[Federal Register: May 11, 2010 (Volume 75, Number 90)]
[Rules and Regulations]
[Page 26102-26113]
[DOCID:fr11my10-11]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2010-0062; FRL-9141-3]

Approval and Promulgation of Implementation Plans, State of
California, San Joaquin Valley Unified Air Pollution Control District,
New Source Review

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: EPA is taking final action on revisions to the San Joaquin
Valley Unified Air Pollution Control District portion of the California
State Implementation Plan. Specifically, EPA is taking final action on
three amended District rules, one of which was submitted on March 7,
2008 and the other two of which were submitted on March 17, 2009. Two
of the submitted rules reflect revisions to approved District rules
that provide for review of new and modified stationary sources (``new
source review'' or NSR) within the District, and the third reflects
revisions to an approved District rule that provides a mechanism by
which existing stationary sources may voluntarily limit their
operations to avoid the requirement to secure a Federally-mandated
operating permit. The NSR rule revisions relate to exemptions from
permitting and offsets requirements for certain agricultural

operations, to the establishment of NSR applicability and offset
thresholds consistent with a classification of ``extreme''
nonattainment for the ozone standard, and to the implementation of
EPA's NSR Reform Rules. With respect to the revised District NSR rules,
EPA is finalizing a limited approval and limited disapproval because,
although the changes would strengthen the SIP, there are deficiencies
in enforceability that prevent full approval. With respect to the rule
pertaining to operating permit requirements, EPA is finalizing a full
approval. EPA is also taking final action to remove certain obsolete
conditions placed on previous approvals of various California
nonattainment plans. Lastly, EPA is deferring further action on the
Agency's proposal to correct the May 2004 approval of the previous
version of the District's NSR rules pending receipt from California of
an interpretation of the District's legal authority with respect to
agricultural sources under state law.
    The limited approval and limited disapproval action triggers a
sanctions clock, and EPA's obligation to promulgate a Federal
implementation plan, because the revisions to the District rules that
are the subject of this action are required under anti-backsliding
principles established for the transition from the 1-hour to the 8-hour
ozone standard.

DATES: Effective Date: This rule is effective on June 10, 2010.

ADDRESSES: EPA has established docket number EPA-R09-OAR-2010-0062 for
this action. The index to the docket is available electronically at
http://www.regulations.gov and in hard copy at EPA Region IX, 75
Hawthorne Street, San Francisco, California. While all documents in the
docket are listed in the index, some information may be publicly
available only at the hard copy location (e.g., copyrighted material),
and some may not be publicly available in either location (e.g., CBI).
To inspect the hard copy materials, please schedule an appointment
during normal business hours with the contact listed in the FOR FURTHER
INFORMATION CONTACT section.

FOR FURTHER INFORMATION CONTACT: Laura Yannayon, Permits Office (AIR-
3), U.S. Environmental Protection Agency, Region IX,<PHONE_NUMBER>,
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us'' and
``our'' refer to EPA.

Table of Contents

I. Proposed Action
    A. Correction of EPA's May 2004 Final Approval
    B. Proposed Action on Amended District Rules
    1. Summary of Evaluation of Changes Related to Minor NSR
    2. Summary of Evaluation of Changes Related to ``Extreme'' Ozone
Area NSR Requirements
    3. Summary of Evaluation of Changes Implementing EPA's NSR
Reform Rules
    4. Summary of Evaluation of Amended Rules for Enforceability
    5. Summary of Evaluation of Amended Rule 2530
    6. Summary of Evaluation of Amended Rules for Compliance with
CAA Section 110(l)
    C. Removal of Obsolete Conditions on SIP Approvals
II. Public Comments and EPA's Responses
III. Final Action
IV. Statutory and Executive Order Reviews*COM019*

I. Proposed Action

    On January 29, 2010 (75 FR 4745), under the Clean Air Act (CAA or
``Act''), we proposed three actions in connection with the permitting
rules for the San Joaquin Valley Unified Air Pollution Control District
(``District'') portion of the California State Implementation Plan
(SIP).\1\
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    \1\ The San Joaquin Valley includes all of San Joaquin,
Stanislaus, Merced, Madera, Fresno, Kings and Tulare counties, and
the western half of Kern County, in the State of California. The San
Joaquin Valley is designated as a nonattainment area for the 1997 8-
hour ozone national ambient air quality standard (NAAQS) and the
1997 (annual) and 2006 (24-hour) fine particulate matter
(PM2.5) NAAQS and is designated as attainment or
unclassifiable for the other NAAQS. See 40 CFR 81.303. The area is
further classified as ``serious'' for the 8-hour ozone NAAQS, but
the State of California has submitted a request to reclassify the
area to ``extreme.'' See 74 FR 43654 (August 27, 2009) for EPA's
proposed approval of the State's reclassification request. The San
Joaquin Valley was further classified as an ``extreme'' area for the
now-revoked 1-hour ozone NAAQS when EPA designated the area with
respect to the 8-hour ozone NAAQS.
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A. Correction of EPA's May 2004 Final Approval

    First, we proposed to correct an error in our May 2004 final rule
approving the District's Rules 2020 and 2201 that establish the
requirements and exemptions for review of new or modified stationary
sources (``new source review'' or ``NSR''). In our proposed rule, we
explained how our error arose from the failure, based on information
available at the time, to recognize that the District did not have the
authority under State law to implement Rules 2020 and 2201 with respect
to permitting of minor agricultural sources with actual emissions less
than 50% of the applicable ``major source'' thresholds and with respect
to the imposition of emissions offset requirements for minor
agricultural sources.
    In response to our proposed rule, several comments were submitted
that object to our proposed correction action and the interpretation of
State law upon which it is based, and raise significant questions as to
the true extent of District authority with respect to agricultural
sources under State law. Specifically, the commenters who object to our
proposed correction cite ``savings'' clauses in State law that they
contend ratify District NSR rules that contain no permitting or offsets
exemptions for agricultural sources notwithstanding other provisions in
State law that would otherwise limit such District authority over those
sources. To ensure our action is based on a correct interpretation of
State law, we have decided to request the State of California to
provide us with a legal interpretation of the extent of District
authority with respect to agricultural sources under State law and to
defer further rulemaking on the correction proposal until we have the
opportunity to consider the StateY's response to our request.

B. Proposed Action on Amended District Rules

    In this section, we summarize the information we provided in the
proposed rule concerning the submitted rules subject to this final
action, the changes in the rules relative to the corresponding rules in
the existing SIP, and our evaluation of the amended rules relative to
the applicable CAA and EPA requirements. We provide only a summary of
this information herein. For a more detailed discussion of these
issues, please see our January 29, 2010 proposed rule.
    Table 1 lists the rules on which we proposed action in our January
29, 2010 proposed rule with the dates that they were revised by the
District and submitted to EPA by the California Air Resources Board
(CARB). Today, we are taking final action on the three listed rules.

                 Table 1--Submitted Rules for Which We Are Taking Final Action in Today's Action
----------------------------------------------------------------------------------------------------------------
                                          Rule                  Rule title              Amended     Submitted
----------------------------------------------------------------------------------------------------------------
SJVUAPCD................................         2020  Exemptions.....................     12/20/07     03/07/08
SJVUAPCD................................         2201  New and Modified Stationary         12/18/08     03/17/09
                                                        Source Review Rule.
SJVUAPCD................................         2530  Federally Enforceable Potential     12/18/08     03/17/09
                                                        to Emit.
----------------------------------------------------------------------------------------------------------------

