(b). Lack of information or alternative methodology to determine different estimates for GHG permits or thresholds

      A second reason why we would not lower applicability thresholds at this time even if we concluded that we had overestimated the numbers of GHG permits is that we would face significant information gaps, as well as a lack of any alternative methodology, which would preclude us from determining the appropriate thresholds at this time. For one thing, we do not have a clear idea as to the amount of the possible overestimate of GHG permits, in light of the fact that at least some of amount appears to be due to the recent economic downturn and slow recovery, as well as the other factors described above. Moreover, the actual number of GHG permits issued provides little information as to which of the many data points or assumptions and estimates in the methodology had inaccuracies and thereby led to the possible overestimate. Nor has any commenter suggested an alternative methodology that could make use of the data in a manner that leads to a reasonable determination of the threshold.

      In essence, the EPA's methodology is a type of a model that cannot mirror the real world perfectly. In the Tailoring Rule, the EPA acknowledged that many steps in its methodology carried uncertainty. See Tailoring Rule Summary of Methodology at 6 (noting uncertainty of "accurately predicting which of the 519 nonattainment actions might also coincide with a PSD action related to GHG emissions..."); 9 (noting necessity to make assumptions concerning how many formerly minor modification projects would be subject to major PSD review at the different GHG significance levels options "in the absence of experience and quantitative information from commenters"); 13 (noting "some level of uncertainty" in applying the same modification rate to GHG-only sources as to conventional sources). Inaccuracies in any one or more of the many assumptions in the methodology, depending on what those inaccuracies are, could result in over-estimates in the number of permits. By the same token, inaccuracies in the underlying data, such as the estimates of permit activity in the NSR ICR, could also result in over-estimates in the amount of GHG permitting activity.

      However, even if we were to conclude that the fewer than expected number of GHG permits to date means that the data sets or methodology do contain inaccuracies that are the cause for at least part of an over-estimate, little information is available that would allow identifying which data points or assumptions are inaccurate, measuring the extent of those inaccuracies or, as a result, determining more accurate estimates. That is, the EPA has little basis for correcting its data sets and methodology. By the same token, no commenter has suggested any alternative methodology that could make use of the information available (and, in light of the extensive process we employed for developing our methodology, we would not expect any alternative to be readily available). As a result, if, for example, the EPA were to conclude that in fact the number of "anyway" PSD and nonattainment GHG permits at the 100,000/75,000 threshold level is fewer than the EPA's methodology estimates, the EPA has little basis for estimating what the number of those permits actually is at those thresholds, or what the number of those permits would be at lower thresholds. The same is true, as another example, for minor modifications becoming newly major. Accordingly, the current state of our information renders it impossible, based on our current methodology, to determine more accurate numbers of GHG permits and, again, we have no other methodology with which to make that determination.

      As a result, if we were to attempt to lower the thresholds at this time, as an environmental advocacy organization commenter urges, we would risk negative consequences. At such lower thresholds, permitting authorities might face administrative burdens higher than what we would expect. This is because lowering the thresholds without a methodology that we can rely on could result in more than the expected numbers of new construction and modifications becoming subject to PSD and more than the expected numbers of sources becoming subject to title V. In addition, as noted, lowering the thresholds could well increase permitting authority administrative expenses for hiring, training, education, and outreach; and again as noted, we have not accounted for those expenses in determining overall permitting burden. Thus, attempting to lower the thresholds at this time would give rise to risks that permitting authorities could incur unexpectedly high administrative burdens that could delay PSD and title V permitting.

(c). Expectation of receiving additional information over time

      A third reason why we would not lower applicability thresholds at this time even if we concluded that we had over-estimated numbers of GHG permits is that we expect to receive more information over time that may shed light on the accuracy of various aspects of our data sets and methodology, and that therefore will facilitate, as necessary, determining more accurate burden estimates and more accurate applicability thresholds.

      An important set of new data will cover Step 2 title V permits. Sources that were already subject to title V due to their non-GHG pollutants have been subject to requirements for their GHG emissions since January 2, 2011, but to this point, no more than a very low level of permitting activity has resulted from those obligations. As a result, we have little actual information concerning numbers of title V permits or other aspects of title V permitting. The level of title V permitting is expected to increase sharply beginning July 1, 2012 because title V permit applications for sources not otherwise subject to title V are due at that time. These sources became subject to title V requirements under Tailoring Rule Step 2 as of July 1, 2011, and under CAA section 503(c), must submit their permit application within 12 months of that date. Information we receive about title V permitting activity will be important for assessing the accuracy of both the title V and PSD applicability thresholds because, as we noted in the Tailoring Rule, many permitting authorities administer PSD and Title V with the same resources:

      We should also note that in this rulemaking we are justifying our conclusions about permitting authority administrative burdens on the basis of their PSD and title V cost as calculated on both a separate basis and a combined basis. That is, we believe that the administrative burdens of the PSD program justify our tailoring approach for the PSD requirements, and the administrative burdens of the title V program justify our tailoring approach for the title V requirements, but in addition, the administrative burdens of both programs on a combined basis justify the tailoring approaches. Viewing the administrative burdens on a combined basis provides a useful perspective because most permitting authorities have a single organizational unit that is responsible for both the PSD program and the title V program, and in many cases, the same employees work on both programs. In addition, in some jurisdictions, permitting authorities issue a single, merged permit that includes both PSD and title V requirements. For these reasons, considering administrative burdens on a combined PSD and title V basis, offers a more accurate picture of the issues these agencies will face in transitioning to GHG permitting.

75 FR 31537/col. 2.

      In addition, as noted, we have reason to expect to see greater numbers of GHG permits in the future. That will yield more information about permitting activity.

It should also be recalled that the permitting authority's administrative burdens depend not only on the numbers of permit applications, but also on the time needed to process the applications. Although the EPA's methodology includes estimates for that time, which varies depending on the permitting activity, to this point, no information has been provided to the EPA to verify or call into question those estimates. In addition, as noted, permitting authorities have other administrative expenses  -  hiring and training of staff, public education and outreach for the regulated community, enforcement  -  that are part of their administrative burdens but that we did not attempt to quantify in the Tailoring Rule. We expect that we may well receive information over time about these components of GHG permitting, which could lead to adjustments to the thresholds.

      Below we discuss in more detail our upcoming efforts to collect more information about permitting activity, our timeline, and how that relates to the rest of the phase-in process established in the Tailoring Rule. Here, it is important to emphasize that this new information may point towards adjustments in overall permitting burden and, ultimately, in the applicable thresholds, but at present, we cannot predict the direction and extent of those adjustments. As a result, attempting to make an adjustment at this time to permitting thresholds based on the information concerning numbers of GHG permits would amount to a piecemeal approach, one that would lead to calls for the EPA to continue to revise the data sets, methodology, permitting burdens, and thresholds whenever additional information became available that pointed towards a different burden estimate and therefore a different threshold. Such a piecemeal approach would create significant uncertainty for the permitting authorities and regulated community, and we decline to adopt it.

      For all these reasons, it would be premature to attempt to lower the permitting thresholds based on the partial information we have concerning numbers of GHG permits.

D. State capacity       Another reason why we disagree with the comment from the environmental advocacy organization commenter (19269) that thresholds should be reduced at this time is that state permitting resources do not appear to be higher, and in many cases could well be lower, than what they were at the time we finalized the Tailoring Rule in June, 2010. 75 FR 31514 (June 3, 2010). This reduction in permitting resources offsets to at least some extent the fact that, at the present time, permitting authorities have less of an increase in GHG permitting burden than we estimated in the Tailoring Rule. In addition, this reduction leads us to be cautious in considering increasing GHG permitting burdens by lowering the applicability thresholds.

      As we noted in the Step 3 proposal:

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

77 FR 14235/col.2. We did not receive any comments to the contrary.  Some states or localities provided information that their resources for GHG permitting were falling, either because of lower overall resources or because of other regulatory demands. The South Coast Air Quality Management District (SCAQMD) (19280) stated:

      ... SCAQMD's overall staffing, as well as permitting resources, continue to drop.  Between the years 2011-2012 and 2016-2017, SCAQMD plans to reduce its total authorized staffing from 817 to 755, a reduction of about 7.6%. (Moreover, SCAQMD has already reduced its authorized staff from over one thousand positions in the early 1990s.) While it is unknown exactly which positions will be eliminated, it is reasonable to expect that a proportionate share of permit processing staff positions will be eliminated. These staff reductions are necessary in order for SCAQMD to ultimately achieve a balanced budget by 2015....

      The State of Nevada (19304) stated:

      .... Nevada's universe of Title V sources will increase by approximately 150% over the next few years. In addition to impacting our permitting resources, this expansion of the Title V universe will place an immense burden on Nevada's oversight resopnsibilities for compliance and enforcement.

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

E. Future data collection and response to commenters' suggestion for a supplemental proposal

      In the preamble, we describe our intentions to collect additional information about permitting activity, and we respond to environmental advocacy organization (19292) commenters' suggestion that instead of finalizing Step 3 at this time, we issue a supplemental notice of proposed rulemaking.

Other Comments Received on the Proposed Thresholds

2.3.1	Comments on a Permanent Exclusion for Small Sources

Comment:

	Two industry commenters (19265, 19276) asserted that the EPA has fallen short by not addressing a permanent exclusion for smaller sources as discussed for Step 3 in the final Tailoring Rule. The commenters asserted that the clear intent of Congress for the PSD and title V programs is that these programs apply only to major sources and that a GHG major source threshold for combustion, comparable to criteria pollutant major sources, would be between 100,000 to over 700,000 tpy CO2e. The commenters acknowledged that the EPA has discretion to fashion an interpretation that is a reasonable construction of the statute when Congressional intent is unclear, but they stated that it is hard to imagine that Congress ever envisioned PSD or title V programs addressing GHG emissions.

Response:

      Nothing in the Tailoring Rule  -  its regulations or preamble discussion  -  obligated the EPA to take action during Step 3 to address a permanent exclusion for smaller sources. See 75 FR 31572 (Tailoring Rule). The EPA did not include such an exclusion in its Step 3 proposal, and we are not taking final action on such an exclusion in this rulemaking. Accordingly, we are not further addressing these comments.              For the sake of completeness, if we were required to address such an exclusion in this Step 3 action, we add that it is too soon in the phase-in process to consider a permanent exclusion for smaller sources. This is because, among other things, we have not had the opportunity to develop and evaluate the effectiveness of certain streamlining techniques that may be available with respect to smaller sources. As a result, we cannot at present determine whether, and to what extent, the burdens associated with permitting smaller sources can be mitigated.

2.3.2	Comments on a Permanent Exclusion/Deferral for Biogenic Emissions

Comment:

	Five industry commenters (19265, 19275, 19276, 19279, 19289) advocated for a permanent deferral or exclusion for biogenic CO2 emissions.

	Two of these industry commenters (19265, 19289) requested that the EPA discuss the biogenic deferral and provide a perspective on what will occur if this deferral becomes permanent. The commenters supported a permanent deferral for biogenic CO2 from the Tailoring Rule.

	Another of the commenters (19275) also expressed strong support for continued exclusion of biogenic CO2 emissions in the final rule. The commenter requested that the EPA explain in the preamble to the final rule that, as a result of the deferral rule, biogenic CO2 emissions are not subject to Step 3 of the Tailoring Rule.

