[Federal Register Volume 75, Number 250 (Thursday, December 30, 2010)]
[Rules and Regulations]
[Pages 82430-82461]
[FR Doc No: 2010-32786]

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Part II

Environmental Protection Agency

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40 CFR Part 52

Determinations Concerning Need for Error Correction, Partial Approval
and Partial Disapproval, and Federal Implementation Plan Regarding
Texas Prevention of Significant Deterioration Program; Final Rule

Federal Register / Vol. 75 , No. 250 / Thursday, December 30, 2010 /
Rules and Regulations

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-HQ-OAR-2010-1033; FRL-9245-2]
RIN 2060-AQ67

Determinations Concerning Need for Error Correction, Partial
Approval and Partial Disapproval, and Federal Implementation Plan
Regarding Texas Prevention of Significant Deterioration Program

AGENCY: Environmental Protection Agency (EPA).

ACTION: Interim Final rule.

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SUMMARY: EPA is correcting its previous full approval of Texas's Clean
Air Act (CAA) Prevention of Significant Deterioration (PSD) program to
be a partial approval and partial disapproval. The state did not
address, or provide adequate legal authority for, the program's
application to all pollutants that would become newly subject to
regulation in the future, including non-National Ambient Air Quality
Standard (NAAQS) pollutants, among them greenhouse gases (GHGs).
Further, EPA is promulgating a federal implementation plan (FIP), as
required following the partial disapproval, to establish a PSD
permitting program in Texas for GHG-emitting sources. EPA is taking
this action through interim final rulemaking, effective upon
publication, to ensure the availability of a permitting authority--
EPA--in Texas for GHG-emitting sources when they become subject to PSD
on January 2, 2011. This will allow those sources to proceed with plans
to construct or expand. This rule will expire on April 30, 2011. EPA is
also proposing a notice-and-comment rulemaking that mirrors this
rulemaking.

DATES: This action is effective on December 30, 2010.

ADDRESSES: EPA has established a docket for this rulemaking under
Docket ID No. EPA-HQ-OAR-2010-1033. All documents in the docket are
listed in the http://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, will be publicly available only in hard copy. Publicly
available docket materials are available either electronically in
http://www.regulations.gov or in hard copy at the U.S. Environmental
Protection Agency, Air Docket, EPA/DC, EPA West Building, Room 3334,
1301 Constitution Ave., NW., Washington, DC. The Public Reading Room is
open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding
legal holidays. The telephone number for the Public Reading Room is
(202) 566-1744, and the telephone number for the Air Docket is (202)
566-1742.

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

I. General Information

A. Does this action apply to me?

    The only governmental entity potentially affected by this rule is
the State of Texas. Other entities potentially affected by this rule
include sources in all industry groups within the State of Texas, which
have a direct obligation under the CAA to obtain a PSD permit for GHGs
for projects that meet the applicability thresholds set forth in the
Tailoring Rule.\1\ This independent obligation on sources is specific
to PSD and derives from CAA section 165(a). The majority of entities
potentially affected by this action are expected to be in the following
groups:
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    \1\ Prevention of Significant Deterioration and Title V
Greenhouse Gas Tailoring Rule; Final Rule. 75 FR 31514 (June 3,
2010). The Tailoring Rule is described in more detail later in this
preamble.

------------------------------------------------------------------------
             Industry group                         NAICS \a\
------------------------------------------------------------------------
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.
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\a\ North American Industry Classification System.

B. How is the preamble organized?

    The information presented in this preamble is organized as follows:

I. General Information
    A. Does this action apply to me?
    B. How is the preamble organized?
II. Overview of Interim Final Rule
    A. Brief Summary
    B. Detailed Overview
III. Background
    A. Legal Background

    1. Requirements for SIP Submittals and EPA Action
    2. General Requirements for the PSD Program
    3. SIP PSD Requirements
    B. Regulatory Background: Texas SIP and PSD Program
    1. Texas's Initial Attainment SIP Revision
    2. Texas's Initial PSD SIP Revision
    C. Regulatory Background: GHG Rules
    1. GHGs and Their Sources
    2. GHG Regulatory Actions
    3. Implementation of GHG PSD Requirements
    4. Summary of the Effect of EPA's Implementation Actions in
States Other Than Texas
    5. EPA's Implementation Approach for Texas and Texas's Response
IV. Interim Final Action
    A. Determination That EPA's Previous Approval of Texas's PSD
Program Was in Error
    1. Gaps in Texas's PSD Program Concerning Application of PSD to
Pollutants Newly Subject to Regulation and Concerning Assurances of
Legal Adequacy
    2. Flaws in PSD Program
    3. EPA's Error in Approving Texas's PSD Program
    B. Error Correction: Conversion of Previous Approval to Partial
Approval and Partial Disapproval
    C. Reconsideration Under CAA Section 301, Other CAA Provisions,
and Case Law
    D. Relationship of This Action to GHG PSD SIP Call
    E. Relationship of This Rulemaking to Other States
V. Federal Implementation Plan
    A. Authority To Promulgate a FIP
    B. Timing of FIP
    C. Substance of GHG PSD FIP
    1. Components of FIP
    2. Dual Permitting Authorities
    D. Period for GHG PSD FIP To Remain in Place
    E. Primacy of Texas's SIP Process
VI. Interim Final Rule, Good Cause Exception
VII. Statutory and Executive Order Reviews
    A. Executive Order 12866--Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform
    E. Executive Order 13132--Federalism
    F. Executive Order 13175--Consultation and Coordination With
Indian Tribal Governments
    G. Executive Order 13045--Protection of Children From
Environmental Health Risks and Safety Risks
    H. Executive Order 13211--Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898--Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
    K. Congressional Review Act
VIII. Judicial Review
IX. Statutory Authority

II. Overview of Interim Final Rule

A. Brief Summary

    This rulemaking is intended to assure that large GHG-emitting
sources in Texas will be able to obtain preconstruction permits under
the CAA New Source Review (NSR) PSD program, and do so when they become
subject to PSD, which will occur on January 2, 2011. In this manner,
this rulemaking will allow those sources to avoid delays in
construction or modification.
    In this rulemaking, EPA is determining that it erred in fully
approving Texas's PSD program in 1992 because at that time, the program
had a gap, which recent statements by Texas have made particularly
evident. The program did not address its application to, or provide
assurances that it has adequate legal authority to apply to, all
pollutants newly subject to regulation, including non-NAAQS pollutants,
among them GHGs. As a result, EPA is correcting its previous full
approval to be a partial approval and partial disapproval. EPA is
taking this action through the error-correction mechanism provided
under CAA section 110(k)(6). The partial disapproval requires EPA,
under CAA section 110(c)(1)(B), to promulgate a FIP within 2 years,
and, as part of this rulemaking, EPA is exercising its discretion to
promulgate the FIP immediately. Under the FIP, EPA will become the
permitting authority for, and apply federal PSD requirements to, large
GHG-emitting sources in accordance with the thresholds established
under what we call the Tailoring Rule, which EPA recently promulgated.
    By becoming the permitting authority, EPA will be able to process
preconstruction PSD permit applications for GHG-emitting sources and
thereby allow the affected sources to avoid delays in construction and
modification.\2\ According to Texas, 167 GHG-emitting sources will
require PSD permits during 2011. It is likely that some of these
sources will become subject to PSD soon after January 2, 2011, and
therefore will have a pressing need to have a permitting authority in
place by that time. Although the CAA allows states to implement PSD,
and Texas has been implementing an EPA-approved PSD program since 1992,
Texas has recently informed EPA that it does not have the intention or
the authority to apply PSD to GHG-emitting sources, and that it could
very well maintain this position even if the DC Circuit upholds the GHG
rules against legal challenges that Texas and other parties have
recently brought. Texas's unwillingness to implement this aspect of the
federal PSD program leaves EPA no choice but to resume its role as the
permitting authority for this portion, in order to assure that
businesses in Texas are not subject to delays or potential legal
challenges and are able to move forward with planned construction and
expansion projects that will create jobs and otherwise benefit the
state's and the nation's economy. It bears emphasizing that it is
incumbent on EPA to take action now so that there will be no period of
time when sources are unable to obtain necessary PSD permits, beginning
on January 2, 2011.
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    \2\ Texas will continue to be the permitting authority for
sources of other pollutants. This split permitting process will also
take place in the seven other states for which EPA is implementing a
GHG PSD FIP.
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    In order to assure no gap in permitting, EPA is taking this action,
including the FIP, through an interim final rule that is exempt from
notice-and-comment due to the ``good cause'' exception of the
Administrative Procedure Act. This interim final rule will remain in
place until April 30, 2011. On a parallel track, EPA is also initiating
a proposed rulemaking that mirrors this rulemaking, and that EPA
intends to finalize and make effective by May 1, 2011.

B. Detailed Overview

    The CAA requires each state, including Texas, to adopt into its
State Implementation Plan (SIP) a PSD program. CAA sections
110(a)(2)(C), 110(a)(2)(J), 161. One of the PSD requirements is that
PSD applies by operation of law to any pollutant as soon as that
pollutant becomes subject to regulation under the CAA for the first
time, and that includes non-NAAQS pollutants. CAA section 165(a)(1),
169(1). EPA has consistently interpreted these CAA provisions in that
manner. The CAA further requires that EPA-approved PSD programs must
meet all CAA requirements, CAA section 110(k)(3), and this includes
applying PSD to all pollutants newly subject to regulation, including
non-NAAQS pollutants. In addition, the CAA requires each state to
adhere to various requirements related to SIP adoption, including that
the state ``provide * * * necessary assurances that the State * * *
will have adequate * * * authority under State * * * law to carry out
such implementation plan. * * *'' CAA section 110(a)(2)(E)(i). Once a
state has made a SIP submittal, the CAA requires EPA to approve or
disapprove the SIP revision in whole or in part,

depending on the extent to which the CAA requirements are met. CAA
section 110(k)(3),(4). If EPA disapproves, it must promulgate a FIP
that addresses the disapproved SIP or portion of the SIP at any time
within two years of the disapproval. CAA section 110(c)(1)(B). In
addition, the CAA authorizes EPA to ``determine [ ]'' if a previous
action in approving a SIP revision was ``in error,'' and if so, to
``revise such action as appropriate.'' CAA section 110(k)(6).
    In 1972, EPA approved Texas's initial SIP to attain and maintain
the NAAQS. At that time, EPA approved the state's assurances of
adequate legal authority. In the early 1980s, following the 1977 CAA
Amendments that enacted the PSD program, EPA, which at that time
administered PSD, delegated to Texas partial authority to implement the
PSD program. During this time, EPA made clear to Texas that EPA's
regulatory PSD program covers non-NAAQS pollutants.
    In 1985-88, Texas developed a PSD program and in a series of
submittals, submitted it to EPA as a SIP revision. The Texas program
incorporated by reference much of EPA's PSD regulations, 40 CFR part
52, including the PSD applicability provisions in 40 CFR part
52.21(b)(1)(i). Thus, the Texas PSD program by its terms applied to
``any air pollutant regulated under the Clean Air Act.'' However, Texas
state law imposed limits that precluded the Texas PSD program from
applying automatically, as a matter of law, to each newly regulated
pollutant. Rather, Texas's program applied only to pollutants that were
subject to regulation at the time the state adopted the SIP revision
establishing the PSD program, so that the state would need to take
additional action to subject subsequently regulated pollutants to PSD,
for example, an expeditious state law change that would be promptly
submitted to EPA as a SIP revision to update the PSD program. Texas and
EPA were both well aware of this limitation. In fact, while EPA was
reviewing Texas's PSD SIP revision, EPA promulgated a national ambient
air quality standard (NAAQS) for PM10, thereby subjecting
that pollutant to PSD for the first time, and Texas updated its state
PSD rule to apply to PM10 and submitted that as a SIP
revision. Texas did not, however, explicitly recognize that after EPA
approved its PSD program, EPA could well subject to PSD for the first
time additional pollutants, and Texas did not address that situation in
any manner. For example, Texas did not provide assurances that it would
take action to apply its PSD program to all pollutants newly subject to
regulation, including non-NAAQS pollutants; nor did Texas provide
information as to the method or timing of such action.
    During the course of its consideration of Texas's proposed PSD SIP
revision, EPA became concerned that Texas would not implement EPA's
interpretation of the core PSD requirement that sources' implement best
available control technology (BACT). As a result, EPA asked for written
commitments that Texas would implement the PSD program in accordance
with EPA interpretations. In a September 5, 1989, letter, which we call
the Texas PSD Commitments Letter, Texas stated that it was ``committed
to the implementation of EPA decisions regarding PSD program
requirements.'' Separately, as for Texas's legal authority to carry out
the PSD program, the state, in its various SIP submittals, made general
references to its legal authority for adopting and submitting SIP
revisions.
    In 1992, EPA fully approved Texas's PSD rules. In the preamble to
this final approval, EPA did not specifically address the issue of how
the PSD program would apply to pollutants newly subject to regulation,
including non-NAAQS pollutants, or the state's legal authority for
applying PSD to such pollutants. EPA did state that it was basing the
approval on (among other things) the 1989 Texas PSD Commitments Letter.
However, EPA acknowledged questions about the scope of these
commitments and EPA made clear that even with that letter, Texas
retained significant discretion in implementing the PSD program.
    Because the application of PSD to pollutants newly subject to
regulation is a key component of the program, and because Texas's PSD
program, unlike that of most states, did not automatically apply to
such pollutants, it was important that Texas, in its SIP submittals,
address how it would apply its program to such pollutants. This could
include providing, for example, assurances that its program would apply
to such pollutants or information as to the method and timing for
applying its program to such pollutants. In addition, under CAA section
110(a)(2)(E)(i), Texas was required to provide assurances that it had
adequate legal authority to apply its program to such pollutants.
    However, as noted previously, there is no indication in the record
of Texas's SIP submissions or EPA's action on them that Texas
specifically addressed its program's application to pollutants newly
subject to regulation. Texas did provide the 1989 Texas PSD Commitments
Letter, in which it generally committed ``to implement EPA requirements
relative to [PSD].'' But by its terms, this 1989 letter did not commit
to apply PSD to such pollutants and in any event, EPA, in discussing
this letter in the preamble to the final rule, acknowledged that Texas
retained substantial discretion in implementing PSD.
    Thus, at the time that Texas submitted and EPA approved the state's
PSD program, the program had important gaps. It did not address its
application to, or provide the requisite assurance that it had legal
authority to apply to, pollutants newly subject to regulation,
including non-NAAQS pollutants.
    Texas has recently made statements that have made these gaps
particularly evident.\3\ Texas has stated that it is not required to
submit a SIP revision to apply PSD to non-NAAQS pollutants, including
GHGs. Texas has explained that in its view, the CAA is clear, under the
legal doctrine that we call Chevron step 1, described later, that the
PSD program is limited to NAAQS pollutants and does not apply to non-
NAAQS pollutants. In addition, Texas has stated that it does not have
the intention or the authority to apply PSD to GHG-emitting sources,
and that it could very well maintain this position even if the D.C.
Circuit upholds the GHG rules in the current litigation before that
Court.
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    \3\ Texas made these statements in various letters to EPA in
response to rulemakings and in court filings challenging those
rulemakings, as discussed in detail later in this preamble.
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    Texas's recent statements highlight the gaps in its PSD program
concerning the application of PSD, and the legal authority for applying
PSD, to pollutants newly subject to regulation, including non-NAAQS
pollutants, among them GHGs. What's more, Texas's recent statements are
consistent with the view that the state's silence on this subject at
the time it submitted and EPA approved its PSD SIP means that Texas did
not, at that time, view itself as obligated to apply PSD to each
pollutant newly subject to regulation, including non-NAAQS pollutants.
    Specifically, Texas's recent statement that the CAA PSD provisions
are clear by their terms--which is what a Chevron step 1 interpretation
means--that they do not apply to non-NAAQS pollutants, suggests that
Texas would have interpreted the CAA PSD provisions the same way at the
time Texas submitted its PSD program. But at the least, Texas's PSD
program contained a gap because it failed to address this issue; and
that gap is significant because it facilitates Texas, at this time,
taking the position that PSD does not apply to non-NAAQS