    With respect to District Rule 2020 (``Exemptions''), the rule's
purpose is to specify emission units that are not required to obtain an
Authority to Construct or Permit to Operate and to specify the
recordkeeping requirements to verify such exemptions. Generally, the
changes that we are taking action on today relative to the existing SIP
version would revise and clarify certain exemptions and exempt certain
agricultural sources from permitting requirements.
    Among the changes in amended District Rule 2020 relative to the
version previously approved into the SIP are changes that will do the
following:
     Revise the existing exemption for steam generators, steam
superheaters, water boilers, water heaters, steam cleaners, and closed
indirect heat transfer systems that have a maximum input heat rating of
five million Btu per hour or less and that are fired exclusively on
natural gas or liquefied petroleum gas (LPG) (see paragraph 6.1.1 of
the submitted rule); \2\
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    \2\ The existing exemption is limited to the types of equipment
described above but also establishes the following specifications
for both natural gas and LPG combusted by the equipment: ``provided
the fuel contains no more than five percent by weight hydrocarbons *
* * and no more than 0.75 grains of total sulfur per 100 standard
cubic feet of gas * * *.'' The revised exemption establishes
separate specifications for natural gas and for LPG. The hydrocarbon
content limit remains five percent for natural gas but drops to two
percent for LPG. The sulfur content limit increases from 0.75
grains, to 1.0 grain for natural gas, and to 15 grains (per 100
standard cubic feet of gas). The revised exemption requires use of
the latest versions of the relevant ASTM test methods.
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     Clarify and tighten the existing exemption for certain
types of transfer equipment, such as loading and unloading racks, and
equipment used exclusively for the transfer of refined lubricating oil
(see paragraph 6.7 of the submitted rule); and
     Exempt agricultural sources to the extent such sources are
exempt pursuant to California Health & Safety Code (CH&SC) section
42301.16 (see paragraph 6.20 of the submitted rule). CH&SC section
42301.16 essentially exempts agricultural sources with actual emissions
less than 50 percent of a major source applicability threshold from
permitting unless the District makes certain findings.
    With respect to District Rule 2201 (``New and Modified Stationary
Source Review Rule''), the rule's purpose is to provide for the review
of new and modified stationary sources of air pollution and to provide
mechanisms including emission trade-offs by which Authorities to
Construct such sources may be granted, without interfering with the
attainment or maintenance of ambient air quality standards. District
Rule 2201 is also intended to provide for no net increase in emissions
above specified thresholds from new and modified stationary sources of
all nonattainment pollutants and their precursors.
    Generally, amended District Rule 2201 incorporates three major
changes relative to the version of Rule 2201 that is approved into the
SIP. First, amended District Rule 2201 would replace the term, ``Major
Modification,'' with two terms, ``Federal major modification'' and ``SB
288 major modification.'' (See paragraphs 3.17 and 3.34 of the amended
rule.) The former term incorporates EPA's NSR reform principles, and
the latter term retains the pre-NSR reform approach to determining
whether a modification is a major modification.\3\ Second, amended
District Rule 2201 would incorporate the lower ``major source'' and
``Federal major modification'' emissions thresholds, and higher offset
ratios, for the ozone precursors, VOC and NOX, consistent
with an ``extreme'' ozone classification. (See paragraphs 3.17, 3.23,
and 3.34 of the amended rule.) Lastly, changes to District Rule 2201
would exempt new or modified agricultural sources from offset
requirements to the extent provided by CH&SC section 42301.18(c), which
exempts agricultural sources from the offsets requirement if emissions
reductions from such sources would not meet the criteria for real,
permanent, quantifiable, and enforceable emissions reductions, unless
the offsets are required by Federal CAA requirements. (See paragraph
4.6.9 of the amended rule.)
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    \3\ Using these two definitions, the District performs two
separate ``major modification'' determinations. Where the
modification of an existing source falls within the definition of
``SB 288 Major Modification,'' the modification will be required at
a minimum to meet the NSR SIP requirements that had applied prior to
adoption by the District of the 2002 NSR Reforms into Rule 2201.
Where the modification also falls within the definition of ``Federal
Major Modification,'' the modification will have to meet additional
NSR Requirements consistent with 2002 NSR Reform.
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    Unlike District Rules 2020 and 2201, District Rule 2530
(``Federally Enforceable Potential to Emit'') is not an NSR rule, but
is a rule that relies on thresholds based on certain percentages of the
major source thresholds established for NSR purposes as a basis to
exempt sources from the requirements of Rule 2520 (``Federally Mandated
Operating Permits''). Relative to the corresponding rule in the
existing SIP, the amended rule would lower the thresholds below which
sources of VOC or NOX are exempt from the requirements of
Rule 2520 (see paragraph 6.1 of the amended rule), would lower the
thresholds below which sources are exempt from certain recordkeeping
and reporting requirements under Rule 2530 (see paragraph <IP_ADDRESS> of
the amended rule); and would lower certain alternative operational
limits (see, e.g., paragraph 6.2.4 of the amended rule).
    In evaluating the amendments to the three District Rules, we found
that significant changes fall into four broad categories: Changes
affecting minor source NSR permitting requirements; changes relating to
the area's extreme classification for the 1-hour ozone standard;
changes relating to NSR Reform; and changes affecting the mechanism
used by sources to avoid title V requirements, and we evaluated these
changes for compliance with the requirements under CAA section 110(a),
section 110(l), and section 182(e) and (f). In addition, we reviewed
the amended rules for compliance with EPA's regulations for NSR,
including 40 CFR 51.160 through 40 CFR 51.165. In so doing, we took
into account the pollutant-specific designations for the San Joaquin
Valley, summarized in table 2.\4\
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    \4\ We also identified and evaluated a number of other, less
substantive changes, and found all of them to be either neutral or
strengthening relative to the existing SIP and consistent with all
applicable requirements. See section IV.B.5 of the January 29, 2010
proposed rule.

              Table 2--San Joaquin Valley Area Designations
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          Pollutant                Designation         Classification
------------------------------------------------------------------------
(Revoked) Ozone--1-hour       Nonattainment.......  Extreme (at the time
 standard.                                           of designation for
                                                     the 1997 8-hour
                                                     ozone standard).
Ozone--1997 8-hour standard.  Nonattainment.......  Serious.\a\
Respirable Particulate        Attainment..........  Not Applicable.
 Matter (PM10).
Fine Particulate Matter       Nonattainment.......  Not Applicable.
 (PM2.5).
Carbon Monoxide.............  Attainment (4 urban   Not Applicable.
                               areas);
                               Unclassifiable/
                               Attainment (rest of
                               valley).
Nitrogen Dioxide............  Unclassifiable/       Not Applicable.
                               Attainment.
Sulfur Dioxide..............  Unclassifiable/       Not Applicable.
                               Attainment.
------------------------------------------------------------------------
\a\ The State of California has requested reclassification of the San
  Joaquin Valley to ``extreme'' for the 1997 8-hour ozone standard. See
  74 FR 43654 (August 27, 2009).

