streamlining occurs through general rulemaking or a simplified permit
process, EPA fails to explain why the cost and time savings that could
be achieved if such measures were adopted and combined with other
streamlining procedures cannot work together so that NSR for GHGs can be
implemented for all sources as required by law.  The commenter asserts
that EPA should not adopt a 6-year time frame for sources below
25,000 tpy, but rather should move as expeditiously as possible to
fully implement the NSR program to achieve all available pollution
reductions as the statute and common sense require.

	A state commenter (4521) recommends that EPA to delay GHG permitting
until there is accurate monitoring and reporting data available.  The
commenter believes that states should be given additional time (at least
1 year after March 2011, but more appropriately, 3 years for which there
is ample precedent) to assess the reporting data and plan for any
additional permitting needs.

	One commenter (4518) states that the basis of the 5 year period is
unclear – it is not clear if all operating permits expire after 5
years and then need to be renewed, or if permits are simply reviewed
every 5 years.  The commenter believes that if permits expire after 5
years, and then undergo a speedy renewal process, then a 5-year period
for the first phase is sufficient since all operating permits will
either be newly issued or renewed within the period.  However, the
commenter is concerned that many permitting agencies have delays in
their permitting process and that permitting agencies would need to hire
a significant number of permit engineers in order to meet the permitting
requirements, which could take up to 2 years.

	The commenter (4518) also believes that EPA should explain what kind of
oversight will be ongoing within the initial phase.  The commenter notes
that EPA may need to work closely with permitting agencies to monitor
the permit process within each permitting agency to determine compliance
with standard procedures as established by the EPA, and funding will be
an important issue, particularly within the initial phase of the
process.  The EPA has indicated a willingness to assist permitting
agencies with the establishment of e-permitting applications and other
means of streamlining the permit application process, which the
commenter believes should prove useful.  Although facilities will have
to supply information on estimates of GHG emissions for renewal of
permits, the commenter contends that it is not clear if the rules for
calculating estimates will change, or if there will be less deviation
allowed for these estimates.  The commenter believes that this could
prove to be a critical point regarding the significance level, and for
new facilities and modifications that result in GHG emissions that are
close to the threshold.

Response:

We agree with commenters who support the phased-in approach of the GHG
Tailoring Rule.  Our final action reflects a multi-step process that we
believe will create a manageable workload for the increase in permitting
actions that will occur due to the regulation of GHG emission sources
under the PSD and title V programs.  In our final action we do not
include any automatic reversion to the statutory thresholds for GHGs;
instead, we have established the initial steps of a multi-step phase-in
of lower applicability thresholds with a commitment for further
regulatory activity and review for any lower GHG threshold adoption.  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.  For complete discussion of
the legal and policy rationale behind our phased-in approach, including
the basis for the chosen thresholds and time periods under steps 1 and 2
and the need for further study on the implications of adding smaller GHG
sources, please refer to section V.B of the preamble.

	We disagree with the one commenter that does not believe that our
proposed five-year evaluation study is necessary to evaluate
implementation issues for smaller sources.  We believe, as we did at
proposal, that this time is necessary to adequately 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.  As we
discussed in the proposal, and reiterate in this final action, we do not
have sufficient information at this time to determine the applicability,
effectiveness and legal viability of the various permitting streamlining
techniques proposed.  For reasons discussed in more detail in
section V.E.1 of the final preamble regarding streamlining, we are not
now able to determine how such techniques will be implemented or whether
they will prove viable or effective.  We agree with the commenter that
these measures may reduce the scope, cost, and complexity of these
programs, but there is considerable uncertainty as to the extent of this
effect.  EPA will first need to collect and analyze small source data
that we do not currently have – because these are sources that EPA has
not traditionally regulated – in order to assess which of these
techniques are viable or effective for such sources.  In general, EPA
will then need to conduct notice-and-comment rulemaking to establish the
approaches, and that rulemaking will need to address various legal and
policy aspects of these approaches.  After that, the permitting
authorities will need some time to adopt the streamlining techniques as
part of their permitting programs. Throughout this entire phase-in
process, EPA will be interacting with permitting authorities to obtain
feedback on the real-world implementation.

	As we proposed, we are establishing in the final rule an enforceable
commitment to act within 5 years to complete a study projecting the
administrative burdens that remain for small sources after permitting
authorities have had time to secure resources, hire and train staff, and
gain experience with GHG permitting for new types of sources and
technologies, and after EPA has had time to develop (and states have had
time to adopt) streamlining measures to reduce the permitting burden for
such sources.  We will use this study to serve as the basis for an
additional rulemaking that would take further action to address small
sources.  And to clarify for the commenter that suggested that the 5
year study period is linked somehow to the operating permit expiration
and renewal process, we did not consider the operating permit cycle as a
basis for the 5 year study period.

Chapter 7.  Comments on the Economic Impacts of the Proposed Rule

7.1  Economic/Societal Impacts and the Regulatory Impacts Analysis of
the Rule

	Section IX of the proposal preamble (74 FR 55337, October 27, 2009)
presents EPA’s assessment of the economic impacts of the proposed
rule, including the expected benefits and costs of the proposed rule on
affected entities.  At proposal, we concluded that the proposed rule
lifts, for a period of 6 years, the burden to obtain a title V operating
permit required by the CAA for smaller sources of GHGs and the burden of
PSD requirements for smaller new or modifying sources of GHGs.  We also
concluded that, for larger GHG sources, there are no direct economic
burdens or costs as a result of the proposed rule, because requirements
to obtain a title V operating permit or to adhere to PSD requirements of
the CAA are already mandated by the CAA and by existing rules and are
not imposed as a result of the proposal.

	At proposal, we conducted an RIA that provided the details of the
benefits of regulatory relief that smaller GHG sources will experience
in terms of costs avoided as a result of the proposal and the potential
for social costs in terms of foregone environmental benefits during this
6-year period.  We concluded that the proposal would provide relief to
small entities (as defined by industry category for stationary sources
by the SBA definition).

	We also assessed the social costs of the proposal.  The social costs
represent the foregone environmental benefits that would occur if
regulatory relief were offered to small sources of GHG emission sources,
as proposed.  These benefits are those attributed to title V and PSD
permitting programs in general.  We acknowledged at proposal that it was
not possible at the time to quantify these social costs, but stated that
the universe of possible emissions that would be regulated by sources
excluded under the Tailoring Rule is small compared to those that would
remain subject to title V and PSD permitting.  We also expressed our
interest in continuing to use regulatory and non-regulatory tools for
reducing emissions from smaller GHG sources because we believe that
these tools will likely result in more efficient and cost-effective
regulation than would case-by-case permitting.

	Comments received on the economic and societal impacts of the proposed
rule and our RIA are presented in this subsection.

Comment:

Several commenters (2504, 2797, 3278, 3512, 3607, 3741, 3858, 3859,
3860, 3906, 3915, 3916, 3998, 4020, 4021,4106, 4122, 4123, 4123, 4154,
4209, 4210, 4238, 4241, 4318, 4512, 4519, 4521, 4522, 4523, 4555, 4574,
4632, 4667, 4745, 4747, 4749, 4770, 4771, 5169, 4794, 4859, 4862, 4864,
4865, 4866, 4867, 4868, 4871/5063/5605, 4903, 4949, 4950, 4952, 4953,
4989, 4991, 4992, 5005, 5038, 5045, 5056, 5059, 5073, 5080, 5082, 5083,
5089, 5104, 5110, 5114, 5128, 5135, 5136, 5140, 5141, 5142, 5143, 5148,
5179, 5184, 5198, 5215, 5224, 5236, 5243, 5245, 5257, 5258, 5276, 5277,
5278, 5279, 5280, 5304, 5307, 5315, 5317, 5327, 5328, 5329, 5336, 5337,
5339, 5340, 5343, 5344, 5346, 5347, 5351, 5367, 5392, 5411, 5417, 5444,
5449, 5451, 5452, 5453, 5454, 5504, 5525, 5573, 5601, 5602, 5603, 5605,
5606, 5607, 5708, 5712, 5713, 5729, 5741, 5743, 5767, 5769, 5771, 5784,
5785, 5787, 5789, 5803, 5808, 5844, 5884, 5885, 5922, 6141, 6201, 6203,
6359, 6491 7125, 7127, 7128, 7130, 7131, 7132, 7133, 7134, 7136, 7192,
7203, 7204, 7212, 7294, 7295, 7295, 7935, 7961, 7986, 7993, 8015, 8071,
8089, 8212, 8272, 8300, 8301, 8303, 8322, 8396, 8400, 8401, 8405, 8521,
8533, 8581, 8584, 8585, 8803, 10432, 14710, 15050, 15051, 16411) express
concern about the economic impacts of the proposed rule on industry and
the overall U.S. economy/society (including costs passed on to the
general public).  These commenters state that EPA’s effort to regulate
GHG emissions will impose too great a burden on businesses in America,
given the status of our economy (especially if regulated under the CAA).
 Specific impacts listed by commenters include added costs (including
increased energy costs) and permitting delays that hamper the business
sector’s ability to create jobs, grow, and modify, thus delaying
recovery from the recession.  Several commenters believe that jobs will
be lost.  Other commenters express concern that businesses will be
forced to relocate overseas (causing leakage of jobs and emissions),
which would ultimately negatively affect the environment because they
would be relocating to countries that do not have the restrictions and
requirements found in the United States.  Some commenters contend that
the proposed rule will not deliver regulatory relief to small entities
as intended as sources will still be subject to state laws and minor
NSR.

Several of these commenters express concern over the proposed rule’s
impact on industry and the economy as a whole.  A sample of
representative comments is presented in the following bullets:

The commercial/industrial community may not remain economically viable
if it must absorb another costly and complex layer of environmental
regulation, especially in this period of economic hardship when many
firms are barely holding on.  Jobs could be lost and local economies
could suffer.  (5351, 5573, 5767, 7128)  Regulation of GHGs is an
unfunded mandate that will cause prices to rise by approximately 17
percent for U.S. firms, making U.S. goods uncompetitive and costing
jobs.  (5712)

The requirements would slow down or stop many proposed new businesses or
the expansion of existing ones and impose a heavy, costly blanket of
regulation at this particularly ill-chosen time.  The inability for
industries to increase production by adding more equipment in a short
time would hinder their ability to meet customer needs and would stifle
productivity and true job growth.  (3860, 4770, 5712, 5713, 5789)
Economic growth will be stifled because of the delay associated with:

Permitting for sources/modifications that previously were not subject to
PSD (up to 12 to 18 months).  (4241, 5329)

The backlog of permits at state agencies overwhelmed by the increased
permitting load.  (4770, 5343, 5524, 5573, 5672, 5713, 5744, 5884)
Alternatively, the government will have to expand, throwing our country
further into debt.  (5573)

Litigation over permits.  (7131)

Regulation of GHGs puts U.S. businesses at an economic disadvantage with
no demonstrated environmental benefit.  (3915, 4521, 4667, 4864,
4871/5063/5605, 5179, 5789, 7986)  Controlling GHGs in the manner
proposed by EPA may have some beneficial effects on air quality, but
will have little to no measurable effects on climate, and great
detrimental effects on the economy and our standard of living.  (5307)

Regulating GHG emissions will increase energy costs (especially natural
gas), hurting all industry sectors.  (5179, 5607, 5729, 6491)

Companies will be forced to redirect resources – that could have been
used for growth and investment – for regulatory compliance efforts.
Additionally, these regulations will result in production cuts, reduced
consumer spending, increased unemployment, higher energy costs, and
ultimately a much slower economy.  (5789)

Changing the emissions standards is an expensive proposition for
businesses.  This is a time of extreme economic uncertainty and many
companies cannot afford to alter their internal systems or make costly
operational modifications in order to comply with drastic rule changes.
(4209)

Many facilities below the 25,000 tpy threshold will nevertheless be
affected, as sources over the Tailoring Rule‘s thresholds and
significance levels will likely pass their compliance costs through to
end users through increased prices.  For many end users, increased
costs, including energy costs, could be the difference between staying
in business and closing up shop.  (4950, 5110, 7128)  The proposed
regulation will cost American consumers a staggering amount of money.
(5136)

Title V permitting entails significant costs and paperwork but does
little, if anything, to reduce CO2 and GHG emissions.  (3915, 4521,
4632, 4864, 4871/5063/5605, 7986)

Uncertainty is a significant impediment to economic recovery right now,
and the proposed GHG rule only adds to this sense of uncertainty.
(4123, 5884)  The rule will certainly be challenged in court, adding to
uncertainty around business expansion.  (5713)

The proposed PSD/title V GHG Tailoring Rule would result in economic
disruption and subject regulated industries to significant business
investment and legal compliance risks.  (4106)

Regulation of GHGs under the CAA will discourage projects meant to
improve efficiency or otherwise make current businesses more
environmentally-friendly.  (4667, 5344, 16411)

Even if new green jobs are created, they would be more than offset by
job losses in the traditional energy sector and across all existing
sectors.  (3860, 5729)

Several commenters (0331, 3953, 4512, 4632, 4749, 4771, 4786,
4871/5063/5605, 5038, 5073, 5142, 5245, 5411, 5602, 5743, 5785, 5922,
6141, 7295) express concerns regarding the economic impact that they
believe the proposed Tailoring Rule would have on specific
industries/affected entities.  Representative comments are presented in
the following bullets:

Agricultural sector:

Permitting costs, “citizen suits,” and the uncertainty associated
with the proposed rule are very concerning.  Many local economies rely
heavily on the livestock industry.  (4632, 5245, 5602, 5743)

Some agricultural commenters (3953, 4512, 5602) include the following
footnote to their concerns regarding the burden their industry would
face if title V fees were imposed on emissions of GHGs from livestock:
“Section 424 of the FY 2010 Interior-Environment Appropriations Act
prohibits the expenditure of funds to promulgate or implement any
regulation requiring title V permits based on biological processes from
livestock.  Thus, for at least FY 2010, livestock producers will not be
required to obtain title V permits based on emissions from livestock.”

