[Federal Register Volume 77, Number 134 (Thursday, July 12, 2012)]
[Rules and Regulations]
[Pages 41051-41075]
[FR Doc No: 2012-16704]

=======================================================================
-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-HQ-OAR-2009-0517; FRL-9690-1]
RIN 2060-AR10

Prevention of Significant Deterioration and Title V Greenhouse
Gas Tailoring Rule Step 3 and GHG Plantwide Applicability Limits

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The EPA is promulgating the third step (Step 3) of our phase-
in approach to permitting sources of greenhouse gas (GHG) emissions
that we committed to do in the GHG Tailoring Rule. This rule completes
Step 3 by determining not to lower the current Prevention of
Significant Deterioration (PSD) and title V applicability thresholds
for GHG-emitting sources established in the Tailoring Rule for Steps 1
and 2. We are also promulgating regulatory revisions for better
implementation of the federal program for establishing plantwide
applicability limitations (PALs) for GHG emissions, which will improve
the administration of the GHG PSD permitting programs.

DATES: This action is effective on August 13, 2012.

ADDRESSES: The EPA has established a docket for this rulemaking under
Docket ID No. EPA-HQ-OAR-2009-0517. All documents in the docket are
listed in the www.regulations.gov index. Although listed in the index,
some information is not publicly available, e.g., Confidential Business
Information 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
electronically in www.regulations.gov or in hard copy at the Air and
Radiation Docket and Information Center, EPA/DC, EPA West, Room 3334,
1301 Constitution Avenue Northwest, Washington, DC. The Public Reading
Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday,
excluding legal holidays. The telephone number for the Public Reading
Room is<PHONE_NUMBER>, and the telephone number for the Air and
Radiation Docket and Information Center is<PHONE_NUMBER>.

FOR FURTHER INFORMATION CONTACT: Michael S. Brooks, Air Quality Policy
Division, Office of Air Quality Planning and Standards (C504-05),
Environmental Protection Agency, Research Triangle Park, North Carolina
27711; telephone number<PHONE_NUMBER>; fax number<PHONE_NUMBER>;
email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. General Information

A. Executive Summary

1. Purpose of the Regulatory Action
    The purpose of this Step 3 rule is to continue the process of
phasing in GHG permitting requirements under the PSD and title V
programs begun in Steps 1 and 2 of the Tailoring Rule.\1\ As a result
of actions to regulate GHGs under other Clean Air Act (CAA) programs,
GHGs are required to be addressed under the major source permitting
requirements of the Act's PSD and title V programs. The Tailoring Rule
was necessary because the CAA applicability requirements that determine
which sources are subject to permitting under these programs are based
on annual potential emission rates of 100 or 250 tons per year (tpy).
Implementing these requirements for GHG-emitting sources immediately
after they became subject to PSD and title V requirements would have
brought so many sources into those programs so as to overwhelm the
capabilities of state and local (hereafter, referred to collectively as
state) permitting authorities to issue permits, and as a result, would
have impeded the ability of sources to construct, modify or operate
their facilities.
---------------------------------------------------------------------------

    \1\ ``Prevention of Significant Deterioration and Title V
Greenhouse Gas Tailoring Rule; Final Rule,'' 75 FR 31514, June 3,
2010 (the Tailoring Rule).
---------------------------------------------------------------------------

    To prevent this outcome, the EPA promulgated the Tailoring Rule to
tailor the PSD and title V applicability criteria that determine which
GHG sources and modification projects become subject to the permitting
programs. In the Tailoring Rule, we explained that the administrative
burdens of immediate implementation of the PSD and title V requirements
without tailoring ``are so severe that they bring the judicial
doctrines of `absurd results,' `administrative necessity,' and `one-
step-at-a-time' into the Chevron two-

step analytical framework for statutes administered by agencies.'' 75
FR 31517 June 3, 2010. We further explained that on the basis of this
legal interpretation, we would phase in the applicability of PSD and
title V to GHG-emitting sources so that those requirements would apply
to at least the largest sources initially, and to as many more sources
as promptly as possible, at least to a certain point. Id. In the
Tailoring Rule, we went on to promulgate the first two steps of the
phase-in program, which we call Step 1, which took effect on January 2,
2011; and Step 2, which took effect on July 1, 2012, and incorporated
Step 1. In these steps, we established the PSD and title V
applicability thresholds at what we call the 100,000/75,000 levels,
which refers to the number of tpy in carbon dioxide equivalent
(CO2e) potential emissions.
    In addition, in the Tailoring Rule, we made regulatory commitments
for subsequent action, including this Step 3. Specifically, we
committed in Step 3 to propose or solicit comment on lowering the
100,000/75,000 threshold on the basis of three criteria that concerned
whether the permitting authorities had the necessary time to develop
greater administrative capacity due to an increase in resources or
permitting experience, as well as whether the EPA and the permitting
authorities had developed ways to streamline permit issuance. We
committed to complete the Step 3 action by July 1, 2012.
    In this rulemaking, we have evaluated whether it is now possible to
lower the 100,000/75,000 threshold to bring additional sources into the
PSD and title V permitting programs in light of the three criteria. In
addition, we have continued our identification and evaluation of
potential approaches to streamline permitting so as to enable
permitting authorities to permit more GHG-emitting sources without
undue burden.
2. Summary of Major Provisions
    The EPA is finalizing Step 3 by determining not to lower the
current GHG applicability thresholds from the Step 1 and Step 2 levels
at this time. We have found that the three criteria have not been met
because state permitting authorities have not had sufficient time and
opportunity to develop the necessary infrastructure and increase their
GHG permitting expertise and capacity, and that we and the state
permitting authorities have not had the opportunity to develop
streamlining measures to improve permit implementation.
    We are also promulgating revisions to our regulations under 40 CFR
part 52 for better implementation of the federal program for
establishing PALs for GHG emissions. A PAL establishes a site-specific
plantwide emission level for a pollutant that allows the source to make
changes at the facility without triggering the requirements of the PSD
program, provided that emissions do not exceed the PAL level. Under the
EPA's interpretation of the federal PAL provisions, such PALs are
already available under PSD for non-GHG pollutants and for GHGs on a
mass basis, and we are revising the PAL regulations to allow for GHG
PALs to be established on a CO2e basis as well. We are also
revising the regulations to allow a GHG-only source \2\ to submit an
application for a CO2e-based GHG PAL while also maintaining
its minor source status. We believe that these actions could streamline
PSD permitting programs by allowing sources and permitting authorities
to address GHGs one time for a source and avoid repeated subsequent
permitting actions for a 10-year period.
---------------------------------------------------------------------------

    \2\ Consistent with the definition that the EPA is promulgating
in 40 CFR 52.21(aa)(2)(xii) and the relevant GHG thresholds in
effect at this time, a GHG-only source is an existing stationary
source that emits 100,000 tpy CO2e or more, but does not
emit or have the potential to emit any other regulated NSR pollutant
at or above the applicable major source threshold.
---------------------------------------------------------------------------

B. Does this action apply to me?

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

------------------------------------------------------------------------
             Industry group                         NAICS \a\
------------------------------------------------------------------------
Agriculture, fishing, and hunting......  11
Mining.................................  21
Utilities (electric, natural gas, other  2211, 2212, 2213
 systems).
Manufacturing (food, beverages,          311, 312, 313, 314, 315, 316
 tobacco, textiles, leather).
Wood product, paper manufacturing......  321, 322
Petroleum and coal products              32411, 32412, 32419
 manufacturing.
Chemical manufacturing.................  3251, 3252, 3253, 3254, 3255,
                                          3256, 3259
Rubber product manufacturing...........  3261, 3262
Miscellaneous chemical products........  32552, 32592, 32591, 325182,
                                          32551
Nonmetallic mineral product              3271, 3272, 3273, 3274, 3279
 manufacturing.
Primary and fabricated metal             3311, 3312, 3313, 3314, 3315,
 manufacturing.                           3321, 3322, 3323, 3324, 3325,
                                          3326, 3327, 3328, 3329
Machinery manufacturing................  3331, 3332, 3333, 3334, 3335,
                                          3336, 3339
Computer and electronic products         3341, 3342, 3343, 3344, 3345,
 manufacturing.                           4446
Electrical equipment, appliance, and     3351, 3352, 3353, 3359
 component manufacturing.
Transportation equipment manufacturing.  3361, 3362, 3363, 3364, 3365,
                                          3366, 3366, 3369
Furniture and related product            3371, 3372, 3379
 manufacturing.
Miscellaneous manufacturing............  3391, 3399
Waste management and remediation.......  5622, 5629
Hospitals/Nursing and residential care   6221, 6231, 6232, 6233, 6239
 facilities.
Personal and laundry services..........  8122, 8123
Residential/private households.........  8141
Non-Residential (Commercial)...........  Not available. Codes only exist
                                          for private households,
                                          construction and leasing/sales
                                          industries.
------------------------------------------------------------------------
\a\ North American Industry Classification System.

C. How is this preamble organized?

    The information in this SUPPLEMENTARY INFORMATION section of this
preamble is organized as follows:

Outline

I. General Information
    A. Executive Summary
    1. Purpose of the Regulatory Action
    2. Summary of Major Provisions
    B. Does this action apply to me?
    C. How is this preamble organized?
    D. What acronyms, abbreviations and units are used in this
preamble?
II. Overview of the Final Rule
III. Background
    A. Statutory and Regulatory Background for PSD and Title V
    B. How does the Tailoring Rule address GHG emissions under PSD
and title V?
    C. In the Tailoring Rule, what commitments did the EPA make for
Step 3 and subsequent action?
    D. In the Tailoring Rule, what plan did the EPA announce for
developing streamlining measures, and what has the EPA done since
then?
    E. What did the EPA propose in the Step 3 proposal?
IV. Summary of Final Actions
    A. Applicability Thresholds for GHGs
    B. Plantwide Applicability Limitations for GHGs
    C. Synthetic Minor Source Permitting Authority for GHGs and
Other Streamlining Measures
V. What is the legal and policy rationale for determining not to
lower the current thresholds in the final action?
    A. Overview
    B. Have states had adequate time to ramp up their resources?
    C. What is the ability of permitting authorities to issue timely
permits?
    D. What progress has the EPA made in developing streamlining
methods?
    E. What would be the effects on emissions of lowering the
current thresholds?
    F. What is the effective date of this action?
    G. Conclusion
VI. What streamlining approach is the EPA finalizing with this
action?
    A. What is the EPA finalizing?
    B. What is a PAL?
    C. Why is the EPA amending the regulations?
    D. Extending PALs to GHGs on a CO2e Basis and Using
PALs To Determine Whether GHG Emissions Are ``Subject to
Regulation''
    E. Can a GHG source that already has a mass-based GHG PAL obtain
a CO2e-based PAL?
VII. Comment and Response
    A. Thresholds for GHGs
    1. Narrow Scope of Step 3
    2. The Three Criteria
    3. Disparity Between Estimated and Actual Numbers of Permits
    B. Plantwide Applicability Limitations for GHGs
VIII. 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
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions That Significantly Affect
Energy Supply, Distribution or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
    K. Congressional Review Act
    L. Judicial Review
IX. Statutory Authority

D. What acronyms, abbreviations and units are used in this preamble?

     The following acronyms, abbreviations and units are used in this
preamble:

APA Administrative Procedure Act
BACT Best Available Control Technology
CAA or Act Clean Air Act
CAAAC Clean Air Act Advisory Committee
CFR Code of Federal Regulations
CO2e Carbon Dioxide Equivalent
EPA U.S. Environmental Protection Agency
FIP Federal Implementation Plan
FR Federal Register
GHG Greenhouse Gas
NAAQS National Ambient Air Quality Standard
NACAA National Association of Clean Air Agencies
NSR New Source Review
NTTAA National Technology Transfer and Advancement Act
OMB Office of Management and Budget
PAL[s] Plantwide Applicability Limitation[s]
PSD Prevention of Significant Deterioration
SCAQMD South Coast Air Quality Management District
SIP State Implementation Plan
tpy Tons Per Year
UMRA Unfunded Mandates Reform Act

