[Federal Register Volume 87, Number 198 (Friday, October 14, 2022)]
[Proposed Rules]
[Pages 62322-62337]
[FR Doc No: 2022-22259]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51 and 52

[EPA-HQ-OAR-2004-0014; FRL-4940.2-03-OAR]
RIN 2060-AQ47

Prevention of Significant Deterioration (PSD) and Nonattainment
New Source Review (NNSR): Reconsideration of Fugitive Emissions Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing to
repeal regulatory amendments promulgated through a final rule adopted
in 2008 under the Clean Air Act (CAA or Act) that addressed the
consideration of ``fugitive'' emissions of air pollutants from
stationary sources when determining the applicability of certain
permitting requirements under the Act. Those amendments have been
stayed as a result of the reconsideration process. To bring closure to
the reconsideration proceeding, the EPA is proposing to fully repeal
the 2008 rule by removing

the stayed provisions of the regulatory amendments adopted in 2008. The
EPA is also proposing to remove a related exemption for modifications
that would be considered major solely due to the inclusion of fugitive
emissions. As a result of the proposed changes, all existing major
stationary sources would be required to include fugitive emissions in
determining whether a physical or operational change constitutes a
``major modification,'' requiring a permit under the Prevention of
Significant Deterioration (PSD) or Nonattainment New Source Review
(NNSR) programs.

DATES:
    Comments: Comments must be received on or before December 13, 2022.
    Public hearing: If anyone contacts EPA requesting a public hearing
by October 19, 2022, the EPA will hold a virtual public hearing. See
SUPPLEMENTARY INFORMATION for information on requesting and registering
for a public hearing.

ADDRESSES:
    Comments: You may send comments, identified by Docket ID No. EPA-
HQ-OAR-2004-0014, by any of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov/
(our preferred method). Follow the online instructions for submitting
comments.
     Email: [email protected]. Include Docket ID No. EPA-
HQ-OAR-2004-0014 in the subject line of the message.
     Fax:<PHONE_NUMBER>. Attention Docket ID No. EPA-HQ-OAR-
2004-0014.
    Instructions: All submissions received must include the Docket ID
No. EPA-HQ-OAR-2004-0014 for this rulemaking. Comments received may be
posted without change to https://www.regulations.gov/, including any
personal information provided. For detailed instructions on sending
comments and additional information on the rulemaking process, see the
SUPPLEMENTARY INFORMATION section of this document. For further
information on EPA Docket Center services and the current status,
please visit us online at https://www.epa.gov/dockets.

FOR FURTHER INFORMATION CONTACT: For information about this proposed
rule, contact Mr. Matthew Spangler, Air Quality Policy Division, Office
of Air Quality Planning and Standards (C504-05), Environmental
Protection Agency, Research Triangle Park, NC; telephone number: (919)
541-0327; email address: [email protected].

SUPPLEMENTARY INFORMATION: The information presented in this document
is organized as follows:

I. General Information
    A. Entities Potentially Affected by This Action
    B. Obtaining a Copy of This Document and Other Related
Information
    C. Preparing Comments for the EPA
    D. Participation in Virtual Public Hearing
II. Background
    A. New Source Review Program
    B. Applicability of the Major NSR Program
    C. Treatment of ``Fugitive Emissions'' in the Major NSR Program
    D. Fugitive Emissions in Major Modification Determinations
    E. Petition for Reconsideration and Administrative Stays of the
Fugitive Emissions Rule
III. Proposed Action
    A. Results of the EPA's Reconsideration
    B. Proposed Revisions to Regulations
IV. Interpretation of CAA Sections 302(j) and 111(a)(4)
    A. Previous EPA Interpretations
    B. NRDC's Petition for Reconsideration
    C. Proposed Interpretation of CAA Sections 302(j) and 111(a)(4)
V. Policy Considerations and Impact on Regulated Entities
    A. Purposes of NSR
    B. Increasing Clarity
    C. Previous Policy Considerations
    D. Impacts on Regulated Entities
VI. SIP Minimum Program Elements
VII. Definition of ``Fugitive Emissions''
VIII. Environmental Justice Considerations
IX. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act (PRA)
    C. Regulatory Flexibility Act (RFA)
    D. Unfunded Mandates Reform Act (UMRA)
    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 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 (NTTA)
    J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
X. Statutory Authority

I. General Information

A. Entities Potentially Affected by This Action

    Entities potentially affected by this action include sources that
do not belong to a source category listed in 40 Code of Federal
Regulations (CFR) 52.21(b)(1)(iii) (and other identical provisions in
other sections of the CFR). Entities potentially affected by this
proposed action also include state and local air pollution control
agencies responsible for permitting sources pursuant to the New Source
Review (NSR) program.

B. Obtaining a Copy of This Document and Other Related Information

    The EPA has established a docket for this rulemaking under Docket
ID No. EPA-HQ-OAR-2004-0014. All documents in the dockets are listed in
https://www.regulations.gov/. Although listed, some information is not
publicly available, e.g., Confidential Business Information (CBI) or
other information whose disclosure is restricted by statute. Certain
other material, such as copyrighted material, is not placed on the
internet and will be publicly available only in hard copy. Publicly
available docket materials are available either in the docket for this
action, Docket ID No. EPA-HQ-OAR-2004-0014, or electronically at
https://www.regulations.gov/.
    In addition to being available in the docket, an electronic copy of
this Federal Register document will be posted at https://www.epa.gov/nsr.

C. Preparing Comments for the EPA

    Instructions. Submit your comments, identified by Docket ID No.
EPA-HQ-OAR-2004-0014, at https://www.regulations.gov (our preferred
method), or the other methods identified in the ADDRESSES section. Once
submitted, comments cannot be edited or removed from the docket. The
EPA may publish any comment received to its public docket. Do not
submit to EPA's docket at https://www.regulations.gov any information
you consider to be CBI or other information whose disclosure is
restricted by statute. This type of information should be submitted by
mail as discussed below.
    Multimedia submissions (audio, video, etc.) must be accompanied by
a written comment. The written comment is considered the official
comment and should include discussion of all points you wish to make.
The EPA will generally not consider comments or comment contents
located outside of the primary submission (i.e., on the web, cloud, or
other file sharing system). For additional submission methods, the full
EPA public comment policy, information about CBI or multimedia
submissions, and general guidance on making effective comments, please
visit https://www.epa.gov/dockets/commenting-epa-dockets. For further
information and updates on EPA Docket

Center services, please visit us online at https://www.epa.gov/dockets.
    Submitting CBI. Do not submit information containing CBI to the EPA
through https://www.regulations.gov/ or email. Clearly mark the part or
all the information that you claim to be CBI. For CBI information on
any digital storage media that you mail to the EPA, mark the outside of
the digital storage media as CBI and then identify electronically
within the digital storage media the specific information that is
claimed as CBI. In addition to one complete version of the comments
that includes information claimed as CBI, you must submit a copy of the
comments that does not contain the information claimed as CBI directly
to the public docket through the procedures outlined in Instructions
above. If you submit any digital storage media that does not contain
CBI, mark the outside of the digital storage media clearly that it does
not contain CBI. Information not marked as CBI will be included in the
public docket and the EPA's electronic public docket without prior
notice. Information marked as CBI 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: OAQPS
Document Control Officer (C404-02), OAQPS, U.S. Environmental
Protection Agency, Research Triangle Park, North Carolina 27711,
Attention Docket ID No. EPA-HQ-OAR-2004-0014. Note that written
comments containing CBI and submitted by mail may be delayed and no
hand deliveries will be accepted.

D. Participation in Virtual Public Hearing

    To request a virtual public hearing, contact Ms. Pamela Long at
(919) 541-0641 or by email at [email protected]. If requested, the
virtual hearing will be held on October 31, 2022. The hearing will
convene at 9:00 a.m. Eastern Time (ET) and will conclude at 3:00 p.m.
ET. The EPA may close a session 15 minutes after the last pre-
registered speaker has testified if there are no additional speakers.
The EPA will announce further details at https://www.epa.gov/nsr.
    Upon publication of this document in the Federal Register, the EPA
will begin pre-registering speakers for the hearing, if a hearing is
requested. To register to speak at the virtual hearing, please use the
online registration form available at https://www.epa.gov/nsr or
contact Ms. Pamela Long at<PHONE_NUMBER> or by email at
[email protected]. The last day to pre-register to speak at the hearing
will be October 26, 2022. Prior to the hearing, the EPA will post a
general agenda that will list pre-registered speakers in approximate
order at: https://www.epa.gov/nsr.
    The EPA will make every effort to follow the schedule as closely as
possible on the day of the hearing; however, please plan for the
hearings to run either ahead of schedule or behind schedule.
    Each commenter will have 3 minutes to provide oral testimony. The
EPA encourages commenters to provide the EPA with a copy of their oral
testimony electronically (via email) by emailing it to
[email protected]. The EPA also recommends submitting the text of your
oral testimony as written comments to the rulemaking docket.
    The EPA may ask clarifying questions during the oral presentations
but will not respond to the presentations at that time. Written
statements and supporting information submitted during the comment
period will be considered with the same weight as oral testimony and
supporting information presented at the public hearing.
    Please note that any updates made to any aspect of the hearing will
be posted online at https://www.epa.gov/nsr. While the EPA expects the
hearing to go forward as set forth above, please monitor our website or
contact Ms. Pamela Long at<PHONE_NUMBER> or by email at
[email protected] to determine if there are any updates. The EPA does
not intend to publish a document in the Federal Register announcing
updates.
    If you require the services of a translator or special
accommodations such as audio description, please pre-register for the
hearing with Ms. Pamela Long and describe your needs by October 21,
2022. The EPA may not be able to arrange accommodations without
advanced notice.

II. Background

A. New Source Review Program

    The NSR program was designed to protect public health and welfare
from the effects of air pollution and to preserve and/or improve air
quality throughout the nation. See 42 U.S.C. 7470(1), (2), (4). The NSR
program requires certain stationary sources of air pollution to obtain
air pollution permits prior to beginning construction. Construction of
new sources with emissions above statutory thresholds, and
modifications of existing sources emitting above those thresholds, that
increase emissions of ``regulated NSR pollutants'' by more than amounts
specified in the EPA's NSR regulations are subject to ``major source''
NSR requirements. New construction or modifications of smaller emitting
sources and modifications of existing major sources that do not
increase emissions by more than the thresholds in the major NSR
regulations may be subject to minor NSR requirements or excluded from
NSR altogether.
    The major source NSR program includes two distinct programs that
each have unique requirements for new or modified sources. The
applicability of these two programs depends on whether the area where
the source is located is exceeding the National Ambient Air Quality
Standards (NAAQS). The PSD program, based on requirements in Part C of
title I of the CAA, applies to pollutants for which the area is not
exceeding the NAAQS (areas designated as attainment or unclassifiable)
and to regulated NSR pollutants for which there are no NAAQS. The NNSR
program, based on Part D of title I of the CAA, applies to pollutants
for which the area is not meeting the NAAQS (areas designated as
nonattainment).
    To implement the requirements of the CAA for these programs, most
states have EPA-approved State Implementation Plans (SIPs) containing
PSD and NNSR preconstruction permitting programs that meet the minimum
requirements reflected in the EPA's major NSR program regulations at 40
CFR 51.166 and 51.165. Upon EPA approval of a SIP, the state or local
air agency becomes the permitting authority for major NSR permits for
sources within its boundaries and issues permits under state law.
Currently, state and local air agencies issue the vast majority of
major NSR permits each year. When a state or local air agency does not
have an approved NSR program, federal regulations apply and either the
EPA issues the major NSR permits or a state or local air agency issues
the major NSR permits on behalf of the EPA by way of a delegation
agreement. For sources located in Indian Country, 18 U.S.C. 1151, the
EPA is the permitting authority for major NSR.
    The permitting program for construction of new non-major sources
and minor modifications to major sources is known as the minor NSR
program. CAA section 110(a)(2)(C) requires states to develop a program
to regulate the construction and modification of any stationary source
``as necessary to assure that [NAAQS] are achieved.'' 42 U.S.C.
7410(a)(2)(C). The CAA and the EPA's regulations are less prescriptive
regarding minimum requirements for minor NSR, so air agencies generally
have more flexibility in designing minor NSR programs in their EPA-
approved SIPs. Minor NSR

permits are almost exclusively issued by state and local air agencies,
although the EPA issues minor NSR permits in many areas of Indian
Country.
    The applicability of the PSD, NNSR, and/or minor NSR programs to a
stationary source must be determined in advance of construction and is
a pollutant-specific determination. Thus, a stationary source may be
subject to the PSD program for certain pollutants, NNSR for some
pollutants, and minor NSR for others.