	Highlighting the allowance for the 3-year deferral of biogenic emissions and EPA's Step 3 proposal analysis of the permitting burden that appears to exclude biogenic CO2 emissions from waste sector sources, specifically MSW landfills and waste-to-energy facilities, one industry commenter (19276) requested that the EPA expeditiously promulgate an exclusion of biogenic CO2 emissions.

	One industry commenter (19279) requested that the EPA promulgate a final rule to replace its temporary 3-year biogenic CO2 deferral with a permanent exclusion. The commenter stated that regulation of biogenic GHG emissions (1) conflicts with international, federal, and state GHG policies and initiatives; (2) is counterproductive to growth in renewable energy sources; and (3) will create significant and complex permitting burdens. In addition, the commenter asserted that recovery of energy from MSW biomass (in the case of MSW landfills) does not pose land use or carbon stock changes and results in net GHG reductions. The commenter suggested that the EPA establish a categorical exemption for biogenic CO2 emissions from landfills and associated beneficial use projects.

Response:

      The EPA appreciates the commenter's views. The EPA is using the time under the Deferral for CO2 Emissions from Bioenergy and Other Biogenic Sources under the Prevention of Significant Deterioration (PSD) and title V Programs to study the science surrounding biogenic CO2 emissions and is developing an accounting framework to assist permitting programs and sources. Specific issues related to the merits (or consequences) of making the deferral permanent are premature pending the EPA's examination of the science associated with biogenic CO2 emissions from stationary sources and related issues, as well as beyond the scope of this rulemaking. Following its examination of the science, the EPA plans to conduct a subsequent rulemaking to determine how biogenic emissions of CO2 should be treated under the PSD and title V programs.

2.3.3	Comments on the Need to Analyze the Impact on Sources in Evaluating Thresholds

Comment:

	One industry commenter (19281) alleged that the EPA has avoided conducting any analysis of the economic burden of interpreting the CAA as requiring PSD and title V permitting for GHG emissions by claiming that the Tailoring Rule is a "relief" rule. The commenter stated that Step 3 of the Tailoring Rule involves reconsidering of the thresholds that are in place, therefore, the EPA is now in the position of determining what the regulatory burdens on GHG sources going forward will be and the scope of such sources that would be burdened by such regulations. In determining those burdens, according to the commenter, the EPA is obligated to consider the economic impact of its actions and cannot proceed ignorant of those impacts.

	Another industry commenter (19278) stated that regulating GHGs under the CAA and PSD is making smaller sources subject to federal permitting rather than state permitting for modifications. The commenter asserted that this inhibits small businesses' ability to compete effectively in the marketplace. The commenter argued that, in order for the EPA to analyze the true impact of GHG Tailoring Rule changes, a more accurate analysis is needed, which would include an assessment of minor source permitting.

	One industry commenter (19262) stated that the EPA should consider impacts on stationary sources when determining whether to lower the permitting thresholds in the future. The commenter further stated that the EPA needs to place a greater emphasis on the direct and indirect effects on regulated entities that will result if, and when, the EPA decides to lower the permitting thresholds. The industry commenter (19262) asserted that the EPA must consider the current uncertainty and impact that lowering the permitting thresholds will have on regulated entities. The commenter requested that the EPA provide greater assurance that the applicability thresholds will not be lowered beyond 2016. Along with considering the impacts of a lower threshold on regulated entities, the commenter requested that the EPA explain whether it intends to require permits for lower thresholds in the future, and if so, when and at what levels.

Response:

      With respect to the comments by industry commenter (19281), as discussed in the proposal, this rule would not change the existing GHG permitting thresholds, and therefore would not impose any additional burden on any sources, including small entities, to obtain PSD or title V permits or on any permitting authorities to issue such permits. Furthermore, the proposed provisions for GHG PALs would have the effect of reducing permitting burden on entities, including small entities, in that the burden associated with obtaining or issuing a PAL permit would be more than offset through avoiding subsequent PSD permitting actions with greater associated burden. We have therefore concluded that this rule will be neutral or relieve the regulatory burden for all affected small entities.

      With respect to the comments by industry commenter (19278), as noted above, the methodology in the Tailoring Rule did take into account the administrative burdens associated with modifications by sources that would be minor sources based solely on their non-GHG emissions, but that become subject to PSD by virtue of their GHGs.  In any event, for the reasons discussed, we are not reviewing the Tailoring Rule methodology in this Step 3, but we intend to track permitting activity in the states to facilitate any such review, to the extent appropriate, in the upcoming five-year study and Step 4.

	With respect to the comments by industry commenter (19262), we appreciate these comments. They are not relevant to the Step 3 rulemaking because (i) as noted, the three criteria as the EPA interprets and applies them point towards determining not to lower the thresholds, and as a result, it is not necessary to consider impacts on sources; and (ii) it is not necessary in this action to determine the course of future rulemaking, including the extent to which to consider impacts on sources in future rulemaking.

2.3.4	Comments on "GHG-Only" Sources

Comment:

	Two industry commenters (19278, 19281) asserted that the current threshold of 100,000 tpy CO2e makes facilities major for PSD that would not be major for PSD based on conventional pollutants and the EPA should not increase this burden (i.e., the EPA should not lower the GHG threshold below 100,000 tpy in any future step). The commenters provided examples of facilities that would be major emitting facilities for GHG emissions but not for conventional regulated pollutants under PSD (i.e., minor for all pollutants other than CO2e at the Tailoring Rule level threshold). Industry commenter (19281) argued that triggering PSD for GHG emissions at well-controlled units is a significant road block to clean energy projects such as combined cycle power plants and inside-the-fence-cogeneration, which would be in direct opposition to the EPA's GHG policy.

	One industry commenter (19287) reported that the Tailoring Rule resulted in a number of its sites becoming "major" for GHG emissions and subject to title V and PSD rules for the first time, and that it is still in the process of applying for its title V permits. The commenter believes that, as such, regulatory agencies are just now beginning to see the impact of the new GHG rules to complex sources such as semiconductor fabrication facilities. Another industry commenter (19290) also reported that the semiconductor industry is just now addressing the operating permit requirements of the Step 2 rule, and that, in the semiconductor industry, a number of facilities are being brought into the title V permitting program for the first time based solely on their GHG emissions.

	One industry commenter (19272) presented an overview of information gathered on projects implemented by the company over the past 5 years. The commenter included a table illustrating that no energy project undertaken by the company in the last 5 years triggered PSD for currently-regulated pollutants, but 8 out of 10 new facility construction projects would have triggered PSD for CO2e, and 3 out of 5 projects would have constituted PSD modifications for CO2e.

Response:

      The EPA appreciates these comments and the data they provide. The EPA believes these comments are consistent with our determination that the thresholds should not be lowered at this time. It is not necessary to respond specifically to these comments in this rulemaking because, on the basis of the three criteria, we are determining not to lower the thresholds. In addition, as noted, in this rulemaking, we are not required to, and we did not propose to, establish any permanent exclusions.        2.3.5  Other Comments

Comment:

	Industry commenters (19270, 19273, 19278, 19281, 19282, 19285, 19306) reiterated comments that they made during the Tailoring Rule and litigation over the Tailoring Rule that PSD does not apply to GHGs or that it applies in a limited way, such as only if the source is subject to PSD due to its emissions of NAAQS pollutants. An industry commenter (19306) added that the EPA should respond to pending petitions to reconsider the Tailoring Rule that raised these points.

Response:

	The EPA addressed the issue of the applicability of PSD to GHGs in the Tailoring Rule and is not re-opening that issue in this Step 3 rulemaking. For the sake of completeness, if these comments were relevant to this Step 3 rulemaking, the EPA's response would be the same as the EPA stated in the Tailoring Rule, 75 FR 31560/col. 2  -  31562/col. 2, the related sections in the Tailoring Rule Response to Comment document, and the EPA's merits brief in the challenge to the Tailoring Rule in the D.C. Circuit. The EPA's timing for responding to the pending petitions to reconsider the Tailoring Rule is also not relevant to this rulemaking.

Comment:

	An industry commenter (19285) stated that the Tailoring Rule cannot be justified under the administrative necessity or one-step-at-a-time doctrines.

Response:

	The EPA addressed the issue of the applicability of the administrative necessity and one-step-at-a-time doctrines in the Tailoring Rule, and is not re-opening that issue in this Step 3 rulemaking. For the sake of completeness, if this comment were relevant to this Step 3 rulemaking, the EPA's response would be the same as the EPA stated in the Tailoring Rule, 75 FR 31541/col. 2  -  31579/col. 2; the related sections in the Tailoring Rule Response to Comment; and the EPA's merits brief in the challenge to the Tailoring Rule in the D.C. Circuit..

Comment:

	An industry commenter (19282) stated that the EPA must ensure that in any future action that revises the PSD or title V thresholds that those thresholds do not become applicable before the standard statutory periods for SIP and Title V program revision under Section 110 and title V, respectively.

Response:

	This comment is not relevant to this rulemaking. As a result, we do not respond to it here.

Comment:

	An industry commenter (19282) advised the EPA, beyond confirming the thresholds, to terminate this rulemaking and process the SIP and title V backlog as well as approve what it called SIP "sunsetting" provisions concerning GHG permitting requirements.

Response:

	Because these comments are not relevant to this rulemaking, we do not respond to them here.

Comment:

	An industry commenter (19281) stated that the EPA unlawfully included six GHGs as subject to PSD permitting requirements in the Tailoring Rule, even though only four GHGs were made "subject to regulation" by the Tailpipe Rule.

Response:

	The EPA addressed the issue of which pollutants were subject to PSD and title V in the Tailoring Rule, and is not re-opening that issue in this Step 3 rulemaking. Thus, this comment is not relevant to this rulemaking. For the sake of completeness, if this comment were relevant to this Step 3 rulemaking, the EPA's response would be the same as the EPA stated in the Tailoring Rule, 75 FR 31527/col. 1  -  31530/col. 1; the related sections in the Tailoring Rule Response to Comment; and the EPA's Tailoring Rule merits briefs.

Comment:

	An industry commenter (19281) stated that the EPA imposed the Tailoring Rule upon the states through their SIPs in an unlawful manner, failed to conduct an analysis of the economic burdens imposed by the Tailoring Rule, and violated the CAA's express command that the EPA may not exempt any source from title V permitting requirements.

Response:

	The EPA addressed these issues in the Tailoring Rule, and is not re-opening these issues in this Step 3 rulemaking. Thus, this comment is not relevant to this rulemaking. For the sake of completeness, if these comments were relevant to this Step 3 rulemaking, the EPA's responses would be the same as the EPA stated in the Tailoring Rule, the related sections in the Tailoring Rule Response to Comment, and the EPA's Tailoring Rule merits briefs.

Comment:

	Virtually all of the state, industry, and environmental advocacy organization commenters provided comments on streamlining measures other than PALs, including the EPA's proposal concerning synthetic minors as well as the other streamlining measures on which the EPA solicited comment. In addition, one industry commenter (19281) commented requiring consideration of carbon capture and sequestration (CCS) technology as part of the BACT analysis is time-consuming and costly, and that because CCS is not commercially available, its analysis should not be required part of any BACT analysis.

