											6560-50-P

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, 70, and 71

[EPA-HQ-OAR-2009-0517; FRL- - _________]

RIN 2060-AP86

Prevention of Significant Deterioration and Title V Greenhouse Gas
Tailoring Rule

AGENCY:  Environmental Protection Agency (EPA).

ACTION:  Final ruleRule.

SUMMARY:  EPA is tailoring the applicability criteria that determine
which stationary sources and modification projects become subject to
permitting requirements for greenhouse gas (GHG) emissions under the
Prevention of Significant Deterioration (PSD) and title V programs of
the Clean Air Act (CAA or Act).  This rulemaking is necessary because
without it PSD and title V requirements would apply, as of January 2,
2011, at the 100 or 250 tons per year (tpy) levels provided under the
CAA, greatly increasing the number of required permits, imposing undue
costs on small sources, overwhelming the resources of permitting
authorities, and severely impairing the functioning of the programs. 
EPA is relieving these resource burdens by phasing in the applicability
of these programs to GHG sources, starting with the largest GHG
emitters.  This rule establishes two initial steps of the phase-in.  The
rule also commits the agency to take certain actions on future steps
addressing smaller sources, but excludes certain smaller sources from
PSD and title V permitting for GHG emissions until at least April 30,
2016.

DATES:  This action is effective on [INSERT DATE 60 DAYS FROM DATE OF
PUBLICATION IN THE FEDERAL REGISTER].

ADDRESSES:  EPA has established a docket for this rulemaking under
Docket ID No. EPA-HQ-OAR-2009-0517.  All documents in the docket are
listed in the   HYPERLINK "http://www.regulations.gov" 
www.regulations.gov  index.  Although listed in the index, some
information is not publicly available, e.g., Confidential Business
Information or other information whose disclosure is restricted by
statute.  Certain other material, such as copyrighted material, is not
placed on the Internet and will be publicly available only in hard copy.
 Publicly available docket materials are available either electronically
in   HYPERLINK "http://www.regulations.gov"  www.regulations.gov  or in
hard copy at the EPA Docket Center EPA/DC, EPA West, Room 3334, 1301
Constitution Avenue, Northwest, Washington, D.C.  The Public Reading
Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday,
excluding legal holidays.  The telephone number for the Public Reading
Room is (202) 566-1744, and the telephone number for the EPA Docket
Center is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT:  Mr. Joseph Mangino, Air Quality Policy
Division, Office of Air Quality Planning and Standards (C504-03),
Environmental Protection Agency, Research Triangle Park, NC 27711;
telephone number: (919) 541-9778; fax number: (919) 541-5509; e-mail
address:    HYPERLINK "mailto:mangino.joseph@epa.gov" 
mangino.joseph@epa.gov . 

SUPPLEMENTARY INFORMATION:  

I.  General Information

A.  Does this action apply to me?

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

Industry Group	NAICSa

Agriculture, fishing, and hunting	……………………….	

11



Mining………………………………………		

21



Utilities (electric, natural gas, other systems)
………………………………………………..	

2211, 2212, 2213



Manufacturing (food, beverages, tobacco, textiles, leather)
…………………………….	

311, 312, 313, 314, 315, 316 



Wood product, paper manufacturing
…………………………………..	

321, 322 



Petroleum and coal products manufacturing.	…………………….	

32411, 32412, 32419



Chemical manufacturing.	………………………		

3251, 3252, 3253,3254, 3255, 3256,3259



Rubber product manufacturing	…………………….	

3261, 3262



Miscellaneous chemical products
………………………………………………..	

32552, 32592, 32591, 325182, 32551



Nonmetallic mineral product manufacturing…………………….		

3271, 3272, 3273, 3274, 3279



Primary and fabricated metal manufacturing…….		

3311, 3312, 3313, 3314, 3315, 3321, 3322, 3323, 3324, 3325, 3326, 3327,
3328, 3329



Machinery manufacturing…………………….		

3331, 3332, 3333, 3334, 3335, 3336, 3339



Computer and electronic products manufacturing…………………….	


3341, 3342, 3343, 3344, 3345, 4446



Electrical equipment, appliance, and component
manufacturing…………………….		

3351, 3352, 3353, 3359



Transportation equipment manufacturing…………………….		

3361, 3362, 3363, 3364, 3365, 3366, 3366, 3369



Furniture and related product manufacturing…………………….		

3371, 3372, 3379



Miscellaneous manufacturing…………………….		

3391, 3399



Waste management and remediation…………………………		

5622, 5629



Hospitals/Nursing and residential care
facilities…………………………….		

6221, 6231, 6232,6233, 6239



Personal and laundry services………………………………….		

8122, 8123



Residential/private households…………………………….		

8141 



Non-Residential (Commercial)……………………….		

Not available.  Codes only exist for private households, construction,
and leasing/sales industries. 

a	North American Industry Classification System.

B.  How is this preamble organized?

	The information presented in this preamble is organized as follows:

Outline

I.  General Information

A.  Does this action apply to me?

B.  How is this preamble organized?

C.  Preamble Acronyms and Abbreviations

II.  Overview of the Final Rule 

III.  Background 

A.  What are GHGsgreenhouse gases and their sources?

B.  Endangerment Finding and the LDVRLight-Duty Vehicle Rule

1.  Endangerment Finding

2.  Light-Duty Vehicle Rule

C.  What are the general requirements of the PSD program?

1.  Overview of the PSD Program

2.  General Requirements for PSD

D.  What are the general requirements of the title V operating permits
program?

1.  Overview of Title V

2.  Title V Permit Requirements

E.  The Interpretive MemoMemorandum 

IV.  Summary of Final Actions  

A.  How do you define the GHG pollutant for PSD and title V purposes?

1.  GHG Pollutant Defined as the Sum-of-Six Well-Mixed GHGs

2.  What GWP values should be used for calculating CO2e?

B.  When will PSD and title V applicability begin for GHGs and emission
sources?

1.  What are the Step 1 thresholds, timing, and calculation methodology?

2.  What are the Step 2 thresholds, timing, and calculation methodology?

3.  What about Step 3?

4.  What about the proposed 6- year exclusion for smaller sources?  

5.  When and how will EPA take further action on smaller sources? 

C.  How do state, local, and tribal area programs adopt the final GHG
applicability thresholds?

D.  How do you treat GHGs for purposes of title V permit fees?

E.  Other Actions and Issues 

1.  Timing for Permit Streamlining Techniques

2.  Guidance for BACTBest Available Control Technology Determinations

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

4.  Transitional Issues Includingincluding Requests for Grandfathering

V.  What is the legal and policy rationale for the final actions? 

A.  Rationale for Our Approach to Calculating GHG Emissions for PSD and
Title V Applicability Purposes

1.  Grouping of GHGs into a Single Pollutant

2.  Identifying Which GHGs are Included in the Group

3.  Use of GWP vs. Mass-Based GHG Thresholds

4.  Determining What GWP Values Are To Beare to be Used 

5.  Use of Short Tons vs. Metric Tons 					 

B.  Rationale for Thresholds and Timing for PSD and Title V
Applicability to GHG Emissions Sources

	1.  Overview

2.  Data Concerning Costs to Sources and Administrative Burdens to
Permitting Authorities

3.  “Absurd Results,” “Administrative Necessity,” and
“One-Step-at-a-Time” Legal Doctrines

	4.  The PSD and Title V Programsprograms

5.  Application of the “Absurd results” Doctrine for the PSD Program

6.  Application of the “Absurd Results” Doctrine for the Title V
Program 

	7.  Additional Rulemaking for the PSD and Title V Programs

8.  Rationale for the Phase-in Schedule for Applying PSD and Title V to
GHG Sources

9.  “Administrative Necessity” Basis for PSD and Title V
Requirements in Tailoring Rule

	10. “One-Step-at-a-Time” Basis for Tailoring Rule 

C.  Mechanisms for Implementing and Adopting the Tailoring Approach

1.  PSD Approach:  Background and Proposal

2.  Rationale for Our Final Approach to Implementing PSD

3.  Other Mechanisms

4.  Codification of Interpretive Memo

5.  Delaying Limited Approvals and Request for Submission of Information
from States Implementing a SIP-Approved PSD Program

6.  Title V Programs

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

E.  Other Actions and Issues  

1.  Permit Streamlining Techniques

2.  Guidance for BACTBest Available Control Technology Determinations 

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

4.  Transitional Issues Including Requests for Grandfathering      

VI.  What are the economic impacts of the final rule?  

A.  What entities are affected by this final rule?

B.  What are the estimated annual benefits to sources due to regulatory
relief from the statutory requirements?

1.  What are annual estimated benefits or avoided burden costs for title
V permits? 

2.  What are annual benefits or avoided costs associated with NSR
permitting regulatory relief? 

	C.  What are the economic impacts of this rulemaking?

	D.  What are the costs of the final rule for society?

VII.  Comments on Statutory and Executive Orders Reviews 

A.  Comments on Executive Order 12866 - Regulatory Planning and Review

B.  Comments on the Paperwork Reduction Act

C.  Comments on the RFA

Regulatory Flexibility Act

D.  Comments on the Unfunded Mandates Reform Act

E.  Comments on Executive Order 13132 – Federalism

F.  Comments on Executive Order 13175 - Consultation and Coordination
with Indian Tribal Governments

G.  Comments on Executive Order 13211 - Actions That Significantly
Affect Energy Supply, Distribution, or Use

VIII.  Statutory and Executive Orders Reviews 

A.  Executive Order 12866 - Regulatory Planning and Review

B.  Paperwork Reduction Act

C.  Regulatory Flexibility Act

D.  Unfunded Mandates Reform Act

E.  Executive Order 13132 – Federalism

F.  Executive Order 13175 - Consultation and Coordination with Indian
Tribal Governments

G.  Executive Order 13045 - Protection of Children from Environmental
Health and Safety Risks

H.  Executive Order 13211 - Actions That Significantly Affect Energy
Supply, Distribution, or Use

I.  National Technology Transfer and Advancement Act

J.  Executive Order 12898 – Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations

K.  Congressional Review Act

L.  Judicial Review

IXXI.  Statutory AuthorityLanguage

C.  Preamble Acronyms and Abbreviations

	The following are abbreviations of terms used in thisthe preamble.

ANPR				Advance Notice of Proposed Rulemaking

APA				Administrative Procedure Act		

AQRVs			Air Quality Related Values

BACT				Best Available Control Technology

Btu				British thermal units

Btu/hr			British thermal units per hour

CAA or Act		Clean Air Act

CAAAC			Clean Air Act Advisory Committee

CAFECAFÉ				Corporate Average Fuel Economy

CH4				Methane

CO				Carbon Monoxide 

CO2				Carbon Dioxide

CO2e				Carbon Dioxide Equivalent

EO				Executive Order

EPA				U.S. Environmental Protection Agency

FDA				Food and Drug Administration

FIP				Federal Implementation Plan

FTEs				Full- Time Equivalents

Employees

GHG				Greenhouse Gases

GHz				Gigahertz

GWP				Global Warming Potential

HAP				Hazardous Air Pollutant

HFCs				Hydrofluorocarbons

ICR				Information Collection Request

IPCC				Intergovernmental Panel on Climate Change	

IQA				Information Quality Act

LDVR				Light- Duty Vehicle Rule

MACT				Maximum Achievable Control Technology

MCL				Maximum Contaminant Level

N2O				Nitrous Oxide

NAAQS			National Ambient Air Quality Standard

NHTSA	National Highway Traffic Safety Administration

NMOC				Nonmethane Organic Compounds			

NOx				Nitrogen Oxides

NPDES	National Pollutant Discharge Elimination System

NOx				Nitrogen Oxide

NMOC				Non-Methane Organic Emissions			

NSPS				New Source Performance Standard

NSR				New Source Review

NTAA				National Tribal Air Association

NTTAA	National Technology Transfer and Advancement Act

OMB				Office of Management and Budget

PFCs				Perfluorocarbons

PM				Paticulate Matter

PSD				Prevention of Significant Deterioration

PTE				Potential to Emit

RFA				Regulatory Flexibility Act

RIA				Regulatory Impact Analysis

RTC				Response to Comment

SBA				Small Business Administration

SBAR				Small Business Advocacy Review

SBREFA	Small Business Regulatory Enforcement Fairness Act

SF6				Sulfur Hexafluoride

SIP				State Implementation Plan

SNPR				Supplemental Notice of Proposed Rulemaking

TIP				Tribal Implementation Plan

SO2				Sulfur Dioxide

TRS				Total Reduced Sulfur

TSD				Technical Support Document

tpyTPY				Tons Per Year

UMRA	Unfunded Mandates Reform Act

UNFCCCUNFCC	United Nations Framework Convention on Climate Change

VOC				Volatile Organic Compound

II. Overview of the Final Rule 

EPA is relieving overwhelming permitting burdens that would, in the
absence of this rule, fall on permitting authorities and sources.  We
accomplish this by tailoring the applicability criteria that determine
which GHG emission sources become subject to the PSD and title V
programs of the CAA.  In particular, EPA is establishing with this
rulemaking a phase-in approach for PSD and title V applicability, and is
establishing the first two steps of the phase-in for the largest
emitters of GHGs.  We also commit to certain follow-up actions regarding
future steps beyond the first two, discussed in more detail later.  Our
legal basis for this rule is our interpretation of the PSD and title V
applicability provisions under the familiar Chevron two-step framework
for interpreting administrative statutes, taking account of three legal
doctrines, both separately and interdependently:  they are what we will
call (1i) the “absurd results” doctrine, which authorizes agencies
to apply statutory requirements differently than a literal reading would
indicate, as necessary to effectuate congressional intent and avoid
absurd results, (2ii) the “administrative necessity” doctrine, which
authorizes agencies to apply statutory requirements in a way that avoids
impossible administrative burdens; and (3iii) the
“one-step-at-a-time” doctrine, which authorizes agencies to
implement statutory requirements a step at a time.  This legal basis
justifies each of the actions we take with this rule – e.g., each of
the first two steps of the phase-in approach -- both (1i) as part of the
overall tailoring approach, and (2ii) independently of each other action
we take with this rule.  EPA also has authority for this Tailoring Rule
under CAA section 301(a)(1), which authorizes the Administrator “to
prescribe “such regulations as are necessary to carry out his
functions under [the CAA].”

For the first step of this Tailoring Rule, which will begin on January
2, 2011, PSD or title V requirements will apply to sources’ GHG
emissions only if the sources are subject to PSD or title V anyway due
to their non-GHG pollutants.  Therefore, EPA will not require sources or
modifications to evaluate whether they are subject to PSD or title V
requirements solely on account of their GHG emissions.  Specifically,
for PSD, Step 1 requires that as of January 2, 2011, the applicable
requirements of PSD, most notably, the best available control technology
(BACT) requirement, will apply to projects that increase net GHG
emissions by at least 75,000 tpy carbon dioxide equivalent (CO2e), but
only if the project also significantly increases emissions of at least
one non-GHG pollutant.  For the title V program, only existing sources
with, or new sources obtaining, title V permits for non-GHG pollutants
will be required to address GHGs during this first step.  

The second step of the Tailoring Rule, beginning on July 1, 2011, will
phase -in additional large sources of GHG emissions.  New sources as
well as existing sources not already subject to title V that emit, or
have the potential to emit, at least 100,000 tpy CO2e will become
subject to the PSD and title V requirements.  In addition, sources that
emit or have the potential to emit at least 100,000 tpy CO2e and that
undertake a modification that increases net emissions of GHGs by at
least 75,000 tpy CO2e will also be subject to PSD requirements.  For
both steps, we also note that if sources or modifications exceed these
CO2e-adjusted GHG triggers, they are not covered by permitting
requirements unless their GHG emissions also exceed the corresponding
mass-based triggers (i.e., unadjusted for CO2e.)  

EPA believes that the costs to the sources and the administrative
burdens to the permitting authorities of PSD and title V permitting will
be manageable at the levels in these initial two steps, and that it
would be administratively infeasible to subject additional sources to
PSD and title V requirements at those times.  However, we also intend to
issue a supplemental notice of proposed rulemaking (SNPR) in 2011, in
which we will propose or solicit comment on a third step of the phase-in
that would include more sources, beginning by July 1, 2013.  In the same
rulemaking, we may propose or solicit comment on a permanent exclusion
from permitting for some category of sources, based on the doctrine of
“absurd results,” within the Chevron framework.  We are establishing
an enforceable commitment that we will complete this rulemaking by July
1, 2012, which will allow for 1 year's notice before Stepstep 3 would
take effect.  

In addition, we commit to explore streamlining techniques that may well
make the permitting programs much more efficient to administer for GHGs,
and that therefore may allow their expansion to smaller sources.  We
expect that the initial streamlining techniques will take several years
to develop and implement.  

We are also including in this action a rule that no source with
emissions below 50,000 tpy CO2e, and no modification resulting in net
GHG increases of less than 50,000 tpy CO2e, will be subject to PSD or
title V permitting before at least 6 years from now, April 30, 2016. 
This is because we are able to conclude at the present time that the
administrative burdens that would accompany permitting sources below
this level will be so great that even the streamlining actions that EPA
may be able to develop and implement in the next several years, and even
with the increases in permitting resources that we can reasonably expect
the permitting authorities to acquire, it will be impossible to
administer the permit programs for these sources until at least 2016. 

Further, we are establishing an enforceable commitment that we will (1i)
complete a study by April 30, 2015, to evaluate the status of PSD and
title V permitting for GHG-emitting sources, including progress in
developing streamlining techniques; and (2ii) complete further
rulemaking based on that study by April 30, 2016, to address the
permitting of smaller sources.  That rulemaking may also consider
additional permanent exclusions based on the “absurd results”
doctrine, where applicable. 

This Tailoring Rulemaking is necessary because without it, PSD and title
V would apply to all stationary sources that emit or have the potential
to emit more than 100 or 250 tons of GHGs per year beginning on January
2, 2011.  This is the date when EPA’s recently promulgated Light- Duty
Vehicle Rule (LDVR) takes effect, imposing control requirements for the
first time on carbon dioxide (CO2) and other GHGs.  If this January 2,
2011 date were to pass without this Tailoring Rule being in effect, PSD
and title V requirements would apply at the 100/250 tpy applicability
levels provided under a literal reading of the CAA as of that date. 
From that point forward, a source owner proposing to construct any new
major source that emits at or higher than the applicability levels (and
which therefore may be referred to as a “major” source) or modify
any existing major source in a way that would increase GHG emissions
would need to obtain a permit under the PSD program that addresses these
emissions before construction or modification could begin.  Similarly,
title V would apply to a new or existing source exceeding the 100 tpy
applicability level in the Act, if the source did not already have a
title V permit.  

Under these circumstances, many small sources would be burdened by the
costs of the individualized PSD control technology requirements and
permit applications that the PSD provisions, absent streamlining,
require.  Additionally, state and local permitting authorities would be
burdened by the extraordinary number of these permit applications, which
are orders of magnitude greater than the current inventory of permits
and would vastly exceed the current administrative resources of the
permitting authorities.  Permit gridlock would result with the
permitting authorities able to issue only a tiny fraction of the permits
requested.  

These impacts – the costs to sources and administrative burdens to
permitting authorities – that would result from application of the PSD
and title V programs for GHG emissions at the statutory levels as of
January 2, 2011, are so severe that they bring the judicial doctrines of
“absurd results,” “administrative necessity,” and
“one-step-at-a-time” into the Chevron two-step analytical framework
for statutes administered by agencies.  Under the U.S. Supreme Court’s
decision in Chevron, the agency must, at Stepstep 1, determine whether
Congress’s intent as to the specific matter at issue is clear, and, if
so, the agency must give effect to that intent.  If congressional intent
is not clear, then, at Stepstep 2, the agency has discretion to fashion
an interpretation that is a reasonable construction of the statute.  

To determine congressional intent, the agency must first consider the
words of the statutory requirements, and if their literal meaning
answers the question at hand, then, in most cases, the agency must
implement those requirements by their terms.  However, under the
“absurd results” doctrine, the literal meaning of statutory
requirements should not be considered to indicate congressional intent
if that literal meaning would produce a result that is senseless or that
is otherwise inconsistent with - and especially one that
undermines undermines -- underlying congressional purpose.  In these
cases, if congressional intent for how the requirements apply to the
question at hand is clear, the agency should implement the statutory
requirements not in accordance with their literal meaning, but rather in
a manner that most closely effectuates congressional intent.  If
congressional intent is not clear, then an agency may select an
interpretation that is reasonable under the statute.  

Under the “administrative necessity” doctrine, Congress is presumed,
at Chevron Step step 1, to intend that its statutory directives to
agencies be administrable, and not to have intended to have written
statutory requirements that are impossible to administer.  Therefore,
under this doctrine, an agency may depart from statutory requirements
that, by their terms, are impossible to administer, but the agency may
depart no more than necessary to render the requirements administrable. 
Under the “one-step-at-a-time” doctrine, Congress is presumed at
Chevron Stepstep 1 to have intended to allow the agency to administer
the statutory requirements on a step-by-step basis, as appropriate, when
the agency remains on track to implement the requirements as a whole. 
Each of these doctrines supports our action separately, but the three
also are intertwined and support our action in a comprehensive manner. 

Here, we have determined, through analysis of burden and emissions data
as well as consideration of extensive public comment, that the costs to
sources and administrative burdens to permitting authorities that would
result from application of the PSD and title V programs for GHG
emissions at the statutory levels as of January 2, 2011 should be
considered “absurd results.”  Therefore, we conclude that under the
“absurd results” doctrine, Congress could not have intended that the
PSD or title V applicability provisions – in particular, the threshold
levels and timing requirements -- apply literally to GHG sources as of
that date.  

Even so, we conclude that the PSD and title V provisions and their
legislative history do indicate a clear congressional intent, under
Chevron Step 1, as to whether the two permitting programs applied to GHG
sources, and that the intent was in the affirmative, that the permitting
programs do apply to GHG sources.  Our previous regulatory action
defining the applicability provisions made this clear, and we do not
reopen this issue in this rulemaking.  Moreover, even if this
long-established regulatory position were not justifiable based on
Chevron Step 1 – on the grounds that in fact, congressional intent on
this point is not clear - then we believe that this position, that the
statutory provisions to apply PSD and title V generally to GHG sources,
was justified under Chevron step 2.

As to how to apply the PSD program to GHG sources, congressional intent,
as expressed in the various statutory provisions and statements in the
legislative history, is clear that PSD should apply at least to the
largest sources initially, at least to as many more sources as possible
and as promptly as possible over time - consistent with streamlining
actions that we intend to consider coupled with increases in permitting
authority resources --– and at least to a certain point.  This is the
approach we take in this Tailoring Rule, and because it is consistent
with congressional intent, we believe it is required under Chevron
Stepstep 1.  Even if congressional intent were not clear as to how to
apply the PSD  requirements to GHG sources, we would have authority
under Chevron Stepstep 2 to establish a reasonable interpretation that
is consistent with the PSD provisions, and we believe that the tailoring
approach so qualifies.  

As for title V, the statutory provisions and legislative history, which
of course are different than those concerning the PSD program, do not
express a clear intent as to how title V applies to GHG sources, which
leads our analysis to Chevron Stepstep 2, and here, again, we believe
that the tailoring approach is a reasonable interpretation that is
consistent with the title V provisions.  

For both PSD and title V, we intend to use the tailoring approach to
address smaller GHG sources over time, consistent with Congress’s
expectations that the programs would not impose undue costs to sources
or undue administrative burdens to permitting authorities.  However, we
cannot say at this point how close to the statutory thresholds we will
eventually reach. 

Because this rule establishes only the first two phases of the tailoring
approach, we do not find it necessary to answer these questions in this
rule, and instead we expect to resolve them through future rulemaking. 
We will remain mindful of the concerns that Congress expressed about
including small sources in either program.  We intend to consider the
issue of the applicability of title V to GHG sources without applicable
requirements (i.e., “empty permits”) in future steps of our
tailoring approach.  When we do so, we will further assess the potential
for the approach of excluding empty permits from title V to relieve
burden consistent with statutory requirements.   

In addition, because Congress can be said to have intended the PSD and
title V programs to apply to GHG sources, the Tailoring Ruletailoring
rule is also justifiable under the “administrative necessity” and
“one-step-at-a-time” doctrines.

The legal analysis just described justifies each of the actions in this
rule.  The first two steps that we promulgate in this rule, which take
effect on January 2, 2011 and July 1, 2011, constitute the most that
permitting authorities can reasonably be expected to do by those times. 
Similarly, the 50,000 tpy floor that we promulgate through at least
April 30, 2016 is reasonable because the information we have available
now shows that it constitutes the most that permitting authorities can
reasonably be expected to do by that date.  Finally, the study and two
additional rulemakings – to take effect by July 1, 2013 and April 30,
2016 - to which we commit in this rule establish a track for acquiring
additional information and for taking further steps to address the
application of PSD and title V more closely to the literal statutory
levels.  We intend to apply them as closely to those levels as is
consistent with congressional intent and administrative imperatives, in
light of the “absurd results,” “administrative necessity,” and
“one-step-at-a-time” doctrines, although, as noted previously, we
will consider in future rulemaking how closely to the statutory
thresholds we will be able to implement the PSD and title V programs as
well as what to require with respect to a potentially large number of
sources with empty title V permits. 

In this rule, we are adopting regulatory language codifying our phase-in
approach.  As we will explain, many state, local and tribal area
programs will likely be able to immediately implement our approach
without rule or statutory changes by, for example, interpreting the term
“”subject to regulation” that is part of the applicability
provisions for PSD and title V.  We ask permitting authorities to
confirm that they will follow this implementation approach for their
programs, and if they cannot, then we ask them to notify us so that we
can take appropriate follow-up action to narrow our federal approval of
their programs before GHGs become subject to regulation for PSD and
title V programs on January 2, 2011.  Narrowing our approval will ensure
that for federal purposes, GHG sources below the size thresholds we
establish in this Tailoring Rule are not obligated to hold PSD or title
V permits until the states develop and submit revised PSD and title V
programs that EPA approves, either because they adopt our tailoring
approach or because, if they continue to cover smaller GHG sources, the
states have demonstrated that they have adequate resources to administer
those programs.

The thresholds we are establishing are based on CO2e for the aggregate
sum of six greenhouse gases that constitute the pollutant that will be
subject to regulation, which we refer to 

as GHGs.  These gases are:  CO2, methane (CH4), nitrous oxide (N2O),
hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur
hexafluoride (SF6).  Thus, in this rule, we provide that PSD and title V
applicability is based on the quantity that results when the mass
emissions of each of these gases is multiplied by the Global Warming
Potential (GWP) of that gas, and then summed for all six gases. 
However, we further provide that in order for a source’s GHG emissions
to trigger PSD or title V requirements, the quantity of the GHGs must
equal or exceed both the applicability thresholds established in this
rulemaking on a CO2e basis and the statutory thresholds of 100 or 250
tpy on a mass basis.  Similarly, in order for a source to be subject to
the PSD modification requirements, the source’s net GHG emissions
increase must exceed the applicable significance level on a CO2e basis
and must also result in a net mass increase of the constituent gases
combined. 

We are adopting this rule after careful consideration of numerous public
comments.  On October 27, 2009 (74 FR 55292), EPA proposed the GHG
Tailoring Rule.  EPA held two public hearings on the proposed rule, and
received over 400,000 written public comments.  The public comment
period ended on December 28, 2009.  The comments have provided detailed
information that has helped EPA understand better the issues and
potential impacts of this rule, and the final rule described in this
preamble incorporates many of the suggestions we received.  We respond
to many of these comments in explaining our rationale for the final
rule, which is described in section V.  The final rule adopts many
elements of the proposal but differs from the proposal in several
important respects.  We proposed to apply PSD and title V to GHG sources
that emit or have the potential to emit at least 25,000 tpy CO2e, and we
proposed a PSD significance level in a range between 10,000 and 25,000
tpy CO2e, but based on consideration of the additional information we
received and our further analysis, we are finalizing the threshold
levels in the amounts and on the schedule described previously.  In
addition, the mechanism for state, local, and tribal program
implementation has been significantly changed to reflect the comments
received that we needed to develop an implementation approach that
states could adopt under state law more expeditiously.  

	The remainder of this notice describes our approach and rationale in
more detail.  Following this overview, section III of this preamble
provides background information on the nature of GHG emissions, recent
regulatory developments that affect when and how GHG emissions are
subject to stationary source permitting, and the general requirements of
the PSD and title V programs.  Section IV describes in detail the
summary of the key actions being taken in this rule, including the
determination of emissions, the thresholds and timing for the phase-in,
our approach to implementing the phase-in, and the additional future
actions we will take.  Section V provides a more detailed description of
each action, explaining the policy and legal rationale and responding to
comments received.  Section V begins with our decisions on how to
calculate the mass-based and CO2e-based emissions used in the phase-in. 
Section V then turns to our legal and policy rationale for the first two
steps of the phase-in, the 50,000 tpy floor, and the subsequent study
and rulemakings to determine whether and how smaller sources should be
subject to permitting.  This section then describes key implementation
issues including the approach to state adoption.  After describing our
plans for follow-up on title V fee programs, the section concludes by
describing permit streamlining techniques; guidance on BACT for the GHG
sources that are affected under the first two steps of the Tailoring
Rule phase-in; requests for exemptions; and transitional issues,
including grandfathering.  Finally, section VI describes the expected
impacts that will result from the phase-in approach (i.e, the narrower
application of PSD and title V requirements during the phase-in period)
and sections VII and VIII address administrative requirements.

III. Background 

A.  What are GHGs greenhouse gases and their sources?

Greenhouse gases GHGs trap the Earth’s heat that would otherwise
escape from the atmosphere into space, and form the greenhouse effect
that helps keep the Earth warm enough for life.  Greenhouse gases are
naturally present in the atmosphere and are also emitted by human
activities.  Human activities are intensifying the naturally occurring
greenhouse effect by increasing the amount of GHGs in the atmosphere,
which is changing the climate in a way that endangers human health,
society, and the natural environment.

Some GHGs, such as CO2, are emitted to the atmosphere through natural
processes as well as human activities.  Other gases, such as fluorinated
gases, are created and emitted solely through human activities.  As
previously noted, the well-mixed GHGs of concern directly emitted by
human activities include CO2, CH4, N2O, HFCs, PFCs, and SF6.  These six
GHGs will, for the purposes of this final rule, be referred to
collectively as "the six well-mixed GHGs,” or, simply, GHGs, and
together constitute the “air pollutant” upon which the GHG
thresholds in this action are based.  These six gases remain in the
atmosphere for decades to centuries where they become well-mixed
globally in the atmosphere.  When they are emitted more quickly than
natural processes can remove them from the atmosphere, their
concentrations increase, thus increasing the greenhouse effect.  The
heating effect caused by the human-induced buildup of GHGs in the
atmosphere is very likely the cause of most of the observed global
warming over the last 50 years.  A detailed explanation of greenhouse
gases, climate change and its impact on health, society, and the
environment is included in EPA’sEPA's technical support document (TSD)
for the endangerment finding final rule (Docket ID No.
EPA-HQ-OAR-2009-0472-11292).   

In the United States, the combustion of fossil fuels (e.g., coal, oil,
gas) is the largest source of CO2 emissions and accounts for 80 percent
of the total GHG emissions.  Anthropogenic CO2 emissions released from a
variety of sources, including through the use of fossil fuel combustion
and cement production from geologically stored carbon (e.g., coal, oil,
and natural gas) that is hundreds of millions of years old, as well as
anthropogenic CO2 emissions from land-use changes such as deforestation,
perturb the atmospheric concentration of CO2 and the distribution of
carbon within different reservoirs readjusts.  More than half of the
energy related emissions come from large stationary sources such as
power plants, while about a third comes from transportation.  Of the six
well-mixed GHGs, four (CO2, CH4, N2O, and HFCs) are emitted by motor
vehicles.  In the United States industrial processes (such as the
production of cement, steel, and aluminum), agriculture, forestry, other
land use, and waste management are also important sources of GHGs.  

Different GHGs have different heat-trapping capacities.  The concept of
GWP was developed to compare the heat-trapping capacity and atmospheric
lifetime of one GHG to another.  The definition of a GWP for a
particular GHG is the ratio of heat trapped by one unit mass of the GHG
to that of one unit mass of CO2 over a specified time period.  When
quantities of the different GHGs are multiplied by their GWPs, the
different GHGs can be summed and compared on a CO2e basis.  For example,
CH4 has a GWP of 21, meaning each ton of CH4 emissions would have 21
times as much impact on global warming over a 100-year time horizon as 1
ton of CO2 emissions.  Thus, on the basis of heat-trapping capability, 1
ton of CH4 would equal 21 tons of CO2e.  The GWPs of the non- CO2 GHGs
range from 21 (for CH4) up to 23,900 (for SF6).  Aggregating all GHGs on
a CO2e basis at the source level allows a facility to evaluate its total
GHG emissions contribution based on a single metric. 

