provide that after the effective date of a title V program, it is
unlawful for any person to operate a ``major source'' without a title V
permit (CAA section 502(a), and define a ``major source'' to include
``any major stationary facility or source of air pollutants which
directly emits, or has the potential to emit, one hundred tons per year
or more of any air pollutant.'' CAA sections 501(2)(B) and 302(j).
    Under the current interpretation of the title V applicability
provisions, EPA's recent promulgation of the LDVR will trigger the
applicability of title V for GHG sources at the 100 tpy threshold
levels as of January 2, 2011. This is because title V applicability
hinges on the definition of ``major source,'' which, under EPA's long-
standing narrowing interpretation, but absent further tailoring,
applies title V to sources of any air pollutant that is subject to
regulation under another provision of the CAA. EPA's promulgation of
the LDVR means that GHGs will become subject to regulation on the date
that the rule takes effect, which will be January 2, 2011.
    But absent tailoring, the January 2, 2011 trigger date for GHG PSD
applicability will see an extraordinarily large number of sources--some
6.1 million--become subject to title V, an increase of over 400-fold
over the 14,700 sources that currently are subject to title V. The
great majority of these will be small commercial or residential
sources.
    We believe that for many reasons, this result is contrary to
congressional intent for the title V program, and in fact would
severely undermine what Congress sought to accomplish with the program.
As a result, under Chevron, accounting for the ``absurd results''
doctrine, the statutory definition for ``major source'' (as EPA has
already narrowed it to refer to any air pollutant ``subject to
regulation'') should not be read to apply to all GHG sources at or
above the 100 tpy threshold as of the January 2, 2011 date. Rather, the
definition of ``major source'' should be tailored so that it applies to
GHG sources on a phased-in basis, with the largest sources first, as we
describe in this rule.
a. Congressional Intent for the Title V Program
    As we said, previously, in a similar circumstance involving the PSD
program, applying title V requirements to GHG sources without tailoring
the definition of ``major source''--and, as discussed later, without
streamlining the title V requirements or allowing for time for
permitting authorities to ramp up resources--would result in a program
unrecognizable to the Congress that enacted title V, and one that would
be flatly unadministrable. Without tailoring, the PSD program would
expand from the current 14,700 sources to some 6.1 million, with the
great

majority of the sources being small commercial and residential sources
that not only have never been permitted before, but that in many cases
have no applicable requirements under the CAA to include in the permit.
In the next several sections, we will describe some of the specific
ways that this literal application of title V would not only differ
from, but would undermine, congressional intent. But the big picture is
readily drawn: The influx of millions of permit applications would do
nothing less than overwhelm the program Congress finely crafted for
thousands of sources, with its multi-step deadlines measured in days
and months, its multiple mandates for expeditious permit processing,
its nuanced limitations on the need for permit revisions, its efforts
to save smaller sources permit fees. Regulatory gridlock, precisely
what Congress strove to avoid, would result.
    Most visibly, interpreting the applicability provisions literally
to include GHG sources at the 100 tpy level immediately would revise
the program from what Congress envisioned in three major ways, the
legislative history of each of which was discussed previously:
     It would immediately expand the program to cover several-
hundred-fold more sources than Congress anticipated.
     It would immediately expand the program to cover very
small sources that Congress expected would not be included in the
program.
     It would immediately expand the program so that a large
number of sources have empty permits, that is, permits without
applicable requirement, and undermine the implementation of the program
for sources with applicable requirements.
    Revising the program in this way through a literal interpretation
of the applicability provisions--without tailoring the applicability
requirements and without streamlining the program requirements--is
clearly inconsistent with Congress's conception of the program's scope,
and these inconsistencies are foundational. Most importantly, the
program that would result would be unduly costly to sources and
impossible for permitting authorities to implement, and therefore would
frustrate the purposes that Congress intended to achieve with the
program that it did design.
    As discussed previously, Congress was fully aware that with the
title V program, it was subjecting sources and permitting authorities
to additional costs and administrative burdens, and it was fully aware
of concerns that absent careful design, the program could become a
formula for regulatory gridlock. Determined to make the program
workable, Congress crafted the provisions to be efficient and workable.
    However, if title V were to apply to GHG sources at the 100 tpy
level, until EPA could develop streamlining methods, all of these
sources newly subject to title V would need to apply for permits. We
estimate that the commercial and residential sources would incur, on
average, expenses of $23,175, while an industrial source would incur
expenses of $46,350, to prepare a permit application and receive a
permit. The great majority of these sources would be small commercial
and residential sources of the type that Congress did not expect would
be included in title V. For example, as discussed above, the
legislative history of title V, including both the permit program under
CAA sections 501-506 and the ``small business stationary source
technical and environmental compliance assistance program'' under CAA
section 507, indicated that Congress did not expect that ``printers,
furniture makers, dry cleaners, and millions of other small
businesses'' would become subject to title V. House Committee Report,
H.R. 101-590, at 354. These sources generally do not have the potential
to emit conventional pollutants at or above the 100 tpy threshold.\46\
However, many do have the potential to emit GHGs above that threshold.
Many printers and furniture makers use a variety of combustion
equipment that has the potential to emit at least 100 tpy
CO2, and many commercial dry cleaners have gas-fired driers
that have the potential to emit at least 100 tpy of CO2. All
told, there are in fact ``millions of * * * small businesses'' that
would become subject to title V--of the 6.1 million sources that would
become subject to title V, the great majority are small businesses--if
the title V applicability provisions are applied literally to GHG
sources.
---------------------------------------------------------------------------

    \46\ As noted previously, the fact that some small sources are
subject to title V because they are ``major sources'' of HAPs or
certain area sources and therefore are covered under CAA sections
502(a) and 501(2)(A) does not alter the conclusion from the
legislative history that Congress did not expect large numbers of
small sources to become subject to title V. The fact that Congress
authorized the Administrator to exempt area sources from the title V
program where compliance with title V would be ``impracticable,
infeasible, or unnecessarily burdensome'' reinforces the conclusion
that Congress did not intend the program to be ``impracticable,
infeasible or unnecessarily burdensome'' for small sources.
---------------------------------------------------------------------------

    Moreover, the overall cost to all 6.1 million sources--before the
development of streamlining methods--would be a staggering $49 billion
per year over a 3 year period. Imposing burdens of this magnitude on
these sources--individually and in total--would of course be contrary
to Congress's efforts to minimize the expenses of title V, especially
to small sources. The magnitude of the costs is, in a sense, heightened
because a great many of these sources will not have applicable
requirements to include in their permits; therefore, much of the costs
will produce relatively little benefit.
    Yet, the most important reason why applying the title V program to
GHG sources without tailoring, and before the development of
streamlining methods, would be inconsistent with congressional intent,
is that the resulting program would prove unadministrable. Adding some
6.1 million permit applications to the 14,700 that permitting
authorities now handle would completely overwhelm permitting
authorities, and for all practical purposes, bring the title V
permitting process to a standstill.
    The costs to permitting authorities of this multi-million-source
program would again be staggering. On average, and without
streamlining, a permitting authority would expend 214 hours, which
would cost $9,844, to issue a permit to a commercial or residential
source; and 428 hours, which would cost $19,688, to issue a permit to
an industrial source. In all, permitting authorities would face over
$21 billion in additional permitting costs each year due to GHGs,
compared to the current program cost of $62 million each year.
    Beyond this disconnect with congressional expectations as to scope
of the program, the extraordinarily large number of permit applications
would overwhelm permitting authorities and slow their ability to
process permit applications to a crawl. As described at proposal, the
survey of permitting authorities conducted by NACAA found that a
literal application of the title V applicability provisions to all GHG
sources would result in permitting delays of some 10 years. However, as
we further noted at proposal, this estimate was based on the assumption
that the applicability threshold would be 100 tpy based on actual
emissions; in fact, the applicability threshold would be 100 tpy based
on PTE, which would sweep in many more sources. Moreover, as stated
elsewhere, we currently estimate the amount of per-permit work hours
for permitting authorities in processing title V permit applications to
be several times higher than what we estimated at proposal. As with
PSD, such a program would be beyond anything within our experience, and
it is difficult to give a meaningful estimate

for how long the permitting process would take for each permit on
average. But it is clear that the period would be many years longer
than even the 10 years estimated by NACAA.
    In addition, applying title V to all GHG sources without tailoring
would be in tension with a specific CAA requirement, that of CAA
section 503(c), which imposes a time limit of 18 months from the date
of receipt of the completed permit application for the permitting
authority to issue or deny the permit. It would be impossible for
permitting authorities to meet this statutory requirement if their
workload increases from some 14,700 permits to 6.1 million, and without
streamlining. Instead, as just noted, permit applications would face
multi-year delays in obtaining their permits.
    Moreover, these delays would undermine the overall statutory design
that promotes the smooth-running of the permitting process, and the
underlying purpose of the title V program itself. As noted elsewhere,
Congress intended through title V to facilitate sources' compliance
with their CAA obligations by establishing an operating permit program
that requires the source to combine all of its CAA requirements, and
explain how it will assure compliance with such requirements. Congress
established a comprehensive process to implement the operating permit
program. Through this process, following the date that sources become
subject to title V, they have 1 year to submit their permit
applications. CAA section 503(c). As noted, the permitting authority
then has 18 months to issue or deny the permit. CAA section 503(c).
Permitting authorities must provide an opportunity for public comment
and a hearing. CAA section 502(b)(6). If the permitting authority
proposes to issue the permit, the permitting authority must submit the
permit to EPA for review, and notify affected states. CAA section
505(a)(1). EPA then has 45 days to review the permit and, if EPA deems
it appropriate, to object to the permit. CAA section 503(b)(1). If EPA
does object, then the permitting authority must, within 90 days, revise
it to meet the objections, or else EPA becomes required to issue or
deny the permit. CAA section 503(c). If EPA does not object, then,
within 60 days of the close of the 45-day review period, any person may
petition EPA to object, and EPA must grant or deny the petition within
60 days. CAA section 505(b)(2). This set of applicant, permitting
authority, and EPA actions and deadlines establishes the process for
the prompt and efficient issuance of operating permits for the
appropriate universe of sources.
    But at least for an initial period, until resources could be ramped
up and streamlining methods could be developed, the extraordinary
numbers of these permit applicants would sweep aside this carefully
constructed program, and instead, backlog the permit authorities. This
initial period would last for many years. As discussed elsewhere, it
would take several years to develop and apply streamlining measures--in
particular, general permits--and during that time, the permit backlog
would grow so large that it would take many more years for permitting
authorities to catch up by raising the requisite funds and hiring and
training the necessary employees.
    What's more, only a fraction of these millions of sources newly
covered by title V will be subject to any CAA requirements due to their
GHG emissions, and we suspect that a larger number will not be subject
to any CAA requirements at all. As a result, for most of these sources,
although they would need to apply for and receive a permit, there would
be no applicable requirements to include in the permit and thus the
exercise would not improve compliance.
    The picture that emerges from a literal application of title V's
requirements to all GHG sources--at the 100 tpy level, beginning on
January 2, 2011--shows multi-year delays in issuance of all permits,
for both the sources that have applicable requirements and that
Congress clearly intended the program to cover, and for the millions of
sources that may not be subject to any applicable requirements. In
short, this literal interpretation would apply title V to millions of
sources that Congress did not expect be covered, and the ensuing
administrative burdens--at least initially--would impede the issuance
of permits to the thousands or perhaps tens of thousands of sources
that Congress did expect be covered. This is the type of ``absurd
results'' from a literal application of statutory provisions that the
courts have held should be avoided. And even beyond all that, the sheer
magnitude of the numbers involved--millions of permits requiring
thousands of FTEs at a cost to the permitting authorities of billions
of dollars, all this beginning immediately at the time that GHGs become
subject to regulation--makes clear that this result of a literal
application of the title V provisions to GHG sources cannot be what
Congress intended.
b. EPA's Reconciliation of Applicability Provisions With Congressional
Intent
    For the reasons just described, we should not consider the literal
meaning of the applicability provisions to be determinative of
congressional intent as to the applicability of title V to all GHG
sources; rather, we should examine other provisions of the statute and
the legislative history to determine congressional intent on that
question. If congressional intent is clear, we must adopt and implement
an applicability approach that is as close as possible to congressional
intent; and if congressional intent is not clear, then we must select
an interpretation that is reasonable and consistent with the statutory
requirements. This section explains EPA's view of congressional intent
for the applicability of the title V program to GHG sources and the
principles and approach EPA is using for tailoring. In addition, we
also respond to other approaches that were suggested by commenters.
    To determine congressional intent, we consider the statutory
provisions and legislative history, and this analysis is similar to
that for PSD. The most important title V provisions and legislative
history for this purpose are the following:
    (1) The applicability provisions themselves, which, as we have
interpreted them, apply title V to all sources that emit at least 100
tpy of any air pollutant subject to regulation. CAA sections 502(a),
501(2)(B), 302(j). Although we do not believe these provisions should
be applied literally to GHG sources, their broad phrasing indicates,
directionally, a congressional intent towards inclusiveness of sources
in title V, including GHG sources.
    (2) The provisions for general permits, CAA section 504(d); and
title V fees, CAA section 502(b)(3)(A). These provisions give title V
an important measure of flexibility as to its scope. The explicit
authorization of general permits means that title V may be applied to
more sources and more efficiently, thereby saving costs to both source
and permitting authority. The requirements for permit fees provide a
mechanism for permitting authorities to, over time, develop their
programs to cover more sources. In this sense, these provisions could
be construed to indicate congressional intent to apply title V
inclusively, to the extent that permitting authorities can accommodate
additional sources through general permits and permit fees.
    (3) The detailed procedural requirements--including time periods,
such as the 18-month time period for action on permit applications--for
title V permit processing. CAA sections 503, 505. Although these
requirements are consistent with applying title V to GHG sources--in
the sense that at least in