Response:

	We appreciate these comments. As discussed, we are carefully analyzing possible streamlining methods and are working with a Clean Air Act Advisory Committee workgroup that is focused on streamlining methods. The information, insights, and perspective that these commenters offer is valuable. In this Step 3 rulemaking, we are not taking action on any streamlining method other than PALs, and as a result, we will not respond to these comments now, but will consider them as we continue to analyze and develop streamlining methods. The comment concerning the treatment of CCS in determining BACT is not relevant to this rulemaking and as a result, we will not respond to that comment now.

Comment:

	An industry commenter (19283) urged the EPA to confirm that GHG-only sources are not subject to PSD review for non-GHG pollutants.

Response:

	This comment is beyond the scope of this rulemaking, and, accordingly, we are not responding to it here. We refer the commenter to a question-and-answer document we issued on March 15, 2011, entitled "Triggering PSD at Non-Anyway Sources and Modifications," which has information relevant to this comment.

http://www.epa.gov/nsr/ghgdocs/TriggeringPSDatnonAnywaySourcesandMods.pdf.

Comment:

	An industry commenter (19270) stated that the EPA should focus its resources primarily on the development of a cost-effective NSPS program that can, by stages, satisfy and displace the use of individual permitting to address GHG emissions.

Response:

	This comment is beyond the scope of this rulemaking, and, accordingly, we are not responding to it here.

Comment:

	An industry commenter (19278) stated that the EPA should defer action on Step 3 until after the D.C. Circuit hands down its decisions on the Tailoring Rule and other GHG cases.

Response:

	The EPA is respectful of the Court's processes and recognizes that the Court's decisions, depending on what they are, could impact this Step 3 rulemaking. The EPA believes it preferable to maintain the schedule for Step 3 action provided under the Tailoring Rule regulations because that approach provides greater certainty for stakeholders. If the Court's decisions may require revisions to the Step 3 rulemaking, the EPA will consider those revisions as appropriate.

Comments on PALS for GHGs

      The comments and response in this section concern the EPA's proposal to revise the PSD regulations for Plantwide Applicability Limitations (PALs) for GHG emissions, so that GHG PALs provide sources with the same kind of operational flexibility as PALs provide for other pollutants and as a way to streamline PSD applicability determinations for GHGs.

Comments on GHG PALs in General

Comment:

	Fifteen industry commenters (19253, 19258, 19259, 19262, 19265, 19270, 19271, 19273, 19276, 19279, 19285, 19287, 19288, 19290, 19303), six state and local agency commenters (19260, 19264, 19266, 19267, 19280, 19291), and one state solid waste authority (19289) expressed general support for the concept of GHG PALs, although some had misgivings about some aspect(s) of the proposal. Supporting commenters generally indicated that GHG PALs can streamline PSD permitting and reduce administrative burden for some sources. Two commenters (19259, 19291) stated that PALs should be available for GHGs to be consistent with the treatment of other regulated NSR pollutants. Three supporting commenters (19262, 19287, 19290) noted that PALs provide increased flexibility, certainty, and the ability to respond rapidly to changing market conditions. One of these commenters (19290) listed the benefits of PALs, including creating an incentive to minimize emissions to create room for expansions, providing planning certainty, streamlining modifications, lowering permitting workload overall, and enhanced emissions reporting and availability of information to the public. Two industry commenters (19287, 19290) and one state agency commenter (19291) stated that the PAL provisions should be finalized as soon as possible based on the proposal. The state agency commenter (19291) asserted that this is necessary so existing PAL permit holders can utilize the flexibility afforded by PALs under their current permits.              Five industry commenters (19262, 19270, 19273, 19285, 19288) and one local agency commenter (19280) specifically expressed support for the proposal to allow GHG PALs to be used as an alternative approach for determining whether GHG emissions are subject to regulation and whether a project is a major modification for purposes of permitting. One industry commenter (19262) elaborated that PALs provide sources with operational flexibility and add certainty to the process by providing assurance that a source's GHG emissions are not subject to regulation and will not trigger a major modification.

	Five industry commenters (19278, 19281, 19282, 19284, 19306) and two environmental advocacy group commenters (19269, 19292) generally oppose GHG PALs as proposed. The opposing industry commenters generally indicated that the proposed PALs offer little in the way of streamlining and seem to complicate processes already put in place by states to limit emissions of pollutants. One of the industry commenters (19278) added that PALs are complex instruments to negotiate and the fact that they expire after a fixed period of time leaves businesses with significant uncertainty about future operations. One commenter (19278) thinks the proposal did not adequately explain why GHG PALs are the EPA's preferred streamlining approach or why PALs are needed. One environmental advocacy agency commenter (19269) opposes GHG PALs because they will be used to avoid installation of new pollution controls, and they will reduce the opportunities for agency oversight and public input because permitting reviews would be less frequent. Many of these commenters prefaced their comments on the Step 3 proposal by stating that they do not believe that the EPA's regulation of GHGs under the Act is appropriate or legal. These commenters often made clear that they were not conceding this point by providing comments on the GHG PAL proposal.

Response:              In the Tailoring Rule, we did not identify PALs as a viable streamlining technique for GHG sources. However, since we finalized the Tailoring Rule, we have recognized that plantwide limitations could be designed in a way that would be useful for easing the administration of GHG permitting. In the EPA's March 8, 2012 notice proposing Step 3, the EPA proposed to revise the PSD regulations for GHG PALs. The EPA stated, "We believe that this action will streamline PSD permitting programs by allowing sources and permitting authorities to address GHGs one time for a source and avoid repeated subsequent permitting actions." 77 FR at 14,228/col. 2. We considered changes to the existing PAL rules to address the unique PSD applicability aspects associated with GHGs and to provide greater operational flexibility, while making application of PAL rules to GHGs more consistent with the outcome achieved when those rules are applied to regulated NSR pollutants other than GHG.                 We are finalizing the proposed streamlining measure that would revise the PAL permitting program to allow permitting authorities to issue GHG PALs on either a mass basis (tpy) or a CO2e basis, including the option to use the CO2e-based increases provided in the subject to regulation thresholds in setting the PAL, and to allow PALs to be used as an alternative approach for determining whether a project is a major modification and whether GHG emissions are subject to regulation. The changes in this final rule will provide for better implementation of PALs for GHGs, which are consistent with the approach to GHG permitting described in the Tailoring Rule, and thus can play a relevant role in our strategy for developing streamlining options for permitting authorities to help ease the administrative burdens associated with GHG permitting for sources and permitting authorities alike.                Similar to some of the commenters, we believe that GHG PALs can provide certain environmental and permitting benefits, and that GHG PALs should work more like PALs for other pollutants and should provide assurance that a source's GHG emissions are not subject to regulation and will not trigger a major modification. Accordingly, this rulemaking allows GHG PALs to provide sources increased operational flexibility and regulatory certainty, as well as streamlining GHG PSD applicability determinations, because it will allow GHG PALs to be used to determine whether a project is a major modification and whether GHG emissions are subject to regulation. Thus, during the PAL term, a source may make modifications without triggering PSD applicability and PSD permitting obligations for GHGs, as long as it complies with its GHG PAL. If the source complies with its PAL, it need not separately analyze whether its GHGs are subject to regulation or whether the change is a major modification for GHGs.  This certainty could help sources with planning or with the ability to respond to rapidly changing markets, by reducing potential delays from permitting. The fact that PALs expire after 10 years does not lessen the certainty provided during those 10 years, and a PAL may be renewed at the end of the PAL term consistent with the PAL regulations to provide ongoing certainty to sources.  In addition, GHG PALs could also reduce GHG workload burdens on permitting authorities by decreasing the number of PSD permit applications that permitting authorities must process for these sources over the long term.              While we anticipate that GHG PALs over the long run will result in a lessening of permitting burdens and will be accounted for in determining the viability of lowering the thresholds at Step 4, it will take time for permitting authorities and the regulated community to gain experience with GHG PALs. Even though we do believe that GHG PALs are a valuable tool for streamlining the permitting process for GHGs, we do not anticipate a significant reduction in permitting burdens in the short term as a result of their implementation.  In the overall structure of the Tailoring Rule phase in process, however, the long term benefits could ultimately free up resources to be able to more fully implement the program.              Moreover, we believe the approach to PALs in the final rule will provide air quality benefits by encouraging sources to reduce GHG emissions through efficiency improvements or the use of other emission reduction procedures, processes or equipment before such sources are subject to PSD permitting for GHG, and may encourage sources potentially subject to PSD to minimize their emissions to stay under the PAL and avoid triggering major modification permitting requirements. We also believe that compliance with a GHG PAL generally assures that the environment remains protected from adverse air impacts resulting from changes a source undertakes in compliance with such a PAL, because emissions cannot exceed this pre-established level without further review. A PAL also results in environmental benefit by providing the community with an understanding of the long-term emissions impact from a facility, by preventing emissions creep (i.e., a series of unrelated individual emissions increases that are below major NSR applicability thresholds) and by requiring enhanced monitoring, recordkeeping and reporting provisions to demonstrate compliance with the PAL.               In response to the comments that PALs do not offer significant streamlining and seem to complicate existing state mechanisms for limiting emissions, the EPA notes that, as explained above, PALs may offer streamlining of GHG PSD applicability determinations and permitting.  The decision of any source to request a GHG PAL and the decision of any permitting authority to either adopt the GHG PAL regulations or issue a GHG PAL are completely voluntary. There is no requirement for sources and permitting authorities to use these rules if they believe that a GHG PAL would not streamline the permitting process. We received comments indicating that some sources and permitting authorities do believe they offer streamlining benefits, so we have decided to finalize those changes.  Likewise, any source that feels that a PAL is too complex to negotiate and/or does not provide enough certainty about future operations can choose other permitting options as appropriate for their operations and as provided for under existing federal law and/or the SIP-approved permitting programs in their area.

      However, the fact that the EPA is moving forward with these GHG revisions to the federal PAL permitting program in 40 CFR 52.21 is not intended to limit the availability of other processes put into place by states, as consistent with the applicable EPA-approved state implementation plans (SIPs).  Moreover, the EPA intends to continue to evaluate other streamlining options for GHG permitting, including through further evaluation of streamlining comments on this proposal and the forthcoming recommendations of a recently established Clean Air Act Advisory Committee on this subject.                   In response to the comment that GHG PALs will be used to avoid installation of pollution controls and will reduce the opportunities for agency and public oversight, the EPA notes that, as explained above, a GHG PAL imposes an overall limitation on GHG emissions from the plant that remains in place for 10 years, providing the public and permitting authorities with an understanding of the long-term GHG emissions impact of the source. The PAL regulations contain public participation requirements to ensure that the public has the opportunity to be involved in the PAL permitting process and provide input. As to agency oversight, the PAL regulations (and the regulations generally governing the CAA permits in which those limits will be contained) provide for oversight of the permit to ensure that violations of the PAL can be detected and handled appropriately, including stringent record-keeping, monitoring, and reporting requirements and CAA enforcement mechanisms.                In response to the commenters opposing the EPA's regulation of GHGs under the Act, the EPA notes that the EPA has explained this authority to regulate GHGs in prior actions, including the original Tailoring Rule, and the revision of the PAL regulations to better accommodate GHG emissions does not reopen those prior determinations. Thus, this comment is beyond the scope of the present rulemaking.                     Accordingly, the final Step 3 rule amends the PSD regulations at 40 CFR 52.21 to create authority for reviewing authorities applying the federal PSD permitting program to issue PALs to major and potentially-major GHG stationary sources recognize the unique applicability characteristics of GHGs and provide GHG sources with greater operational flexibility.