B.  Endangerment Finding and the LDVRLight-Duty Vehicle Rule

1.  Endangerment Finding

On April 2, 2007, the U.S.nited States Supreme Court found that GHGs are
air pollutants under CAA section 302(g).  Massachusetts v. EPA, 549 U.S.
497 (2007).  As a result, the Supreme Court found that EPA was required
to determine, under CAA section 202(a), whether (1a) GHGs from new motor
vehicles cause or contribute to air pollution which may reasonably be
anticipated to endanger public health or welfare, or (2b) the science is
too uncertain to make a reasoned decision.  After issuing a proposal and
receiving comment, on December 7, 2009, the Administrator signed two
distinct findings regarding GHGs under CAA section 202(a):

Endangerment Finding:  The Administrator found that the current and
projected atmospheric concentrations of the mix of six long-lived and
directly emitted GHGs — —CO2, CH4, N2O, HFCs, PFCs, and SF6
(referred to as “well-mixed greenhouse gases” in the endangerment
finding) – )–are reasonably anticipated to endanger the public
health and welfare of current and future generations.

Cause or Contribute Finding:  The Administrator found that the emissions
of the single air pollutant defined as the aggregate group of six
well-mixed greenhouses gases from new motor vehicles and new motor
vehicle engines contributes to the GHG air pollution that threatens
public health and welfare.  

These findings, which were published December 15, 2009 (74 FR 66496), do
not themselves impose any requirements on industry or other entities. 
However, they were a prerequisite to finalizing the GHG standards for
light-duty vehicles, described next.  

2.  Light-Duty Vehicle Rule

The LDVR, 75 FR 25324 (May 7light-duty vehicle rule, signed on April 1,
2010), is a joint rule between EPA and the Department of
Transportation’s National Highway Traffic Safety Administration
(NHTSA) that establishes a national program consisting of new standards
for light-duty vehicles that will reduce GHGgreenhouse gas emissions and
improve fuel economy.  EPA finalized the national GHG emissions
standards under the Act, and NHTSA finalized Corporate Average Fuel
Economy (CAFE) standards under the Energy Policy and Conservation Act,
as amended.  The new standards apply to new passenger cars, light-duty
trucks, and medium-duty passenger vehicles, starting with model year
2012.  The EPA GHG standards are projected to result in an estimated
combined average emissions level of 250 grams of CO2 per mile for model
year 2016 vehicles.  The standards begin with the 2012 model year, with
standards increasing in stringency through model year 2016.  The
standards are a fleet average for each manufacturer, based on a
footprint attribute curve, meaning that the actual target for a vehicle
will vary depending on the size of the vehicle.  Under the
footprint-based standards, each manufacturer will have a GHG standard
unique to its fleet, depending on the footprints of the vehicle models
produced by that manufacturer.  A manufacturer will have separate
footprint-based standards for cars and for trucks. 

 The endangerment and contribution findings described previously require
EPA to issue standards under section 202 (a) “applicable to
emission” of the air pollutant that EPA found causes or contributes to
the air pollution that endangers public health and welfare.  The final
emissions standards satisfy this requirement for GHGs from light-duty
vehicles.  Under section 202(a), the Administrator has significant
discretion in how to structure the standards that apply to the emission
of the air pollutant at issue here, the aggregate group of six GHGs. 
EPA has the discretion under section 202(a) to adopt separate standards
for each gas, a single composite standard covering various gases, or any
combination of these.  In the LDVR, EPA finalized separate standards for
N2O and CH4, and a CO2 standard that provides for credits based on
reductions of HFCs, as the appropriate way to issue standards applicable
to emission of the single air pollutant, the aggregate group of six
GHGs.  EPA did not set any standards for PFCs or SF6, as they are not
emitted by motor vehicles. 

C.  What are the general requirements of the PSD program?

1. Overview of the PSD Program

The PSD program is a preconstruction review and permitting program
applicable to new major stationary sources and major modifications at
existing major stationary sources.  The PSD program applies in areas
that are designated “attainment” or “unclassifiable” for a
National Ambient Air Quality Standard (NAAQS).  The PSD program is
contained in part C of title I of the CAA.  The "nonattainment new
source review (NSR)" program applies in areas not in attainment of a
NAAQS or in the Ozone Transport Region and is implemented under the
requirements of part D of title I of the CAA.  Collectively, we commonly
refer to these two programs as the major NSR program.  The governing EPA
rules are contained in 40 CFR 51.165, 51.166, 52.21, 52.24, and part 51,
Appendicesappendices S and W.  There is no NAAQS for CO2 or any of the
other well-mixed GHGs, nor has EPA proposed any such NAAQS; therefore,
unless and until we take further such action, we do not anticipate that
the "nonattainment" major NSR program will apply to GHGs.

The applicability of PSD to a particular source must be determined in
advance of construction or modification and is pollutant-specific.  The
primary criterion in determining PSD applicability for a proposed source
is whether the source is a “major emitting facility,”,”, based on
its predicted potential emissions of regulated pollutants, within the
meaning of CAA section 169(1) and either constructs or undertakes a
modification.  EPA has implemented these requirements in its
regulations, which use somewhat different terminology for determining
PSD applicability, which is whether the source is a “major stationary
source” or whether the proposed project is a “major modification.”

a.  Major Stationary Source

Under PSD, a “"major stationary source”" is any source belonging to
a specified list of 28 source categories which emits or has thea
potential to emit (PTE) of 100 tpy or more of any pollutant subject to
regulation under the CAA, or any other source type which emits or has
the potential to emit PTE such pollutants in amounts equal to or greater
than 250 tpy.  We refer to these levels as the 100/250-tpy thresholds. 
A new source with a potential to emit (PTE) at or above the applicable
“major stationary source threshold”" is subject to major source NSR.
 These limits originate from section 169 of the CAA, which applies PSD
to any “major emitting facility” and defines the term to include any
source that emits or has a PTE of 100 or 250 tpy, depending on the
source category.  Note that the major source definition incorporates the
phrase “subject to regulation,” which, as described later, will
begin to include GHGs on January 2, 2011, under our interpretation of
that phrase discussed in the recent Interpretive Memo notice.  75 FR
17004, April 2, 2010. 

b.  Major Modifications

PSD also applies to existing sources that undertake a "major
modification," which occurs:  (1) when there is a physical change in, or
change in the method of operation of, a "major stationary source;" (2)
the change results in a "significant" emission increase of a pollutant
subject to regulation (equal to or above the significance level that EPA
has set for the pollutant in 40 CFR 52.21(b)(23)); and (3) there is a
“significant net emissions increase” of a pollutant subject to
regulation that is equal to or above the significance level (defined in
40 CFR 52.21(b)(23)).  Significance levels, which EPA has promulgated
for criteria pollutants and certain other pollutants, represent a de
minimis contribution to air quality problems.  When EPA has not set a
significance level for a regulated NSR pollutant, PSD applies to an
increase of the pollutant in any amount (that is, in effect, the
significance level is treated as zero).  

2.  General Requirements for PSD

This section provides a very brief summary of the main requirements of
the PSD program.  One principal requirement is that a new major source
or major modification must apply BACT, which is determined on a
case-by-case basis taking into account, among other factors, the cost
effectiveness of the control and energy and environmental impacts.  EPA
has developed a “top-down” approach for BACT review, which involves
a decision process that includes identification of all available control
technologies, elimination of technically infeasible options, ranking of
remaining options by control and cost effectiveness, and then selection
of BACT.  Under PSD, once a source is determined to be major for any
regulated NSR pollutant, a BACT review is performed for each attainment
pollutant that exceeds its PSD significance level as part of new
construction or for modification projects at the source, where there is
a significant increase and a significant net emissions increase of such
pollutant.

.

In addition to performing BACT, the source must analyze impacts on
ambient air quality to assure that no violation of any NAAQS or PSD
increments will result, and must analyze impacts on soil, vegetation,
and visibility.  In addition, sources or modifications that would impact
Class I areas (e.g., national parks) may be subject to additional
requirements to protect air quality related values (AQRVs) that have
been identified for such areas.  Under PSD, if a source’s proposed 
project may impact a Class I area, the Federal Land Manager is notified
and is responsible for evaluating a source’s projected impact on the
AQRVsAQRV’s and recommending either approval or disapproval of the
source’s permit application based on anticipated impacts.  There are
currently no NAAQS or PSD increments established for GHGs, and therefore
these PSD requirements would not apply for GHGs, even when PSD is
triggered for GHGs.  However, if PSD is triggered for a GHG emissions
source, all regulated NSR pollutants which the new source emits in
significant amounts would be subject to PSD requirements.  Therefore, if
a facility triggers review for regulated NSR pollutants that are non-GHG
pollutants for which there are established NAAQS or increments, the air
quality, additional impacts, and Class I requirements would apply to
those pollutants.

The permitting authority must provide notice of its preliminary decision
on a source's application for a PSD permit, and must provide an
opportunity for comment by the public, industry, and other interested
persons.  After considering and responding to comments, the permitting
authority must issue a final determination on the construction permit. 
Usually NSR permits are issued by state or local air pollution control
agencies, which have their own permit programs approved by EPA in their
State Implementation Plans (SIPs)SIP.  In some cases, EPA has delegated
its authority to issue PSD permits to the state or local agency.  In
other areas, EPA issues the permits under its own authority.

D. What are the general requirements of the title V operating permits
program?

1.  Overview of Title V

The operating permit requirements under title V are intended to improve
sources' compliance with other CAA requirements.  The title V program is
implemented through regulations promulgated by EPA, 40 CFR part 70, for
programs implemented by state and local agencies and tribes, and 40 CFR
part 71, for programs generally implemented by EPA. 

In summary, the title V program requires major sources (defined and
interpreted by EPA to include sources that emit or have a PTE of 100 tpy
of any pollutant subject to regulation) and certain other sources to
apply for operating permits.  Under EPA’s long-standing
interpretation, a pollutant, such as a GHG, is “subject to
regulation” when it is subject to a CAA requirement establishing
actual control of emissions.  Title V generally does not add new
pollution control requirements, but it does require that each permit
contain all pollution control requirements or “applicable
requirements” required by the CAA (e.g., New Source Performance
Standard (NSPS), and State Implementation Plan (SIP) requirements,
including PSD), and it requires that certain procedural requirements be
followed, especially with respect to compliance with these requirements.
 "Applicable requirements" for title V purposes include stationary
source requirements, but do not include mobile source requirements. 
Other procedural requirements include providing review of permits by
EPA, states, and the public, and requiring permit holders to track,
report, and annually certify their compliance status with respect to
their permit requirements.

2.  Title V Permit Requirements

This section provides a brief summary of the requirements of the title V
program that are most relevant to this action.  A source generally must
apply for a title V permit within 1 year of first becoming subject to
permitting – for new sources, this is usually within 1 year of
commencing operation.  The application must include, among other things,
identifying information, a description of emissions and other
information necessary to determine applicability of requirements and
information concerning compliance with those requirements.  The
permitting authority uses this information to develop the source's
operating permit.

Title V permits generally contain the following elements:  (1) emissions
limitations and standards to assure compliance with all applicable
requirements; (2) monitoring, recordkeeping, and reporting requirements,
including submittal of a semiannual monitoring report and prompt
reporting of deviations from permit terms; (3) fee payment; and (4) an
annual certification of certification by a responsible official.  The
detailed requirements are set forth at 40 CFR 70.6.

In addition to the permit content requirements, there are procedural
requirements that must be followed in issuing title V permits, including
(1) application completeness determination; (2) public notice and a
30-day public comment period, including an opportunity for a public
hearing, on draft permits; (3) EPA and affected state review; and (4) a
statement of the legal and factual basis of the draft permit.  The
permitting authority must take final action (issue or deny) on the
permit applications within 18 months of receipt.  EPA also has 45 days
from receipt of a proposed permit to object to its issuance, and
citizens have 60 days after that to petition EPA to object to a permit. 
Permits may also need to be revised or reopened if new requirements come
into effect during the permit terms or if the source makes changes that
conflict with, or necessitate changes to, the current permit.  Permit
revisions and re-openings follow procedural requirements which vary
depending on the nature of the necessary change to the permit.

E.  The Interpretive MemoMemorandum 

 On December 18, 2008, EPA issued a memorandum, "EPA's Interpretation of
Regulations that Determine Pollutants Covered by Federal Prevention of
Significant Deterioration (PSD) Permit Program" (known as the “Johnson
Memo” or the “PSD Interpretive Memo,” and referred to in this
preamble as the “Interpretive Memo”) that set forth EPA’s
interpretation regarding which EPA and state actions, with respect to a
previously unregulated pollutant, cause that pollutant to become
“subject to regulation” under the Act.  Whether a pollutant is
“subject to regulation” is important for the purposes of determining
whether it is covered under the federal PSD and title V permitting
programs.  The Interpretive Memo established that a pollutant is
“subject to regulation” only if it is 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 (referred to as the
“actual control interpretation”).  On February 17, 2009, EPA granted
a petition for reconsideration on the Interpretive Memo, and announced
its intent to conduct a rulemaking to allow for public comment on the
issues raised in the memorandum and on related issues.  EPA also
clarified that the Interpretive Memo would remain in effect pending
reconsideration.

On March 29, 2010, EPA signed a notice conveying its decision to
continue applying (with one limited refinement) the Interpretive
Memo’s interpretation of “subject to regulation”
(“Interpretation of Regulations that Determine Pollutants Covered by
Clean Air Act Permitting Programs”).“).  See 75 FR 17004.  EPA
concluded that the “actual control interpretation” is the most
appropriate interpretation to apply given the policy implications. 
However, we refined our interpretation in one respect: we established
that PSD permitting requirements apply to a newly regulated pollutant at
the time a regulatory requirement to control emissions of that pollutant
“takes effect” (rather than upon promulgation or the legal effective
date of the regulation containing such a requirement).  In addition,
based on the anticipated promulgation of the LDVR, we stated that the
GHG requirements of the vehicle rule would take effect on January 2,
2011, because that is the earliest date that a 2012 model year vehicle
may be introduced into commerce.  In other words, the compliance
obligation under the LDVR does not occur until a manufacturer may
introduce into commerce vehicles that are required to comply with GHG
standards, which will begin with model year 2012 and will not occur
before January 2, 2011.  We also reiterated EPA’s interpretation that
the 100 tpy major source threshold for title V is triggered only by
pollutants “subject to regulation” under the Act, and we defined and
applied that term for title V purposes in the same way that we did for
PSD purposes.  That is, we stated that a pollutant is “subject to
regulation” if it is subject to a CAA requirement establishing
“actual control of emissions;” that a pollutant is considered
“subject to regulation” for title V purposes when such a requirement
“takes effect”; and, based on the anticipated promulgation of the
LDVR, that the GHG requirements of the vehicle rule would take effect on
January 2, 2011.

On April 1, 2010, we finalized the LDVR as anticipated, confirming that
manufacturer certification can occur no earlier than January 2, 2011. 
Thus, under the terms of the final notice for the Interpretive Memo,
GHGs become subject to regulation on that date, and PSD and title V
program requirements will also begin to apply upon that date.  		 

IV. Summary of Final Actions  

This section describes the specific actions we are taking in this final
rule.  It describes the overall tailoring approach for NSR and title V
applicability, the steps we are taking to put it into place, and future
actions that we commit to take.  The next section, V, provides the legal
and policy rationale for these actions.  In that section, we provide a
description of our rationale and response to comments for each action,
presented in the same order as we describe the actions here.

A. How do you define the GHG pollutant for PSD and title V purposes?

1.  GHG Pollutant Defined as the Sum-of-Six Well-Mixed GHGs

We are identifying the air pollutant for purposes of PSD and title V
applicability to be the pollutant subject to regulation, which is the
air pollutant for GHGs identified in EPA’s LDVR, as well as EPA’s
endangerment and contribution findings..  In the LDVR, EPA set emissions
standards under section 202(a) that were “applicable to emission” of
a single air pollutant defined as the aggregate sum of six
GHGsgreenhouse gases.  The six GHGs, which are well-mixed gases in the
atmosphere, are CO2, CH4, N2O, HFCs, PFCs, and SF6.  Earlier, EPA made
the contribution finding for this single air pollutant.  

Furthermore, as proposed, we are using an emissions threshold that
allows all six constituent gases to be evaluated using a common metric
– CO2e.  Thus, to determine applicability, a source's GHG emissions
are calculated on a CO2e basis by multiplying the mass emissions of any
of the six GHGs that the source emits by that gas’s GWP and then
summing the CO2e for each GHG emitted by the source.  This sum,
expressed in terms of tpy CO2e, is then compared to the applicable
CO2e-based permitting threshold to determine whether the source is
subject to PSD and title V requirements.  

In addition, because we are implementing this phase-in through the term
“subject to regulation,” the regulatory language is structured such
that the statutory mass-based thresholds (i.e., for PSD, 100/250 tpy for
new construction and zero tpytoy for modifications at a major stationary
source, and for title V, 100 tpy) continue to apply.  As a result,
stationary source apply and stationary sources or modifications that do
not meet these thresholds are not subject to permitting requirements. 
While, technically evaluation of the mass-based thresholds is the second
step in the applicability analysis, from a practical standpoint most
sources are likely to treat this as an initial screen, so that if they
would not trigger PSD or title V on a mass basis, they would not proceed
to evaluate emissions on a CO2e basis.  We have treated evaluation of
mass-based thresholds as the initial step in our descriptions.  As
applicable, a source would evaluate these mass-based thresholds by
summing each of the six GHGs it emits on a mass basis (i.e., before
applying GWP).  We expect that it will be very rare for a new stationary
source or modification to trigger permitting based on CO2e and not also
trigger based on mass alone.  

 Determining permit program applicability for the GHG “air
pollutant” by using the sum-of-six GHGs is based on EPA’s
interpretation that the PSD and title V requirements apply to each
“air pollutant” that is “subject to regulation” under another
provision of the CAA.  As discussed previously, the final LDVR for GHGs
makes it clear that the emissions standards EPA adopted are standards
applicable to emission of the single air pollutant defined as the
aggregate mix of these six well-mixed GHGsgreenhouse gases.  See LDVR,
May 7April 1, 2010, 75 FR 25398-99, section I Preamble, II.A.2.c., pp
153-4., and 40 CFR 86.1818-12.  For reasons explained in more detail in
section V, we have determined it is legally required, and preferable
from a policy standpoint, for EPA to use the same definition of the air
pollutant for permitting purposes as that used in the rule that
establishes the control requirements for the pollutant.  We also believe
there are implementation advantages for applying PSD and title V in this
way.  Thus, this rule establishes that a stationary source will use the
group of six constituent gases for permitting applicability, rather than
treating each gas individually.  Similarly, you will include all six
constituent gases because that is how the air pollutant is defined, even
though motor vehicles only emit four of the six. 

2.  What GWP values should be used for calculating CO2e?

We are requiring that wherever you perform an emissions calculations
involving CO2e for the purposes of determining the applicability of PSD
or title V requirements, you use the GWP values codified in the EPA’s
GHG mandatory GHG reporting rule.  This approach will assure consistency
between the values required for calculations under the mandatory
reporting rule and for PSD or title V.  In addition, because any changes
to Table A-1 of the mandatory GHG reporting rule regulatory text must go
through a rulemaking, this approach will assure that the values used for
the permitting programs will reflect the latest values adopted for usage
by EPA after notice and comment.

B.  When will PSD and title V applicability begin for GHGs and emission
sources?

Overview

	In this action, we establish the first two phases of our phase-in
approach, which we refer to as Stepssteps 1 and 2.  We also commit to a
subsequent rulemaking in which we will propose or solicit comment on
establishing a further phase-in, that is, a Stepstep 3, that would apply
PSD and title V to additional sources, effective July 1, 2013, and on
which we commit to take final action, as supported by the record, by no
later than July 1, 2012.

We also commit to undertaking an assessment of sources’ and permitting
authorities’ progress in implementing PSD and title V for GHG sources,
and to complete this assessment by 2015.  We further commit to
completing another round of rulemaking addressing smaller sources by
April 30, 2016.  Our action in that rulemaking would address permitting
requirements for smaller sources, taking into account the remaining
problems concerning costs to sources and burdens to permitting
authorities.  Finally, we determine in this action that we will apply
PSD or title V requirements to sources that emit GHGs, or that conduct
modifications that result in increases in emissions of GHGs, in amounts
of less than 50,000 tpy CO2e any earlier than when we take the required
further action to address smaller sources by April 30, 2016. 

Through this process, we will implement the phase-in approach by
applying PSD and title V at threshold levels that are as close to the
statutory levels as possible, and do so as quickly as possible, at least
to a certain point.  The level and timing of the thresholds that we
promulgate in future actions will be based on our assessment of the
resulting costs to sources and burdens to permitting authorities, and
that, in turn, will depend on such variables as our progress in
developing streamlining approaches and on permitting authorities’
progress in developing permitting expertise and acquiring more
resources.  At this time, we cannot foresee exactly when or in what
manner those developments will occur.  Therefore, we cannot promulgate
more components of the tailoring approach beyond what we promulgate in
this action.  We can say only that we may continue the phase-in process
with further rulemaking after 2016.  Alternatively, we may make a
definitive determination in one of the future rulemaking actions that,
under the “absurd results” doctrine, PSD or title V applies only to
certain GHG sources, and does not apply to the remaining GHG sources,
and with that rulemaking, bring this tailoring process to a close.

1.  What are the Step 1 thresholds, timing, and calculation methodology?

a. PSD Permitting

Step 1 of the Tailoring Rule phase-in will begin on January 2, 2011. 
With respect to the PSD program, GHG sources will become subject to PSD
for their GHG emissions if they undergo PSD permitting anyway, either
for new construction or for modification projects, based on emissions of
non-GHG pollutants, in which case they will be subject to the PSD
requirements for GHG if they increase GHG emissions by 75,000 tpy CO2e
or more.  Under this step, only these sources, which we refer to as
“anyway” PSD sources, will become subject to PSD; no sources will
become major sources for PSD purposes or be treated as undertaking
modifications that trigger PSD based solely on their GHG emissions.  As
a result, no additional PSD permitting actions will be necessary solely
due to GHG emissions.  However, existing or newly-constructed sources
that are determined to be major sources based on non-GHG emissions are
required to conduct a BACT review for their GHG emissions (from new
construction) or emissions increases (from modifications), if they are
subject to PSD due to their non-GHG emissions from construction or
modification actions and each of the following conditions is met: 

(1)	  The GHG emissions (or net emissions increase) due to the new
construction (or modification) project, calculated as the sum of the six
well-mixed GHGs on a mass basis (no GWPs applied) exceed a value of 0
tpy; and

(2)	  The GHG emissions (or net emissions increase) due to the new
construction (or modification) project, calculated as the sum of the six
well-mixed GHGs on a CO2e basis (GWPs applied) equal or exceed a value
of 75,000 tpy CO2e.  

The purpose of the first condition is to determine whether the GHG
emissions or net emissions increase has resulted in an “increase in
the amount” of an air pollutant as required by the Act.  Because EPA
has not defined a mass-based regulatory significance level for GHGs,
that level, in effect, is treated as zero.  See 40 CFR 52.21 (b)(23)(ii)
and 51.166 (b)(23)(ii).  In practice, this means any amount of new
emissions or an emission increase will exceed the mass-based limit.  We
are not, at this time, establishing a significance level based on mass
emissions, and instead we are establishing one based on CO2e that
addresses permitting burdens.  The zero mass-based amount applies, but
only as an initial screen to exclude sources or changes that have no
mass increase of GHGs.  

b.  Title V Permitting

Under Stepstep 1, only sources required to have title V permits for
non-GHG pollutants (i.e., “anyway” title V sources) will be required
to address GHGs as part of their title V permitting.  That is, no
sources will become major for title V based solely on their GHG
emissions.  Note further, however, that the 75,000 tpy CO2e limit does
not apply to title V, so that anyway title V sources must apply any
title V requirements to their GHG emissions.  Sources with title V
permits must address GHG requirements when they apply for, renew, or
revise their permits.  These requirements will include any GHG
applicable requirements (e.g., GHG BACT requirements from a PSD process)
and associated monitoring, record-keeping and reporting.  When a permit
application is otherwise required, they will also need to identify GHG
emissions and other information in that application to the extent
required under 40 CFR 70.5(c) and 71.5(c), including information
necessary to determine applicable requirements.

2.  What are the Step 2 thresholds, timing, and calculation methodology?

a.  PSD Permitting

Step 2 will begin July 1, 2011.  Under Stepstep 2, anyway PSD sources -
that is, sources already subject to PSD based on non-GHGs and covered
under Stepstep 1 previously -- will remain subject to PSD.  In addition,
sources with the potential to emit 100,000 tpy CO2e or more of GHG will
be considered major sources for PSD permitting purposes (provided that
they also emit GHGs or some other regulated NSR pollutant above the
100/250 tpy (mass based) statutory thresholds.  Additionally, any
physical change or change in the method of operation at a major source
(including one that is only major due to GHGs) resulting in a net GHG
emissions increase of 75,000 tpy CO2e or more will be subject to PSD
review and requirements with respect to GHGs (provided that it also
results in an increase of GHG emissions on a mass basis).   

  Specifically, for purposes of determining whether a GHG emission
source, resulting from either new undertaking construction or a physical
or operational change at an existing source, is considered a major
source under PSD, both of the following conditions must be met:

(1) The GHG emission source,  A newly constructed source which is not
major for another pollutant, emits or has the potential to emit GHG in
amounts that equal or exceed the following, calculated as the sum-of-six
well-mixed GHGs on a mass basis (no GWPs applied):

100 tpy for sources in any of the 28 major emitting facility source
categories listed under PSD, or 

250 tpy for any other stationary source.   

(2)	The GHG emission  A newly constructed source emits or has the
potential to emit GHGs in amounts that equal or exceed 100,000 tpy CO2e
basis.

For determining whether a modification project at a major stationary
source is subject to PSD review, both of the following conditions must
be met:

(1)  The net GHG emissions increase resulting from the project,
calculated as the sum of-six well-mixed GHGs on a mass basis (no GWPs
applied) equals or exceeds 0 tpy.    

2)  The net GHG emissions increase resulting from the project,
calculated as the sum-of-six well-mixed GHGs on a mass basis (no GWPs
applied) equals or exceeds 0 tpy.    

(2)	The net GHG emissions increase resulting from the project,
calculated as the sum-of-six well-mixed GHGs on a CO2e basis (GWPs
applied) equals or exceeds 75,000 tpy CO2e.  

The purpose of the first condition in both of these determinations
previously is to confirm whether the GHG emissions or emissions increase
have exceeded, on a mass-basis, the statutory major source thresholds
(where the source is not otherwise major) and mass-based statutory
significance level for GHGs, which, as noted previously, is 0 tpy.  See
40 CFR 52.21 (b)(23)(ii) and 51.166 (b)(23)(ii).  

As an example of how the mass-based test would apply, consider a
modification project that results in a 5 tpy increase of GHG emissions
on a mass basis, associated with a high-GWP GHG gas (for example, SF6,
with a GWP value of 23,900), but also results in a 100 tpy reduction in
CO2 emissions (assume no other contemporaneous increases or decreases of
GHG).  In this example, there would be a net decrease of GHG emissions
on a mass basis (5 tpy – 100 tpy = -95 tpy).  Because there is no
mass-based increase of GHG, this project does not trigger PSD, despite
the fact that the net GWP-adjusted emissions increase of SF6 in this
example would equal 119,500 tpy of CO2e and the project would thus
exceed 75,000 tpy CO2e.

b.  Title V Permitting

Under Stepstep 2, “anyway” title V sources - that is, sources
already subject to title V based on non-GHGs and that are covered under
Stepstep 1 previously -- will continue to be subject to title V.  In
addition, GHG emission sources that equal or exceed the 100,000 tpy CO2e
threshold will be required to obtain a title V permit if they do not
already have one.  It is important to note that the requirement to
obtain a title V permit will not, by itself, result in the triggering of
additional substantive requirements for control of GHG.  Rather, these
new title V permits will simply incorporate whatever applicable CAA
requirements, if any, apply to the source being permitted.  Both of
theThe following conditions need to be met in order for title V to apply
under Stepstep 2 to a GHG emission source:.

(1)	An existing or newly constructedFor determining whether a GHG
emission source is subject to permitting under title V:

1)  An existing or newly constructed source, emits or has the potential
to emit GHGs in amounts that equal or exceed 100 tpy calculated as the
sum of the six well-mixed GHGs on a mass basis (no GWPs applied).  

(2)	  An existing or newly constructed source, emits or has the
potential to emit GHGs in amounts that equal or exceed 100,000 tpy
calculated as the sum of the six well-mixed GHGs on a CO2e basis (GWPs
applied).

3.   What about Step 3?

In this rule, EPA establishes an enforceable commitment to complete
another rulemaking no later than July 1, 2012, in which we will propose
or solicit comment on a Stepstep 3 of the phase-in and may also consider
other approaches that may result in the permanent exclusion of a
category of sources from PSD or title V requirements, under the Chevron
framework, taking account of the “absurd results” doctrine.

Consistent with our phase-in approach, it is important for us to
consider whether, at some point during the implementation of Stepstep 2,
it will become possible to administer GHG permitting programs for
additional sources.  For example, if EPA is able to promulgate measures
that streamline programs to at least some extent, if permitting
authorities increase their resources, or if implementation experience
and more seasoned staff results in more effective use of scarce
permitting resources, then we expect that we will be able to phase -in
the application of PSD and title V to more sources by establishing
Stepstep 3.  We do not have enough information now to establish a final
Stepstep 3, particularly because there will be significant transition
occurring in the GHG permitting programs during Stepssteps 1 and 2. 
However, we believe that it will be possible to develop a record on
which to base Stepstep 3 sometime soon after we begin to implement
Stepstep 2.  

Therefore, we plan to propose a rule in which we solicit comment on or
propose lower thresholds for PSD and title V applicability, and we
establish an enforceable commitment to finalize a rule in which we
address those matters by July 1, 2012.  In order to provide a year for
permitting authorities and sources to prepare for any additional GHG
permitting action in Step 3, we will establish that Step 3 would take
effect on July 1, 2013.  We also commit to explore, between now and the
Stepstep 3 proposal, a wide range of streamlining options.  In the
proposal, we will take comment on streamlining approaches we think may
be viable (except to the extent we will have already issued guidance
documents concerning streamlining approaches), and we will address those
options in the final rule. 

In addition, as part of the Stepstep 3 action, we may solicit comment on
a permanent exclusion of certain sources from PSD, title V or both,
based on an “absurd results” rationale.  For example, we may make a
final determination that under the “absurd results” doctrine, PSD
and/or title V do not apply to a set of GHG sources that, although above
the statutory thresholds for those programs, are too small and
relatively inconsequential in terms of GHG contribution.  Another type
of such exclusion for the title V program could be for sources that
would otherwise be required to obtain an “empty permit,” that is,
for example, one that would not contain any applicable requirements
because there are none that apply to the source.  If we  promulgate a
permanent exclusion, we may conclude that by that time, we will have
brought into the PSD and title V programs the full set of sources that
would be consistent with congressional intent (or, if congressional
intent on that point is unclear, with a reasonable policy consistent
with statutory requirements)), and, under those circumstances, we would
find that such a rule brings the tailoring process to a close.  The
application of the “absurd results” rationale for a permanent
exclusion is discussed in more detail in section V.B., later in this
preamble.

4.  What about the proposed 6- year exclusion for smaller sources?  

The tailoring proposal contemplated at least a 6-year exclusion from
permitting for small sources.  This proposed exclusion was based on the
overwhelming numbers of permitting actions at small sources and the need
for time for permitting authorities to secure resources, hire and train
staff, and gain experience with GHG permitting for new types of sources
and technologies.  It was also based on the time needed for EPA to
develop, and for states to adopt, streamlining measures to reduce the
permitting burden (e.g., concerning PTE, presumptive BACT, or general
permits).  We therefore proposed such an exclusion, and proposed that it
would last 6 years – 5 years to complete a required study evaluating
permitting burden and assessing the effect of streamlining measures or
techniques in reducing this burden, plus an additional year to complete
a final rulemaking that would phase in additional sources as appropriate
based on the study.  

	We are finalizing the 6-year exclusion, and for reasons described
later, are establishing that in no event will sources below 50,000 tpy
CO2e be subject to PSD or title V permitting during the 6-year period,
nor will modifications be subject to PSD unless they increase emissions
by 50,000 tpy CO2e or more.  The exclusion will last until we take the
action described later to address smaller sources, which is required by
April 30, 2016.  The exclusion provides certainty that, before this
date, EPA will not act to cover sources and modifications below these
thresholds, including during the required Stepstep 3 rulemaking that
will occur in 2012.  In effect, this means that Stepstep 3 will
establish a major source threshold and significance level no lower than
50,000 tpy CO2e.  This does not necessarily mean we will cover sources
below this level on April 30, 2016.  It simply means that the provision
we are adopting would assure that EPA does not cover such sources any
sooner than that.