B. Applicability of the Major NSR Program

    Major NSR applies to (1) construction of new major sources and (2)
major modifications of existing major sources. In either case, the
initial step in assessing applicability is to determine whether the new
or modified source in question qualifies as a ``major stationary
source.'' A new or existing source qualifies as a major stationary
source if it ``emits or has the potential to emit'' a regulated NSR
pollutant in an amount greater than the specified annual thresholds.
For the PSD program, the major source threshold is 100 tons per year
(tpy) for sources in certain source categories listed in the
regulations, and 250 tpy for any other type of source. See 40 CFR
51.166(b)(1)(i)(a) and 52.21(b)(1)(i)(a). The major source threshold
for NNSR is generally 100 tpy for all source categories but is lower
for some pollutants in nonattainment areas classified as Serious,
Severe, or Extreme. See 40 CFR 51.165(a)(1)(iv).
    If a proposed new source's actual or potential emissions of a
regulated NSR pollutant \1\ are at or above the applicable major source
threshold, it is subject to preconstruction review under major NSR for
that pollutant.\2\ Furthermore, under PSD, the proposed new source
would also be subject to major NSR review for any other regulated NSR
pollutant that it emits at or above the pollutant's ``significant''
emissions rate as defined in 40 CFR 51.166(b)(23) and 52.21(b)(23).
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    \1\ 40 CFR 52.21(b)(50) defines the term ``regulated NSR
pollutant'' for purposes of PSD. The term generally includes
pollutants for which a NAAQS has been promulgated and other
pollutants subject to regulation under the CAA. This ``regulated NSR
pollutant'' definition, however, excludes the Hazardous Air
Pollutants regulated under section 112 of the CAA. For purposes of
NNSR, ``regulated NSR pollutant'' is defined at 40 CFR
51.165(a)(1)(xxxvii).
    \2\ Physical changes at an existing non-major source can also
establish a ``major stationary source'' if the physical change by
itself would exceed the applicable major stationary source
threshold. E.g., 40 CFR 52.21(b)(1)(i)(c).
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    An existing major stationary source can be subject to major NSR
when a proposed physical change or a change in the method of operation
qualifies as a ``major modification.'' \3\ A major modification occurs
when a physical or operational change (i.e., a construction project)
would result in (1) a significant emissions increase of a regulated NSR
pollutant, considering emissions increases and decreases from the
project alone, and (2) a significant net emissions increase of a
regulated NSR pollutant, considering the project as well as other
contemporaneous emissions increases and decreases at the source. See,
e.g., 40 CFR 52.21(b)(2)(i) and (b)(52). As noted in the previous
paragraph, the NSR regulations define the annual emissions rate
considered ``significant'' for each regulated NSR pollutant. See 40 CFR
51.165(a)(1)(x), 51.166(b)(23), and 52.21(b)(23). In determining the
increase in emissions from a physical or operational change, new
emissions units are evaluated at their potential emissions, while
existing and replacement units are generally evaluated by comparing
their baseline actual emissions before the physical or operational
change to their projected actual emissions after the change. See, e.g.,
40 CFR 52.21(a)(2)(iv)(c-f), (b)(7), and (b)(33).
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    \3\ Notably, modifications to existing non-major sources cannot
be considered major modifications. However, as described in footnote
2, a physical change at an existing minor source that itself exceeds
the major source thresholds would establish a major stationary
source.
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C. Treatment of ``Fugitive Emissions'' in the Major NSR Program

    For purposes of major NSR, ``fugitive emissions'' are defined as
``emissions which could not reasonably pass through a stack, chimney,
vent, or other functionally equivalent opening.'' E.g., 40 CFR
52.21(b)(20). Examples of fugitive emissions include windblown dust
from surface mines and volatile organic compounds (VOCs) emitted from
leaking pipes and fittings at petroleum refineries. Section VII of this
preamble further discusses the definition of ``fugitive emissions.''
    For certain types of sources, fugitive emissions are treated
differently from non-fugitive emissions in determining whether major
NSR applies to a source. Fugitive emissions may be relevant to
determining whether a source triggers major NSR in two distinct
contexts.
    First, for purposes of determining whether a new or existing source
is a ``major stationary source,'' \4\ quantifiable fugitive emissions
are included in calculating a source's emissions only if the source
belongs to one of the source categories specifically listed in the
major NSR regulations. See, e.g., 40 CFR 52.21(b)(1)(iii).\5\ Thus,
fugitive emissions from sources not belonging to a listed category are
generally not included in determining whether a source is a major
stationary source. The treatment of fugitive emissions in determining
whether a new or existing source is a major source is well-established
and is not impacted by this proposed action.
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    \4\ The relevant statutory provisions use the terms ``major
stationary source'' and ``major emitting facility'' interchangeably.
See 42 U.S.C. 7479(1), 7602(j). The EPA uses the shorthand phrase
``major source'' to refer to this concept, and any reference to a
``major source'' in this preamble refers to the concept of ``major
stationary source'' under NSR.
    \5\ A single stationary source may be comprised of multiple
different pollutant-emitting activities. See, e.g., 40 CFR
52.21(b)(5) and (6) (requiring the aggregation of all pollutant-
emitting activities that belong to the same major industrial
grouping, are located on one or more contiguous or adjacent
properties, and are under the control of the same person (or persons
under common control)). Although these activities might be assigned
different source categories if viewed in isolation, EPA's
longstanding approach is to examine the source as a whole and assign
it to a single source category based on its ``primary activity.''
See, e.g., 54 FR 48870, 48881 (November 28, 1989). Under this
approach, if the source's primary activity is determined to be one
of the listed source categories, then fugitive emissions from all
pollutant-emitting activities that are part of that stationary
source are considered in determining whether the source as a whole
exceeds the relevant major source threshold. See, e.g., 54 FR 48882;
Letter from Cheryl Newton, EPA Region 5, to Janet McCabe, Indiana
Department of Environmental Management (March 6, 2003) (Newton
Letter). Even if the primary activity of a source does not fit
within a listed source category, fugitive emissions should be
quantified from emission units within the source that do belong to a
listed category (e.g., a boiler of sufficient size, or a coal
cleaning plant); this is sometimes referred to as a ``nested'' or
``embedded'' source. See, e.g., Newton Letter. In this case,
fugitive emissions from the ``nested'' portion of the source
belonging to a listed source category would be included in
determining whether (1) the ``nested'' portion of the source
exceeded the relevant major source threshold (generally 100 tons per
year), and whether (2) the source as a whole exceeded the relevant
major source threshold (generally 250 tons per year for PSD).
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    Second, the inclusion of fugitive emissions may impact whether a
physical or operational change at a major stationary source results in
a ``major modification.'' This proposed action addresses the treatment
of fugitive emissions in this second context. As discussed further in
Sections III and IV of this preamble, the EPA proposes to affirm its
longstanding position that all existing major sources (regardless of
source category) must include fugitive emissions when determining if a
modification is major. A summary of the relevant history of the
treatment of fugitive emissions in the context of modifications is
presented in Section II.D of this preamble; additional discussion of
the legal and policy considerations underlying this history is included
in Section IV.A of this preamble.

    Once a source is subject to the major NSR program, fugitive
emissions are generally treated the same as stack emissions in
determining which substantive requirements apply to the source.\6\
Specifically, for PSD, once a new source is determined to be ``major''
(i.e., over the 100 or 250 tpy threshold) for a particular pollutant,
all emissions (including fugitive emissions) are included in all
subsequent analysis, including PSD applicability for other individual
pollutants (i.e., comparing emissions to the significant emission
rates), Best Available Control Technology (BACT) analyses, and air
quality impact analyses. E.g., 40 CFR 52.21(j)(2); see also 54 FR 48871
n.2. Similarly, once a modification is determined to be major with
respect to at least one regulated NSR pollutant (and provided an
exemption discussed in Section II.D of this preamble does not apply),
fugitive emissions are included in all subsequent analyses. E.g., 40
CFR 52.21(j)(3); see also 54 FR 48871 n.2; In re Masonite Corp., 5 EAD
551, 582-83 (EAB 1994).
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    \6\ See generally Alabama Power v. Costle, 636 F.2d 323, 369
(D.C. Cir. 1979) (``The terms of section 165, which detail the
preconstruction review and permit requirements for each new or
modified `major emitting facility' apply with equal force to
fugitive emissions and emissions from industrial point sources . . .
. EPA is correct that a major emitting facility is subject to the
requirements of section 165 for each pollutant it emits irrespective
of the manner in which it is emitted.'').
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D. Fugitive Emissions in Major Modification Determinations

    Following the 1977 CAA Amendments, the EPA's initial 1978
regulations implementing the major NSR program required that fugitive
emissions from sources in all source categories be included in the
first instance in calculating whether a new source or modification of
an existing source was major.\7\ However, in its 1979 Alabama Power
decision that reviewed the 1978 regulations,\8\ the D.C. Circuit held
that CAA section 302(j) requires a rulemaking to identify the sources
that must include fugitive emissions in determining whether a source is
a ``major emitting facility'' (i.e., ``major stationary source''). In
response, in 1980 the EPA promulgated a list of source categories,
along with a provision exempting sources not belonging to one of those
listed source categories from substantive major NSR requirements if the
source or modification would be considered ``major'' solely due to the
inclusion of fugitive emissions. 45 FR 52676 (August 7, 1980)
(promulgating, e.g., 40 CFR 52.21(i)(4)(vii), which was later
recodified at 40 CFR 52.21(i)(1)(vii) in 2002).\9\
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    \7\ See, e.g., 43 FR 26380, 26403-04 (June 19, 1978); see also
48 FR 38742, 38743 (August 25, 1983) (discussing history of the
EPA's treatment of fugitive emissions in the 1978 rule and related
rules); 49 FR 43202 (October 26, 1984) (same). These initial
regulations excluded ``fugitive dust'' from air quality impact
assessments, but this exclusion was vacated by the D.C. Circuit
court. See Alabama Power, 636 F.2d at 370.
    \8\ Alabama Power, 636 F.2d 323.
    \9\ The 1980 rule also added this exemption to EPA's NSR
regulations in 40 CFR 51.18 (later recodified in 40 CFR 51.165), 40
CFR 51.24 (later recodified in 40 CFR 51.166), and 40 CFR part 51
appendix S. Collectively, these four nearly identical provisions are
referred to as the ``1980 exemption.'' For an illustration of how
the 1980 exemption has functioned in the major modification context,
see In re Masonite Corp., 5 EAD 551, 581-83 (EAB 1994).
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    In 1984, the EPA finalized revisions to the NSR regulations that
were intended to better implement CAA section 302(j), the statutory
provision on which the 1980 exemption was based. In the context of
major source determinations, the EPA revised the definition of ``major
source'' such that sources in non-listed source categories need not
include fugitive emissions in the first instance in determining whether
their emissions exceed major source thresholds. 49 FR 43202 (October
26, 1984). This reflected a more straightforward approach for major
source determinations than the one established in the 1980
exemption.\10\
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    \10\ Under the 1980 exemption, all sources were still required
to include fugitive emissions in the first instance when calculating
whether a new source or modification would be major. As a result, a
non-listed source or modification could theoretically be classified
as a major source but nonetheless exempt from substantive major NSR
requirements if the terms of the exemption were met. In 1981, the
EPA granted a petition for reconsideration of this aspect of the
1980 rules and clarified that the regulations were not intended to
function this way. Instead, the intent was that any source in a non-
listed category that would be ``major'' only if fugitive emissions
were taken into account should not be considered ``major.'' See
Letter from Douglas M. Costle, Administrator, EPA, to Robert T.
Connery (January 19, 1981). The EPA's 1984 amendments to the ``major
source'' definition codified this intent by excluding fugitive
emissions from the major source calculation in the first instance.
See 49 FR 43202 at 43204 and 43208-09 (October 26, 1984).
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    The EPA declined at that time to finalize a similar revision for
major modifications. Instead, in a companion document to the 1984 final
rule, the EPA proposed an ``interpretive ruling'' reevaluating and
reversing the EPA's prior assumption that fugitive emissions should be
treated the same in major source and major modification contexts. 49 FR
43211 (October 26, 1984). For major modification determinations, the
EPA proposed to include quantifiable fugitive emissions from sources in
all source categories when determining whether a physical or
operational change meets the significance thresholds for a major
modification. This was based on the EPA's interpretation that CAA
section 302(j) does not apply in the major modification context, and
that CAA section 111(a)(4), which defines ``modification,'' requires
consideration of all types of emissions (as discussed further in
Section IV.A of this preamble). Along with this interpretation, the EPA
proposed to remove the 1980 exemption, which was no longer needed in
the major source context after the 1984 revisions and which conflicted
with the agency's proposed interpretation in the major modification
context. In 1986, the EPA again solicited comment on the 1984
``interpretive ruling.'' 51 FR 7090 (February 28, 1986).
    The EPA ultimately ``retain[ed]'' and ``reaffirm[ed]'' the EPA's
1984 interpretive ruling in a 1989 action finalizing certain other rule
revisions. 54 FR 48870 (November 28, 1989).\11\ This interpretation--
that all sources must include fugitive emissions in the major
modification context--remained the EPA's position until 2008.\12\ The
EPA inadvertently failed to remove the 1980 exemption in the 1989 rule,
creating an apparent conflict between the EPA's interpretation and the
legacy regulatory text.
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    \11\ Subsequent EPA rules have referred to this 1989 rule as
``finalizing'' the EPA's 1984 interpretive ruling. E.g., 73 FR 77884
(December 19, 2008).
    \12\ In October 1990, the EPA released a draft New Source Review
Workshop Manual, in which the agency stated that fugitive emissions
``are included in the potential to emit (and increases in the same
due to modification)'' if they occur at one of the source categories
listed pursuant to section 302(j). DRAFT NSR Workshop Manual at A.9
(1990). This phrasing seemingly contradicted the 1989 interpretive
ruling, although the EPA later acknowledged that this language was
not intended to change the EPA's policy in this area. 73 FR 77885
(December 19, 2008). A 1994 EPA Environmental Appeals Board
decision, In re. Masonite Corp., considered the existing regulatory
text addressing the treatment of fugitive emissions in major
modification determinations but did not evaluate or disturb the 1989
interpretation. See 5 EAD at 581-83.
---------------------------------------------------------------------------

