									6560-50-P

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-HQ-OAR-2009-0597; FRL-xxxx-x]

Prevention of Significant Deterioration (PSD):  Reconsideration of
Interpretation of Regulations that Determine Pollutants Covered by the
Federal PSD Permit Program

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Notice of reconsideration; proposed rule.

SUMMARY:  In a December 18, 2008 memorandum, EPA established an
interpretation of the regulatory phrase “subject to regulation” that
is applied to determine the pollutants subject to the federal Prevention
of Significant Deterioration (PSD) program under the Clean Air Act (CAA
or Act).  On February 17, 2009, the EPA Administrator granted a petition
for reconsideration of the regulatory interpretation in the memorandum.
However, the Administrator did not grant a request to stay the
memorandum, so the interpretation remains in effect for the federal PSD
program pending completion of this reconsideration action.  This notice
implements the grant of reconsideration by discussing and requesting
public comment on various interpretations of the regulatory phrase
“subject to regulation.” The interpretations discussed in this
notice include our current and preferred interpretation, which would
make PSD applicable to a pollutant on the basis of an EPA regulation
requiring actual control of emissions of a pollutant, as well as
interpretations that would make PSD applicable to a pollutant on the
basis of an EPA regulation requiring monitoring or reporting of
emissions of a pollutants, the inclusion of regulatory requirements for
specific pollutants in an EPA-approved state implementation plan (SIP),
an EPA finding of endangerment, and the grant of a section 209 waiver.
This notice also takes comments on related issues and other
interpretations that could influence this reconsideration.

DATES:  Comments.  Comments must be received on or before [INSERT DATE
60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER].

	Public Hearing.  If anyone contacts EPA requesting a public hearing by
[INSERT DATE 15 DAYS AFTER PUBLICATION IN THE FEDERAL REGISTER], we will
hold a public hearing approximately 30 days after publication in the
Federal Register.

ADDRESSES:  Submit your comments, identified by Docket ID No.
EPA-HQ-OAR-2009-0597, by one of the following methods:

  HYPERLINK "http://www.regulations.gov"  www.regulations.gov :  Follow
the on-line instructions for submitting comments.

Email:    HYPERLINK<EMAIL_ADDRESS><EMAIL_ADDRESS>.

Mail:  Air and Radiation Docket and Information Center, Environmental
Protection Agency, Mailcode: 6102T, 1200 Pennsylvania Ave., NW,
Washington, DC 20460.

Hand Delivery:  Environmental Protection Agency, EPA West Building, Room
3334, 1301 Constitution Ave., NW, Washington, DC.  Such deliveries are
only accepted during the Docket’s normal hours of operation, and
special arrangements should be made for deliveries of boxed information.

	Instructions:  Direct your comments to Docket ID No.
EPA-HQ-OAR-2009-0597.  EPA’s policy is that all comments received will
be included in the public docket without change and may be made
available online at   HYPERLINK "http://www.regulations.gov"
www.regulations.gov , including any personal information provided,
unless the comment includes information claimed to be Confidential
Business Information (“CBI”) or other information whose disclosure
is restricted by statute. Do not submit information that you consider to
be CBI or otherwise protected through   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov  or e-mail. The
HYPERLINK "http://www.regulations.gov"  www.regulations.gov  website is
an “anonymous access” system, which means EPA will not know your
identity or contact information unless you provide it in the body of
your comment. If you send an e-mail comment directly to EPA without
going through   HYPERLINK "http://www.regulations.gov"
www.regulations.gov , your e-mail address will be automatically captured
and included as part of the comment that is placed in the public docket
and made available on the Internet.  If you submit an electronic
comment, EPA recommends that you include your name and other contact
information in the body of your comment and with any disk or CD-ROM you
submit. If EPA cannot read your comment due to technical difficulties
and cannot contact you for clarification, EPA may not be able to
consider your comment.  Electronic files should avoid the use of special
characters, any form of encryption, and be free of any defects or
viruses.  For additional information about EPA’s public docket, visit
the EPA Docket Center homepage at   HYPERLINK
"http://www.epa.gov/epahome/dockets.htm"
http://www.epa.gov/epahome/dockets.htm .

	Docket:  The December 18, 2008 interpretive memorandum, the petition
for reconsideration, and all other documents in the record for this
reconsideration are in Docket ID. No. EPA-HQ-OAR-2009-0597.  All
documents in the docket are listed in the   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov  index.  Although
listed in the index, some information is not publicly available, e.g.,
CBI or other information whose disclosure is restricted by statute.
Certain other material, such as copyrighted material, will be publicly
available only in hard copy. Publicly available docket materials are
available either electronically in   HYPERLINK
"http://www.regulations.gov"  www.regulations.gov  or in hard copy at
the Air and Radiation Docket and Information Center, EPA/DC, EPA West
Building, Room 3334, 1301 Constitution Ave., NW, Washington, DC.  The
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 Public
Reading Room is<PHONE_NUMBER>, and the telephone number for the Air and
Radiation Docket and Information Center is<PHONE_NUMBER>.

Public Hearing:  If a hearing is held, it will be held at the U.S.
Environmental Protection Agency, 1200 Pennsylvania Avenue, Washington,
DC 20004.

FOR FURTHER INFORMATION CONTACT:  Mr. David J. Svendsgaard, Air Quality
Policy Division, Office of Air Quality Planning and Standards (C504-03),
U.S. Environmental Protection Agency, Research Triangle Park, NC 27711;
telephone number:<PHONE_NUMBER>; fax number:<PHONE_NUMBER>; e-mail
address   HYPERLINK<EMAIL_ADDRESS><EMAIL_ADDRESS>.

	To request a public hearing, please contact Ms. Pam Long, Air Quality
Policy Division, Office of Air Quality Planning and Standards (C504-03),
U.S. Environmental Protection Agency, Research Triangle Park, NC 27711;
telephone number:<PHONE_NUMBER>; fax number:<PHONE_NUMBER>; e-mail
address:   HYPERLINK<EMAIL_ADDRESS><EMAIL_ADDRESS>.

SUPPLEMENTARY INFORMATION:

I.	General Information

A.	Does this action apply to me?

Entities affected by this rule include sources in all industry groups.
Entities potentially affected by this rule also include states, local
permitting authorities, and tribal authorities.  The majority of
categories and entities potentially affected by this action are expected
to be in the following groups:

Industry Group	NAICSa

Utilities (electric, natural gas, other systems)

2211, 2212, 2213

Manufacturing (food, beverages, tobacco, textiles, leather)

311, 312, 313, 314, 315, 316

Wood product, paper manufacturing

321, 322

Petroleum and coal products manufacturing

32411, 32412, 32419

Chemical manufacturing

3251, 3252, 3253,3254, 3255, 3256,3259

Rubber product manufacturing

3261, 3262

Miscellaneous chemical products

32552, 32592, 32591, 325182, 32551

Nonmetallic mineral product manufacturing

3271, 3272, 3273, 3274, 3279

Primary and fabricated metal manufacturing

3311, 3312, 3313, 3314, 3315, 3321, 3322, 3323, 3324, 3325, 3326, 3327,
3328, 3329

Machinery manufacturing

3331, 3332, 3333, 3334, 3335, 3336, 3339

Computer and electronic products manufacturing

3341, 3342, 3343, 3344, 3345, 4446

Electrical equipment, appliance, and component manufacturing

3351, 3352, 3353, 3359

Transportation equipment manufacturing

3361, 3362, 3363, 3364, 3365, 3366, 3366, 3369

Furniture and related product manufacturing

3371, 3372, 3379

Miscellaneous manufacturing

3391, 3399

Waste management and remediation

5622, 5629

Hospitals/Nursing and residential care facilities

6221, 6231, 6232,6233, 6239

Personal and laundry services

8122, 8123

Residential/private households		8141

Non-Residential (Commercial)		Not available.  Codes only exist for
private households, construction and leasing/sales industries.

a	North American Industry Classification System.

B.	Where can I get a copy of this document and other related
information?

In addition to being available in the docket, an electronic copy of this
proposal will also be available on the World Wide Web.  Following
signature by the EPA Administrator, a copy of this notice will be posted
on the EPA's New Source Review (NSR) Web Site, under Regulations &
Standards, at   HYPERLINK "http://www.epa.gov/nsr"  www.epa.gov/nsr .

C.	What should I consider as I prepare my comments for EPA?

1.  Submitting CBI.  Do not submit this information to EPA through
HYPERLINK "http://www.regulations.gov"  www.regulations.gov  or e-mail.
Clearly mark the part or all of the information that you claim to be
CBI.  For CBI information in a disk or CD ROM that you mail to EPA, mark
the outside of the disk or CD ROM as CBI and then identify
electronically within the disk or CD ROM the specific information that
is claimed as CBI.  In addition to one complete version of the comment
that includes information claimed as CBI, a copy of the comment that
does not contain the information claimed as CBI must be submitted for
inclusion in the public docket.  Information so marked will not be
disclosed except in accordance with procedures set forth in 40 CFR part
2.  Send or deliver information identified as CBI only to the following
address: Roberto Morales, OAQPS Document Control Officer (C404-02), U.S.
EPA, Research Triangle Park, NC 27711, Attention Docket ID No.
EPA-HQ-OAR-2009-0597.

2.  Tips for preparing your comments.  When submitting comments,
remember to:

Identify the rulemaking by docket number and other identifying
information (subject heading, Federal Register date and page number).

Follow directions - The agency may ask you to respond to specific
questions or organize comments by referencing a Code of Federal
Regulations (CFR) part or section number.

Explain why you agree or disagree; suggest alternatives and substitute
language for your requested changes.

Describe any assumptions and provide any technical information and/or
data that you used.

If you estimate potential costs or burdens, explain how you arrived at
your estimate in sufficient detail to allow for it to be reproduced.

Provide specific examples to illustrate your concerns, and suggest
alternatives.

Explain your views as clearly as possible, avoiding the use of profanity
or personal threats.

Make sure to submit your comments by the comment period deadline
identified.

D.	How can I find information about a possible public hearing?

People interested in presenting oral testimony or inquiring if a hearing
is to be held should contact Ms. Pam Long, New Source Review Group, Air
Quality Policy Division (C504-03), U.S. EPA, Research Triangle Park, NC
27711, telephone number<PHONE_NUMBER>.  If a hearing is to be held,
persons interested in presenting oral testimony should notify Ms. Long
at least 2 days in advance of the public hearing.  Persons interested in
attending the public hearing should also contact Ms. Long to verify the
time, date, and location of the hearing.  The public hearing will
provide interested parties the opportunity to present data, views, or
arguments concerning these proposed rules.