5.  When and how will EPA take further action on smaller sources? 

As we proposed, we are establishing an enforceable commitment to act
within 5 years to complete a study projecting the administrative burdens
that remain for small sources after permitting authorities have had time
to secure resources, hire and train staff, and gain experience with GHG
permitting for new types of sources and technologies, and after EPA has
had time to develop (and states have had time to adopt) streamlining
measures to reduce the permitting burden for such sources.  We will use
the results of this study to serve as the basis for an additional
rulemaking that would take further action to address small sources. 
Similar to the enforceable commitment to act on Step step 3, we are
making an enforceable commitment to complete this rulemaking by April
30, 2016.

We cannot predict at this time what form that final action will take. 
It could function as a Stepstep 4, bringing in additional sources based
on, for example, streamlining actions, increased permitting authority
resources, and experienced and more efficient permitting staff; and it
could further indicate that we intend to follow-up with a Stepstep 5 to
bring in more sources.  Alternatively, it could also function as a final
step excluding certain sources permanently based on our application of
the Chevron framework, taking account of the “absurd results”
doctrine, and subjecting the remaining sources to permitting.  However,
whatever final action we take would explain any necessary changes to the
Stepstep 3 thresholds and would supersede the 6-year exclusion for
sources and modifications below 50,000 tpy CO2e.

C.  How do state, local and tribal area programs adopt the final GHG
applicability thresholds?

We are finalizing our proposed approach to change the definition of
“major stationary source” in the PSD implementing regulations, and
the “major source” definition in the title V implementing
regulations to tailor the application of these permitting programs to
GHG emissions.  We are also finalizing finalize a significance level for
GHG emissions for purposes of defining a major modification under the
PSD program, and add an exclusion from PSD and title V permitting for
GHG emissions, until we complete a rulemaking required by April 30,
2016, for any sources that are not already subject to PSD and title V
permitting and that emit less than 50,000 tpy of CO2e.

	As explained earlier, we are adopting thresholds that phase in the
applicability of GHG permitting over a specified time period.  In
adopting regulatory changes to implement these thresholds, we follow an
approach that is substantively the same as the approach proposed, but
takes a different form for purposes of revisions to our PSD and title V
regulations.  Specifically, in this final rule, for our regulations, in
conjunction with the definitions of “major stationary source” and
“major modification” (for PSD) and “major source” (for title V),
we are adopting a definition of explicitly codifying the term “subject
to regulation.”  Moreover, we are defining codifying an interpretation
of this term so that GHG emissions from sources above the threshold are
treated as subject to regulation, and therefore the sources that emit
them are subject to PSD and title V.  We are not finalizing the approach
we proposed, which was to revise the numerical thresholds in the
definitions so that GHG sources would have a higher threshold.  Although
we are defining codifying these changes to the term “subject to
regulation,” we recognize that from a substantive standpoint, our
tailoring approach entails interpreting the definitions of “major
emitting facility,” “major modification,” and “major source”
to phase -in the applicability of PSD and title V, as applicable, to GHG
sources, and it makes no difference whether we interpret those
definitions through a definition of the term “subject to
regulation,” revising the numerical thresholds, or revising other
terms in those definitions.  Accordingly, our action should be
understood as interpreting any one of those terms.

We are adopting definitions ofchoosing the term “subject to
regulation” to implementinterpret and codify the tailoring approach
because that will 

facilitate rapid adoption and implementation of the final rules by
states.  Under this approach, states may not need to undertake a
regulatory or legislative action before implementing the finl rule. 
These states would be able to establish their interpretations of the
term interpretation of “subject to regulation” used in existing
state rules before January 2, 2011, which is the date that the LDVR and
permitting requirements would take effect, and thereby exempt sources
below the threshold from PSD and title V as a matter of both federal and
state law.  We are also codifying in this definition EPA interpretations
discussedfinalizing this definition consistent with our statements in
our recent action “Reconsideration of Interpretation of Regulations
that Determine Pollutants Covered by Clean Air Act Permitting
Programs” (75 FR 17704) to provide a complete picture of the
meaningbetter inform readers of our existing interpretation of this
phrase as it applies to all air pollutants.  States may not need to
undertake a regulatory or legislative action before implementing the
final rule.    

Because we are finalizingfinalize the rule in a manner that will allow
most states to rapidly adopt and implement the final rule, and because
our recent action on the Interpretive Memo allowed for a longer
transition time than we anticipated at proposal, we are delaying final
action on our proposal to issue limited approvals for SIP-approved PSD
programs and part 70 operating permit programs.  Instead, we are
requesting that states submit information to the appropriate EPA
Regional Administrator by [INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION
IN THE FEDERAL REGISTER] so that we may determine whether it is still
necessary to finalize any of our proposed limited approvals for any
SIP-approved PSD and part 70 title V state programs.  In that letter,
states should explain whether they will apply the meaningadopt EPA’s
regulatory interpretation of the term “subject to regulation”
established by EPA in this action in implementing both their PSD and
part 70 title V permitting programs, and if so, whether the state
intends to do soadopt the interpretation without undertaking a
regulatory or legislative process.  If a state must revise its statutes
or regulations to implement this rulethe interpretation, we ask that
itstates to provide an estimate of the time to adopt final rules in its
letter to the Regional Administrator.  If a state chooses not to apply
the approach reflected in this ruleadopt our interpretation, the letter
should address whether the state has alternative authority to implement
the final rule’s 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 carried out
permitting at thresholds lower than those in the final rules.  For any
state that is unable or unwilling to applyadopt the permitting
thresholds in the final rules, and otherwise is unable to demonstrate
adequate personnel and funding, or alternate authority to permit GHG
emissions sources consistent with the final rules, EPA will move forward
with finalizing a limited approval of the state’s permitting program. 
By the same token, if we do not receive a letter from a state in
response to this request by [INSERT DATE 60 DAYS AFTER DATE OF
PUBLICATION IN THE FEDERAL REGISTERPROMULGATION], we will be obliged to
move forward with finalizing a narrowing of our approval of the existing
SIP or title V program.

We also ask any state that currently lacks authority to issue PSD or
title V permits to any GHG emissions sources to notify the EPA Regional
Administrator by letter as to whether the state intends to undertake
rulemaking to revise its rules consistent with these applicability
thresholds.  For any state that lacks the ability to issue PSD or title
V permits for GHG emissions sources consistent with the final rule, we
intend to undertake a separate action to call for revisions to these
programs.  We also intend to move quickly to impose a Federal
Implementation Plan (FIP) for PSD through 40 CFR 52.21, and use our
federal title V authority to ensure that GHG sources will be permitted
consistent with the final rules.  Our request for information from
states is discussed further in section V.C.

D.  How do you treat GHGs for purposes of title V permit fees?

We are not amending the title V regulations for fees at this time,
including any of the provisions specifying the presumptive minimum fee. 
We are also not, at this time, calling for each state, local or tribal
program to submit new fee adequacy demonstrations as a result of
increased GHG permitting workload during Steps steps 1 and 2.  However,
as described in section VI.D the statutory and regulatory requirement to
collect fees sufficient to cover all reasonable (direct and indirect)
costs required to develop and administer title V programs still applies.
 Therefore, we are recommending that each program review its resource
needs for GHG-emitting sources and determine if the existing fee
approaches will be adequate.  If those approaches will not be adequate,
we suggest that state, local and tribal agencies 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 will
closely monitor approved title V programs during implementation of 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.  In developing alternative approaches, we note the value of
approaches that do not require a per-ton fee for GHG and therefore do
not require a GHG inventory to develop.  Finally, we offer to work with
permitting authorities that request our assistance with developing fee
approaches.

E.  Other Actions and Issues 

This section describes other actions we intend to take in the future
related to GHG permitting in addition to the actions that we are
promulgating with this final rule.  This section also responds to
commenters’ suggestions that we undertake certain additional actions
in this rule, which we decline to do.

1.  Timing for Permit Streamlining Techniques

As described at proposal, we intend to develop a series of streamlining
approaches as an integral part of our phase-in approach.  The approaches
we described at proposal included:  (1) defining PTE for various source
categories, (2) establishing emission limits for various source
categories that constitute presumptive BACT, (3) establishing procedures
for use of general permits and permits-by-rule, (4) establishing
procedures for electronic permitting, and (5) applying lean techniques
to establish more efficient permitting processes.  Taken as a whole,
these techniques have the potential to obviate the applicability of PSD
and title V requirements for some GHG-emitting sources; promote more
efficient treatment of GHG-emitting sources that will already be subject
to PSD and title V; and allow the expeditious expansion of PSD and title
V applicability to more GHG-emitting sources while protecting those
sources and the permitting authorities from undue expenses.  

As a result, we fully intend to move forward expeditiously with
developing streamlining approaches.  However, for reasons discussed in
section V.E, we do not expect to develop and implement any of these
approaches before Stepstep 2 begins.  Moreover, we generally expect that
each of the first three – which are the most far-reaching -- will take
several years to implement because we will need to undertake notice and
comment rulemaking to develop them, and then the permitting authorities
will need to adopt them through the appropriate state or local
processes.  We commit to explore a wide range of possible approaches
before the Stepstep 3 rulemaking, and, in that rulemaking, to propose
those that we think may be viable once we have had time to gather and
review key supporting data, and once the states and we have key
implementation experience that can inform our thinking.  Because the
streamlining approaches generally carry uncertainty - as demonstrated by
comments we received raising legal and policy concerns, as discussed
later, that we will have to address -- we cannot commit with this action
to adopt any streamlining actions in particular, nor to adopting them on
any particular schedule.  However, we intend to pursue streamlining
options as expeditiously as possible, beginning immediately and
proceeding throughout the phase-in period, and we encourage permitting
authorities to do the same.

2.  Guidance for BACTBest Available Control Technology Determinations

Through this final rule we are not amending our regulations or issuing
guidance on BACT for GHGs.  As described in our proposal, we recognize
the need to develop and issue technical and policy guidance for
permitting of GHGs, and we plan to accomplish it through a separate
effort that will involve stakeholder input.  This effort is already
underway; in addition to comments EPA received on the proposed Tailoring
Rule related to GHG BACT guidance and information needs, EPA received a
suite of recommendations from the Clean Air Act Advisory Committee
(CAAAC) to which EPA is actively responding.  This includes technical
guidance and database tools that EPA anticipates issuing by June 2010,
and policy guidance that will be issued by the end of 2010.  Thus, this
important information will be available to support permitting agencies
in their BACT determinations at the time that the GHGs become a
regulated NSR pollutant, once the LDVRlight-duty vehicle rule takes
effect in January 2011.  EPA is confident that these measures will help
support a smooth transition to permitting emissions of GHGs.

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

  EPA has decided not to provide exemptions from applicability
determinations (major source and major modification) under title V and
PSD for certain GHG emission sources, emission activities, or types of
emissions at this time.  Commenters requested several applicability
exemptions with respect to GHGs from, for example, agricultural sources,
residential sources, small businesses, energy-intensive industrial
processes (e.g., aluminum, steel, cement, glass, and pulp and paper
manufacturers), lime production, semiconductor production, poultry
production, solid waste landfills, biomass combustion/biogenic
emissions, fugitive emissions, and pollution control projects.  For
reasons explained in section VI.E, we have decided to address the need
for tailoring through a uniform threshold-based approach, rather than
through a collection of various specific exclusions.  

4.  Transitional Issues Includingincluding Requests for Grandfathering

For reasons explained in section V.E, EPA has determined that
transitional issues for pending applications and permitted sources are
adequately addressed by existing requirements and the amount of lead
time provided before permitting requirements apply to GHGs under this
rule and the March 29, 2010 final action regarding the Interpretive
memo.  This rule does not contain any additional exemptions or
grandfathering provisions addressing the transition to PSD and title V
permitting for GHGs.  

We are not promulgating an exemption for PSD permit applications that
are pending when Stepstep 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 GHGsgreenhouse gases.  Any PSD
permits issued to such Stepstep 1 sources on or after January 2,
20112010 will need to address GHGs.  This action makes no change to the
position we expressed on this issue on April 2, 2010.    

 	Final PSD permits issued before January 2, 2011 need not be reopened
or amended to incorporate requirements for GHGs that take effect after
the permit is issued.  A source that is authorized to construct under a
PSD permit but has not yet begun actual construction on January 2, 2011
may begin actual construction after that date without having to amend
the previously-issued PSD permit to incorporate GHG requirements,
provided the permit has not expired.   

Sources that are not subject to PSD permitting requirements until Step 2
need not obtain a PSD permit addressing GHGs in order to continue any
actual construction that begins before July 1, 2011, when such a source
was not a major stationary source required to obtain a PSD permit. 
However, StepPhase 2 sources that begin actual construction in Stepphase
2 may do so only after obtaining a PSD permit.   

The title V permitting regulations already include a robust set of
provisions to address the incorporation of new applicable requirements
and other transitional considerations.  A title V source applying for
the first time must submit its permit application within 12 months after
the source becomes subject to the operating permit program or an earlier
time at the discretion of the permitting authority.  Where a source is
required to obtain a PSD permit, the source must apply for a title V
permit or permit revision within 12 months of commencing operation or on
or before such earlier date as the permitting authority may establish. 
Where additional applicable requirements become applicable to a source
after it submits its permit application, but prior to release of a draft
permit, the source is obligated to supplement its application. 
Permitting authorities may also ask for additional information during
the processing of an application.  In addition, where a source that
already has a title V permit becomes subject to additional applicable
requirements, the permitting authority is required to reopen the permit
to add those applicable requirements if the permit term has 3 or more
years remaining and the applicable requirements will be in effect prior
to the date the permit is due to expire.  

V.  What is the legal and policy rationale for the final actions? 

In this section, we describe the legal and policy rationale for our
action, including our rationale for the following:  (1A) our approach to
calculating GHG emissions for PSD and title V applicability purposes,
(2B) our approach to establishing the thresholds and timing of PSD and
title V applicability to GHG emissions sources; (3C) how state, local,
and tribal area programs adopt the final GHG applicability thresholds;
(4D) treatment of GHGs for title V permit fees; (5E) future activities,
including streamlining actions.  We present the rationale description in
the following five subsections later, corresponding to the basic
presentation of the approach in section IV.

A.   Rationale for Our Approach to Calculating GHG Emissions for PSD and
Title V Applicability Purposes

1.   Grouping of GHGs into a Single Pollutant

	In this section, we explain our treatment of the air pollutant at issue
for purposes of PSD and title V, such that sources that emit that
pollutant in the requisite quantities become subject to PSD and/or title
V requirements.  We explain our rationale for treating the GHG air
pollutant as a combined group of six GHGsgreenhouse gases instead of six
separate air pollutants defined by each individual GHGgreenhouse gas,
and our rationale for including all six of the GHGs in that group.  We
also define the GHG metric to use for comparison to the applicability
thresholds.   

	We proposed to identify the air pollutant as the aggregate group of the
six GHGs that comprise the GHG pollutant, and to use a GHG metric for
the applicability thresholds based on CO2e.  The summed CO2e emissions
would then be compared to the applicable permitting threshold to
determine whether the source is subject to PSD and title V requirements.
 Historically, the PSD and title V regulatory provisions do not, in the
first instance, define the “air pollutant” to which they apply, but
rather rely for the definition of the pollutant on a cross-reference to
the regulatory provision under another part of the Act that establishes
the emission standards or limits for that pollutant that in turn causes
the pollutant to be subject to regulation under PSD and title V
permitting.  As an example, the pollutant “‘total reduced
sulfur”’ (TRS) is a pollutant comprised of the sum of multiple
compounds that was originally defined under the NSPS, subpartSubpart BB,
Standards of Performance for Kraft Pulp Mills, which then caused it to
be subject to regulation under the PSD program.  The actual compounds
that define the pollutant TRS are identified in the NSPS.  The PSD
program regulations did not introduce its own independent definition of
TRS, but instead relied on the definition as contained in the Kraft Pulp
Mills NSPS. 

However, at the time of our proposal, the endangerment and cause or
contribute findings had not been completed and the LDVR for GHGs had not
been finalized.  Thus, there was no final agency action defining the
“air pollutant” consisting of GHGs to be considered “subject to
regulation.””.  Absent a definition of “greenhouse gases” under
another regulatory provision that we could cross-reference, we proposed
to define “greenhouse gases” for permitting purposes as “the
single air pollutant that is comprised of the group of six GHGs, as
proposed in the [CAA] section 202(a) endangerment and contribution
findings.”  74 FR 55,329, col. 1.  The six well-mixed GHGs identified
in the proposed contribution finding were: CO2, CH4, N2O, SF6, HFCs, and
PFCs.   

 In the proposal, we further recognized that the LDVR for GHGs, as it
was proposed, would result in reductions of only four of the gases, not
all six, because only four are emitted by vehicles.  However, we
concluded that if the LDVR were finalized as proposed, then the air
pollutant for purposes of PSD and title V applicability would be a
single air pollutant that is the aggregate mix of the group of six GHGs
because –

[t]hese six GHGs as a class comprise the air pollutant that is the
subject of the endangerment finding and companion contribution finding
and constitute the air pollutant that is regulated by the light-duty
vehicle rule through measures that address the components of that air
pollutant that are emitted from the mobile sources.  Thus, although the
CAA section 202(a) proposal establishes controls only with respect to
four GHGs, as a legal matter, the proposal covers the entire set of GHGs
that as a class are the single “air pollutant” in the proposed
endangerment and contribution findings.

74 FR 55,329 col. 1. 

 We also solicited comment on whether we should identify the GHG metric
in a different way, such as addressing each GHG constituent compound
individually or including (whether individually or as a group) only
those four GHG constituent compounds for which reductions would occur
through the emission standards or limits proposed in the LDVR. 

A minority of the comments on our proposal addressed this issue.  Some
commenters supported combining the individual GHGs as one pollutant for
purposes of determining permitting applicability, and stated that it is
not uncommon for EPA to recognize “collective”‘collective’ air
pollutants comprised of many individual compounds based upon shared
threats to health and welfare, including such EPA-created group
pollutants as sulfur oxides, nitrogen oxides, volatile organic compounds
(VOCs), and particulate matter (PM).   

On the other hand, a significant number of commenters also raised
concerns about grouping the individual GHGs into one metric.  Some of
these commenters argued that grouping GHGs is not appropriate because
GHGs are not like other air pollutants that are comprised of numerous
substances of concern (e.g., VOCs and PM), individual GHGs do not
interact or combine to create a pollutant of concern, and EPA has not
established a “GHG”‘GHG’ NAAQS that supports the definition of
the pollutant as a group.  Some were concerned that regulating the GHGs
as a group would increase the likelihood that a source will trigger
permitting requirements, adding that this is unnecessary and would
conflict with the “absurd results” and “administrative
necessity” doctrines because it would lead to larger numbers of
sources becoming subject to permitting.  Some commenters opposing
grouping suggested that we should explore regulating each of the GHG
pollutants on an individual mass basis rather than collectively because
in their view, it is reasonable and feasible to regulate and control
emissions of each of the listed pollutants, other than CO2carbon
dioxide, at the 100/250 tpy thresholds, or less if deemed necessary, in
accordance with the established mechanisms of the Act and doing so would
lead to a better environmental result.  Finally, some commenters argued
that disaggregating the pollutants would also allow for more appropriate
technology review.

	After considering these comments, and taking into account other related
actions that have occurred since proposal, we have determined that PSD
and title V permitting program requirements will apply, as proposed, to
the “single air pollutant that is comprised of the group of six
GHGs.”  74 FR 55,329, col. 1.  We believe that this approach is both
compelled by the statute and reflects the preferable policy approach.  

As more fully discussed elsewhere in this rulemaking, the PSD
requirements apply to a “major emitting facility” that undertakes
construction or “modification.”  CAA sections section 165(a), 169
(2)(C).  The term “major emitting facility” is defined as, in
general, a source that emits 100 or 250 tons of “any air pollutant,”
CAA section 169(1), and, similarly, the term “modification” is
defined as a physical or operational change that results in the
increased or new emissions of “any air pollutant.”  CAA sections
169(2)(C), 111(a)(4).  Through regulation, we have interpreted the term
“any air pollutant,” as found in both the terms “major emitting
facility” and “modification,” more narrowly to mean any
“regulated NSR pollutant,” and we further define this term to
include any pollutant that is “subject to regulation under the Act.”
 40 CFR 52.21(b)(50)(iv), 52.21.(b)(2).  

Similarly, as discussed elsewhere, the title V requirements apply to a
“major source,” which is defined, in general, as any source that
emits at least 100 tpy of “any air pollutant.”  CAA sections§§
502(a), 501(2)(B), 302(j).  EPA has interpreted the term “any air
pollutant” narrowly so that applies only with respect to air
pollutants that are subject to regulation under the CAA.  Memorandum
from Lydia N. Wegman, Deputy Director, Office of Air Quality Planning
and Standards, U.S. EPA, “Definition of Regulated Air Pollutant for
Purposes of Title V” (Apr. 26, 1993).  

Based on these provisions, the key issue for present purposes in
determining whether a source is subject to PSD (because it qualifies as
a major emitting facility that undertakes construction or modification)
or title V is whether the pollutant or pollutants that the source emits
comprise the “air pollutant” that is “subject to regulation”
under the Act.  

The phrase “subject to regulation under the Act,” by its terms,
identifies the air pollutant that is subject to PSD and title V as the
same air pollutant that is identified in the regulatory action under
another provision of the Act.  The term is a simple cross-reference.  It
carries no implication that EPA, in identifying the pollutant to which
PSD or title V apply, may redefine the pollutant that is regulated
elsewhere in the Act.  Whatever the pollutant is that is regulated
elsewhere, it is that pollutant to which PSD and title V apply.  

Since the time of our proposal, we have finalized both the contribution
finding and the LDVR for GHGs.  The final LDVR for GHGs specifies, in
the rule’s applicability provisions, the air pollutant subject to
control as the aggregate group of the six 

GHGs, including CO2, CH4, N2O, SF6, HFCs, and PFCs.   Because it is
this pollutant that is regulated under the LDVR, it is this pollutant to
which PSD and title V apply.  Specifically, the applicability provision
in the LDVR provides a clear reference to the definition of the single
pollutant comprised of the aggregate group of the six well-mixed GHGs,
which makes clear PSD and title V applicability depends on the same
sum-of-six GHG construct.  We must follow this construct of the
aggregate group of the six gases and do not have discretion to interpret
the GHG “‘air pollutant”’ differently for the purposes of PSD or
title V.  

This construct of the pollutant as the aggregate group of the six gases
is also consistent with the definition of the air pollutant in the final
contribution finding for GHGs [see 74 FR 66496, 66499, 66536-7 (December
15, 2009)].  There, the Administrator defined the air pollutant as the
“aggregate group of the same six … greenhouse gases,” 74 FR
66536), and these well-mixed GHGsgreenhouse gases are defined to include
CO2, CH4, N2O, SF6, HFCs, and PFCs.  

Moreover, even if we had discretion to identify the GHGs air pollutant
differently in the permitting programs than in the LDVR, we believe it
is reasonable to identify the GHGs air pollutant through the sum-of-six
construct for the same reasons why we adopted that definition in the
contribution finding and for additional reasons noted below specific to
the permit programs.  The term “air pollutant” is defined under CAA
section 302(g) as “any air pollution agent or combination of such
agents, including any physical, chemical, biological, radioactive …
substance or matter which is emitted into or otherwise enters the
ambient air.”  Under this definition, EPA has broad discretion to
identify an air pollutant, including, as appropriate, treating a
combination of air pollutant agents as a single air pollutant.  Here, we
think that the six well-mixed gases are appropriately combined into a
single air pollutant because, as noted in the contribution findings,
they share several important attributes:  Each of the six gases: -- 

Is directly emitted (and is not formed by secondary processes in the
atmosphere);

Is long-lived in the atmosphere after it is emitted; 

Is sufficiently long-lived that it becomes “well-mixed,” which means
that its concentration is essentially uniform in the atmosphere (as
opposed to having significant local/regional variation); and 

Has well understood atmospheric properties (e.g., radiative forcing).

See 74 FR 66516-66518.

In addition, treating the six GHGs greenhouse gases as a single air
pollutant is consistent with the actions of international scientific
bodies.  For example, the Intergovernmental Panel on Climate Change
(IPCC) considers in various reports how the six gases drive
human-induced climate change and how that affects health, society, and
the environment.  Similarly, the United Nations Framework Convention on
Climate Change (UNFCCC) requires reporting of these six gases and the
commitments under the UNFCCC and Kyoto Protocol are based on the
combined emissions of these six gases.  Finally, as discussed later, it
is standard practice to compute the “carbon dioxide (CO2)
equivalency” of aggregate emissions using GWP.  

We disagree with commenters who argued that grouping all six GHGs is not
appropriate because GHGs are not like other air pollutants that are
comprised of numerous substances of concern (e.g., VOCs and PM).  First,
as noted previously, we are following the approach to a single air
pollutant comprised of the aggregate of the six GHGsgreenhouse gases
initially adopted in the contribution finding and followed in the LDVR. 
Many of these same comments have already been addressed in the
contribution finding and Responseresponse to Comment (RTC)comments
document for that action, and those responses apply equally here.  

In addition to the reasons described in the endangerment and
contribution findings, there are CAA permitting programmatic and policy
advantages to using the sum-of-six construct for the GHG air pollutant
for PSD and title V applicability purposes.  We believe now, as we did
at proposal, that the benefits in using the cumulative group of GHGs
outweigh any implementation advantages to using an individual-GHG-based
metric.  The advantages to sum-of-six definition include that it may: --
(1) allow significantly more flexibility to sources for designing and
implementing control strategies that maximize reductions across multiple
GHGs and would also likely align better with possible future regulations
that allow for such flexibility; (2) more effectively support possible
future offsets or trading mechanisms that involve different source
categories and different compositions of GHG emissions;  and (3) could
better accommodate and harmonize with future regulations because it
establishes one class of pollutants that includes individual components
that may, in turn, become subject to specific emission standards under
future regulatory efforts.  

We disagree with commenters who believe that aggregating the GHGs under
one GHG metric for permitting applicability purposes would lead to an
excessive amount of source permitting activity.  This is because the
phase-in approach addresses overwhelming permitting burdens associated
with permitting of GHGsgreenhouse gases.  It does so by designing our
applicability thresholds to allow for a manageable amount of new
permitting actions based on the emissions from sources using the
sum-of-six metric.  If we based applicability on individual gases,
(assuming, again, that we had authority to deviate from the definition
of “air pollutant” as used in the LDVR), we would still need to
determine what level of permitting is manageable and appropriate based
on thresholds on an individual gas basis and would expect that the final
rule would result in the same levels of remaining burden.  Accordingly,
unless the permitting program were being implemented at the statutory
thresholds, the effect of a decision to aggregate or not aggregate would
not reduce workload; rather, it would simply shift work from permitting
facilities that trigger based on combined GHGs to those that trigger
based on individual GHGs.  Although we acknowledge that this may affect
applicability for a particular source, we disagree with the
commentcommenter that doing so would conflict with our conclusions based
on the “absurd results” or “administrative necessity” doctrines.
 By using a consolidated and weighted measurement, we are able to direct
the limited administrative resources to those new sources and
modifications with the greatest impact on GHG emissions. 

We also believe that the additional flexibility resulting from the
sum-of-six GHG metric will provide substantially more opportunities for
sources to address emission increases of GHGs than they would have had
under an individual gas based metric, and, thereby, possibly reduce
their permitting burden through multi-gas mitigation strategies.  We
disagree with the comment that isolating BACT review on sources that
emit a single GHG necessarily leads to better environmental results than
it would for sources that undergo a combined review for all six gases. 
To the contrary, given that Congress built in considerations of energy,
environmental, and economic impacts into the BACT requirement, we think
that allowing consideration of those factors across six gases will
likely result in decisions that more appropriately account for those
impacts at the source.

2.  Identifying Which GHGs are Included in the Group

As discussed previously, we proposed to include the combination of six
well-mixed GHGs as the air pollutant that triggers PSD and title V
applicability:  CO2, CH4, N2O, SF6, HFCs, and PFCs.  Some commenters
supported including all six.  They cite the proposed contribution
findings that identify the pollutant through the sum-of-six construct,
and they emphasize that EPA, in order to protect the public, has to
control all the GHGs greenhouse gases it has regulated and reduce the
overall impact of the mix of six GHGsgreenhouse gases.

However, a substantial number of commenters, mainly from industry
sectors who also disagree with grouping the GHGs together, contend that
only the constituent gases that are actually subject to controls under
the LDVR should be included in determining applicability under the
Tailoring Rule.  Some of these commenters believe that only the three
compounds (CO2, CH4, N2O) for which the LDVR contains emissions
standards or caps should be considered in the GHG metric for permitting,
while others would also add HFCs (which are included in a credit
flexibility arrangement under the LDVR) for a total of four GHGs.  These
commenters argued that PSD is not triggered for all six GHGs by the LDVR
because under the proposed PSD interpretation in the Interpretive
Memo“EPA’s Interpretation of Regulations that Determine Pollutants
Covered by Federal Prevention of Significant Deterioration (PSD) Permit
Program”, actual emission controls under the Act are required to
trigger PSD obligations for a given pollutant.  They also argue that
including all six would conflict with EPA’s rationale for the
Tailoring Rule by leading to larger numbers of sources subject to
permitting, thereby increasing the harm that EPA says it wants to avoid.
 They further assert that the EPA cannot exercise its discretion to
widen the scope of PSD and title V applicability to six GHGs when it is
relying on the judicial doctrines of “absurd results” and
“administrative necessity” to narrow PSD and title V applicability. 
They explain that in their view, those doctrines apply only when EPA has
taken all steps possible to narrow the scope of PSD and title V and
thereby avoid the administrative problems that force it to rely on those
doctrines.

There were a few comments on whether to include specific gases as part
of the sum-of-six grouping.  Several commenters representing sectors
that have significant SF6 usage specifically argue that SF6 should not
be included as a GHG, at least at this time, because there are no known
SF6 controls, it is not clear how PTE would be calculated from such
facilities, and EPA has not addressed the economic burden that
regulation of these facilities would create.  A solid waste industry
commenter asserts that the Tailoring Rule should confirm that CH4 and
N2O will not be regulated under PSD or title V because these pollutants
are only emitted in miniscule amounts from automobiles.  

	We disagree with commenters who suggest that because the LDVR actually
reduces only four of the six GHGs, EPA may apply PSD and title V to only
those four GHGs.  It is true that the LDVR standard for the single air
pollutant that is comprised of the aggregate of six GHGs consists of
individual standards for only four particular constituents of the single
air pollutant – which are emissions limits or caps for three GHGs
(CO2, CH4, and N2O) and an emission crediting option for one GHG (HFCs)
– but this does not dictate that only those four compounds are subject
to regulation for permitting purposes.  Although the LDVR results in
reductions only with respect to four specific GHGs, as a legal matter
the LDVR standard covers the entire set of GHGs that as a class are the
single “air pollutant” in the contribution finding.  Similar to our
rationale for addressing the group of six GHGs as one pollutant for PSD
and title V applicability purposes, we must adhere to the definition of
applicability, cited previously, in the final LDVR for GHGs and include
CO2, CH4, N2O, SF6, HFCs, and PFCs.  We do not have discretion to select
only a subset of these gases in defining our GHG threshold metric for
the permitting applicability purposes.  See LDVR, May 7April 1, 2010, 75
FR 25398-99, section I Preamble, II.A.2.c., pp 153-4 (discussing EPA’s
exercise of discretion under section 202(a) in setting emissions
standards applicable to emission of the single air pollutant).  [April
1, 2010 Preamble, II.A.2.c, pp 153-4.]  

For the same reasons, we disagree that this approach is inconsistent
with the Agency’s final action in “EPA’s Interpretation of
Regulations that Determine Pollutants Covered by Federal Prevention of
Significant Deterioration (PSD) Permit Program.”  While it is the case
that only four constituent gases are reduced by the LDVR, the “‘air
pollutant” that is controlled, and thus “subject to regulation,”
is the group of six, and it is this “air pollutant” to which PSD and
title V apply.   

We also disagree with commenters who suggested that including all six
GHGs in determining permitting applicability would conflict with our
“absurd results” and “administrative necessity” rationale for
the phase-in periods and applicability thresholds for GHGs.  Even if we
did have discretion to identify the air pollutant for PSD and title V
purposes as consisting of only four of the six well-mixed GHGs, we do
not believe that doing so would have any meaningful impact on the
administrative burdens that are at the heart of our reliance on the
“absurb results” and “administrative necessity” doctrines.  The
number of additional permitting actions and amount of additional
permitting burden resulting from including all six GHGs, rather than
four, is minimal.  This is because the administrative burden of GHG
permitting is dominated by CO2 and CH4 emission sources.  For example,
with a major source threshold set at 100,000 tpy CO2e, the combined
population of sources that would be major for N2O, HFCs, PFCs, and SF6
accounts for fewer than two percent of the GHG sources that would remain
covered.	

