[Federal Register Volume 77, Number 46 (Thursday, March 8, 2012)]
[Proposed Rules]
[Pages 14226-14264]
[FR Doc No: 2012-5431]

Vol. 77

Thursday,

No. 46

March 8, 2012

Part V

Environmental Protection Agency

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40 CFR Parts 51, 52, 70 and 71

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Prevention of Significant Deterioration and Title V Greenhouse Gas
Tailoring Rule Step 3, GHG Plantwide Applicability Limitations and GHG
Synthetic Minor Limitations; Proposed Rule

Federal Register / Vol. 77 , No. 46 / Thursday, March 8, 2012 /
Proposed Rules

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, 70 and 71

[EPA-HQ-OAR-2009-0517; FRL-9643-8]
RIN 2060-AR10

Prevention of Significant Deterioration and Title V Greenhouse
Gas Tailoring Rule Step 3, GHG Plantwide Applicability Limitations and
GHG Synthetic Minor Limitations

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: This proposal concerns the third step (Step 3) in the EPA's
Tailoring Rule. We are proposing to maintain the applicability
thresholds for greenhouse gas (GHG)-emitting sources at the current
levels. We are also proposing two streamlining approaches, which will
improve the administration of GHG Prevention of Significant
Deterioration (PSD) and title V permitting programs. The first proposal
addresses the implementation of GHG plantwide applicability limitations
(PALs). We propose to allow permitting authorities to issue GHG PALs on
either a mass-basis (tpy) or a carbon dioxide equivalent
(CO2e)-basis 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 second proposal
would create the regulatory authority for the EPA to issue synthetic
minor limitations for GHGs in areas subject to a GHG PSD Federal
Implementation Plan (FIP). We also discuss our progress in evaluating
the suitability of other streamlining approaches and solicit further
comment.

DATES: Comments must be received on or before April 20, 2012.
    Public Hearing. One public hearing will be held on March 20, 2012.
For additional instructions on the public hearing, go to the
SUPPLEMENTARY INFORMATION section of this document.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-HQ-
OAR-2009-0517, by one of the following methods:
     http://www.regulations.gov: Follow the online instructions
for submitting comments.
     Email<EMAIL_ADDRESS>Attention Docket ID No.
EPA-HQ-OAR-2009-0517.
     Fax:<PHONE_NUMBER>.
     Mail: Attention Docket ID No. EPA-HQ-OAR-2009-0517, Air
and Radiation Docket and Information Center, Mailcode: 2822T, U.S.
Environmental Protection Agency, 1200 Pennsylvania Avenue NW.,
Washington, DC 20460. Please include a total of two copies. In
addition, please mail a copy of your comments on the information
collection provisions to the Office of Information and Regulatory
Affairs, Office of Management and Budget, Attn: Desk Officer for EPA,
725 17th Street NW., Washington, DC 20503.
     Hand Delivery: Air and Radiation Docket and Information
Center, EPA/DC, EPA West, Room 3334, 1301 Constitution Avenue NW.,
Washington, DC 20004, Attention Docket ID No. EPA-HQ-OAR-2009-0517.
Such deliveries are only accepted during the Docket Center's normal
hours of operation, and special arrangements should be made for
deliveries of boxed information.
    Instructions: Direct your comments to Docket ID No. EPA-HQ-OAR-
2009-0517. The EPA's policy is that all comments received will be
included in the public docket without change and may be made available
online at www.regulations.gov, including any personal information
provided, unless the comment includes information claimed to be
Confidential Business Information (CBI) or other information whose
disclosure is restricted by statute. Do not submit information that you
consider to be CBI or otherwise protected through www.regulations.gov
or email. The www.regulations.gov Web site is an ``anonymous access''
system, which means the EPA will not know your identity or contact
information unless you provide it in the body of your comment. If you
send an email comment directly to the EPA without going through
www.regulations.gov your email address will be automatically captured
and included as part of the comment that is placed in the public docket
and made available on the Internet. If you submit an electronic
comment, the EPA recommends that you include your name and other
contact information in the body of your comment and with any disk or
CD-ROM you submit. If the EPA cannot read your comment due to technical
difficulties and cannot contact you for clarification, the EPA may not
be able to consider your comment. Electronic files should avoid the use
of special characters, any form of encryption, and be free of any
defects or viruses. For additional instructions on submitting comments,
go to section I.C of the SUPPLEMENTARY INFORMATION section of this
document.
    Docket: All documents in the docket are listed in the
www.regulations.gov index. Although listed in the index, some
information is not publicly available, e.g., CBI or other information
whose disclosure is restricted by statute. Certain other material, such
as copyrighted material, will be publicly available only in hard copy.
Publicly available docket materials are available either electronically
in www.regulations.gov or in hard copy at the Air and Radiation Docket
and Information Center, EPA/DC, EPA West, Room 3334, 1301 Constitution
Avenue NW., Washington, DC. The Public Reading Room is open from 8:30
a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The
telephone number for the Public Reading Room is<PHONE_NUMBER>, and the
telephone number for the Air and Radiation Docket and Information
Center is<PHONE_NUMBER>.
    Public Hearing: One public hearing will be held on this proposed
rule. The hearing will be held on March 20, 2012, at the DoubleTree
Hotel--Crystal City, 300 Army Navy Drive, Arlington, Virginia 22202;
phone number<PHONE_NUMBER>. The public hearing will convene at 10 a.m.
and continue until 7 p.m. (local time) or later, if necessary,
depending on the number of speakers wishing to participate. The EPA
will make every effort to accommodate all speakers that are registered
and arrive before 7 p.m. A lunch break is scheduled from 1 p.m. until 2
p.m. and a thirty minute break is scheduled from 4:30 p.m. until 5 p.m.
during the hearing. The EPA Web site for the rulemaking, which includes
the proposal and information about the public hearing, can be found at:
www.epa.gov/nsr.

FOR FURTHER INFORMATION CONTACT: Michael S. Brooks, Air Quality Policy
Division, Office of Air Quality Planning and Standards (C504-05),
Environmental Protection Agency, Research Triangle Park, North Carolina
27711; telephone number<PHONE_NUMBER>; fax number<PHONE_NUMBER>;
email address<EMAIL_ADDRESS>The public hearing will provide
interested parties the opportunity to present data, views, or arguments
concerning these proposed rules. Persons interested in presenting oral
testimony should notify Ms. Long at least 1 day in advance of the
public hearing. To register to speak, attend or for information
pertaining to the public hearing on this document, contact Ms. Pamela
S. Long, Air Quality Policy Division, Office of Air Quality Planning
and Standards (C504-01), Environmental Protection Agency, Research
Triangle Park, North Carolina 27711; telephone number<PHONE_NUMBER>;
fax number<PHONE_NUMBER>; email address<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: The information in this SUPPLEMENTARY

INFORMATION section of this preamble is organized as follows:

I. General Information
    A. Executive Summary
    1. Purpose of the Regulatory Action
    2. Summary of Major Provisions
    B. Does this action apply to me?
    C. Where can I get a copy of this document and other related
information?
    D. What should I consider as I prepare my comments for the EPA?
    1. Submitting CBI
    2. Tips for Preparing Your Comments
    E. How can I find information about the public hearing?
    F. What acronyms, abbreviations and units are used in this
preamble?
II. Overview of the Proposed Rule
III. Background
    A. Statutory and Regulatory Background for PSD and Title V
    B. How does the Tailoring Rule address GHG emissions under PSD
and Title V?
    C. In the Tailoring Rule, what commitments did the EPA make for
Step 3?
    D. In the Tailoring Rule, what plan did the EPA announce for
developing streamlining measures?
    E. In the Tailoring Rule, what commitments did the EPA make for
subsequent action?
IV. Available Information on GHG Permitting
    A. GHG Permitting Activity to Date
    B. Consultations With States
    C. Additional Technical Support for the Step 3 Rule
V. Proposed Step 3 Rule
    A. Overview
    B. Have states had adequate time to ramp up their resources?
    C. What is the ability of permitting authorities to issue timely
permits?
    D. Has the EPA developed streamlining methods?
    E. Limited Benefit From Lowering Thresholds in Step 3
    F. Conclusion
VI. Streamlining for PSD and Title V Permitting of GHGs
    A. Plantwide Applicability Limitations for GHGs
    1. What is the EPA proposing?
    2. What is a PAL?
    3. Why are we proposing to amend the regulations?
    4. Options for Allowing GHG-Only Sources To Obtain a GHG PAL
    5. Extending PALs to GHGs on a CO2e Basis and Using
PALs To Determine Whether GHG Emissions Are ``Subject to
Regulation''
    6. Can a GHG source that already has a mass-based GHG PAL obtain
a CO2e-based PAL once we issue final changes to the PAL
rules?
    7. How would we change the regulatory provisions to implement
PALs for GHG-only major sources?
    B. Synthetic Minor Source Permitting Authority for GHGs
    1. What is the EPA proposing?
    2. What is synthetic minor limitation, and what is its function?
    3. What is a ``subject to regulation'' limitation?
    4. Why does the EPA need authority to issue synthetic minor
source permits?
    5. What are the benefits to a federal GHG synthetic minor permit
program?
    6. What is the legal rationale for EPA's GHG synthetic minor
source permitting authority?
    7. What changes would EPA make to the PSD regulations to allow
EPA to issue GHG synthetic minor permits?
    C. Redefining Potential To Emit and Source Category Specific PTE
    D. General Permitting for GHGs
    1. What is a general permit?
    2. What is the legal authority for general permits?
    3. Have the states used general permits?
    4. What steps has the EPA made toward developing general
permits?
    5. General Permits and Title V
    E. Presumptive BACT for GHGs
    1. Definition of BACT
    2. What is presumptive BACT?
    3. How the EPA Could Consider Implementing Presumptive BACT
    4. Possible Impediments to Presumptive BACT
    F. Title V Empty Permits
VII. Request for Comment
    A. Solicitation of Comment on Proposed Step 3
    1. General
    2. Call for Additional Information Concerning State Burdens
    B. Solicitation of Comment on Streamlining Techniques
    1. Plantwide Applicability Limitations for GHGs
    2. Synthetic Minor Source Permitting Authority for GHGs
    3. Redefining PTE and Source Category Specific PTE
    4. General Permits for GHGs
    5. Presumptive BACT for GHGs
VIII. Statutory and Executive Order Reviews
    A. Executive Order 12866: Regulatory Planning and Review and
Executive Order 13563: Improving Regulation and Regulatory Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    D. Unfunded Mandates Reform Act
    E. Executive Order 13132: Federalism
    F. Executive Order 13175: Consultation and Coordination With
Indian Tribal Governments
    G. Executive Order 13045: Protection of Children From
Environmental Health and Safety Risks
    H. Executive Order 13211: Actions That Significantly Affect
Energy Supply, Distribution or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898: Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
    K. Determination Under Section 307(d)
IX. Statutory Authority

