability measures contained in the PSD regulations (40 CFR 52.21(a)(2)(iv)) will remain available for permitting purposes and will remain in the discretion of the source and permitting authority to rely upon, we believe that allowing the additional applicability and permitting options provided by these PAL changes can also address the unique PSD applicability aspects associated with GHGs while allowing greater operational flexibility within a permitting program that generally provides environmental benefits, as explained above. Contrary to one commenter's speculation that sources would not want or need GHG PALs, some industry commenters strongly supported GHG PALs and believed they would provide significant benefits for their plants and finalizing specific, targeted revisions to address GHGs in the existing PAL provisions could allow permitting authorities and the regulated community to use the changes quickly. 

	To clarify, we do not believe that this action would require permitting authorities to take any action with respect to existing PAL permits or programs, or to any other regulatory programs that can address GHG emissions. The rulemaking today revises only the regulations for the federal PAL permitting program in 40 CFR 52.21, which governs permits issued by the EPA (and its delegated states), and does not require changes to the PAL provisions contained in 40 CFR 51.166. We do not intend these changes to 40 CFR 52.21 to affect existing state authority to issue PAL permits, and we note that these revisions are not minimum requirements that must be adopted by states into their EPA-approved SIP PSD permitting programs. 

      Also in response to the concern of the availability of PALs, the EPA recognizes that the revised  the PAL provisions for GHGs will only be available for permits issued under authority of 40 CFR 52.21. States may choose to submit SIP revisions consistent with these revisions to the EPA for approval, but in this case, the revisions would likely not be available in time to enhance the state's ability to manage the GHG permitting programs during Step 3. However, we note that states that have adopted PAL permitting programs may already be able to interpret their PAL provisions and the definition of "subject to regulation" 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. Nothing in this final rulemaking action is intended to change or limit such states' existing interpretation, and thus these changes 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.  
 
      Several of the these commenters touch on issues (such as whether the final regulatory language would accompany the final rule, the Major Source Opt-in Approach and the Minor Source Approach to GHG PALs, the effective terms of PALs and transitional issues related to future reductions in applicability thresholds of GHGs) that are discussed in more detail subsequently in other sections of this response to comments rule and in the preamble to the final Step 3 rule.

Comment:  
      One commenter (19278) requested that the EPA conduct a thorough review and analysis of state PAL approaches in order for stakeholders to determine if flaws in state PAL programs will negate any expected burden reductions from GHG PALs and demonstrate that they will reduce burdens in the long term and achieve emission reductions before they are implemented.
Response:  
      A study of PALs as envisioned by the commenter is not required by statute or regulation prior to our finalizing of this Step 3 rule. At the outset, the changes that the EPA is finalizing in this rule will only expand the existing federal regulatory program to better implement PALs for GHGs, does not change the PAL provisions contained in 40 CFR 51.166 or require corresponding changes in state SIP programs,  and are not intended to affect existing state PAL programs, as explained above. Since the EPA is directly streamlining only the federal permitting program with this rule and is not requiring or intending states to change their current PAL programs in response to this rule, study of the current functioning of the state PAL programs is not necessary. 
      With regard to the federal PAL permitting program, as discussed more fully in the responses provided above, we believe the changes finalized in this rule will improve implementation of the program for GHGs, given the limitations identified for implementing the existing PAL provisions for those emissions, and will also help ease the overall permitting burden for those sources and permitting authorities that avail themselves of such flexibility, since the revised PAL program would allow more sources to receive more effective PAL permits now which could lead to fewer permitting actions in the future. 

Comment: 

	Many commenters who supported the concept of GHG PALs (industry commenters 19270, 19273, and 19279; state and local agency commenters 19264 and 19267) and opposing commenters (environmental commenters 19269 and 19292 and industry commenters 19281, 19282, 19284, and 19306) stated that specific regulatory language for GHG PALs must be made available to allow for effective and meaningful comment. Most of these commenters indicated that proposed GHG PAL language must be the subject of notice and comment rulemaking before it is finalized. 

      One industry commenter (19279) asserted that any PAL program for landfills would likely require special policies and guidance. Two industry commenters (19287, 19290) indicated that the revised GHG PALs standards will be critical to the semiconductor industry, which requires both regulatory certainty and the ability to implement facility or process changes and expansions quickly in order to satisfy technological advancements and market changes. The commenters noted that many semiconductor facilities have been minor sources of non-GHG pollutants and relied on cap-type limits in state minor source permits for years, and that GHG PALs are now necessary to preserve their ability to make the rapid changes that are critical to the success of the industry, while also complying with clean air regulations
      
      One industry commenter (19287) suggested specific revisions to the existing PSD regulatory language for PALs that they believed could be used to implement the changes that EPA described in the proposal. 
      
      One local agency commenter (19280) cautioned the EPA to ensure in its implementing regulations that adequate monitoring, recordkeeping and reporting requirements are in place because otherwise, sources in areas where less vigorous MRR is required would gain a competitive advantage over sources in more rigorous areas, and the GHG reduction goals of the program will be frustrated. Commenter 19292 argued that robust, transparent and meaningful GHG emission monitoring and reporting is fostered by an emissions-unit by emissions-unit analysis, whereas plantwide monitoring and reporting can obscure valuable information required by permitting agencies, sources and the public in structuring the most efficient GHG reduction technologies and operating efficiencies

Response:

      The EPA disagrees with the comments objecting to the GHG PALs proposal on notice-and-comment grounds. 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 Procedures Act 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 applicable 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, 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 14239-14244. 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. 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. 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 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 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.
 
	Commenters also requested that the EPA provide clarification that the proposed changes to the federal regulations would not impact existing state authority to issue PAL permits or existing 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 EPA is making to the PAL regulations in 52.21 are not intended to change those existing state interpretations. Accordingly, the changes that 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.
      
	We did not propose to include any specific regulatory language or guidance to address the concerns of the semiconductor industry, landfills, or any other specific industry group, and thus we have not finalized any such regulatory languages or guidance for specific industries. However, we do not believe that such industry-specific changes to the PAL program are necessary, since our final rules (and the benefits arising from them) will apply to those industries in the same way they will apply to other industries. Furthermore, we believe the GHG-specific changes to the PAL program that we are providing in this rule may prove especially beneficial to industries that need flexibility to quickly respond to market demands. 

      We appreciate the specific suggestions for revisions to the underlying NSR regulatory text for the PAL program to put our Step 3 proposal in effect, and we have taken these comments in considerations as we developed the regulatory revisions in our final rule and have included a number of the suggested changes, as appropriate.
      
      Also, concerning monitoring, 40 CFR 52.21(aa)(12) lays out requirements for monitoring PALs that are applicable to PALs issued for any pollutants and we did not propose to revise these requirements or otherwise add any new requirements specifically for GHGs in the final rule. We believe these existing monitoring provisions will be adequate for GHGs in the same way that they are adequate for other PAL pollutants, and we note that the commenters did not identify any specific provisions of the current monitoring requirements that would be deficient when applied to GHGs. With regard to the comment that GHG reduction goals of the program will be frustrated if sources in areas where less vigorous monitoring is required would gain a competitive advantage over sources located in areas with more rigorous requirements, we note that the GHG-specific changes to the PAL program apply to one permitting program  -  federal PALs issued by the EPA and our delegated states  -  and thus monitoring requirements (and GHG reductions) should be consistent under that program.

Comment: 

	Some commenters made their support of PALs contingent on PALs being voluntary. One industry commenter (19273) indicated support provided that GHG PALs are voluntary for the source. One state and local agency association commenter (19264) stated that the EPA must ensure that the use of GHG PALs remains subject to the discretion of individual permitting authorities. 

	One local agency commenter (19280) voiced strong support for the "EPA's apparent decision not to make PALs mandatory for permitting authorities," citing the EPA's statement at 77 FR 14241 that permitting authorities would likely only agree to issue a PAL if they believe they have the necessary resources to do so. This commenter noted that the local agency had opposed PALs when they were originally adopted because they were made a mandatory element of the NSR program and the agency did not believe that the regulations required adequate monitoring, recordkeeping and reporting to make PALs enforceable. 
      
