starting to become available.  Finally, the sixth year, in which EPA
must complete rulemaking, requires proposal and promulgation of a rule
within one year, which is an ambitious schedule.  Therefore we believe
that 6 years is an ambitious schedule, and appropriate for this type of
effort.  We also have received a substantial numbers of comments from
permitting authorities that agreed with our 5-year timeframe, or a
greater timeframe, to get more prepared for permitting smaller sources.

d. Other comments on “absurd results” doctrine.

	We received other comments on our application of the “absurd
results” doctrine, which we respond to in the Response to Comments
document.  One comment was overarching, and so we respond to it here:
Some commenters argued that the “absurd results” doctrine could not
be applied because EPA had other approaches for resolving the problems
raised by applying PSD to GHG sources.  In particular, the commenters
insisted that we were not obligated to issue the light-duty vehicle
rule, and had we not done so, we would not have triggered PSD; or at the
least, we could have delayed issuing the light-duty vehicle rule for
some period of time, during which we could develop streamlining measures
and permitting authorities could ramp up resources and thereby minimize
the need for tailoring when we did promulgate the light-duty vehicle
rule.

	These commenters also commented during the light-duty vehicle
rulemaking that we were not obligated to conduct that rulemaking, or to
conduct it at the time that we did.  We believe that our response there
suffices for here, as well:

	Some of the comments relating to the stationary source permitting
issues suggested that EPA should defer setting GHG standards for new
motor vehicles to avoid … [adverse] stationary source permitting
impacts. EPA is issuing these final GHG standards for light-duty
vehicles as part of its efforts to expeditiously respond to the Supreme
Court’s nearly three year old ruling in Massachusetts v. EPA, 549 U.S.
497 (2007). In that case, the Court held that greenhouse gases fit
within the definition of air pollutant in the Clean Air Act, and that
EPA is therefore compelled to respond to the rulemaking petition under
section 202(a) by determining whether or not emissions from new motor
vehicles cause or contribute to air pollution which may reasonably be
anticipated to endanger public health or welfare, or whether the science
is too uncertain to make a reasoned decision.

	The Court further ruled that, in making these decisions, the EPA
Administrator is required to follow the language of section 202(a) of
the CAA. The Court stated that under section 202(a), "[i]f EPA makes
[the endangerment and cause or contribute findings], the Clean Air Act
requires the agency to regulate emissions of the deleterious pollutant."
549 U.S. at 534. As discussed above, EPA has made the two findings on
contribution and endangerment. 74 FR 66496 (December 15, 2009). Thus,
EPA is required to issue standards applicable to emissions of this air
pollutant from new motor vehicles.

	The Court properly noted that EPA retained "significant latitude" as to
the "timing ... and coordination of its regulations with those of other
agencies" (id.). However it has now been nearly three years since the
Court issued its opinion, and the time for delay has passed. In the
absence of these final standards, there would be three separate federal
and state regimes independently regulating light-duty vehicles to
increase fuel economy and reduce GHG emissions: NHTSA’s CAFE
standards, EPA’s GHG standards, and the GHG standards applicable in
California and other states adopting the California standards. This
joint EPA-NHTSA program will allow automakers to meet all of these
requirements with a single national fleet because California has
indicated that it will accept compliance with EPA’s GHG standards as
compliance with California's GHG standards. 74 FR at 49460. California
has not indicated that it would accept NHTSA’s CAFE standards by
themselves. Without EPA’s vehicle GHG standards, the states will not
offer the federal program as an alternative compliance option to
automakers and the benefits of a harmonized national program will be
lost. California and several other states have expressed strong concern
that, without comparable federal vehicle GHG standards, the states will
not offer the federal program as an alternative compliance option to
automakers. Letter dated February 23, 2010 from Commissioners of
California, Maine, New Mexico, Oregon and Washington to Senators Harry
Reid and Mitch McConnell (Docket EPA-HQ-OAR-2009-0472-11400). The
automobile industry also strongly supports issuance of these rules to
allow implementation of the national program and avoid “a myriad of
problems for the auto industry in terms of product planning, vehicle
distribution, adverse economic impacts and, most importantly, adverse
consequences for their dealers and customers.” Letter dated March 17,
2010 from Alliance of Automobile Manufacturers to Senators Harry Reid
and Mitch McConnell, and Representatives Nancy Pelosi and John Boehner
(Docket EPA-HQ-OAR-2009-0472-11368). Thus, without EPA’s GHG standards
as part of a federal harmonized program, important GHG reductions as
well as benefits to the automakers and to consumers would be lost.165 In
addition, delaying the rule would impose significant burdens and
uncertainty on automakers, who are already well into planning for
production of MY 2012 vehicles, relying on the ability to produce a
single national fleet. Delaying the issuance of this final rule would
very seriously disrupt the industry’s plans

Instead of delaying the LDV rule and losing the benefits of this rule
and the harmonized national program, EPA is directly addressing concerns
about stationary source permitting in other actions that EPA is taking
with regard to such permitting. That is the proper approach to address
the issue of stationary source permitting, as compared to delaying the
issuance of this rule for some undefined, indefinite time period.

75 FR____ (April__, 2010) (footnote omitted).

9.  “Administrative necessity” basis for PSD and Title V
requirements in Tailoring Rule

EPA believes that the “administrative necessity” doctrine, within
the Chevron  framework, also justifies today’s rulemaking.  Applying
the applicability requirements of the PSD and title V programs according
to a literal reading of their terms (as EPA has narrowed them in the
past through interpretation) to GHG sources beginning on the January 2,
2011 date that regulation of GHGs takes effect would sweep so many
sources into those programs as to render the programs impossible for the
permitting authorities to administer.  Although streamlining the PSD and
title V programs offers some promise to improve the administrability of
the programs, given the time needed to implement such streamlining, the
step-by-step expansion of PSD and title V requirements to GHG sources
that we are promulgating today is the most that the permitting
authorities can reasonably be expected to administer.

This section discusses the application of the “administrative
necessity” doctrine.  Our views concerning this doctrine remain
similar to what we said at proposal, with adjustments for the new
analysis we have conducted and information we have received since
proposal, as well as the revisions we made to the tailoring approach.
This analysis and information have already been presented above, in the
discussion of the “absurd results” basis.  It is not necessary to
reiterate the lengthy discussion of the doctrine that we included in the
proposal or the factual data presented above; as a result, this section
is briefer and highlights the conclusions we have reached about the
application of this doctrine..

	As noted above, under the current interpretation of the PSD
applicability provision, EPA’s recent promulgation of the light-duty
vehicle rule will trigger the applicability of PSD for GHG sources at
the 100/250 tpy threshold levels as of January 2, 2011.  This is because
PSD applicability hinges on the definition of “major emitting
facility,” which, under EPA’s long-standing narrowing
interpretation, and absent further tailoring, applies PSD to sources of
any air pollutant that is subject to regulation under another provision
of the CAA.  EPA’s promulgation of the light-duty vehicle rule means
that GHGs will become subject to regulation on the date that the rule
takes effect, which will be January 2, 2011.

	Absent tailoring, the January 2, 2011 trigger date for GHG PSD
applicability will see an extraordinarily large number of PSD permitting
actions – we estimate more than 81,000 per year –  representing an
increase of almost 300-fold over the current 280 PSD permitting actions
each year.  In addition, over 6 million sources will become subject to
title V, an increase of more than 400-fold over the 14,700 sources that
currently are subject to title V.

	Under the three-step approach that we read the caselaw to establish for
implementing the “administrative necessity” doctrine, as described
above, see 74 Fed. Reg. 55,315 col. 1 to 55,316 col. 3, an agency is not
required to adhere to literal statutory requirements if the agency, as
the first step, makes every effort to adjust the requirements within the
statutory constraints, but concludes with justification – at the
second step – that it would be impossible to comply with the literal
reading of the statute.  Under those circumstances, the agency may –
at the third step – develop what is in effect a compliance schedule
with the statutory requirements, under which the agency will implement
the statute as much as administratively possible and as quickly as
administratively possible.

a. First step of the “administrative necessity” analysis:
streamlining

	In the proposed rulemaking, EPA discussed at length the prospect of
streamlining both PSD and title V.  EPA described “several potentially
useful tools available in the streamlining toolbox for the PSD
permitting threshold level, the PSD significance level, and the title V
permitting threshold,” specifically –

For the PSD permitting threshold level and significance level, there are
at least three such tools:  The first is interpreting the definition of
"potential to emit" so that the amount of a source's emissions that
counts in determining whether it qualifies as a major source and
therefore is above the permitting threshold requirements is closer to
the amount of its emissions when it is in actual operation, rather than
the amount of emissions that the source would emit if it were operating
continuously.  Narrowing the definition of PTE is a potentially
extremely important tool in this context because identifying the amount
of a source's emissions as closer to its actual emissions in this manner
would mean that very large numbers of residential and commercial sources
would have significantly lower emissions and would fall below the
statutory threshold requirements for triggering PSD.  Second, EPA
believes it may be able to develop programs involving general permits,
under which large numbers of similarly situated sources would each be
covered by essentially the same permit established through a regulatory
action by the permitting authority.  This approach could achieve
economies of scale and thereby reduce administrative burden.  Third, EPA
believes it may be able to streamline the single most time-consuming
element of the PSD permit program, which is the determination of BACT as
required under CAA §165(a)(4), by establishing presumptive BACT levels
for certain source categories that comprise large numbers of sources.
As for title V, as discussed below in detail, EPA believes that defining
"potential to emit" to reflect more closely a source's actual operation
and developing a program of general permits could streamline the
administration of title V permits.

74 FR 55,315 col. 2-3.

	At proposal we stated that we would, and we still commit to, vigorously
pursue development of these streamlining measures, and, as indicated in
our discussion of streamlining methods in section V.E.1 and in response
to comments, we have already begun developing those measures.  For
example, as described elsewhere, we have done much work – both with
stakeholders and in-house -- to begin to develop recommendations for
what controls would qualify as BACT for various industries.  This work
is important as a foundation for developing presumptive BACT, which is a
potentially quite efficient streamlining measure.

	However, it is not possible for us or the State and local permitting
authorities to develop and implement streamlining techniques by the time
that PSD and title V are triggered for sources emitting GHGs – January
2, 2011 -- or shortly thereafter.  Developing streamlining methods would
entail acquiring more information about the affected industry, may
entail rulemaking, and would likely entail some type of public review of
proposals for streamlining even if not done through rulemaking.  As
discussed in section VI.E, we do not expect that we could complete all
those steps for meaningful streamlining measures within two years.

b. Second step of the “administrative necessity” analysis:
demonstration of administrative impossibility.

	With no streamlining measures available at the time that PSD and title
V would apply to sources of GHGs or shortly thereafter, under the second
step of the “administrative necessity” analysis, we must determine
whether implementation of the statutory requirements at that time would
be administratively impossible for the permitting authorities.  We are
mindful that the D.C. Circuit has cautioned that this showing is a high
hurdle, and that in none of the “administrative necessity” decisions
was an administrative agency successful in making such a showing, as we
recognized in the proposal.  See 74 Fed. Reg. at __.

	Even so, we believe there is no question that a literal application of
the PSD and title V programs to GHG sources as of January 2, 2011 would
be flatly impossible for the State and local permitting authorities to
administer for at least an initial period of time.   The key facts have
been recounted above, and no more than a brief recitation is necessary
here.  Although the PSD and title V programs are best seen as a joint
program, it is useful to separate them to show how stark the
administrative problems are:  On the PSD side, annual permit
applications would increase by over 300-fold, from 280 to 80,000; costs
to the permitting authorities would increase more than 100-fold, from
$12 million to $1.5 billion; and the permitting authorities would need
to hire, train, and manage 9,772 FTEs .   For title V, total permit
applications would increase by over 400-fold, from 14,700 to 6.1
million; costs to the permitting authorities would increase by about the
same amount, from $62 million to $21 billion; and the permitting
authorities would need to hire, train, and manage 229,118 FTEs.

	We have elaborated upon these burdens elsewhere in today’s notice.
It is clear that they justify our conclusion that they bespeak an
impossible administrative task.  It is not hyperbole to say that if
these administrative responsibilities are not considered impossible
within the meaning of the “administrative necessity” doctrine, then
it is difficult to imagine what would be considered impossible.

c.  Third step of the “administrative necessity” analysis:
tailoring

	Under the third step of the “administrative necessity” analysis, we
must demonstrate that the steps we intend to take towards implementation
of the statutory requirements are the most that can be done during the
indicated time frames, in light of administrative resources.  See 74 FR
___.  This amounts to establishing a schedule for phasing in PSD and
title V applicability to GHG sources.