I. General Information

A. Executive Summary

1. Purpose of the Regulatory Action
    The purpose of this ``Step 3'' rule is to continue the process of
phasing in GHG permitting requirements under the PSD and title V
programs begun in Steps 1 and 2 of the Tailoring Rule.\1\ As a result
of actions to regulate GHGs under other Clean Air Act (CAA or ``the
Act'') programs, GHGs are required to be addressed under the major
source permitting requirements of the Act's PSD and title V programs.
The Tailoring Rule is necessary because the statutory definitions that
have been used for other air pollutants to determine which sources are
``major sources'' subject to permitting under these programs are based
on annual emission rates of 100 or 250 tpy which, if implemented
immediately for GHGs, would bring so many sources into the programs as
to overwhelm the capabilities of state permitting authorities to issue
permits and potentially impede the ability of sources to construct or
modify their facilities.
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    \1\ ``Prevention of Significant Deterioration and Title V
Greenhouse Gas Tailoring Rule; Final Rule,'' 75 FR 31,514 (June 3,
2010) (the Tailoring Rule).
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    To prevent this outcome, the EPA promulgated the Tailoring Rule to
create a higher major source threshold for GHGs. In the Tailoring Rule,
we explained that ``[t]hese impacts * * * are so severe that they bring
the judicial doctrines of `absurd results,' `administrative necessity,'
and `one-step-at-a-time' into the Chevron two-step analytical framework
for statutes administered by agencies.'' Tailoring Rule, 75 FR at
31517. We further explained that on the basis of this legal
interpretation, we would phase-in the applicability of PSD and title V
to GHG-emitting sources so that those requirements would apply ``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.'' Id. In the Tailoring Rule, we went on to
promulgate the first two steps of the phase-in program, which we call
Steps 1 and 2, and we made commitments for subsequent action.
    Under Step 1 of the Tailoring Rule, which began on January 2, 2011,
sources above the GHG threshold that are required to obtain a PSD or
title V permit anyway due to emissions of other pollutants (referred to
as ``anyway'' sources) are required also to address their GHG emissions
in the permit. Under Step 2, which became effective on July 1, 2011,
sources with

GHG emissions above the Tailoring Rule threshold also are required to
obtain a PSD or title V permit, even if they would not be subject to
these programs based on emissions of other pollutants.
    In the Tailoring Rule, the EPA also committed to this Step 3
rulemaking. For this rulemaking we have evaluated whether it is now
possible to lower the GHG major source threshold to bring additional
sources into the CAA permitting programs without overwhelming state
permitting authorities. In addition, we have continued our
identification and evaluation of potential approaches to streamline
permitting so as to enable permitting authorities to permit more GHG-
emitting sources without undue burden. The specific actions being
proposed today are briefly described in the following paragraphs.
2. Summary of Major Provisions
    The EPA is proposing to leave the GHG major source thresholds
unchanged from the Step 2 level at this time. We have found that the
capabilities of the state permitting authorities have not improved to
the extent necessary for additional sources to be brought into the
system. This proposal is discussed further in section V of this
preamble.
    We are also proposing to revise the PSD regulations to provide for
GHG PALs. A PAL establishes a site-specific plantwide emission level
for a pollutant that allows the source to make changes at the facility
without a PSD permit, provided that emissions to not exceed the PAL
level. Such PALs are already available under PSD for other pollutants,
and we are proposing to create provisions to allow for GHG PALs as
well. 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.
This action is discussed further in section VI.A of this preamble.
    We are proposing regulatory provisions as well to allow for
``synthetic minor'' permits for GHGs under the federal PSD program.
Applicability under PSD and title V is triggered when a source ``emits,
or has the potential to emit'' a pollutant at a level greater than the
major source threshold. Under this system, there are some sources that
have the potential to emit a pollutant above the threshold (e.g., if
the source were to operate 24 hours per day, 7 days per week), but do
not have actual emissions above the threshold, due to physical or
operational limitations, and do not plan to ever have emissions that
great. The EPA has long allowed for such sources to voluntarily accept
enforceable limits on their emissions to keep them below the major
source threshold; such sources are referred to as ``synthetic minor''
sources. However, synthetic minor permits are typically issued by
states under their minor source NSR programs, and there is no generally
applicable federal minor NSR program. To allow for issuance of
synthetic minor permits for GHGs in all areas subject to the federal
PSD program, we are proposing to add GHG synthetic minor provisions to
the federal PSD program. We believe that permitting synthetic minor GHG
sources under these provisions will reduce the number of sources
subject to PSD and title V, reducing the burden on state permitting
authorities and the sources. This action is discussed further in
section VI.B of this preamble.

B. Does this action apply to me?

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

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

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

    In addition to being available in the docket, an electronic copy of
this proposed rule will also be available on the World Wide Web.
Following signature by the EPA Administrator, a copy of this proposed
rule will be posted in the regulations and standards section of our New
Source Review (NSR) Web site, under Regulations & Standards, at http://www.epa.gov/nsr.

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

1. Submitting CBI
    Do not submit this information to the EPA through
www.regulations.gov or email. Clearly mark the part or all of the
information that you claim to be CBI. For CBI information in a disk or
CD-ROM that you mail to the EPA, mark the outside of the disk or CD-ROM
as CBI and then identify electronically within the disk or CD-ROM the
specific information that is claimed as CBI. In addition to one
complete version of the comment that includes information claimed as
CBI, a copy of the comment that does not contain the information
claimed as CBI must be submitted for inclusion in the public docket.
Information so marked will not be disclosed except in accordance with
procedures set forth in 40 CFR Part 2. Send or deliver information
identified as CBI only to the following address: Roberto Morales, OAQPS
Document Control Officer (C404-02), Environmental Protection Agency,
Research Triangle Park, NC 27711, Attention Docket ID No. EPA-HQ-OAR-
2009-0517.
2. Tips for Preparing Your Comments
    When submitting comments, remember to:
     Identify the rulemaking by docket number and other
identifying information (subject heading, Federal Register date and
page number).
     Follow directions--The agency may ask you to respond to
specific questions or organize comments by referencing a Code of
Federal Regulations (CFR) part or section number.
     Explain why you agree or disagree; suggest alternatives
and substitute language for your requested changes.
     Describe any assumptions and provide any technical
information and/or data that you used.
     If you estimate potential costs or burdens, explain how
you arrived at your estimate in sufficient detail to allow for it to be
reproduced.
     Provide specific examples to illustrate your concerns, and
suggest alternatives.
     Explain your views as clearly as possible, avoiding the
use of profanity or personal threats.
     Make sure to submit your comments by the comment period
deadline identified.

E. How can I find information about the public hearing?

    Persons interested in presenting oral testimony should contact Ms.
Pamela Long, Air Quality Policy Division (C504-01), Environmental
Protection Agency, Research Triangle Park, NC 27711; telephone number
(919) 541-0641 or email<EMAIL_ADDRESS>at least 1 day in advance of
the public hearing. Persons interested in attending the public hearing
should also contact Ms. Long to verify the time, date and location of
the hearing. The public hearing will provide interested parties the
opportunity to present data, views or arguments concerning these
proposed rules.

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

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

AFUE..........................  Annual Fuel Utilization Efficiency
BACT..........................  Best Available Control Technology
CAA or Act....................  Clean Air Act
CFR...........................  Code of Federal Regulations
CH4...........................  Methane
CO2...........................  Carbon Dioxide
CO2e..........................  Carbon Dioxide Equivalent
DOE...........................  U.S. Department of Energy
EPA...........................  U.S. Environmental Protection Agency
ECOS..........................  Environmental Council of the States
FIP...........................  Federal Implementation Plan
FR............................  Federal Register
GHG...........................  Greenhouse Gas
GP............................  General Permit
GWP...........................  Global Warming Potential
HFCs..........................  Hydrofluorocarbons
ICR...........................  Information Collection Request
LDVR..........................  Light-Duty Vehicle Rule
N2O...........................  Nitrous Oxide
NAAQS.........................  National Ambient Air Quality Standard
NACAA.........................  National Association of Clean Air
                                 Agencies
NRDC..........................  Natural Resources Defense Council
NSR...........................  New Source Review
NTTAA.........................  National Technology Transfer and
                                 Advancement Act
OMB...........................  Office of Management and Budget
PAL...........................  Plantwide Applicability Limitation
PFCs..........................  Perfluorocarbons
PSD...........................  Prevention of Significant Deterioration
PTE...........................  Potential to Emit
RFA...........................  Regulatory Flexibility Act
SBA...........................  Small Business Administration
SF6...........................  Sulfur Hexafluoride
SIP...........................  State Implementation Plan
SNPR..........................  Supplemental Notice of Proposed
                                 Rulemaking
TSD...........................  Technical Support Document
tpy...........................  Tons Per Year
UMRA..........................  Unfunded Mandates Reform Act

II. Overview of the Proposed Rule

    In the Tailoring Rule, we included an enforceable commitment to
propose or solicit comment on what we call Step 3 of the process for
phasing in, or tailoring, the applicability thresholds at which GHG
emission sources are subject to the CAA PSD and title V permitting
requirements. We also stated in that rule that we would lower the
Tailoring Rule thresholds 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, and only after we had the
opportunity to expedite GHG permit issuance through streamlining
measures. In addition, in the Tailoring Rule, we committed to complete
action on the Step 3 rulemaking by July 1, 2012, and to make the Step 3
rule effective on July 1, 2013. In the short period of time since the
EPA promulgated the Tailoring Rule, the states and we have made
progress in GHG permitting capacity and streamlining in some areas, but
not enough to justify lowering the thresholds at this time. As a
result, in this rulemaking, we propose to maintain Step 3 of the
Tailoring Rule at current levels.
    In section III of this proposal, we discuss background information,
including the potential numbers of permit actions, amounts of GHG
emissions, and administrative costs of permit actions for the sources
that are potentially subject to GHG permitting for Step 3.
    In section IV, we discuss the available information regarding the
impact that GHG permitting is having on permitting authorities. In
section V, we discuss our proposal to maintain the current
applicability requirements for GHG PSD and title V permitting at the
levels established under Steps 1 and 2 of the Tailoring Rule--which are
the first two steps in the Tailoring Rule's phase-in program for PSD
and title V applicability--which we generally refer to as the 100,000/
75,000 levels. Our basis for maintaining the current applicability
requirements stems from the Tailoring Rule itself, in which we
determined that with the Step 1 and 2 thresholds, permitting
authorities would be required to handle a large number of GHG
permitting actions that would impose significant administrative burdens
on the permitting authorities, and that lowering those thresholds in
Step 3 would bring in more permitting actions that in turn would add
more burden. Accordingly, we stated we would lower the GHG thresholds
only if certain criteria are met. The criteria are: (i) The development
of what we call streamlining measures that would make GHG permitting
more efficient, (ii) whether permitting authorities had the

time needed to ramp up their resources, and (iii) the ability of
sources to meet the requirements of the PSD program and the permitting
authorities' ability to issue timely permits.\2\ Information currently
available indicates that the permitting authorities are not
significantly better positioned now to process more GHG permits than
they were at the time we promulgated Steps 1 and 2 in the Tailoring
Rule. We also note that lowering the thresholds to include the
relatively low-emitting sources currently under consideration for Step
3 would result in a very small addition to the amount of GHG emissions
subject to permitting requirements while potentially adding thousands
of sources to the permitting process. For these reasons, we propose in
Step 3 to maintain, and not lower, the current applicability
thresholds.
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    \2\ 75 FR 31559.
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    As we committed to do in the Tailoring Rule, we have been exploring
a variety of approaches that could be used to streamline PSD and title
V permitting for sources of GHGs. In section VI, we discuss
streamlining techniques with the potential to make the PSD and title V
permitting programs more efficient to administer for GHG-emitting
sources, and propose two streamlining techniques. In section VI.A, we
propose to add provisions to the PSD regulations at 40 CFR 51.166 and
52.21 to better address PALs for GHGs. More specifically, we propose
regulatory changes to implement GHG PALs on either a mass-basis (tpy)
or a CO2e-basis, including for existing sources that are not
yet currently major for any regulated NSR pollutants and are not major
sources because of their GHG emissions, and we also propose allowing
PALs to be used as an alternative approach for determining both whether
a project is a major modification and whether GHG emissions are subject
to regulation. In section VI.B, we propose to add provisions to the PSD
regulations at 40 CFR 52.21 to create GHG synthetic minor source
permitting authority, in areas subject to a GHG PSD FIP. In doing so,
we propose changes to create the regulatory authority for the EPA to
issue synthetic minor limitations for GHG emissions to allow sources to
restrict emissions below the PSD applicability thresholds. A synthetic
minor limit may also allow sources to restrict emissions below the
title V permitting applicability threshold on a source-wide basis. We
also request comment on whether any states with approved SIPs lack
authority to issue GHG synthetic minor limitations.
    In the rest of section VI, we discuss our progress in evaluating
the suitability of other streamlining options and request further
comment, for the purposes of both PSD and title V permitting, on
potential-to-emit calculations and the use of general permits; and for
PSD permitting, on the use of presumptive best available control
technology (BACT).
    In section VII, we solicit comment on the full range of topics
discussed in this proposal. In addition, we call for additional
information from states as to their current and expected air permit
budgets as well as their current and expected future levels of
permitting based on the current thresholds and the possibility of lower
thresholds in the future.