Oil and gas industry:  The industry and associated jobs will move
overseas where emission restrictions are significantly less stringent or
do not exist, therefore resulting in a net increase in global GHG
emissions and an increase in our country’s dependence on foreign oil.
(4871/5063/5605)

Refining, production, and energy industry as a whole:  The proposed rule
would have a major impact on energy supply, fuel prices, and energy
security for the entire country.  (7295)  It will increase the
country’s reliance on imported energy.  (5607)

Natural gas industry:  The demand for natural gas is expected to
increase due to GHG regulations, and the natural gas industry will need
to significantly expand its transmission infrastructure, especially in
the Appalachian region.  The proposed PSD provisions would affect the
construction and modification of interstate natural gas pipelines and
supporting facilities, and the title V provisions would affect a number
of existing natural gas pipeline facilities and potentially affect the
smaller facilities associated with the well heads and gathering
pipelines.  Permitting delays and uncertainty could worsen an already
ailing economy in the region, which will be facing major negative
economic impacts from the expected effect of GHG regulation on the coal
industry in Appalachia.  In addition, permitting delays may discourage
the use of larger compressor stations in favor of smaller ones, with the
result that the economies of aggregation would be lost and a far larger
environmental footprint and greater GHG emissions would result.  (4749,
6141)

Rural electric cooperatives:  Because they are not-for-profit,
cooperatives will be forced to pass along all costs of meeting any new
requirements to their consumer-owners.  Such increased costs for
electric power, particularly in rural areas served by cooperatives, have
negative impacts on economic development and jobs.  (4122, 4318, 4523,
4992, 5038, 5080, 5089, 5114, 5128, 5327, 5601, 5741, 6459, 8301)
Because cooperatives have a disproportionate amount of fossil-fuel fired
generation when compared to the electric utility industry as a whole,
these negative impacts could be disproportionately higher for rural
electric cooperatives and their consumer-owners.  (5038)

Ethanol industry:  The 25,000 tpy GHG emissions threshold would force
every commercial-scale ethanol plant in Iowa to obtain a title V permit,
adding economic and regulatory burden to ethanol producers following one
of the most challenging periods in the 30-year history of the modern
ethanol industry.  Because of their low emissions of conventional
pollutants, the vast majority of today’s ethanol plants qualify for a
synthetic minor source permit, not the more burdensome title V permit.
(5142)

Rubber and tire manufacturing industry:  Growth will be stifled, which
is contrary to the intent of the statute.  The tire manufacturing
industry is a trade sensitive industry, and the cost (direct
transactional costs, the cost of delay, the regulatory uncertainty and
its affect on the company’s ability to raise capital, and the cost of
BACT) would increase at U.S. plants relative to foreign competitors in
the global rubber manufacturing industry.  Such competitive disadvantage
would move production from the United States to other countries which
have less stringent GHG controls, resulting in carbon “leakage” such
that total global emissions will increase.  (5922)

Flat glass industry:  The industry already employs many methods to
increase fuel burning efficiency and optimize the use of scrap glass
which helps to reduce the GHG emissions from the glass melting furnace
(4771).  Increased costs at U.S. plants (as listed in the previous
bullet) will result in carbon leakage and an increase in net global GHG
emissions.  (4771, 5169)

Semiconductor manufacturing:  The United States will lose jobs in this
sector, and become more dependent on non-U.S. semiconductor suppliers
for the chips that are the ‘building blocks" of the electronics
industry.  These chips help enable new and greener technologies and
support the creation of green technology and green energy jobs.  (5411)
The industry must be able to predict potential regulatory requirements
in order to effectively design future processes and controls (which are
developed over a 10-year period or longer) to meet its regulatory
obligations and remain a leader in the highly competitive semiconductor
industry.  The proposed regulation of GHGs would be potentially
devastating to U.S. operations due to the inherent delay and regulatory
uncertainty and the reversal of years of planning and extensive
resources devoted to managing regulatory obligations.  (5417)

Brick manufacturing:  An expensive and lengthy major NSR permitting
process will further damage the industry’s potential to recover during
these difficult economic times.  (5073)

Commercial real estate sector:  The Tailoring Rule will affect property
values and operating costs.  (5785)

Homebuilding sector:  The cost to homebuilders of raw materials,
commodities (such as concrete and glass), and energy will increase
substantially because the industries that supply the housing industry
will be subject to these CAA permitting obligations.  (4794, 5104, 6201,
6203)  One of the commenters (5104) provides several pages explaining
the impact of the proposed rule on the ability of individuals to afford
to buy homes and the impact on home energy costs.  The commenter
estimates that between 337,000 and 1.57 million households would be
priced out of the home buying market, and an increase in energy costs of
from about $200 a year to about $1,200 a year.

California’s transformation of the electric generator system to
greater reliance on renewable generation:  The federal permit gridlock
that could result from the proposed rule has the potential to interfere
with California’s transformation, which could retard, rather than
facilitate, reductions in GHG emissions from the electricity sector.
(4786)

Low-income households:  Higher energy prices fall disproportionately on
low-income households since they spend a larger percentage of their
income on energy. (5789)

Several commenters express concern about the “leakage” of jobs and
GHG emissions to outside the United States, resulting in a net increase
in GHG emissions (4667, 4771, 4859, 4871/5063/5605, 5082, 5169, 5224,
5302, 5337, 5922, 7134, 8089, 8303, 8581, 10432).  As set out in the
bullets above, this concern was specifically noted for the oil and gas
industry (4871/5063/5605), the tire manufacturing industry (5922), and
the flat glass industry (4771, 5169).  One commenter (5337) opines that
the implications of leakage are complex and reach beyond the immediate
economic harm to the regulating country, and that such leakage also
presents a threat to international trade relations and to international
agreements on limiting GHGs.  The commenter cites an interagency report
(The Effects of H.R. 2454 on International Competitiveness and Emission
Leakage in Energy-Intensive Trade-Exposed Industries (December 2, 2009))
which was completed as part of the consideration of proposed cap and
trade legislation, and notes that it identifies which industrial sectors
are most vulnerable to leakage.  The commenter suggests that this report
provides a workable and well supported list of industries that should be
exempted from PSD regulation of GHGs, which should be supplemented with
an “individual showing” process for additional sectors to qualify
for a leakage-protecting exemption.  This commenter strongly encourages
EPA to exempt the entire industrial sector from GHG regulation under
PSD.  Another commenter (5169) provides a figure illustrating a detailed
rebate system included in the Waxman-Markey and Boxer-Kerry bills to
prevent leakage for energy-intensive industries (Waxman-Markey; S. 1733,
Boxer-Kerry).

Several state commenters address the economic impacts of the rule.  All
of these state commenters are concerned over the increased costs that
would result to their states.  (2797, 3858, 3916, 4154, 4238, 4521,
4786, 4989, 4871/5063/5605, 5135, 5148, 5198, 5339, 7935, 8803)
According to state commenters, at a time when state budgets are being
cut and fee revenue is down, agencies are laying off staff, implementing
furloughs, reducing salaries, enacting hiring freezes, and taking other
cost-reducing measures, the ability to increase staff and obtain
additional resources simply does not exist and will not exist for the
foreseeable future.  (4989, 5135, 5198, 19144)

Several other commenters (5179, 5258, 5346, 7961) express concern that
the proposed Tailoring Rule will have an adverse affect on a specific
state’s economy (sometimes disproportionately to other states).  One
commenter (5258) states that the proposed changes will severely affect
the manufacturing industry, specifically in New Hampshire.  Similarly,
another commenter (7961) is concerned that Kansas, which is fuel
intensive and reliant on agriculture and its complements, would find
itself disproportionately harmed by the proposed GHG regulations.  Three
commenters (5140, 5179, 5278) address potential effects on Texas.  An
industry group representing refining, petroleum, and electric generation
industries in Texas (5278) indicates that if GHGs are addressed in the
permit-by-permit manner EPA proposes in the Tailoring Rule, these
industries, and Texas industry overall, will be disproportionately
affected because of Texas’ status as a major energy and chemical
producer.  Another commenter (5179) notes regulation of GHG emissions
under the CAA would significantly harm the Texas chemical industry and
Texas manufacturing as a whole.  The commenter asserts that chemicals
are the number one export from Texas with over $30 billion annually and
are the top Texas manufacturing sector, and account for 60 percent of
the U.S. chemical production.  A third commenter (5140) indicates that
it would not be economically viable to spend the approximately $4.6
billion necessary to permit newly subject sources pursuant to regulation
under the CAA in Texas.  The group feels that to the extent that
industry does not leave the state to avoid permitting costs, the costs
of regulation may be passed on to consumers in the form of increased
energy costs.  The commenter estimates that, in Texas alone, increased
energy costs will result in a loss of $12 to $16.6 billion in Gross
State Product (GSP) per year by 2020 and $44.3 to $52.2 billion by 2030.
 [Texas Advisory Panel on Federal Environmental Regulations, Comments on
the Environmental Protection Agency’s Proposed Endangerment and Cause
or Contribute Findings for Greenhouse Gases under Section 202(a) of the
Clean Air Act (June 23, 2009) at p. 21]

Several commenters (5124, 5140, 5181, 5191, 5278, 6609) assert that
EPA’s proposed rule offers no relief to regulated entities obligated
to comply with state law and minor NSR permitting requirements.
Implementation-related comments from these commenters and other

commenters, and EPA’s response to implementation-related concerns,
are presented in Chapter 8 of this document.

Many commenters (2371, 3512, 3858, 4095, 4106, 4122, 4298, 4318, 4319,
4521, 4522, 4523, 4684, 4745, 4747, 4770, 4862, 4865,8545, 4952, 4992,
5038, 5062, 5063/5605, 5073, 5080, 5082, 5083, 5085, 5086, 5089, 5110,
5111, 5114, 5124, 5128, 5133, 5137, 5139, 5140, 5141, 5143, 5179, 5181,
5183, 5224, 5257, 5277, 5278, 5279, 5280, 5317, 5327, 5337, 5339, 5342,
5343, 5347, 5367, 5390, 5417, 5601, 5718, 5741, 5773, 5787, 5858, 5886,
6459, 8015, 8283, 8301, 8400, 8459, 10432) believe that EPA’s RIA
understates the impact of the proposed rule or that EPA’s analysis is
insufficient or flawed.  Comments on specific aspects of EPA’s
methodology for estimating the burden of the proposed rule are addressed
in section 6.3 of this document.  Examples of the broader comments on
the RIA are presented below.

Numerous commenters contend (2371, 3858, 4095, 4106, 4122, 4318, 4521,
4522, 4523, 4745, 4770, 4862, 4870, 4952, 4992, 5038, 5062, 5063/5605,
5073, 5080, 5082, 5083, 5085, 5089, 5110, 5114, 5140, 5128, 5133, 5137,
5143, 5179, 5181, 5257, 5277, 5278, 5317, 5324, 5327, 5337, 5342, 5343,
5367, 5390, 5601, 5741, 5787, 5886, 6459, 8283, 8301, 8459, 8545) that
EPA has not fulfilled its requirement to fully evaluate the impacts of
regulating GHGs under the CAA, which necessitates a full RIA of the
burden on regulated entities (and state permitting authorities), and an
opportunity for the public to comment on such analysis.  The commenters
believe that the proposed rule fails to provide a comprehensive analysis
of the regulatory burdens created by PSD and title V for GHGs in that
the RIA solely focuses on the avoided permitting costs for sources of
GHG emissions when compared to statutory thresholds and does not
evaluate the newly imposed costs for sources above the proposed
thresholds and significance levels.  In addition, they assert that the
RIA is inadequate because it contains no assessment of the policy or
economic consequences of regulating the remaining sources under PSD and
title V.  Representative comments enlarging on this theme are summarized
below:

The RIA is incorrect in stating that “larger sources” of GHGs will
not be economically impacted because requirements to obtain a title V
operating permit or to adhere to PSD requirements are already mandated
by existing rules and are not imposed as a result of this proposed
rulemaking.  (5083, 5110)  The EPA's assertion that larger sources will
not experience an impact stands in contrast to its statement in the
section 202 proposed rule that the regulatory impacts of the PSD and
title V obligations would be addressed in the Proposed Tailoring Rule.
(5083)

The EPA has provided no assessment of the implications of its actions
for large stationary sources, such as power plants and manufacturing
facilities, or for the nation’s economy.  Such an impact analysis is
required because EPA could have chosen not to regulate GHGs at all.
(2371, 3858, 4095, 4122, 4318, 4521, 4522, 4523, 4745, 4862, 4870, 4952,
4992, 5038, 5080, 5082, 5085, 5089, 5110, 5114, 5128, 5137, 5179, 5181,
5257, 5277, 5317, 5327, 5337, 5342, 5343, 5601, 5741, 6459, 8301, 8545)
This violates section 307(d) of the Act and the APA.  (4870, 5181)
Because EPA did not analyze these impacts for the LDVR, it must do so
under the Tailoring Rule.  (5181)