	Because this step is based on the administrative resources of the
permitting authorities, our analysis is similar, and leads to the same
conclusions, as we described under the “absurd results” basis.

10. “Step-at-a-time” basis for tailoring rule

	In addition to the “absurd results” and “administrative
necessity” doctrines, the “step-at-a-time” judicial doctrine,
within the Chevron framework, supports at least part of EPA’s
tailoring rule.  The caselaw, described above, indicates that courts
will accept an initial step towards full compliance with a statutory
mandate, as long as the agency is headed towards full compliance, and we
believe that the doctrine is applicable here. EPA intends to require
full compliance with the CAA applicability provisions of the PSD and
title V programs, but we believe that in the case of GHG-emitting
sources, by application of the “absurd results” doctrine or the
“administrative necessity” doctrine, full compliance with the
applicability provisions does not necessarily mean full compliance with
the literal terms of those provisions.  Rather, as we have explained
elsewhere, in the case of GHG sources, full compliance may mean
compliance with higher levels that are consistent with congressional
intent, under the “absurd results” doctrine, or that are within the
reach of permitting authorities in light of their administrative
constraints, under the “administrative necessity” doctrine.
Today’s rulemaking constitutes a package of initial steps towards that
full compliance, and, seen in that light, is supported by the
“step-at-a-time” doctrine.

	Even if the doctrine were found to apply only when an agency is
committed to fully implementing statutory requirements according to
their literal terms, we believe that the steps we promulgate today would
be considered valid under the step-at-a-time doctrine.  This is because
even if we are incorrect about the applicability of the “absurd
results” and “administrative necessity” doctrines, so that GHG
sources are required to comply with the literal terms of the PSD and
title V applicability provisions, the “step-at-a-time” doctrine
would allow PSD and title V applicability to be phased in, and the steps
we promulgate today would be upheld as reasonable initial steps toward
full compliance with the literal terms of the CAA.  As we have described
elsewhere, there is little question but that sources and permitting
authorities cannot reasonably be expected to comply with or implement
PSD and title V applicability requirements in the near term – by
January 2, 2011 and July 1, 2011 -- except to the limited extent
described under steps 1 and 2.  Nor is applicability of the PSD and
title V requirements at levels below 50,000 tpy CO2e reasonable before
six years from promulgation of today’s rule, as discussed elsewhere.
If further steps resulting in full compliance with the literal terms of
the applicability provisions of PSD and title V were required, it would
be reasonable for those steps to occur in the future, as part of the
rulemaking to be completed by the sixth year after promulgation, to
which EPA commits itself as part of today’s action, or as part of
subsequent actions.  See id. (upholding agency action as a step towards
full compliance with statutory mandate when the agency expected full
compliance to occur some 20 years after the deadline in the statute).

C.  Mechanisms for implementing and adopting the tailoring approach

In this section, we discuss three issues related to adoption of the
tailoring approach within our regulations and by permitting agencies.
The first is the regulatory mechanism for implementing the tailoring
approach, and our rationale for the specific way we are revising the PSD
and title V applicability provisions to incorporate the tailoring
approach.  The second is the process by which state or local permitting
authorities may incorporate the tailoring approach into their PSD SIP
and title V permit programs.  Finally, we discuss our reasons for
delaying action on our limited approval of both SIP-approved PSD
programs and titleV programs, and request further information from
States on both programs.

In brief, we proposed to exempt sources emitting GHGs below certain
threshold levels from the definition of “major stationary source”
and “major modification” in PSD programs and the definition of
“major source” in title V programs. We further proposed to
effectuate this change in SIP-approved PSD programs and Part 70 title V
programs by limiting our prior approval of those programs to the revised
applicability thresholds for GHGs.  While these changes would have the
effect of putting the lower thresholds in place in states as a matter of
federal law, state commenters expressed concern that they would not be
able to adopt the tailoring rule under state laws on an expeditious
basis.  To address this, our final action differs from our proposed rule
in the way we incorporate the limitations promulgated in this tailoring
rule into the “major stationary source,” “major modification”
and “major source” definitions.  This approach relies on further
defining the term “subject to regulation” and is not substantively
different in effect from the proposed rule, but this mechanism will
facilitate more rapid adoption and implementation of the limitations in
this final rule by states through interpretation of language in existing
state regulations.  We are also delaying action on our proposed limited
approval of SIP-approved PSDprograms and Part 70 title programs to
determine how each State will implement the final rules.

1.  PSD Approach: Background and Proposal

Under CAA §165(a), no “major emitting facility” may construct or
modify unless it receives a preconstruction permit that meets the
requirements of the PSD program.  CAA §169(1) defines a major emitting
facility as “any … source[]” in one of 28 specified source
categories that “emit[s], or ha[s] the potential to emit, one hundred
tons per year or more of any air pollutant;” or “any other source
with the potential to emit two hundred and fifty tons per year or more
of any air pollutant.”  EPA’s regulations replace the term “major
emitting facility” with the term “major stationary source,” and
defines the term as “[a]ny of … [28 types of] stationary sources of
air pollutants which emits, or has the potential to emit, 100 tons per
year or more of any regulated NSR pollutant” or “any stationary
source which emits, or has the potential to emit 250 tons per year or
more of a regulated NSR pollutant.” 40 CFR 51.166(b)(1)(i)(a)-(b).
The term “regulated NSR pollutant” is defined to include, among
other things, “any … air pollutant that otherwise is subject to
regulation under the Clean Air Act.”  40 CFR 51.166(b)(50).  Note that
the regulatory definition in effect narrows the statutory definition to
read “one hundred tons per year or more” or “two hundred and fifty
tons per year or more of any air pollutant subject to regulation under
the Clean Air Act” (emphasis added).

Similarly, under the statute, a modification occurs if there is a
physical change or change in the method of operation “which increases
the amount of any air pollutant emitted . . .” Section 111(a)(4).  As
with the major stationary source definition, we have limited coverage of
the modification provision to physical changes or changes in the method
of operation that result in a significant increase, and a significant
net emissions increase of a “regulated NSR pollutant.”  40 CFR
51.166(b)(2)(i).

Our proposed rule revised the definition of “major stationary source
to 1) exempt GHG from the regulated NSR pollutants that, if emitted by a
source in the 100 or 250 tpy quantities, would cause the source to
qualify as a “major stationary source;” and 2) add a specific
threshold at which a source that emits a specified quantity of GHGs (at
proposal, that quantity was 25,000 tpy CO2e) would qualify as a “major
stationary source.”  74 FR 55,351, proposed 40 CFR 51.166(b)(1)(i)(a),
(b), (d).  We also proposed a significance threshold, the amount of an
increase needed to trigger PSD for a modifications or require BACT for a
new source, of 25,000 tpy CO2e.  74 FR 55351 40 C.F.R 51.166(b)(23)(i).
Additionally, we recognized that it may take some time before States
could change their SIP-approved PSD programs and that, absent additional
action on our part, GHG-emitting sources would remain subject to the 100
or 250 tpy thresholds, and subject to a zero significance threshold for
major modifications as a matter of Federal law.  To address this issue,
we proposed to narrow our previous approval of those SIPs, under the
authority of the Administrative Procedures Act and the general authority
of CAA section 301. Our limited approval would revise existing
SIP-approved programs to authorize permitting under the Clean Air Act
only for GHG sources at the appropriate levels.

In response to our proposed approach, we received numerous comments from
State and local permitting agencies expressing concern that our proposed
approach in the Tailoring Rule could meet its objectives to avoid
applying PSD requirements to small sources under federal law, but would
not succeed in avoiding the application of PSD requirements to those
small sources under state law. The commenters explained that, although
EPA was changing federal PSD applicability thresholds for GHG-emitting
sources to incorporate the tailoring approach, and limiting the scope of
SIPs consistent with these thresholds state rules containing the
originally- approved SIP thresholds would continue to apply as a matter
of state law.  As a result, states would be faced with the same
administrative difficulties recognized in the proposed rule in
implementing existing State law.  Rather, as commenters explained, for
the most part, the laws and regulations states adopt to implement
federal PSD programs mirror EPA’s regulations, so that the state laws,
in addition to the federally approved SIPs, apply PSD to sources that
emit air pollutants subject to regulation at the 100/250 tpy threshold.
Commenters reasoned that, until the States can change their state laws,
the 100/250 tpy thresholds will continue to apply as a matter of state
law, even though the higher thresholds apply as a matter of federal law.
  Importantly, these commenters emphasized that their State process
requires that they incorporate the higher thresholds for GHG sources in
their SIPs only through a rulemaking or, in some cases, through a
legislative change. These processes would require many months and in
some cases as long as two years.  As a result, sources that emit GHGs
below the federally established levels in the final rule, but above the
100/250 tpy levels in state laws and rules, would still be required to
obtain PSD permits under state law.  Commenters emphasized that this
situation was untenable.

In addition to the State comments just described, we received comments
that took issue with our description of our legal mechanism as an
application of the numerical thresholds.  They asserted that in fact,
our mechanism consisted of interpreting the term “any source” to
exclude small GHG-emitting sources.  Other commenters objected to our
proposed mechanism of narrowing our previous SIP approval, arguing that
this mechanism was without legal basis.

2.  Rationale for Our Final Approach to Implementing PSD

In response to these concerns, we are adding another mechanism to
implement the tailoring approach for PSD by interpreting the phrase
“subject to regulation” that is used within the phrase “any
regulated NSR pollutant ” that is part of the definitions of “major
stationary source”  and “major modification.”  To implement this
mechanism, we are codifying an interpretation of “subject to
regulation” so that the GHGs emitted by sources that fall below the
thresholds or scope established in Steps 1 and 2  are not treated as
“subject to regulation,” and therefore do not trigger PSD for the
sources that emit them. .

To understand this approach, it is useful to return to the definition of
“major stationary source,” which, again, is central to PSD
applicability.  The definition, quoted above, employs the term
“regulated NSR pollutant,” which is a defined term.  The definition
incorporates many other elements as well (e.g., the 100/250 threshold
requirements), but for convenience, we shorthand it as follows:  a
“major stationary source” is “[a]ny … source[] of air
pollutants, which emits, or has the potential to emit, [depending on the
source category, either] 100 [or 250] tons per year or more of any air
pollutant that is subject to regulation under the Clean Air Act.”   A
similar construct exists for the “major modification” definition.
Returning to our shorthand above and applying our definition of
“subject to regulation, the definition would now read  A “major
stationary source” is “[a]ny … source[] of air pollutants, which
emits, or has the potential to emit, [depending on the source category,
either] 100 [or 250] tons per year or more of any air pollutant subject
to regulation under the Clean Air Act,  [but GHGs are not subject to
regulation under the Clean Air Act if emitted by sources below the
thresholds established in steps 1 and 2 .]”    Similarly, major
modification now means “any physical change or change in the method of
operation that would result in:  a significant emissions increase . . .
. of a regulated NSR pollutant . . but GHG are not subject to regulation
under the Clean Air Act if emitted by sources below the thresholds
established in steps 1 and 2 and result in an increase less than the
amounts specified therein.”

Although EPA is codifying its interpretation of “subject to
regulation”, states may be able to follow EPA’s approach to
tailoring for GHG permitting without having to undertake a rulemaking
action to revise regulations that are included in their SIPs or without
requiring an act of the State legislature.  EPA believes this can be
accomplished through interpretation by the states if the state has taken
the position, or determines now, that the state’s definition of
“subject to regulation,” “regulated NSR pollutant” and/or
“major stationary source” is intended to be interpreted in a way
that tracks the meanings that EPA has assigned to these phrases.  As a
result, these States can adopt the meaning of subject to regulation
established by EPA and apply it by interpretation before January 2,
2011, and thereby avoid the situation in which, as a matter of State
law, GHG-emitting sources above the 100 or 250 tpy thresholds become
subject to PSD by that date.  We believe that States can adopt this
regulatory approach through an interpretation, rather than by a
rulemaking action or state legislative process, because we view the
phrase “regulated NSR pollutant” as open-ended, and therefore
subject to interpretation, as the following discussion demonstrates.

On December 18, 2008, EPA issued an interpretive memorandum establishing
EPA’s interpretation of the definition “regulated NSR pollutant”
found at 40 C.F.R. 52.21(b)(50)).. Id. EPA intended this memo to resolve
any ambiguity in subpart (vi) of this definition which includes “any
pollutant that otherwise is subject to regulation under the Act.”
Specifically, the memo stated that EPA will interpret the definition of
“regulated NSR pollutant” to exclude pollutants for which EPA
regulations only require monitoring or reporting but to include each
pollutant subject to either a provision in the Clean Air Act or
regulation adopted by EPA under the Clean Air Act that requires actual
control of emissions of that pollutant.