II. Overview of the Final Rule

     In the Tailoring Rule, we included an enforceable commitment to
complete a rulemaking to propose or solicit comment on Step 3 of the
phase-in approach to GHG permitting, and complete that action by July
1, 2012. We stated in the Tailoring Rule that in Step 3, we would lower
the applicability thresholds, and consequently increase the number of
GHG sources required to obtain such permits, only if we determined that
the states have had enough time to develop the necessary infrastructure
and increase their GHG permitting expertise and capacity to efficiently
manage the expected increase in administrative burden from such
permitting, and only if we and the permitting authorities had the
opportunity to expedite, or otherwise decrease the burdens of, GHG
permitting through streamlining measures.
    We proposed Step 3 by notice dated March 8, 2012.\3\ In that
notice, we proposed determining not to lower the current applicability
thresholds for PSD and title V. We also proposed two streamlining
approaches to improve permit implementation: (1) The use of GHG PALs on
either a mass or CO2e basis, which includes the option to
use the CO2e-based increases provided in the subject to
regulation applicability thresholds in setting the PAL, and to allow
PALs to be used as an alternative approach for determining whether a
project is a major modification and whether GHG emissions are subject
to regulation; and (2) regulatory authority for the EPA or a delegated
state or local agency to issue synthetic minor limitations for GHG in
areas subject to a Federal Implementation Plan (FIP) that imposes PSD
permitting programs for GHGs.
---------------------------------------------------------------------------

    \3\ ``Prevention of Significant Deterioration and Title V
Greenhouse Gas Tailoring Rule Step 3, GHG Plantwide Applicability
Limitations and GHG Synthetic Minor Limitations; Proposed Rule,'' 77
FR 14226, March 8, 2012 (the Step 3 proposal).
---------------------------------------------------------------------------

    In the short period of time since the EPA promulgated the Tailoring
Rule, the EPA and the states have not made sufficient progress
developing sufficient capacity or streamlining mechanisms to handle a
larger number of permits than Steps 1 and 2 require. As a result, we
are finalizing Step 3 by determining not to lower the current, 100,000/
75,000 applicability thresholds. In addition, we are finalizing a
portion of the GHG PALs streamlining measure we proposed for Step 3. At
this time we are not finalizing our proposed streamlining measure of
providing regulatory authority for the EPA or a delegated agency to
issue synthetic minor limitations for GHG in areas subject to a PSD FIP
for GHGs or other streamlining measures.
    In section III of this preamble, we discuss background information,
including how the Tailoring Rule addresses GHG emissions under PSD and
title V, what commitments the EPA made for Step 3 and subsequent
actions and what we said in the Step 3 proposal.

    In section IV, we describe this final action. In section V, we
discuss our legal and policy rationale for determining not to lower the
current 100,000/75,000 applicability requirements for GHG PSD and title
V permitting. In section VI, we discuss our rationale for revising
regulations for the better implementation of GHG PALs, which will
improve the administration of GHG PSD permitting programs. In section
VII, we briefly summarize some key comments received on the portions of
the proposal that we are finalizing and we summarize our responses; in
section VIII, we address the statutory and Executive Order reviews that
are required for all rulemakings; and in section IX, we provide the
statutory authority for the rulemaking.

III. Background

    This section describes key aspects of the background for this
rulemaking. For other background information, such as a description of
GHGs and their sources, the regulatory backdrop to the Tailoring Rule
and the EPA's GHG PSD and title V programs, see the Tailoring Rule, the
related actions that the EPA took shortly before finalizing the
Tailoring Rule \4\ and the GHG PSD and title V implementation rules
that the EPA promulgated shortly after the Tailoring Rule.\5\ For
purposes of this rule, we assume that the reader is familiar with these
materials. In the following paragraphs we provide a brief summary of
key statutory and regulatory background for the PSD and title V
permitting programs for purposes of this rulemaking.
---------------------------------------------------------------------------

    \4\ ``Endangerment and Cause or Contribute Findings for
Greenhouse Gases Under Section 202(a) of the Clean Air Act,'' 74 FR
66496, December 15, 2009 (the Endangerment and Cause-or-Contribute
Findings); ``Light-Duty Vehicle Greenhouse Gas Emission Standards
and Corporate Average Fuel Economy Standards; Final Rule,'' 75 FR
25324, May 7, 2010 (the Light-Duty Vehicle Rule); ``Interpretation
of Regulations that Determine Pollutants Covered by Clean Air Act
Permitting Programs,'' 75 FR 17004, April 2, 2010 (the Timing
Decision or the Johnson Memo Reconsideration).
    \5\ ``Action to Ensure Authority to Issue Permits under the
Prevention of Significant Deterioration Program to Sources of
Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP
Call--Final Rule,'' 75 FR 77698, December 13, 2010 (the GHG PSD SIP
Call); ``Action to Ensure Authority to Issue Permits Under the
Prevention of Significant Deterioration Program to Sources of
Greenhouse Gas Emissions: Federal Implementation Plan; Final Rule,''
75 FR 82246, December 30, 2010 (the GHG PSD SIP Call FIP);
``Limitation of Approval of Prevention of Significant Deterioration
Provisions Concerning Greenhouse Gas Emitting Sources in State
Implementation Plans; Final Rule,'' 75 FR 82535, December 30, 2010
(the PSD Narrowing Rule); ``Action to Ensure Authority to Implement
Title V Permitting Programs Under the Greenhouse Gas Tailoring Rule;
Final Rule,'' 75 FR 82254, December 30, 2010 (the Title V Narrowing
Rule).
---------------------------------------------------------------------------

A. Statutory and Regulatory Background for PSD and Title V

    Under the CAA, PSD applies to any ``major emitting facility'' that
commences construction or undertakes a ``modification.'' CAA section
165(a), 169(2)(C). The Act defines the term ``major emitting facility''
as a stationary source that emits or has the potential to emit any air
pollutant in the amount of at least 100 or 250 tpy, depending on the
source category, on a mass basis. CAA section 169(1). The Act also
defines ``modification'' as any physical or operational change that
increases the amount of any air pollutant emitted by the source. CAA
section 111(a)(4).
    Under the CAA, title V applies to, among other sources, a ``major
source,'' which is defined to include any stationary source that is a
``major stationary source'' under section 302 of the Act. CAA section
501(2). Under section 302, a ``major stationary source'' is defined as
any stationary facility or source of air pollutants which directly
emits, or has the potential to emit, 100 tpy or more of any air
pollutant. CAA section 302(j).
    The EPA's regulations implement these requirements. Under the
regulations, PSD applies to any ``major stationary source'' that begins
actual construction on a new facility or undertakes a ``major
modification'' in an area designated as attainment or unclassifiable
for a national ambient air quality standard (NAAQS). 40 CFR
52.21(a)(2)(i)-(iii). The regulations define a ``major stationary
source'' as a stationary source that emits, depending on the source
category, at least 100 or 250 tpy, on a mass basis, of a ``regulated
[new source review (NSR)] pollutant.'' 40 CFR 52.21(b)(1)(i)(a)-(b). A
``regulated NSR pollutant'' is defined as any of the following: (1) In
general, any pollutant subject to a NAAQS, (2) any pollutant subject to
a new source standard of performance under CAA section 111, (3) any of
a certain type of stratospheric ozone depleting substances, or (4)
``[a]ny pollutant that otherwise is subject to regulation under the
Act'' (with certain exceptions for hazardous air pollutants under CAA
section 112). 40 CFR 52.21(b)(50)(i)-(iv). The title V regulations
define a ``major source'' in 40 CFR 70.2.

B. How does the Tailoring Rule address GHG emissions under PSD and
title V? 6
---------------------------------------------------------------------------

    \6\ We include this discussion of the Tailoring Rule for
background purposes only. In our Step 3 proposal we did not re-open
for comment any of the determinations made in the Tailoring Rule or
subsequent related final rules or our rationale for finalizing such
rules, and we do not re-open now.
---------------------------------------------------------------------------

    In the Tailoring Rule, the EPA explained that the rulemaking was
necessary because without it, the CAA PSD preconstruction review
permitting program and the title V operating permit program would apply
to all stationary sources that emit or have the potential to emit at
least 100 or 250 tpy of GHGs beginning on January 2, 2011.
    In the Tailoring Rule, we explained that in light of the
overwhelming administrative burdens that would result from applying PSD
and title V at the 100/250 tpy statutory levels, we would exercise our
legal authority to phase in the applicability of PSD and title V to
GHG-emitting sources so that those requirements would apply ``at least
to the largest sources initially, at least to as many more sources as
possible and as promptly as possible over time * * * and at least to a
certain point.'' 75 FR 31517 June 3, 2010. In the Tailoring Rule, we
went on to promulgate the first two steps of the phase-in program,
which we call Steps 1 and 2, and we made commitments for subsequent
action.
    In selecting those thresholds, we closely reviewed the numbers of
potential additional permitting actions for GHG-emitting sources, and
the resulting administrative burdens, that could occur at various
permitting thresholds. We further estimated that the combined
additional PSD and title V permitting burdens due to Steps 1 and 2
could, on an annual basis, mean a 42 percent increase in costs over the
current PSD and title V program. 75 FR 31540, Table V-1 June 3, 2010.

C. In the Tailoring Rule, what commitments did the EPA make for Step 3
and subsequent action?

    In the Tailoring Rule we committed to undertake Step 3 by proposing
or soliciting comment on lowering the thresholds, so that more sources
would be subject to PSD and title V requirements, but we did not commit
to finalize lower thresholds. We committed to complete Step 3 by July
1, 2012. We further stated that in light of the administrative burdens,
we would not, in Step 3, lower the thresholds below the 50,000/50,000
tpy CO2e levels. In addition, we committed to complete a
study of the administrative burdens by April 30, 2015, and to complete
Step 4 by April 30, 2016. 40 CFR 52.22(b); 40 CFR 70.12(b).

D. In the Tailoring Rule, what plan did the EPA announce for developing
streamlining measures, and what has the EPA done since then?

    In the Tailoring Rule, we announced a plan to explore streamlining
techniques that could make the permitting programs more efficient to
administer for GHGs, and that therefore could allow expanding those
programs to smaller sources. Streamlining techniques to be evaluated
included: (1) Defining potential emissions to be closer to actual
emissions for various source categories, (2) establishing emission
limits for presumptive Best Available Control Technology (BACT) for
various source categories, (3) encouraging use of general permits or
permits-by-rule, (4) encouraging use of electronic permitting and (5)
encouraging the application of more efficient techniques (which we call
Lean techniques) to the permitting process for more efficient
permitting of GHG sources. We believe that these techniques have the
potential to streamline the PSD and title V permitting programs for
GHGs to ``allow the expeditious expansion of PSD and title V
applicability to more GHG-emitting sources while protecting those
sources and the permitting authorities from undue expenses.'' 75 FR
31526 June 3, 2010.
    While we intend to move forward to develop streamlining approaches,
we also stated in the Tailoring Rule that we did not expect to develop
and implement any of these prior to Step 3. We also stated in the rule
that several of these streamlining approaches will take several years
to develop, requiring separate rulemaking both at the federal level,
and then through state and local processes. We, nonetheless, committed
to explore a number of possible streamlining actions prior to the Step
3 rulemaking.
    We are making progress in developing streamlining approaches. In
addition to discussing and soliciting comment on streamlining measures
in the Step 3 proposal, in April 2012, we convened what we call the GHG
Permit Streamlining Workgroup (or the Workgroup). The Workgroup is
formed under the Clean Air Act Advisory Committee (CAAAC): Permits, New
Source Review and Toxics Subcommittee. The Workgroup is comprised of
industrial, environmental, tribal and state and local representatives.
It is tasked with exploring potential streamlining approaches that may
make the administration of the CAA permitting programs more efficient
for permitting authorities, and that may potentially reduce the
permitting burden for smaller GHG-emitting sources if the programs are
expanded to apply to these sources. The Workgroup meets regularly and
is expected to complete a report by October 2012.

E. What did the EPA propose in the Step 3 proposal?

    In the Federal Register dated March 8, 2012, the EPA proposed Step
3, proposing to determine not to lower the GHG PSD and title V
threshold levels from the 100,000/75,000 tpy CO2e Step 2
levels. 77 FR 14226 March 8, 2012. The EPA explained that the criteria
it identified in the Tailoring Rule for evaluating whether to lower the
thresholds in Step 3 did not, at the present time, point towards
lowering them. The EPA further explained that the states generally had
not had the time to increase their resources sufficiently or develop
GHG-specific permitting expertise, and that we and the states had not
had the opportunity to develop streamlining measures. 77 FR 14228 March
8, 2012.
    In addition, we proposed to revise the PSD regulations to provide
for GHG PALs. We stated that ``[w]e believe that this action will
streamline PSD permitting programs by allowing sources and permitting
authorities to address GHGs one time for a source and avoid repeated
subsequent permitting actions.'' 77 FR 14228 March 8, 2012.
    In addition, we proposed regulatory provisions to allow for
``synthetic minor'' permits for GHGs under the federal PSD program. We
stated that ``[w]e believe that permitting synthetic minor GHG sources
under these provisions will reduce the number of sources subject to PSD
and title V, reducing the burden on state permitting authorities and
the sources.'' 77 FR 14228 March 8, 2012.