Comment:         Five industry commenters (19278, 19281, 19282, 19284, 19306) believe that the proposed GHG PALs do not offer significant streamlining opportunities. One of the commenters (19284) noted that PALs are resource-intensive permits to obtain as a general matter and permitting authorities have limited resources to devote to them. Another industry commenter (19306) similarly stated that GHG PALs for minor sources would require significant resource investment by regulators and sources, adding that the EPA has not justified adoption of their proposals for PALs. A third industry commenter (19282) asserted that the implementation of GHG PALs for criteria-pollutant-major-sources or GHG-only sources will not provide meaningful streamlining, and even if they could, the timeline for developing the regulatory authority and then implementing such PALs is daunting given that the EPA has not proposed regulatory language for any of the PAL provisions. Another industry commenter (19281) concluded that the EPA's efforts may best be prioritized towards other streamlining measures. One commenter (19278) stated that the EPA does not explain why emission monitoring under 40 CFR 52.21(a)(2)(iv) to determine whether the source triggers the `subject to regulation' definition," is disfavored as a matter of law or policy, or how a PAL can provide for superior outcomes.

	Three of the industry commenters (19278, 19282, 19306) urged the EPA to recognize that approaches currently employed by states to limit the potential-to-emit of pollutants (such as synthetic minor limitations, cap-based permits, and flexible permits) may be used to limit GHGs, so in most cases the EPA's proposed PAL approaches are unnecessary. One of the commenters (19278) questioned whether sources would need or want to obtain PALs because these simpler approaches are available. Another industry commenter (19282) asserted that states have issued cap-based permits for years under their minor NSR programs and even pursuant to major NSR. This commenter does not believe that the EPA intended to limit flexibility that might be afforded in a SIP or state title V program that would remove sources from the PSD program for GHGs or would otherwise provide streamlining. The commenter added that it is important for the EPA to recognize that these permitting approaches exist in evaluating the need for and likelihood of use for additional regulatory programs that may serve the same purpose.

      One environmental advocacy agency commenter (19292) is concerned that whether a PAL program could reduce permitting burdens since (a) thresholds must be reduced as far as possible as soon as possible; (b) PALs must be cancelled or amended as soon as thresholds are reduced, and (c) the EPA believes any benefits from PALs would not accrue for at least 3 years, 77 FR 14237. Also, this commenter asserted that the EPA's PAL proposal is not justified by the administrative impossibility rationale or particular evidence that it would be impossible to administer the programs considering the structure of PALs in the Step 3 proposal.

Response:

      In the Tailoring Rule, we explained that the impacts of requiring PSD and title V permitting for GHGs at the applicability thresholds set forth in the Act were so severe that they bring the judicial doctrines of "absurd results," "administrative necessity," and "one-step-at-a-time" into the Chevron two-step analytical framework for statutes administered by agencies. On this basis, we promulgated the phase-in of the applicability of PSD and title V to GHG-emitting sources so that those requirements would apply "at least to the largest sources initially, at least to as many more sources as possible and as promptly as possible over time ... and at least to a certain point." However, we did not indicate that every subsequent action under the Tailoring Rule would need to be separately justified under these judicial doctrines. Because the GHG PAL actions finalized today are meant to provide additional easing of burdens identified in the Tailoring Rule, and are not separate deviations from statutory requirements addressed in the Tailoring Rule, the EPA does not believe that these revisions need to be separately justified under the administrative necessity doctrine. (See also Responses provided in Section 2.2 above, addressing comments that the Step 3 proposal required separate justification.) Use of GHG PALs as finalized in this action is consistent with the Tailoring Rule justification and provides an alternative mechanism for determining whether GHGs are subject to regulation at a source based on Tailoring Rule thresholds.                      In the Tailoring Rule, we explained that we would lower the applicability thresholds, and consequently increase the number of GHG sources required to obtain such permits, only after we determined that the states have had enough time to develop the necessary infrastructure and increase their GHG permitting expertise and capacity to efficiently manage the expected increase in administrative burden from such permitting, and only after we had the opportunity to expedite or otherwise decrease the burdens of GHG permitting through development of various streamlining measures. We stated that streamlining options to be evaluated included: 1) defining PTE for various source categories, 2) establishing source category emission limits for presumptive BACT, 3) establishing general permits and permits-by-rule, 4) establishing a process for electronic permitting, and 5) establishing a process for lean techniques for more efficient permitting processes. [75 FR 31526.]                While we intend to move forward and develop additional streamlining approaches in the future, we also stated in the Tailoring Rule that several of these streamlining approaches will take several years to develop, requiring separate rulemaking both at the federal level, and then through state and local processes. In the Tailoring Rule, we did not identify PALs as a viable streamlining technique for GHG sources. However, since we finalized the Tailoring Rule, we have recognized that plant-wide limitations could be designed in a way that would be useful for easing administration of GHG permitting, as explained in the response above. Thus, this rulemaking on GHG PALs is part of EPA's larger effort to develop streamlining mechanisms for GHG permitting. It is reasonable to move forward with GHG PALs at this point because these revisions may encourage sources that are currently subject to PSD permitting, or could be subject to PSD permitting because they are close to applicability thresholds, to apply for and receive a GHG PALs instead of a GHG PSD permit. Because a PAL provides an alternative PSD applicability compliance mechanism, this could help ease the overall permitting burden for permitting authorities that issue permits under authority of 40 CFR 52.21, since it may lead to fewer permitting actions in the future, even if initial establishment of the PAL requires significant permitting resources. Furthermore, because EPA is making specific, targeted revisions to address GHGs in the existing PAL provisions, the EPA has been able to finalize this regulatory authority promptly, and permitting authorities should be able to use the changes quickly, since they will take effect 30 days after publication of this rule and can be used as part of permitting program that permitting authorities should be familiar with as a generally matter.                The EPA has provided ample justification for revising the existing PAL provisions to better address GHGs. We are revising the existing PAL regulations because we read the existing federal regulations for the PAL and PSD programs in 40 CFR 52.21 to only allow permitting authorities to issue GHG PALs on a mass basis without use of the CO2e-based increases provided in the subject to regulation thresholds in setting the PAL, and to only allow GHG PALs to be issued to existing major stationary sources,  [40 CFR 52.21(aa)(1)] and because the existing regulations do not allow compliance with a PAL to be considered for the purpose of determining whether GHG emissions are "subject to regulation."               The PSD provisions generally define a "major stationary source" as a stationary source which emits or has the potential to emit 100 or 250 tpy or more of a regulated NSR pollutant, depending on the type of source. 40 CFR 52.21(b)(1)(i)(a)-(b). A GHG-only source is a source that emits or has the potential to emit 100/250 tpy GHG on a mass basis, and emits or has the potential to emit 100,000 tons per year of CO2e or more, but does not emit or have the potential to emit any other regulated NSR pollutant at or above the applicable major source threshold. Regardless of the amount of GHGs currently emitted, a GHG-only source that has avoided PSD applicability for GHG under Step 1 or 2 would be a minor source for purposes of PSD, and would only become major for PSD when it proposes to undertake a change that increases GHG emissions by at least 75,000 tpy CO2e, the amount of change needed under the current Tailoring Rule thresholds ... Currently, permitting authorities issuing a PAL under the federal PAL program can only issue a PAL to a GHG-only source when the source proposes to undertake a change that would make it an existing major stationary source. 40 CFR 52.21(b)(49)(v)(b). As a result, GHG-only sources may not currently use PALs as an alternate mechanism for determining major NSR applicability in the same way that existing major stationary source of other non-GHG regulated NSR pollutants may. Instead, because the Tailoring Rule applicability determinations are triggered only by the GHG emissions related to a particular action on the part of the source, and not on the source's general GHG emissions, GHG-only sources must wait to obtain a PAL until they actually propose to make a change that qualifies the source as a major stationary source under the PSD program.               Moreover, as we read the current federal regulations, any GHG PALs issued under the existing federal regulations can only be mass-based. This requirement is due to the fact that PALs were originally designed to be an alternative method for determining PSD applicability for regulated air pollutants, and such pollutants only have mass-based applicability triggers for PSD, which the PAL provisions reference. On the other hand, GHG applicability for PSD under the Tailoring Rule relies on CO2e thresholds for determining whether the GHG emissions from any particular action are "subject to regulation," which in turn informs the determination of whether a source is a major modification. Thus, under the current regulations, there is a mismatch between the mass-based PAL and the CO2e-based applicability thresholds that trigger PSD for GHG, such that the existing PAL regulations do not provide an effective alternative applicability determination mechanism for GHG sources.               Given these limitations identified for implementing the existing PAL provisions for GHG emissions, changing the PAL regulations to provide for the authority to issue CO2e-based PALs and to issue PALs to GHG-only sources will provide GHG sources with additional operational flexibility, and reduce GHG workload burdens on permitting authorities by decreasing the number of PSD permit applications that permitting authorities must process for these sources over the long term. Providing an option that allows a source to use PALs designed to take into account the unique characteristics of GHG applicability under the Tailoring Rule, as we provide in this final rule, will help streamline the major NSR permitting program and provide more operational flexibility for GHG sources. Being able to issue PALs to GHG-only sources and to establish a PAL on a CO2e basis will provide planning certainty to sources of GHG emissions, and will relieve the current time pressure to issue a PAL permit concurrent with authorization for a planned major modification which could potentially delay that project. Regardless of which metric is specified to measure GHG emissions in a PAL, compliance with a GHG PAL generally assures that the environment remains protected from adverse air impacts resulting from changes a source undertakes in compliance with such a PAL, because emissions cannot exceed this pre-established level without further review. A PAL also provides an incentive for a source  -  whether a current PSD major source or a source with the potential GHG emissions to become such a major source  -  to minimize GHG emissions increases from future projects in order to stay under the PAL and avoid triggering major modification permitting requirements.               These regulatory changes that allow GHG-only sources to establish a PAL are consistent with the Clean Air Act (CAA) in that it regulates sources that, but for the Tailoring Rule, would be major stationary sources based on the mass of their GHG emissions. This approach is also consistent with our Tailoring Rule principles, since we expect that the PALs established under this rule would be established at levels very close to relevant GHG applicability thresholds in the Tailoring Rule, and it also fulfills our streamlining goals by allowing applicability determinations for PSD to occur through an alternative mechanism that helps to manage permitting authorities' long term permitting burdens. These regulatory changes that allow sources to establish a PAL on a CO2e basis also make PALs for GHGs function similar to PALs for non-GHGs. A significant emissions rate, as specified in 40 CFR 52.21(b)(23), is a threshold used to determine when PSD applies to modifications at existing major sources, and only modifications that result in net emissions increases above the significant rate trigger major PSD permitting requirements. Unless a specific significant emissions rate has been established, the federal regulations specify that the significant rate is effectively zero, i.e., any increase in emissions would trigger PSD. Under the current PAL provisions, a permitting authority establish the PAL level for a pollutant at a particular source by adding the applicable significant rate in found in 40 CFR 52.21(b)(23) to the baseline actual emissions of that pollutant at the source.              The EPA did not promulgate a significant emissions rate for GHG emissions in 40 CFR 52.21(b)(23) in the final Tailoring Rule. Thus, if a permitting authority establishes a mass-based GHG PAL under the existing federal regulations, the PAL level included in the permit may not include any margin above the baseline actual emissions to account for emissions growth. Absent this margin, a GHG PAL would provide less flexibility to a source when compared to PALs for other regulated NSR pollutants.               This final rule revises the PAL provisions of PSD to provide GHG sources with the same kind of flexibility sources currently have for other regulated NSR pollutants by allowing sources to establish a CO2e-based PAL using the CO2e-based emission increases provided in the subject to regulation thresholds in 40 CFR 52.21(b)(49). Thus, under the final rule, a permitting authority issuing a CO2e-based PAL under the current Tailoring Rule thresholds may add 75,000 tpy CO2e to a source's CO2e baseline actual emissions to establish the PAL level, because the Tailoring Rule established 75,000 tpy CO2e as the appropriate rate of emissions increase for the GHG subject to regulation applicability threshold for existing sources. In the Tailoring Rule, the EPA revised the definition of "subject to regulation" to establish a threshold level of GHG emissions that a source must meet, on both a source and project basis, before GHGs are considered an NSR regulated pollutant for PSD permitting purposes. However, the EPA also made clear that its action had the same substantive effect, and should be treated as if the EPA had revised other components of the definition of "major stationary source" to achieve the same effect. Thus, in addressing PALs for GHGs in this rule the EPA is continuing to focus on the thresholds incorporated into the "subject to regulation" provision, consistent with the approach in the Tailoring Rule.              The PAL revisions in this final rule will also have the effect of streamlining future major NSR applicability determinations for sources that choose a CO2e-based PAL, by eliminating the need to evaluate GHG emissions on a mass basis for major NSR applicability as long as the source is complying with the CO2e PAL, because a CO2e PAL can function to assure not only that a change is not considered a major modification, but also that GHG emissions from the source undertaking that change are not subject to regulation. Since the Tailoring Rule requires a source to determine whether a specific action would increase the GHG emissions by a certain amount that would make them subject to regulation for PSD permitting purposes, setting a PAL based on the increase identified in the Tailoring Rule thresholds will insure that the source does not exceed that amount and thus will not emit GHGs in amounts that would be subject to regulation. In addition, since the Tailoring Rule requires the same calculation to determine whether a major modification triggers PSD permitting requirements for GHGs, such a PAL limit will also insure that a source does not trigger those requirements. In sum, we believe that the existing PAL regulations do not generally provide an effective means of achieving burden reductions for permitting authorities and GHG sources when compared to the operational flexibility provided by PALs for regulated NSR pollutants other than GHGs, and therefore are overly restrictive with respect to GHG-only sources. Accordingly, in this final rule we are revising the PSD rules for PALs to allow permitting authorities to: (1) issue effective PALs to GHG-only sources; (2) issue either a mass-based (tpy) or a CO2e-based PAL to a particular source; (3) allow CO2e-based PALs to include the CO2e-based emission increases provided in the subject to regulation thresholds; and (4) allow compliance with a GHG PAL to be used as an alternative applicability approach for determining both whether a project is a major modification and is subject to regulation for GHGs. Provided a source complies with a GHG PAL that meets the requirements in 40 CFR 52.21(aa)(1) through (15), GHG emissions at the source will not be "subject to regulation," and a project at the source will not result in a major modification.         	The EPA recognizes that states may have other approaches to limiting the potential-to-emit of pollutants (such as synthetic minor limitations, cap-based permits, and flexible permits), but we do not believe this renders the changes the EPA is finalizing for issuance of GHG PALs unnecessary. Certainly states may continue to utilize any such permitting approaches that are approved in their federally approved programs to the extent those programs are available for GHGs. Still, we believe sources and permitting authorities alike could ultimately benefit from the availability of GHG PALs as explained above as another option that could limit burdens of permitting GHGs under PSD. We additionally note that the EPA has not historically had a minor source permitting program (though it has recently issued one for tribal lands) and has not developed the same array of alternative permitting approaches as some states have. While the existing applicability measures contained in the PSD regulations (40 CFR 52.21(a)(2)(iv)) will remain available for permitting purposes and will remain in the discretion of the source and permitting authority to rely upon, we believe that allowing the additional applicability and permitting options provided by these PAL changes can also address the unique PSD applicability aspects associated with GHGs while allowing greater operational flexibility within a permitting program that generally provides environmental benefits, as explained above. Contrary to one commenter's speculation that sources would not want or need GHG PALs, some industry commenters strongly supported GHG PALs and believed they would provide significant benefits for their plants and finalizing specific, targeted revisions to address GHGs in the existing PAL provisions could allow permitting authorities and the regulated community to use the changes quickly.