	After reconsidering this interpretation through a formal notice and
comment process, EPA refined its interpretation to establish that the
PSD permitting requirements will not apply to a newly regulated
pollutant until a regulatory requirement to control emissions of that
pollutant “takes effect.” 75 FR 17704.  Importantly, as stated
above, since the term “regulated NSR pollutant” is embedded within
the definition of “major stationary source” this interpretation
effectively defines which major stationary sources are subject to PSD
permitting.  As a result, for example, EPA explained that PSD and title
V permitting requirements for GHGs will not apply to GHGs until at least
January 2, 2011 - following the anticipated promulgation of EPA
regulations requiring control of GHG emissions under Title II of the
CAA. Id.  Nonetheless, because this final rule tailors the application
of GHG permitting, GHG emissions at certain thresholds will not be
“subject to regulation” as we interpret that term within the
“regulated NSR pollutant” definition.

	In the Response to Comment document for EPA’s reconsideration of the
PSD interpretative memorandum, we stated that,

Absent a unique requirement of state law, EPA believes that state laws
that use the same language that is contained in EPA’s PSD program
regulations at 52.21(b)(50) and 51.166(b)(50) are sufficiently
open-ended to incorporate greenhouse gases as a regulated NSR pollutant
at the appropriate time consistent with EPA’s interpretation of these
regulations (cite docket #).

	Historically, EPA has interpreted certain state approved-SIP programs
as sufficiently open-ended such that the rules provide for the
“automatic assumption for the responsibility for review” of new
pollutants before the general deadline for states to revise their PSD
programs.  See e.g. 52 FR at 24682. Conversely, we have also read
federal rules and state SIPs to provide for the automatic removal of a
pollutant when such pollutant is no longer “subject to regulation.”
For example, the 1990 CAA amendments exempted hazardous air pollutants
listed in Section 112(b)(1) from the PSD requirements.  See CAA Section
112(b)(6).  Following passage of the amendments, EPA issued “New
Source Review (NSR) Program Transitional Guidance“,, a memorandum from
John S. Seitz, Director Office of Air Quality Planning and Standards to
Regional Air Division Directors on March 11, 1991.  In that guidance,
EPA interpreted its regulations to automatically cease to apply to
listed HAPs (with some noted exceptions.), and implicitly stated that a
State with an open-ended SIP-approved rule could also automatically
cease to regulate HAPs.

	After reviewing these past practices in the PSD permitting program, and
EPA’s prior statements regarding pollutants subject to the PSD
program, we conclude that State rules that contain the same language as
used in the 40 C.F.R. Section 52.21(b)(50) or 40 C.F.R. Section
51.166(b)(49), or who otherwise have sufficiently open-ended NSR
regulations, would be able to implement our tailoring rule approach to
permitting of GHG sources without the need for a SIP revision if they
establish that the state intended to apply the same meaning as EPA when
it incorporated the term “subject to regulation” in its PSD program
regulations.  If states adopt this reading of their regulations, GHG
sources falling below the specified cutoffs would not be emitting
pollutants “subject to regulation” within the definition of
“regulated NSR pollutant” and therefore would not be subject to PSD
permitting as a major stationary source.

During our consideration of this action, we participated in
teleconferences with several permitting authorities (6 states and 1
local agency) to discuss this issue of whether they could implement the
proposed rule without the need for state law or regulations changes or a
revision of the provisions of state law that are a part of the SIP.
[Placeholder: docket # for meeting summary] We specifically discussed
whether defining the phrase “subject to regulation”  would better
facilitate state incorporation of the limitations in this final rule.
The state and local agencies participating in the calls generally agreed
that defining the phrase “subject to regulation” that is used within
the definition of “regulated NSR pollutant” would, compared to our
proposed approach, better facilitate state  incorporation of the
limitations in the final rule in states with regulations that mirror the
existing  federal rules, or in states whose rules are otherwise
sufficiently open-ended to incorporate the limitations in the final rule
by interpretation.  Participants from each agency also indicated that it
is likely that their rules were sufficiently open-ended to do so because
they contain the term “subject to regulation” and that term has not
been previously interpreted in ways that would preclude adoption of
EPA’s meaning of the term by interpretation (although some indicated
they may elect to pursue rulemaking in addition to interpretation).
Accordingly, we selected the “subject to regulation” regulatory
approach as the mechanism for codifying the final rule.

3. Other mechanisms

The mechanism for implementing the terms of this tailoring rule
described above has the same substantive effect as the mechanism we
considered in the proposed rule.  Defining the term “subject to
regulation”, has the effect of modifying the meaning of the regulatory
terms “major stationary source” and “major modification” –
again, the keys to PSD applicability – to exclude GHG-emitting sources
below the thresholds established in Steps 1 and 2, and our action should
be interpreted to rely on any of several legal mechanisms to accomplish
this interpretation.   The thrust of this rulemaking is to apply the PSD
definition of “major stationary source” – which embodies the
statutory term, “major emitting facility” -- to GHG sources by
treating only GHG sources that emit at levels above the steps 1 and 2
thresholds as meeting that definition.  Our action may reasonably be
construed to have the effect of revising the meaning of several terms in
these definitions, including: (i) the numerical thresholds, as we
proposed; (ii) the term, “any source,” which some commenters
identified as the most relevant term for purposes of our proposal; or
(iii) the term, “subject to regulation,” which, as discussed above,
our regulations attach to the definition of “major stationary
source” and “major modification.”  The specific choice of which
term constitutes the mechanism does not have a substantive legal effect
because each mechanism involves one or another of the components of the
regulatory term “major stationary source” and it is that term that
we are defining to exclude the indicated GHG-emitting sources. Thus,
while the “subject to regulation” mechanism facilitates expeditious
implementation by states, and we are therefore revising our regulations
to adopt this approach, there is no substantive difference in effect
between the alternative mechanisms we may use to finalize the proposed
rule.

Similarly, with respect to “major modification” although our final
action revises our regulations to incorporate the “subject to
regulation” mechanism, we believe that our final action should be
construed as interpreting the definition of the regulatory term
“major modification”—which embodies the statutory term
“modification”--– to exclude GHG-emitting sources below the
thresholds established in Steps 1 and 2, and that our action should be
interpreted to rely on any of the several mechanisms noted above to
accomplish this interpretation.  Further, we believe that our action may
reasonably be construed to revise any of several terms in that
definition,  – including (i) the numerical thresholds (zero for
modifications under the statute), as we proposed; (ii) the term, “a
stationary source,” which parallels the “any source” theory
identified by commenters with respect to “major stationary source”;
or (iii) the term, “subject to regulation,” which, as discussed
above, that our regulations attach to the definition of “major
modification.”  We believe that the specific choice of which term
constitutes the mechanism does not have a substantive legal effect
because each mechanism involves one or another of the components of the
regulatory term “major modification” and it is that term that we are
interpreting to exclude the indicated GHG-emitting sources. Thus, while
the “subject to regulation” mechanism facilitates expeditious
implementation by states, and we are therefore revising our regulations
to adopt this approach, we otherwise find no substantive difference
between the alternative mechanisms we may use to finalize the proposed
rule.

4.  Codification of Interpretive Memo

Notably, we recently affirmed our interpretation of the term “subject
to regulation” as it applies broadly to the PSD program through a
formal notice and comment process. [placeholder cite Johnson}.  In the
response to comments for that action, we indicated that we may opt to
codify our interpretation of the term in the GHG final tailoring rule.
Accordingly, our final rule adopts this interpretation to bring
additional clarity to our rules.  Specifically, we add a new paragraph
to the definitions “subject to regulation” that contains our
existing interpretation of that term.  We also moved existing exceptions
(e.g. Section 112 hazardous air pollutants) to a new paragraph with in
the definition of "subject to regulation".   Movement of these
regulations is not intended to effect any change in how those
regulations are implemented, but merely simplify the regulations clearly
delineating different terms and concepts.

We do not believe that codification of this interpretation from the
Interpretive Memo is necessary to continue the effectiveness of the
interpretation, nor do we believe that our action disturbs States’
existing authority to adopt the definition through interpretation of
their existing rules.  Our decision to codify our existing
interpretation is based solely on a desire to better inform readers of
the existing interpretation.

5. Delaying Limited Approvals and Request for Submission of Information
from States implementing a SIP-approved PSD program

Because we now anticipate that many states will be able to implement the
final rules through interpretation without the need to revise their
SIPs, we are delaying further action on our proposal to limit approved
SIPs until we better understand how permitting authorities will
implement our final rule.  For this purpose, we ask each State to submit
a letter to the appropriate Regional Administrator no later than [insert
date 60 days after promulgation].  In that letter, states should explain
whether they will apply EPA’s meaning of the term “subject to
regulation” and if so, whether the state intends to incorporate that
meaning of the term without undertaking a regulatory or legislative
process.  If a State must revise its regulations to apply EPA’s
meaning of the term “subject to regulation” we ask States to provide
an estimate of the time to adopt final rules in its letter to the
Regional Administrator.  If a state chooses not to adopt EPA’s meaning
by interpretation, the letter should address whether the State has
alternative authority to implement today’s phase-in approach or some
other approach that is at least as stringent, but which also addresses
the expected shortfalls in personnel and funding that would exist if the
state to carried out PSD permitting under its existing program
thresholds.

For any State that is unable or unwilling to adopt the limitations  in
the final rules by January 2, 2011, and who otherwise are unable to
demonstrate adequate personnel and funding, EPA will move forward with
finalizing a limited approval of the existing SIP.  Although we received
comments questioning EPA’s authority to undertake a limited approval
using our general rulemaking and 110(k)(6) authorities, we are not
responding to those comments at this time.  We will address these
comments in any final action we take to implement a limited approval.

In our proposed rule, we also noted that a handful of EPA-approved SIPs
fail to include provisions that would subject GHG emissions to their PSD
requirements when regulations that EPA promulgates to regulate GHGs take
effect and thereby trigger the applicability of PSD for sources that
remain covered under today’s rule.  This is generally because these
SIPs specifically list the pollutants subject to the SIP program
requirements, rather than including a definition of NSR regulated
pollutant that mirrors the federal rule, or because a state otherwise
interprets its regulations to limit which pollutants the state may
regulate.  At proposal, we indicated that we intended to take separate
action to identify these SIPs, and to take regulatory action to correct
this SIP deficiency.  We ask any state or local permitting agency that
does not believe its existing SIP provides authority to issue PSD
permits to GHG sources consistent with the final rule to notify the
Regional Administrator by letter (which should be done no later than the
previously described letter regarding adoption of the tailoring rule).
This letter should inform the Regional Administrator whether the state
intends to undertake rulemaking to revise their rules to the handle GHG
sources that will be covered under the applicability thresholds in this
rulemaking, or alternatively, whether the state believes it has adequate
authority through other means to issue federally-enforceable PSD permits
to GHG sources consistent with the final rule.  For any State that lacks
the ability to issue PSD permits for GHGs consistent with the final
rule, we will undertake a separate action to call the SIP.  As
appropriate, we will also move quickly to impose a FIP through 40 C.F.R.
Section 52.21 to ensure that GHG sources will be regulated consistent
with the final rule.

6.  Title V programs

	Our final action also differs from the proposal in the specific
regulatory mechanism by which we tailor the definition of “major
source” for title V permit programs, but is a logical outgrowth of our
proposed rule.  EPA proposed to implement tailoring for GHGs under title
V by excluding sources of GHGs from the general definition of “major
source” under 40 C.F.R. sections 70.2 and 71.2, and adding a separate
definition of “major source” with tailored thresholds for sources of
GHGs.  In response to comments, particularly from states concerned with
implementation of the proposed approach under state law, EPA is adopting
an approach in the final rule that 1) amends the definition of “major
source” by codifying EPA’s long-standing interpretation that
applicability for a “major stationary source” under CAA sections
501(2)(B), and 302(j) and 40 C.F.R. section 70.2 and 71.2 is triggered
by sources of pollutants “subject to regulation,” and 2) adding a
definition of “subject to regulation.”   Further, we are delaying
our action to move forward with a limited approval of existing state
Part 70 programs.