IV. Summary of Final Actions

A. Applicability Thresholds for GHGs

    In this rule, consistent with the proposal, we are finalizing Step
3 by determining not to lower the current 100,000/75,000 tpy
CO2e PSD and title V applicability threshold levels. This
action is based on our analysis of the three criteria--(1) the time
that permitting authorities need to ramp up their resources, including
developing permitting infrastructure as well as hiring and training
staff, (2) sources' abilities to meet the requirements of the PSD
program and permitting authorities' abilities to issue timely permits,
including gaining experience with GHG permitting and (3) whether the
EPA and the states could develop streamlining measures. 75 FR 31559
June 3, 2010. Information currently available to the EPA indicates that
these criteria have not been met.

B. Plantwide Applicability Limitations for GHGs

    We are finalizing the proposed streamlining measure that would
revise the existing PAL permitting program to allow permitting
authorities to issue GHG PALs on either a mass basis (tpy) or a
CO2e basis, including the option to use the CO2e-
based increases provided in the subject to regulation thresholds in
setting the PAL, and to allow such PALs to be used as an alternative
approach for determining whether a project is a major modification and
whether GHG emissions are subject to regulation. Within the GHG PAL
proposal, we discussed the potential options of a Minor Source Approach
and a Major Source Opt-in Approach for allowing sources that are not
currently major sources to receive a PAL. After reviewing the comments
received, we are finalizing the Minor Source Approach, which will allow
permitting authorities to issue GHG PALs to GHG-only sources without
requiring the source to undertake an action that would make GHGs
``subject to regulation'' and bring the source into major stationary
source status under the Tailoring Rule. Thus, GHG-only sources may
obtain a GHG PAL and remain a ``minor source'' so long as their GHG
emissions remain below the PAL.\7\ However, we are not finalizing the
Major Source Opt-in Approach, since many public comments that supported
the GHG PALs changes questioned the usefulness of this approach for
providing real streamlining benefits.
---------------------------------------------------------------------------

    \7\ While we are not taking final action on the GHG synthetic
minor permitting program described in the Step 3 proposal, that
decision does not affect our authority to issue GHG PAL permits
under the Minor Source Approach that we are finalizing in this
action.
---------------------------------------------------------------------------

C. Synthetic Minor Source Permitting Authority for GHGs and Other
Streamlining Measures

    In our Step 3 proposal, we also proposed creating the regulatory
authority for the EPA to issue synthetic minor limitations for GHGs in
areas subject to a GHG PSD FIP, and discussed our progress in
evaluating the suitability of other streamlining measures and solicited
further comment on those other streamlining measures. We are not
finalizing the proposed synthetic minor streamlining measure for GHGs
in areas subject to a GHG PSD FIP after considering public comments
that suggest the program may not be

needed at this time. We also are not taking further action on the other
streamlining measures at this time, as we consider the comments
received. However, we continue to pursue streamlining options as
expeditiously as possible, beginning immediately and proceeding
throughout the phase-in period and encourage permitting authorities to
do the same. We thank the commenters for their input, which we will
consider as we move forward to develop effective streamlining measures
to make the GHG permitting programs more efficient to administer. Any
such action would provide for additional opportunity for stakeholder
input and comment, as appropriate.

V. What is the legal and policy rationale for determining not to lower
the current thresholds in the final action?

A. Overview

    This final rule fulfills our commitment in the Tailoring Rule to
undertake Step 3 of the GHG PSD and title V phase-in process. At this
time we conclude that while they have taken important initial steps to
manage this new program, state permitting authorities have not had
sufficient time and opportunity to develop the necessary infrastructure
and increase their GHG permitting expertise and capacity, and that we
and the state permitting authorities have not had the opportunity to
develop streamlining measures. As a result, the criteria for lowering
the applicability thresholds from their current Step 2 levels have not
been met. Accordingly, we are determining not to lower the thresholds,
so that they will remain at the 100,000/75,000 levels.
    In the Tailoring Rule, we committed to undertake future rulemaking,
including this Step 3 rulemaking, to examine whether we could lower the
thresholds to as low as 50,000/50,000 tpy CO2e, and thereby
apply PSD and title V to more sources. We recognized that lowering the
thresholds would add more administrative costs on top of those added by
Steps 1 and 2, and as a result, we stated that whether and when we
would lower the thresholds would depend on three criteria: (1) The time
that permitting authorities need to ramp up their resources, including
developing permitting infrastructure as well as hiring and training
staff, (2) sources' abilities to meet the requirements of the PSD
program and permitting authorities' abilities to issue timely permits,
including gaining experience with GHG permitting and (3) whether the
EPA and the states could develop streamlining measures.
    As described in the following sub-sections, the states and the EPA
have made some progress in these areas. For example, the states have
issued some GHG PSD permits and we will be finalizing one streamlining
measure in this final rulemaking. However, neither the states nor the
EPA have had the opportunity to make significant progress in these
areas. First, the states generally have made little progress in
developing their GHG permitting infrastructure--e.g., hiring additional
personnel and establishing policies and conducting outreach programs to
sources unfamiliar with the permitting process--largely because their
permitting resources have not increased. In fact, some states indicate
that their permitting resources have decreased, and some indicate that
their resources may decrease further in the near future. Second, the
states have had only limited experience in GHG PSD permitting and
therefore have not had the opportunity to develop significant
expertise. The main reasons for this are the unexpectedly low amount of
PSD permitting to date and the short amount of time since GHG
permitting began. Similarly, for title V, applications for title V
permits are generally not due until a year after title V becomes
applicable to a source. Thus, for Step 2 title V sources, permit
applications were generally not due until July 1, 2012. As a result,
states would only start reviewing such applications by this date, and
accordingly they would not have gained much experience permitting such
sources under title V by July 1, 2012. Finally, the states and we have
not had the opportunity to develop significant streamlining approaches.
This is largely because, as we stated in the Tailoring Rule, certain
streamlining approaches require a longer process to develop, including
significant data collection activities, notice and comment rulemaking
to obtain specific authority and, in some cases, the development of
necessary implementation tools. Because of these criteria, we are not
lowering the thresholds from their current levels.
    The following discusses these criteria, and notes the states' and
our experience with GHG permitting to date under the current Step 1 and
Step 2 applicability thresholds. We also address the environmental
benefits potentially associated with any further reduction in the GHG
PSD permitting thresholds.

B. Have states had adequate time to ramp up their resources?

    One criterion that we described in the Tailoring Rule for whether
to lower the thresholds in Step 3 was whether the permitting
authorities could increase their resources. Specifically, we described
this criterion as ``the time that permitting authorities need to ramp
up their resources in an orderly and efficient manner to manage the
additional workload.'' 75 FR 31559 June 3, 2010. We explained that we
expected Steps 1 and 2 to result in an increase in the numbers of PSD
permits for new construction and modifications and in the numbers of
title V permits; and we expected that some increase in state permitting
resources would be needed to accommodate, at least in part, those new
demands.
    In fact, all indications are that the states have not had the
opportunity to obtain the necessary resources and to develop their
infrastructure to accommodate the level of permitting expected in Steps
1 and 2. Instead, in many cases, reductions in state environmental
agency budgets have occurred, which is fully consistent with the
overall reductions in state budgets that have been recently seen across
the nation.
    In the proposal, we noted several indications that state permitting
resources have decreased in the past several years. For example, an
August 2010 report by the Environmental Council of the States concluded
that state budgets decreased by an average of approximately $21 million
per state from 2009 to 2011.\8\ In addition, a June 28, 2011 letter
from the National Association of Clean Air Agencies (NACAA) to the U.S.
House of Representatives detailing the status of 40 state and local air
quality agencies \9\ indicated that 80 percent of air agencies
experienced a decline in staffing levels in the preceding 4 years.
According to the letter, over the years 2008-2010, the average loss of
staff per agency was 16.7 percent. In addition to staffing losses, 48
percent of air agencies experienced furloughs, and the majority faced
significant declines in budgets. These cutbacks resulted in curtailing
core air program activities including permit issuance, as well as
education and outreach programs. Further, we also noted in the proposal
that we had consulted informally with some states, and many confirmed
that they have seen

their budgets and staffs reduced in recent years as the states have
responded to the economic downturn and budget shortfalls.
---------------------------------------------------------------------------

    \8\ S. Brown, A. Fishman, ``The Status of State Environmental
Agency Budgets, 2009-2011.''
    \9\ Letter from S. William Becker, NACAA, to Honorable Michael
Simpson and Honorable James Moran, U.S. House of Representatives.
---------------------------------------------------------------------------

    In light of these developments, we noted in the Step 3 proposal:

* * * States have not been able to develop their GHG permitting
infrastructure--e.g., hiring additional personnel, establishing
policies and conducting outreach programs to sources unfamiliar with
the permitting process--largely because their permitting resources
have not increased and, in fact, in some cases have decreased and
may decrease further in the near future.

77 FR 14235 March 8, 2012. We received comments from states and
localities supporting those statements, and providing confirmation that
their resources for GHG permitting were falling, in part because of
lower overall resources. For example, the South Coast Air Quality
Management District (SCAQMD) stated, ``* * * SCAQMD's overall staffing,
as well as permitting resources, continue to drop.'' 10 11
---------------------------------------------------------------------------

    \10\ The SCAQMD comments are located in the docket for this
rulemaking, Docket No. EPA-HQ-OAR-2009-0517-19280.
    \11\ One environmental advocacy organization commented that in
its view, its home state of Pennsylvania underfunded the state
environmental agency. The commenter emphasized that such
underfunding should not be taken as an indication of a lack of GHG
permitting capacity. Another environmental advocacy organization
made a comparable point more generally. We have applied this
criteria on a nationwide basis, and we have found that many states
are confronting decreased resources, including states, such as some
of the ones in the Regional Greenhouse Gas Initiative, that have
taken action to regulate GHGs.
---------------------------------------------------------------------------

    These recent reductions in state permitting resources have
undermined the states' ability to build their GHG permitting
infrastructure through hiring and training of staff and through
education and outreach programs to the affected sources.\12\ These
reductions point away from lowering the Step 1 and 2 thresholds at this
time. In the Tailoring Rule, we estimated that lowering the thresholds
to 60,000/60,000 tpy CO2e would increase administrative
burdens by 20 percent above the total burdens at the Step 2 levels (and
40 percent above the pre-GHG permitting burdens); and that lowering
them to 50,000/50,000 tpy CO2e would increase administrative
burdens by 40 percent above the total burdens at the Step 2 levels (and
99 percent above the pre-GHG permitting burdens). Also, as a result of
a large increase in the number of GHG sources required to get permits,
permitting agencies will need to conduct education and outreach
programs to small business and the public who have not typically been
subject to air quality permitting requirements in the past to raise
awareness and understanding of the regulatory requirements for these
smaller sources. Absent this outreach effort, we believe that many
sources will not understand, and perhaps may not even be aware of, the
new regulatory obligations.
---------------------------------------------------------------------------

    \12\ As we noted in the Step 3 proposal, some states have also
been obliged to devote resources to developing and submitting for
EPA approval SIP revisions and title V program revisions authorizing
GHG permitting, instead of using those resources to build GHG
permitting infrastructure. 77 FR 14236 March 8, 2012.
---------------------------------------------------------------------------

    It is important to recognize that to this point, states have not
been confronted with the amount of GHG permit activity that we
estimated in the Tailoring Rule for Steps 1 and 2. Environmental
advocacy organizations emphasized this point in commenting on the
proposal, and one of these organizations concluded that the EPA should
lower the thresholds. We respond to these comments in more detail
below, but in brief, although we recognize the disparity in actual
permitting activity compared to our estimates, this disparity does not
serve as a basis for lowering the thresholds in this Step 3 rulemaking.
As we discuss below, there is some indication that at least part of
this disparity may be temporary, due to the recent economic downturn
and slow recovery, as well as other factors. Moreover, in the Tailoring
Rule, we based the level of the thresholds on overall administrative
burden that we determined based on several sets of data and a complex,
multi-component methodology. The number of GHG permits is an important
component of overall burden, but there are other components as well,
including (1) the per-permit processing costs and (2) other
administrative burdens, including training and enforcement expenses,
public education and outreach expenses, and the expenses of additional
synthetic minor source permitting for GHG sources seeking to avoid PSD
and title V applicability. At this time, with just the first year of
implementation of the Step 2 thresholds having been completed on June
30, 2012, we do not have enough new information about the data sets and
methodology to merit revising the administrative burden estimates or,
therefore, the thresholds. In particular, we note some indications that
in the Tailoring Rule, we may have underestimated the administrative
burdens in certain respects by, for example, not fully accounting for
the additional synthetic minor permitting activity, that is, sources
taking synthetic minor limitations on their GHG emissions so as to
avoid becoming subject to PSD or title V due to those emissions. As a
result, contrary to the commenters, we do not consider the unexpectedly
smaller number of GHG permits to indicate that states have greater
permitting capacity.
    For the previously described reasons, states have not had the
opportunity to build capacity and resources to handle GHG permitting.
Accordingly, this criterion of state resources supports determining not
to lower the current thresholds.