E.	How is the preamble organized?

The information presented in this preamble is organized as follows:

I.  General Information

A.	Does this action apply to me?

B.	Where can I get a copy of this document and other related
information?

C.	What should I consider as I prepare my comments for EPA?

D.	How can I find information about a possible public hearing?

E.	How is the preamble organized?

II.  Background

III. This Action

A. 	Overview

B.	Actual Control of Emissions

C. 	Monitoring and Reporting Requirement

D.	EPA-Approved State Implementation Plan

E.	Finding of Endangerment

F.	Granting of Section 209 Waiver

G.	Timing of Regulation

H. 	Other Issues

IV.	Statutory and Executive Order Reviews

A.	Executive Order 12866 - Regulatory Planning and Review

B.	Paperwork Reduction Act

C.	Regulatory Flexibility Act

D.	Unfunded Mandates Reform Act

E.	Executive Order 13132 - Federalism

F.	Executive Order 13175 - Consultation and Coordination with Indian
Tribal Governments

G.	Executive Order 13045 - Protection of Children from Environmental
Health Risks and Safety Risks

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

I.	National Technology Transfer and Advancement Act

J.	Executive Order 12898 - Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations

V.	Statutory Authority

II.  Background

On December 18, 2008, in order to address an ambiguity that existed in
the federal PSD regulations, then-EPA Administrator Stephen Johnson
issued a memorandum setting forth the official EPA interpretation
regarding which pollutants were “subject to regulation” for the
purposes of the federal PSD permitting program.  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 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).

In Massachusetts v. EPA, the Supreme Court held that greenhouse gases
(GHGs), including carbon dioxide (CO2), are air pollutants under the
CAA.  The case arose from EPA’s denial of a petition for rulemaking
filed by more than a dozen environmental, renewable energy, and other
organizations requesting that EPA control emissions of GHGs from new
motor vehicles under section 202 of the CAA.  The Court found that in
accordance with CAA section 202(a), the Administrator was required to
determine whether or not emissions of GHGs from new motor vehicles cause
or contribute to air pollution which may reasonably be anticipated to
endanger public health or welfare, or whether the science is too
uncertain to make a reasoned decision.

On August 30, 2007, EPA Region VIII issued a PSD permit to Deseret Power
Electric Cooperative, authorizing it to construct a new waste-coal-fired
electric generating unit near its existing Bonanza Power Plant, in
Bonanza, Utah.  Final Air Pollution Control Prevention of Significant
Deterioration (PSD) Permit to Construct, Permit No. PSD-OU-0002-04.00,
Deseret Power Electric Cooperative (Aug. 30, 2007).  The Deseret PSD
permit did not include best available control technology (BACT) limits
for CO2.  In responding to comments received during the permitting
process, the Region acknowledged the Massachusetts decision but found
that decision alone did not require PSD permits to include limits on CO2
emissions.  Region VIII explained that the requirement for PSD permits
to contain BACT emissions limitations for each pollutant “subject to
regulation” under the CAA, as found in the CAA section 165(a)(4) and
40 CFR 52.21(b)(12), did not apply to CO2 emissions because the Agency
had historically interpreted the phrase “subject to regulation” to
“describe pollutants that are presently subject to a statutory or
regulatory provision that requires actual control of emissions of that
pollutant.”  Region VIII explained that EPA codified this approach by
defining the term “regulated NSR pollutant” in 40 CFR 52.21(b)(50)
and requiring BACT for “each regulated NSR pollutant” in 40 CFR
52.21(j)(2). See Response to Public Comments on Draft Air Pollution
Control Prevention of Significant Deterioration (PSD) Permit to
Construct, Permit No. PSD-OU-0002-04.00 (Aug. 30, 2007) at 5-6.

On November 13, 2008, the Environmental Appeals Board (EAB) issued a
decision in a challenge to the Deseret PSD permitting decision.  In re
Deseret Power Electric Cooperative, PSD Appeal No. 07-03 (EAB Nov. 13,
2008) (“Deseret”).  In briefs filed in that case, Region VIII and
the EPA Office of Air and Radiation maintained the position that the
Agency had a binding, historic interpretation of the phrase “subject
to regulation” in the federal PSD regulations that required PSD permit
limits to apply only to those pollutants already subject to actual
control of emissions under other provisions of the CAA.  Response of EPA
Office of Air and Radiation and Region VIII to Briefs of Petitioner and
Supporting Amici (filed March 21, 2008).  Accordingly, these EPA offices
argued that the regulations contained in 40 CFR Part 75, which require
monitoring of CO2 at some sources, did not make CO2 subject to PSD
regulation.  The order and opinion issued by the EAB remanded the permit
after finding that prior EPA actions were insufficient to establish a
historic, binding interpretation that “subject to regulation” for
PSD purposes included only those pollutants subject to regulations that
require actual control of emissions.  However, the EAB also rejected
arguments that the CAA compelled only one interpretation of the phrase
"subject to regulation" and found "no evidence of a Congressional intent
to compel EPA to apply BACT to pollutants that are subject only to
monitoring and reporting requirements."  Thus, the Board remanded the
permit to the Region to "reconsider whether or not to impose a CO2 BACT
limit in light of the ‘subject to regulation’ definition under the
CAA."  The Board encouraged EPA to consider “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.” See Deseret at 63-64.

Shortly thereafter, in order to address the ambiguity that existed in
the federal PSD program following the EAB’s Deseret decision, then-EPA
Administrator Stephen Johnson issued the PSD Interpretive Memo.  The
Memo sets forth the official EPA interpretation regarding which
pollutants are “subject to regulation” for the purposes of the
federal PSD permitting program, interpreting the phrase 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,” while excluding pollutants “for which EPA
regulations only require monitoring or reporting.”  Memo at 1.

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.
Petition for Reconsideration, In the Matter of: EPA Final Action
Published at 73 FR 80300 (Dec. 31, 2008), entitled “Clean Air Act
Prevention of Significant Deterioration (PSD) Construction Permit
Program; Interpretation of Regulations That Determine Pollutants Covered
by the Federal PSD Permit Program.”  Petitioners argued that the PSD
Interpretive Memo “was impermissible as a matter of law, because it
was issued in violation of the procedural requirements of the
Administrative Procedures Act. . . and the Clean Air Act. . ., it
directly conflicts with prior agency actions and interpretations, and it
purports to establish an interpretation of the Act that conflicts with
the plain language of the statute.”  Petition at 2.  Accordingly,
Petitioners requested that EPA reconsider and retract the PSD
Interpretive Memo.  Petitioners later amended their Petition for
Reconsideration to include a request to stay the effect of the Memo
pending the outcome of the reconsideration request.  Amended Petition
for Reconsideration (filed Jan. 6, 2009).

On February 17, 2009, the EPA Administrator granted the Petition for
Reconsideration on the PSD Interpretive Memo, citing to the authority
under the Administrative Procedures Act, and announced her intent to
conduct a rulemaking to allow for public comment on the issues raised in
the Memo and on any issues raised by the opinion of the EAB’s Deseret
decision, to the extent they do not overlap with the issues raised in
the Memo.  Administrator Jackson did not stay the effectiveness of the
PSD Interpretive Memo pending reconsideration, but she did re-iterate
that the Memo “does not bind States issuing [PSD] permits under their
own State Implementation Plans.”  See Letter from Lisa P. Jackson, EPA
Administrator, to David Bookbinder, Chief Climate Counsel at Sierra Club
(Feb. 17, 2009) at 1.

III.	This Action

A.	Overview

In accordance with the Administrator’s February 17, 2009 letter
granting reconsideration, in the sections that follow, we summarize the
interpretation contained in the PSD Interpretive Memo regarding when a
pollutant becomes “subject to regulation” for the purposes of
applying PSD program requirements and the Memo’s arguments in support
of that interpretation, as well as a summary of Petitioners’ main
arguments in favor of alternative interpretations, and request public
comment on those interpretations.  Specifically, this reconsideration
action addresses five interpretations of the regulatory phrase
“subject to regulation” – the actual control interpretation
adopted by the PSD Interpretive Memo; the monitoring and reporting
interpretation advocated by Petitioners; the inclusion of regulatory
requirements for specific pollutants in SIPs, which is discussed in both
the PSD Interpretive Memo and the Petition for Reconsideration; an EPA
finding of endangerment, which is discussed in the PSD Interpretive
Memo; and the grant of a section 209 waiver, which was raised by
commenters in another EPA action.  EPA is also addressing other issues
raised in the PSD Interpretive Memo and related actions that may
influence the present reconsideration and request for public comment, as
necessary.

Of the five interpretations described in this reconsideration, the EPA
continues to favor the “actual control interpretation,” which
remains in effect at this time.  As explained in the following section,
the actual control interpretation best reflects our past policy and
practice, is in keeping with the structure and language of the statute
and regulations, and best allows for the necessary coordination of
approaches to controlling emissions of newly identified pollutants.
While the other interpretations described herein may represent
alternatives for interpreting “subject to regulation,” no particular
one is compelled by the statute, nor did the EAB determine that any one
of them was so compelled.  Because we have overarching concerns over the
policy and practical application of each of the other interpretations,
as discussed in more detail later in this notice, we are inclined to
adopt the actual control interpretation as our final interpretation.
Nevertheless, in this notice, we are requesting comment on a wide range
of issues related to each of these interpretations and will carefully
consider those comments before reaching a final decision.

As a general matter, the stated 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
Prevention of Significant Deterioration (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.’”
Memo at 1.  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 EAB has already determined that “the meaning of the term
‘subject to regulation under this Act’ as used in [CAA] sections 165
and 169 is not so clear and unequivocal as to preclude the Agency from
exercising discretion in interpreting the statutory phrase” in
implementing the PSD program.  Deseret at 63.

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.”  The Memo states that
“EPA has not previously issued a definitive interpretation of the
definition of ‘regulated NSR pollutant’ in section 52.21(b)(50) or
an interpretation of the phrase ‘subject to regulation under the
Act’ that addressed whether monitoring and reporting requirements
constitute ‘regulation’ within the meaning of this phrase.”  The
Memo, however, explains that the interpretation reflects the
“considered judgment” of then-Administrator Johnson regarding the
PSD regulatory requirements and is consistent with both historic Agency
practice and prior statements by Agency officials.  See Memo at 1-2.