	We finalize this alternative approach to address concerns similar to
those we received with respect to State implementation of SIP-approved
PSD programs.  Specifically, we received comments that the mechanism we
proposed would not address the significant administrative and
programmatic considerations associated with permitting GHGs under title
V, because the 100 tpy threshold would continue to apply as a matter of
State law.  Commenters stated that states would need to undertake a
regulatory and/or legislative process to change the threshold in their
state laws which they could not complete before the laws would otherwise
require issuance of operating permits to GHGs sources.  After
considering the commenters’ concerns, we are finalizing an approach
designed to address the state law concerns for states, and also now find
that it may be unnecessary to move forward with our proposed approach to
limit approval of existing Part 70 programs in many States.

	EPA’s approach  involves the interrelationship of terms within the
Part 70 definition of “major source” in title V and EPA’s
implementing regulations, and EPA’s historical practice of
interpreting the term “any air pollutant” in the “major stationary
source” component of that definition.  EPA believes the approach in
the final rule will allow many states to adopt the final rule through
interpretation of existing state laws.  Specifically, paragraph (3)
within the definition of “major source” found in 40 CFR sections
70.2 and 71.2 defines a major source as a “a major stationary source
of air pollutants, as defined in section 302 of the Act, that directly
emits or has the potential to emit, 100 tpy or more of any air
pollutant…”  The EPA previously articulated the Agency’s
interpretation that the regulatory and statutory definitions of “major
source” under title V, including the term “any air pollutant,
applies to pollutants “subject to regulation.” Memorandum from Lydia
N.Wegman, Deputy Director, Office of Air Quality Planning and Standards,
U.S. EPA, to Air Division Directors, “Definition of Regulated Air
Pollutant for Purposes of Title V” (Apr.26, 1993)(Wegman Memo).  EPA
recently re-affirmed this position in EPA’s Reconsideration of
Interpretation of Regulations that Determine Pollutants Covered by Clean
Air Act Permitting Programs. 75 FR 17704, 17022-23 (April 2,
2010)(Interpretive Memorandum Reconsideration Final Action).

	Accordingly, under our long-established policy, States historically
have interpreted the term “any air pollutant” under the title V
definition of “major source,” to mean any pollutant “subject to
regulation” under the Act.  Thus, as a matter of established
interpretation, EPA and States effectively read the definition of
“major source” under title V to include a source “…that directly
emits or has the potential to emit, 100 tpy or more of any air pollutant
subject to regulation under the Act.” [emphasis added].By amending our
regulations to expressly include and define “subject to regulation”
to implement our tailoring for GHGs under title V, we are seeking to
enable States to adopt and implement this approach through a continued
interpretation of the phrase “any air pollutant” within the “major
source” definition, without the need for changes to state regulations
or statutes.  States may be able to track EPA’s approach to tailoring
for GHG permitting without regulatory or statutory changes, for example,
where a state has taken the position, or determines now, that the
state’s interpretation of “major source,” “subject to
regulation” and/or “any air pollutant” is intended to track
EPA’s interpretation.

	Thus, EPA is adding the phrase “subject to regulation” to the
definition of “major source” under 40 C.F.R section 70.2 and 71.2.
EPA is also adding to these regulations a definition of “subject to
regulation.”  Under the part 70 and part 71 regulatory changes adopted
today, the term “subject to regulation,” for purposes of the
definition of “major source,” has two components.  The first
component codifies the general approach EPA recently articulated in the
“Reconsideration of Interpretation of Regulations That Determine
Pollutants Covered by Clean Air Act Permitting.” 75 FR 17704.  Under
this first component, a pollutant “subject to regulation” is defined
to mean a pollutant subject to either a provision in the CAA or
regulation adopted by EPA under the CAA that requires actual control of
emissions of that pollutant and that has taken effect under the CAA.
See id. at 17022-23; Wegman Memo at 4-5.  To address tailoring for GHGs,
EPA includes a second component of the definition of “subject to
regulation,” specifying that GHGs, are not subject to regulation for
purposes of defining a major source, unless as of July 1, 2011, the
emissions of GHGs are from a source emitting or having the potential to
emit 100,000 tpy of GHGs on a CO2e basis.

	As explained above, we find no substantive difference between the
alternative mechanisms for implementing GHG tailoring in the final rule.
 Whether we add GHG thresholds directly to the definition of “major
source,” (as we proposed), or alternatively, expressly add and define
the term “subject to regulation,” both approaches revise the
definition of “major source” to implement the GHG tailoring rule.
Accordingly, we adopt the later approach to facilitate State
implementation of the final rule through an interpretation of existing
State Part 70 programs.  Similar to our explanation above for PSD, while
we adopt the “subject to regulation” mechanism for implementing GHG
tailoring in the final rule, the thrust of our rulemaking today is to
apply the title V definition of “major source” – which includes
the statutory term, “major stationary source” -- to GHG sources by
treating only GHG sources that emit at levels above the steps 1 and 2
thresholds as meeting that definition.  Further, we believe that our
action may reasonably be construed to revise any of several terms in
that definition, including (i) the numerical thresholds, as we proposed;
(ii) the term “any air pollutant,” or (iii) the term “subject to
regulation,” which, as discussed above, our regulations graft into the
definition of “major source.”  We believe that the specific choice
of which term constitutes the legal mechanism does not have a
substantive legal effect because each mechanism involves one of the
components of the regulatory term “major source,” and it is that
term that we are interpreting to tailor title V applicability for
GHG-emitting sources.  Thus, while the “subject to regulation”
mechanism facilitates expeditious implementation by states, and we are
therefore revising our regulations to adopt this approach, we otherwise
find no substantive difference between the alternative mechanisms we may
use to finalize the proposed rule.

Further, similar to our revised approach for addressing State
SIP-approved PSD programs, we are delaying our action to issue limited
approvals for State part 70 operating permit programs.  In our proposed
rule, we explained our concern that states lack adequate personnel and
resources to carry out part 70 operating permit programs for GHG sources
that emit or have the potential to emit 100 tpy of GHGs.   Accordingly,
we proposed to use our general rulemaking authority under Section 301(a)
of the CAA and APA section 553 to limit our prior approval of State
operating permit programs. This limited approval action would have had
the effect of applying Clean Air Act permitting requirements only to
sources that exceed the permitting thresholds established in this rule
for the phase in, because only those sources would be covered by the
federally approved part 70 programs. 74 FR at 55345.  As discussed
above, we are proceeding with a slightly revised approach to address
concerns similar to those raised with our proposed approach for
addressing SIP-approved PSD permit programs.  Because we now recognize
that, like the PSD program, many States will be able to implement the
final rules without the need to revise their existing Part 70 operating
permit programs, we are delaying further action on our proposal to limit
approval of existing Part 70 programs until we better understand how
permitting authorities will implement our final rule.  In addition to
the information requested above on SIP-approved PSD permit programs, we
ask each State to submit a letter to the appropriate Regional
Administrator no later than [insert date 60 days after promulgation]
detailing the state’s  plan for permitting of GHG sources under the
state’s part 70 program.  In that letter, states should explain
whether they will adopt an interpretation of the terms “major
source,” “any air pollutant” or “subject to regulation” that
is consistent with EPA’s regulatory interpretation of the these terms
as codified  at 40 C.F.R. section 70.2, and whether the State intends to
adopt the interpretation without undertaking a regulatory or legislative
process. This approach may be available, for example, where a state has
taken the position, or determines now, that the state’s interpretation
of “major source,” “subject to regulation” and/or “any air
pollutant” is intended to track EPA’s interpretation, resulting in
title V permitting for sources of GHGs as described in EPA’s
regulations adopted today.  If a State must revise its title V
regulations or statutes to implement the interpretation, we ask States
to provide an estimate of the time to adopt final rules or statutes in
its letter to the Regional Administrator.  If a State chooses not to (or
cannot) adopt our interpretation, the letter should address whether the
State has alternative authority to implement the GHG tailoring approach
or some other approach that is at least as stringent, but which also
addresses the expected shortfalls in personnel and funding that would
exist if the state to carried out permitting under Part 70 program
thresholds lower than those adopted by EPA in this final rule.  For any
State that is unable or unwilling to adopt the permitting thresholds in
the final rules, and otherwise is unable to demonstrate adequate
personnel and funding, EPA will move forward with finalizing a limited
approval of the state’s existing part 70 program.

In our proposed rule, we also noted that a handful of Part 70 operating
permit programs may include provisions that would not require operating
permits for any source of GHG emissions because, for example, the
programs may apply only to pollutants specifically identified in the
program provisions.  States may be unable to interpret their regulatory
provisions to interpret the term “any pollutant” to include
pollutants “subject to regulation.”  We indicated that we intended
to take separate action to identify these programs, and to take
regulatory action to correct this deficiency.  Accordingly, we ask any
State or local permitting agency that does not believe its existing part
70 regulations convey authority to issue title V permits to GHG sources
consistent with the final rule to notify the Regional Administrator by
letter as to whether the state intends to undertake rulemaking to revise
their rules consistent with today’s applicability thresholds.  This
notification should be done no later than the previously described
letter regarding adoption of the tailoring rule, and could be combined
with similar notifications we request regarding the PSD program.  We
will undertake a separate regulatory action to address part 70 programs
that lack the ability to issue operating permits for GHG sources
consistent with the final rule.  We will use our federal title V
authority to ensure that GHG sources will be permitted consistent with
the final rule.

D.    Rationale for Treatment of GHGs for Title V Permit Fees

The title V program requires permitting authorities to collect fees
“sufficient to cover all reasonable (direct and indirect) costs
required to develop and administer [title V] programs.”   To meet this
requirement, permitting authorities either collect an amount not less
than a minimum amount specified in our rules (known as the
“presumptive minimum”), or may collect a different amount (usually
less than the presumptive minimum).  We did not propose to change the
title V fee regulations in our notice of proposed rulemaking for this
action, nor did we propose to require new fee demonstrations when title
V programs begin to address GHGs.  However, we did recommend that each
state, local or tribal program review its resource needs for GHG and
determine if the existing fee approaches will be adequate.  If those
approaches will not be adequate, we suggested that states should be
proactive in raising fees to cover the direct and indirect costs of the
program or develop other alternative approaches to meet the shortfall.
We are retaining this proposed approach, and are not changing our fee
regulations as part of today’s final action establishing steps 1 and 2
of the phase-in.  However, we are offering some additional clarification
of our fee approach during these steps in response to comments we
received on this issue.  Additional discussion of fees will be included
as part of subsequent actions establishing step 3 and beyond.

A few state commenters suggested that EPA should modify part 70 to adopt
a presumptive minimum fee (or range for such fee) for GHGs, some of whom
suggested that current fees may be insufficient to cover the costs of
their program.  It is important to clarify that altering the presumptive
minimum would only affect those states that chose to charge the
presumptive minimum fee to sources.  Most states – including some of
the commenters asking EPA to raise the presumptive minimum -- collect a
lower amount that is not based on the presumptive minimum, but rather,
relies on another fee schedule that it developed and EPA approved as
adequate to cover costs.  Therefore, it is useful to first discuss our
approach to programs that have fee schedules resulting in a different
amount before discussing our approach to the presumptive minimum.

Because of the added GHG title V permitting workload described elsewhere
in this notice, any state that will not, under its current fee
structure, collect fees adequate to fund the permitting of GHG sources
must alter its fee structure in order to meet the requirement that fees
be adequate to cover costs.  Changes may not be required in every
instance; circumstances will vary from state to state.  For example a
state may see increases in revenue from newly-covered sources (based on
emissions of pollutants already subject to fees) that fully cover the
state’s increased costs, or a state may be over-collecting fees now
and could use the surplus to offset the increased costs.  Nonetheless,
in many cases, we think states will need to adjust their fee structures
to cover the costs of GHG permitting in order to meet the requirements
of the Act and our regulations.

For this reason, although we are not calling for new fee demonstrations
at this time, we plan to closely monitor state title V programs during
the first two steps of the Tailoring Rule to ensure that the added
workload from incorporating GHGs into the permit program does not result
in fee shortfalls that imperil operating permit program implementation
and enforcement, whatever the basis of the states’ fee schedule.  As
described in the proposal, such fee oversight by EPA may involve fee
audits under the authority of §70.9(b)(5) to ensure that adequate fees
are collected in the aggregate to cover program costs, with emphasis on
whether the additional GHG workload is being appropriately funded.
Also, EPA retains the ability to initiate a program revision under
§70.4(i)(3) or issue a notice of deficiency under the process described
in §70.10(b) to address fee adequacy issues, which may be uncovered
during a fee audit.  By relying on existing oversight measures, we are
ensuring that the fee requirements are met with a minimum of disruption
to existing programs at a time when they will already be facing
significant challenges related to GHG permitting.