III. Background

    This section describes key aspects of the background for this
rulemaking. For other background information, such as a description of
GHGs and their sources, the regulatory backdrop to the Tailoring Rule,
and the EPA's GHG PSD and title V programs, see the Tailoring Rule, the
related actions that the EPA took shortly before finalizing the
Tailoring Rule,\3\ and the GHG PSD and title V implementation rules
that we call the GHG PSD SIP Call and GHG FIP,\4\ as well as the GHG
PSD and title V Narrowing Rules.\5\ For purposes of this proposal, we
assume that the reader is familiar with the above-referenced materials.
In the following paragraphs we provide a brief summary of key statutory
and regulatory background for the PSD permit and title V programs.
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    \3\ ``Endangerment and Cause or Contribute Findings for
Greenhouse Gases Under Section 202(a) of the Clean Air Act,'' 74 FR
66,496 (December 15, 2009) (the Endangerment and Cause-or-Contribute
Findings); ``Light-Duty Vehicle Greenhouse Gas Emission Standards
and Corporate Average Fuel Economy Standards; Final Rule,'' 75 FR
25,324 (May 7, 2010) (the Light-duty Vehicle Rule); ``Interpretation
of Regulations that Determine Pollutants Covered by Clean Air Act
Permitting Programs,'' 75 FR 17,004 (April 2, 2010) (the Timing
Decision or the Johnson Memo Reconsideration). In the ``Endangerment
Finding,'' which is governed by CAA section 202(a) in December 2009
the Administrator exercised her judgment to conclude that ``six
greenhouse gases taken in combination endanger both the public
health and the public welfare of current and future generations.''
The Administrator also found ``that the combined emissions of these
greenhouse gases from new motor vehicles and new motor vehicle
engines contribute to the greenhouse gas air pollution that
endangers public health and welfare under CAA section 202(a).'' 74
FR 66496. This Endangerment Finding led directly to promulgation of
what we call the ``Light-duty Vehicle Rule'' or the ``LDVR,'' also
governed by CAA section 202(a), in which EPA set standards for the
emission of greenhouse gases for new motor vehicles built for model
years 2012-2016. The Johnson Memo Reconsideration provided EPA's
interpretation of a pre-existing definition in its PSD regulations
delineating the ``pollutants'' that are taken into account in
determining whether a source must obtain a PSD permit and the
pollutants each permit must control. Regarding the Vehicle Rule, the
Johnson Memo Reconsideration stated that such regulations, when they
take effect on January 2, 2011, will, by operation of the applicable
CAA requirements, subject GHG-emitting sources to PSD requirements.
    \4\ ``Action to Ensure Authority to Issue Permits under the
Prevention of Significant Deterioration Program to Sources of
Greenhouse Gas Emissions: Finding of Substantial Inadequacy and SIP
Call--Final Rule,'' 75 FR 77,698 (December 13, 2010) (the GHG PSD
SIP Call); ``Action to Ensure Authority to Issue Permits Under the
Prevention of Significant Deterioration Program to Sources of
Greenhouse Gas Emissions: Federal Implementation Plan; Final Rule,''
75 FR 82246 (December 30, 2010) (the GHG PSD SIP Call FIP).
    \5\ ``Limitation of Approval of Prevention of Significant
Deterioration Provisions Concerning Greenhouse Gas Emitting Sources
in State Implementation Plans; Final Rule,'' 75 FR 82535 (December
30, 2010) (the PSD Narrowing Rule); ``Action to Ensure Authority to
Implement Title V Permitting Programs Under the Greenhouse Gas
Tailoring Rule; Final Rule,'' 75 FR 82254 (December 30, 2010) (the
Title V Narrowing Rule).
---------------------------------------------------------------------------

A. Statutory and Regulatory Background for PSD and Title V

    Under the CAA, new major stationary sources of certain air
pollutants, defined as ``regulated NSR pollutants,'' and major
modifications to existing major sources are required to, among other
things, obtain a PSD permit prior to construction or major
modification. We refer to the set of requirements that determine which
sources and modifications are subject to PSD as the ``applicability''
requirements. Once major sources become subject to PSD, these sources
must, in order to obtain a PSD permit, meet the various PSD
requirements. For example, they must apply BACT, demonstrate compliance
with air quality related values and PSD increments, address impacts on
special Class I areas (e.g., some national parks and wilderness areas),
and assess impacts on soils, vegetation, and visibility. These PSD
requirements are the subject of Sections III and IV of this document.
    In this section, we discuss how the CAA and relevant EPA
regulations describe the PSD applicability requirements. The CAA
applies the PSD requirements to any ``major emitting facility'' that
constructs (if the facility is new) or undertakes a modification (if
the facility is an existing source).\6\ The term ``major emitting
facility'' is defined as a stationary source that emits, or has a PTE
of, at least 100 TPY, if the source is in one of 28 listed source
categories, or, if the source is not, then at least 250 TPY, of ``any
air pollutant.'' 42 U.S.C. 7479(1). For existing facilities, the CAA
adds a definition of modification, which, in general, is any physical
or

operational change that ``increases the amount'' of any air pollutant
emitted by the source.\7\
---------------------------------------------------------------------------

    \6\ 42 U.S.C. 7475(a), 7479(1).
    \7\ 42 U.S.C. 7479(1), 7411(a)(4).
---------------------------------------------------------------------------

    The EPA's regulations implement these PSD applicability
requirements through use of different terminology, and, in the case of
GHGs, with additional limitations. Specifically, the regulations apply
the PSD requirements to any major stationary source that begins actual
construction \8\ (if the source is new) or that undertakes a major
modification (if the source is existing).\9\ The term major stationary
source is defined as a stationary source that emits, or has a PTE of,
at least 100 TPY if the source is in one of 28 listed source
categories, or, if the source is not, then at least 250 TPY, of
regulated NSR pollutants.\10\ We refer to these 100- or 250-TPY amounts
as the major source limits or thresholds. A major modification is
defined as ``any physical change in or change in the method of
operation of a major stationary source that would result in: a
significant emissions increase [ ] of a regulated NSR pollutant [ ];
and a significant net emissions increase of that pollutant from the
major stationary source.'' \11\ EPA rules specify what amount of
emissions increase is ``significant'' for listed regulated NSR
pollutants (e.g., 40 TPY for sulfur dioxide, 100 TPY for carbon
monoxide), but for any regulated NSR pollutant that is not listed in
the regulations, any increase is significant.\12\
---------------------------------------------------------------------------

    \8\ 40 CFR 52.21(b)(11).
    \9\ 40 CFR 52.21(a)(2).
    \10\ 40 CFR 52.21(b)(1)(i).
    \11\ 40 CFR 52.21(b)(2)(i) and the term ``net emissions
increase'' as defined at 40 CFR 52.21(b)(3).
    \12\ 40 CFR 52.21(b)(23)(i)-(ii).
---------------------------------------------------------------------------

    A pollutant is a ``regulated NSR pollutant'' if it meets at least
one of four requirements, which are, in general, any pollutant for
which EPA has promulgated a NAAQS or a new source performance standard
(NSPS), certain ozone depleting substances, and ``[a]ny pollutant that
otherwise is subject to regulation under the Act.'' \13\ PSD applies on
a regulated-NSR-pollutant-by-regulated-NSR-pollutant basis. The PSD
requirements do not apply to regulated NSR pollutants for which the
area is designated as nonattainment. Further, some modifications are
exempt from PSD review (e.g., routine maintenance, repair and
replacement).\14\
---------------------------------------------------------------------------

    \13\ 40 CFR 52.21(b)(50).
    \14\ 40 CFR 52.21(b)(2)(iii).
---------------------------------------------------------------------------

    Under the CAA, title V applies to a ``major source,'' which is
defined to include any stationary source that is a ``major stationary
source'' under section 302 of the Act.\15\ CAA Sec.  501(2). Under
section 302, a ``major stationary source'' is defined as any stationary
facility or source of air pollutants which directly emits, or has the
potential to emit, 100 tpy or more of any air pollutant.\16\ The title
V regulations define a ``major source'' in 40 CFR 70.2.
---------------------------------------------------------------------------

    \15\ CAA Sec.  501(2).
    \16\ CAA Sec.  302(j).
---------------------------------------------------------------------------

    In the Tailoring Rule, the EPA promulgated, for the first time, a
regulatory definition of the term ``subject to regulation'' for
purposes of the PSD regulations, and included that term, as defined, in
the title V regulations. Under the Tailoring Rule regulations, a
pollutant is ``subject to regulation'' if, in general, the pollutant is
subject to actual control of the quantity of emissions (as opposed to,
for example, being subject only to monitoring requirements). E.g., 40
CFR 51.166(b)(48), 40 CFR 70.2. In addition, the Tailoring Rule also
provides a special rule for GHGs, which provides that GHGs become
pollutants ``subject to regulation,'' and therefore subject to PSD and
title V, if they meet the following two-step phase-in thresholds. Step
1 applies the applicable requirements of PSD, including the BACT
requirement to projects that increase net GHG emissions by the
applicable threshold (75,000 tpy CO2e) provided these
projects would be subject to PSD anyway by significantly increasing
emissions of at least one non-GHG pollutant. Under Step 1, for the
title V program, only sources with current title V permits for non-GHG
pollutants will have to address GHGs.
    Step 2 then expands the program by phasing in additional large
sources of GHG emissions that are not already subject to PSD or title V
permitting requirements due to non-GHG emissions. In Step 2, PSD and
title V requirements will apply to new sources that emit, or have the
potential to emit, at least 100,000 tpy CO2e. For existing
sources, Step 2 applies title V requirements to existing sources that
emit, or have the potential to emit, 100,000 tpy CO2e and
that are not already subject to title V requirements, and also applies
PSD requirements to those sources that emit, or have the potential to
emit, 100,000 tpy CO2e and undertake a modification that
increases net emissions by at least 75,000 tpy CO2e. See 75
FR 31516.
    In the Tailoring Rule, the EPA explained that ``we selected the
`subject to regulation' mechanism'' as the legal mechanism for
establishing the phase-in thresholds because we had received
information that states could more expeditiously adopt those thresholds
through that mechanism. The EPA added that ``our action in this
rulemaking [in establishing the phase-in thresholds] should be
interpreted to rely on any of several legal mechanisms to accomplish
this result * * * [including] revising the meaning of several terms in
the [PSD] definition [ provisions].'' 75 FR 31582. In this manner, EPA
identified several legal bases within the definitional previsions of
the PSD regulations to support the phase-in approach.