    In 2002, the EPA finalized major revisions to its NSR regulations.
67 FR 80186 (December 31, 2002) (``NSR Reform Rule''). Among many other
changes, and consistent with the 1989 interpretive ruling, this 2002
rule explicitly required the inclusion of fugitive emissions in
calculating emissions increases for purposes of determining whether a
physical or operational change constitutes a major modification for all
major sources, regardless of source category.\13\

Notwithstanding this affirmation and codification of the agency's
longstanding position, the EPA again inadvertently left the 1980
exemption in the CFR.\14\
---------------------------------------------------------------------------

    \13\ See, e.g., 40 CFR 52.21(b)(41)(ii)(b) and
52.21(b)(48)(i)(a) (definitions of ``projected actual emissions''
and ``baseline actual emissions,'' both of which include fugitive
emissions to the extent quantifiable).
    \14\ Although the 1980 exemption was renumbered from 40 CFR
52.21(i)(4)(vii) to 40 CFR 52.21(i)(1)(vii) in the 2002 NSR Reform
Rule, its content was not altered. As a result, the 1980 exemption--
which speaks in terms of calculating potential emissions increases--
does not align with the other changes effectuated in the 2002 rule,
which focus on calculating or projecting actual emissions increases
in determining whether a project is a major modification.
---------------------------------------------------------------------------

    In 2003, the EPA received a petition from Newmont USA Ltd., dba
Newmont Mining Corporation, requesting that the EPA reconsider the
treatment of fugitive emissions in the provisions adopted in the 2002
NSR Reform Rule.\15\ After granting the petition for reconsideration in
2004,\16\ the EPA proposed in 2007 and finalized in 2008 a rule titled
``Prevention of Significant Deterioration (PSD) and Nonattainment New
Source Review (NSR): Reconsideration of Inclusion of Fugitive
Emissions'' (the Fugitive Emissions Rule). 72 FR 63850 (November 13,
2007); 73 FR 77882 (December 19, 2008). The Fugitive Emissions Rule,
which became effective on January 20, 2009, reversed the EPA's position
as set forth in the 1984 and 1989 interpretive rulings concerning the
treatment of fugitive emissions for major modification purposes. Under
the Fugitive Emissions Rule, only sources in listed source categories
designated through rulemaking pursuant to section 302(j) of the Act
needed to include fugitive emissions in determining whether a change is
a major modification. Thus, the Fugitive Emissions Rule adopted the
same approach for considering fugitive emissions when determining
whether a change is a major modification as has been used since 1984
for determining whether a source is a major stationary source. Because
the 2008 Fugitive Emissions Rule rendered the 1980 exemption obsolete
in the major modification context, the EPA also removed the 1980
exemption in the 2008 rule.
---------------------------------------------------------------------------

    \15\ Newmont Mining Corporation, EPA-HQ-OAR-2004-0014-0005.
    \16\ Jeffrey R. Holmstead, EPA, EPA-HQ-OAR-2004-0014-0014.
---------------------------------------------------------------------------

E. Petition for Reconsideration and Administrative Stays of the
Fugitive Emissions Rule

    On February 17, 2009, the Natural Resources Defense Council (NRDC)
submitted a petition for reconsideration of the 2008 Fugitive Emissions
Rule under CAA 307(d)(7)(B).\17\ On April 24, 2009, the EPA responded
by letter indicating that the EPA was convening a reconsideration
proceeding and granting a 3-month administrative stay of the rule.\18\
---------------------------------------------------------------------------

    \17\ John Walke, NRDC, EPA-HQ-OAR-2004-0014-0060.
    \18\ Lisa Jackson, EPA, EPA-HQ-OAR-2004-0014-0062.
---------------------------------------------------------------------------

    The initial 3-month administrative stay of the Fugitive Emissions
Rule became effective on September 30, 2009. 74 FR 50115 (September 30,
2009). An interim final rule extending the stay for an additional 3
months became effective on December 31, 2009. 74 FR 65692 (December 11,
2009). An additional 18-month stay became effective on April 1, 2010.
75 FR 16012 (March 31, 2010). In each of these stay actions (beginning
on September 30, 2009), the EPA not only stayed the CFR paragraphs
added or changed by the Fugitive Emissions Rule, but also amended the
CFR to temporarily reinstate the 1980 exemption (which had been removed
by the 2008 rule).
    These initial administrative stays were intended to ``effectuate
this stay of the December 19, 2008, rule [by] reinstating previous
provisions on a temporary basis.'' 74 FR 50115. However, in several
cases, paragraphs of the affected regulations were stayed in their
entirety, unintentionally staying existing regulatory provisions
unrelated to those that were revised by the Fugitive Emissions Rule. To
correct this error, on March 30, 2011, the EPA published an ``interim
rule'' to more precisely effectuate the stay of the Fugitive Emissions
Rule itself (i.e., to stay only those portions of the NSR regulations
that were added or revised by the 2008 rule, without staying other
unrelated portions of the NSR regulations). 76 FR 17548 (March 30,
2011). In order to do this, the interim rule revised 47 paragraphs of
the regulatory text that were changed by the Fugitive Emissions Rule,
reverting these paragraphs to the regulatory text that existed prior to
the Fugitive Emissions Rule.\19\ And, as with the 2009 and 2010
actions, in the 2011 action, the EPA again added the 1980 exemption
back to the four relevant sections of the CFR. The interim rule also
extended the stay of seven other provisions indefinitely until the EPA
completed its reconsideration of the Fugitive Emissions Rule.\20\
---------------------------------------------------------------------------

    \19\ For a complete list of these provisions, see 76 FR 17551.
    \20\ Although the 2011 interim rule was effective immediately,
the EPA also provided a public comment period. 76 FR 17551. This
solicitation of comments pertained to the procedural action
undertaken in the 2011 interim rule--measures to stay the
effectiveness of the 2008 Fugitive Emissions Rule--and did not
extend to the substance of the EPA's reconsideration of the 2008
Fugitive Emissions Rule. Nonetheless, several comments on the 2011
interim rule addressed substantive topics related to the EPA's
reconsideration. The current proposed rule generally addresses those
substantive comments as well as substantive comments provided during
earlier regulatory actions. Commenters are welcome to submit or re-
submit any comments relevant to the content of this proposed rule.
---------------------------------------------------------------------------

    In summary, due to the EPA's stay actions described in this
section, the Fugitive Emissions Rule only briefly took effect between
January 20, 2009, and September 30, 2009. Since 2009, the regulations
that predated the 2008 Fugitive Emissions Rule have been the operative
regulations governing the treatment of fugitive emissions in the major
modification context.

III. Proposed Action

A. Results of the EPA's Reconsideration

    This proposed rule seeks to close out the reconsideration process
initiated in 2009 in a manner that better aligns with the structure and
purpose of the NSR program and that minimizes confusion for all
stakeholders. After reevaluating the legal and policy bases of the
Fugitive Emissions Rule, the EPA no longer considers that rule's
treatment of fugitive emissions in the context of major modifications
to be appropriate. Instead, for the reasons described further in
Sections IV and V of this preamble, the EPA is proposing to reaffirm
the EPA's longstanding interpretation of CAA sections 302(j) and
111(a)(4). Specifically, the EPA proposes to reaffirm its
interpretation that the language in CAA section 302(j) regarding
fugitive emissions applies only in the major source context, and not in
the major modification context. The EPA proposes to interpret CAA
section 111(a)(4) to require that all sources consider increases in all
types of emissions (including fugitive emissions) in determining
whether a proposed change would constitute a major modification.
Accordingly, the EPA is proposing to repeal the 2008 Fugitive Emissions
Rule by removing the portions of the 2008 rule that remain in the
agency's NSR regulations.
    Additionally, in light of the statutory interpretation presented in
Section IV.C of this preamble, the EPA is proposing to remove the
``major solely due to the inclusion of fugitive emissions'' exemption
first promulgated in 1980 and reinstated in 2009. As described in
Section II.D of this preamble, this 1980 exemption was inadvertently
left in the EPA's regulations from 1989 to 2008 despite the fact that
the agency had interpreted the statute in that period (as EPA proposes
now) to provide no such exemption in the context of

modifications. This inconsistency, along with other issues related to
the 1980 exemption, has created significant uncertainty about the EPA's
treatment of fugitive emissions in the major modification context.