Turning to the minority of states that do use the presumptive minimum,
we did not propose to change the presumptive minimum calculation method
to account for GHG.  Currently under the statute and our rules, the
presumptive minimum is based on a subset of air pollutants (i.e., VOC,
NAAQS pollutants except for CO, and pollutants regulated under the NSPS
and MACT standards promulgated under sections 111 and 112 of the Act,
respectively) that does not include GHGs.  The amount is specified on a
per-ton basis and changes with inflation (it is currently set at
$43.75/ton), but does not apply to emissions over 4,000 tpy of a given
pollutant from a given source.  We noted several difficulties in
applying the presumptive minimum to GHG, including the large amounts of
GHG emissions relative to other pollutants and the need for better data
to establish a GHG-specific amount.  Noting that GHGs are not currently
included in the Act’s list of pollutants to which the presumptive fee
applies, we also invited comment on whether we should raise the fee for
listed pollutants to cover the added cost of GHG permitting.

A few state commenters asked us to set a presumptive fee for GHGs, which
we take to mean we should add GHGs to the list of pollutants to which a
presumptive fee would apply.  However, many commenters noted that the
current presumptive minimum fee is unreasonable for GHGs because GHGs
are emitted in greater quantities than the pollutants currently subject
to presumptive fees, which would result in excessive fees.  These
commenters believe that EPA needs to limit the fees that states can
charge for GHGs.  Moreover, one commenter read the statute to prohibit
us from listing GHGs in the presumptive fee calculation in the first
place.  Several commenters disagreed with the idea of instead increasing
the presumptive fee for other pollutants to cover the cost of regulating
GHGs, some of whom believed that this would unfairly punish existing
sources or would bring in no new revenue from sources triggering title V
for the first time.

After considering these comments, we remain disinclined, as we were at
proposal, to change the presumptive fee calculation regulations.  While
there is some support for changing the regulations, the comments confirm
the challenges in doing so.  While we expressly rejected charging the
full presumptive cost per ton amount for GHG, we also did not propose
language to establish a different amount just for GHG, to establish
whether a different tpy cap would apply, or to assess whether GHGs could
even be added to the list.  Thus, many commenters were very concerned
about whether the full $43.75 or the 4000 tpy cap would apply to GHG if
we listed it as a regulated pollutant for fee purposes.  Furthermore, we
noted at proposal, and commenters did not disagree, that more data would
be needed to establish the appropriate basis for the GHG presumptive
minimum.  We are not taking a final position today on whether the
statute is amenable to including GHG in the presumptive fee calculation
currently, but these comments illustrate some of the difficulties of
such an approach.

At the same time, we are not increasing the presumptive minimum for
other pollutants already included in the fee calculation.  We disagree
with the commenter who said such an approach would bring in no new
revenue from newly-subject sources.  Many of the newly subject sources
would emit already-included pollutants.  If new revenue from these
pollutants were insufficient, and because the Act does not specify how
the shortfall must be addressed, the amount of any projected shortfall
could be made up by increasing fees on these pollutants.  In fact, the
projected shortfall could be addressed without having to inventory GHG
emissions from title V sources, since the emissions of already-included
pollutants are well-known.  We also note that, although some commenters
are concerned that failing to assess fees for GHGs directly would be
unfair, the statute does not provide that the presumptive fee be
proportional to each type of pollutant or be proportionally allocated to
all sources. Rather, the presumptive fee approach provides a backstop
for states that do not wish to adopt a more tailored approach.
Nonetheless, we have decided not to increase the presumptive fee amounts
for other pollutants because we lack information about the extent to
which shortfalls exist due to GHG permitting, and which mix of sources
and fees is appropriate for addressing any such shortfall in a state.
This approach also provides greater flexibility to states and minimizes
disruption to existing programs.

We note that, contrary to the statements of some commenters, the CAA
provisions allowing for a presumptive fee calculation do not override
the basic requirement that fees be adequate to cover costs. As noted
above, we expect states to see a revenue increase from emissions of
listed pollutants at newly-major sources for GHG, and it is also
possible that the presumptive minimum may currently be resulting in
over-collection of fees in a state.  Thus, a state continuing to use the
presumptive minimum may not have a shortfall.  However, if states using
the presumptive minimum approach do have a revenue shortfall due to GHG
permitting, the statute requires the shortfall to be addressed.  The EPA
has had, and will continue to have, the ability to require states that
use the presumptive minimum to increase their fees if the presumptive
minimum results in a revenue shortfall that imperils operating permit
program implementation and enforcement.  Thus, although we are not
changing the presumptive minimum in our regulations, we plan to follow
the same oversight approach for states using the presumptive minimum as
for those collecting less based on a resource demonstration.  As
described above, this approach may involve fee audits with emphasis on
whether the additional GHG workload is being appropriately funded, and
other appropriate follow-up.

Consistent with our proposal, EPA is not modifying its own part 71 fee
structure (which closely mirrors the presumptive minimum) in order to
charge an additional fee for GHG.  EPA must revise its fee schedule if
the schedule does not reflect the costs of program administration.  We
have not determined that the existing fee structure will be inadequate
to fund the part 71 programs costs during the first two phases of
permitting GHGs as set forth in this action.  However, we are required
to review the fee schedule every two years, and make changes to the fee
schedule as necessary to reflect permit program costs.  40 CFR section
71.9(n)(2).  Thus we will continue to examine the increases in part 71
burden due to GHG permitting, the current revenue collection, and the
increases in revenue from newly-subject part 71 sources, and will adjust
the part 71 fee approach accordingly.

Finally, several state and industry commenters asked EPA to provide
guidance and recommendations for an appropriate GHG fee structure.  We
note that title V grants permitting authorities considerable discretion
in charging fees to sources for title V purposes and does not require or
prohibit fees specifically for GHGs, provided the states collect fees in
the aggregate that are sufficient to cover all the direct and indirect
program costs.  In responding to requests for guidance, we do not wish
to limit state discretion.  For example, some commenters suggest that
EPA prohibit emissions-based fees for GHG or cap the amount that can be
collected, while others suggest we provide a range of acceptable fees.
We are concerned that, given the wide variety of fee approaches that
states now take, providing specific guidance may be disruptive, rather
than helpful, to states.

On the other hand, we recognize that it will initially be difficult for
states to establish an appropriate emissions fee for GHG.  As noted
above, there are currently limited data available for establishing such
a fee, and, due to the large quantities of GHG emissions, such a fee may
only amount to a few cents per ton.  At the same time, as noted in the
proposal, a number similar to that used for other pollutants (e.g., the
presumptive minimum of $45/ton of GHG) would be inappropriate because it
would likely result in huge over-collection.  Because of this challenge,
we note that §70.9(b)(3) allows the state to charge fees to individual
sources on any basis (e.g., emission fee, application fee, service-based
fees, or others, in any combination).  While most states use
emissions-based fees, there is merit to considering all the available
fee bases to address increased GHG workload, including approaches that
do not require a GHG emissions inventory for fee purposes.  For example,
where it is possible to estimate a revenue shortfall as a percentage of
fee revenue, it may be appropriate to simply attach a percentage-based
surcharge to each source’s fee to match that shortfall.  Similarly,
where the shortfall could be estimated as a total dollar amount, a flat
surcharge could be added to each source’s fee to address the
shortfall.

These suggestions should not be read to indicate that EPA prefers any
particular approach, or that EPA rejects a cost per ton approach.
Rather, they illustrate that it is possible to address a revenue
shortfall without establishing a GHG per-ton fee.  While the EPA is
declining to recommend specific approaches in this preamble, we are
committed to assisting states in implementing the fee requirements for
GHG.  Therefore, we will work with any state that requests assistance
from EPA in developing a workable fee approach.

E.    Other Actions and Issues

1.  Permit Streamlining Techniques

In our proposal, we stated that while we were phasing-in permitting
requirements, we would make a concerted effort to assess and implement
streamlining options, tools, and guidance to reduce the costs to sources
and permitting authorities of GHG permitting.  We recognized that the
development and implementation of these techniques should be an integral
part of our strategy during the phase-in period, and we stated that we
would undertake as many of these streamlining actions as possible as
quickly as possible.   We discussed several streamlining techniques in
particular, including (1) defining potential to emit (“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 and permits-by-rule, (4)
establishing procedures for electronic permitting, and (5) establishing
“lean” techniques for permit process improvements.   The first three
of these approaches have the potential to have the greatest impact in
reducing the numbers of sources subject to PSD or title V (the
definition of PTE) or of reducing permitting costs (presumptive BACT and
general permits or permits-by-rule).

In our proposal, we also described the timing for development and
implementation of these streamlining techniques.  We explained that each
of the first three techniques would generally take 3-4 years to develop
and implement, and therefore would be of limited use in the near-term.
This time frame is necessary because EPA will first need to collect and
analyze small source data that we do not currently have – because
these are sources that EPA has not traditionally regulated --  in order
to assess which of these techniques are viable or effective for such
sources.  In general, EPA will then need to conduct notice-and-comment
rulemaking to establish the approaches, and that rulemaking will need to
address various legal and policy aspects of these approaches.  After
that, the permitting authorities will need some time to adopt the
streamlining techniques as part of their permitting programs.

We received several comments on streamlining techniques.  In general,
the comments indicate widespread support for our pursuit of streamlining
approaches, but some commenters were concerned that one or more of
EPA’s identified streamlining options were complex, vague,
ineffective, and questionable legally.   Noting our proposal to phase-in
permitting, in part to allow more time to develop streamlining options
for smaller sources, some commenters suggested that we should delay
permitting for larger sources for the same reasons.  We disagree.  Such
a delay is not justified under the legal doctrines of “absurd
results” and “administrative necessity.”  While implementation of
steps 1 and 2 – which will cover larger sources -- will pose
implementation challenges, and some of the streamlining tools could
assist with meeting these challenges, we have assessed the burdens
associated with GHG permitting and have established a phase-in schedule
that represents a manageable workload, even in the absence of
streamlining techniques.  On the other hand, we do agree with these
commenters that, absent streamlining, applying PSD and title V
requirements to the much large number of small sources would lead to
absurd results and administrative impossibility.  The sources for whom
the phase-in delays applicability are precisely the sources that have
the greatest need for streamlining measures, and thus the greatest need
for a deferral while we develop and implement streamlining options.

In addition, commenters generally echoed many of our concerns about why
it will take time to put these measures in place, and no commenter
presented any information to suggest that our 3-4 year estimate for the
PTE, presumptive BACT, and general permit measures was invalid.

For these three techniques, we continue to believe that as we noted at
proposal, we will require collection of significant category-specific
data for source and emission unit types that have heretofore generally
not been regulated by the CAA (e.g., furnaces, water heaters, etc.),
which could take up to one year.  Moreover, commenters had differences
of opinion as to whether and how we should move forward on these
approaches, and some raised policy and legal issues that we would likely
want to explore through a notice and comment process.   Even if a
rulemaking were done expeditiously, it would likely require one year.
Finally, unlike lean and electronic permitting, these approaches, once
finalized by EPA, will likely require additional time of up to two years
for states to adopt.  Thus, it is clear that these approaches will not
be in place in time to ease any burden prior to the planned rulemaking
for step 3.

Some commenters did observe that the fourth and fifth techniques, lean
and electronic permitting, could, at least theoretically, become
available sooner.  However, these commenters also noted that successful
design and implementation of these approaches will require
implementation experience with GHG permitting that is not now available.
 We expect that for the lean and electronic permitting techniques, at
least one year of implementation experience (of the type that we will
gain starting in 2011) would be required, plus at least an additional
year to extrapolate that experience to small sources and put these
approaches into effect for small source permitting.  Thus, we do not
think the lean and electronic permitting would be in place before the
beginning of 2013.  Moreover, a handful of commenters questioned whether
lean and/or electronic permitting would alleviate significant burden.
Thus we are not able, at this time, to presume that these approaches
will ease any burden prior to the planned rulemaking for step 3.

	It is also important to note that, as a practical matter, while these
efforts to streamline the program for small sources are underway, EPA
and states will also be devoting a significant amount of their
permitting resources and expertise to implementing the PSD and title V
programs for the GHG-emitting sources covered under Steps 1 and 2.   We
have established these steps in a manner that they will be feasible for
EPA and state/local/tribal authorities, but even so, they will not only
consume current permitting authority resources, but they will also
require substantial additional resources.  As a result, the efforts to
develop and implement streamlining techniques will have to compete with
the work necessary to administer existing programs.  For example, during
the remainder of 2010, as described elsewhere in this notice, EPA
permitting program resources will, in addition to continuing to
administer programs for non-GHG pollutants, be used to conduct at least
the following GHG-related activities in addition to streamlining: (1)
develop BACT and other information and guidance for implementing
programs for sources covered by Step 1, followed by additional guidance
and information for sources covered by Step 2; (2) review and act on
information we receive regarding state adoption of GHG permitting
requirements, which may entail  narrowing of previous SIP approvals or
processing of other programmatic revisions; and (3) propose and finalize
measures to address programs with deficiencies in GHG coverage.  As the
beginning of step 2 nears, we will also begin to receive and process the
first applications for permits that will incorporate GHG requirements
(i.e., those that will be issued after January 2, 2011).  States seeking
to implement streamlining approaches will face similar competition for
permitting resources.