pollutants.\4\ Texas's recent statement that it does not have the
authority to apply PSD to GHG-emitting sources highlights that Texas's
PSD program has a gap due to its failure to provide assurances of
adequate legal authority. Specifically, Texas's direct statement that
it does not have authority to apply PSD to GHGs casts doubt on whether
Texas, at the time it submitted the PSD SIP submittals, would have
viewed itself as having such authority. There seems to be a meaningful
possibility that at the time Texas submitted and EPA approved the
state's PSD program, during 1985-1992, Texas considered itself under
some legal limit or constraint in applying PSD to all pollutants newly
subject to regulation. At the least, it is apparent that at the time
that Texas submitted its PSD program, Texas did not provide the
``necessary assurances'' that it ``will have adequate * * * authority
under State * * * law to carry out such implementation plan (and is not
prohibited by any provision of * * * State law from carrying out such
implementation plan or portion thereof),'' as required under CAA
section 110(a)(2)(E)(i).
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    \4\ It should be noted that in the past, Texas has applied its
PSD program to non-NAAQS pollutants. Even so, Texas's recent
statements indicate very clearly that Texas does not consider itself
obligated to update its PSD program to apply to all newly regulated
non-NAAQS pollutants, but instead Texas may choose which non-NAAQS
pollutants to which it will apply PSD.
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    The gaps in Texas's PSD SIP--its failure to address, or provide
assurances of the requisite legal authority concerning, the application
of PSD to all pollutants newly subject to regulation, including non-
NAAQS pollutants--means that the PSD SIP was flawed at the time that
EPA reviewed it for action. EPA did not address those flaws and
instead, issued a full approval of the SIP.
    In this rulemaking, therefore, EPA is ``determin[ing]'' that EPA's
previous action fully approving Texas's PSD program was ``in error,''
under CAA section 110(k)(6). The key terms in this provision, as just
quoted, confer broad discretion upon EPA to make decisions as to when
it erred in approving a SIP revision. Thus, it is clear that under this
provision, EPA erred in approving the Texas PSD program in light of
that program's flaws.
    Once EPA determines that its previous approval of the Texas PSD SIP
was in error, EPA, under CAA section 110(k)(6), ``may * * * revise [its
previous full approval] as appropriate. * * *'' In this rulemaking, EPA
is revising its previous full approval of Texas's PSD SIP to be (i) a
partial approval, so that Texas's SIP remains approved to the extent of
the pollutants that the PSD program already does cover; and (ii) a
partial disapproval. The partial disapproval is based on the Texas PSD
SIP's failure to apply PSD to each pollutant newly subject to
regulation, including each non-NAAQS pollutant, among them GHGs. An
alternative legal basis for this rulemaking is EPA's inherent
administrative authority to reconsider a previous action.
    It should be noted that even if the general assurances that Texas
provided in its 1989 PSD Commitments Letter or may have otherwise
provided in the record of its PSD SIP submittal were read to indicate
that Texas did provide assurances that it would implement, and had
legal authority to implement, EPA's interpretation that PSD applies to
each pollutant newly subject to regulation, including non-NAAQS
pollutants, then Texas's recent statements to the contrary indicate
that Texas now is not complying with those assurances. Under these
circumstances, EPA would still be justified in determining that its
prior approval was in error and should be converted to a partial
approval and partial disapproval. This is because under these
circumstances, EPA's prior approval should be considered to have been
based on those assurances, so that Texas's explicitly stated intent to
not act in accordance with those assurances would eliminate the basis
for that prior approval.
    After promulgating the partial disapproval in this rulemaking, EPA
is required to promulgate a FIP ``at any time within 2 years,'' under
CAA section 110(c)(1). EPA is exercising its discretion to immediately
promulgate the FIP, and is doing so as part of this rulemaking. The FIP
consists of appropriate action to apply the PSD program to pollutants
that are subject to the PSD program under the CAA, but that Texas has
not made subject to Texas's PSD program. At present, Texas has stated
that it has neither the intention nor the authority to apply its PSD
program to GHG-emitting sources. Therefore, the FIP applies the EPA PSD
regulatory program to the GHG portion of the PSD permit for GHG-
emitting sources in Texas, including the thresholds in what we call the
Tailoring Rule that limit PSD to large sources. Further, the FIP
commits EPA to take future action as appropriate with respect to any
additional newly regulated pollutants. The FIP does not apply to any
other currently regulated pollutants because at this point, Texas's PSD
program addresses all other pollutants that are subject to regulation
under the CAA. EPA is promulgating the FIP immediately, as opposed to a
later time within the two-year period, because certain GHG-emitting
sources in Texas will become subject to the PSD program as of January
2, 2011. Immediate promulgation of the FIP will allow EPA to act as the
permitting authority in Texas for these sources as of January 2, 2011,
and thereby avoid delays in these sources' ability to construct or
modify.
    It should be noted that EPA has recently taken another action
concerning Texas's PSD program as that program relates to GHGs. In a
final rule signed on December 1, 2010 and published by notice dated
December 13, 2010, EPA issued what we call a SIP call, under CAA
section 110(k)(5), requiring Texas and 12 other states whose SIP-
approved PSD programs do not apply to GHG-emitting sources to submit a
corrective SIP revision; and EPA established a deadline for that SIP
submittal for each state, which ranged from as early as December 22,
2010 for seven of the states to December 1, 2011 for Texas. In
addition, EPA stated that if Texas or any of the other states failed to
submit its corrective SIP revision by its deadline, EPA intended to
promulgate a FIP immediately thereafter.
    The timing of the SIP call was driven by the fact that the affected
states did not have authority to issue PSD permits to GHG-emitting
sources and, as a result, those sources could face delays in
construction and modification when they become subject to PSD as early
as January 2, 2011. EPA designed the SIP call to maximize the
opportunity of each affected state to assure that its sources would
have a permitting authority available as of that date. EPA did so by
allowing each state flexibility for its SIP submittal deadline, and
therefore for the date that EPA could put a FIP in place. Each of the
affected states except Texas responded with a plan that would assure
that its sources would not confront permitting delays. Texas did not
submit such a plan and as a result, its sources--according to Texas, as
many as 167 during 2011--do confront the possibility of permitting
delays. In addition, it was in responding to the SIP call and related
EPA rulemakings that Texas made the statements noted earlier in this
preamble that made particularly evident the flaws in its PSD program.
    This is an important reason why EPA is proceeding with this error-
correction/partial-disapproval rulemaking at this time. This rulemaking
allows EPA to put a FIP in place immediately, instead of waiting until
December 1, 2011;

thereby act as the permitting authority in Texas beginning January 2,
2011; and in that capacity, allow Texas sources to avoid delays in
construction or modification.
    Although this rulemaking and the SIP call have similarities, EPA is
authorized to proceed with each rulemaking with respect to Texas at
this time, and it is both necessary and appropriate that we do so. EPA
is authorized to proceed with the SIP call for reasons explained in
that rule. Nothing in CAA section 110(k)(5), which authorizes the SIP
call, precludes EPA from proceeding with this rulemaking, which, as
noted earlier, is authorized under CAA section 110(k)(6). As we discuss
below, it was Texas's response to the SIP call proposal, along with
other statements Texas made around the same time, that focused
attention on the underlying flaws in Texas PSD SIP, which led to this
error-correction rulemaking. EPA is not, at this time, undertaking a
similar error-correction rulemaking for any of the other states that
are subject to the SIP call. EPA has discretion as to whether and when
to undertake such a rulemaking, and each of the other states has chosen
a course of action that at present appears to assure that its large
GHG-emitting sources will have a permitting authority available when
the sources need one, and therefore will not face delays in
constructing or modifying. Moreover, none of these other states has
made the type of recent statements that may have exposed flaws in its
SIP, as Texas has done. As a result, EPA sees no need to inquire into
whether any of these other states have flaws in their SIP PSD programs
as Texas does.
    EPA is applying the ``good cause'' exemption from notice-and-
comment rulemaking, authorized under Administrative Procedure Act
section 553(b)(3)(B) to promulgate this action as an interim final
rulemaking that takes effect immediately upon publication in the
Federal Register. As a result, this action, including the FIP, will
take effect by January 2, 2011, when GHG-emitting sources become
subject to the requirement to obtain a PSD preconstruction permit. The
use of the ``good cause'' exemption is justified because the notice-
and-comment process would add delays in issuing the final rule and
therefore is impractical and contrary to public interest. Unless and
until EPA promulgates this rule, Texas sources will not have available
a permitting authority to process their PSD permit applications and as
a result, may face delays in construction and modification.
    Simultaneously with issuing this interim final rulemaking, EPA is
proposing for notice-and-comment an error-correction/partial-
disapproval and FIP rule that mirrors this rule. EPA expects to
complete final action on this notice-and-comment rule so that it takes
effect by May 1, 2011. This interim final rule will stay in place until
April 30, 2011, and then be replaced by the notice-and-comment rule.
    Although we recognize that Texas has indicated that the state does
not intend to submit a SIP revision to apply its PSD program to GHG-
emitting sources, we emphasize that it is our preference that Texas
assume responsibility for permitting GHG-emitting sources as soon as
possible, and we are prepared to work with Texas to bring this about.
Thus, we are prepared to work with the state to help it promptly
develop and submit to us a SIP revision that extends its PSD program to
GHG-emitting sources and if it does so, we intend to act on that SIP
revision promptly. We also encourage Texas to accept a delegation of
authority to implement the FIP, so that it will still be the state that
processes the permit applications, albeit operating under federal law.