B. Proposed Revisions to Regulations

    The Fugitive Emissions Rule revised similar regulatory text in all
four sections of the CFR associated with the major NSR program,
including 40 CFR 51.165, 51.166, 52.21, and appendix S to part 51. This
proposed action would revise the text in each of these four sections in
order to fully repeal the 2008 rule.
    As discussed in Section II.E of this preamble, the EPA's March 2011
interim rule revised 47 paragraphs of the regulatory text that had been
changed by the Fugitive Emissions Rule, reverting these paragraphs back
to the text that existed prior to the Fugitive Emissions Rule. These
paragraphs need not be revised further in this action in order to
repeal the Fugitive Emissions Rule. To the extent necessary, the EPA
proposes in this action to affirm those changes to the regulatory text
effectuated in the March 2011 interim rule and lift the ``interim''
label from those aspects of the 2011 rule.
    Seven additional paragraphs that were added (instead of revised) by
the Fugitive Emissions Rule were stayed in the EPA's 2009, 2010, and
2011 actions, but still exist within the EPA's NSR regulations. 40 CFR
51.165(a)(1)(v)(G), 51.165(a)(1)(vi)(C)(3), 51.166(b)(2)(v),
51.166(b)(3)(iii)(d), part 51 appx. S II.A.5(vii), 52.21(b)(2)(v),
52.21(b)(3)(iii)(c). These provisions are accompanied by a notation in
the CFR (at the end of each CFR section) that these provisions are
stayed and have no current legal effect. For these paragraphs, the EPA
is proposing to concurrently lift the existing stay and remove these
provisions from the regulations (the only way to remove these
provisions is to lift the stay). In so doing, the EPA intends to
permanently restore the relevant regulatory text that existed before
the Fugitive Emissions Rule was promulgated.
    Four paragraphs embodying the 1980 exemption were removed by the
Fugitive Emissions Rule, but were reinstated in the EPA's 2009, 2010,
and 2011 actions in order to effectuate a stay of the Fugitive
Emissions Rule. 40 CFR 51.165(a)(4), 51.166(i)(1)(ii),
52.21(i)(1)(vii), and part 51 appx. S II.F. In light of the
interpretation advanced in Section IV.C of this preamble--that all
sources must account for fugitive emissions in determining whether a
modification is major--the EPA is also proposing to remove these
provisions embodying the 1980 exemption.
    Given the number and complexity of the regulatory provisions
impacted by the Fugitive Emissions Rule and the current proposal, the
EPA specifically seeks comment on whether the proposed changes to the
regulatory text, in addition to those changes previously made in 2011,
will fully effectuate the repeal of the Fugitive Emissions Rule and
conform the EPA's regulations to the interpretation described in
Section IV.C of this preamble.

IV. Interpretation of CAA Sections 302(j) and 111(a)(4)

    The plain language of CAA sections 302(j) and 111(a)(4), as well as
the legislative history and case law involving these provisions,
supports requiring that all existing major sources include fugitive
emissions when determining whether a modification at the source
requires a major NSR permit. This view is consistent with the approach
the EPA has applied in the NSR program for most of the past 4 decades,
but the EPA has inadvertently fostered uncertainty on this subject
through its rulemaking actions and omissions. To end this uncertainty
and better align the regulations with the structure and purpose of the
NSR program, the EPA proposes to affirm the longstanding interpretation
that fugitive emissions must be counted from all existing major sources
when determining whether a modification is major. As discussed in
Section V of this preamble, this approach properly accommodates the
relevant policy considerations associated with balancing the potential
air quality benefits that could result from this action with the
potential impacts on a limited subset of sources.

A. Previous EPA Interpretations

    When the EPA established the foundation for the current NSR program
in response to the 1977 CAA Amendments, the EPA required all
quantifiable emissions (including fugitive emissions) to be considered
in determining whether sources are subject to major NSR. 43 FR 26388,
26395 (June 19, 1978) (``[T]he regulations do not exclude fugitive dust
from the determination of potential emissions.'').\21\ However, in
recognition of concerns from the surface coal mining industry, the
EPA's 1978 regulations excluded ``fugitive dust'' from air quality
impact assessments for new and modified sources. See, e.g., 40 CFR
52.21(k)(5) (1978); 43 FR 26395.
---------------------------------------------------------------------------

    \21\ As the EPA later explained, prior to 1980, the ``EPA
considered all reasonably quantifiable emissions of a pollutant--
including both point emissions (e.g., from a stack or chimney) and
fugitive emissions--on the ground[s] that the emissions deteriorate
air quality regardless of how they emanate.'' 45 FR 52690 (August 7,
1980).
---------------------------------------------------------------------------

    In its 1979 Alabama Power decision, the U.S. Court of Appeals for
the D.C. Circuit considered various challenges to the 1978 NSR
regulations, including those related to the treatment of fugitive
emissions. In relevant part, the D.C. Circuit stated that it had
``reason to doubt whether EPA possesses the statutory authority to
promulgate the [fugitive dust] exception in this manner.'' Id. at
370.\22\ Although the court did not specifically resolve the matter, it
nonetheless vacated and remanded the 1978 fugitive dust exemption
``[i]n light of [the court's] interpretation of section 302(j), and in
accordance with [the court's] discussion as to the limits of EPA
general exemption authority.''
---------------------------------------------------------------------------

    \22\ In suggesting this, the court referred to another section
of its opinion, where the court identified ``principles pertinent to
an agency's authority to adopt general exemptions to statutory
requirements.'' Id. at 357; see id. at 357-361.
---------------------------------------------------------------------------

    The D.C. Circuit's discussion of CAA section 302(j) was
particularly noteworthy. CAA section 302(j) defines ``major stationary
source'' and ``major emitting facility'' as ``any stationary facility
or source of air pollutants which directly emits, or has the potential
to emit, one hundred tons per year or more of any air pollutant
(including any major emitting facility or source of fugitive emissions
of any such pollutant, as determined by rule by the Administrator).''
42 U.S.C. 7602(j). The D.C. Circuit held that CAA ``section 302(j)
specifically attaches a rulemaking requirement for the inclusion of
fugitive emissions in the threshold calculation'' of determining
whether a source is a ``major emitting facility.'' 636 F.2d at 369.\23\
---------------------------------------------------------------------------

    \23\ The D.C. Circuit found that the general definition of
``major stationary source'' or ``major emitting facility'' in CAA
section 302(j) was not expressly modified by the PSD-specific
definition of ``major emitting facility'' in CAA section 169(1)
(which is silent with respect to fugitive emissions), and
accordingly that CAA section 302(j)'s rulemaking requirement for
fugitive emissions controlled with respect to the PSD program. 636
F.2d at 370.
---------------------------------------------------------------------------

    In response to the Alabama Power decision, in its 1980 revisions to
the NSR regulations, the EPA removed the 1978 partial exclusion for
fugitive dust. In order to implement the CAA section 302(j) rulemaking
requirement, the EPA also listed, by rule, a number of source
categories for which fugitive emissions were to be considered in
threshold determinations. See 45 FR 52676 (August 7, 1980)
(promulgating, e.g., 40

CFR 52.21(i)(4)(vii), which was later recodified at 40 CFR
52.21(i)(1)(vii) in 2002). Specifically, although the 1980 regulations
required all sources to include fugitive emissions in the first
instance when determining whether a new source or modification was
considered major, the 1980 rule provided an exemption from substantive
major NSR requirements for sources that did not belong to a listed
source category if the source or modification would be considered
``major'' solely due to the inclusion of fugitive emissions. This 1980
exemption did not differentiate between ``major source'' and ``major
modification'' inquiries. However, the EPA did not discuss this lack of
differentiation, nor did the EPA suggest that this result was required
by CAA section 302(j) or the Alabama Power decision.\24\
---------------------------------------------------------------------------

    \24\ The EPA's 1980 preamble discussion spoke generally of
``threshold determinations'' or ``threshold calculations'' but did
not specifically evaluate whether or how both the major source and
major modification inquiries were implicated by CAA section 302(j)
and the Alabama Power decision. Where the EPA did speak more
specifically to one of these inquiries, it spoke only to ``major
emitting facility'' (i.e., ``major source'') determinations under
CAA sections 169(1) and 302(j). See, e.g., 45 FR 52690.
---------------------------------------------------------------------------

    When the EPA revised the NSR regulations in 1984 to better
implement the CAA section 302(j) rulemaking requirement, it finalized
regulatory text within the definition of ``major source'' that more
directly excluded fugitive emissions from major source calculations for
sources not in the listed source categories. 49 FR 43202 (October 26,
1984). However, the EPA decided not to finalize similar revisions with
respect to major modifications. Instead, in a companion document
accompanying the 1984 rule, the EPA for the first time took a closer
look at the applicability of section 302(j) and the Alabama Power
decision in the context of major modifications. The EPA explained that
in its 1980 and 1983 regulatory actions, the ``EPA assumed that the
rulemaking requirement in section 302(j) applies to modifications as
well as to sources.'' 49 FR 43213 (October 26, 1984) (emphasis
added).\25\ The EPA further explained that the litigants and commenters
on those 1980 and 1983 actions similarly ``carried that assumption into
their communications, without evidencing any examination of it.'' Id.
After examining the assumption for the first time in 1984, the EPA
``concluded that it appears to be incorrect.'' Id. Accordingly, the EPA
proposed an ``interpretive rule'' outlining its interpretation that CAA
section 302(j) did not apply in the major modification context, and
that all sources (not just those in a listed source category) should
include fugitive emissions in the major modification context. The 1984
proposed interpretive rule, summarized in the following paragraphs,
explained the basis for the decision in considerable detail. See 49 FR
43213.
---------------------------------------------------------------------------

    \25\ Put another way, the EPA's 1980 interpretation ``took it
for granted'' that fugitive emissions would be treated the same for
major source and major modification determinations. 72 FR 63857
(November 13, 2007).
---------------------------------------------------------------------------

    First, the EPA explained that the plain language of the Act
strongly suggests that Congress did not intend the rulemaking
requirement in section 302(j) to apply to modifications. The EPA noted
that CAA section 302(j) on its face defines major source and does not
speak to modifications of those sources. By contrast, the EPA noted
that the definition of ``modification'' in CAA section 111(a)(4) (which
is incorporated by the statutory provisions for major NSR \26\) appears
to require the inclusion of fugitive emissions in threshold
applicability determinations for modifications. CAA section 111(a)(4)
provides that ``the term `modification' means any physical change in,
or change in the method of operation of, a stationary source which
increases the amount of any air pollutant emitted by such source or
which results in the emissions of any air pollutant not previously
emitted.'' 42 U.S.C. 7411(a)(4). The EPA indicated that, in defining
``modification'' solely in terms of the total amount of pollution that
a source change would produce, section 111(a)(4) suggests that Congress
intended to establish here no qualitative distinction between different
types of emissions (e.g., fugitive or non-fugitive). Thus, the EPA
concluded that Congress intended to require the inclusion of fugitive
emissions for modifications without any intermediate rulemaking step.
49 FR 43213.
---------------------------------------------------------------------------

    \26\ CAA section 169(2)(C), 42 U.S.C. 7479(2)(C), which governs
the PSD program, states: ``The term `construction' when used in
connection with any source or facility, includes the modification
(as defined in section 111(a) of this title) of any source or
facility.'' CAA section 171(4), 42 U.S.C. 7501(4), which governs the
NNSR program, states: ``The terms `modification' and `modified' mean
the same as the term `modification' as used in section 111(a)(4) of
this title.''
---------------------------------------------------------------------------

    Next, the EPA's 1984 interpretive rule examined the legislative
history surrounding these statutory provisions. With respect to CAA
section 302(j), the EPA noted that the passages in the relevant House
and conference reports that focus on CAA section 302(j) (as well as CAA
section 302(j) itself) refer only to major sources, and not to
modifications of these sources. 49 FR 43213 (citing H.R. Report No. 95-
294, 95th Cong., 1st Sess. 4, 9, 144 (1977); H.S. Rep. No. 95-564, 95th
Cong., 1st Sess. 172 (1977)). With respect to the reference to
``modification'' in the PSD provisions of the Act, the EPA indicated
that the conference committee said that it ``[i]mplements conference
agreement to cover `modification' as well as `construction' by defining
`construction' in Part C to conform to usage in other parts of the
Act.'' Id. (quoting 123 Cong. Rec. H. 11957. col. 3 (daily ed.)
(November 1, 1977)). The EPA posited that the phrase ``usage in other
parts of the Act,'' most likely refers not only to CAA section
111(a)(4), but also to the EPA regulations implementing section 111
that were in effect at the time. Id. The EPA explained that those
regulations (as well as CAA section 111(a)(4) itself) on their face
require the inclusion of fugitive emissions in CAA section 111
applicability determinations, inasmuch as they concern themselves only
with the quantity of the emissions in question. Id. (citing 40 CFR
60.14(a) (1977)). Moreover, the EPA explained that prior to the
enactment of CAA section 302(j) in 1977, both the EPA and states made
no distinction between fugitive and non-fugitive emissions in threshold
applicability determinations. Id. (citing 40 CFR 51.18, 52.21(d)(1)
(1977); 41 FR 55528 (December 21, 1976)). Given that CAA section 302(j)
ran against longstanding practice throughout the agency's
implementation of the CAA, the EPA suggested that if Congress had
intended a change as to modifications, it probably would have said so
explicitly, yet Congress said nothing. Id.
    The 1984 interpretive rule also addressed practical issues related
to the inclusion or exclusion of fugitive emissions in major
modification determinations and concluded that including fugitive
emissions in this context would be consistent with Congress's purposes,
including the potential relief from the burdens of NSR afforded by the
CAA section 302(j) rulemaking requirement. Given that the EPA's
regulations did not require unlisted sources with predominantly
fugitive emissions (e.g., surface coal mines) to count fugitive
emissions towards major source thresholds, the EPA noted that it is
unlikely that those sources would be considered major sources in the
first instance. And, because only modifications to an existing major
source can be considered major modifications, the EPA concluded that it
would be unlikely for sources of predominantly fugitive emissions to be
subject to major NSR due to a

modification, even under the EPA's proposed interpretation. 49 FR
43214.
    When the EPA ``affirmed'' the 1984 interpretive rule in a related
1989 rulemaking, it did so based on the justifications presented in
1984, with some additional discussion based on comments received from
stakeholders. See 54 FR 48882 (November 28, 1989). Specifically,
commenters argued: (1) that congressional silence on the subject
indicated a lack of guidance (rather than support for the EPA's
position) and (2) because new sources and modifications are generally
treated the same in most respects under the Act, there is no basis to
treat them differently under CAA section 302(j). The EPA was not
persuaded by these comments. The EPA concluded that its interpretation
was both reasonable and proper, warranting deference under Chevron,
U.S.A. Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984).
Additionally, the EPA reiterated and elaborated on its view that the
agency's interpretation should have little general impact on sources of
predominantly fugitive emissions like surface coal mines. This remained
the EPA's interpretation of CAA sections 302(j) and 111(a)(4) until the
Fugitive Emissions Rule was proposed in 2007 and finalized in 2008.\27\
---------------------------------------------------------------------------

