Reconsideration of Interpretation of Regulations that Determine
Pollutants Covered by Clean Air Act Permitting Programs

EPA’s Response to Public

Comments

U.S. Environmental Protection Agency

Office of Air Quality Planning and Standards

Air Quality Policy Division

Research Triangle Park, NC

March 29, 2010

FOREWORD

This document provides responses to public comments on the U.S.
Environmental Protection Agency’s (EPA’s) Reconsideration of
Interpretation of Regulations that Determine Pollutants Covered by Clean
Air Act Permitting Programs.”  EPA received comments on this
Reconsideration proposal via mail, e-mail, and facsimile.  Copies of all
comment letters submitted are available at the EPA Docket Center Public
Reading Room, or electronically through http://www.regulations.gov by
searching Docket ID EPA-HQ-OAR-2009-0597.

This document provides a single response to each significant argument,
assertion, and question contained within the totality of comments.
Within each comment summary, EPA provides in parentheses, one or more
lists of Docket ID numbers for commenters who raised particular issues;
however, these lists are not meant to be exhaustive and EPA does not
individually identify each and every commenter who made a certain point
in all instances, particularly in cases where multiple commenters
expressed essentially identical arguments.

Table of Contents

  TOC \o "1-3" \h \z \u    HYPERLINK \l "_Toc257362972"  FOREWORD
PAGEREF _Toc257362972 \h  i

  HYPERLINK \l "_Toc257362973"  Acronyms and Abbreviations	  PAGEREF
_Toc257362973 \h  v

  HYPERLINK \l "_Toc257362974"  Chapter 1.   Introduction	  PAGEREF
_Toc257362974 \h  1

  HYPERLINK \l "_Toc257362975"  Table 1.   Comment Letters Received on
Proposed Reconsideration Notice	  PAGEREF _Toc257362975 \h  3

  HYPERLINK \l "_Toc257362976"  Chapter 2.   Procedural Issues	  PAGEREF
_Toc257362976 \h  6

  HYPERLINK \l "_Toc257362977"  2.1.   Codification of EPA
Interpretation	  PAGEREF _Toc257362977 \h  6

  HYPERLINK \l "_Toc257362978"  2.2.   Issuance of Memorandum without
Notice and Comment Process	  PAGEREF _Toc257362978 \h  8

  HYPERLINK \l "_Toc257362979"  2.2.1.   Effect and Meaning of Previous
EPA Interpretation Issued in 1978	  PAGEREF _Toc257362979 \h  10

  HYPERLINK \l "_Toc257362980"  2.2.2.   Argument that PSD Interpretive
Memo Overturns an EAB Decision	  PAGEREF _Toc257362980 \h  13

  HYPERLINK \l "_Toc257362981"  2.2.3.   Contention that PSD
Interpretive Memo Amends the Substance of the PSD Program	  PAGEREF
_Toc257362981 \h  16

  HYPERLINK \l "_Toc257362982"  2.3.   Relevance of Related Public
Participation Opportunities	  PAGEREF _Toc257362982 \h  17

  HYPERLINK \l "_Toc257362983"  2.4.   Interpretation of Statute and
Revisions Thereto	  PAGEREF _Toc257362983 \h  18

  HYPERLINK \l "_Toc257362984"  2.5.   Revisions to Interpretation in
PSD Interpretive Memo	  PAGEREF _Toc257362984 \h  19

  HYPERLINK \l "_Toc257362985"  Chapter 3.   Actual Control of Emissions
  PAGEREF _Toc257362985 \h  21

  HYPERLINK \l "_Toc257362986"  3.1.   Overview of Comments on Actual
Control Interpretation	  PAGEREF _Toc257362986 \h  21

  HYPERLINK \l "_Toc257362987"  3.2.    Interpretation of the Clean Air
Act	  PAGEREF _Toc257362987 \h  24

  HYPERLINK \l "_Toc257362988"  3.2.1.   Arguments that Plain Language
of Act Precludes Actual Control Interpretation	  PAGEREF _Toc257362988
\h  27

  HYPERLINK \l "_Toc257362989"  3.2.2.   Meaning of the Term
“regulation”	  PAGEREF _Toc257362989 \h  30

  HYPERLINK \l "_Toc257362990"  3.2.3.   Ambiguity of Statutory Language
and EPA Discretion	  PAGEREF _Toc257362990 \h  31

  HYPERLINK \l "_Toc257362991"  3.2.4.   Pollutants “Subject To”
Regulation Are Pollutants That EPA Has the Authority to Regulate
PAGEREF _Toc257362991 \h  33

  HYPERLINK \l "_Toc257362992"  3.2.5.   Distinction Between Term
“Control” and “Regulations” In Other Portions of the Clean Air
Act	  PAGEREF _Toc257362992 \h  38

  HYPERLINK \l "_Toc257362993"  3.2.6.   EPA Elevates Policy Preference
Over Plain Statutory Meaning	  PAGEREF _Toc257362993 \h  41

  HYPERLINK \l "_Toc257362994"  3.3.   Interpretation of Regulations
PAGEREF _Toc257362994 \h  42

  HYPERLINK \l "_Toc257362995"  3.4.    Policy Considerations Raised by
Actual Control Interpretation	  PAGEREF _Toc257362995 \h  44

  HYPERLINK \l "_Toc257362996"  3.4.1.   Orderly and Deliberative
Decision Making Process	  PAGEREF _Toc257362996 \h  45

  HYPERLINK \l "_Toc257362997"  3.4.2.   Public Participation Concerns
PAGEREF _Toc257362997 \h  46

  HYPERLINK \l "_Toc257362998"  3.4.3.   Development of Control
Strategies	  PAGEREF _Toc257362998 \h  48

  HYPERLINK \l "_Toc257362999"  3.4.4.   Past Policy and Practice
PAGEREF _Toc257362999 \h  49

  HYPERLINK \l "_Toc257363000"  Chapter 4.   Monitoring and Reporting
Requirement	  PAGEREF _Toc257363000 \h  56

  HYPERLINK \l "_Toc257363001"  4.1.   Overview of Comments on
Monitoring and Reporting Interpretation	  PAGEREF _Toc257363001 \h  56

  HYPERLINK \l "_Toc257363002"  4.2.   Statutory Interpretation
PAGEREF _Toc257363002 \h  56

  HYPERLINK \l "_Toc257363003"  4.2.1.   Meaning of the Term Regulation
 PAGEREF _Toc257363003 \h  56

  HYPERLINK \l "_Toc257363004"  4.2.2.   Effect of Section 821 of the
Clean Air Act	  PAGEREF _Toc257363004 \h  58

  HYPERLINK \l "_Toc257363005"  4.2.3.   Effect of 2008 Consolidated
Appropriations Act and Mandatory Greenhouse Gas Reporting Rule	  PAGEREF
_Toc257363005 \h  60

  HYPERLINK \l "_Toc257363006"  4.2.4.   Effects Threshold for PSD
Permitting	  PAGEREF _Toc257363006 \h  61

  HYPERLINK \l "_Toc257363007"  4.3.   Policy Considerations Raised by
Monitoring and Reporting Interpretation	  PAGEREF _Toc257363007 \h  63

  HYPERLINK \l "_Toc257363008"  4.4.   Monitoring Equipment Captures and
Controls Emissions	  PAGEREF _Toc257363008 \h  68

  HYPERLINK \l "_Toc257363009"  4.5.   Applicability of Title V
Requirements Based on Monitoring and Reporting	  PAGEREF _Toc257363009
\h  69

  HYPERLINK \l "_Toc257363010"  4.6.   Practice of Distinguishing
Pollutants Covered by Control Requirements and Monitoring Requirements
PAGEREF _Toc257363010 \h  70

  HYPERLINK \l "_Toc257363011"  4.7.   Enforceability of Monitoring
Regulations	  PAGEREF _Toc257363011 \h  70

  HYPERLINK \l "_Toc257363012"  Chapter 5.   EPA-Approved State
Implementation Plan (SIP)	  PAGEREF _Toc257363012 \h  72

  HYPERLINK \l "_Toc257363013"  5.1.   Overview of Comments on the SIP
Interpretation	  PAGEREF _Toc257363013 \h  72

  HYPERLINK \l "_Toc257363014"  5.2.   Consistency with the Statute and
Congressional Intent	  PAGEREF _Toc257363014 \h  72

  HYPERLINK \l "_Toc257363015"  5.3.    Implications of Applying
State-specific Decisions to the Nation	  PAGEREF _Toc257363015 \h  77

  HYPERLINK \l "_Toc257363016"  5.4.   Content of “Applicable
Implementation Plan”	  PAGEREF _Toc257363016 \h  79

  HYPERLINK \l "_Toc257363017"  5.5.   Implementation Considerations of
a SIP Interpretation for GHGs	  PAGEREF _Toc257363017 \h  80

  HYPERLINK \l "_Toc257363018"  5.6.    Reliance on Connecticut Decision
  PAGEREF _Toc257363018 \h  80

  HYPERLINK \l "_Toc257363019"  Chapter 6.   Finding of Endangerment
PAGEREF _Toc257363019 \h  82

  HYPERLINK \l "_Toc257363020"  6.1.   Appropriateness of Triggering PSD
Requirements from an Endangerment Finding	  PAGEREF _Toc257363020 \h  82

  HYPERLINK \l "_Toc257363021"  6.2.   Endangerment Finding Must be
Specific to Stationary Sources to Trigger PSD Requirements	  PAGEREF
_Toc257363021 \h  84

  HYPERLINK \l "_Toc257363022"  6.3.    Endangerment Finding as
Prerequisite to Regulation or as a Regulation Itself	  PAGEREF
_Toc257363022 \h  85

  HYPERLINK \l "_Toc257363023"  6.4.   Consistency with Supreme Court
Ruling	  PAGEREF _Toc257363023 \h  86

  HYPERLINK \l "_Toc257363024"  Chapter 7.   Granting of Section 209
Waiver	  PAGEREF _Toc257363024 \h  88

  HYPERLINK \l "_Toc257363025"  7.1.   Granting Waiver of State
Preemption	  PAGEREF _Toc257363025 \h  88

  HYPERLINK \l "_Toc257363026"  7.2.   Adoption of California Standards
by Other States	  PAGEREF _Toc257363026 \h  94

  HYPERLINK \l "_Toc257363027"  Chapter 8.   Timing of Regulation
PAGEREF _Toc257363027 \h  95

  HYPERLINK \l "_Toc257363028"  8.1.   Effective Date of Control
Requirements	  PAGEREF _Toc257363028 \h  95

  HYPERLINK \l "_Toc257363029"  8.1.1.   Legal analysis for the “takes
effect” reading for the effective date interpretation:	  PAGEREF
_Toc257363029 \h  95

  HYPERLINK \l "_Toc257363030"  8.1.2.   General comments on the
effective date interpretation:	  PAGEREF _Toc257363030 \h  100

  HYPERLINK \l "_Toc257363031"  8.2.   Compliance Date	  PAGEREF
_Toc257363031 \h  104

  HYPERLINK \l "_Toc257363032"  8.3.   Promulgation Date	  PAGEREF
_Toc257363032 \h  108

  HYPERLINK \l "_Toc257363033"  8.4.   Apply PSD only after Significance
Level has been promulgated	  PAGEREF _Toc257363033 \h  112

  HYPERLINK \l "_Toc257363034"  8.5.   Timing Based on Economic and
Technical Feasibility of Controls	  PAGEREF _Toc257363034 \h  113

  HYPERLINK \l "_Toc257363035"  Chapter 9.   Regulation of Greenhouse
Gases	  PAGEREF _Toc257363035 \h  114

  HYPERLINK \l "_Toc257363036"  9.1.   GHG and CO2 are Air Pollutants
PAGEREF _Toc257363036 \h  114

  HYPERLINK \l "_Toc257363037"  9.2.   Date When PSD Permitting
Requirements Apply to GHGs	  PAGEREF _Toc257363037 \h  114

  HYPERLINK \l "_Toc257363038"  9.3.   Need More Time Before PSD/Title V
Applies to GHGs	  PAGEREF _Toc257363038 \h  120

  HYPERLINK \l "_Toc257363039"  9.3.1.   Impacts from GHG Regulation
Support Actual Control Interpretation	  PAGEREF _Toc257363039 \h  120

  HYPERLINK \l "_Toc257363040"  9.3.2.   Implementation Concerns Warrant
More Time	  PAGEREF _Toc257363040 \h  122

  HYPERLINK \l "_Toc257363041"  9.3.3.   Provide More Time by Delaying
Final Action on the GHG LDV Rule	  PAGEREF _Toc257363041 \h  128

  HYPERLINK \l "_Toc257363042"  9.4.   Identifying the Greenhouse Gases
“Subject to Regulation” Under LDV Rule	  PAGEREF _Toc257363042 \h
129

  HYPERLINK \l "_Toc257363043"  9.5.   Permit Application Transition
PAGEREF _Toc257363043 \h  130

  HYPERLINK \l "_Toc257363044"  9.6.   Potential Retroactive Liability
PAGEREF _Toc257363044 \h  133

  HYPERLINK \l "_Toc257363045"  9.7.   Clean Air Act Is Poorly Suited to
Greenhouse Gas Regulation	  PAGEREF _Toc257363045 \h  134

  HYPERLINK \l "_Toc257363046"  9.8.   Arguments That PSD Cannot Apply
to Pollutants Regulated Only Under Title II of Clean Air Act	  PAGEREF
_Toc257363046 \h  136

  HYPERLINK \l "_Toc257363047"  9.9.   Need for Additional Process and
Analysis Before Regulating Stationary Source GHG Emissions	  PAGEREF
_Toc257363047 \h  155

  HYPERLINK \l "_Toc257363048"  9.9.1.   Requests for More Orderly
Process and Judgment Before EPA Regulates GHGs Emissions from Stationary
Sources	  PAGEREF _Toc257363048 \h  155

  HYPERLINK \l "_Toc257363049"  9.9.2.   Analysis of Effects on Large
Stationary Sources	  PAGEREF _Toc257363049 \h  157

  HYPERLINK \l "_Toc257363050"  9.10.   Combustion of Biomass-Derived
Fuels	  PAGEREF _Toc257363050 \h  159

  HYPERLINK \l "_Toc257363051"  Chapter 10.   State Program
Implementation	  PAGEREF _Toc257363051 \h  161