III. Background

    EPA described the relevant background information in the preambles
for several proposed and final rulemakings that implement the PSD GHG
permitting program. These include the Tailoring Rule,\5\ 75 FR at
31518-21, and the GHG PSD SIP call,\6\ 75 FR at 53896-98 (September 7,
2010) (proposal), or, simply, the SIP call. Knowledge of this
background information is presumed and will be only briefly summarized
here.
---------------------------------------------------------------------------

    \5\ Prevention of Significant Deterioration and Title V
Greenhouse Gas Tailoring Rule; Proposed Rule.'' 74 FR 55,292 (Oct.
27, 2009) (proposed Tailoring Rule).
    \6\ ``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 (Dec. 13, 2010) (final SIP call);
``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; Proposed
Rule,'' 75 FR 53,892 (proposed SIP call).
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A. Legal Background

1. Requirements for SIP Submittals and EPA Action
    This section reviews background information concerning the CAA
requirements for what SIPs must include, the process for state
submittals of SIPs, requirements for EPA action on SIPs and SIP
revisions, and FIPs.
a. Requirements for What SIPs Must Include
    Congress enacted the NAAQS and SIP requirements in the 1970 CAA
Amendments. CAA section 110(a)(1) requires that states adopt and submit
to EPA for approval SIPs that implement the NAAQS. CAA section
110(a)(2) contains a detailed list of requirements that all SIPs must
include to be approvable by EPA.
    Of particular relevance for this action, subparagraph (E)(i) of CAA
section 110(a)(2) provides that SIPs must ``provide * * * necessary
assurances that the state * * * will have adequate personnel, funding,
and authority under State * * * law to carry out such implementation
plan. * * *'' As applicable to PSD programs, this provision means that
EPA may approve the SIP PSD provisions only if EPA is satisfied that
the state will have adequate legal authority under state law.
b. EPA Action on SIP Submittals
    After a SIP or SIP revision has been submitted, EPA is authorized
to act on it under CAA section 110(k)(3)-(4). Those provisions
authorize a full approval or, if the SIP or SIP revision meets some but
not all of the applicable requirements, a conditional approval, a
partial approval and disapproval, or a full disapproval. If EPA
disapproves a required SIP or SIP revision, then EPA must promulgate a
FIP at any time within two years after the disapproval, unless the
state corrects the deficiency within that period of time by submitting
a SIP revision that EPA approves. CAA Sec.  110(c)(1).\7\
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    \7\ States are subject to sanctions for failure to submit, or
for EPA disapproval of, SIPs for nonattainment areas, under CAA
section 179. These sanctions provisions are not relevant for this
rule because they do not apply to PSD SIPs.
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c. SIP Call
    The CAA provides a mechanism for the correction of SIPs with
certain types of inadequacies, under CAA section 110(k)(5), which
provides:
(5) Calls for Plan Revisions
    Whenever the Administrator finds that the applicable
implementation plan for any area is substantially inadequate to * *
* comply with any requirement of this Act, the Administrator shall
require the State to revise the plan as necessary to correct such
inadequacies. The Administrator shall notify the State of the
inadequacies and may establish reasonable deadlines (not to exceed
18 months after the date of such notice) for the submission of such
plan revisions.

This provision by its terms authorizes the Administrator to ``find[]
that [a SIP] * * * is substantially inadequate to

* * * comply with any requirement of this Act,'' and, based on that
finding, to ``require the State to revise the [SIP] * * * to correct
such inadequacies.'' This latter action is commonly referred to as a
``SIP call.'' In addition, this provision authorizes EPA to establish a
``reasonable deadline (not to exceed 18 months after the date of such
notice)'' for the submission of the corrective SIP revision.
    If EPA does not receive the corrective SIP revision by the
deadline, CAA section 110(c) authorizes EPA to ``find[ ] that [the]
State has failed to make a required submission.'' CAA section
110(c)(1)(A). Once EPA makes that finding, CAA section 110(c)(1)
requires EPA to ``promulgate a Federal implementation plan at any time
within 2 years after the [finding] * * * unless the State corrects the
deficiency, and [EPA] approves the plan or plan revision, before [EPA]
promulgates such [FIP].''
    CAA section 110(k)(5), by its terms--specifically, the use of the
term ``[w]henever''--authorizes, but does not require, EPA to make the
specified finding and does not impose any time constraints for EPA to
do so. As a result, EPA has discretion in determining whether and when
to make the specified finding. See New York Public Interest Research
Group v. Whitman, 321 F.3d 316, 330-31 (2d Cir. 2003) (opening phrase
``Whenever the Administrator makes a determination'' in CAA section
502(i)(1) grants EPA ``discretion whether to make a determination'');
Her Majesty the Queen in Right of Ontario v. EPA, 912 F.2d 1525, 1533
(DC Cir. 1990) (``whenever'' in CAA section 115(a) ``impl[ied] a degree
of discretion'' in whether EPA had to make a finding).
d. Authority for EPA To Revise Previous Action on SIPs
    EPA has authority to revise its previous action concerning SIP
submittals. Two mechanisms are available to EPA: The error correction
mechanism provided under CAA section 110(k)(6), and EPA's general
administrative authority to reconsider its own actions under CAA
sections 110 and 301(a), in light of case law.
(i). Error Correction Under CAA Section 110(k)(6)
    CAA section 110(k)(6) provides as follows:

    Whenever the Administrator determines that the Administrator's
action approving, disapproving, or promulgating any plan or plan
revision (or part thereof), area designation, redesignation,
classification, or reclassification was in error, the Administrator
may in the same manner as the approval, disapproval, or promulgation
revise such action as appropriate without requiring any further
submission from the State. Such determination and the basis thereof
shall be provided to the State and public.

The key provisions for present purposes are that the Administrator has
the authority to ``determine ;'' when a SIP approval was ``in error,''
and when she does so, she may then revise the SIP approval ``as
appropriate,'' in the same manner as the approval, and without
requiring any further submission from the state.

    As quoted previously, CAA section 110(k)(6) provides EPA with the
authority to correct its own ``error,'' but nowhere does this provision
or any other provision in the CAA define what qualifies as ``error.''
Thus, the term should be given its plain language, everyday meaning,
which includes all unintentional, incorrect or wrong actions or
mistakes.
    The legislative history of CAA section 110(k)(6) is silent
regarding the definition of error, but the timing of the enactment of
the provision suggests a broad interpretation. The provision was
enacted shortly after the Third Circuit decision in Concerned Citizens
of Bridesburg v. U.S. EPA, 836 F.2d 777 (1987). In Bridesburg, the
court adopted a narrow interpretation of EPA's authority to
unilaterally correct errors. The court stated that such authority was
limited to typographical and other similar errors, and stated that any
other change to a SIP must be accomplished through a SIP revision. Id.
at 786. In Bridesburg, EPA determined that it lacked authority to
include odor regulations as part of a SIP unless the odor regulations
had a significant relationship to achieving a NAAQS, and so directly
acted to remove 13-year-old odor provisions from the Pennsylvania SIP.
Id. at 779-80. EPA found the previous approval of the provisions to
have been an inadvertent error, and so used its ``inherent authority to
correct an inadvertent mistake'' to withdraw its prior approval of the
odor regulations without seeking approval of the change from
Pennsylvania. Id. at 779-80, 785. After noting that Congress had not
contemplated the need for revision on the grounds cited by EPA, Id. at
780, the court found that EPA's ``inherent authority to correct an
inadvertent mistake'' was limited to corrections such as
``typographical errors,'' and that instead EPA was required to use the
SIP revision process to remove the odor provision from the SIP. Id. at
785-86.
    When the court made its determination in Bridesburg in 1987, there
was no provision explicitly addressing EPA's error correction authority
under the CAA. In 1990, Congress passed CAA section 110(k)(6),
apparently for the purpose of overturning the Bridesburg opinion. This
is apparent because CAA section 110(k)(6) both (i) authorizes EPA to
correct SIP approvals and other actions that were ``in error,'' which,
as noted previously, broadly covers any mistake, and thereby contrasts
with the holding in Bridesburg that EPA's pre-section 110(k)(6)
authority was limited to correction of typographical or similar
mistakes; and (ii) provides that the error correction need not be
accomplished via the SIP revision or SIP call process, which contrasts
with the holding of Bridesburg requiring a SIP revision. Because
Congress apparently intended CAA section 110(k)(6) to overturn
Bridesburg, the definition of ``error'' in that provision should be
sufficiently broad to encompass the error that EPA asserted it made in
its approval action at issue in Bridesburg, which goes well beyond
typographical or other similar mistakes.
    EPA has used CAA section 110(k)(6) in the past to correct errors of
a non-technical nature. For example, EPA has used CAA section 110(k)(6)
as authority to make substantive corrections to remove a variety of
provisions from federally approved SIPs that are not related to the
attainment or maintenance of NAAQS or any other CAA requirement. See,
e.g., ``Approval and Promulgation of Implementation Plans; Kentucky:
Approval of Revisions to the State Implementation Plan,'' 75 FR 2440
(Jan. 15, 2010) (correcting the SIP by removing a provision, approved
in 1982, used to address hazardous or toxic air pollutants); ``Approval
and Promulgation of Implementation Plans; New York,'' 73 FR 21,546
(April 22, 2008) (issuing a direct final rule to correct a prior SIP
correction from 1998 that removed general duties from the SIP but
neglected to remove a reference to ``odor'' in the definition of ``air
contaminant or air pollutant''); ``Approval and Promulgation of
Implementation Plans; New York,'' 63 FR 65557 (Nov. 27, 1998) (issuing
direct final rule to correct SIP by removing a general duty ``nuisance
provision'' that had been approved in 1984); ``Correction of
Implementation Plans; American Samoa, Arizona, California, Hawaii, and
Nevada State Implementation Plans,'' 63 FR 34,641 (June 27, 1997)
(correcting five SIPs by deleting a variety of administrative
provisions concerning variances, hearing board procedures, and fees
that had been approved during the 1970s).

    CAA section 110(k)(6), by its terms--specifically, the use of the
terms ``[w]henever'' and ``may'' and the lack of any time constraints--
authorizes, but does not require, EPA to make the specified finding. As
a result, EPA has discretion in determining whether and when to make
the specified finding. See New York Public Interest Research Group v.
Whitman, 321 F.3d 316, 330-31 (2d Cir. 2003) (opening phrase ``Whenever
the Administrator makes a determination'' in CAA section 502(i)(1)
grants EPA ``discretion whether to make a determination''); Her Majesty
the Queen in Right of Ontario v. EPA, 912 F.2d 1525, 1533 (D.C. Cir.
1990) (``whenever'' in CAA section 115(a) ``impl[ied] a degree of
discretion'' in whether EPA had to make a finding).

(ii) Inherent Authority To Reconsider

    The provisions in CAA section 110 that authorize EPA to take action
on a SIP revision inherently authorize EPA to, on its own initiative,
reconsider and revise that action as appropriate. The courts have found
that an administrative agency has the inherent authority to reconsider
its decisions, unless Congress specifically proscribes the agency's
discretion to do so. See, e.g., Gun South, Inc. v. Brady, 877 F.2d 858,
862 (11th Cir. 1989) (holding that agencies have implied authority to
reconsider and rectify errors even though the applicable statute and
regulations do not provide expressly for such reconsideration);
Trujillo v. General Electric Co., 621 F.2d 1084, 1086 (10th Cir. 1980)
(``Administrative agencies have an inherent authority to reconsider
their own decisions, since the power to decide in the first instance
carries with it the power to reconsider''); see also New Jersey v. EPA,
517 F.3d 574 (DC Cir. 2008) (holding that an agency normally can change
its position and reverse a prior decision but that Congress limited
EPA's ability to remove sources from the list of hazardous air
pollutant source categories, once listed, by requiring EPA to follow
the specific delisting process at CAA section 112(c)(9)).\8\
---------------------------------------------------------------------------

    \8\ For additional case law, see Belville Mining Co. v. United
States, 999 F.2d 989, 997 (6th Cir. 1993); Dun & Bradstreet Corp. v.
United States Postal Service, 946 F.2d 189, 193 (2d Cir. 1991); Iowa
Power & Light Co. v. United States, 712 F.2d 1292 (8th Cir. 1983).
---------------------------------------------------------------------------

    Section 301(a) of the CAA, read in conjunction with CAA section 110
and the case law just described, provides further statutory authority
for EPA to reconsider its actions under CAA section 110. CAA section
301(a) authorizes EPA ``to prescribe such regulations as are necessary
to carry out [EPA's] functions'' under the CAA. Reconsidering prior
rulemakings, when necessary, is part of ``[EPA's] functions'' under the
CAA--in light of EPA's inherent authority as recognized under the case
law to do so--and as a result, CAA section 301(a) confers such
authority upon EPA.
    EPA finds further support for its authority to narrow its approvals
in APA section 553(e), which requires EPA to give interested persons
``the right to petition for the issuance, amendment, or repeal of a
rule,'' and CAA section 307(b)(1), which expressly contemplates that
persons may file a petition for reconsideration under certain
circumstances (at the same time that a rule is under judicial review).
These authorizations for other persons to petition EPA to amend or
repeal a rule suggest that EPA has inherent authority, on its own, to
issue such amendment or repeal. This is because EPA may grant a
petition from another person for an amendment to or repeal of a rule
only if justified under the CAA, and if such an amendment or repeal is
justified under the CAA, then EPA should be considered as having
inherent authority to initiate the process on its own, even without a
petition from another person.
    EPA recently used its authority to reconsider prior actions and
limit its prior approval of a SIP in connection with California
conformity SIPs. See, e.g., 68 FR 15720, 15723 (discussing prior action
taken to limit approvals); 67 FR 69139 (taking final action to amend
prior approvals to limit their duration); 67 FR 46618 (proposing to
amend prior approvals to limit their duration, based on CAA sections
110(k) and 301(a)). EPA had previously approved SIPs with emissions
budgets based on a mobile source model that was current at the time of
EPA's approval. Later, EPA updated the mobile source model. But, even
though the model had been updated, emissions budgets would continue to
be based on the older, previously approved model in the SIPs, rather
than the updated model. To rectify this problem, EPA conducted a
rulemaking that revised the previous SIP approvals so that the
approvals of the emissions budgets would expire early, when the new
ones were submitted by states and found adequate, rather than when a
SIP revision was approved. This helped California more quickly adjust
its regulations to incorporate the newer model. EPA is using its
authority to reconsider and limit its prior approval of SIPs generally
in the same manner as it did in connection with California conformity
SIPs.
f. FIPs
    As noted previously, if the state fails to submit a required SIP
revision, or does so but EPA then disapproves that SIP revision, then
the CAA requires EPA to promulgate a FIP and thereby, in effect,
federalize the part of the air pollution control requirements for which
the state, through the required SIP revision, would otherwise have been
responsible. Specifically, under CAA section 110(c)(1), EPA is required
to--

promulgate a [FIP] at any time within 2 years after the
Administrator (A) finds that a State has failed to make a required
submission * * *, or (B) disapproves a [SIP] submission in whole or
in part, unless the State corrects the deficiency, and the
Administrator approves the plan or plan revision, before the
Administrator promulgates such [FIP].