      Four industry commenters (19265, 19276, 19288, 19289), who support GHG PALs, indicated that there are real-world limitations on PAL implementation. One of the industry commenters (19288) stated that many states have not adopted the NSR reforms that make PALs a regulatory option. The other three commenters (19265, 19276, 19289) pointed out that in California, Senate Bill 288 (adopted in 2010) prevents the implementation of federal NSR reforms, which includes PALs. Two of these commenters (19265, 19276) noted that if California, and perhaps other states, prevent the use of PALs, this would impact the EPA's ability to adopt meaningful permit streamlining. The third of these commenters (19289) added that the functionality of any streamlining strategy is ultimately limited by the permitting threshold level, so while there is some advantage to expanding the use of PALs this will not truly alleviate the permitting burden.
      
	One state agency commenter (19266) and one industry commenter (19271) support GHG PALs provided that it is clarified that EPA's authority would not usurp current state authority. The state agency commenter (19266) specifically opposes the EPA issuing GHG PALs that include non-GHG pollutants in states that have an approved PSD program. The commenter asserted that lack of a clear division of permitting authority will lead to confusion among sources over where to submit applications, and could lead to other jurisdictional and enforcement issues. The commenter alleged that recent EPA Region VI guidance indicates that, for GHG-only sources in Texas, the EPA will issue PSD permits for non-GHG pollutants that are above a significance level but below major source thresholds, which the commenter believes conflicts with current EPA thinking that state permitting authorities with approved PSD programs for non-GHG pollutants have exclusive jurisdiction over how to authorize those emissions. 

      Environmental advocacy agency commenter (19292) is concerned that the EPA should revisit all of its PAL rules and policies before extending PALs to GHGs and that superior environmental performance should be required as a condition of the added modification flexibility provided under a PAL

Response:

      As explained above, participation in the PAL program is voluntary. The decision of any source to request a GHG PAL and the decision of any permitting authority to either adopt the GHG PAL regulations or issue a GHG PAL are completely voluntary. There is no requirement for sources and permitting authorities to use these rules.  Moreover, this rulemaking revises only the regulations for the federal PAL permitting program in 40 CFR 52.21, which governs permits issued by the EPA (and its delegated states), does not require changes to the PAL provisions contained in 40 CFR 51.166. The changes to the federal permitting program at 40 CFR 52.21 is not intended to affect existing state authority (or lack thereof) to issue PAL permits, and we note that these revisions are not minimum requirements that must be adopted by states into their EPA-approved SIP PSD permitting programs. Thus, non-federal permitting authorities are not required to adopt these changes and nothing in this rule is meant to suggest that permitting authorities must implement a PAL program generally or a GHG-PAL program specifically. However, to the extent non-federal permitting authorities want to adopt these changes into their SIP-approved programs or already interpret their existing PAL program to implement GHG PALs in a manner similar to the changes that the EPA is implementing, we think that these changes will result in streamlining benefits for GHG permitting. However, even if states do not have authority, or choose not, to use GHG PALs as provided for in these changes, we believe the likely burden reduction and streamlining benefits afforded to federal permitting program support the changes to the federal PAL program contained in this final rule.
      
      The EPA disagrees that functionality of PALs as a streamlining strategy is ultimately limited by the permitting threshold level. As explained in the proposal and as provided for in the revisions that EPA is finalizing, so long as a source complies with the limits contained in a GHG PAL, the GHGs will not be subject to regulation during the PAL's term. Accordingly, changes in the "subject to regulation" thresholds that may occur after a PAL is issued will not affect the source, so long as it complies with the PAL. However, under the rules finalized by EPA, the level of the CO2e-based PAL in a specific permitting action is established by adding to the source's baseline actual emissions an amount of GHGs up to an amount equal to the CO2e emissions increase defined as "significant" as provided in the "subject to regulation" definition provided in paragraph (b)(49)(iii) at the time the PAL permit is being issued, so future permitting actions will automatically take any new GHG thresholds into account when the permits are issued. (Since mass-based GHG PALs do not allow any emissions increase above baseline, changes in the "subject to regulation" threshold are irrelevant for the purposes of setting the PAL.) 
      
      With regard to comments arguing that the EPA should not issue GHG PALs that include non-GHG pollutants in states that have an approved PSD program, those comments are moot. In finalizing the Minor Source approach to GHG PALs, we have specifically limited application of the PAL for GHG-only sources to addressing only GHG pollutants. Moreover, because adherence to a PAL serves as an alternative PSD applicability mechanism, sources complying with a GHG PAL will not trigger PSD permitting requirements for GHGs and thus reviewing authorities will not have to address non-GHG pollutants that may be emitted above the PSD permitting significance emissions rate, as long as the source does not undertake a modification that increases non-GHG pollutants in amounts that would otherwise trigger PSD.
      
      Finally, the EPA does not agree that we need revisit all of the PAL rules and policies as part of this rulemaking. The proposal and final rule for Step 3 of the Tailoring Rule did not seek to revise any provision of the previous NSR reform rule, including for PALs, with respect to non-GHGs. We also note that the use of PALs as an alternative NSR applicability mechanism (including the EPA's rationale that use of PALs would provide environmental benefits) and the basic elements of PAL permits have already been upheld. See 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 revisions to the PAL provisions that the EPA is promulgating in this action, the EPA did not propose to or take comment on, and is not  finalizing, revisions to the PAL program. Thus, the EPA is not re-opening the existing PAL provisions generally. Accordingly, the comments suggesting that the EPA should revisit all generally applicable PAL provision in this action are beyond the scope of this rulemaking, and the EPA does not have to address the general PAL program implementation issues raised in the comment. 
       
Comments on Options Related to GHG PALs

3.2.1	Comments on the Major Source Opt-In and Minor Source Approaches

Comment: 

	Six industry commenters (19259, 19262, 19270, 19273, 19287, 19290) expressed general support for both the Major Source Opt-In Approach and the Minor Source Approach for GHG PALs. Two state and local agency commenters (19260, 19266) and one industry commenter (19253) preferentially support the Major Source Opt-In Approach. Two state and local agency commenters (19280, 19291) prefer the Minor Source Approach, although one of these (19280) indicated that the agency would not object to finalizing both approaches as long as the EPA does not make PALs mandatory. One industry commenter (19278), who generally opposed the PAL proposal, nevertheless indicated a preference for the Minor Source Approach. It should be noted that some commenters indicated that their support was conceptual, pending review of actual regulatory language to implement the approaches. Specific comments on the two approaches are summarized in additional comments below.

      Two industry commenters (19287, 19290) stated that GHG PALs should be available without restrictions and without being related to the current emissions level of the facility or the need to go through PSD. One commenter (19290) stated that the usefulness of PALs to their industry would be significantly diminished if a PAL could be secured only at the time a PSD permit is being processed.
      	
      One state agency commenter (19291) expressed concern with the implications of creating new major sources in the state under the Major Source Opt-In Approach when potential emissions are below the major source thresholds. The commenter added that these facilities may ultimately lose any flexibility allowed under the PAL, if, at the time the PAL permit expires, they have not constructed or modified any sources (increased emissions), but would still be considered major sources. The commenter does not believe that facilities would consider obtaining a Major Source Opt-In PAL due to these issues.

	Some industry commenters (19278, 19281, 19282, 19284) likewise believe that there is little incentive for sources to opt into the major source program to obtain a PAL under the Major Source Opt-In Approach. Two of the commenters (19281, 19282) elaborated that a source that obtained a Major Source Opt-In PAL would thereafter be considered a major source, and any significant (rather than major) increase of a criteria pollutant would trigger PSD for that pollutant. One of these commenters (19281) stated that without proposed regulatory language, the commenter could not tell with any certainty whether the EPA intends to remedy this problem. The commenter contended that, for example, the EPA could choose not to extend its "major-for-one-major-for-all" policy in the GHG context; thus, a source could simply opt into a major source PAL for GHGs but remain minor for other pollutants. Another of these commenters (19282) asserted that resource requirements for obtaining this type of PAL are significant, making it unlikely that a state permitting authority would be willing or able to invest the time to issue it. Finally, the commenter concluded that this approach does not provide any meaningful benefit over the flexibilities that states already possess under their existing programs to structure cap-based permits.  