The Petition for Reconsideration generally argues that the
interpretation in the Memo “misconstrues the plain language of the
Act, adopts impermissible interpretations of existing regulations, and
ignores the distinct purpose of the PSD program.”  Petitioners assert
that the PSD Interpretive Memo “attempts to revive a definition [of
“subject to regulation”] that the EAB found was not supported by any
prior interpretation of the statute.”  The Petition also claims that
CO2 is a pollutant “subject to regulation” for the purposes of the
PSD program because CO2 emissions are already regulated under an
existing SIP and existing monitoring and reporting requirements.  See
Petition at 9-10.

Although EPA issued the Memo after the EAB’s Deseret decision, which
specifically concerned whether CO2 emissions should be considered
“subject to regulation,” the PSD Interpretive Memo establishes an
interpretation of “subject to regulation” that applies generally to
the PSD program and the treatment of all pollutants under that program.
Petitioners requested reconsideration of the entire PSD Interpretive
Memo, but their arguments primarily address the Memo’s application to
CO2 and only address the broader applicability of the PSD program to
other pollutants as a secondary matter.  Issues of general and specific
PSD applicability are somewhat interchangeable, but it is important to
address the pollutant applicability issue for the PSD program as a
whole.  Accordingly, Petitioners primarily address the application of
the various interpretations to CO2, we will generally focus this
reconsideration on the application of the interpretation of the
definition of “subject to regulation” to all pollutants, instead of
focusing on the specific applicability to CO2 or GHGs, including
particular actions that Petitioners argue have triggered PSD
requirements for those pollutants.  This will allow us to uniformly
apply the final interpretation in the future as new pollutants become
potentially “subject to regulation.”

B.	Actual Control of Emissions

The PSD Interpretive Memo established that EPA will interpret the
“subject to regulation” provision of the “regulated NSR
pollutant” definition “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.” (Hereinafter, referred to as the “actual control
interpretation.”)  In so doing, the Memo observes that the EAB
rejected claims that the language of the CAA compelled only one
interpretation of the phrase “subject to regulation,” and instead
found that the phrase is ambiguous.

The PSD Interpretive Memo explains that the “structure and language of
EPA’s definition of ‘regulated NSR pollutant’ at 40 CFR
52.21(b)(50)” supported the actual control interpretation.  The Memo
discusses how the first three parts of the definition describe
pollutants that are subject to regulatory requirements that mandate
control or limitation of the emissions of those pollutants, which
suggests that the use of “otherwise subject to regulation” in the
fourth prong also intended some prerequisite act or process of control.
The Memo also explains that the definition’s use of “subject to
regulation” should be read in light of the primary meaning of
“regulation” in various dictionaries, which each used or
incorporated a control requirement.  See Memo at 6-9.

	The PSD Interpretive Memo observes that the actual control
interpretation is consistent with EPA’s broad responsibilities under
the CAA.  The Memo explains that the actual control interpretation gives
a broad scope to the PSD permitting program while instilling
“reasonable boundaries” for administration of the program in an
“effective, yet manageable,” way.  The Memo also explains that
important policy concerns support application of PSD requirements only
after actual control requirements are in place under another part of the
Act, because the actual control interpretation:  (1) allows the Agency
to assess “whether there is a justification for controlling” those
emissions based on relevant criteria in the Act; (2) provides an
opportunity for public notice and comment when a new pollutant is
proposed to be regulated under other portions of the Act; (3) promotes
“the orderly administration of the permitting program by providing an
opportunity for EPA to develop regulations to manage the incorporation
of a new pollutant into the PSD program”; (4) preserves EPA’s
“ability to gather information to inform the Administrator’s
judgment regarding the need to establish controls on emissions”; and
(5) safeguards the Administrator’s authority to require such controls
on individual pollutants under other portions of the Act before
triggering PSD requirements.  Finally, the Memo clarifies that while the
“subject to regulation” interpretation issue had been raised in the
context of CO2 emissions, “adoption of [the actual control]
interpretation is also necessary to preserve EPA’s ability to collect
emissions data on other pollutants for research and other purposes,”
both now and in the future, without triggering the requirements of the
PSD permitting program.  See Memo at 9-10.

	The PSD Interpretive Memo next describes how an actual control
interpretation of “subject to regulation” is “consistent with the
historic practice of the Agency and with prior statements by Agency
officials.”  The Memo explains that 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.  The Memo
also articulates that in 1998, well after promulgation of the CO2
monitoring regulations, the EPA found CO2 to be a pollutant under the
Act and stated that EPA had the authority to regulate it, but found
“the Administrator has made no determination to date to exercise that
authority under the specific criteria provided under any provision of
the Act.”  The PSD Interpretive Memo explains that the 1978 Federal
Register notice promulgating the initial PSD regulations, which stated
that pollutants “subject to regulation” in the PSD program included
“any pollutant regulated in Subchapter C of Title 40 of the Code of
Federal Regulations,” is not inconsistent with the actual control
interpretation because actual control could be inferred by the specific
list of regulated pollutants that followed the reference to 40 CFR.  See
Memo at 10-13.

	Finally, the PSD Interpretive Memo finds that the actual control
interpretation is supported, and not precluded, by the language and
structure of the CAA.  The Memo notes that the EAB had already concluded
that the CAA’s use of the phrase “subject to regulation under this
Act” was ambiguous and susceptible to various interpretations, and
explains that the Board determined that “the terms of the statute do
not preclude reading ‘subject to regulations under this Act’ to mean
‘subject to control’ by virtue of a regulation or otherwise.”  The
Memo argues that the actual control interpretation was consistent with
Congress’ specification that BACT control under PSD “could be no
less stringent than NSPS [i.e., New Source Performance Standards] and
other control requirements under the Act indicates that Congress
expected BACT to apply to pollutants controlled under these programs.”
 The Memo also finds support for the actual control interpretation in
the non-PSD portions of the Act, reasoning that similar to those CAA
sections that authorized the Administrator to establish emissions
limitations or controls under other programs, Congress “expected that
pollutants would only be regulated for purposes of the PSD program after
the Administrator has promulgated regulations requiring control of a
particular pollutants. [sic]”  See Memo at 13-14.

In contrast, the Petition for Reconsideration argues that in putting
forth the actual control interpretation, the PSD Interpretive Memo
“attempts to revive” a definition of “subject to regulation”
that was not supported by the EAB’s Deseret decision.  Petition at
9-10.  With regard to the Memo’s assertion that the interpretation is
supported by the language and structure of the “regulated NSR
pollutant” definition, Petitioners disagree.  The Petition argues that
the Memo placed undue emphasis on the PSD regulation while “[i]n
reality, the [PSD Interpretive] Memo is interpreting the language of the
statute” because the regulation “simply parrots” the language
contained in the Act.  As such, Petitioners claim that the Agency’s
actual control interpretation is not entitled to any deference.
Petitioners also argue that the Memo improperly relied on the other
prongs of the definition in finding an actual control interpretation,
contending that the EAB already rejected that type of analysis and that
the first three prongs referred to a promulgated “standard” (and not
to controls) such that the last prong should apply to pollutants
regulated in some other way than a standard.  See Petition at 18-20.

The Petition asserts that the PSD Interpretive Memo improperly relies on
a number of Agency documents in arriving at the actual control
interpretation.  Petitioners argue that the EAB already determined that
“the only relevant interpretation of the applicable statutory and
regulatory language was to be found in EPA’s 1978 PSD rulemaking”
(emphasis in original) and that the 1978 preamble interpretation
“directly contradicted EPA’s theory” regarding an actual control
interpretation.  Petitioners also note that the EAB determined that the
interpretation of “subject to regulation” found in the 1978 preamble
language suggests that the phrase includes “any pollutant covered by a
regulation in Subchapter C of Title 40 of the CFR, such as CO2.”
Petitioners argue that the Memo improperly attempts to alter the
still-applicable 1978 interpretation because the EAB already rejected
reliance on the types of control requirements identified following the
“subject to regulation” sentence in the 1978 preamble, and because
there is no ambiguity in the language used in the 1978 preamble’s
interpretation.  See Petition at 3 and 15-18.

The Petition for Reconsideration also contends that the PSD Interpretive
Memo ignores the plain language of the CAA because CO2 is clearly
“subject to regulation under the Act.”  With regard to the EAB’s
finding of ambiguity in the Act’s use of “subject to regulation,”
Petitioners simply note that “[t]o the extent the EAB declined to hold
that the PSD provision requires use of BACT for CO2 emissions,
[Petitioners] disagree with the Board’s decision in that case.”
Petition at footnote 10.  Petitioners assert that the Memo’s reliance
on the structure of the CAA contradicts the broad purpose of regulation
under the PSD program.  The Petition asserts that Congress
“deliberately established a much lower threshold” for requiring PSD
control mechanisms than they did when “establishing generally
applicable standards such as the NAAQS, [NSPS], or motor vehicle
standard.”  Petition at 21.

With this reconsideration, we note the policy and legal arguments stated
in the PSD Interpretive Memo, and summarized above, for the actual
control interpretation.  This interpretation remains our preference for
a number of reasons.  The Memo explains that this interpretation best
reflects our past policy and practice, as applied consistently over the
years.  The Memo also describes why such an interpretation allows for a
more practical development of regulations and guidance concerning
control of pollutants once they are determined to endanger public health
or welfare.  Triggering PSD prior to a judicious review of the
pollutant’s health and environmental effects, as well as its emission
characteristics and control options for different source types, could
lead to serious implementation consequences for the program as a whole.
As part of this reconsideration, we request comment on whether the
policy concerns EPA described in the PSD Interpretive Memo, as well as
those noted in the Petition for Reconsideration, are also of concern to
commenters.

For example, the Memo notes the importance of providing EPA the time to
collect and assess data on newly identified pollutants prior to
undertaking PSD reviews and determining emission control requirements.
Without this time, the EPA’s ability to make regulatory decisions that
are based on analysis of a robust and relevant dataset on a pollutant
would be significantly hampered.  Furthermore, without this prior review
period, individual technical BACT reviews could be time-consuming due to
the need to research and develop the generally available emission
control options for a new pollutant about which this information is not
well known.  Triggering PSD with actual control interpretation would
also allow EPA to review and promulgate a significant emissions rate
(SER) for a pollutant before it would be subject to PSD permitting
requirements, so that de minimis increases in emissions are not
automatically captured, thus hindering efficient implementation of the
program.  Thus, the actual control interpretation allows the greatest
opportunity for the EPA to address whether and how a pollutant should be
“subject to regulation” based on the promulgation of more general
control requirements.