For similar reasons, we disagree with commenters who specifically
suggest SF6 emissions should not be included in the applicability metric
for GHGs.  As we have stated earlier in this section, our selection of
the GHG metric is driven by the definition of the “air pollutant” as
defined in the LDVR, and in consideration of the final GHG endangerment
finding.  SF6 is specifically included as one of the “well-mixed
greenhouse gases” in the definition of air pollutant in the
contribution finding, and is included in the definition of the air
pollutant in the LDVR for which that rule is applicable.  We do not
believe we have the discretion to define the “air pollutant”
differently for PSD and title V applicability purposes than the
definition of the “air pollutant” that is regulated elsewhere.  In
any event, including SF6 emissions based on the thresholds finalized in
this rulemaking does not add an excessive administrative burden for
permitting authorities.  Based on our threshold evaluation study, we
estimate that less than 40 sources of SF6 nationwide would exceed the
100,000 tpy CO2e threshold.  Furthermore, SF6 is a high GWP gas and, as
discussed elsewhere, we have included a mass-based trigger for high GWP
gases that will likely have the effect of further reducing this count.  

For the same reasons, we disagree with the commenters who suggest we
include black carbon and other short-lived climate forcers to the list
of GHGs, and well as commenters asking for an exclusion of CH4 and N2O. 
The definition of the air pollutant, as cited in the LDVR, includes CH4
and N2O and does not include black carbon or other short-lived gases.

3.  Use of GWP vs. Mass-Basedmass-based GHG Thresholdsthresholds

For the reasons discussed previously, we are determining permit program
applicability based on the sum-of-six well-mixed gases that comprise the
GHG air pollutant.  This section discusses our use of both the CO2e
metric and mass emissions of the GHGs for applicability purposes.  

Under our proposal, a source’s emissions of all six GHGs would be
combined into a single metric by multiplying the mass of each individual
GHG (in tpy) by its GWP value, and summing these products to determine
the total emissions of the GHG pollutant in tpy CO2e.  We received
comments on this aspect of the proposed metric.  Several commenters
explicitly support the use of GWP and the CO2e metric for GHG emissions.
 These commenters believe EPA has the authority to select an appropriate
metric to measure GHGs in the PSD program, and policy considerations
support the choice of GWP.  Some of them note that GWP is a widely-used
metric which employs internationally-recognized conversion factors to
compare GHGs based upon their climate properties, and some add that
states and local areas that have climate action plans for GHG reductions
use CO2e.  Some of these commenters believe this metric will ensure a
standard measure across all permitting agencies and will lead to a more
effective system for permitting authorities and create more
opportunities to reduce emissions over the full class of GHGs, rather
than focusing on reducing individual GHGs.

On the other hand, some commenters oppose the use of GWP and CO2e,
believing that thresholds should be based on individual mass-based
emissions for each GHG.  Some of these commenters felt that EPA has no
discretion to ignore the metric for regulation established by Congress
for PSD in section 169 of the Act.  Some commenters were also concerned
that the use of CO2e will complicate the implementation of BACT because
sources that trigger PSD will be required to install BACT for each
regulated pollutant, not for CO2e.  As a result, a source that exceeds
the threshold primarily due to its CO2 emissions would be forced to
install BACT for all other individual GHGs, regardless of how minor
those other emissions may be.  Finally, a commenter was concerned that
use of GWP would complicate implementation because GWP values can
sometimes change.

In our proposal preamble discussion of GHG metric, EPA also raised the
possibility of including a limitation in the metric to address the
prospect (expected to occur only rarely) that high-GWP gases could be
emitted in quantities less than statutory thresholds for PSD and title V
but nevertheless exceed the proposed thresholds in terms of CO2e.  Most
commenters on this subject support a dual threshold under which a source
would be subject to title V or PSD only if its GHG emissions exceeded
both the statutory thresholds on an actual tonnage basis and the
tailored thresholds on a CO2e basis.  Commenters supporting this
approach felt that it would be unlawful to apply PSD when GHGs are below
the statutory thresholds, or when there is not a net emissions increase.
 Others added that the complexity of accounting for emissions according
to both mass and GWP should be manageable and is not a reason to ignore
the role of mass–based emission rates in determining the applicability
of PSD requirements.  Additionally, one commenter observed that a dual
threshold is consistent with phasing in the Tailoring Rule and is an
effective way to address the current uncertainty surrounding how to
measure high-GWP gases such as SF6.  In contrast, a few commenters
stated they do not support a dual threshold, primarily on the grounds
that there is no benefit to the added complexity.

After considering these comments, we have decided to adopt applicability
thresholds in the final rule based on a CO2e metric for the sum-of-six
well-mixed gases, and also to adopt an additional mass-based threshold
for the sum-of-six gases as discussed in the proposal.  First, as
discussed in the previous section, we have explained why the appropriate
pollutant for PSD purposes is the single pollutant GHG, which is
composed of the six well-mixed gasses.  Regarding the CO2e metric, we
continue to believe there are a number of advantages, as laid out in the
proposal, to a CO2e measure that would not be available if we used only
a mass-based metric.  These include:  (1) a CO2e metric, by
incorporating the GWP values, best addresses the relevant environmental
endpoint, which is radiative forcing of the GHGs emitted; (2) when
combined with a sum-of-six gases approach, the CO2e metric best allows
for consideration of their combined effects when sources emit any one or
combination of the six well-mixed GHGs; (3) a cumulative CO2e metric is
consistent with the metric used in the mandatory GHG reporting rule and
other related rules and guidelines; and (4) a CO2e metric allows more
flexibility for designing and implementing control strategies that
maximize reductions across multiple GHGs.  We recognize the tension
between the mass-based metric in the statute and the CO2e-based metric
we are adopting in this rule, but as discussed later, we will address
this by also retaining the mass-based metric.  Moreover, given our need
to tailor our approach to covering sources of GHGs, we believe that the
considerations driving our choice to also use a CO2e-based metric are
appropriate for defining the phase-in and allow for permitting resources
to be directed at those sources and modifications that have the greatest
impact on radiative forcing of the GHGs emitted.  

We recognize the concern of commenters who stated that we cannot ignore
the statutory thresholds based on the mass-based emissions of an air
pollutant as described under CAA section 169(1).  As we mentioned in the
proposal, because both the PSD and title V statutory thresholds are
expressed on a mass basis (—i.e., tons of a pollutant with no
weighting values applied) —we were concerned from a legal standpoint
that the metric proposed (CO2e) could have the effect of subjecting to
PSD or title V requirements a source whose emissions fall below the
statutory threshold limits on a strictly mass basis, but whose
CO2e-based emissions exceed the CO2e thresholds we establish under the
Tailoring Rule.  As an example, in rare instances it is possible that a
source may emit only a non-CO2 GHG in very small amounts, on a mass
basis, but one that carries a very large GWP.  In this case, it is
possible that the source may emit the GHG in amounts that fall below the
PSD and/or title V statutory applicability threshold (100 or 250 tpy, as
applicable) on a mass basis, but exceed the 100,000 CO2e PSD and title V
applicability thresholds for Step step 2 finalized in this action. 
Under these circumstances, without a mass-based threshold, the source
would trigger PSD and title V for its CO2e emissions even though its GHG
mass emissions would not, in fact, exceed the statutory triggers.  

Upon review of the comments pertaining to this issue and further
analysis of the legal and programmatic implications, we are adopting a
two-part applicability process, for both major source applicability
determinations for GHGs under PSD and title V and for determining if a
net increase has occurred in PSD applicability determinations for
modifications.  As explained in the RTC document, we accomplish this
two-step applicability approach by continuing to rely on the existing
mass-based applicability provisions in the current regulations, and by
including new regulatory provisions that add a definition of "subject to
regulation" that in turn includes the phase-in thresholds.  Similarly,
for PSD modification reviews and associated netting analyses, the same
two-step process must be used.  Our summary in section IV.A described
how we expect this provision to be implemented in practice. 

We acknowledge that the possibility of changing GWP values is a downside
to the use of CO2e for the GHG metric, and we address this comment in
the next section, where we discuss our plan to codify GWP values.  By
codifying GWP, any changes will be manageable, and, in our judgment,
will not outweigh the benefits of a CO2e-based approach.  We also
acknowledge that a CO2e-based approach may appear to complicate the BACT
review and implementation process.  However, we disagree with the
commenter’s ultimate conclusion that BACT will be required for each
constituent gas rather than for the regulated pollutant, which is
defined as the combination of the six well-mixed GHGs.  To the contrary,
we believe that, in combination with the sum-of-six gases approach
described above, the use of the CO2e metric will enable the
implementation of flexible approaches to design and implement mitigation
and control strategies that look across all six of the constituent gases
comprising the air pollutant (e.g., flexibility to account for the
benefits of certain CH4methane control options, even though those
options may increase CO2).  Moreover, we believe that the CO2e metric is
the best way to achieve this goal because it allows for tradeoffs among
the constituent gases to be evaluated using a common currency.

4.  Determining What GWP Values Are To Beare to be Used 

	At proposal, we proposed to link the calculation of CO2e for GHGs to
GWP values in EPA’s “Inventory of U.S. Greenhouse Gas Emissions and
Sinks” (GHG Inventory).  See, e.g., proposed 40 CFR 51.166(b)(58). 
Numerous commenters expressed concerns about this proposal on various
grounds, including the following:

The EPA should follow the proper notice-and-comment procedures and the
requirements of the Information Quality Act (IQA) for the relevant
technical underpinnings of the proposal.  The EPA relies upon the GWPs
of the IPCC without providing the supporting data for review, and it is
inappropriate to use this as a basis for this rule without first making
all the raw data available for public inspection and comment.

The EPA cannot tie the definition of GWP to the GHG Inventory because it
is a non-regulatory document that may be changed without
notice-and-comment rulemaking.  Before EPA uses a new GWP, that GWP must
be subject to notice and comment to comply with the requirements of CAA
section 307 and the Administrative Procedure Act (APA).

An annual update of GWP would create a moving target for sources
conducting applicability determinations and assessing compliance with
minor NSR and PSD emission limits.  The EPA needs to ensure that
applicability and compliance with limits continue to be based on the GWP
that existed when the determination was made or the limit was
established.

The EPA should freeze the GWP at the current values by incorporating
those values into the regulation.  The EPA could still revise the
“NSR” GWP, but would have to revise the regulation to do so.

Commenters added that it is important to ensure that all permitting
agencies are using the same calculations for the determination of CO2e
for GHGs.

We agree with commenters who suggested we should codify, either in the
Tailoring Rule or through reference to codified values in another
rulemaking, the GWP values to be used in permitting analyses.  We agree
that this approach provides certainty as to which GWP values need to be
used by permitting authorities and allows sources to plan appropriately
for possible changes in the GWP values.  As mentioned in the comments,
recommended GWP values from IPCC can change over time.  While this is
infrequent — the last such changes were in 2007 —when it occurs,
there are generally significant lag times in universal adoption of new
values because of inconsistencies that could be created in national
inventories and emission reporting mechanisms.  In a regulatory setting,
such as in the permitting programs, this could potentially create
significant implementation issues, such as when a GWP change occurs
while a permit action is in progress.  EPA also recognized similar
potential implementation issues in developing its final mandatory GHG
reporting rule for GHGs, and codified in the regulatory text for that
rule the GWP values to be used in reporting GHGs as part of that final
rulemaking.

For these reasons, we have decided to follow the approach in the
mandatory GHG reporting rule and require that for PSD and title V
permitting requirements, wherever emissions calculations are performed,
that permitting authorities and sources use GWP values that are codified
in EPA rules.  We will establish the GWP values for PSD and title V
rules based on a cross-reference to the values that are codified in the
EPA’s GHG mandatory GHG reporting rule.  74 FR 56,395, Table A-1 to
subpartSubpart A of 40 CFR partPart 98 – Global Warming Potentials. 
Any changes to Table A-1 of the mandatory GHG reporting rule regulatory
text must go through an appropriate regulatory process.  In this manner,
the values used for the permitting programs will reflect the latest
values adopted for usage by EPA after a regulatory process and will be
consistent with those values used in the EPA’s GHG mandatory GHG
reporting rule.  Furthermore, the lead time for adopting changes to that
rule will provide a transition time to address implementation concerns
raised by commenters.

5.  Use of Short Tons vs. Metric Tons 

	We proposed that the GHG metric would be expressed in terms of English
(or short) tons, rather than metric (or long) tons.  A few commenters
support using short tons for this purpose.  Others prefer the use of
metric tons, and most of the them note that the mandatory GHG reporting
rule Reporting Rule is based on metric tons and believe that the
Tailoring Rule should be consistent with that rule.  These commenters
believe that using different units in the two rules would be confusing
and could result in sources that are not subject to the mandatory GHG
reporting ruleReporting Rule becoming subject to PSD.  Some of the
commenters add that various “cap and trade” legislative proposals
also quantify GHGs in metric tons.  A few other commenters recommend
that EPA harmonize the applicability thresholds established under the
Tailoring Rule and the mandatory GHG reporting ruleReporting Rule
without expressing a preference for short or metric tons.

	We are finalizing our proposal to use short tons because short tons are
the standard unit of measure for both the PSD and title V permitting
programs and the basis for the threshold evaluation to support this
rulemaking.  Calculation inputs for PSD are typically prepared in
English units (e.g., poundslbs of fuel,  British thermal units
(Btu)MMBtu’s, etc.) which is the common convention for all PSD
analyses and the units of the statutory thresholds under the Act.  

It is true that the mandatory GHG mandatory reporting rule uses metric
tons, but this does not create an inconsistency between permitting
programs and the reporting rule because the two rules already use
different applicability approaches.  Although we originally proposed
25,000 tpy as the major source level for permitting programs, which was
similar to the threshold in the reporting rule, we decided to adopt
substantially higher thresholds in the final rule.  Furthermore, even if
the numbers were similar, the thresholds used for the reporting rule are
based on actual emissions, while the PSD and title V programs thresholds
are based on PTEpotential to emit.  Therefore, we are less persuaded by
arguments for consistency, and believe it is more important for ease of
permit program implementation to ensure that GHG emissions calculations
for PSD and title V will build on the same set of input variables used
to develop short-ton based estimates for non-GHG pollutants.  Thus, the
use of short tons should actually facilitate the development of the GHG
emission estimate.  It would likely be more confusing to require a
multi-pollutant PSD applicability analysis to present emissions
information using different units for different pollutants, as would be
the case if we required metric tons for GHG but continue to use short
tons for every other pollutant.  Finally, we do not expect this choice
to introduce additional complexity because the conversion between short
tons and metric tons is a very simple calculation.  Therefore, based on
these considerations we are requiring that short tons be used as the
basis for emission calculations used to meet PSD and title V permitting
requirements. 			

B.  Rationale for Thresholds and Timing for PSD and Title V
Applicability to GHG Emissions Sources

	In this subsection, we describe our legal and policy rationale for our
determinations concerning PSD and title V applicability to GHG emissions
sources.  This subsection includes:  (1) an overview of our rationale;
(2) data concerning costs to sources and administrative burdens to
permitting authorities; (3) a review of the Chevron legal framework and
the “absurd results,” “administrative necessity,” and
“one-step-at-a-time” doctrines, as well as a review of how those
doctrines fit into the Chevron framework; (4) an overview of the
relevant  PSD and title V requirements and their legislative history;
(5) our application of the “absurd results” doctrine for tailoring
the PSD requirements; (6) our application of the “absurd results”
doctrine for tailoring the title V requirements; (7) our plans to issue
further rulemaking that will address the “absurd results” basis for
both PSD and title V requirements; (8) our rationale for the phase-in
schedule for applying PSD and title V to GHG sources; (9) our
application of the “administrative necessity” basis for tailoring
the PSD and title V requirements; and (10) our application of the
“one-step-at-a-time” basis for tailoring the PSD and title V
requirements.

1.  Overview

Under the familiar Chevron two-step approach to construction of
agency-administered statutes, the agency must first, at Chevron Stepstep
1, determine whether Congress's intent in a particular provision on a
specific question is clear; and if so, then the agency must follow that
intent.  If the intent of the provision is not clear, then the agency
may, under Chevron Stepstep 2, fashion a reasonable interpretation of
the provision.  The best indicator of congressional intent is the
literal meaning of the provision and generally, according to the
caselaw, if the literal meaning addresses the specific question, then
the agency should follow the literal meaning.   

However, the courts have developed three doctrines relevant here that
authorize departure from a literal application of statutory provisions. 
The first is the “absurd results” doctrine, which authorizes such a
departure if the literal application would produce a result that is
inconsistent with congressional intent, and particularly if it would
undermine congressional intent.  The judicial doctrine of
“administrative necessity” authorizes an agency to depart from
statutory requirements if the agency can demonstrate that the statutory
requirements, as written, are impossible to administer.  The
“one-step-at-a-time” doctrine authorizes an agency, under certain
circumstances, to implement a statutory requirement through a phased
approach.  Each of the three doctrines fits into the Chevron framework
for statutory construction because each of the three is designed to
effectuate congressional intent.  

To apply the statutory PSD and title V applicability thresholds
literally to sources of GHG emissions would bring tens of thousands of
small sources and modifications into the PSD program each year, and
millions of small sources into the title V program.  These extraordinary
increases in the scope of the permitting programs would mean that the
programs would become several hundred-fold larger than what Congress
appeared to contemplate.  Moreover, the great majority of additional
sources brought into the PSD and title V programs would be small sources
that Congress did not expect would need to undergo permitting and that,
at the present time, in the absence of streamlined permit procedures,
would face unduly high permitting costs.  Further, again at the present
time, in the absence of streamlined permit procedures the administrative
strains would lead to multi-year backlogs in the issuance of PSD and
title V permits, which would undermine the purposes of those programs. 
Sources of all types – whether they emit GHGs or not – would face
long delays in receiving PSD permits, which Congress intended to allow
construction or expansion.  Similarly, sources would face long delays in
receiving title V permits, which Congress intended to promote
enforceability.  For both programs, the addition of enormous numbers of
additional sources would provide relatively little benefit compared to
the costs to sources and the burdens to permitting authorities.  In the
case of PSD, the large number of small sources that would be subject to
control constitute a relatively small part of the environmental problem.
 In the case of title V, a great many of the sources that would be newly
subject to permit requirements would have “empty” permits, that is,
permits that do not include any applicable requirements, and that
therefore serve relatively serve little purpose.  For these reasons, the
“absurd results” doctrine applies to avoid a literal application of
the thresholds at this time.  By the same token, the impossibility of
administering the permit programs brings into play the “administrative
necessity” doctrine.  This doctrine also justifies not applying the
PSD or title V applicability threshold provisions literally to GHG
sources at this time.  

The situation presented here is exactly the kind that the “absurd
results,” “administrative necessity,” and “one-step-at-a-time”
doctrines have been developed to address.  Separately and
interdependently, they authorize EPA and the permitting authorities to
tailor the PSD and title V applicability provisions through a phased
program as set forth in this rule, and to use the initial period of
phase-in to develop streamlining measures, acquire expertise, and
increase resources, all of which would facilitate applying PSD and title
V on a broader scale without overburdening sources and permitting
authorities.  In this manner, the phased approach reconciles the
language of the statutory provisions with the results of their
application and with congressional intent.

2.  Data Concerning Costs to Sources and Administrative Burdens to
Permitting Authorities

	This final action concerning applicability of PSD and title V to
GHG-emitting sources, including the decisions on timing for the selected
permitting thresholds, is based on our assessments of both the costs to
the regulated sources to comply with PSD and title V permitting
requirements and the administrative burdens to the permitting
authorities to process PSD and title V permit actions for GHG-emitting
sources.  This section provides a summary of our cost and administrative
burden assessments of permitting that would be required in the absence
of any tailoring as well as under various tailoring options.

Our estimates of costs to the sources and administrative burdens to the
permitting authorities from PSD and title V applicability for GHG
emissions are based on labor and cost information from the existing
Information Collection Requests (ICRs) for PSD and title V programs.  We
apply the same basic methodology used for the proposal, which
incorporates information on numbers and types of affected sources and
estimated permitting actions.  We evaluate administrative burdens in
terms of staffing needs, time for processing permits, and monetary
costs, and we make some judgments about how those burdens would affect
the permitting authorities’ ability to effectively manage and
administer their programs with the addition of GHG emission sources.  We
present the administrative burden data for applying PSD and title V
requirements at the literal statutory thresholds - that is, the 100/250
tpy levels for PSD (and 0 tpy for modifications) and the 100 tpy level
for title V ––- as well as at other thresholds, which range from
25,000 tpy CO2e to 100,000 tpy CO2e.  We have significantly revised
upwards our assessments of costs to sources and administrative burdens
since proposal, and we summarize later our reasons for doing so.  We
also present significant comments concerning administrative burdens, and
our responses to those comments.  

	In the next section, concerning legal and policy rationale for our
actions, we discuss how these data on costs to the sources and
administrative burdens to the permitting authorities informed our
decisions that PSD and title V requirements should not, at present, be
applied to GHG-emitting sources under the literal terms of the statutory
thresholds as well as our decisions concerning what thresholds to apply
for Steps 1 and 2 of the applicability phase-in approach and the
applicability floor of 50,000 tpy CO2e.  

a.  Costs to Sources 

	As we did at proposal, we have estimated costs to the sources of
complying with PSD and title V starting from the data in the ICRs.  We
recognize that the sizes of the sources, as measured by their emissions,
that would be swept into the PSD and title V programs would vary
greatly, and that their permitting costs would vary as well.  For
example, their PSD permitting costs would depend on the amount and types
of their emissions and their control requirements.  Accordingly, we have
determined average costs, as described later.

For PSD, at proposal, we estimated that on average, an industrial source
would incur costs of $84,500 to prepare the PSD application and receive
the permit, and on average, a commercial or residential source would
incur costs of 20 percent that amount, or $16,900.  74 FR at 55,337 col.
3 to 55,339 col. 3.  For this action, we retain the same burden
estimates for an average industrial source.  This type of source would
need 866 hours, which would cost $84,500, to prepare the application and
the PSD permit.  However, based on comments received, we have determined
that a more accurate estimate for an average commercial or residential
source is 70 percent of that amount of time that an industrial source
would need, up from our proposal of 20 percent.  Thus, an average
commercial or residential source would need 606 hours, which would cost
$59,000, to prepare the PSD application and receive the permit.  We are
increasing this time over what we proposed because we now recognize that
virtually all commercial and residential sources will have no experience
with the PSD permitting process, and therefore will face a significant
learning curve that will entail more time to complete the application,
develop control recommendations, and take the other required steps.  We
believe this learning period could extend from 2 to possibly 4 years or
more from the date that the sources become subject to PSD requirements,
depending on the type and actual number of new sources that come in for
permitting.  In addition, we expect that in many cases, draft PSD
permits for GHGs will receive comments from various stakeholders, from
citizens groups to equipment vendors, who will seek to participate in
the permit process, and that all this could add to the hours that the 

permittee will need to invest in the process.  The actual costs to
sources to install BACT controls, while still uncertain at this point,
would likely add additional costs across a variety of sources in a
sector not traditionally subject to such permitting requirements.

For title V, at proposal, we estimated that on average, an industrial
source would incur costs of approximately $46,400 to prepare the title V
application and receive the permit, and on average, a commercial or
residential source would incur costs of 10 percent that amount, or
almost $5,000.  74 FR at 55,338 col. 1 to 55,339 col. 3.  For this
action, we retain the same burden estimates for an average industrial
source.  This type of source would need 350 hours, which would cost
$46,400, to prepare the application and the title V permit.  However, we
have determined that a more accurate estimate for an average commercial
or residential source is 50 percent of that amount of time that an
industrial source would need, up from our proposal of 10 percent.  Thus,
an average commercial or residential source would need about 175 hours,
which would cost $23,200, to prepare the title V application and receive
the permit.  This increase is due to the same reasons as with the PSD
program just discussed.  We now recognize that virtually all commercial
and residential sources will have no experience with the title V
permitting process, and, therefore, will face a significant learning
curve that will entail more time to assess, for the firs time, their GHG
emissions (because such sources are not covered by EPA’s mandatory GHG
reporting rule), complete the application, respond to permitting
authority comments, meet other title V administrative requirements, and
respond to interested stakeholders.  

b.  Administrative Burdens to Permitting Authorities

(1) Estimated Permitting Authority Burden at Proposal

As at proposal, we estimated the administrative burdens to the
permitting authorities at the various threshold levels for PSD or title
V applicability as follows.  First, for a particular threshold level, we
estimated the number of GHG-emitting sources that would be subject to
PSD requirements because they would undertake new construction or
modification, and the number of existing sources that would be subject
to title V requirements.  Second, we estimated the average additional
administrative burden and cost of each PSD permitting action and each
title V permitting action for the GHG-emitting sources.  Third, we
multiplied those two estimates, and the product is the additional
administrative burden at the particular threshold level.  We employed
the same methodology for this final rule, but, as discussed later, and
described in more detail in our final burden analysis, we have updated
several key assumptions since the proposal as a result of our
consideration of comments received. 

First, we present the administrative burdens at the statutory levels for
PSD and title V applicability.  At proposal, for the PSD program, we
estimated the administrative burdens that would result from applying PSD
at the 100/250 tpy major emitting facility threshold levels in two ways,
as described in this section.  We stated that at present, 280 sources
are subject to PSD each year, both for new construction and
modifications.  This figure served as the baseline from which to
calculate increases in administrative burdens due to permitting
GHG-emitting sources.

The first method that we used to calculate the administrative burdens to
the permitting authorities was in terms of workload hours, which we then
converted to monetary costs.  To make the workload calculation, we first
estimated the number of GHG-emitting sources that would become subject
to PSD through new construction and modification.  Based on our GHG
threshold data analysis, we estimated that almost 41,000 new and
modified sources per year would become subject to PSD review.  We first
calculated the number of new sources that would become subject to PSD. 
To do this, we estimated growth rates for the various sectors, and then
applied those growth rates to the numbers of sources in those sectors. 
We then calculated the number of modifications.  To do this, we first
assumed that each year, two percent of sources that meet or exceed the
threshold levels for PSD applicability due to their conventional
pollutants undertake modifications.  We then calculated the number of
sources that would meet or exceed the threshold levels for PSD
applicability due to their GHG emissions, and applied the same
assumption that two percent of them would undertake modifications.  In
this manner, we estimated the number of modifications of GHG-emitting
sources that would become subject to PSD.

  We noted that currently, 280 PSD permits are issued each year, but
that applying PSD to GHG-emitting sources at the 100/250 tpy statutory
threshold levels would cause an increase in permits of more than
140-fold.  The reason for the extraordinary increase in PSD
applicability lies simply in the fact that it takes a relatively large
source to generate emissions of conventional pollutants in the amounts
of 100/250 tpy or more, but many sources combust fossil fuels for heat
or electricity, and the combustion process for even small quantities of
fossil fuel produces quantities of CO2 that are far in excess of the
sources’ quantities of conventional pollutants and that, for even
small sources, equal or exceed the 100/250 tpy levels. 

 Based on the 140-fold increase in permits, we then estimated the
per-permit burden on permitting authorities.  As we stated in the
proposal:

We estimated the number of workload hours and cost a permitting
authority would expend on each new source and each modification.  We
based these estimates on the workload hours and cost for processing
permits for new sources of non-GHG emissions, which we derived from
labor and cost information from the existing [Information Collection
Requests (“ICRs”)] for PSD programs.  The ICRs show that permitting
authorities expend 301 hours to permit a new or modified industrial
source….   

We then made assumptions for number of workload hours and costs for new
sources of GHG emissions.  We assumed that permitting new industrial GHG
sources that emit in excess of the 250-tpy threshold would be of
comparable complexity to permitting non-GHG emitting industrial sources
that are subject to PSD.  Thus, for these sources, we assumed that
permitting authorities would expend the same number of workload hours
and costs, on a per-permit basis, as they do for non-GHG emitting
industrial sources.  On the other hand, for commercial and residential
GHG sources that emit GHGs above the 250-tpy threshold (and as a result
would be subject to the requirements of the PSD permitting program at
this threshold level), we assumed that the workload hours and cost for
permitting these sources would be significantly less than—only 20
percent of—the hours and cost necessary to prepare and issue initial
PSD permits or permit modifications for industrial GHG sources.  This
20-percent estimate amounts to 60 hours of permitting authority time per
residential or commercial permit.

Based on these assumptions, the additional annual permitting burden for
permitting authorities, on a national basis, is estimated to be 3.3
million hours at a cost of $257 million to include all GHG emitters
above the 250-tpy threshold.  

74 FR at 55,301 col. 2.  

Note that at the proposal, in calculating the PSD administrative burdens
that would occur each year due to GHG emissions, we did not undertake
separate calculations for the administrative burdens associated with
permitting obligations stemming from the GHG emissions of the 280
sources already subject to PSD permitting requirements due to their
conventional pollutants.  In effect, we treated these 280 sources are
part of the over 40,000 sources that would become subject to PSD due to
their GHG emissions.

The second way that we evaluated the burden on permitting authorities
was by reviewing a study conducted by state and local air permitting
agencies.  As we said in the preamble:  

In addition to conducting our burden analysis, we also reviewed summary
information from state and local air permitting agencies regarding
additional resources and burden considerations if GHG sources that emit
above the 100/250-tpy thresholds were subjected to the PSD and title V
programs.  This information covered 43 state and local permitting
agencies, representing programs from different regions of the country
and various permitting program sizes (in terms of geographic and source
population coverage)….  This information showed significant burdens
projected by permitting agencies with adding sources of GHG emissions in
terms of staffing, budget, and other associated resource needs. 
Importantly, the agencies based their analysis on the assumption that,
for purposes of determining whether a source is major, its emissions
would be calculated on an actual emissions ("actuals") basis, and not on
a PTE basis.  On an actuals basis, the agencies estimated a 10-fold
increase in the number of permits.  

Specifically, the agencies estimated that:

Assuming, again, that number of permits was to increase by 10-fold
(based on actual emissions), the resulting workload would require an
average of 12 more [full-time equivalents (FTEs)] per permitting
authority at an estimated cost of $1 million/year; 

Without the additional FTEs, the average processing time for a permit
would increase to 3 years, which is three times the current average
processing time;

Permitting authorities would need 2 years on average to add the
necessary staff;

Permitting authorities would also need, on average, eight additional
enforcement and judicial FTEs;

Ninety percent of permitting agencies would need to train their staff in
all aspects of permitting for sources of GHG emissions.

A quarter of permitting agencies were currently under a hiring freeze.

 	We went on to explain that this state survey significantly
underestimated the administrative burdens:

It is important to reiterate that the state and local permitting
information on burden was based on the number of additional facilities
subject to PSD because their emissions of GHGs exceed the 100/250-tpy
thresholds at actual emissions rates, not PTE-based emissions rates. 
However, the PSD applicability requirements are based on PTE.  By
adjusting the increase in number of permits to account for GHG sources
that exceed the 100/250-tpy applicability thresholds based on their PTE
emissions, EPA estimated a 140-fold increase in numbers of PSD permits,
much more than the 10-fold increase estimated by the states based on
actual emissions. 

74 FR at 55,301 col. 2-3.

In addition to PSD, we also estimated title V burdens at the statutory
threshold.  At proposal, for the title V program, we estimated the
administrative burdens that would result from applying title V
requirements at the 100 tpy major source threshold level in the same two
ways as for PSD, as follows.:  The first method was to calculate the
administrative burdens in terms of workload hours, which we then
converted to monetary costs.  To make the workload calculation, we first
estimated the number of existing GHG-emitting sources that would become
subject to title V.  Based on our GHG threshold data analysis, we
estimated that approximately 6 million sources would become subject to
title V.  Compared to the 14,700 title V permits currently issued, this
would be an increase in permits of more than 400-fold.  We noted, in
addition, that most of the 14,700 sources already subject to title V
also emit GHGs and may be affected as well.

We then described the type of work that the permitting authorities would
need to do for these GHG-emitting sources – the six million that would
become newly subject to title V and most of the 14,700 that are already
subject to title V – as follows.  Note at the outset that the
permitting authorities’ workload is greater for sources newly subject
to title V than for existing sources that seek a revised or renewed
permit.  As EPA noted in the preamble:

[T]he[] permits [for the 6six million new sources] would need to include
any requirements for non-GHGs that may apply to the source, such as
provisions of an applicable State Implementation Plan (SIP).  For any
such requirements, permitting authorities would also need to develop
terms addressing the various compliance assurance requirements of title
V, including monitoring, deviation reporting, six-month monitoring
reports, and annual compliance certifications.