	One industry commenter (19281) stated that the EPA suggested that a source that obtains a PAL under the Major Source Opt-In Approach must remain a major source under PSD and title V at the expiration of the PAL (citing 77 FR 14241). While the commenter understands the need for any appropriate emission limitations to remain in effect after expiration of the PAL, the commenter believes that if the source is minor, then it should be treated as so. The commenter asserted that there is no justification in this case for a "once in-always in" type of policy. The commenter added, however, that without regulatory language to review, it is unclear whether the EPA is referring to sources that are truly minor.

      One state agency commenter (19266) supported the issuance of PALs for sources that opt into major source status where the EPA issues the PAL for GHGs only, and states issue the PALs for all other non-GHG pollutants under their approved PSD program. The commenter supported the Major Source Opt-In Approach despite noting that under current federal rules, a project must be a major modification of an existing major source to obtain a PAL. 
      
      One industry commenter (19273), who generally supported the concept of GHG PALs, indicated that it is difficult to express support or opposition to the Major Source Opt-In Approach because there are uncertainties about how the approach would be implemented in the absence of specific regulatory language. The commenter inquired as to whether a source that opted into being considered a major source under this approach would have to undergo major NSR/PSD review at the time it applied for the PAL or at the time it implemented a project that increases CO2e emissions by at least 75,000 tpy. Further, the commenter assumed that such a source would have to obtain a title V permit, but indicated that it is not clear what applicable requirements of the PAL would be listed on that permit. 

	Two industry commenters (19287, 19290), who supported the adoption of both proposed approaches to GHG PALs, indicated that the Minor Source Approach would more likely be used in the semiconductor industry where many sources currently use minor source cap-type permits to maintain minor source status for all non-GHG regulated pollutants. One of the commenters (19290) added that if the EPA finalizes only one of the two approaches, the Minor Source Approach should be adopted. One industry commenter (19278), who generally did not support GHG PALs, stated that the Minor Source Approach is the more tenable of the two approaches proposed by the EPA.

	Two state and local agency commenters (19280, 19291) preferred the Minor Source Approach. One of the commenters (19280) expressed that this approach will be less burdensome as a streamlining technique than the Major Source Opt-In Approach as the latter would require additional resources to address non-GHG pollutants. The second commenter (19291) indicated that this is the more promising approach because it allows the facility to remain below major source thresholds and only "major" amounts of increases in non-GHG NSR pollutants (i.e., 100/250 tpy) would trigger PSD.

	One industry commenter (19282) stated that the Minor Source Approach provides minimal benefit over state-issued cap permits because a properly-structured synthetic minor permit provides significant flexibility to sources and most of the advantages of a GHG Minor Source Approach PAL. The commenter indicated that the main incentive for utilizing such a PAL would be the ability to clearly obtain a 75,000 tpy significances level above baseline actual emissions; however, if the PAL applied to a limited number of GHG-emitting units, the benefit is likely to be minimal. The commenter concluded that while the proposed approach might provide some benefit to some sources, it is unlikely to provide any significant streamlining benefit and this means that there are not likely to be a significant number of sources that would experience "streamlining" or be taken "off the table" as a result of this approach.
	
Response:  

      Our Step 3 proposal was for the purpose of continuing the process of phasing in GHG permitting requirements under the PSD and title V permitting programs that we begun in Steps 1 and 2 of the Tailoring Rule. In our proposal we evaluated whether it is possible to lower the GHG major source threshold to bring additional sources into the CAA permitting programs. We also continued our identification and evaluation of potential streamlining approaches, among other options for finalizing the regulatory provisions for PALs, we discussed and sought comment on two approaches for regulating GHG sources under a PAL. We called the first approach the "Major Source Opt-in Approach." This approach would have provided GHG-only sources the ability to become existing major stationary sources, and thus receive PALs for GHGs and any other pollutant emitted by the source. A GHG-only source could become a major stationary source by agreeing to be considered an existing major stationary source, without having a specific qualifying project that increases CO2e emissions at the source by at least 75,000 tpy CO2e. We called the second approach the "Minor Source Approach." In contrast to the Major Source Opt-in approach, under the Minor Source Approach a GHG-only source would remain a minor source. A reviewing authority could issue GHG PALs to the GHG-only sources without requiring the source to become an existing major stationary source, and thus could not include PAL limits for non-GHG pollutants. 
      
      In light of the many public comments expressing a preference for the Minor Source Approach 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 make the source a major stationary source under the Tailoring Rule. Thus, sources may remain a GHG "minor source" but still qualify to obtain a GHG PAL. We are not finalizing the Major Source Opt-in Approach since many public comments that supported the GHG PALs changes questioned the usefulness of the Major Source Opt-in Approach for providing real streamlining benefits. Accordingly, all comments regarding the Major Source Opt-in Approach are moot at this time and will not be addressed in this document. In the final rule for Step 3 we also allow reviewing authorities to establish GHG PALs for PSD major and minor sources as an alternative applicability approach for determining if the source is subject to regulation and if a major modification has occurred with respect to GHGs.

      Under the final rule, regardless of the amount of GHGs currently emitted, a GHG-only source that has avoided PSD applicability for GHG under Steps 1 or 2 would be a minor source for purposes of PSD, and would 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.  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. As a result, GHG-only sources could not use PALs as an alternate for major NSR applicability determinations in the same way that existing major stationary source of other regulated NSR pollutants could. Instead, GHG-only sources had to wait until they actually proposed to make a change that qualified the source as a major stationary source under the PSD program before they could get a PAL. Under this final rule, provided a source complies with a GHG PAL, GHG emissions at the source will not be "subject to regulation," and a project at the source will not result in a major modification. Also under this final rule, as is typical for non-GHG NSR regulated pollutants under a PAL, an existing PSD major source could establish a GHG PAL as an alternative applicability methods for determining if a major modification has occurred with respect to GHGs.
      
      This final rule adopts the Minor Source Approach for GHG PALs by revising the PSD regulations to allow a GHG-only source to submit an application for a GHG PAL that will also allow the source to maintain its minor source status. A GHG-only source that complies with its GHG PAL will not trigger PSD permitting requirements for GHGs, but could trigger PSD for other regulated NSR pollutant if it undertakes a change that increases emissions by a "major" amount for any non-GHG regulated pollutant. 40 CFR 52.21(b)(1)(i)(c). That is, this approach authorizes permitting authorities to use the PAL program for minor sources only to regulate GHG emissions. 
      
      Moreover, under the Tailoring Rule existing minor sources that emit only GHGs, but no other regulated pollutants, in major amounts, 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 make the source major for GHGs, 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 alternate major modification applicability approach.
      
      Accordingly, 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. Under the Minor Source Approach of this final rule the EPA has determined that the scope of the program is limited only to a source's GHG emissions and could not include PAL limits for non-GHG pollutants emitted in amounts below the major source levels. Again, we believe changes to the federal PAL permitting program to implement the Minor Source Approach fulfills our streamlining goals by allow applicability determinations for PSD to occur in a manner that best manages reviewing authorities' long-term permit burden.  
      
      However, as also explained in the responses above, if states and other permitting authorities have other permitting mechanisms available to them to address those burdens, they can rely on their existing authority  -  nothing in this final rule is intended to limit the availability of other processes put into place by states, as consistent with the applicable EPA-approved state implementation plans (SIPs). Moreover, the decision of any source to request a GHG PAL and the decision of any permitting authority to either adopt the GHG PAL regulations or issue a GHG PAL are completely voluntary. There is no requirement for sources and permitting authorities to use these rules if they believe that a GHG PAL would not streamline the permitting process. Likewise, any source that feels that a PAL is too complex to negotiate and/or does not provide enough certainty about future operations can choose other permitting options as appropriate for their operations and as provided for under existing federal law and/or the SIP-approved permitting programs in their area. But given that we did receive comments indicating that some sources and permitting authorities did believe GHG PALs would offer streamlining benefits, we have decided to finalize those changes.  

Comment:
      
       One commenter (19282) stated that the source could obtain PALs for its criteria pollutants as well, subject to the monitoring, recordkeeping and reporting provisions required under a PAL permit and that, at the end of the PAL term, the source would continue to be considered a "major source" and could not return to minor status. They also assert that there are significant legal questions as to whether the EPA has the authority to bring minor sources into its regulatory structure, adding that these legal questions apply equally to the proposed Major Source Opt-In Approach and Minor Source Approach. The commenter asserted that state minor NSR programs under CAA section 110 govern regulation of minor sources and the EPA has defined in its own rule that GHG-only sources are minor sources under the Act. The commenter stated that, historically, the Agency has not issued permits to minor sources for this very reason. The commenter asserted that the suggestion that the sources are in fact major "but for" the Tailoring Rule does not, in and of itself, make these sources major and subject to the EPA's jurisdiction.
      