This opportunity extends not only to CO2 and other GHGs, but to non-GHG
pollutants that may, in the future, become regulated NSR pollutants.
Therefore, we request comment on the importance of affording EPA the
necessary time to study and evaluate the emissions characteristics and
control options for new pollutants prior to making emissions of those
pollutants subject to PSD permitting requirements.  Similarly, we ask
for comment on the extent to which the availability of such time under
the actual control interpretation should weigh in our consideration of
whether to adopt this approach.  Finally, we seek comment on any other
policy factors we should consider that are not addressed in the Memo or
the Petition for Reconsideration that would weigh for or against the
actual control interpretation.

C.	Monitoring and Reporting Requirement

In addition to finding that the actual control interpretation should be
applied to the federal PSD program, the PSD Interpretive Memo also
rejects an interpretation of “subject to regulation” in the
regulated NSR pollutant definition that would have applied to pollutants
for which EPA regulations only require monitoring or reporting.
(Hereinafter, referred to as the “monitoring and reporting
interpretation.”).  The Memo begins by noting that the EAB’s Deseret
decision found “no evidence of a Congressional intent to compel EPA to
apply BACT to pollutants that are subject only to monitoring and
reporting requirements.”  Memo at 4.  The Memo finds such an
interpretation is inconsistent with important policy considerations,
past Agency practice and statements, and an overall reading of the CAA.

In describing policy concerns arising from the monitoring and reporting
interpretation, the PSD Interpretive Memo explains that “requiring
[PSD emissions] limitations automatically for pollutants that are only
subject to data gathering and study would frustrate EPA’s ability to
accomplish several objectives of the Clean Air Act.”  The Memo
explains that administration of the CAA’s pollutant control programs
relies on reasoned decision-making that is often based on collection of
emissions data under CAA section 114(a)(1).  The Memo predicts that
adopting the monitoring and reporting interpretation would impair
EPA’s decision-making, leading to the “perverse result” of
requiring PSD limits for a pollutant while the Agency is still deciding
whether to establish controls on that pollutant under other parts of the
Act.  The Memo also stresses that the monitoring and reporting
interpretation had broader implications than PSD limits for CO2 because
it would apply to other pollutants that may emerge in the future.  See
Memo at 9-10.

	The PSD Interpretive Memo also finds that the monitoring and reporting
interpretation is inconsistent with past agency practice because “EPA
has not issued PSD permits containing emissions limitations for
pollutants that are only subject to monitoring and reporting
requirements,” including CO2 emissions.   The Memo determines that the
monitoring and reporting interpretation is not required under the 1978
preamble language, explaining that the preamble language could be
interpreted in a variety of ways and “did not specifically address the
issue of whether a monitoring or reporting requirement makes a pollutant
‘regulated in’ [Subpart C of Title 40] of the Code of Federal
Regulations.” See Memo at 11-12.

	Finally, the PSD Interpretive Memo articulates that the monitoring and
reporting interpretation is not required by the language of the CAA.
The Memo emphasizes that the EAB rejected arguments that the language of
the CAA required application of the monitoring and reporting
interpretation, instead finding “no evidence of Congressional intent
to compel EPA to apply BACT to pollutants that are subject only
monitoring and reporting requirements.”  The Memo reasons that the
overall regulatory direction given to EPA in the CAA is “evidence that
Congress generally expected that EPA would gather emissions data prior
to establishing plans to control emissions or developing emissions
limitations” and finds rejection of the monitoring and reporting
interpretation “fully consistent with Congressional design.”   See
Memo at 4.

The Petition for Reconsideration asserts that applying the monitoring
and reporting interpretation to the PSD program is appropriate because
“monitoring and reporting requirements clearly constitute
regulation” and CO2 emissions are subject to PSD permitting
requirements based on the existing requirement to monitor and report CO2
emissions.  Petitioners state that the policy concerns expressed in the
Memo are a “red herring” because “EPA has not identified a single
pollutant other than CO2 that would be affected by an interpretation of
‘regulation’ in Section 165 to include monitoring and reporting
regulations.”  The Petition argues that EPA can gather pollutant
information about pollutants under Section 114 without adopting
regulations, and thus avoid triggering PSD requirements for those
pollutants.  See Petition at 13 and 22.

The Petition stresses that the PSD Interpretive Memo could not eliminate
the monitoring and reporting interpretation based on concerns about
applying it to future pollutants because Congress could choose to
expressly exclude future pollutants from PSD requirements in express
terms.  Petitioners also argue that the Memo does not provide a
statutory provision to support the claim that requiring BACT for
pollutants under a monitoring and reporting interpretation would
conflict with the information-gathering objectives of the CAA.  The
Petition also contends that the Memo fails to demonstrate anything
“unworkable” about requiring PSD for pollutants subject to
monitoring regulations.  See Petition at 22-23.

Finally, Petitioners assert that CO2 is clearly “subject to
regulation” under the interpretation provided in the 1978 preamble
language because the CO2 monitoring and reporting regulations are
contained in the Subpart C of Title 40 of the CFR.  Petitioners contend
that the CO2 monitoring and reporting requirements meet the statutory
and regulatory definition of “subject to regulation” and have the
force of law in the same way as control requirements.  The Petition also
claims that each of the dictionary definitions of “regulation”
relied upon in the Memo would include monitoring.  Petitioners also
contend that a monitoring and reporting interpretation is consistent
with an actual control requirement because there must be some control of
pollutant emissions in order to monitor them.  See Petition at 14-16.

We note that the EAB already found “no evidence of Congressional
intent to compel EPA to apply BACT to pollutants that are subject only
monitoring and reporting requirements.”  Deseret at 63.  In light of
that finding, we request comment on the arguments made in the Memo and
discussed further in this reconsideration proposal. Our review of the
arguments in the PSD Interpretive Memo indicates that a monitoring and
reporting interpretation would be unlikely to preserve the Agency’s
ability to conduct monitoring or reporting for investigative purposes to
inform future rulemakings involving actual emissions control or limits.
The Petition for Reconsideration argues that these concerns are a “red
herring” because EPA has not identified a pollutant other than CO2
that would be affected by the monitoring and reporting interpretation.
We believe that additional comment would assist us in evaluating this
concern.

However, we also note that EPA has issued regulations, such as NSPS,
that require monitoring of noncriteria pollutant emissions in order to
demonstrate compliance with the regulation on the criteria pollutant(s).
 For example, one of our NSPS stipulates that if a source uses
Continuous Emissions Monitoring Systems (CEMS) to measure emissions of
NOx and SO2 from its boiler, the source must also have a CEMS to measure
oxygen gas (O2) or CO2.  See 40 CFR 60.49Da(b) and (c).  Clearly, there
is no intent by the EPA to consider O2 as “subject to regulation,”
and therefore subject to PSD, as a result of this NSPS requirement, but
the application of the monitoring and reporting interpretation as put
forward in the Petition could require just that.

In addition, it is not always possible to predict when a new pollutant
will emerge as a candidate for regulation.  In such cases, the Memo’s
reasoning is correct in that we would be unable to promulgate any
monitoring or reporting rule for such a pollutant without triggering PSD
under this interpretation.  Nonetheless, we seek additional comment on
the extent to which our interest in preserving the ability to
investigate unregulated pollutants as stated in the memo is a real,
rather than hypothetical, concern.  We further seek comment on any other
policy factors we should consider that are not addressed in the Memo or
the Petition for Reconsideration that would weigh for or against the
monitoring and reporting interpretation.

D.	EPA-approved State Implementation Plan

In discussing the application of the actual control interpretation to
specific actions under the CAA, the PSD Interpretive Memo rejects an
interpretation of “subject to regulation” in which regulatory
requirements for an individual pollutant in the SIP for a single state
would “require regulation of that pollutant under the PSD program
nationally.”  (Hereinafter, referred to as the “SIP
interpretation.”)  The Memo reasons that application of the SIP
interpretation would convert EPA’s approval of regulations applicable
only in one state into a decision to regulate a pollutant on a
nationwide scale for purposes of the PSD program.  The PSD Interpretive
Memo explains that the establishment of SIPs is better read in light of
the “cooperative federalism” underlying the Act, whereby Congress
allowed individual states to create and apply some regulations more
stringently than federal regulations within its borders, without
allowing individual states to set national regulations that would impose
those requirements on all states.  In rejecting the SIP interpretation,
the PSD Interpretive Memo also explains that a similar position had been
adopted in EPA’s promulgation of the NSR regulations for fine
particulate matter (or “PM2.5”), without any public comments
opposing that position.  See Memo at 15-16.

The Petition for Reconsideration argues that the SIP interpretation is
appropriate for the PSD program and applies to CO2 emissions at this
time.  Petitioners note that the Delaware SIP established regulations
limiting CO2 emissions in 2008 and that, in approving that SIP
provision, EPA stated it was doing so under the CAA, thus making the CO2
standards enforceable under various provisions of the CAA.  The Petition
argues that the Memo rejected the SIP interpretation without providing a
relevant statutory or regulatory basis for that position.  Instead,
Petitioners claim that the SIP interpretation is directly supported by
the plain language of “subject to regulation under the Act” because
those emissions are restricted under the CAA, whether in one state or
all.  Finally, the Petition asserts that because SIP regulations are
incorporated into Subpart C of Title 40 of the CFR after approval by
EPA, the SIP interpretation must apply given the 1978 preamble language
interpreting “subject to regulation” for the PSD program.  See
Petition at 10-12.

EPA continues to believe that the CAA and our implementing regulations
are intended to provide states flexibility to develop and implement SIPs
to meet the air quality goals of their state.  Each state’s
implementation plan is a reflection of the air quality concerns in that
state, allowing a state to dictate treatment of specific pollutants of
concern (or their precursors) within its borders based on air quality,
economic, and other environmental concerns of that state.  As such,
pollutant emissions in one state may not present the same problem for a
state a thousand miles away.  As expressed in the PSD Interpretive Memo,
we have concerns that the SIP interpretation would improperly limit the
flexibility of states to develop and implement their own air quality
plans because the act of one state to establish regulatory requirements
for a particular pollutant would drive national policy by determining
that a new pollutant is “subject to regulation,” thus requiring all
states to subject the new pollutant to PSD permitting. Whether one
state, five states, or 45 states make the decision that their air
quality concerns are best addressed by imposing regulations on a new
pollutant, we do not think those actions should trump the cooperative
federalism inherent in the CAA. While several states may face similar
air quality issues and may choose regulation as the preferred approach
to dealing with a particular pollutant, we are concerned that allowing
the regulatory choices of some number of states to impose PSD regulation
on all other states would do just that.