C. What is the ability of permitting authorities to issue timely
permits?

    Another criterion identified in the Tailoring rule is whether
permitting authorities have the ability to issue timely permits \13\
based on efficiencies resulting from GHG permitting implementation
experience.\14\ In describing this criterion in the Tailoring Rule, we
expected that permitting authorities, by acting on the anticipated
volume of GHG PSD permit actions, would have the opportunity to
establish efficient methods for resolving issues and processing
permits, including developing expertise within their staffs. This would
allow them to achieve efficiencies that, in turn, would create capacity
for processing more GHG

permit applications. Thus, with this criterion, we based our commitment
to complete the Step 3 rulemaking in part on the assumption that Steps
1 and 2 would provide us with the necessary information to determine
whether and when it has become possible for states to administer GHG
permitting programs for additional sources. However, as events have
transpired, states have not yet had the opportunity to make this
progress.
---------------------------------------------------------------------------

    \13\ This criterion may be measured by the period of time
permitting authorities need to issue permits.
    \14\ In the Tailoring Rule, we described this criterion as
``information we have as to the sources' abilities to meet the
requirements of the PSD program and the permitting authorities'
ability to process permits in a timely fashion.'' 75 FR 31,559 June
3, 2010. An issue arises as to the meaning of this reference to
sources. We stated in the Step 3 proposal: ``We note that in the
Tailoring Rule, we made clear that sources' abilities to meet the
requirements of the PSD and title V programs depend at least in part
on the ability of the states to develop, as part of the state
programs, outreach and educational efforts to facilitate source
compliance. Accordingly, for present purposes, we think this
component concerning sources may be examined by a review of the
states' progress in developing state GHG permitting programs.'' 77
FR 14232 March 8, 2012. Industry commenters took issue with this
statement, and asserted that this criterion requires an examination
of sources' abilities to meet PSD requirements that is independent
of the permitting authorities' ability to process permits in a
timely fashion. We do not find it necessary in this rulemaking to
resolve this issue as to the meaning of the reference to sources.
This is because for purposes of this rulemaking, the information we
have about permitting authorities leads us to conclude that this
criterion points towards determining not to lower the thresholds.
Even if the sources were to be treated as a separate component of
this criterion, no commenter suggested that information about the
sources would lead us to conclude anything differently about this
criterion. Because, in this rulemaking, information about sources
does not play a role in assessing this criterion, it is not
necessary to resolve the issue of the meaning of the sources'
abilities to comply with GHG permitting requirements, and whether
sources' abilities to comply should be considered independently from
the permitting authorities' ability to administer GHG permitting.
---------------------------------------------------------------------------

    In our Step 3 proposal, we showed that as of December 1, 2011, the
EPA and permitting authorities had issued 18 GHG PSD permits. We noted
that these 18 permit actions had been spread among 11 states, almost
all of which had issued only one GHG permit. We concluded: ``This
activity has simply been too limited to allow States to build internal
capacity to handle GHG permitting for a diverse set of sources, to
develop more efficient techniques for permitting any particular source
category, or to develop streamlining approaches to address GHG
permitting.'' 77 FR 14237 March 8, 2012.
    Since then, the pace of permitting has remained too low for states
to build their GHG permitting capacity. As of May 21, 2012, the EPA and
permitting authorities have issued a total of 44 GHG PSD permits.
Importantly, states have seen little if any title V permitting activity
to this point; indeed, applications for title V permits from Step 2 (or
``GHG-only'') sources were generally not due until July 1, 2012 (i.e.,
1 year after the effective date of Step 2, when GHG-only sources could
have first become subject to title V).
    Therefore, the conclusions we drew at proposal remain valid. The
GHG permitting activity has simply been too limited to allow states to
build internal capacity to handle GHG permitting for a diverse set of
sources, to develop more efficient techniques for permitting any
particular source category or to develop streamlining approaches to
address GHG permitting. In sum, the states' experiences to date do not
provide a basis for us to conclude that permitting authorities in fact
have the ability to issue timely permits for a larger set of actions
based on GHG permitting experience. Therefore, this criterion points
towards determining not to lower the current thresholds.

D. What progress has the EPA made in developing streamlining methods?

    In the Tailoring Rule, we indicated that the criterion of
implementation of permit streamlining measures would assist permitting
authorities by removing some sources from the permit program, or
allowing more efficient processing of permit applications.
Specifically, we described this criterion as ``our progress in
developing streamlining methods that will render the permitting
authority workload more manageable by taking some sources off the table
(through regulations or guidance interpreting `potential to emit'), and
by allowing for more efficient permit processing (through general
permits and presumptive BACT).'' 75 FR 31559 June 3, 2010. We further
stated, however, that some streamlining methods would take several
years for the EPA to develop, and for states to gain authority to
implement. Thus, we did not anticipate that streamlining approaches
would necessarily be available by the time of the Step 3 rulemaking. We
also noted that in consultations with the states, they reported that
they had made little progress in implementing streamlining measures,
and none had adopted streamlining measures specifically to address
GHGs.
    The states and we continue to make progress in streamlining. The
revision to the PALs regulations that we promulgate in this action is a
step in that direction. In addition, as noted, we recently convened the
CAAAC GHG Permit Streamlining Workgroup to explore potential
streamlining approaches. The Workgroup meets regularly and is expected
to issue a report by this October with suggestions for specific
approaches. Even so, to this point, neither we nor the states have been
able to develop or implement sufficient streamlining actions to
meaningfully reduce permitting administrative burdens. Accordingly,
this criterion points towards determining not to lower the current
thresholds.\15\
---------------------------------------------------------------------------

    \15\ Environmental advocacy organization commenters stated that
in light of the less-than-expected amount of GHG permitting
activity, the three criteria should be considered either to be
irrelevant or to have been met. We respond to this comment below
and, in more detail, in the Response to Comments document.
---------------------------------------------------------------------------

E. What would be the effects on emissions of lowering the current
thresholds?

    The fact that the PSD program would apply to a large percentage of
the national inventory of stationary source GHG emissions at the
100,000/75,000 tpy CO2e levels of the Tailoring Rule, while
increasing the number of sources subject to permitting by only a modest
amount, supported the reasonableness of our decision to establish the
thresholds at those levels. For the current rulemaking, we have
conducted further analysis, which shows that reducing the thresholds in
Step 3 to as low as 60,000/60,000 tpy CO2e would bring
within the potential sphere of the PSD program less than an additional
1 percent of all GHG emissions from all stationary sources nationally
while potentially subjecting over 2,000 additional sources to the
permitting program. Our analysis shows that as the thresholds go lower,
the number of sources increases dramatically, but the volume of GHG
emissions emitted by each additional source gets smaller and smaller.
Lowering the thresholds to 50,000/50,000 tpy CO2e would
bring within the sphere of PSD an additional 3 percent of the national
inventory of GHG emissions while potentially subjecting over 4,500
additional sources to the permitting programs. Of course, in any year,
only a fraction of national GHG stationary source emissions would
actually become subject to PSD controls because only a fraction of
sources would undertake modifications or new construction that trigger
BACT controls. Thus, the additional reductions in GHG emissions from
lowering the thresholds in Step 3 would be small under any
circumstances even if the thresholds were lowered to 50,000/50,000 tpy
CO2e. This small amount of incremental environmental benefit
from lowering the thresholds, coupled with the additional burden
associated with permitting these sources (in light of the lack of
increase in state resources and experience as well as the lack of
streamlining measures), supports the reasonableness of our
determination not to lower the thresholds in Step 3.

F. What is the effective date of this action?

    The effective date of this action is August 13, 2012. In the
Tailoring Rule, we provided that Step 3 would take effect by July 1,
2013.\16\ We selected this date because it would provide a 1-year delay
following the required, July 1, 2012 date of promulgation of Step 3.
The purpose of the delay would be to allow states sufficient time to
incorporate any lower thresholds into their state implementation plans
(SIPs), and submit a SIP revision for EPA approval. However, because
the EPA is determining not to lower the thresholds, SIP revisions are
not necessary and, as

a result no delay in the effective date is necessary.
---------------------------------------------------------------------------

    \16\ The Tailoring Rule regulations provide that Step 3 ``shall
become effective July 1, 2013.'' 40 CFR 52.22(b)(1), 70.12(b)(1),
71.13(b)(1), which we read to mean effective by July 1, 2013,
consistent with the accompanying discussion in the preamble. 75 FR
31516 June 3, 2010 (describing Step 3 as possibly including more
sources ``beginning by July 1, 2013'').
---------------------------------------------------------------------------

G. Conclusion

    In the Tailoring Rule, we recognized that the Step 1 and 2
thresholds we promulgated would create significant administrative
burdens on permitting authorities. We stated that we would lower the
thresholds, and thereby create additional administrative burdens, based
on consideration of three criteria concerning state resources and
experience as well as EPA and state efforts to streamline the
permitting process. In this rulemaking, on the basis of these criteria
and the public comments received, we determine not to lower the
thresholds at this time. Permitting authorities need additional time to
secure resources, hire and train staff, and gain experience with GHG
permitting, and additional time is required to develop streamlining
measures to expedite permit program administration, before we move
toward fuller implementation of the program. We note that determining
not to lower the current PSD and title V thresholds for Step 3 does not
have implications for whether we will lower the thresholds in Step 4 or
afterwards. Our actions in Step 4 will depend on our evaluation of the
appropriate factors at the time of that rulemaking. If those factors
point in the direction of lowering the thresholds, we will act
accordingly.
    As noted, we recognize the concerns expressed by environmental
advocacy organization commenters concerning the disparity between
expected number of permits and actual number of permits. We intend to
track permitting activity to provide a sufficient base of information
to assure that the 5-year study (required to be completed by April 30,
2015) is robust, and to facilitate appropriate action concerning the
thresholds in Step 4 (required to be completed by April 30, 2016). We
discuss these plans below in our response to these commenters.

VI. What streamlining approach is the EPA finalizing with this action?

    In the Tailoring Rule, the EPA committed to explore streamlining
measures as an integral part of the phase-in approach to permitting
requirements for GHG emissions under PSD and title V. Streamlining
techniques would allow permitting authorities to be more efficient in
administering their GHG permit programs by reducing the overall
resources required to administer these programs now and in the future.
By implementing effective streamlining techniques, permitting,
authorities could move more rapidly toward regulating a larger set of
GHG sources at lower thresholds. In the Tailoring Rule, we identified
potential streamlining options. We also acknowledged that it will take
us several years to develop, and for states to gain authority to
implement, effective streamlining methods. We committed to continue to
explore the identified options, and to request comment on these and any
additional streamlining approaches in the Step 3 rulemaking.
    This final rule provides a mechanism to streamline the GHG PSD
permit program by expanding the existing PSD PAL provisions to better
implement PALs for GHGs. The expanded PAL provisions (1) allow
permitting authorities to establish GHG PALs on either a mass basis
(tpy) or a CO2e basis, (2) include the option to use the
CO2e-based increase provided in the subject to regulation
thresholds in setting the CO2e PAL, (3) include the option
to issue a GHG PAL (issued on a mass basis or CO2e basis) to
GHG-only sources that have the potential to become major sources under
the Tailoring Rule and (4) allow GHG PALs (issued on a mass basis or
CO2e basis) to be used as an alternative approach for
determining both whether a project is a major modification and whether
GHG emissions are subject to regulation. Accordingly, permitting
authorities implementing the federal PSD program will be able to use
the authority provided to them under 40 CFR 52.21, including the
changes finalized in this rule, and corresponding permitting procedures
(such as those in 40 CFR part 124) to issue PAL permits for GHGs in a
manner consistent with PAL permits issued for regulated NSR pollutants
other than GHGs.
    In the Tailoring Rule, we did not identify PALs as a viable
streamlining technique for GHG sources. However, since we finalized the
Tailoring Rule, we have recognized that PALs could be designed in a way
that could be useful for easing the administration of GHG permitting,
and we proposed changes to the existing PAL rules in our Step 3
proposal to address the unique PSD applicability aspects associated
with GHGs. In the final rule, we have amended the existing PAL
regulations to recognize the unique applicability characteristics of
GHGs and to provide GHG sources with greater operational flexibility,
while making application of the PAL rules to GHGs more consistent with
the outcome achieved when those rules are applied to other regulated
NSR pollutants. We believe the approach to PALs in the final rule will
provide air quality benefits by encouraging sources to control GHG
emissions through efficiency improvements or the use of other emission
reduction procedures, processes or equipment before such sources are
subject to PSD permitting for GHGs, and may encourage sources
potentially subject to PSD to limit their emissions without triggering
major modification permitting procedures or related administrative
processes necessary to revise title V permits to reflect such major
modifications.
    Accordingly, this final rule amends the PSD regulations at 40 CFR
52.21 to create authority for permitting authorities applying the
federal PSD permitting program to issue PALs on either a mass basis or
a CO2e basis to major sources and GHG-only sources that have
the potential to become major sources, including the option to use the
CO2e-based applicability thresholds provided in the
``subject to regulation'' definition in setting the PAL limit for a
CO2e-based PAL, and also to allow such PALs to be used as an
alternative approach for determining whether a project is a major
modification and subject to regulation for GHGs. We are also making
small changes to a number of the existing provisions in order to ensure
that those provisions can be implemented in light of the GHG-based
changes described above. In so doing, we did not seek comment on or re-
open the entire PAL program. Instead, the request for comment was
limited to the specific changes we are making with respect to GHGs
(non-GHG PAL-related issues are outside the scope of this rulemaking).
The following discussion outlines our approach to PALs for GHGs.