Although this provision, by its terms, mandates that EPA promulgate a
FIP under the specified circumstances, and mandates that EPA do so
within two years of when those circumstances occur, the provision gives
EPA discretion to promulgate the FIP ``at any time within [that] 2 year
[ ]'' period. Thus, EPA is authorized to promulgate a FIP immediately
after either the specified state failure to submit or EPA disapproval.
    However, CAA section 110(c)(1), as quoted earlier, further provides
that if EPA delays promulgating a FIP until later in the 2-year period,
and, in the meantime, the state corrects the deficiency by submitting
an approval SIP revision that EPA approves, then EPA is precluded from
promulgating the FIP. Similarly, once EPA promulgates a FIP, it stays
on the books until the state submits an approvable SIP that EPA then
approves.
2. General Requirements for the PSD Program
    The PSD program is a preconstruction review and permitting program
applicable, under EPA rules, to large new stationary sources and, in
general, expansions of existing sources. The PSD program applies in
areas that are designated ``attainment'' or ``unclassifiable'' for a
NAAQS, and is contained in part C of title I of the CAA.\9\
---------------------------------------------------------------------------

    \9\ In contrast, the ``nonattainment new source review (NSR)''
program applies in areas not in attainment of a NAAQS and in the
Ozone Transport Region and is implemented under the requirements of
part D of title I of the CAA. We commonly refer to the PSD program
and the nonattainment NSR program together as the major NSR program.
The EPA rules governing both programs are contained in 40 CFR
51.165, 51.166, 52.21, 52.24, and part 51, Appendices S and W. There
is no NAAQS for CO2 or any of the other well-mixed GHGs,
nor has EPA proposed any such NAAQS; therefore, unless and until we
take further such action, the nonattainment NSR program does not
apply to GHGs.

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

    The applicability of PSD to a particular source must be determined
in advance of construction or modification and is pollutant-specific.
Sources subject to PSD cannot construct or modify unless they first
obtain a PSD permit that, among other things, includes emission
limitations that qualify as BACT (discussed later). CAA sections
165(a)(1), 165(a)(4), 169(1).
    Under the CAA, PSD applies to a stationary source that qualifies as
a ``major emitting facility,'' and that newly constructs or undertakes
a modification. A source is a ``major emitting facility'' if it emits
or has the potential to emit 100 or 250 tpy, depending on the source
category, of ``any air pollutant.'' CAA section 165(a)(1), 169(1). We
refer to these levels as the 100/250-tpy thresholds. EPA has
implemented these requirements in its regulations, which, as discussed
next, use somewhat different terminology for determining PSD
applicability and which have interpreted the term ``any air pollutant''
more narrowly so that only emissions of any pollutant subject to
regulation under the CAA trigger PSD.
    Specifically, under EPA's regulations, PSD applies to a ``major
stationary source'' that newly constructs or that undertakes a ``major
modification.'' 40 CFR 52.166(a)(7), (b)(1)(i), (b)(2)(i). A ``major
stationary source'' is any source that emits or has the potential to
emit 100 or 250 tpy or more, depending on the source category, of any
``regulated NSR pollutant.'' 40 CFR 51.166(b)(1)(i)(a). The regulations
define that term to include four classes of air pollutants, including,
as a catch-all, ``any pollutant that otherwise is subject to regulation
under the Act.'' 40 CFR 51.166(b)(49)(iv). As discussed below, the
phrase ``subject to regulation'' will begin to include GHGs on January
2, 2011, under our interpretation of that phrase as described in the
Tailoring Rule, 75 FR at 31,580/3, and what we call the ``Johnson Memo
Reconsideration'' (or the ``Timing Decision'').\10\
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    \10\ ``Interpretation of Regulations that Determine Pollutants
Covered by Clean Air Act Permitting Programs.'' 75 FR 17,004 (April
2, 2010). This action finalizes EPA's response to a petition for
reconsideration of ``EPA's Interpretation of Regulations that
Determine Pollutants Covered by Federal Prevention of Significant
Deterioration (PSD) Permit Program'' (commonly referred to as the
``Johnson Memo''), December 18, 2008.
---------------------------------------------------------------------------

    One principal PSD requirement is that a new major source or major
modification must meet emissions limitations based on application of
BACT, which must be determined on a case-by-case basis taking into
account energy, environmental, and economic impacts, among other
factors. To ensure that these criteria are satisfied, EPA has developed
and recommends that permitting authorities apply a ``top-down''
approach for BACT review, a decision process that includes
identification of all available control technologies, elimination of
technically infeasible options, ranking of remaining options by control
and effectiveness; evaluation (and possible elimination) of controls
based on economic, environmental or energy impacts; and then selection
of the remaining top-ranked option as BACT. When PSD applies to a
source because of its emissions of a particular pollutant, then BACT
(and other PSD requirements) apply for other pollutants that are
subject to regulation and that exceed specified levels.
3. SIP PSD Requirements
    The CAA contemplates that the PSD program be implemented by the
states through their SIPs. CAA section 110(a)(2)(C) requires that:

    Each implementation plan * * * shall * * * include a program to
provide for * * * regulation of the modification and construction of
any stationary source within the areas covered by the plan as
necessary to assure that national ambient air quality standards are
achieved, including a permit program as required in part [ ] C * * *
of this subchapter.

    CAA section 110(a)(2)(J) requires that:

    Each implementation plan * * * shall * * * meet the applicable
requirements of * * * part C of this subchapter (relating to
significant deterioration of air quality and visibility protection).

    CAA section 161 provides that:

    Each applicable implementation plan shall contain emission
limitations and such other measures as may be necessary, as
determined under regulations promulgated under this part [C], to
prevent significant deterioration of air quality for such region * *
* designated * * * as attainment or unclassifiable.

    These provisions, read in conjunction with the PSD applicability
provisions, CAA section 165(a)(1), 169(1), mandate that SIPs include
PSD programs that are applicable to any air pollutant that is subject
to regulation under the CAA, including, as discussed later in this
preamble, GHGs as of January 2, 2011.\11\
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    \11\ In the Tailoring Rule, we noted that commenters argued,
with some variations, that the PSD provisions applied only to NAAQS
pollutants, and not GHGs, and we responded that the PSD provisions
apply to all pollutants subject to regulation, including GHGs. See
75 FR 31560-62; ``Prevention of Significant Deterioration and Title
V GHG Tailoring Rule: EPA's Response to Public Comments,'' May 2010,
pp. 38-41. We are not reopening that issue in this rulemaking.
---------------------------------------------------------------------------

    Most states have EPA-approved SIP PSD programs, and as a result, in
those states, PSD permits are issued by state or local air pollution
control agencies. In states that do not have EPA-approved SIP PSD
programs, EPA issues PSD permits under its own authority, although in
some cases, EPA has delegated such authority to the state or local
agency.

B. Regulatory Background: Texas SIP and PSD Program

1. Texas's Initial Attainment SIP Revision
    In 1972, shortly after the enactment of the 1970 CAA Amendments,
Texas submitted to EPA its SIP to attain and maintain the NAAQS that
EPA had promulgated by that time. As part of that SIP revision, Texas
provided assurances that it had legal authority to carry out the SIP,
in accordance with the predecessor to CAA section 110(a)(2)(E)(i). EPA
approved Texas's SIP, including the assurances of legal authority, by
notice dated May 31, 1972. 37 FR 10842.
2. Texas Initial PSD SIP Revision
    In the 1977 CAA Amendments, Congress enacted the PSD program. In
the immediate aftermath, EPA acted as the PSD permitting authority in
the states, but EPA began to delegate to various state authorities all
or part of EPA's authority to issue PSD permits. In addition, at this
time, EPA revised its pre-existing regulations, which had established a
preconstruction permitting program, to conform to the 1977 CAA
requirements. Each state was required to adopt a PSD program and submit
it for approval as a SIP revision, and if the PSD program met CAA
requirements, EPA approved the program, and the state then became the
PSD permitting authority.
    This process occurred for most of the states in the Nation,
including Texas. A brief history of Texas's initial PSD SIP approval
follows:\12\
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    \12\ This history is described in ``Approval and Promulgation of
Implementation Plan, State of Texas; Prevention of Significant
Deterioration--Final rulemaking, 57 FR 28,093, 28,094 (June 24,
1992); ``Approval and Promulgation of Implementation Plan, State of
Texas; Prevention of Significant Deterioration--Proposed rulemaking,
54 FR 52,823, 52,824 (December 22, 1989).
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a. Texas's Receipt of Delegation Authority for the PSD Program
    Beginning in 1980, when EPA was still the permitting authority for
federally required PSD permits in Texas, the state requested delegation
of certain

aspects of the Federal PSD program, and in a series of actions, EPA
granted that authority.\13\ During this time, Texas also revised its
state--i.e., Texas Air Control Board (TACB)--PSD regulations. EPA
commented on an early set of proposed revisions to TACB regulations by
letter dated December 23, 1980 and made clear that PSD applies to non-
NAAQS pollutants.\14\ EPA reiterated these statements to Texas in
1983.\15\
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    \13\ See, e.g., 48 FR 6023 (February 9, 1983).
    \14\ Letter from Jack S. Divita, U.S EPA, Region 6, to Roger
Wallis, Texas Air Control Board (December 23, 1980), p. 2. In that
letter, EPA objected to Texas's proposed definitions of the terms
``major facility/stationary source'' and ``major modification'' on
grounds they are not equivalent to the definition of those terms in
EPA's PSD and nonattainment NSR regulations because Texas's proposed
definitions--include only those stationary sources and modifications
with emissions of air contaminants for which a [NAAQS] has been
issued. Under the PSD and [nonattainment] NSR requirements,
[Texas's] definitions must include sources with emissions of ``any
air pollutant subject to regulation under the Act.'' * * * Since the
proposed definitions would exclude PSD and [nonattainment] NSR
coverage for those sources emitting pollutants subject to
regulations under the Act, but for which a NAAQS has not been
issued, they are not equivalent to the federal definitions of
``major stationary source'' and ``major modification.''
    Id. (emphasis omitted).
    \15\ Environmental Protection Agency--Region 6, ``EPA Review of
Texas Revisions to the General Rules and Regulations VI,'' p. 4
(August 1983), cited in 48 FR 55483/1 & n.1 (December 13, 1983).
---------------------------------------------------------------------------

b. Texas's SIP PSD Program
    During 1985-1988, Texas submitted a series of SIP revisions
comprising its PSD program to EPA for approval. In these SIP revisions,
Texas established key components of its PSD rules by incorporating by
reference EPA's PSD rules found in 40 CFR 52.21. Of most importance for
present purposes, Texas incorporated by reference (IBR'd) EPA's PSD
applicability regulations in 52.21.\16\ Under EPA's regulations, as
then written, PSD applied to ``any pollutant subject to regulation
under the [Clean Air] Act.'' 40 CFR 52.21(b)(1)(i)) (1985-1988). It
bears emphasis that this provision, by its terms, applied PSD to each
and every air pollutant subject to regulation under the CAA, which, as
discussed elsewhere, has been EPA's consistent interpretation of the
CAA requirements for PSD applicability. CAA section 165(a)(1),
169(1).\17\
---------------------------------------------------------------------------

    \16\ For convenience, we will use the acronym ``IBR'' for the
various grammatical usages of incorporate by reference, including
the noun form, i.e., IBR, for incorporation by reference; as well as
the verb form, e.g., IBR'd, for incorporated by reference.
    \17\ As also discussed elsewhere, this is a narrowing
interpretation of the PSD applicability requirements in CAA section
169(1), which, read literally, apply PSD to ``any air pollutant.''
---------------------------------------------------------------------------

(i). Incorporation by Reference
    In adopting a particular SIP revision that IBR'ed EPA's
regulations, however, Texas intended that IBR to apply to only the EPA
regulations as they read as of the date that Texas adopted the SIP
revision. Texas did not intend that IBR in that SIP revision to apply
to subsequent revisions to those regulations. This became readily
apparent during the course of EPA's review of Texas's SIP revisions.
The TACB adopted the first SIP revision on July 26, 1985.\18\ This SIP
revision consisted, in relevant part, of a revision to TACB Regulation
VI--Sec.  116.3.(a) to add subparagraph (13), which read, in relevant
part,
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    \18\ TACB Board Order No. 85-7 (July 26, 1985).