 The SIP interpretation could have significant negative consequences to
the PSD program and the ability for states to manage their own air
quality programs.  One practical effect of allowing state-specific
concerns to create national policy upon EPA’s approval of a state’s
preferred implementation policy is that EPA’s review of SIPs would
likely be much more time-consuming, since we would have to consider each
nuance of the SIP as a potential statement of national policy.  Thus,
there would be heightened oversight of air quality actions in all states
– even those regarding local and state issues that are best decided by
local agencies – for fear of having a national policy compelled by the
action of one state.  Given the need for states to effectively manage
their own air quality programs, we believe "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.

Although we remain concerned about the consequences to the PSD program
of the SIP interpretation as described in the Memo, we are seeking
comment on the issues raised in the Petition for Reconsideration.
However, our request for comment is limited because we have already
finalized a position very similar to that in the Memo in our final NSR
implementation rule for PM2.5 (73 FR 28321, May 16, 2008).  As we
explained in the final rule, we adopted the position contained in the
proposed rule without receiving any public comments opposing that
position.  That final rule did not require ammonia to be regulated as a
PM2.5 precursor but did give states the option to regulate ammonia as a
precursor to PM2.5 in nonattainment areas for purposes of NSR on a
case-by-case basis.  In that final rule, we explained that if a state
demonstrates to the Administrator’s satisfaction that ammonia
emissions in a specific nonattainment area are a significant contributor
to that area’s ambient PM2.5 concentrations, the state would regulate
ammonia as a PM2.5 precursor under the NSR program in that nonattainment
area.  We explained that once this demonstration is made, ammonia would
be a “regulated NSR pollutant” under nonattainment NSR for that
particular nonattainment area.  In all other nonattainment areas in that
state and nationally, ammonia would not be subject to the NSR program.
With regard to PSD, we specifically stated that “the action of any
State identifying ammonia emissions as a significant contributor to a
nonattainment area’s PM2.5 concentrations, or [EPA’s] approval of a
nonattainment SIP doing so, does not make ammonia a regulated NSR
pollutant for the purposes of PSD” in any areas nationally.  See 73 FR
28330   (May 16, 2008).  Therefore, we request comment on the question
of whether there is a basis that can be upheld under the Act and our CAA
implementing regulations that would allow for application of a different
SIP-based interpretation than the interpretation established in that
final PM2.5 NSR implementation rule.  If so, we ask for comment on how
the adoption of that different interpretation could be done in a way
that addresses the policy concerns with this approach that were raised
in the Memo.

E.  Finding of Endangerment

In providing the reasoning as to which actions make a pollutant
“subject to regulation” for the purposes of the PSD program, the PSD
Interpretive Memo states that the “otherwise subject to regulation”
prong of the regulated NSR pollutant definition should not be
interpreted “to apply at the time of an endangerment finding.”  Memo
at 14.  (Hereinafter, referred to as the “endangerment finding
interpretation.”)  As explained in the Proposed Endangerment and Cause
or Contribute Findings for Greenhouse Gases under Section 202(a) of the
CAA, there are actually two separate findings involved in what is often
referred to as an endangerment finding.  74 FR 18886 (April 24, 2009).
First, whether air pollution may reasonably be anticipated to endanger
public health or welfare, and second, whether emissions from the
relevant source category cause or contribute to this air pollution.  In
that proposal, we referred to the first finding as the endangerment
finding, and the second as the cause or contribute finding.  Often,
however, both tests are referred to collectively as the endangerment
finding.  In this reconsideration package, we will consider the phrase
“endangerment finding” to refer to both findings.

The only reference to an endangerment finding in the Petition for
Reconsideration is in the argument that Congress “clearly intended
that BACT apply regardless of whether an endangerment finding had been
made for that pollutant.”   However, the Petition does not argue that
an endangerment finding itself should trigger PSD requirements. In fact,
Petitioners argue against the endangerment finding interpretation,
stating that Congress “deliberately established a much lower threshold
for requiring BACT than an ‘endangerment finding.’” See Petition
at 21.

The issue of whether “lower thresholds” (such as monitoring and
reporting requirements) should make a pollutant “subject to
regulation” within the meaning of the PSD program is already being
addressed in other sections of this notice.  However, in accordance with
the February 17, 2009 grant of reconsideration, EPA has reconsidered the
endangerment finding interpretation included in the PSD Interpretive
Memo and proposes to reaffirm that an endangerment finding is not an
appropriate trigger for PSD regulation.  To be clear, this proposed
affirmation applies to both steps of what is often referred to as the
endangerment finding – the finding that air pollution may reasonably
be anticipated to endanger public health or welfare and the finding that
emissions of an air pollutant from a particular source category causes
or contributes to this air pollution – regardless of whether the two
findings occur together or separately.

As the PSD Interpretive Memo explains, an endangerment finding should
not be construed as “regulating” the air pollutant(s) at issue.  It
is, rather, a prerequisite to issuing regulations that themselves impose
control requirements.  As such, it is unlike the other triggering
actions identified in the “regulated NSR pollutant” definition,
which set standards that require imposition of actual limitations on
emissions that a source or sources must comply with.  An endangerment
finding, a cause or contribute finding, or both, on the other hand, do
not contain or require source limits that are backed by rule of law;
rather, they are often the first step required before EPA may set
specific emissions limits through a rule.

Furthermore, the other actions addressed in the “regulated NSR
pollutant” definition weigh against the endangerment finding
interpretation.  Under the first prong of that definition, PSD
regulation is triggered by promulgation of a National Ambient Air
Quality Standard (NAAQS) under CAA section 109.  However, in order to
promulgate NAAQS standards under section 109, EPA must list and identify
air quality criteria for a pollutant under section 108, CAA section
109(a)(1)(A), which in turn can only happen after the Administrator
makes an endangerment finding and a version of a cause or contribute
finding, CAA section 108(a)(1)(A)-(B), in addition to meeting other
requirements, see CAA section 108(a)(1)(C).  Thus, if we were to find
that an endangerment finding and/or cause or contribute findings would
make a pollutant “subject to regulation” within the meaning of the
PSD program, it would read all meaning out of the first prong of the
“regulated NSR pollutant” definition because a pollutant would
become subject to PSD permitting requirements well before the
promulgation of the NAAQS under 109.  40 CFR 52.21(b)(50)(i).

Similarly, the second prong of the definition of “regulated NSR
pollutant” includes any pollutant that is subject to a standard
promulgated under section 111 of the CAA.  Section 111 requires the
Administrator to list a source category, if in his or her judgment,
“it causes, or contributes significantly to, air pollution which may
reasonably be anticipated to endanger public health or welfare.”  CAA
section 111(B)(1)(A).  After EPA lists a source category, it promulgates
NSPS for that source category.  For a source category not already
listed, if we were to list it on the basis of its emissions of a
pollutant that was not previously regulated, and such a listing made
that pollutant “subject to regulation” within the meaning of the PSD
program, this chain of events would result in triggering PSD permitting
requirements for that pollutant well in advance of the point
contemplated by the second prong of the regulated NSR pollutant
definition.  40 CFR 52.21(b)(50)(ii).

In addition, as explained in the Memo, waiting to apply PSD requirements
until after the actual promulgation of control requirements that follow
an endangerment finding “makes sense.”  The Memo explains that when
promulgating the final regulations establishing the control requirements
for a pollutant, EPA often makes decisions that are also relevant to
decisions that must be made in implementing the PSD program for that
pollutant.  See Memo at 14.  For example, EPA often does not make a
final decision regarding how to identify the specific pollutant subject
to an NSPS standard until the NSPS is issued, which occurs after both
the endangerment finding and the source category listing.

Accordingly, we believe that the prerequisite act of making an
endangerment finding, a cause or contribute finding, or both, should not
make a pollutant “subject to regulation” for the purposes of the PSD
program.  As explained above, EPA believes that there are strong legal
and policy reasons for rejecting the endangerment finding
interpretation.  EPA seeks comment on any other policy factors or legal
arguments that are not addressed above but could weigh for or against
our consideration of the endangerment finding interpretation.

F.  Granting of Section 209 Waiver

	While neither the PSD Interpretive Memo nor the Petition for
Reconsideration raise the issue of whether a decision to grant a waiver
under the section 209 of the CAA would trigger PSD requirements under
the CAA section 165(a)(4), EPA received comments in response to the
proposed grant of a CAA section 209 waiver to the state of California to
establish GHG emission standards for new motor vehicles that suggested
that arguments might be made that the grant of the waiver made GHGs
subject to regulation for the purposes of PSD.  See 74 FR 32744, 32783
(July 8, 2009).  Those commenters requested that EPA state clearly that
granting the California Waiver did not render GHGs “subject to
regulation” under the CAA, while others commented that the question of
when and how GHGs should be addressed in the PSD program or otherwise
regulated under the Act should instead be addressed in separate
proceedings.  At that time, EPA stated that the PSD interpretation
issues were not a part of the waiver decision and would be more
appropriately addressed in another forum.

	Accordingly, we are taking this opportunity to state our position that
a decision to grant a CAA section 209 waiver to the state of California
to establish GHG emission standards for new motor vehicles does not
trigger PSD requirements for GHGs.  As explained below, EPA does not
interpret the CAA or the Agency’s PSD regulations to make the PSD
program applicable to pollutants that may be regulated by states after
EPA has granted a waiver under section 209 of the CAA.

	As the EPA Administrator previously explained to Congress, “a
decision to grant a waiver under section 209 of the Act removes the
preemption of state law otherwise imposed by the Act. Such a decision is
fundamentally different from the decisions to establish requirements
under the CAA that the Agency and the [EAB] have considered in
interpreting the provisions governing the applicability of the PSD
program.”  Letter from Lisa P. Jackson to Senator James M. Inhofe
(March 17, 2009).  As explained more fully below, the decision to grant
a CAA section 209 waiver is different from the other actions that have
been alleged to trigger the statutory and regulatory PSD requirements,
including the other interpretations of “subject to regulation”
discussed above, in two key respects.