      One state agency commenter (19266) questioned the EPA's authority to issue PALs under the Minor Source Approach. The commenter requested that the EPA fully explain the basis for treating GHG sources differently than non-GHG minor sources in terms of allowing a PAL to avoid PSD for GHG sources, but not also allowing the PAL for non-GHG sources under a minor source program. The commenter indicated that the imposition of the Tailoring Rule is not ample justification for the Minor Source Approach, asserting that the EPA should not use the burden imposed by the Tailoring Rule as justification to give GHG sources special treatment under a PAL when its PSD FIPs have caused the permitting process to be too burdensome. The commenter disagreed that prohibiting the extension of PALs to non-GHG minor sources would burden a state's permitting resources. 

      One industry commenter (19273) stated that while the concept of the Minor Source Approach sounds appealing, the commenter does not know of any authority that allows the EPA to issue a minor source permit, except in Indian country, much less a minor source PAL permit. The commenter conjectured that perhaps the EPA intends this proposal to be a permit for state permitting authorities with minor source programs to implement. Despite this issue, the commenter welcomed flexibility and new permit tools in the GHG permitting arena and encouraged the EPA to develop and publish the details for this approach. 
      
Response:  

      As explained above, 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. Under the Minor Source Approach of this final rule the EPA has determined that the scope of the program is limited only to a source's GHG emissions and could not include PAL limits for non-GHG pollutants emitted in amounts below the major source levels.
      
      Contrary to the assertions made in the comments, these regulatory revisions are 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 the 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 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, as that section authorizes the EPA to promulgate "such regulations as are necessary to carry out [its] functions under this chapter." 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. 
      
      In response to the industry commenter who questioned who would issue PALs created under the Minor Source Approach and the authority for the EPA to issue such PALs, we note that the changes to the PAL provisions finalized in this action are only changes to the federal PAL program and thus only impacts permits issued by the EPA and our delegated states. While SIP-approved permitting authorities may have existing authority to issue such permits or may revise their programs to include the changes the EPA is finalizing today, the changes contained in this rule are intended for use by the EPA (and our delegated states) to issue PAL permits in areas covered by the GHG FIP. Accordingly, permitting authorities implementing the federal PSD program will be able to use their existing permitting authorities, including the authority provided to them under 40 CFR 52.21 and the changes finalized in this rule, and corresponding permitting procedures (such as those in 40 CFR 124 and the Tribal Minor NSR Rule) to issue PAL permits for GHGs in a manner consistent to PAL permits issued for regulated NSR pollutants other than GHGs.
      
      Issuing PALs to GHG-only sources that remain minor sources also 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 reviewing authority could establish a baseline actual emissions level. New major stationary sources do not have historical actual emissions from which a reviewing authority can establish an actuals PAL, and so we declined to include these sources in the actuals PAL program. 
      
      When we originally promulgated the PAL rules, we also chose not to extend the PAL program to minor (source) NSR permit programs, because PALs are an alternate major NSR 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. However, 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 of 75,000 tpy CO2e or more, we do not believe that extending the PAL provisions to GHG-only sources runs afoul of the reasoning we provided when initially limiting the PAL program to existing major stationary sources. 
      
      As explained above, the changes finalized by EPA in this rule allow GHG-only sources to receive a PAL addressing only GHG emissions and allows such sources to remain a minor source (absent any other PSD-triggering change) so long as they adhere to the limits provided in their PAL. Since the limits on such sources generally will restrict sources from undertaking the types of large modifications that would lead to increases in emissions of other regulated NSR pollutants at levels that would trigger major source status, we believe it unnecessary to extend the PAL authority under this approach to other non-GHG pollutants and nothing in this final action is intended to do that. However, adherence to the GHG PAL provides an alternative NSR applicability mechanism for GHGs only. To the extent that a source undertakes a modification that is consistent with its GHG PAL but still increases non-GHG pollutants in amounts that trigger PSD permitting responsibilities for those pollutants, the source will become a major source for those pollutants and major source permitting requirements will apply for those pollutants. (As a general matter, GHG emissions would not be addressed in that subsequent action, since the proposal and final rules make it clear that adherence to a GHG PAL does not make GHG "subject to regulation" for PSD permitting purposes.)    
      
3.2.2	Comments on the Basis for GHG PALs (Mass or CO2e)

Comment:

	Several industry commenters (19259, 19262, 19270, 19273, 19285, 19287, 19288, 19290) and one state agency commenter (19260) support the EPA's proposal to issue GHG PALs on either a mass basis of CO2e basis. One of the industry commenters (19262) added that this approach would provide needed flexibility and spur creativity and pollution prevention. The commenter pointed out that a facility may be able to change its use of raw materials or processes to lower its GHG emissions under the proposal but may not be able to make these same changes under a rigid, mass-based system. 

	Another of the industry commenters (19290) asserted that both the mass-based and CO2e-based options are needed and consistent with the structure of the Tailoring Rule. The commenter stated that depending on the circumstances (types and levels of GHGs emitted historically and anticipated in the future), a facility owner may be in a better position to proceed on one basis or the other.

	One state agency commenter (19280) recommended calculating GHG PALs on a CO2e basis. Another state agency commenter (19291) stated that PALs should be extended to major sources on a CO2e basis. In the context of discussing the PAL proposal, an environmental commenter (19292) states that any optional streamlining provisions should be based on CO2e emissions rather than mass emissions of GHG pollutants. (As noted in a previous comment, this commenter believes that GHG PAL provisions should be finalized quickly so existing PAL permit holders can utilize the flexibility afforded by PALs under their current permits.)

      Two industry commenters (19282, 19290) indicated that the lack of a mass-based significance level for GHG PALs is a barrier to the use of mass-based PALs. One of the commenters (19290), who strongly supports GHG PALs for GHG-only sources, asked that the EPA consider creating a massed based significance level for GHGs. The other commenter (19282) opined that for GHG PALs to be viable for major sources of criteria pollutants, the EPA should revisit its view that no mass-based increase can occur under the current regulations or should eliminate this requirement through rule revision. The commenter stated that the EPA should interpret its current regulations to allow a CO2e-based PAL under the current regulations, given that the CO2e metric utilizes mass to determine the effect value of an increase. To the extent that the EPA is unwilling to do so, the commenter asserted that the EPA should ensure that sources can use PALs on a CO2e basis. 

      Three industry commenters (19259, 19273, 19290) and one state agency commenter (19291) indicated that CO2e-based GHG PALs should be set by adding the 75,000 tpy applicability threshold to actual baseline emissions. One of the industry commenters (19290) stated that the addition of the significance level of emissions to the baseline actual emissions is an important aspect of current PAL rules, in that it provides a needed margin for year-to-year variability during the 10 years the PAL limits site emissions. Another industry commenter (19282) believes that the EPA should ensure that sources can add up to the significance level to their baseline actual emissions in calculating the PAL level, consistent with the existing PAL regulations.

      One industry commenter (19290) stated that, consistent with the role CO2e emissions play under the Tailoring Rule, compliance with the CO2e PAL at a GHG-only facility must provide assurance that the source is not subject to regulation with regard to PSD for any other pollutant so long as the PAL is met. The commenter also recommended that the EPA change the rules to have the mass-based PAL work in the same manner for GHG-only facilities; that is, the rule should state that a GHG-only facility meeting its mass-based PAL cannot trigger PSD for another minor pollutant. The commenter asserted that to the extent that the EPA determines that mass-based PALs do not provide the same protection from coincidental triggering of PSD for another pollutant, a source should be provided the option of obtaining a PAL for one or more of the other pollutants which are minor but could have a significant increase at the same time a GHG increase occurs under the mass-based GHG PAL. 