    (13) The proposed facility shall comply with the Prevention of
Significant Deterioration of Air Quality regulations promulgated by
the [EPA] in the Code of Federal Regulations at 40 CFR 52.21 as
amended * * *, hereby incorporated by reference, except for [certain
identified] paragraphs [not here relevant].\19\
---------------------------------------------------------------------------

    \19\ Id.

    The TACB submitted this SIP revision to EPA on December 11,
1985.\20\ EPA responded with a letter to Texas, dated July 3, 1986,
commenting on several aspects of the SIP revision, including inquiring
whether the state had authority to IBR Federal rules prospectively,
asking for ``legal clarification'' on the subject, and recommending
that if the TACB did not have such authority, then the TACB should
clarify the IBR by ``referencing the appropriate date.'' \21\
---------------------------------------------------------------------------

    \20\ Letter from Mark White, Governor of Texas, to Lee M.
Thomas, Administrator of U.S. EPA, December 11, 1985.
    \21\ Letter from William B. Hathaway, Director, Air, Pesticides
and Toxics Division, EPA Region 6, to Allen Eli Bell, Executive
Director, TACB (July 3, 1986). Specifically, EPA stated-- State's
authority to IBR Federal rules prospectively--The Board approved and
signed the incorporation of the PSD regulations on July 26, 1985, An
amendment to the Federal PSD regulations [40 CFR 52.21(o)(3), p(1)
and p(3)] occurred on July 12, 1985. However, the TACB proposed to
adopt the Federal regulations and carried out the public
participation process before the July 12, 1985, promulgation date of
the amendments. We need a legal analysis from the state concerning
the TACB's legal authority to incorporate by reference the Federal
rules prospectively. We recognize that the proposed Federal rules
were unchanged on the final promulgation; however, the Texas Water
Commission believes that the State can not adopt prospective Federal
rules under the State laws. We would appreciate a legal
clarification on this subject. If the State did not intend
prospective adoption, the rules should be clarified by referencing
the appropriate date. Id. p. 2 and Enclosure p. 5.
---------------------------------------------------------------------------

    Texas responded with a letter dated October 24, 1986,\22\ in which
it stated:
---------------------------------------------------------------------------

    \22\ Letter from to Steve Spaw, Deputy Executive Director, TACB,
to William B. Hathaway, Director, Air, Pesticides and Toxics
Division, EPA Region 6 (October 24, 1986).

    An issue of concern * * * is whether the [TACB] intended to
incorporate by reference federal rules prospectively in the PSD rule
Sec.  116.3(a)(13) and in the stack height rule Sec.  116.3(a)(14).
[A]lthough our intention was not prospective rulemaking and we do
not believe the rule language implies such, we have no specific
objection to including the date of federal adoption of any federal
material adopted by reference by the TACB in future SIP revisions
(including the proposed PSD and stack height revisions). By
initiating the public hearing process for PSD rules again (to
incorporate requested revisions), federal PSD regulations amended on
July 12, 1985 will be subject to the state public participation
process. This should eliminate the concern expressed in your July 3,
1986 letter.\23\
---------------------------------------------------------------------------

    \23\ Id. 1-2.

Accordingly, on July 17, 1987, the TACB adopted a revision to its PSD
rule, Sec.  116.3(a)(13), so that the rule continued to IBR EPA's PSD
regulatory requirements at 40 CFR 52.21, but referenced the date of
November 7, 1986.\24\ Texas submitted that as a SIP revision to EPA on
October 26, 1987.\25\
---------------------------------------------------------------------------

    \24\ TACB Board Order No. 87-09 (July 17, 1987). See 12 Tex.
Reg. 2575/2 (August 7, 1987) (discussing revision to section
116.3(a)(13) in response to request from U.S. EPA).
    \25\ Letter from William P. Clements, Jr., Governor of Texas, to
Lee M. Thomas, Administrator of U.S. EPA (October 26, 1987).
---------------------------------------------------------------------------

    However, some eight months later, by notice published on July 1,
1987, EPA adopted the PM10 NAAQS,\26\ and thereby subjected
to PSD sources emitting PM10. Recognizing this, the TACB, on
July 15, 1988, adopted still another revision to its PSD rule to change
the referenced date to August 1, 1987, and thereby incorporated EPA's
application of PSD to PM10-emitting sources into Texas's PSD
program.\27\ Texas submitted that revised rule to EPA as a SIP revision
on September 29, 1988.\28\ As so revised, the Texas PSD rule (again,
Sec.  116.3(a)(13)) read, in relevant part, as follows:
---------------------------------------------------------------------------

    \26\ 52 FR 24634 (July 1, 1987).
    \27\ TACB Board Order No. 88-08 (July 15, 1988).
    \28\ Letter from Letter from William P. Clements, Jr., Governor
of Texas, to Lee M. Thomas, Administrator of U.S. EPA (September 29,
1988).

    (13) The proposed facility shall comply with the Prevention of
Significant Deterioration (PSD) of Air Quality regulations
promulgated by the Environmental Protection Agency (EPA) in the Code
of Federal Regulations at 40 CFR 52.21 as amended August 1, 1987 * *
*, except for [certain identified] paragraphs [not here
---------------------------------------------------------------------------
relevant].\29\

    \29\ TACB Board Order No. 88-08 (July 15, 1988).

EPA proposed to approve this SIP revision, with this iteration of the
Texas PSD rule, by notice dated December 22,

1989,\30\ and EPA issued a final approval by notice dated June 24,
1992.\31\ In the preambles to the proposed and final rule, and in
supporting documents, EPA recounted part of this history of Texas
revising its regulations to IBR the current EPA regulatory
requirements.\32\
---------------------------------------------------------------------------

    \30\ 54 FR 52823.
    \31\ 57 FR 28093.
    \32\ 57 FR 28093, 28094/2 (June 24, 1992) (final rule); 54 FR
52823, 52824/1 (December 22, 1989) (proposed rule); Technical
Support Document: Texas State Implementation Plan for Prevention of
Significant Deterioration, U.S. Environmental Protection Agency, 4
(November 28, 1988). Moreover, Texas submitted another SIP revision
on February 18, 1991 to change the date in section 116.3(a)(13) from
``August 1, 1987'' to ``October 17, 1988'' to reflect the amendments
to 40 CFR 52.21 as promulgated in the Federal Register on October
17, 1988 (53 FR 40656) (Nitrogen Oxides PSD increments). EPA did not
act on this SIP revision when it approved the Texas PSD program on
June 24, 1992, but did approve this SIP revision later, on September
9, 1994 (59 FR 46556). See 62 FR 44084/2.
---------------------------------------------------------------------------

    This history shows that both EPA and Texas were well aware that
Texas's method of IBR'ing EPA's regulatory requirements into Texas's
PSD rule was not prospective, and that as a result, Texas would need to
take further action, such as a SIP revision, to update its PSD rules
whenever EPA newly subjected another pollutant to PSD. In fact, Texas
did so--to apply PSD to PM10--during the time that EPA was
reviewing its PSD SIP. However, after stating simply that it does not
intend prospective IBR, Texas did not explicitly address this issue.
That is, Texas did not acknowledge that following approval of Texas's
PSD program, EPA could well subject to regulation additional
pollutants--whether through a revised NAAQS or regulation under another
CAA provision--and Texas did not discuss how it would respond.\33\
---------------------------------------------------------------------------

    \33\ Following EPA approval of Texas's PSD program, Texas has
occasionally submitted SIP revisions to update its PSD program to
accommodate further EPA regulatory revisions. See, e.g., 69 FR
43752, 43753 (July 22, 2004).
---------------------------------------------------------------------------

    (ii). Legal Authority
    The record of Texas's PSD program includes limited references to,
or discussion of, legal authority that may be relevant to whether Texas
provided assurances that it had adequate legal authority to apply PSD
to pollutants newly subject to regulation. The following merit review:
    First, in adopting and submitting the PSD SIP revisions, the TACB--
the agency charged with taking that action--relied on its general legal
authority to adopt and submit the SIP revisions. The TACB adopted
regulatory amendments through ``Board Orders,'' and then submitted
those Board Orders to EPA as SIP revisions. The Board Orders typically
cited general authority under the Texas CAA. One example is TACB Board
Order No. 88-08 (July 15, 1988), which revised the Texas PSD rule to
provide a later date for IBR'ing EPA's PSD program, and which comprised
one of the SIP revisions that formed the basis for the Texas PSD
program that EPA approved by notice dated June 24, 1992 (57 FR 28093).
This Board Order provides, in relevant part, ``Section 3.09(a) of the
Texas CAA gives the Board authority to make rules and regulations
consistent with the general intent and purposes of the Act and to amend
any rule or regulation it makes'' and ``the Board hereby certifies that
the amendments as adopted have been reviewed by legal counsel and found
to be a valid exercise of the Board's legal authority.'' Board Order
No. 88-08, page 2.
    Second, the 1990 CAA Amendments amended CAA section 169(1) to add
another type of source that was subject to PSD: Large municipal
combustors. Shortly after the 1990 amendments, and before issuing final
approval for the Texas PSD program, EPA asked Texas for assurances that
its PSD program would apply to large municipal waste combustors. In a
March 30, 1992 letter, EPA stated the following:

    Since we proposed approval of this SIP before enactment of the
1990 Clean Air Act Amendments (CAAA), it is necessary that we
address several issues in the final approval notice in order to be
in conformance with the CAAA.
* * * * *
    ``Municipal Waste Combustion--Section 169(1) is amended by
expanding the list of major emitting facilities that are subject to
PSD requirements if they emit or have the potential to emit 100 tons
per year or more of any regulated pollutant. This list now includes
municipal incinerators capable of charging more than fifty tons of
refuse per day. This requirement has been effective since November
15, 1990, for all applicable PSD sources. In the conference call
[with EPA Region 6], the * * * TACB * * * legal representative said
that the TACB has the existing legal authority, and can and will be
reviewing such sources for PSD applicability and permitting.'' \34\

    \34\ Letter from A. Stanley Meiburg, Director, Air, Pesticides &
Toxics Division, EPA Region 6, to Steve Spaw, Executive Director,
TACB (March 30, 1992).

Thus, according to this letter, Texas provided oral statements in a
conference call with EPA Region 6 that Texas has legal authority to
apply its state PSD rules to large municipal waste combustors.
    Texas responded in a letter dated April 17, 1992:

    We understand that you need confirmation in several areas to
conform with the requirements of the 1990 Federal Clean Air Act
Amendment * * * before the final delegation will be made.
* * * * *
    We will address as a major source subject to PSD review,
municipal waste combustors capable of changing more than 50 tons of
refuse per day as one of the sources subject to PSD review if they
emit or have the potential to emit 100 tons per year or more of any
regulated pollutant.\35\

    \35\ Letter from Steve Spaw, Executive Director, TACB, to A.
Stanley Meiburg, Director, Air, Pesticides and Toxics Division, EPA
Region 6 (April 17, 1992).

    Although the TACB Board Order referred to the TACB's general legal
authority, the record reveals no discussion or assurances that this
legal authority was adequate to apply PSD to pollutants newly subject
to regulation. Similarly, the oral assurance that the TACB apparently
provided that it had legal authority to apply PSD to large municipal
combustors, as required under the then-newly enacted 1990 CAA
Amendments, does not address whether Texas had adequate authority to
apply PSD to each pollutant that EPA newly subjects to regulation.
(iii). Texas's Commitments
    The rulemaking record of EPA's approval of Texas's PSD SIP shows
that Texas provided two commitments that are relevant for present
purposes:

(I). 1987 Texas PSD Commitments Statement

    The TACB adopted revisions to TACB Regulation VI on July 17, 1987,
which the Governor submitted on October 27, 1987. Those revisions
included the following statement, which we call the 1987 Texas PSD
Commitments Statement:

    Revision To The Texas State Implementation Plan For Prevention
Of Significant Deterioration Of Air Quality

The Texas Air Control Board (TACB) will implement and enforce the
federal requirements for Prevention of Significant Deterioration of
Air Quality (PSD) as specified in 40 CFR 51.166(a) by requiring all
new major stationary sources and major modifications to obtain air
quality permits as provided in TACB regulation VI, Control of Air
Pollution by Permits for New Construction and Modification. In
addition, the TACB will adhere to the following conditions in the
implementation of the PSD program:
* * * * *

4. Plan assessment

    The TACB will review the adequacy of the Texas PSD plan on an
annual basis and within 60 days of the time information becomes
available that an applicable increment may be violated. If the TACB
determines that an increment is being

exceeded due to the violation of a permit condition, appropriate
enforcement action will be taken to stop the violation. If an
increment is being exceeded due to a deficiency in the state PSD
plan, the plan will be revised and the revisions will be subject to
public hearing.