	First, a waiver granted under CAA section 209(b)(1) simply removes the
prohibition found in section 209(a) that forbids states from  adopting
or enforcing their own standards relating to control of emissions from
new motor vehicles or new motor vehicle engines.  Thus, the grant of the
waiver simply allows California the authority to adopt and enforce state
emissions standards for new motor vehicles that it would have otherwise
had without the initial prohibition in section 209(a).  As EPA
previously explained, by removing the section 209(a) prohibition, the
waiver “merely gives back to California what was taken away by section
209(a) – the ability to adopt and enforce its own state emission
standards.”  See 74 FR 32751 (July 8, 2009).  Importantly, granting
the waiver does not itself establish any federal emission standards or
other federal requirements for the pollutants.  Courts have recognized
such a distinction.  See   HYPERLINK
"http://web2.westlaw.com/find/default.wl?tf=-1&serialnum=1994159367&rs=W
LW9.07&referencepositiontype=S&ifm=NotSet&fn=_top&sv=Split&referenceposi
tion=21&pbc=EA26D772&tc=-1&ordoc=2014377680&findtype=Y&db=506&vr=2.0&rp=
%2ffind%2fdefault.wl&mt=EnvironmentalLaw" \t "_top"  American Automobile
Manufacturers Association v. Commissioner, Massachusetts Department of
Environmental Protection, 31 F.3d 18, 21 (1st Cir. 1994)  (stating that
“there can be only two types of cars ‘created’ under emissions
regulations in this country: ‘California’ cars and ‘federal’
(that is, EPA-regulated) cars”).  Thus, grant of a section 209 waiver
to the California emissions standards does not render those standards to
be federal standards and does not make a

pollutant covered by the California standards “subject to

regulation” under the CAA.

	Second, enforcement of any emission standard that might be established
after a waiver is granted would occur pursuant to regulation under state
law, not regulation “under the Act.”  Specifically, section
209(b)(3) of the CAA provides that for any new motor vehicle to which
state emission standards apply pursuant to a waiver granted under
section 209(b)(1), “compliance with such State standards shall be
treated as compliance with applicable Federal standards” for purposes
of Title II of the Act.  This provision was added when Congress amended
section 209 to allow some California standards to be less stringent than
federal standards as long as California’s standards are “in the
aggregate” at least as protective of human health and the environment.
 Section 209(b)(3) ensures that a vehicle complying with California’s
standards for which a waiver has been granted, but not necessarily all
federal standards, is not subject to enforcement under the Act for
failure to meet all federal standards.  However, EPA would not enforce
California’s standards as it would its own.  Although the California
standards for which EPA has granted a waiver include GHG emissions
standards, EPA’s granting of a waiver does not promulgate those GHG
standards as EPA standards, nor does it lead to EPA enforcement of those
GHG standards.  Therefore, the grant of a waiver to California does not
render GHG emissions subject to regulation under the CAA.

	We are also aware that some states have chosen, pursuant to section 177
of the CAA, to adopt the California low emission vehicle (CAL LEV)
program into their state pollution control programs, including specific
pollutant emissions standards that are included in CAL LEV after the
grant of a section 209 waiver.  However, for the same reasons as
discussed above, the adoption of those standards by other states under
section 177 does not change the fact that those standards are still
state standards enforced under state law. Accordingly, we find that
adoption of

waived standards pursuant to CAA section 177 should not trigger PSD
requirements for the pollutants included in those standards.

	Accordingly, we believe that neither the act of granting a section 209
waiver for emission standards nor the adoption of such standards
pursuant to section 177 makes a pollutant “subject to regulation”
for the purposes of the PSD program.  EPA believes there is strong legal
support for this position.  EPA requests comment on this position and
any other legal or policy factors that weigh for or against our
consideration of the grant of a section 209 waiver interpretation.

G.  Timing of Regulation

In a related matter concerning the final interpretation of the
regulatory language found in 40 CFR 52.21(b)(50)(iv), we are seeking
comment on whether the interpretation of “subject to regulation”
should also more clearly identify the specific date on which PSD
regulatory requirements would apply.  In the PSD Interpretative Memo,
the Administrator stated that EPA interprets language in the definition
of “regulated NSR pollutant” to mean that the fourth part of the
definition should “apply to a pollutant upon promulgation of a
regulation that requires actual control of emissions.”  Memo at 14.
However, after evaluating the underlying statutory requirement in the
CAA and the language in all parts of the regulatory definition more
closely, EPA proposes to modify its interpretation of the fourth part of
the definition with respect to the timing of PSD applicability.

In considering the actual application of PSD requirements to regulated
NSR pollutants that are “subject to regulation,” we believe that the
term “subject to regulation” in the statute and regulation is most
naturally interpreted to mean that PSD requirements apply when the
regulations addressing a particular pollutant become final and
effective.  The CAA requires PSD controls “for each pollutant subject
to regulation” under the Act that are emitted from a source and does
not mention promulgation.  See 42 U.S.C. 7475(a)(4) and 7479(3)
(emphasis added).  The regulatory language of 40 CFR 52.21(b)(50)(iv)
does not specify the exact time at which the PSD requirements should
apply to pollutants in that class, whether upon promulgation or
effective date of the underlying regulation.  However, the use of
“subject to” in the Act suggests that PSD requirements are intended
to be triggered when those standards become effective for the pollutant.
 No party is required to comply with a regulation until it has become
final and effective.  Prior to that date, an activity covered by a rule
is not in the ordinary sense “subject to” any regulation.
Regardless of whether one interprets regulation to mean monitoring or
actual control of emissions, prior to the effective date of a rule there
is no regulatory requirement to monitor or control emissions.

In addition, applying PSD to a pollutant upon the effective date of a
regulation would harmonize application of the PSD program with the
requirements of the Congressional Review Act (CRA).  Under the CRA,
major regulations promulgated by EPA do not become effective until after
Congress has had an opportunity to review them.  See 5 U.S.C. 801 et
seq.  As part of that review, Congress can potentially disapprove final
actions issued by federal agencies within a specified time period.
Accordingly, under the CRA, a major rule cannot take effect until 60
days after it is published in the Federal Register.  Since an EPA
regulation that would trigger PSD requirements for a pollutant could be
disapproved by Congress after it is promulgated, it would be more
consistent with the CRA to defer application of PSD requirements to a
pollutant until the rule regulating the pollutant is final and
effective, and not simply promulgated.

Since the fourth part of the definition of “regulated NSR pollutant”
(40 CFR 52.21(b)(50)(iv)), does not use the word promulgated and uses
the “subject to regulation” language from the CAA, the language in
the fourth part of the definition can be interpreted to render PSD
requirements applicable to a pollutant upon the effective date of a
regulation.  Because this is consistent with a more natural reading of
the statutory language in the Clean Air Act, the application of the
Congressional Review Act to EPA regulations, and the “actual control
interpretation” favored by EPA at this time, we propose upon
reconsideration to interpret section 40 CFR 52.21(b)(50)(iv) to make PSD
requirements applicable to a pollutant upon the effective date of a
regulation covered by this part of the definition.

The PSD Interpretive Memo relied on other parts of the definition of
“regulated NSR pollutant” to conclude that PSD requirements apply to
a pollutant upon promulgation of a control requirement.  However, a
closer reading of the other parts of that definition indicates that the
language used in several parts of the definition may in fact be
construed to make PSD applicable upon the effective date of regulatory
requirements, rather than the date of promulgation.  The definition says
that PSD requirements apply to NSPS or Title VI pollutants once they are
“subject to a[ny] standard promulgated under” particular provisions
of the CAA.  40 CFR 52.21(b)(50)(ii)-(iii).  While the word
“promulgated” appears in the definition, this term qualifies the
underlying standard and does not directly address the actual application
of PSD requirements.  Under the language in these two parts of the
definition, PSD requirements apply when a pollutant becomes “subject
to” the underlying standard, which is “promulgated under” a
particular part of the Act.  For the same reasons as discussed above, we
think it is best to interpret these two provisions to apply PSD
requirements to NSPS and Title VI pollutants on the effective date of
the underlying standards.

However, different timing language is used for the first class of
pollutants described in the regulated NSR pollutant definition: PSD
requirements apply once a “standard has been promulgated” for a
NAAQS pollutant or its precursors.  40 CFR 52.21(b)(50)(i).  The use of
“has been” in the regulation indicates that a pollutant becomes a
“regulated NSR pollutant,” and hence PSD requirements for the
pollutant are triggered, on the date a NAAQS is promulgated.  Thus, it
may not be possible for EPA to read the regulatory language in this
provision to make PSD applicable to a NAAQS pollutant upon the effective
date of the NAAQS.  Although our present view is that the Clean Air Act
is most naturally read to make PSD requirements applicable upon the
effective date of a rule that “regulates” the pollutant, we are not
at this time proposing to modify the language in section 40 CFR
52.21(b)(50)(i).  Since EPA is not presently proposing to establish a
NAAQS for any additional pollutants, the timing of PSD applicability for
a newly identified NAAQS pollutant does not appear to be of concern at
this time.  If EPA adopts the interpretation proposed here with respect
to the timing of PSD applicability, we will consider whether a revision
of this regulatory language is needed at such time as EPA may be
considering promulgation of a NAAQS for an additional pollutant.

Accordingly, in considering statutory language and the actual
application of PSD requirements in practice, we believe the “subject
to regulation” language in the fourth part of the regulated NSR
pollutant definition should be interpreted such that PSD requirements
would not apply to pollutants covered by this part of the definition
until the effective date of the underlying regulation.  EPA believes the
underlying statutory requirements and the structure of the regulation
support this position.  EPA requests comment on our interpretation that
a pollutant becomes “subject to regulation” under section
52.21(b)(50)(iv) upon the effective date of the underlying regulation,
as well as any other legal or policy factors that that could inform this
interpretation.