    \27\ None of the EPA documents or actions that followed the 1989
interpretive ruling (e.g., the EPA's 1990 DRAFT NSR workshop manual,
the 1995 Masonite EAB decision, or the 2002 NSR Reform Rule)
addressed the substance of the interpretations presented in 1989. As
noted in the preamble to the 2008 rule, potentially conflicting
statements in the 1990 DRAFT NSR workshop manual were not intended
to reflect a change in position from the 1989 interpretive rule. See
73 FR 77885 (December 19, 2008). The 1995 Masonite EAB decision
considered how the 1980 exemption (which, as noted in Section II.D
of this preamble, was inadvertently not removed from the EPA's
regulations in 1989) functioned in practice, and did not evaluate
the EPA's 1989 interpretive rule or the statutory bases underlying
the agency's 1989 interpretation. See 5 EAD at 581-83. The 2002 NSR
Reform Rule explicitly codified the position expressed in the 1989
interpretive rule, without further discussion of the EPA's
interpretation of the relevant statutory provisions.
---------------------------------------------------------------------------

    The Fugitive Emissions Rule represented a significant shift in the
EPA's treatment of fugitive emissions. This 2008 rule was the first
time the EPA had, after focused deliberation, applied the CAA section
302(j) rulemaking requirement to major modifications, such that only
sources in categories listed by rule would need to account for fugitive
emissions when determining whether a project constituted a major
modification.
    To justify this changed interpretation, the EPA argued that the
lack of any reference in CAA section 302(j) to ``major modification,''
in addition to a scant legislative history, created ambiguity and room
for the EPA to extend CAA section 302(j) to the context of major
modifications.\28\ See 73 FR 77888 (December 19, 2008). The EPA stated
that it could not conclude from the statutory text or legislative
history what Congress specifically intended on this point.\29\
Accordingly, the EPA suggested that Congress simply did not know enough
to make the critical decisions regarding the treatment of fugitive
emissions in the major source and major modification contexts, instead
assigning resolution of these complex issues to the EPA. The EPA
additionally posited that CAA ``section 302(j) evinces, at a minimum,
an intent by Congress to require a special look at fugitive emissions
for purposes of calculating a source's emissions for NSR purposes.'' 73
FR 77888.\30\
---------------------------------------------------------------------------

    \28\ Notably, even as the EPA reversed its prior interpretation
of CAA 302(j), it nonetheless maintained that the EPA's historical
interpretation finalized in 1989 remained a reasonable construction
of the statute.
    \29\ The EPA indicated that no authoritative conference or
committee report addressed the issue of how fugitive emission should
be addressed in NSR permitting. The EPA nonetheless addressed
portions of the legislative history reflecting industry testimony
detailing concerns with the feasibility of controlling or measuring
fugitive emissions.
    \30\ The EPA's rationale in the Fugitive Emissions Rule focused
on CAA section 302(j) and largely did not address CAA section
111(a)(4). After summarizing the EPA's prior interpretation (and
public comments) relating to the CAA section 111(a)(4) definition of
``modification,'' the EPA simply asserted that this statutory
provision does not ``address the issue'' without further discussion.
73 FR 77888.
---------------------------------------------------------------------------

    The EPA then explained the policy and programmatic reasons
supporting its shift in approach. First, the EPA stated that its new
position was most consistent with its earliest and most nearly
contemporaneous construction of the statute in the 1980 NSR rules. The
EPA argued that providing a more uniform approach--i.e., treating
fugitive emissions the same in both major source and major modification
contexts--more accurately reflected the original intent of Congress in
establishing CAA section 302(j) and the resulting EPA rules that
followed. Second, the EPA said that the revised position better
addressed an additional regulatory burden that had not been adequately
recognized in the past. Specifically, the EPA asserted that the EPA's
policies discussed in 1984 and 1989 would have imposed a new burden on
major sources in unlisted source categories, ``since their fugitive
emissions would be counted in determining whether they had made a
change constituting a major modification and thus possibly subjecting
those modifications to NSR review.'' 73 FR 77889.

B. NRDC's Petition for Reconsideration

    NRDC's 2009 petition for reconsideration argued that the Fugitive
Emissions Rule was unlawful and urged the EPA to return to its prior
interpretation concerning fugitive emissions. NRDC's petition focused
largely on the definition of ``modification'' in CAA section 111(a)(4).
Citing CAA section 111(a)(4) and the D.C. Circuit's 2005 New York v.
EPA decision (New York I),\31\ NRDC emphasized that the definition of
modification focuses exclusively on increases in ``actual'' emissions.
NRDC asserted that the EPA's prior interpretations echoed this focus
and did not differentiate between stack emissions and fugitive
emissions, instead focusing on the total amount of pollution that a
change at a source would produce. Citing the D.C. Circuit's 2006 New
York v. EPA decision (New York II),\32\ NRDC further asserted that the
coverage of CAA section 111(a)(4) is broad--including any physical
change that increases emissions--and subject only to narrow de minimis
exceptions.
---------------------------------------------------------------------------

    \31\ 413 F.3d 3, 40 (D.C. Cir. 2005).
    \32\ 443 F.3d 880, 885 (D.C. Cir. 2006).
---------------------------------------------------------------------------

    NRDC claimed that, in promulgating the Fugitive Emissions Rule, the
EPA failed to address the definition of modification in CAA section
111(a)(4), explain its reversal of its interpretation of this statutory
provision, or respond to comments concerning this provision. Moreover,
NRDC claimed that the Fugitive Emissions Rule created an impermissible
exemption to the definition of ``modification'' because the EPA did not
(and could not) claim (1) that the exemption was supported by the de
minimis doctrine, (2) that increased fugitive emissions do not qualify
as ``the amount of any air pollutant emitted by such source'' under CAA
section 111(a)(4), or (3) that exempt fugitive emissions increases do
not fall within the meaning of ``any physical change'' or ``any''
change in the method of operation under CAA section 111(a)(4).\33\ As
noted previously, on April 24, 2009, the EPA responded by letter
indicating that the EPA was convening a reconsideration proceeding.
---------------------------------------------------------------------------

    \33\ The NRDC petition also raised other arguments, including a
discussion of the legislative history of CAA section 302(j) and
other concerns related to the implementation of the Fugitive
Emissions Rule by state and local air agencies.
---------------------------------------------------------------------------

C. Proposed Interpretation of CAA Sections 302(j) and 111(a)(4)

    After reconsidering the 2008 Fugitive Emissions Rule, the EPA
proposes to return to the position first articulated in 1984, adopted
in a final action in 1989,

and which remained the EPA's interpretation until revisited in 2008.
Given CAA section 302(j)'s silence with respect to modifications, in
conjunction with the definition of ``modification'' in CAA section
111(a)(4), the EPA does not believe the CAA section 302(j) rulemaking
requirement applies to major modification determinations. Moreover, the
EPA does not consider it appropriate to allow existing major sources in
non-listed source categories to omit increases and decreases in
fugitive emissions when evaluating whether a physical or operational
change constitutes a major modification. All major sources should
include both stack and fugitive emissions in the major modification
context.
    The EPA considers this a prudent change in position. The EPA's
treatment of fugitive emissions in modifications has a complicated
history, particularly during the early years of the NSR program
following the 1977 CAA Amendments. However, the interpretation advanced
now most closely aligns with the interpretation of CAA section 302(j)
originally proposed in 1984 and adopted in 1989. This interpretation
was more thoughtful and fully developed than the one the EPA had
followed from 1980 until 1984,\34\ and has reflected the EPA's position
for the majority of the NSR program's existence.\35\ More importantly,
the legal and policy reasoning advanced in the 1984 and 1989 actions
(summarized in Section IV.A of this preamble), in light of more recent
case law (New York I and II), reflects a more complete depiction of the
relevant statutory authorities than the reasoning articulated in the
2008 Fugitive Emissions Rule. The EPA also believes this approach fully
accommodates congressional intent and the practical and policy
considerations surrounding this issue. Therefore, for the reasons
detailed later in this preamble, the EPA is well-justified in returning
to its longest-standing view concerning the treatment of fugitive
emissions in the major modification context.
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    \34\ As noted in the EPA's 1984 action (and acknowledged in the
Fugitive Emissions Rule itself), the EPA's interpretations prior to
1984 ``assumed'' and ``took for granted'' that fugitive emissions
should be treated the same for major source and major modification
decisions, without evaluating whether CAA section 302(j) or the D.C.
Circuit's Alabama Power decision lent themselves to this result. See
49 FR 43213 (October 26, 1984); 72 FR 63857 (November 13, 2007).
Thus, the EPA's claim in 2008 that the Fugitive Emissions Rule was
``most consistent with EPA's earliest and most nearly
contemporaneous construction of the statute'' was not entirely
accurate. 73 FR 77888 (December 19, 2008). By the EPA's 2008 logic,
one could just as easily describe the EPA's 1978 approach--which
considered fugitive emissions from all sources for both major source
and major modification purposes--as the ``most nearly
contemporaneous construction of the statute.'' However, both the
EPA's 1978 and 1980-1983 approaches similarly neglected to fully
consider of the specific text of CAA sections 302(j) and 111(a)(4).
    \35\ The EPA's alternate interpretation--proposed in 2007 and
finalized in the 2008 Fugitive Emissions Rule--was effective for
only a short period of time between the Fugitive Emissions Rule's
effective date of January 20, 2009, and when the first stay of the
rule became effective on September 30, 2009.
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    CAA section 302(j), as interpreted by the Alabama Power court,
restricts the EPA's consideration of fugitive emissions in certain
situations, requiring a rulemaking before the EPA can consider such
emissions towards major stationary source thresholds. In extending this
rulemaking requirement to major modifications, the 2008 rule focused
largely on the fact that both CAA section 302(j) and the accompanying
legislative history were silent with respect to the treatment of
fugitive emissions for major modification purposes. The EPA concluded
that CAA section 302(j) indicates congressional intent ``to require a
special look at fugitive emissions for purposes of calculating a
source's emissions for NSR purposes.'' 73 FR 77888 (December 19, 2008).
This conclusion, while true to an extent, reflected an overbroad
understanding of the ``special look'' required by CAA section 302(j),
which is not specific to NSR \36\ and only explicitly addresses one
aspect of the expansive NSR program (major source determinations).\37\
Notwithstanding this ``special look,'' the EPA did not in 2008
interpret CAA section 302(j) as requiring the EPA to conduct rulemaking
to identify source categories prior to including fugitive emissions in
the major modification context. Instead, the EPA determined that the
congressional silence gave the agency the discretion to ``apply'' the
CAA section 302(j) methodology to major modifications.\38\ Moreover, in
the final Fugitive Emissions Rule in 2008, the EPA acknowledged that
its prior interpretation remained a permissible construction of the Act
(as the agency had previously asserted in 1989). 73 FR 77888; see 54 FR
48883 (November 28, 1989).
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    \36\ For example, the definition of ``major stationary source''
in CAA section 302(j) is also implicated by the title V operating
permits program. See, e.g., 42 U.S.C. 7661(2)(B).
    \37\ Most aspects of the NSR program treat fugitive and non-
fugitive emissions similarly. See supra note 6 and accompanying
text.
    \38\ Compare 73 FR 77889 (December 19, 2008) (final rule,
described in text) with 72 FR 63857 (November 13, 2007) (proposed
rule, which had proposed to ``conclude that it is reasonable to
interpret section 302(j) to require EPA to conduct rulemaking to
identify source categories that should include their fugitive
emissions for all threshold applicability purposes.'' (emphasis
added)).
---------------------------------------------------------------------------