	To clarify, we do not believe that this action would require permitting authorities to take any action with respect to existing PAL permits or programs, or to any other regulatory programs that can address GHG emissions. The rulemaking today revises only the regulations for the federal PAL permitting program in 40 CFR 52.21, which governs permits issued by the EPA (and its delegated states), and does not require changes to the PAL provisions contained in 40 CFR 51.166. We do not intend these changes to 40 CFR 52.21 to affect existing state authority to issue PAL permits, and we note that these revisions are not minimum requirements that must be adopted by states into their EPA-approved SIP PSD permitting programs.

      Also in response to the concern of the availability of PALs, the EPA recognizes that the revised  the PAL provisions for GHGs will only be available for permits issued under authority of 40 CFR 52.21. States may choose to submit SIP revisions consistent with these revisions to the EPA for approval, but in this case, the revisions would likely not be available in time to enhance the state's ability to manage the GHG permitting programs during Step 3. However, we note that states that have adopted PAL permitting programs may already be able to interpret their PAL provisions and the definition of "subject to regulation" to allow PAL permits to be issued on a CO2e-basis and for a PAL to be set at a level that reflects baseline actual emissions plus a 75,000 tpy CO2e emissions increase. Nothing in this final rulemaking action is intended to change or limit such states' existing interpretation, and thus these changes do not, as a general matter, impact existing state authority to issue PAL permits for GHG emissions or existing GHG PAL permits that might have already been issued.           Several of the these commenters touch on issues (such as whether the final regulatory language would accompany the final rule, the Major Source Opt-in Approach and the Minor Source Approach to GHG PALs, the effective terms of PALs and transitional issues related to future reductions in applicability thresholds of GHGs) that are discussed in more detail subsequently in other sections of this response to comments rule and in the preamble to the final Step 3 rule.

Comment:         One commenter (19278) requested that the EPA conduct a thorough review and analysis of state PAL approaches in order for stakeholders to determine if flaws in state PAL programs will negate any expected burden reductions from GHG PALs and demonstrate that they will reduce burdens in the long term and achieve emission reductions before they are implemented. Response:         A study of PALs as envisioned by the commenter is not required by statute or regulation prior to our finalizing of this Step 3 rule. At the outset, the changes that the EPA is finalizing in this rule will only expand the existing federal regulatory program to better implement PALs for GHGs, does not change the PAL provisions contained in 40 CFR 51.166 or require corresponding changes in state SIP programs,  and are not intended to affect existing state PAL programs, as explained above. Since the EPA is directly streamlining only the federal permitting program with this rule and is not requiring or intending states to change their current PAL programs in response to this rule, study of the current functioning of the state PAL programs is not necessary.        With regard to the federal PAL permitting program, as discussed more fully in the responses provided above, we believe the changes finalized in this rule will improve implementation of the program for GHGs, given the limitations identified for implementing the existing PAL provisions for those emissions, and will also help ease the overall permitting burden for those sources and permitting authorities that avail themselves of such flexibility, since the revised PAL program would allow more sources to receive more effective PAL permits now which could lead to fewer permitting actions in the future.

Comment:

	Many commenters who supported the concept of GHG PALs (industry commenters 19270, 19273, and 19279; state and local agency commenters 19264 and 19267) and opposing commenters (environmental commenters 19269 and 19292 and industry commenters 19281, 19282, 19284, and 19306) stated that specific regulatory language for GHG PALs must be made available to allow for effective and meaningful comment. Most of these commenters indicated that proposed GHG PAL language must be the subject of notice and comment rulemaking before it is finalized.

      One industry commenter (19279) asserted that any PAL program for landfills would likely require special policies and guidance. Two industry commenters (19287, 19290) indicated that the revised GHG PALs standards will be critical to the semiconductor industry, which requires both regulatory certainty and the ability to implement facility or process changes and expansions quickly in order to satisfy technological advancements and market changes. The commenters noted that many semiconductor facilities have been minor sources of non-GHG pollutants and relied on cap-type limits in state minor source permits for years, and that GHG PALs are now necessary to preserve their ability to make the rapid changes that are critical to the success of the industry, while also complying with clean air regulations              One industry commenter (19287) suggested specific revisions to the existing PSD regulatory language for PALs that they believed could be used to implement the changes that EPA described in the proposal.               One local agency commenter (19280) cautioned the EPA to ensure in its implementing regulations that adequate monitoring, recordkeeping and reporting requirements are in place because otherwise, sources in areas where less vigorous MRR is required would gain a competitive advantage over sources in more rigorous areas, and the GHG reduction goals of the program will be frustrated. Commenter 19292 argued that robust, transparent and meaningful GHG emission monitoring and reporting is fostered by an emissions-unit by emissions-unit analysis, whereas plantwide monitoring and reporting can obscure valuable information required by permitting agencies, sources and the public in structuring the most efficient GHG reduction technologies and operating efficiencies

Response:

      The EPA disagrees with the comments objecting to the GHG PALs proposal on notice-and-comment grounds. The EPA notes that the CAA provisions contained in section 307, which govern rulemakings such as this, do not explicitly require the Agency to propose specific regulatory text as part of that process. In addition, the Administrative Procedures Act requires simply that "either the terms or substance of the proposed rule or a description of the subjects and issues involved" be included in a notice of proposed rulemaking. We believe that the notice and opportunity for comment provided for the GHG PALs proposal was sufficient to satisfy the applicable requirements of the APA and CAA, and as explained below, we believe that we have provided adequate notice of the changes we are making to the PAL provisions to give a meaningful opportunity for comment on those changes.          	In the Step 3 proposal, we described the various changes we were proposing in detail, including a description of the Minor Source Approach that we are finalizing today, a description of how we intended to extend PALs to GHGs on a CO2e basis, and a description of how we proposed to allow the use of PALs to determine whether GHG emissions are subject to regulation. 77 FR 14239-14244. The Step 3 proposal also gave notice that we would revise a number of existing regulatory provisions to implement the approach selected. 77 FR 14244. In addition, we highlighted specific provisions of the PALs that we proposed to change and explained how we proposed to change those provisions. 77 FR 14244. For instance, we explained that for the Minor Source Approach, we proposed to revise the PAL applicability provisions in 40 CFR 52.21(aa)(1) to include GHG-only sources. Id. We further explained that we proposed to change the "subject to regulation" definition at 40 CFR 52.21(b)(49) and the PAL applicability section in 52.21(aa)(1) to indicate that a source that complies with a GHG PAL will not be "subject to regulation" for GHGs. Id. In addition, we explained that we proposed to revise 40 CFR 52.21(aa)(6) to allow PALs issued on a CO2e basis to include the 75,000 tpy CO2e emissions increase from the applicability thresholds, so that amount could be added to baseline actual emissions in setting the level of the PAL. Id. While we are making GHG-specific revisions to a number of other regulatory provisions in the PAL regulations, these changes simply implement the same regulatory revisions that we described repeatedly in the proposal  -  i.e., making GHG PALs available on a CO2e and mass basis, allowing a CO2e-based PAL to include an emissions increase based on Tailoring Rule thresholds, and the Minor Source Approach. Although the proposal did not list every specific provision we are revising in this final rule, each of these changes has the effect of implementing the GHG PAL approach described in the proposal and many of those changes are fairly small (for example, inserting "GHG-only source" to provisions that currently list only "major stationary source"). Accordingly, our proposal provided sufficient information on the regulatory changes that we are finalizing in this action that allowed for public notice and comment.