	These time frames and resource considerations for streamlining confirm
the approach to phase-in that we are taking in today’s rule.  First
and foremost, they make clear that it will not be possible to have
streamlining measures in place in time for either Step 1 or Step 2.
Therefore our selection of threshold for those steps is not built on
assumptions that streamlining will remove some or all of the burden
during those steps.

	Second, they make clear that, while no significant streamlining can be
in place by the time we must begin to develop the step 3 rule (i.e.,
latter half of 2011, to promulgate by July 2012, effective July 2013),
it is likely that by that time EPA and states will have had an
opportunity to gain implementation experience that could serve as the
basis for beginning to implement streamlining techniques that do not
require rulemaking or state adoption (e.g., lean and electronic
permitting).  It is also likely that we will have had an opportunity to
gather technical information – which we have already begun to gather
--for certain source and emissions unit categories that would be
necessary to support proposal of PTE or presumptive BACT approaches for
those categories.  We expect that the step 3 rulemaking will provide an
opportunity for us to use that experience and data to begin to propose
streamlining approaches that need notice and comment rulemaking.  We can
also begin to take into account any burden reductions from possible
early streamlining efforts – that is, through lean and electronic
permitting -- in the establishment of step 3.

	Third, it is clear that the potential availability of streamlining
measures does not call into question our decision today that in no event
will we broaden PSD and title V applicability to cover GHG-emitting
sources below the 50,000 tpy CO2e level prior to July 2016, as discussed
elsewhere.  EPA cannot now predict the resources that will be required
to implement PSD and title V programs for GHG-emitting sources once
various streamlining techniques are ultimately completed.  This is
uncertain not only because we need data and implementation experience
with GHG permitting during steps 1, 2, and 3 that we can apply to
estimates for small sources, but also because, as comments indicate,
there is a broad range of legal and policy issues to consider in
crafting the streamlining approaches we ultimately adopt.  We have
presented an initial assessment of options and obtained views of
commenters both supporting and opposing them, and it is the result of
these future actions, whose outcomes are uncertain at this time, that
will ultimately determine the extent to which streamlining approaches
will allow for the administration of PSD and title V programs for
numerous small sources.  Thus, while we are optimistic that we can craft
workable, common-sense solutions, we nonetheless, believe it is
important to preserve our small source exclusion until we have not only
had time to put the streamlining approaches in place, but also have had
time to assess the burdens that remain, before we bring in additional
sources below the 50,000 tpy levels.   We believe that the six-year
timeframe will require a sustained intensive effort by EPA and states to
develop, adopt, and implement streamlining techniques, and will require
EPA to then evaluate those techniques and complete a rulemaking
concerning PSD and title V applicability to small-sources based on that
evaluation.  In this manner, the six-year period will give us the
necessary time to make the best decisions about the actions we should
take beyond step 3.

While comments make clear that there are issues to be addressed, nothing
in the comments has persuaded us that we should abandon our streamlining
efforts.  To the contrary, the strong support for these efforts shown by
many commenters reinforces our intention, as stated at proposal, to move
forward with these approaches as an integral part of our phase-in
approach.  Moreover, notwithstanding the competition for GHG permitting
resources and expertise, we believe it is critical that we move forward
expeditiously.  As noted above, we are already taking a first step by
initiating permitting for larger sources, beginning January 2011, that
will begin to provide valuable implementation experience.  This
experience can be useful in allowing states to begin implementing early
streamlining measures, like lean and electronic permitting, which do not
require EPA action.  We have also already begun, and will continue,
developing data necessary to support rulemakings addressing approaches
such as PTE, presumptive BACT, and general permits. We expect to be able
to use these data to support rulemakings on these topics, as
appropriate, at about the same time as our step 3 rulemaking.  Because
of the uncertainty surrounding such approaches, we are not today
committing to finalize rules on any particular approach, but we do plan
to pursue all streamlining options as expeditiously as possible,
beginning immediately and proceeding throughout the phase-in period, and
we encourage permitting authorities to do the same.  We commit to
consider a wide array of possible streamlining measures, and we commit
to propose and take comment on, in the step 3 rulemaking, a set of those
measures that we determine are viable to pursue further.

2.   Guidance for Best Available Control Technology Determinations

The CAA requires that a PSD permit contain, among other things,
emissions limits based on the best available control technology (BACT)
for each pollutant subject to regulation under the Act emitted from the
source that triggers PSD.  42 U.S.C. § 7475(a)(4); 42 U.S.C. §
7479(3).  BACT is defined as follows:

(3) The term "best available control technology" means an emission
limitation based on the maximum degree of reduction of each pollutant
subject to regulation under this Act emitted from or which results from
any major emitting facility, which the permitting authority, on a
case-by-case basis, taking into account energy, environmental, and
economic impacts and other costs, determines is achievable for such
facility through application of production processes and available
methods, systems, and techniques, including fuel cleaning, clean fuels,
or treatment or innovative fuel combustion techniques for control of
each such pollutant. In no event shall application of "best available
control technology" result in emissions of any pollutants which will
exceed the emissions allowed by any applicable standard established
pursuant to section 111 or 112 of this Act. Emissions from any source
utilizing clean fuels, or any other means, to comply with this paragraph
shall not be allowed to increase above levels that would have been
required under this paragraph as it existed prior to enactment of the
Clean Air Act Amendments of 1990.

42 U.S.C. § 7479(3).

Thus, the BACT process is designed to determine the most effective
control strategies achievable in each instance, considering energy,
environmental, and economic impacts.  However, the case-by-case nature
of BACT, together with the range of factors and technologies that must
be considered, presents a challenge in determining BACT for newly
regulated pollutants.  When a new pollutant is regulated, the first
permit applicants and permitting authorities that are faced with
determining BACT for a new pollutant will likely need to invest more
time and resources in gathering and analyzing information necessary to
make an assessment of BACT under the statutory criteria.  Once the PSD
permitting program matures with respect to the new pollutant, successive
BACT analyses will establish precedents that can inform subsequent BACT
determinations.  While the BACT provisions clearly contemplate that the
permitting authority evaluate control strategies on a case-by-case
basis, EPA recognizes the need to develop and share policy guidance and
technical information for sources and permitting authorities as they
begin to permit sources for newly regulated pollutants, such as of GHGs.
 When applied in a practical manner, this additional EPA guidance and
technical information should reduce time and resource needs when
evaluating BACT for newly regulated pollutants.

As described in the proposed GHG Tailoring Rule, EPA intends to compile
and make available technical and background information on GHG emission
factors, control technologies and measures, and measurement and
monitoring methodologies for key GHG source categories.  We expressed
our intent to work closely with stakeholders in developing this
supporting information and to ensure this information is available in
sufficient time to assist permitting agencies in their BACT
determinations.  The proposal took comment on what other types of
support or assistance EPA can provide to initially help air pollution
control agencies with the permitting of GHGs.

Commenters on the proposed GHG Tailoring Rule generally supported EPA
providing technical information and policy guidance for sources of GHGs.
 Several commenters specifically requested guidance to clarify
GHG-related issues, such as how to compute CO2eq emissions, how to
evaluate emissions of CO2 from biomass fuel, and whether an air quality
analysis will be required for GHGs.  Additionally, commenters requested
that EPA issue “white papers” and other tools that would provide
information on a range of control technologies and measures for major
stationary source categories, such as power plants, cement kilns, glass
furnaces, and other sources.  Many of these commenters further requested
that EPA provide an opportunity for stakeholder input on the guidance,
and a few commenters insisted that permitting for sources of GHGs should
not begin prior to issuing final guidance.

Consistent with our commitment at proposal to involve all stakeholders
in our guidance development, EPA called upon the CAAAC in September
2009, to provide assistance and recommendations for what types of
guidance and technical information would be helpful.  Specifically, our
charge to the CAAAC was “… to discuss and identify the major issues
and potential barriers to implementing the PSD Program under the CAA for
greenhouse gases … [and] focus initially on the BACT requirement,
including information and guidance that would be useful for EPA to
provide concerning the technical, economic, and environmental
performance characteristics of potential BACT options.”  This charge
also requested the CAAAC to “identify and discuss approaches to enable
state and local permitting authorities to apply the BACT criteria in a
consistent, practical and efficient manner.”

At its October 6, 2009, meeting, the CAAAC established a Climate Change
Work Group, made up of 35 representatives from a variety of industries,
state and local governments, and environmental and public health
non-profit organizations, organized under CAAAC’s Permits, New Source
Review and Toxics Subcommittee.  The Work Group initially focused its
attention on the procedure for evaluating BACT and decided  that the
process and criteria for determining BACT for criteria pollutants
represented a workable and acceptable framework for GHGs.  The Work
Group also recommended a second phase, in which the Work Group would
consider member proposals regarding possible alternative or
supplementary approaches to applying the PSD program to GHG sources.

In February 2010, the CAAAC completed work on the first phase of their
effort and sent EPA a list of recommendations that highlighted areas of
the BACT determination process that are in need of technical and policy
guidance.  For more information, see the Interim Phase I Report on
Issues related to Best Available Control Technology (BACT) for
Greenhouse Gases (GHGs), February 3, 2010 that is located in the public
docket for this rulemaking and at   HYPERLINK
"http://www.epa.gov/air/caaac/climate/2010_02_InterimPhaseIReport.pdf"
http://www.epa.gov/air/caaac/climate/2010_02_InterimPhaseIReport.pdf .
In response we are working on a number of fronts to develop technical
information, guidance and training to assist states in permitting large
stationary sources of GHGs, including identifying GHG control measures
for different industries.  EPA is currently working with States on
technical information and data needs related to BACT determinations for
GHGs.  This includes developing the EPA Office of Research and
Development GHG Mitigation Strategies Database, enhancing the
RACT/BACT/LAER Clearinghouse to include GHG-specific fields, and
preparing technical information on sector-based GHG control measures.
Also, EPA is actively developing BACT policy guidance for GHGs that will
undergo notice and comment and will culminate in training courses for
State, local and tribal permitting authorities.  The results of all of
these efforts will roll out over the remainder of 2010.  EPA currently
awaits the Work Group’s recommendations from its second phase of
deliberations, which is underway as of the date of this notice.

EPA does not agree with some commenters’ suggestion that EPA should
delay permitting any sources until final BACT guidance is issued.  As
discussed in the final action on reconsideration of the Interpretive
Memo, delaying the application of BACT to enable the development of
guidance or control strategies is not consistent with the BACT
requirements.  63 FR at 17008.  Furthermore, as just described, EPA
expects such a delay to be unnecessary because EPA will soon begin
providing technical information to inform BACT decisions, and will
continue to provide additional guidance prior to the date that GHG
permitting begins.  However, even in the absence of such guidance, a
delay would not be justified under the legal doctrines of absurd results
and administrative necessity.  While implementation of the BACT
requirement during steps 1 and 2 will pose implementation challenges,
EPA has assessed the burden associated with GHG permitting with
consideration given to these challenges, and has established a phase-in
schedule that represents a manageable workload.

Thus, while BACT will remain a case-by-case assessment, as it always has
been under the PSD program, EPA is confident that this guidance
development effort will help support a smooth transition to permitting
emissions of GHGs.  Furthermore, EPA will continue to work to provide
the most updated information and support tools to allow permitting
authorities to share and access the most updated information on GHG BACT
determinations as they are made once permitting of GHGs begins.  EPA
remains committed to involving stakeholders in the upcoming efforts to
develop guidance to help to permitting authorities in making BACT
determinations for sources of GHGs.

3.    Requests for Higher Category-Specific Thresholds or Exemptions
from Applicability

Although we did not propose any categorical exemptions, many commenters
requested exemptions from major source and major modification
applicability determinations under title V and PSD for certain types of
GHG-emitting sources or certain types of GHG emissions as follows:

Source Categories.  Many also commenters requested various exemptions or
exclusions from source applicability for GHGs under both PSD and title V
permitting, either during the phase-in period or permanently, citing
anticipated burdens, societal costs, and differences in emission
characteristics.  Many non-traditional sources or source categories
(sources that have not historically been required to get permits)
requested exemptions from permitting based on GHG emissions, including
agricultural, residential, and small businesses.  In general, these
non-traditional sources sometimes, but not always cited absurd results
and administrative necessity arguments in their exemption requests.