A. What is the EPA finalizing?

    As noted, we are finalizing revisions to the federal PAL
regulations to allow permitting authorities to establish GHG PALs on
either a mass basis (tpy) or a CO2e basis, including the
option to use the CO2e-based applicability thresholds for
GHGs provided in the subject to regulation definition in setting the
PAL on a CO2e basis and to issue a GHG PAL to GHG-only
sources that have the potential to become major sources under the
Tailoring Rule (Minor Source Approach), and to allow GHG PALs to be
used as an alternative approach for determining both whether a project
is a major modification and whether GHG emissions are subject to
regulation.

B. What is a PAL?

    Under the EPA's existing regulations, a PAL is an emissions
limitation for a single pollutant expressed in tpy that is enforceable
as a practical matter and is established source-wide in accordance

with specific criteria. 40 CFR 52.21(aa)(2)(v). Such PALs are voluntary
in the sense that sources may, but are not required to, apply for a
PAL, and the decision to issue a PAL to particular source is at the
discretion of the permitting authority. These PALs offer an alternative
method for determining major NSR applicability. If a source can
maintain its overall emissions of the PAL pollutant below the PAL
level, the source can make a change without triggering PSD review. This
allows sources to make the changes necessary to respond rapidly to
market conditions, while generally assuring the environment is
protected from adverse impacts from the change. A PAL also results in
significant environmental benefit by providing the community with an
understanding of the long-term emissions impact from a facility, by
preventing emissions creep (i.e., a series of unrelated individual
emissions increases that are below major NSR applicability thresholds)
and by requiring enhanced monitoring, recordkeeping and reporting
provisions to demonstrate compliance with the PAL.

C. Why is the EPA amending the regulations?

    We are revising the existing PAL regulations because the EPA
interprets the existing regulations under 40 CFR 52.21 for the federal
PAL and PSD programs to allow permitting authorities to issue GHG PALs
only on a mass basis.\17\ In addition, our interpretation of the
existing regulations did not provide for the use of the
CO2e-based subject to regulation thresholds in setting the
PAL limit, only allowed GHG PALs to be issued to existing major
stationary sources [40 CFR 52.21(aa)(1)] and did not allow compliance
with a PAL to be considered for the purpose of determining whether GHG
emissions are ``subject to regulation.''
---------------------------------------------------------------------------

    \17\See EPA guidance ``Establishing a Plantwide Applicability
Limitation for Sources of GHGs'' April 19, 2011, located at http://www.epa.gov/nsr/ghgdocs/ghgissuepal.pdf.
---------------------------------------------------------------------------

    The PSD provisions generally define a ``major stationary source''
as a stationary source which emits or has the potential to emit 100 or
250 tpy or more of a regulated NSR pollutant, depending on the type of
source. 40 CFR 52.21(b)(1)(i)(a)-(b). A ``GHG-only source'' is an
existing stationary source that emits or has the potential to emit 100/
250 tpy of GHGs on a mass basis, and emits or has the potential to emit
CO2e in amounts equal to or more than the GHG subject to
regulation threshold for new sources (currently 100,000 tpy of
CO2e or more), but does not emit or have the potential to
emit any other regulated NSR pollutant at or above the applicable major
source threshold. Regardless of the amount of GHGs currently emitted, a
GHG-only source that has avoided PSD applicability for GHG under Step 1
or 2 of the Tailoring Rule would be a minor source for purposes of PSD,
and could only become major for PSD when it proposes to undertake a
change that increases GHG emissions by at least 75,000 tpy
CO2e, the amount of increase needed under the current
Tailoring Rule thresholds.\18\ 40 CFR 52.21(b)(49)(v)(b). Because the
existing PAL provisions are only available to existing major stationary
sources, permitting authorities issuing a PAL under the federal PAL
program can only issue a PAL to a GHG-only source when the source
proposes to undertake a change that would make it an existing major
stationary source.\19\ 40 CFR 52.21(aa)(1). As a result, GHG-only
sources may not currently use PALs as an alternative mechanism for
determining major NSR applicability in the same way that existing major
stationary sources of non-GHG regulated NSR pollutants may. Instead,
because the Tailoring Rule applicability determinations depend on the
GHG emissions related to a particular action on the part of the source,
GHG-only sources must currently wait to obtain a PAL until they
actually propose to make a change that qualifies the source as a major
stationary source under the PSD program. Moreover, as we read the
current federal regulations in 40 CFR 52.21, any GHG PALs issued under
those regulations can only be mass-based. This requirement is due to
the fact that PALs were originally designed to be an alternative method
for determining PSD applicability for regulated air pollutants, and
such pollutants only have mass-based applicability triggers for PSD,
which the PAL provisions reference. For example, setting an actuals PAL
level under 40 CFR 52.21(aa)(6) of the existing regulations requires
reliance on the mass-based baseline actual emissions under 40 CFR
52.21(b)(48) and mass-based significant levels under 40 CFR
52.21(b)(23).
---------------------------------------------------------------------------

    \18\ This is a consequence of the wording used to implement the
Tailoring Rule Step 1 and 2 thresholds through the definition of
``subject to regulation.''
    \19\ While the changes we are finalizing in this rulemaking will
allow minor sources that are also GHG-only sources to obtain a PAL
for their GHG emissions only under the federal PAL program, the
revisions in this rulemaking will not allow any other minor sources
to obtain a PAL for any pollutants and do not otherwise disturb the
settled requirement that a source seeking to obtain a PAL for non-
GHG pollutants must be a major stationary source.
---------------------------------------------------------------------------

    On the other hand, PSD applicability for GHG emissions from
existing sources under the Tailoring Rule relies on CO2e
thresholds for determining whether the GHG emissions from any
particular action are ``subject to regulation,'' which in turn informs
the determination of whether a source is a major modification. Thus,
under the current regulations, there is a mismatch between the mass-
based PAL and the CO2e-based portions of the PSD
applicability thresholds, such that the existing PAL regulations do not
provide an effective alternative applicability determination mechanism
for GHG sources.
    We believe changing the PAL regulations to provide for
CO2e-based PALs will provide GHG sources with additional
operational flexibility, and could reduce GHG workload burdens on
permitting authorities by decreasing the number of PSD permit
applications that permitting authorities must process for these sources
over the long term. Being able to establish a PAL on a CO2e
basis will provide planning certainty to GHG sources, and will relieve
the current time pressure to issue a PAL permit concurrent with
authorization for a planned major modification which could potentially
delay that project. We also believe that, regardless of which metric is
specified to measure GHG emissions in a PAL, compliance with a GHG PAL
generally assures that the environment remains protected from adverse
air impacts resulting from changes a source undertakes in compliance
with such a PAL, because emissions cannot exceed this pre-established
level without further review. A PAL also provides an incentive for a
source to minimize GHG emissions increases from future projects in
order to stay under the PAL and avoid triggering major modification
permitting requirements.
    These regulatory changes that allow sources to establish a PAL on a
CO2e basis also make PALs for GHGs function similarly to
PALs for non-GHGs. A significant emissions rate, as specified in 40 CFR
52.21(b)(23), is a threshold used to determine when PSD applies to
modifications at existing major stationary sources, and only
modifications that result in net emissions increases above the
significant rate trigger major PSD permitting requirements. Unless a
specific significant emissions rate has been established, the federal
regulations specify that the significant rate is effectively zero,
i.e., any increase in emissions would trigger PSD. Under the

current PAL provisions, a permitting authority establishes the PAL
level for a pollutant at a particular source by adding the applicable
significant rate found in 40 CFR 52.21(b)(23) to the baseline actual
emissions of that pollutant at the source.
    The EPA did not promulgate a significant emissions rate for GHG
emissions in 40 CFR 52.21(b)(23) in the final Tailoring Rule. Thus, if
a permitting authority establishes a mass-based GHG PAL under the
existing federal regulations, the PAL level included in the permit may
not include any margin above the baseline actual emissions to account
for emissions growth. Absent this margin, a GHG PAL would usually
provide less flexibility to a source when compared to PALs for other
regulated NSR pollutants.
    This final rule revises the PAL and ``subject to regulation''
provisions in 40 CFR 52.21 to provide GHG sources with the same kind of
flexibility sources currently have for other regulated NSR pollutants
by allowing sources the option to establish a CO2e-based PAL
using the CO2e-based emission increase provided in the
subject to regulation thresholds in 40 CFR 52.21(b)(49). Thus, under
the final rule, a permitting authority issuing a CO2e-based
PAL under the current Tailoring Rule thresholds may add 75,000 tpy
CO2e to a source's CO2e baseline actual emissions
to establish the PAL level, because the Tailoring Rule established
75,000 tpy CO2e as the appropriate rate of emissions
increase for the GHG subject to regulation applicability threshold for
existing sources. In the Tailoring Rule, the EPA revised the definition
of ``subject to regulation'' to establish a threshold level of GHG
emissions that a source must meet, on both a source and project basis,
before GHGs are considered a regulated NSR pollutant for PSD permitting
purposes. However, the EPA also made clear that its action had the same
substantive effect and should be treated as if the EPA had revised
other components of the definition of ``major stationary source'' to
achieve the same effect. Thus, in addressing PALs for GHGs in this
rule, the EPA is continuing to focus on the thresholds incorporated
into the ``subject to regulation'' provision, consistent with the
approach in the Tailoring Rule.
    The PAL revisions in this final rule will also have the effect of
streamlining future major NSR applicability determinations for sources
that choose a GHG PAL. The revisions eliminate the need to evaluate GHG
emissions for major NSR applicability as long as the source is
complying with the GHG PAL, because a GHG PAL can function to assure
not only that a change is not considered a major modification, but also
that GHG emissions from the source undertaking that change are not
subject to regulation. Since the PSD regulations, including the
Tailoring Rule, require an existing source to determine (1) whether a
specific action would increase the GHG emissions by a certain
CO2e amount that would make them subject to regulation for
PSD permitting purposes, and if so, (2) whether the GHG emissions
increase is also significant on a mass basis to qualify the change as a
major modification, the rule changes that allow for setting a GHG PAL
at a level that either includes the CO2e-based increase
identified in the Tailoring Rule thresholds or the mass-based
significant emissions rate will insure that the source does not exceed
that amount and thus will not emit GHGs in amounts that would trigger
PSD permitting obligations. In sum, we believe that the existing
federal PAL regulations do not generally provide an effective means of
achieving burden reductions for permitting authorities and GHG sources
when compared to the operational flexibility provided by PALs for
regulated NSR pollutants other than GHGs, and therefore are overly
restrictive with respect to GHG sources. Accordingly, in this final
rule we are revising the PSD rules for PALs to allow permitting
authorities to: (1) Issue effective PALs to GHG-only sources; (2) issue
either a mass-based (tpy) or a CO2e-based PAL to a
particular source; (3) allow CO2e-based PALs to include the
CO2e-based emission increases provided in the subject to
regulation thresholds; and (4) allow compliance with a GHG PAL to be
used as an alternative applicability approach for determining both
whether a project is a major modification and is subject to regulation
for GHGs. Provided a source complies with a GHG PAL that meets the
requirements in 40 CFR 52.21(aa)(1) through (15), GHG emissions at the
source will not be ``subject to regulation,'' and a project at the
source will not result in a major modification for GHG purposes.
    The Minor Source Approach discussed in the proposal for Step 3
allows a GHG-only source to remain a minor source for PSD purposes and
still obtain a GHG PAL.\20\ In this way permitting authorities can
issue a GHG PAL to a GHG-only source that would only cover GHG
emissions without requiring the source to trigger PSD permitting
requirements as a prerequisite.
---------------------------------------------------------------------------