Adding to the burden described above would be the burden to add GHG
terms to the 14,700 existing title V permits.  While, in general,
existing title V permits would not immediately need to be revised or
reopened to incorporate GHG (because as noted above, there are generally
not applicable requirements for GHGs that apply to such sources),
permitting authorities may face burdens to update existing title V
permits for GHG under two possible scenarios: (1) EPA promulgates or
approves any applicable requirements for GHGs that would apply to such a
source, which would generally require a permit reopening or renewal
application, or (2) the source makes a change that would result in an
applicable requirement for GHGs to newly apply to the source, such as
PSD review, which would generally require an application for a permit
revision.  Permitting authorities will also need to process permit
renewal applications, generally on a five-year cycle, and such renewals
would need to assure that the permit properly addresses GHG.  Finally
they would have to process title V applications for new sources
(including all the PSD sources previously discussed).

  

74 FR at 55,302 cols. 2-3.

In light of those demands, we estimated the per-permit burden on
permitting authorities as follows.  Note, at the outset, that as with
PSD, we based the workload hours on information in ICRs for industrial
sources, and we then assumed that the workload for commercial and
residential sources would be the indicated percentage of the workload
for industrial sources:  

As with PSD, we have quantified the extent of the administrative problem
that would result in workload hours and cost on the basis of information
concerning hours and costs for processing existing title V permits that
is indicated on ICRs.  However, we recognize that more than 97 percent
of these new sources would be commercial and residential sources.  We
estimate that for permitting authorities, the average new commercial or
residential permit would require 43 hours to process, which is 10
percent of the time needed for the average new industrial permit.  For
an average existing permit, which permitting authorities would need to
process through procedures for significant revisions and permit
renewals, adding GHG emissions to the permit would result in, we
estimate, 9 additional hours of processing time, which is 10 percent of
the amount of time currently necessary for processing existing permits. 
We estimate that the total nationwide additional burden for permitting
authorities for title V permits from adding GHG emissions at the 100-tpy
threshold would be 340 million hours, which would cost over $15 billion.

74 FR at 55,302 col. 3.

As with PSD, the second way that we evaluated the burden on permitting
authorities at the statutory threshold was by reviewing a study
conducted by state and local air permitting agencies of the burden of
applying title V to existing GHG-emitting sources at the 100 tpy
statutory threshold level.  As we said in the preamble to the proposed
rule:  

[W]e also reviewed summary information from state and local permitting
agencies, which showed significant burdens associated with adding GHGs
in their title V programs in terms of staffing, budget, and other
associated resource needs.  Again, note that the permitting agencies
based their estimates on numbers of permits that would be required from
sources subject to the 100-tpy title V applicability threshold on an
actuals—not PTE—basis.  Based on that level, the agencies assumed a
40-fold increase in numbers of permits, and estimated that:

The resulting workload would require an average of 57 more FTEs per
permitting agency at an estimated cost of $4.6 million/year; 

Without the additional FTEs, the average processing time for a permit
would increase to almost 10 years, which is 20 times the current average
permit processing time;

Permitting authorities would need 2 years on average to add the
necessary staff;

On average, permitting authorities would need 29 additional enforcement
and judicial staff;

Eighty percent of permitting authorities would need to train their staff
in all aspects of permitting for sources of GHG emission.

A quarter of permitting agencies were currently under a hiring freeze.  

     As with PSD, we added that this state survey significantly
underestimated the administrative burdens:

It is important to reiterate that, as with PSD, the state and local
information on projected permitting burden is based on the number of
additional facilities subject to title V because their emissions of GHGs
exceed the 100-tpy thresholds at actual emissions rates, not the
PTE-based emissions rates.  However, the title V applicability
requirements are based on PTE.  As noted elsewhere in this preamble, the
state and local agencies estimated a 40-fold increase in numbers of
title V permits based on the amount of GHG sources' actual emissions. 
By adjusting the summary estimates provided by the state and local
agencies to account for GHG sources that exceed the 100-tpy threshold
based on their PTE emissions, EPA estimated that the average permitting
authority would need 570 more FTEs to support its title V permitting
program.

74 FR at 55,302 col. 3 – 55,303 col. 1.

(2)  Revisions to Proposal Estimates of Permitting Authority Burden

We received numerous comments from state and local authorities stating
that EPA had underestimated the administrative burden on the permitting
authorities in the proposal.  State and local authorities stated that in
particular, EPA underestimated the number of modifications and the
amount of time it would take permitting authorities to process permits,
particularly for commercial and residential sources.  Based on the
comments and additional analysis that we have conducted in response, we
are revising in several respects our estimates of the administrative
burdens for applying PSD and title V at the statutory threshold levels.

First we present revisions to our analysis regarding the burdens at the
statutory levels.  Before we present those changes, we want to note a
revision to our methodology that affected our estimate of the number of
permits currently issued under existing programs.  We are revising
upwards the number of sources that are already subject to PSD permitting
requirements anyway for their conventional pollutants, which, as
discussed previously, we refer to as  (“anyway” sources).  This
revision has implications both for (1i) the number of sources that would
become subject to PSD due to their GHG emissions; and also (2ii) the
baseline number of sources already subject to PSD, which we use to
compare the amount of increases in administrative burden due to
permitting GHG sources.  At proposal, we stated that 280 sources each
year are subject to PSD due to their new construction or modifications. 
However, upon further analysis, we have realized that this figure is too
low because it includes only sources that have emissions of one or more
NAAQS pollutants at the 100/250 tpy thresholds and that are located in
areas of the country that are designated attainment or unclassifiable
for all of those pollutants, and thus are not designated nonattainment
for any of those NAAQS pollutants.  We estimate that another 520 sources
have emissions of one or more NAAQS pollutants at the 100/250 tpy
thresholds and are located in areas of the country that are
nonattainment for at least one of those NAAQS pollutants.  Some of these
520 sources may also emit one or more pollutants at the 100/250 tpy
level for which their area is designated attainment or unclassifiable,
and therefore may be subject to PSD for those pollutants.  Accordingly,
the correct number of “anyway” sources subject to PSD each year is
the 280 sources that are located in areas that are attainment or
unclassifiable for each pollutant that the sources emits at the 100/250
tpy level, plus at least some of the 520 sources that are located in
areas that are nonattainment for at least one of the NAAQS pollutants
that the sources emit at or above the 100/250 tpy threshold.  In the
absence of data on the number of nonattainment NSR permits that do not
have a PSD component, and because we expect this to be a small number,
we have assumed for purposes of this action, that each of the 520
sources is subject to PSD for at least one pollutant, so that we will
consider all 800 sources as subject to PSD.  Of this number, we estimate
that 70 percent, or 560 sources will undergo a modification, while the
remaining 240 permitting actions will involve new construction.  Of the
modifications, we assume that 80 percent, or 448, would become subject
to additional requirements due to their GHG emissions because those
projects have combustion-related activities that would likely emit GHGs
in the requisite quantities.  Our estimate of 80 percent of modification
activities significantly involving combustion activities is based on a
review of a random sample of PSD permits.  In total we estimate that 688
sources, either upon new construction or modification, would need to add
GHG requirements to their otherwise required PSD permitting action.

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

Turning to the revisions to our burden estimates that we made as a
result of public comment, we begin by noting that many commenters
believed that we significantly underestimated the administrative burdens
associated with the proposed thresholds or that the administrative
burden under the proposed thresholds would still overwhelm the states
and result in significant permitting delays and uncertainty for sources.
 Many of these commenters indicate that our estimate of the number of
sources that would be subject to permitting is too low, and some add
that we have underestimated the per-permit effort required.  (More
detail on these comments is given elsewhere on the methodology used in
the analysis).  Several state and local agencies provided estimates of
the increased number of permits and/or staff that would be required
under the thresholds we proposed that were higher than our original
estimates.  Specifically, commenters recommended that we increase the
estimated administrative burdens for PSD permits by anywhere from 100
percent to over 2,000 percent; and that we increase the burdens for
title V permits by anywhere from 29 percent to 240 percent.  Many
commenters indicated that EPA has not adequately accounted for
“synthetic minor” sources or modification projects, stating that
many such sources and projects will not be able to keep GHGs below the
proposed thresholds, and those who could do so may not be able to
establish enforceable synthetic minor limits.  Numerous commenters also
stated that the EPA has underestimated the rate of major modifications
for GHGs under PSD.  Some commenters assert that we underestimated the
number of permits required for specific industry sectors, including the
oil and gas production industry, the natural gas transmission industry,
the semiconductor industry, the wood products industry, the brick
industry, and landfills.  Some of the state and local commenters also
believe that we have overestimated their ability to hire and train
sufficient staff to administer GHG permitting.  

We are persuaded by the data and arguments provided by the many
commenters who believe EPA underestimated the number of permitting
actions and the burdens of each action, and thus the overall
administrative burdens associated with permitting GHG sources. 
Accordingly, we have reevaluated our assessment of these administrative
burdens, for both the PSD and title V programs.  In conducting this
re-evaluation, we considered arguments made by the commenters, as well
as any actual data they provided, and then we determined whether and how
to modify various aspects of our detailed assessment of the burdens. 
Based on this consideration we have substantially revised upwards our
estimate of administrative burdens, based on the analysis included in
the final docket for this rulemaking.  The revisions affect two elements
of our analysis by showing:  (1) a substantial increase in the number of
PSD and title V permits that will occur at a given threshold, and (2) an
increase in the average burden estimate for each such permit.  

	Regarding the increase in our estimate of the number of projects that
will occur, we estimated an increase in both PSD and title V permit
actions, though the greatest changes were for PSD.  At proposal, we
estimated that, if PSD requirements were to apply to GHG sources at the
100/250 tpy statutory levels, 40,496 projects - consisting of 3,299
projects at industrial sources and 37,197 projects at commercial or
residential sources -- would need PSD permits each year.  Some of these
projects involve the construction of an entirely new source, but the
majority of these are modifications.  We now estimate that at the
100/250 tpy levels, 81,598 projects would become subject to PSD each
year.  These projects include 26,089 actions at industrial sources and
55,509 at commercial and residential sources.  We describe our
calculation of this 81,598 amount in a TSD.  The great majority of these
81,598 projects that would become subject to PSD are modifications.  We
base these estimates on the assumption that the significance levels
would be 100 tpy regardless of category.  

Our estimate of the number of PSD modifications is where we made our
most significant upward revisions from our proposal, based on comments. 
Our doubling of the estimated PSD permitting actions – from 40,496 at
proposal to 81,598 -- results from three separate adjustments we made to
our estimates at proposal of the number of permit actions that would
result from applying PSD to GHG sources.  Two of these increased the
number of major modifications, and one of these increased the number of
major sources and modifications.  The most significant adjustment, and
one that was raised by multiple commenters, was that we undercounted the
number of major modification projects at existing major sources because
we did not include the existing projects that avoid major PSD review by
either taking “synthetic minor” limits or by netting out for
conventional pollutants, but that would not be able to avoid PSD through
those mechanisms for GHGs.  

We agree that the ability and procedures for sources to achieve
reductions, or minimize increases, due to GHGs through adoption of
enforceable limits or through netting out are not well established at
this point.  We believe that there will be numerous instances,
particularly for combustion-related projects, where it will not be
possible for sources to achieve the same level of reductions for CO2
emissions as they do for NOx emissions of nitrogen oxides (NOx), for
example, simply because there are not as many proven control techniques
that can reduce CO2 emissions to the same degree as NOx.  Also, more
research will be necessary in the type of emission units and processes
resulting in GHG emissions, and how they operate over a wide range of
utilization patterns at a variety of source categories, before
permitting authorities will be able to establish procedures and rules
for developing minor source permit limitations.  Therefore, we adjusted
our count of major modification permits under PSD upward to account for
this.  

The second change to the number of permits concerns the general
modification rate of 2 percent that we applied at proposal, based on
historical experience across all pollutant types.  Commenters provided
information that suggest that this 2 percent figure is an underestimate
for GHG sources because their emissions of CO2 are high and accumulate
quickly from various changes involving combustion units.  Therefore, a
greater percentage of their physical or operational changes will result
in GHG emissions in excess of the significance levels that we identified
at proposal.  In light of these comments, we reviewed the source
populations and pollutant mix within the various populations, and
determined that we should revise our general modification rate to 4
percent for GHG sources.  This 4 percent rate was obtained by dividing
the current annual major NSR permit actions involving modifications by
the 14,700 existing sources.  We have revised our burden analysis
accordingly.  Again, the burden analysis in the docket describes our
basis for these calculations in more detail.  

The third adjustment to the number of permits involves our estimate of
the number of sources with PTE potential to emit that is greater than
the various thresholds considered.  This affects the number of major
sources at the statutory thresholds, which we used to estimate the
number of PSD and title V major sources, but also has an effect on the
number of major modifications because the number of modifications
depends on the size of the population of major sources.  Commenters
provided evidence that our estimates of capacity utilization (which, as
described previously, we use for estimating potential-to-emit based on
data for actual emissions) for the general manufacturing source category
(referred to as “unspecified stationary combustion” in our analysis)
and for the oil and gas industry were not accurate.  In our proposal,
our estimated range for capacity utilization for “‘unspecified
stationary combustion” varied from 70 to 90 percent depending on
manufacturing category.  For the oil and gas industry, our estimate was
90 percent.  We received comments indicating that these utilization
rates are higher than what is normally achieved in real-world
conditions, particularly for smaller manufacturing type facilities. 
Accordingly, in this action, we are using a 50 percent capacity
utilization rate for both of these source categories, which better
reflects what can be deemed reasonable operation under normal conditions
for facilities in these source categories.  This adjustment increased
the overall number of affected facilities at various threshold levels
and we have revised our burden analysis accordingly.

	A few commenters asserted that we underestimated the number of
residential homes, commercial buildings, and retail stores that would be
subject to permitting requirements because these commenters believed the
estimate in EPA’s TSD was based on actual emissions from space heating
equipment rather than PTE.  We wish to clarify that our threshold
analysis estimates for the number of residential and commercial sources
(as well as all other sources) did use a PTE basis.  To calculate the
PTE amount for these sources, we extrapolated from the actual emissions
data for the residential and commercial sources.  Specifically, we
assumed that a typical residential facility operates its fuel combustion
sources at only 10 percent of its capacity and a typical commercial
facility operates at only 15 percent of its capacity.  Based on these
assumptions, we multiplied residential actual emissions by a factor of
10, and commercial actual emissions by a factor of 6.6 to obtain
PTE-based estimates.  There is very little information available on the
capacity utilization rates of fuel combustion equipment at different
types of residential and commercial facilities, but we believe our
methodology was reasonable for these types of sources and we did not
adjust it in response to this comment.  Information on the development
of these estimates is provided in our Technical Support Document for
Greenhouse Gas Emissions Thresholds Evaluation. 

 The second source of upward revisions to our administrative burden
estimate is that we are increasing the estimated average cost to
permitting authorities of issuing each PSD and title V permit at the
statutory thresholds.  At proposal, we estimated that for PSD permits,
permitting authorities would expend, on average, 301 hours to permit an
industrial source of GHG emissions, and 20 percent of that time, or 60
hours to permit a commercial or residential source.  After estimating
that amount of workload, we went on to estimate the monetary cost to
permitting authorities of that workload.  Similarly, for title V
permits, we estimated at proposal that permitting authorities would
expend 10 percent of the number of hours needed to process an industrial
permit in order to process a commercial or residential permit for GHG
sources.

We received comments from both permitting authorities and sources
asserting that our methodology underestimated the administrative burden
on grounds that (1) our methodology fails to recognize that when a
source triggers PSD for conventional pollutants, additional labor hours
would be required to issue BACT for GHGs; (2) our estimate of 60 hours
(versus 301 hours) to issue PSD permits to commercial and residential
sources of GHGs is unrealistically low; (3) our estimate failed to
account for the increase in the complexity of permits for criteria
pollutants due to (i) increases in criteria pollutant emissions becoming
newly subject to BACT at sources that are major only for GHGs, which
will result in increased permitting and (ii) BACT controls for criteria
pollutants (e.g., an oxidizer for VOCs) may result in significant GHG
emissions, triggering an additional BACT determination.; and (4) our
methodology failed to account for the significant additional PSD and
title V burdens due to sources that obtain federally enforceable permit
limits on GHGs in order to become “synthetic minors” and thereby
avoid PSD (and possibly also title V).

	Based on these comments and our own reassessment of permitting actions
created by the addition of GHGs, we have revised upwards in several ways
our estimate of the additional per-permit costs of applying PSD and
title V to GHG sources, including the following:  First we have added an
estimate of the additional permitting cost for adding a GHG component to
“anyway” PSD and title V permitting actions for conventional
pollutants.  We estimated this burden based on information in the
comments together with our own judgment about how to adjust the burden
numbers contained in the current supporting statements for our approved
permitting ICRs.  These adjustments are found in our revised burden
estimate document.

Second, we have raised the per-permit burden hours for commercial and
residential sources for PSD and title V.  At proposal, our estimates
were based on the fact that many of these permits will be technically
simpler due to such factors as a lower number of emissions points,
simpler processes, and less required modeling.  However, commenters
pointed out that, until EPA streamlines its permitting procedures, there
are many permitting activities that represent a fixed cost, such as
public notice, hearing, and response to comment activities.  In
addition, we agree, as commenters pointed out, that many of these
sources will need significantly more permitting authority staff time to
assist them in the permit application and preparation process because of
their lack of experience with these requirements.  In addition,
permitting authorities will have little, if any, experience in
permitting commercial and residential sources, and therefore will face a
learning curve that will entail more time to take permitting action.  In
addition, we expect that in many cases PSD and title V permit
applications for GHGs will receive comments from various stakeholders,
from citizens groups to equipment vendors, who will seek to participate
in the permit process, and responding and revising permits accordingly
will add to the hours that the permitting authority will spend.  

As a result, we raised the PSD per-permit hours for various steps in the
permitting process, as described in the burden estimate document.  While
we continue to estimate that permitting authorities will expend, on
average, 301 hours to issue a PSD permit to an industrial source, and
that this would cost $23,243, we now recognize that a permitting
authority would expend 70 percent of that time or 210 hours, to permit a
commercial or residential source, which would cost $16,216.  Similarly,
for title V, while we continue to estimate that permitting authorities
will expend, on average, 428 hours to issue a title V permit to an
industrial source, and that this would cost $19,688, we now recognize
that a permitting authority would expend 50 percent of the time, or 214
hours, to permit a commercial or residential source, which would cost
$9,844.

We disagree with commenters who suggested that by basing our estimates
on the numbers of newly constructing and modifying sources with high
enough emissions to qualify as major emitting facilities, we failed to
account for the costs of sources that seek “synthetic minor” permits
to avoid PSD, and possibly title V, requirements.  In fact, our
methodology includes sources that might take such limits as newly-major
sources for their GHG emissions; and therefore we count the full
administrative burden associated with a PSD permit and a title V permit
for those sources.  In effect, we assume that such sources would go
through PSD or title V permitting, rather than take “synthetic
minor” limits.  We take this approach because although we suspect that
there may, in fact, be significant synthetic minor activity, we do not
have data that would allow us to determine whether, and how many of,
these sources will be able to adopt “synthetic minor” limits or
restrict their operations to obtain minor source permitting status.  Nor
do we have data on the amount of the administrative burden that would
fall on any particular permitting authority to establish a “synthetic
minor” limit, except that we understand that the amount varies widely
across states.  As a result, we opted to include these sources in our
analysis as sources receiving a PSD or title V permit.  Therefore, to
the extent that synthetic minor activity occurs, our estimate would
already have included the burden for that activity.  In fact, our
estimate would have overestimated the burden to the extent that a
permitting authority would have less administrative costs to issuing a
“synthetic minor” permit, as compared to a PSD or title V permit. 

(3)  Revised Burden Estimates at Statutory Thresholds

Based on the revisions just described, we estimate that in all, if
sources that emit GHGs become subject to PSD at the 100/250 tpy levels,
permitting authorities across the country would face over $1.5 billion
in additional PSD permitting costs each year.  This would represent an
increase of 130 times the current annual burden hours under the NSR
major source program for permitting authorities.  The permitting
authorities would need a total of almost 10,000 new full time employees
(FTEs) to process PSD permits for GHG emissions.  

In addition, we estimate that in all, if sources that emit GHGs become
subject to title V at the 100 tpy level, permitting authorities across
the country would incur about 1.4 billion additional work hours, which
would cost $63 billion.  We estimate that most of this work would be
done over a 3 year period, which would amount to 458 million in
additional work hours, and $21 billion in additional costs, on an annual
basis over that 3-year period.

We also note that the survey of state and local permitting authorities
described in the proposed rulemaking continues to shed light on the
extent of the administrative burdens, including staffing, budget, and
other associated resource needs, as projected by the permitting
authorities.  As noted previously, that survey concluded that
application of the PSD requirements to GHG-emitting sources at the level
of 100/250 tpy or more of actual emissions would, without additional
FTEs, increase the average processing time for a PSD permit from one to
3 years.  The survey further concluded that application of the title V
requirements to GHG-emitting sources at the level of 100 tpy or more of
actual emissions would, without additional FTEs, increase the average
processing time for a title V permit from 6 months to 10 years.  As we
noted at proposal, this survey assumed a ten-fold increase in the number
of PSD permits and a 40-fold increase in the number of title V permits
due to GHG-emitting sources, but those assumptions were severely
underestimated because they were based on actual emissions.  At
proposal, our calculations, which were based on potential emissions,
indicated a 140-fold increase in PSD permits and a more than 400-fold
increase in title V permits.  In this rulemaking, we recognize that even
our estimates at proposal were severely underestimated.  We now
recognize that the number of PSD permits will be about twice what we
estimated at proposal, and the average processing time for both PSD and
title V permits will be two or three times greater than what we
estimated at proposal.  The survey of state and local permitting
authorities provided other useful information as well, including the
fact that it would take the permitting authorities 2 years, on average,
to hire the staff necessary to handle a ten-fold increase in PSD permits
and a 40-fold increase in title V permits, and that 90 percent of their
staff would need additional training in all aspects of permitting for
GHG sources.  

(4)  Revised Estimates of Administrative Burdens at Various Threshold
Levels

In order to determine the appropriate PSD and title V applicability
level for GHG sources, we not only estimated the burden at the statutory
thresholds, as described previously, but we also estimated the number of
sources, number of permitting actions, and amount of administrative
burden at various applicability levels for both PSD and title V, based
on the revised methodology described previously, that we used to
estimate the administrative burdens of applying PSD and title V at the
statutory levels.  This information is summarized in Table VI-1,
previously.  Note that Table VI-1 also includes, in the last column, the
administrative burdens, described previously, associated with the
100/250 tpy thresholds.Table V-1.  Coverage and Burden Information

	Current Program1

	“Anyway” Source Approach 75k Major Mod.

	100k Major Source

100k Major Mod.	100k Major Source

75k Major

Mod.	100k Major Source

50k Major

Mod.	50k Major

Source

50k Major

Mod.	25k Major Source

25k Major

Mod.	100/250

Major,

100 Mod.

Number of Major Sources	15,000	15,000	15,550         	15,550         
15,550         	18,500     

	22,500         	6,118,252

Number of Newly Major GHG Sources	N/A	0	550	550	550	3,500	7,500
6,105,913

Number of PSD New Construction Actions	240	240	242	242	242	243	250
19,889

Number of PSD Modification Actions at Covered major sources	448	448	468
1,363	2,257	2,354	9,645	62,284

Permitting Authority Cost to Run PSD programs	$12M/yr.	$15M/yr.	$15M/yr.
$36M/yr.	$57M/yr.	$59M/yr.	$229M/yr.	$1.5B/yr

Permitting Authority Work Hours to Run PSD programs2	150,795	185,195
192,055	461,450	730,544	764,781	2.97 M	19.7 M

Permitting Authority Cost to Run Title V Programs	$62M/yr. 	$63M/yr.
$67M/yr. 	$69M/yr. 	$70M/yr. 	$88M/yr. 	$126M/yr. 	$21 B/yr



Permitting Authority Work Hours to Run Title V Programs 	1.35 M	1.38 M
1.46 M	1.49 M	1.53 M	1.92 M	2.74 M	460 M

Annual Total Cost to Run PSD and Title V Programs and percent increase
in cost over current program 

	$74M/yr.	$78M/yr.       

5% increase (once states adopt)	$82M/yr.  

11% increase	$105M/yr   

42% increase	$127M/yr.       

72% increase	$147M/yr.   

99% increase	$355M/yr.   

380% increase	$22.5 B/yr

30,305% increase

% GHG emissions covered3	-0-	65%	67%	67%	67%	70%	75%	78%

Notes:  (1) As explained in the preamble, "current program" figures for
PSD permits also reflect NSR permits in nonattainment areas that we
assume include a PSD component for at least one pollutant.  (2) Number
of FTEs may be calculated as work hours divided by 2,000 hours.  (3)
Percent of national GHG stationary source emissions emitted from sources
that would be considered major for GHG emissions under each threshold
scenario.

As described in the TSD, we considered several different major
source/major modification threshold combinations.  We chose the
combinations to reflect representative, incremental steps along the
possible range.  Because it is time- and resource- intensive to develop
estimates for a given step, we chose intervals that best reflect
representative points within the range, given those time and resource
constraints.  Here, we discuss key observations about some of the
combinations that we assessed.  As the table indicates, under the
current PSD and title V programs, approximately 15,000 sources qualify
as major PSD sources for at least one pollutant and therefore meet the
applicability thresholds.  Of these, approximately 668 sources are
subject to PSD requirements each year for at least one pollutant - 240
because they undertake new construction, and 448 because they undertake
modifications.  The permitting authorities’ administrative burdens for
the NSR program are 153,795 work hours, and $12 million.  For the title
V program, the 15,000 sources are, for the most part already permitted,
and therefore need revised permits as required and renewal permits on a
5-year schedule.  The permitting authorities’ title V administrative
burdens on an annual basis are 1,349,659 work hours and $62 million.

The first threshold Table 1 describes – and which, as discussed later,
we are adopting for Step 1 – is the “anyway” source approach. 
Under this approach, (i) PSD applies to the GHG emissions from projects
that are subject to PSD anyway as new sources or major modifications due
to their emissions of non-GHG pollutants and that result in an increase
(or, in the case of modifications, a net increase) of at least 75,000
tpy CO2e; and (ii) title V applies to what we will call “anyway”
title V sources, that is, sources that are subject to title V anyway due
to their emissions of non-GHG pollutants.  Under this approach, the
number of sources subject to PSD each year – including new
construction and modifications - is the same as under the current
program, but the permitting authorities will need to address GHG
emissions as part of those permitting actions each year and, to do so,
will require, each year, 34,400 additional workload hours costing an
additional $3 million.  For title V, we estimate that the number of
title V sources that require permitting actions will, on average, be the
same each year, but permitting authorities will need to address GHG
requirements for some of them; as a result, permitting authorities will
need, each year, 27,468 additional work hours costing $1 million in
additional funding.

	Another threshold described in Table VI-1 is the one we are adopting
under Step 2, as described later, under which (i) sources will be
subject to PSD on account of their GHG emissions if they newly construct
and emit at least 100,000 tpy CO2e, or if they are existing sources that
emit at least 100,000 tpy CO2e of GHGs and make a modification that
results in a net emissions increase of at least 75,000 tpy CO2e; and
(ii) existing sources will be subject to title V due to their GHG
emissions if they emit 100,000 tpy CO2e in GHG emissions.  Under this
approach, which we will call the 100,000/75,000 approach, we estimate
that each year, compared to current levels, the permitting authorities
will need to issue GHG permits to two additional sources that newly
construct and to 915 additional sources that undertake modifications. 
Doing so will require 310,655 additional workload hours costing an
additional $24 million, compared to the current program.  For title V,
an additional 190 sources will require new title V permits each of the
first 3 years, and the permitting authorities’ associated costs will
be 141,322 work hours and $7 million more than the current program.  

The last approach we will describe here may be called the 50,000/50,000
approach, which, as discussed later, we adopt as the floor for
thresholds during the first 6 years after promulgation.  Under this
approach, (i) sources will be subject to PSD on account of their GHG
emissions if they newly construct and emit at least 50,000 tpy CO2e, or
if they are existing sources that emit at least 50,000 tpy CO2e of GHGs
and make a modification that results in a net emissions increase of at
least 50,000 tpy CO2e; and (ii) existing sources will be subject to
title V on account of their GHG emissions if they emit 50,000 tpy CO2e
in GHG emissions.  Under this approach, each year, the permitting
authorities will need to issue GHG permits to 3 additional sources that
newly construct and 1,900 that undertake modifications above current
permitting levels.  Doing so will require 613,986 additional workload
hours costing $47 million, compared to the current program.  For title
V, an additional 1,189 sources will require new title V permits each of
the first 3 years and the permitting authorities’ associated costs
will be 568,017 work hours and $26 million more than the current
program.  

We present the remaining entries in the table to illustrate how the cost
and burden estimates vary with increasing or decreasing thresholds
relative to those selected in this rule.  These variations are important
in understanding how alternative thresholds would compare to the ones
selected.  We also include entries reflecting the baseline (current
program without GHG permitting) and the burdens if we immediately
implemented the full statutory thresholds on January 2, 2011, without
tailoring or streamlining.

3.  “Absurd Results,” “Administrative Necessity,” and
“One-Step-at-a-Time” Legal Doctrines

a.  Introduction and Summary

Having described the factual underpinnings of our action, which are the
costs to sources and administrative burdens to permitting authorities,
we now describe the legal underpinnings.  They involve the framework for
analyzing agency-administered statutes, as established by the U.S.
Supreme Court in Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-43
(1984).  In this case, Chevron framework must take into account the
“absurd results,” “administrative necessity,” and
“one-step-at-a-time” legal doctrines.  We believe that each of these
doctrines provides independent support for our action, but in addition,
the three doctrines are directly intertwined and can be considered in a
comprehensive and interconnected manner.  Moreover, although each of the
three doctrines pre-date the 1984 Chevron decision, in which the U.S.
Supreme Court established the framework for construing
agency-administered statutes, each fits appropriately 

into the Chevron framework.

To reiterate, for convenience, the statutory provisions at issue: 
Congress, through the definition of “major emitting facility,”
applied the PSD program to include “any … source [[ that] emit[s],
or ha[s] the potential to emit, one hundred [or, depending on the source
category two hundred fifty] tons per year or more of any air
pollutant.”  CAA sections§§ 165(a), 

169(1).  In addition, Congress, through the definition of
“modification,” applied the PSD program to include “any physical
change in, or change in the method of operation of, a stationary source
which increases the amount of any air pollutant emitted by such source
or which results in the emission of any air pollutant not previously
emitted.”  CAA sections§§ 165(a), 169(2)(C), 111(a)(4).  Similarly,
Congress, through the definition of “major source,” specified that
the title V program includes “any stationary facility or source of air
pollutants which directly emits, or has the potential to emit, one
hundred tons per year or more of any air pollutant.”  CAA sections§§
502(a), 501(2)(B), 302(j).  EPA, through long-established regulatory
action, in the case of PSD, and long-established guidance, in the case
of title V, has interpreted these definitions narrowly so that they
apply only with respect to air pollutants that are subject to regulation
under the CAA.  

Applying these definitions by their terms, as interpreted narrowly by
EPA, to GHGgreenhouse gas sources at the present time would mean that
the PSD and title V programs would apply to an extraordinarily large
number of small sources, the sources would incur unduly high compliance
costs, and permitting authorities would face overwhelming administrative
burdens.  As a result, we believe Congress did not intend for us to
follow this literal reading, and instead, with this action, we chart a
course for tailoring the applicability provisions of the PSD program and
the title V program by phasing them in over time to the prescribed
extent.

For our authority to take this action, we rely in part on the “absurd
results” doctrine, because applying the PSD and title V requirements
literally (as previously interpreted narrowly by EPA) would not only be
inconsistent with congressional intent concerning the applicability of
the PSD and title V programs, but in fact would severely undermine
congressional purpose for those programs.  We also rely on the
“administrative necessity” doctrine, which applies because
construing the PSD and title V requirements literally (as previously
interpreted narrowely by EPA) would render it impossible for permitting
authorities to administer the PSD provisions.  The tailoring approach we
promulgate in this action is consistent with both doctrines.  It is also
consistent with a third doctrine, the “one-step-at-a-time” doctrine,
which authorizes administrative agencies under certain circumstances to
address mandates through phased action.