B. How does the Tailoring Rule address GHG emissions under PSD and
Title V? \17\
---------------------------------------------------------------------------

    \17\ We include this discussion of the Tailoring Rule for
background purposes only. We do not reopen for comment any of the
determinations made in the Tailoring Rule or our rationale for them.
---------------------------------------------------------------------------

    In the Tailoring Rule, the EPA explained that the rulemaking was
necessary because without it, the CAA PSD preconstruction review
permitting program and the title V operating permit program would,
under a literal reading of those provisions, apply to all stationary
sources that emit or have the potential to emit more than 100 or 250
tpy of GHGs beginning on January 2, 2011. This was the date when the
EPA's recently promulgated Light Duty Vehicle Rule (LDVR) took effect,
imposing control requirements for the first time on carbon dioxide
(CO2) and other GHGs, thereby making them subject to
regulation and triggering the PSD and title V permitting requirements.
Therefore, a source owner proposing to construct any new major source
that would emit or have the potential to emit at or higher than the
100/250 tpy applicability levels (and which therefore may be referred
to as a ``major'' source) or modify any existing major source in a way
that would increase GHG emissions, would need to obtain a permit under
the PSD program that addresses these emissions before construction or
modification could begin. Similarly, title V would apply to a new or
existing GHG source exceeding the 100 tpy applicability threshold in
the Act.
    In the Tailoring Rule, we further explained that under these
circumstances, and in the absence of streamlining methods, state and
local permitting authorities would be burdened by the need to issue PSD
permits to tens of thousands of small sources (including, for example,
many commercial sources and small industrial sources) and to issue
title V permits to millions of small sources (including, for example,
many residential sources).

These extraordinary numbers of permit applications are orders of
magnitude greater than the current inventory of annual applications and
would vastly exceed the current administrative resources of the
permitting authorities. Permit gridlock would result with the
permitting authorities able to issue only a tiny fraction of the
permits requested.
    In the Tailoring Rule, we further explained that ``[t]hese impacts
* * * are so severe that they bring the judicial doctrines of `absurd
results,' `administrative necessity,' and `one-step-at-a-time' into the
Chevron two-step analytical framework for statutes administered by
agencies.'' Tailoring Rule, 75 FR at 31517. We further explained that
on the basis of this legal interpretation, we would phase-in the
applicability of PSD and title V to GHG-emitting sources so that those
requirements would apply ``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.'' Id. In the
Tailoring Rule, we went on to promulgate the first two steps of the
phase-in program, which we call Steps 1 and 2, and we made commitments
for subsequent action.
    In the Tailoring Rule, we closely reviewed the numbers of
additional permitting actions for GHG-emitting sources, and the
resulting administrative burdens, that would occur at various
permitting thresholds. For example, we estimated the following
permitting burdens associated with the Step 1 and Step 2 thresholds,
compared to the administrative burdens of the then-current PSD and
title V programs (that is, before applicability to GHG-emitting
sources):

Step 1:
    Number of sources subject to PSD and title V permitting: The same
as prior to Step 1
    Additional workload hours PSD program: 34,000 at a cost of $3
million
    Additional workload hours title V program: 27,468 at a cost of $1
million
Step 2:
    Number of additional sources subject to PSD permitting: 2 new
sources, 915 modified sources
    Additional workload hours PSD program: 310,655 at a cost of $24
million
    Number of additional sources subject to title V permitting: 190
sources for each of the first 3 years
    Additional workload hours title V program: 141,322 at a cost of $7
million

75 FR 31541.
    We further estimated that the combined additional PSD and title V
permitting burdens after implementation of Steps 1 and 2 would, on an
annual basis, mean a 42 percent increase in costs over the then-current
PSD and title V program. 75 FR 31540, Table V-1.

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

    In the Tailoring Rule, we noted that ``following implementation of
the first phase of PSD and title V applicability to GHG sources,
generally at the [proposed] threshold, additional action would be
required over time to assure full compliance with the statute.'' 75 FR
31571. Accordingly, we included in the Tailoring Rule an enforceable
commitment to issue a notice of proposed rulemaking in which we would
propose or solicit comment on a third step of the phase-in, which we
call Step 3. We committed to complete Step 3 by July 1, 2012, and to
make Step 3 effective by July 1, 2013. We committed to solicit comment
on lowering the thresholds, so that more sources would be subject to
PSD and title V requirements, 40 CFR 52.22(b)(1), 40 CFR 70.12(b)(1),
but we did not commit to either propose or finalize lower thresholds.
We further stated that in light of the administrative burdens, we would
not, in Step 3, lower the thresholds below the 50,000/50,000 tpy
CO2e levels.
    In the Tailoring Rule, we recognized that lowering the thresholds
in Step 3, and thereby bringing more sources into PSD and title V
permitting, would mean that the permitting authorities would confront
even greater administrative burdens. For example, we estimated that
lowering the thresholds to the 50,000/50,000 level would increase
administrative costs by 40 percent above administrative costs
associated with Step 2.\18\ Accordingly, we explained that whether we
could lower the thresholds in Step 3 depended on (i) whether the EPA
could develop streamlining measures, (ii) the time that permitting
authorities need to ramp up their resources, and (iii) sources'
abilities to meet the requirements of the PSD program and permitting
authorities' ability to issue timely permits. 75 FR 31524. We
elaborated:
---------------------------------------------------------------------------

    \18\ 75 FR 31540 (Table V-1).
---------------------------------------------------------------------------

(2) Criteria for Establishing Phase-in Schedule

    The specific phase-in schedule under the tailoring approach will
depend on several things. The first is our progress in developing
streamlining methods that will render the permitting authority
workload more manageable by taking some sources off the table
(through regulations or guidance interpreting ``potential to
emit''), and by allowing for more efficient permit processing
(through general permits and presumptive BACT). At the same time,
streamlining techniques will lower permitting costs to sources or
even eliminate some sources' obligations to obtain permits
altogether. The second is the time that permitting authorities need
to ramp up their resources in an orderly and efficient manner to
manage the additional workload. The third is information we have as
to the sources' abilities to meet the requirements of the PSD
program and the permitting authorities' ability to process permits
in a timely fashion. That information will be based on the real-
world experience the permitting authorities will accumulate as they
proceed to process permit application for the larger GHG sources.
    Thus, under our present approach, we will develop streamlining
techniques, we expect the permitting authorities to ramp up
resources in response to the additional demands placed upon them in
the first two steps, and we will gather real world- information
about the GHG permitting process; and based on all that, we will
address expanding the PSD program in a step-by-step fashion to
include more sources over time. We intend to follow this process to
establish * * * the PSD applicability thresholds * * *.

75 FR 31559. With respect to the third criterion, we note that in the
Tailoring Rule, we made clear that sources' abilities to meet the
requirements of the PSD and title V programs depend at least in part on
the ability of the states to develop, as part of the state programs,
outreach and educational efforts to facilitate source compliance.
Accordingly, for present purposes, we think this component concerning
sources may be examined by a review of the states' progress in
developing state GHG permitting programs. We also note that permitting
authorities' abilities to issue timely GHG permits may be measured by
the extent of any permitting backlog, and depend in large part on the
permitting authorities' development of expertise. In this rulemaking,
we seek information from the states as to their ability to issue timely
permits, including data concerning their backlog, but we also are
examining, more broadly, the states' progress in developing expertise
in GHG permitting.

D. In the Tailoring Rule, what plan did the EPA announce for developing
streamlining measures?

    In the Tailoring Rule, we announced a plan to explore streamlining
techniques that could make the permitting programs more efficient to
administer for GHGs, and that therefore

could allow expanding those programs to smaller sources. Streamlining
techniques to be evaluated include: (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. We believe that these techniques have the
potential to streamline the PSD and title V permitting programs for
GHGs to ``allow the expeditious expansion of PSD and title V
applicability to more GHG-emitting sources while protecting those
sources and the permitting authorities from undue expenses.'' 75 FR
31526.
    While we intend to move forward and develop streamlining
approaches, we also stated in the Tailoring Rule that we did not expect
to develop and implement any of these prior to Step 2. We also stated
in the rule that several of these streamlining approaches will take
several years to develop, requiring separate rulemaking both at the
federal level, and then through state and local processes. We,
nonetheless, committed to explore a number of possible streamlining
actions prior to the Step 3 rulemaking.
    In addition, with respect to title V, in the Tailoring Rule we
noted that commenters on the proposal for that rule stated that the EPA
should apply the title V program only to sources that are subject to
applicable requirements, so that sources should not be required to hold
``empty permits'' (e.g., permits issued to a source that is not subject
to any applicable requirement for any pollutant). In the Tailoring
Rule, we recognized that not requiring sources to hold such ``empty
permits'' is a potential means for relieving title V permitting
burdens. [75 FR 31566.] We also stated that--

    We need to gather more information concerning the potential
number and utility of ``empty permits'' for GHG sources, in light of
the fact that the need for requirements in title V permits will vary
based on the requirements of each SIP, and the fact that some SIPs
contain broadly applicable requirements.

75 FR 31566. We added that in the Step 3 rulemaking, ``we may consider
whether to limit title V applicability to GHG sources in order to
minimize the number of GHG sources with `empty' permits.'' Tailoring
Rule, 75 FR 31567.

E. In the Tailoring Rule, what commitments did the EPA make for
subsequent action?

    In addition, in the Tailoring Rule, we established an enforceable
commitment that we will (i) complete a study by April 30, 2015, to
evaluate the status of PSD and title V permitting for GHG-emitting
sources, including progress in developing streamlining techniques; and
(ii) complete further rulemaking (which we refer to as Step 4), based
on that study by April 30, 2016, to address the permitting of smaller
sources. That rulemaking may also consider additional permanent
exclusions based on the ``absurd results'' doctrine, where applicable.
    In the Tailoring Rule, we also included a provision assuring that
no source with emissions or potential to emit below 50,000 tpy
CO2e, and no modification resulting in an increase and a net
GHG increases of less than 50,000 tpy CO2e, would be subject
to PSD or title V permitting before April 30, 2016. We included this
provision on the basis of our conclusion that the administrative
burdens that would accompany permitting sources below the 50,000 tpy
threshold would be so great that it would be impossible to administer
the permit programs for these sources until at least 2016, even with
the streamlining actions that the EPA may be able to develop, and the
increases in permitting resources that we reasonably expect the
permitting authorities to acquire.

IV. Available Information on GHG Permitting

    To support this Step 3 rulemaking, the EPA has gathered additional
information on the impact that GHG permitting is having on permitting
authorities at the current threshold levels and the potential impact
that would result from a reduction in the GHG permitting thresholds to
levels as low as 50,000 tpy CO2e. Section IV.A discusses the
actual permitting that has occurred since January 1, 2011. Section IV.B
discusses information gathered through preliminary consultations with
eight state PSD permitting authorities, as well as, experience garnered
from the EPA regional offices that are the PSD permitting authorities
for certain states.\19\ Section IV.C presents information from an
analysis of the number of existing and new sources that would be
potentially major sources of GHGs at a range of thresholds between the
current level of 100,000 tpy CO2e and 50,000 tpy
CO2e.
---------------------------------------------------------------------------

    \19\ In the title V program, the responsible permitting agency
is referred to as the ``permitting authority,'' while in the PSD
program, this entity is referred to as the ``reviewing authority.''
We use the two terms interchangeably in this preamble.
---------------------------------------------------------------------------

A. GHG Permitting Activity to Date

    As of December 1, 2011, the EPA and state permitting authorities
had issued 18 PSD permits with GHG requirements. We also estimate that
as of that date, the EPA and state permitting authorities had received
an additional 50 GHG PSD permit applications. The types of source
categories for which permitting authorities have issued GHG permits
include: biofuel production, cement plants, electric generating units,
lime production facilities, outer continental shelf exploration, pulp
and paper mills, and refineries. Eleven states and three EPA regions
issued these permits. In most cases, no permitting authority issued a
permit for the same source category more than once. We discuss in
section V the extent to which these permitting actions have provided
information relevant to Step 3.