    Moreover, the EPA's 2008 conclusion that Congress ``simply did not
know enough to make the critical decisions regarding the extent to
which fugitive emissions should be included in threshold applicability
determinations'' for both major source and major modification
determinations is undermined by the fact that Congress chose to
explicitly provide special treatment of fugitive emissions in the
relevant definition of major source, while declining to do so in the
relevant definition of major modification. As the EPA first explained
in 1984, because the special treatment of fugitive emissions in CAA
section 302(j) ``ran against the grain of longstanding practice[, i]f
Congress had intended a change as to modifications, it probably would
have said so explicitly, yet it said nothing.'' 49 FR 43213 (October
26, 1984).
    On its face, CAA section 302(j) only applies to determining what
constitutes a ``major stationary source.'' CAA section 302(j) does not
merely reference this concept, but literally defines this specific term
(along with the interchangeable term, ``major emitting facility''), and
this term alone. Nothing in the definition of ``major stationary
source'' in CAA section 302(j)--or its usage elsewhere in the NSR-
relevant statutory provisions \39\--suggests that its restriction on
counting fugitive emissions was intended to be extended to other,
distinct definitions or inquiries, such as the operative definition of
``modification'' in CAA section 111(a)(4). Rather than expand this
principle to other contexts, the silence in CAA section 302(j) with

respect to anything other than ``major source'' inquiries suggests
Congress's intent to confine the fugitive emissions rulemaking
requirement to major source determinations. The EPA's authority to
apply a similar treatment in another, different context depends on the
operative statutory provisions governing that context.\40\ As discussed
in the following paragraphs, in the context of determining whether a
major modification has occurred, the EPA does not interpret CAA section
111(a)(4) as providing a basis for restricting consideration of
fugitive emissions in such a manner.
---------------------------------------------------------------------------

    \39\ The definitions of ``major stationary source'' (or ``major
emitting facility'') in CAA section 302(j) and ``modification'' in
CAA section 111(a)(4) are related in that both are implicated by the
statutory provisions governing NSR applicability. For example, CAA
section 165 states that the ``construction'' of a ``major emitting
facility'' triggers PSD, and ``construction'' is defined by CAA
section 169 to include both new construction as well as
modifications, as defined in section 111(a). 42 U.S.C. 7475(a),
7479(2)(C). However, the fact that PSD can be triggered either by
the construction of a new major source or by the modification of a
major source does not mean that the restrictions in defining what
constitutes a major source also apply to determining whether a
modification has occurred to such a major source. The distinction
between these two concepts is apparent throughout the EPA's NSR
regulations, which apply different rules to new major sources and
modified major sources. And, while the definition of ``major
source'' and the restrictions in CAA section 302(j) continue to be
relevant to major modifications to a certain extent--since only
existing major sources can undergo a major modification--this
preliminary inquiry into whether an existing source is a major
source is distinct from the inquiry of whether a change at such a
source amounts to a major modification.
    \40\ Notably, the D.C. Circuit has emphasized the limited reach
of CAA section 302(j) with respect to other areas of the CAA, such
as the EPA's regulation of hazardous air pollutants under CAA
section 112. See NMA v. EPA, 59 F.3d 1351, 1360-61 (D.C. Cir. 1995).
---------------------------------------------------------------------------

    The EPA's 1984 and 1989 interpretations of the definition of
``modification'' in CAA section 111(a)(4) formed a central tenet of the
agency's prior position that all emissions--both stack and fugitive--
must be accounted for in the modification context. CAA section
111(a)(4) provides that ``the term `modification' means any physical
change in, or change in the method of operation of, a stationary source
which increases the amount of any air pollutant emitted by such source
or which results in the emissions of any air pollutant not previously
emitted.'' 42 U.S.C. 7411(a)(4).\41\ As first stated in 1984, the EPA
proposes to reaffirm in this rule that, in defining ``modification''
solely in terms of the total amount of pollution that a change would
produce, Congress did not make a distinction between different types of
emissions--stack or fugitive--in the context of modifications under the
major NSR program. CAA section 111(a)(4)'s discussion of ``any''
physical or operational change, and its focus on increases in ``any air
pollutant,'' further support this position. This is consistent with the
EPA's historical interpretation of CAA section 111(a)(4) in other
relevant contexts, namely the NSPS program. See, e.g., 49 FR 43213
(October 26, 1984).
---------------------------------------------------------------------------

    \41\ The Fugitive Emissions Rule did not engage with this
definition; instead, the EPA asserted simply that CAA section
111(a)(4) does not ``address the issue.'' Given that Congress was
clearly able to provide special consideration for fugitive emissions
in CAA section 302(j), the fact that CAA section 111(a)(4) does not
specifically address fugitive emissions actually undercuts, rather
than supports, the argument that fugitive emissions should be
treated in a special way for purposes of determining whether a
change is a major modification.
---------------------------------------------------------------------------

    This interpretation is also consistent with case law discussing the
boundaries on the EPA's authority to establish exemptions to major NSR.
As early as 1979, the Alabama Power court expressed skepticism of the
EPA's authority to promulgate its initial 1978 exemption for fugitive
dust--remanding that provision and providing extensive discussion of
the limits on EPA's general exemption authority. 636 F.2d at 370; see
id. at 357-61. More recently, as noted in NRDC's petition for
reconsideration, the D.C. Circuit's New York I and New York II
decisions further explored the EPA's limited ability to establish
exemptions to the definition of ``modification'' in the context of
major NSR. In New York I, the court ``conclude[d] that the CAA
unambiguously defines `increases' in terms of actual emissions,''
explaining that the phrase `` `the amount of any air pollutant emitted
by [the] source' [in CAA section 111(a)(4)] plainly refers to actual
emissions.'' 413 F.3d at 40. In New York II, the court stated the
following: ``Because Congress used the word `any,' EPA must apply NSR
whenever a source conducts an emission-increasing activity that fits
within one of the ordinary meanings of `physical change.' '' 443 F.3d
at 885. Additionally, in vacating an exclusion from NSR applicability,
the court concluded, ``only physical changes that do not result in
emission increases are excused from NSR.'' Id. at 887. Thus, allowing
certain sources to omit fugitive emissions in determining whether a
change is a major modification would run counter to the D.C. Circuit's
direction that modifications must account for all actual emissions
increases from ``any'' physical change (i.e., not just changes that
increase non-fugitive emissions), subject only to de minimis
exceptions.
    In summary, for purposes of major NSR, the EPA proposes to affirm
that CAA section 302(j) requires rulemaking before considering a
source's fugitive emissions only in the major source context, and not
in the major modification context. The EPA proposes to restore its
longest-standing interpretation that CAA section 111(a)(4) requires
that all major sources consider increases in all types of emissions
(including fugitive emissions) in determining whether a proposed change
would constitute a major modification.
    The EPA has considered the legal issues underlying the treatment of
fugitive emissions in major modifications in multiple actions over the
past 4 decades. During these prior actions, the EPA has also received
and considered a substantial amount of feedback from stakeholders, upon
which the conclusions in this proposal are based. However, the EPA
solicits comment concerning the interpretation of CAA sections 302(j)
and 111(a)(4) described in this section, in light of the authorities
and considerations discussed in this Section. The EPA seeks comment on
whether this interpretation supports repealing the 2008 Fugitive
Emissions Rule, as well as removing the similar ``major solely due to
the inclusion of fugitive emissions'' exemption first established in
1980.

V. Policy Considerations and Impact on Regulated Entities

    Through this proposal, the EPA seeks to realign its NSR regulations
to better reflect the purpose of the NSR program and to end the
regulatory uncertainty that has surrounded the EPA's treatment of
fugitive emissions in the major modification context over the past four
decades. The EPA expects any impacts of this proposed action on a
limited subset of the regulated community to be manageable.

A. Purposes of NSR

    The NSR program was designed to protect public health and welfare
from the effects of air pollution and to preserve and/or improve air
quality throughout the nation. See 42 U.S.C. 7470(1), (2), (4). As the
EPA has recognized since the early days of the NSR program, emissions
deteriorate air quality regardless of how they emanate--whether stack
or fugitive. 45 FR 52690 (August 7, 1980). Fugitive emissions in
particular are more likely to have localized impacts on the air quality
of communities located near these sources of pollution. The EPA
welcomes comments from affected communities and other stakeholders on
this topic and the broader air quality impacts of this rule.
    Allowing large, existing sources of pollution to ignore increases
in fugitive emissions when determining whether a project is a major
modification, as the EPA did in its 2008 Fugitive Emissions Rule, could
reduce the likelihood that projects would be subject to careful
evaluation through the major NSR permitting process, notwithstanding
significant increases in actual air pollution. This would undermine an
important tool that the EPA and state and local air agencies use to
preserve and improve air quality. Thus, the EPA's proposal seeks to
preserve the ability to evaluate all increases of air pollution at
existing major sources, regardless of origin, consistent with the
purposes of NSR.

B. Increasing Clarity

    By removing outdated and conflicting provisions from the CFR and
aligning the regulatory text with the EPA's stated interpretation, the
agency seeks to restore clarity, certainty, and consistency to the
regulations. The proposed approach reflects a more straightforward,
simplified test for determining whether a change at an existing source
is a major modification. Collectively, the EPA expects these changes to
assist existing major sources to better understand the requirements
that might be applicable to planned modifications, and to streamline
the permitting process.
    First, the proposed rule would eliminate uncertainty caused by the
EPA's stay of the 2008 rule and the revisions to the regulatory text
made in 2011 to effectuate the stay. Viewing the current text of the
CFR, it is difficult to understand the proper treatment of fugitive
emissions. The CFR is currently a patchwork of regulations that
includes some of the paragraphs promulgated by the 2008 rule (which are
stayed, although this may not be readily apparent from the paragraphs
themselves) \42\ alongside reinstated paragraphs that predated, and
conflict with, the stayed paragraphs from the 2008 rule. The proposed
changes to remove the remaining stayed portions of the 2008 rule would
restore much-needed clarity to the CFR.
---------------------------------------------------------------------------

    \42\ The CFR notations indicating that these provisions are
stayed are located at the end of each CFR section, relatively far
from the stayed paragraphs themselves.
---------------------------------------------------------------------------

    Second, the proposed changes would eliminate uncertainty caused by
inconsistencies between the EPA's longstanding interpretation of CAA
sections 302(j) and 111(a)(4) and the 1980 exemption. As discussed in
Section IV.A of this preamble, from 1989 through 2008, the EPA
interpreted CAA sections 302(j) and 114(a)(4) to require all existing
major sources to include fugitive emissions when determining whether a
modification is major. Nonetheless, since 1980 (excepting a brief
period in 2009), the NSR regulations have included an exemption
allowing certain types of sources to avoid substantive major NSR
requirements if a modification would be considered major solely due to
the inclusion of fugitive emissions. The EPA's failure to remove this
1980 exemption in 1989 (and in subsequent actions) in light of the
agency's interpretation has led to significant confusion for both
permitting authorities and the regulated community. Additional
confusion has resulted from the imprecise drafting of the 1980
exemption \43\ and the fact that this regulatory text reflects outdated
applicability procedures.\44\ The EPA expects that removing the 1980
exemption to align the regulations with the EPA's longstanding
interpretation (which the EPA proposes to affirm in the current action)
will further eliminate uncertainty.
---------------------------------------------------------------------------