	Our discussion of the legal bases for this rule is organized as
follows:  In this section V.B.3, we provide an overview of the three
doctrines and describe how they fit into the Chevron framework for
statutory construction.  In section V.B.4, we discuss the PSD and title
V programs, including each program’s relevant statutory provisions,
legislative history, and regulatory history.  In sections V.B.5 and
V.B.6 we discuss the “absurd results” approach for PSD and title V,
respectively, that we are finalizing in our action.  In section V.B.7.,
we discuss additional rulemaking in which we may consider exempting
certain categories of sources from PSD and title V under the “absurd
results” doctrine.  In section V.B.8, we discuss the legal and policy
rationale for the phase-in schedule that we are adopting for applying
PSD and title V to GHG sources.  In section V.B.9 we discuss the
“administrative necessity” approach for PSD and title V,
respectively.  In section V.B.10, we discuss the third legal basis for
our action, the “one- step-at-a-time” doctrine.  

b.  The “Absurd Results” Doctrine

Turning first to the “absurd results” doctrine, we note at the
outset that we discussed the doctrine at length in the notice of
proposed rulemaking, and we incorporate by reference that discussion,
although we make some refinements to that discussion in this preamble. 
The starting point for EPA's interpretation of the PSD and title V
applicability provisions and reliance on the “absurd results”
doctrine is the familiar Chevron two-step analysis.  We discuss this
analysis in greater detail later, but in brief, in interpreting a
statutory provision, an agency must, under Chevron Stepstep 1, determine
whether Congress's intent on a particular question is clear; if so, then
the agency must follow that intent.  If the intent of the provision is
not clear, then the agency may, under Stepstep 2, fashion a reasonable
interpretation of the provision.  Chevron U.S.A. Inc. v. NRDC, 467 U.S.
837, 842-43 (1984).  

The courts consider the best indicator of congressional intent to be the
plain meaning of the statute.  However, the U.S. Supreme Court has held
that the literal meaning of a statutory provision is not conclusive
“in the ‘rare cases [in which] the literal application of a statute
will produce a result demonstrably at odds with the intentions of the
drafters’ … [in which case] the intention of the drafters, rather
than the strict language, controls.”  United States v. Ron Pair
Enterprises, 489 U.S. 235, 242 (1989).  This doctrine of statutory
interpretation may be termed the “absurd results” doctrine.

Although, as just noted, the U.S. Supreme Court has described the
“absurd results” cases as “rare,” in that case the Court seemed
to be referring to the small percentage of statutory-construction cases
that are decided on the basis of the doctrine.  The D.C. Circuit, in
surveying the doctrine over more than a century of jurisprudence,
characterized the body of law in absolute numbers as comprising
“legions of court decisions.”  In re Franklyn C. Nofziger, 925 F.2d
428, 434 (D.C. Cir. 1991).  Indeed, there are dozens of cases, dating
from 

within the past several years to well into the 19th century, in which
the U.S. Supreme Court has applied the “absurd results” doctrine to
avoid the literal application of a statute, or if not so holding, has
nevertheless clearly acknowledged the validity of the doctrine.  Some of
the more recent of these cases include:  Logan v. United States, 552
U.S. 23, 36-37 (2007) (“[s]tatutory terms, we have held, may be
interpreted against their literal meaning where the words ‘could not
conceivably have been intended to apply’ to the case at hand [citation
omitted]”); Nixon v. Missouri Municipal League, 541 U.S. 125, 132-33
(2004)  TA \l "Nixon v. Missouri Municipal League, 541 U.S. 125 (2004)"
\s "Nixon v. Missouri Municipal League, 541 U.S. 125 (2004)" \c 1  
(“any entity” includes private but not public entities); Raygor v.
Regents of Univ. of Minn., 534 U.S. 533, 542-45 (2002)  TA \l "Raygor v.
Regents of Univ. of Minn., 534 U.S. 533, 542-45 (2002)" \s "Raygor v.
Regents of Univ. of Minn., 534 U.S. 533, 542-45 (2002)" \c 1   
(“implying a narrow interpretation of … ‘any claim asserted’ so
as to exclude certain claims dismissed on Eleventh Amendment
grounds”); United States v. X-Citement Video, Inc., 513 U.S. 64, 69
(1994) (rejecting a literal interpretation of the statutory term
“knowingly” on grounds that Congress could not have intended the
“positively absurd” results that some applications of such an
interpretation would produce, “[f]or instance, a retail druggist who
returns an uninspected roll of developed film to a customer “knowingly
distributes” a visual depiction and would be criminally liable if it
were later discovered that the visual depiction contained images of
children engaged in sexually explicit conduct”); Rowland v. Cal.
Men’s Colony, 506 U.S. 194, 200 (1993) (finding that an artificial
entity such as an association is not a “person” under the statute,
and describing the absurdity doctrine as a “common mandate of
statutory construction”); United States v. Ron Pair Enterprises, 489
U.S. 235, 242 (1989) (the plain meaning of a statutory provision is not
conclusive “in the ‘rare cases [in which] the literal application of
a statute will produce a result demonstrably at odds with the intentions
of the drafters’ … [in which case] the intention of the drafters,
rather than the strict language, controls”);  Green v. Bock Laundry
Machine Company, 490 U.S. 504 (1989) (provision in Federal Rule of
Evidence that protects “the defendant” against potentially
prejudicial evidence, but not the plaintiff, refers to only criminal,
and not civil, defendants); Public Citizen v. United States Dep’t of
Justice, 491 U.S. 440, 453-54 (1989) (rejecting a broad, straightforward
reading of the term “utilize,” on grounds that a literal reading
would appear to require the absurd result that all of FACA’s
restrictions apply if a President consults with his own political party
before picking his Cabinet, and such a reading “was unmistakably not
Congress’ intention”); Watt v. Alaska, 451 U.S. 259, 266 (1981)
(rejecting reliance on plain statutory language and concluding that the
term “minerals” in section§ 401(a) of the Wildlife Refuge Revenue
Sharing Act applies only to minerals on acquired refuge lands; stating
“[t]he circumstances of the enactment of particular legislation may
persuade a court that Congress did not intend words of common meaning to
have their literal effect”); Train v. Colorado Public Interest
Research Group, Inc., 426 U.S. 1,  23-24 (1976) (prohibition in Federal
Water Pollution Control Act against discharging into navigable waters
“pollutants,” which are defined to include “radioactive
materials,” does not apply to three specific types of radioactive
materials); Jackson v. Lykes Bros. S.S. Co., 386 U.S. 731, 735 (1967)
(refusing to distinguish between a longshoreman hired by “an
independent stevedore company” and one hired by “the shipowner ….
. . to do exactly the same kind of work,” despite the clear terms of
the Act, and stating: “[w]e cannot hold that Congress intended any
such incongruous, absurd, and unjust result in passing this Act,” when
the Act was “designed to provide equal justice to every longshoreman
similarly situated”);  HYPERLINK
"http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=708&FindType
=Y&ReferencePositionType=S&SerialNum=1962103008&ReferencePosition=1067"
Lynch v. Overholser,  HYPERLINK
"http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=708&FindType
=Y&ReferencePositionType=S&SerialNum=1962103008&ReferencePosition=1067" 
369 U.S. 705, 710, (1962)  (statutory construction is not confined to
the “bare words of a statute”); United States v. Bryan, 339 U.S.
323, 338 (1950) (“Despite the fact that the literal language would
encompass testimony elicited by the House Committee in its questioning
of respondent relative to the production of the records of the
association, the Court will not reach that result if it is contrary to
the congressional intent and leads to absurd conclusions.  And we are
clearly of the opinion that the congressional purpose would be
frustrated if the words, “in any criminal proceeding,” were read to
include a 

prosecution for willful default under R.S. § 102.”).

	The D.C. Circuit has also handed down numerous decisions that applied
the absurd results doctrine to avoid a literal interpretation or
application of statutory provisions or that have acknowledged the
doctrine.  Some of the most recent ones include:  Arkansas Dairy
Cooperative Ass’n, Inc., v. U.S. Dep’t of Agriculture, 573 F.3d 815
(D.C. Cir. 2009) (rejecting the canon of construction that presumes that
Congress is aware of existing law pertinent to the legislation that it
enacts, when in this case, the presumption that Congress was aware of
the Departments definition of “hearing” would lead to “the absurd
result that Congress intended to impose a requirement with which the
Secretary could not comply;” stating:  “Courts, ‘in interpreting
the words of a statute, [have] some scope for adopting a restricted
rather than a literal or usual meaning of its words where acceptance of
that meaning would lead to absurd results …. . . or would thwart the
obvious purpose of the statute …. . . .’” (quoting In re Trans
Alaska Pipeline Rate Cases, 436 U.S. 631, (1978));   Buffalo Crushed
Stone, Inc. v. Surface Transportation Board, 194 F.3d 125, 129-30 (D.C.
Cir. 1999) (regulation of Surface Transportation Board providing that if
a notice of exemption “contains false or misleading information, the
use of the exemption is void ab initio” does not apply to a notice
containing false information when declaring the notice void ab initio
would undermine the goals of the governing statute; a conflict between
the “literal application of statutory language” and maintaining the
integrity of the regulatory scheme should be resolved by construing the
text in accordance with its purpose); Mova Pharm. Corp. v. Shalala, 140
F.3d 1060, 1068-69 (D.C. Cir. 1998) (as discussed at length later,
describes the “absurd results” doctrine in the context of the
Chevron framework for statutory construction; invalidates a Food and
Drug Administration’s (FDA) regulation designed to remedy what the FDA
described as the absurd result of a literal application of the statutory
provisions governing FDA approval of successive generic drug
applications, on grounds that “[i]n effect, the FDA has embarked upon
an adventurous transplant operation in response to blemishes in the
statute that could have been alleviated with more modest corrective
surgery;” states that “[t]he rule that statutes are to be read to
avoid absurd results allows an agency to establish that seemingly clear
statutory language does not reflect the "unambiguously expressed intent
of Congress," Chevron, 467); U.S. at 842, and thus to overcome the first
step of the Chevron analysis”v. Stewart, 104 F.3d 1377, 1388 (D.C.
Cir. 1997); Environmental Defense Fund v. EPA, 82 F.3d 451, 468-69 
(D.C. Cir. 1996) (although Act requires that a federal action conform to
the SIP that is currently in place, EPA may instead require conformity
to a revised implementation plan that state commits to develop;
“[t]his is one of those rare cases …* ** [that] requires a more
flexible, purpose-oriented interpretation if we are to avoid ‘absurd
or futile results.’”); American Water Works Ass’n v. EPA, 40 F.3d
1266, 1271 (D.C. Cir. 1994) (holding that EPA’s interpretation of the
term “feasible” so as to require a treatment technique instead of a
an maximum contaminant level (MCL) for lead is reasonable; the court
stated: “Indeed, where a literal reading of a statutory term would
lead to absurd results, the term simply ‘has no plain meaning …. . .
and is the proper subject of construction by the EPA and the courts.’ 
If the meaning of ‘feasible’ suggested by the NRDC is indeed its
plain meaning, then this is such a case; for it could lead to a result
squarely at odds with the purpose of the Safe Drinking Water Act.” 
(quoting Chem. Mfrs. Ass’n v. Natural Res. Def. Council, Inc., 470
U.S. 116, 126 (1985))  (citation omitted); In re Nofziger, 925 F.2d 428,
434-35 (D.C. Cir. 1991) (provision authorizing payment of attorney fees
to the subject of an investigation conducted by an independent counsel
of the Department of Justice only if “no indictment is brought”
against such individual does not preclude payment of attorney fees when
an indictment is brought but is determined to be invalid). 

c.  The “Administrative Necessity” Doctrine

In the proposed rulemaking, we also described in detail the
“administrative necessity” doctrine, 74 FR 55311 col. 3 to 55318
col. 3, and we incorporate that discussion by reference into this
notice.  Under this doctrine, if a statutory provision, however clear on
its face, is impossible for the agency to administer, then the agency is
not required to follow the literal requirements, and instead, the agency
may adjust the requirements in as refined a manner as possible to assure
that the requirements are administrable, while still achieving
Congress's overall intent.  The D.C. Circuit set out the doctrine of
"administrative necessity" in a line of cases that most prominently
includes Alabama Power v. Costle, 636 F.2d 323 (D.C. Cir. 1980).  The
Court cited the doctrine most recently in New York v. EPA, 443 F.3d 880,
884, 888 (D.C. Cir. 2006).

As we stated in the proposed rulemaking, “We believe that the
“administrative necessity” case law establishes a three-step process
under which an administrative agency may, under the appropriate
circumstances, in effect revise statutory requirements that the agency
demonstrates are impossible to administer so that they are
administrable.”  74 FR 55315 col. 1.  Specifically:

[T]he three steps are as follows:  When an agency has identified what it
believes may be insurmountable burdens in administering a statutory
requirement, the first step the agency must take is to evaluate how it
could streamline administration as much as possible, while remaining
within the confines of the statutory requirements.  The second step is
that the agency must determine whether it can justifiably conclude that
even after whatever streamlining of administration of statutory
requirements (consistent with those statutory requirements) it conducts,
the remaining administrative tasks are impossible for the agency because
they are beyond its resources, e.g., beyond the capacities of its
personnel and funding.  If the agency concludes with justification that
it would be impossible to administer the statutory requirements, as
streamlined, then the agency may take the third step, which is to phase
in or otherwise adjust the requirements so that they are administrable. 
However, the agency must do so in a manner that is as refined as
possible so that the agency may continue to implement as fully as
possible Congressional intent.

74 FR 55315 cols. 1-2.

	It should also be noted that we believe the administrative burdens
encountered by the state and local permitting authorities are fully
relevant under the “administrative necessity” doctrine.  Although
the caselaw that discusses the doctrine focuses on federal agencies (,
see 74 FR 55312-14), under the CAA, state and local agencies are EPA’s
partners in implementing provisions of the CAA, and have primary
responsibility for implementing the PSD program.  They generally adopt
EPA’s PSD requirements in their SIPs, as required under CAA section
110(a)(2)(C); and they generally adopt EPA’s title V requirements in
their title V programs, as required under CAA section 502(d).  They
issue the PSD and title V permits and are responsible in the first
instance for enforcing the terms of the permits.  In all these respects,
the law that the state and local permitting authorities administer is
both federal and state law.  Under certain circumstances, EPA may become
responsible for permit issuance and enforcement in the first instance,
but even then, EPA may, and frequently has, delegated those duties to a
state, in which case, the state implements federal law directly.  Thus,
although the PSD and title V programs are federal requirements, for the
most part, it is the states that implement those programs.  For this
reason, the administrative burdens that the states face in implementing
the programs are relevant in determining the applicability of the
“administrative necessity” doctrine.

d.  “One-Step-at-a-Time” Doctrine

In addition to the “absurd results” and “administrative
necessity” doctrines, another judicial doctrine supports at least part
of EPA’s Tailoring Rule, and that is the doctrine that agencies may
implement statutory mandates one step at a time, which we will call the
“one-step-at-a-time” doctrine.  In the notice of proposed
rulemaking, we also described this doctrine and recent case law applying
it.  74 FR 55,319 col. 1-3.  As we noted, that the U.S. Supreme Court
recently described the doctrine in Massachusetts v. EPA, 549 U.S. 497,
524 (2007), as follows: “Agencies, like legislatures, do not generally
resolve massive problems in one fell regulatory swoop;” and instead
they may permissibly implement such regulatory programs over time,
“refining their preferred approach as circumstances change and as they
develop a more nuanced understanding of how best to proceed.”  We
assume familiarity with our discussion in the proposal, but we expand
upon it here to review the caselaw in greater detail and to highlight
certain components of the doctrine that are particularly relevant to the
Tailoring Rule.

The roots of the doctrine go back at least to the D.C. Circuit’s 1979
decision in United States Brewers Association, Inc. v. EPA, 600 F.2d 974
(D.C. Cir. 1979).  There, the Court considered a challenge to EPA’s
guidelines for managing beverage containers, which EPA was required to
promulgate under the Resource Conservation and Recovery Act of 1976
(RCRA).  RCRA gave EPA one year to promulgate the guidelines.  EPA
promulgated a partial set of guidelines, started two others, and was
challenged before the year was out by petitioners who objected to the
initial guideline, saying it fell short of the statutory mandate.  The
Court upheld the initial guideline, stating:  “Under these
circumstances we think the question of whether the Agency has fully
satisfied the mandate of the statute is not fit for judicial review at
this time, when the Agency, still well within the one-year period
granted by statute, is deeply involved in the process of formulating
rules designed to carry out the congressional mandate.  The Agency might
properly take one step at a time.”  States Brewers Association, Inc.
v. EPA, 600 F.2d at 982.	

The Court addressed the doctrine at greater length in National
Association of Broadcasters v. FCC, 740 F.2d 1190, 1209-14 (D.C. Cir.
1984).  There, the Court noted that under certain statutory schemes,
step-by-step agency action might not be authorized; but the Court
emphasized that when it is authorized, it may offer significant
benefits; and the Court went on to delineate some of the circumstances
under which its use is justified.  In that case, the Court held that
Federal Communications Commission (FCC) acted reasonably in making a
spectrum allocation decision that granted direct broadcast satellite
service priority use of a gigahertz (GHz) band in 5-years time, and -
although acknowledging that fixed service users that were, at that time,
using that band, would have to relocate to other bands – in postponing
the details of the fixed service relocation to future proceedings.  The
Court described in some detail “[t]he circumstances under which …
[an] agency may defer resolution of problems raised in a rulemaking,”
as follows:  

	The requisite judgment is in essence a pragmatic one.  In an ideal
world, of course, agencies would act only after comprehensive
consideration of how all available alternatives comported with a
well-defined policymaking objective, and in some circumstances, statutes
indeed mandate that agencies proceed by only such a course ….  But
administrative action generally occurs against a shifting background in
which facts, predictions, and policies are in flux and in which an
agency would be paralyzed if all the necessary answers had to be in
before any action at all could be taken ….  We have therefore
recognized the reasonableness of [an agency’s] decision to engage in
incremental rulemaking and to defer resolution of issues raised in a
rulemaking even when those issues are “related”‘related’ to the
main ones being considered ….  At the same time, [an agency] cannot
‘restructure [an] entire industry on a piecemeal basis’ through a
rule that utterly fails to consider how the likely future resolution of
crucial issues will affect the rule’s rationale ….

	Drawing a line between the permissible and the impermissible in this
area will generally raise two questions.  First the agency will likely
have made some estimation, based upon evolving economic and
technological conditions, as to the nature and magnitude of the problem
it will have to confront when it comes to resolve the postponed issue. 
With regard to this aspect of the agency’s decision, as long as the
agency’s predictions about the course of future events are plausible
and flow from the factual record compiled, a reviewing court should
accept the agency’s estimation ….  Second, once the nature and
magnitude of the unresolved issue is determined, the relevant question
is whether it was reasonable, in the context of the decisions made in
the proceeding under review, for the agency to have deferred the issue
to the future.  With respect to that question, postponement will be most
easily justified when an agency acts against a background of rapid
technical and social change and when the agency’s initial decision as
a practical matter is reversible should the future proceedings yield
drastically unexpected results.  In contrast, an incremental approach to
agency decision making is least justified when small errors in
predictive judgments can have catastrophic effects on the public welfare
or when future proceedings are likely to be systematically defective in
taking into account certain relevant interests….  

740 F.2d at 1210-11 (citations omitted).

In City of Las Vegas v. Lujan, 891 F.2d 927 (D.C. Cir. 1989), the Court
suggested that one component of upholding partial agency compliance with
a statutory directive is evidence that the agency was on track for full
compliance.  There, the Court upheld the Department of Interior’s
decision to list the population of desert tortoises living north and
west of the Colorado River (the “Mojave” population) as endangered
species, but not the nearby population living south and east of the
river (the “Sonoran” population).  The agency explained that the
Mojave population faced certain threats that the Sonoran population did
not, and the Court found nothing to fault in that reasoning.  The Court
added:  “Since agencies have great discretion to treat a problem
partially, we would not strike down the listing if it were a first step
toward a complete solution, even if we thought it ‘should’ have
covered both the Mojave and Sonoran populations.”  City of Las Vegas
v. Lujan, 891 F.2d 927, 935 (D.C. Cir. 1989) (footnote omitted).   

In Grand Canyon Air Tour Coalition v. F.A.A., 154 F.3d 455 (D.C. Cir.
1998), the D.C. Circuit added another component to the
“one-step-at-a-time” doctrine:  While reiterating that
“ordinarily, agencies have wide latitude to attack a regulatory
problem in phases and that a phased attack often has substantial
benefits,”  id. at 471, the Court went on to uphold partial agency
action even when that action was long-delayed.  There, the relevant
statute was the Overflights Act, which required the Federal Aviation
Administration (FAA) to reduce aircraft noise from sightseeing tours in
Grand Canyon National Park, and established the goal of “substantial
restoration of natural quiet and experience of the park.”  The statute
required the agency to develop a plan to implement the statutory
requirements within 120 days after enactment, and report to Congress
within 2 years after the date of the plan as to the plan’s success. 
In fact, the FAA did not develop, through rulemaking, a plan until ten
years after enactment, and when it did, it acknowledged that the plan
was only a partial one, and that it would need two more rules and
another ten years to meet the statutory goal of substantial restoration.
 Although recognizing that the Overflights Act did not establish an
explicit timetable for meeting the statutory goal, the Court stated that
“[t]he language of the Overflights Act does manifest a congressional
concern with expeditious agency action,” and described the agency’s
action variously as “tardy,” “undeniably slow,” and “slow and
faltering.”  Id. at 476-77.  Even so, the Court upheld the FAA’s
action against different challenges from appellants and intervenors that
(i) the agency acted unreasonably in not promulgating a complete plan to
meet the statutory goal, instead of promulgating just the first step;
and (ii) the agency acted unreasonably in not waiting until it had a
complete plan before promulgating the first step.  The Court stated: 
“We agree that it would be arbitrary and capricious for an agency
simply to thumb its nose at Congress and say – without any explanation
– that it simply does not intend to achieve a congressional goal on
any timetable at all….,” but went on to emphasize that the FAA’s
rule was the first of three that the agency assured would achieve the
statutory goal.  The Court cited City of Las Vegas v. Lujan, discussed
previously, for the proposition that “a court will not strike down
agency action ‘if it were a first step toward a complete
solution.’”  Grand Canyon Air Tour Coalition v. F.A.A., 154 F.3d
455, 477-78 (D.C. Cir. 1998).

e.  Consistency of Doctrines with Chevron Framework

Although the formation of the “absurd results,” “administrative
necessity,” and “one-step-at-a-time” doctrines pre-date the
Chevron two-step analysis for construing statutes that Congress has
authorized an agency to administer, we believe that the doctrines can be
considered very much a part of that analysis, and courts have continued
to apply them post-Chevron.  Under Chevron Stepstep 1, an agency must
determine whether “Congress has directly spoken to the precise
question at issue.”  If so, “the court, as well as the agency, must
give effect to the unambiguously expressed intent of Congress.” 
However, if “the statute is silent or ambiguous with respect to the
specific issue, the question for the court is whether the agency’s
answer is based on a permissible construction of the statute.”  

Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-42 (1984).

Thus, Step step 1 under Chevron calls for determining congressional
intent for the relevant statutory directive on the specific issue
presented.  To determine Congress’s intent, the agency must look first
to the statutory terms in question, and generally interpret them
according to their literal meaning, within the overall statutory
context, and perhaps with reference to the legislative history.  If the
literal meaning of the statutory requirements is clear then, absent
indications to the contrary, the agency must take it to indicate
congressional intent and must implement it.  Even if the literal meaning
of the statutory requirements is not clear, if the agency can otherwise
find indications of clear congressional intent, such as in the
legislative history, then the agency must implement that congressional
intent.

The D.C. Circuit has indicated that the “absurd results” doctrine
fits into the Chevron Step step 1 analysis in the following way:  Recall
that in the cases in which the courts have invoked this doctrine, the
literal meaning of the statutory requirements has been clear, but has
led to absurd results.  This can occur when the literal meaning, when
applied to the specific question, conflicts with other statutory
provisions, contradicts congressional purpose as found in the
legislative history – and, in particular, undermines congressional
purpose – or otherwise produces results so illogical or otherwise
contrary to sensible public policy as to be beyond anything Congress
would reasonably have intended.  See United States v. Ron Pair
Enterprises, 489 U.S. 235, 242-43 (1989); Griffin v. Oceanic
Contractors, Inc., 458 U.S. 564, 571 (1982).

Under these circumstances, the agency must not take the literal meaning
to indicate congressional intent.  As the D.C. Circuit has explained,
“where a literal reading of a statutory term would lead to absurd
results, the term ‘simply has no plain meaning …. . . and is the
proper subject of construction by the EPA and the court.’” 
American Water Works Assn v. EPA, 40 F.3d 1266, 1271 (D.C. Cir. 1994)
(quoting Chemical Manufacturers’ Association v. NRDC, 470 U.S. 116,
126 (1985)).  Under these circumstances, if the agency can find other
indications of clear congressional intent, then the agency must
implement that intent.  See United States v. Ron Pair Enterprises, 489
U.S. 235, 242-43 (1989).  This may mean implementing the statutory
terms, albeit not in accordance with their literal meaning, but in a way
that achieves a result that is as close as possible to congressional
intent.  As the D.C. Circuit said in Mova Pharm. Corp. v. Shalala, 140
F.3d 1060 (D.C. Cir. 1998):

The rule that statutes are to be read to avoid absurd results allows an
agency to establish that seemingly clear statutory language does not
reflect the “‘unambiguously expressed intent of Congress,”’ …
and thus to overcome the first step of the Chevron analysis.  But the
agency does not thereby obtain a license to rewrite the statute.  When
the agency concludes that a literal reading of a statute would thwart
the purposes of Congress, it may deviate no further from the statute
than is needed to protect congressional intent ….  . . .  [T]he agency
might be able to show that there are multiple ways of avoiding a
statutory anomaly, all equally consistent with the intentions of the
statute’s drafters …. . . .  In such a case, we would move to the
second stage of the Chevron analysis, and ask whether the agency’s
choice between these options was “‘based on a permissible
construction of the statute.”’  Otherwise, however, our review of
the agency’s deviation from the statutory text will occur under the
first step of the Chevron analysis, in which we do not defer to the
agency’s interpretation of the statute..” 

Id. at 1068 (quoting Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842, 843
(1984) (citations omitted)).

The “administrative necessity” doctrine is not as well developed as
the “absurd results” doctrine, so that the courts have not had
occasion to explicitly describe how the doctrine fits into the Chevron
analytical framework.  However, we think that a reasonable approach, in
line with the D.C. Circuit’s approach to the “absurd results”
doctrine as just described, is as follows:  Recall that under the
“administrative necessity” doctrine, an agency is not required to
implement a statutory provision in accordance with the literal
requirements when doing so would be impossible, but the agency must
nevertheless implement the provision as fully as possible.  Placed in
the context of the Chevron framework, we think that that the
“administrative necessity” doctrine is based on the premise that
inherent in the statutory design is the presumption that Congress does
not intend to impose an impossible burden on an administrative agency. 
See Alabama Power v. Costle, 636 F.2d 323, 357 (D.C. Cir. 1980)
(describing the “administrative necessity” approach as one of the
“limited grounds for the creation of exemptions [that] are inherent in
the administrative process, and their unavailability under a statutory
scheme should not be presumed, save in the face of the most unambiguous
demonstration of congressional intent to foreclose them”). 

Therefore, if the literal meaning of a statutory directive would impose
on an agency an impossible administrative burden, then that literal
meaning should not be considered to be indicative of congressional
intent.  Rather, congressional intent should be considered to achieve as
much of the statutory directive as possible.  As a result, the agency
must adopt an approach that implements the statutory directive as fully
as possible.  This is consistent with the D.C. Circuit’s holding in
Mova Pharm. Corp that if congressional intent is clear, but the plain
meaning of a statute does not express that intent, then the agency must,
under Chevron Stepstep 1, select an interpretation that most closely
approximates congressional intent.  Mova Pharm. Corp, 140 F.3d at 1068.

	The “one-step-at-a-time” doctrine fits into the Chevron framework
in much the same manner that the “administrative necessity” doctrine
does.  That is, inherent in the statutory design is the presumption that
Congress intended an agency, under certain circumstances, to implement
the statutory requirements in a one-step-at-a-time fashion, as long as
the agency stays on a path towards full implementation.  

Under all of the circumstances described previously, congressional
intent is clear – whether it is indicated by the plain language or
otherwise – and as a result, the agency must follow that intent under
Chevron Stepstep 1.  On the other hand, the agency may determine that
congressional intent on the specific issue is not clear.  In these
cases, the agencies should proceed to Chevron Stepstep 2 and select an
interpretation or an application that is a permissible construction of
the statute.  This situation generally occurs when the statutory
provisions are ambiguous or silent as to the specific issue, and there
are no other indications of clear congressional intent.  In addition, in
some cases in which the literal meaning of the statutory provision, when
applied to the specific question, leads to an absurd result – and,
therefore, the statutory provision should be considered not to have a
plain meaning – there may be no other indications of clear
congressional intent.  Under all these circumstances, the agency is
authorized, under Chevron Stepstep 2, to develop and implement a
construction of the statute that the courts will uphold as long as it is
reasonable.

As noted previously, the D.C. Circuit, has pointed out that this
situation may also occur when the literal language leads to an absurd
result, and, in attempting to implement congressional intent, the agency
is “able to show that there are multiple ways of avoiding a statutory
anomaly, all equally consistent with the intentions of the statute’s
drafters …. . . .  In such a case, we would move to the second stage
of the Chevron analysis, and ask whether the agency’s choice between
these options was ‘based on a permissible construction of the
statute.’”  Mova Pharm. Corp, 140 F.3d at 1068.  As the U.S. Supreme
Court has recently said, although in a context different than “absurd
results,” “ In the end, the interpretation applied by EPA "governs
if it is a reasonable interpretation of the statute - not necessarily
the only possible …. . . interpretation, nor even the interpretation
deemed most reasonable by the courts."  Entergy Corp. v. Riverkeeper,
Inc., 129 S.Ct. 1498. 1505 (2009).

As a related matter, although the courts have described Chevron Stepstep
2 as requiring that the agency’s policy be “a permissible
construction of the statute,” see Mova Pharm. Corp, 140 F.3d at 1068
(quoting Chevron, 467 U.S. at 842-43), if the statutory requirements
cannot be read literally because doing so would produce “absurd
results,” then the agency’s policy need not be completely consistent
with those particular requirements.  The policy must still, in order to
be upheld, be consistent with Congress’s actions, but those actions
should be considered to afford the agency broad discretion considering
that both the statutory terms cannot be considered dispositive and
underlying congressional intent is not clear.  As the U.S. Supreme Court
has recently said, although in a context different than “absurd
results,” “ In the end, the interpretation applied by the agency
governs if it is a reasonable interpretation of the statute -- not
necessarily the only possible …. . . interpretation, nor even the
interpretation deemed most reasonable by the courts."  Entergy Corp. v.
Riverkeeper, Inc., 129 S.Ct. 1498. 1505 (2009).

There is another aspect of the “administrative necessity” doctrine
worth noting in this context:  The doctrine applies when (i) a literal
application of the statutory directive to the case at hand is impossible
for the agency to administer; and (ii) even so, either Congress clearly
intended the statutory directive to apply to the case at hand or, if
Congress did not clearly intend that, then the agency reasonably
construes the statute to apply the statutory directive to the case at
hand.  In contrast, if Congress did not intend the statutory directive
to apply to the case at hand, or if congressional intent is uncertain
and the agency considers another approach to be reasonable, then the
“administrative necessity” doctrine would not apply.  As a result,
the agency would not be required to implement the statutory directive to
the case at hand at all, much less in a more administrable fashion.

f.  Interconnectedness of the Legal Doctrines

Although we believe that each of the “absurd results,”
“administrative necessity,” and “one-step-at-a-time” doctrines
provide independent support for our action, we also believe that in this
case, the three doctrines are intertwined and form a comprehensive basis
for EPA’s tailoring approach.  As just discussed, each of the three
doctrines is tied into the Chevron analytical framework because each is
designed to give effect to underlying intent.  As discussed previously,
each of the three doctrines comes into play in this case because a
literal reading of the PSD and title V applicability provisions results
in insurmountable administrative burdens.  Those insurmountable
administrative burdens - along with the undue costs to sources -- must
be considered “absurd results” that would undermine congressional
purpose for the PSD and title V programs.  Under the “absurd
results” doctrine, EPA is authorized not to implement the
applicability provisions literally – that is, not to implement them as
applying on the January 2, 2011 date that PSD and title V are triggered
to all GHG sources at or above the statutory thresholds -- but instead
to tailor them in a manner consistent with congressional intent.  That
means applying the PSD and title V requirements through a phase-in
approach to as many sources as possible and as quickly as possible,
starting with the largest sources, as EPA does with this Tailoring Rule,
 at least to a certain point.  By the same token, the insurmountable
administrative burdens bring into play the “administrative
necessity” doctrine, under which EPA is, again, authorized not to
implement the applicability provisions literally, but instead to apply
them in a manner consistent with administrative resources.  This also
means phasing them in through the approach in the Tailoring Rule. 
Finally, the “one-step-at-a-time” doctrine, which authorizes
incremental action by agencies to implement statutory requirements under
certain circumstances, provides further support for the phased tailoring
approach in the Tailoring Rule.

g.  Application of Chevron Approach

The Chevron analytical approach, and the three legal doctrines at issue
here, apply to this action in the following manner:  To reiterate, for
convenience, the statutory provisions at issue:  Congress, through the
definition of “major emitting facility,” applied the PSD program to
include (i) “any … stationary sources of air pollutants which emit
or have the potential to emit, one hundred [or, depending on the source
category, two hundred fifty] tons per year or more of any air
pollutant,” CAA sections§§ 165(a), 169(1); and (ii) and such sources
that undertake a physical or operational change that “increases the
amount of any air pollutant emitted” by such 

sources, CAA sections§§ 165(a), 169(2)(C), 111(a)(4).  Similarly,
Congress, through the definition of “major source,” specified that
the title V program includes “any stationary facility or source of air
pollutants which directly emits, or has the potential to emit, one
hundred tons per year or more of any air pollutant.”  CAA sections§§
502(a), 501(2)(B), 302(j).  EPA, through long-established regulatory
action, in the case of PSD, and long-established interpretation, in the
case of title V, has interpreted these definitions so that they apply
only with respect to air pollutants that are subject to regulation under
the CAA.  