    \20\ A source may be major for title V but minor for PSD because
of the difference in applicability thresholds (e.g., title V major
source status may be 100 tpy on a mass basis for a particular
regulated air pollutant but 250 tpy on a mass basis under PSD for
the same pollutant) and/or for other reasons (e.g., a source that
did not trigger PSD when it commenced construction and that did not
subsequently increase its emissions above any major modification
threshold but still has emissions over 100 tpy on a mass basis). In
such cases, the title V permit may be an available mechanism to
issue such PALs. 40 CFR 52.21(aa)(2)(ix).
---------------------------------------------------------------------------

    We are providing for the Minor Source Approach for GHG PALs in this
final rule by revising the PAL regulations to allow a GHG-only source
to submit an application for a GHG PAL while maintaining its minor
source status. We also define a number of terms when used for the
specific purpose of imposing a GHG PAL for a minor source. A GHG-only
source that complies with its GHG PAL will not trigger PSD permitting
requirements for GHGs, but could still trigger PSD for other regulated
NSR pollutants if it undertakes a change that increases emissions by an
amount at or above the major source threshold for any non-GHG regulated
NSR pollutant. 40 CFR 52.21(b)(1)(i)(c).
    Moreover, under the Tailoring Rule, GHG-only sources must determine
whether any project will result in GHG emissions that are subject to
regulation (on a CO2e basis) and correspondingly will also
result in a major modification (on a mass basis). Because GHG-only
sources must undertake these determinations for any change, even those
that would not lead to emissions at or above the applicable thresholds
for GHGs, the regulatory revisions we are finalizing clarify that GHGs
will not be ``subject to regulation'' under 40 CFR 52.21(b)(49) at such
sources, as long as the source is complying with a GHG PAL that meets
the requirements in 40 CFR 52.21(aa)(1) through (15). We believe that
extension of the PAL program to these sources through the Minor Source
Approach is consistent with the purposes and design of the PAL
program--to allow use of a PAL as an alternative PSD applicability
approach for existing sources.
    Issuing GHG PALs to GHG-only sources that remain minor sources does
not conflict with the basis for the existing PAL rules. When we
promulgated the existing PAL rules in 2002 (67 FR 80186), we limited
the application of the PAL provisions to existing major stationary
sources only. We included this provision based on our decision to limit
PALs to sources that had historical emissions through which the
permitting authority could establish a baseline actual emissions level.
New major stationary sources do

not have historical actual emissions from which a permitting authority
can establish an actuals PAL, and so we declined to include these
sources in the actuals PAL program. By contrast, because GHG-only
sources are existing sources, specific sources could already have
sufficient historical actual emissions data to provide the GHG
information necessary to set the actuals PAL for GHGs or may be
collecting data now that would allow them to establish a GHG PAL in the
future. However, permitting authorities retain discretion to determine,
on a case-by-case basis, whether the historical actual emissions data
available for a particular source is sufficient to establish a GHG PAL.
    When we originally promulgated the PAL rules, we also chose not to
extend the PAL program to minor source NSR permit programs, because the
PAL rules provide an alternative PSD applicability provision to
determine whether a project results in a major modification, and we did
not believe the program would be useful to minor sources. At that time,
the rules generally required only existing major stationary sources to
undertake a major modification applicability analysis to determine
whether a change triggers PSD review. Given the unique ``subject to
regulation'' PSD applicability requirement for GHGs, wherein an
existing source that emits major amounts of GHGs is a major stationary
source only at the time it proposes to undertake a project that will
result in an emissions increase that equals or exceeds the subject to
regulation thresholds, we do not believe that extending the PAL
provisions to allow GHG-only sources to get GHG PALs runs afoul of the
reasoning we provided when initially limiting the PAL program to
existing major stationary sources.
    Because the GHG-only source must be a minor source when it applies
for its GHG PAL and will remain a minor source under this Minor Source
Approach (absent any other PSD-triggering change), and will not be
expected to trigger a major modification applicability analysis for
future increases in non-GHG regulated NSR pollutants, we believe it is
unnecessary to extend the PAL authority under this approach to other
pollutants. Moreover, we recognize that extending the PAL program in
that way could place a burden on permitting authorities and redirect
resources needed to issue permits to other stationary sources that
trigger PSD requirements for GHGs.
    The Minor Source Approach of the final rule is consistent with the
CAA in that it regulates sources that, but for the Tailoring Rule,
would be major stationary sources based on the mass of their GHG
emissions. This approach is also consistent with our Tailoring Rule
principles, since we expect that the GHG PALs established under this
rule would be established at levels very close to relevant GHG
applicability thresholds in the Tailoring Rule. Because of the unique
nature of GHG emissions, the EPA has determined that the scope of the
regulatory revisions that it is finalizing to implement this Minor
Source Approach for PALs is available only for a source's GHG emissions
and not for non-GHG pollutants. As mentioned above, the Minor Source
Approach for GHG PALs also fulfills our streamlining goals by allowing
applicability determinations for PSD to occur through an alternative
mechanism that helps to manage permitting authorities' long term
permitting burdens.
    These regulatory revisions are also consistent with our permitting
authority under the CAA. As we explained in the Step 3 proposal, in the
context of the Tailoring Rule, we interpret sections 165, 169 and 301
of the CAA to provide authority to issue preconstruction permits to GHG
sources that do not qualify as major sources under the Tailoring Rule,
but that emit or have the potential to emit GHGs at or above the
statutory major source thresholds and that, without the Tailoring Rule,
would qualify as ``major emitting facilities'' under the CAA. As
explained in the Tailoring Rule, because the administrative burden
associated with immediately implementing the PSD permitting program at
statutory levels for GHGs would have crippled the program, we tailored
the program and phased in the permitting requirements to ensure that
the program would be administrable for GHGs. Under the Minor Source
Approach that we are finalizing in this action, qualifying sources emit
or have the potential to emit GHGs in levels above, and in many cases
much higher than, the statutory thresholds. But for the Tailoring Rule,
such sources would qualify as ``major emitting facilities'' under CAA
section 169 and would be subject to PSD permitting requirements.
Because the PAL provisions finalized today could also help to ensure
that the PSD permitting program can be administered in an effective and
efficient manner for GHGs, we interpret CAA sections 165 and 169 to
convey to permitting authorities, including the EPA, the legal
authority to issue GHG PAL permits to sources that qualify under the
Minor Source Approach. Similarly, we interpret CAA section 301(a)(1) to
provide additional authority to issue PAL permits to such sources.
Accordingly, the EPA interprets sections 165, 169 and 301 of the CAA to
provide the authority to issue GHG PAL permits under the Minor Source
Approach as finalized in this action.

D. Extending PALs to GHGs on a CO2e Basis and Using PALs To
Determine Whether GHG Emissions Are ``Subject to Regulation''

    In this action, we are allowing permitting authorities to establish
a CO2e-based GHG PAL, and in so doing, allowing them to add
up to an amount equal to the emissions increase contained in the
``subject to regulation'' applicability threshold (currently 75,000 tpy
CO2e for an existing source) to the source's baseline actual
emissions to set the actuals PAL level for GHGs. We are also allowing
GHG PALs, either on a mass basis or a CO2e basis, to serve
as an alternative approach for determining whether GHG emissions are
subject to regulation. That is, rather than applying the emissions
increase tests currently contained in the ``subject to regulation''
definition, a source could demonstrate that GHG emissions are not
``subject to regulation'' by complying with a GHG PAL. Thus, compliance
with a GHG PAL would be used as an alternative approach for determining
that a project neither causes GHG emissions to be subject to
regulation, nor causes the source to have a major modification.
    With respect to the subject to regulation determination, we believe
that it is necessary to allow GHG PALs to be used as an alternative
provision for making this determination, because failing to do so would
negate the flexibility we wish to achieve by revising GHG PALs. This is
because without these regulatory revisions, sources would still be
required to monitor individual emissions changes using the procedures
in 40 CFR 52.21(b)(49) to determine whether a project causes GHG
emissions to be ``subject to regulation.'' If we do not allow GHG PALs
to be used to determine whether GHGs are subject to regulation, these
determinations would use procedures that rely on an emissions-unit-by-
emissions-unit analysis and a shorter contemporaneous period to
evaluate net emissions changes, neither of which are required under a
PAL. This would undermine the very benefits the PAL is intended to
provide, such as clarity, regulatory certainty and operational
flexibility. We believe that the enhanced recordkeeping, reporting and
monitoring associated with a PAL, and the environmental benefits
resulting

from a PAL, warrant extension of the alternative applicability
provisions to ``subject to regulation'' determinations to assure that
the GHG PAL provides the intended flexibility to sources.
    With respect to extending the PAL regulations to allow GHG limits
to be set on a CO2e basis, we also believe these changes
provide PALs to be used for GHGs in a manner consistent with the
Tailoring Rule and the purpose of the PAL program. When we originally
proposed the Tailoring Rule, we proposed to include applicability
thresholds within the definitions of major stationary source and major
modification, based on emissions of CO2e. We also originally
proposed to establish a CO2e-based significant emissions
rate. However, in the final rule, we changed our regulatory approach
and instead included these applicability thresholds within the
``subject to regulation'' definition, and we did not revise the
definition of significant to include a CO2e-based emissions
rate. We did so, in part, because we intended this change in regulatory
structure to facilitate more rapid adoption of the rules by permitting
authorities. Nonetheless, we also explained that we intended the
definition of ``subject to regulation'' to function in tandem with the
definitions of ``major stationary source'' and ``major modification''
to determine whether a given project triggers PSD preconstruction
permit requirements. 75 FR 31582 June 3, 2010. That is, if a source
emits GHG emissions at a level that causes the emissions to become
``subject to regulation,'' that same level of emissions increase will
likely cause the source to be a major stationary source and to trigger
PSD requirements as a major modification. Since the PAL program for
non-GHG pollutants allows actuals PAL levels to be set by adding up to
the amount of the emissions that would be allowed before a project
triggered PSD requirements as a major modification, we think the PAL
program for GHGs should apply similarly. Accordingly, since the
CO2e-based emission increase contained in the second part of
the ``subject to regulation'' definition works in tandem with the
``major modification'' provision to determine whether PSD applies, we
are amending the regulations so that a CO2e-based GHG PAL
can be established by adding up to an amount equal to the
CO2e emissions increase defined as ``significant'' for the
purposes of 40 CFR 52.21(b)(49)(iii) at the time the PAL permit is
being issued (currently, 75,000 tpy CO2e) to the source's
baseline actual emissions.
    In our proposed Tailoring Rule, we noted that, in rare instances,
there may be an exception to the general principle that a GHG source
exceeding the proposed 75,000 tpy CO2e significant emissions
threshold for major modification applicability would also exceed the
statutory mass applicability thresholds for PSD, namely if a source
emits very small amounts of a particular GHG that carries a very large
global warming potential. 74 FR 55330 October 27, 2009. We noted our
concern that the proposed rule could cause such sources, whose mass
emissions do not meet the major stationary source tpy threshold, to
nonetheless be regulated under the permit programs. When we finalized
the Tailoring Rule using the subject to regulation approach, we
resolved this concern by retaining both a mass-based threshold and a
CO2e-based threshold. Our intent in retaining both
thresholds was to assure that there was no source with GHG emissions
that were subject to PSD that would not otherwise meet the statutory
criteria for treatment as a major stationary source.
    This same regulatory structure can create the opposite effect for
sources operating under a GHG PAL. Instead of providing GHG PAL sources
with the ability to use either threshold to show that they are not
undertaking a major modification and that major NSR does not apply,
sources must monitor both thresholds to prove this outcome under the
current rules. This is because a mass-based GHG PAL cannot assure that
there is no increase in CO2e tpy GHG. Since the Tailoring
Rule requires a source to determine whether a specific action would
increase the GHG emissions by a certain amount that would make them
subject to regulation for PSD permitting purposes, setting a
CO2e-based GHG PAL based on the increase identified in the
Tailoring Rule thresholds will require that the source does not exceed
that amount and thus will insure that changes at the source would not
cause an increase in GHGs emissions in an amount that would be subject
to regulation and thus insures that they are not subject to PSD
permitting. In addition, since the Tailoring Rule and the existing PSD
regulations require similar calculation of a source's emissions to
determine whether a major modification triggers PSD permitting
requirements for GHGs, compliance with a mass-based PAL, which as
explained earlier will not allow any increase above baseline and thus
does not result in a significant emissions increase, will also insure
that a source with a mass-based GHG PAL does not trigger those
requirements. Expanding the GHG PAL program to allow GHG PALs to be
used as an alternative method of assuring that any changes at the
source are neither ``subject to regulation'' nor major modifications
resolves this issue, making GHG PALs function more like PALs for non-
GHG pollutants.