The EPA has failed to satisfy its obligations under the CAA and
administrative law to assess and solicit comment on the full range of
impacts of its proposed regulation of GHG emissions under the CAA.  This
is more than a procedural flaw in EPA’s rulemaking process – it is a
failure to assess the true impacts of its actions and to consider less
burdensome and costly alternatives to regulating GHGs under the CAA.
(4122, 4318, 4522, 4523, 4952, 4992, 5038, 5080, 5089, 5114, 5128, 5257,
5317, 5327, 5601, 5741, 6459, 8301)  The EPA must not regulate in an
arbitrary way, something it does when it fails to “consider all of the
relevant factors and demonstrate a reasonable connection between the
facts on the record and the resulting policy choice.”  Small Refiner
Lead Phase-Down Task Force v. EPA, 705 F.2d 506, 519 (D.C. Cir. 1983)
(quoting Sierra Club v. Costle, 647 F.2d 298, 323 (D.C. Cir. 1981)).
The EPA’s assessment of the impacts of regulating GHGs under the CAA
is so clearly deficient that there is no question that it is arbitrary
under the CAA and basic principles of administrative law.  (5317)

A comprehensive RIA is needed to determine the economic impact on
mid-sized and small businesses with process emissions that would
otherwise avoid the PSD program.  (5083, 5133, 5143, 5367)

The EPA has failed to assess costs and benefits associated with
“leakage” of jobs and GHGs emissions.  (5337, 8459)

EPA’s analysis must address individual industrial sectors that would
be impacted by regulation of GHGs under the CAA.  (5143)

The analysis should include the impact of applying minor NSR to GHGs.
As written, SIP-approved minor NSR programs will be affected by the
proposed regulation.  While, as EPA states in the proposal, it is true
that the CAA does not require minor NSR programs to address non-NAAQS
pollutants, the facts are that states have adopted applicability
provisions identical to the PSD program for minor NSR.  The EPA has
approved those programs as part of SIPs – SIPs that EPA deemed
“necessary to attain and maintain” a NAAQS pursuant to section 110.
Given this approval and federalizing of the state regulations, EPA
cannot now claim that minor NSR implications are irrelevant to this
action.  To the extent EPA interprets the Act and its PSD regulations to
require that PSD be triggered based on a non-NAAQS pollutant, EPA cannot
ignore the implications for SIP-approved minor NSR programs using the
same language.  As a practical matter, EPA needs to address and resolve
the enormous and unreasonable burden imposed by regulating GHGs under
state minor NSR programs.  (5140, 5181, 5278)

The costs for a PSD permit (in actual fees, consulting fees, and cost of
lost time) should be included in any assessment and EPA should justify
that each cost (and the total cost) is reasonable, based on
environmental benefit.  (5073)

The EPA has a duty to conduct an RIA of the effect the proposed
revisions to 40 CFR 51 and 52 have on stationary sources of GHGs as
required in section 317(2) (sic) of the CAA (but it has failed to meet
this obligation.  (5082) [Note: Section 317(a)(4) would apply to this
PSD rulemaking.]

The proposed Tailoring Rule fails to recognize a source’s regulatory
costs and burdens.  Sources must spend considerable time and resources
on planning, analysis, design, maintenance and operational plans,
training, standard operating procedures, etc. to manage ongoing
regulatory obligations in addition to monitoring, recordkeeping, and
reporting requirements typically specified in permits to demonstrate
compliance.  Similar expenditures and resources are necessary to ensure
compliance with potential regulatory requirements for continuing changes
in equipment and operations.  Even newly permitted title V sources of
GHGs, which EPA erroneously states “would be issued permits that do
not include any applicable requirements,” would be subject to
burdensome title V requirements (e.g., compliance certification,
deviation reporting, annual or semi-annual monitoring reporting) and
more stringent monitoring (including CAM) under 40 C.F.R. part 64),
recordkeeping, and reporting than would otherwise be required to
demonstrate compliance with non-GHG applicable requirements under
existing minor source permits.  (5417)

If EPA elects to interpret CAA section 165 to automatically require PSD
permits for GHGs, then it must fully consider all the costs that stem
from that interpretation.  Absent full consideration of those costs, the
Tailoring Rule (and EPA's related LDVR and Reconsideration Rule) will be
arbitrary and capricious.  See American Iron & Steel Inst. v. EPA, 115
F.3d 979, 997 (D.C. Cir. 1997) (remanding because EPA "adopted a cost
estimate that can only be described as fanciful" and "failed to address
whether the measure is cost-justified").  (5277)

The EPA is effectively playing a shell game with respect to its
statutory obligation to provide a thorough RIA to accompany its
proposal.  The EPA’s strategy will render such a rule vulnerable to
legal challenge.  A rule that fails to address relevant comments may be
held arbitrary and capricious (American Mining Congress v. EPA).  (4862)

EPA needs to quantify the costs to federal, state, and local governments
and the regulated community, assess the benefits associated with
reduction of GHG emissions, and show that the benefits to U.S. citizens
of such regulations outweigh the costs.  (5063/5605)

	One commenter (5139) believes that EPA’s cost-benefit analysis is
seriously flawed because EPA generally characterizes the foregone
benefits of reducing GHGs as negligible, while the savings achieved
through eliminating compliance with the CAA for sources below the
proposed thresholds are extremely large.  Even though EPA acknowledges
the numerous, significant uncertainties involved in its assumptions
throughout this rulemaking, it is somehow able to set precise price tags
on the administrative burdens purportedly avoided by “small” sources
that would be exempted from compliance by the Tailoring Rule.  EPA
claims that these sources would save some $52 billion and $1.15 billion,
respectively, in title V and PSD permitting costs.  Yet, EPA says that
it simply cannot estimate the other side of the coin: “It is not
possible at this time to quantify the social costs of avoided BACT.”
The EPA compounds the error by combining this assertion with
contradictory claims that the allegedly unquantifiable benefits of
compliance “are likely to be small,” and that, “while it is
extremely difficult to measure the degree of improved compliance, if
any, that would be foregone [by not requiring title V permits], we
expect that they would be negligible.”

Some commenters (4770, 5328, 5390, 8015, 8283, 8400) believe that EPA
should perform a thorough analysis of the potential cost and economic
impacts of applying PSD and title V to GHGs at the statutory thresholds.
 Some of these commenters believe this is necessary because if the
Tailoring Rule does not survive legal scrutiny, the statutory thresholds
for PSD and title V must be implemented (4770, 5328, 5390, 8015, 8400).
A commenter (5390) indicates that this analysis should encompass the
significant adverse consequences that will be faced by industry,
including, in particular, potentially millions of newly regulated
sources that are small businesses with small capital improvement
budgets, small profit margins, and almost no tolerance for increased
regulatory costs.

Response:

Some of the comments discussed above disagree with the assertion that
the proposed Tailoring Rule provides “regulatory relief”.  Other
comments contend that the Tailoring Rule as proposed: (1) has a
significant economic burden on industry, the U.S. economy, and society,
(2) hampers businesses ability to create, grow, and modify operations
delaying recovery from the recession, (3) may result in movement of
industry overseas contributing to leakage of jobs and emissions, and (4)
negatively impacts specific domestic industry, commercial, agriculture,
waste, and energy sectors significantly and some business sectors
disproportionately.  Numerous comments outlined above assert that the
RIA completed for proposal was inadequate for the following reasons: (1)
the RIA did not consider impacts to large sources that will be required
to comply with title V and NSR permitting when GHG emissions are
regulated, (2) the RIA underestimated the number of sources affected at
the proposal threshold/significance levels of <25,000 CO2 equivalent
(CO2e),  (3) the RIA failed to estimate or underestimated the costs for
sources to obtain permits and to comply with NSR BACT requirements and
for permitting authorities to process permits, and (4) the RIA
overstates the benefits of regulating sources of GHGs.  A number of
comments state that EPA must analyze the full impacts of the Tailoring
Rule to comply with CAA section 307(d) and the APA.

EPA has carefully considered the comments addressing the issue of
whether the Tailoring Rule is a “regulatory relief” rule, and we are
not persuaded that we erred in concluding that the effect of the
Tailoring Rule is to provide regulatory relief to a large number of
sources of GHG for a period of up to six years.  This final rule will
provide relief from title V permitting to over 6 million sources of GHG
in this country in total.  Likewise tens of thousands of sources
potentially subject to PSD permitting requirements annually for GHG will
have regulation postponed for a period of up to 6 years under this rule,
followed by an additional required rule addressing the period beyond 6
years.  While larger sources of GHG may be required to obtain title V
permits or modify existing permits and to comply with PSD requirements,
these burdens result not from the Tailoring Rule but rather from the CAA
requirement to apply PSD to each pollutant subject to regulation, which
is triggered when the Light Duty Vehicle Rule takes effect.  To clearly
illustrate this, consider what would occur if EPA did not complete the
Tailoring Rule.  Sources would not be relieved of the requirement to
obtain permits addressing each pollutant subject to regulation when they
construct or modify, nor would they be relieved of their obligation to
obtain title V permits.  Instead, these requirements would simply apply
to a much larger population of sources and modifications, and would lead
to the absurd results and severe impairment to program implementation
that this rule is designed to address.

In response to comments that the Tailoring Rule will: (1) have a
significant economic burden on industry, the U.S. economy, and society,
(2) hamper businesses ability to create, grow, and modify operations
delaying recovery from the recession, (3) may result in movement of
industry overseas contributing to leakage of jobs and emissions and (4)
negatively impact specific domestic industry, commercial, agriculture,
waste, and energy sectors significantly and some sectors
disproportionately, the EPA responds that this Tailoring Rule does not
impose regulatory burdens on any entities.  This Tailoring Rule lifts
the burden of title V and PSD permitting for over six million title V
sources in total and tens of thousands of new and modifying PSD sources
annually. This rule does not impose regulatory requirements on any
entities, but rather provides regulatory relief to sources of GHG and
permitting authorities.  This final rule provides permitting thresholds
for sources of GHG that exceed levels contained in the CAA and these
levels are phased in steps based upon application of the administrative
necessity and absurd results doctrines as explained in the preamble for
the rule section V.B.   The EPA carefully considered comments provided
in setting the threshold levels for the final rule that exceed the
levels proposed.  For step 1 that is effective from January 2, 2011
through June 30, 2011, only sources required to undergo title V or PSD
permitting based upon non-GHG air pollutants are required to obtain an
operating permit or PSD permit to include GHG emissions.  Step 2,
effective from July 1, 2011 until such time as EPA acts on a rule to
amend it (which for reasons described above, we assume is June 30, 2013
for the purposes of this analysis), requires larger sources emitting GHG
above 100,000 CO2e tpy to obtain a title V permit (if they do not
already have one) and to comply with PSD requirements when they are
newly constructed or modify in a way that increases emissions by more
than a 75,000 CO2e tpy significance level.   Thereafter, EPA makes an
enforceable commitment to consider a possible step 3 to further lower
thresholds below 100,000 CO2e tpy and/or permanently exclude some
sources from the program(s), but only after a regulatory process is
conducted addressing administrative necessity and absurd results
considerations based upon the actual permitting experiences in the first
two steps of the phase-in. In addition, EPA provides a deferral of
permitting until we take required action in April 2016 for sources and
modifications that emit below 50,000 CO2e tpy.  The deferral will end
when a required study is conducted of the permitting process for sources
of GHG and EPA acts, based on the study, to promulgate a rule that
describes the additional GHG permitting requirements beyond 2016.  The
EPA notes that the threshold/significance levels established in the
final rule substantially exceed those proposed.  In the 6 years
following promulgation of this rule, the EPA estimates that compared to
baseline estimates that do not include the effects of this rule, over
six million sources of GHG emissions in total will be allowed to
continue to operate without a title V operating permit.  During this
period, tens of thousands of new sources or modifying sources each year
will not be subject to PSD requirements for GHG.  For this large number
of smaller sources, this rule alleviates the regulatory burden
associated with obtaining an operating or PSD permit or complying with
NSR BACT requirements.  Therefore, this final action may be considered
beneficial to these small sources because it provides relief from
regulation that would otherwise be required.

With regards to comments received that the RIA should have been a more
comprehensive analysis to include the larger sources of GHG that will be
required to obtain permits when GHG are regulated, the EPA maintains as
previously explained that there are no direct economic burdens or costs
as a result of this rule for these sources.  Requirements for larger GHG
sources to obtain title V or PSD permits are already mandated by the Act
and by existing rules and are not imposed as a result of the Tailoring
Rule.  Thus the economic impacts for larger sources of GHG do not occur
because of this Tailoring Rule.  To include these larger sources in the
RIA would actually be an inaccurate assessment of how this rule affects
sources and would ignore the fact that this rule is regulatory relief.