  HYPERLINK \l "_Toc257363052"  10.1.   Applicability of PSD
Interpretive Memo to State PSD Programs	  PAGEREF _Toc257363052 \h  161

  HYPERLINK \l "_Toc257363053"  10.2.   Need to Complete SIP Revision
Process	  PAGEREF _Toc257363053 \h  162

  HYPERLINK \l "_Toc257363054"  Chapter 11.   Other Issues	  PAGEREF
_Toc257363054 \h  165

  HYPERLINK \l "_Toc257363055"  11.1.   Combination of Interpretations
PAGEREF _Toc257363055 \h  165

  HYPERLINK \l "_Toc257363056"  11.2.   Municipal Solid Waste (MSW)
Landfill Gas Emission Standards	  PAGEREF _Toc257363056 \h  165

  HYPERLINK \l "_Toc257363057"  11.3.   Section 821 of Public Law
101-549	  PAGEREF _Toc257363057 \h  166

  HYPERLINK \l "_Toc257363058"  11.4.   Alternatives Analysis Under
Section 165 of the CAA	  PAGEREF _Toc257363058 \h  169

  HYPERLINK \l "_Toc257363059"  11.5.   Broad Focus of Proposal
PAGEREF _Toc257363059 \h  169

  HYPERLINK \l "_Toc257363060"  11.6.   Adequacy of Comment Opportunity
 PAGEREF _Toc257363060 \h  171

Acronyms and Abbreviations

Acronym/Abbreviation	Definition

AEP	American Electric Power

APS	Arizona Public Service

AFBF	American Farmers Bureau Federation

AF&PA	American Forest & Paper Association

AMI	American Meat Institute

ANPR	Advance Notice of Proposed Rulemaking

APA	Administrative Procedures Act

API	American Petroleum Institute

APPA	American Public Power Association

BACT	Best Available Control Technology

CAA or Act	Clean Air Act

CAFE	Corporate Average Fuel Economy

CAIP	Clean Air Implementation Project

CAPCOA	California Air Pollution Control Officers Association

CARB	California Air Resources Board

CEMS	Continuous Emissions Monitoring System

CIBO	Council of Industrial Boiler Owners

CO2	Carbon Dioxide

CRA	Congressional Review Act

DfE	Design for the Environment

DHEC	Department of Health and Environmental Control

EAB	Environmental Appeals Board

EDF	Environmental Defense Fund

EEI	Edison Electric Institute

EPA	Environmental Protection Agency

FR	Federal Register

GHG	Greenhouse Gas

HAP	Hazardous Air Pollutants

HFC	Hydrofluorocarbon

ICR	Information Collection Request

IDEM	Indiana Department of Environmental Management

INGAA	Interstate Natural Gas Association of America

LDV	Light-Duty Vehicle

LDVR	Light-Duty Vehicle Rule

LPPC	The Large Public Power Council

MACT	Maximum Achievable Control Technology

MY 2012	Model Year 2012

NAAQS	National Ambient Air Quality Standard(s)

NACAA	National Association of Clean Air Agencies

NAM	National Association of Manufacturers

NEDA/CAP	National Environmental Defense Association/Clean Air Project

NHTSA	National Highway Traffic Safety Administration

NMA	National Mining Association

NRDC	Natural Resources Defense Council

NSPS	New Source Performance Standard

NSR	New Source Review

NRECA	National Rural Electric Cooperative Association

PFC	Perfluorocarbons

PM	Particulate Matter

PRA	Paperwork Reduction Act

PSD	Prevention of Significant Deterioration

PTE	Potential to Emit

RFA	Regulatory Flexibility Act

RIA	Regulatory Impact Analyses

RMA	Rubber Manufacturers Association

SBREFA	Small Business Regulatory Enforcement Fairness Act

SF6	Sulfur hexafluoride

SIP	State Implementation Plan

SO2	Sulfur Dioxide

TCC	Texas Chemical Council

TCEQ	Texas Commission on Environmental Quality

TIP	Texas Industry Project

TPY	Tons Per Year

UARG	Utility Air Regulatory Group

UMRA	Unfunded Mandates Reform Act

U.S.	United States of America

Chapter 1.   Introduction

	On December 18, 2008, then-EPA Administrator Stephen Johnson issued a
memorandum setting forth EPA’s interpretation regarding which
pollutants were “subject to regulation” for the purposes of the
federal Prevention of Significant Deterioration (PSD) permitting
program.  See Memorandum from Stephen Johnson, EPA Administrator, to EPA
Regional Administrators, RE:  EPA’s Interpretation of Regulations that
Determine Pollutants Covered by Federal Prevention of Significant
Deterioration (PSD) Permit Program (Dec. 18, 2008) (“PSD Interpretive
Memo” or “Memo”); see also 73 FR 80300 (Dec. 31, 2008) (public
notice of Dec. 18, 2008 memo).  The Memo interprets the phrase
“subject to regulation” to include pollutants “subject to either a
provision in the CAA or regulation adopted by EPA under the CAA that
requires actual control of emissions of that pollutant.”  The Memo was
necessary after issues were raised regarding the scope of pollutants
that should be addressed in PSD permitting actions following the Supreme
Court’s April 2, 2007 decision in Massachusetts v. EPA, 549 U.S. 497
(2007).  The Memo also addresses a November 13, 2008 decision by the
Environmental Appeals Board (EAB) in a challenge to a PSD permit to
construct a new electric generating unit.  In re Deseret Power Electric
Cooperative, PSD Appeal No. 07-03 (EAB Nov. 13, 2008) (“Deseret”).
The Deseret Power permit was issued by EPA Region 8 in August 2007 and
did not include best available control technology (BACT) limits for
carbon dioxide (CO2).

The purpose of the PSD Interpretive Memo is to “establish[] an
interpretation clarifying the scope of the EPA regulation that
determines the pollutants subject to the federal PSD program under the
Clean Air Act (CAA or Act)” by providing EPA’s “definitive
interpretation” of the definition of the term “regulated NSR
pollutants” found at 40 CFR 52.21(b)(50) and resolving “any
ambiguity in subpart ([iv]) of that paragraph, which includes ‘any
pollutant that otherwise is subject to regulation under the Act.’”
As the Memo explains, the statute and regulation use similar language
– the regulation defines a regulated NSR pollutant to include “[a]ny
pollutant that otherwise is subject to regulation under the Act” and
requires BACT for “each regulated NSR pollutant,” 40 CFR
52.21(b)(50) and (j), while the Act requires BACT for “each pollutant
subject to regulation under this [Act],” CAA sections 165(a)(4) and
169.  The PSD Interpretive Memo seeks to resolve the ambiguity in
implementation of the PSD program by stating that “EPA will interpret
this definition of ‘regulated NSR pollutant’ to exclude pollutants
for which EPA regulations only require monitoring or reporting but to
include each pollutant subject to either a provision in the Clean Air
Act or regulation adopted by EPA under the Clean Air Act that requires
actual control of emissions of that pollutant.”

	On December 31, 2008, EPA received a petition for reconsideration of
the position taken in the PSD Interpretive Memo from Sierra Club and 14
other environmental, renewable energy, and citizen organizations.
Petitioners argued that the PSD Interpretive Memo violated the
Administrative Procedure Act and the CAA, conflicts with prior agency
actions and interpretations, and attempts to establish an interpretation
of the Act that conflicts with the plain language of the statute.  On
February 17, 2009, EPA granted the petition for reconsideration on the
PSD Interpretive Memo and announced its intent to conduct a rulemaking
to allow for public comment on the issues raised in the Memo and on any
issues raised by Deseret, to the extent they do not overlap with the
issues raised in the Memo.  EPA did not stay the effectiveness of the
PSD Interpretive Memo pending reconsideration, but the Agency did
reiterate that the Memo “does not bind States issuing [PSD] permits
under their own State Implementation Plans.”

On October 7, 2009 (74 FR 51535), EPA proposed a reconsideration of the
PSD Interpretive Memo that solicited comment on five possible
interpretations of the regulatory phrase “subject to regulation” –
the “actual control” interpretation (adopted by the Memo); the
“monitoring and reporting” interpretation (advocated by
Petitioners); the inclusion of regulatory requirements for specific
pollutants in SIPs (discussed in both the Memo and the Petition for
Reconsideration); an EPA finding of endangerment (discussed in the
Memo); and the grant of a section 209 waiver interpretation (raised by
commenters in another EPA action).  EPA also addressed, and requested
public comment on, other issues raised in the PSD Interpretive Memo and
related actions.

	The comment period for the proposed reconsideration notice ended on
December 7, 2009.  EPA received 71 comments on the proposal.  Commenters
represented a range of interests, including regulatory agencies,
corporations that may need to obtain PSD permits, trade associations
representing various industrial sectors, and environmental and public
interest groups.  Table 1 identifies each public comment received on the
proposal submitted to the Federal Register Docket Management System
(FDMS).  In this document, we identify each commenter by using its
Docket Document ID number in Air Docket ID No.
EPA–HQ–OAR–2009–0597.  For example, “0065.1” identifies the
specific comment document in the docket (i.e., Docket Document ID No.
EPA–HQ–OAR–2009–0597–0065.1).

	The purpose of this Response-to-Comments document (RTC) is to respond
to comments received on EPA’s October 7, 2009 proposal.  This document
contains summarized public comments and EPA responses to those comments.
 This document responds to all comments received, although it does not
respond to comments on issues we did not seek comment on in the
proposal, that were beyond the scope of the issues raised in the
proposal, or that were otherwise not relevant to the proposal.  The
comments in this document are grouped into categories to reflect major
issues discussed in the proposal and other related issues.

Table 1.   Comment Letters Received on Proposed Reconsideration Notice

	The full text of each comment is available for public inspection and
copying at EPA’s Air and Radiation Docket and Information Center,
Environmental Protection Agency, Room B102, 1301 Constitution Avenue,
NW, Washington, DC (Docket ID No. EPA-HQ-OAR-2009–0597).  The EPA
Docket Center Public Reading Room is open from 8:30 a.m. to 4:30 p.m.,
Monday through Friday, excluding legal holidays.  The telephone number
for the Reading Room is<PHONE_NUMBER> and the telephone number for the
Air and Radiation Docket and Information Center is<PHONE_NUMBER>.
Copies may also be mailed on request from the Air Docket by calling
(202) 260-7548.  A reasonable fee may be charged for copying.
Electronic versions of public comments on the proposal are contained in
Docket ID No. EPA–HQ–OAR–2009–0597, which can be accessed the
federal-wide eRulemaking site at  HYPERLINK "http://www.regulations.gov"
www.regulations.gov .

Docket ID. No.	Commenter Name

0048	Anonymous Commenter

0049	National Association of Manufacturers (NAM)

0050	American Farm Bureau Federation (AFBF)

0051	BP America

0052	Ohio Environmental Protection Agency (EPA)

0053	American Petroleum Institute (API)

0054	Regional Air Pollution Control Agency

0055	Georgia-Pacific

0056	National Environmental Defense Association/Clean Air Project
(NEDA/CAP)

0057	Alabama Department of Environmental Management

0058	California Air Pollution Control Officers Association (CAPCOA)

0059	Flexible Packaging Association

0060	Lilly

0061	The National Climate Coalition

0062	National Association of Clean Air Agencies (NACAA)

0063	Interstate Natural Gas Association of America (INGAA)

0064	The Large Public Power Council (LPPC)

0065	Midwest Ozone Group

0066	American Meat Institute (AMI)

0067	American Electric Power (AEP)

0068	Alliance of Automobile Manufacturers

0069	City Utilities of Springfield, Missouri

0070	The Class of 85 Regulatory Response Group

0071	American Forest & Paper Association (AF&PA)

0072	Calpine Corporation

0073	Edison Electric Institute (EEI)

0074/0075	U.S. Chamber of Commerce

0076	Council of Industrial Boiler Owners (CIBO)

0077	California Air Resources Board (CARB)

0078/0094	Semiconductor Industry Association

0079	Nucor Corporation

0080	Peabody Energy

0081	Progress Energy

0082	Rubber Manufacturers Association (RMA)

0083	Consumers Energy

0084	Landmark Legal Foundation

0085	Air Permitting Forum

0086	American Chemical Council, American Iron and Steel Institute, Brick
Industry Association, Corn Refiners Association, Institute of Shortening
and Edible Oils, National Association of Manufacturers, National Oilseed
Processors Association, and National Petrochemical and Refiners
Association

0087	Clean Air Task Force, Indiana Wildlife Federation, Michigan
Environmental Council, and the Ohio Environmental Council

0088	Jeff Walker, Private Citizen

0089	Utility Air Regulatory Group (UARG)

0090	Arizona Public Service (APS)

0091	South Carolina Department of Health and Environmental Control
(DHEC)

0092	BCCA Appeal Groups

0093	ConocoPhillips

0094	Semiconductor Industry Association

0095	Sierra Club, Natural Resources Defense Council (NRDC) and
Environmental Defense Fund (EDF)

0096	Missouri Joint Municipal Electric Utility Commission

0097	RRI Energy, Inc.

0098	Texas Industry Project (TIP)

0099	Sierra Club

0100	Coalition for Responsible Regulation, Inc.

0101	Center for Biological Diversity

0102	Texas Commission on Environmental Quality (TCEQ)

0103	Indiana Department of Environmental Management (IDEM)

0104	Texas Chemical Council (TCC)

0105	Dow Chemical Company

0106/0107	American Public Power Association (APPA)

0108	The National Rural Electric Cooperative Association (NRECA)

0109	Duke Energy Corporation

0110	National Mining Association (NMA)

0111	Texas Oil & Gas Association

0112	Intel Corporation

0113	Energy-Intensive Manufacturers Working Group on Greenhouse Gas
Regulation

0114	National Association of Manufacturers

0115	SCANA Corporation

0116	South Carolina Chamber of Commerce

0117	National Association of Homebuilders

0118	Clean Air Implementation Project (CAIP)

Chapter 2.   Procedural Issues

2.1.   Codification of EPA Interpretation

Comment:

One industry   SEQ CHAPTER \h \r 1 commenter (0104) does not support a
codification of the final interpretation of when a pollutant is
“subject to regulation” because it is not necessary.  The commenter
notes that because regulation under PSD already includes a stringent
permitting analysis that requires the installation of BACT, the
performance of an ambient air quality impacts analysis, an additional
impacts analysis and thorough public participation throughout the
process, there is no need to further codify the law in this area.