1. Summary of Evaluation of Changes Related to Minor NSR
    As to the changes related to minor source NSR permitting
requirements, we found that the amended rules would affect minor source
NSR (``minor NSR'') by revising an existing permitting exemption for
certain natural-gas- or LPG-fired combustion and heat transfer systems
(see paragraph 6.1 in submitted District Rule 2020), by exempting minor
agricultural sources with actual emissions less than 50 percent of the
major source threshold (see paragraph 6.20 in submitted District Rule
2020) from permitting, and by exempting all new or modified minor
agricultural sources from the offset requirement (see paragraph 4.6.9
of submitted District Rule 2201).
    We concluded that the amended rules met EPA's minor NSR
requirements in 40 CFR 51.160 because, even with the new and amended
exemptions, the District NSR program would continue to provide the
District with the information necessary to determine whether the
construction or modification of a stationary source would result in a
violation of applicable portions of the control strategy; or would
result in interference with attainment or maintenance of the NAAQS.
With respect to the revised exemption for certain smaller combustion
and heat transfer systems, we based this conclusion on our
determination that the relaxed sulfur content specification in amended
Rule 2020, paragraph 6.1, would have no significant impact on emissions
in the valley.
    With respect the limited permitting exemption for agricultural
sources, we based this conclusion on a number of factors. For
particulate matter, we rely upon the implementation of certain
prohibitory rules, such as District Rule 4550 (``Conservation
Management Practices'') and the District's Regulation VIII (``Fugitive
PM10 Prohibitions'', particularly, Rules 8011 and 8081) to
act as non-permitting means to reduce fugitive dust emissions at
agricultural sources that fall under the exemption and thereby reduce
the potential for localized exceedances of the PM10 and
PM2.5 standards. For ozone precursors (VOC and
NOX), we noted that the limited permitting exemption would
only apply to agricultural operations with ``actual'' emissions (i.e.,
including fugitive emissions) \5\ of less than 5 tons per year, and
that, as such, the scope of the exemption would be limited to small-
scale agricultural operations and would be acceptable so long as the
ozone plans for the valley do not count on permitting of such sources.
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    \5\ The District's view on whether the CH&SC section 42301.16
(and cited in District Rule 2020, section 6.20) covers fugitive VOC
emissions is found in the District's Final Staff Report (page B-13,
response to comment 19) on proposed amendments to Rule 2201
and Rule 2530 (dated December 18, 2008): ``The District appreciates
the opportunity to reiterate that, for the purposes of implementing
CH&SC sections 40724.6(c) and 42301.16(c), all emissions, except for
fugitive dust, must be included in calculations to determine
district permitting requirements based on one-half of the major
source thresholds. The statutory language of these sections is
consistent, which read separately or in the interrelated nature in
which they were intended to be read, and [sic] District's
implementation adheres to this statutory language.'' Thus, fugitive
VOC emissions are included in the determination of whether actual
emissions from a minor agricultural operation are greater than 50%
of the applicable major source threshold which, for VOC, is 10 tons
per year, or, in other words, greater than 5 tons per year.
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    With respect to the regional planning context, for the proposed
rule, we reviewed the various approved and submitted San Joaquin Valley
attainment or maintenance plans, and noted that none of these plans
rely upon reductions from NSR for agricultural sources less than 50
percent of the major source threshold. We also noted that, for
attainment planning purposes, growth in emissions from agricultural
sources has been established by CARB's area source inventory growth
methodologies, and no mitigation of that growth from an offsets
requirement has been considered when determining the impact of the
growth on the District's ability to achieve attainment with the
standards.\6\ We concluded that, because the plans do not rely on
emission reductions from permitting of agricultural sources less than
50% of the major source threshold and do not rely on offsets for new or
modified minor agricultural sources, approval of the amended Rules 2020
and 2201 would be consistent with regional planning efforts to attain
and maintain the NAAQS.
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    \6\ Also see the District's Clean Air Act section 110(l)
analysis, entitled ``San Joaquin Valley Unified Air Pollution
Control District Rules 2020 and 2201, as amended September 21, 2006,
District's Clean Air Act 110(l) Analysis,'' dated November 20, 2007.
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    Lastly, with respect to minor source NSR changes, we noted that,
under Federal law, minor sources are not required to obtain offsets,
and thus, the exemption for minor agricultural sources from the offsets
requirement is consistent with Federal requirements.
2. Summary of Evaluation of Changes Related to ``Extreme'' Ozone Area
NSR Requirements
    In our January 29, 2010 proposed rule, we identified the applicable
requirements for nonattainment areas classified as ``extreme'' for the
1-hour ozone standard and reviewed the amended District rules for
compliance with the applicable requirements. For such areas, the
relevant NSR requirements include a major source threshold of 10 tons
per year of VOC or NOX [see CAA section 182(e) and 182(f)
and 51.165(a)(1)(iv)], an offset ratio of 1.5 to 1 [see CAA section
182(e)(1) and 40 CFR 51.165(a)(9)], and definition of major
modification that applies to any change at a major stationary source
which results in any increase in emissions from any discrete operation,
unit, or other pollutant emitting activity at the source [see CAA
section 182(e)(2) and 40 CFR 51.165(a)(1)(x)(E)].
    As submitted on March 17, 2009, the VOC and NOX
provisions in District Rule 2201 have been amended to include the 10
ton per year threshold

(see paragraph 3.23 of amended Rule 2201), the 1.5 to 1 offset ratio
(see paragraph 4.8.1 of amended Rule 2201), and the ``any increase''
threshold for major modifications (see paragraph <IP_ADDRESS> of amended
Rule 2201). As such, we concluded that District Rule 2201 has
adequately been amended to reflect ``extreme'' ozone area requirements
under the CAA and 40 CFR 51.165.
3. Summary of Evaluation of Changes Implementing EPA's NSR Reform Rules
    In our proposed rule, we described EPA's implementation of NSR
Reform Rules and the ensuing litigation and identified the basic
program elements that NSR programs must be amended to include. We
concluded that, as submitted on March 17, 2009, District Rule 2201 has
been amended to provide for the minimum program elements of the 2002
NSR Reform Rules that remain in the wake of subsequent litigation and
EPA rulemaking. The amended District Rule provides for the minimum
program elements by replacing a single definition for ``Major
Modification'' with two definitions, one for ``Federal Major
Modification'' and the other for ``SB 288 Major Modification.'' As
discussed above, the former term captures the NSR Reform program
elements (and the ``any increase'' emissions threshold required in
``extreme'' ozone areas), while the latter retains the pre-Reform
approach to determining major modification status. Paragraph 3.17.1 of
amended Rule 2201 incorporates the new method for determining baseline
actual emissions and the actual-to-projected-actual methodology for
determining whether a major modification has occurred. Paragraph 3.17.2
incorporates provisions allowing major stationary sources to comply
with Plantwide Applicability Limits (PALs).
4. Summary of Evaluation of Amended Rules for Enforceability
    For the reasons given in the January 2010 proposed rule and
summarized above, we found the amendments to District Rules 2020 and
2201 to be acceptable under applicable NSR regulations; however, SIP
rules must also be enforceable [see CAA section 110(a)], and we found
two specific deficiencies related to enforceability of Rules 2020 and
2201 that prevent our full approval. These deficiencies arise from the
ambiguity introduced by the references in both paragraph 6.20 (of Rule
2020) and paragraph 4.6.9 (of Rule 2201) to State law under
circumstances where the State law has not been submitted to EPA for
approval into the SIP. Specifically, paragraph 6.20 (of Rule 2020)
provides a permitting exemption for: ``Agricultural sources, but only
to the extent provided by California Health and Safety Code, Section
42301.16.'' In turn, CH&SC section 42301.16(a) requires districts to
extend permitting requirements to all agricultural sources that are
``required to obtain a permit pursuant to Title I * * * or Title V * *
* of the Federal Clean Air Act,'' which we have interpreted as
referring to ``major'' sources under the CAA, and to all other
agricultural sources (referred to herein as ``minor'') with actual
emissions one-half of the applicable major source emissions thresholds
(or greater) for any air contaminant, excluding fugitive dust. See
CH&SC section 42301.16(b). However, CH&SC section 42301.16(b) also
provides a means through which a district can extend the exemption from
``one-half of any applicable emissions threshold'' to the ``major
source'' threshold if certain findings are made in a public hearing.
    Because CH&SC section 42301.16 is not included in the California
SIP, nor has California submitted the section to EPA for approval, the
SIP would be ambiguous as to the extent of the agricultural source
permitting exemption if EPA were to approve submitted District Rule
2020 into the SIP. Effective enforcement of the permitting requirements
would rely on judicial notice of the statutory provision cited in the
rule, and such judicial notice may or may not be forthcoming. There is
no need to rely on judicial notice when the District can eliminate the
ambiguity by clearly stating the exemption for agricultural sources in
District Rule 2020 or by submitting CH&SC section 42301.16 to EPA for
approval into the SIP. Moreover, even if we could assume that judicial
notice of the statutory provision would be taken, CH&SC section
42301.16 by its terms allows for a relaxation of the one-half of major
source permitting threshold for agricultural sources, and such
relaxations should be reviewed by EPA under section 110 for approval as
a SIP revision. Therefore, we proposed a limited approval and limited
disapproval of submitted Rule 2020. In our January 2010 proposed rule,
we noted that the deficiency in Rule 2020 can be remedied by the
District by replacing the statutory reference to CH&SC section 42301.16
in paragraph 6.20 with a clear description of the sources covered by
the exemption, and by submitting the amended rule to EPA (via CARB) as
a SIP revision. In today's document, we are taking final limited
approval and limited disapproval action today on amended Rule 2020
consistent with our January 29, 2010 proposal.
    Paragraph 4.6.9 of submitted Rule 2201 contains a similarly-
ambiguous reference to state law in listing emission offset exemptions:
``Agricultural sources, to the extent provided by California Health and
Safety Code, section 42301.18(c), except that nothing in this section
shall circumvent the requirements of section 42301(a).'' CH&SC section
42301.18(c) states: ``A district may not require an agricultural source
to obtain emissions offsets for criteria pollutants for that source if
emissions reductions from that source would not meet the criteria for
real, permanent, quantifiable, and enforceable emission reductions.''
Our understanding is that the District has no plans to require
emissions offsets for new or modified agricultural sources unless such
new or modified source is a ``Major Source'' or a ``Federal Major
Modification'' as defined in another section of Rule 2201. Once again,
there is no need for ambiguity in the applicability of the emissions
offset exemption, and therefore, EPA proposed a limited approval and
limited disapproval of submitted Rule 2201. The deficiency in Rule 2201
can be remedied by either submittal of the statutory provisions cited
in paragraph 4.6.9 or by replacing the references with a clear
description of the applicability of the offset requirement to
agricultural sources, and by submitting the amended rule to EPA (via
CARB) as a SIP revision. In today's document, we are taking final
limited approval and limited disapproval action today on amended Rule
2201 consistent with our January 29, 2010 proposal.
5. Summary of Evaluation of Amended Rule 2530
    In our January 2010 proposed rule, we discussed the purpose of
District Rule 2530 and the applicable EPA guidance and corresponding
parameters for such rules, and explained that the emission limits and
the alternative operational limits in the rule were amended by the
District in step with the valley's classification of ``extreme'' for
the 1-hour ozone NAAQS. We reviewed the amended limits in District Rule
2530, as submitted on March 17, 2009, and found them to be acceptable.
Based on our review of the amended rule in relation to its underlying
purpose, we are taking final action today to approve amended District
Rule 2530 because we find that it has been appropriately modified to
reflect the decrease in the major source threshold for VOC and
NOX consistent with the area's