Response:

      Our Step 3 proposal discussed several changes to the existing PSD regulations in 40 CFR 52.21, including to allow reviewing authorities to issue PALs to both existing major and potentially major GHG stationary sources (GHG-only sources) on either a mass-basis or a CO2e basis, to allow CO2e-based PALs to include an increase based on the subject to regulations applicability threshold (currently 75,000 tpy CO2e), and to allow GHG PALs to be used as an alternative approach for determining whether a project is a major modification and subject to regulation for GHGs. 

      The proposal clarified that under current regulations any EPA-issued PALs can only be mass-based because when those requirements were established (as part of the NSR Reform rule) all NSR applicability thresholds were mass-based, while subsequently the Tailoring Rule established a CO2e threshold for GHGs to determine if a source's GHG emissions are subject to regulation, but a mass threshold for GHGs to determine if a major modification has occurred. Thus, under the current PAL regulations, GHG sources must monitor both metrics to ultimately determine whether a change triggers major NSR review.

      In the Step 3 proposal, we explained that under the current PAL rules, PALs are established by adding the significant emissions rate to baseline actual emissions and that in the Tailoring Rule we did not promulgate a mass-based significant emissions rate for GHG, so the significance rate for GHGs is effectively zero (i.e., any increase would trigger NSR). Thus, under the current PAL rules, a mass-based GHG PAL may not include any margin above the baseline actual emissions for emissions growth, which means a GHG PAL generally provides less flexibility to a source when compared to PALs for other regulated NSR pollutants. Continuing on we explained that the proposed rules would provide GHG PAL sources with the same kind of flexibility sources currently have for other regulated NSR pollutants by allowing sources to establish a CO2e-based PAL using the 75,000 tpy CO2e applicability threshold for GHGs. A reviewing authority could add the 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 applicability threshold for existing sources. We explained that changing the regulations will also have the effect of streamlining future major NSR applicability determinations for sources that choose a CO2e PAL, by eliminating the need to evaluate GHG emissions on a mass basis for major NSR applicability as long as the source is complying with the CO2e PAL, because a CO2e PAL can function to assure both that GHG emissions are not subject to regulation, and in turn does not trigger a major modification.
      
      We agree with the comments that GHG PALs should be available on a CO2e basis in addition to a mass basis, and we are finalizing an approach that would allow either metric to be used to establish a GHG PAL. More specifically, in the final Step 3 rule we are finalizing our proposal to allow reviewing authorities to establish a CO2e-based GHG PAL, and in doing so, 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. 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 for GHGs. The EPA proposed and is now finalizing these changes through this rulemaking, instead of attempting to interpret our federal regulations in a manner different than previously interpreted. However, as we explained above, states that have adopted PAL permitting programs may already be able to interpret their PAL provisions and the definition of "subject to regulation" 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 an amount equal to the emissions increase contained in the "subject to regulation" applicability threshold (currently 75,000 tpy CO2e). Nothing in this final rulemaking action is intended to change or limit such states' existing interpretation, and thus these changes 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
      
      With respect to the "subject to regulation" determination, we further believe that it is necessary to allow GHG PALs established on either a mass basis or CO2e basis to be used as an alternative provision for making this determination because failing to do so would negate the flexibility gained by creating a GHG PAL. This is because without these regulatory changes, 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 trigger the "subject to regulation" definition. If we do not allow GHG PALs to be used to determine whether GHGs are subject to regulation, these determination would use procedures that rely on an emissions-unit-by-emissions-unit analysis, and a shorter contemporaneous period to measure emissions changes, neither of which are required under a PAL. This would undermine some of 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 from a PAL, warrant extension of the alternative applicability provisions to "subject to regulation" determinations to assure that the PAL provides the intended flexibility to sources.
      
      With respect to extending the PAL regulations to allow GHG PAL 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, both for both major stationary sources and GHG-only sources. 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 tpy 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 reviewing 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 - 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, 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 PAL 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 paragraph (b)(49)(iii) at the time the PAL permit is issued (currently 75,000 tpy CO2e) to the source's baseline actual emissions. However, with regard to the comments suggesting that the EPA revise the regulations to create a mass-based significant level for GHGs or otherwise change the regulations to allow for some type of mass-based increase in a GHG PAL, the EPA did not seek comment on or re-open the decision not to specify a mass-based significant emissions level for GHGs and did not propose to change the existing PAL provisions to allow mass-based increases to baseline actual emissions in setting a GHG PAL, so any comments on that issue are outside the scope of this rulemaking. Accordingly, when establishing a mass-based GHG PAL the PAL would continue to be set at a level that includes the mass-based significant emissions rate, which is effectively zero under 40 CFR 52.21(b)(23)(ii).  
      
	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 CO2e significant emissions threshold for major modification applicability would also exceed the statutory mass applicability threshold 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. 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 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 insure that the source does not exceed that amount and thus will not emit GHGs in amount that would be subject to regulation and thus insures they are not subject to PSD permitting. In addition, since the Tailoring Rule and the existing PSD regulations require similar calculations of a source's mass 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, on either a mass basis and a CO2e basis, 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. 
      
      In response to the comment that CO2e and mass-based PALs for a GHG-only source should also somehow assure that other pollutants do not coincidentally trigger PSD applicability, or that minor sources for other pollutants should be allowed to obtain a mass-based PAL, the EPA declines to offer such additional flexibility in this final rule. We did not allow PALs for minor sources at the time we promulgated the NSR reform rules, and we have explained above why we believe PALs are appropriate only for minor GHG sources that are also GHG-only sources in this Step 3 rulemaking. 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. Although we requested comment on the Major Source Opt-in Approach, which would have given GHG-only sources the option of being considered a major source for purposes of obtaining a GHG PAL and obtaining PALs for non-GHG pollutants, we did not request comment on an option that would have allowed sources to remain minor sources while obtaining PALs for non-GHG pollutants. Thus, issues related to the treatment of non-GHG emissions for PAL purposes at minor sources is beyond the scope of this rulemaking, and we did not discuss or ask for comment on them in the Step 3 proposal.   
      
      Nevertheless, given that some of commenters seem to exhibit a general confusion about how PSD applicability will be addressed when a source has a GHG PAL, we want to clarify that PSD for GHGs will not be triggered so long as the source complies with its GHG PAL.  However, a source complying with a GHG PAL could still trigger PSD for other regulated NSR pollutants if it undertakes a change that would result in emissions increases of those pollutants sufficient to trigger PSD permitting requirements. Specifically, PSD could be triggered if the change increased emissions of non-GHG regulated NSR pollutants by an amount that would qualify as either (1) a major stationary source by itself under 40 CFR 52.21(b)(1), if the source is a GHG-only source; or (2) a major modification under the analysis set forth in 40 CFR 52.21(a)(2)(iv)(a) and provisions referenced therein, if the source is an existing major source. In addition, if a source with a GHG PAL undertakes a change that causes its GHG emissions to exceed the PAL, that change will qualify as a PAL major modification under 40 CFR 52.21(aa)(2)(viii), and the source would be required to address the change in accordance with the existing procedures in 40 CFR 52.21(aa)(11).

3.2.3	Comments on Setting the Level of a GHG PAL

Comment:
	
      One environmental commenter (19269) states that because GHGs have not been recorded for 10 years, the EPA should ensure that records are both recent and were properly recorded in order to set the GHG baseline appropriately, stating that a 10-year window would be inappropriate. The commenter also requested that the EPA limit the length of a PAL and continually review technology to set the proper time limits, as shorter timeframes will allow for larger emission reductions because of rapid control technology development that they believe will occur during initial stages of GHG regulation.  
      
      Another environmental commenter (19292) opines that setting the baseline at the highest actual emissions over the previous 10 years plus 75,000 tons CO2e is not consistent with the need to hew the thresholds to the statutory requirements as closely as possible or the administrative impossibility rationale. Also this commenter states that calculating baselines over many years requires robust monitoring and reporting of actual emissions during that period such that the EPA must supply sufficient information concerning the existence of source-wide, credible and verifiable GHG emission records for whatever look back period it selects. Also, the EPA has not provided up-to-date information concerning the length of business cycles applicable to sources it proposes could obtain a PAL. Absent such information, it is not possible to determine whether whatever lookback period the EPA selects is indeed "`a fair and representative time frame for encompassing a source's normal business cycle.'" EPA v. New York, 413 F.3d at 56.
      