theory, there is nothing intrinsic to GHG sources that would mean that
permitting authorities could not comply with these requirements--these
requirements cast doubt on whether Congress can be said to have
intended that title V cover the many small GHG sources (at least
immediately) in light of the risk that including all those sources in
title V would strain the process.
    (4) The provisions and legislative history concerning applicable
requirements, which indicate that a purpose of title V is to include
sources' applicable requirements in their permits. CAA sections
503(b)(2), 504(a). These provisions, and the accompanying legislative
history, discussed previously, suggest an intent to include within
title V GHG sources that have applicable requirements, but may also
suggest that Congress would not have intended to include in title V the
large numbers of GHG sources that have ``empty permits,'' at least
where their inclusion would undermine implementation of the program for
sources with applicable requirements.
    (5) The small-business-assistance provisions of section 507 and the
legislative history of title V--both the permitting program and the
small-business-assistance program--concerning the scope of the
permitting program and small businesses. These indicate that Congress
intended title V to cover some tens of thousands of sources, and did
not intend that title V apply to small businesses. These provisions and
legislative history suggest that Congress did not intend for title V to
apply to include large numbers of small GHG sources.

Finally, the legislative history of title V does not explicitly mention
GHG sources, which could suggest that Congress did not have occasion to
focus on whether and how title V would apply to GHG sources.
    With all this, we believe that Congress had a clear intent on the
question of whether title V generally applies to GHG sources, and that
was that it does. As with PSD, the most important indication of
congressional intent in this regard is the applicability provisions,
which provide, in part, that title V applies to ``any stationary
facility or source of air pollutants which directly emits, or has the
potential to emit, [the requisite quantity] of any air pollutant.'' CAA
sections 502(a), 501(2)(B), 302(j). This term is quite broad, and
should be read to include GHG sources. See Massachusetts v. EPA, 549
U.S. 497, 533 (2007) (``Because greenhouse gases fit well within the
Clean Air Act's capacious definition of `air pollutant,' we hold that
EPA has the statutory authority to regulate the emission of such gases
from new motor vehicles.''). Moreover, including GHG sources--under
certain circumstances--is consistent with the various statutory
provisions and statements in the legislative history described
previously.
    In the alternative, if it is concluded that Congress did not
express a clear intent on that question, then, under Chevron Step 2,
EPA exercises its discretion to conclude that title V applies to GHG
sources as a general matter. This is a reasonable policy because
applying the title V program to at least the larger GHG sources will
assure promote accountability and enforceability for those sources,
which is a key goal of the title V program, and will not impose
obligations that are beyond the resources of those sources or
insurmountable burdens on the permitting authorities. This policy is a
reasonable interpretation of the statutory provisions for the same
reasons just discussed.
    As to the question of how title V applies to GHG sources, we
believe that Congress cannot be said to have expressed a clear intent.
A central aspect of how title V is to apply to GHG sources concerns
``empty permits,'' and on this aspect, some of the above-described
provisions and statements in the legislative history point in different
directions. This is particularly true of, on the one hand the title V
applicability provisions, which apply by their terms inclusively and,
on the other hand, the requirement that sources include applicable CAA
requirements in their permits, and the statements in the legislative
history indicating that Congress intended title V to cover sources
subject to other CAA requirements.
    Because Congress cannot be said to have expressed an intent as to
the manner and scope of title V applicability to GHG sources, then,
under Chevron Step 2, EPA may apply a reasonable interpretation of the
applicability provision to determine the scope of coverage of GHG
sources that is consistent with the statutory requirements. The
Tailoring Rule qualifies as such an interpretation. The Tailoring Rule
in effect reads the applicability provisions not to apply title V to
GHG sources at or above the 100 tpy level, but instead to apply title V
to as many of the GHG sources at or above that level as possible and as
quickly as possible, starting with the largest sources first, that is
consistent with both the permitting authorities' ability to administer
the program and with a sensible imposition of costs to sources. This
tailoring approach is consistent with the inclusive direction of the
applicability provision, the flexibility in title V's scope that is
inherent in the provisions authorizing general permits and requiring
permit fees, the detailed process requirements, and the legislative
history that focuses on Congress's concern about costs to sources and
administrability. With the tailoring approach, over time, more sources
may be included in title V, consistent with those provisions and
legislative history. This reconciles the inclusiveness of the
applicability provisions with Congress's expectations of a more limited
scope for the title V program.\47\ However, as part of the tailoring
approach, we recognize that we may at some point determine that it is
appropriate to exclude certain sources, such as the smallest of the GHG
sources. In addition, we intend to address the issue of sources with
``empty permits'' in a later rulemaking, as discussed previously.
---------------------------------------------------------------------------

    \47\ As with PSD, this way of reconciling the PSD applicability
provisions with Congress's expectations for a narrower PSD program
is consistent with the U.S. Supreme Court's view that the CAA should
be read to include ``regulatory flexibility, [without which]
changing circumstances and scientific developments would soon render
the Clean Air Act obsolete.'' Massachusetts v. EPA, 549 U.S. 532.
---------------------------------------------------------------------------

    The specific phase-in schedule will depend on the following: We
will gather information about the permitting authorities' ability to
process permits, and we will develop streamlining techniques. Based on
that information, we will address expanding the title V program in a
step-by-step fashion to include more sources over time. Each step will
be based on our assessment of the permitting authorities' and sources'
ability to comply with their respective obligations under the title V
program.
    We recognize that the availability of permit fees to support title
V permit actions creates a potentially important source of resources,
and that this has implications for the permitting authorities' ability
to implement the title V program for sources of GHGs. At least in
theory, permitting authorities could assess and collect sufficient fees
to support hiring and training sufficient personnel so that they could
expand their programs to match the expansion in the number of sources
covered by the program.
    Even so, title V fees cannot be considered a panacea that will
resolve all resource problems that permitting authorities will have,
for several reasons. Permitting authorities will likely be constrained
as to the rate in which they can increase fees in light of

the costs to sources. As indicated elsewhere, at least at the outset of
the program before streamlining techniques have been developed, a
literal application of the title V applicability provisions to GHG
sources would, on average, cost each industrial source $46,400 and each
commercial or residential source $23,200 to complete the permit
application and take other associated actions; and it would cost each
permitting authority, on average, $19,688 to process the industrial
source permit and $9,844 to process the commercial or residential
source permit. Particularly in light of the high costs to sources of
applying for a permit, it is not likely that permitting authorities
would be able to pass on to the sources in the form of fees, the
entirety of the permitting authorities' own high costs for processing
those permits, at least not right away. Even to the extent it would be
possible to raise permit fees, permitting authorities would have to
undergo a process to assess, impose, and collect those fees, and then
hire and train personnel. The survey from the state and local agencies
described previously forecast a 2-year period for hiring and training,
without counting time for the fee process. For these reasons, we do not
believe that the authorization for fees will allow the permitting
authorities either to accelerate Steps 1 or 2 of the tailoring schedule
or to permit a larger number of sources at those steps. Step 1 will
take effect on January 2, 2011, Step 2 will take effect on July 1,
2011, and the process for determining and collecting fees, and then
hiring and training personnel will take at least several years after
July 1, 2011.
    Moreover, we do not believe that the authorization for fees means
that permitting authorities can reasonably be expected to permit title
V sources at levels below 50,000 tpy CO2e before 2016. The
next level below 50,000 tpy CO2e for which we have data is
25,000 tpy CO2e, and the costs to permitting authorities to
run their programs at that level ($126 million) is more than double
their current costs ($62 million). We do not consider it reasonable to
expect permitting authorities to more than double their program within
the first 6 years of title V applicability to GHG sources. That it is
not reasonable to expect that is made even clearer when the permitting
authorities' burdens in implementing their PSD programs are considered.
The ability of permitting authorities to impose fees may have more
important implications for subsequent steps, and as we address those
subsequent steps in future rulemakings, we will consider the fees.
EPA's approach to fees in this rulemaking is discussed elsewhere.
c. Other Possible Approaches to Reconciling Literal Reading of Title V
Applicability Provisions and Congressional Intent
    Having described how the Chevron framework, accounting for the
``absurd results'' doctrine, applies to title V requirements in this
case and why it supports this Tailoring Rule--under which we expect to
apply title V to more sources, in a step-by-step fashion, over time--we
turn to the last part of our discussion of this doctrine. Here, we
address another possible approach suggested by comments, which is that
EPA should apply the title V program only to sources that are subject
to applicable requirements, so that sources should not be required to
hold ``empty permits'' (e.g., permits issued to a source that is not
subject to any applicable requirement for any pollutant). To the extent
that commenters argue that the statute requires EPA to adopt a ``no-
empty-permits'' theory, we disagree. We believe that although various
provisions of title V indicate that one of title V's purposes is to
gather a source's applicable requirements into a single permitting
mechanism, see CAA sections 503(b)(1), 504(a), we do not read those
provisions as expressly limiting, as a matter of Chevron Step 1, title
V to sources with applicable requirements. The applicability
provisions, by their terms, include sources based on amount of
emissions, and do not include any explicit limits to applicability
based on whether the sources has applicable requirements. As described
previously, we believe that Congress, although clearly expressing an
intent that title V apply to GHG sources generally, did not express a
clear intent as to how title V applies to GHG sources. The tension
between these two sets of provisions, which we identified in the
proposal and commenters further discussed, provides further support for
that conclusion. Accordingly, we have discretion under Chevron Step 2
to determine a reasonable approach, consistent with the statutory
requirements, concerning the application of title V to GHG sources with
empty permits.
    We note that to date, we have issued permits to sources without
applicable requirements, albeit on rare occasions. We have little
reason to believe that the ``empty-permits'' issue will arise in Steps
1 and 2 of our tailoring approach because we believe there will be no
``empty permits'' in Step 1 or Step 2 or, if there are, that they will
be very few in number. As stated elsewhere, we believe that the
tailoring approach we adopt in this rulemaking for Steps 1 and 2 is a
reasonable approach that is consistent with statutory requirements.
    We need to gather more information concerning the potential number
and utility of ``empty permits'' for GHG sources, in light of the fact
that the need for requirements in title V permits will vary based on
the requirements of each SIP, and the fact that some SIPs contain
broadly applicable requirements. As stated elsewhere, we intend to
consider the issue of the applicability of title V to GHG sources with
``empty permits'' in Step 3 of our tailoring approach. When we do so,
we will further assess the potential for the approach of excluding
empty permits from title V to relieve burden consistent with statutory
requirements.
7. Additional Rulemaking for the PSD and Title V Programs
    The previous sections 5 and 6 discussed our application of the
Chevron framework, accounting for the ``absurd results'' doctrine, to
the PSD and title V applicability requirements, respectively. As
another point in this regard, which is relevant for both PSD and title
V purposes, we also commit to subsequent rulemakings in which we may
further address the ``absurd results'' doctrine.
    Specifically, we will propose or solicit comment on establishing a
further phase-in, that is, a Step 3, that would apply PSD and title V
to additional sources, effective July 1, 2013, and on which we commit
to take final action, as supported by the record, by no later than July
1, 2012. We further commit to completing another round of rulemaking
addressing smaller sources by April 30, 2016. Our action in that
rulemaking would take into account the severity of the remaining
problems associated with permitting authority burden and source costs.
    While committing to future action, we do not decide in this rule
when the phase-in process will ultimately end, or at what threshold
level, because all that depends on uncertain variables such as our
progress in developing streamlining approaches and on permitting
authorities' progress in developing permitting expertise and acquiring
more resources. We may continue the phase-in process with further
rulemaking(s) after 2016. Alternatively, we may make a final
determination through future rulemaking that, under the ``absurd
results'' doctrine, PSD and/or title V do not apply to GHG sources
that, while small and relatively inconsequential in terms of GHG
contribution, are above