For each of these applicability provisions, the approach under Chevron
is as follows:  Under Chevron Stepstep 1, we must determine whether
Congress expressed an intention on the specific question, which is
whether the PSD or title V applicability provisions apply to GHG
sources.  Said differently, the specific question is whether, in the
case of PSD, Congress intended that the definitions of “major emitting
facility” and “modification” apply, respectively, to all GHG
sources that emit at least 100 or 250 tpy or GHGs and to all physical or
operational changes by major emitting facilities that “increase[] the
amount” of GHGs; and, in the case of title V, whether the definition
of “major source” applies to all GHG sources that emit at least 100
tpy GHGs.

To determine intent, we must first examine the terms of the statute in
light of their literal meaning.  Here, the literal reading of each
provision covers GHG sources.  For PSD, a GHG source that emits at least
100 or 250 tpy GHGs literally qualifies as “stationary source [] of
air pollutants which emit[s] or ha[s] the potential to emit, one hundred
[or two hundred fifty] tons per year or more of any air pollutant
[subject to regulation under the CAA].”  CAA section§ 169(1).  For
modifications, a physical or operational change that increases the
amount of GHG emissions qualifies as a “modification” because it
“increases the amount of any air pollutant emitted” by the source. 
Similarly, for title V, a GHG source that emits at least 100 tpy GHGs
literally qualifies as “any stationary facility or source of air
pollutants which directly emits, or has the potential to emit, one
hundred tons per year or more of any air pollutant [subject to
regulation under the CAA].”  CAA sections§§ 502(a), 501(2)(B),
302(j).  

Although each definition is clear that it applies to GHG sources as a
general matter, However, applying each definition in accordance with its
literal meaning to all GHG sources at the specified levels of emissions
and at the present time – in advance of the development of
streamlining methods and greater permitting authority expertise and
resources -- would create undue costs for sources and impossible
administrative burdens for permitting authorities.  These results are
not consistent with other provisions of the PSD and title V
requirements, and are inconsistent with – and, indeed, undermine –
congressional purposes for the PSD and title V provisions.  Accordingly,
under the “absurd results” doctrine, neither the PSD definition of
“major emitting facility” nor “modification” nor the title V
definition of “major source,” should be applied literally to all GHG
sources, and therefore none should be considered to have a literalplain
meaning with respect to its application to all GHG sources.

In analyzingparsing the provisions of each definition more closely, we
believe that each has four terms, any one of which could be considered
not to have its literal meaning, in this respect.  Specifically, each
provision includes (i) the term “any … source,” or “a stationary
source,” and that term could be considered not to refer literally to
all of the GHG sources; (ii) either the term “two hundred fifty tons
per year” or “100 tons per year,” or the term “increases the
amount,” and those terms could be considered not to refer literally to
the tonnage amount of emissions from all of the GHG sources; (iii) the
term “any air pollutant,” and that term could be considered not to
refer literally to the emissions from all of the GHG sources; and (iv)
the term “subject to regulation under the CAA” (which we have
interpreted “any air pollutant” to include), and that term could be
considered not to refer literally to the emissions from all of the GHG
sources.  As long as any one of those fourthree terms mayshould be
considered not to have its literal meaning as applied to GHG sources,
then the definition as a whole – again, for PSD, the terms “major
emitting facility” or “modifications,” and for title V, the term
“major source” – cannot be considered to apply literally to GHG
sources.  Because we read the terms together, as integral parts of each
definition as a whole, we do not think that the choice of which of those
fourthree terms within each definition cannot be considered to apply
literally to GHG sources has substantive legal effect.  In other words,
we believe that any one of these terms, or all of them together as part
of each definition as a whole, should be considered not to apply
literally in the case of GHG sources.

Having determined that each definition does not have a literalplain
meaning with respect to the applicability of on the specific question of
whether PSD or title V applies to all GHG sources, we must next inquire
as to whether Congress has nevertheless expressed an intent on that
question through other means.  We discuss the statutory terms and
legislative history of the PSD and title V provisions in more detail
later, but for now it suffices to say that on the issue of whether PSD
and title V apply to GHG sources, we believe that congressional intent
is clear, and that is to apply PSD and title V to GHG sources generally.
 We believe that this intent is clear from the broad phrasing of the
applicability provisions – as noted earlier, the definitions apply by
their terms to GHG source generally, even though the definitions should
not be applied literally to all GHG sources - the fact that the various
components of the PSD and title V programs can be readily applied to GHG
sources, and the fact that the two programs can readily accommodate at
least some GHG sources.  As a result, we believe that as a matter of
Chevron Step step 1, PSD and title V generally apply to GHG sources. 
Our previous regulatory action defining the applicability provisions
made this clear, and we do not reopen this issue in this rulemaking. 
Moreover, even if this long-established regulatory position were not
justifiable based on Chevron step 1 – on the grounds that in fact,
congressional intent on this point is not clear -- then we believe that
this position, that the statutory provisions to apply PSD and title V
generally to GHG sources, was justified under Chevron step 2.  

On the issue of how to apply PSD to GHG sources, including the specific
threshold levels and the timing, we believe that Congress could be
considered to have expressed a clear intent that GHG sources be included
in the PSD program at as close to the statutory thresholds as possible,
and as quickly as possible, and at least to a certain point, all as
consistent with the need to assure that the PSD program does not impose
undue costs on sources or undue administrative burdens on the permitting
authorities.  Under this view, EPA would be required at Chevron Stepstep
1 to adopt the Tailoring Rule because, by phasing in PSD applicability,
it most closely gives effect to Congress’s intent.  Under these
circumstances, EPA is authorized to exercise its expert judgment as to
the best approach for phasing in the application of PSD to GHG sources.

Even so, we recognize that it could be concluded that on the issue of
how to apply PSD to GHG sources, congressional intent is unclear.  Under
these circumstances, EPA has the discretion at Chevron Stepstep 2 to
adopt the Tailoring Rule because it is a reasonable interpretation of
the statutory requirements (remaining mindful that the applicability
requirements cannot be applied literally).  Under the Tailoring Rule,
EPA seeks to include as many GHG sources in the permitting programs at
as close to the statutory thresholds as possible, and as quickly as
possible, although we recognize that we ultimately may stop the phase-in
process short of the statutory threshold levels.    

As for title V, we believe that taken together, the various statutory
requirements and statements in the legislative history do not evidence a
clear congressional intent for how title V is to be applied to GHG
sources.  As discussed later, the relevant title V requirements and
statements in legislative history differ from PSD, not least because
they include provisions that concern empty permits that point in
different directions.  As a result, here, too, EPA has the discretion at
Chevron Stepstep 2 to adopt the Tailoring Rule as a reasonable
interpretation of the statutory requirements.  Alternatively, even if
the statute does express a clear intent as to title V that, similar to
PSD, title V requirements must be phased in as closely to the statutory
threshold as possible and as quickly as possible, this Tailoring
Ruletailoring rule is consistent with that intent.  

It should also be noted that although EPA has concluded that applying
the PSD and title V applicability provisions literally in the case of
GHG sources would produce “absurd results” and therefore is not
required, this conclusion has no relevance for applying other CAA
requirements – such as the requirements concerning endangerment and
contribution findings under CAA section 202(a)(1) or emission standards
for new motor vehicles or new motor vehicle engines under CAA section
202 -- to GHGs or GHG sources.  EPA’s conclusions with respect to the
PSD and title V applicability requirements are based on the specific
terms of those requirements, other relevant PSD and title V provisions,
and the legislative history of the PSD and title V programs.

Within the context of the Chevron framework, the “administrative
necessity” doctrine applies as follows:  Under the doctrine, Congress
is presumed to intend that the PSD and title V applicability
requirements be administrable.  Here, those applicability requirements,
if applied to GHG sources in accordance with their literal meaning,
would be impossible to administer.  Accordingly, under Chevron Stepstep
1, it is consistent with congressional intent that EPA and the
permitting authorities be authorized to implement the applicability
requirements in a manner that is administrable, that is, through the
tailoring approach.  

As for the “one-step-at-a-time” doctrine, we believe it applies
within the Chevron framework in conjunction with the “absurd
results” and “administrative necessity” doctrines.  As we discuss
elsewhere, the PSD and title V applicability provisions by their terms
require that sources at or above the 100/250 tpy thresholds comply with
PSD and title V requirements at the time those requirements are
triggered, which is when GHGs become subject to regulation.  Therefore,
if the literal meaning of the applicability provisions as applied to GHG
sources were controlling – that is, if it reflected congressional
intent -- it would foreclose use of the one-step-at-a-time doctrine to
implement a phase-in approach.  However, the literal meaning is not
controlling because - in light of the absurd results, including the
insurmountable administrative burdens, that would result from the
literal meaning -- congressional intent is not to require the
application of the PSD and title V requirements to all GHG sources at or
above the statutory thresholds at the time that GHGs become subject to
regulation.  Instead, as described previously, we consider congressional
intent for the applicability provisions, as applied to GHG sources,
either (i) to be clear that PSD and title V should be phased in for GHG
sources as quickly as possible, or (ii) to be unclear, so that EPA may
reasonably choose to phase PSD and title V in for those sources in that
manner.  Under either view, congressional intent for PSD and title V
applicability to GHG sources accommodates the “one-step-at-a-time”
approach.  

4.  The PSD and Title V Programs

Having discussed both the factual underpinnings and, immediately above,
the legal underpinnings for our tailoring approach, we now discuss the
PSD and title V programs themselves, including, for each program, the
key statutory provisions, their legislative history, and the relevant
regulations and guidance documents through which EPA has implemented the
provisions.  We start with the PSD program.

a.  The PSD program

(1)  PSD Provisions

Several PSD provisions are relevant for present purposes because of the
specific requirements that they establish and the window that they
provide into congressional intent.  These provisions start with the
applicability provisions, found in CAA sections 165(a) and 169(1), which
identify the new sources subject to PSD, and CAA section §111(a)(4),
which describes the modifications of existing sources that are subject
to PSD.  CAA section §165(a) provides:

	No major emitting facility on which construction is commenced after
August 7, 1977, may be constructed in any area to which this part
applies unless—

	(1) a permit has been issued for such proposed facility in accordance
with this part setting forth emission limitations for such facility
which conform to the requirements of this part;

	(2) the proposed permit has been subject to a review in accordance with
this section …,* * *, and a public hearing has been held with
opportunity for interested persons including representatives of the
Administrator to appear and submit written or oral presentations on the
air quality impact of such source, alternatives thereto, control
technology requirements, and other appropriate considerations;

...

* * *

	(4) the proposed facility is subject to the best available control
technology for each pollutant subject to regulation under this chapter
emitted from, or which results from, such facility ….* * * *.  

The term "major emitting facility" is defined, under CAA section
§169(1) to include:

…* * * stationary sources of air pollutants which emit, or have the
potential to emit, one hundred tons per year or more of any air
pollutant from [28 listed] types of stationary sources.  …* * *   Such
term also includes any other source with the potential to emit two
hundred and fifty tons per year or more of any air pollutant.  This term
shall not include new or modified facilities which are nonprofit health
or education institutions which have been exempted by the State.

As for modification of existing sources, CAA section 169(1)(C)  provides
that the term "construction," as used in CAA section 165(a) (the PSD
applicability section) "includes the modification (as defined in section
111(a)(4)) of any source or facility."  Section 111(a)(4), in turn,
provides: 

The term "modification" means any physical change in, or change in the
method of operation of, a stationary source which increases the amount
of any air pollutant emitted by such source or which results in the
emission of any air pollutant not previously emitted.

As interpreted by EPA regulations, these provisions, taken together,
provide that new stationary sources are subject to PSD if they emit at
the 100/250-tpy thresholds air pollutants that are subject to EPA
regulation, and that existing stationary sources that emit such air
pollutants at the 100/250-tpy thresholds are subject to PSD if they
undertake a physical or operational change that increases their
emissions of such air pollutants by any amount.

Other provisions of particular relevance are the requirements for timely
issuance of permits.  The permitting authority must “grant[] or den[y]
[any completed permit application] not later than one year after the
date of filing of such completed application.”  CAA section §165(c). 

In addition, the PSD provisions articulate “‘the purposes of [the
PSD program],” which are to balance environmental protection and
growth.  CAA section §160.  One of the purposes, in subsection (1), is
specifically “to protect public health and welfare,” and another, in
subsection (3), is “to insure that economic growth will occur in a
manner consistent with the preservations of existing clean air
resources.”  

The PSD provisions also include detailed procedures for implementation. 
Most relevant for sources of GHG are the provisions that the proposed
permit for each source must be the subject of a public hearing with
opportunity for interested persons to comment, CAA section §165(a)(2),
and each source must be subject to BACTbest available control
technology, as determined by the permitting authority on a
source-by-source basis, CAA section §165(a)(4), 169(3). 

(2)  PSD Legislative History

The legislative history of the PSD provisions, enacted in the 1977 CAA
Amendments, makes clear that Congress was largely focused on sources of
criteria pollutants:  primarily sulfur dioxide (SO2), PM, NOx, and
carbon monoxide (CO).  This focus is evident in the basic purpose of the
PSD program, which is to safeguard maintenance of the NAAQS.  See S
95-127 (95th Cong., 1st Sess.), at 27.

	Congress designed the PSD provisions to impose significant regulatory
requirements, on a source-by-source basis, to identify and implement
BACT and, for criteria pollutant, to also undertake certain studies. 
Congress was well aware that because these requirements are
individualized to the source, they are expensive.  Accordingly, Congress
designed the applicability provisions (i) to apply these requirements to
industrial sources of a certain type and a certain size – sources
within 28 specified source categories and that emit at least 100 tpy --
as well as all other sources that emit at least 250 tpy, and, by the
same token, (ii) to exempt other sources from these requirements.  

	Although Congress required that CAA requirements generally apply to
“major emitting facilities,” defined as any source that emits or has
the potential to emit 100 tpy of any pollutant, Congress applied PSD to
only sources at 100 tpy or higher in 28 specified industrial source
categories, and at 250 tpy or more in all other source categories.  This
distinction was deliberate:  According to Sen. McClure, Congress
selected the 28 source categories after reviewing an EPA study
describing 190 industrial source categories.  122 Cong. Rec. 24521 (July
29, 1976) (statement by Sen. McClure).

	Congress also relied on an EPA memorandum that identified the range of
industrial categories that EPA regulated under its regulations that
constituted the precursor to the statutory PSD program, and listed both
the estimated number of new sources constructing each year and the
amount of pollution emitted by the “typical plant” in the category. 
The memorandum was prepared by B.J. Steigerwald, Director of the Office
of Air Quality Planning and Standards and Roger Strelow, EPA’s
Assistant Administrator for Air and Waste Management
(“Steigerwald-Strelow  memorandum”).  The Steigerwald-Strelow
memorandum makes clear that the 100 tpy cut-off for the 28 listed
sources categories, and the 250 tpy cut-off for all other sources, was
meaningful; that is, there were a large number of sources below those
cut-offs that Congress explicitly contemplated would not be included in
the PSD program.  Id. at 24548-50.

Consistent with this, the legislative history on the Senate side also
specifically identified certain source categories that Senators believed
should not be covered by PSD.  The Senate bill language limited PSD to
sources of 100 tpy or more in 28 listed source categories, and to any
other categories that the Administrator might add.  Sen. Muskie stated
that the Senate bill excluded “houses, dairies, farms, highways,
hospitals, schools, grocery stores, and other such sources.”  123
Cong. Rec. 18021 (June 8, 1977) (statement of Sen. Muskie).  Sen.
McLure’s list of excluded source categories were “[a] small gasoline
jobber, or a heating plant at a community college, [which] could have
the potential to emit 100 tons of pollution annually.”  122 Cong. Rec.
24548-49 (July 29, 1976) (statement of Sen. McClure).  The Senate
Committee Report included a comparable list, and in describing it,
concisely articulated the cost-conscious basis for the line-drawing:
“[the PSD] procedure … must include an effective review-and-permit
process.  Such a process is reasonable and necessary for very large
sources, such as new electrical generating plants or new steel mills. 
But the procedure would prove costly and potentially unreasonable if
imposed on construction of storage facilities for a small gasoline
jobber or on the construction of a new heating plant at a junior
college, each of which may have the potential to emit 100 tons of
pollution annually.”  S. Rpt. 95-127 at 96-97.

The enacted legislation differs from the Senate bill by replacing the
authorization to EPA to include by regulation source categories in
addition to the listed 28 source categories with an inclusion of all
other sources if they exceed 250 tpy, and with an authorization for the
states to exempt hospitals and educational institutions.  But
Congress’s overall intention remains clear, as the D.C. Circuit
described in Alabama Power:    "Congress's intention was to identify
facilities which, due to their size, are financially able to bear the
substantial regulatory costs imposed by the PSD provisions and which, as
a group, are primarily responsible for emissions of the deleterious
pollutants that befoul our nation's air….[With respect to] the heating
plant operating in a large high school or in a small community college
…. . . [w]e have no reason to believe that Congress intended to define
such obviously minor sources as 'major' for the purposes of the PSD
provision."  636 F.2d at 353-54.  

	A particularly important indication of congressional intent to limit
the PSD program it was designing to larger sources comes in considering
the emissions profile of the small-sized boilers.  Congress focused
closely on identifying which sources with emissions in excess of 100 tpy
should not be subject to PSD even though they are subject to CAA
requirements generally.  But Congress viewed a large set of sources as
emitting below 100 tpy and therefore not included in the PSD program. 
Chief among these sources, in terms of absolute numbers of sources, were
small boilers.  The Steigerwald-Strelow memorandum identified two
categories of these boilers, differentiated by size.  The first ranges
in size from 10 to 250 x 106 Btu per hour (Btu/hr), and has a “typical
plant” size of 107 Btu/hr, with “BACT emissions from typical
plant” of 53 tpy, and a total of 1,446 sources in the category.  The
second category ranges in size from 0.3 to 10 x 106 Btu/hr, and has a
“typical plant” size of 1.3 x 106 Btu/hr, with “BACT emissions
from typical plant” of 2 tpy, and a total of 11,215 sources in the
category.  The memorandum discusses these two categories in the context
of explaining which source categories exceed a size of 100 tpy - and
therefore would be subject to PSD if a 100 tpy threshold were set -- by
stating, “Fortunately, most truly small boilers and typical space
heating operations would not be covered.”  122 Cong. Rec. 24549 (July
29, 1976).  

	 The legislative history also provides a window into the scope of the
program that Congress anticipated and related administrability concerns.
 According to the Steigerwald-Strelow memorandum, the number of new
sources each year whose “BACT emissions from typical plant” exceed
100 for the 28 listed source categories and 250 for all other source
categories is less than 100 per year.  Although the Steigerwald-Strelow
memorandum does not attempt to estimate the number of modifications, it
appears that based on this information, Congress had reason to expect
the total size of the PSD program to be measured in the hundreds or
perhaps thousands of permits each year.  A program of this size would be
manageable by EPA and the permitting authorities.  

(3)  PSD Regulatory History:  Regulations Concerning the Definition of
“Major Stationary Source”

For present purposes, the regulatory history of the PSD program is most
noteworthy because it shows that since the inception of the program
following the 1977 CAA Amendments, EPA has interpreted the statutory PSD
applicability provisions to apply more narrowly – to any air pollutant
subject to regulation – than their literal meaning (“any air
pollutant”).  EPA’s initial rulemaking implementing the PSD program,
which was proposed and finalized in 1977-1978, made explicit that the
entire PSD program applied to only pollutants regulated under the Act. 
43 FR 26,380, 26,403/3, 26,406 (June 19, 1978) (promulgating 40 CFR
51.21(b)(1)(i)).  In 1979-1980, EPA revised the PSD program to conform
to Alabama Power v. Costle, 636 F.2d 323 (D.C. Cir. 1980).  44 FR 51,924
(September. 5, 1979) (proposed rule); 45 FR 52,676 (August. 7, 1980)
(final rule).  In this rulemaking, EPA did not disturb the pre-existing
provisions that limited the applicability of the PSD program to
regulated air 

pollutants.  In 1996 EPA proposed, and in 2002 finalized, a set of
amendments to the PSD provisions that included revisions to conform with
the 1990 CAAAct Amendments, which, in relevant part, exempted hazardous
air pollutants (HAPs) from PSD, under CAA section§ 112(b)(6).  See 61
FR 38,250 (July 23, 1996), 67 FR 80,186 (December. 31, 2002).  In the
preamble to the final rule, EPA noted that based on a request from a
commenter, EPA was amending the regulations to “clarify which
pollutants are covered under the PSD program.”  EPA accomplished this
by promulgating a definition for “regulated NSR pollutant,” which
listed categories of pollutants regulated under the Act, and by
substituting that defined term for the  phrase “pollutants regulated
under the Act” that was previously used in various parts of the PSD
regulations.  67 FR at 80,240.  The definition of “regulated NSR
pollutant” includes several categories of pollutants (including, in
general, NAAQS pollutants and precursors, pollutants regulated under CAA
section §111 NSPSnew source performance standards, Class I or II
substances regulated under CAA title VI) and a catch-all category,
“[a]ny pollutant that otherwise is subject to regulation under the
Act.”  E.g., 40 CFR 52.21(b)(50).  As in the previous rulemakings, EPA
did not address the difference between the definition of “major
emitting facility” and its regulatory approach or indicate that it had
received comments on this issue.  While the definition of “major
modification” in the PSD regulations has changed over time with
respect to how emission increases are calculated, the regulatory history
with respect to pollutant coverage parallels that of major emitting
facility.  

We recount this regulatory history as background information.  We are
not reconsidering or reopening these regulations to the extent they
interpret the definition of “major emitting facility” and
“modification” narrowly to be limited to pollutants subject to
regulation under the Act.

b.  Title V Program

Having reviewed the key statutory provisions, their legislative history,
and the relevant administrative interpretations for the PSD program, we
now do the same for the title V program.  

(1)  Title V Provisions

The key title V provisions for present purposes start with the
applicability provisions, which are found in CAA sections §§502(a),
501(2)(B), and 302(j).  These provisions provide that it is unlawful for
any person to operate a "major source" without a title V permit, section
§502(a), and define a "major source" to include “"any major
stationary facility or source of air pollutants which directly emits, or
has the potential to emit, one hundred tons per year or more of any air
pollutant.”."  CAA  sections §501(2)(B) and §302(j).  As noted
elsewhere, these provisions, taken together and as interpreted by EPA,
provide that stationary sources are subject to title V if they emit at
the 100-tpy threshold air pollutants that are subject to EPA regulation.

In addition, although title V does not have a set of provisions
describing its purpose, it is clear from its provisions and its
legislative history, discussed later, that its key goal is to gather
into one permitting mechanism the CAA requirements applicable to a
source and impose conditions necessary to assure compliance with such
requirements, and thereby promote the enforceability of CAA requirements
applicable to the covered sources.  Section CAA §503(b)(1) requires
that the source’s permit application contain a compliance plan
describing how the source will ”comply with all applicable
requirements” of the CAA, and section §504(a) requires that “[e]ach
permit issued under [title V] shall include … * * *  such …* * *
conditions as are necessary to assure compliance with applicable
requirements of [the Clean Air Act].”  See H.R. Rep. No. 101–490, at
351 (1990) (“(‘‘It should be emphasized that the operating permit
to be issued under this title is intended by the Administration to be
the single document or source of all of the requirements under the Act
applicable to the source.”’’).

Importantly, title V is replete with provisions designed to make the
permitting process as efficient and smooth-running as possible,
including the expeditious processing of permit applications and the
timely issuance of permits.  Section CAA §503(c) requires that “the
permitting authority shall approve or disapprove a completed application
…* * * and shall issue or deny the permit, within 18 months after the
date of receipt thereof ….”  Section * * * *”  CAA §502(b)(6)
requires the permitting authority to develop “adequate, streamlined,
and reasonable procedures for expeditiously determining when
applications are complete, for processing such applications, for public
notice …* * * and for expeditious review of permit actions, including
…* * * judicial review in State court of the final permit action by
[specified persons].”  Section CAA §502(b)(7) includes a “hammer”
provision designed to reinforce timely permit issuance, which is that
the permitting authority’s program must include:

To ensure against unreasonable delay by the permitting authority,
adequate authority and procedures to provide that a failure of such
permitting authority to act on a permit application or permit renewal
application (in accordance with the time periods specified in [CAA]
section  §503 …)] * * *) shall be treated as a final permit action
solely for purposes of obtaining judicial review in State court of an
action brought by any person referred to in paragraph (6) to require
that action be taken by the permitting authority on such application
without additional delay.

Section CAA §502(b)(8) requires the permit program to include
“[a]uthority and reasonable procedures consistent with the need for
expeditious action by the permitting authority on permit applications
and related matters, to make available to the public [certain
permit-related documents]”.  Section CAA §502(b)(9) requires a permit
revision to incorporate requirements promulgated after issuance of the
permit, but only if the permit is for a major source and has a term of 3
or more years remaining.  In addition, the revision must occur “as
expeditiously as practicable.”  Section CAA §502(b)(10) requires the
permit program to include operational flexibility provisions that
“allow changes within a permitted facility …. . . without requiring
a permit revision, if the changes are not modifications …. . . and
…. . . do not exceed the emissions allowable under the permit …. . .
.”

In addition, title V includes a comprehensive and finely detailed
implementation schedule that mandates timely issuance of permits while
building in EPA and affected state review, public participation, and
timely compliance by the source with reporting requirements.  Following
the date that sources become subject to title V, they have 1 year to
submit their permit applications.  CAA section §503(c).  As noted
previously, the permitting authority then has 18 months to issue or deny
the permit.  CAA section §503(c).  Permitting authorities must provide
an opportunity for public comment and a hearing.  CAA section
§502(b)(6).  If the permitting authority proposes to issue the permit,
the permitting authority must submit the permit to EPA, and notify
affected states, for review.  CAA section §505(a)(1).  EPA then has 45
days to review the permit and, if EPA deems it appropriate, to object to
the permit.  CAA section §505(b)(1).  If EPA does object, then the
permitting authority must, within 90 days, revise it to meet the
objections, or else EPA becomes required to issue or deny the permit. 
CAA section §505(c).  If EPA does not object, then, within 60 days of
the close of the 45-day review period, any person may petition EPA to
object, and EPA must grant or deny the petition within 60 days.  CAA
section §505(b)(2).  If a permit is issued, it must include a permit
compliance plan, under which the permittee must “submit progress
reports to the permitting authority no less frequently than every 6
months,” and must “periodically (but no less frequently than
annually) certify that the facility is in compliance with any applicable
requirements of the permit, and [] promptly report any deviations from
permit requirements to the permitting authority.”  CAA section
§503(b).

(2)  Title V Legislative History

(a)  Scope of Title V

The legislative history of title V, enacted by Congress in the 1990 CAA
Amendments, indicates the scope of the program that Congress expected: 
Congress expected the program to cover some tens of thousands of
sources, which would approximate the scope of the permit program under
the Clean Water Act.  The Senate Committee on Environment and Public
Works stated:

	EPA estimates that the new permit requirements will cover about 8,200
major sources that emit 100 tons per year or more of criteria pollutants
(which are regulated under SIPs).  In addition, many smaller sources are
(or, as EPA promulgates additional regulations, will be) covered by new
source performance standards under section 111 of the Act, hazardous air
pollutant standards under section 112 of the Act, and nonattainment
provisions of this legislation.  By comparison, under the Clean Water
Act, some 70,000 sources receive permits, including more than 16,000
major sources.  Although many air pollution sources have more emission
points than water pollution sources, the additional workload in managing
the air pollution permit system is estimated to be roughly comparable to
the burden that States and EPA have successfully managed under the Clean
Water Act.

S. Rep. 101–228, at 353 (1990).  Sen. Mitchell, the Senate Majority
Leader, stated that he expected “over 10,000 permits [to] …. . . be
issued under this program.”  136 Cong. Rec. S3239-03 (March 27, 1990).
 Others in Congress had similar estimates.  See, e.g., 136 Cong. Rec.
S3166 (“thousands and thousands of permit applications … will be
required to be submitted”) (statement of Sen. Nickles).

Furthermore, the legislative history indicates that Congress did not
contemplate that large numbers of very small sources would be subject to
title V’s requirements.  This becomes clear by reviewing the
legislative history of a companion piece of legislation to the operating
permits provisions that Congress enacted into CAA section 507, which is
the “Small business stationary source technical and environmental
compliance assistance program.”  CAA section 507.  Under this
provision, sources that, among other things, “are not major stationary
source[s]” and that emit less than 50 tpy of any regulated pollutant,
as well as less than 75 tpy or all regulated pollutants, are eligible
for assistance under CAA section 507.  CAA section 507(c)(1).  The House
Committee Report described this provision – including what types of
sources it expected this provision to benefit -- as follows: 

New section [507] is a small source/small business provision added by
the Committee.  It seeks to help small businesses to comply with the
problems that are likely to occur under the Act as amended by this bill.
 For purposes of this section, small businesses or small emitters are
defined as sources that are emitting 100 tons or less per year and that
have a number of employees that would qualify them for assistance from
the Small Business Administration (SBA).  As we look to the future of
environmental protection under the Act, we take special steps here to
ensure that it is possible for these small businesses to comply with
minimum hassle and in recognition of the problems that are unique to
them.  Such small businesses include printers, furniture makers, dry
cleaners, and millions of other small businesses in this country. 

House Committee Report, H.R. 101-590, at 354.  In this manner, the House
Committee Report made clear that it expected “millions of … small
businesses”  including “printers, furniture makers, dry cleaners”
and many others  to benefit from the CAA section 507 small source/small
business program, but Congress did not expect them to become subject to
the operating permit requirements of title V because their emissions
fell below 100 tpy, which is, in general, the threshold for title V
applicability as a “major source.”

The legislative history of title V confirms that Congress viewed a
principal purpose of title V as providing a vehicle to compile the
requirements applicable to the source.  As the report of the House
Committee on Energy and Commerce (“House Committee Report”) stated,
“‘‘It should be emphasized that the operating permit to be issued
under this title is intended by the Administration to be the single
document or source of all of the requirements under the Act applicable
to the source.”  H.R. Rep. No. 101–490, at 351 (1990).  Combined
with the source’s reporting requirements, this compilation of
applicable requirements would facilitate public awareness of a
source’s obligations and compliance and would facilitate compliance
and enforcement.

On the Senate side, Sen. Chafee, one of the floor managers of the bill,
made a similar point:

The permits will serve the very useful function of gathering and
reciting in one place -- the permit document itself -- all of the duties
imposed by the Clean Air Act upon the source that holds the permit. 
This would clearly be an improvement over the present system, where both
the source and EPA must search through numerous provisions of state
implementation plans and regulations to assemble a complete list of
requirements that apply to any particular plant….

Once these permits are in place, plant managers will be better able to
understand and to follow the requirements of the Clean Air Act.  At the
same time, EPA will be better able to monitor how well each plant is
complying with those requirements.  This is a highly sensible approach
for all concerned.

136 Cong. Rec. S213 (January 24, 1990) (statement of Sen. Chafee).  Sen.
Lieberman made a similar statement.  136 Cong. Rec. 3172-73 (March 26,
1990) (statement of Sen. Lieberman).  Thus, a central purpose of the
title V permit program is to compile all the requirements applicable to
the source into a single place, the permit.  Implicit in this purpose is
that the sources subject to title V will have applicable requirements to
be compiled.  As Sen. Chafee directly stated, “[T]he vast majority of
these permit applications will … , in all likelihood, only codify the
existing requirements of the applicable State implementation plan.” 
136 Cong. Rec. S2720 (March 20, 1990) (statement of Sen. Chafee).  