    \43\ See supra note 10 and accompanying text.
    \44\ See supra note 14 and accompanying text.
---------------------------------------------------------------------------

    The proposed changes provide a more straightforward method for
accounting emissions increases and decreases in the context of
modifications, which could potentially reduce the administrative burden
for certain sources affected by these changes and for permitting
authorities processing permit applications. Specifically, if the 2008
rule is repealed and the 1980 exemption is removed, major sources in
non-listed categories would no longer have to distinguish between
fugitive and non-fugitive emissions in determining whether a future
modification is major. Removing this potentially complicated and
contentious analytical step from the permitting process would provide
greater certainty for sources contemplating modifications and ease the
administrative burden for both sources and permitting authorities.\45\
---------------------------------------------------------------------------

    \45\ These changes would not impact previously issued permits,
and would only apply to permits issued after the finalization of
this rule or the approval of a SIP reflecting similar changes,
depending on the permitting authority.
---------------------------------------------------------------------------

C. Previous Policy Considerations

    After reevaluating the policy and programmatic reasons that
motivated the 2008 Fugitive Emissions Rule, the EPA no longer views
these considerations as warranting the same approach. First, in the
2008 rule, the EPA suggested--without explanation--that it is better to
adopt a uniform approach to major source and major modification
determinations (that is, to allow the same sources to exclude fugitive
emissions from both types of determinations). 73 FR 77888 (December 19,
2008). Upon reflection, the EPA sees little benefit in pursuing this
type of ``uniformity'' for uniformity's sake. Most elements of the NSR
program make no distinction between stack and fugitive emissions; the
ability for non-listed sources to exclude fugitive emissions in
initially determining whether they constitute a major source is the
unique exception. At a certain point in the NSR applicability
evaluation process, all sources (including those in non-listed
categories) must account for all emissions (including fugitive
emissions) in determining which substantive requirements apply.\46\
Thus, ``uniformity'' in the treatment of fugitive emissions is
ultimately illusory. The more pertinent issue is whether the EPA's
approach to determining what constitutes a ``major modification''
should align more closely with the preliminary determination of whether
a non-listed source is a ``major source'' (where fugitive emissions are
excluded), or with consequent determinations concerning the application
of substantive major NSR requirements to a major source or modification
(where fugitive emissions are included). For the reasons presented in
this section, the EPA believes the latter reflects better policy.\47\
---------------------------------------------------------------------------

    \46\ See supra note 6 and accompanying text. Notably, the 2008
Fugitive Emissions Rule itself further codified this principle. See,
e.g., 40 CFR 52.21(b)(20)(vii) (2009) (``For all other purposes of
this section, fugitive emissions are treated in the same manner as
other, non-fugitive emissions. This includes, but is not limited to,
the treatment of fugitive emissions for the application of best
available control technology (see paragraph (j) of this section),
source impact analysis (see paragraph (k) of this section),
additional impact analyses (see paragraph (o) of this section), and
PALs (see paragraph (aa)(4)(i)(d) of this section).'').
    \47\ The proposed approach also establishes ``uniformity'' in
that all existing major sources are treated the same in the
modification context, regardless of source type.
---------------------------------------------------------------------------

    The EPA also said in 2008 that its prior approaches had not
adequately recognized the regulatory burden associated with requiring
all sources to consider fugitive emissions in the major modification
context. For support, the EPA explained: ``our interpretation proposed
in 1984 and finalized in 1989 imposed a new regulatory burden on major
sources in a source category on the section 302(j) list, since their
fugitive emissions would be counted in determining whether they had
made a change constituting a major modification and thus possibly
subjecting those modifications to NSR review.'' 73 FR 77889 (December
19, 2008). While this was a concise summary of the potential effect of
the EPA's pre-2008 interpretations (and the one proposed in the current
action), this statement did not address or contradict the EPA's more
extensive consideration and discussion of the same issue in the
interpretive rule proposed in 1984 and finalized in 1989. In these
prior documents, the EPA explained that few sources would likely be
impacted by the interpretation. See 54 FR 48882 (November 28, 1989).
The following subsection addresses these potential impacts.

D. Impacts on Regulated Entities

    After reevaluating currently available information, the EPA expects
that the proposed interpretation, and the resulting revocation of the
2008 Fugitive Emissions Rule and removal of the 1980 exemption will
have a limited practical impact and result in limited increased burden
for regulated entities, for the following reasons. First, revoking the
2008 Fugitive Emissions Rule should have almost no appreciable impact
on the status quo, given that the 2008 rule has been stayed (in some
form) since September 2009 (less than a year after becoming effective).
    Second, removing the 1980 exemption from the regulations should
also have a limited impact. To the EPA's knowledge, the exemption has
generally not been relied on by sources, and the population of sources
that could invoke the exemption is limited. The changes proposed in
this rule would only impact sources that do not belong to a listed
source category (as listed sources have to include fugitive emissions
for major modification purposes under any scenario). More importantly,
it would only impact those non-listed sources that are already
considered existing major stationary sources (as major modifications
can only occur at existing major sources).\48\ Given that non-listed
sources do not count fugitive emissions towards major source
thresholds, the EPA understands the universe of such sources to be
relatively small, particularly for sources of predominantly fugitive
emissions that might be most concerned with the EPA's proposed changes.
As explained in the EPA's 1989 interpretive rule, the EPA expects that
major NSR applicability for sources of predominantly fugitive emissions
would, in most situations, be attributable to other existing EPA
regulations and policies--such as those defining the scope of a
stationary source--and not to the EPA's interpretation of CAA section
302(j) with respect to modifications. See 54 FR 48883 (November 28,
1989); see also 51 FR 7092 (February 28, 1986). Non-listed sources with
large quantities of non-fugitive (stack) emissions are more likely to
be considered major sources, and thus could be impacted by this rule.
However, the likelihood that such a source (with large amounts of non-
fugitive emissions) would undertake a modification that would be major
solely due to consideration of the source's fugitive emissions seems
remote. In any case, as described in the following paragraphs, the EPA
expects that any entities that are affected are likely well-positioned
to handle the additional obligations of major NSR review.
---------------------------------------------------------------------------

    \48\ Although physical changes to existing non-major sources
could trigger major NSR if the physical change itself exceeded major
source thresholds, this would not be considered a ``major
modification,'' but rather, a new ``major source.'' See, e.g., 40
CFR 52.21(b)(1)(i)(c). Thus, consideration of fugitive emissions in
this context would be governed by the EPA's long-standing
regulations governing the treatment of fugitive emissions in major
source determinations, and non-listed sources would not count
fugitive emissions towards the threshold.
---------------------------------------------------------------------------

    The policy considerations that may have motivated Congress to enact
CAA section 302(j), and which motivated the EPA's listing of certain
source categories but not others in its definition of ``major source,''
are already effectively accomplished by allowing sources in non-listed
categories to exclude fugitive emissions when determining whether they
constitute a ``major source.'' As discussed in Section IV of this
preamble, the sparse legislative history does not express a clear
purpose for the treatment of fugitive emissions in CAA section 302(j).
However, as the Alabama Power court suggested, CAA section 302(j) ``may
well define a legislative response to the policy considerations
presented by the regulation of sources where the predominant emissions
are fugitive in origin, particularly fugitive dust.'' 636 F.2d at 369.
The court also noted that the provision ``gives EPA flexibility to
provide industry-by-industry consideration and appropriate tailoring of
coverage.'' Id. The EPA believes that the industry-specific coverage
afforded by allowing sources in non-listed source categories to omit
fugitive emissions in determining whether they are a ``major source''
is sufficient coverage for NSR purposes. As noted in the preceding
paragraph, by omitting fugitive emissions in determining whether a non-
listed source is a major source, this significantly reduces the
possibility that such a source of predominantly fugitive emissions
would be considered major, accordingly limiting the possibility that
future modifications at such a source would trigger major source NSR.
    To the extent that any sources are impacted by this rule, such
sources will, by definition, be existing major stationary sources. In
the specific context at issue here, these sources are likely to be
large, relatively well-resourced operations, given that their emissions
will necessarily generally exceed 250 tons per year for at least one
pollutant even before considering fugitive emissions. Thus, although
these major sources do not belong to a listed source category, they
nonetheless represent the type of ``facilities, which, due to their
size, are financially able to bear the substantial regulatory costs
imposed by the PSD provisions and which . . . are primarily responsible
for emissions of the deleterious pollutants that befoul our nation's
air.'' \49\ If these facilities were constructed anew, they would be
subject to the major NSR program (and, presumably, many if not most of
these sources have already been through the major NSR permitting
process). These sources should be familiar with the NSR program and
able to manage any additional obligations imposed by this proposed
regulatory change.
---------------------------------------------------------------------------

    \49\ Alabama Power, 636 F.2d at 353 (explaining Congress's
intention in establishing the definition of ``major emitting
facility'' and ``major stationary source'' for PSD purposes in CAA
section 169(1)). As the court stated, ``the Act does not give the
agency a free hand authority to grant broad exemptions. Though the
costs of compliance with section 165 [PSD] requirements are
substantial, they can reasonably be borne by facilities that
actually emit, or would actually emit when operating at full
capacity, the large tonnage thresholds [for major stationary
sources] specified in section 169(1).'' Id. at 354.
---------------------------------------------------------------------------

    Accordingly, in light of these policy considerations and the legal
constraints discussed in Section IV.C of this preamble, the EPA does
not consider it necessary or prudent to extend a second, additional
exemption to these existing major sources that are contemplating
modifications, as the EPA did in the Fugitive Emissions Rule. Doing so
would unnecessarily render future modifications less likely to trigger
major NSR review, even in cases where a modification would
significantly increase actual air pollution, frustrating the ultimate
goals of the major NSR program (as discussed in Section V.A of this
preamble). Overall, the EPA believes the interpretation and regulatory
approach proposed in the current action strikes the appropriate balance
to protect air quality while ensuring ``that economic growth will occur
in a manner consistent with the preservation of existing clean air
resources.'' 42 U.S.C. 7470(3).
    The EPA's proposed conclusions regarding the limited potential
impact of this action are based on the agency's experience over the
past 4 decades as well as feedback received from stakeholders on prior
actions. However, the EPA solicits additional comments from
stakeholders on the practical impact of the proposed action, including
the scope of overall programmatic impacts (e.g., how many sources might
be affected). Specifically, the EPA seeks information on the types and
numbers of existing major sources that do not belong to a listed source
category and that have predominantly fugitive emissions, or which might
otherwise be affected by this rule. As

noted in the previous paragraphs, the EPA expects the number of such
sources to be relatively small, but the EPA would welcome more
quantitative information on this topic. Relatedly, the EPA solicits
information about specific real-world or hypothetical examples of
situations where a particular type of source might be affected by the
proposed changes (e.g., how the changes might impact a regulated
entity's behavior in considering whether to undertake a modification).

VI. SIP Minimum Program Elements

    If the EPA affirms the interpretation of CAA sections 302(j) and
111(a)(4) discussed in Section IV.C of this preamble--i.e., that all
existing major sources must account for fugitive emissions in
determining whether a modification is major--the EPA proposes that the
changes to the EPA regulations reflected in this rule would also be
minimum program elements for SIPs. If this rule is finalized as
proposed, it is likely that any SIPs containing an exemption for
fugitive emissions in the major modification context will be less
stringent than the minimum program elements specified in the EPA's
regulations and would therefore need to be revised. The scope of
necessary SIP revisions would be a case-specific inquiry and would
depend on the nature of any final changes to the EPA's regulations as
well as the nature of existing SIP provisions. Based on a preliminary
review of existing EPA-approved SIPs, the EPA observes that very few
state or local agencies have EPA-approved SIP provisions based on, or
incorporating, the 2008 Fugitive Emissions Rule. This makes sense
considering that the EPA stayed and amended the 2008 rule shortly after
it became effective, leaving a relatively small window of time for
states to adopt revisions based on the 2008 rule. However, the EPA
understands that significantly more SIPs contain provisions based on,
or incorporating, the 1980 exemption (as recodified in the 2002 NSR
Reform Rule). Accordingly, if the EPA finalizes a rule that not only
repeals the 2008 rule, but also removes the 1980 exemption from the
EPA's regulations, a larger number of permitting authorities may be
required to submit SIP revisions. If the EPA determines that conforming
SIP revisions are necessary, states would be required to submit SIP
revisions no later than three years after the final rule amending the
EPA's regulations publishes in the Federal Register. 40 CFR
51.166(a)(6)(i). The EPA is soliciting comment on the need to establish
the proposed changes as minimum program elements and the consequent
potential for SIP revisions.