  SEQ CHAPTER \h \r 1 An industry commenter (0105) states that EPA
should not codify its final interpretation in the federal PSD rules
found at 40 CFR 52.21 and 51.166, and should leave the interpretation as
a policy memo.  The commenter believes the logic presented in support of
the “actual control” interpretation was very reasonable and
supported by existing regulatory language and case law.  Further, the
commenter states that given the dynamic nature of the GHG regulatory and
legislative activity currently on-going in the U.S., leaving the
interpretation in a policy memo would be preferred and more easily allow
EPA to potentially respond to future scenarios.  Commenter also states
that if EPA determines it would like to codify these interpretations,
they should publish specific regulatory language for review and comment.

Eight industry commenters (0067, 0083, 0089, 0090, 0096, 0106/0107,
0108, 0109) took no position on codification of the actual control
interpretation in 40 CFR 52.21 other than to note that (1) EPA should
not delay final action on the proposed PSD Interpretation while it
undertakes any codification, and (2) that interpretation should apply
both to administration of the federal PSD permitting program under 40
CFR 52.21 and to EPA approval of (or other action on) new or revised
state PSD plans under 40 CFR 51.166.

A state agency commenter (0091) states that it is absolutely essential
that the definition of a regulated NSR pollutant, and when a pollutant
is subject to NSR, be resolved, and that it is just as important that
the resolution is a practical and scientifically justified approach that
can be readily-implemented by the permitting agencies.

One industry commenter (0050) submits that EPA’s interpretation (they
support the “actual control” interpretation) should be codified in
regulation so that it can be applied generally to any future “air
pollutant.”

	Another industry commenter (0081) states that EPA should consider
codifying its chosen interpretation.  The commenter (0081) believes this
would more formally clarify EPA’s position, provide certainty to the
regulated community, and help resolve the issue of the PSD requirements
potentially applying retroactively.  The commenter (0081.1) also
recommended that EPA codify its position as to the specific regulatory
event that triggers PSD, i.e., when a regulation establishing actual
controls takes effect.  However, the commenter (0081.1) believes EPA
should formally propose its various codifications through additional
notice and comment rulemaking because this Reconsideration should not be
seen as the equivalent of a formal regulatory process; rather, the
commenter (0081) believes that through the Reconsideration EPA is
requesting comment on whether it should undertake such a process.

One industry commenter (0093) urges EPA to continue the interpretation
of “subject to regulation” per the PSD Interpretive Memo and
perhaps, although unnecessary, codify the clarification in regulatory
text.

One industry commenter (0108) states that it would be a positive step
for EPA to codify its chosen interpretation, assuming EPA selects the
actual control interpretation.  The commenter (0108) believes this would
more formally clarify EPA’s position, provide certainty to the
regulated community, and help resolve the issue of the PSD requirements
potentially applying retroactively.  The commenter (0108) adds that to
ensure consistency in application of  PSD by states that incorporate EPA
regulatory language in their State Implementation Plan(s) (SIP[s]), EPA
should also consider making similar codifications of its interpretation
in 40 CFR 51.66.  The commenter (0108) also recommends that EPA codify
its position as to the specific regulatory event that triggers PSD,
i.e., when a regulation establishing actual controls takes effect.
However, the commenter (0108) believes EPA should formally propose its
various codifications through additional notice and comment rulemaking
because this Reconsideration should not be seen as the equivalent of a
formal regulatory process.

Response:

EPA does not believe it is necessary to codify its interpretation in the
regulatory text.  The Agency feels it is more important to promptly
communicate and apply our final decisions regarding the applicability of
the PSD program in light of recent and upcoming actions related to GHGs.
 More specifically, EPA recently finalized the “Mandatory Reporting of
Greenhouse Gases” rule (known as the “Reporting Rule”), 74 FR
56259 (Oct. 30, 2009), which added monitoring requirements for
additional GHGs not covered in the Part 75 regulations.  Further, EPA is
poised to finalize by the end of March 2010 the LDV Rule that will
establish controls on GHGs that take effect in Model Year 2012, which
starts as early as January 2, 2011.  Thus, these actions make it
important that EPA immediately apply its final interpretation of the PSD
regulations on this issue (as refined in this action).  Furthermore,
even if EPA modified the text of the federal rules, many states may
continue to proceed under an interpretation of their rules.  EPA thus
believes overall implementation of PSD permitting programs is
facilitated by this notice that describes how existing requirements in
federal regulations at 40 CFR 52.21 are interpreted by EPA and how
similar state provisions may be interpreted by states.

EPA finds merit in most of the points raised by commenters, but
necessarily has to reconcile these competing considerations.  EPA agrees
that codification of the Agency’s interpretation in the regulatory
text, while not necessary, would provide some measure of additional
certainty to all stakeholders (including regulated sources that must
obtain PSD permits).  Although not necessarily required here, we also
agree that it is preferable that EPA publish specific regulatory
language for review and comment.  However, regardless of whether
codification of this interpretation is ultimately desirable, the Agency
does not believe the national interest is served by delaying final
action on the issues addressed in this notice pending additional
procedural steps or by deferring the applicability of EPA’s final
interpretation. See, 5 U.S.C. §553(d).  EPA is still considering the
option of codifying its interpretation at a later date.

2.2.   Issuance of Memorandum without Notice and Comment Process

  SEQ CHAPTER \h \r 1 According to one environmental group commenter
(0095), EPA chose not to respond to petitioners’ early procedural
challenges to the Memo (see 74 FR 51538 at n.3), and describes these
notice and comment procedures as voluntary (Id. at 51548), a
characterization that the commenter strongly disagrees with.  These
comments incorporate the Petition for Reconsideration, which argues that
the PSD Interpretive Memorandum was a substantive rule and not an
interpretive rule.  To illustrate the nature of an interpretive rule,
the Petition for Reconsideration quotes the following passage from a
court decision:

Interpretative rules “simply state[ ] what the administrative agency
thinks the statute means, and only remind[ ] affected parties of
existing duties.” General Motors Corp. v. Ruckelshaus, 742 F.2d 1561,
1565 (D.C. Cir. 1984) (en banc) (internal quotation marks omitted).
Interpretative rules may also construe substantive regulations.  See
Syncor Internat’l Corp. v. Shalala, 127 F.3d 90, 94 (D.C. Cir. 1997).

Assoc. of Amer. RR v. Dept. of Transp., 198 F.3d 944 at 947 (D.C. Cir.
1999) (emphasis added).  The Petition argues that the PSD Interpretive
Memo is a substantive rule, and not an interpretive one, because it
reverses a formal agency interpretation, overturns an EAB decision, and
amends the substance of the PSD program.

Another commenter (0087) incorporated by reference the arguments put
forth in that Petition and in the Amended Petition for Reconsideration
filed by Sierra Club on January 6, 2009.

Two industry commenters (0051, 0053) disagree with petitioners that
claimed the PSD Interpretive Memo is invalid because EPA issued it
without undergoing notice-and-comment procedures.  The commenter states
that EPA is undergoing notice-and-comment procedures and is thereby
curing any possible procedural faults in the memorandum’s issuance,
and that the Memorandum is an interpretative action that is exempt from
notice-and-comment procedures, rather than a substantive rulemaking.

Eight industry commenters (0067, 0083, 0089, 0090, 0096, 0106/0107,
0108, 0109) notes that the petitioners raised procedural issues in their
Petition for Reconsideration, arguing that the actual control
interpretation established in the PSD Interpretive Memorandum represents
a change in EPA’s historical interpretation of the phrase “subject
to regulation” and thus required a public notice-and-comment
proceeding to alter that interpretation.  The commenters disagree with
arguments that the PSD Interpretive Memorandum represents a change in
EPA’s historical interpretation or practice, and noted that, in any
event, EPA in the present rulemaking proceeding is supplying the process
petitioners argued is required, allowing all interested parties to
provide comments on the established interpretation and various proposed
alternative interpretations and providing a statement of basis and
purpose for the actual control interpretation.

Response:

The PSD Interpretive Memo is not a substantive rule promulgated under
section 307(d) of the CAA, but rather an interpretation of the terms of
a regulation at 40 CFR 52.21(b)(50).  An interpretive document is one
that explains or clarifies, and is consistent with, existing statutes or
regulation.  See National Family Planning and Reproductive Health
Ass’n v. Sullivan, 979 F.2d 227, 236-37 (D.C. Cir. 1992).  The PSD
Interpretive Memo explains and clarifies the meaning of the definition
of “regulated NSR pollutant” in section 52.21(b)(50) of the existing
NSR regulations, and does not alter the meaning of the definition in any
way that is inconsistent with the terms of the regulation.  The
memorandum construes substantive regulations and explains what EPA
thinks sections 165(a)(4) and 169(3) of the CAA mean in the context of
various other provisions of the statute.  See, Assoc. of Amer. RR v.
Dept. of Transp., 198 F.3d 944 at 947 (D.C. Cir. 1999).  In addition,
since the memorandum does not require sources or permit writers to
address a category of pollutants that have not been previously addressed
in PSD permits, it functions only to remind affected parties of existing
duties.  As such, the Memo qualifies as an interpretive rule under the
APA.

The three main arguments made in the Petition for reconsideration to
support the view that the PSD Interpretive Memorandum is a substantive
rule do not demonstrate that the PSD Interpretive Memorandum is not
“interpretive” in nature.  Even if the primary premise of these
arguments was correct – that EPA’s action reverses a prior
interpretation and overturns an adjudication of the EAB – these points
address only the question of whether the EPA Administrator may revise an
interpretation without following a notice and comment process or adopt
an interpretation in manner that does not strictly follow instructions
or recommendations that the EAB gave to Region 8 upon remand of a
particular permit.  These two arguments do not address whether the
memorandum in fact clarifies the meaning of the regulation or explains
what EPA thinks the statute means.  While the third argument – that
EPA has substantively amended the requirements of the PSD program –
does have bearing on the question of whether the memorandum contains any
substantive rules, EPA does not agree that the memorandum establishes
any new substantive requirements.  The responses that follow address
these three arguments from the Petition in more detail.

Since the PSD Interpretive Memo is interpretive in nature, EPA was not
required to go through a notice and comment rulemaking process to issue
the document.  EPA’s authority to make rules and interpret them
derives from the CAA.  Along with the APA, section 307(d) of the CAA
establishes procedures for the exercise of rulemaking authority and
exceptions to those procedures.  Section 307(d) of the CAA establishes
procedures for, among other things, “the promulgation or revision of
any regulations under part C of subchapter I of this chapter (relating
to prevention of significant deterioration of air quality and protection
of visibility).”  However, that section of the CAA states clearly that
it “shall not apply in the case of any rule or circumstance referred
to in subparagraphs (A) or (B) of subsection 553(b) of title 5 of the
United States Code.”  Under 5 U.S.C. 553(b)(A), interpretive rules are
exempt from notice and comment requirements.  Thus, section 307(b) of
the CAA preserves the Agency’s authority to establish interpretations
of regulations promulgated under the Act without engaging in a notice
and comment rulemaking process that is otherwise required for the
promulgation and revision of PSD regulations.  Courts have frequently
recognized that interpretive rules are exempt from notice and comment.
See, e.g., Devon Energy v. Kempthorne, 551 F.3d 1030, 1040 (D.C. Cir.
2008).

Finally, EPA has now completed a notice and comment process with respect
to the content of the PSD Interpretive Memorandum.  Thus, even if EPA
had in fact erred in its assessment of the procedural obligations
associated with issuance of the memorandum, EPA has taken action that
would cure this alleged error.  The only procedural question remaining
after the completion of this reconsideration process is whether EPA
should codify its interpretation in the regulatory text.  As discussed
above, EPA has elected not to codify its interpretation at this time,
but EPA has not ruled out the possibility of amending the regulations at
a later date to explicitly reflect EPA’s interpretation of the CAA.

2.2.1.   Effect and Meaning of Previous EPA Interpretation Issued in
1978

The environmental group commenter (0095) emphasizes that the Agency’s
prior legally binding interpretation of the phrase “subject to
regulation” (established in 1978) remains in effect until such time
that the EPA completes a formal rulemaking procedure establishing a new
interpretation.  The commenter (0095) states that the Administrator’s
decision to conduct notice and comment rulemaking on the issues raised
in the Memo does not change the status of the law until this rulemaking
procedure is complete and a new legal interpretation has been finalized
and taken effect, and cites a D.C. Circuit ruling that when an
agency’s purported interpretation of a statute or regulation
“constitutes a fundamental modification of its previous
interpretation,” the agency “cannot switch its position” without
following appropriate procedures.  Paralyzed Veterans of Am. v. D.C.
Arena L.P., 117 F.3d 579, 586 (D.C. Cir. 1997).

The commenter (0095) further states that the interpretation of the
phrase “subject to regulation under this Act” has been established
since 1978.  At that time, EPA clearly stated in a Federal Register
preamble that the phrase “‘subject to regulation under this Act’
means any pollutant regulated in Subchapter C of Title 40 of the Code of
Federal Regulations for any

source type.”  See 43 FR at 26388, 26397 (June 19, 1978).  This
earlier interpretation has never been withdrawn or modified and directly
conflicts with both the interpretation the Memo purported to adopt and
that proposed by EPA in its reconsideration.  Because the Subchapter C
regulations include, inter alia, regulations that require monitoring and
reporting of CO2 emissions, the logical implication of the 1978 Preamble
is that BACT applies to CO2 emissions.  The Agency’s effort to
establish a different interpretation precluding consideration of CO2
must be conducted via notice and comment rulemaking and until that
process is complete the prior interpretation remains in effect.

	The Petition for Reconsideration interprets EPA’s position in the PSD
Interpretive Memo to be that the Agency is free to adopt a wholly new
definition of the term “regulated in” because the 1978 preamble does
not “amplify the meaning” of this term.  The Petition contends EPA
seeks to evade the procedures mandated by Paralyzed Veterans by
disguising a revision of governing law as an interpretation of its
previous interpretation.  According to the Petition, the PSD
Interpretive Memo claims that the phrase “regulated in” as it
appears in the 1978 preamble is ambiguous and thus subject to
clarification by the Agency, such that the 1978 Preamble may be
understood to mean “regulated by actual control of emissions” by use
of the term “regulated.” The Petitioner argues that this is a
newly-proposed understanding of the words “regulated in” that fits
unnaturally with the text of the 1978 Federal Register.  According to
the Petition, this reading would impose an enormously substantive and
restrictive qualification by use of the words “regulated in,” while
dismissing the far more prominent reference to “Subchapter C of Title
40 of the Code of Federal Regulations” as irrelevant verbiage.