the statutory tonnage thresholds for these programs, and thereby end
the phase-in process. In addition, we may consider whether to limit
title V applicability to GHG sources in order to minimize the number of
GHG sources with ``empty'' permits.
8. Rationale for the Phase-In Schedule for Applying PSD and Title V to
GHG Sources
    Having discussed in sections V.B.5, V.B.6, and V.B.7 the reasons
for tailoring the PSD and title V programs, we now describe our
rationale for selecting the specific phase-in schedule in this rule for
applying PSD and title V to GHG-emitting sources. To reiterate for
convenience, under Step 1 of this schedule, which begins on January 2,
2011, (1) PSD applies to the GHG emissions of ``anyway'' PSD sources,
that is, sources that are subject to PSD anyway due to their emissions
of conventional pollutants and that undertake a modification that
results in an increase of at least 75,000 tpy CO2e; and (2)
title V applies to ``anyway'' title V sources, that is, sources that
are subject to title V anyway due to their emissions of conventional
pollutants. Under Step 2, which begins on July 1, 2011, (1) sources
will be subject to PSD on account of their GHG emissions if they newly
construct and emit at least 100,000 tpy CO2e, or if they are
existing sources that emit at least 100,000 tpy CO2e of GHGs
and make a modification that results in the emission of at least 75,000
tpy CO2e; and (2) existing and new sources will be subject
to title V on account of their GHG emissions if they emit 100,000 tpy
CO2e in GHG emissions. In addition, EPA intends to begin
another round of rulemaking--Step 3--in 2011 and commits to complete it
by July 1, 2012. In that rulemaking, we will propose or solicit comment
on a further phase-in of GHG sources for PSD and title V applicability,
and we may propose or solicit comment on another application of the
``absurd results'' doctrine that excludes categories of sources from
PSD or title V. However, under this rule, in no event will EPA apply
PSD or title V to sources below the 50,000 tpy CO2e levels
in Step 3, or any other step we might promulgate prior to April 2016.
In addition, EPA commits to conduct a study, to be concluded by April
30, 2015, evaluating the status of PSD and title V applicability to GHG
sources, and, based on the study, complete a rulemaking by April 30,
2016 that addresses another round of a phase-in.
a. Rationale for Step 1
    In Step 1 of our tailoring approach, which begins on January 2,
2011, PSD and title V requirements will apply to only those sources
that are subject to PSD or title V requirements anyway due to their
conventional pollutants (``anyway'' sources) and that, in the case of
PSD, make modifications that result in an increase in GHG emissions of
at least 75,000 tpy CO2e. No sources would become major for
PSD or title V under this step based on their GHG emissions alone. This
section describes our proposal, comments on the proposal and our
response to those comments, and our rationale for Step 1.
(1) Proposal
    In our proposal, we proposed (1) the application of PSD and title V
requirements to sources that emit at least 25,000 tpy CO2e,
(2) a PSD significance level of between 10,000 and 25,000 tpy
CO2e, and (3) a commitment to undertake a study to be
followed by further rulemaking after 6 years. In addition, we solicited
comment on the alternative of limiting PSD and title V applicability to
``anyway'' sources for at least the first 6 years. Under this approach,
PSD and title V applicability would be determined based on non-GHG
pollutants, and without regard to GHGs, but those sources subject to
PSD would also be subject to BACT requirements for GHGs if their GHG
emissions exceeded the significance level established in the final
rule, and those sources subject to title V would be required to include
any applicable requirements for GHGs in their permits.
(2) Comments
    Many commenters supported this ``anyway''-source approach, and
offered a variety of reasons: According to the commenters, (1) This
approach is a better reading of Congress's intent in the Act and is
consistent with Alabama Power v. Costle, 636 F.2d 323 (DC Cir. 1980);
(2) this approach would reduce the permitting workload on sources
currently considered minor and focus PSD and title V requirements on
large sources of non-GHG pollutants, as intended by Congress; (3) it is
appropriate to base PSD and title V applicability on non-GHG emissions
until data on GHG emissions are available from the mandatory GHG
reporting rule; (4) in the initial phase, this approach would be more
straightforward to administer, would provide a more predictable
permitting workload, and would prevent a flood of newly regulated
sources from overburdening state agencies; (5) this approach would
provide permitting agencies time to develop experience handling GHG
sources and requirements under the PSD and title V programs; (6) this
approach would provide EPA and the permitting agencies the time needed
to develop streamlining techniques; (7) this approach is consistent
with the ``absurd results'' and ``administrative necessity'' doctrines
because the scope of the permitting programs would remain consistent
with both congressional intent and current administrative practice, but
EPA and state agencies would still be allowed to begin regulating GHG
emissions from existing PSD and title V sources; and (8) sources
already required to obtain PSD permits are best equipped to work
through BACT issues with permitting authorities.
    Commenters added that if BACT is applied for GHGs due to permit
actions involving non-GHG pollutants, EPA would need to set a
significance threshold for the application of BACT, without which BACT
could apply to very small (e.g., 1 ton) GHG increases associated with
projects that otherwise triggered PSD for increases of non-GHG.
(3) Determination as to Step 1, PSD and Title V Applicability and PSD
Significance Level
    After considering the administrative burdens from increased
permitting actions and the need for permitting authorities to have
sufficient time to develop necessary expertise and staffing resources
to address that burden, we have decided in this final action to
establish the ``anyway'' source approach as Step 1. Beginning on
January 2, 2011, sources subject to PSD requirements for their
conventional pollutants anyway will be required to apply BACT to their
GHG emissions if they construct or modify and in so doing, emit at
least 75,000 tpy CO2e in GHGs. Similarly, sources subject to
title V requirements anyway due to their conventional pollutants will
be required to meet certain requirements for their GHGs, as described
elsewhere. These requirements at Step 1 for PSD and title V will not
expire. On July 1, 2011, a further phase-in of PSD and title V
applicability--Step 2--will kick in.
    At Step 1, by definition, all of the covered sources are already
subject to PSD and title V permitting requirements, and will simply be
adding a GHG component to what would be an otherwise occurring
permitting action for conventional pollutants. These sources include
fossil fuel-fired power plants, petroleum refineries, cement plants,
iron and steel plants, pulp and paper plants, petroleum refineries,
large

landfills, and other large industrial sources. These sources will need
to perform some additional analysis that is unique to GHG emission
units, particularly related to the BACT review and selection process,
but they will likely be able to utilize information developed as part
of other permitting requirements for conventional pollutants, such as
equipment fuel usage and operational parameters. Also, because these
facilities are familiar with the case-by-case permitting processes,
including all the steps from the application to the final review
process, they will not confront a high PSD or title V learning curve.
    The ``anyway'' source approach has particular appeal during the
first step of the phase-in approach because it begins to apply key PSD
and title V program requirements as soon as January 2, 2011 to large
sources of emissions, but because it applies only to sources that are
already subject to PSD for other pollutants, it can be implemented
efficiently and with an administrative burden that is manageable in the
next 8 months. We expect that under this approach, the sources and
permitting authorities will still face substantial additional work to
address the GHG emissions. In addition to the activities discussed
elsewhere, there will be significant and complex policy questions about
how BACT will be implemented for GHGs that must be resolved. These
issues will include how to determine BACT for GHGs, how to do netting,
and other similar issues. Even with EPA guidance, many case-specific
policy issues will arise and will have to be resolved by the permitting
authority in the context of a specific permit application.
Nevertheless, with the ``anyway'' source approach, this work will be
manageable because the associated permitting burden will be limited to
adding a GHG component to each existing permit action for which it will
be required, and will avoid the significantly greater burdens
associated with large numbers of new permit actions that would be
required for sources and modifications that would be subject to PSD for
the first time. Instead, this ``anyway'' source approach allows
permitting authorities sufficient time to develop necessary expertise
and staffing resources to address GHG BACT.
    We agree with commenters that the establishment of a significance
level--which, in effect, is a BACT threshold--is appropriate, and we
have decided to establish this level at 75,000 tpy CO2e
because, for reasons discussed later, that is the level that will apply
during Step 2. At this level, the administrative burdens, described
later, will be manageable. Importantly, we believe a consistent
significance level between Steps 1 and 2, as opposed to a lower
significance level in Step 1, will provide for a smoother transition
and avoid the problems that would arise if PSD applied to modifications
during Step 1 that PSD would not apply to in Step 2. Otherwise, we
would create a perverse incentive for companies to delay such projects
until Step 2 to avoid BACT.
    We estimate that Step 1 will result in a 23 percent increase in
permitting authority work hours and a $3 million increase--which
amounts to a 25 percent increase from the current program cost of $12
million--in their annual costs for running PSD programs. This is
primarily due to the GHG BACT review requirements. For title V
programs, we estimate a 2 percent increase in permitting authority work
hours and a $1 million increase in the title V annual program costs for
permitting authorities under Step 1 as compared to the current program
cost of $62 million. These work hours and costs will be needed
primarily to review GHG emissions information, add any GHG-related
requirements to title V revisions and renewal actions that would
otherwise be occurring, respond to comments and petitions from the
public, as well as develop fee requirements and make fee determinations
associated with issuing new or revised title V permits that add GHG-
related information. For both the PSD and title V programs on a
combined basis, the additional costs for Step 1 will be $4 million,
which amounts to a 5 percent increase in the current combined program
cost of $74 million.
    In addition to these workload and monetary costs, permitting
authorities will confront additional burdens before and during Step 1,
which we have not attempted to quantify. One of the most significant of
these is training staff in the PSD-related areas of GHG emissions
calculations and BACT evaluations. In addition, permitting staff will
need to build staff expertise and capacity for addressing GHG
requirements in preparation for Step 2, which will begin only 6 months
after Step 1; and in communicating and providing outreach to sources
addressing GHG emissions for the first time. Based on comments we
received on the proposal from permitting authorities, we believe these
additional training and outreach requirements--for both the PSD and
title V programs--will add significantly to the permitting authorities'
burden during the initial 6-month period under Step 1.
    We believe that these administrative burdens are substantial but
manageable. Following this action, permitting authorities will have
only 8 months to prepare for Step 1, when they will need to increase
their resources by 5 percent for both the PSD and title V programs
combined, and be able to implement BACT requirements for GHG sources.
During Step 1, they will need to prepare for Step 2, when, as discussed
later, they will need to process over 900 additional PSD permits each
year and begin to process over 1,100 additional title V permit actions.
    We have decided to limit Step 1 to the ``anyway'' source approach,
and not apply PSD or title V to sources based on their GHG emissions,
for several reasons. First, we believe that the administrative burdens
described previously are the most that the permitting authorities can
reasonably be expected to manage before and during Step 1. Tighter PSD
and title V applicability requirements would mean greater
administrative burdens.
    Second, we believe that the costs of GHG permitting to the sources,
as described previously, are substantial and as a result, necessitate
that we wait for the permitting authorities to develop the PSD and
title V programs for GHG sources during the first 6 months of 2011
before subjecting sources to PSD and title V requirements on account of
their GHG emissions. By July 1, 2011, when Step 2 takes effect, the PSD
and title V programs will be better developed. For example, the
permitting authorities will have more experience making BACT
determinations. In addition, by that time, sources will have had more
time to prepare for the permitting processes. In addition, as suggested
by one commenter, the additional time will allow sources and permitting
authorities to address the current uncertainty surrounding how to
measure high-GWP gases.
    Third, we estimate that ``anyway'' sources account for
approximately 65 percent of total national stationary source GHG
emissions. As a result, limiting Step 1 to these sources will still
capture a large portion of the GHG inventory.
    A large number of commenters urged us to leave this ``anyway''
source approach in place until such time as we complete an assessment
and conduct further rulemaking, which we proposed would be 6 years from
now. We are not taking this action; rather, for the reasons discussed
next, we believe it is reasonable to use GHG thresholds to begin to
phase in PSD and title V applicability to additional sources in Step 2.