H.  Other Issues

As a general matter, during the public comment period for other GHG
rulemaking actions, such as the GHG Mandatory Reporting Rule (74 FR
16447, April 10, 2009) and the proposed Endangerment Finding (74 FR
18885, April 24, 2009), EPA received some comments that discussed the
interpretation of the PSD applicability issues we are reconsidering
here.  The notices of proposed rulemaking for those packages clearly
indicated that the issue of how and when PSD permitting requirements
would apply to GHG pollutants would be addressed during this
reconsideration action (74 FR at 16456, n. 8 and 18905, n. 29), and EPA
will not be searching other rulemaking dockets for comments that might
be applicable to our current reconsideration of the PSD Interpretive
Memo.  Accordingly, we direct all parties that might have submitted
comments regarding interpretation of the PSD applicability definitions
in those other rulemakings to submit new comments in accordance with the
requests in this reconsideration process.  In particular, commenters
should submit only those portions of their previously submitted comments
that respond to the specific requests for comment in this action.

We believe the above summary of the PSD Interpretive Memo, the summary
of Petitioners’ arguments for reconsideration of the Memo, and the
requests for comments presented thus far provide an adequate basis for
the public to comment on the Agency’s reconsideration of the PSD
Interpretive Memo.  However, in accordance with Administrator
Jackson’s February 17, 2009 grant of reconsideration, EPA also seeks
comment on any other interpretations of “subject to regulation” and
any other issues that were not addressed in the PSD Interpretive Memo
but may help to inform our present reconsideration of that Memo,
including those raised by the EAB’s Deseret decision.

For example, there is an issue from the Deseret case that is relevant to
our consideration of the monitoring & reporting interpretation.  Briefs
submitted by Region VIII and the EPA Office of Air and Radiation (OAR)
in that case argued that even if the monitoring & reporting
interpretation was adopted by the Board, PSD permitting requirements
would not apply to CO2 emissions.  Region VIII and OAR reasoned that the
existing CO2 monitoring and reporting regulations were not promulgated
“under the Act” because the text, context, and legislative history
of the underlying statutory provision “demonstrate that Congress did
not intend section 821 of the 1990 Public Law” amending the CAA to
become part of the CAA.  Deseret at 55.  The EAB found that the
statutory text both supported and subverted this argument, and also that
the Agency’s prior actions and statements were inconsistent with and
contradictory to it.    Accordingly, the Board declined to rely on this
argument in deciding the case and directed Region VIII to consider the
issue more fully on remand.  Should the EPA adopt the monitoring and
reporting interpretation, it will be necessary for EPA to resolve
whether or not the existing CO2 monitoring and reporting regulations
were promulgated “under the Act” since the position taken by Region
VIII and OAR in the Deseret case would keep us from applying that
interpretation in some instances.  We therefore welcome comments on this
issue.  We note that there are several factors that make us less
inclined to maintain the position advocated by Region VIII and OAR in
the Deseret case on remand.  Notably, the EAB found that EPA’s
previous statements on whether section 821 was part of the Clean Air Act
had been inconsistent and that EPA had taken actions that were
contradictory to the position advocated by Region VIII and OAR.
Although we are considering changing our position, we want our review of
this issue to be informed by public comments.  Accordingly, consistent
with our grant of reconsideration, we seek comment on the section 821
issue and any other issues or interpretations to the extent they could
inform our final interpretation of the regulatory phrase “subject to
regulation.”

In addition, this reconsideration of the PSD Interpretive Memo is
following the type of notice and comment process normally found in
formal rulemaking proceedings.  See CAA section 307(d).  Accordingly,
EPA is also seeking comment on whether or not, upon completion of this
reconsideration, the Agency should codify the final interpretation of
what makes a pollutant “subject to regulation” for the purposes of
PSD applicability into the definitions section of the federal PSD
regulations.  40 CFR 52.21(b).  If a commenter supports EPA codifying
its “subject to regulation” PSD applicability position, we request
that the commenter include in their comment suggested amendatory
language for inclusion in 40 CFR 52.21.

As we are requesting comment on whether to codify the Agency’s final
interpretation in the federal PSD rules found at 40 CFR 52.21, we also
request comment on whether that interpretation should be also codified
in 40 CFR 51.166 for permitting authorities with approved implementation
plans.  We note that the PSD Interpretive Memo expressly limits the
applicability of the interpretation to permitting jurisdictions that
fall under the federal PSD program.  Since the EAB determined that the
interpretation adopted in this memorandum was not previously established
by the Agency, that interpretation should not apply retroactively to
prior approvals of SIPs by EPA Regional Offices.  However, the Memo
gives discretion to EPA Regional Office authorities to apply the
Memo’s interpretation prospectively when reviewing and approving new
submissions for approval or revision of state plans under 40 CFR 51.166.
 The Memo also explains that when states use the same language in their
approved implementation plans as contained in 40 CFR 52.21(b)(50), those
states may interpret that language in their state regulations in the
same manner as reflected in the Memo.  See Memo at 3, n. 1.  For the
sake of consistent application of EPA’s final interpretation, we are
soliciting comment on whether we should also codify the Agency’s final
interpretation as a revision to 40 CFR 51.166.

 Finally, we note that, in addition to the policy questions raised by
each of the interpretations above, there is another overarching
consideration upon which we seek comment:  the consequence that a given
interpretation would have on the scope and timing of the triggering of
the PSD program for GHGs.  Although the policy questions discussed
earlier extend beyond the immediate issues surrounding triggering of PSD
for GHGs, we also seek comment on whether these immediate issues,
discussed below, warrant consideration in this reconsideration effort.

The actual control interpretation would mean that GHGs become “subject
to regulation” upon final promulgation of the GHG Light Duty Vehicle
Rule recently proposed by EPA.  [CITE, or “also published in the
Proposed Rules section of this Federal Register”]  We are concerned
about millions of small and previously unpermitted sources becoming
immediately subject to PSD permitting as a result of finalization of
that rule.  The basis for this concern, and EPA’s approach to
addressing it, are explained in a separate proposal known as the GHG
Tailoring Rule.  [CITE, or “also published in the Proposed Rules
section of this Federal Register”]  The GHG Tailoring Rule proposes to
establish temporary applicability thresholds for PSD and Title V
purposes to levels that reflect the administrative capabilities of
permitting authorities to address GHG emissions from stationary sources.
 Without the GHG Tailoring Rule, PSD permitting requirements would apply
to numerous small sources, resulting in a program that is impossible to
administer due to a tremendous influx of permit applications accompanied
by, at least initially, a shortfall of resources, training, and
experience by permitting authorities, the regulated community, and other
stakeholders.

	The GHG Tailoring Rule is intended to address this problem in advance
of regulation under the GHG Light Duty Vehicle Rule.  Therefore, under
our preferred interpretation of “subject to regulation”, EPA will
not face the administrative impossibility problem if the GHG Tailoring
Rule is finalized according to this planned timing.  However, if EPA
adopts any other interpretation (which thereby would void the PSD
Interpretive Memo), additional timing considerations arise.  Finalizing
any other interpretation prior to promulgating the GHG Light Duty
Vehicle Rule and Tailoring Rule would result in earlier triggering of
PSD permitting requirements for future new and modified sources of GHGs
including the large numbers of small sources addressed by the Tailoring
Rule.  On the other hand, finalizing any other interpretation after EPA
promulgates the GHG Light Duty Vehicle Rule and Tailoring Rule would
likely have a limited effect on triggering PSD permitting requirements
for future new and modified sources of GHGs, because we expect that the
GHG Light Duty Vehicle Rule would already have triggered PSD for the
same pollutants and the Tailoring Rule would be in place.  Our strong
preference is that these three GHG actions -- the Light Duty Vehicle
Rule, the Tailoring Rule, and this reconsideration -- work together with
EPA’s other GHG-related actions to yield a common sense and efficient
approach to GHG regulation that does not result in the imposition of an
impossible administrative burden on permitting agencies.  Our preferred
approach has the added benefit of achieving this goal by triggering PSD
only after a Tailoring Rule can be put in place.  We seek comment on
whether and how this goal could be achieved were EPA to adopt any of the
other four interpretations.

IV.	Statutory and Executive Order Reviews

A.	Executive Order 12866 - Regulatory Planning and Review

Under Executive Order (EO) 12866 (58 FR 51735, October 4, 1993), this
action is a "significant regulatory action."  The action was identified
as a "significant regulatory action" because it raises novel legal or
policy issues.  Accordingly, EPA submitted this action to the Office of
Management and Budget (OMB) for review under EO 12866 and any changes
made in response to OMB recommendations have been documented in the
docket for this action.

B.	Paperwork Reduction Act

This action does not impose an information collection burden under the
provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.  We
are not promulgating any new paperwork requirements (e.g., monitoring,
reporting, and recordkeeping) as part of this proposed action.  The OMB
has previously approved the information collection requirements
contained in the existing NSR regulations (40 CFR parts 51 and 52) under
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.,
and has assigned OMB control number 2060–0003, EPA ICR number 1230.23.
 The OMB control numbers for EPA's regulations in 40 CFR are listed in
40 CFR part 9.

C.	Regulatory Flexibility Act

	This proposed reconsideration of the PSD Interpretive Memo is not
subject to the Regulatory Flexibility Act (RFA), which generally
requires an agency to prepare a regulatory flexibility analysis for any
rule that will have a significant economic impact on a substantial
number of small entities.  The RFA applies only to rules subject to
notice and comment rulemaking requirements under the Administrative
Procedure Act (APA) or any other statute.  In the case of this
reconsideration process, public notice and comment was not required
under the APA or CAA, but rather was voluntarily conducted in accordance
with the February 17, 2009 letter granting reconsideration.
Accordingly, an RFA analysis is not required.

However, EPA recognizes that some small entities continue to be
concerned about the potential impacts of the statutory imposition of PSD
requirements that may occur given the various EPA rulemakings currently
under consideration concerning greenhouse gas emissions.  As explained
in the preamble for the proposed PSD Tailoring Rule [CITE, or “...
also published within the same Federal Register”], EPA is using the
discretion afforded to it under section 609(c) of the RFA to consult
with OMB and SBA, with input from outreach to small entities, regarding
the potential impacts of PSD regulatory requirements as that might occur
as EPA considers regulations of GHGs.  Concerns about the potential
impacts of statutorily imposed PSD requirements on small entities will
be the subject of deliberations in that consultation and outreach.
Concerned small entities should direct any comments relating to
potential adverse economic impacts on small entities from PSD
requirements for GHG emissions, including any concerns about the impacts
of this reconsideration action, to the docket for the PSD tailoring
rule.