Several commenters from sectors that consume a great deal of energy in
their industrial processes and that are subject to international
competitiveness, such as aluminum, steel, cement, glass, pulp and paper,
and other manufacturers, requested that they be exempt from permitting
under this final rule.  These commenters opine that EPA has not
carefully considered the environmental and economic consequences of this
action because if we had, we would have exempted them for several
reasons, including that other countries typically exempt similar sources
from GHG cap and trade programs because the industries are making
significant energy efficiency improvements absent GHG regulation, and
because permitting such sources may cause many facilities to move to
countries that have less regulation or no regulation for GHGs.

Other industry groups cited unique characteristics of their emissions,
or the quantities in which they are emitted, that they argued should
justify exclusion or unique thresholds. Semiconductor production
facilities asked for exemptions, arguing that combustion-related GHG
emissions are different from their GHG emissions, which result from the
use of high-GWP industrial gases, such as PFCs, with higher GWP values
that are more likely to trigger permitting requirements at relatively
low tpy values.  One lime production commenter stated that EPA could
encourage energy efficiency projects at their plants by excluding
calcination and other process emissions, arguing that these emissions
are a relatively small portion of the national inventory that will have
no material effect on air quality and global warming.  Another commenter
requested that EPA exclude emissions from poultry production (natural
bird respiration) from permitting consideration because the IPCC
excludes them from their GHG emission estimates. Representatives of the
landfill industry pointed to the relationship between current statutory
thresholds that apply to their regulated emissions, primarily
non-methane organic emissions (NMOC), and the equivalent amount of GHG
emissions this corresponds to.  They argued for a source-category
specific threshold that is at least equivalent to their current NMOC
threshold, or roughly 750,000 tpy CO2e according to their estimate.

Although the proposal for the tailoring rule did generally discuss how
the statutory requirements for major source applicability (100/250
thresholds) could be phased-in in ways that would offer relief to
traditional and non-traditional sources, such as residences, farms,
small business, and semiconductor manufacturers, it did so through the
proposed establishment of relatively high CO2e thresholds during the
early implementation period and lowering the thresholds over time as
streamlining mechanisms become available to reduce administrative
burdens.  We did not propose any permanent exemptions of any kind.
Also note that the proposal discussed energy efficiency, process
efficiency improvements, recovery and beneficial use of process gasses,
and certain raw material and product changes in the context of
short-term, low-cost means of achieving GHG emission reductions for
small-scale stationary sources, but not in the context of exemptions.

As discussed above, we are still considering whether permanent
exemptions from the statute are justified for GHG permitting based on an
absurd results theory.  However, similar to our conclusion for the
suggested biomass exclusion below, we have determined that we do not
have sufficient basis to create any of the suggested exclusions.  We did
not propose any sort of permanent exclusion based on an interpretation
of the statutory provisions of PSD or title V.  Regardless of any
arguments about the legality and advisability from a policy or economic
standpoint of such exclusions, we would need to propose a PSD and/or
title V specific legal and policy rationale that fits within the Clean
Air Act, to specify details regarding our implementation approach, and
to provide an opportunity for public comment before adopting any such
exclusion.  Therefore we are not doing so here.  We note, however, that
nothing in today’s rule forecloses the opportunities we may have to
explore such options in the future.

The remaining option for creating such exclusions in this rule is to
find that such an exclusion is necessary to avoid administrative
necessity or absurd results.  We did solicit comment on alternative
approaches to the proposed phase-in for permitting.  Some commenters
suggested that the administrative necessity or absurd results rationale
could be used to create at least temporary exclusions that would allow
more sources to escape permitting than would already be excluded under
step 1, step 2, and the small source exclusion until 2016.  We
considered each of these requests in the context of the overwhelming
permitting burdens and the options for reducing such burdens, and
ultimately decided that, given our threshold-based approach to the phase
in, it is not appropriate to also adopt such exclusions to address the
same burdens.  We have finalized steps 1 and 2 using the threshold-based
approach, which applies administrative necessity and absurd results
arguments in a way that effectively exempts all small sources during
this part of the phase-in.  The suggested exclusions alone would not
address the overwhelming permitting burdens, and the threshold-based
approach would still be necessary.  Moreover, once the threshold
approach is applied as described, we do not see that the remaining
burdens would be so overwhelming as to lead to absurd results or
administrative impossibility.   While we could have crafted specific
exemptions of the kind suggested as an alternative means of tailoring
the programs, our approach achieves the same result and does so in a way
that will be simpler to administer.   Furthermore, specifically with
respect to high GWP, gases as discussed above, we have included a
mass-based trigger that addresses comments regarding the inclusion of
those gases.  Therefore, we are not finalizing any such exclusions in
today’s rule.

Concerning the comment that we did not take appropriate economic and
environmental considerations into account for this rulemaking action, we
disagree.  The approach we finalize today for steps 1 and 2 minimizes
economic burdens by limiting permitting to the largest GHG emission
sources.  We further note that the PSD program as applied to the sources
that are covered in steps 1 and 2 contains an express requirement to
take energy, environmental, and economic considerations into account
when making control technology (i.e., BACT) decisions and accordingly
many of the concerns about control costs will be able to be accounted
for in that analysis.

Biomass Combustion/Biogenic Emissions.  Several commenters request that
EPA exempt emissions from biogenic activities or biomass combustion or
oxidation activities, including solid waste landfills, waste-to-energy
projects, fermentation processes, combustion of renewable fuels, ethanol
manufacturing, biodiesel production, and other alternative energy
production that use biomass feedstocks (e.g., crops, or trees).  For
example, commenters urged that EPA exclude emissions from biomass
combustion in determining the applicability of PSD to GHGs based on the
notion that such combustion is “carbon neutral” (i.e., that
combustion or oxidation of such materials would cause no net increase in
GHG emissions on a lifecycle basis).  Other commenters oppose the
exemption of biogenic activities because they opine that carbon
neutrality of biomass combustion is an incorrect assumption that stems
from a “critical accounting error” in the Kyoto protocols.  These
commenters oppose the exemption of biogenic/biomass activities, citing
the lack of a valid scientific basis for treating these GHG emissions
differently than other GHG emissions.

The proposed Tailoring Rule did not address this issue of exemptions for
biomass combustion or biogenic emissions.  We discussed biogenic
emissions in the context of discussing voluntary efforts underway for
emission reduction of certain high-GWP gasses but there was no
discussion of any exemptions from applicability for GHGs derived from
biogenic activities or biofuels combustion.  We are mindful of the role
that biomass or biogenic fuels and feedstocks could play in reducing
GHG, and we do not dispute the commenters’ observations that state,
federal, and international rules and policies recognize
carbon-neutrality in various ways.  However, we have determined that we
do not have sufficient basis to create an exclusion from the permitting
applicability provisions for biomass combustion or biogenic fuels and
feedstocks.  Such an exclusion alone while reducing burdens for some
sources, would not address the overwhelming permitting burdens described
above, and a threshold-based approach would still be needed.  Once we
adopt a threshold-based approach, we do not have information regarding
the administrative burden of permitting projects that specifically
involve these source types, nor did the commenters provide any that
demonstrate an overwhelming permitting burden would still exist that
justifies a temporary exclusion for biomass sources.

At the same time, we did not propose any sort of permanent exclusion
basis based on an interpretation of the statutory provisions of PSD or
title V.  Regardless of any arguments about the legality and
advisability of such an exclusion, we would need to propose a PSD and/or
title V specific legal and policy rationale and specify details
regarding our implementation approach (e.g. an approach to carbon
accounting), and would need to provide an opportunity for public comment
before adopting any such exclusion.  Therefore we are not able to
finalize such an approach here.  We note, however, that nothing in
today’s rule forecloses the opportunities we may have to explore such
options in the future.

We further note that, while we are not promulgating an applicability
exclusion for biogenic emissions and biomass fuels or feedstocks, there
is flexibility to apply the existing regulations and policies regarding
BACT in ways that take into account their lifecycle effects on GHG
concentrations.  This topic has already been explored by the CAAAC
workgroup on BACT issues related to GHGs that recently provided
recommendations to EPA [DAVE S. provide a reference to report and docket
it] While that group was unable to come to a consensus on how
biomass-based emissions should be treated, it provided us with
information that we will consider as we issue guidance on BACT.  As
previously discussed, we plan to issue BACT guidance later this year,
but are not doing so as part of this rulemaking.    This issue warrants
further exploration in that context, and we plan to fully explore it and
take action as appropriate.

Fugitive Emissions.  Numerous commenters believe that fugitive GHG
emissions should be excluded from major source determinations, citing
difficulties in measuring or estimating such emissions.  Others believe
EPA did not address fugitive emissions in the proposal and they ask for
clarification of the treatment of fugitive GHGs in applicability
determinations under PSD and title V.  Some of these commenters state
that EPA has not undertaken a rulemaking under section 302(j) for any
source category of fugitive GHGs, so they should not be included.
Several commenters representing the solid waste disposal industry
requested exemptions for fugitive emissions for landfills and
waste-to-energy projects, pointing out that current practice under PSD
is for fugitive emissions from certain landfills to not be counted
toward major source determinations.

In the proposal, EPA did not offer any specific guidance or discuss
exemptions for fugitive emissions of GHGs.  Commenters did not suggest
that a fugitive exemption would address the overwhelming permitting
burdens described above, or that it was necessary to specifically tailor
GHG applicability through the use of a fugitive emissions exclusion for
categories that would otherwise be required to include them.  We do
agree with commenters' stating that we should clarify how to count
fugitives in determining applicability under this rule.  In response, we
note that we are not finalizing any special rules for fugitive emissions
related to GHG.  Thus, EPA's rules related to the treatment of fugitives
would apply. Regarding the comment that a 302(j) rulemaking is required
before fugitive emissions may be counted, we disagree.  As we read
302(j), once EPA has established by rule that fugitive emissions are to
be counted for a specific source category, nothing in section 302(j)
requires EPA to conduct new rulemaking to allow for the counting of
additional pollutants from that category. We read 302(j) as imposing an
obligation to determine if fugitive emission generally should be counted
from a source or source category and not requiring that EPA list both
source categories and relevant pollutants. Indeed, our practice in
listing categories has not been to limit the pollutants to which the
listing applies.  Therefore, we are applying our existing rules and
policies for fugitive emissions for GHG as we would any other pollutant.

Pollution Control Projects.  Other commenters request exemptions for
pollution control projects from PSD major modification requirements,
particularly projects that increase the efficiency or thermal
performance of a unit or facility, resulting in emission reductions on a
pounds/megawatt-hour or production basis.  The current PSD rules do not
exclude pollution control projects from being considered a physical
change or change in the method of operation that would – if it
resulted in a significant net emissions increase -- constitute a major
modification, nor does case law suggest that we could adopt a permanent
exclusion in the future.  We also do not believe we should adopt an
exclusion for pollution control projects that relies solely on absurd
results or administrative necessity for reasons similar to those
described above for other requested exclusions.  Although such an
exclusion may have positive features, it would not address the
overwhelming permitting burdens that justify the tailoring approach.

4.    Transitional Issues including Requests for Grandfathering

In the tailoring rule proposal, we did not discuss or specifically ask
for comment on any provisions to address the transition from a
permitting regime that does not incorporate greenhouse gases to one that
does, such as “grandfathering” provisions or similar approaches that
would exempt previously issued permits or pending applications from
having to incorporate requirements for greenhouse gases.   We
nonetheless received several public comments that addressed a variety of
transitional issues.   One group of comments addresses situations prior
to permit issuance where a PSD or title V application is either
administratively complete or more generally being processed prior to the
trigger date for GHG permitting (“in process” applications).
Another group of comments addresses situations where a PSD or title V
permit is issued prior to the GHG trigger date and the commenters
request that the application and/or permit be exempt from any
requirements for updates related to GHGs after permit issuance.