    This 1987 Texas PSD Commitments Statement does not specifically
address the application of PSD to pollutants newly subject to
regulation. The first paragraph, as quoted above, commits TACB to
require ``all new major stationary sources and major modifications to
obtain air quality permits as provided in TACB regulation VI * * *,''
but this does not commit TACB to address pollutants newly subject to
regulation. Instead, this limits the TACB requirement to application of
PSD to sources ``as provided in TACB regulation VI,'' and that
regulation VI does not automatically update. As for ``4, Plan
assessment,'' although the first sentence calls for the TACB to review
the adequacy of the Texas PSD plan on an annual basis, and although the
rest of the provision requires a plan revision if an increment
violation is determined to result from a deficiency in the plan, this
does not address what happens when a new pollutant becomes subject to
regulation and does not require a plan revision to apply to the new
pollutant. The fact that Texas agreed to revise the plan if the plan is
found to be deficient and that deficiency results in an increment being
exceeded serves to highlight the lack of any comparable focus on how
the plan would deal with pollutants newly subject to regulation.
    EPA's technical support document supporting its proposed approval
stated, with respect to this 1987 Texas PSD Commitments Statement:

    The ``Revision to Texas State Implementation Plan for Prevention
of Significant Deterioration of Air Quality'' specifies how the TACB
will fulfill the requirements of 40 CFR 51.166(a), plan revisions,
and plan assessment. The EPA has reviewed the State's commitment and
has determined that the TACB has addressed the continuous plan
revisions and assessments adequately.\36\

    \36\ Technical Support Document: Texas State Implementation Plan
for Prevention of Significant Deterioration, U.S. Environmental
Protection Agency, 6 (November 28, 1988).

This general discussion by EPA does not indicate that EPA considered
the Texas statement to apply to pollutants newly subject to regulation.
(II). 1989 Texas Commitment Letter
    In 1989, as EPA considered Texas's SIP revision submittal, EPA
became concerned that a Texas official had made statements that lead
EPA to question whether Texas would adhere to EPA's interpretation that
BACT must be implemented through the Top-Down process.\37\ Accordingly,
EPA advised Texas that EPA would not approve Texas's PSD program unless
Texas provided a letter assuring EPA that Texas would follow EPA
requirements in general, and particularly with respect to the
interpretation of BACT. Texas provided this letter, which we call the
Texas PSD Commitments Letter, on September 5, 1989.\38\ In this letter,
Texas acknowledged EPA's concern that a Texas official had--
---------------------------------------------------------------------------

    \37\ Letter from Allen Eli Bell, Executive Director, Texas Air
Control Board to Robert Layton Jr., Regional Administrator, U.S. EPA
(September 5, 1989) 1 (Texas's Commitments Letter).
    \38\ Texas's 1989 Commitments Letter, p. 1.

    indicated a lack of intent to follow federal interpretations of
the Clean Air Act and Environmental Protection Agency (EPA)
operating policies, most specifically, the ``Top-Down'' approach for
Best Available Control Technology (BACT) analysis in reviewing PSD
---------------------------------------------------------------------------
permit applications.

Texas went on to state:

    [Y]ou may be assured that the position of the [Texas Air Control
Board (TACB)] is, and will continue to be, to implement EPA
requirements relative to programs for which we have received State
Implementation Plan approval, and to do so as effectively as
possible.* * * Again, the TACB is committed to the implementation of
EPA decisions regarding PSD program requirements. We look forward
\39\ approval of the PSD revisions and believe EPA will find the
management of that program in Texas to be capable and effective.\40\
---------------------------------------------------------------------------

    \39\ Sic: the word ``to'' should be in between ``forward'' and
``approval''
    \40\ Texas's 1989 Commitments Letter, p. 1.

    By notice dated December 22, 1989, EPA proposed to fully approve
Texas's PSD program.\41\ In this proposal, EPA focused on the issue of
how EPA's current and future interpretations of PSD statutory
requirements would be reflected in the state-implemented program. EPA
stated:
---------------------------------------------------------------------------

    \41\ 54 FR 52823.

    In adopting the Clean Air Act, Congress designated EPA as the
agency primarily responsible for interpreting the statutory
provisions and overseeing their implementation by the states. The
EPA must approve state programs that meet the requirements of 40 CFR
51.166. Conversely, EPA cannot approve programs that do not meet
those requirements. However, PSD is by nature a very complex and
dynamic program. It would be administratively impracticable to
include all statutory interpretations in the EPA regulations and the
SIPs of the various states, or to amend the regulations and SIPs
every time EPA interprets the statute or regulations or issues
guidance regarding the proper implementation of the PSD program, and
the Act does not require EPA to do so. Rather, action by the EPA to
approve this PSD program as part of the SIP will have the effect of
requiring the state to follow EPA's current and future
interpretations of the Act's PSD provisions and EPA regulations, as
well as EPA's operating policies and guidance (but only to the
extent that such policies are intended to guide the implementation
of approved state PSD programs). Similarly, EPA approval also will
have the effect of negating any interpretations or policies that the
state might otherwise follow to the extent they are at variance with
EPA's interpretation and applicable policies. Of course, any
fundamental changes in the administration of PSD would have to be
accomplished through amendments to the regulations in 40 CFR 52.21
---------------------------------------------------------------------------
and 51.166, and subsequent SIP revisions.

54 FR 52,824/2-3.

    EPA went on to state that it was basing its proposed approval of
Texas's PSD program on Texas's agreement, as contained in the September
5, 1989, letter, that Texas would ``implement that PSD SIP approved
program in compliance with all of the EPA's statutory interpretations
and operating policies.'' 54 FR 82,825/2. EPA stated--

    * * * EPA's approval of the Texas PSD SIP requires the state to
follow EPA's statutory interpretations and applicable policies[],
including those concerning [BACT].* * *
    In support of the discussion above, the Executive Director of
the TACB has submitted a letter, dated September 5, 1989, which
commits the TACB to implement the PSD SIP approval program in
compliance with all of the EPA's statutory interpretations and
operating policies. Specifically, the TACB's letter states that (1)
``* * * you may be assured that the position of the agency is, and
will continue to be, to implement EPA requirements relative to
programs for which we have received [SIP] approval, and to do as
effectively as possible * * *'', and (2) ``* * * the TACB is
committed to the implementation of the EPA decisions regarding PSD
program requirements * * *''. The EPA has evaluated the content of
this letter and has determined that the letter sufficiently commits
the TACB to carry out the PSD program in accordance with the Federal
requirements as set forth in the [CAA] applicable regulations, and
as further clarified in the EPA's statutory and regulatory
interpretations, including the proper conduct of BACT analyses. The
EPA also interprets this letter as committing the TACB to follow
applicable EPA policies such as the ``Top-Down'' approach. This
letter will be incorporated into the SIP upon the final approval
action.

54 FR 52,825/1-2.

    EPA issued a final rule to give full approval to the program by
notice dated June 24, 1992, 57 FR 28,093. In the final rule, EPA
indicated that it had received adverse comments concerning its
statements in the proposal that Texas was required to adopt all of
EPA's

interpretations of the PSD requirements. Accordingly, EPA refined its
views. EPA stated:

    Comment 1: The commenters expressed concern with the preamble
language in the proposal notice, suggesting that final approval
would require that the State follow EPA's current and future
interpretations of the Act's PSD provisions and EPA regulations as
well as EPA's operating policies and guidance. The commenter
contended that such a condition would be unlawful * * * and would
improperly limit the State's flexibility. * * *
    Response 1: The EPA did not intend to suggest that Texas is
required to follow EPA's interpretations and guidance issued under
the Act in the sense that those pronouncements have independent
status as enforceable provisions of the Texas PSD SIP, such that
mere failure to follow such pronouncements, standing alone, would
constitute a violation of the Act. As clarified herein, EPA's intent
is merely to place the State and the public on notice of EPA's
longstanding views that the Agency must continue to oversee the
State's implementation of the PSD SIP.* * *
    * * * Texas and other states [have] considerable discretion to
implement the PSD program as they see fit.
    * * * PSD-SIP approved states remain free to follow their own
course, provided that state action is consistent with the letter and
spirit of the SIP, when read in conjunction with the applicable
statutory and regulatory provisions.
* * * * *
    Comment 4: One commenter noted that the TACB's letter, dated
September 5, 1989, cannot reasonably be interpreted as a legal
requirement that the State follow the EPA's present and future new
source review interpretations, policies and guidance, including the
BACT ``Top-Down'' approach, because it only commits Texas to
implement properly established EPA requirements and legally-binding
EPA decisions. The commenter said that the Clean Air Act
specifically requires that, if at all, any such change in EPA policy
for BACT determinations be accomplished through notice and comment
rulemaking, and that the EPA first prepare an economic impact
assessment.
    Response 4: In certain circumstances, EPA's approval of a SIP
revision through notice-and-comment rulemaking procedures can serve
to adopt specific interpretations or decisions of the Agency. For
example, a state may commit in writing to follow particular EPA
interpretations or decisions in administering the PSD program. As
part of the SIP revision process, EPA may incorporate that State's
commitment into the SIP by reference. This process has been followed
in today's action. Of course, EPA agrees with the commenter that the
Agency must act reasonably in construing the terms of a commitment
letter, so as to avoid approving it in a manner that would
contravene the state's intent in issuing the letter in the first
place. Moreover, the State commitment must be consistent with the
plain language of the applicable statutory or regulatory provisions
at issue. Similarly, EPA cannot unilaterally change the clear
meaning of any approved SIP provision by later guidance or policy.
Rather, as stated in the proposed approval notice, such fundamental
change must be accomplished through the SIP revision process.
    Consistent with the terms of the TACB letter dated September 5,
1989, EPA views that letter as a commitment on the part of the TACB
to ``implement EPA program requirements * * * as effectively as
possible,'' and as a commitment ``to the implementation of the EPA
decisions regarding PSD program requirements.'' EPA agrees, however,
that the TACB letter need not be interpreted as a specific
commitment by the State to follow a ``Top-Down'' approach to BACT
determinations.

57 FR 28095/1-2; 28096/1.

    As for the fact that Texas's PSD program was limited to pollutants
that were regulated as of the date Texas adopted the program as a SIP
revision, but did not automatically apply to newly regulated
pollutants, the preamble to the final rule alluded to this limitation:

    The State's regulation VI requires review and control of air
pollution from new facility construction and modification and allows
the TACB to issue permits for stationary sources subject to this
regulation. Section 116.3(a)(13) of the TACB Regulation VI
incorporates by reference the Federal PSD regulations (40 CFR 52.21)
as they existed on August 1, 1987, which include revisions
associated with the July 1, 1987, promulgation of revised National
Ambient Air Quality Standards for particulate matter (52 FR 24872)
and the visibility NSR requirements noted above.

57 FR 28094.

    However, there is no indication in the preamble for the final rule
that (i) Texas specifically addressed the requirement that its PSD
program apply to pollutants newly subject to PSD, including non-NAAQS
pollutants, or (ii) Texas provided assurances that it had adequate
authority under State law to carry out the PSD program, including
applying PSD to pollutants newly subject to regulation, among them non-
NAAQS pollutants. Nor is there any indication that EPA asked Texas to
do so.\42\
---------------------------------------------------------------------------

    \42\ See ``Technical Support Document (TSD): State of Texas
State Implementation Plan for Prevention of Significant
Deterioration'' (November 28, 1988).
---------------------------------------------------------------------------

    As discussed later, in 1996 EPA proposed, and in 2002 finalized,
what we call the NSR Reform Rule,\43\ which included a set of
amendments to the PSD provisions that included revisions to conform to
the 1990 CAA Amendments. See 61 FR 38250 (July 23, 1996), 67 FR 80186
(December 31, 2002). The NSR Reform Rule revised the terminology for
PSD applicability. In 2006, Texas submitted a SIP revision to
incorporate the NSR Reform Rule into its PSD program, including
revising its applicability provisions. EPA disapproved this SIP
revision by notice dated September 15, 2010.\44\ Accordingly, the
applicable Texas PSD applicability provisions remain the ones in the
state's currently approved SIP.
---------------------------------------------------------------------------

    \43\ ``Prevention of Significant Deterioration (PSD) and
Nonattainment New Source Review (NNSR): Baseline Emissions
Determination, Actual-to-Future-Actual Methodology, Plantwide
Applicability Limitations, Clean Units, Pollution Control Projects--
Final Rule,'' 67 FR 80186 (December 31, 2002) (NSR Reform rule).
    \44\ 75 FR 56,424 (September 15, 2010).
---------------------------------------------------------------------------