      Two industry commenters (19253, 19258) believe that the EPA should consider the conversion of a mass-based GHG PAL to a CO2e-based PAL be based upon similar conversion procedures that are specified in 40 CFR Part 98 "Mandatory GHG Reporting" rule. The commenters indicated that any source that would have a GHG PAL would most likely be reporting under this rule and therefore will already be familiar with its application; therefore, it would save both the permitting authority and the regulated community time and expenses in trying to develop a parallel and potentially conflicting mechanism to accomplish this. The commenters added that there should not be NSR compliance issues associated with such conversion. 
      
      One environmental advocacy group commenter (19292) opposes allowing conversion from a mass-based PAL to a CO2e-based PAL. They think the preamble discussion on this subject is too opaque for meaningful comment -- there is no explanation of how that goal would be accomplished and no examples that would allow the reader to assess the impacts of such a conversion and under what circumstances it could occur -- and because no regulatory text was proposed. They think such a conversion would slow adoption of the statutory applicability thresholds by delaying expiration of PALs, since the PALs do not automatically decrease as the GHG applicability thresholds decrease. They explain that allowing up to 10 years to be added to the effective period of a PAL would leave the GHG applicability thresholds and GHG baselines out of date by up to three decades. Also, they are concerned that the proposal makes no provision for when and how the public would obtain notice of a source's decision to change or switch between PALs.
      
      Three industry commenters (19281, 19282, 19285) stated that the EPA should clarify that GHG PALs will remain in effect through the PAL term regardless of whether the EPA lowers the applicability threshold in the future. Two of these commenters (19282, 19285) indicated that sources will be reluctant to enter into PALs without some assurance that the thresholds will not be lowered during the PAL terms. One of the commenters (19282) pointed out that PAL permits generally result in emission reductions beyond that which otherwise would be required, so it makes sense to retain the issued PAL level for the 10-year term of the permit. In contrast, one environmental advocacy group commenter (19292) contended that it is crucial to consider the interplay between the need to lower thresholds as soon as administrative impossibility disappears and the existing regulations that would adjust PALs emissions limitations when emission standards changed [citing 40 CFR 52.32(b)(48)(ii)]. The commenter stated that the EPA must provide information concerning how it interprets these provisions to operate in a GHG PALs program and how sources obtain new PALs when thresholds are limited. The commenter implied that PALs must be cancelled or amended as soon as thresholds are reduced and to this end they believe PAL terms should not extend beyond 5 years.  

Response:

      As a general matter, in our Step 3 proposal, we proposed four specific types of revisions to the existing PAL program to better accommodate GHG emissions  -  to "allow reviewing authorities to issue PALs to both existing major and potentially major GHG stationary sources on either a mass-basis or a CO2e basis and to allow GHG PALs to be used as an alternative approach for determining whether a project is a major modification and subject to regulation"  -  and we discussed the provisions that we would likely change to do so. See 77 FR. 14239 and 14244. However, aside from those specific changes, we did not propose, or otherwise take comment on, altering other applications of PALs for GHGs or re-opening the existing PAL provisions generally. Thus, the comments suggesting that the EPA should revisit certain generally applicable PAL provisions are beyond the scope of this rulemaking. To begin, we did not propose or take comment on  -  and are not finalizing  -  a revision to allow the GHG baseline emissions for PAL purposes to be calculated using a different process from the process used to calculate the baseline emissions for other NSR regulated pollutants for PAL purposes, such as by shortening the look back period (typically 10 years) for actual baseline emissions. Likewise, we did not propose to revise the effective term (typically 10 years) of all GHG PALs; however, we did propose a transition period of up to 10 years after the final Step 3 rule is finalized to allow for a one-time conversion of any existing mass-based GHG PAL to a CO2e-based PAL. In the final rule, though two commenters suggested a mechanism for the conversion process, the public comments do not indicate strong support or a pressing need for such a transition period, and accordingly, we are not taking action on that segment of the proposal. Thus, under the existing PAL regulations and the revisions we are finalizing in this action, an existing mass-based GHG PAL would have to expire before a new CO2e-based PAL could become effective, and the new PAL would reflect whatever applicability thresholds are in effect at the time it is issued. 
      
      With regard to comments asserting that the EPA cannot finalize these GHG-specific PAL revisions or needs to make additional changes to the PAL program to accommodate GHGs, because there is insufficient GHG emissions data as a general matter, we disagree. Given the overall streamlining benefits that these revisions will have and the use of GHG PALs to achieve burden reductions for permitting authorities, as explained in the responses above, we believe that finalizing these revisions to the federal PAL program is consistent with the goals of the Tailoring Rule and the PAL program. However, we reiterate that participation in the PAL permit program is voluntary and the decision to issue a GHG PAL to a particular source will remain at the discretion of the relevant permitting authority. 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, and to the extent a permitting authority does not feel it can reasonably rely on the GHG emissions data provided by, or the GHG baseline period proposed by, a source, the authority can choose not to establish a GHG PAL or may be able to establish a GHG PAL using different baseline data or a different baseline period than those suggested by the applicant (consistent with the authority provided in 40 CFR 52.21(aa)(2)(xiii)). In addition, the GHG PAL rules we are finalizing today contain a provision which proscribes, in a manner consistent with non-GHG PALs, the use of a 24-month period for which there is inadequate data to determine annual emissions for purposes of establishing baseline actual emissions. See 40 CFR 52.21(aa)(2)(xiii)(d). In addition, since GHG PALs can only be established through a permitting process that includes a 30-day public comment period (see 40 CFR 52.21(aa)(5)), the public will also have the opportunity to examine the adequacy of the existing GHG data and raise concerns with the permitting authority, if necessary.  Accordingly, EPA believes that the overall GHG PAL revisions can be finalized because there are sufficient safeguards within the existing PAL program to address possible GHG data deficiencies for a particular permitting action.
      
      Also, in response to comments concerning whether GHG PALs should be revised to reflect lower GHG applicability thresholds (e.g., in the event we lower the GHG applicability thresholds in Step 4) before the PAL term expires, we did not propose to revise any existing PAL rules to change how such scenarios are handled for GHGs that would be different from how this would occur for other PAL pollutants. Current 40 CFR 52.21(aa)(8)(ii)(b) generally provide discretion for permitting authorities to reopen PAL permits for several reasons, one of which is to reduce a PAL when a new Federal requirement takes effect during the PAL term; thus, permitting authorities may reopen PALs to lower GHG thresholds before the permit term expires. Consequently, the final rule does not revise the existing PAL reopening rules in this respect. The EPA notes that the PAL reopening provisions cited above are discretionary and are not a mandate for permitting authorities. The EPA believes it would be consistent with the Tailoring Rule to not undertake such a reopening in the interest of minimizing the number of significant administrative actions necessary for processing related to GHGs by such states, which would lessen the benefits of streamlining that we have described for GHG PALs. We also note that the revisions that the EPA is finalizing in this action insure that any new GHG applicability thresholds will be reflected in GHG PALs established after such thresholds go into effect. (See, e.g., 40 CFR 52.21(aa)(6)(iii), which states that in setting the actuals PAL for GHGs, the limit "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" (emphasis added).)
      
      With regard to comments that we have to justify each specific GHG-based revisions to the PAL rules, including these CO2e-based changes, based on the administrative necessity doctrine provided in the Tailoring Rule, as explained above, the GHG PAL revisions finalized today are meant to provide additional easing of burdens identified in the Tailoring Rule, but are not separate deviations from statutory requirements addressed in the Tailoring Rule. Accordingly, the EPA does not believe that these revisions need to be separately justified under the administrative necessity doctrine.
      
Other Comments on GHG PALs

Comment: 

	Two commenters in the semiconductor industry (19287, 19303) strongly encouraged the EPA to find a means to provide PALs for new facilities so the semiconductor industry can continue to grow and flourish in the United States. One of the commenters (19287) noted that to remain competitive, the semiconductor industry must frequently install and remove manufacturing tools, make minor changes to process chemistry and make other modifications to the manufacturing process needed to introduce the new product line, which is easily done under a PAL but is much more complex and time-consuming if no PAL is available. The other commenter (19303) stated that a new state-of-the-art facility is an ideal candidate for a variety of flexible permitting options, including a PAL, if significant investment has already been made to limit GHG emissions. The commenter urged the EPA to consider whether a provisional PAL could be developed for a new greenfield facility, based on projected emissions, which could then be adjusted as needed once a sufficiently representative operating history has been established. 