Regarding comments that EPA underestimated the number of sources
affected at the proposal threshold/significance levels of 25,000 CO2e,
failed to estimate or underestimated the costs for sources to obtain
permits and to comply with NSR BACT requirements and for permitting
authorities to process permits and overstated the benefits of regulating
sources of GHGs, the EPA did make improvements and modifications to the
RIA completed for this final rule.  As previously discussed the
threshold levels finalized in this rule were revised substantially
upward.  Based upon comments, EPA modified estimates of the number of
sources affected at various threshold levels upward.  EPA also improved
the burden estimates associated with obtaining permits for sources and
permitting authorities in response to comments.  After consideration of
the burden imposed by the proposed rule with these improved estimates
for affected sources, the EPA modified the steps of the phase-in period
to include two initial steps, described previously that are higher, and
therefore cover fewer sources and are less burdensome than the proposal
threshold of 25,000 CO2e tpy emissions.  EPA also increased the
threshold below which permitting would not apply for six years from
25,000 to 50,000 tpy CO2e.  After the initial two step period, EPA has
committed to consider lower thresholds but only down to 50,000 tpy CO2e,
and only after a regulatory process that uses information gathered on
actual permitting activity during the first two steps of the phase-in
period.  The RIA conducted for the final rule also incorporates
improvements in our estimates of the number of sources affected at
alternative thresholds and improved estimates of the costs of obtaining
permits by sources and processing permits by permitting authorities. The
EPA acknowledges that the regulatory relief associated with the control
costs due to BACT requirements for PSD new and modifying sources is not
included in the RIA for the final rule due to the lack of sufficient
data about the nature of those requirements.  However, it is the case
that, as it relates to burden, those estimates would simply increase the
amount of regulatory relief associated with this final rule.  For more
information about the economic analysis conducted for the final rule,
see the “Regulatory Impact Analysis for the Final Prevention of
Significant Deterioration and Title V Greenhouse Gas Tailoring Rule”
EPA 452/R-10-003 included in the docket for this rulemaking.

7.2  Regulatory Flexibility Analysis

	The Regulatory Flexibility Act (RFA) generally requires an agency to
prepare a RFA of any rule subject to notice and comment rulemaking
requirements under the APA or any other statute unless an agency
certifies that the rule will not have a significant economic impact on a
substantial number of small entities.  After considering the economic
impacts of our Tailoring Rule proposal, we certified that it would not
have a significant economic impact on a substantial number of small
entities.  We concluded at proposal that, since our proposal relieves
the regulatory burden on small entities, it will not have a significant
impact on a substantial number of small entities under both the title V
and PSD permitting programs.

At proposal, and as noted previously, EPA certified that the proposed
rule would not have a significant impact on a substantial number of
small entities and therefore we concluded that we were not obligated to
convene a formal Small Business Advocacy Review Panel (SBARP).
Nonetheless, because we were, and are, aware that many small entities
may be interested in the various GHG rulemakings that were under
development and the potential impacts of the statutory imposition of PSD
requirements that may occur as a result of these rulemakings, we, in
collaboration with the SBA, conducted an outreach meeting designed to
exchange information with small entities.  The outreach effort was
organized and led by representatives from EPA’s OAQPS within the OAR,
EPA’s OPEI, the OIRA within the OMB, and the OA of the SBA.
Documentation of this meeting, which includes a summary of the advice
and recommendations

received from the SERs identified for the purposes of this process can
be obtained in the docket for this rulemaking.  (See Docket No.
EPA-HQ-OAR-2009-0517-19130).

Comments received on RFA SBREFA requirements and the small business
impacts anticipated by the proposed Tailoring Rule are presented in this
subsection.

Comment:

Several commenters (3513, 3698, 3720, 3757, 3859, 3906, 4095, 4630,
4632, 4684, 4693, 4865, 4867, 4870, 4950, 5052, 5056, 5058, 5073, 5083,
5085, 5088, 5104, 5110, 5111, 5136, 5140, 5145, 5181, 5183, 5184, 5236,
5277, 5278, 5236, 5279, 5343, 5344, 5367, 5449, 5705, 5715, 5771, 5801,
5886, 6201, 6880, 7127, 7134, 7961, 8015, 8071, 8322, 8400, 14710) state
that regulation of GHGs under the CAA will result in additional and
significant regulatory burden on many small businesses and sources.
Additionally, several of these commenters express that EPA failed to
conduct an adequate analysis of the effects that the proposed Tailoring
Rule will have on small entities as required under RFA SBREFA (including
EPA’s failure to conduct the required SBARP) and other statutes and
EOs.

Some of these commenters specifically comment on the adverse effect that
regulation of GHGs under the CAA will have on small facilities/entities,
with and without the Tailoring Rule.  Examples of the types of comments
received are summarized below.

Some commenters indicate that certain industrial sectors include many
small businesses that would be adversely impacted even at the thresholds
of the proposed Tailoring Rule.  These include companies that explore
and produce domestic oil and gas (5056), the baking industry (5303),
small refiners (3757, 3968, 5705), concrete paver producers (5088), the
housing industry  (5104/6201), more than 100 small brick manufacturers
(4867), 400-500 small foundries (4867), 150 small pulp and paper mills
(4867), over 100 small coal mines (4867), 80 small lime manufacturers
(4867), 350 small municipal utilities (4867), more than 40 small
electric cooperatives (4867), and at least 16 small petroleum refineries
(4867).  Some of these 1,200+ small entities report that they will be
required to obtain title V permits for the first time solely because of
their GHG emissions.  (4867)

A number of commenters note that the Tailoring Rule defers small source
regulation, but does not permanently exempt small sources from
permitting requirements.  The commenters are concerned about the impacts
on small entities that will occur when the temporary thresholds under
the Tailoring Rule revert to the statutory levels (if that ultimately
occurs).  (3906, 4684, 4870, 5104/6201, 5110, 5236, 5343)  Some of the
commenters elaborated as follows:

Expanding the PSD and title V programs by reverting to the statutory
thresholds will result in precisely the same "absurd results" that led
EPA to promulgate the Tailoring Rule.  The 2008 report, A Regulatory
Burden: The Compliance Dimension of Regulating CO2 as a Pollutant
indicates that 1.2 million or more buildings would be subject to PSD at
the 250 tpy threshold level, many of which are previously-unregulated
establishments (e.g., office buildings, warehouses, health care
facilities).  Permitting under PSD could cost these newly-regulated
buildings an average of $125,120 (using EPA estimates from the
Information Collection Request [ICR] for the proposed rule), and that is
before factoring in the cost of installing BACT equipment.  (5110)

One industry commenter (5104/6201) provides several pages of examples of
how the building industry has already implemented a number of voluntary
initiatives to reduce the overall GHG emission contributions associated
with energy use, such as improving energy efficiency and incorporating
green building practices into the mainstream.  The Tailoring Rule
responds to the commenter’s concerns and gives a measure of critically
needed relief to the homebuilding industry from the repercussions of PSD
and title V permitting.  However, the commenter expresses concern that
this relief be made as permanent as possible.

Other representative comments related to the impacts of GHG regulation
under the CAA and the Tailoring Rule include the following:

Any attempt to require PSD permitting for GHGs would impose significant
costs on regulated entities, not relieve them.  EPA repeatedly asserts
that the Proposed Rule would "lift" costs on small entities and impose
no new costs on large entities.  That theory is incorrect with respect
to PSD permitting.  (5277)

Despite EPA’s intention, the proposed threshold for the GHG Tailoring
Rule will include substantially more small sources of GHG emissions than
will be included in the 25,000 ton threshold for EPA’s recently
promulgated GHG reporting rule.  (4632)

Even with the raised 25,000-ton threshold, a large number of small
businesses will be ensnared.  According to comments submitted by the SBA
(4867), over 1,200 small businesses will not be provided relief by the
Tailoring Rule from the "absurd results" created by EPA‘s efforts to
regulate GHGs under the CAA.  (5110)

EPA is giving inadequate consideration to the significant resource
burdens on small business owners and regulatory agencies, absent
evidence that there will be a corresponding environmental benefit.  The
commenter does not agree that a program that will potentially subject
new small business sources to PSD and title V requirements in the
short-term is the same as "providing regulatory relief."  The "cost
saving" noted by EPA is similarly incorrect.  The direct economic
impacts will be felt by the businesses throughout the U.S., both small
and large.  (5367)

The proposed rule will have a negative effect on the “economic
resurgence” of small businesses through the triggering of regulation
of millions of stationary sources.  (8400)

Regulatory approval is already a serious hurdle for small businesses,
and this ruling would put in even greater burden on them.  (5771)

Based on the language of the CAA, small businesses with GHG emissions
from 250 to 25,000 tpy could find themselves trying to figure out what
compliance and enforcement regulations apply.  (3859)  Even though the
EPA and larger environmental groups state that they will not press for
expansion of federal power over small manufacturers through the court
system, smaller sources will have significant exposure to civil
liability.  (3513)

Sources such as agricultural, residential, and small businesses (as
defined by the SBA) should be exempted from this rule during the first
5-7 years to allow EPA and permitting authorities time to gain
experience with the program.  Many small businesses do not have the
money or resources to spend on environmental consultants to assist them
in calculating their GHG emissions and do all the other cumbersome
paperwork that will be required under this proposal, including
determining BACT, doing the modeling required for the NAAQS, as well as
the increment modeling.  Small businesses and service providers must be
provided with education, resources, and tools to help them understand
whether and how they will be impacted by the rule and how they can
report and comply.  Without this time and resource consideration,
implementation of this rule as written will cause undue hardships for
small businesses.  (5367)

The estimated costs for a title V permit are unduly burdensome for small
businesses subject to the rule.  This is particularly true because the
title V permit does not necessarily ensure reduction of GHG emissions or
provide any additional environmental benefit.  (5236)

As noted above, several commenters provide that EPA, in considering the
economic impacts, failed to conduct an adequate analysis of the effects
that the proposed Tailoring Rule will have on small entities as required
under RFA SBREFA (including EPA’s failure to conduct the required
SBARP).  Examples of the types of comments received are presented below.

	Several commenters contend that EPA has not met the requirements of the
RFA by not conducting an adequate analysis of the impacts of the
proposed rule on small businesses and/or by not convening an SBARP for
the proposed Tailoring Rule (or for the other related GHG rulemakings).
(3757, 3968, 4095, 4630, 4632, 4648, 4684, 4693, 4867, 4870, 5052, 5062,
5073, 5085, 5088, 5111, 5140, 5145, 5181, 5236, 5278, 5343, 5705, 5715,
5886)

It is clear that the LDVR directly triggers regulatory impacts for small
entities.  If this were not true, EPA would not need the GHG Tailoring
Rule.  (4630, 4867, 4870, 5181)  Nevertheless, EPA declined to take
comment on the potential impacts of the LVDVR on small businesses, and
directed comment on this issue to the Tailoring Rule.  Now, EPA deflects
any substantive consideration of the issue by concluding that the
Tailoring Rule relieves regulatory burden.  Thus, EPA has deflected its
obligations under sections 603 and 604 of the RFA.  (4630)  The EPA
cannot state on the one hand that it was not obligated to address the
PSD burdens raised in the LDVR and on the other claim that it is not
required to conduct an RFA in this rule because it “relieves” the
burdens on small entities.  (4870, 5181)

EPA has no legal basis to avoid conducting a SBAR panel.  Although there
are rare situations where an agency may have a legitimate reason for not
conducting the small business impact analysis required by the RFA (which
in this case would include a SBAR panel), none of those situations are
present here.  (4867)

The EPA should have convened as many as four separate SBARPs to evaluate
the impact of the GHG rulemakings on small entities, including SBARPs
for the Endangerment Finding, the LDVR, the Tailoring Rule, and (even if
for none of the individual rules) for the combined GHG rulemakings.
This new regulatory program should not have been launched without the
benefit of a thorough review of the potential small entity impacts, as
required by the RFA.  (4648, 4693, 5145, 5715, 5886)

The EPA should initiate a SBARP to examine the economic impact in detail
before a final rule is published.  (3757, 3968)

The EPA should convene a separate SBAR panel for each primary industry
sector likely to be affected by GHG regulation.  (4684)

By not convening an SBARP, EPA has lost its best opportunity to learn
how its new GHG rules would actually affect small businesses, small
communities, and small non-profit associations.  (5088)

Although EPA has undertaken some outreach efforts in lieu of convening
an SBARP(s), these efforts are insufficient to meet the requirements of
the RFA or to estimate the economic impact of this rule on small
businesses, which will be significant in many cases.  (3757, 3968, 4867,
5052, 5073, 5140, 5278)  The EPA's use of section 609(c) of the RFA to
justify consultation with Office of Management and Budget (OMB) and SBA,
with input from outreach to small entities, instead of convening an
SBARP is a misreading of the RFA.  (4867)

Although the Tailoring Rule defers small-source regulation, it does not
exempt small sources from regulation.  Since EPA has now legally
committed itself to small-source regulation under PSD and title V, it is
obligated to examine the effects on small sources now, not at some point
in the future.  The commenter states that the fact that EPA does not
know the precise character of small-source regulation at this point is
no defense.  EPA could conduct an evaluation of various alternative
regulatory scenarios.  (5343)

	Some commenters specifically indicate that EPA was incorrect in
certifying under the RFA that regulating GHGs under the CAA will not
have “a significant economic impact on a substantial number of small
entities.”  These commenters sometimes referred to the proposed
Tailoring Rule, sometimes to the LDVR, sometimes to the Endangerment
Finding, and sometimes to the combination of these rulemakings which EPA
has advanced in coordination.  (3757, 3968, 4867, 5073, 5088, 5133,
5181, 5705)  Some commenters elaborated on this point as follows:

The EPA has offered little or no information to support this
certification with respect to small business refiners.  The commenter
disagrees with EPA’s certification and suggests that such a peremptory
dismissal of possible economic impact is primarily intended to obviate
the need for a SBARP that would otherwise be required under SBREFA.
(3757, 3968, 5705)