	We further note that the comments raising concerns about the adequacy of the notice for the GHG PAL revisions did not identify any particular aspect of the revisions that we are finalizing in this action that  were not adequately explained in the proposal to allow for comment. In fact, despite the general notice concerns raised by commenters, many commenters did provide detailed comments on our proposed changes to the PAL provisions. We also note that while one comment indicated that the description of the proposed conversion from a mass-based PAL to a CO2e-based PAL was too opaque for meaningful comment, that comment is not relevant to this final action because we are not taking action on that proposed change.

	For these reasons, we believe that we have provided sufficient notice and opportunity for comment on the revisions to the regulatory provisions for GHG PALs that we are adopting in this action.   	Commenters also requested that the EPA provide clarification that the proposed changes to the federal regulations would not impact existing state authority to issue PAL permits or existing PAL permits that might have already been issued. In this action, we are finalizing revisions to certain sections of the federal regulations governing the issuance of permits pursuant to federal authority at 40 CFR 52.21, in particular the provisions relating to PALs at 40 CFR 52.21(aa) and provisions relating to the definition of "subject to regulation" at 40 CFR 52.21(b)(49). These provisions govern permits issued pursuant to federal authority, and, accordingly, these changes would only affect permits issued under federal authority (i.e., those issued by the EPA or a delegated state or local agency). We do not intend these changes to 40 CFR 52.21 to affect existing state authority to issue PAL permits, and nothing in this action would require permitting authorities to take any action with respect to their existing PAL regulations or any existing PAL permits. We also note that these revisions are not minimum program requirements that must be adopted by states into their EPA-approved SIP PSD permitting programs. Accordingly, this final rule does not adopt these changes into the existing PAL provisions contained in 40 CFR 51.166, but nothing in this action is intended to restrict states from adopting these, or similar, changes into their SIP-approved PAL program if they choose to do so. Moreover, to the extent that states with existing PAL permitting programs have interpreted their PAL provisions to allow PAL permits to be issued on a CO2e-basis and for a PAL to be set at a level that reflects baseline actual emissions plus a 75,000 tpy CO2e emissions increase, the changes that EPA is making to the PAL regulations in 52.21 are not intended to change those existing state interpretations. Accordingly, the changes that EPA is finalizing to address GHG PALs in the federal regulations do not, as a general matter, impact existing state authority to issue PAL permits for GHG emissions or existing GHG PAL permits that might have already been issued.        	We did not propose to include any specific regulatory language or guidance to address the concerns of the semiconductor industry, landfills, or any other specific industry group, and thus we have not finalized any such regulatory languages or guidance for specific industries. However, we do not believe that such industry-specific changes to the PAL program are necessary, since our final rules (and the benefits arising from them) will apply to those industries in the same way they will apply to other industries. Furthermore, we believe the GHG-specific changes to the PAL program that we are providing in this rule may prove especially beneficial to industries that need flexibility to quickly respond to market demands.

      We appreciate the specific suggestions for revisions to the underlying NSR regulatory text for the PAL program to put our Step 3 proposal in effect, and we have taken these comments in considerations as we developed the regulatory revisions in our final rule and have included a number of the suggested changes, as appropriate.              Also, concerning monitoring, 40 CFR 52.21(aa)(12) lays out requirements for monitoring PALs that are applicable to PALs issued for any pollutants and we did not propose to revise these requirements or otherwise add any new requirements specifically for GHGs in the final rule. We believe these existing monitoring provisions will be adequate for GHGs in the same way that they are adequate for other PAL pollutants, and we note that the commenters did not identify any specific provisions of the current monitoring requirements that would be deficient when applied to GHGs. With regard to the comment that GHG reduction goals of the program will be frustrated if sources in areas where less vigorous monitoring is required would gain a competitive advantage over sources located in areas with more rigorous requirements, we note that the GHG-specific changes to the PAL program apply to one permitting program  -  federal PALs issued by the EPA and our delegated states  -  and thus monitoring requirements (and GHG reductions) should be consistent under that program.

Comment:

	Some commenters made their support of PALs contingent on PALs being voluntary. One industry commenter (19273) indicated support provided that GHG PALs are voluntary for the source. One state and local agency association commenter (19264) stated that the EPA must ensure that the use of GHG PALs remains subject to the discretion of individual permitting authorities.

	One local agency commenter (19280) voiced strong support for the "EPA's apparent decision not to make PALs mandatory for permitting authorities," citing the EPA's statement at 77 FR 14241 that permitting authorities would likely only agree to issue a PAL if they believe they have the necessary resources to do so. This commenter noted that the local agency had opposed PALs when they were originally adopted because they were made a mandatory element of the NSR program and the agency did not believe that the regulations required adequate monitoring, recordkeeping and reporting to make PALs enforceable.               Four industry commenters (19265, 19276, 19288, 19289), who support GHG PALs, indicated that there are real-world limitations on PAL implementation. One of the industry commenters (19288) stated that many states have not adopted the NSR reforms that make PALs a regulatory option. The other three commenters (19265, 19276, 19289) pointed out that in California, Senate Bill 288 (adopted in 2010) prevents the implementation of federal NSR reforms, which includes PALs. Two of these commenters (19265, 19276) noted that if California, and perhaps other states, prevent the use of PALs, this would impact the EPA's ability to adopt meaningful permit streamlining. The third of these commenters (19289) added that the functionality of any streamlining strategy is ultimately limited by the permitting threshold level, so while there is some advantage to expanding the use of PALs this will not truly alleviate the permitting burden.        	One state agency commenter (19266) and one industry commenter (19271) support GHG PALs provided that it is clarified that EPA's authority would not usurp current state authority. The state agency commenter (19266) specifically opposes the EPA issuing GHG PALs that include non-GHG pollutants in states that have an approved PSD program. The commenter asserted that lack of a clear division of permitting authority will lead to confusion among sources over where to submit applications, and could lead to other jurisdictional and enforcement issues. The commenter alleged that recent EPA Region VI guidance indicates that, for GHG-only sources in Texas, the EPA will issue PSD permits for non-GHG pollutants that are above a significance level but below major source thresholds, which the commenter believes conflicts with current EPA thinking that state permitting authorities with approved PSD programs for non-GHG pollutants have exclusive jurisdiction over how to authorize those emissions.

      Environmental advocacy agency commenter (19292) is concerned that the EPA should revisit all of its PAL rules and policies before extending PALs to GHGs and that superior environmental performance should be required as a condition of the added modification flexibility provided under a PAL

Response:

      As explained above, participation in the PAL program is voluntary. The decision of any source to request a GHG PAL and the decision of any permitting authority to either adopt the GHG PAL regulations or issue a GHG PAL are completely voluntary. There is no requirement for sources and permitting authorities to use these rules.  Moreover, this rulemaking revises only the regulations for the federal PAL permitting program in 40 CFR 52.21, which governs permits issued by the EPA (and its delegated states), does not require changes to the PAL provisions contained in 40 CFR 51.166. The changes to the federal permitting program at 40 CFR 52.21 is not intended to affect existing state authority (or lack thereof) to issue PAL permits, and we note that these revisions are not minimum requirements that must be adopted by states into their EPA-approved SIP PSD permitting programs. Thus, non-federal permitting authorities are not required to adopt these changes and nothing in this rule is meant to suggest that permitting authorities must implement a PAL program generally or a GHG-PAL program specifically. However, to the extent non-federal permitting authorities want to adopt these changes into their SIP-approved programs or already interpret their existing PAL program to implement GHG PALs in a manner similar to the changes that the EPA is implementing, we think that these changes will result in streamlining benefits for GHG permitting. However, even if states do not have authority, or choose not, to use GHG PALs as provided for in these changes, we believe the likely burden reduction and streamlining benefits afforded to federal permitting program support the changes to the federal PAL program contained in this final rule.              The EPA disagrees that functionality of PALs as a streamlining strategy is ultimately limited by the permitting threshold level. As explained in the proposal and as provided for in the revisions that EPA is finalizing, so long as a source complies with the limits contained in a GHG PAL, the GHGs will not be subject to regulation during the PAL's term. Accordingly, changes in the "subject to regulation" thresholds that may occur after a PAL is issued will not affect the source, so long as it complies with the PAL. However, under the rules finalized by EPA, the level of the CO2e-based PAL in a specific permitting action is established by adding to the source's baseline actual emissions an amount of GHGs up to an amount equal to the CO2e emissions increase defined as "significant" as provided in the "subject to regulation" definition provided in paragraph (b)(49)(iii) at the time the PAL permit is being issued, so future permitting actions will automatically take any new GHG thresholds into account when the permits are issued. (Since mass-based GHG PALs do not allow any emissions increase above baseline, changes in the "subject to regulation" threshold are irrelevant for the purposes of setting the PAL.)               With regard to comments arguing that the EPA should not issue GHG PALs that include non-GHG pollutants in states that have an approved PSD program, those comments are moot. In finalizing the Minor Source approach to GHG PALs, we have specifically limited application of the PAL for GHG-only sources to addressing only GHG pollutants. Moreover, because adherence to a PAL serves as an alternative PSD applicability mechanism, sources complying with a GHG PAL will not trigger PSD permitting requirements for GHGs and thus reviewing authorities will not have to address non-GHG pollutants that may be emitted above the PSD permitting significance emissions rate, as long as the source does not undertake a modification that increases non-GHG pollutants in amounts that would otherwise trigger PSD.              Finally, the EPA does not agree that we need revisit all of the PAL rules and policies as part of this rulemaking. The proposal and final rule for Step 3 of the Tailoring Rule did not seek to revise any provision of the previous NSR reform rule, including for PALs, with respect to non-GHGs. We also note that the use of PALs as an alternative NSR applicability mechanism (including the EPA's rationale that use of PALs would provide environmental benefits) and the basic elements of PAL permits have already been upheld. See New York v. EPA, 413 F.3d 3, 36-38 (D.C. Cir. 2005). The changes the EPA is finalizing, to make implementation of that mechanism more useful as applied to GHGs, are consistent with that decision as well as the Tailoring Rule. Aside from the specific revisions to the PAL provisions that the EPA is promulgating in this action, the EPA did not propose to or take comment on, and is not  finalizing, revisions to the PAL program. Thus, the EPA is not re-opening the existing PAL provisions generally. Accordingly, the comments suggesting that the EPA should revisit all generally applicable PAL provision in this action are beyond the scope of this rulemaking, and the EPA does not have to address the general PAL program implementation issues raised in the comment.          Comments on Options Related to GHG PALs

3.2.1	Comments on the Major Source Opt-In and Minor Source Approaches

Comment:

	Six industry commenters (19259, 19262, 19270, 19273, 19287, 19290) expressed general support for both the Major Source Opt-In Approach and the Minor Source Approach for GHG PALs. Two state and local agency commenters (19260, 19266) and one industry commenter (19253) preferentially support the Major Source Opt-In Approach. Two state and local agency commenters (19280, 19291) prefer the Minor Source Approach, although one of these (19280) indicated that the agency would not object to finalizing both approaches as long as the EPA does not make PALs mandatory. One industry commenter (19278), who generally opposed the PAL proposal, nevertheless indicated a preference for the Minor Source Approach. It should be noted that some commenters indicated that their support was conceptual, pending review of actual regulatory language to implement the approaches. Specific comments on the two approaches are summarized in additional comments below.