Response:

	We agree with the commenters that GHG PALs can be useful to facilities, including those that make frequent modifications but are able to maintain emissions below a set level. Under the regulatory revisions that we are finalizing for GHG PALs, a source with a GHG PAL could use compliance with that PAL to determine that a particular change does not make GHGs subject to regulation and does not trigger PSD review for GHGs. In this way, as described in more detail above and in the preamble, we believe these revisions to our regulations will provide sources with a GHG PAL with increased operational flexibility, and will provide sources and permitting authorities with a streamlined mechanism for evaluating PSD applicability for GHGs, while continuing to generally assure that the environment remains protected from adverse air impacts resulting from changes a source undertakes in compliance with such a PAL.   

	However, to the extent the commenters are requesting that the EPA extend the PAL program to new (or greenfield) sources, that is a settled matter that is outside the scope of this rulemaking. The existing PAL rules states that an actuals PAL applies "for any existing stationary source." See 40 CFR 52.21(aa)(1)(i). We did not propose to change this requirement for GHG PALs, and we are not including such an exception for GHGs in this rulemaking. The EPA did not seek comment on or re-open the existing PAL provisions aside from the specific GHG-based revisions that the EPA discussed in the proposal, which were are promulgating in this action. Thus, the comment is outside the scope of this rulemaking.
 
      We also note that the reasons the EPA identified for limiting the application of the PAL provisions to existing major stationary sources when we promulgated the existing PAL rules in 2002 (67 FR 80186) pertain to GHG PALs in the same way that they apply to PALs generally. The EPA limited the use of PALs to sources that had historical emissions through which the reviewing authority could establish a baseline actual emissions level. New major stationary sources do not have historical actual emissions from which a reviewing authority can establish an actuals PAL, and so we declined to include these sources in the actuals PAL program. In addition, we doubt that use of projected emissions rather than actual emissions as a baseline to determine PSD applicability would be consistent with the requirements of the Act for Major New Source Review and with the court's decision in New York v. EPA, 413 F.3d 3, 38-40 (D.C. Cir. 2005).

Comment: 

	One industry commenter (19288) stated that the EPA should clarify that individual GHG emissions can be "netted" for purposes of determining the availability of a PAL, noting that the Tailoring Rule allows a "sum-of-six well-mixed GHGs on a mass basis" for determining whether a new source or a modified source triggers PSD and applies a similar summing methodology for the calculation of CO2e emissions. The commenter pointed out that the PSD regulations at 40 CFR 52.21(b)(3)(i)(b) define net emissions increases to mean contemporaneous increases and decreases, but the proposed rule refers to the issuance of PALs for GHGs in a general fashion, stating broadly that PALs allow a source to make changes at the source that do not trigger NSR if overall emissions at a source remain below the PAL level. The commenter believes that while the existing regulations provide for PALs on a "tpy" basis, further clarification would ensure that individual GHG emissions increases and decreases can be combined to stay within a yearly PAL limitation for the regulated GHG pollutant. The commenter indicated that given the complexity of various construction projects at EGUs and other sources that may need to be undertaken for compliance with various CAA regulations, sources need to be certain how compliance with a PAL will be calculated for GHGs. 

Response: 

      Compliance with a PAL should be determined based on comparing the source's actual emissions of GHGs to the PAL, using the metric established in the PAL. Thus, if the PAL is established on a CO2e-basis, then compliance with the PAL shall be determined by comparing the source's GHG emissions on a CO2e-basis with the PAL. If the PAL is mass-based, then the source's GHG emissions on a mass basis must be compared to the PAL. As 40 CFR 52.21(b)(49)(i) defines the term "GHGs" as "the aggregate group of six greenhouse gases," the rules require all six gases to be considered together as GHGs, whether the PAL is established on a CO2e or mass basis. Accordingly, an owner or operator must take all six gases that comprise the pollutant GHGs into account when demonstrating compliance for a GHG PAL. The process for how the owner or operator shall show compliance with a PAL is described in 40 CFR 52.21(aa)(4)(a); the netting provisions in 40 CFR 52.21(b)(3)(i)(b) are not relevant to demonstrating compliance with a GHG PAL.  We are not revising the definition of GHGs in 40 CFR 52.21(b)(49)(i) in this rulemaking, and we are making only minor changes to the PAL compliance demonstration provisions in 40 CFR 52.21(aa)(4)(a) to ensure that those provisions apply to PALs for GHG-only sources in the same way that they apply to other PALs. The EPA did not seek comment on or re-open the existing PAL provisions aside from the specific GHG-based revisions to the PAL provisions that the EPA is promulgating in this action. Thus, the comment is directed to settled matters that are beyond the scope of this rulemaking. 

Comment: 

	One local agency commenter (19280) sought to clarify that CAA section 182(e)(2) precludes the use of PALs at major sources for ozone precursors (volatile organic compounds and nitrogen oxides) in extreme ozone areas. 

Response:

      Issues related to ozone precursors or any requirements concerning extreme ozone areas or use of PALs in such areas are beyond the scope of this rulemaking, as the EPA proposal only addressed the use of PALs for GHGs, and the EPA did not seek comment on or re-open the existing PAL provisions aside from the specific GHG-based revisions to the PAL provisions that EPA is promulgating in this action. Thus, we are not responding to this comment. 
      

Miscellaneous Comments 

Impacts Analysis

Comment:

      Three industry commenters (19263, 19274, 19281) opined that the EPA needed to consider the impact of its regulatory proposals on small businesses, and that the EPA is required to prepare a Regulatory Flexibility Analysis (RFA) under the Regulatory Flexibility Act and its amending law, the Small Business Regulatory and Enforcement Fairness Act, unless the rule will not have a significant impact on a substantial number of small entities. 
      
      Two industry commenters (19263, 19274) disagreed with the EPA's certification that the proposed action will not have a significant impact on a substantial number of small entities because it does not impose additional burden on any sources to obtain a PSD or title V permit.  One commenter (19274) believes that a regulatory flexibility analysis must be performed where an action has a substantial effect on a significant number of small entities, even if that effect is beneficial.  Another commenter (19263) believes that, despite the EPA's assertion that this proposal is simply a flexible alternative to PSD permits, the reality is that the proposal will impose significant new requirements on a substantial number of entities, many of which could meet the definition of a small entity. 
      
      Another industry commenter (19281) argued that, thus far, the EPA has justified not conducting an RFA by claiming that the Tailoring Rule only provides "regulatory relief," and not new burdens upon regulated sources. See, e.g., Tailoring Rule, 75 FR 31595-97 (asserting that Tailoring Rule has no economic expense, because it provides "regulatory relief"). The commenter stated that, even if the EPA could have avoided conducting an analysis of the burdens of its initial Tailoring Rule, it cannot do so in the Step 3 rulemaking. The commenter explained that, unlike the original Tailoring Rule, which imposed initial major source thresholds for GHG permitting, Step 3 involves reconsidering the thresholds already in place. According to the commenter, if the EPA were to lower the existing thresholds, such an action could no longer be considered "regulatory relief," even under the EPA's mistaken understanding of the term. Therefore, the commenter opined that, given that the EPA is no longer offering an initial form of "relief" from the CAA's mandates, the EPA is now in the position of determining what will be the regulatory burdens on GHG sources going forward and the scope of such sources that would be burdened by such regulations. 
      
Response:

      We disagree with these commenters. 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, 604; see also, e.g., National Ass'n of Psychiatric Health Sys. v. Shalala, 120 F. Supp. 2d 33, 42 (D.D.C. 2000) ("The Regulatory Flexibility Act (`RFA'), 5 U.S.C. § 601 et seq., requires agencies to assess the negative impact of their rules on small businesses.") 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. As we indicated in the Tailoring Rule Response to Comments Document (RTC), the Tailoring Rule was designed "to relieve potential burdens associated with applying for title V and PSD permits. Because there is no new impact associated with this rule, the EPA is able to certify that there is no SISNOSE for this rule." Details on the EPA's determination of no SISNOSE can be found electronically at: http://www.regulations.gov and searching for Docket No. EPA-HQ-OAR-2009-0517-19181.  
      