``extreme'' classification for the 1-hour ozone standard.
6. Summary of Evaluation of Amended Rules for Compliance with CAA
Section 110(l)
    CAA section 110(l) provides: ``Each revision to an implementation
plan submitted by a State under this chapter shall be adopted by such
State after reasonable notice and public hearing. The administrator
shall not approve a revision of a plan if the revision would interfere
with any applicable requirement concerning attainment and reasonable
further progress (as defined in section 7501 of this title) or any
other applicable requirement of this chapter.'' 42 U.S.C. 7410(l).
    In our January 2010 proposed rule, for the purposes of CAA section
110(l), we took into account the overall effect of the revisions
included in this action. Given the wide application of the lower major
source thresholds to all types of new or modified stationary sources of
VOC and NOX and the limited extent of the exemptions from
permitting and offsets for certain types of agricultural sources, we
found that the overall effect of the revisions would strengthen the
SIP, notwithstanding deficiencies identified above in enforceability.
Moreover, we concluded that we do not anticipate localized exceedances
of the PM10 or PM2.5 standards, due to the
permitting exemption for certain agricultural sources, given the
application of non-permitting requirements in the SIP. Lastly, we noted
that the revisions are consistent with the assumptions of the various
air quality plans developed for the valley.
    Accordingly, we concluded that the revisions to Rules 2020, 2201,
and 2530 would not interfere with any applicable requirements for
attainment and reasonable further progress or any other applicable
requirement of the CAA and are approvable under section 110(l) of the
Clean Air Act.

C. Removal of Obsolete Conditions on SIP Approvals

    In our January 29, 2010 proposed rule, we also proposed to remove
certain obsolete conditions placed on SIP approvals of certain
California nonattainment plans in the 1980's. These NSR-related
conditions are identified in table 3, below, by applicable county, EPA
action, and CFR citation.

               Table 3--Obsolete Conditions Being Removed
------------------------------------------------------------------------
                              Conditional approval
           County               Federal Register     Regulatory citation
                                    citation
------------------------------------------------------------------------
Kern County \a\.............  46 FR 42450 (August   40 CFR
                               21, 1981).            52.232(a)(5)(i)(A)
San Joaquin County..........  47 FR 19694 (May 7,   40 CFR
                               1982), amended at     52.232(a)(6)(i)(A)
                               50 FR 7591
                               (February 25, 1985).
Kings, Madera, Merced,        47 FR 19694 (May 7,   40 CFR
 Stanislaus, and Tulare        1982).                52.232(a)(10)(i)(A)
 Counties.
Fresno County...............  47 FR 28617 (July 1,  40 CFR
                               1982).                52.232(a)(11)(i)(A)
------------------------------------------------------------------------
\a\ In today's document, we are removing the Kern County condition for
  carbon monoxide and ozone only.

    We proposed removal of the condition in 40 CFR 52.232(a)(5)(i)(A)
because we concluded that it was obsolete as to carbon monoxide and
ozone in light of the approval of District NSR rules in 2004 (69 FR
27837, May 17, 2004), the change in the boundary for the 1-hour ozone
nonattainment boundary for San Joaquin Valley (66 FR 56476, November 8,
2001), and the redesignation of the East Kern County 1-hour ozone
nonattainment area to attainment (69 FR 21731, April 22, 2004).
However, as to particulate matter, we found the condition to be
unfulfilled because the Kern County Air Pollution Control District
(APCD) \7\ retains jurisdiction over a small portion of the San Joaquin
Valley planning area, the portion of the San Joaquin Valley planning
area over which Kern County APCD retains jurisdiction remains
nonattainment for PM10 (see 73 FR 66759, November 12, 2008),
and because we have yet to approve a revision to Kern County APCD NSR
rules that meet the condition in 40 CFR 52.232(a)(5)(i)(A). We proposed
removal of the conditions set forth in 40 CFR 52.232(a)(6)(i)(A),
(a)(10)(i)(A), and (a)(11)(i)(A) as obsolete in light of the approval
of District NSR rules in 2004 (69 FR 27837, May 17, 2004).\8\ We are
taking final action today to remove the obsolete provisions described
above for the reasons given in our January 29, 2010 proposed rule and
that are summarized above. We are retaining the condition in 40 CFR
52.232(a)(5)(i)(A) as to particulate matter until we approve the Kern
County APCD's nonattainment NSR rules for the East Kern County
PM10 nonattainment area or until we approve a redesignation
request for the East Kern PM10 area to ``attainment.''
---------------------------------------------------------------------------

    \7\ Kern County ACPD, one of the original county-based APCDs
covering San Joaquin Valley, was not entirely consolidated into the
current San Joaquin Valley Unified Air Pollution Control District
(herein, referred to as ``District''), but its jurisdiction is no
longer county-wide, and is limited to the eastern portion of the
county.
    \8\ The condition established in 40 CFR 52.232(a)(11) also
relates to Ventura County, but removal of the condition is proper as
to Ventura County in light of EPA's subsequent approval of the
Ventura County nonattainment NSR rules at 68 FR 9561 (February 28,
2003).
---------------------------------------------------------------------------

II. Public Comments and EPA's Responses

    Our January 29, 2010 proposed rule (75 FR 4745) provided for a 30-
day comment period. During that period, we received adverse comments
from three groups: Greenberg-Glusker law firm (referred to herein as
``Dairy Cares''), on behalf of Dairy Cares, a coalition of California's
dairy producer and processor associations, by letter dated March 1,
2010; Earthjustice, by letter dated March 1, 2010; and the Center on
Race, Poverty & the Environment (referred to herein as ``AIR''), on
behalf of the Association of Irritated Residents and other community
and environmental groups, by letter dated March 1, 2010. AIR joins in
the comments from Earthjustice, but also adds comments of its own. As
noted previously, we have decided to defer further rulemaking action on
our proposal to correct our May 2004 approval of the previous version
of District NSR rules pending a legal interpretation from the state
regarding the extent of the District's permitting and offsets authority
in connection with agricultural sources under State law. Thus, we have
not responded to the comments related to that aspect of our proposal in
this document, but will respond to those comments in a separate final
rule if we subsequently finalize our proposed correction as proposed on
January 29, 2010. In the following paragraphs, we provide a summary of
the significant adverse comments and

our responses (i.e., related to the aspects of our proposal other than
the error correction).
    Comment #1: Dairy Cares disagrees with EPA's approval of the
District's Rule Revisions to the extent it is predicated on an
interpretation that the exemption for emission offsets does not apply
to major sources. Dairy Cares claims that CH&SC section 42301.18(c)
prohibits any district from requiring any agricultural source to obtain
offsets until agricultural source reductions meet the criteria for
creditability. Dairy Cares claims that, under CH&SC 42301.18(c), the
District does not have the requisite State authority to require
emission offsets unless the offsets can be credited. Dairy Cares
acknowledges that CH&SC section 42301.16(a) requires that agricultural
sources obtain permits ``consistent with Federal requirements,'' and
that the Clean Air Act generally requires certain emission offsets from
new or expanding Federal major sources, but argues that integral to
such emission offsets requirements is the ability to credit emission
reductions. To the extent there is a conflict between sections
42310.16(a) and 42301.18(c), Dairy Cares asserts that the more specific
provision--section 42301.18(c)--must control.
    Response #1: Dairy Cares is correct that EPA's proposed (limited)
approval (and limited disapproval) of revised District Rule 2201 is
predicated in part on an interpretation of CH&SC sections 42301.16(a)
and 42301.18(c) to the effect that CH&SC section 42301.16(a) limits the
applicability of the emission offset exemption in CH&SC section
42301.18(c) so as to exclude major agricultural sources from the
exemption. In other words, we have concluded that State law requires
the District to impose the emissions offsets requirements on new or
modified agricultural sources that are considered new major sources or
major modifications, notwithstanding the limitation on District
authority set forth in CH&SC section 42301.18(c).
    Paragraph 4.6.9 of revised District Rule 2201 provides that
emission offsets shall not be required for:

    ``Agricultural sources, to the extent provided by California
Health and Safety Code, section 42301.18(c), except that nothing in
this section shall circumvent the requirements of section
42301.16(a).''

    CH&SC section 42301.16(a) provides:

    ``In addition to complying with the requirements of this
chapter, a permit system established by a district pursuant to
section 42300 shall ensure that any agricultural source that is
required to obtain a permit pursuant to Title I (42 U.S.C. Sec. 7401
et seq.) or Title V (42 U.S.C. Sec. 7661 et seq.) of the Federal
Clean Air Act is required by district regulations to obtain a permit
in a manner that is consistent with the Federal requirements.''

    CH&SC section 42301.18(c) provides:

    ``A district may not require an agricultural source to obtain
emissions offsets for criteria pollutants for that source if
emissions reductions from that source would not meet the criteria
for real, permanent, quantifiable, and enforceable emission
reductions.''

    EPA interprets the reference in CH&SC section 42301.16(a) to ``any
agricultural source that is required to obtain a permit pursuant to
Title I * * * or Title V * * * of the Federal Clean Air Act'' as a
reference to sources considered ``major sources'' under the Clean Air
Act and not to ``minor sources'' because only the former are required
to obtain a permit. A state may exempt new or modified minor sources
from regulation so long as the overall program for regulation of new or
modified stationary sources assures that the NAAQS are achieved. See
section 110(a)(2)(C) of the Act.
    EPA interprets the directive in CH&SC 42301.16(a) to the Districts
to ensure that their permit rules require major agricultural sources
(and major modifications of such sources) to obtain a permit in a
manner ``that is consistent with the Federal requirements'' as
referring to, in this context, the minimum requirements for new or
modified major sources, including but not limited to, emission offsets
[see CAA section 173(a)(1)] and use of emissions control technology
representing the lowest achievable emission rate [see CAA section
173(a)(2)]. With certain exceptions not relevant here (e.g., rocket
engines), the Act does not exempt any major sources or major
modifications in nonattainment areas from the offset requirement,
regardless of whether emissions reductions for a given source meet the
criteria for real, permanent, quantifiable, and enforceable emission
reductions. In other words, contrary to Dairy Cares' claim, the ability
to credit emission reductions is not integral to the emissions offset
requirements.
    We find no statutory or regulatory basis to support Dairy Cares'
claim that exemption of major agricultural sources from the offset
requirement does not conflict with the Clean Air Act. Dairy Cares
points to Clean Air Act sections 173(c) and 182(e)(2), 40 CFR
51.165(a)(1)(vi)(A) and 40 CFR part 51, appendix S as support for the
general principle that credits are an integral part of the statutory
and regulatory scheme for offsets, and further, that one cannot be
imposed (emission offsets requirements) without allowing for the other
(credits for emissions reductions from the source).
    First, section 173 (``* * * may comply with any offset requirement
only by obtaining emission reductions from the same source or other
sources * * * '') provides two basic approaches to meeting the
emissions offset requirement, by obtaining emissions reductions from
the same source or by obtaining emissions reductions from other
sources. The fact that, for the time being, one approach (internal
offsets) is quite limited (i.e., limited to certain discrete units at a
farm from which emissions reductions are considered creditable, e.g.,
boilers and stationary engines and pumps) does not justify a full
exemption from the emissions offset requirement for all major
agricultural sources. If Congress had intended major agricultural
sources to be exempt from the offset requirement, it could well have
carved out an exception as it has for rocket engines [see CAA section
173(e)]. Moreover, a new major agricultural source is in no different
position than any other new major source in that both have no internal
emissions reductions to use to comply with the offset requirement.
    Two other provisions cited by Dairy Cares, CAA section 182(e)(2)
(``* * * not considered a modification if the owner * * * elects to
offset the increase * * * from discrete operations, units or activities
within the source'') and 40 CFR 51.165(a)(1)(vi)(A) (``net emissions
increase means * * * any other increases and decreases in actual
emissions that are * * * otherwise creditable'') relate to
identification of modifications as ``major modifications.'' Dairy Cares
is correct in that the limited ability by agricultural sources to use
internal credits may well make it harder to avoid ``major
modification'' status and the corresponding requirements. However,
there is simply no language in either the statutory provision or
regulatory provision cited above that conditions ``major modification''
status on whether or not the source can credit its emissions
reductions. Furthermore, as noted above, discrete units at agricultural
sources, such as boilers and stationary pumps, can already be used for
internal credits in a major modification applicability determination at
an agricultural source.
    Dairy Cares points to a provision in 40 CFR part 51, appendix S,
that allows, under certain circumstances, emissions reduction credits
from shutdowns or curtailments as further evidence that allowance for
credits from a source are integral to the imposition of the emissions
offset requirement on the source. However, once again, the

provision allowing under certain circumstances the use of credits from
shutdowns or curtailments is but one means to comply with the offset
requirement, and its unavailability to a certain category of sources
does not negate the underlying statutory requirement on all new major
sources and major modifications, including the category of sources for
which shutdown or curtailment credits are unavailable, in nonattainment
areas to provide emissions offsets for the applicable nonattainment
pollutants.
    Hence, with respect to agricultural sources, to be ``consistent
with the Federal requirements'' within the meaning of CH&SC 42301.16(a)
means a District permitting program must impose an emissions offset
requirement for new major sources and major modifications. We view
CH&SC 42301.16(a) as not only a grant of authority to Districts to
establish a permitting system that, in nonattainment areas, requires
imposition of an emissions offset requirement on all agricultural
sources that are new major sources or major modifications, but as an
affirmative directive to do so.
    Lastly, we recognize that CH&SC section 42301.18(c), read in
isolation, withholds the authority from Districts to require emissions
offsets from any (i.e., major and minor) new or modified agricultural
sources until agricultural source reductions meet the criteria for
creditability. As explained above, however, such a reading would
prevent District from establishing permitting programs for major
sources and major modifications ``consistent with Federal
requirements'' as required by the Legislature through CH&SC section
42301.16(a).
    We also do not agree that CH&SC section 42301.18(c) is simply a
more specific statute that should be given precedence over the more
general statute CH&SC section 42301.16(a). The two CH&SC sections
simply address different permitting issues; one generally relates to
emissions offsets for (both major and minor) agricultural sources
whereas the other generally relates to permitting of major sources. We
see no reason to interpret the two statutory provisions in question as
in direct conflict and thereby to choose one provision over the other,
but rather to give effect to both by interpreting CH&SC section
42301.18(c) as withholding the authority from Districts to impose an
emission offset requirement on new or modified agricultural sources
(until emissions reductions from such sources are creditable) but only
with respect to non-major agricultural sources and modifications.
    Our interpretation of CH&SC sections 42301.16(a) and 42301.18(c) is
further supported by our knowledge of the regulatory context in which
Senate Bill 700 (SB 700), which established the two cited provisions,
was promulgated by the California Legislature. One of the principal
purposes for promulgation of SB 700 was to respond to a ``SIP call''
under CAA section 110(k)(5) by EPA based on the lack of State or
District authority to carry out the applicable nonattainment NSR or PSD
portions of the SIP with respect to major agricultural sources. See 68
FR 37746 (June 25, 2003). Under Dairy Cares' interpretation, the
California Legislature would have failed to address this deficiency by
failing to provide the necessary authority with respect to
nonattainment NSR. However, for the reasons stated above, the relevant
provisions of SB 700, i.e., CH&SC sections 42301.16(a) and 42301.18(c),
need not be interpreted that way.
    Finally, we note that CARB and the District interpret the relevant
State law in the same way as EPA. In a letter to Air Pollution Control
Officers dated September 3, 2008, the CARB Executive Officer requests
the heads of the various air districts in California to update their
permit rules as they apply to agricultural sources in accordance with
CH&SC 42301.16. In reference to agricultural sources that are major,
the CARB Executive Officer states that ``Both Federal and State law
require ``best available control technology'' (BACT) and offsets for
these sources. Any exemption for major sources from permit requirements
that can arguably be considered to be in your District's rule and in
the SIP must be removed.'' See page 3 of the CARB September 3, 2008
letter. Later, in this letter, in reference to the offsets exemption in
CH&SC 42301.18(c), the CARB Executive Officer states ``This exemption
should be narrowly applied, and, in any event, cannot be used to exempt
major Federal sources from offset requirements.'' See page 4 of the
CARB September 3, 2008 letter.
    The District's interpretation can be found in its response to a
similar comment as addressed herein, wherein the District stated:

    ``The District appreciates the opportunity to further clarify
this very important issue. To state it as clearly as possible, the
offset exemption of section 4.6.9 is NOT [emphasis from original]
available to agricultural sources which are major sources of air
pollution. Only non-major sources are provided any exemption from
offsetting requirements by this section.
    This is not new language, nor is it new interpretation. There is
no confusion in the legislative history, or in CAPCOA's white paper
on SB 700 implementation. The purpose of the language of section
42301.16(a) is to specifically require [emphasis from original]
offsets from major sources of air contaminants, as this was
specifically necessary to fulfill the mandates of the Federal SIP
call that the state was under at the time. Without this language
specifically requiring offsets of major agricultural sources, the
law would not have met EPA's requirement that we subject major
California agricultural sources to Federal permitting requirements,
and EPA would not have been able to stop the SIP call and the
impending sanctions. Therefore the suggested change cannot be
made.''

See the District's final staff report on proposed amendment to Rule
2201 (page B-12).
    In light of EPA's, CARB's, and the District's interpretation of
CH&SC sections 42301.16(a) and 42301.18(c), we view paragraph 4.6.9 of
revised District Rule 2020 as simply, and correctly, reflecting current
State law as set forth in the two cited sections of the CH&SC. In other
words, with respect to the issue of emissions offsets requirements, we
see no difference between the authority granted to the District under
applicable State law and the language found in paragraph 4.6.9 of
revised District Rule 2020. Thus, we disagree with Dairy Care's
assertion that we are again making the error of approving a rule change
that is in conflict with California law.
    Comment #2: Earthjustice claims that EPA's rationale for approval
of the various exemptions being added to the District's NSR rules is
flawed because it is premised on the false claim that the District has
a plan that will achieve the national standards for particulate matter
and ozone.
    Response #2: In our January 2010 proposed rule, we reviewed the
status of air quality plans in the San Joaquin Valley, and relied upon
the plans as a basis to conclude that the net effect of the changes in
the rules would not interfere with reasonable further progress or
attainment of any of the NAAQS and thus are approvable under CAA
section 110(l). See sections IV.B.1 (``Regulatory Context'') and IV.B.8
(``CAA Section 110(l)'') of the proposed rule. In our proposed rule, we
noted that EPA has not yet taken action on the submitted San Joaquin
Valley 2007 Ozone Plan or the submitted San Joaquin Valley 2008
PM2.5 Plan. Thus, it is incorrect to say that we have based
our proposed approval of the revised District NSR rules on the premise
that the District has a plan that will achieve the national standards
for those

pollutants. Instead, we have reviewed the plans to ensure that the
changes to the District's NSR rules are consistent with the assumptions
and control strategies in these plans and found that the changes are
indeed consistent with the plans and would strengthen the SIP.
Furthermore, we continue to believe that the plans are facially valid,
contrary to the unsupported claims by Earthjustice that they are not
meaningful plans or that the plans have been undermined by the state.
    Our detailed review of the plans and subsequent notice-and-comment
rulemaking may lead to the requirement that California adopt additional
control measures to provide for attainment of the ozone and particulate
matter standards, but California will not necessarily be required to
extend permitting and offsets requirements to minor agricultural
sources to meet that requirement. While certain SIP requirements are
prescribed by the Act and EPA regulations, extending permitting and
offsets requirements to minor agricultural sources would be considered
a discretionary control measure and thus the state may well decide to
select some other measure.
    Comment #3: Earthjustice claims that EPA's analysis under CAA
section 110(l) of the boilers and steam generator exemptions is
incomplete because it does not address whether the District can allow
these sources to be constructed or expanded with no mitigation for
emissions increases.
    Response #3: As an initial starting point, the exemption in amended
Rule 2020, paragraph 6.1, would not be a new permitting exemption.
Rather, the existing exemption found in the current SIP version of
paragraph 6.1 of Rule 2020 is being revised in certain ways, only one
of which arguably expands the exemption. The revision that arguably
expands the exemption involves changes in the maximum sulfur content
specifications for natural gas and liquefied petroleum gas (LPG)
combusted by the applicable types of sources (such as boilers and steam
generators with maximum input heat ratings of 5 million Btu per hour
(gross) or less).
    With respect to the sulfur content specification, the amended rule
would raise the maximum allowable limit from 0.75 grains (of total
sulfur) per 100 standard cubic feet (scf) for both natural gas and LPG,
to 1.0 grain per 100 scf for natural gas and 15 grains per 100 scf for
LPG. The District's memo dated November 13, 2009, which is cited in the
proposed rule, indicates that the reason for the increase is to align
the maximum sulfur content specification in the exemption to the
corresponding specification used by the relevant utilities in their own
contracts for delivery of natural gas. For LPG, the reason for the
increase is to align the specification in the exemption with the
corresponding industry standard specifications as set by the Gas
Processors Association (GPA). The industry practice by LPG distributors
of adding odorant for safety purposes (typically mercaptan) containing
between 1 and 3 grains of sulfur per 100 scf alone exceeds the existing
specification of 0.75 grains of sulfur.
    For perspective, we note that the sulfur dioxide emissions from
natural gas combustion at 5 million Btu per hour or less amounts to
0.35 lb per day and 0.06 tons per year, assuming maximum operation 24
hours per day, 365 days per year (based on AP-42 (section 1.4)
emissions factors, sulfur content of 1 grain per 100 cubic feet). The
corresponding sulfur dioxide emissions for LPG are 1.97 lb/day and 0.36
ton per year, once again, assuming maximum continuous operation (based
on AP-42 (section 1.5) emissions factors for propane, and sulfur
content of 15 grains per 100 cubic feet). In other words, this
particular exemption relates to very small emissions sources, that
would not be subject to BACT under District Rule 2201, paragraph 4.1.1
(``* * * BACT shall be required for * * * any new emissions unit * * *
with a Potential to Emit exceeding 2.0 pounds in any one day''), even
if such sources were subject to permitting.
    Sulfur dioxide is a criteria pollutant in its own right, but is
also a precursor pollutant for PM10 and PM2.5.
While San Joaquin Valley is designated as ``attainment'' for both the
sulfur dioxide NAAQS and the PM10 NAAQS, the valley is
designated as nonattainment for the PM2.5 NAAQS. Thus, to
satisfy Federal Clean Air Act requirements regarding NSR, the valley
must require emissions offsets for new major sources of sulfur dioxide
and major modifications at existing major sources of sulfur dioxide.
The applicable major source threshold for sulfur dioxide, as a
precursor to PM2.5, is 100 tons per year.
    The District's NSR rule is more broad than required in this respect
and applies the emission offset requirement for sulfur dioxide to
sulfur dioxide sources with emissions exceeding 54,750 pounds per year
(27.4 tons per year). See paragraph 4.5.3 of the District Rule 2201.
Clearly, at less than 1 ton of sulfur dioxide per year, new sources of
the type covered by the revised exemption would not otherwise be
subject to the offset requirement unless they were located at an
existing sulfur dioxide source with emissions greater than 27.4 tons
per year. To gain some perspective as to the number of facilities with
sulfur dioxide emissions greater than 27.4 tons per year within the
valley, we used CARB's California Emission Inventory Development and
Reporting System (CEIDARS) database and reviewed the listings of 3,651
facilities and discovered a total of only 26 that had sulfur dioxide
emission greater than 27.4 tons per year based on actual emission in
2007. Based on the low rate of sulfur dioxide emissions generated by
types of sources covered by the revised exemption and the small number
of sources subject to the offset requirement, the potential in foregone
sulfur dioxide emission reductions (offsets) due to the installation of
the types of sources covered by this particular exemption is very
limited.
    Therefore, for the reasons stated in the proposed rule and
supplemented herein, we continue to believe that the relaxed sulfur
content specification in amended Rule 2020, paragraph 6.1, would have
no significant impact on emissions in the valley. Even if there would
be some small incremental increase in sulfur dioxide emissions due to
the hypothetical relaxation in an otherwise applicable emissions offset
requirement on account of the revised exemption, such an increase would
be more than offset itself by the reductions in emissions that would
flow from the lower major source emissions thresholds and more
stringent emissions offset requirement for the other PM2.5
precursors, volatile organic compounds and nitrogen oxides. Moreover,
we have concluded that overall set of changes in District Rules 2020,
2201, and 2530, including the change in the sulfur fuel content
specification, other changes in the permitting and offsets exemptions,
the lower major source emissions thresholds, and the more stringent
emissions offset requirement, would not interfere with reasonable
further progress or attainment of any of the NAAQS and thus are
approvable under CAA section 110(l).
    Comment #4: Earthjustice contends that, in addition to the
relaxations highlighted by EPA in the notice of proposed rulemaking,
the District is also relaxing its equivalency demonstration outlined in
section 7.0 of Rule 2201 by removing the requirement to demonstrate
equivalency with the Federal new source review program that was in
effect in December 2002. Earthjustice asserts that the purpose of this
provision was to enshrine equivalency with the Federal program prior to
the relaxations adopted by EPA as part of NSR Reform and that the