The EPA’s RFA certifications for the three GHG rule proposals lack a
factual basis and are improper.  It is clear that the GHG rules are
likely to have a significant economic impact on a large number of small
entities, including small businesses, small communities, and small
non-profit associations who will be affected either immediately or in
the near-term.  Over 1,200 small entities and their representatives have
informed the SBA that their anticipated GHG emissions will exceed the
25,000 tpy CO2e threshold; accordingly, they will immediately become
subject to PSD and title V permitting requirements for GHGs.  Some of
these 1,200+ small entities (e.g., brick manufacturers) report that they
will be required to obtain title V permits for the first time solely
because of their GHG emissions.  The EPA estimates the cost of obtaining
a first-time title V permit for industrial facilities at $46,350 per
permit, and new PSD permits are estimated to cost $84,530 per permit.
These estimates do not include the costs of project delays and potential
operational modifications required by permitting authorities.  In total,
these costs may exceed 3 percent of annual operating expenditures for
some small entities (e.g., electrical distribution cooperatives).  Under
EPA’s RFA Guidance, rules with 3 percent or greater economic impact on
more than 1,000 small entities are presumed to be ineligible for
certification under the RFA.  Had EPA thoroughly analyzed the potential
reach of the GHG permitting requirements on small entities, it would
have learned that the GHG Tailoring Rule will not benefit a substantial
number (over 1,200) of small entities.  (4867)

The EPA’s RFA certification for the LDVR states that the SBREFA
review of the potential impacts on small entities of regulating GHG
emissions under the PSD program would occur in the context of the
Tailoring Rule.  However, the Tailoring Rule lacks any analysis of the
costs of regulating GHGs under the PSD program and the impact of those
costs on small businesses.  Instead, the analysis in the rule focuses
exclusively on avoided costs.  (5133)

The EPA neglected to consider the millions of small businesses,
hospitals, schools, small government entities, and others that will be
dramatically impacted by the rule’s unprecedented and direct effect on
small entities, because the rule imposes these burdens in the first
instance (as a result of the LDVR), is ineffective to change state law,
and will inevitably be struck down by the courts.  Moreover, even at the
25,000 tpy threshold level, numerous small businesses will be affected
by this rule.  (4870, 5181)

Response:

The RFA generally requires an agency to prepare a regulatory flexibility
analysis of any rule subject to notice and comment rulemaking
requirements under the APA or any other statute unless the agency
certifies that the rule will not have a significant economic impact on a
substantial number of small entities subject to the rule.  If a covered
agency, such as EPA, is unable to certify a rule at proposal, they must
conduct a SBAR panel.

If an agency certifies that the rule at issue does not have a
significant impact on a substantial number of small entities (SISNOSE),
the agency is not required to undertake any regulatory flexibility
analyses or conduct a SBAR panel.  5 U.S.C. section 605(b).

EPA disagrees with commenters that assert EPA must undergo an SBAR panel
to determine how much more relief EPA could potentially give.  The SBAR
panel is required only when EPA is unable to certify no SISNOSE.
EPA’s certification of this action is fully supported by the RFA, and
accordingly EPA was not required to undertake RFA analyses such as the
SBAR panel or regulatory flexibility analyses.

Agencies can properly certify a rule when the rule does not impose
burdens on regulated entities, as the “relevant economic impact [is]
the impact of compliance with the proposed rule on regulated small
entities.”  Mid-Tex Elec. Co-Op., Inc. v. FERC, 773 F.2d 327, 342-343
(D.C. Cir. 1985) (emphases added).  Courts have refused to “convert
every rulemaking process into a massive exercise in economic modeling”
by requiring a full RFA analysis.  Cement Kiln Recycling Coalition v.
EPA, 255 F.3d 855, 869 (D.C. Cir. 2001).

This rule does not impose any new regulatory requirements or burdens on
any small entities.  Instead, this rule is designed to relieve potential
burdens associated with applying for title V and PSD permits.  Because
there is no new impact associated with this rule, EPA is able to certify
that there is no SISNOSE for this rule.  Contrary to the assertions of
some commenters, the RFA does not require that EPA consider multiple
rules in the context of an RFA analysis for an individual rule, as to do
so would require the type of “massive exercise in economic modeling”
that courts have rejected.  EPA is only require to consider the new
impacts of the

specific rule in question on the small entities subject to regulatory
requirements of the rule under consideration.

Although the RFA does not apply to this action, EPA recognized that some
small entities were concerned about the potential indirect impacts of
the statutory imposition of PSD requirements that may occur given the
various EPA rulemakings concerning GHG emissions.  In the interest of
providing small entities a forum to express their concerns in addition
to the opportunity provided in the notice and comment process, EPA used
the discretion afforded to it under section 609(c) of the RFA to consult
with OMB and SBA, with input from outreach to small entities, regarding
the potential impacts of PSD regulatory requirements on small entities
that might occur as EPA considers regulations of GHGs.

EPA, in collaboration with the SBA, conducted an outreach meeting
designed to exchange information with small entities that may be
interested in these regulations.  The outreach effort was organized and
led by representatives from EPA’s OAQPS within the OAR, EPA’s OPEI,
the OIRA within the OMB, and the Office of Advocacy of the SBA.
Documentation of this meeting, which includes a summary of the advice
and recommendations received from the SERs identified for the purposes
of this process, can be obtained in the docket for this rulemaking.
(See Docket No. EPA-HQ-OAR-2009-0517-19130).

The EPA took this small business outreach effort into account when
finalizing this rule.  Many commenters from this outreach effort said
that there were many more small businesses that would subject to PSD and
title V due to the proposed permitting thresholds than EPA estimated at
proposal.  Based upon these comments and others received regarding the
threshold, the EPA increased the threshold and significance levels from
the proposal levels to levels at or above those recommended by SBA.  The
final Tailoring Rule provides permitting thresholds for sources of GHG
that exceed levels contained in the CAA and these levels are phased in
steps based upon application of the administrative necessity and absurd
results doctrines as explained in the preamble for the rule in preamble
section V.B.  For step 1 that is effective from January 2, 2011 through
June 30, 2011, only sources required to undergo title V or PSD
permitting based upon non-GHG air pollutants are required to obtain an
operating permit or PSD permit to include GHG emissions.  Step 2,
effective from July 1, 2011 until such time as EPA acts on a rule to
amend it (which for reasons described above, we assume is June 30, 2013
for the purposes of this analysis), requires larger sources emitting GHG
above 100,000 CO2e tpy to obtain a title V permit (if they do not
already have one) and to comply with PSD requirements when they are
newly constructed or modify in a way that increases emissions by more
than a 75,000 CO2e tpy significance level.  Thereafter, EPA makes an
enforceable commitment to consider a possible step 3 to further lower
thresholds below 100,000 CO2e tpy and/or permanently exclude some
sources from the program(s), but only after a regulatory process is
conducted addressing administrative necessity and absurd results
considerations based upon the actual permitting experiences in the first
two steps of the phase-in.  In addition, EPA provides a deferral of
permitting until we take required action in April 2016 for sources and
modifications that emit below 50,000 CO2e tpy.  The deferral will end
when a required study is conducted of the permitting process for sources
of GHG and EPA acts, based on the study, to promulgate a rule that
describes the additional GHG permitting requirements beyond 2016.  In
the 6 years following promulgation of this rule, the EPA estimates that
compared to baseline estimates that do not include the effects of this
rule, over six million sources of GHG emissions in total will be allowed
to continue to operate without a title V operating permit.  During this
period, tens of thousands of new sources or modifying sources each year
will not be subject to PSD requirements for GHG.  . During this period,
tens of thousands of new sources or modifying sources each year will not
be subject to PSD requirements for GHG.  For this large number of
smaller GHG sources – some of which are small businesses, governments
or other small entities – this rule, this rule alleviates the
regulatory burden associated with obtaining an operating or PSD permit
or complying with NSR BACT requirements.  Therefore, this final action
should be considered beneficial to these small sources that are small
entities because it provides relief from regulation that would otherwise
be required.

Section 609(c) of the RFA allows agencies to, in their discretion, apply
the provisions of the RFA that address SBAR panels to a rule that “the
agency intends to certify… but the agency believes may have a greater
than de minimis impact on a substantial number of small entities.”  5
U.S.C. § 609(c) (emphasis added).  EPA does not believe that the use of
this discretion requires a rigid application of the entirety of section
609(c).  Instead, agencies may pick and choose elements of the SBAR
panel process to apply as they deem appropriate for the rule at issue.

EPA believes that section 609(c) of the RFA authorizes agencies to
engage in outreach similar to that of a formal SBAR panel where, as in
this action, the RFA would not otherwise apply due to the certification
of the rule.  EPA maintains that this action does not create new
significant impacts for small entities, and EPA’s use of 609(c) does
not indicate otherwise.  As indicated by the word “may,” an agency
has discretion to invoke this provision in a variety of circumstance and
is not limited to those situations where it is certain that a rule has a
greater than de minimis impact.

EPA is not required to take into account effects beyond those caused by
the Tailoring Rule for the purposes of the RFA.  No permitting
requirements are imposed by this final Tailoring Rule. Instead, this
final Tailoring Rule offers regulatory relief to over an estimated six
million sources of GHG emissions that would otherwise be required to
obtain a title V permit and tens of thousands of sources of GHG
emissions subject to PSD permitting requirements that would otherwise be
required statutorily to obtain permit.  The RFA does not require that an
agency complete a regulatory flexibility analysis or conduct an SBAR
panel where the rule does not have any negative impact on small entities
subject to the rule.

Accordingly, EPA maintains that it has fully complied with the
requirements of the Regulatory Flexibility Act in this action.  Because
this rule does not create new significant impacts for a substantial
number of small entities, EPA has statutory authority to certify this
rule under the RFA.  Thus, EPA was not required to conduct an SBAR panel
or any regulatory flexibility analyses for this action.

Chapter 8.  Implementation Issues

8.1  Comments on EPA’s Mechanism for Implementing and Adopting the
Tailoring Approach

This section concerns comments received on the proposal’s approach to
adopting the Tailoring Rule within our regulations and by state, local
and tribal permitting authorities.

Comment:

Many commenters argue that EPA has not addressed the need for states to
adopt the Tailoring Rule into state regulations before it can take
effect.  Before the Tailoring Rule could apply, states will need time to
amend their SIPs from the 100 or 250 tpy statutory thresholds to the
thresholds in the Tailoring Rule (4118, 4243, 4298, 4515, 4691, 4903,
5084, 5140, 5143, 5276, 5278, 5317, 5417, 5789, 6414, 7935, 8015,
16411).  In addition, states run the risk of being sued if they issue
permits to sources that emit more than 100/250 tpy of GHGs before the
state law and regulations are amended for this purpose (5133).
Similarly, sources that emit more than 100/250 tpy of GHGs may be
subject to state enforcement actions or third-party suits, which would
produce inequality in treatment of sources in SIP-approved states versus
other states (4243).  Other commenters add that the Tailoring Rule
adjustments of emissions thresholds will directly conflict with their
state’s existing laws and implementation plans (5085, 7294).  Thus,
some of these commenters suggest that:

EPA should clarify whether the current statutory thresholds for PSD and
title V apply until the SIP is revised.  (5063)

EPA could modify the Tailoring Rule to assure that state programs do not
apply to the smaller sources of GHGs.  (16411)

EPA should disapprove state SIPs that require PSD permits for
sources/modifications below the Tailoring Rule thresholds (5922, 8015).
One commenter adds that EPA has enough information to conclude that
states would not have adequate resources to implement their state PSD
programs if the threshold for GHGs is 100/250 tpy.  Thus, EPA can
disapprove state SIPs to the extent they require PSD permits for
sources/modifications below the thresholds established in the Tailoring
Rule.  Failure to disapprove such SIPs would create great confusion for
sources and generate permitting gridlock (and “absurd results”) that
EPA is trying to avoid (5922).

EPA should issue a Notice of Deficiency (NOD), under CAA section
502(i)(1), and a SIP call, under CAA section 110(k)(5), to all states
concurrent with the final Tailoring Rule, unless a state can demonstrate
that it has commenced and is committed to finalizing any changes
necessary under state law to make it consistent with the Tailoring Rule
(4298).  Issuing a NOD and a SIP call in this manner is necessary to
maintain an even playing field among the states.  The commenter believes
that EPA should not finalize any action that would trigger GHG
permitting until each state program has been amended (4298).  In
addition, one commenter (4515/4691) supports the use of a SIP call under
section 110(k)(5) of the CAA or the conditioning of section 105 grant
funding to force appropriate revisions in SIP approved states.

EPA should use every available legal tool to ensure that the Tailoring
Rule requirements are incorporated into SIPs (4196).  One commenter adds
that EPA should establish an expeditious deadline for states to submit
corrective plan revisions (5306).  According to the commenter, EPA can
ease state adoption of PSD permit program revisions and expedite EPA
review and approval of the states’ adjustments by adopting model
guidelines to help inform state rulemaking, and EPA should complete this
process by the end of 2010.  The same basic framework and timelines can
apply to the title V permit program and state administration of
corrective adjustments.  Here, too, EPA can promptly issue a notice of
deficiency and call for expeditious corrective action.  See 42 U.S.C.
7661a(i).  (5306).