b. Rationale for Step 2
(1) Proposal
    We proposed to establish the applicability level for PSD and title
V to GHG sources at 25,000 tpy CO2e, and we proposed a PSD
significance level in the range of 10,000 to 25,000 tpy
CO2e. Our burden estimates at proposal led us to conclude
that at those threshold levels, for the PSD program, ``approximately
400 additional new or modified facilities would be subject to PSD
review in a given year. These include approximately 130 new facilities
and approximately 270 modifications * * *.'' 74 FR 55331, col. 1. We
estimated that processing these numbers of additional permits, along
with doing the additional work associated with GHG emissions from
sources subject to PSD anyway due to their conventional emissions,
would increase permitting authority burdens by ``approximately 112,000
staff hours at an additional cost of approximately $8 million. This
workload amount represents an increase of about 1.3 times, or 32
percent, in the current burden for permitting authorities on a
nationwide basis.'' Id. col. 3. We concluded that ``this additional
burden is manageable,'' but that ``any threshold lower than 25,000 tpy
CO2e, would create undue administrative burdens.'' Id.
    For the title V program, we estimated that at a 25,000-tpy
CO2e permitting threshold, ``about 13,600 existing
facilities'' would become subject to title V, and that to manage the
additional workload associated with permitting those sources and with
the other permit revisions and modifications that would result from the
25,000 tpy CO2e threshold, permitting authorities would
require an additional 492 FTEs, which would be an estimated 50 percent
increase over current title V staffing levels. 74 FR 55335, cols. 1-2.
(2) Comments
    We received a significant number of comments from both permitting
authorities and industry representatives that our proposed GHG
threshold of 25,000 tpy CO2e for major source applicability
was too low and would result in an unmanageable amount of permitting
actions in the near term. Many offered evidence that we severely
underestimated both the number of permitting actions and the per-permit
administrative burden, for both PSD and title V programs.
    Commenters also asserted that the proposed 25,000 tpy threshold is
too low because it will subject small sources (including many small
businesses) to PSD and title V, which is not in keeping with Congress's
intent to limit PSD and title V to large sources when Congress set the
100/250 tpy thresholds for the permitting programs. 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 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 become subject to PSD and title V due to the proposed permitting
thresholds than EPA estimated at proposal.
    Many commenters recommended specific major source thresholds for
PSD and title V, including levels of 25,000 (as proposed), 40,000,
50,000, 100,000, 150,000, 250,000, and 1,000,000 tpy CO2e. A
majority of the commenters--including both industry and state agency
commenters--recommended major source thresholds of 100,000 tpy
CO2e. However, several state agency commenters recommended
thresholds of 50,000 tpy CO2e. Other commenters recommended
sector-specific thresholds. For example, solid waste industry
commenters suggested thresholds of 820,000 tpy CO2e for PSD
[which they calculate to be equivalent to the existing PSD threshold
for ``municipal solid waste landfill emissions,'' i.e., 250 tpy
nonmethane organic compounds (NMOC)] and 320,000 tpy CO2e
for title V (calculated to be equivalent to the existing major source
applicability threshold of 100 tpy NMOC). Other commenters urged EPA to
set the GHG thresholds at levels that correspond to emissions of
conventional pollutants at the 100/250 tpy level.
    Many of the commenters that recommended increasing the thresholds
cited EPA's estimates that a particular threshold would significantly
reduce the number of sources subject to the rule while causing only a
slight reduction in the percentage of GHGs captured. Several of these
commenters noted that Table VIII-2 in the proposal preamble indicates
that shifting the major source threshold for PSD from 25,000 to 100,000
tpy CO2e would reduce the number of major sources from
13,661 to 4,850 while reducing the coverage of U.S. stationary source
GHG emissions by only about 4 percent. Other commenters referred to the
regulatory impact analysis (RIA) for the mandatory GHG reporting rule
to conclude that raising the threshold from 25,000 to 100,000 tpy
CO2e would exclude thousands of entities that, on a combined
basis, emit only one percent of the nation's GHG emissions. See the RTC
document for this final rulemaking for more detailed description of
comments received on our proposed burden assessment.
    Many commenters also recommended specific PSD GHG significance
thresholds, including levels of 10,000 (as proposed), 15,000 (within
the proposed range), 25,000 (also as proposed), 40,000, 50,000, and
100,000, and 150,000 tpy CO2e, as well as suggesting sector-
specific thresholds. These recommendations were based on the view that
we had underestimated the number of modifications and that the burden
of permitting at the proposed levels would therefore be much worse than
we projected. A number of the commenters argued that the significance
threshold should be no less than the major source threshold, at
whatever level that is set. The largest number of commenters
recommended a PSD significance threshold of 100,000 tpy
CO2e, although significant numbers also support 25,000 and
50,000 tpy CO2e.
(3) Rationale for Step 2
    Based on these comments, we reassessed our original burden
estimates from our proposal. This reassessment is discussed at the
beginning of this section. We decided that, once this adjustment is
taken into account, the burdens at the proposed 25,000 threshold and
the proposed 10,000-25,000 significance levels would be unmanageable.
We therefore evaluated higher thresholds ranging from a 25,000 tpy
CO2e major source applicability level for PSD and title V to
a 50,000, 75,000, or 100,000 tpy CO2e level, with associated
PSD GHG significance levels of equal or lesser magnitude; and we
selected the 100,000/75,000 tpy CO2e level. Central to our
decision to promulgate higher thresholds than what we proposed is our
recognition, based on comments and further analysis, that applying PSD
to GHG sources at the statutory or any other threshold level or
significance level that we have considered would result in (1) a
greater number of sources, and significantly greater number of
modifications than we first estimated becoming subject to those
programs; and (2) a greater per-permit cost than we first estimated to
the permitting authority of processing those permit actions. We
discussed our revised estimates and reasoning at the beginning of this
section.
    We now estimate that the 25,000/25,000 tpy level would result in
250 additional PSD permit actions for new construction (either for GHG-
only sources or additions to otherwise occurring permits) and an
additional 9,200 PSD permits for modifications

each year (compared to our estimate at proposal of 130 for new
construction and 270 for modifications). This level of permitting would
require an additional 2,815,927 work hours, or 1,400 FTEs (compared to
our estimate at proposal of 112,000 additional work hours, or 57 FTEs);
and would cost an additional $217 million each year (compared to our
estimate at proposal of an additional $8 million). See 74 FR 55331
(proposal). This $217 million amount represents approximately a 1,800
percent increase over current permitting authority annual cost of $12
million for the major NSR programs.
    For title V, under our final burden analysis at a 25,000 tpy
CO2e threshold, we estimate a $64 million annual increase in
program costs to permitting authorities to add GHG emission sources,
which reflects a greater than 100 percent increase over current program
costs of $62 million. We estimate that this increased burden would
result in the need for almost 700 new FTEs nationwide at permitting
authorities (compared to our estimate at proposal of 492 additional
FTEs, or about a 50 percent increase in existing program size). This
increase in burden is due to an estimated annual increase of 2,500 new
title V permits, over 9,500 permit revisions, and over 2,600 permit
renewal actions due to GHG emission sources. These additional title V
actions compare to current annual program actions of approximately 50
new title V permits, 1,394 significant revisions, and 3,267 permit
renewals.
    Based on this information, we have decided not to finalize our
proposal to apply a 25,000 tpy CO2e applicability threshold
to GHG sources at the time that PSD and title V take effect. At that
level, too many sources--many more than we thought at proposal--would
be subject to high permitting costs. In addition, permitting at that
level and at that time would not be administratively feasible. The
resulting increase in the number of PSD and title V permitting actions
and workload would create insurmountable resource demands for
permitting agencies in the near term, which would jeopardize the
functioning of these permitting programs. We are mindful that not only
would the permitting programs have to bear the costs that our estimates
are able to monetize, but they would also incur burdens associated with
hiring and training staff to make and implement GHG BACT
determinations, GHG emissions evaluations, and other evaluations
required under the PSD program for a wide variety of formerly
unpermitted sources, including significant numbers and types of small
manufacturing and commercial or residential establishments. They would
also incur burdens associated with reviewing applications, citizen
comment and petitions, and the need to communicate and provide outreach
to new categories of sources, including, again, significant numbers and
types of small manufacturing and commercial or residential sources.
Thus, the increased administrative burdens at the 25,000/25,000 tpy
CO2e levels are so great that we have concluded that they
would not be consistent with the goals of avoiding absurd results that
contravene congressional intent, including avoiding a permitting burden
that would overwhelm the capacity of permitting authorities to
effectively implement their programs.
    Based on our revised burden analysis, in this final action, we have
decided to establish a multi-step, phase-in approach that contains a
significantly higher initial threshold level. We have determined that a
100,000 tpy CO2e major source threshold level for PSD and
title V purposes, and a 75,000 tpy CO2e significance level,
produce a level of permitting activity that would certainly be an
increase over current workload, but that would be administratively
feasible by July 1, 2011. As a result, we have decided to finalize
these thresholds as Step 2.
    In reaching this conclusion, we needed to consider both the
sources' abilities to manage the permitting process and the permitting
authorities' capacity to address newly-major sources as expeditiously
as possible. As to the former, sources subject to Step 2 will, for the
most part, continue to include the ``anyway'' sources subject to Step
1. In addition, we estimate that Step 2 will include about 500
additional sources that are not already subject to permitting. Most of
them will become subject to PSD and title V because of fuel burning. In
order to meet the 100,000/75,000 threshold, they will have to burn a
significant quantity of fuel, and that means they will be a significant
size. In general, these sources include municipal or commercial
landfills that are large, but not large enough to be covered by the
NSPS, pulp and paper facilities, electronics manufacturing plants,
chemical production plants, and beverage producers. Although these
sources have not been subject to PSD permitting before, some of them
have already been subject to minor source permitting, and so will have
some familiarity with the permitting process. In addition, in general,
these sources are in source categories that have larger sources that
are already subject to PSD and title V. As a result, they are in
industries that have experience in the permitting process. Because of
their relatively large size and access to knowledge about the
permitting processes, we believe these sources will be able to manage
the permitting requirements.
    As to the permitting authorities' capacity to handle the Step 2
workload, we note first that our Step 1 approach does not cover newly-
major sources. As a result, the Step 2 threshold and timing has to be
established in a way that takes into account permitting authority
challenges in addressing many sources and categories that would be
subject to major source permitting for the first time.
    We considered the various PSD and title V threshold applicability
and significance level options in our final burden analysis, summarized
in Table VI-1, including levels at 50,000 CO2e and 100,000
CO2e. As Table VI-1 indicates, we estimate that a 100,000
tpy CO2e major source applicability threshold would result
in approximately 550 sources becoming newly classified as major sources
for PSD based on their GHG emissions, while a 50,000 tpy
CO2e threshold would result in 3,500 newly classified major
sources.
    We then considered the impact on both PSD and title V programs of
different PSD significance level options for GHGs. The choice of a PSD
significance level has a direct impact on title V burdens because PSD
permit requirements resulting from modification activities will result
in required title V permit revisions. We developed PSD and title V
burden estimates based on significance levels of 50,000 tpy, 75,000 tpy
and 100,000 tpy CO2e, combined with a major source
applicability level of 100,000 tpy CO2e.
    At a 50,000 tpy CO2e significance level, we estimated an
annual increase of approximately 1,800 PSD permitting actions and
almost 2,000 additional title V permitting actions, as compared to Step
1. At a 75,000 tpy CO2e significance level, we estimated an
annual increase of approximately 900 PSD permitting actions and just
over 1,000 additional title V permitting actions as compared to Step 1.
At a 100,000 tpy CO2e significance level we estimated an
annual increase of approximately 25 PSD permitting actions and 210
additional title V permitting actions as compared to Step 1. For title
V, under these different scenarios, the major source applicability
level of 100,000 tpy CO2e results in approximately 200 new
permits annually, but, as noted, the choice of significance levels
affects the number of required permit revisions.