District now seeks to take advantage of the less stringent NSR Reform
provisions governing major modifications. Earthjustice claims that the
change to section 7.1.1 means that fewer offsets will be required in
order to demonstrate equivalence, that EPA's analysis completely fails
to address this relaxation, and that EPA needs to quantify the
reduction in offsets this change will allow and explain how this growth
in emissions can be reconciled with the fact that the District has no
real strategy for attaining the national standards.
    Response #4: Earthjustice claims that the revisions to Rule 2201
have the effect of (1) relaxing the equivalency demonstration required
in Section 7.0 of Rule 2201, because it removed the requirement to
demonstrate equivalency with the Federal NSR program that was in effect
in December 2002, i.e., prior to the effective date of EPA's NSR reform
rules, and (2) now requires demonstration with current ``less
stringent'' Federal NSR program requirements. EPA disagrees with both
of these claims. First, the only significant revisions made to Section
7.0 was to remove the December 2002 date reference as to which version
of 40 CFR 51.165 should be used for determining equivalency with
Federal offset requirements. The underlying requirements for
demonstrating equivalency with the Federal NSR program offset
requirements remain unchanged.
    Second, regarding the claim that the current Federal NSR
regulations are less stringent, and therefore fewer Federal offsets are
now required, we do not agree that fewer offsets necessarily means that
the San Joaquin Valley NSR program would achieve fewer emissions
reductions overall. Even if the District's implementation of revised
NSR rules that incorporate NSR reform requires fewer emissions offsets,
EPA concludes that any such foregone offsets are themselves offset by
the new lower ``major modification'' threshold of zero for ozone
precursors, down from 25 tons per year under the existing SIP District
Rule 2201, and higher offset ratio of 1.5 to 1, up from 1.2 to 1.
Moreover, the regional air quality plans do not take credit for
reductions and mitigations required under the District's NSR rules in
that they do not reduce future year's emissions by taking credit for
emissions reductions provided through permitting actions. See, e.g.,
page D-4, of appendix D to the San Joaquin Valley 2007 Ozone Plan.
    Comment #5: AIR takes issue with EPA's statement in the proposed
rule that the Agency's 2001 limited approval and limited disapproval of
Rule 2020 had the effect of exempting all agricultural sources from
permitting in the San Joaquin Valley portion of the SIP. AIR contends
that EPA's statement is at odds with the plain language of the Clean
Air Act, which neither exempts major agricultural stationary sources
nor affords EPA the authority to grant an exemption through a limited
approval/limited disapproval action.
    Response #5: AIR is objecting to EPA's background discussion
concerning the effect of EPA's approval (in 2001) of the versions of
the District's NSR rules that preceded the versions of the rules in the
current applicable SIP (which were approved in 2004), and thus AIR's
comment has no direct bearing on today's final action on amended
District NSR rules, as submitted in 2008 and 2009.\9\
---------------------------------------------------------------------------

    \9\ Nonetheless, we affirm our statement that, prior to our 2004
approval of the District's NSR rules (Rules 2020 and 2201), the
District portion of the California SIP included a broad exemption
from permitting for all agricultural sources. This is because our
2001 action on previous versions of District Rule 2020 and 2201 was
a limited approval and limited disapproval action and that the
version of Rule 2020 approved in 2001 included a full exemption from
permitting for agricultural sources consistent with state law at the
time. See paragraph 4.1.2 of District Rule 2020, as amended on
September 17, 1998, and approved on July 19, 2001. We identified the
agricultural permitting exemption as one of the deficiencies that
prevented our full approval of the rules and that triggered a
``sanctions clock.'' As explained in our July 2001 final rule, the
limited approval and limited disapproval action incorporated the
rules into the SIP, as they were submitted, with no exception as to
those provisions that we found deficient. We generally take limited
approval and limited disapproval actions where a given SIP revision
is not composed of separable parts, and while the overall submittal
strengthens the SIP, there are deficiencies that prevent full
approval. See 66 FR 37587, at 37590 (July 19, 2001).
---------------------------------------------------------------------------

III. Final Action

    Under CAA sections 110(k)(2) and 301(a) and for the reasons set
forth above and in our January 29, 2010 proposed rule, we are
finalizing a limited approval and limited disapproval of amended
District NSR Rules 2020 and 2201, as submitted on March 7, 2008 and
March 17, 2009, respectively. The amended District Rules 2020 and 2201
revise certain existing exemptions; establish an exemption from
permitting, and from offsets, for certain minor agricultural
operations; establish applicability thresholds (for major sources and
major modifications) and offset thresholds consistent with a
classification of ``extreme'' for the ozone standard; and implement NSR
Reform.
    We are finalizing a limited approval and limited disapproval
action, because the individual provisions within District Rules 2020
and 2201 are not separable, and, because, although the rule amendments
would strengthen the SIP and meet all but one of the applicable
requirements for SIPs in general and NSR SIPs in particular, they
contain unacceptably ambiguous references to statutory provisions that
prevent full approval. This action incorporates amended Rules 2020 and
2201 into the District portion of the Federally enforceable California
SIP, including those provisions identified as deficient. The amended
Rules 2020 and 2201 approved herein supersede the versions of the
corresponding rules that were approved in May 2004 in the applicable
SIP.
    The final limited disapproval triggers a sanctions clock and EPA's
obligation to promulgate a Federal implementation plan. Sanctions will
be imposed unless EPA approves subsequent SIP revisions that correct
the rule deficiencies within 18 months of the effective date of this
action. These sanctions will be imposed under section 179 of the Act
according to 40 CFR 52.31. In addition, EPA must promulgate a FIP under
section 110(c) unless we approve subsequent SIP revisions that correct
the rule deficiencies within 24 months. Note that the submitted rules
have been adopted by the District, and EPA's final limited disapproval
does not prevent the local agency from enforcing it.
    With respect to amended District Rule 2530, as submitted on March
17, 2009, we are taking final action to approve the amended rule
because we find that it has been appropriately modified to reflect the
decrease in the major source threshold for VOC and NOX
consistent with an ``extreme'' classification. This action incorporates
amended Rule 2530 into the District portion of the Federally
enforceable California SIP. The amended Rule 2530 approved herein
supersedes the previous version of the corresponding rule that was
approved in April 1996 in the applicable SIP.
    EPA is also removing certain obsolete conditions placed on 1980's
era approvals by EPA on various nonattainment plans submitted by
California for the San Joaquin Valley.
    Lastly, we have decided to defer further action on the Agency's
January 2010 proposal to correct a previous approval of the District
NSR rules pending receipt from California of a legal interpretation of
the extent of District authority with respect to agricultural sources
under state law.