The Petition argues that the words “regulated” and “regulation”
appear pervasively throughout the 1978 Federal Register and always
describe “any act of regulating

or regulation.”  The Petitioners believe that the Agency used
“regulation” and “regulate” in 1978 to encompass all forms of
regulation and contends that, in the PSD Interpretive Memo, EPA departs
from a standard-English definition of these terms.  According to the
Petition, the only plausible reading of the 1978 Federal Register
preamble is that it described all the regulations contained “in
Subchapter C of Title 40 of the Code of Federal Regulations.”  The
Petitioners argue that EPA believes it can freely substitute its
definition of “regulation” as “regulation requiring actual control
of emissions” for the word “regulation” in whatever form the
latter appears in any regulatory document.

The Petitioners also believe that various aspects of the EAB’s
decision in the Desert matter confirmed that EPA intended to apply the
Petitioners’ meaning of the term “regulated.”  The Petition argues
that in the dispute before the EAB in the Deseret matter, EPA offices
assumed that the 1978 preamble used the word “regulated” to describe
any provision in the application portion of the CFR, which is why EPA
tried limit the meaning of this phrase to just the types of pollutants
listed in the 1978 rule preamble.  The Petitioners also contend that the
PSD Interpretive Memo continues to rely on a premise rejected by the
Deseret decision that the list of specific categories of regulations in
the 1978 preamble establishes a binding limitation on the meaning of the
phrase “any pollutant regulated in Subchapter C of title 40 of the
Code of Federal Regulations”

Response:

EPA agrees that the interpretation reflected in the 1978 preamble
remains applicable, but disagrees with the meaning that these commenters
and Petitioners ascribe to the Agency’s 1978 statement.  The PSD
Interpretive Memorandum clearly and persuasively explains why the 1978
interpretive statement did not determine whether monitoring or reporting
requirements make a pollutant “subject to regulation under the Clean
Air Act.”  The 1978 preamble did not address whether any pollutant
subject to a monitoring requirement promulgated in the appropriate part
of the CFR is in fact “regulated in Subchapter C of Title 40 of the
Code of Federal Regulations.”  The PSD Interpretive Memorandum and
this final action on reconsideration add interpretive statements that
speak to more particular questions not addressed in 1978 statement.
These additional interpretations apply in parallel with the 1978
interpretation and are not inconsistent with the latter.  In light of
these considerations, the PSD Interpretive Memorandum did not purport to
change or supersede the 1978 statement, nor did EPA propose to supersede
or change that interpretation in the October 7 notice of
reconsideration.

The meaning these commenters and Petitioners assign to the 1978
interpretation is not supported by the terms of the interpretive
statement or EPA’s action since issuing the statement.  The commenter
argues that EPA impermissibly changed the 1978 interpretive statement
because the commenter recognizes only one potential meaning of the term
“regulation” or “regulate” and therefore assumes that the 1978
notice must have intended to applying this single meaning of the term
“regulation” or “regulate.”  These commenters and Petitioners
neglect to consider the ambiguity of the term “regulated” as a form
of the word “regulate,” and the primary dictionary meaning of the
terms “regulation” and “regulate” cited by EPA.  Each of the
sections of the 1978 Federal Register document cited by the Petition
uses the term “regulation” in the context of a sentence that
describes a provision in the CFR.  See, 43 FR at 26389 (“The
regulations made final today apply to any source . . .”), 26398 (“In
the regulations adopted today, EPA’s assessment of the air quality
impacts of new major sources and modifications will be based on”
certain EPA guidelines), 26401 (“Such offsets have always been
acceptable under the agency’s PSD regulations . . . .”), 26402
(“Environmental groups pointed out that the proposed regulations did
not specifically require Federal Land Managers to protect
“affirmatively” air quality related values . . . .”).  The context
in which EPA used the term “regulation” in these sentences does not
demonstrate that EPA intended the term “any pollutant regulated in
Subchapter C of Title 40 of the Code of Federal Regulations for any
source type” to mean what the Petitioner argues it necessarily must
mean (any pollutant covered for any reason in a regulation promulgated
in Subchapter C of Title 40 of the CFR).  The Petitioners charge EPA
with neglecting to consider the standard English definitions of the term
“regulation” and “regulate,” but EPA considered commonly used
meanings of these terms and applied the meaning that appears as the
primary meaning of the term “regulate” that is used in Webster’s
dictionary.

Consequently, EPA does not agree that the PSD Interpretive Memo applies
a substantive and restrictive qualification on the use of the words
“regulated in.”  EPA has only applied an accepted meaning of the
term regulate and not added any restriction or qualification that is not
already inherent in the meaning of this term.  EPA does not believe it
can substitute any meaning for term “regulation,” but rather that it
may reasonably apply accepted meanings of terms found in standard
English dictionaries that fit the context of the sentence in which the
terms are used.  The Petitioners do not substantiate their conclusion
that the reference to “Subchapter C of Title 40 of the Code of Federal
Regulations” is more prominent in the context of this sentence than
the term “regulated in.”  It is unclear whether the Petitioner
believes prominence is determined by the number of words in each phrase
or some other criteria.  Considering the full context of the sentence at
issue, it is not obvious that the term “regulated in” is any less
prominent or significant than other parts of that sentence.  EPA does
not agree that its identification of an unresolved question in the
meaning of this sentence from the 1978 preamble makes the reference to
Subchapter C of the Title 40 of the CFR meaningless.  The BACT
requirement still applies to any pollutant regulated in this portion of
the CFR, but the question still remains what pollutants are in fact
“regulated” through provisions in this portion of the CFR.

Commenters also appear to assume that this 1978 interpretative statement
is the only example of EPA’s past practice with respect to whether
pollutants covered by, but not controlled under, regulations in the CFR
make the PSD permitting requirements applicable to a pollutant.

These commenters have not provided any additional information to
demonstrate that EPA (or another other PSD permitting authority) has in
fact acted in accordance with the meaning that the commenters assign to
the 1978 interpretation.  The record shows that EPA has not in practice
given the 1978 statement the meaning used by the commenter.  A review of
numerous federal PSD permits shows that EPA has been applying the actual
control interpretation in practice – issuing permits that only
contained emissions limitations for pollutants subject to regulations
requiring actual control of emissions under other portions of the Act.
If EPA had given the 1978 interpretation the meaning the commenter uses,
the Agency would have previously issued PSD permits containing BACT
emission limitations on CO2 and oxygen.  The argument that EPA’s
failure to do so was wrong does not establish that it has in fact been
EPA’s position since 1978 that PSD permits should cover pollutants
subject to monitoring and reporting requirements that are promulgated
anywhere in Subchapter C of the Title 40 of the CFR.  Furthermore, in
1998, well after promulgation of the initial CO2 monitoring regulations
in 1993, EPA’s General Counsel concluded that CO2 would qualify as an
“air pollutant” that EPA had the authority to regulate under the
CAA, but the General Counsel also observed that “the Administrator has
made no determination to date to exercise that authority under the
specific criteria provided under any provision of the Act.” Memorandum
from Jonathan Z. Cannon, General Counsel to Carol M. Browner,
Administrator, entitled EPA’s Authority to Regulate Pollutants Emitted
by Electric Power Generation Sources (April 10, 1998).

	Furthermore, with respect to the EAB’s conclusion in the Deseret
matter, the PSD Interpretive Memo highlights portions of the EAB
decision that describe the ambiguity in the phrase “regulated in
Subchapter C of Title 40 of the Code of Federal Regulations” and the
term “regulation.”  The PSD Interpretive Memorandum references the
“specific categories of regulations identified in the second
sentence” of the passage quoted from the 1978 preamble only to
illustrate that the PSD Interpretive Memorandum is not inconsistent with
that 1978 statement.  Consistent with the statements in the PSD
Interpretive Memo, EPA agrees with and accepts the EAB’s reasoning
that the enumerated categories of pollutants do not establish a
controlling limitation on the scope of pollutants subject to regulation.
 However, that reasoning still does not establish whether monitoring or
reporting requirements make pollutants subject to regulation or whether
a pollutant is “regulated in” the CFR when the code contains only a
requirement to monitor and report, but not control, emissions of a
pollutant.  This has remained an open question since 1978 that EPA was
free to address in the PSD Interpretive Memorandum without changing any
prior EPA interpretive statement or acting inconsistent with the
reasoning of the EAB’s Deseret opinion.

2.2.2.   Argument that PSD Interpretive Memo Overturns an EAB Decision

Comment:

The Petition for Reconsideration (which is incorporated in public
comments) contends that the PSD Interpretive Memo supersedes the EAB’s
decision in the Deseret matter.  The Petition contends, based on the
terms of 40 CFR 124.2(a), that the Administrator has no jurisdiction to
undo a statutory interpretation adopted in an EAB ruling or substitute
his judgment for that of the Board.  According to the Petitioners, the
EAB held in its Deseret opinion that EPA must undertake a notice and
comment process to adopt a new interpretation of the PSD regulatory
program.  The Petition asserts that the EAB is the final agency
decision-maker as to PSD permits, and the EAB has already determined
that a notice and comment process is required for EPA to address the
appropriate scope of analysis in PSD permits.  The Petitioners argued
that the EAB clearly anticipated that EPA would follow a notice and
comment process when it suggested that “[t]he Region should consider
whether interested persons, as well as the Agency, would be better
served by the Agency addressing the interpretation of the phrase
‘subject to regulation under this Act’ in the context of an action
of nationwide scope, rather than through this specific permitting
proceeding.”

Response:

EPA does not agree that the PSD Interpretive Memorandum overturns or is
in any way precluded by the EAB’s decision in the Deseret matter.  The
record supports the conclusion that the PSD Interpretive Memorandum
achieved its purpose to “build on the Board’s Deseret opinion” and
not to supersede it.  Memo at 2.

The PSD Interpretive Memorandum does not undo any statutory
interpretation adopted in the EAB ruling.  In addressing the meaning of
the CAA, the EAB concluded only that the meaning of the term “subject
to regulation” in CAA sections 165 and 169 is not so clear and
unequivocal that it precludes EPA from exercise its discretion to
interpret the statute.  Deseret at 63.  The EAB also concluded there was
“no evidence of Congressional intent to compel EPA to apply BACT to
pollutants that are subject only to monitoring and reporting
requirements.”  Deseret at 63.  The EAB remanded the PSD permit in
that case on the grounds that “the Region’s rationale for not
imposing a CO2 BACT limit in the Permit – that is lacked the authority
to do so because of an historical Agency interpretation of the phrase
‘subject to regulation under this Act’ as meaning ‘subject to a
statutory or regulatory provisions that require actual control of
emissions of that pollutant’ is not supported by the administrative
record.”  Thus, the grounds for remand were not based on any statutory
interpretation that EPA was compelled to apply BACT to pollutants
subject to monitoring or reporting requirements.  Furthermore, the
Board’s opinion did not discuss any specific procedural requirements
of the Administrative Procedure Act or section 307(d) of the Clean Air
Act.

EPA does not read the EAB’s Deseret decision to contain any statutory
interpretation or instructions that required the Administrator to
undertake a notice and comment process to address the appropriate scope
of analysis in PSD permits.  The Deseret permit appeal involved the
review of the rationale supplied by Region 8 to justify a decision not
to establish emission limitations for CO2 in a permit and the merits of
EPA’s contention that it had already established an interpretation of
the applicable law that precluded such an action.  The EAB’s specific
instructions in its remand order were directed to Region 8, which has
not yet acted on those instructions in the context of the permit for the
Deseret facility.  Because the Board found the record for this permit
inadequate to support the rationale provided, the Board directed Region
8 to “reconsider whether or not to impose a CO2 BACT limit in the
Permit” and “develop an adequate record for its decision, including
reopening the record for public comment.”  Id. at 64.  In addition,
the Board said that the Region should consider whether interested
persons and EPA would “be better served by the Agency addressing the
interpretation of the phrase ‘subject to regulation in an action of
nationwide scope, rather than through this specific permit
proceeding.”  Id.  The Board also said this analysis should “address
whether an action of nationwide scope may be required in light of the
Agency’s prior interpretive statements made in various memoranda and
published in the Federal Register and the Agency’s regulations.”
The Board did not explicitly direct the Region or any other EPA office
to take public comment on any action of nationwide scope that may result
from this analysis.  The Board’s instructions regarding public comment
applied to the record for Region 8’s decision on the question of
whether or not to impose a CO2 BACT limit in the permit for the Deseret
facility.  EPA does not dispute that one might draw the inference that
the EAB anticipated a subsequent EPA action of nationwide scope on this
issue would entail a notice and comment process, but that was not an
express instruction of the Board’s order.

The instructions to EPA Region 8 in the Deseret opinion did not preclude
the Administrator from taking subsequent action to adopt an
interpretation of PSD regulations in accordance with the procedure that
Administrator deemed appropriate under the circumstances.  In the
defining the term “Environmental Appeals Board,” section 124.2(a) of
EPA’s regulations explains that “[t]he Administrator delegates
authority to the Environmental Appeals Board to issue final decisions in
RCRA, PSD, UIC, or NPDES permit appeals filed under this subpart.”
While this delegation implies some degree of authority on the EAB to
interpret EPA regulations and the CAA, the Part 124 regulations do not
divest the Administrator of the power to promulgate regulations to
implement the PSD program or to interpret those regulations.  Section
124(a) only delegates the power to adjudicate appeals PSD permits to the
EAB and issue final decisions in those matters.  This provision does not
say that the Administrator has the delegated the authority to promulgate
regulations under the PSD program to the EAB.  The Administrator retains
the authority to interpret the CAA and to promulgate and amend PSD
program regulations.  By extension, the Administrator also retains the
authority to interpret those regulations and to determine the
appropriate procedure to be followed when establishing a given
interpretation.  The fact that the EAB issues final decisions on
particular PSD permit appeals does not mean that the EAB also issues
final decisions on all matters relating to the PSD permitting
requirements.