    Based on this information, we have decided to set our final Step 2
thresholds at 100,000 tpy CO2e for major source
applicability under PSD and title V and at a 75,000 tpy CO2e
significance level for PSD. Overall, we estimate that the almost 900
additional PSD permitting actions (virtually all of which would be
modifications) per year at these levels will result in an approximately
$21 million increase (from Step 1) in states' annual costs for running
PSD programs. In addition, we estimate that the 1,000 additional title
V permit actions will cause the total title V burden for permitting
authorities to increase by $6 million annually from Step 1. This total
increase in permit program burdens of $27 million represents a 34
percent increase over the $78 million in total cost of PSD and title V
programs at Step 1. We consider this a substantial increase
particularly because Step 2's start date of July 1, 2011, is only 6
months after Step 1's start date of January 2, 2011. What's more, Step
1 will entail a substantial increase in permitting authority
obligations, so that adding the costs of Step 1 and Step 2 together--
$31 million--means that permitting authorities will be required to
increase their permitting resources by approximately 42 percent between
now and Step 2. In addition to the administrative burdens we have been
able to monetize, we must be mindful that permitting authorities will
incur other burdens, including the significant support and outreach
activities by permitting staff for the many newly permitted sources. We
believe that any lower thresholds in this timeframe, whether in the PSD
and title V applicability levels or in the significance level, would
give rise to administrative burdens that are not manageable by the
permitting authorities.
    Although the burdens at the 100,000 tpy CO2e/75,000 tpy
CO2e levels are steep, we consider them manageable. Step 2
permitting for GHGs will mostly involve source categories in which some
sources have traditionally been subject to permitting, which should
render applying even the new GHG requirements more manageable. These
source categories include fossil fuel-fired power plants, petroleum
refineries, cement plants, iron and steel plants, and petroleum
refineries, in addition to other large industrial type source
categories. A full description of the type of sources that we expect
will have GHG emissions that exceed the 100,000 tpy CO2e
threshold is provided in the ``Technical Support Document for
Greenhouse Gas Emissions Thresholds Evaluation'' located in the public
docket for this rulemaking. In addition, because Step 2 does not begin
until July 1, 2011, permitting authorities have about 14 months to
prepare for it.
    In addition, we believe that the sources that will become subject
to PSD and title V requirements at the 100,000/75,000 tpy
CO2e levels will be able to accommodate the additional costs
of permitting. For the most part, these sources will be of a comparable
size and activity level as those sources that are already subject to
those requirements.
    Because the administrative burdens at the 100,000/75,000 tpy
CO2e level are as heavy as the permitting authorities can
reasonably be expected to carry, adopting these threshold levels is
consistent with our legal basis under the ``absurd results'' doctrine.
Under this basis, we are reconciling the statutory levels with
congressional intent by requiring that the PSD and title V requirements
be applied to GHG sources at levels as close as possible to the
statutory thresholds, and as quickly as possible, in light of costs to
sources and administrative burdens.
    Because the administrative burdens at the 100,000/75,000 tpy
CO2e level are manageable, we do not believe that higher
threshold levels are justifiable for Step 2. Specifically, at the
100,000/100,000 level--which would entail a 100,000 tpy CO2e
significance level, rather than a 75,000 tpy CO2e level--
permitting sources would need to handle only 20 additional
modifications beyond current levels, and thus would not incur
substantial additional costs. By the same token, we disagree with
commenters who suggested that we needed to set permanent GHG permitting
thresholds for major sources at a rate equivalent to the amount of GHGs
that would be emitted by conventional pollutants at the 100 and 250 tpy
level in order to meet the legal bases of the ``absurd results'' and
``administrative necessity'' doctrines. These levels would likely be
well above 300,000 tpy CO2e, depending on fuel types and
assumptions regarding the relative emissions of GHGs compared to the
conventional pollutants. Our data show that none of the levels above
100,000/75,000 tpy CO2e would result in significant
increases in administrative burdens. As a result, establishing these
levels would not apply PSD or title V requirements to GHG sources as
quickly as possible, and thus would not be consistent with our approach
in the Tailoring Rule.
    We estimate that facilities meeting the Step 2 major source
applicability thresholds account for approximately 67 percent of total
national stationary source GHG emissions. Many commenters felt that
this should be an important basis for our selection of a threshold,
stating that there is no significant loss in GHG emissions coverage of
source categories at the 100,000 tpy CO2e threshold, and in
some cases arguing that as a result, we should set the level even
higher. We agree that it is important that the coverage in Step 2
represents 86 percent of the coverage at full implementation of the
statutory 100/250 thresholds.
c. Rationale for EPA's Plan Beyond Step 2
    EPA commits that after Step 2, EPA will begin another rulemaking in
2011 and complete it by July 1, 2012, and in that rulemaking take
comment on a further phase-in of GHG sources for PSD and title V
applicability (Step 3). However, under this rule, in no event will EPA
apply PSD or title V to sources below the 50,000 tpy CO2e
levels prior to 2016. In addition, EPA commits to conduct a study, to
be concluded by April 30, 2015, evaluating the status of PSD and title
V applicability to GHG sources, and, based on the study, complete a
rulemaking by April 30, 2016, that addresses another round of a phase-
in.
(1) Proposal
    In our proposal, we noted that following implementation of the
first phase of PSD and title V applicability to GHG sources, generally
at the 25,000 tpy CO2e threshold, additional action would be
required over time to assure full compliance with the statute. We did
not establish more steps in the schedule, but we did commit to conduct
a study, to be completed by 5 years after promulgation, evaluating the
status of PSD and title V applicability to GHG sources, and, based on
the study, complete a rulemaking by 6 years after promulgation that
addressed an additional step of the phase-in.
(2) Comments
    A number of commenters supported the proposal's overall approach to
phase in the permitting of GHGs, mainly because this approach will
allow permitting of the largest sources of GHGs immediately while
collecting more information about smaller sources and more fully
considering streamlining options for subsequent phases. Many of these
commenters made clear that they do not support implementation of the
statutory 100/250 tpy thresholds, even through a phase-in approach. On
the other hand, one commenter asserted that EPA has failed to
demonstrate that

it needs 6 years to study and implement NSR and title V for sources
emitting less than 25,000 tpy. The commenter contends that EPA has not
analyzed, among other things, what combined effect the full
implementation of its streamlining proposals in the 15 months before
the due-date for title V permit applications would be to reduce the
cost, complexity, and number of title V permit applications that would
have to be submitted.
(3) Rationale for Further Steps
    We agree with commenters who support a phased-in approach to the
Tailoring Rule. Our final action reflects a multi-step process that we
believe will facilitate a manageable expansion of PSD and title V
applicability, as appropriate, to GHG-emitting sources. In our final
action, we have established the initial two steps of a multi-step
phase-in of lower threshold applicability with a commitment to take
further regulatory activity to consider adopting lower thresholds. We
believe this process will provide substantial opportunity for
permitting authorities and sources to establish enough experience and
information, and to provide significant real-world feedback to EPA, so
as to better inform decisions on future phase-in steps.
    With this overall phase-in approach in mind, in this final rule,
EPA includes an enforceable commitment to undertake a notice-and-
comment rulemaking that would begin with an SNPR that we expect to be
issued in 2011 and that we commit will be finalized in 2012. The notice
will propose or solicit comment on further reductions in the
applicability levels. This rulemaking will take effect by July 1, 2013,
and therefore, in effect, constitute Step 3. In this action, we are
committing to a rulemaking for Step 3, but are not promulgating Step 3,
because it is important to allow EPA and the permitting authorities to
gain experience permitting sources under Steps 1 and 2, and to allow
time to develop streamlining methods, before attempting to determine
what would be the next phase-in levels for PSD and title V
applicability. While committing to future action, we do not decide in
this rule when the phase-in process will ultimately end, or at what
threshold level, because all that depends on uncertain variables such
as our progress in developing streamlining approaches and on permitting
authorities' progress in developing permitting expertise and acquiring
more resources. We may continue the phase-in process with further
rulemaking(s) after 2016. Alternatively, we may make a final
determination through future rulemaking that, under a Chevron analysis,
accounting for the ``absurd results'' doctrine, PSD and/or title V do
not apply to GHG sources that, while small and relatively
inconsequential in terms of GHG contribution, are above the statutory
tonnage thresholds for these programs, and thereby end the phase-in
process.
    In addition, in this action, we are determining that in no event--
whether through Step 3 or a subsequent step--will we apply PSD or title
V to sources at the 50,000/50,000 tpy CO2e level or lower
prior to May 1, 2016. We have several reasons for making this
determination at this time. Most importantly, our examination of the
expected burdens to the permitting authorities of applying PSD and
title V to GHG sources convinces us that extending the permitting
programs to sources at or below the 50,000/50,000 tpy CO2e
level within 6 years of promulgation would result in prohibitively
heavy burdens. This threshold option would result in close to 2,000
additional annual PSD permitting actions per year over the current
program and more than 1,000 over Step 2, including both new
construction and modifications. For title V, we estimated an increase
of over 1,000 new title V permits (all newly permitted sources because
of GHG emissions) over 2,000 permit revisions per year over the current
program, and about 980 new title V permits and 900 permit revisions
more than the Step 2 amounts.
    These increases, which could occur between 2013 and 2016 under our
approach depending on the outcome of the Step 3 rulemaking, represent
very substantial additions to the permitting program. In terms of cost,
we estimate that these additional actions would result in a $73 million
per year increase in joint PSD and title V program costs over the
current programs--which is almost a doubling of costs--and $42 million
annual cost increase over Step 2 for the current programs. We believe
that it would take permitting authorities some time to adjust to this
workload. This is particularly true because at the 50,000/50,000 tpy
CO2e level, smaller sources--including ones not previously
subject to permitting requirements--will become subject to PSD and
title V. It will take some time for both the permitting authorities and
the sources to absorb these new obligations.
    Importantly, the next lower cut-off--below 50,000 tpy
CO2e for the major threshold level--is the 25,000/25,000 tpy
CO2e level. For the reasons discussed previously, this level
is clearly not manageable within the first 6 years after this action.
This applicability level would bring in over 7,000 sources that would
be newly subject to title V permitting and result in close to 10,000
new PSD permitting actions. This would result in a 380 percent increase
over current program costs for PSD and title V to run these programs.
Based on comments we received from state and local permitting agencies
on our proposed Tailoring Rule, these levels of permitting activities
would far exceed the administrative capabilities of the permitting
agencies for at least the near future. Thus, the 6-year exclusion is
necessary to provide these agencies and their permittees certainty that
this will not occur.
    We recognize that at present, we do not have data that would allow
us to compile administrative burden estimates for specific levels
between the 50,000/50,000 and 25,000/25,000 tpy CO2e levels
we assessed. However, it is clear that the burdens begin to rise
sharply below the 50,000/50,000 tpy CO2e level. To
reiterate, the combined PSD and title V administrative burdens at the
50,000/50,000 tpy CO2e level cost almost twice as much as
the current programs, but the burdens at the 25,000/25,000 tpy
CO2e level cost almost four times as much as the current
programs. As a result, we conclude that dropping the level below
50,000/50,000 tpy CO2e too soon would quickly expose the
permitting authorities to unacceptably high burdens.
    As a further reason for concluding that we will not reduce
thresholds beyond 50,000/50,000 tpy CO2e during the first 6
years, we recognize that the PSD permitting process in particular
carries important ramifications for the permitting authorities and the
affected sources. If we have underestimated the permitting burden or
the ability of states to respond to their additional workload, then
permitting backlogs will result, and PSD permit issuance will be
delayed, and sources seeking a PSD permit will not be able to construct
or modify. If this were to happen on a large enough scale, it could
have potentially serious consequences for the national economy.
    Moreover, we need to be mindful that the best information we
currently have as to permitting authority burdens represents a national
average, as described previously. Our information at the individual
state and local level, where permitting occurs, is not as robust.
Accordingly, we recognize that a particular state may encounter
permitting costs that are higher than average, and this may result in
permitting backlogs in that state, with