D.	Unfunded Mandates Reform Act

Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 U.S.C.
1531-1538, requires federal agencies, unless otherwise prohibited by
law, to assess the effects of their regulatory actions on state, local,
and tribal governments and the private sector.  Federal agencies must
also develop a plan to provide notice to small governments that might be
significantly or uniquely affected by any regulatory requirements.  The
plan must enable officials of affected small governments to have
meaningful and timely input in the development of EPA regulatory
proposals with significant federal intergovernmental mandates and must
inform, educate, and advise small governments on compliance with the
regulatory requirements.

This proposed reconsideration does not contain a federal mandate that
may result in expenditures of $100 million or more for state, local, and
tribal governments, in the aggregate, or the private sector in any one
year.  Thus, this proposed rule is not subject to the requirements of
sections 202 or 205 of UMRA.

In developing this reconsideration notice, EPA consulted with small
governments pursuant to a plan established under section 203 of UMRA to
address impacts of regulatory requirements in the rule that might
significantly or uniquely affect small governments.

E.	Executive Order 13132 - Federalism

This action does not have federalism implications.  It will not have
substantial direct effects on the States, on the relationship between
the national government and the States, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132.   This action would ultimately
simplify and reduce the burden on state and local agencies associated
with implementing the PSD program by providing clarity on what
pollutants are “subject to regulation” to the CAA for PSD
applicability purposes.  Therefore, this proposed rule will not impose
substantial direct compliance costs on state or local governments, nor
will it preempt state law.  Thus, the requirements of sections 6(b) and
6(c) of the Executive Order do not apply to this rule.

In the spirit of Executive Order 13132, and consistent with EPA policy
to promote communications between EPA and state and local governments,
EPA specifically solicits comment on this proposed rule from state and
local officials.

F.	Executive Order 13175 - Consultation and Coordination with Indian
Tribal Governments

Subject to the Executive Order 13175, entitled “Consultation and
Coordination with Indian Tribal Governments” (65 FR 67249, November 9,
2000), EPA may not issue a regulation that has tribal implications, that
imposes substantial direct compliance costs, and that is not required by
statute, unless the federal government provides the funds necessary to
pay the direct compliance costs incurred by tribal governments, or EPA
consults with tribal officials early in the process of developing the
proposed regulation and develops a tribal summary impact statement.

EPA has concluded that this action may have tribal implications.
However, it will neither impose substantial direct compliance costs on
tribal governments nor preempt tribal law.  There are no tribal
authorities currently issuing major NSR permits; however, this may
change in the future.

Although Executive Order 13175 does not apply to this proposed rule, EPA
specifically solicits additional comment on this proposed action from
tribal officials.

G.	Executive Order 13045 - Protection of Children from Environmental
Health Risks and Safety Risks

EPA interprets EO 13045 (62 FR 19885, April 23, 1997) as applying only
to those regulatory actions that concern health or safety risks, such
that the analysis required under section 5-501 of the EO has the
potential to influence the regulation.  This action is not subject to EO
13045 because this proposed reconsideration merely proposes to
reconsider EPA’s previous PSD applicability with regards to what
constitutes a pollutant being “subject to regulation” under the CAA
for the purposes of PSD applicability.

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

This rule is not a “significant energy action” as defined in
Executive Order 13211, “Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use”  (66 FR
28355, May 22, 2001) because it is not likely to have a significant
adverse effect on the supply, distribution, or use of energy.  This
action proposes options and positions that would clarify PSD
applicability for pollutants “subject to regulation” under the CAA
and does not, in and of itself, pose any new requirements.

I.	National Technology Transfer and Advancement Act

Section 12(d) of the National Technology Transfer and Advancement Act of
1995 (NTTAA), Public Law No. 104-113, 12(d) (15 U.S.C. 272 note) directs
EPA to use voluntary consensus standards in its regulatory activities
unless to do so would be inconsistent with applicable law or otherwise
impractical.  Voluntary consensus standards are technical standards
(e.g., materials specifications, test methods, sampling procedures, and
business practices) that are developed or adopted by voluntary consensus
standards bodies.  NTTAA directs EPA to provide Congress, through OMB,
explanations when the Agency decides not to use available and applicable
voluntary consensus standards.

This proposed reconsideration does not involve technical standards.
Therefore, EPA is not considering the use of any voluntary consensus
standards.

J.	Executive Order 12898 - Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations

Executive Order 12898 (59 FR 7629, February 16, 1994) establishes
federal executive policy on environmental justice.  Its main provision
directs federal agencies, to the greatest extent practicable and
permitted by law, to make environmental justice part of their mission by
identifying and addressing, as appropriate, disproportionately high and
adverse human health or environmental effects of their programs,
policies, and activities on minority populations and low-income
populations in the U.S.

EPA has determined that this proposed reconsideration of PSD
applicability will not have a disproportionately high and adverse human
health or environmental effects on minority or low-income populations
because it does not affect the level of protection provided to human
health or the environment.  This proposed reconsideration merely
proposes to reconsider EPA’s previous PSD applicability with regards
to what constitutes a

Page 75 of 75 - Prevention of Significant Deterioration (PSD):
Interpretation of “Subject to Regulation” for Pollutants Covered
Under Federal PSD

pollutant being “subject to regulation” under the CAA for the
purposes of PSD applicability.

V.	Statutory Authority

	The statutory authority for this action is provided by sections 101,
107, 110, and 301 of the CAA as amended (42 U.S.C. 7401, 7410, and
7601).

List of Subjects in 40 CFR Part 52

	Environmental protection, Administrative practice and procedure, Air
pollution control, Intergovernmental relations, Reporting and
recordkeeping requirements.

_______________________________

Dated:

_______________________________

Lisa P. Jackson,

Administrator.

 On April 17, 2009, the EPA Administrator took the first step in the CAA
section 202 rulemaking process by proposing endangerment and cause or
contribute findings for GHGs under the CAA.  74 FR 18886 (April 24,
2009).  [Placeholder – insert sentence regarding and cite to proposed
mobile source standards if already published]

 On January 15, 2009, a number of environmental organizations that filed
this Petition for Reconsideration also filed a petition challenging the
PSD Interpretive Memo in U.S. Court of Appeals for the District of
Columbia Circuit. Sierra Club v. E.P.A., No. 09-1018 (D.C. Cir., filed
Jan. 15, 2009).  Thereafter, various parties moved to intervene in that
action or filed similar petitions challenging the Memo.  The
consolidated D.C. Circuit cases have been held in abeyance pending this
reconsideration process.  Id., Order (filed March 9, 2009).

  Because Administrator Jackson’s grant of reconsideration directed
the Agency to conduct this reconsideration using a notice and comment
process, this action does not address the procedural challenge presented
in the Petition for Reconsideration.

   While the sections below provide a summary of the primary arguments
contained in the PSD Interpretive Memo and the Petition for
Reconsideration, we advise the public to review the original documents
contained in Docket EPA-HQ-OAR-2009-0597 in preparing their comments.

 As noted previously, the only change between the original Petition
(filed Dec. 31, 2008) and the Amended Petition (filed Jan. 6, 2009) is
the addition of a request that EPA stay the effect of the PSD
Interpretive Memo pending the outcome of the reconsideration request.
Since the request for a stay was already denied in the February 17, 2009
letter granting reconsideration, the remainder of this notice references
the original Petition when summarizing the arguments contained in those
documents.

 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).

 EPA recognizes that two courts have addressed the issue of whether the
California motor vehicle standards have the effect of federal standards
once a § 209 waiver is granted, but those cases are not applicable to
our current determination because they did not involve interpretation of
the CAA.  Those cases were examining whether the California standards
were “other motor vehicle standards of the government” under the
specific provisions of the Energy Policy and Conservation Act (EPCA).
See Century Valley Chrysler-Jeep, Inc. v. Goldstene, 529 F.Supp. 2d 1151
(E.D. Cal. 2007), appeals pending Nos. 08-17378, 08-17380 (9th Cir.,
filed Oct. 30, 2008);  Green Mountain Chrysler Plymouth Dodge Jeep v.
Crombie, 508 F.Supp. 2d 295 (D. Vt. 2007)).  In those cases, automobile
dealers and manufacturers brought action challenging the validity of the
California GHG emissions standards, arguing that the standards were
preempted by the fuel economy standards established by EPCA.  After
examining the statutory language and legislative history of EPCA, the
courts found that the EPCA fuel standards were not preemptive of the
California standards.   The courts noted that the term “Federal
standards fuel economy reduction” as used in the original codification
of section 502(d) of the Energy Policy and Conservation Act (EPCA),
referred to EPA-approved California emission standards, and noted that
“there is nothing in [EPCA] or in case law to support the proposition
that a regulation promulgated by California and granted waiver of
preemption under [CAA] section 209 is anything other than a ‘law of
the Government’ whose effect on fuel economy must be considered by
NHTSA in setting fuel economy standards.”  Century Valley
Chrysler-Jeep, 529 F.Supp. 2d at 1173.  See also Green Mountain Chrysler
Plymouth Dodge Jeep, 508 F.Supp. 2d at 347.

However, these Courts did not examine whether California standards were
federal standards under the specific provisions of the CAA.
Accordingly, their holdings are properly limited to interpretation of
EPCA’s preemption provisions and are not binding on our present
consideration of whether the California standards should be considered
federal standards under the provisions of the CAA, in particular,
provisions such as the PSD program.  As noted above, a waiver granted to
California motor vehicle emissions standards does not preempt the
federal CAA standards but instead lifts the preemption that the Act
would normally have under CAA § 209(a).  Accordingly, we believe these
courts’ determinations that the California emissions standards were a
type of “Federal standards fuel economy reduction” that were not
preempted by EPCA’s fuel economy provisions do not change the fact
that the California standards are not federal standards that EPA adopts
or enforces as part of its CAA regulatory program, and thus should not
trigger PSD permitting requirements.

 To the extent that some states adopt the CAL LEV emission standards
pursuant to section 177 and then incorporate by reference those
standards into their SIPs, including the emission standards included in
the CAL LEV program pursuant to a section 209 waiver, the PSD
Interpretive Memo already expressed the view that inclusion of a
pollutant standard in a SIP does not make that pollutant subject to the
PSD program requirements.  While we are taking comment on that SIP
interpretation as part of this reconsideration, the current inclusion of
the CAL LEV standards into state SIPs does not make the pollutants
covered by those standards “subject to regulation” under the Act
since the PSD Interpretive Memo remains in effect for the federal PSD
program.

Draft – Do Not Cite or Quote  		September 8, 2009

For Internal EPA Deliberations Only

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