B. Consultations With States

    To obtain additional information on the current status of GHG
permitting based on the implementation of Step 1 and Step 2 and the
potential impact of reducing the GHG thresholds in Step 3, we consulted
with eight state permitting authorities--Iowa, Louisiana, Michigan, New
Jersey, North Carolina, Pennsylvania, South Dakota and Utah--all of
which have experience with GHG permitting, and which represent a cross-
section of state programs geographically and in terms of population and
types of sources. In addition, we reviewed the experience of the EPA
regional offices that act as PSD permitting authorities in state
jurisdictions: Region 4, which issues PSD permits for GHG emissions in
Florida and for all regulated pollutant emissions from outer
continental shelf sources in the eastern portion of the Gulf of Mexico;
Region 6, which issues PSD permits for GHG emissions in Arkansas and
Texas; and Region 9, which issues PSD permits for all regulated
pollutants in many of the local air quality management districts in
California. For additional information concerning responses to the
survey, please refer to the Docket ID No. EPA-HQ-OAR-2009-0517.
    These states and regional offices confirm that they have not yet
experienced the increase in the number of major source permitting
actions that was predicted to result from the implementation of Step 1
and Step 2. They generally do not believe that 2011 has been
representative of the permitting burdens that they expect will

ultimately occur under the current Tailoring Rule.
    In addition, the states confirmed that to this point, they have not
been able to build up their GHG permitting infrastructure. For example
the permitting activity to date has provided limited, if any,
opportunity to build internal capacity to handle GHG permitting for a
diverse set of sources or more efficiency for any particular source
category. Similarly, the lack of permitting experience greatly
diminished the opportunity to develop meaningful streamlining
approaches to address GHG permitting. As a result, states indicated
that they have made little or no progress in implementing streamlining
measures, and have not adopted any such measures specifically to
address GHGs.

C. Additional Technical Support for the Step 3 Rule

    To support the decision-making process for this Step 3 rule, the
EPA carried out an analysis to estimate the number of facilities that
would exceed different GHG emissions threshold levels.\20\ This
analysis built upon analysis the EPA included in the Tailoring Rule to
support the threshold decisions in that action.\21\ In the Tailoring
Rule analysis, the EPA evaluated eight different PTE thresholds between
100 and 100,000 tpy CO2e, including 50,000 tons per year.
For this Step 3 analysis, the EPA evaluated nine additional thresholds
between 50,000 and 100,000 tpy CO2e in 5,000 tpy increments
(that is, 55,000 through 95,000 tpy CO2e). The EPA
considered stationary sources in the following sectors:
---------------------------------------------------------------------------

    \20\ See Technical Support Document ``Summary of Methodology and
Data Used to Evaluate Resource Requirements at Alternative
Greenhouse Gas (GHG) Permitting Thresholds'' (December 2011).
    \21\ See ``Technical Support Document for Greenhouse Gas
Emissions Thresholds Evaluation,'' March 29, 2010, Docket No. EPA-
HQ-OAR-2009-0517-19158.
---------------------------------------------------------------------------

     Electricity Generation (facilities with fossil fuel-fired
electric generating units);
     Industrial sources (14 subcategories of industries with
process and combustion GHG emissions);
     Energy (oil and gas extraction, transport, and processing;
underground coal mining);
     Waste Treatment (landfills and municipal solid waste
incinerators);
     Agriculture (stationary fuel combustion);
     Commercial (stationary fuel combustion); and
     Residential (stationary fuel combustion).

For each sector, the analysis estimated the number of sources that
would become major sources for GHGs at each of the different threshold
levels and the number of new major sources projected to be added each
year. The study found that at a Step 3 major source threshold of 50,000
tpy CO2e, approximately 4,650 additional sources would
become major sources of GHGs (increasing from 5,326 at 100,000 tpy
CO2e, to 9,980 at 50,000 tpy). About half of these would be
in the ``unspecified industrial stationary combustion'' subcategory of
industrial facilities; 16 percent in the waste treatment sector,
landfill subcategory; 14 percent in the energy sector, oil and gas
subcategory; 12 percent in the commercial/stationary fuel combustion
sector; 4 percent in the electricity generation sector and the
remaining 4 percent scattered among the remaining sectors and
industrial subcategories. At a threshold of 80,000 tpy CO2e
the number of commercial sources that become major sources of GHGs
significantly increases (compared to 100,000 tpy CO2e) and
at a threshold of 55,000 tpy CO2e, some multi-family
residential sources become major sources. The analysis found that no
sources in the agricultural or single family residential categories
would become major sources of GHGs at a threshold of 50,000 tpy
CO2e. Note that this analysis did not differentiate between
sources that become major only because of the source's GHGs emissions
from sources that are already major for one or more other pollutants.
    The EPA's analysis identified sources that would become subject to
permitting requirements because of GHG emissions alone.\22\ Based on
this analysis, we estimate that a reduction from the current Step 2
threshold to 50,000 tpy CO2e would result in nearly 3,000
sources becoming major sources due to their GHG emissions alone
(increasing from 552 sources at 100,000 tpy CO2e, to 3,539
at 50,000 tpy). In addition, we estimate that 1,014 additional
modifications would be subject to PSD permitting based on GHG emissions
at 50,000/50,000 tpy CO2e versus the Step 2 thresholds of
100,000/75,000 (increasing from 917 per year to 1,931).
---------------------------------------------------------------------------

    \22\ See ``Summary of Methodology and Data Used to Evaluate
Resource Requirements at Alternative Greenhouse Gas (GHG) Permitting
Thresholds,'' December 2011.
---------------------------------------------------------------------------

    In addition to determining the amount of potential additional
permit actions associated with the various thresholds, the EPA also
determined the administrative burdens associated with those actions. To
do so, the EPA relied on the same per-permit administrative cost
figures used in the Tailoring Rule for both PSD and title V permitting,
for both commercial/residential sources and industrial sources, as well
as for both new construction and modifications.\23\ The EPA also
determined the amount of GHG stationary source emissions associated
with the sources potentially affected by the various thresholds.
---------------------------------------------------------------------------

    \23\ We note that none of the challenges to the Tailoring Rule
have addressed these burden estimates; we have not revisited them
for purposes of this rule, nor are we are re-opening them for
comment.
---------------------------------------------------------------------------

    To determine the impacts of lowering the thresholds in Step 3, the
EPA compared the amounts of administrative costs and GHG inventory
covered at the various cut-points to the amounts at the 100,000/75,000
Step 2 levels.\24\ For example, with respect to the PSD administrative
costs, as we stated in the Tailoring Rule, 75 FR 31540 (Table V-1), at
the 100,000/75,000 Step 2 levels, we expect annual PSD permitting
actions for GHG-emitting sources to include 242 newly constructed
sources and 1,365 modifications (917 for GHG emissions alone plus 448
for anyway sources) and we expect that these PSD GHG permitting actions
would increase permitting authority administrative burdens by 42
percent above existing total air permitting burdens (including
permitting for conventional (i.e., non-GHG pollutants under Tailoring
Rule Step 1), because these actions would trigger permitting
requirements for both PSD and title V. In total, we estimate the
facilities meeting the Step 2 major source applicability thresholds
account for approximately 67 percent of the total national stationary
source GHG emissions. At the 50,000/50,000 levels, the EPA estimates
annual PSD permitting actions involving GHG-emitting sources to include
243 newly constructed sources and 2,379 modifications (1 more newly
constructed source and 1,014 more modifications than at the 100,000/
75,000 level). While the EPA estimates these GHG permitting actions to
increase permitting authority administrative burdens by 40 percent
above the total burdens at Step 2 levels (and 99% above the
administrative burdens without GHG permitting), we estimate the
facilities meeting these major source applicability thresholds to
account for approximately 70 percent of

total national stationary source GHG emissions, just three percent more
than currently covered under Step 2. For a more complete description of
the EPA's analysis and an explanation, see the Technical Support
Document titled, ``Summary of Methodology and Data Used to Evaluate
Resource Requirements at Alternative Greenhouse Gas (GHG) Permitting
Thresholds'' (December 2011).
---------------------------------------------------------------------------

    \24\ This level refers to new sources as well as existing
sources that are not ``anyway'' sources and that emit, or have the
potential to emit, at least 100,000 tpy CO2e, as well as
existing sources that emit or have the potential to emit at least
100,000 tpy CO2e and that undertake a modification that
increases net emissions of GHGs by at least 75,000 tpy
CO2e.
---------------------------------------------------------------------------

V. Proposed Step 3 Rule

A. Overview

    The Tailoring Rule's phase-in approach is based on data concerning
the numbers of GHG permitting actions the permitting authorities would
have to undertake and the costs of those actions--both absolute and in
comparison to their current budgets--at various different thresholds
for the applicability of PSD and title V to GHG-emitting sources. In
the Tailoring Rule, we began the phase-in by establishing Steps 1 and
2, which applied PSD and title V to ``anyway'' sources \25\ and sources
emitting GHGs at the 100,000/75,000 tpy CO2e level. To do
so, we determined that permitting authorities could handle the hundreds
of additional permitting actions that would occur under Steps 1 and 2,
even though the authorities' administrative costs would increase by 42
percent over their then-current administrative costs for both PSD and
title V programs.
---------------------------------------------------------------------------

    \25\ We refer to these sources as ``anyway'' sources because
they will become subject to PSD for their GHG emissions if they
undergo PSD permitting anyway, either for new construction or for
modification projects, based on emissions of non-GHG pollutants;
and, by the same token, the will become subject to title V for their
GHG emissions if they are subject to title V anyway due to their
non-GHG emissions.
---------------------------------------------------------------------------

    The present rulemaking represents the fulfillment of our commitment
in the Tailoring Rule to undertake Step 3 of the GHG PSD and title V
phase-in process. At this time, because of the limited amount of new
construction and modifications that sources have undertaken in the past
year, we believe state permitting authorities have not had sufficient
time and opportunity to develop the necessary infrastructure and
increase their GHG permitting expertise and capacity, which makes it
administratively infeasible to apply PSD and title V permitting
requirements to additional sources. Accordingly, we are proposing to
leave the applicability thresholds for GHGs unchanged.
    In the Tailoring Rule, we committed to undertake future rulemaking,
including this Step 3 rulemaking, to examine whether we could lower the
thresholds to, potentially, as low as 50,000/50,000, and thereby apply
PSD and title V to more sources. We recognized that lowering the
thresholds would add more administrative costs on top of those added by
Steps 1 and 2, and as a result, we stated that whether and when we
would lower the thresholds would depend on the pace at which the EPA
and permitting authorities could develop streamlining measures to
expedite permit program administration and permitting authorities could
hire and train staff, as well as gain experience with GHG permitting.
Specifically, we indicated that further phase-in of GHG applicability
would depend on three criteria: (i) Whether the EPA could develop
streamlining measures, (ii) the time that permitting authorities need
to ramp up their resources, and (iii) sources' abilities to meet the
requirements of the PSD program and permitting authorities' abilities
to issue timely permits.
    As described in the following, the states and the EPA have made
some progress in these areas. For example, the states have issued some
GHG permits and we are proposing streamlining measures in this
rulemaking. However, neither the states nor the EPA have had the
opportunity to make significant progress in these areas. First, the
states have had only limited experience in GHG permitting and therefore
have not had the opportunity to develop significant expertise. The main
reasons for this are the unexpectedly low number of PSD permit
applications submitted to date and the short amount of time since GHG
permitting began. As the volume of PSD permit applications increases,
EPA expects that more permitting authorities will further develop the
necessary specialized expertise required for case-by-case review of GHG
permit applications, including the establishment of a robust GHG BACT
record. Second, the 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. Similarly,
for title V, applications for title V permits are not generally due
until a year after title V becomes applicable to a source. Thus, for
Step 2 title V sources, permit applications are generally not due until
July 1, 2012, and states have not gained title V permitting experience.
Third, we have not had the opportunity to develop significant
streamlining approaches, largely because, as we stated in the Tailoring
Rule, certain streamlining approaches require a longer process. Because
of these reasons and following the criteria, described in the Tailoring
Rule, we are establishing Step 3 at the current levels.
    The following discusses these criteria, beginning with the ability
of states to ramp up and build infrastructure, and notes the states'
and our experience with GHG permitting to date under the current Step 1
and Step 2 applicability thresholds. We also address the additional two
criteria noted above and the environmental benefits potentially
associated with any further reduction in the GHG PSD permitting
thresholds.