E. Can a GHG source that already has a mass-based GHG PAL obtain a
CO2e-based PAL?

    In the Step 3 proposal, we proposed to add transition provisions to
the PAL regulations that would allow a GHG source that has a mass-based
GHG PAL to convert to a CO2e-based GHG PAL once, at the
source's option, and if agreed to by the permitting authority. However,
public comments indicate that there is no pressing need for such a
transition provision at this time. As a result, we are not finalizing
that segment of the proposal at this time. We are also not aware of any
mass-based PALs that have been issued or are being reviewed by any
permitting authorities that may need such transition provisions. If the
need for such a transition provision arises in the future; we can
address it as part of our future streamlining actions. Streamlining
continues to be a key element to our phased-in approach to GHG
permitting and we fully intend to move forward expeditiously with
developing additional streamlining approaches.

VII. Comment and Response

    In this section, we briefly summarize and respond to some key
comments we received during the comment period. We describe in detail
these and other comments as well as our responses in the Response to
Comments document to this rule, which can be found in the docket for
this rulemaking under Docket No. EPA-HQ-OAR-2009-0517.

A. Thresholds for GHGs

    We received dozens of comments, including 90 from individual
citizens, on the proposed Step 3 rulemaking. The majority of the
commenters other than individual citizens were from industry, and most
of these comments supported the proposal not to lower the GHG
thresholds. Some of these commenters made clear that they supported
maintaining these applicability thresholds only if the DC Circuit
upholds the Tailoring Rule against the current legal challenges and
only as long as the EPA requires GHG permitting under PSD. Reasons
supporting not lowering the Step 1 and 2 thresholds included the lack
of permitting authorities' ability to fully implement the program at
(or closer to)

statutory applicability thresholds, the lack of implementation of
effective permit streamlining measures at this time and the inability
of sources to cope with regulatory burdens. In addition, several state
and local agency commenters supported the current thresholds, citing
the need for increased resources, a large learning curve and little
incremental air quality benefit in the control of GHGs. We appreciate
these comments, and in some cases they provided additional information
concerning state permitting administration and possible reasons for the
less-than-expected numbers of permit applications that we have
incorporated into our rationale. Two environmental advocacy
organization commenters, one of which consisted of a group of national
organizations, opposed the proposal, and we discuss their comments in
detail immediately below.
    Environmental advocacy organization commenters stated that for the
EPA to justify not lowering the current Tailoring Rule thresholds,
``the doctrine of administrative necessity requires that EPA provide
evidence of continuing administrative impossibility,'' and therefore
the EPA must provide data demonstrating that lowering thresholds would
create administrative impossibilities. In addition, these commenters
raised concerns about some of the specific aspects of the three
criteria. For example, with respect to the criterion of whether states
have had the time to increase their permitting resources, the
commenters cautioned that the EPA should not ``attempt to rely on a
decision by one or more state legislatures to underfund CAA programs as
evidence of `administrative necessity.' ''
    In addition, the environmental advocacy organization commenters
stressed that the actual permitting activity has been much less than
the EPA's methodology estimated, and stated, ``[w]here estimates of
permitting burdens conflict with actual experience, the agency must
update its methods for assessing administrative loads based on the
actual experience of permitting agencies to date.'' The commenters
stated that the EPA's claims that macro-economic fluctuations were the
cause of the unexpectedly low level of permitting could not be
supported. One of the commenters further stated that the EPA could not
rely on the three criteria it identified to justify maintaining the
thresholds because ``[t]hese criteria are pertinent only in the face of
evidence that the permitting demand continues to exceed capacity by a
significant amount * * * EPA's current record does not so
demonstrate.'' This commenter asserted that in the Step 3 proposal, the
``EPA has not provided sufficient justification for its conclusion that
the permitting load faced by permitting agencies warrants maintenance
of the current thresholds for the period covered by Step 3. While
maintenance of the current applicability thresholds for GHG emissions
may be justified by a record demonstrating continued administrative
necessity, the EPA has not yet provided sufficient evidence in its
proposed action.'' This commenter concluded that the EPA ``may wish to
consider a supplementary proposal or notice of data availability that
ensures adequate and transparent notice to stakeholders with adequate
opportunity to comment.'' The other commenter asserted that the limited
amount of actual permitting means that the three criteria either are
not required to have been met or in fact have been met. This other
commenter concluded that the EPA was required to lower the thresholds.
1. Narrow Scope of Step 3
a. Summary
    The EPA disagrees with the environmental advocacy organization
commenters' views that in Step 3, the EPA must justify maintaining the
current thresholds on grounds of administrative necessity. In brief,
the structure of the Tailoring Rule's multi-step phase-in process makes
clear that Step 3 is a narrow action designed to afford the EPA the
opportunity to lower the Tailoring Rule thresholds shortly after
promulgating the Tailoring Rule if certain specific events were to
happen. Those events, which are reflected in the three criteria the EPA
articulated as the basis for Step 3, concern improvement in state
resources and expertise as well as the development of streamlining
methods. Under these circumstances, it would not have been appropriate
to wait several years, until the EPA completed the 5-year study and
then promulgated Step 4, before lowering the thresholds. Importantly,
Step 3 occurs too soon after the Tailoring Rule to permit a more
fundamental review of the data and methodology underlying the EPA's
estimates of permitting burdens. That more fundamental review, to the
extent needed, could occur during the 5-year study and Step 4 that are
required several years later, in 2015 and 2016, respectively. The terms
of the Tailoring Rule regulatory provisions and the discussion in the
rule's preamble concerning this phase-in approach--Step 3, the 5-year
study and Step 4--as interpreted by the EPA, confirm the narrowness of
Step 3. As a result, the EPA is authorized to proceed with Step 3 as we
do in this rulemaking, which is by applying the three criteria to
determine whether to lower the thresholds.
b. Discussion
    Step 3 can be best understood when viewed in the overall context of
the phase-in process. The following is the schedule that the EPA
established in the Tailoring Rule for the phase-in process, including
Step 3 and subsequent action:

June 3, 2010: Tailoring Rule is published in the Federal Register.
January 2, 2011: Step 1 takes effect.
July 1, 2011: Step 2 takes effect.
July 1, 2012: Title V permit applications are due for sources that
become subject to Step 2.
July 1, 2012: The EPA completes Step 3.
July 1, 2013: Step 3 takes effect.
April 30, 2015: The EPA completes 5-year study.
April 30, 2016: The EPA completes Step 4.

40 CFR 52.22(b).

    In the first instance, Step 3's narrowness is clear from its
timing, so soon after Steps 1 and 2. In promulgating the Tailoring
Rule, which included Steps 1 and 2, the EPA undertook a robust analysis
of administrative necessity. This analysis included compiling several
sets of data and developing a complex, multi-component methodology, all
of which were fully vetted through the Tailoring Rule process.
    The EPA scheduled Step 3 shortly after the promulgation of Steps 1
and 2. Under this schedule, the EPA would promulgate Step 3 on the same
day as the close of the first full year that Step 2 would have been in
effect. As noted, Step 3's purpose was to provide a vehicle for the
prompt lowering of the thresholds if certain events occurred by that
time--state resources or expertise increased significantly, or the EPA
was able to streamline permitting--so as to avoid a delay of some 4
years until the promulgation of Step 4 before lowering the thresholds.
The EPA never intended that Step 3 entail a broad review of the
underlying data sets and methodology for assessing permitting burden.
Step 3 is simply too soon after the promulgation of the Tailoring Rule,
and too soon after Step 2, for the EPA to have acquired and evaluated
sufficient information to be able to review and revise the data and
methodology.
    The narrowness of Step 3 is also clear from the EPA's description
of it in the Tailoring Rule regulations and preamble. The regulations
establish Step 3 in a paragraph entitled, ``Near-term

Action on GHGs,'' and describe it as follows: ``The Administrator shall
solicit comment, under section 307(b) of the Act, on promulgating lower
GHGs thresholds for PSD applicability.'' 40 CFR 52.22(b)(1). The
Tailoring Rule preamble elaborated as follows:

[The] EPA includes an enforceable commitment to undertake a notice-
and-comment rulemaking that would begin with [a supplemental notice
of proposed rulemaking] that we expect to be issued in 2011 and that
we commit will be finalized in 2012. The notice will propose or
solicit comment on further reductions in the applicability levels.
This rulemaking will take effect by July 1, 2013 and therefore, in
effect, constitute [sic: constitutes] Step 3. In this [Tailoring
Rule] action, we are committing to a rulemaking for Step 3, but are
not promulgating Step 3, because it is important to allow EPA and
the permitting authorities to gain experience permitting sources
under Steps 1 and 2, and to allow time to develop streamlining
methods, before attempting to determine what would be the next
phase-in levels for PSD and title V applicability.

75 FR 31572 June 3, 2010. As noted above, the preamble went on to
explicitly identify three criteria for the EPA to evaluate in Step 3 to
determine whether to lower the thresholds, which concerned progress in
permitting authorities' acquiring resources and developing expertise,
as well as the EPA's and the permitting authorities' progress in
developing streamlining measures. 75 FR 31559 June 3, 2010. The EPA
interprets these regulations and preamble discussion to make clear that
the EPA designed Step 3 narrowly as an opportunity to lower the
thresholds very soon after finalizing the Tailoring Rule, if PSD and
title V implementation for GHGs was on track and if certain events were
unfolding in a way that allowed permitting at a lower threshold. We
note that courts grant an administrative agency the highest level of
deference in interpreting the agency's own regulations. Auer v.
Robbins, 519 U.S. 452, 461 (1997).
    Our interpretation of the Step 3 provisions finds support by
contrasting them with the provisions for Step 4. The regulations
establish Step 4 in a paragraph titled, ``Further Study and Action on
GHGs.'' 40 CFR 51.22(b)(2), 40 CFR 70.12(b)(2). Importantly, the
regulations make clear that Step 4 is to be preceded by, and must be
based on, an assessment--which we call the 5-year study--that must be
completed by April 30, 2015. That study is to be wide-ranging: The
regulations describe it as ``a study projecting the administrative
burdens'' of regulating sources below the then-existing thresholds. 40
CFR 52.22(b)(2)(i), 40 CFR 70.12(b)(2)(i). The regulations go on to
describe Step 4 as a rule that is ``[b]ased on the results of the
study'' and ``address[es] the permitting obligations of such sources,''
and that must be finalized by April 30, 2016. 40 CFR 52.22(b)(2)(ii),
40 CFR 70.12(b)(2)(ii).
    Step 4's provisions, along with its timing, make clear that it has
a broader scope than Step 3. By the time of the 5-year study, several
years of implementation of GHG permitting will have occurred, and as a
result, the EPA will have a more robust set of data concerning various
aspects of implementation and the EPA's methodology. As noted, in the
study, the EPA must evaluate that data as appropriate and ``project[] *
* * administrative burdens.'' The EPA must then conduct the Step 4
rulemaking based on the study. All this makes clear that Step 4
provides a greater opportunity for evaluating administrative necessity,
as appropriate, but Step 3, in contrast, is designed more narrowly.
    That Step 3 has a narrow scope is further made clear by reference
to the separate provision in the Tailoring Rule regulations that under
no circumstances will the EPA lower the thresholds below the 50,000/
50,000 tpy CO2e level before April 30, 2016. 40 CFR
52.22(b)(2)(iii), 40 CFR 70.12(b)(2)(iii). This provision means that
the EPA would not lower the thresholds below those levels during Step
3. The environmental advocacy organization commenters did not comment
that the EPA was free to disregard this limit in Step 3, and as a
result, those commenters appeared at least implicitly to accept that
this limit does constrain whatever action the EPA may take in Step 3.
It is the EPA's interpretation that just as the EPA narrowed Step 3 by
establishing the 50,000/50,000 tpy CO2e floor, the EPA also
narrowed the scope of Step 3 to be limited to the three criteria,
described above. In addition, the presence of this 50,000/50,000 tpy
CO2e limit contradicts commenters' argument that the EPA
should be required to make a new showing of administrative
impossibility in Step 3. It would be illogical for the EPA to be
required to conduct a new evaluation of administrative burdens and a
new showing of administrative impossibility in Step 3 if the EPA had
already decided that no matter what the evaluation of administrative
burdens revealed, Step 3 could not result in thresholds below the
50,000/50,000 tpy CO2e level.
    The environmental advocacy organization commenters emphasize the
imperatives of the administrative necessity doctrine, and we fully
recognize those imperatives. We discussed the administrative necessity
doctrine at length in the proposed and final Tailoring Rule preambles,
and we concluded that the doctrine authorized us to promulgate the
Tailoring Rule only on the basis that we would phase in the PSD and
title V applicability thresholds as quickly as possible and as closely
as possible to the statutory 100/250 tpy levels. But we are authorized
to create a structure for this phase-in process to achieve the overall
goal, and in doing so, we may design a particular step to achieve a
particular effect. We designed Step 3 narrowly to provide an
opportunity to adjust the thresholds soon after promulgating them if
certain events transpired. This is consistent with, and could help
assure the success of, the overall phase-in process. Contrary to the
environmental advocacy organization commenters' comments, Step 3 does
not necessarily entail a re-analysis of administrative burdens or a new
showing of administrative impossibility simply because Step 3 is an
action that the EPA is taking within an overall context that involves
the administrative necessity doctrine.
2. The Three Criteria
    The EPA disagrees with various comments by the environmental
advocacy organization commenters concerning the specifics of the three
criteria for lowering the Tailoring Rule thresholds. With respect to
their comment on the criterion of state resources, we acknowledge their
concern as to whether a state could in effect manipulate the first
criterion in the manner they suggest by underfunding the state
environmental agency. However, we apply this criterion on a nationwide
basis, so that we examine whether the states taken as a whole have
increased their resources. At proposal, we noted evidence that because
of the recent economic downturn and slow recovery, state environmental
agencies across the country have generally seen budget reductions. This
includes agencies in states that have moved forward to regulate GHGs in
other ways. Applying this criterion on a nationwide basis minimizes
concerns about a particular state seeking to underfund its
environmental agency.\21\
---------------------------------------------------------------------------

    \21\ We recognize that on a nationwide basis, state budget
pressures have resulted from recent macroeconomic conditions, and
that with ongoing economic growth, state budgets may be expected to
increase. But at present, we remain concerned that on a nationwide
basis, the capacity of state and local permitting authorities for
GHG permitting may be less than what we expected at the time of the
Tailoring Rule, and that possible diminution of capacity at least
partly offsets the less-than-expected number of permitting actions.