EPA must defer regulating GHGs until states have time to amend their
rules and laws and submit amended SIPs to EPA, and EPA has finalized
approval of the SIP revisions (3720, 4106, 4118, 4524, 4903, 5800).
Deferring application of PSD to GHGs until SIPs are revised, one
commenter adds (4903), would be consistent with Congress’s intent in
the CAA Amendments of 1977, where EPA was given two years “to propose
regulations for increments or other means for preventing significant
deterioration” for four criteria pollutants (pollutants subject to
NAAQS) for which the legislation did not supply increments.  Those
regulations then would not go into effect for another year.  Then at
that point, “revision of SIPs would begin.”  Additionally, PSD
“[r]egulations for new ambient air quality standards are to be
followed within two years by measures to prevent significant
deterioration.”  H.R. Rep. 95-564 at 151.

	Other commenters state that while EPA has proposed to essentially
change the meaning and application of federal law, EPA cannot amend the
statutes and rules in effect at the state level (3720, 4524, 5133, 5317,
5743, 5789, 5800, 6414, 8283, 16411) as EPA proposed.  Sources will
still be subject to state-specific regulations (4243, 5343, 16411) and
by specifically using the proposed Tailoring Rule’s revised thresholds
a state will be in violation of its own SIP and thus the CAA (4631,
5318, 6491, 7961).  In addition, the Tailoring Rule does not require
states to change laws or regulations to conform to the thresholds set by
the rule (3935, 4095, 5743).  Some states could conclude, based on their
own individual legal opinion, that they cannot follow the same
"administrative necessity" approach that EPA is adopting (5789, 6414,
8283) because they feel that EPA is relaxing the statutory thresholds
without appropriate authority (7961).  Moreover, one commenter argues
the state law issues mentioned above make the Tailoring Rule ineffective
practically and thus legally vulnerable because the “administrative
necessity” doctrine cannot be justified (4095).

Other commenters argue EPA’s proposal is likely to encourage a
confusing patchwork of inharmonious federal and state regulations, since
states have the authority to be more stringent than the EPA and thus to
decide not to change their state regulations to implement the Tailoring
Rule (3720, 3935, 4518, 4524, 5140, 5168, 5278, 5743, 5789, 5800, 6414,
8015, 8283, 16411) or may wait to revise their laws until it becomes
clear that whatever final rule emerges has survived judicial review
(5317).  One commenter adds, however, that it is important for states to
strive for  GHG emissions reductions and that this can be achieved by
offering incentives to institute best practices and technologies to
reduce GHG emissions to levels that are below the 25,000 tpy CO2e
threshold (4518). ).  Another commenter said the proposed rule lacks an
appropriate coordinating plan with state governments regarding their
respective SIPs for the PSD program.  (4555)

Response:

In response to these concerns, we are adding another mechanism to
implement the tailoring approach for PSD, and that is to adopt a
definition  within our PSD regulations, of the phrase “subject to
regulation,” as found within the phrase “any regulated NSR
pollutant,” which, in turn, is part of the definitions of “major
stationary source” and “major modification.”  To implement this
mechanism, we are defining the phrase “subject to regulation” so
that the GHGs emitted by sources that fall below the thresholds or scope
established in steps 1 and 2 are not treated as “subject to
regulation,” and therefore do not trigger PSD for the sources that
emit them.  As discussed in section V.B.3. of the preamble to the final
rule published in the Federal Register, the term “subject to
regulation” is one of four terms that should be considered not to
apply literally in the case of GHG sources.

To understand this approach, it is useful to return to the definition of
“major stationary source,” which, again, is central to PSD
applicability.  The definition, quoted previously, employs the term
“regulated NSR pollutant,” which is a defined term.  The definition
incorporates many other elements as well (e.g., the 100/250 threshold
requirements), but for convenience, we quote it as follows:  a “major
stationary source” is “[a]ny … source[] of air pollutants, which
emits, or has the potential to emit, [depending on the source category,
either] 100 [or 250] tons per year or more of any air pollutant that is
subject to regulation under the Clean Air Act.”  40 CFR
51.166(b)(1)(i(a)-(b).  Applying our definition of “subject to
regulation” to exclude GHG sources that emit below specified
thresholds, the definition may now be paraphrased as follows:  A
“major stationary source” is any source of air pollutants, which
emits, or has the potential to emit, depending on the source category,
either 100 or 250 tpy or more of any air pollutant subject to regulation
under the CAA, except that the source’s GHGs are considered to be
subject to regulation under the CAA only to the extent indicated under
steps 1 and 2 of the Tailoring Rule, e.g., for step 2, only if the
source’s GHG emissions exceed the threshold established in step 2.  We
adopt the same approach for the definition of the regulatory term
“major modification.”

Although EPA is codifying its regulations to apply the phrase “subject
to regulation” in this manner, we have been advised that states may be
able to adopt our approach without having to undertake a rulemaking
action to revise their SIP regulations or without requiring an act of
the state legislature.  Instead, it is our understanding that states may
adopt our approach by interpreting the term “subject to regulation”
reflected in their regulations to have the same meaning that we are
assigning to that term in our regulations in this rulemaking.  This is
particularly – although not exclusively -- the case in a state that
has taken the position, or determines now, that the state’s definition
of “subject to regulation,” or, more broadly, “regulated NSR
pollutant” or “major stationary source” or “major modification,
is intended to be interpreted in a way that tracks the meanings that EPA
has assigned to these phrases.  Such states can adopt the meaning of
“subject to regulation” that we establish in this rule by January 2,
2011, and thereby avoid the situation in which, as a matter of state
law, GHG-emitting sources above the 100 or 250 tpy thresholds become
subject to PSD by that date.  The following explains our basis for
concluding that states may apply EPA’s approach under existing
regulations that use the term “subject to regulation.”

On December 18, 2008, EPA issued the Interpretive Memorandum,
establishing EPA’s interpretation of the definition “regulated NSR
pollutant” found at 40 CFR 52.21(b)(50).  EPA intended this memorandum
to resolve ambiguity in subpart (iv) of this definition, which includes
“any pollutant that otherwise is subject to regulation under the
Act.”  Specifically, the memorandum stated that EPA will interpret the
definition of “regulated NSR pollutant” to exclude pollutants for
which EPA regulations only require monitoring or reporting but to
include pollutants subject to either a provision in the CAA or
regulation adopted by EPA under the CAA that requires actual control of
emissions of that pollutant.

After reconsidering this interpretation through a formal
notice-and-comment process, EPA refined its interpretation to establish
that the PSD permitting requirements will not apply to a newly regulated
pollutant until a regulatory requirement to control emissions of that
pollutant “takes effect.”  75 FR 17704.  Importantly, as stated
previously, because the term “regulated NSR pollutant” is embedded
within the definition of “major stationary source,” this
interpretation effectively defines which major stationary sources are
subject to PSD permitting.  As a result, for example, EPA explained that
PSD and title V permitting requirements for GHGs will not apply to GHGs
until at least January 2, 2011, following the anticipated promulgation
of EPA regulations requiring control of GHG emissions under title II of
the CAA.  Id.

	In the RTC document for EPA’s reconsideration of the PSD
interpretative memorandum, we stated that,

Absent a unique requirement of state law, EPA believes that state laws
that use the same language that is contained in EPA’s PSD program
regulations at 52.21(b)(50) and 51.166(b)(50) are sufficiently
open-ended to incorporate greenhouse gases as a regulated NSR pollutant
at the appropriate time consistent with EPA’s interpretation of these
regulations (emphasis added).  (Docket ID No.
EPA-HQ-OAR-2009-0597-0128).

Because the state regulations that include EPA’s definition of the
term “subject to regulation” in the reconsideration of the PSD
interpretive memorandum are “sufficiently open-ended to incorporate
greenhouse gases as a regulated pollutant,” those state regulations
are also sufficiently open-ended to incorporate the further refinement
to the meaning of the phrase “subject to regulation” that we make in
this rulemaking.

	By the same token, EPA has historically interpreted certain state
SIP-approved programs as sufficiently open-ended such that the rules
provide for the “automatic assumption for the responsibility for
review” of new pollutants before the general deadline for states to
revise their PSD programs.  See, e.g., 52 FR at 24682.  Conversely, we
have also read federal rules and state rules approved in SIPs to provide
for the automatic removal of a pollutant when such pollutant is no
longer “subject to regulation.”  For example, the 1990 CAA
amendments exempted HAPs listed in Section 112(b)(1) from the PSD
requirements.  See CAA section 112(b)(6).  Following passage of the
amendments, EPA issued “New Source Review (NSR) Program Transitional
Guidance“, a memorandum from John S. Seitz, Director, Office of Air
Quality Planning and Standards to Regional Air Division Directors on
March 11, 1991.  In that guidance, EPA interpreted its PSD regulations
to automatically cease to apply to listed HAPs (with some noted
exceptions), and implicitly stated that a state with an open-ended
SIP-approved PSD rule could also take the position that its SIP-approved
rule automatically ceased to regulate HAPs.

	After reviewing these past practices in the PSD permitting program, and
EPA’s prior statements regarding pollutants subject to the PSD
program, we conclude that states with SIP-approved rules that contain
the same language as used in 40 CFR 52.21(b)(50) or 40 CFR
51.166(b)(49), or that otherwise have sufficiently open-ended PSD
regulations, would be able to implement our Tailoring Rule approach to
permitting by interpreting their regulations, and without needing to
promulgate a regulation or seek state legislative action.  This is
particularly – although not exclusively -- the case for states that
take the position that they intend their rules to apply in the same
manner as EPA's counterpart rules.  If states adopt this reading of
their regulations, GHG sources falling below the specified cutoffs would
not be emitting pollutants “subject to regulation” within the
definition of “regulated NSR pollutant” and therefore would not be
subject to PSD permitting as a major stationary source or for making a
major modification.

During our consideration of this action, we participated in
teleconferences with one local and six state permitting authorities to
discuss this issue of whether they could implement the proposed rule
without the need for state law or regulation changes or a revision of
the provisions of state law that are a part of the SIP.  We specifically
discussed whether defining the phrase “subject to regulation” would
better facilitate state incorporation of the limitations in this final
rule.  The state and local agencies participating in the calls generally
agreed that defining the phrase “subject to regulation” would,
compared to our proposed approach, better facilitate state incorporation
of the limitations in the final rule in states with regulations that
mirror the existing federal rules, or in states whose rules are
otherwise sufficiently open-ended to incorporate the limitations in the
final rule by interpretation.  Participants from each agency also
indicated that their rules contain the term “subject to regulation”
and that term has not been previously interpreted in ways that would
preclude application of the meaning assigned to the term by EPA.  We
therefore concluded it is likely the state rules are sufficiently
open-ended to apply EPA’s approach by interpretation (although some
states indicated they may elect to pursue rulemaking in addition to or
instead of interpretation).  Accordingly, we selected the “subject to
regulation” regulatory approach as the mechanism for implementing the
final rule.

	As just described, we selected the “subject to regulation”
mechanism because it most readily accommodated the needs of States to
expeditiously revise – through interpretation or otherwise -- their
state rules.  Even so, it is important to recognize that this mechanism
has the same substantive effect as the mechanism we considered in the
proposed rule, which was revising numerical thresholds in the
definitions of major stationary source and major modification.  Most
importantly, although we are codifying the “subject to regulation”
mechanism, that approach is driven by the needs of the states, and our
action in this rulemaking should be interpreted to rely on any of
several legal mechanisms to accomplish this result.  Thus, our action in
this rule should be understood as revising the meaning of several terms
in these definitions, including:  (i) the numerical thresholds, as we
proposed; (ii) the term, “any source,” which some commenters
identified as the most relevant term for purposes of our proposal; (iii)
the term, “any air pollutant; or (iv) the term, “subject to
regulation.”  The specific choice of which of these constitutes the
nominal mechanism does not have a substantive legal effect because each
mechanism involves one or another of the components of the terms
“major stationary source” -- which embodies the statutory term,
“major emitting facility” -- and “major modification,” which
embodies the statutory term, “modification,” and it is those
statutory and regulatory terms that we are defining to exclude the
indicated GHG-emitting sources.

	Our final action also differs from the proposal in the specific
regulatory mechanism by which we tailor the definition of “major
source” for title V permit programs, but is a logical outgrowth of our
proposed rule.  EPA proposed to implement tailoring for GHGs under title
V by excluding sources of GHGs from the general definition of “major
source” under 40 CFR 70.2 and 71.2, and adding a separate definition
of “major source” with tailored thresholds for sources of GHGs.  In
response to comments, particularly from states concerned with
implementation of the proposed approach under state law, EPA is adopting
an approach in the final rule that 1) amends the definition of “major
source” by codifying EPA’s longstanding interpretation that
applicability for a “major stationary source” under CAA sections
501(2)(B) and 302(j) and 40 CFR 70.2 and 71.2 is triggered by sources of
pollutants “subject to regulation,” and 2) adding a definition of
“subject to regulation.”  Further, we are delaying our action to
move forward with limiting our previous approval of existing state part
70 programs.

	We finalize this alternative approach to address concerns similar to
those we received with respect to state implementation of SIP-approved
PSD programs.  Specifically, we received comments that the mechanism we
proposed would not address the significant administrative and
programmatic considerations associated with permitting GHGs under title
V, because the 100 tpy threshold would continue to apply as a matter of
state law.  Commenters stated that states would need to undertake a
regulatory and/or legislative process to change the threshold in their
state laws which they could not complete before the laws would otherwise
require issuance of operating permits to GHGs sources.  After
considering the commenters’ concerns, we are finalizing an approach
designed to address the state law concerns for states.  As a result, it
is unnecessary to move forward at this time with our proposed approach
to limit approval of existing part 70 programs in many states.