      In addition, the EPA, in collaboration with the SBA, conducted an outreach meeting for small businesses to express any concerns about the rule and these concerns were considered as EPA finalized the Tailoring Rule. More details about this meeting and how the information was used to finalize the Tailoring rule can be found electronically at: http://www.regulations.gov and searching for Docket No. EPA-HQ-OAR-2009-0517-19181.
      
      Furthermore, since the final rule will not change the existing GHG permitting thresholds, the rule 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. As we indicated in the proposal for the Tailoring Rule Step 3, we will reassess the applicability of the requirements of the Regulatory Flexibility Act if we take action to lower the thresholds (77 FR 14258). However, additional analysis under the RFA is not necessary at this point because the EPA's decision not to change the thresholds does not impose additional burdens on sources (including small entities) already affected by the existing statutory and regulatory requirements, much less burdens that would have a significant economic impact on a substantial number of small entities.
      
      Likewise, the final revisions to the existing PAL program to better accommodate GHG emissions would have the effect of reducing the overall permitting burden on all entities, including small entities, 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. 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 the revisions to the PAL provisions contained in this final rule will either have a neutral impact or relieve regulatory burden for all affected small entities, and thus can be certified as not having a significant economic impact on a substantial number of small entities.
      
      Since neither the decision not to change the existing GHG permitting thresholds nor the changes to the GHG PAL provisions finalized in this action will increase burdens associated with the existing statutory and regulatory requirements to apply for title V and PSD permits, the EPA is able to certify that there is no SISNOSE for this rule.

GHG NSPS Standard  -  EGUs ("Carbon Pollution Rule")

Comment:

      Several industry commenters (19278, 19283, 19287) and one state commenter (19277) expressed concern that the adoption of the proposed NSPS for GHGs from EGUs could circumvent the intention of the Tailoring Rule and result in the application of PSD at the traditional 100/250 tpy thresholds due to the definition of "Regulated NSR Pollutant." The following recommendations were made by the commenters to the EPA to avoid the NSPS for GHGs from triggering PSD for GHGs if "any" GHG increase occurs:
   * Amend the definition of "regulated NSR pollutant" or cross-reference it to the definition of "subject to regulation" in the Phase 1 Tailoring Rule. (19283)
   * Use either this rulemaking or the Carbon Pollution Rule (40 CFR Part 60, Subpart TTTT) to make the needed changes to the PSD definitions. (19287)
   * Address this concern, even if the action is to clarify for states and regulated industry that such a reading is not an accurate interpretation of the CAA. (19287)
   * Amend §52.21(b)(50)(ii) (§52.21(b)(50)) - the definition for "regulated NSR pollutant" by adding the parenthetical "(other than GHG)" to read as follows:
            (ii) Any pollutant (other than GHG) that is subject to any standard promulgated under section 111 of the Act. (19278, 19283)
   * Delay both federal and state rules to prevent the regulation of GHG at 100/250 tpy on a mass basis, and/or utilize this Step 3 proposal to make a revision to the regulated NSR pollutant and/or subject to regulation definitions. Without this time allowance, the commenter feels it may not be able to make the revision at a state level in sufficient time to avoid the potential requirement to regulate GHG at 100/250 tpy. (19277)
Response:

      We appreciate these comments.  Because they concern action that the EPA has proposed in the Carbon Pollution Rule, "Standards of Performance for Greenhouse Gas Emissions for New Stationary Sources: Electric Utility Generating Units," 77 FR 22392 (April 13, 2012), we do not consider them relevant for this Step 3 rulemaking. For the proposed Carbon Pollution rule, the EPA recently made available potential regulatory text language to make clear that the PSD applicability thresholds for GHGs established in the Tailoring Rule would continue to apply if the EPA were to finalize the Carbon Pollution Rule. This regulatory text language was made available in a memorandum issued by the Agency on May 8, 2012 titled: "Proposed Regulatory Text Language for PSD Thresholds." This memorandum can be accessed at: http://www.regulations.gov/#!documentDetail;D=EPA-HQ-OAR-2011-0660-7602 or by searching http://www.regulations.gov under docket ID number: EPA-HQ-OAR-2011-0660-7602.  
      
Implementation Issues

Comment:

      Several industry commenters (19282, 19283, 19284) suggested that, since title V applications are due July 1, 2012 and no streamlining measures (e.g., synthetic minor rule) have been finalized, the EPA should stay the rule or issue a deferral of Step 2 for title V. The industry commenters (19282, 19283, 19284) suggested that, until states develop and are able to implement streamlining, the EPA should issue a transition policy similar to what the EPA did for hazardous air pollutants in light of the title V application deadlines in the 1990s (to consider as minor those sources with actual emissions at 50 percent of the major source threshold). 

Response:

	As noted, Step 3 has the narrow purpose of examining whether the three criteria that support lowering the applicability thresholds have been met, and, consistent with that narrow purpose, we did not propose or solicit comment on staying or deferring Step 2 for title V. Accordingly, we are not responding to these comments at this time. For the sake of completeness, if we were required to respond at this time, we recognize that for the most part, permitting authorities are just beginning to engage in title V permitting for GHG sources, and, as noted, that is a reason we are not lowering the thresholds at this time. However, we accounted for these burdens in the Tailoring Rule and commenters have not provided any new information to suggest that the permitting burdens are insurmountable. Accordingly, for this reason, too, we are not taking action on commenters' request that we establish a stay or deferral of Step 2 for title V or establish a transition policy. We addressed this issue in the Tailoring Rule, where we stated that "the existing title V regulations provide an adequate regulatory framework for managing the transition to incorporating GHG requirements in title V permits and additional specific exemptions or transition rules for title V are not currently warranted (75 FR 31595)."  

      Nevertheless, as noted, we will continue to evaluate the burdens on permitting authorities and explore and develop streamlining options to assist permitting authorities in the implementation of both the PSD and title V permitting programs.  

Other

Comment:

      One industry commenter (19250) requested that the EPA grant a 31-day extension of the comment period, which would have extended the commenter period to Monday, May 21, 2012.
      
Response:

      In the Tailoring Rule, we made an enforceable commitment to complete this Step 3 rulemaking by July 1, 2012. Therefore, we were not able to extend the comment period of this rulemaking due to the importance of proceeding with this action in a timely matter. However, as we have done in the past, we would consider, to the extent possible, any comments that arrived after the close of the comment period.

Comment:

	One industry commenter (19281) suggested that the EPA also could streamline the GHG permitting process by forgoing review under the Endangered Species Act (ESA). According to the commenter, in areas where the EPA acts as the GHG permitting authority, the EPA has taken the position that it may not issue a permit until it establishes the permit will have no impact on endangered species pursuant to Section 7 of the ESA even when the only reason the source is seeking a PSD permit is because of GHG emissions. Yet, in those circumstances, the commenter asserted that the ESA review has nothing to do with GHG emissions. In addition, the commenter argued that the EPA must complete a consultation in accordance with section 106 of the National Historic Preservation Act. To expedite these consultations, the commenter stated that the EPA requests that the permit applicants provide a biological assessment and cultural resources report covering the project and action area. The commenter requested that the EPA drop these requirements because ESA consultation is not legally required when there is no federal action, i.e., no PSD permit authorizing an increase in regulated pollutants other than GHGs. 

Response:
      
      The EPA appreciates the commenter's concerns but notes that the federal permits at issue provide required CAA authorization for the construction of new and modified sources. Commenters have not demonstrated that federal GHG PSD permits are not federal actions or that the laws cited by the commenter do not apply to federal permitting actions that may have the relevant types of effects.    
      
      As the commenter noted, when ESA and NHPA requirements are applicable to a federal GHG PSD permit, the EPA has been working with applicants to gather the information necessary to comply with these requirements as early as possible in an effort to avoid delays. The EPA also attempts to streamline the necessary analyses and procedures to comply with these laws by working closely with permit applicants to ensure the information is complete. The EPA will continue to look for opportunities to streamline compliance with these federal requirements, but does not believe such requirements can be dismissed in federal GHG PSD permitting actions.  
      
      The ESA calls for consideration of the various relevant effects caused by the federal action, and ESA Services and the EPA have not historically limited consultation to the effects of only those pollutants address in a PSD permit. Commenters have not shown how the ESA and applicable regulations enable the EPA and the ESA Services to limit the scope of effects considered in the consultation process in the manner proposed.