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

    A criterion that we described in the Tailoring Rule for whether to
lower the thresholds in Step 3 was whether the permitting authorities
could increase their resources. As discussed previously in the
background section, we stated in the Tailoring Rule that we expected
Steps 1 and 2 to result in an increase in PSD permits for new
construction and modifications and in title V permits. We estimated
that Steps 1 and 2 would result in a 42 percent increase in
administrative burdens for permitting authorities. We expected that
some increase in state permitting resources would be needed to
accommodate, at least in part, those new demands.
    As noted, to this point states have not been confronted with the
amount of GHG permit applications that we had expected in the Tailoring
Rule for Steps 1 and 2. EPA estimates that the unexpected small number
of permit applications to this point reflect the economic downturn,
which has depressed new construction and modifications. The number of
permit applications in a given year is based on individual business
decisions which we believe are directly linked to the economic
situation. The Agency expects that this situation will be short-lived,
and that the pace of permitting will pick up as economic conditions
improve and as GHG permitting becomes better established. Thus, it is
prudent for states to continue to plan on confronting additional
administrative demands expected as part of Steps 1 and 2. As discussed
in the following, they have confronted other administrative burdens as
well and if the thresholds are lowered in Step 3, they will confront
still more administrative burdens. Importantly, based on our
consultations with a limited number of states, we do not believe that
states have had the opportunity to obtain the necessary

resources and to develop their infrastructure to accommodate the level
of permitting expected in Steps 1 and 2.
    In addition, an August 2011 report by the Environmental Council of
the States (ECOS) \26\ emphasizes the continued need for additional
resources before full implementation of the program can begin. It also
notes that permitting authorities expect workloads to double or triple
as a result of applications for synthetic minor limits to sources who
wish to avoid GHG permitting.
---------------------------------------------------------------------------

    \26\ S. Brown, A. Fishman, ``The Status of State Environmental
Agency Budgets, 2009-2011,'' Steven Brown, Executive Director, and
Adam Fishman, Intern.
---------------------------------------------------------------------------

    Further, as quantified in the Tailoring Rule, lowering the
thresholds would increase those burdens. We have estimated that
lowering the thresholds to 60,000/60,000 would increase administrative
burdens by 20 percent above the total burdens at Step 2 levels (and 40
percent above the pre-GHG permitting burdens). As noted above, lowering
them to 50,000/50,000 would increase administrative burdens by 40
percent above the total burdens at Step 2 levels (and 99 percent above
the pre-GHG permitting burdens). As we discussed in the Tailoring Rule,
lowering applicability thresholds would trigger requirements for more
sources that never before have been regulated under the PSD and title V
permitting programs. As a result, permitting agencies will need to
conduct an education and outreach program to raise awareness and
understanding of the regulatory requirements for these smaller sources.
Absent this outreach effort, we believe that many sources will not
understand, and perhaps may not even be aware of, their new regulatory
obligations.
    Finally, we note that certain procedural aspects of the GHG
permitting process have proved to be more resource- and time-intensive
for states than anticipated at the time of the Tailoring Rule. In the
final Tailoring Rule, we finalized the applicability thresholds within
the definition of ``subject to regulation,'' instead of within the
``major stationary source'' definition. We made this change in
regulatory approach because we received information indicating that
many states could adopt the applicable thresholds through a regulatory
interpretation of the term ``subject to regulation,'' instead of a SIP
revision.\27\ Since finalizing the Tailoring Rule, we discovered that
in fact, very few states were able to adopt the applicable thresholds
by interpretation alone, and instead needed SIP revisions to be able to
regulate GHGs under their approved PSD programs at the levels of the
final Tailoring Rule. Moreover, some states were obliged to invoke
emergency procedures to expedite revision of their state laws. This
unexpected, additional state process required for adopting the
Tailoring Rule thresholds may have delayed some states in developing
their permitting program infrastructure.
---------------------------------------------------------------------------

    \27\ As discussed in the preamble to the final Tailoring Rule
(75 FR 31581), we participated in teleconferences with 1 local and 6
state agency permitting authorities on this topic, and they
generally agreed that this approach would better facilitate state
incorporation of the limitations in the final rule. We therefore
concluded that it was likely that the state rules were sufficiently
open-ended to apply EPA's approach by interpretation (although some
states might elect to pursue rulemaking in addition to or instead of
interpretation).
---------------------------------------------------------------------------

    By the same token, for title V programs, we believed that many
states could adopt the Tailoring Rule thresholds through a regulatory
interpretation of the term ``subject to regulation,'' and that this
approach would allow permitting authorities to implement title V for
GHGs quickly with little rulemaking burden. However, as it has
happened, most states need to change the state laws and/or regulations
governing their title V programs to be able to permit GHGs at the
Tailoring Rule threshold levels. In fact, it turned out that only 5
state programs and numerous local districts in California, did not need
to enact program revisions.
    In the Tailoring Rule, we expected that over time, permitting
authorities would have the opportunity to increase their resources to
allow them to process more GHG permit applications in a timely fashion.
To this point, we see little evidence that permitting authorities could
increase resources and, in fact, permitting authorities generally are
facing fewer resources. Reductions in state environmental agency
budgets are fully consistent with the overall reductions in state
budgets recently seen in the United States.
    The August 2010 ECOS report, noted previously,\28\ concluded that
state budgets decreased by an average of approximately $21 million per
state from 2009 to 2011. On June 28, 2011, the National Association of
Clean Air Agencies (NACAA) sent a letter to the U.S. House of
Representatives detailing the status of 40 state and local air quality
agencies.\29\ The NACAA letter indicates that 80 percent of air
agencies experienced a decline in staffing levels in the last 4 years.
Over the years 2008-2010, the average loss of staff per agency was 16.7
percent. In addition to staffing losses, 48 percent of air agencies
experienced furloughs, and the majority faced significant declines in
budgets. These cutbacks resulted in curtailing core air program
activities including permit issuance, and education and outreach
programs. In our recent consultations with states most confirmed that
they have seen their budgets and staffs reduced in recent years as the
states have responded to the economic downturn and budget shortfalls.
For the previously described reasons, states have not had the
opportunity to build capacity and resources to handle GHG permitting.
Accordingly, this criterion of state resources supports maintaining the
current thresholds.
---------------------------------------------------------------------------

    \28\ ``The Status of State Environmental Agency Budgets, 2009-
2011,'' p. 3.
    \29\ S. William Becker to Honorable Michael Simpson, Chairman
Subcommittee on Interior, Environment, and Related Agencies, and
Honorable James Moran Ranking Member, Subcommittee on Interior,
Environment, and Related Agencies.
---------------------------------------------------------------------------

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

    The second criterion we address is whether permitting authorities
have the ability to issue timely permits based on efficiencies
resulting from GHG permitting implementation experience.\30\ In
describing this criterion in the Tailoring Rule, we expected that
permitting authorities, by acting on the anticipated volume of GHG PSD
permit actions, would have the opportunity to establish efficient
methods for resolving issues and processing permits, including
developing expertise within their staff. This would allow them to
achieve efficiencies that, in turn, would create capacity for
processing more GHG permit applications. Thus, with this criterion, we
based our commitment to complete the Step 3 rulemaking in part on the
assumption that Steps 1 and 2 would provide us with the necessary
information to determine whether and when it has become possible for
states to administer GHG permitting programs for additional sources.
This has not yet happened.
---------------------------------------------------------------------------

    \30\ As noted above, this criterion may be measured by the
period of time permitting authorities need to issue permits, and it
also encompasses the sources' ability to meet GHG permitting
requirements.
---------------------------------------------------------------------------

    While we recognize that we have not yet completed a full year of
implementation for Steps 1 and 2, GHG permit applications are fewer
than we had expected. As of December 1, 2011, the EPA and state
permitting authorities have issued only 18 GHG PSD permits. As noted,
these 18 permit actions have been spread among 11 states and the EPA.
Almost all of the states have issued only one GHG permit, and only
Michigan has issued as many as three

permits. This activity has simply been too limited to allow States to
build internal capacity to handle GHG permitting for a diverse set of
sources, to develop more efficient techniques for permitting any
particular source category, or to develop streamlining approaches to
address GHG permitting. In our consultations with the states, some have
confirmed that they have not been able to build up their GHG permitting
infrastructure. However, they generally have added that they do not
believe that 2011 has been representative of the permitting burdens
that they expect will ultimately occur under the current Tailoring
Rule. In sum, the states' experiences to date do not provide a basis
for us to conclude that permitting authorities in fact have the ability
to issue timely permits based on GHG permitting experience thus far.

D. Has the EPA developed streamlining methods?

    In the final Tailoring Rule, we indicated that implementation of
permit streamlining approaches would assist permitting authorities by
removing some sources from the permit program, or allowing more
efficient processing of applications. As we indicated in the final
Tailoring Rule, however, we expected it would take several years for
the EPA to develop and for States to gain authority to implement
effective streamlining methods. We did not anticipate that streamlining
approaches would be available by the time of the Step 3 rulemaking. We
also note that in the previously described consultations, the states
reported that they have made little progress in implementing
streamlining measures, and none have adopted measures specifically to
address GHGs. This information is consistent with EPA's estimate, in
general, that it would take at least 3 years for EPA to develop, and
for states to adopt and implement streamlining methods, so that
sufficient progress on streamlining would likely not occur before the
Step 3 rulemaking deadline.
    We are proposing requirements for PALs and synthetic minor
limitations for sources, and these also constitute streamlining methods
that can be expected to free up administrative resources. However,
these methods will not be available in time to enhance the state's
ability to manage the GHG permitting programs during Step 3. The
benefits of a PAL will not be seen until the States adopt these
requirements into their SIPs and sources apply for and receive permits
that reflect PALs. For the previously-described reasons, although we
are making progress in developing streamlining measures, the current
status of streamlining measures supports maintaining the thresholds for
Step 3.
    In addition, as noted, we are continuing to consider other
streamlining approaches, including limits on potential-to-emit, general
permits, and presumptive BACT. For the most part, these other
streamlining methods even if further developed, would have limited
benefit for improving permitting administration for the source
categories currently subject to GHG PSD permitting or that are under
consideration for Step 3. We discuss our progress in developing these
other streamlining methods, and their limited utility for Step 3, in
section VI. This rulemaking provides a good opportunity to provide the
EPA with input on additional streamlining ideas for implementation of
the GHG permitting programs. More specifically, in section VII.B we
request comment on other potential streamlining techniques that may
hold promise to reduce PSD and/or title V permitting burden for sources
of GHGs and permitting authorities.

E. Limited Benefit From Lowering Thresholds in Step 3

    The fact that PSD would apply to the great bulk of GHG emissions at
the Tailoring Rule thresholds was a factor in our decision to establish
the thresholds at the 100,000/75,000 levels. For the current
rulemaking, we have conducted further analysis, which shows that
reducing the thresholds in Step 3 to as low as 60,000/60,000 would
bring within the potential ambit of the PSD program less than an
additional 1 percent of all GHG emissions from all stationary sources
above the statutory thresholds while potentially adding a significant
number of sources into the permitting programs. This is because of the
large amount of GHG emissions that come from very large sources,
coupled with the relatively small number of additional sources that
emit between the 100,000/75,000 and the 60,000/60,000 levels. Lowering
the thresholds to 50,000/50,000 would bring within the ambit an
additional 3 percent, above the 100,000/75,000 levels, of all GHG
emissions from all stationary sources above the statutory thresholds.
Please refer to the following Chart. Of course, in any year, only a
fraction of those emissions would actually become subject to PSD
controls, which would be the fraction emitted by sources that undertake
modifications or new construction. Thus, the additional reductions in
GHG emissions from lowering the thresholds in Step 3 would be small
under any circumstances even if the thresholds were lowered to 50,000/
50,000. This small amount of environmental benefit is an additional
factor that, along with the additional burden associated with
permitting these sources supports not lowering the thresholds in Step
3.