---------------------------------------------------------------------------

3. Disparity Between Estimated and Actual Numbers of Permits
    We recognize the disparity that the environmental advocacy
organization commenters stress between the estimated and actual
permitting. However, we disagree that this disparity obliges us to
reconsider the Tailoring Rule data and methodology during Step 3. For
the reasons described above, Step 3 has a narrow scope: it is limited
to the three criteria and as a result, it does not entail a review of
the underlying data and methodology.
a. No Re-Opening of Methodology
    In addition, we made clear in the Step 3 proposal that we would not
re-open the methodology in this rulemaking:

[I]n this rulemaking, we are relying on the same methodology used in
the Tailoring Rule to calculate administrative burdens, and we are
not re-opening that methodology or soliciting comment on it. We are
simply proposing action and soliciting comment on Step 3 of the
phase-in approach.

77 FR 14255 March 8, 2012. We affirm here that we are not re-opening
the data and methodology.
b. Reasons for Not Reconsidering Data Sets and Methodology
    Although we are not re-opening the data and methodology, for the
sake of completeness, we will respond directly to concerns expressed by
the commenters. Even if we were prepared to re-open the data and
methodology, we would conclude that notwithstanding the disparity
commenters emphasize, they have not provided, and we do not have,
sufficient information to be able to conduct a review and revision of
the data and methodology at this time.
(1) Summary
    In the Tailoring Rule, our analysis of administrative burden was
rendered complex by the need to account for many different types of
permitting activity. We had to rely on several different sources of
data and we had to develop a complex and multi-component methodology,
with numerous assumptions and estimates. The sources of data were the
best available, the assumptions in the methodology were reasonable and,
importantly, all were fully vetted through the Tailoring Rule process.
No one commented that the data and methodology over-estimated the
amount of permitting burden, and no one brought such a challenge after
promulgation.
    In this Step 3 rulemaking, environmental advocacy organization
commenters pointed out the disparity between the expected and actual
number of GHG permit actions, but they did not challenge any specific
aspects of this data and methodology. Thus, it remains possible that at
least part of the disparity is temporary, due to macro-economic
conditions and other factors. Even if the disparity has occurred
because the data and methodology do contain inaccuracies that yield an
over-estimate of the number of GHG permits, such inaccuracies must be
considered in the context of the overall administrative burden due to
GHG permitting. This burden also entails the amount of per-permit
processing costs and other components of permitting administration,
such as minor source permitting. Therefore, even if we were to conclude
that actual data show an overestimate in the number of GHG permits, we
are not in a position at present to attempt to lower the applicability
thresholds.
    We have little information as to the amount of any overestimate in
actual permits. Other information may suggest that we have not
accounted for certain other components of permitting administration--
such as additional synthetic minor source permitting--which points
towards an under-estimate of GHG-related permitting burden. And most
broadly, we may well receive new information over time concerning other
aspects of our data sets and methodology that may point towards
adjustments in overall permitting burden and, ultimately, in the
applicable thresholds, even though at present, we cannot predict the
direction and extent of those adjustments. As a result, attempting to
make an adjustment at this time to permitting thresholds based on the
current information concerning numbers of GHG permits would amount to a
piecemeal approach that would create significant uncertainty for the
permitting authorities and regulated community, and we decline to adopt
it. For all these reasons, it would be premature to attempt to lower
the permitting thresholds based on the partial information we have
concerning numbers of GHG permits.
(2) Discussion
    At the outset, it must be emphasized that in the Tailoring Rule,
our analysis of administrative burden was rendered complex by the fact
that there are many different types of sources (that is, many different
types of industrial sources as well as commercial and residential
sources), many different sizes of sources (that is, minor and major
sources, and many sizes of major sources), two types of activity that
trigger PSD (that is, new construction and modifications), two types of
sources based on their association with the PSD and title V programs
(that is, ``anyway'' sources that are subject to PSD and title V anyway
due to their non-GHG emissions, and GHG-only sources for whom the PSD
or title V requirements are triggered solely because of their GHG
emissions) and two permitting programs (that is, PSD and title V). To
estimate the administrative burdens associated with the full range of
GHG permitting activity, we had to rely on several different sources of
data concerning the amounts of PSD and title V permitting activity and
a complex and multi-component methodology, which in turn included many
assumptions and estimates. The data sets and methodology were fully
vetted through the Tailoring Rule process. At proposal, no one
commented that the data and methodology overestimated the amount of GHG
permitting burden. On the contrary, stakeholders commented that the EPA
had significantly underestimated the numbers of permits and per-permit
costs. Based on those comments and the EPA's further analysis, the EPA
revised its methodology to substantially increase the expected number
of GHG permitting actions and the amount of time the permitting
authorities would need to process some of them. Following promulgation
of the Tailoring Rule, no one sought administrative reconsideration or
a court challenge of the data and methodology.
    Although environmental advocacy organization commenters have
pointed out the disparity between the total number of expected annual
permits, based on the EPA's methodology, and the total actual number,
these commenters did not provide any specific information that casts
doubt on any particular aspect of the data and methodology.
    In the absence of such information, there are several possible
explanations for the disparity. It is possible that the unexpectedly
small amount of permit activity is at least in part a temporary
phenomenon due, as discussed in the proposal, to prospective permittees
having accelerated their applications to 2010 to avoid GHG PSD
requirements, or, as noted above, to recent macro-economic conditions.
In addition, industry commenters have stated because GHG permitting is
still in its initial stage, some sources have taken a

wait-and-see approach before undertaking new construction or
modifications, and that has resulted in fewer permit applications.
Another factor is the possibility that some of the smaller sources that
have never before been subject to the PSD program, but that are now
subject to GHG PSD permitting requirements, are unaware of their
permitting obligations. Most generally, as we noted in the Step 3
proposal, some officials in several states have stated that they
thought the pace of GHG permitting would increase above the pace
observed in 2011. Even so, we recognize that it is also possible that
some aspects of the data sets and methodology do contain inaccuracies
that may point towards overestimation of the number of GHG permits.
During the Tailoring Rule, we did acknowledge uncertainties in many
aspects of the methodology, which were discussed in the primary
technical support document that described the methodology.\22\
---------------------------------------------------------------------------

    \22\ ``Summary of Methodology and Data Used to Estimate Burden
Relief and Evaluate Resource Requirements at Alternative Greenhouse
Gas (GHG) Permitting Thresholds'' (March 2010), included as
Attachment C to the ``Regulatory Impact Analysis for the Final
Prevention of Significant Deterioration and Title V Greenhouse Gas
Tailoring Rule: Final Report'' (May 2010), Docket No. EPA-HQ-OAR-
2009-0517-19161.
---------------------------------------------------------------------------

    However, the possibility that we over-estimated numbers of GHG
permits due to inaccuracies in the data or methodology must be
considered in the context of the overall administrative burden due to
GHG permitting. This burden entails not only (1) the number of GHG
permits; but also (2) the amount of per-permit processing costs; and
(3) other components of GHG permitting administration, which include
minor source permitting, hiring and training, outreach and education as
well as enforcement actions. Viewed in this context, it is clear that
even if we were to conclude that actual data shows an overestimate in
the number of GHG permits, we are not in a position at present to
attempt to lower the applicability thresholds, as an environmental
advocacy organization commenter urged.
    There are several reasons: First, we do not know the amount of any
overestimate, in light of the fact that at least some of it may be due
to macro-economic conditions and other factors; and in addition, the
information that we have concerning the number of GHG permits actually
issued provides little insight into which of the many data points or
assumptions and estimates in the methodology may have led to the
overestimate. This means we do not have enough information to adjust
the estimates of overall permitting burden or the applicable
thresholds.
    Second, the information concerning numbers of permits tells only
part of the overall administrative-burden story. Over time, we may well
receive other information that may suggest that our data sets and
methodology do not account for certain components of permitting
administration, which point towards an under-estimate of permitting
burden. For example, our methodology does not account for the
permitting burdens resulting from permitting synthetic minor sources
that seek to avoid GHG requirements, staff hiring and training, public
education and outreach to sources and enforcement. 75 FR 31571 June 3,
2010.
    Third and most broadly, we must recognize that we may receive more
information over time that may shed light on the accuracy of various
aspects of our methodology. This is true not only for the numbers of
permits that we estimate and other components of the GHG permitting
program, but also for the estimates of the per-permit costs to the
permitting authorities. For example, GHG-only sources have not been
required to submit their Step 2 title V permit applications until July
1, 2012, and as a result, we have little actual information concerning
numbers of title V permits or other aspects of title V permitting. As
noted, to this point, little information has been provided to the EPA
to specifically verify or call into question the many data sets or
estimates and assumptions in the methodology. As a result, even if the
EPA had sufficient information to conclude that specific aspects of its
methodology contained inaccuracies that pointed in the direction of
over-estimating administrative permit burden, that information would
affect only part of overall administrative burden, and it would be
premature to attempt to adjust the permitting thresholds based solely
on that partial information. Soon thereafter, the EPA could acquire
additional information indicating that other aspects of its methodology
were also inaccurate, and that information would lead to calls for the
EPA to continue to revise the data sets and methodology whenever
additional information became available that pointed towards a
different burden estimate and therefore a different threshold. Such a
piecemeal approach would create significant uncertainty for the
permitting authorities and regulated community, and we decline to adopt
it.
    We also disagree with another environmental advocacy organization's
comment that the EPA should consider issuing ``a supplemental notice of
proposed rulemaking or notice of data availability that ensures
adequate and transparent notice to stakeholders with adequate
opportunity to comment,'' in lieu of finalizing Step 3 at this time.
Even if there is a basis to believe that the methodology for estimating
PSD GHG permitting burden may be inaccurate, it is reasonable for the
EPA to finalize at this time the Step 3 rulemaking as proposed, thereby
determining not to lower the thresholds. This will maintain the
schedule for action already established in the regulations promulgated
during the Tailoring Rule. In particular, the EPA is already obligated
to undertake the 5-year study, to be followed by Step 4, which will
afford the opportunity to review and revise the data sets and
methodology, as appropriate, on a schedule that can accommodate any
need to gather and analyze data. Importantly, this schedule will also
accommodate the development of GHG permitting under title V, including
the collection and analysis of information concerning progress. This
approach of conducting any necessary review during the 5-year study and
Step 4 will avoid uncertainty concerning the timing of when the EPA may
lower the thresholds.
    The key to our decision to proceed at this juncture is the fact
that under the regulations we promulgated during the Tailoring Rule, we
are already obligated to undertake the 5-year study by April 30, 2015
and to finalize Step 4 by April 30, 2016. In the Tailoring Rule
regulations, we described the study as ``a study projecting the
administrative burdens'' of regulating sources below the then-existing
thresholds, 40 CFR 52.22(b)(2)(i), and in the Tailoring Rule preamble
we added to that description the following:

    In this action, EPA is also finalizing its proposal to commit to
conduct an assessment of the threshold levels--to be completed in
2015, 5 years after this action--that will examine the permitting