C. Regulatory Background: GHG Rules

1. GHGs and Their Sources
    Greenhouse gases trap the Earth's heat that would otherwise escape
from the atmosphere into space, and form the greenhouse effect that
helps keep the Earth warm enough for life. Greenhouse gases are
naturally present in the atmosphere and are also emitted by human
activities. Human activities are intensifying the naturally occurring
greenhouse effect by increasing the amount of GHGs in the atmosphere,
which is changing the climate in a way that endangers human health,
society, and the natural environment.
    Some GHGs, such as carbon dioxide (CO2), are emitted to
the atmosphere through natural processes as well as human activities.
Other gases, such as fluorinated gases, are created and emitted solely
through human activities. As previously noted, the well-mixed GHGs of
concern directly emitted by human activities include CO2,
methane (CH4), nitrous oxide (N2O),
hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur
hexafluoride (SF6). These six GHGs, for the purposes of this
final rule, are referred to collectively as ``the six well-mixed
GHGs,'' or, simply, GHGs, and together constitute the ``air pollutant''
upon which the GHG thresholds in the Tailoring Rule are based. These
six gases remain in the atmosphere for decades to centuries where they
become well-mixed globally in the atmosphere. When they are emitted
more quickly than natural processes can remove them from the
atmosphere, their concentrations increase, thus increasing the
greenhouse effect. The heating effect caused by the human-induced
buildup of GHGs in the atmosphere is very likely the cause of most of
the observed global warming over the last 50 years. A detailed
explanation of greenhouse gases, climate change and its impact on
health, society, and the environment is

included in EPA's technical support document (TSD) for the endangerment
finding final rule (Docket ID No. EPA-HQ-OAR-2009-0472-11292).
    In the United States, the combustion of fossil fuels (e.g., coal,
oil, gas) is the largest source of CO2 emissions and
accounts for 80 percent of the total GHG emissions. Anthropogenic
CO2 emissions released from a variety of sources, including
fossil fuel combustion and industrial manufacturing processes that rely
on geologically stored carbon (e.g., coal, oil, and natural gas) that
is hundreds of millions of years old, as well as anthropogenic
CO2 emissions from land-use changes such as deforestation,
all perturb the atmospheric concentration of CO2 and cause
readjustments in the distribution of carbon within different
reservoirs. More than half of the energy-related emissions come from
large stationary sources such as power plants, while about a third
comes from transportation. Of the six well-mixed GHGs, four
(CO2, CH4, N2O, and HFCs) are emitted
by motor vehicles. In the United States industrial processes (such as
the production of cement, steel, and aluminum), agriculture, forestry,
other land use, and waste management are also important sources of
GHGs.
    Different GHGs have different heat-trapping capacities. The concept
of Global Warning Potential was developed to compare the heat-trapping
capacity and atmospheric lifetime of one GHG to another. The definition
of a GWP for a particular GHG is the ratio of heat trapped by one unit
mass of the GHG to that of one unit mass of CO2 over a
specified time period. When quantities of the different GHGs are
multiplied by their GWPs, the different GHGs can be summed and compared
on a CO2e basis. For example, CH4 has a GWP of
21, meaning each ton of CH4 emissions would have 21 times as
much impact on global warming over a 100-year time horizon as 1 ton of
CO2 emissions. Thus, on the basis of heat-trapping
capability, 1 ton of CH4 would equal 21 tons of
CO2e. The GWPs of the non-CO2 GHGs range from 21
(for CH4) up to 23,900 (for SF6). Aggregating all
GHGs on a CO2e basis at the source level allows a facility
to evaluate its total GHG emissions contribution based on a single
metric.
2. GHG Regulatory Actions
    Over the past year, EPA has completed four distinct actions related
to greenhouse gases under the CAA. The result of these rules, in
conjunction with the operation of the CAA, has been to trigger PSD
applicability for GHG sources on and after January 2, 2011, but to
limit the scope of PSD for those sources. These actions include, as
they are commonly called, the ``Endangerment Finding'' and ``Cause or
Contribute Finding,'' which we issued in a single final action; \45\
the Johnson Memo Reconsideration, noted previously; the ``Light-Duty
Vehicle Rule'' (LDVR or Vehicle Rule); \46\ and the ``Tailoring Rule,''
also noted previously.
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    \45\ ``Endangerment and Cause or Contribute Findings for
Greenhouse Gases Under Section 202(a) of the Clean Air Act.'' 74 FR
66,496 (December 15, 2009).
    \46\ ``Light-Duty Vehicle Greenhouse Gas Emission Standards and
Corporate Average Fuel Economy Standards; Final Rule.'' 75 FR 25,324
(May 7, 2010).
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a. Endangerment Finding, Vehicle Rule, Johnson Memo Reconsideration
    In the Endangerment Finding, which is governed by CAA section
202(a), the Administrator exercised her judgment, based on an
exhaustive review and analysis of the science, to conclude that ``six
greenhouse gases taken in combination endanger both the public health
and the public welfare of current and future generations.'' 74 FR at
66,496. The Administrator also found ``that the combined emissions of
these greenhouse gases from new motor vehicles and new motor vehicle
engines contribute to the greenhouse gas air pollution that endangers
public health and welfare under CAA section 202(a).'' Id.
    The Endangerment Finding led directly to promulgation of the
Vehicle Rule, also governed by CAA Sec.  202(a), in which EPA set
standards for the emission of greenhouse gases for new motor vehicles
built for model years 2012-2016. 75 FR 25,324. The Vehicle Rule
established the first controls for GHGs under the CAA.
    The Johnson Memo Reconsideration--as well as the Tailoring Rule,
which we discuss later--is governed by the PSD and Title V provisions
in the CAA. It was issued to address the automatic statutory triggering
of the PSD and Title V programs for GHGs due to the Vehicle Rule
establishing controls for GHGs. The Johnson Memo Reconsideration
provided EPA's interpretation of a pre-existing definition in its PSD
regulations delineating the ``pollutants'' that are taken into account
in determining whether a source must obtain a PSD permit and the
pollutants each permit must control. The Johnson Memo Reconsideration
stated that when the Vehicle Rule takes effect on January 2, 2011, it
will, in conjunction with the applicable CAA requirements, trigger the
application of PSD to GHG-emitting sources. 75 FR 17,004.
b. Tailoring Rule
    In the Tailoring Rule, EPA limited PSD applicability, at the
outset, to only the largest GHG-emitting sources, and to phase-in PSD
applicability, as appropriate, to smaller sources over time. 75 FR
31,514. In the Tailoring Rule, EPA identified the air pollutant that,
if emitted or potentially emitted by the source in excess of specified
thresholds, would subject the source to PSD requirements, as the
aggregate of six GHGs: CO2, CH4, N2O,
HFCs, PFCs, and SF6. EPA based this identification on the
Vehicle Rule, which included applicability provisions specifying that
the rule ``contains standards and other regulations applicable to the
emissions of those six greenhouse gases.'' 75 FR at 25686 (promulgating
40 CFR 86.1818-12(a)). The Tailoring Rule noted that it was because the
Vehicle Rule subjected to regulation the pollutant that comprises the
six GHGs, that PSD was triggered for that pollutant and that, as a
result, the pollutant must be defined for PSD purposes in the same way
as it is identified in the Vehicle Rule. 75 FR 31,527. The Vehicle Rule
identified the pollutant as the aggregate of the six gases because in
the Endangerment Finding, the Administrator found that those six
gases--which she described as long-lived and directly emitted GHGs--
may reasonably be anticipated to endanger public health and welfare.
c. Scope of PSD Applicability
    In the Tailoring Rule and subsequent rulemakings, commenters raised
an issue concerning the applicability of PSD to non-NAAQS pollutants. A
discussion of this issue is useful background information for the
present action, including what we call the automatic-updating nature of
PSD requirements under the CAA, that is, that as soon as a pollutant
becomes subject to regulation under another CAA provision, it becomes
subject to PSD.
i. Applicability of PSD to Non-NAAQS Pollutants
    In the Tailoring Rule, EPA responded to a set of comments that PSD
applies only to NAAQS pollutants, and not non-NAAQS pollutants such as
GHGs. In brief, several commenters advanced the argument that primarily
because the PSD provisions in CAA sections 161 and 165(a) limit PSD
applicability to sources located in attainment or unclassifiable areas,
PSD applicability should be limited to the NAAQS pollutants for which
the area in which the source is located is attainment or
unclassifiable. On the basis of this interpretation, the commenters
urged

EPA to conclude that PSD does not apply to GHGs. 75 FR 31,560/2-3.
    EPA disagreed with these comments and reiterated its long-held view
that PSD applies to ``any pollutant subject to regulation under the
CAA,'' and that includes non-NAAQS pollutants. 75 FR 31,560/3. EPA
explained--

    We recognize, as we have said elsewhere, that a major purpose of
the PSD provisions is to regulate emissions of NAAQS pollutants in
an area that is designated attainment or unclassifiable for those
pollutants. However, we do not read CAA sections 161 and the ``in
any area to which this part applies'' clause in 165(a), in the
context of the PSD applicability provisions, as limiting PSD
applicability to those pollutants. The key PSD applicability
provisions are found in sections 165(a) and 169(1). Section 165(a)
states, ``No major emitting facility on which construction is
commenced after August 7, 1977, may be constructed in any area to
which this part applies unless [certain requirements are met]. A
``major emitting facility'' is defined, under CAA section 169(1), as
``any * * * stationary source[] which emit[s], or ha[s] the
potential to emit, one hundred [or, depending on the source
category, two hundred fifty] tons per year or more of any air
pollutant.'' As discussed elsewhere, EPA has long interpreted the
term ``any air pollutant'' to refer to ``any air pollutant subject
to regulation under the CAA,'' and for present purposes, will
continue to read the ``subject to regulation'' phrase into that
term.
    Although section 165(a) makes clear that the PSD requirements
apply only to sources located in areas designated attainment or
unclassifiable, it does not, by its terms, state that the PSD
requirements apply only to pollutants for which the area is
designated attainment or unclassifiable. Rather, section 165(a)
explicitly states that the PSD requirements apply more broadly to
any pollutant that is subject to regulation.

Id.
    EPA went on to discuss the statements by the D.C. Circuit
concerning the PSD applicability provisions--which, again, according to
their literal terms, apply PSD to ``any air pollutant,'' CAA section
165(a)(1), 169(1)--in the seminal case interpreting the PSD
requirements: Alabama Power v. Costle, 636 F.2d 323 (DC Cir. 1980).
There, the DC Circuit noted that these PSD applicability provisions
must be read to apply PSD quite broadly; indeed, the Court indicated
they could apply even to air pollutants not yet regulated under other
provisions of the Act. 636 F.2d at 352-53 & n. 60.\47\
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    \47\ ``Prevention of Significant Deterioration and Title V GHG
Tailoring Rule: EPA's Response to Public Comments,'' p. 39.
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    EPA also emphasized that EPA's long-standing regulations have
interpreted this provision broadly enough to capture non-NAAQS
pollutants:

    In addition, it should not be overlooked that we have applied
PSD to non-NAAQS pollutants since the inception of the program over
30 years ago. For example, prior to the 1990 CAA Amendments, PSD
applied to HAPs regulated under CAA section 112; and over the years,
EPA has established significance levels for fluorides, sulfuric acid
mist, hydrogen sulfide, TRS, reduced sulfur compounds, municipal
waste combustor organics, municipal waste combustor metals,
municipal waste combustor acid gases, and municipal solid waste
landfill emissions, see 40 CFR 51.166(b)(23)(i) * * *. Of course,
the basis for all these actions is PSD's applicability to these non-
NAAQS air pollutants. We are not aware that EPA's actions in
establishing significance levels for these pollutants gave rise to
challenges on grounds that the PSD provisions do not apply to them.
As the U.S. Supreme Court recently stated in upholding an EPA
approach in another context: ``While not conclusive, it surely tends
to show that the EPA's current practice is a reasonable and hence
legitimate exercise of its discretion * * * that the agency has been
proceeding in essentially this fashion for over 30 years.'' Entergy
Corp. v. Riverkeeper, Inc., 129 S.Ct. 1498, 1509 (2009) (citations
omitted).

75 FR 31,581/3 to 31,582/1
    To this, it may be added that the regulatory history of the PSD
applicability provisions supports their broad application: EPA's
initial, 1977-78 rulemaking implementing the PSD program made explicit
that the PSD program applied to ``any pollutant regulated under the
Clean Air Act.'' 43 FR 26380, 26403, 26406 (June 19, 1978)
(promulgating 40 CFR 51.21(b)(1)(i)). In 1979-1980, EPA revised the PSD
program to conform to Alabama Power v. Costle, 636 F.2d 323 (DC Cir.
1980). 44 FR 51924 (September 5, 1979) (proposed rule); 45 FR 52676
(August 7, 1980) (final rule). In this rulemaking, EPA did not disturb
the pre-existing provisions that applied the PSD program to regulated
air pollutants. In October 1990, EPA prepared the ``New Source Review
Workshop Manual--Prevention of Significant Deterioration and
Nonattainment Area Permitting'' (draft NSR Manual), which although in
draft form, and not a binding rule, has often been referenced as a
reflection of EPA's thinking on PSD permitting issues. See, Alaska
Dept. of Conservation v. EPA, 540 U.S. 461, 476 n. 7 (2004); In re:
Indeck-Elwood, LLC, 13 E.A.D. 133 n. 13 (EAB Sept. 27, 2006); In re:
Prairie State Generating Company, 13 E.A.D. 6 n. 2 (EAB Aug 24, 2006).
This manual states that PSD applies to ``each pollutant regulated by
the Act,'' including ``criteria and * * * noncriteria'' pollutants.
Draft NSR Manual, pp. A.18. See id. at A.28, A.30. In 1996 EPA
proposed, and in 2002 finalized what we call the NSR Reform Rule,\48\
which included a set of amendments to the PSD provisions that included
revisions to conform to the 1990 CAA Amendments. See 61 FR 38250 (July
23, 1996), 67 FR 80186 (December 31, 2002). In the preamble to the
final rule, EPA noted that based on a request from a commenter, EPA was
amending the regulations to ``clarify which pollutants are covered
under the PSD program.'' EPA accomplished this by promulgating a
definition for ``regulated NSR pollutant,'' and by substituting that
defined term for the phrase ``pollutant regulated under the Act'' that
was previously used in various parts of the PSD regulations. 67 FR
80240. The definition of ``regulated NSR pollutant'' includes several
categories of pollutants, including, in general, NAAQS pollutants and
precursors, pollutants regulated under CAA section 111 NSPS, Class I or
II substances regulated under CAA title VI, and a catch-all category,
``[a]ny pollutant that otherwise is subject to regulation under the
Act.'' E.g., 40 CFR 52.21(b)(50). The explicit inclusion of Class I or
II substances regulated under CAA title VI confirms that PSD applies to
non-NAAQS pollutants. 75 FR 31,561/3 to 31,562/1.
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    \48\ ``Prevention of Significant Deterioration (PSD) and
Nonattainment New Source Review (NNSR): Baseline Emissions
Determination, Actual-to-Future-Actual Methodology, Plantwide
Applicability Limitations, Clean Units, Pollution Control Projects--
Final Rule,'' 67 FR 80186 (December 31, 2002) (NSR Reform rule).
---------------------------------------------------------------------------