the consequence that sources in that state will face long delays in
constructing or modifying. Similarly, even if a particular state's
costs are in line with the national average, that state may not be able
to find the additional resources to cover those costs as readily as
other states. For this reason, too, sources in that state could face
long delays in constructing or modifying.
    Beyond the administrative burdens to permitting authorities, we
recognize that the costs of PSD and title V permitting to sources may
be high, and we are not inclined to allow their imposition at this time
on sources smaller than the 50,000/50,000 tpy CO2e
threshold. At that level, the permitting programs will apply to a
significant number of newly permitted sources, including a variety of
small manufacturing, commercial and residential categories. The next
level that we have analyzed is the 25,000/25,000 tpy CO2e
threshold. At that level, more than 7,000 more sources would become
subject to PSD each year--almost all due to modifications--and another
4,000 sources would become subject to title V each year. These sources
would be even smaller than those that already will have become subject
to PSD and title V due to their GHG emissions. We do not think it
reasonable to subject more of those types of sources, and smaller ones,
to permitting costs within the next 6 years.
    Finally, we note that moving from a 50,000 tpy CO2e
threshold to 25,000 tpy CO2e will increase the emissions
coverage of GHG stationary sources from 70 percent to 75 percent
nationwide, which we consider to be a relatively small amount.
    We recognize that our progress in developing streamlining methods
will be a key determinant to the ability of permitting authorities to
administer, and sources to comply with, PSD and title V at GHG emission
levels below 50,000/50,000 tpy CO2e. Although we commit to
pursue streamlining, we cannot predict our progress. This uncertainty
may be problematic for stakeholders, primarily permitting authorities
and industry. That is, permitting authorities will face uncertainty in
planning the scope of their programs over the next few years, and
industry will face uncertainty as to what new construction projects and
modifications will be subject to PSD for GHGs. By determining now that
for the next 6 years we will not impose PSD requirements below a floor
at the 50,000/50,000 tpy CO2e level, we add a measure of
needed certainty.
    We also recognize that selecting a level that is too high or
keeping a level for too long means that some sources may construct or
modify without implementing BACT level controls, and this could result
in additional emissions of GHGs. We need to be vigilant and to protect
against this outcome. Even so, all things considered, we believe that
our determination not to apply the PSD or title V permitting
requirements to sources below the 50,000/50,000 tpy CO2e
level for the first 6 years also represents a reasonable balancing of
protection of the environment with promotion of economic development.
This type of balancing is consistent with our authority under the PSD
provisions.
    We also raised the issue of ``hollow'' or ``empty'' permits in
discussing our rationale for why it may make sense to delay title V
permitting under our proposal. We were concerned that many title V
permits for GHG sources would contain no applicable requirements, and
their issuance would therefore be of little value and would not be the
best use of scarce resources. Several commenters agreed that
implementing title V for GHGs will, at least initially, require ``empty
permits'' to be issued to GHG sources because such sources will not be
subject to ``substantive'' requirements, and that this would not be the
best use of scarce resources.
    We believe that the amount of resources that would be spent on, and
the limited value that would result from, ``empty permits'' does
warrant consideration under the Chevron analysis, taking account of the
``absurd results'' doctrine. Therefore, we intend to consider the role
of ``empty permits'' when we undertake future rulemaking. However, we
believe the issue of ``empty permits'' has limited or no relevance to
the first two steps of the phase-in that we are promulgating in this
rule. During Step 1, permitting for GHGs is only required if the source
is otherwise subject to permitting for its emissions of non-GHGs. Those
sources very likely will be subject to existing substantive applicable
requirements for non-GHGs (e.g., NSPS, Maximum Achievable Control
Technology (MACT), and SIP requirements, including PSD). Thus, there
should be no, or at least no additional, ``empty permits'' during Step
1. For Step 2, it is possible that sources that become subject to title
V requirements for GHG emissions may not be subject to other
requirements, but our assessment suggests that this is very unlikely.
We estimate that virtually all of the 550 newly-major sources in Step 2
will be subject to applicable requirements under the CAA because they
are from categories that have been traditionally subject to
regulations, such as smaller industrial sources from already regulated
categories, large landfills, and oil/gas/coal production. Even the
approximately 50 newly-subject commercial sources in Step 2, which we
estimate to be comprised of very large hospitals, are likely to be
covered by standards for medical waste incinerators. In addition, we
expect these sources may well be subject to SIP requirements. Thus, we
do not expect any, or at most very few ``empty permits'' during Step 2.
    In later stages of implementation (e.g., prospective Step 3) or in
the event that we permit smaller, non-traditional sources of GHGs that
have never otherwise been subject to major source permitting, there
would be a greater potential for ``empty permits'' to be issued under
title V. Cognizant of this, we intend to further explore in the
rulemaking for Step 3 ``empty permit'' theories under the ``absurd
results'' rationale that may serve to permanently narrow the scope of
title V to exclude sources that would potentially be required to obtain
an ``empty permit'' due to GHG emissions.
    In this action, EPA is also finalizing its proposal to commit to
conduct an assessment of the threshold levels--to be completed in 2015,
5 years after this action--that will examine the permitting
authorities' progress in implementing the PSD and title V programs for
GHG sources as well as EPA's and the permitting authorities' progress
in developing streamlining methods. We further commit to undertake
another round of rulemaking--beginning after the assessment is done,
and to be completed by April 30, 2016--to address smaller sources.
    We disagree with the commenter who asserted that we do not need 6
years to study and implement PSD and title V for smaller sources. 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 and effectiveness of the various permitting streamlining
techniques. For reasons discussed in more detail in section V.E.1
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. We do commit
in this action to fully investigate, propose, and evaluate permit
streamlining techniques to determine where they may have applications,
how they would be applied, and whether they can withstand legal
challenge. Even for

those techniques that may ultimately be deemed viable, there is a
significant time period necessary for rulemaking and state adoption,
all of which could take up to 3 years or more. We also note that we
will be required to complete our study of the effectiveness of these
techniques within 5 years, meaning that, in order to complete it in
time, we will essentially need to begin the study as soon as relevant
data are starting to become available. Finally, the sixth year, in
which EPA must complete rulemaking, requires proposal and promulgation
of a rule within 1 year, which is an ambitious schedule. Therefore we
believe that 6 years is appropriate for this type of effort. We also
have received a substantial number of comments from permitting
authorities that agreed with our 5-year timeframe, or a greater
timeframe, to get more prepared for permitting smaller sources.
d. Other Comments on ``Absurd Results'' Doctrine
    We received other comments on our application of the ``absurd
results'' doctrine, which we respond to in the RTC document. One
comment was overarching, and so we respond to it here: Commenters have
asserted that under the ``absurd results'' doctrine, EPA does not have
authority to, or at least should not, promulgate the endangerment/cause
or contribute findings (which we will sometimes refer to as the
``findings'') or the LDVR because doing so would trigger the PSD and
title V requirements, which in turn would give rise to ``absurd
results''. According to commenters, under the ``absurd results'' case
law, EPA is obliged to avoid taking any action that would trigger
absurd results and in this case that means foregoing the endangerment/
cause or contribute findings and/or the LDVR, or at least deferring
finalizing them until EPA has time to streamline PSD and title V
requirements so as to avoid ``absurd results''. Commenters made the
related comment that if we promulgate the LDVR, and thereby trigger
PSD, we cannot rely on the ``absurd results'' doctrine because it is
our own actions--the promulgation of the LDVR--that will have given
rise to the ``absurd results,'' and under those circumstances, the
doctrine is not available.
    The comments that EPA had no authority to promulgate, or should not
have promulgated, the endangerment/cause or contribute findings or the
LDVR at the times that EPA did are not relevant to this rule, the
Tailoring Rule. EPA has already promulgated the findings and the LDVR,
and the LDVR triggers PSD and title V applicability, as we have seen.
These comments would have been relevant only to the proposed findings
and LDVR, and we are not, in this rulemaking, revisiting or reopening
the findings or the LDVR.\48\
---------------------------------------------------------------------------

    \48\ EPA does have pending before it ten petitions to reconsider
the endangerment and cause or contribute findings. EPA is carefully
evaluating those petitions and expects to issue its decision(s) on
or about July 30, 2010.
---------------------------------------------------------------------------

    Commenters claim that if EPA promulgates the LDVR, the ``absurd
results'' doctrine will no longer apply to the Tailoring Rule because
it will have been EPA's own action--promulgation of the LDVR--that
gives rise to the ``absurd results''. We disagree for several reasons.
For one thing, commenters have not cited case law, and our research has
disclosed none, in which a court specifically addressed a similar
situation and issued a holding along the lines of what commenters urge.
Moreover, commenters' approach would be punitive because the absurd
results would occur absent this rule going final. Such an outcome would
be counter to the purpose of the doctrine. That is, it would mean that
PSD and title V would apply to GHG sources by their terms--at the
statutory levels, as of January 2, 2011--with all the adverse
consequences described elsewhere.
    In any event, and although we are not obligated to respond to these
comments on the merits, they are incorrect on the merits, for the
reasons that follow. This discussion should not be viewed as reopening
the endangerment/cause or contribute findings or the LDVR because, as
stated previously, we are not reconsidering or reopening those two
actions in this rule.
    In determining and implementing congressional intent, it is
important that the statutory provisions at issue be considered
together--(1) The obligation to make a determination on endangerment
and contribution under CAA section 202(a); (2) if affirmative
endangerment/cause or contribute findings are made, the obligation to
promulgate standards applicable to the emission of any air pollutant
from new motor vehicles or new motor vehicle engines under CAA section
202(a); and (3) the PSD and title V applicability provisions. The most
appropriate reading, and certainly a reasonable reading, is that we are
required to take the action we have taken, and are taking with this
rule, and that is to issue the findings, promulgate the LDVR, and
promulgate the Tailoring Rule. Our approach gives effect to as much of
Congress's intent for each of these provisions, and the CAA as a whole,
as possible.
    With respect to the endangerment/cause or contribute findings under
CAA section 202(a), congressional intent is clear that, as we stated in
making the findings and the Supreme Court held in Massachusetts v. EPA,
we are precluded from considering factors other than the science based
factors relevant to determining the health and welfare effects of the
air pollution in question. Accordingly, EPA determined that under
Massachusetts v. EPA, 549 U.S. 497 (2007) we were precluded from
deferring or foregoing the findings due to concern over impacts on
stationary sources affected by PSD or title V requirements. See 74 FR
at 66496, 66500-01 (``Taken as a whole, the Supreme Court's decision
clearly indicates that policy reasons do not justify the Administrator
avoiding taking further action on the questions here.''); see also
Massachusetts v. EPA, 549 U.S. at 533; see also 74 FR at 66515-16
(December 9, 2009). (The Administrator ``must base her decision about
endangerment on the science, and not on the policy considerations about
the repercussions or impact of such a finding).\49\ Moreover, as EPA
also noted, ``EPA has the ability to fashion a reasonable and common-
sense approach to address greenhouse gas emissions and climate
change.'' 74 FR at 66516.
---------------------------------------------------------------------------

    \49\ Note, that at least one petition for reconsideration on the
endangerment/contribution findings raises the same arguments related
to the timing of decisions and absurd results. As noted before, EPA
is carefully evaluating all the pending petitions for
reconsideration.
---------------------------------------------------------------------------