[GRAPHIC] [TIFF OMITTED] TP08MR12.025

F. Conclusion

    In the Tailoring Rule, we recognized that the Step 1 and 2
thresholds we promulgated would create significant administrative
burdens on permitting authorities. We stated that we would lower the
thresholds, and thereby create additional administrative burdens, only
after: (i) We had the opportunity to develop efficiencies in GHG
permitting through streamlining measures; (ii) the states had the
opportunity to build up their GHG permitting infrastructure and to
develop GHG permitting expertise; and (iii) sources have the ability to
meet the requirements of the PSD program and permitting authorities
have the ability to issue timely permits. These things have not
happened, as the preceding discussion has made clear. As a result,
consistent with the commitment we made in the Tailoring Rule, lowering
the thresholds is not feasible at this time.
    Importantly, because, as noted above, permit activity is linked to
macro-economic conditions, we consider the relative lull in permit
activity due largely to the recent economic downturn to be temporary,
and we expect that the pace of permit applications will increase. In
fact, because of the link to macro-economic conditions, it is difficult
to predict whether the increase in permit activity under Step 2 will
occur incrementally or rapidly. If it occurs rapidly, it would be
particularly burdensome for states. As a result, even a modest increase
in permitting burden that could result from lowering thresholds in Step
3 could overwhelm state permitting capacity and result in substantial
delays in processing permit applications.
    All told, these considerations support maintaining the Tailoring
Rule thresholds through Step 3. Additional time is required to develop
streamlining measures to expedite permit program administration, and
permitting authorities need additional time to secure resources, hire
and train staff, and gain experience with GHG permitting before we move
toward full implementation of the program. Accordingly and consistent
with our Tailoring Rule commitment, we propose to maintain the
thresholds of 100,000/75,000 tpy CO2e.
    We note that maintaining PSD and title V applicability for GHG
sources at the current thresholds for Step 3 does not have implications
for whether we will lower the thresholds in Step 4, which we describe
above, or afterwards. Our actions in Step 4 will depend on our
evaluation of the criteria and other factors described above. If those
criteria and other factors point in the direction of lowering the
thresholds, we will do so, and we will lower them to whatever level
indicated. A decision not to lower the thresholds in Step 3 does not
foreclose a decision to lower them in Step 4.

VI. Streamlining for PSD and Title V Permitting of GHGs

    In the Tailoring Rule, the EPA committed to explore streamlining
measures as an integral part of the phase-in approach to permitting
requirements for GHG emissions under PSD and title V. Streamlining
techniques would allow permitting authorities to be more efficient in
administering their GHG permit programs by reducing the overall
resources required to administer the PSD permitting program now and in
the future. By implementing effective streamlining techniques
permitting authorities could move more rapidly toward regulating a
larger set of GHG sources. In the Tailoring Rule, we identified
potential streamlining options. We also acknowledged that it will take
us several years to develop, and for states to gain authority to

implement effective streamlining methods. We committed to continue to
explore the identified options, and to request comment on these and any
additional streamlining approaches in the Step 3 rulemaking.
    Today, we propose to adopt two regulations: One that streamlines
the PSD permit program, and one that potentially streamlines both the
PSD and the title V permit program. As explained more fully below, the
first regulation expands the existing PAL provisions to allow reviewing
authorities to establish GHG PALs on either a mass-basis (tpy) or a
CO2e-basis, including for existing sources that are not yet
GHG major sources, and allows PALs to be used as an alternative
approach for determining both whether a project is a major modification
and whether GHG emissions are subject to regulation. As discussed
below, the second regulation establishes a mechanism that allows
individual sources to obtain synthetic minor limitations (potential to
emit (PTE) limitations) for GHG emissions in areas subject to a GHG PSD
FIP, which would allow certain sources or projects that might otherwise
be required to obtain a GHG PSD permit to obtain a permit with an
emissions limitation that would restrict the source's GHG emissions
below the GHG PSD permitting threshold.
    We previously had not identified PALs as a viable streamlining
technique. Since we finalized the Tailoring Rule, we recognized that
the existing PAL regulation has limited value for GHG sources, and that
revising the current PAL regulations to address the unique
applicability aspects associated with GHGs could streamline PSD
permitting for more sources and make PALs for GHGs more useful for all
source categories. Specifically, by amending the regulations, we hope
to encourage greater use of GHG PALs, which in turn would encourage
sources to reduce existing GHG emissions through efficiency
improvements and other measures to maximize the operational flexibility
provided by the PAL.
    In contrast, our proposed Tailoring Rule discussed the synthetic
minor--PTE mechanism we now propose, but expressed concerns that this
approach might overwhelm permitting authorities based on the sheer
number of sources that could apply for individual synthetic minor
permits. Since finalizing the Tailoring Rule, we have continued to
evaluate this. We have concluded that offering a mechanism to establish
PTE limits for individual sources provides environmental benefit, and
helps streamline the PSD and title V permit programs, at least in the
short term.
    Accordingly, today we propose to amend the federal PSD regulations
to create authority for (i) reviewing and permitting authorities to
issue PALs to major and potentially-major GHG stationary sources on
either a mass-basis or a CO2e basis and also to allow such
PALs to be used as an alternative approach for determining whether a
project is a major modification and subject to regulation for GHGs by
amending regulations in 40 CFR 51.166 and 52.21, and (ii) federal
reviewing authorities to issue GHG synthetic minor permits by amending
regulations in 40 CFR 52.21. We also discuss our progress in evaluating
the suitability of other streamlining options that we identified in the
final Tailoring Rule including:
    (1) Defining PTE for various source categories,
    (2) Establishing emission limits for various source categories that
constitute presumptive BACT,
    (3) Establishing procedures for use of general permits.
    Although we propose two streamlining regulations on a more rapid
schedule than we originally envisioned, we do not project that these
approaches will provide a sufficient reduction in the immediate permit
workload to justify a decrease from the Step 1 and Step 2 applicability
levels. The PAL rule, in fact, may increase the immediate short term
workload by requiring development of PAL provisions and potential SIP
revisions, as well as gaining experience in issuing PALs, but will
reduce the long term workload on reviewing authorities and sources. The
GHG synthetic minor permit program will reduce the short term workload
by providing a less burdensome permitting process, and it may allow
some sources to avoid PSD and title V permitting at the current Step 1
and Step 2 applicability levels. We believe that these streamlining
regulations will offer advantages to industry, permitting authorities
and the environment. They will provide operational flexibility to
sources and will also provide incentives for sources to install good
emission control systems to maximize operational flexibility. These
streamlining regulations also help build GHG permitting capacity,
because both regulations still require the reviewing authority to gain
an understanding of GHG emissions for the individual source in context
of establishing appropriate emission limitations and monitoring,
recordkeeping and reporting requirements. Accordingly, we believe
implementation of both regulations should decrease overall
administrative burdens and thus could enable us to reduce the GHG
applicability thresholds at some time in the future.
    The following discussion outlines our two streamlining proposals,
and then discusses the viability of other streamlining options.

A. Plantwide Applicability Limitations for GHGs

1. What is the EPA proposing?
    Our proposal intends to provide permitting authorities with the
authority to issue GHG PALs to sources at which GHG emissions could
become subject to regulation, and which then must undertake a major
modification NSR applicability determination. We provide a summary of
several approaches for amending the regulatory language to implement a
GHG PALs program, and request comment on possible changes to the
regulations, any of which we may finalize.
    We propose three changes to the existing PSD regulations in 40 CFR
51.166 and 52.21. These changes allow reviewing authorities to issue
PALs to both existing major and potentially major GHG stationary
sources on either a mass-basis or a CO2e basis 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 proposed changes would continue to protect the environment from
adverse impacts from projects that would increase emissions. The
changes would also streamline GHG preconstruction permitting as part of
our overall efforts to tailor the PSD applicability provisions to
include regulation of GHG emissions.
    Specifically, we propose to amend the regulations to allow
reviewing authorities to (1) issue PALs to GHG-only sources \31\; (2)
issue either a mass-based (tpy) or a CO2e-based PAL to a
particular source; and (3) allow compliance with a GHG PAL to be used
as an alternative applicability approach for determining whether a
project is a major modification and subject to regulation \32\ for
GHGs. We believe these changes are appropriate to enable the use of
PALs for GHG, given the unique

characteristics of GHGs and the subject to regulation applicability
approach adopted for GHGs in the Tailoring Rule. We request comment on
each aspect of this proposal.
---------------------------------------------------------------------------

    \31\ 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.
    \32\ For an explanation of ``subject to regulation,'' see the
background section in the Tailoring Rule at 75 FR 31516.
---------------------------------------------------------------------------

2. What is a PAL?
    Under the EPA's regulations, a PAL is an emissions limitation
expressed in tons per year for a pollutant that is enforceable as a
practical matter and is established source-wide in accordance with
specific criteria.\33\ PALs are voluntary in the sense that sources
may, but are not required, to apply for a PAL, and whether to issue a
PAL to particular source is at the discretion of the reviewing
authority. PALs offer an alternative method for determining major NSR
applicability. If the overall emissions at a source remain below the
PAL level, the source can make changes at the source that do not
trigger major NSR. This allows sources to respond rapidly to market
conditions, while assuring there is no adverse impact to the
environment from the change. A PAL also results in significant
environmental benefit, by providing the community with an understanding
of the long-term emissions impact from a facility, preventing emissions
creep (i.e., a series of unrelated individual emissions increases that
are below major NSR applicability thresholds), and requiring enhanced
monitoring, recordkeeping and reporting to demonstrate compliance with
the PAL.
---------------------------------------------------------------------------

    \33\ 40 CFR 52.21(aa)(2)(v).
---------------------------------------------------------------------------

3. Why are we proposing to amend the regulations?
    The EPA reads its current PAL and PSD regulations as restricting
permitting authorities from issuing certain kinds of GHG PALs. We
interpret our current regulations to restrict sources that can obtain
GHG PALs to existing major stationary sources, \34\ and to not allow
sources to rely on the PALs emissions limitation in determining whether
GHG emissions are ``subject to regulation.''
---------------------------------------------------------------------------

    \34\ 40 CFR 52.21(aa)(1).
---------------------------------------------------------------------------

     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.\35\ 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.\36\
Regardless of the amount of GHGs currently emitted, a GHG-only source
is a minor source for purposes of PSD, and only becomes major for PSD
when it proposes to undertake a change that increases GHG emissions by
at least 75,000 tpy CO2e. Currently, reviewing authorities
using the federal PAL provisions \37\ can only issue a PAL to a GHG-
only source when the source proposes to undertake such a change, thus
becoming a major stationary source.\38\ As a result, GHG-only sources
may not currently use the alternate major NSR applicability provisions
provided by a PAL in the same way that existing major stationary source
of other regulated NSR pollutants may. Instead, 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.\39\
---------------------------------------------------------------------------

    \35\ 40 CFR 52.21(b)(1)(i)(a)-(b).
    \36\ For the purpose of this rule, we term such sources ``GHG-
only sources.''
    \37\ There can be alternative state PAL provisions or they may
simply adopt EPA's regulations.
    \38\ 40 CFR 52.21(b)(49)(v)(b).
    \39\ Because an anyway source emits or has the potential to emit
another regulated NSR pollutant in amounts at or above the major
source thresholds, it is a major stationary source, and it may apply
for a PAL for its GHG emissions on a mass basis at any time under
the current regulations as long as it otherwise qualifies (e.g., has
sufficient emissions data to establish a PAL).
---------------------------------------------------------------------------