	EPA’s approach involves the interrelationship of terms within the
part 70 definition of “major source” in title V and EPA’s
implementing regulations, and EPA’s historical practice of
interpreting the term “any air pollutant” in the “major stationary
source” component of that definition.  EPA believes the approach in
the final rule will allow many states to adopt the final rule through
interpretation of existing state laws.  Specifically, paragraph (3)
within the definition of “major source” found in 40 CFR 70.2 and
71.2 defines a major source as a “a major stationary source of air
pollutants, as defined in section 302 of the Act, that directly emits or
has the potential to emit, 100 tpy or more of any air pollutant…”
The EPA previously articulated the Agency’s interpretation that the
regulatory and statutory definitions of “major source” under title
V, including the term “any air pollutant,” applies to pollutants
“subject to regulation.”  EPA recently re-affirmed this position in
EPA’s Reconsideration of Interpretation of Regulations that Determine
Pollutants Covered by Clean Air Act Permitting Programs.  75 FR 17704,
17022-23 (April 2, 2010), the Interpretive Memorandum Reconsideration
Final Action.

	Accordingly, under our long-established policy, states historically
have interpreted the term “any air pollutant” under the title V
definition of “major source” to mean any pollutant “subject to
regulation” under the Act.  Thus, as a matter of established
interpretation, EPA and states effectively read the definition of
“major source” under title V to include a source “…that directly
emits or has the potential to emit, 100 tpy or more of any air pollutant
subject to regulation under the Act”  [emphasis added].  By amending
our regulations to expressly include and define “subject to
regulation” to implement our tailoring for GHGs under title V, we are
seeking to enable states to adopt and implement this approach through a
continued interpretation of the phrase “any air pollutant” within
the “major source” definition, without the need for changes to state
regulations or statutes.  States may be able to track EPA’s approach
to tailoring for GHG permitting without regulatory or statutory changes,
for example, where a state has taken the position, or determines now,
that the state’s interpretation of “major source,” “subject to
regulation” and/or “any air pollutant” is intended to track
EPA’s interpretation.

	Thus, EPA is adding the phrase “subject to regulation” to the
definition of “major source” under 40 CFR 70.2 and 71.2.  EPA is
also adding to these regulations a definition of “subject to
regulation.”  Under the part 70 and part 71 regulatory changes
adopted, the term “subject to regulation,” for purposes of the
definition of “major source,” has two components.  The first
component codifies the general approach EPA recently articulated in the
“Reconsideration of Interpretation of Regulations That Determine
Pollutants Covered by Clean Air Act Permitting.”  75 FR 17704.  Under
this first component, a pollutant “subject to regulation” is defined
to mean a pollutant subject to either a provision in the CAA or
regulation adopted by EPA under the CAA that requires actual control of
emissions of that pollutant and that has taken effect under the CAA.
See id. at 17022-23; Wegman Memo at 4-5.  To address tailoring for GHGs,
EPA includes a second component of the definition of “subject to
regulation,” specifying that GHGs are not subject to regulation for
purposes of defining a major source, unless as of July 1, 2011, the
emissions of GHGs are from a source emitting or having the potential to
emit 100,000 tpy of GHGs on a CO2e basis.

	As explained previously, we find no substantive difference between the
alternative mechanisms for implementing GHG tailoring in the final rule.
 Whether we add GHG thresholds directly to the definition of “major
source” (as we proposed), or alternatively, expressly add and define
the term “subject to regulation,” both approaches revise the
definition of “major source” to implement the GHG Tailoring Rule.
Accordingly, we adopt the later approach to facilitate state
implementation of the final rule through an interpretation of existing
state part 70 programs.  Similar to our explanation previously for PSD,
while we adopt the “subject to regulation” mechanism for
implementing GHG tailoring in the final rule, the thrust of our
rulemaking is to apply the title V definition of “major source” –
which includes the statutory term, “major stationary source” - to
GHG sources by treating only GHG sources that emit at levels above the
steps 1 and 2 thresholds as meeting that definition.  Further, we
believe that our action may reasonably be construed to revise any of
several terms in that definition, including (i) the numerical
thresholds, as we proposed; (ii) the term “any air pollutant,” (iii)
the term “a major stationary source,” (iv) the term “subject to
regulation,” which, as discussed previously, our regulations graft
into the definition of “major source.”  We believe that the specific
choice of which term constitutes the legal mechanism does not have a
substantive legal effect because each mechanism involves one of the
components of the regulatory term “major source” – which embodies
the meaning of the statutory term, “major source” -- and it is that
term that we are interpreting to tailor title V applicability for
GHG-emitting sources.  Thus, while the “subject to regulation”
mechanism facilitates expeditious implementation by states, and we are
therefore revising our regulations to adopt this approach, we otherwise
find no substantive difference between the alternative mechanisms we may
use to finalize the proposed rule.

Further, similar to our revised approach for addressing state
SIP-approved PSD programs, we are delaying our action to limit our
previous approvals for state part 70 operating permit programs.  In our
proposed rule, we explained our concern that states lack adequate
personnel and resources to carry out part 70 operating permit programs
for GHG sources that emit or have the potential to emit 100 tpy of GHGs.
 Accordingly, we proposed to use our general rulemaking authority under
section 301(a) of the CAA and APA section 553 to limit our prior
approval of state operating permit programs.  This limited approval
action would have had the effect of applying CAA permitting requirements
only to sources that exceed the permitting thresholds established in
this rule for the phase-in, because only those sources would be covered
by the federally approved part 70 programs.  74 FR at 55345.  As
discussed previously, we are proceeding with a slightly revised approach
to address concerns similar to those raised with our proposed approach
for addressing SIP-approved PSD permit programs.  Because we now
recognize that, like the PSD program, many states will be able to
implement the final rules without the need to revise their existing part
70 operating permit programs, we are delaying further action on our
proposal to limit approval of existing part 70 programs until we better
understand how permitting authorities will implement our final rule.

In addition to the information requested previously on SIP-approved PSD
permit programs, we ask each state to submit a letter to the appropriate
EPA Regional Administrator no later than 60 days after promulgation
detailing the state’s plan for permitting of GHG sources under the
state’s part 70 program.  In that letter, states should explain
whether they will adopt an interpretation of the terms “major
source” or any of its component terms – “a major stationary
source,” “any air pollutant,” or “subject to regulation,” or
the numeral thresholds -- that is consistent with EPA’s regulatory
interpretation of the these terms as codified at 40 CFR 70.2, and
whether the state intends to adopt the interpretation without
undertaking a regulatory or legislative process.  This approach may be
available, for example, where a state has taken the position, or
determines now, that the state’s interpretation of these terms is
intended to track EPA’s interpretation, resulting in title V
permitting for sources of GHGs as described in EPA’s regulations
adopted in this rule.  If a state must revise its title V regulations or
statutes to implement the interpretation, we ask that it provides an
estimate of the time to adopt final rules or statutes in its letter to
the EPA Regional Administrator.  If a state chooses not to (or cannot)
adopt our interpretation, the letter should address whether the state
has alternative authority to implement the GHG tailoring approach or
some other approach that is at least as stringent, but which also
addresses the expected shortfalls in personnel and funding and delays in
permitting that would exist if the state carried out permitting under
part 70 program thresholds lower than those adopted by EPA in this final
rule.  For any state that is unable or unwilling to adopt the permitting
thresholds in the final rules, and otherwise is unable to demonstrate
adequate personnel and funding, EPA will move forward with finalizing a
narrowed limited approval of the state’s existing part 70 program.  If
we do so, then we will respond in that action to comments on our
proposal.

In our proposed rule, we also noted that a handful of part 70 operating
permit programs may include provisions that would not require operating
permits for any source of GHG emissions because, for example, the
programs may apply only to pollutants specifically identified in the
program provisions, and the provisions do not specifically identify
GHGs.  In these cases, states may be unable to interpret their
regulatory provisions to interpret the term “any pollutant” to
include pollutants “subject to regulation.”  We indicated that we
intended to take separate action to identify these programs, and to take
regulatory action to correct this deficiency.  Accordingly, we ask any
state or local permitting agency that does not believe its existing part
70 regulations convey authority to issue title V permits to GHG sources
consistent with the final rule to notify the EPA Regional Administrator
by letter as to whether the state intends to undertake rulemaking to
revise its rules consistent with these applicability thresholds.  This
notification should be done no later than the previously described
letter regarding adoption of the Tailoring Rule, and could be combined
with similar notifications we request regarding the PSD program.  We
intend to undertake a separate regulatory action to address part 70
programs that lack the ability to issue operating permits for GHG
sources consistent with the final rule.  We also intend to use our
federal title V authority to ensure that GHG sources will be permitted
consistent with the final rule.  Also, while EPA does not believe NODs,
authorized under section 502(i) of the Act and §70.10(b), are needed at
this time, EPA will review the information submitted by states in
response to this final rule, work with them to adopt the tailoring rule,
and undertake oversight actions, if appropriate, which may include
issuing NODs.

Comment:

Several commenters question the legal merits of EPA’s
“retroactive” reinterpretation of SIPs (3720, 4524, 5083, 5133,
5140, 5181, 5278, 5800).  For example, courts may not agree that EPA may
circumvent the procedural requirements of SIP calls and public notice
and comment by withdrawing prior approvals of any GHG threshold below
EPA’s 25,000 tpy (5133) and even if EPA could rely on the SIP
“correction” provision in section 110(k), there is no similar
provision for EPA to “correct” an error in its original approval of
a title V program (5140, 5181, 5278).  In addition, this plan disrupts
the normal, orderly process of revision of state programs (5133) and
this contravenes settled law on the roles of EPA and the states in SIP
planning (5181).  Furthermore, if a state wanted to fix its SIP after
the fact, relaxing the CAA rules would fall under the CAA’s
“antibacksliding” provision (4631, 5318, 6491, 7961).  Such a
retroactive effort would call into question the validity of permits
issued and invite litigation.  Two commenters (5140, 5278) also contend
that EPA’s proposed approach to program revisions is problematic
because the requirement to obtain a permit is a source obligation, so if
EPA’s approach is invalid, the sources will be liable for failure to
obtain a permit.  Sources are also at risk of citizen suits under
federal law for failure to hold required permits.  While a source may
raise the proposed rule as a defense to a citizen suit, a court that
believes EPA was not authorized to retroactively revise its SIP
approvals could similarly disregard the proposed rule.  EPA’s proposed
rule thus puts sources at an unacceptable risk of enforcement through
citizen suits.

Response:

Because we now anticipate that many states will be able to implement our
tailoring approach through interpretation of the term “subject to
regulation,” and without the need to revise their SIPs, we are
delaying further action on our proposal to limit our approval of SIPs
until we better understand how permitting authorities will, in fact,
implement our tailoring approach.  For this purpose, we ask each state
to submit a letter to the appropriate EPA Regional Administrator no
later than 60 days after publication of this rule in the Federal
Register.  In that letter, the state should explain whether it will
apply EPA’s meaning of the term “subject to regulation” and if so,
whether the state intends to incorporate that meaning of the term
through interpretation, and without undertaking a regulatory or
legislative process.  If a state must undertake a regulatory or
legislative process, then the letter should provide an estimate of the
time needed to adopt the final rules.  If a state chooses not to adopt
EPA’s meaning by interpretation, the letter should address whether the
state has alternative authority to implement either our tailoring
approach or some other approach that is at least as stringent, whether
the state intends to use that authority.  If the state does not intend
to interpret or revise its SIP to adopt the tailoring approach or such
other approach, then the letter should address the expected shortfalls
in personnel and funding that will arise if the state attempts to carry
out PSD permitting for GHG sources under the existing SIP and
interpretation.

For any state that is unable or unwilling to adopt the tailoring
approach by January 2, 2011, and that otherwise is unable to demonstrate
adequate personnel and funding, we will move forward with finalizing our
proposal to limit our approval of the existing SIP.  Although we
received comments questioning our authority to limit approval as
proposed, using our general rulemaking and section 110(k)(6)
authorities, we are not responding to those comments at this time.  We
will address these comments in any final action we take to implement a
limited approval.

In our proposed rule, we also noted that a handful of EPA-approved SIPs
fail to include provisions that would apply PSD to GHG sources at the
appropriate time.  This is generally because these SIPs specifically
list the pollutants subject to the SIP PSD program requirements, and do
not include GHGs in that list, rather than include a definition of NSR
regulated pollutant that mirrors the federal rule, or because the state
otherwise interprets its regulations to limit which pollutants the state
may regulate.  At proposal, we indicated that we intended to take
separate action to identify these SIPs, and to take regulatory action to
correct this SIP deficiency.

We ask any state or local permitting agency that does not believe its
existing SIP provides authority to issue PSD permits to GHG sources to
notify the EPA Regional Administrator by letter, and to do so no later
than 60 days after publication of this rule in the Federal Register.
This letter should indicate whether the state intends to undertake
rulemaking to revise its rules to apply PSD to the GHG sources that will
be covered under the applicability thresholds in this rulemaking, or
alternatively, whether the state believes it has adequate authority
through other means to issue federally-enforceable PSD permits to GHG
sources consistent with this final rule.  For any State that lacks the
ability to issue PSD permits for GHG sources consistent with this final
rule, we intend to undertake a separate action to issue a SIP call,
under CAA section 110(k)(5).  As appropriate, we may also impose a FIP
through 40 CFR  52.21 to ensure that GHG sources will be permitted
consistent with this final rule.