    In the Tailoring Rule, EPA went on to discuss other PSD and CAA
provisions, including their legislative history and interpretation in
the case law, that all support applying PSD to any pollutant this is
subject to regulation, including non-NAAQS pollutants. Id. 31,560/2 to
31,562/2.\49\
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    \49\ EPA gave additional reasons why it does not agree that PSD
applies only to NAAQS pollutants in the record for the Tailoring
Rule, ``Prevention of Significant Deterioration and Title V GHG
Tailoring Rule: EPA's Response to Public Comments,'' May 2010,
pp.38-41; and in EPA's court filings in defense of challenges to the
Tailoring Rule. ``EPA's Response To Motions To Stay'' 47-59
Coalition for Responsible Regulation v. EPA, No. 09-1322 (and
consolidated cases) (DC Cir. 2010), Coalition for Responsible
Regulation v. EPA, No. 09-1073 (and consolidated cases) (DC Cir.
2010), Coalition for Responsible Regulation v. EPA, No. 09-1092 (and
consolidated cases) (DC Cir. 2010), Coalition for Responsible
Regulation v. EPA, No. 09-1131 (and consolidated cases) (DC Cir.
2010) (hereafter, Coalition for Responsible Regulation v. EPA, No.
09-1322 (and consolidated cases)).
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ii. Automatic Application of PSD to Newly Regulated Pollutants
    Under the PSD applicability requirements, PSD applies to sources
automatically, that is, by operation of law, as soon as their emissions
of pollutants become subject to regulation

under the CAA. This is because CAA section 165(a)(1) prohibits ``major
emitting facilit[ies]'' from constructing or modifying without
obtaining a permit that meets the PSD requirements, and CAA section
169(1) defines a ``major emitting facility'' as a source that emits a
specified quantity of ``any air pollutant,'' which, as noted earlier,
EPA has long interpreted as any pollutant subject to regulation.
Whenever EPA promulgates control requirements for a pollutant for the
first time, that pollutant becomes subject to regulation, and any
stationary source that emits that pollutant in sufficient quantities
becomes a ``major emitting facility'' that, when it constructs or
modifies, becomes subject to PSD without any further action from EPA or
a state or local government.
    EPA regulations have long codified automatic PSD applicability. See
43 FR 26380, 26403/3, 26406 (June 19, 1978) (promulgating 40 CFR
51.21(b)(1)(i)) and 42 FR 57479, 57480, 57483 (November 3, 1977)
(proposing 40 CFR 51.21(b)(1)(i)) (applying PSD requirements to a
``major stationary source'' and defining that term to include sources
that emit specified quantities of ``any air pollutant regulated under
the Clean Air Act''). Most recently, in the 2002 NSR Reform Rule, noted
previously, EPA reiterated these requirements, although changing the
terminology to ``any regulated NSR pollutant.'' 67 FR 80,186. EPA
stated in the preamble: ``The PSD program applies automatically to
newly regulated NSR pollutants, which would include final promulgation
of an NSPS applicable to a previously unregulated pollutant.'' 67 FR at
80240/1.
    In most states with approved PSD programs, PSD does apply
automatically. However, in a minority of states with approved PSD
programs, it does not.\50\ Instead, each time EPA subjects a previously
unregulated air pollutant to regulation, these states must submit a SIP
revision incorporating that pollutant into its program. Despite the
time needed for the state to submit a SIP revision and EPA to approve
it, the pollutant-emitting sources in the state become subject to PSD
under the CAA as soon as EPA first subjects that pollutant to control.
Because under CAA section 165(a)(1) and 169(1), as interpreted by EPA,
a source that emits specified quantities of any air pollutant subject
to regulation cannot construct or modify unless it first receives a PSD
permit, as a practical matter, in a state with an approved PSD program
that does not automatically update and that has not been revised to
include the newly regulated pollutant, the sources may find themselves
subject to the CAA requirement to obtain a permit, but without a
permitting authority to issue that permit. As discussed later, this
action is needed because GHG-emitting sources in Texas would otherwise
confront that situation.
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    \50\ 75 FR at 53,897/3 (proposed GHG PSD SIP call).
---------------------------------------------------------------------------

    In a recent decision, the 7th Circuit, mistakenly citing to PSD
provisions when the issue before the court involved the separate and
different non-attainment provisions of CAA sections 171-193, concluded
that sources could continue to abide by permitting requirements in an
existing SIP until amended, even if that SIP does not comport with the
law. United States v. Cinergy Corp., No. 09-3344, 2010 WL 4009180 (7th
Cir. Oct. 12, 2010). In stark contrast to the nonattainment provisions
actually at issue in Cinergy--which are not self-executing and must
therefore be implemented through a SIP-PSD is self-executing; it is the
statute (CAA section 165), not just the SIP, that prohibits a source
from constructing a project without a permit issued in accordance with
the Act.
3. Implementation of GHG PSD Requirements
    Because PSD is implemented through the SIP system, EPA has taken a
series of actions to address the obligations of states (including
localities and other jurisdictions, as appropriate) to implement PSD
requirements for GHG-emitting sources. EPA has taken these actions
through the Tailoring Rule and a series of subsequent actions.\51\
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    \51\ A detailed description of EPA's implementation efforts, and
the status of state compliance with those efforts, is included in
Declaration of Regina McCarthy, Coalition for Responsible Regulation
v. EPA, DC Cir. No. 09-1322 (and consolidated cases) (McCarthy
Declaration), including Attachment 1 (Tables 1, 2, and 3), which can
be found in the docket for this rulemaking.
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a. Tailoring Rule
    EPA proposed the Tailoring Rule by notice dated October 27, 2009,
74 FR 55292. In that action, EPA proposed to phase in PSD
applicability, for GHGs, starting with a threshold of 25,000 tpy on a
CO2e basis. This threshold was above the statutory
thresholds of 100 or 250 tpy on a mass basis, depending on the source
category, for new construction).\52\
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    \52\ Even so, EPA recognized that many SIPs with approved PSD
programs would continue to require PSD permitting of GHG-emitting
sources at the statutory thresholds because these SIPs would remain
in place even after EPA finalized the Tailoring Rule. Until the
states revised those SIPs, sources in those states would remain
subject to those thresholds as a matter of both state and federal
law. This would result in the same problems of overwhelming
administrative burdens and costs that EPA designed the Tailoring
Rule to address. To solve these problems, EPA encouraged each
affected state to submit a SIP revision that EPA would approve to
raise the thresholds to conform to the Tailoring Rule. EPA
recognized that it would take time for the states to develop and
submit for approval such SIP revisions, and for EPA to approve them.
Accordingly, as an interim measure, EPA proposed, as part of the
proposed Tailoring Rule, to narrow its approval of the existing EPA-
approved SIPs so that those SIPs would remain approved only to the
extent they regulate GHG emissions at or above the Tailoring Rule
thresholds. Specifically, EPA proposed to rescind its approval of
the SIP permitting threshold provisions to the extent they required
PSD permits for sources whose GHG emissions fall below the proposed
Tailoring Rule thresholds. 74 FR at 55,340/3 to 55,343/3 (proposed
Tailoring Rule).
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    EPA finalized the Tailoring Rule by notice dated June 3, 2010. 75
FR 31514. Comments on the proposed rule had persuaded EPA that the
proposed GHG-applicability threshold was too low to avoid undue
administrative burdens. Accordingly, in the final Tailoring Rule, EPA
raised those threshold levels to, depending on the circumstances,
75,000 and/or 100,000 tpy on a CO2e basis, while retaining
the approach of a phase-in. EPA established the initial levels in the
first two steps of the phase-in schedule, committed the agency to take
future steps addressing smaller sources, and excluded the smallest
sources from PSD permitting for GHG emissions until at least April 30,
2016.
    In addition, in the Final Tailoring Rule, EPA incorporated the PSD
thresholds for GHGs in the definition of the term ``subject to
regulation.'' As noted previously, under EPA's PSD regulations, PSD
applies to a ``major stationary source;'' a ``major stationary source''
is defined as a source that emits 100/250 tpy on a mass basis of a
``regulated NSR pollutant;'' and a ``regulated NSR pollutant,'' in
turn, is defined as, among other things, a pollutant that is ``subject
to regulation'' under the CAA.\53\ In the Tailoring Rule, EPA added a
limitation to the term ``subject to regulation'' so that the only GHG
emissions that would be treated as ``subject to regulation'' (and
therefore subject to PSD) are those emitted at or above specified
thresholds of, depending on the circumstances, 75,000 and/or 100,000
tpy on a CO2e basis.\54\
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    \53\ 40 CFR 51.166(a)(7)(i), (b)(1)(i)(a), (b)(49).
    \54\ Specifically, under the revised definition of ``subject to
regulation,'' sources that emit at least the 75,000 and/or 100,000
tpy CO2e threshold amount of GHGs are subject to PSD as
long as the amount of GHG emissions also exceeds, in general, 100/
250 tpy on a mass basis for new sources and zero tpy on a mass basis
for modifications of existing sources. 40 CFR 51.166(b)(48), 75 FR
at 31,606; see EPA Office of Air Quality Planning and Standards,
``PSD and Title V Permitting Guidance for Greenhouse Gases (November
2010).

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    Some states advised EPA that it is likely they would be able to
implement the Tailoring Rule thresholds by interpreting the term
``subject to regulation'' in their SIPs, and without having to take
further action. A state's ability to take this approach would have
implications for how EPA needed to implement the Tailoring Rule.\55\
Accordingly, in the Tailoring Rule, EPA began a process to gather more
information about how states would implement permitting for GHG-
emitting sources.
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    \55\ Specifically, a state's implementation of the Tailoring
Rule in this manner prior to January 2, 2011 would obviate the need
for EPA to narrow its approval of that state's SIP, as EPA had
proposed in the proposed Tailoring Rule. Thus, in the Final
Tailoring Rule, EPA delayed final action on its narrowing proposal
so that EPA could gather information about the process and time-line
for states to implement the Tailoring Rule.
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b. 60-Day Letters
    To gather this information, EPA, in the Tailoring Rule, asked
states to submit letters within 60 days of publication of the Tailoring
Rule, which we refer to as the 60-day letters, concerning the status of
their PSD program and their legal authority for applying PSD program to
GHG-emitting sources. This information would help clarify, for each
state, the two central issues for PSD applicability to GHG-emitting
sources: (i) Whether the state has an approved PSD program that applies
to GHG-emitting sources; and (ii) if so, what action the state would
take to limit the applicability of its PSD program to GHG-emitting
sources at or above the Tailoring Rule thresholds.\56\ This information
would assist EPA to determine what, if any, action it needed to take
with respect to the states.
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    \56\ Alternatively, a state could choose to apply its PSD
program to sources below the Tailoring Rule thresholds and acquire
sufficient resources to implement the program as expanded, but no
state had indicated an intention to proceed in this manner.
---------------------------------------------------------------------------

    Almost all states submitted 60-day letters, generally by August 4,
2010. The letters, along with other information EPA received through
review of state requirements and further communications with state
officials, indicate that the states, localities, and other
jurisdictions may be divided into three categories, described below,
for purposes of EPA's implementation of the PSD program to GHG-emitting
sources.
c. The Three Categories of States and EPA's Implementation Process
    The first category, which includes 7 states, 35 subsections of
states, the District of Columbia, American Samoa, Guam, Puerto Rico,
the U.S. Virgin Islands, and Indian Territory, does not have an
approved SIP PSD permitting program. Instead, federal requirements
apply. Thus, implementation of PSD for GHG-emitting sources in these
jurisdictions is the simplest of all the states: GHG-emitting sources
will become subject to PSD and the thresholds in the Tailoring Rule
will apply as of January 2, 2011 without further action.\57\
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    \57\ McCarthy Declaration, paragraphs 28-33, page 8, and
Attachment 1, Table 1.
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    The second category includes 14 states and a number of districts
within states that have approved PSD SIPs, but those SIPs do not apply
the PSD program to GHG-emitting sources. This group includes Texas,
which is the focus of this action. The implementation process for this
category is discussed later.\58\
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    \58\ Id., paragraphs 34-55, pages 8-12, and Attachment 1, Table
2.
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