    Regarding the timing of the LDVR, Congress's intent was that
endangerment/cause or contribute findings under section 202(a) would in
fact lead to control of the air pollutants from new motor vehicles and
new motor vehicle engines contributing to the harm. The primary goal of
section 202(a) is to achieve such reductions by requiring that EPA
adopt emissions standards, and as a result, proceeding with the LDVR is
consistent with that goal. In contrast, deferring the LDVR and thereby
delaying achievement of the public health and welfare benefits Congress
expected and required under section 202(a) would run directly counter
to what Congress intended under section 202(a)--EPA issuing emissions
standards to address the public health and welfare problems that were
identified, not EPA refusing to do so.
    Moreover, we have compelling reasons to proceed with the LDVR, in
the manner that we did. As we stated in the LDVR, in response to
similar comments that we were not obligated to

conduct that rulemaking, or to conduct it at the time that we did:
    Some of the comments relating to the stationary source
permitting issues suggested that EPA should defer setting GHG
standards for new motor vehicles to avoid * * * [adverse] stationary
source permitting impacts. EPA is issuing these final GHG standards
for light-duty vehicles as part of its efforts to expeditiously
respond to the Supreme Court's nearly three year old ruling in
Massachusetts v. EPA, 549 U.S. 497 (2007). In that case, the Court
held that greenhouse gases fit within the definition of air
pollutant in the Clean Air Act, and that EPA is therefore compelled
to respond to the rulemaking petition under section 202(a) by
determining whether or not emissions from new motor vehicles cause
or contribute to air pollution which may reasonably be anticipated
to endanger public health or welfare, or whether the science is too
uncertain to make a reasoned decision. The Court further ruled that,
in making these decisions, the EPA Administrator is required to
follow the language of section 202(a) of the CAA. The Court stated
that under section 202(a), ``[i]f EPA makes [the endangerment and
cause or contribute findings], the Clean Air Act requires the agency
to regulate emissions of the deleterious pollutant.'' 549 U.S. at
534. As discussed above, EPA has made the two findings on
contribution and endangerment. 74 FR 66496 (December 15, 2009).
Thus, EPA is required to issue standards applicable to emissions of
this air pollutant from new motor vehicles.
    The Court properly noted that EPA retained ``significant
latitude'' as to the ``timing * * * and coordination of its
regulations with those of other agencies'' (id.). However it has now
been nearly three years since the Court issued its opinion, and the
time for delay has passed. In the absence of these final standards,
there would be three separate federal and state regimes
independently regulating light-duty vehicles to increase fuel
economy and reduce GHG emissions: NHTSA's CAFE standards, EPA's GHG
standards, and the GHG standards applicable in California and other
states adopting the California standards. This joint EPA-NHTSA
program will allow automakers to meet all of these requirements with
a single national fleet because California has indicated that it
will accept compliance with EPA's GHG standards as compliance with
California's GHG standards. 74 FR at 49460. California has not
indicated that it would accept NHTSA's CAFE standards by themselves.
Without EPA's vehicle GHG standards, the states will not offer the
federal program as an alternative compliance option to automakers
and the benefits of a harmonized national program will be lost.
California and several other states have expressed strong concern
that, without comparable federal vehicle GHG standards, the states
will not offer the federal program as an alternative compliance
option to automakers. Letter dated February 23, 2010 from
Commissioners of California, Maine, New Mexico, Oregon and
Washington to Senators Harry Reid and Mitch McConnell (Docket EPA-
HQ-OAR-2009-0472-11400). The automobile industry also strongly
supports issuance of these rules to allow implementation of the
national program and avoid ``a myriad of problems for the auto
industry in terms of product planning, vehicle distribution, adverse
economic impacts and, most importantly, adverse consequences for
their dealers and customers.'' Letter dated March 17, 2010 from
Alliance of Automobile Manufacturers to Senators Harry Reid and
Mitch McConnell, and Representatives Nancy Pelosi and John Boehner
(Docket EPA-HQ-OAR-2009-0472-11368). Thus, without EPA's GHG
standards as part of a federal harmonized program, important GHG
reductions as well as benefits to the automakers and to consumers
would be lost.165 In addition, delaying the rule would impose
significant burdens and uncertainty on automakers, who are already
well into planning for production of MY 2012 vehicles, relying on
the ability to produce a single national fleet. Delaying the
issuance of this final rule would very seriously disrupt the
industry's plans.
    Instead of delaying the LDV rule and losing the benefits of this
rule and the harmonized national program, EPA is directly addressing
concerns about stationary source permitting in other actions that
EPA is taking with regard to such permitting. That is the proper
approach to address the issue of stationary source permitting, as
compared to delaying the issuance of this rule for some undefined,
indefinite time period.

75 FR 25,402 cols. 1-3 (May 7, 2010) (footnote omitted).
    With respect to both the endangerment/cause or contribute findings
and the LDVR, it would require speculation and conjecture to defer--or,
certainly, to forego altogether--the findings or LDVR until EPA
completed streamlining the PSD and title V requirements on grounds that
doing so would allow full compliance in the future with all PSD and
title V statutory provisions. That is the gist of commenters'
argument--that EPA should defer or forego issuance of the findings and
the LDVR to avoid causing an absurd result from implementation of the
separate PSD and title V programs. Underlying this claim is the
assumption that this would allow EPA to avoid the ``absurd results''.
As we discuss elsewhere in this rulemaking, there is no basis at this
point to determine that streamlining will ultimately allow full
compliance with the PSD and title V requirements. Rather, it is
possible that EPA may conclude that none of the available streamlining
techniques will allow all GHG sources at the statutory thresholds to
comply with PSD and title V requirements in a manner that does not
impose undue costs on the sources or undue administrative burdens on
the permitting authorities. Under these circumstances, EPA may then
permanently exclude GHG source categories from PSD or title V
applicability under the absurd results doctrine. Moreover, it may well
take many years before EPA is in a position to come to a conclusion
about the extent to which streamlining will be effective and therefore
be able to come to a conclusion as to whether any source categories
should be permanently excluded from PSD or title V applicability. In
our rulemaking today, we describe what actions we expect to take in the
first 6 years after PSD and title V are triggered for GHG sources, and
we may well be in a situation in which we continue to evaluate
streamlining measures and PSD and title V applicability to GHG sources
after this 6-year period.
    Accordingly, deferring the endangerment/cause or contribute
findings and LDVR until such time that PSD and title V streamlining
would allow full implementation of these programs at the statutory
limits would serve only to delay the benefits of the LDVR, as well as
the benefits that come from phasing in implementation of the PSD
program to cover larger sources first. It would rely on an assumption
that is unfounded at this point, that is, that such full compliance
will be required at some point in the future. Delaying the emissions
benefits of the LDVR and the related emissions benefits from partial
implementation of the PSD program fails to implement Congress' intent
that the endangerment/cause or contribute findings ``shall'' lead to
emissions standards for new motor vehicles contributing to the
endangerment, and related emissions controls for the same air pollutant
under the PSD program. EPA need not determine at this time what
approach would be appropriate if there was a determination that full
compliance with PSD and title V would in fact occur at some point in
the future. In this case, absent such a determination, it would be
improper to rely on speculation of such a future possibility as a basis
under section 202(a) to defer or forego issuance of the LDVR on the
grounds that EPA should defer or forego the LDVR to avoid causing an
absurd result. Likewise there is no basis to defer proceeding at this
time with the streamlining of the PSD and title V programs.
    With respect to the PSD and title V applicability requirements, as
we discuss elsewhere, we believe that Congress expressed a clear intent
to apply PSD and title V to GHG sources and that the phase-in approach
incorporated in the Tailoring Rule is fully appropriate. Proceeding now
with the endangerment/contribution findings and LDVR, even if phasing-
in of the PSD and title V programs is required, is

consistent with our interpretation of the PSD and title V applicability
requirements. Delaying the endangerment/contribution findings or LDVR,
and thereby delaying the triggering of PSD and title V requirements for
GHG sources, would lead to the loss of a practicable opportunity to
implement the PSD and title V requirements in important part, and
thereby lead to the loss of important benefits. As discussed elsewhere,
promulgating the LDVR and applying the PSD and title V requirements to
the largest GHG sources, as we do in this Tailoring Rule, is
practicable because the sources that would be affected by the initial
implementation steps we promulgate in this rule are able to bear the
costs and the permitting authorities are able to bear the associated
administrative burdens. Promulgating the LDVR now provides important
advantages because the sources that would be affected by the initial
steps are responsible for most of the GHG emissions from stationary
sources.
    It should also be noted that as discussed elsewhere in this
rulemaking, our ability to develop appropriate streamlining techniques
for PSD and title V requirements is best done within the context of
actual implementation of the permitting programs, and not in isolation
of them. That is, because the great majority of GHG sources have not
been subject to PSD and title V requirements, we will need to rely on
the early experience in implementing the permitting requirements for
the very large sources that initially will be subject to those
requirements in order to develop streamlining techniques for smaller
sources. It is the real world experience gained from this initial phase
that will allow EPA to develop any further modifications that might be
necessary. This would not and could not occur if the LDVR were delayed
indefinitely or permanently, so that PSD and title V requirements were
not triggered. It is unrealistic to expect that delaying action until a
future tailoring rule could resolve all of the problems identified in
this rulemaking, absent any real world implementation experience.
    At its core, commenters' argument is that EPA should delay (if not
forego altogether) doing anything to address GHG emissions and the
problems they cause until it can do so in a way that does not cause any
implementation challenges, even if that delay results in continued
endangerment to public health and welfare. EPA does not take such a
myopic view of its duties and responsibilities under the CAA. Congress
wrote the CAA to, among other things, promote the public health and
welfare and the productive capacity of the population. CAA Sec.
101(b)(1). EPA's path forward does just this. Thus, proceeding with the
endangerment/cause or contribute findings, the LDVR, and with PSD and
title V through the phase-in approach of the Tailoring Rule maximizes
the ability of EPA to achieve the Congressional goals underlying
sections 202(a) and the PSD and title V provisions, and the overarching
CAA goal of protecting public health and welfare. Congress called for
EPA (1) To determine whether emissions from new motor vehicles
contribute to air pollution that endangers, (2) if that the
determination is affirmative, to issue emissions standards for new
motor vehicles to address the endangerment, and (3) to implement the
PSD and Title V program to address similar emissions in their
permitting program as another tool to address the air pollutant at
issue. Delaying both the LDVR and PSD/title V implementation, as
commenters have called for, would run directly counter to these
Congressional expectations. Commenters' calls for deferral or foregoing
of the findings or LDVR are generally phrased in a conclusory fashion,
and do not demonstrate how EPA could take the required CAA actions
concerning GHGs while remaining within the requirements of each of the
various CAA provisions, and achieving the overall goals of the CAA. As
such the comments do not provide a valid basis for the deferral of
agency action they suggest.
9. ``Administrative Necessity'' Basis for PSD and Title V Requirements
in Tailoring Rule
    EPA believes that the ``administrative necessity'' doctrine, within
the Chevron framework, also justifies this rulemaking. Applying the
applicability requirements of the PSD and title V programs according to
a literal reading of their terms (as EPA has narrowed them in the past
through interpretation) to GHG sources beginning on the January 2, 2011
date that regulation of GHGs takes effect would sweep so many sources
into those programs as to render the programs impossible for the
permitting authorities to administer. Although streamlining the PSD and
title V programs offers some promise to improve the administrability of
the programs, given the time needed to implement such streamlining, the
step-by-step expansion of PSD and title V requirements to GHG sources
that we are promulgating is the most that the permitting authorities
can reasonably be expected to administer.
    This section discusses the application of the ``administrative
necessity'' doctrine. Our views concerning this doctrine remain similar
to what we said at proposal, except that in this rulemaking we place
the doctrine more clearly in the Chevron analytical framework, we
revise our assessment of the administrative burdens due to new analysis
we have conducted and information we have received since proposal, and
we make certain revisions to the tailoring approach.\50\ This analysis
and information, as well as the revisions to the tailoring approach,
have already been presented previously, in the discussion of the
``absurd results'' basis. In addition, it is not necessary to reiterate
the lengthy discussion of the ``administrative necessity'' doctrine
that we included in the proposal or the factual data presented
previously; as a result, this section briefly highlights the
conclusions we have reached about the application of this doctrine.
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    \50\ In addition, we base our reliance on the ``administrative
necessity'' doctrine on the administrative burdens to the permitting
authorities of permitting smaller GHG sources, but not on the
relatively small amount of GHG emissions associated with the smaller
sources. See Alabama Power v. Costle, 636 F.2d 323, 357 (DC Cir.
1980) (establishing the ``administrative necessity'' doctrine as
``inherent in the administrative process'' and presumptively
available under the statutory scheme, absent clear congressional
intent to the contrary; but adding that in contrast, ``there exists
no general administrative power to create exemptions to statutory
requirements based upon the agency's perceptions of costs and
benefits'').
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    As noted previously, under the PSD and title V applicability
provision--read literally, as we have long interpreted them--EPA's
recent promulgation of the LDVR will trigger the applicability of PSD
and title V for GHG sources at the 100/250 tpy and 100 tpy threshold
levels, respectively, as of January 2, 2011. This is because PSD
applicability hinges on the definition of ``major emitting facility''
and title V applicability hinges on the definition of ``major
sources,'' and those terms, read literally, and under EPA's long-
standing narrowing interpretation, apply PSD and title V, respectively,
to sources of any air pollutant that is subject to regulation under
another provision of the CAA. EPA's promulgation of the LDVR means that
GHGs will become subject to regulation on the date that the rule takes
effect, which will be January 2, 2011.
    Absent tailoring, the January 2, 2011 trigger date for GHG PSD
applicability will give rise to an extraordinarily large number of PSD
permitting actions--we estimate more than 81,000 per year--representing
an increase of almost 300-fold over the current 280 PSD permitting
actions each year. In addition, over 6 million sources will become
subject to title V, an increase of