VII. Definition of ``Fugitive Emissions''

    Fugitive emissions, for purposes of both the NSR and title V
permitting programs, are defined as ``emissions which could not
reasonably pass through a stack, chimney, vent, or other functionally
equivalent opening.'' E.g., 40 CFR 52.21(b)(20), 70.2. The 2008
Fugitive Emissions Rule did not change this regulatory definition, but
the preamble to that rule did include a discussion of ``guiding
principles'' based on the EPA's interpretation of this regulatory
definition. See 73 FR 77891 (December 19, 2008). Most of the principles
articulated in the 2008 preamble simply restated or summarized prior
EPA letters and memoranda expressing the EPA's interpretations and
policies on the issue.\50\ The EPA continues to follow its
interpretations and policies concerning the definition of ``fugitive
emissions'' that predated the 2008 rule, including those that were
restated and summarized in the 2008 rule preamble. These positions were
not affected by the 2008 rule or the stays of the 2008 rule. The EPA is
providing the following summary of these interpretations and policies
in order to provide clarity and certainty about how EPA intends to
approach these issues.
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    \50\ For examples of these prior guidance documents, please see
the EPA's online NSR and title V guidance databases, each of which
include a topic page containing guidance related specifically to
fugitive emissions: https://www.epa.gov/nsr/new-source-review-policy-and-guidance-document-index and https://www.epa.gov/title-v-operating-permits/title-v-operating-permit-policy-and-guidance-document-index.
---------------------------------------------------------------------------

    Determining whether certain emissions are fugitive or non-fugitive
at a particular source is inherently a fact-specific inquiry. All
emissions which do actually pass through a stack, chimney, vent, or
other functionally equivalent opening at a facility are non-fugitive.
If emissions do not currently pass through such an opening, then one
must evaluate whether such emissions could reasonably pass.\51\ The EPA
interprets the phrase ``reasonably pass'' by determining whether
emissions could reasonably be collected or captured and discharged
through a stack, chimney, vent, or functionally equivalent opening.
Various criteria guide this case-by-case analysis, and no single
criterion should be considered determinative. Relevant considerations
include whether and to what extent similar facilities collect or
capture similar emissions (including how common this practice is, and
whether the EPA has established a national emissions standard or
regulation that requires some sources in the source category to collect
or capture the emissions) and the technical and economic feasibility
(e.g., cost) of collecting or capturing the emissions.
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    \51\ When the EPA finalized the definition of ``fugitive
emissions'' in the 1980 PSD rulemaking to include the words
``reasonably pass,'' the agency explained that it did so in order to
narrow the proposed definition of fugitive emissions to exclude not
only those emissions that currently do pass through a stack,
chimney, vent, or functionally equivalent opening, but also to those
that do not currently pass but which could reasonably be made to
pass through such an opening. The EPA explained: ``This change will
ensure that sources will not discharge as fugitive emissions those
emissions which would ordinarily be collected and discharged through
stacks or other functionally equivalent openings, and will eliminate
disincentives for the construction of ductwork and stacks for the
collection of emissions.'' 45 FR 52693 (August 7, 1980).
---------------------------------------------------------------------------

    In addition to outlining these longstanding interpretations and
policies, the preamble to the 2008 Fugitive Emissions Rule also
expanded some of the factors that permitting authorities may consider
when assessing whether certain emissions are fugitive or non-fugitive.
Notably, the EPA said for the first time in the 2008 preamble that
permitting authorities could consider the cost of controlling emissions
when determining whether such emissions ``could not reasonably pass''
and accordingly whether such emissions should be considered fugitive or
non-fugitive. The EPA understands that the stay of the 2008 rule left a
question of whether EPA continued to support considering the cost of
control in identifying whether emissions are fugitive. The EPA intended
the initial 2009 stay (and all subsequent stays) of the 2008 Fugitive
Emissions Rule to apply to the entire rulemaking effort, including the
discussion of the definition of ``fugitive emissions'' contained within
the rule's preamble. Thus, the EPA statements regarding the cost of
control were also stayed and were not applied by EPA thereafter.
Likewise, these statements regarding cost of control do not reflect the
EPA's current thinking and should not be relied upon by states or
sources in making permitting decisions. Instead, the EPA continues to
apply the longstanding interpretations and policies that predated the
2008 rule, as summarized in the preceding paragraphs.
    Although the EPA does not propose in this action to revise its
longstanding approach for evaluating this issue, the EPA welcomes
public comment on how to interpret and apply the definition of
``fugitive emissions'' in the NSR and

title V regulations. To the extent that the EPA seeks to provide
additional guidance on applying the definition of ``fugitive
emissions'' in the future, any such guidance may be provided alongside,
or separate from, any final action in this rulemaking concerning the
treatment of fugitive emissions for major modifications. In the
meantime, the EPA will continue to be responsive to case-specific
inquiries from permitting authorities and regulated entities requesting
the EPA's views on whether certain emissions should be considered
fugitive or non-fugitive.

VIII. Environmental Justice Considerations

    The proposed changes are not expected to have any effect or
increased burden on communities with environmental justice concerns.
Although the impact of this proposal is expected to be limited,
requiring all existing major sources to include fugitive emissions in
determining whether a change constitutes a major modification could
potentially result in more projects subject to major NSR and installing
pollution controls, improving the air quality for all communities,
particularly those located near major sources with a large proportion
of fugitive emissions.

IX. Statutory and Executive Order Reviews

    Additional information about these statutes and Executive Orders
can be found at https://www.epa.gov/laws-regulations/laws-and-executive-orders.

A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 13563: Improving Regulation and Regulatory Review

    This action is a significant regulatory action that was submitted
to the Office of Management and Budget (OMB) for review. Pursuant to
E.O. 12866, the EPA has assessed the potential costs and benefits of
this regulatory action. EPA believes the rule will have a limited
practical impact and result in limited increased burden for regulated
entities, as discussed in Section V.D. Any changes made in response to
OMB recommendations have been documented in the docket.

B. Paperwork Reduction Act (PRA)

    This action does not impose any new information collection burden
under the PRA. OMB has previously approved the information collection
activities contained in the existing regulations and has assigned OMB
control numbers 2060-0003 for the PSD and NNSR permit programs. The
burden associated with obtaining an NSR permit for a major stationary
source undergoing a major modification is already accounted for under
the approved information collection requests. A federal agency may not
conduct or sponsor, and a person is not required to respond to, nor
shall a person be subject to a penalty for failure to comply with, a
collection of information subject to the requirements of the PRA unless
that collection of information displays a currently valid OMB control
number.

C. Regulatory Flexibility Act (RFA)

    I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. This
action will not impose any requirements on small entities. In general,
major stationary sources undergoing major modifications are not small
entities, as discussed in Section V of this preamble. State and local
air agencies that could be affected by this rule do not qualify as
small entities under the RFA.

D. Unfunded Mandates Reform Act (UMRA)

    This action does not contain an unfunded federal mandate as
described in UMRA, 2 U.S.C. 1531-1538, and does not significantly or
uniquely affect small governments. This action imposes no enforceable
duty on any state, local or tribal governments or the private sector.
Nonetheless, if this rule is finalized as proposed, it is possible that
some state and local air agencies will need to submit a small, one-time
revision to their SIP. However, the rule could ultimately reduce
regulatory impacts for these state and local agencies (and potentially
affected sources) because they would no longer have to expend resources
differentiating between fugitive and non-fugitive emissions when
assessing whether a project constitutes a major modification.

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.

F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments

    This action does not have tribal implications as specified in
Executive Order 13175. The EPA is currently the reviewing authority for
PSD and NNSR permits issued in tribal lands and, as such, the revisions
being proposed will not impose direct burdens on tribal authorities.
Thus, Executive Order 13175 does not apply to this action.

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

    The EPA interprets Executive Order 13045 as applying only to those
regulatory actions that concern environmental health or safety risks
that the EPA has reason to believe may disproportionately affect
children, per the definition of ``covered regulatory action'' in
section 2-202 of the Executive Order. This action is not subject to
Executive Order 13045 because it does not concern an environmental
health risk or safety risk.

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

    This action is not a ``significant energy action'' because it is
not likely to have a significant adverse effect on the supply,
distribution or use of energy. Industries directly involved in energy
production (e.g., fossil fuel-fired power plants) will not be affected
by this rule because they belong to a listed source category, and this
rule only pertains to sources in non-listed source categories. As
discussed in Section V of this preamble, the EPA considers it unlikely
that this rule would affect other industries involved in energy supply
that do not belong to a listed source category (e.g., surface coal
mining).

I. National Technology Transfer and Advancement Act (NTTA)

    This rulemaking does not involve technical standards.

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

    The EPA believes that this action does not have disproportionately
high and adverse human health or environmental effects on minority
populations, low-income populations and/or indigenous peoples, as
specified in Executive Order 12898 (59 FR 7629, February 16, 1994). The
basis for this decision is contained in Section VIII of this preamble.

X. Statutory Authority

    The statutory authority for this action is provided by 42 U.S.C.
7401 et seq.

List of Subjects

40 CFR Part 51

    Environmental protection, Administrative practice and procedure,

Air pollution control, Carbon monoxide, Fees, Intergovernmental
relations, Lead, Nitrogen oxides, Ozone, Reporting and recordkeeping
requirements, Sulfur oxides, Transportation, Volatile organic
compounds.

40 CFR Part 52

    Environmental protection, Administrative practice and procedure,
Air pollution control, Ammonia, Carbon monoxide, Greenhouse gases,
Intergovernmental relations, Lead, Nitrogen dioxide, Nitrogen oxides,
Ozone, Reporting and recordkeeping requirements, Sulfur dioxide, Sulfur
oxides, Volatile organic compounds.

Michael S. Regan,
Administrator.

    For the reasons stated in the preamble, title 40, chapter I of the
Code of Federal Regulations is proposed to be amended as follows:

PART 51--REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF
IMPLEMENTATION PLANS

0
1. The authority citation for part 51 continues to read as follows:

    Authority: 23 U.S.C. 101; 42 U.S.C. 7401-7671q.

Sec.  51.165  [Amended]

0
2. Amend Sec.  51.165 by:
0
a. Lifting the stay on paragraphs (a)(1)(v)(G) and (a)(1)(vi)(C)(3);
0
b. Removing paragraphs (a)(1)(v)(G) and (a)(1)(vi)(C)(3); and
0
c. Removing and reserving paragraph (a)(4).

Sec.  51.166  [Amended]

0
3. Amend Sec.  51.166 by:
0
a. Lifting the stay on paragraphs (b)(2)(v) and (b)(3)(iii)(d);
0
b. Removing paragraphs (b)(2)(v) and (b)(3)(iii)(d); and
0
c. Removing and reserving paragraph (i)(1)(ii).

Appendix S to Part 51 [Amended]

0
4. Amend appendix S to part 51 by:
0
a. Lifting the stay on paragraph II.A.5(vii);
0
b. Removing paragraph II.A.5(vii); and
0
c. Removing and reserving paragraph II.F.

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

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

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

Sec.  52.21  [Amended]

0
6. Amend Sec.  52.21 by:
0
a. Lifting the stay on paragraphs (b)(2)(v) and (b)(3)(iii)(c);
0
b. Removing paragraphs (b)(2)(v) and (b)(3)(iii)(c); and
0
c. Removing and reserving paragraph (i)(1)(vii).

[FR Doc. 2022-22259 Filed 10-13-22; 8:45 am]
BILLING CODE 6560-50-P