Furthermore, the Board did not clearly conclude that the prior
interpretative statements of the Agency required that the Agency
undertake a notice and comment process to address the issues covered in
the PSD Interpretive Memorandum.  The Board did say that the Region’s
analysis on remand “should address whether an action of nationwide
scope may be required in light of the Agency’s prior interpretive
statements made in various memoranda and published in the Federal
Register and the Agency’s regulations.”  However, this was simply an
instruction to assess the issue described, not a conclusion that Region
8’s rationale in that case was inconsistent with any prior
interpretive statements or that a notice and comment process was
required to adopt such an interpretation in an action of nationwide
scope.  In addition, as discussed in the PSD Interpretive Memorandum,
the EAB did appear to question whether subsequent EPA memorandum could
result in a change the interpretation set forth in the 1978 Federal
Register notice.  Deseret at 52.  But the Board did not make a finding
that the cited court cases in fact precluded EPA from issuing an
additional memorandum that addressed the issue under consideration by
the Board.  The Board’s analysis was specific to two particular
memoranda that lacked characteristics that are present in the PSD
Interpretive Memorandum, which references the relevant provisions of the
CAA, announces an EPA interpretation of the PSD provisions, and
discusses the Administrator’s prior interpretive statement on this
issue from the 1978 Federal Register.

Finally, even if the EAB had made a determination that notice and
comment process was required to address this issue in an action of
nationwide scope, EPA has now completed a notice and comment process
before making a final decision to continue applying the PSD Interpretive
Memorandum, as modified in this action.

2.2.3.   Contention that PSD Interpretive Memo Amends the Substance of
the PSD Program

The Petition for Reconsideration argues that the PSD Interpretive
Memorandum seeks to substantively amend EPA regulations to establish new
legal rights, restrictions, and/or obligations under the Act’s PSD
program.  The Petition lists the following actions that are alleged to
be newly established: (1) exempting pollutants that are subject to
regulation under the Act through state implementation plans (“SIPs”)
(Memo at 15).  On this point, the Petition acknowledged EPA’s view
that it has adopted a similar approach under the NSR program for the
regulation of ammonia as a PM2.5 precursor, but the Petition contends
that EPA was required to follow the model in that instance of adopting
the position in the PSD Interpretive memo through a notice and comment
rulemaking process; (2)  Establishing Regional Office responsibilities
with regard to future SIP submittals (Memo  at 3 n.1); (3) determining
how pollutants will become subject to PSD permitting in the future on
enactment of new congressionally-mandated emission limits (Memo at 6
n.5); (4) imposing requirements that address when pollutants for which
EPA has made a regulatory endangerment determination must be treated as
PSD pollutants (Id. at 14); and (5) defining when and how import
restrictions will trigger PSD for a pollutant.  The Petition asserts the
breadth of issues addressed in the memo (regarding what the Petitioner
contend are numerous and disparate regulatory programs) rebuts the view
that the PSD Interpretive Memo is an interpretive rule.

Response:

	EPA does not agree that these portions of the memorandum established
new legal rights, restrictions, or obligations under the PSD program.
The memorandum does not require any additional emissions limitations or
impose any additional criteria that a permit applicant must satisfy to
obtain a permit.  Likewise, the memorandum did not eliminate any permit
terms or conditions that had previously been required by EPA.  The
memorandum preserved the status quo regarding the criteria for obtaining
a PSD permit and the required terms and conditions of any permit.

	The five examples of new matters addressed in the memo are each matters
on which EPA explains and clarifies existing rights, restrictions, or
obligations under the PSD program.  These portions of the memo do not
add requirements or limitations, but rather explain and clarify how EPA
intends to apply existing requirements in the face of the uncertainty
created by the EAB’s decision in the Deseret case and related actions.
 The Agency’s discussion of the significance of State Implementation
Plan provisions that require controls on a pollutant not regulated
outside the state follows an interpretation previously established by
EPA in a prior rulemaking regarding precursors to PM2.5.  The fact that
EPA initially established this interpretation through a notice and
comment rulemaking process did not necessitate that EPA employ the same
process to apply this established approach to a comparable situation.
Furthermore, the additional reasoning for this position supplied in the
PSD Interpretation did not itself establish a new right, restriction, or
obligation.  The footnote on page 3 of the memorandum addressing EPA
Regional office responsibilities with regard to SIP submittals merely
explains how the Region’s should handle this existing responsibility
to review SIP submissions after the EAB’s determination that EPA had
not previously established the interpretation later adopted in the PSD
Interpretive Memorandum.  Another explanatory element is the discussion
of the EPA’s view that existing statutory instructions for EPA to
promulgate emission limitations of various types do not trigger the PSD
requirements until EPA promulgates the required limitations.  This
portion of the memo clarifies EPA’s view of what the statute and
regulations mean with respect to when a pollutant becomes subject
regulation under such requirements.  Likewise, the memo’s discussion
of the significance of an endangerment finding that is not accompanied
by direct regulatory requirements is a variation on this same question
regarding the particular stage in the regulatory process when a
pollutant becomes “subject to regulation.”  This part of the memo
does not create a limitation that is not already inherent in one
accepted meaning of the term “regulation” used in the existing
statute and regulations.  Since the definition of “regulated NSR
pollutant” in the PSD regulations expressly incorporates the
pollutants covered by the production and import restrictions under Title
VI of the CAA, the discussion of these import restrictions in the
memorandum does not add new rights, obligations, or limitations on the
application of the PSD program to these pollutants.  At most, this
portion of the memo clarifies and explains the time at which the PSD
requirements are invoked by the application of these requirements to
particular pollutants.  Moreover, each of these issues pertains to one
regulatory program – the PSD permitting.  Each of these topics is an
element or variation of the same basic question regarding the
applicability of the phrase “subject regulation” to particular
pollutants based on the EPA’s implementation of other programs under
the CAA.

2.3.   Relevance of Related Public Participation Opportunities

Comment:

The Petition for Reconsideration argues that public participation in the
specific adjudicatory proceeding regarding the Deseret plant or public
participation in EPA’s advanced notice of proposed rulemaking
(“ANPRM”) on regulation of GHGs under the CAA is legally
insufficient to cure the procedural failures of the PSD Interpretive
Memo.  The Petition argues that the EAB case not an adequate substitute
for notice and comment on a rule of nationwide scope because it
addressed only a single facility, and the adjudicatory process
associated with an individual permit proceeding cannot substitute for
notice and comment on a legislative rule of broad national significance.
 The Petition argues that the ANPRM never indicated EPA’s intention to
take imminent final action establishing new parameters for the PSD
regulatory program, nor specific intent to reinterpret agency policy
articulated in the 1978 preamble.

Response:

	EPA has never asserted that the opportunities for public input provided
in the EAB appeal and the ANPRM were sufficient to cure any perceived
procedural deficiency in the manner EPA issued the Memo.  Since EPA
maintains that the PSD Interpretive Memo is an interpretation that the
Agency was authorized to issue without a notice and comment rulemaking
process, there was no procedural deficiency that needed to cured by
referencing these particular opportunities for the public to provide EPA
with their views on this issue.  Since EPA recognized that there was
significant public interest in the issue addressed in the PSD
Interpretive Memo, EPA’s purpose in referencing the previous public
comment opportunities was simply to illustrate that, even though public
comment was not required by law, EPA had nevertheless considered the
views of several interested stakeholders and all information available
to EPA at that time.  Even in circumstances where quick action by EPA is
warranted and a formal public comment opportunity is not mandatory, EPA
recognizes that the Agency is accountable to the citizens of the United
States and should be responsive to public concerns.  Furthermore, EPA
understands that the best decisions are those that are well-informed and
reflect an evaluation of all relevant considerations.  EPA thus
referenced these earlier opportunities for public input to show that the
Agency’s action was responsive to public concerns and reflected
consideration of all information available to the Agency at that time.

2.4.  Interpretation of Statute and Revisions Thereto

	Comment:

The Petition for Reconsideration argues that PSD Interpretive Memo is
not entitled to deference because the regulation simply parrots the
language of the statute.  The Petition quotes the following statement
from a Supreme Court decision:

[T]he existence of a parroting regulation does not change the fact that
the

question here is . . . the meaning of the statute. An agency does not

acquire special authority to interpret its own words when, instead of
using

its expertise and experience to formulate a regulation, it has elected

merely to paraphrase the statutory language.”

Gonzales v. Oregon, 546 U.S. 243, 257 (2006).

Response:

EPA does not contend that it can interpret the PSD regulations in a
manner that is inconsistent with the requirements of the CAA.  The PSD
Interpretive Memorandum explains in detail why the Agency’s
interpretation of the language in the regulation is not precluded by the
language in the CAA that the regulation is modeled upon.  EPA need not
address the question of whether its interpretation of the regulation is
entitled judicial deference to reach the conclusion that its
interpretation of the regulation is permissible under the CAA.

	Comment:

One state commenter (0057) asserts that a tenet of administrative law is
that, if an agency seeks to change a previous, formal interpretation of
the meaning and/or the implementation of a rule or statute, it must go
through a rulemaking to do so.

The Petition for Reconsideration contends that the D.C. Circuit has held
that “when an agency’s purported interpretation of a statute or
regulation constitutes a fundamental modification of its previous
interpretation, the agency cannot switch its position without following
appropriate procedures.”  Petition at 5 (citing Paralyzed Veterans of
Am. v. D.C. Arena L.P., 117 F.3d 579, 586 (D.C. Cir. 1997) (internal
quotations omitted).  According to the Petition, “[o]nce an agency
provides an interpretation of a statute – as EPA did here, in 1978 –
‘it can only change that interpretation as it would formally modify
the regulation itself: through the process of notice and comment
rulemaking.’”  Petition at 5.

Response:

These comments overextend the reach of this line of case law.  The
Paralyzed Veterans line of cases holds only that regulatory agencies
cannot change a long-standing, definitive, and authoritative
interpretation of its regulations without going through a notice and
comment process.  See, Paralyzed Veterans of America v. D.C. Arena L.P.,
117 F.3d 579, 586 (D.C. Cir. 1997); Alaska Professional Hunters Ass’n
Inc. v. FAA, 177 F.3d 1030, 1033-34 (D.C. Cir. 1999).  To EPA’s
knowledge, no court has required a rulemaking procedure when the Agency
seeks to issue or change its interpretation of a statute.  Nevertheless,
EPA has completed this notice and comment proceeding before deciding to
adopt the revised interpretation of the CAA described in this final
action.

2.5.   Revisions to Interpretation in PSD Interpretive Memo

Comment:

One state commenter (0057) asserts that a tenet of administrative law is
that, if an agency seeks to change a previous, formal interpretation of
the meaning and/or the implementation of a rule or statute, it must go
through a rulemaking to do so.  Based on this principle, the commenter
argues that EPA cannot merely “re-interpret” its previous
interpretation; it must undergo a rulemaking process and formally change
the federal PSD rules to legally effect the change.

Response:

The commenter does not specify any specific change in interpretation
that the commenter is concerned about.  Since EPA’s interpretation of
the PSD program regulations is unchanged in most respects by this
action, it is not clear that the particular refinement to that
interpretation that EPA is making in this action would invoke the
doctrine described by the commenter.  Even if this refinement is viewed
as a fundamental change, EPA has completed the revision to the
interpretation in the PSD Interpretive Memo after a notice and comment
process.  Furthermore, since EPA initiated a process of reconsidering
and soliciting comment on the PSD Interpretive Memo within three months
of its issuance, the memorandum had not yet become particularly
well-established or long-standing.  See Metwest v. Secretary of Labor,
560 F.3d 506, 511 n.4 (D.C. Cir. 2009).  Thus, the case law referenced
by the commenter does not preclude the action EPA has taken here to
refine its interpretation of the regulations.

As noted above, while this doctrine has been applied to some types of
changes in the interpretation of a rule, EPA does not agree that any
court has established a principle of administrative law that requires a
notice and comment process before an agency can change its
interpretations of a statute.

Chapter 3.   Actual Control of Emissions

3.1.   Overview of Comments on Actual Control Interpretation

	Comment:

Forty industry and commerce commenters (0050, 0051, 0053, 0055, 0056,
0059, 0060, 0061, 0063, 0065, 0066, 0067, 0068, 0070, 0071, 0073, 0074,
0076, 0080, 0081, 0083, 0085, 0086, 0089, 0090, 0092, 0093, 0096, 0097,
0098, 0103, 0104, 0105, 0106/0107, 0108, 0109, 0110, 0112, 0115, 0116,
0118), one legal commenter (0084), and six state/local agency
associations (0054, 0058, 0062, 0077, 0091, 0109) support EPA’s
position that the “actual control interpretation” established in the
PSD Interpretive Memo is the proper interpretation of the phrase
“subject to regulation.”

Four industry and commerce commenters (0051, 0053, 0068, 0074) state
that EPA must retain the “actual control” interpretation set forth
in the PSD Interpretive Memo because the “actual control”
interpretation is supported by the statutory text, is consistent with
past EPA practice, and is sound public policy.  These commenters said
that alternatives to the “actual control” interpretations are not
legally supportable, are contrary to past practice, and/or are contrary
to public policy considerations.

The industry commenter (0118) reiterates the arguments made in the PSD
Interpretive Memo and proposed PSD Interpretation notice, and states
that the arguments strongly support the “actual control”
interpretation, and asserts that the “actual control” interpretation
is consistent with the EPA’s longstanding interpretation of the phrase
“subject to regulation” and is supported by legal and compelling
policy reasons.

One of the industry commenters (0109) believes that this interpretation
is consistent with EPA’s longstanding practice, is reasonable and
logical, and is supported by strong policy and legal rationales, while
the other alternative interpretations examined by EPA are not required
by law, are neither reasonable nor consonant with sound public policy,
and could implicate retroactive liability concerns.

  SEQ CHAPTER \h \r 1 Industry commenter (0105) supports EPA’s
preferred interpretation of “subject to regulation” based on an EPA
regulation requiring “actual control” of emissions of a pollutant,
and agrees this interpretation is supported by EPA’s past policy and
practice and is in keeping with the language and structure of the CAA.

Three industry commenters (0067, 0073, 0083) similarly state that this
interpretation is consistent with EPA’s longstanding practice, is
consistent with the language and structure of the CAA, and is supported
by important policy concerns.  These commenters (0067, 0073, 0083)
believe that the alternative interpretations are fundamentally flawed
for the reasons articulated by EPA in the proposed PSD Interpretation.

Under the circumstance that a lack of Congressional action essentially
forces EPA to move forward with regulation of CO2 under the CAA, an
industry commenter (0097) supports and endorses the EPA’s previous
interpretation which is the “actual control interpretation” under a
final national rule, agreeing that this interpretation best reflects
past policy and practice, is in keeping the structure and language of
the statute and regulations, best reflects Congressional intent in the
CAA and best allows for the necessary coordination of approaches to
controlling emissions of newly identified pollutants.