more than 400-fold over the 14,700 sources that currently are subject
to title V. The permitting authorities will find it impossible to
administer programs of these sizes as of that date.
    All this results from a literal application of the PSD and title V
applicability provisions to GHG sources. However, under Chevron, we
must interpret and apply statutory requirements on the basis of
congressional intent. Although the literal meaning of the statutory
provisions is the first and generally the best indicator of
congressional intent, there are cases in which that is not so. As
discussed previously, we believe that as a general matter, statutory
directives should be considered to incorporate Congress's intent that
they be administrable, and we believe that this proposition is implicit
in the ``administrative necessity'' doctrine that the DC Circuit has
established and that we believe applies here. See Alabama Power v.
Costle, 636 F.2d 323, 356-57 (DC Cir. 1980). This doctrine authorizes
EPA to undertake a process for rendering the PSD and title V
requirements administrable. Indeed, the Court in Alabama Power
established this doctrine specifically in the context of the PSD
provisions, including, in particular, the modification provision. As
noted elsewhere, the Court held that EPA may ``consider the
administrative burden'' associated with applying PSD for emissions
increases, and establish significance levels designed to avoid ``severe
administrative burdens on EPA, as well as severe economic burdens'' on
sources. Id. at 405.
    As we said in the proposal, we read the case law to establish a
three-step approach for implementing the ``administrative necessity''
doctrine: An agency is not required to adhere to literal statutory
requirements if the agency, as the first step, makes every effort to
adjust the requirements within the statutory constraints, but concludes
with justification--at the second step--that it would be impossible to
comply with the literal reading of the statute. Under those
circumstances, the agency may--at the third step--develop what is in
effect a compliance schedule with the statutory requirements, under
which the agency will implement the statute as much as administratively
possible and as quickly as administratively possible. See 74 FR 55315--
55316.
a. First Step of the ``Administrative Necessity'' Analysis:
Streamlining
    In the proposed rulemaking, EPA discussed at length the prospect of
streamlining both PSD and title V. EPA described ``several potentially
useful tools available in the streamlining toolbox for the PSD
permitting threshold level, the PSD significance level, and the title V
permitting threshold,'' specifically:

    For the PSD permitting threshold level and significance level,
there are at least three such tools: The first is interpreting the
definition of ``potential to emit'' so that the amount of a source's
emissions that counts in determining whether it qualifies as a major
source and therefore is above the permitting threshold requirements
is closer to the amount of its emissions when it is in actual
operation, rather than the amount of emissions that the source would
emit if it were operating continuously. Narrowing the definition of
PTE is a potentially extremely important tool in this context
because identifying the amount of a source's emissions as closer to
its actual emissions in this manner would mean that very large
numbers of residential and commercial sources would have
significantly lower emissions and would fall below the statutory
threshold requirements for triggering PSD. Second, EPA believes it
may be able to develop programs involving general permits, under
which large numbers of similarly situated sources would each be
covered by essentially the same permit established through a
regulatory action by the permitting authority. This approach could
achieve economies of scale and thereby reduce administrative burden.
Third, EPA believes it may be able to streamline the single most
time-consuming element of the PSD permit program, which is the
determination of BACT as required under CAA Sec.  165(a)(4), by
establishing presumptive BACT levels for certain source categories
that comprise large numbers of sources. As for title V, as discussed
below in detail, EPA believes that defining ``potential to emit'' to
reflect more closely a source's actual operation and developing a
program of general permits could streamline the administration of
title V permits.

74 FR 55315 col. 2-3.

    At proposal we stated that we would, and we still commit to,
vigorously pursue development of these streamlining measures, and, as
indicated in our discussion of streamlining methods in section V.E.1
and in response to comments, we have already begun developing those
measures. For example, as described elsewhere, we have done much work--
both with stakeholders and in-house--to begin to develop
recommendations for what controls would qualify as BACT for various
industries. This work is important as a foundation for developing
presumptive BACT, which is a potentially efficient streamlining
measure.
    However, it is not possible for us or the state and local
permitting authorities to develop and implement streamlining techniques
by the time that PSD and title V are triggered for sources emitting
GHGs--January 2, 2011--or shortly thereafter. Developing streamlining
methods would entail acquiring more information about the affected
industry, may entail rulemaking, and would likely entail some type of
public review of proposals for streamlining even if not done through
rulemaking. As discussed in section V.E, we do not expect that we could
complete all those steps for meaningful streamlining measures within 2
years.
b. Second Step of the ``Administrative Necessity'' Analysis:
Demonstration of Administrative Impossibility
    With no streamlining measures available at the time that PSD and
title V would apply to sources of GHGs or shortly thereafter, under the
second step of the ``administrative necessity'' analysis, we must
determine whether implementation of the statutory requirements at that
time would be administratively impossible for the permitting
authorities. We are mindful that the DC Circuit has cautioned that this
showing is a high hurdle. See 74 FR 55317.
    Even so, we believe there is no question that a literal application
of the PSD and title V programs to GHG sources as of January 2, 2011
would be flatly impossible for the state and local permitting
authorities to administer for at least an initial period of time.\51\
The key facts have been recounted previously, and no more than a brief
recitation is necessary here. On the PSD side, annual permit
applications would increase by over 300-fold, from 280 to almost
82,000; costs to the permitting authorities would increase more than
100-fold, from $12 million to $1.5 billion; and the permitting
authorities would need to hire, train, and manage 9,772 FTEs. For title
V, total permit applications would increase by over 400-fold, from
14,700 to 6.1 million; costs to the permitting authorities would
increase from $62 million to $21 billion; and the permitting
authorities would need to hire, train, and manage 229,118 FTEs.
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    \51\ We recognize that in a few states, we are the permitting
authority. We do not think that this changes the calculation of
administrative burdens. We do not believe that we could reasonably
be expected to adjust our budget to accommodate the large new
permitting burdens, and even if we could, the administrative burdens
would remain in most of the rest of the nation where it is the state
or local agencies that bear permitting responsibility.
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    We have elaborated upon these burdens elsewhere in this notice.
They bespeak an impossible administrative task. It is not hyperbole to
say that if these administrative responsibilities are not considered
impossible within the

meaning of the ``administrative necessity'' doctrine, then it is
difficult to imagine what would be considered impossible.
c. Third Step of the ``Administrative Necessity'' Analysis: Tailoring
    Under the third step of the ``administrative necessity'' analysis,
we must demonstrate that the steps we intend to take towards
implementation of the statutory requirements are the most that can be
done during the indicated time frames, in light of administrative
resources. In this manner, we adhere most closely to the statutory
requirements. See 74 FR 55318. This amounts to establishing a schedule
for phasing in PSD and title V applicability to GHG sources. Because
this step is based on the administrative resources of the permitting
authorities, our analysis is similar, and leads to the same
conclusions, as we described previously concerning the ``absurd
results'' basis. That is, we believe that our tailoring approach--
including Step 1, to be implemented as of January 2, 2011; Step 2, to
be implemented as of July 1, 2011; the additional rulemaking that we
commit to finalize by July 1, 2012, and that will address further
threshold reductions as a Step 3; the study and subsequent rulemaking
to address smaller sources by April 30, 2016; and the determination not
to lower the threshold below 50,000/50,000 tpy CO2e before
April 30, 2016 at the earliest--is the most that we can do to expand
the PSD and title V programs, based on administrative resources and the
information we currently have about the prospects for streamlining and
increasing permitting resources.
    As noted previously, at some point in the process of additional
rulemaking, we may conclude under the ``absurd results'' doctrine that
we will not apply PSD or title V to GHG sources below a certain size
level. The same conclusion may be supportable under the
``administrative necessity'' doctrine if we decide, based on the
information available to us, that even with all of the streamlining
that we are able to accomplish and even with a significant expansion of
permitting resources, it may not be administratively feasible to
implement PSD or title V to sources below that level. See Alabama Power
v. Costle, 636 F.2d at 358 (acknowledging, in discussing the
``administrative necessity'' doctrine, that ``[c]ategorical exemptions
from the clear commands of a regulatory statute [are] sometimes
permitted,'' although emphasizing that such exemptions ``are not
favored'').
    In addition, as noted above, in a subsequent rulemaking, we may
conclude that title V should not apply to GHG sources with ``empty
permits,'' under the ``absurd results'' doctrine. The basis for this
conclusion could be a determination that (1) although the applicability
provisions apply by their terms to sources on the basis of their
emissions, and without regard to whether the sources would hold ``empty
permits,'' those provisions cannot be read literally under the ``absurd
results'' doctrine; and (2) it is not clear whether Congress intended
that title V apply to such sources, and EPA has reasonably determined,
under Chevron Step 2, that title V does not. If we come to that
conclusion, then, at that point in time, the ``administrative
necessity'' doctrine would remain relevant for title V purposes only if
it is necessary, for administrative reasons, to phase in the
application of title V to GHG sources that have applicable
requirements, and that therefore do not have ``empty permits.'' This is
because the ``administrative necessity'' doctrine is relevant only when
a statutory directive, read literally, imposes impossible
administrative obligations, and Congress may be presumed to have
intended that the directive be administrable. The ``administrative
necessity'' doctrine would not come into play if it is concluded either
that under the ``absurd results'' doctrine Congress did not intend the
statutory directive or that, under that doctrine, Congress's intent was
not clear and EPA reasonably decided that the directive does not apply.
10. ``One-Step-at-a-Time'' Basis for Tailoring Rule
    In addition to the ``absurd results'' and ``administrative
necessity'' doctrines, the ``one-step-at-a-time'' judicial doctrine,
within the Chevron framework, supports EPA's Tailoring Rule. The case
law under this doctrine, described previously, indicates that the
doctrine justifies an agency's step-by-step approach under the
following circumstances or conditions: (1) The agency's ability to
comply with a statutory directive depends on facts, policies, or future
events that are uncertain; (2) the agency has estimated the extent of
its remaining obligation; (3) the agency's incremental actions are
structured in a manner that is reasonable in light of the
uncertainties; and (4) the agency is on track to full compliance with
the statutory requirements. EPA's Tailoring Rule fulfills each of those
four.
    First, as the DC Circuit stated in National Association of
Broadcaster v. FCC, 740 F.2d 1190, 1210 (DC Cir. 1984) (``National
Association of Broadcasters''), incremental agency action is most
readily justifiable ``against a shifting background in which facts,
predictions, and policies are in flux and in which an agency would be
paralyzed if all the necessary answers had to be in before any action
at all could be taken.'' Those circumstances are present here, and so
is that fact that the task at hand is extraordinarily demanding. As
discussed previously, EPA and the permitting authorities' progress in
implementing the PSD and title V programs for GHG sources will depend
in large measure on the development of streamlining measures and
increases in permitting authorities' resources, and those things carry
some uncertainty and in any event, under the best of circumstances,
cannot have much impact for at least several years. It will take EPA
that long to develop streamlining measures, and it will take permitting
authorities that long to begin to raise money and hire and train FTEs.
    Second, as the Court stated in National Association of
Broadcasters, ``the agency [should] ma[k]e some estimation, based upon
evolving economic and technological conditions, as to the nature and
magnitude of the problem it will have to confront when it comes to
[undertake the remaining steps]'' and that estimation must be
``plausible and flow from the factual record compiled.'' Id. at 1210.
Here, EPA has done this by estimating the number of PSD and title V
permits and the costs of issuing them, and has provided as much
information as possible about the development of streamlining methods
and permitting authority resources.
    Third, again as the Court stated in National Association of
Broadcasters, it must be ``reasonable, in the context of the decisions
made in the proceeding under review, for the agency to have deferred
the issue to the future. With respect to that question, postponement
will be most easily justified when an agency acts against a background
of rapid technical and social change and when the agency's initial
decision as a practical matter is reversible should the future
proceedings yield drastically unexpected results.'' Id. at 1211. Here,
our tailoring approach is reasonable in light of changes in permitting
authority capacity that may occur with the development of streamlining