8.2  Transitional Issues

This section involves comments concerning transitional issues, including
commenter requests for grandfathering exemptions from GHG permitting
requirements; commenter requests for clarification on whether and when
permits and applications must be revised, reopened or otherwise updated
to address GHG emissions after the Tailoring Rule takes effect; and
commenter requests for delays in the effective “trigger” date of the
Tailoring Rule.

8.2.1  Requests for “Grandfathering” and for Exemptions from
Revision, Reopening or Update Requirements for Application and Permits

Comment:

Several commenters ask that existing permits be exempted from having to
consider GHG emissions in PSD and title V permitting after the Tailoring
Rule is finalized.  They suggest that EPA not require sources with valid
PSD (5079) or title V (4120, 5059, 5079, 5224) permits to seek revised
permits for GHGs.

Several commenters would also like us to grandfather sources that have
no permits at the time the new GHGs requirements come into effect.  They
recommend that facilities that have been determined not to need PSD
permits before the effective date of GHG regulation and that exceed the
thresholds for GHG emissions, but not for criteria pollutants, not be
required to apply for PSD permits (5113).  Another commenter thinks that
EPA should grandfather facilities that may not be title V facilities
now, but would become subject to title V due to GHG thresholds.  (3282)

	Other commenters would like us to grandfather permit applications that
were submitted prior to the effective date (or when GHG emissions are
first subject to regulation) of the Tailoring Rule from any requirement
to address GHGs in the application, and by extension, the permit
(because the application is the basis for the permit).  They believe it
would be unduly burdensome and impose unreasonable additional costs and
delay to reopen PSD and title V permit applications already submitted to
address GHG emissions if the sources are working in good faith under the
existing regulatory process (4515, 4691, 4786, 5147, 5224, 5277, 5341,
5711, 5742, 6458).  Some of these commenters (4208, 4228, 4514, 4525,
4903, 5144, 5706, 5742, 5773, 6202, 6270, 6458, 6460) add that there is
no information currently available as to what BACT will look like for
GHG emissions, while one commenter (5277) adds that this would slow PSD
and other permitting to a crawl due to low staff numbers, hiring
freezes, and lack of training opportunity for permitting staff.  For
these reasons, some of these commenters recommend that:

EPA require sources that have already submitted a complete PSD permit
application before the applicable PSD triggering date for GHGs (and
irrespective of when any completeness determination is made) to have the
application evaluated, and its permit issued, on the basis of the PSD
requirements in effect at the time the application was submitted.
(4122, 4318, 4522, 4523, 4749, 4992, 5038, 5080, 5089, 5113, 5114, 5128,
5257, 5317, 5327, 5601, 5741, 6459, 8025, 8301).  Some of these
commenters believe this approach would be consistent with the
administrative law principle that legislative rules cannot have
retroactive effect unless expressly authorized by Congress [citing,
e.g., Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208-09 (1988)].

EPA should add that neither the application nor the final permit would
need to address GHGs (5317) and that the permit applications would be
final and should not be reopened to address GHG emissions.  (5113)

EPA should clarify that GHG permitting is not required for applications
received before the effective date of the Tailoring Rule, assuming the
permit has not been issued, and that EPA should delay permitting until
at least October 1, 2011.  (5341)

Facilities should be grandfathered (4515, 4691, 4770, 5180, 5199, 5277,
5301, 5711, 6458) because EPA has provided similar exclusions in the
past when the rules of the NSR program changed (4515, 4691, 5180, 5277,
5711) (e.g., comment 5277 cites the PM-10 surrogate policy, 40 CFR
52.21(i)(1)(x) and two guidance documents as examples of past practices
EPA has used for grandfathering) and EPA could use the “administrative
necessity” doctrine to confirm that only new permit applications are
impacted.  If a PSD or title V permit application is submitted and is
administratively complete before the date on which PSD or title V begins
to apply to a pollutant, then that application should not be subject to
any requirements for that pollutant nor should the application be
considered as incomplete on the ground that it did not address that
pollutant (5199)

Various commenters ask EPA to clarify that if a source with a final PSD
permit has not commenced construction by the time GHGs become subject to
regulation, they should not be required to submit new permit
applications to address the new GHGs requirements.  They recommend that
EPA allow permitted sources that commence construction within 18 months
from the date when GHGs become subject to regulation (or any earlier
date required by the SIP) not be required to seek a revised PSD permit
for GHGs (5078, 5079) or be required to obtain a PSD permit solely due
to their GHGs emissions (5180).  One commenter (5224) requests that EPA
confirm that construction projects that have not commenced when the LDVR
goes into effect, where all the applicable permitting has been
initiated/completed, are exempt from having to revise their PSD permit
application.

	Other commenters would like us to grandfather minor sources from the
new GHG requirements (4122, 4318, 4522, 4523, 4691, 4749, 4992, 5038,
5080, 5089, 5114, 5128, 5257, 5301, 5317, 5327, 5601, 5741, 6459, 8301).
 They recommend that EPA provide that any source that is not “major”
and that has submitted a complete “minor NSR” application before the
applicable PSD triggering date for GHGs have that application evaluated,
and its permit issued, on the basis of the minor NSR requirements in
effect at the time the application was submitted (4122, 4318, 4522,
4523, 4691, 4749, 4992, 5038, 5080, 5089, 5114, 5128, 5257, 5317, 5327,
5601, 5741, 6459, 8301).  One commenter adds that this would be
consistent with, for example, the 1980 PSD Regulations, which exempted
all sources not subject to the pre-existing PSD regulations if they
obtained all permits required by the applicable SIP before the date of
promulgation of the new PSD regulations (and commenced construction
within 18 months of the date of promulgation) (4691).

One commenter, 4298, requests that EPA implement a generous transition
policy for sources with actual emissions below the PTE thresholds.  The
commenter adds that any “state-enforceable limits that are enforceable
as a practical matter” should be explicitly recognized as limiting
PTE, without the need to eventually upgrade such requirements to
“federal enforceability” in a permit.

Many commenters request, in general, that EPA clarify transitional and
timing issues associated with the Tailoring Rule.

EPA must adopt reasonable transition provisions and this is consistent
with EPA past practice.  (4122, 4318, 4522, 4523, 4749, 4992, 5038,
5080, 5089, 5114, 5128, 5257, 5317, 5327, 5601, 5741, 6459, 8301)  The
commenters provide many examples where EPA has provided such transition
considerations in the past.

At a minimum, any new GHG rules should provide a transition period and
allow greater phase-in to reduce economic disruption and ease state
administration of permits, suggesting the transition should extend to
March 2012.  (4106)

General comments and questions, specific to the transition for the PSD
program:

EPA should consider provisions in the final rule that would allow an
orderly transition of GHG regulation under the PSD program (4120, 4749).
 If not, the Tailoring Rule might still yield an unworkable program.

The final Tailoring Rule should clarify at which stage ongoing projects'
PSD reviews must consider GHGs.  (5079)

EPA should consider not requiring approval of PSD permits between
approval of the Tailoring Rule and the date the state approves the GHG
thresholds in their rules (5338) to allow time for the state to
incorporate the new thresholds into their rules.

What will the requirement be for a facility that has a PSD permit
underway with the appropriate regulatory authority?  Must the PSD
application be rewritten to include a review of GHG emissions from the
proposed project and then resubmitted to the regulator for review
(4747)?

General comments, specific to the transition for the title V program:

For sources with existing title V permits:

Incorporate GHG references and the GHG monitoring rule requirements into
their title V permits at the time the permit is normally up for renewal.
 (2797, 5084, 5443, 5528, 6681)

Incorporate the GHG provisions when their permit is up for renewal, but
not before the first year of GHG reporting data for year 2010 is
submitted in early 2011.  The data will be better and will avoid the
need for companies to prepare the data twice.  (5705)

Permits should not be required to address GHGs before renewals even if
they undergo a modification.  (4749)

How must a source amend the permit to incorporate GHGs?  Should the
source assume that the provisions for “reopening for cause” at 40
CFR 70.7(f)(1)(i) apply?

Permits should not be required to comply with the new GHGs provisions
until the source undertakes a PSD modification or consider a phased-in
approach with a higher major source threshold for title V initially than
that for PSD.  The same "administrative necessity" and "absurd results"
legal doctrines that EPA relies on for the proposal as a whole would
also apply to these types of title V-specific tailoring approaches.
(7935)

GHGs limits (and any associated monitoring, recordkeeping, reporting, or
testing requirements) should not be included in title V permits because
there are no applicable requirements that place limits or require
controls of GHGs in the CAA.  (4749)

For sources that become subject to title V for the first time:

Require application submittal one year after they become subject to
regulation.  (2797, 5084, 5443, 5528, 6681)

Sources subject under step 2 should submit applications one year after
the effective date of step 2.  (2797, 5084, 5443, 5528, 6681)

Where title V permitting for GHGs is required EPA should eliminate
states’ discretion to require permit applications any sooner than 1
year after commencing operation.  (4298)

EPA should clarify that sources in states with merged PSD and title V
permit programs should apply for the permit prior to construction.
(4298)

Authority should be given to the states to call for 20 percent of the
new required title V applications for sources over 25,000 tpy CO2e every
year over a 5-year period.  If not, all of the renewal applications will
be due together 5 years later, and every 5 years thereafter.  (8747)

EPA should provide the maximum legally defensible amount of time to pass
between the issuance of the LDVR and the date GHGs become regulated
pollutants.  (5338)

Response:

We partially addressed transitional issues for PSD permitting in our
April 2, 2010 final action on reconsideration of the Interpretive Memo.
75 FR 17021.  This action addressed the applicability of PSD permitting
requirements for GHGs to pending PSD permit applications that were (or
will be) submitted prior to January 2, 2011 based on emissions of
pollutants other than GHGs.  However, we have not yet addressed the
questions raised by public comments concerning sources that obtain PSD
permits, minor NSR permits, or determinations that no such permits are
needed prior to the step 1 period set forth in this rule.  We have also
not yet addressed questions about the applicability of PSD permitting
requirements for sources that are not currently required to submit an
application for a PSD permit but that could be required to do so in step
2 of the phase-in established in this action.  In addition, our April 2,
2010 action did not address transitional issues concerning the
application of the title V provisions to GHGs.

1.  Transition for PSD Permit Applications Pending When Step 1 Begins

In our action on April 2, 2010, EPA explained that the Agency did not
see grounds to establish a transition provision for pending PSD permit
applications because we had determined that PSD permitting requirements
would not apply for GHGs for another 9 months.  We explained that permit
applications submitted prior to April 2, 2010 should in most cases be
issued prior to January 2, 2011 and, thus, effectively have a transition
period of 9 months to complete processing before PSD requirements become
applicable to GHGs.  We also observed that, in the case of any PSD
permit application review that cannot otherwise be completed within the
next 9 months based on the requirements for pollutants other than GHGs,
it should be feasible for permitting authorities to begin incorporating
GHG considerations into permit reviews in parallel with the completion
of work on other pollutants without adding delay to permit processing.
Additional discussion of EPA’s reasons for not developing transition
provisions for PSD permit applications that are pending on January 2,
2011 are provided in the April 2, 2010 notice.  75 FR 17021-22.

For these same reasons, we continue to feel that a transition period is
not warranted to incorporate GHG requirements into any PSD permit
applications that are pending when step 1 of the permitting phase-in
begins for those sources that would otherwise need to obtain a PSD
permit based on emissions of pollutants other than GHGs.  Thus, this
action makes no change to the position we expressed on this particular
issue in the April 2, 2010 notice.  In this final rule on tailoring the
PSD program to address GHGs, we have determined that the additional
burden of incorporating GHG requirements into PSD permits for the
sources already required to obtain such permits is manageable in the
step 1 period.  Thus, this rule has added no additional requirements or
limitations that would justify deferring the establishment of pollution
controls for this category of GHG sources once PSD permitting
requirements are initially triggered for GHGs.

2.  PSD Permits Issued Prior to Step 1

EPA has not historically required PSD permits to be updated or reopened
after they are issued in the absence of an action by the applicant to
change the physical or operational characteristics of the source
described in the permit application.  EPA’s PSD permitting regulations
contain no provisions that address the modification or amendment of a
PSD permit or require a PSD permit to be reopened or modified on the
basis of new PSD permitting requirements that take effect after the
final permit is issued.  Since PSD permits are construction permits, EPA
has not required updates to PSD permits in the same manner as is
typically required for operating permits that incorporate a variety of
applicable requirements (such as title V permits and NPDES permits under
the CWA).  In addition, unlike operating permits, PSD permits are not
required to be renewed.  However, if construction under a PSD permit is
not commenced in a timely manner or is discontinued for an extended
period, a PSD permit may expire if an extension is not requested or
justified.  See, 40 CFR 52.21(r)(2); 40 CFR 124.5(g).

With respect to the application of PSD permitting requirements for GHGs
beginning on January 2, 2011, we do not see any cause to deviate from
our historical practice of not requiring PSD permits to be reopened or
amended to incorporate requirements that take effect after the permit is