Ten of the industry commenters (0089 and others incorporating this
submission (0065, 0067, 0081, 0083, 0090, 0096, 0106/0107, 0108, 0109))
believe that this interpretation is consistent with EPA’s longstanding
practice, is reasonable and logical, and is supported by strong policy
and legal rationales, while the other alternative interpretations
examined by EPA, or put forward by other parties, are not required by
law, are neither reasonable nor consonant with sound public policy, and
could implicate retroactive liability concerns.

Three commenters (0092, 0093, 0098) representing several groups of
companies (industry) and several other industry commenters recommend
that EPA reaffirm the PSD Interpretive Memo’s position (and also
EPA’s long-standing interpretation) that an air pollutant becomes
“subject to regulation” at the point that regulations requiring
actual controls of emissions are in place.  These commenters believe the
“actual control” interpretation is the only reasonable and rationale
approach, and that other interpretations of “subject to regulation”
would result in an unworkable and unreasonable PSD program.

One industry group commenter (0070) expresses support for the “actual
control interpretation” because it best reflects EPA’s past policy
and practice and is keeping with the structure and language of the CAA
and its regulations.

One industry group commenter (0071) states that the PSD interpretive
memo is a logical and reasonable interpretation of the PSD regulations
and the CAA. The approach in the Interpretive Memo is a reasonable one,
and the other approaches proposed would be unreasonable.

For all the reasons stated in the PSD Interpretive Memorandum, nine
other industry commenters (0065, 0067, 0083, 0089, 0090, 0096,
0106/0107, 0108, 0109) fully agree with EPA’s determination, as
proposed to be reaffirmed in the proposed PSD Interpretation, that the
“actual control” interpretation is, and should continue to be, the
controlling interpretation on this issue.

Four commenters (0087, 0095, 0099, 0101), representing numerous
environmental organizations, are opposed to EPA’s “actual control”
approach.

Although one environmental commenter (0087) applauds EPA’s work in
finalizing the Mandatory Reporting of Greenhouse Gas Rule; the effort
and care EPA has taken in responding to the Supreme Court’s mandate in
Massachusetts v. EPA; and the Proposed and Final Endangerment and
Contribution Findings and proposed CAFE standards for mobile sources;
they express disappointment that, in the proposal, EPA has reaffirmed
what the commenter termed an unlawful decision made by the previous
administration.  The commenter (0087) then states that the positions
taken by EPA in the Proposed Reconsideration are in contrast to the
mandates of the CAA.

  SEQ CHAPTER \h \r 1 One environmental organization commenter (0095)
asserts that EPA’s Reconsideration of the PSD Interpretive Memo
suffers from the same defects of the original Memo, and introduces new
areas of concern.  According to the commenter, the reconsideration
proposal simply restates the policy preferences of the original Memo,
while offering no legal support for EPA’s decision to ignore the plain
language of the CAA, and instead, it reiterates the agency’s position
that “past policy and practice” and a variety of administrative
preferences somehow support the idea that Congress meant the term
“regulation” in section 165 of the CAA to mean “actual control of
emissions,” even though Congress distinguished between “control”
of emissions and “regulation” throughout the CAA.

Response:

EPA has made a final decision to continue applying (with one limited
refinement) the Agency’s existing interpretation of 40 CFR
52.21(b)(50) that is articulated in the PSD Interpretive Memo.  For
reasons explained further below, EPA has concluded that the “actual
control interpretation” is a permissible interpretation of the CAA and
is the most appropriate interpretation to apply given the policy
implications.  EPA has not been persuaded that the Agency is compelled
by the CAA, the terms of EPA regulations, or prior EPA action to apply
any of the four alternatives to its preferred interpretation described
in the October 7, 2009 notice – monitoring and reporting requirement,
EPA-approved SIP, endangerment finding, or CAA section 209 waiver.  EPA
has likewise not been persuaded that all of the alternative
interpretations are precluded by the CAA.  However, since Congress has
not precisely spoken to this issue, EPA has the discretion to choose
among the range of permissible interpretations of the statutory
language.  Since EPA’s interpretation of the regulations is not
precluded by the statutory language, we are electing to maintain that
interpretation on policy grounds.  We have concluded that the “actual
control” interpretation is not only consistent with decades of past
practice, but provides the most reasonable and workable approach to
developing an appropriate regulatory scheme to address newly identified
pollutants of concern.  Thus, except as to the one element that EPA
proposed to modify, EPA is reaffirming the PSD Interpretive Memo and its
establishment of the actual control interpretation as EPA’s definitive
interpretation of the phrase “subject to regulation” under the PSD
provisions in the CAA and EPA regulations.

The actual control interpretation is supported by the language and
structure of the regulations and is consistent with past practice in the
PSD program and prior EPA statements regarding pollutants subject to the
PSD program.  The CAA is most effectively implemented by making PSD
emissions limitations applicable to pollutants after a considered
judgment by EPA (or Congress) that particular pollutants should be
subject to control or limitation.  The actual control interpretation
promotes the orderly administration of the permitting program by
allowing the Agency to first assess whether there is a justification for
controlling emissions of a particular pollutant under relevant criteria
in the Act before applying the requirements of the PSD permitting
program to a pollutant.

EPA responds to more specific points raised by these commenters
elsewhere in this document.

3.2.    Interpretation of the Clean Air Act

Comment:

One commenter (0110) states that they generally agree with the
conclusions EPA draws in the Reconsideration and those originally made
by former EPA Administrator Stephen Johnson in his December 18, 2008
memorandum interpreting the applicability of CAA regulations that
determine when pollutants become covered by the PSD permit program (PSD
Interpretive Memorandum).  Both documents appropriately interpret the
phrase “subject to regulation” in sections 165(a)(4) and 169 of the
CAA, and in the definition of “regulated [New Source Review (NSR)]
pollutant” in 40 CFR 52.21(b)(50).

Commenter (0107) stated that, in Massachusetts v. EPA, the Supreme Court
ruled that the definition of “pollutant” under the CAA is extremely
broad and encompasses many substances that may or may not be necessary
for EPA to regulate unless the Administrator determines that they
endanger the public or the environment.  Commenter (0107) further stated
that, unless a pollutant has been subject to “actual controls,”
there would be no regulatory basis for determining that emissions of the
pollutant should be reduced under another regulatory program such as
PSD.

Another industry commenter (0080) supports the legal and policy
rationales proffered by EPA in the proposed PSD Interpretation, but
added that the legal rationale should focus more broadly on the meaning
of the phrase “subject to regulation” within the PSD statutory
program and the CAA as a whole.  Referring to Crandon v. U.S., 494 U.S.
152, 158 (1990), citing K Mart Corp. v. Carrier, Inc., 486 U.S. 281, 291
(1988); Dolan v. United States Postal Service, 546 U.S. 481, 486 (2006);
and Holloway v. U.S., 526 U.S. 1, 6 (1999), this commenter (0080)
indicated that a basic maxim of statutory construction is that one must
look not only at the particular statutory language, but also consider
the purpose and context of the whole statute.  The commenter (0080) also
noted that the purpose of the CAA is to “protect and enhance the
quality of the Nation’s air resources so as to promote public health
and welfare and the productive capacity of its population.”  CAA
section 101(b)(1).

The commenter (0080) asserts that interpreting the phrase “subject to
regulation” as “subject to regulation that restricts emissions”
fits within the statute because EPA is only authorized to restrict
emissions of  air pollutant where the EPA has made an endangerment
finding (or where Congress has implicitly done so, as in the case of
Title VI).

This industry commenter (0080) states that Massachusetts v. EPA
confirmed the basic structure of the CAA under which first there is an
EPA endangerment finding and then there is regulation.  The commenter
(0080) added that under Massachusetts, EPA may not regulate GHGs simply
because they are “air pollutants” under the Act; it must first find
a danger to public health or welfare.  The commenter (0080) indicates
that the Massachusetts v. EPA Petitioners (which included some of the
Petitioners in this reconsideration) specifically recognized the
requirement for an endangerment finding under section 202, but now the
Petitioners seek to convince EPA that EPA should engage in GHG
regulation even without an endangerment finding.  Considering the
context of the PSD program and the CAA as a whole, the commenter (0080)
finds absurd the Petitioners’ contention that various actions taken by
EPA, even before EPA determined that CO2 endangers health or welfare and
even before EPA decided to require that any emitter should be required
to reduce emissions, should be interpreted as triggering CO2 BACT for a
potentially very large number CO2 emitters.

One industry group commenter (0071) states that the placement of the
phrase “subject to regulation” within the statute requiring BACT
limits strongly suggest that the phrase refers to presently controlled
(and thus “regulated”) pollutants.  See CAA §§165(a)(4), 169(3),
42 U.S.C. 7475(4), 7479(3).  The commenter states that the approach that
EPA has taken to implement the statutory PSD program in the PSD
Interpretive Memo is well within the scope of EPA’s authority to
implement the PSD program (cited Alabama Power Co. v. Costle, 606F. 2nd
1068, 1077 (D.C. Cir 1979) (describing the “flexibility” and
“latitude” EPA has in fashioning PSD regulations); and Envtl. Def.
v. Duke Energy Corp., 127 S. Ct. 1423, 1433-1434 (2007) (legislative
history does not suggest Congress “had details of regulatory
implementation in mind when it imposed PSD requirements on modified
sources”).

A commenter (0093) points out that the term “subject to regulation”
should not be applied more broadly than where referenced in the CAA at
42 U.S.C. §7475(a)(4) which applies to the determination of BACT for
sources that have otherwise triggered PSD applicability.  The commenter
refers EPA to the comments of the American Petroleum Institute (API),
the Texas Industry Project (TIP) and the National Environmental
Development Association Clean Air Project (NEDA/CAP) for further
discussion of the inferiority and unreasonableness of alternate
potential interpretations of “subject to regulation.”

One commenter (0086), representing several groups of companies
(industry), states that the “actual control” interpretation is the
most plausible reading to “subject to regulation” and gave
counter-arguments to some other textual constructions.

One industry commenter (0056) states that the petitioners misread the
decision by the U.S. EAB in the matter of the PSD permit appeal for the
Deseret Power Plant, arguing that EPA lacked the authority to interpret
the phrase “subject to regulation” in Subpart C of Title I of the
CAA.  Petitioners demanded that EPA reconsider and retract the PSD
Interpretive Memo because it was inconsistent with the plain language of
the CAA and it had not been issued consistent with public participation
procedures in the law.  This commenter states that petitioners also
argue that when EPA’s EAB reviewed the same issue in the permit
proceeding for a construction of a new EGU at the Deseret power plant in
Utah, EAB found that the EPA did not have discretion to make the
“actual control” interpretation.  The permit was remanded back to
the permitting authority in Region 8 because EAB found that EPA
improperly cited an interpretation for historical precedent which did
not support a finding that EPA had historically interpreted the phrase
as a pollutant subject to “actual control.”

Ten industry commenters (0089 and others incorporating this submission
(0065, 0067, 0081, 0083, 0090, 0096, 0106/0107, 0108, 0109)) note that
the only judicial decisions addressing this issue have adopted or
affirmed EPA’s actual control interpretation and have rejected other
interpretations advanced by litigants that challenged application of
that interpretation.  See, e.g., Longleaf Energy Associates v. Friends
of the Chattahoochee, 681 S.E.2d 203 (Ga. Ct. App. 2009) (reversing a
lower court’s decision to the contrary), cert. denied, Case No.
S09C1879 (Ga. S. Ct., Sept. 28, 2009); Appalachian Voices v. State Air
Pollution Control Bd., Case No.: CL08-3530 (Cir. Ct. City of Richmond,
Aug. 10, 2009), appeal pending, Appalachian Voices v. State Air
Pollution Control Bd., No. 2199-09-2 (Va. Ct. App., filed Oct. 1, 2009).

Response:

	EPA agrees that the interpretation of the CAA described in the PSD
Interpretive Memorandum is a permissible reading of the Act, considering
the context of the PSD provisions within the Act as whole.

The PSD Interpretive Memo reasonably applies a common meaning of the
term “regulation” to support a permissible interpretation that the
phrase “pollutant subject to regulation” means a pollutant subject
to a provision in the CAA or a regulation issued by EPA under the Act
that requires actual control of emissions of that pollutant.  Public
comments have not demonstrated the dictionary meanings of the term
“regulation” described in the Memo are no longer accepted meanings
of this term.  In light of the different meanings of the term
“regulation,” EPA has not been persuaded by public comments that the
CAA plainly and unambiguously requires that EPA apply any of the other
interpretations described in the October 7, 2009 notice.

Moreover, the Memo carefully explains how the actual control
interpretation is consistent with the overall context of the CAA in
which sections 165(a)(4) and 169(3) are found.  After consideration of
public comment, EPA continues to find this discussion persuasive.  The
“subject to regulation” language appears in the BACT provisions of
the Act, which themselves require actual controls on emissions.  The
BACT provisions reference the New Source Performance Standards (NSPS)
and other control requirements under the Act, which establish a floor
for the BACT requirement.  See 42 U.S.C. §7479(3).  Other provisions in
the CAA that authorize EPA to establish emissions limitations or
controls on emissions provide criteria for the exercise of EPA’s
judgment to determine which pollutants or source categories to regulate.
 Thus, it follows that Congress expected that pollutants would only be
regulated for purposes of the PSD program after:  (1) the EPA
promulgated regulations requiring control of a particular pollutants on
the basis of considered judgment, taking into account the applicable
criteria in the CAA, or (2) EPA promulgates regulations on the basis of
Congressional mandate that EPA establish controls on emissions of a
particular pollutant, or (3) Congress itself directly imposes actual
controls on emissions of a particular pollutant.  In addition,
considering other sections in the Act that require reasoned
decision-making and authorize the collection of emissions data prior to
establishing controls on emissions, it is also consistent with the
Congressional design to require BACT limitations for pollutants after a
period of data collection and study that leads to a reasoned decision to
establish control requirements.  Public commenters did not demonstrate
that it was erroneous for EPA to interpret the PSD provisions in this
manner, based on the context of the Act.

3.2.1.   Arguments that Plain Language of Act Precludes Actual Control
Interpretation

Comment:

	The commenter (0087) states the proposed Reconsideration, like the
original PSD Interpretive Memo, is devoid of legal support as it ignores
the intent of Congress as evidenced by the plain language of the CAA.