      Two industry commenters (19287, 19290) stated that GHG PALs should be available without restrictions and without being related to the current emissions level of the facility or the need to go through PSD. One commenter (19290) stated that the usefulness of PALs to their industry would be significantly diminished if a PAL could be secured only at the time a PSD permit is being processed.       	       One state agency commenter (19291) expressed concern with the implications of creating new major sources in the state under the Major Source Opt-In Approach when potential emissions are below the major source thresholds. The commenter added that these facilities may ultimately lose any flexibility allowed under the PAL, if, at the time the PAL permit expires, they have not constructed or modified any sources (increased emissions), but would still be considered major sources. The commenter does not believe that facilities would consider obtaining a Major Source Opt-In PAL due to these issues.

	Some industry commenters (19278, 19281, 19282, 19284) likewise believe that there is little incentive for sources to opt into the major source program to obtain a PAL under the Major Source Opt-In Approach. Two of the commenters (19281, 19282) elaborated that a source that obtained a Major Source Opt-In PAL would thereafter be considered a major source, and any significant (rather than major) increase of a criteria pollutant would trigger PSD for that pollutant. One of these commenters (19281) stated that without proposed regulatory language, the commenter could not tell with any certainty whether the EPA intends to remedy this problem. The commenter contended that, for example, the EPA could choose not to extend its "major-for-one-major-for-all" policy in the GHG context; thus, a source could simply opt into a major source PAL for GHGs but remain minor for other pollutants. Another of these commenters (19282) asserted that resource requirements for obtaining this type of PAL are significant, making it unlikely that a state permitting authority would be willing or able to invest the time to issue it. Finally, the commenter concluded that this approach does not provide any meaningful benefit over the flexibilities that states already possess under their existing programs to structure cap-based permits.

	One industry commenter (19281) stated that the EPA suggested that a source that obtains a PAL under the Major Source Opt-In Approach must remain a major source under PSD and title V at the expiration of the PAL (citing 77 FR 14241). While the commenter understands the need for any appropriate emission limitations to remain in effect after expiration of the PAL, the commenter believes that if the source is minor, then it should be treated as so. The commenter asserted that there is no justification in this case for a "once in-always in" type of policy. The commenter added, however, that without regulatory language to review, it is unclear whether the EPA is referring to sources that are truly minor.

      One state agency commenter (19266) supported the issuance of PALs for sources that opt into major source status where the EPA issues the PAL for GHGs only, and states issue the PALs for all other non-GHG pollutants under their approved PSD program. The commenter supported the Major Source Opt-In Approach despite noting that under current federal rules, a project must be a major modification of an existing major source to obtain a PAL.               One industry commenter (19273), who generally supported the concept of GHG PALs, indicated that it is difficult to express support or opposition to the Major Source Opt-In Approach because there are uncertainties about how the approach would be implemented in the absence of specific regulatory language. The commenter inquired as to whether a source that opted into being considered a major source under this approach would have to undergo major NSR/PSD review at the time it applied for the PAL or at the time it implemented a project that increases CO2e emissions by at least 75,000 tpy. Further, the commenter assumed that such a source would have to obtain a title V permit, but indicated that it is not clear what applicable requirements of the PAL would be listed on that permit.

	Two industry commenters (19287, 19290), who supported the adoption of both proposed approaches to GHG PALs, indicated that the Minor Source Approach would more likely be used in the semiconductor industry where many sources currently use minor source cap-type permits to maintain minor source status for all non-GHG regulated pollutants. One of the commenters (19290) added that if the EPA finalizes only one of the two approaches, the Minor Source Approach should be adopted. One industry commenter (19278), who generally did not support GHG PALs, stated that the Minor Source Approach is the more tenable of the two approaches proposed by the EPA.

	Two state and local agency commenters (19280, 19291) preferred the Minor Source Approach. One of the commenters (19280) expressed that this approach will be less burdensome as a streamlining technique than the Major Source Opt-In Approach as the latter would require additional resources to address non-GHG pollutants. The second commenter (19291) indicated that this is the more promising approach because it allows the facility to remain below major source thresholds and only "major" amounts of increases in non-GHG NSR pollutants (i.e., 100/250 tpy) would trigger PSD.

	One industry commenter (19282) stated that the Minor Source Approach provides minimal benefit over state-issued cap permits because a properly-structured synthetic minor permit provides significant flexibility to sources and most of the advantages of a GHG Minor Source Approach PAL. The commenter indicated that the main incentive for utilizing such a PAL would be the ability to clearly obtain a 75,000 tpy significances level above baseline actual emissions; however, if the PAL applied to a limited number of GHG-emitting units, the benefit is likely to be minimal. The commenter concluded that while the proposed approach might provide some benefit to some sources, it is unlikely to provide any significant streamlining benefit and this means that there are not likely to be a significant number of sources that would experience "streamlining" or be taken "off the table" as a result of this approach. 	 Response:

      Our Step 3 proposal was for the purpose of continuing the process of phasing in GHG permitting requirements under the PSD and title V permitting programs that we begun in Steps 1 and 2 of the Tailoring Rule. In our proposal we evaluated whether it is possible to lower the GHG major source threshold to bring additional sources into the CAA permitting programs. We also continued our identification and evaluation of potential streamlining approaches, among other options for finalizing the regulatory provisions for PALs, we discussed and sought comment on two approaches for regulating GHG sources under a PAL. We called the first approach the "Major Source Opt-in Approach." This approach would have provided GHG-only sources the ability to become existing major stationary sources, and thus receive PALs for GHGs and any other pollutant emitted by the source. A GHG-only source could become a major stationary source by agreeing to be considered an existing major stationary source, without having a specific qualifying project that increases CO2e emissions at the source by at least 75,000 tpy CO2e. We called the second approach the "Minor Source Approach." In contrast to the Major Source Opt-in approach, under the Minor Source Approach a GHG-only source would remain a minor source. A reviewing authority could issue GHG PALs to the GHG-only sources without requiring the source to become an existing major stationary source, and thus could not include PAL limits for non-GHG pollutants.               In light of the many public comments expressing a preference for the Minor Source Approach we are finalizing the Minor Source Approach, which will allow permitting authorities to issue GHG PALs to GHG-only sources without requiring the source to undertake an action that would make GHGs "subject to regulation", and make the source a major stationary source under the Tailoring Rule. Thus, sources may remain a GHG "minor source" but still qualify to obtain a GHG PAL. We are not finalizing the Major Source Opt-in Approach since many public comments that supported the GHG PALs changes questioned the usefulness of the Major Source Opt-in Approach for providing real streamlining benefits. Accordingly, all comments regarding the Major Source Opt-in Approach are moot at this time and will not be addressed in this document. In the final rule for Step 3 we also allow reviewing authorities to establish GHG PALs for PSD major and minor sources as an alternative applicability approach for determining if the source is subject to regulation and if a major modification has occurred with respect to GHGs.

      Under the final rule, regardless of the amount of GHGs currently emitted, a GHG-only source that has avoided PSD applicability for GHG under Steps 1 or 2 would be a minor source for purposes of PSD, and would only become major for PSD when it proposes to undertake a change that increases GHG emissions by at least 75,000 tpy CO2e, the amount of increase needed under the current Tailoring Rule thresholds.  Because the existing PAL provisions are only available to existing major stationary sources, permitting authorities issuing a PAL under the federal PAL program can only issue a PAL to a GHG-only source when the source proposes to undertake a change that would make it an existing major stationary source. As a result, GHG-only sources could not use PALs as an alternate for major NSR applicability determinations in the same way that existing major stationary source of other regulated NSR pollutants could. Instead, GHG-only sources had to wait until they actually proposed to make a change that qualified the source as a major stationary source under the PSD program before they could get a PAL. Under this final rule, provided a source complies with a GHG PAL, GHG emissions at the source will not be "subject to regulation," and a project at the source will not result in a major modification. Also under this final rule, as is typical for non-GHG NSR regulated pollutants under a PAL, an existing PSD major source could establish a GHG PAL as an alternative applicability methods for determining if a major modification has occurred with respect to GHGs.              This final rule adopts the Minor Source Approach for GHG PALs by revising the PSD regulations to allow a GHG-only source to submit an application for a GHG PAL that will also allow the source to maintain its minor source status. A GHG-only source that complies with its GHG PAL will not trigger PSD permitting requirements for GHGs, but could trigger PSD for other regulated NSR pollutant if it undertakes a change that increases emissions by a "major" amount for any non-GHG regulated pollutant. 40 CFR 52.21(b)(1)(i)(c). That is, this approach authorizes permitting authorities to use the PAL program for minor sources only to regulate GHG emissions.               Moreover, under the Tailoring Rule existing minor sources that emit only GHGs, but no other regulated pollutants, in major amounts, must determine whether any project will result in GHG emissions that are subject to regulation (on a CO2e basis), and correspondingly will also result in a major modification (on a mass basis). Because GHG-only sources must undertake these determinations for any change, even those that would not make the source major for GHGs, we believe that extension of the PAL program to these sources through the Minor Source Approach is consistent with the purposes and design of the PAL program -- to allow use of a PAL as an alternate major modification applicability approach.              Accordingly, the Minor Source Approach of the final rule is consistent with the CAA in that it regulates sources that but for the Tailoring Rule would be major stationary sources based on the mass of their GHG emissions. This approach is also consistent with our Tailoring Rule principles. Under the Minor Source Approach of this final rule the EPA has determined that the scope of the program is limited only to a source's GHG emissions and could not include PAL limits for non-GHG pollutants emitted in amounts below the major source levels. Again, we believe changes to the federal PAL permitting program to implement the Minor Source Approach fulfills our streamlining goals by allow applicability determinations for PSD to occur in a manner that best manages reviewing authorities' long-term permit burden.                However, as also explained in the responses above, if states and other permitting authorities have other permitting mechanisms available to them to address those burdens, they can rely on their existing authority  -  nothing in this final rule is intended to limit the availability of other processes put into place by states, as consistent with the applicable EPA-approved state implementation plans (SIPs). Moreover, the decision of any source to request a GHG PAL and the decision of any permitting authority to either adopt the GHG PAL regulations or issue a GHG PAL are completely voluntary. There is no requirement for sources and permitting authorities to use these rules if they believe that a GHG PAL would not streamline the permitting process. Likewise, any source that feels that a PAL is too complex to negotiate and/or does not provide enough certainty about future operations can choose other permitting options as appropriate for their operations and as provided for under existing federal law and/or the SIP-approved permitting programs in their area. But given that we did receive comments indicating that some sources and permitting authorities did believe GHG PALs would offer streamlining benefits, we have decided to finalize those changes.