With respect to PSD, many commenters requested that we adopt a
“grandfathering” approach to applicability to exempt projects that
have administratively complete PSD or minor NSR permit applications
pending when the GHG permitting requirements go into effect.  Several
commenters urged us to promulgate transition provisions (without
specifically using the term “grandfathering”), pointing out that we
have provided transition periods for revising pending PSD permits, in
the past, when new PSD rules were issued (e.g., in late 1970s and 1980).
 These commenters assert that GHG requirements will cause more
disruption than those previous rule changes.  Several commenters asked
that PSD applications be evaluated on the basis of the PSD requirements
effective when the application is submitted and if submitted prior to
the trigger date, then the application and permit would not need to
address GHGs.  Several commenters also asked that PSD sources with a
valid permit that commences construction within 18 months of the trigger
date not be required to seek a revised PSD permit for GHGs.  Similarly,
several commenters asked that PSD permits issued prior to the GHG
trigger date not be required to be reopened only for the purpose of
addressing GHG emissions. Additional commenters asked that we clarify
that sources or projects not be required to obtain PSD permits if they
obtained a determination that PSD did not apply (a
“non-applicability” determination) prior to the GHG trigger date.
Finally, many commenters also requested “grandfathering” for title V
so that existing title V applications and permits do not need to be
amended, revised, or resubmitted to address GHGs after they become
“subject to regulation”.   Other commenters asked that transition
provisions for title V be provided in the final action that would be
similar to those requested for PSD.

 We partially addressed transitional issues for PSD permitting in our
April 2, 2010 final action on reconsideration of the Interpretive Memo.
75 Fed. Reg. at 17021.  This action addressed the applicability of PSD
permitting requirements for greenhouse gases to pending PSD permit
applications  that were (or will be) submitted  prior to January 2, 2011
based on  emissions of pollutants other than greenhouse gases.  However,
we have not yet addressed the questions raised by public comments
concerning sources that obtain PSD permits, minor NSR permits, or
determinations that no such permits are needed prior to the step 1
period set forth in this rule.    We have also not yet addressed
questions about the applicability of PSD permitting requirements for
sources that are not currently required to submit an application for a
PSD permit but that could be required to do so in step 2 of the phase-in
established in this action.  In addition, our April 2, 2010 action did
not address transitional issues concerning the application of the title
V provisions to greenhouse gases.

a.  Transition for PSD Permit Applications Pending When Step 1 Begins

In its action on April 2, 2010, EPA explained that the Agency did not
see grounds to establish a transition provision for pending PSD permit
applications because we had determined that PSD permitting requirements
would not apply the greenhouse gases for another nine months.   We
explained that permit applications submitted prior to April 2, 2010
should in most cases be issued prior to January 2, 2011 and, thus,
effectively have a transition period of nine months to complete
processing before PSD requirements become applicable to greenhouse
gases.   We also observed that, in the case of any PSD permit
application review that cannot otherwise be completed within the next
nine months based on the requirements for pollutants other than GHGs, it
should be feasible for permitting authorities to begin incorporating GHG
considerations into permit reviews in parallel with the completion of
work on other pollutants without adding delay to permit processing.
Additional discussion of EPA’s reasons for not developing transition
provisions for PSD permit applications that are pending on January 2,
2011 are provided in the April 2, 2010 notice.  75 FR 17021-22.

For these same reasons, we continue to feel that a transition period is
not warranted to incorporate GHG requirements into any PSD permit
applications that are pending when step 1 of the permitting phase-in
begins for those sources that would otherwise need to obtain a PSD
permit based on emissions of pollutants other than greenhouse gases.
Thus, this action makes no change to the position we expressed on this
particular issue in the April 2, 2010 notice.    In this final rule on
tailoring the PSD program to address GHGs, we have determined that the
additional burden of incorporating GHG requirements into PSD permits for
the sources already required to obtain such permits is manageable in the
step 1 period.  Thus, this rule has added no additional requirements or
limitations that would justify deferring the establishment of pollution
controls for this category of GHG sources once PSD permitting
requirements are initially triggered for GHGs.

b.  PSD Permits Issued Prior to Step 1

EPA has not historically required PSD permits to be updated or reopened
after they are issued in the absence of an action by the applicant to
change the physical or operational characteristics of the source
described in the permit application.  EPA’s PSD permitting regulations
contain no provisions that address the modification or amendment of a
PSD permit or require a PSD permit to be reopened or modified on the
basis of new PSD permitting requirements that take effect after the
final permit is issued.   Since PSD permits are construction permits,
EPA has not required updates to PSD permits in the same manner as is
typically required for operating permits that incorporate a variety of
applicable requirements (such as title V permits and NDPES permits under
the Clean Water Act).  In addition, unlike operating permits, PSD
permits are not required to be renewed.   However, if construction under
a PSD permit is not commenced in a timely manner or is discontinued for
an extended period, a PSD permit may expire if an extension is not
requested or justified.  See, 40 C.F.R. 52.21(r)(2); 40 C.F.R. 124.5(g)

With respect to the application of PSD permitting requirements for GHGs
beginning on January 2, 2011, we do not see any cause to deviate from
our historical practice of not requiring PSD permits to be reopened or
amended to incorporate requirements that take effect after the permit is
issued.   Thus, we are not promulgating any new rules or requirements
pertaining to PSD permits issued prior to Step 1 of the phase-in
described in this rule.  There is no mandatory requirement to reopen a
previously issued PSD permit to incorporate GHG requirements that were
not applicable at the time the permit was issued.

A major source that obtains a PSD permit prior to January 2, 2011 will
not be required under EPA regulations to reopen or revise the PSD permit
to address greenhouse gases in order for such a source to begin or
continue construction authorized under the permit.   Our current PSD
permitting regulations provide that “[n]o new major stationary source
or major modification to which the requirements of paragraphs (j)
through (r)(5) of this section apply shall begin actual construction
without a permit that states the major stationary source or major
modification will meet those requirements.”  40 C.F.R. §
51.166(a)(7)(iii); 40 C.F.R. § 52.21(a)(2)(iii).   The term “begin
actual construction” generally means “initiation of physical onsite
construction activities on an emissions unit which are of a permanent
nature” and includes activities such as “installation of building
supports and foundations, laying underground pipework and construction
of permanent storage structures.”  40 C.F.R. § 51.166(b)(11); 40
C.F.R. § 52.21(b)(11).   A source that begins actual construction
authorized under a PSD permit prior to January 2, 2011 will not be in
violation of the prohibition described above if it continues
construction after that date.  This portion of the regulation precludes
only beginning construction without the appropriate preconstruction
permit and does not require a permit to be updated to continue actual
construction that has already begun.

Furthermore, a source that is authorized to construct under a PSD permit
but has not yet begun actual construction on January 2, 2011 may still
begin actual construction after that date without having to amend the
previously-issued PSD permit to incorporate GHG requirements.   Sections
51.166(a)(7)(iii) and 52.21(a)(2)(iii) require “a permit that states
the major stationary source or major modification will meet those
requirement,” which refers to the “requirements in paragraphs (j)
through (r)(5)” referenced earlier in those provisions.    EPA
construes this language to describe a permit that meets the requirements
of paragraph (j) through (r)(5) that are in effect at the time the
permit is issued.  Permitting and licensing decisions of regulatory
agencies must generally reflect the law in effect at the time the agency
makes a final determination on a pending application.  See Ziffrin v.
United States, 318 U.S. 73, 78 (1943); State of Alabama v. EPA, 557 F.2d
1101, 1110 (5th Cir. 1977); In re: Dominion Energy Brayton Point, LLC,
12 E.A.D. 490, 614-616 (EAB 2006); In re Phelps Dodge Corp., 10 E.A.D.
460, 478 n. 10 (EAB 2002).

  Thus, a source may begin actual construction on or after January 2,
2011 under a PSD permit that authorized construction to begin prior to
January 2, 2011 because such a permit states that the source will meet
the requirements of paragraphs (j) through (r)(5) of these regulations
(or state equivalents) that were in effect at the time the permit was
issued.   However, this would not be the case if the permit has expired
because the applicant has discontinued construction or failed to
commence construction by the necessary date.   See, 40 C.F.R.
52.21(r)(2).

This approach is consistent with EPA’s practice when the
preconstruction permitting requirements change by virtue of the
designation of an area as a nonattainment area after a PSD permit is in
issued.  In transitional guidance issued by EPA in 1991, EPA explained
that “the area designation in effect on the date of permit issuance by
the reviewing agency determines which regulations (Part C or D) apply to
that permit.”   Memorandum from John S. Seitz, Director OAQPS, New
Source Review (NSR) Program Transitional Guidance, page 6 (Mar. 11,
1991).  This memorandum explained further that “where a source
receives a PSD or other permit prior to the date the area is designated
as nonattainment, the permit remains in effect” as long as the sources
meets the conditions necessary to prevent the permit from expiring.
Id. at 6.

 This approach does not apply if the source engages in a major
modification after January 2, 2011 that is not authorized by the
previously issued permit.   Once step 1 of the phase-in begins, if the
PSD requirements for GHGs are applicable to a previously-permitted
source that engages in a major modification not covered by the permit,
such a source will need obtain a new PSD permit to authorize the
modification and that permit may need to include GHG requirements
depending on the level of increase in GHGs that results from the
modification.

c.   Additional Sources for Which PSD Applies in Step 2

In light of the terms of existing PSD regulations and the lead time
provided in this action for sources that will first become subject to
PSD permitting in Step 2, we do not believe there is presently a need to
establish transition provisions for sources that will be required to
obtain PSD permits for the first time in Step 2 of the phase-in.   As
described above, under our current PSD permitting regulations, a new
major stationary source or major modification may not begin actual
construction without a PSD permit that meets the applicable
preconstruction permitting requirements.   40 C.F.R. §
51.166(a)(7)(iii); 40 C.F.R. § 52.21(a)(2)(iii).

Since a permit must be obtained before a major source may begin actual
construction, the major source preconstruction permitting requirements
in sections 51.166 and 52.21 of the regulation do not generally apply to
sources that begins actual construction at a time when it was not a
major source required to obtain a PSD permit.  One exception, however,
is the unique circumstance when a source becomes a major source solely
by virtue of the relaxation of an enforceable limitation on the
source’s potential to emit.   40 C.F.R. §51.166(r)(2); 40 C.F.R. §
52.21(r)(4).  But absent these circumstances, PSD preconstruction
permitting requirements do not generally preclude a source from
continuing actual construction that began before the source was a source
required to obtain a PSD permit.  Thus, a source that began actual
construction under the authorization of any previously required minor
source or state construction permit is not required to meet any PSD
preconstruction permitting requirement that becomes applicable after
actual construction begins unless the source engages in a major
modification after PSD permitting requirements are applicable.
Likewise, a PSD permit is not required after a source begins actual
construction based on a valid determination (by the source or the
permitting authority) that the source need not obtain either a major PSD
permitting requirements or and minor NSR permit.   Based on these
provisions in existing regulations, EPA will not require any sources to
which PSD permitting requirements begin to apply in step 2 to obtain a
PSD permit to continue construction that actually begins before step 2
begins.

However, we will expect Phase 2 sources that begin actual construction
in phase 2 (i.e., beginning July 1, 2011) to do so only after obtaining
a PSD permit in accordance with sections 52.21, 51.166, or any
applicable state regulation that meets the requirements of section
51.166.   We recognize the potential for the triggering of step 2 to
result in a change in status where a project may legally have begun
actual construction before step 2 but did not do so and would then need
a PSD permit.  However we also note that we are providing over a year of
lead time before PSD permitting requirements become applicable to step 2
sources.  If projects would be adversely affected by this change in
status, this lead time affords an opportunity for sources planning such
projects to secure appropriate minor NSR permits (which generally take
less than a year to issue), non-applicability determinations, etc  in
time to avoid such a change in status. If a new or modified source that
would become newly subject to PSD in step 2 plans to begin actual
construction before step 2, it has more than a year to obtain the
applicable preconstruction approvals and begin actual construction.
Likewise, a step 2 source that does not anticipate the ability to begin
actual construction before step 2 begins should have enough lead time to
submit a PSD permit application and obtain the necessary permit without
significantly delaying the project further.  Therefore, we do not think
it is necessary or appropriate to promulgate a transition provision that
would exempt step 2 sources from PSD permitting requirements that will
apply based on construction that begins after step 2 takes effect.

This approach for Step 2 sources that have obtained a minor source
construction permit or non-applicability determination differs from the
approach described above for source that obtained a PSD permit prior to
Step 1.   As described above, a Step 1 source that is authorized to
begin actual construction before January 2, 2011 under a
previously-issued PSD permit may begin actual construction under that
permit after January 2, 2011 without modifying the PSD permit to address
GHGs.   However, a Step 2 source that was not required to obtain a PSD
permit before Step 2 begins would need to obtain a PSD permit addressing
GHGs if it has not yet begun actual construction prior to Step 2, even
if the source had obtained any preconstruction approvals that were