  SEQ CHAPTER \h \r 1 One environment organization commenter (0095)
claims that EPA’s position is inconsistent with the plain language of
the CAA.  EPA proposes to adopt an interpretation of a regulation that
parrots the CAA phrase, “pollutant subject to regulation under this
Act.”  The commenter states that interpretation would “exclude
pollutants for which EPA regulations only require monitoring or
reporting but . . . include each pollutant subject to either a provision
in the CAA or regulation adopted by EPA under the CAA that requires
actual control of emissions of that pollutant.”  The commenter (0095)
continues that section 165(a)(4) of the CAA requires BACT “for each
pollutant subject to regulation under this chapter emitted from . . .
such facility.” 42 U.S.C. §7475(a)(4).  CO2 is regulated under
“this chapter” because section 821 of the CAA Amendments of 1990
required EPA to “promulgate regulations” requiring major sources,
including coal-fired power plants, to monitor CO2 emissions and report
their monitoring data to EPA.  In 1993, EPA promulgated these
regulations, which require sources to monitor CO2 emissions, 40 CFR
75.1(b), 75.10(a)(3), prepare and maintain monitoring plans, id.
§75.53, maintain records, id. §75.57, and report monitoring data to
EPA, id. §75.60-64.

The commenter (0101) states that attempting to distinguish the
overwhelming evidence showing that CO2 is now regulated under the CAA,
EPA concludes that “subject to regulation under the Act” is best
interpreted as those pollutants subject to a nationwide standard,
binding in all states, that EPA promulgates on the basis of its CAA
rulemaking authority.”  See 74 FR at 51543.  The commenter (0101)
opines that with each iteration of its position, EPA moves further away
from the clear import of the CAA’s language and structure.  Neither
the plain meaning of section 165(a)(4) nor the intent and purpose of the
CAA permit such redefinition.  This commenter believes that EPA should
correct – not reaffirm – Administrator Johnson’s erroneous
interpretation.  In accordance with the plain language of the statute,
the PSD program becomes applicable to GHGs and other pollutants whenever
they become “subject to regulation.”  The commenter (0101) opines
that this already has occurred as a result of Massachusetts v. EPA.  In
the case of the PSD program, the statute mandates that permitting be
required for any pollutant that is subject to regulation under this
Act.”  CAA §165(a)(4), 42 U.S.C. §7475(a)(4); see also 40 CFR
52.21(b)(50)(iv) (a “regulated NSR pollutant” is “[a]ny pollutant
that otherwise is subject to regulation under the Act”).  Under
Massachusetts v. EPA, GHGs are “subject to regulation” under the CAA
in any normal sense of the phrase.  Indeed, given that EPA has already
“regulated” GHGs in a number of ways, the statute plainly requires
that permitting for GHGs commence immediately.  EPA has already
regulated GHG in the various ways outlined in the Petition: through a
regulation to monitor or report emissions; through a regulation that
approves the inclusion of regulatory requirements in a SIP; through a
finding that pollutants endanger public health or welfare; or through a
regulation that grants a section 209 waiver.  By any of these measures,
GHGs already are “subject to regulation” under the CAA, and the time
to begin issuing PSD permits for these pollutants already has passed.

According to several other commenters (0067, 0083, 0089, 0090, 0096,
0106/0107, 0108, 0109), those opposing the “actual control”
interpretation incorrectly assert that this interpretation is precluded
by the CAA.  To the contrary, as the EAB stated in Deseret, this
interpretation is a reasonable construction of an ambiguous phrase, and
no contrary interpretation is in any way legally compelled.  See Deseret
at 29.  This is clearly an area where EPA has discretion to interpret
the statute in a reasonable way, consistent with well-established
historical practice, to make PSD implementation manageable and
effective.  Rejection of the “actual control” interpretation would
cause the PSD program to apply in a way that frustrates the objectives
and purposes of the CAA.

Response:

EPA has concluded that the plain language of the CAA does not preclude
EPA from applying the actual control interpretation.  EPA finds the
EAB’s reasoning of in the Deseret opinion to be the most persuasive
and adopts that reasoning here.  The EAB concluded that a statutory
plain meaning cannot be ascertained from looking solely at the word
“regulation” to determine whether Congress, in enacting the statute
in 1977, intended “subject to regulation” to apply narrowly to mean
a provision that prescribes actual control of emissions of the
pollutant, or more broadly to embrace requirements for monitoring of
pollutant emissions, among other things.  It does not appear that, when
it enacted CAA sections 165 and 169 in 1977, Congress considered this
precise issue, or more significantly, drafted language sufficiently
specific to address it.  The phrase “subject to regulation under this
Act” is not as clear and unequivocal as commenters argue.

The use of similar, but not identical, language in section 821 of the
1990 Public Law, which requires the Agency to promulgate
“regulations,” does not constrain the Agency’s ability to
interpret sections 165 and 169.  Commenters argue that the only
supportable reading of sections 165 and 169 mandates that PSD regulatory
authority extends to any pollutant subject to “a” or “any”
regulation promulgated in the CFR because that is the meaning of section
821’s direction to promulgate regulations.  The statutory language
does not compel this meaning.

The argument that sections 165 and 169 have only one proper
interpretation, ignores the fact that Section 821 uses different
terminology, “regulations,” from that used in the PSD provisions of
sections 165 and 169, “subject to regulation.” The difference in
terminology is potentially significant.  When read in the context of the
phrases in which they are used, possible alternative meanings of
“regulation” and “regulations” become apparent.  In the phrase
“the Administrator * * * shall promulgate regulations * * * to require
[sources to monitor CO[2]]” in section 821, the term “regulations”
is understood to be the end product of the administrative rule making
process.  Thus, Congress’ direction that EPA promulgate
“regulations” found at various places in the CAA and in section 821
is most naturally read to mean that Congress directed EPA to use its
legislative rule making authority to implement the statutory
requirements, filling in necessary specificity and detail.  Section 112
of the Act uses the term “subject to regulations,” referring to
“regulations” in the plural. CAA sections 112(r)(3) and
112(r)(7)(F). This evidences that Congress may not have meant “subject
to regulation” (singular) to have the same meaning.

The Supreme Court has observed in other contexts that the same or
similar words may be construed differently “not only when they occur
in different statutes, but when used more than once in the same statute
or even in the same section.”  Envtl. Def. v. Duke Energy Corp., 549
U.S. 561, slip op. at 9 (2007) (quoting Atl. Cleaners & Dyers, Inc. v.
United States, 286 U.S. 427, 433 (1932)). In reviewing the meaning of
the phrase “subject to regulation under this Act” we do not confine
ourselves “to examining a particular statutory provision in
isolation.” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132
(2000). Rather, “[t]he meaning -- or ambiguity -- of certain words or
phrases may only become evident when placed in context * * *. It is a
‘fundamental canon of statutory construction that the words of a
statute must be read in their context and with a view to their place in
the overall statutory scheme.’” Id. at 132-33.

We find no evidence that Congress’s addition of section 821 in 1990
was an attempt to interpret or constrain the Agency’s interpretation
of the broader phrase “subject to regulation” as used in sections
165 and 169.  See 136 Cong. Rec. H2915, 2934 (1990) (statement of Rep.
Moorhead), reprinted in S. Comm. on Env’t and Public Works,
Legislative History of Clean Air Act Amendments of 1990, at 2986-87
(1993); 136 Cong. Rec. H2511, 2578 (1990) (statement of Rep. Cooper),
reprinted in S. Comm. on Env’t and Public Works, Legislative History
of Clean Air Act Amendments of 1990, at 2652-53 (1993); 136 Cong. Rec.
H2511, 2561-62 (1990) (statement of Rep. Moorhead), reprinted in S.
Comm. on Env’t and Public Works, Legislative History of Clean Air Act
Amendments of 1990, at 2612-14 (1993).  Section 821 bears no facial
relationship to the PSD provisions of sections 165 and 169. Congress’s
subsequent use of the word “regulations” in a section of the 1990
Public Law that bears no explicit relationship with the earlier-enacted
sections would not appear sufficient, on its own, to implicitly
constrain EPA’s authority to interpret the PSD provisions of section
165 and 169. This is particularly true where, as here, the two sections
were enacted 13 years apart, bear no obvious relationship, and are not
even placed in close proximity. Moreover, the Agency did determine, in
1978 that the phrase “subject to regulation under this Act” used in
the PSD provisions requires interpretation to properly implement the PSD
program, and Congress did not evidence an intent in section 821 to alter
the Agency’s determination.  Normally, more express terminology would
be expected if Congress intended to alter an established meaning.

 Moreover, since section 821 was enacted 13 years after sections 165 and
169, Congress’ use of the term “regulations” in enacting section
821 in 1990 ordinarily would not be looked to as informative of what
Congress intended when much earlier in 1977 it enacted the BACT
requirement. Int’l Bhd. of Teamsters v. Daniel, 439 U.S. 551, 571
(1979) (Burger, C.J., concurring) (understanding of draftsman of
amendment in 1970 “would have little, if any, bearing” on
“construction of definitions enacted in 1933 and 1934”); United
States v. Price, 361 U.S. 304,332(1960) (“The views of a subsequent
Congress form a hazardous basis for inferring the intent of an earlier
one.”)

3.2.2.   Meaning of the Term “regulation”

Comment:

One industry group commenter (0071) opines that an agency’s
interpretation of a statute should focus first on the ordinary
dictionary meaning of the terms used (see, e.g., MCI Telecommunications
Corp. v. AT&T, 512 U.S. 218, 225-28 (1994).  This commenter states that
monitoring emissions does not fit within any of the types of activities
understood to constitute “regulation” of those emissions in the
ordinary meaning of that term, and nothing in the phrase “subject to
regulation” compels a contrary reading to the “actual control”
interpretation.

	A state/local agency association (0058) who agrees with EPA’s
position notes that the PSD Interpretive Memo relies in part on the
Black’s Law Dictionary definition of “regulation.”  The commenter
(0058) reconciles that while EPA’s CO2 monitoring rule is a
“regulation” in the second sense, the pollutant CO2 is not
“subject to” regulation because EPA’s regulation does not in any
way limit CO2; instead, the source operator is the one subject to
regulation because he is required to monitor CO2 emissions.  The
commenter notes that while other EPA regulations may also take the form
of applying to the source operator rather than to the pollutant, the
difference is that in those cases the pollutant itself is in some way
controlled, and thus “subject to” the regulation.

Response:

EPA agrees that its interpretation of the CAA should be informed by
ordinary and accepted dictionary meanings of the applicable terms.  As
discussed in the PSD Interpretive Memo, the term “regulation” can be
used to describe a rule contained in a legal code, such as the CFR, or
the act or process of controlling or restricting an activity.  The
primary meaning of the term “regulation” in Black’s Law Dictionary
(8th Ed.)  TA \l "Black’s Law Dictionary (8th Ed.)" \s "Black’s" \c
3   is “the act or process of controlling by rule or restriction.”
However, an alternative meaning in this same dictionary defines the term
as “a rule or order, having legal force, usu. issued by an
administrative agency or local government.”  The primary meaning in
Webster’s dictionary for the term “regulation” is “the act of
regulating: the state of being regulated.”  Merriam-Webster’s
Collegiate Dictionary 983 (10th ed. 2001).  Webster’s secondary
meaning is “an authoritative rule dealing with details of procedure”
or “a rule or order issued by an executive authority or regulatory
agency of a government and having the force of law.”  Webster’s also
defines the term “regulate” and the inflected forms “regulated”
and “regulating” (both of which are used in Webster’s definition
of “regulation”) as meaning “to govern or direct according to
rule” or to “to bring under the control of law or constituted
authority.”  Id.   EPA thus agrees that monitoring of emissions does
not necessarily fit within one ordinary meaning of the term regulation.

Comment:

The Petition for Reconsideration contends that, in the PSD interpretive
Memo, EPA is interpreting the terms “regulation”, “regulate,”
and “regulated” to mean anything the Administrator wants them to
mean, wherever they might appear in any environmental statute or EPA
regulation.

Response:

To the contrary, EPA has applied common and accepted meanings of these
terms (based on several dictionaries), and EPA has carefully considered
the context in which these terms are used in the CAA and EPA
regulations.  EPA does not purport to have the authority to define words
to mean whatever EPA chooses.

3.2.3.   Ambiguity of Statutory Language and EPA Discretion

One environmental group commenter (0101) states that EPA’s
redefinition of the phrase “subject to regulation” is unsupported
and contrary to the CAA’s purpose and intent.  Confronted with a
statute that requires it to take action more expeditiously than it would
otherwise prefer, the commenter claims that EPA has found a regulatory
ambiguity where none exists, and in the process has attempted to avail
itself of a degree of discretion that the statute does not confer—and
in fact precludes.  The commenter (0101) states that the phrase
“subject to regulation” is not ambiguous and it cannot be redefined
to enlarge EPA’s authority beyond the scope of the statute.  EPA’s
interpretation—that a pollutant is not “subject to regulation”
until EPA decides to subject it to nationwide, binding, numerical
emissions control limits — effectively would allow the agency complete
and exclusive control over whether and how GHGs are to be regulated
under the Act.  The commenter (0101) continues that although EPA might
prefer an interpretation that would allow it to proceed only if and when
it sees fit, the statute does not confer any such wide-ranging
authority.

	The commenter (0101) further provides definitions from multiple
dictionaries in support of their interpretation of “subject to” and
notes that of four definitions, only one even partially conveys
immediate and actual control.  The commenter (0101) continues that EPA
has sought to avoid this conclusion by claiming that the term
“regulation” is ambiguous and that the claim is incorrect.  In the
PSD Interpretive Memo, former EPA Administrator Johnson turned to
dictionary definitions of “regulation” to support the claim of
ambiguity, including “a rule contained in a legal code,” “a rule
or order, having legal force, [usually] issued by an administrative
agency or local government,” and “to bring under the control of law
or constituted authority”.  The commenter contends that none of these
definitions suggests that the term “regulation” is ambiguous or
contradictory.

An industry commenter (0059) states that the EPA has argued successfully
before EPA’s EAB in the Deseret Permit Proceeding, that §§165(a)(4)
and 169 of the PSD provisions in Part C of the CAA that refers to when a
pollutant becomes “subject to regulation” are amenable to many
interpretations.  They assert that this is clearly the case where a
Court reviewing the EPA’s interpretation should find under the Supreme
Court’s decision in Chevron USA v. Natural Resource Defense Council
that Congress did not speak on the issue that it will not disturb such
an interpretation unless it finds that it is unreasonable.  They opine
that it is reasonable for EPA to interpret “subject to regulation”
to mean when GHGs become subject to “actual control.”