Comment:               One commenter (19282) stated that the source could obtain PALs for its criteria pollutants as well, subject to the monitoring, recordkeeping and reporting provisions required under a PAL permit and that, at the end of the PAL term, the source would continue to be considered a "major source" and could not return to minor status. They also assert that there are significant legal questions as to whether the EPA has the authority to bring minor sources into its regulatory structure, adding that these legal questions apply equally to the proposed Major Source Opt-In Approach and Minor Source Approach. The commenter asserted that state minor NSR programs under CAA section 110 govern regulation of minor sources and the EPA has defined in its own rule that GHG-only sources are minor sources under the Act. The commenter stated that, historically, the Agency has not issued permits to minor sources for this very reason. The commenter asserted that the suggestion that the sources are in fact major "but for" the Tailoring Rule does not, in and of itself, make these sources major and subject to the EPA's jurisdiction.              One state agency commenter (19266) questioned the EPA's authority to issue PALs under the Minor Source Approach. The commenter requested that the EPA fully explain the basis for treating GHG sources differently than non-GHG minor sources in terms of allowing a PAL to avoid PSD for GHG sources, but not also allowing the PAL for non-GHG sources under a minor source program. The commenter indicated that the imposition of the Tailoring Rule is not ample justification for the Minor Source Approach, asserting that the EPA should not use the burden imposed by the Tailoring Rule as justification to give GHG sources special treatment under a PAL when its PSD FIPs have caused the permitting process to be too burdensome. The commenter disagreed that prohibiting the extension of PALs to non-GHG minor sources would burden a state's permitting resources.

      One industry commenter (19273) stated that while the concept of the Minor Source Approach sounds appealing, the commenter does not know of any authority that allows the EPA to issue a minor source permit, except in Indian country, much less a minor source PAL permit. The commenter conjectured that perhaps the EPA intends this proposal to be a permit for state permitting authorities with minor source programs to implement. Despite this issue, the commenter welcomed flexibility and new permit tools in the GHG permitting arena and encouraged the EPA to develop and publish the details for this approach.         Response:

      As explained above, the Minor Source Approach of the final rule is consistent with the CAA in that it regulates sources that but for the Tailoring Rule would be major stationary sources based on the mass of their GHG emissions. This approach is also consistent with our Tailoring Rule principles. Under the Minor Source Approach of this final rule the EPA has determined that the scope of the program is limited only to a source's GHG emissions and could not include PAL limits for non-GHG pollutants emitted in amounts below the major source levels.              Contrary to the assertions made in the comments, these regulatory revisions are consistent with our permitting authority under the CAA.  As we explained in the Step 3 proposal, in the context of the Tailoring Rule, we interpret the sections 165, 169, and 301 of the CAA to provide authority to issue preconstruction permits to GHG sources that do not qualify as major sources under the Tailoring Rule, but that emit or have the potential to emit GHGs at or above the statutory major source thresholds and that, without the Tailoring Rule, would qualify as "major emitting facilities" under the CAA. As explained in the Tailoring Rule, because the administrative burden associated with immediately implementing the PSD permitting program at statutory levels for GHGs would have crippled the program, we tailored the program and phased-in the permitting requirements to ensure that the program would be administrable for GHGs. Under the "Minor Source Approach" that we are finalizing in this action, qualifying sources emit or have the potential to emit GHGs in levels above, and in many cases much higher than, the statutory thresholds. But for the Tailoring Rule, such sources would qualify as "major emitting facilities" under CAA section 169 and would be subject to PSD permitting requirements. Because the PAL provisions finalized today could also help to ensure that the PSD permitting program can be administered in an effective and efficient manner for GHGs, we interpret CAA sections 165 and 169 to convey to permitting authorities, including EPA, the legal authority to issue GHG PAL permits to sources that qualify under the "Minor Source Approach." Similarly, we interpret CAA section 301(a)(1) to provide additional authority to issue PAL permits to such sources, as that section authorizes the EPA to promulgate "such regulations as are necessary to carry out [its] functions under this chapter." Accordingly, the EPA interprets sections 165, 169, and 301 of the CAA to provide the authority to issue GHG PAL permits under the Minor Source Approach as finalized in this action.               In response to the industry commenter who questioned who would issue PALs created under the Minor Source Approach and the authority for the EPA to issue such PALs, we note that the changes to the PAL provisions finalized in this action are only changes to the federal PAL program and thus only impacts permits issued by the EPA and our delegated states. While SIP-approved permitting authorities may have existing authority to issue such permits or may revise their programs to include the changes the EPA is finalizing today, the changes contained in this rule are intended for use by the EPA (and our delegated states) to issue PAL permits in areas covered by the GHG FIP. Accordingly, permitting authorities implementing the federal PSD program will be able to use their existing permitting authorities, including the authority provided to them under 40 CFR 52.21 and the changes finalized in this rule, and corresponding permitting procedures (such as those in 40 CFR 124 and the Tribal Minor NSR Rule) to issue PAL permits for GHGs in a manner consistent to PAL permits issued for regulated NSR pollutants other than GHGs.              Issuing PALs to GHG-only sources that remain minor sources also does not conflict with the basis for the existing PAL rules. When we promulgated the existing PAL rules in 2002 (67 FR 80186), we limited the application of the PAL provisions to existing major stationary sources only. We included this provision based on our decision to limit PALs to sources that had historical emissions through which the reviewing authority could establish a baseline actual emissions level. New major stationary sources do not have historical actual emissions from which a reviewing authority can establish an actuals PAL, and so we declined to include these sources in the actuals PAL program.               When we originally promulgated the PAL rules, we also chose not to extend the PAL program to minor (source) NSR permit programs, because PALs are an alternate major NSR applicability provision to determine whether a project results in a major modification, and we did not believe the program would be useful to minor sources. At that time, the rules generally required only existing major stationary sources to undertake a major modification applicability analysis to determine whether a change triggers PSD review. However, given the unique "subject to regulation" PSD applicability requirement for GHGs, wherein an existing source that emits major amounts of GHGs is a major stationary source only at the time it proposes to undertake a project that will result in an emissions increase of 75,000 tpy CO2e or more, we do not believe that extending the PAL provisions to GHG-only sources runs afoul of the reasoning we provided when initially limiting the PAL program to existing major stationary sources.               As explained above, the changes finalized by EPA in this rule allow GHG-only sources to receive a PAL addressing only GHG emissions and allows such sources to remain a minor source (absent any other PSD-triggering change) so long as they adhere to the limits provided in their PAL. Since the limits on such sources generally will restrict sources from undertaking the types of large modifications that would lead to increases in emissions of other regulated NSR pollutants at levels that would trigger major source status, we believe it unnecessary to extend the PAL authority under this approach to other non-GHG pollutants and nothing in this final action is intended to do that. However, adherence to the GHG PAL provides an alternative NSR applicability mechanism for GHGs only. To the extent that a source undertakes a modification that is consistent with its GHG PAL but still increases non-GHG pollutants in amounts that trigger PSD permitting responsibilities for those pollutants, the source will become a major source for those pollutants and major source permitting requirements will apply for those pollutants. (As a general matter, GHG emissions would not be addressed in that subsequent action, since the proposal and final rules make it clear that adherence to a GHG PAL does not make GHG "subject to regulation" for PSD permitting purposes.)            3.2.2	Comments on the Basis for GHG PALs (Mass or CO2e)

Comment:

	Several industry commenters (19259, 19262, 19270, 19273, 19285, 19287, 19288, 19290) and one state agency commenter (19260) support the EPA's proposal to issue GHG PALs on either a mass basis of CO2e basis. One of the industry commenters (19262) added that this approach would provide needed flexibility and spur creativity and pollution prevention. The commenter pointed out that a facility may be able to change its use of raw materials or processes to lower its GHG emissions under the proposal but may not be able to make these same changes under a rigid, mass-based system.

	Another of the industry commenters (19290) asserted that both the mass-based and CO2e-based options are needed and consistent with the structure of the Tailoring Rule. The commenter stated that depending on the circumstances (types and levels of GHGs emitted historically and anticipated in the future), a facility owner may be in a better position to proceed on one basis or the other.

	One state agency commenter (19280) recommended calculating GHG PALs on a CO2e basis. Another state agency commenter (19291) stated that PALs should be extended to major sources on a CO2e basis. In the context of discussing the PAL proposal, an environmental commenter (19292) states that any optional streamlining provisions should be based on CO2e emissions rather than mass emissions of GHG pollutants. (As noted in a previous comment, this commenter believes that GHG PAL provisions should be finalized quickly so existing PAL permit holders can utilize the flexibility afforded by PALs under their current permits.)

      Two industry commenters (19282, 19290) indicated that the lack of a mass-based significance level for GHG PALs is a barrier to the use of mass-based PALs. One of the commenters (19290), who strongly supports GHG PALs for GHG-only sources, asked that the EPA consider creating a massed based significance level for GHGs. The other commenter (19282) opined that for GHG PALs to be viable for major sources of criteria pollutants, the EPA should revisit its view that no mass-based increase can occur under the current regulations or should eliminate this requirement through rule revision. The commenter stated that the EPA should interpret its current regulations to allow a CO2e-based PAL under the current regulations, given that the CO2e metric utilizes mass to determine the effect value of an increase. To the extent that the EPA is unwilling to do so, the commenter asserted that the EPA should ensure that sources can use PALs on a CO2e basis.

      Three industry commenters (19259, 19273, 19290) and one state agency commenter (19291) indicated that CO2e-based GHG PALs should be set by adding the 75,000 tpy applicability threshold to actual baseline emissions. One of the industry commenters (19290) stated that the addition of the significance level of emissions to the baseline actual emissions is an important aspect of current PAL rules, in that it provides a needed margin for year-to-year variability during the 10 years the PAL limits site emissions. Another industry commenter (19282) believes that the EPA should ensure that sources can add up to the significance level to their baseline actual emissions in calculating the PAL level, consistent with the existing PAL regulations.

      One industry commenter (19290) stated that, consistent with the role CO2e emissions play under the Tailoring Rule, compliance with the CO2e PAL at a GHG-only facility must provide assurance that the source is not subject to regulation with regard to PSD for any other pollutant so long as the PAL is met. The commenter also recommended that the EPA change the rules to have the mass-based PAL work in the same manner for GHG-only facilities; that is, the rule should state that a GHG-only facility meeting its mass-based PAL cannot trigger PSD for another minor pollutant. The commenter asserted that to the extent that the EPA determines that mass-based PALs do not provide the same protection from coincidental triggering of PSD for another pollutant, a source should be provided the option of obtaining a PAL for one or more of the other pollutants which are minor but could have a significant increase at the same time a GHG increase occurs under the mass-based GHG PAL.

Response:

      Our Step 3 proposal discussed several changes to the existing PSD regulations in 40 CFR 52.21, including to allow reviewing authorities to issue PALs to both existing major and potentially major GHG stationary sources (GHG-only sources) on either a mass-basis or a CO2e basis, to allow CO2e-based PALs to include an increase based on the subject to regulations applicability threshold (currently 75,000 tpy CO2e), and to allow GHG PALs to be used as an alternative approach for determining whether a project is a major modification and subject to regulation for GHGs.

      The proposal clarified that under current regulations any EPA-issued PALs can only be mass-based because when those requirements were established (as part of the NSR Reform rule) all NSR applicability thresholds were mass-based, while subsequently the Tailoring Rule established a CO2e threshold for GHGs to determine if a source's GHG emissions are subject to regulation, but a mass threshold for GHGs to determine if a major modification has occurred. Thus, under the current PAL regulations, GHG sources must monitor both metrics to ultimately determine whether a change triggers major NSR review.