    Moreover, under current regulations any EPA-issued PAL can only be
mass-based. This requirement is due to the fact that PALs are an
alternative for NSR, which is triggered by mass-based changes in
emissions. Consequently, GHG sources use tpy CO2e to
determine whether a change causes GHG emissions to be subject to
regulation, but tpy of mass emissions of the pollutant to determine
whether a change results in a major modification. Thus, under the
current regulations, sources using the PAL provisions must still
monitor both metrics to ultimately determine whether a change triggers
major NSR review.
    We believe changing the regulations to remove these mass-based
restrictions will provide sources with additional operational
flexibility, and reduce GHG workload burdens on reviewing authorities
by decreasing the number of PSD permit applications reviewing
authorities must process for these sources over the long term.
Providing an option that allows a source to use a GHG PAL will help
streamline the major NSR permitting program and provide more
operational flexibility to sources. Being able to establish a PAL would
provide planning certainty to sources, and would relieve the current
time pressure to issue a PAL permit concurrent with authorization for a
planned major modification which could potentially delay that project.
We also believe that 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,
regardless of which metric is specified to measure GHG emissions in
that PAL, because emissions cannot exceed this pre-established level
without further review. PALs also provide an incentive for a source to
minimize GHG emissions increases from future projects.
    A significant rate is a threshold for applying NSR to
modifications. Only emissions rate increases above the significant rate
trigger major NSR requirements. Currently, a reviewing authority may
establish the PAL level for a pollutant by adding its significant rate
to baseline actual emissions. Unless a significant emissions rate has
been established, the significant rate is effectively zero, i.e., any
increase in emissions would trigger NSR.
    The EPA did not promulgate a mass-based significant emissions rate
for GHG emissions in the final Tailoring Rule. Thus, if a reviewing
authority establishes a mass-based GHG PAL, under our current
interpretation of the regulations, the PAL may not include any margin
above the baseline actual emissions for emissions growth. Absent this
margin, a GHG PAL provides less flexibility to a source when compared
to PALs for other regulated NSR pollutants.
     The proposed rules provides GHG PAL 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
75,000 tpy CO2e applicability threshold for GHGs. A
reviewing authority could add the 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 applicability threshold for existing sources. Changing the
regulations will also have the effect of streamlining future major NSR
applicability determinations for sources that choose a CO2e
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 both that GHG emissions are not subject to regulation, and that
a change does not trigger a major modification.

    In sum, we believe that the current PAL regulations are
inconsistent with the outcome achieved when the PAL rules are applied
to regulated NSR pollutants other than GHGs, and therefore are overly
restrictive with respect to GHG-only sources. Accordingly, we are
proposing to amend the major NSR regulations and PAL rules to allow
reviewing authorities to (1) issue PALs to GHG-only sources; \40\ (2)
issue either a mass-based (tpy) or a CO2e-based PAL to a
particular source; (3) allow CO2e-based PALs to include the
75,000 tpy CO2e rate of emissions increase applicability
threshold; 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 whether GHG emissions are subject
to regulation. 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. We request comment
on each one of these proposals.
---------------------------------------------------------------------------

    \40\ 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.
---------------------------------------------------------------------------

    In the Tailoring Rule the EPA amended 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 to be
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.
4. Options for Allowing GHG-Only Sources To Obtain a GHG PAL
    We request comment on two approaches for regulating GHG-only
sources under a PAL. We call the first approach the Major Source Opt-in
Approach. This approach is consistent with the current restriction that
only allows reviewing authorities to issue PALs to existing major
stationary sources, but the approach would provide 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 call 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.
    Under the Major Source Opt-in Approach, we would amend the
regulations to allow any existing stationary source that emits or has
the potential to emit GHGs in amounts above the first part of the
``subject to regulation'' applicability threshold (currently 100,000
tpy CO2e) and above the 100/250 tpy major stationary source
threshold, to submit an application for a PAL, in which the source
agrees to be considered an existing major stationary source for GHG
emissions. As long as the source complies with the GHG PAL, it would
not trigger the PSD permitting requirements for GHGs for any project,
but the regulations would continue to require the source to evaluate
whether the change triggers PSD applicability for other regulated NSR
pollutants in the attainment or unclassifiable area. This is because
PSD applies whenever a major stationary source undertakes a project
that results in a significant net emissions increase of any regulated
NSR pollutant.
    The EPA believes that allowing GHG-only sources to opt into major
stationary source status is consistent with the Act. But for the
Tailoring Rule, GHG-only sources qualify as ``major emitting
facilities,'' because such sources emit or have the potential to emit
100 or 250 tpy GHG. Thus, these sources fall within the statutory scope
of sources that, absent the Tailoring Rule, we would have authority to
regulate for purposes of PSD. Although we took a limited interpretation
of how to exercise this authority through the Tailoring Rule, we
believe that the Major Source Opt-in Approach is consistent with the
Tailoring Rule's schedule for further phasing-in additional GHG sources
into the PSD permitting program.
    In the final Tailoring Rule, we indicated that we would base our
decision to include additional sources in the GHG permitting programs
on an assessment of three criteria. These criteria are: (i) Whether the
EPA could develop streamlining measures, (ii) the time that permitting
authorities need to ramp up their resources, and (iii) sources'
abilities to meet the requirements of the PSD program and permitting
authorities' ability to issue timely permits. Each of these criteria
supports expanding the PSD permit program to include a source that opts
into the GHG PAL regulatory structure. First, while the Major Source
Opt-in Approach has the potential to increase the total number of GHG
major stationary sources, it does so in a manner that decreases the
long-term permitting burden for both the source and the reviewing
authority. This is because the source would likely require fewer permit
actions over the life of a PAL. Thus, the Major Source Opt-in approach
streamlines the PSD permitting program, which will assist permitting
authorities when the EPA regulates additional GHG sources under the PSD
program. Second, permitting authorities can gain valuable experience in
issuing PAL permits that can build staff expertise. This, in turn,
helps permitting authorities' efforts to ramp up their PSD permitting
programs in a more timely and efficient manner. Third, sources
demonstrate an ability to comply with major stationary source
permitting requirements by voluntarily seeking a PAL under the Major
Source Opt-in provisions. If a source could not comply, then it would
not seek a GHG PAL. Moreover, reviewing authorities likely would only
agree to issue a PAL if they believe they have the necessary resources
to issue the PAL(s), and doing so would not detrimentally affect their
obligations to otherwise issue timely permits. In sum, if a source
opts-into the program, and a reviewing authority agrees to permit the
source, then we believe these sources are properly brought within the
PSD permitting program.
    Under the Major Source Opt-in Approach, a source could also choose
to establish PALs for its non-GHG regulated NSR pollutants to better
manage applicability for all pollutants at the source, including those
regulated NSR pollutants for which the source is not major. Under this
approach, the source will continue to be considered a major source
under PSD and title V at the expiration of the PAL (generally 10 years
after issuance). If the source is subject to the federal PSD program
for GHG emissions, and to a state SIP-approved PSD program for its non-
GHG regulated NSR pollutants, then whether a source can apply for, and
receive, a PAL for its non-GHG regulated NSR

pollutants will be governed by the applicable SIP-approved regulations
and the state reviewing authority. Neither the EPA, nor its delegated
authority, would issue PALs for non-GHG regulated NSR pollutants under
40 CFR 52.21, unless a FIP would govern PSD applicability for that non-
GHG pollutant. As with the current PAL regulations, the ultimate
decision to issue a PAL remains with the reviewing authority, and
individual permitting authorities will have to determine whether they
will issue PALs for non-GHG pollutants also emitted from a source that
receives a GHG PAL through the Major Source Opt-in Approach.
    We are concerned, however, about the potential impact on reviewing
authorities of allowing GHG-only sources to obtain PALs for all their
regulated NSR pollutants, as this could cause a short-term increase in
regulatory burden on permitting authorities at a time when they are
ramping up their programs to address other GHG major stationary
sources. We request comment on this aspect of the Major Source Opt-in
Approach and welcome suggestions for refining the approach to address
concerns with short-term workload burdens for permitting authorities.
    Under the Minor Source Approach, we would amend the regulations to
allow a GHG-only source to submit an application for a GHG PAL, and
would 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.
See 40 CFR 51.166(b)(1)(i)(c). That is, this approach would authorize
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.
    Issuing PALs to GHG-only sources that remain minor sources does not
conflict with the basis for the current PAL rules. When we promulgated
the 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.\41\ 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.
---------------------------------------------------------------------------

    \41\ The provisions in 40 CFR 51.166(b)(3)(iii) illustrate an
exception to this general rule but we did not contemplate that
exception in creating the PAL rules in 2002.
---------------------------------------------------------------------------

    As explained previously, we propose to limit the Minor Source
approach to allow reviewing authorities to establish PALs only for GHG
emissions, and not for other regulated NSR pollutants for which the
source remains a minor source. Because the GHG-only source remains a
minor source (absent any other PSD-triggering change) and, generally,
will not trigger a major modification applicability analysis for
increases in other regulated NSR pollutants, we believe it unnecessary
to extend the PAL authority under this approach to other pollutants.
Moreover we recognize that extending the PAL program in that way could
place a burden on permitting authorities and redirect resources needed
to issue permits to other GHG major stationary sources.
    The Minor Source Approach 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. But
unlike the Major Source Opt-in Approach, which defines the scope of
pollutants included in the PAL based on an individual permitting
authority's discretion and ability to regulate a given source, under
the Minor Source Approach, 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, as with the Major Source Opt-in Approach,
the Minor Source Approach fulfills our streamlining goals by bringing
more sources into the major NSR permitting provisions, in a manner that
best manages reviewing authorities' long-term permit burden.
    We request comment on both the Major Source Opt-in Approach and the
Minor Source Approach. We also request comment on whether we should
finalize both approaches. That is, sources would have the ability,
consistent with the ultimate decision of its reviewing authority,
either to opt into major stationary source status and establish PALs
for all pollutants, or to maintain minor source status and obtain a PAL
for GHG emissions only.
5. Extending PALs to GHGs on a CO2e Basis and Using PALs To
Determine Whether GHG Emissions Are ``Subject to Regulation''
    Currently, the EPA reads the PAL regulations to allow reviewing
authorities to establish a GHG PAL only on a mass basis. Today we
propose to allow reviewing authorities to establish GHG PALs on either
a mass basis or a CO2e basis. More specifically, we propose
to allow reviewing authorities to establish a CO2e-based GHG
PAL by adding up to an amount equal to the emissions increase contained
in the ``subject to regulation'' applicability threshold (e.g., 75,000
CO2e) to the source's baseline actual emissions. We also
propose to allow GHG PALs, either on a mass basis or a CO2e
basis, to serve as an alternate applicability approach for determining
whether GHG emissions are subject to regulation. That is, rather than
applying the emissions increase tests (significant emissions increase
and significant net emissions increase)

currently contained in the ``subject to regulation'' definition, a
source could demonstrate that GHG emissions are not ``subject to
regulation'' by complying with a GHG PAL. Compliance with a GHG PAL
would be used as an alternative applicability approach for determining
that the source neither causes GHG emissions to be subject to
regulation, nor causes the GHG source to have a major modification.
    We further believe that it is necessary to allow the alternative
applicability provision to be included in ``subject to regulation''
determinations for GHG PALs, because failing to do so would negate the
flexibility gained by creating a GHG PAL. This is because without the
changes EPA is proposing, sources would still be required to monitor
individual emissions changes using the procedures in 40 CFR
52.21(a)(2)(iv) to determine whether a source triggers the subject to