An industry commenter (0107) states that the Environmental Appeals Board
(EAB) in the Deseret Permit Proceeding concluded that the phrase
“subject to regulation” is ambiguous and that EPA’s construing the
term to mean when GHGs became subject to actual control was both
“reasonable” and “permissible,” and that EAB remanded the
interpretation back to Region 8 (which had justified the interpretation
based on historical EPA interpretations that EAB found were not
supportive of that position).  The commenter asserts, therefore, that
under Chevron, the question before EPA in this action is whether it is
reasonable to construct the statute to trigger PSD for GHGs when a
requirement requires “actual control” of GHGs.  The commenter (0107)
believes that the “actual control” interpretation of the phrase
“subject to regulation” in sections 165(a) (4) and 169 is consistent
with the CAA and reasonable.

Several other commenters (0067, 0083, 0089, 0090, 0096, 0106/0107, 0108,
0109) said that starting from the premise that the statutory phrase is
ambiguous, a finding supported by the EAB in its Deseret decision, EPA
has discretion to interpret the phrase in a manner that is reasonable
and consistent with the Act and its implementation of the PSD program.
Deseret at 29; see also Chevron v. Natural Res. Def. Council, Inc., 467
U.S. 837, 843 (1984).  According to the EAB’s Deseret decision,
EPA’s interpretation is “reasonable” and “‘permissible’ in
light of the [statutory] ambiguity,” and no contrary interpretation is
compelled by the statute.  Deseret at 29.

Response:

The presence of alternative meanings of the terms in the applicable
phrase from the CAA illustrates ambiguity rather than establishing a
plain meaning.  Because the term “regulation” is susceptible to more
than one meaning (described above), there is ambiguity in the phrase
“each pollutant subject to regulation under the Act” that is used in
both sections 165(a)(4) and 169(3) of the CAA.  Commenters have not
demonstrated that the different meanings of the term “regulation”
considered by the EPA are not in fact accepted and commonly-applied
meanings of this term.  In addition, the term “subject to” is also
susceptible to multiple meanings.  One commenter (0101) cited several
meanings of the latter term that give it a conditional or potential
state, but also acknowledged the following meaning of the term
“subject to”:  “being in a position or in circumstances that place
one under the power or authority of another or others.”  There are
also additional dictionary meanings similar to this last one, which
incorporate the idea of “control.”  Several were cited by parties in
briefs to the EAB in the Deseret matter.  See Response Brief of
Permittee Deseret Power Electric Cooperative, In re: Deseret Power
Electric Cooperative, PSD Appeal No. 07-03, Page 8.  Since neither the
term “regulation” or “subject to” has a consistent and plain
meaning, the combination of both these terms in the phrase “subject to
regulation under the Act” results in an ambiguous phrase.

After considering the different dictionary meanings of the term
“regulation,” the EAB was likewise persuaded that “a statutory
plain meaning cannot be ascertained from looking solely at the word
‘regulation.’”  Deseret, Slip Op. at 28-29.  EPA continues to
finds the EAB’s opinion to be thoughtful and well-reasoned.  Thus, EPA
adopts that reasoning here.  Commenters have not provided any
information that demonstrates any error in the EAB’s analysis or
illustrates a plain meaning that was overlooked by the EAB or the
Administrator.

3.2.4.   Pollutants “Subject To” Regulation Are Pollutants That EPA
Has the Authority to Regulate

Comment:

One environmental group commenter (0101) argues that GHGs are presently
subject to regulation because EPA has the authority to regulate them.
The Supreme Court has determined that EPA “has the statutory authority
to regulate the emission” of GHGs.  Massachusetts v. EPA, 549 U.S. at
532 (emphasis added).  At a minimum, then, EPA is authorized to regulate
GHGs. Where such authorization exists, it must be exercised “within
defined statutory limits,” and all of EPA’s “reasons for action or
inaction must conform to the authorizing statute.”  Id., at 532-33. In
the case of the PSD program, the statute mandates that permitting be
required for any pollutant that is subject to regulation under this
Act.” CAA §165(a)(4), 42 U.S.C. §7475(a)(4); see also 40 CFR
52.21(b)(50)(iv) (a “regulated NSR pollutant” is “[a]ny pollutant
that otherwise is subject to regulation under the Act”).  Under
Massachusetts v. EPA, GHGs are “subject to regulation” under the CAA
in any normal sense of the phrase.  The commenter (0101) further
provides definitions from multiple dictionaries in support of their
interpretation of “subject to” and notes that of four definitions,
only one even partially conveys immediate and actual control.  The
commenter (0101) continues that EPA has sought to avoid this conclusion
by claiming that the term “regulation” is ambiguous and that the
claim is incorrect.

	In contrast, one state/local agency association (0062) argues that
interpretation of the phrase “subject to” regulation advocated by
some goes too far – EPA has very broad authority under section 309 of
the CAA to regulate pollution in whatever form it may occur if there is
an imminent and substantial endangerment, and so under section 309 one
could argue that all pollutants are “subject to” regulation;
however, Congress could not have intended the BACT obligation to apply
today to all pollutants that EPA might theoretically have reason to
regulate in the future.  The commenter (0062) believes that this concept
is reinforced by the language of the statute that appears to use the
terms “subject to regulation” and “regulated” interchangeably.

An industry group commenter (0071) states that it is necessary to make
the PSD program workable and to avoid adverse consequences.  One of the
most important practical implications of the PSD Interpretive Memo is
that it relieves facility owners and permitting authorities from having
to consider a virtually limitless set of chemicals that might be emitted
by a source, but that are not subject to any emission limitation or
other controls under the CAA.

Response:

In the context of the PSD provisions of the CAA, EPA believes it would
be unworkable and contrary to Congressional intent for EPA to interpret
the phrase “pollutants subject to regulation under the Act” to
describe any pollutant that EPA has the authority to regulate.  EPA does
not dispute that, when read in isolation, the statutory language is
susceptible to this meaning if one applies the particular dictionary
definitions of “subject to” cited by Commenter 0101.  In certain
contexts, this meaning of “subject to regulation” may be
appropriate.  However, this is not plainly the meaning that Congress
intended for EPA to apply in the context of CAA sections 165 and 169.
Indeed, EPA believes that applying this meaning would frustrate
Congressional intent for reasoned decision making and a considered
judgment by EPA before regulating a pollutant (see discussion above).

Under this reading of the phrase “subject to regulation,” any
emissions that could be considered an air pollutant, and thus could
potentially be subject to regulation under the CAA at any time in the
future, would require an emissions limitation under the PSD program now.
 This is clearly inconsistent with the EAB’s previous observation that
“[n]ot all air pollutants are covered by the federal PSD review
requirements.”  Knauf Fiber Glass, 8 E.A.D. at 162.  If section
165(a)(4) were interpreted to require EPA to establish PSD emission
limits for all pollutants merely capable of regulation in the future,
this would result in an administratively unworkable program.  There
would be almost no bounds to the substances for which permitting
authorities would be required to set PSD limits, especially in light of
the Supreme Court’s reading of what constitutes an “air pollutant”
under the Act.  See Massachusetts v. EPA, 127 S. Ct. at 1460 (finding
that the Act’s “sweeping definition” of air pollutant “embraces
all airborne compounds of whatever stripe”).

The decision in Massachusetts v. EPA did not instantly render CO2
“regulated” under the CAA, hold that CO2 was already regulated, or
direct EPA to regulate CO2 and other GHG emissions under section 202 or
any other section of the Act.  The Supreme Court simply concluded that
CO2 and other GHG emissions are “air pollutants” under section
302(g) of the Act, 127 S. Ct. at 1460, and therefore found that EPA was
not precluded from regulating these substances under section 202 of the
Act, id. at 1462-63.  The Court clearly indicated that the Agency would
have to take additional steps on remand, including making a finding of
endangerment to public health or welfare, before CO2 could become
regulated under CAA section 202.  Id. at 1363.

In addition, we find it informative that Congress titled section 122 of
the Act “listing of certain unregulated pollutants.”  42 U.S.C.
§7422 (emphasis added).  In this section, Congress directs the
Administrator to review relevant information on radioactive pollutants,
cadmium, arsenic, and polycyclic organic matter, in the ambient air, to
determine whether the pollutant will “cause or contribute to air
pollution which may reasonably be anticipated to endanger public
health.”  If the Administrator makes this endangerment type of
finding, the Act directs the Administrator to add the pollutant to a
list under Section 108(a)(1), 112(b)(1)(A), or 111(b)(1)(A).  Section
122 shows that Congress recognized the existence of air pollutants that
are “unregulated” and set forth a scheme wherein the pollutants
would first be subject to an endangerment type finding, then a listing,
and then promulgation of regulations under the appropriate sections of
the Act.  This process in Section 122, is entirely consistent with
EPA’s interpretation in the PSD Interpretive Memorandum.  If any
pollutant that EPA had the authority to regulate were in fact “subject
to regulation,” then the pollutants listed in section 122 would not
have been “unregulated” at the time section 122 was enacted.

In order to carry out their administrative functions, federal agencies
are often afforded broad discretion in interpreting the statutory
requirements and setting regulatory priorities.  Sierra Club v. Thomas,
828 F.2d 783, 798 (D.C. Cir. 1987) (  TA \l "Sierra Club v. Thomas, 828
F.2d 783 (D.C. Cir. 1987)" \s "828 F.2d at" \c 1  finding that given
Congress’ broad mandate to EPA under the CAA, “the Agency cannot
avoid setting priorities” in carrying out its regulatory duties).
Interpreting sections 165 and 169 to invoke PSD requirements for any
substance that EPA could regulate, would usurp EPA’s discretion to
interpret and implement the PSD program under the CAA in an orderly and
reasoned manner.  See generally, Environmental Defense v. Duke Energy
Corp., 127 S. Ct. 1423 (2007)  TA \l "Environmental Defense v. Duke
Energy Corp., 127 S. Ct. 1423 (2007)" \s "Environmental Defense v. Duke
Energy Corp., 127 S. Ct. 1423 (2007)" \c 1   (finding that EPA has
discretion to define relevant statutory terms in the context of
implementing the overall PSD program).  This is an unworkable
interpretation of the Act that would have EPA establish emissions
limitations under the PSD program on the basis of presumed decisions
under other provisions of the Act that the Administrator has not yet
made or developed a record to support.

Comment:

Commenter (0095) argues, to the extent EPA’s references to past
practice are referring to how it has interpreted the phrase “subject
to regulation” elsewhere in the CAA, EPA -- by regulation -- has
previously given the same phrase its plain meaning, a meaning that is in
direct conflict with the interpretation EPA unlawfully promotes here.
Section 209(e)(1) of the CAA provides:

No state or political subdivision thereof shall adopt or attempt to
enforce any standard or other requirement relating to the control of
emissions from either of the following new nonroad engines or nonroad
vehicles subject to regulation under this chapter - (A) New engines
which are used in construction equipment or vehicles or used in farm
equipment or vehicles and which are smaller than 175 horsepower. (B) New
locomotives or new engines used in locomotives.

According to the commenter (0095), if “subject to regulation” means
“subject to actual control of emissions” as EPA asserts it does
here, then section 209(e)(1) must means that states (or localities) are
preempted from imposing emission standards on these engines only after
EPA imposes “actual control of emissions “ from those engines.  But
in its regulations implementing section 209(e), EPA has repeatedly taken
the position that states and localities are categorically preempted from
regulating those engines, regardless of whether EPA has already
subjected those engines to “actual control” of emissions.

Commenter (0095) adds that under section 209(e), all states are
preempted from adopting emissions standards for ``[n]ew engines which
are used in construction equipment or vehicles or used in farm equipment
or vehicles and which are smaller than 175 horsepower’’ or for
``[n]ew locomotives or new engines used in locomotives.”  59 FR 36969,
36970 (July 20, 1994).  This position is the justification for the
formal regulatory definition (id. at 36986-87):

Sec. 85.1603 Application of definitions; scope of preemption.

(a)  For equipment that is used in applications in addition to farming
or construction activities, if the equipment is primarily used as farm
and/or construction equipment or vehicles, as defined in this subpart,
it is considered farm or construction equipment or vehicles.

(b)  States are preempted from adopting or enforcing standards or other
requirements relating to the control of emissions from new engines
smaller than 175 horsepower, that are primarily used in farm or
construction equipment or vehicles, as defined in this subpart.

(c)  States are preempted from adopting or enforcing standards or other
requirements relating to the control of emissions from new locomotives
or new engines used in locomotives.

(d) No state shall enforce any standards or other requirements relating
to the control of emission from new nonroad engines or vehicles except
as provided for in this subpart.

EPA then repeated this interpretation of that phrase three years later:

Under section 209(e): (1) All states are preempted from adopting
emission standards and other requirements for new nonroad engines used
in construction or farm equipment or vehicles which are smaller than 175
horsepower and for new locomotives and new engines used in locomotives;

62 FR at 67733, 67734; December 30, 1997.  At no point in either of
these rulemakings did EPA discuss the phrase “subject to regulation”
or in any way even hint that preemption of state authority hinged on
whether EPA itself had imposed “actual control” of emissions from
these sources.  In fact, EPA did not promulgate emission controls or any
other standard or control for these engines until years later:  June 17,
1994 for the farm and construction equipment standards (59 FR 31306),
and April 16, 1998 for locomotives.  See 63 FR at 18978.

And, as currently codified in the CFR:

States and localities are preempted from adopting or enforcing standards
or other requirements relating to the control of emissions from new
engines smaller than 175 horsepower that are primarily used in farm or
construction equipment or vehicles, as defined in this part.  For
equipment that is used in applications in addition to farming or
construction activities, if the equipment is primarily used as farm
and/or construction equipment or vehicles (as defined in this part), it
is considered farm or construction equipment or vehicles.

40 CFR Sec. 1074.10(a).

Response:

	EPA’s discussion of past practice was in reference to its application
of the PSD permitting requirements, not this prior interpretation of CAA
section 209(e).  EPA does not dispute the commenters summary of EPA’s
previous interpretation of the phrase “subject to regulation” in the
particular context of the preemption provision in CAA section 209(e).
However, EPA does not agree that EPA’s reading of section 209
establishes a plain meaning of the term “subject to regulation” that