IV. Statutory and Executive Order Reviews

A. Executive Order 12866, Regulatory Planning and Review

    The Office of Management and Budget (OMB) has exempted this
regulatory action from Executive Order 12866, entitled ``Regulatory
Planning and Review.''

B. Paperwork Reduction Act

    This action does not impose an information collection burden under
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.
Burden is defined at 5 CFR 1320.3(b).

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency
to conduct a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements unless the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities. Small entities include small
businesses, small not-for-profit enterprises, and small governmental
jurisdictions.
    This rule will not have a significant impact on a substantial
number of small entities because SIP approvals and limited approvals/
limited disapprovals under section 110 and subchapter I, part D of the
Clean Air Act do not create any new requirements but simply approve
requirements that the State is already imposing. Therefore, because
this limited approval/limited disapproval action and approval action
does not create any new requirements, I certify that this action will
not have a significant economic impact on a substantial number of small
entities.
    Moreover, due to the nature of the Federal-State relationship under
the Clean Air Act, preparation of flexibility analysis would constitute
Federal inquiry into the economic reasonableness of State action. The
Clean Air Act forbids EPA to base its actions concerning SIPs on such
grounds. Union Electric Co., v. U.S. EPA, 427 U.S. 246, 255-66 (1976);
42 U.S.C. 7410(a)(2).

D. Unfunded Mandates Reform Act

    Under section 202 of the Unfunded Mandates Reform Act of 1995
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA
must prepare a budgetary impact statement to accompany any proposed or
final rule that includes a Federal mandate that may result in estimated
costs to State, local, or tribal governments in the aggregate; or to
the private sector, of $100 million or more. Under section 205, EPA
must select the most cost-effective and least burdensome alternative
that achieves the objectives of the rule and is consistent with
statutory requirements. Section 203 requires EPA to establish a plan
for informing and advising any small governments that may be
significantly or uniquely impacted by the rule.
    EPA has determined that the limited approval/limited disapproval
action and approval action promulgated today do not include a Federal
mandate that may result in estimated costs of $100 million or more to
either State, local, or tribal governments in the aggregate, or to the
private sector. This Federal action approves pre-existing requirements
under State or local law, and imposes no new requirements. Accordingly,
no additional costs to State, local, or tribal governments, or to the
private sector, result from this action.

E. Executive Order 13132, Federalism

    Federalism (64 FR 43255, August 10, 1999) revokes and replaces
Executive Orders 12612 (Federalism) and 12875 (Enhancing the
Intergovernmental Partnership). Executive Order 13132 requires EPA to
develop an accountable process to ensure ``meaningful and timely input
by State and local officials in the development of regulatory policies
that have federalism implications.'' ``Policies that have federalism
implications'' is defined in the Executive Order to include regulations
that have ``substantial direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.'' Under Executive Order 13132, EPA may not issue a
regulation that has federalism implications, that imposes substantial
direct compliance costs, and that is not required by statute, unless
the Federal government provides the funds necessary to pay the direct
compliance costs incurred by State and local governments, or EPA
consults with State and local officials early in the process of
developing the proposed regulation. EPA also may not issue a regulation
that has federalism implications and that preempts State law unless the
Agency consults with State and local officials early in the process of
developing the proposed regulation.
    This rule will not have substantial direct effects on the States,
on the relationship between the national government and the States, or
on the distribution of power and responsibilities among the various
levels of government, as specified in Executive Order 13132, because it
merely approves a State rule implementing a Federal standard, and does
not alter the relationship or the distribution of power and
responsibilities established in the Clean Air Act. Thus, the
requirements of section 6 of the Executive Order do not apply to this
rule.

F. Executive Order 13175, Coordination With Indian Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000),
requires EPA to develop an accountable process to ensure ``meaningful
and timely input by tribal officials in the development of regulatory
policies that have tribal implications.'' This rule does not have
tribal implications, as specified in Executive Order 13175. It will not
have substantial direct effects on tribal governments, on the
relationship between the Federal government and Indian tribes, or on
the distribution of power and responsibilities between the Federal
government and Indian tribes. Thus, Executive Order 13175 does not
apply to this rule.

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

    EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997)
as applying only to those regulatory actions that concern health or
safety risks, such that the analysis required under section 5-501 of
the Executive Order has the potential to influence the regulation. This
rule is not subject to Executive Order 13045, because it approves a
State rule implementing a Federal standard.

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

    This rule is not subject to Executive Order 13211, ``Actions
Concerning Regulations That Significantly Affect Energy Supply,
Distribution, or Use'' (66 FR 28355, May 22, 2001) because it is not a
significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act

    Section 12 of the National Technology Transfer and Advancement Act
(NTTAA) of 1995 requires Federal agencies to evaluate existing
technical standards when developing a new regulation. To comply with
NTTAA, EPA must consider and use ``voluntary consensus standards''
(VCS) if available and applicable when developing

programs and policies unless doing so would be inconsistent with
applicable law or otherwise impractical.
    The EPA believes that VCS are inapplicable to this action. Today's
action does not require the public to perform activities conducive to
the use of VCS.

J. Congressional Review Act

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

K. Petitions for Review of This Action

    Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action must be filed in the United States Court
of Appeals for the appropriate circuit by July 12, 2010. Filing a
petition for reconsideration by the Administrator of this final rule
does not affect the finality of this rule for the purposes of judicial
review nor does it extend the time within which a petition for judicial
review may be filed, and shall not postpone the effectiveness of such
rule or action. This action may not be challenged later in proceedings
to enforce its requirements. (See section 307(b)(2).)

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by
reference, Intergovernmental relations, Oxides of nitrogen, Ozone,
Reporting and recordkeeping requirements, Volatile organic compounds.

    Dated: April 12, 2010.
Jared Blumenfeld,
Regional Administrator, Region IX.

0
Part 52, Chapter I, Title 40 of the Code of Federal Regulations is
amended as follows:

PART 52--[AMENDED]

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

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

Subpart F--California

0
2. Section 52.220 is amended by adding paragraphs (c)(354)(i)(E)(14)
and (c)(363)(i)(A)(5) and (6) to read as follows:

Sec.  52.220  Identification of plan.

* * * * *
    (c) * * *
    (354) * * *
    (i) * * *
    (E) * * *
    (14) Rule 2020, ``Exemptions,'' adopted on September 19, 1991 and
amended on December 20, 2007.
* * * * *
    (363) * * *
    (i) * * *
    (A) * * *
    (5) Rule 2201, ``New and Modified Stationary Source Review Rule,''
adopted on September 19, 1991, and amended on December 18, 2008.
    (6) Rule 2530, ``Federally Enforceable Potential to Emit,'' adopted
on June 15, 1995, and amended on December 18, 2008.
* * * * *

0
3. Section 52.232 is amended by removing and reserving paragraphs
(a)(6), (a)(10), and (a)(11) and by revising paragraph (a)(5)(i) to
read as follows:

Sec.  52.232  Part D conditional approval.

    (a) * * *
    (5) * * *
    (i) For PM:
    (A) By November 19, 1981, the NSR rules must be revised and
submitted as an SIP revision. The rules must satisfy section 173 of the
Clean Air Act and 40 CFR Subpart I, ``Review of new sources and
modifications.'' In revising Kern County's NSR rules, the State/APCD
must address all the requirements in EPA's amended regulations for NSR
(45 FR 31307, May 13, 1980 and 45 FR 52676, August 7, 1980) which the
APCD rules do not currently satisfy including those deficiencies cited
in EPA's Evaluation Report Addendum which still apply despite EPA's new
NSR requirements (contained in document File NAP-CA-07 at the EPA
Library in Washington, DC and the Regional Office).
* * * * *
[FR Doc. 2010-10925 Filed 5-10-10; 8:45 am]
BILLING CODE 6560-50-P