More broadly, the legislative history also indicates congressional
concern about the costs of permitting for small businesses, and a
determination to minimize those costs to the extent possible.  This
concern is reflected in several provisions of title V.  For example,
section 502(a) authorizes EPA to exempt all or part of a source category
– except for any major source  from the title V permit program if EPA
“finds that compliance with [title V] requirements is impracticable,
infeasible, or unnecessarily burdensome on such categories.” 
Similarly, the permit fee provisions include a presumptive minimum fee
amount, but authorize an exemption from that presumptive amount upon a
showing that a lesser amount will meet overall fee requirements, CAA
section 502(b)(3)(B)(iv).  One of the drafters of this provision, Rep.
Wyden, explained that its purpose was to preserve the flexibility of
states to impose lower fees of small businesses: 

I note that the provision on fees allows reductions for small sources
where appropriate.  The state has some flexibility, under the general
permit fee provisions, to adjust fee levels for any source so long as
the average fee charged meets the statutory minimum. 

136 Cong. Rec. H12884 (Oct. 26, 1990) (statement of Rep. Wyden).  See,
e.g., 136 Cong. Rec.  H2559 (May 21, 1990) (statement of Rep. Wyden)
(discussing need to “help small businesses through the air permit
labyrinth”).

	The legislative history also indicates that Congress was deeply
concerned both about the need not to burden sources generally with undue
costs and to assure the administrability of the title V program, and as
a result, was determined to make the program as smooth-running as
possible.  These goals are reflected in many of the title V
requirements, as discussed previously.  See, e.g., CAA section
§502(b)(6) (requiring “adequate, streamlined, and reasonable
procedures for expeditiously determining when applications are complete,
for processing such applications, for public notice …* * * and for
expeditious review of permit actions); CAA section §502(b)(7) (includes
a “hammer” provision designed to reinforce timely permit issuance);
CAA section §502(b)(9)-(10) (limiting circumstances under which permit
revision is required; requiring revision to occur “as expeditiously as
practicable;” including operational flexibility provisions).  

The legislative history confirms that these provisions were designed to
reduce costs to sources and promote administrability.  The
“Chafee-Baucus Statement of Senate Managers” for the bill explained
the purpose of the CAA section 502(b)(6) requirement for “[a]dequate,
streamlined, and reasonable procedures for expeditious[]” permit
actions as follows:  

[M]uch concern has been expressed that this new permitting process will
unduly delay the proper functioning of many sources, and we intend to
mitigate any delay by directing that the process be expeditious.

In addition to this general directive for expeditious processing, we
mandate in new section 503 that permitting authorities approve or reject
permit applications within certain specified time periods following
filing.  In this fashion, we have taken explicit steps to protect
against undue delays.

136 Cong. Rec. S16941 (statement of Sen. Chafee).  The same statement
explained that the permit revision procedures of CAA section 502(b)(9)
reflect a –

careful effort to ensure that the permit program works effectively and
efficiently.  Succinctly, this provision accommodates two competing
concerns.  On the one hand, it is important to ensure that permit
requirements remain up-to-date as the provisions of the Clean Air Act
are developed and new requirements are imposed.  On the other hand, it
also is important to be sure that we do not reduce the permit program to
a shambles by requiring sources to engage in a continuous process of
revising their permits as these new requirements are imposed.

136 Cong. Rec. 16942 (Oct. 27, 1990) (Chafee-Baucus statement of Senate
Managers) (statement of Sen. Chafee).

	In addition, these concerns were at the bottom of the following
statement by Sen. Chafee, in which he described how the bill’s
drafters had revised it in response to a concern by industry that an
earlier version of the bill would have put undue costs on industry:  

We have also heard concerns from industry that S. 1630 would burden
sources unduly by requiring them to submit-along with their permit
applications-plans explaining how they intend to comply with all
requirements of the Clean Air Act that apply to them.

But, Mr. President, we emphatically do not intend to burden industry
with preparation and submission of unnecessary compliance plans.  The
substitute clarifies that any compliance plans would address only those
matters by which the sources would comply with new requirements imposed
by this act as it is finally signed into law.  These plans would not
need to address compliance with any existing Clean Air Act requirements,
unless the source is in violation of those requirements.

136 Cong. Rec. S2107 (March 5, 1990) (statement of Sen. Chafee).  

As another indication of congressional concern over administrability,
Congress recognized that at the beginning of the program, large numbers
of permit applications might overwhelm the permitting authorities.  To
protect against this, Congress included in CAA section 503(c) a phase-in
schedule for permitting authorities to act on the initial set of permit
applications.  Under 503(c), permitting authorities were not required to
act on the initial set of permit applications within 18 months after it
received the application, but rather could act on one-third of them on
an annual basis over a 3-year period.  Sen. Chafee, in describing an
early version of this provision – which would have allowed permitting
authorities to phase -in the submission of permit applications –
explained that its purpose was “to avoid a logjam of permit
applications[,] … ensure that [regulatory] gridlock can be avoided,
and [ensure] that the permitting process will work with a minimum of
disruption and delay.”  136 Cong. Rec., S2106 (March 5, 1990)
(statement of Sen. Chafee).

(3)  Title V Regulatory History

 

	As with PSD, for present purposes, the regulatory history of the title
V program is most noteworthy because it shows that beginning shortly
after the inception of the program following the 1990 CAA Amendments,
EPA has interpreted the statutory title V applicability provisions to
apply more narrowly – to any air pollutant subject to regulation –
than their literal meaning (“any air pollutant”).  As discussed
previously, title V applies to any “major source,” defined, as
relevant here, under CAA sections 501(2)(B) and 302(j), as “any
stationary facility or source of air pollutants which directly emits, or
has the potential to emit, one hundred tons per year or more of any air
pollutant ….”....”  EPA’s regulations mirror the CAA
definitional provisions.  40 CFR 70.2.

	However, since 1993, EPA has interpreted the applicability provisions
more narrowly.  At that time, which was shortly after title V was
enacted, EPA issued a guidance document making clear that it interprets
this requirement to apply to sources of pollutants “subject to
regulation” under the Act.  Memorandum from Lydia N. Wegman, Deputy
Director, Office of Air Quality Planning and Standards, U.S. EPA,
“Definition of Regulated Air Pollutant for Purposes of Title V”
(Apr. 26, 1993) (Wegman Memorandum).  The interpretation in this
memorandum was based on:  (1) EPA’s reading of the definitional chain
for “major source” under title V, including the definition of “air
pollutant” under section 302(g) and the definition of “major
source” under 302(j); (2) the view that Congress did not intend to
require a variety of sources to obtain title V permits if they are not
otherwise regulated under the Act (see also CAA section 504(a),
providing that title V permits are to include and assure compliance with
applicable requirements under the Act); and (3) consistency with the
approach under the PSD program.  

While the specific narrow interpretation in the Wegman Memorandum of the
definition of “air pollutant” in CAA section 302(g) is in question
in light of the holding in Massachusetts v. EPA, 549 U.S. 497, 533
(20072077) (finding this definition to be “capacious”),”, we
believe that the overall rationale for our interpretation of the
applicability of title V remains sound.  EPA continues to maintain its
interpretation, consistent with CAA sections 302(j), 501, 502 and
504(a), that the provisions governing title V applicability for “a
major stationary source” can only be triggered by emissions of
pollutants subject to regulation.  This interpretation is based
primarily on the purpose of title V to collect all regulatory
requirements applicable to a source and to assure compliance with such
requirements, see, e.g., CAA section 504(a), and on the desire to
promote consistency with the approach under the PSD program.

	In the Tailoring Rule notice of proposed rulemaking, EPA acknowledged
the Wegman Memorandum and affirmed the memorandum’s continued
viability, stating that “EPA continues to maintain this
interpretation.”  74 FR 55,300, col. 3, fn. 8; see also 75 FR at
17022-23 (Interpretive Memo reconsiderationMemorandum Reconsideration).

As with PSD, we recount this regulatory history as background
information, and we are not reconsidering or re-opening this
interpretation of the definition of “major source” narrowly to be
limited to pollutants subject to regulation under the Act.

5.   Application of the “Absurd Results” Doctrine for the PSD
Program

Having reviewed the factual background, legal doctrines, and the key
components of the PSD and title V programs, we now turn towards
interpreting the PSD and title V requirements in accordance with the
Chevron framework, accounting for the applicable legal doctrines.  We
begin with the “absurd results” doctrine, and apply it first to the
PSD requirements.

In this action, we finalize, with some refinements, the “absurd
results” basis we proposed.  Specifically, we are revising our
regulations to limit PSD applicability to GHG emitting sources by
revising the regulatory term, “regulated NSR pollutant,” and
although our revised regulations do not accord with a literal reading of
the statutory provisions for PSD applicability, which are incorporated
into the definition of “major emitting facility” and “major
modification,” we have concluded that based on the “absurd
results” doctrine, a literal adherence to the terms of these
definitions is not required.  Even so, we believe Congress did intend A
literal adherence would not reflect congressional intent that PSD apply
to GHG sources as a general matter.  Further, we may apply PSD to GHG
sources in a phased-in manner, as we do through the tailoring approach,
because either congressional intent is clear on that issue and the
tailoring approach best reflects it, or congressional intent is unclear
and the tailoring approach is a reasonable interpretation of the
statute.  However, in this rulemaking, it is not necessary to make
decisions, and we do not do so, about congressional intent for applying
PSD to smaller GHG sources, that is, those that emit at or close to the
statutory thresholds.

a.  Congressional Purpose for the PSD Program

To reiterate, for convenience, CAA section §169(1) defines a “major
emitting facility” to include “any … source[] [that] emit[s], or
ha[s] the potential to emit, [depending on the source category], one
hundred [or two hundred fifty] tons per year or more or more of any air
pollutant.”  CAA section§ 169(1); and a “modification” as any
physical or operational change in “a stationary source which increases
the amount of any air pollutant emitted by such source,” CAA section§
169(2)(C), 111(a)(4).  We also reiterate that, as discussed above,
beginning with our initial rulemaking in 1977-1978 to implement the PSD
program, we have interpreted these definitions more narrowly by reading
into them the limitation that a source is subject to PSD only if the air
pollutants in question are “subject to regulation under the Act.” 
40 CFR 51.166(b)(49)(iv).  EPA is not re-opening this interpretation in
this regulation in this action.

Under the current interpretation of the PSD applicability provision,
EPA’s recent promulgation of the LDVR 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, but absent
further tailoring, applies PSD to sources of any air pollutant subject
that is subject to 

regulation under another provision of the CAA.  EPA’s promulgation of
the LDVRlight-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. 

But absent tailoring, the January 2, 2011 trigger date for GHG PSD
applicability will subject an extraordinarily large number of sources,
more than 81,000, to PSD each year, an increase of almost 300-fold.  And
the great majority of these new sources will be small commercial or
residential sources.  We believe that for many reasons, this result is
contrary to congressional intent for the PSD program, and in fact would
severely undermine what Congress sought to accomplish with the program. 
As a result, under our Chevron analysis, accounting for the “absurd
results” doctrine, the statutory definition for “major emitting
facility” (as interpreted narrowly to include “subject to
regulation”) should not be read to apply to all GHG sources at or
above the 100/250 tpy threshold as of the January 2, 2011 date.  Rather,
the definitions of “major emitting facility” and “modification”
should be tailored so that they applies to GHG sources on a phased-in
basis, with the largest sources first, as we describe in this rule.

As explained previously, Chevron Stepstep 1 calls for a determination of
congressional intent, and the courts consider the best indicator of
congressional intent to be the plain meaning of the statute.  However,
the U.S. nited States Supreme Court has held that the literal meaning of
a statutory provision is not conclusive “in the ‘rare cases [in
which] the literal application of a statute will produce a result
demonstrably at odds with the intentions of the drafters’ … [in
which case] the intention of the drafters, rather than the strict
language, controls.”  United States v. Ron Pair Enterprises, 489 U.S.
235, 242 (1989).  To determine whether “the intentions of the …. . .
drafters” differ from the result produced from “literal
application” of the statutory provisions in question, the courts may
examine the overall context of the statutory provisions, including
whether there are related statutory provisions that either conflict or
are consistent with that interpretation; and the legislative history to
see if it exposes what the legislature meant by the terms in question. 
In addition, the courts may examine whether a literal application of the
provisions produces a result that the courts characterize variously as
absurd, futile, strange, or indeterminate, and therefore so illogical or
otherwise contrary to sensible public policy as to be beyond anything
Congress would reasonably have intended.  In such cases, the literal
language cannot be said to reflect the intention of the drafters, and
therefore does not control.  See United States v. Ron Pair Enterprises,
489 U.S. 235, 242-43 (1989); Griffin v. Oceanic Contractors, Inc., 458
U.S. 564, 571 (1982). 

Here, applying the definitions of “major emitting facility” and
“modification” literally (as EPA has interpreted them more narrowly)
at the present time -– in the absence of streamlining measures or
additional permitting authority resources, and without tailoring –
would be contrary to congressional purpose for the PSD provisions, as
found in the statutory provisions and legislative history, especially in
light of the impact from applying those definitions literally.  Congress
established the PSD program in large measure because it was concerned
that around the country, industrial development, which was confronting
barriers to locating in nonattainment areas (that is, areas that do not
meet the NAAQS), would attempt to locate in clean air areas (that is,
attainment areas or unclassifiable areas), but that as a consequence,
the clean air areas would see their air quality deteriorate to the point
where they, too, would no longer meet the NAAQS.  The end result would
be the spread of environmental and health problems to those formerly
clean air areas, as well as more barriers to further industrial
development.  With these concerns in mind, Congress designed the PSD
program to require newly constructing or modifying sources in areas with
air quality that meets the NAAQS (or that is unclassifiable) to analyze
their emissions of NAAQS pollutants and to implement controls as needed
to assure that those emissions do not significantly deteriorate air
quality.  Many of the PSD requirements, and much of the discussion in
the legislative history, reflect these aspects of the PSD program. 
E.g., CAA sections 162, 163, 164, 165(a)(3), 165(d)(2), 165(e), 166; see
generally H. Rep. 95-294, 95th Cong., 1st Sess. (1977)  103-78.

Congress also designed the PSD program to impose controls on non-NAAQS
pollutants, through the requirement under CAA section 165(a)(4) that the
source be “subject to the best available control technology
[(“BACT”)]for each pollutant subject to regulation under this
chapter emitted from, or which results from, such facility.”  For
example, when Congress enacted the PSD provisions in 1977, sources
emitting HAPs were required to implement BACT for those pollutants,
although in the 1990 CAA Amendments, Congress redesigned CAA section
112, which includes the requirements for HAPs, and excluded HAPs from
PSD.  CAA section§ 112(b)(6).

Congress was keenly aware that the PSD program needed to serve two
purposes:  protect the environment and promote economic growth. 
Congress explicitly identified these two goals in the “purposes”
section of the PSD provision, CAA section§ 160, and various PSD
requirements clearly reflect them.  For example, to protect economic
growth, the PSD program expedites the permit process to include a 1-year
limitation on the time that the permitting authority has act on permit
applications.  To protect the environment, in addition to including many
provisions that focus on NAAQS pollutants, the PSD program requires that
the preconstruction permit impose emission limits that reflect BACT for
each pollutant subject to regulation under another CAA provision.  CAA
section 165(a)(4).  This BACT provision also makes clear, by its terms,
that although Congress designed the PSD program largely with NAAQS
pollutants in mind, Congress also intended that sources subject to PSD
control the emissions of their other pollutants as well.  The D.C.
Circuit has recognized the twin goals of environmental protection and
economic development that underlie PSD, and has upheld EPA
interpretations of the PSD program that reflect a balancing of those
goals.  See, e.g., New York v. EPA, 413 F.3d 3, 27 (D.C. Cir.),
rehearing en banc den.  431 F.3d 801 (2005). 

Congress was also keenly aware that the PSD analyses and controls that
it was mandating had to be implemented on a source-by-source basis, and
that this process would be expensive for sources.  As a result, Congress
intended to limit the PSD program to large industrial sources because it
was those sources that were the primary cause of the pollution problems
in question and because those sources would have the resources to comply
with the PSD requirements.  Congress’s mechanism for limiting PSD was
the 100/250 tpy threshold limitations.  Focused as it was primarily on
NAAQS pollutants, Congress considered sources that emit NAAQS pollutants
in those quantities generally to be the large industrial sources to
which it intended PSD to be limited.

That Congress paid careful attention to the types and sizes of sources
that would be subject to the PSD program and designed the thresholds
deliberately to limit the program’s scope is evident from the
legislative history.  Several Senate floor statements and the Committee
Report made clear that PSD should not apply to small sources.  As
discussed later, Congress scrutinized information that EPA provided as
to types and sizes of sources, found largely in the Steigerwald-Strelow
memorandum.  Sen. Muskie stated that the Senate bill excluded “houses,
dairies, farms, highways, hospitals, schools, grocery stores, and other
such sources.”  123 Cong. Rec. 18021 (June 8, 1977) (statement of Sen.
Muskie).  Sen. McClure stated that PSD should be limited to
“industrial plants of significant impact,” and should exclude ”[a]
small gasoline jobber, or a heating plant at a community college,
[which] could have the potential to emit 100 tons of pollution
annually.”  122 Cong. Rec. 24548-49 (July 29, 1976) (statement of Sen.
McClure).  The Senate Committee Report mirrored Sen. McClure’s
statement, and concisely articulated the cost-related basis for the
line-drawing: “[The PSD] procedure … must include an effective
review-and-permit process.  Such a process is reasonable and necessary
for very large sources, such as new electrical generating plants or new
steel mills.  But the procedure would prove costly and potentially
unreasonable if imposed on construction of storage facilities for a
small gasoline jobber or on the construction of a new heating plant at a
junior college, each of which may have the potential to emit 100 tons of
pollution annually.”  S. Rpt. 95-127 at 96-97.

The D.C. Circuit had occasion, in Alabama Power, to acknowledge this
legislative history.  "Congress's intention was to identify facilities
which, due to their size, are financially able to bear the substantial
regulatory costs imposed by the PSD provisions and which, as a group,
are primarily responsible for emissions of the deleterious pollutants
that befoul our nation's air."  Alabama Power, 636 F.2d at 353.  The
Court added, “Though the costs of compliance with [the PSD]
requirements are substantial, they can reasonably be borne by facilities
that actually emit, or would actually emit when operating at full
capacity, the large tonnage thresholds specified in section 169(1).”. 
Id. at 354.

It is not too much to say that applying PSD requirements literally to
GHG sources at the present time – in the absence of streamlining or
increasing permitting authority resources and without tailoring the
definition of “major emitting facility” or “modification” --
would result in a program that would have been unrecognizable to the
Congress that designed PSD.  Congress intended that PSD be limited to a
relatively small number of large industrial sources.  Without phasing in
PSD and title V applicability to GHG sources so as to allow the
development of streamlining methods and increases in permitting
authority resources, the PSD program would expand by January 2, 2011
from the current 280 sources per year to almost 82,000 sources,
virtually all of which would be smaller than the sources currently in
the PSD program and most of which would be small commercial and
residential sources.  Until EPA could develop streamlining methods, all
of the sources that would become newly subject to PSD – whether they
be larger or smaller sources, whether industrial or
commercial/residential sources - would have to undergo source-specific
BACT determinations for their GHG emissions, as well as their emissions
of conventional pollutants in amounts in excess of the significance
levels.  We estimate that the commercial and residential sources – the
great majority of which are small business -- would each incur, on
average, almost $60,000 in PSD permitting expenses.  This result would
be contrary to Congress’s careful efforts to confine PSD to large
industrial sources that could afford these costs.

	A closer look at the legislative history confirms the view that
Congress did not expect PSD to apply to large numbers of small sources,
including commercial and residential sources, and instead expected the
100/250 tpy thresholds to limit PSD’s applicability to larger sources.
 As noted previously, Congress relied on an EPA memorandum – the
Steigerwald-Strelow memorandum -- that identified the range of
industrial categories that EPA regulated under its program that
constituted the precursor to the statutory PSD program, and listed both
the estimated number of new sources constructing each year and the
amount of pollution emitted by the “typical plant” in the category. 
The Steigerwald-Strelow memorandum makes clear that the 100 tpy cut-off
for the 28 listed sources categories, and the 250 tpy cut-off for all
other sources, would exclude from PSD a large number of sources.  122
Cong. Rec. 24548-50 (July 29, 1976).  However, virtually all, if not
all, of the sources in half the 28 source categories emit CO2carbon
dioxide in quantities that equal or exceed the 100 tpy threshold, and
almost all of the sources in the remaining categories emit CO2 in
quantities that equal or exceed the 100 tpy threshold.  Therefore,
applying the “major emitting facility” definition to GHG sources, in
the absence of streamlining methods and without tailoring, would, as a
practical matter, vitiate much of the purpose of the 100 

tpy cut-off for industrial sources.

Most telling, in this regard, is the small-sized boilers, which the
Steigerwald-Strelow memorandum describes, in terms of size, pollutants
emitted, and numbers of sources, as follows:  The memorandum identified
two categories of these boilers, differentiated by size.  The first
ranges in size from 10 to 250 x 106 Btu/hr, and has a “typical
plant” size of 107 Btu/hr, with “BACT emissions from typical
plant” of 53 tpy, and a total of 1,446 sources in that category.  The
second category ranges in size from 0.3 to 10 x 106 Btu/hr, and has a
“typical plant” size of 1.3 x x 106 Btu/hr, with “BACT emissions
from typical plant” of 2 tpy, and a total of 11,215 sources in the
category.  That memorandum makes clear that EPA did not believe that
sources in these two categories – and especially the smallest one –
would be subject to PSD under a 100 tpy threshold, by stating,
“Fortunately, most truly small boilers and typical space heating
operations would not be covered.”  122 Cong. Rec. 24549 (July 29,
1976).  However, these data and conclusions were all based on emissions
of NAAQS pollutants, the amounts of which placed these boilers well
below the PSD threshold limitations.  In general, most boilers of these
small sizes are fired with natural gas, and a natural gas boiler greater
than 0.5 x 106 Btu/hr emits at least 250 tpy CO2.  Therefore, if the CO2
emissions of these small boilers are considered – as would occur by
applying the definition of “major emitting facility” to GHG sources
without tailoring - then most of them would in fact be subject to PSD. 
Again, this result would directly contravene Congress’s intention to
limit PSD to “industrial plants of significant impact.”  122 Cong.
Rec. 24548-49 (statement of Sen. McClure).  

	Perhaps the most compelling reason why applying the PSD program to GHG
sources without tailoring, and before the development of streamlining
methods, would be inconsistent with congressional intent, is that the
resulting program would prove unadministrable.  Although the legislative
history of the PSD program does not reveal much explicit congressional
focus on administrability issues, the Steigerwald-Strelow Memorandum,
which identifies the source categories and numbers of sources that were
before Congress as it considered PSD, suggests that the program that
Congress fashioned could be expected to cover at most a few thousand
sources each year.  This appears to be approximately the size of the
program that EPA administered before the 1977 CAA Amendments, so that it
seems reasonable to assume that Congress expected the PSD program it
enacted to be within EPA’s and the states’ administrative
capacities.   

     Moreover, the Alabama Power court stressed the importance of
administrability concerns:  Most importantly, the Court held that EPA,
in interpreting the “modification” provisions that apply PSD to
physical or operational changes by major emitting facilities that
“increase the amount of any air pollutant emitted,” CAA section
111(a)(4), may “exempt from PSD review some emission increases on
grounds of de minimis or administrative necessity,” and went on to
state that in establishing the exemption thresholds, “[t]he Agency
should look at the degree of administrative burden posed by enforcement
at various de minimis threshold levels.”  636 F.2d at 400,405.  In
addition, the Court based its holding that potential-to-emit for
purposes of the applicability thresholds should be defined as emissions
at full capacity with implementation of control equipment, in part on
its view that with this definition, the number of sources subject to PSD
would be manageable:

Though the costs of compliance with section 165 requirements are
substantial, they can reasonably be borne by facilities that actually
emit, or would actually emit when operating at full capacity, the large
tonnage thresholds specified in section 169(1).  The numbers of sources
that meet these criteria, as we delineate them, are reasonably in line
with EPA’s administrative capability.  

Alabama Power, 636 F.2d at 354.  However, applying PSD to GHG sources
before streamlining and without tailoring would increase the size of the
PSD program at least an order of magnitude beyond what Congress seems to
have expected, which would have been far beyond the “administrative
capability” that Alabama Power described EPA as having.

Beyond this disconnect with congressional expectations, what is most
important is that the extraordinarily large number of permit
applications would overwhelm permitting authorities and slow their
ability to process permit applications to a crawl.  Our best estimate at
present is that permitting authorities would need to process almost
82,000 permit applications per year, compared to, at most, 800 in the
current PSD program.  The total additional workload, in workhours, for
PSD permits would be more than 19.5 million more work hours, compared to
150,795 work hours for the current PSD program, and the total additional
costs would be over $1.5 billion, compared with $12 million for the
current PSD program.

At proposal, we noted that the states had estimated that the influx of
permit applications that would result from applying the 250 tpy
threshold at actual emissions would, without additional resources result
in permitting delays of 3 years.  In fact, as we noted at proposal, a
literal reading of the PSD requirements would require their application
at the 250 tpy PTE level, which would result in ten times more permit
applications than were assumed when the states made the 3-year estimate.
 Further, our current estimates of the numbers of sources that would be
subject to PSD requirements are about twice what we estimated at
proposal, as described elsewhere.  Moreover, our estimate of the number
of hours that permitting authorities would need to process a permit
application from a source in the commercial or residential sector –
which is, by far, the largest single sector – is three and one-half
times as long as we estimated at proposal.  And under a literal reading
of the PSD applicability provisions as applied to GHG sources, the
permitting authorities would be required to implement a program of this
size beginning on January 2, 2011, less than 9 months from now.  We
received many comments from states and industry raising concerns about
the cost to sources and administrative burdens of PSD permitting if the
statutory threshold were to apply for GHG emissions.  One commenter
estimated a cost of over $5 billion and the dedication of over 17,000
FTEs to this effort.  

We consider it difficult to overstate the impact that applying PSD
requirements literally to GHG sources as of January 2, 2011 – before
streamlining or increasing permitting resources and without tailoring --
would have on permitting authorities and on the PSD program, and we are
concerned that this impact could adversely affect national economic
development.  The number of PSD permits that would be required from such
an approach is far beyond what the PSD program has seen to date.  It is
clear throughout the country, PSD permit issuance would be unable to
keep up with the flood of incoming applications, resulting in delays, at
the outset, that would be at least a decade or longer, and that would
only grow worse over time as each year, the number of new permit
applications would exceed permitting authority resources for that year. 
Because PSD is a preconstruction program, during this time, tens of
thousands of sources each year would be prevented from constructing or
modifying.  In fact, it is reasonable to assume that many of those
sources will be forced to abandon altogether plans to construct or
modify.  As a result, a literal application of the PSD applicability
provisions to GHG sources would slow construction nationwide for years,
with all of the adverse effects that this would have on economic
development.  

The remedies for this scenario would be for permitting authorities to
increase their PSD funding by over 100-fold, from $12 million to over
$1.5 billion, or the development by EPA and the permitting authorities
of streamlining techniques.  But it is not possible for permitting
authorities to increase their funding to those levels in the foreseeable
future, partly because of the sheer magnitude of those levels and partly
because of the financial challenges that states currently face.  And,
for the reasons discussed later, although streamlining offers genuine
promise to improve the manageability of the PSD workload, streamlining
cannot do so in the very near term and, in any event, the extent to
which it can do so has not yet come into focus.  

So clear are at least the broad outlines of this picture that EPA did
not receive any substantive comments arguing that permitting authorities
could in fact administer the PSD program with the applicability
requirements applied literally to GHG sources beginning in the very near
future.  Every permitting authority that addressed this issue in their
comments on the proposed GHG Tailoring Rule stated unequivocally that it
could not administer the PSD program at the statutory levels.  To cite a
few examples (each of which considered both the PSD and title V programs
together): NACAA, which represents air pollution control agencies in 53
states and territories, stated it “…agrees with the EPA that
immediately attempting to implement the PSD and title V programs using
the statutory thresholds meets the test for invoking the administrative
necessity and absurd results doctrines.”  Similarly, the California
Air Resources Board stated that it “… concurs with the United
States, EPA that if more appropriate applicability thresholds [as
opposed to the statutory thresholds] are not set for GHG it will not be
administratively possible to implement these [the PSD and tile V]
permitting programs.”  All other state and local permitting agencies
that commented on the proposed tailoring provided similar comments that
they would not have the adequate staff capacity or resources to be able
to successfully administer their permitting programs with the addition
of GHG emission sources at the statutory thresholds for PSD and title V.
 

It is the many-year delays in permit issuance and the consequent
chilling of economic development that provide perhaps the clearest
indication that applying the PSD applicability provisions to GHG sources
without tailoring produces absurd results.  These effects would
undermine one of Congress’s central purposes in establishing the PSD
program, which was to promote development in clean air areas by large
industrial sources (as long as they included environmental safeguards). 
As discussed previously, this goal is manifest in the structure of the
PSD provisions, and Congress even went so far as to make this goal
explicit in the purposes section of the PSD provisions.  

Moreover, at the present time, there is relatively little environmental
benefit in subjecting large numbers of small GHG sources to the
expensive, source-by-source PSD permitting requirements.  They represent
a relatively small share of the GHG inventory and the control options
available to them, at present, are limited.  As a result, approaches
other than source-by-source permitting presently offer more promise for
generating emissions reductions in an efficient manner.  These
approaches, which may be developed through both federal and state
efforts, include requirements, incentives, and educational outreach to
promote efficiency improvements to boilers and furnaces and energy
efficient operations, including, for example, weatherization programs.  


	For all these reasons, interpreting the definition of “major emitting
facility” and “modification” literally - that is, as EPA has
interpreted them more narrowly, but without tailoring and before the
program requirements can be streamlined or permitting authority
resources can be increased -– would produce results that are not
consonant with, and, in fact, would severely undermine, Congress’s
purpose for the PSD program.  These results may fairly be characterized
as the type of absurd results that support our view that the literal
terms of the PSD applicability provisions do not indicate congressional
intent for how those provisions should applied to GHG sources.

b.  Congressonal Intent for the Applicability Provisions

(1)  Congressional Intent for Whether and How PSD Applies to GHG Sources

Several of the PSD provisions and statements in the legislative history
are particularly important in determining whether and how the PSD
program should apply to GHG sources, as discussed elsewhere:  

(1)	The applicability provisions, under CAA section 165(a) and 169(1). 
These provisions are written broadly, and although, as we explain above,
they cannot be read literally to apply to GHG sources at or above the
100/250 tpy, they nevertheless can be read to indicate that
directionally, Congress intended that PSD be applied inclusively.  

(2)	The various PSD provisions that identify the pollutants subject to
PSD.  Compare, e.g., CAA sections 162, 163, 164, 165(a)(3), 165(d)(2),
165(e), and 166 (NAAQS pollutants) with CAA sections 165(a)(3)(C),
165(a)(4) (other pollutants).  These provisions indicate that a major
purpose of the PSD program is to control NAAQS pollutants, but that the
program also covers non-NAAQS pollutants.  

(3)	The requirement that permitting authorities act on PSD applications
within 1 year.  CAA section 165(c).  This provision indicates that
Congress anticipated the PSD program would be of a size that would allow
permitting authorities to meet this deadline.  

(4)	The purpose provision.  CAA section 160.  This provision makes clear
that PSD is designed both to protect public health and welfare and to
promote economic growth.  

(5)	In addition, we consider important the legislative history
indicating the Congress intended PSD to apply to large industrial
sources because they were the primary source of the air pollution
problems and they have the resources to manage the demands of the PSD
permitting process; and that, by the same token, Congress expected that
small sources would not be subject to PSD.  The legislative history does
not specifically mention GHG sources. 

Looking at these provisions and the legislative history together, we
think Congress can be said to have intended that the PSD program apply
to GHG sources as a general matter.  The most important indication of
congressional intent in this regard is the applicability provisions,
which provide, in part, that PSD applies to (i) “any … source[ that]
emit[s], or ha[s] the potential to emit [the specified quantity] of any
air pollutant,” CAA section 169(1); and (ii) to any such source that
undertakes a physical or operational change that “increases the amount
of any air pollutant emitted.”  CAA section 169(2)(C), 111(a)(4). 
These terms are quite broad, and should be read to include GHG sources
and GHGs.  See Massachusetts v. EPA, 549 U.S. 497, 533 (2007)
(“Because greenhouse gases fit well within the Clean Air Act's
capacious definition of ‘air pollutant,’ we hold that EPA has the
statutory authority to regulate the emission of such gases from new
motor vehicles.”).  Moreover, including GHG sources – under certain
circumstances – is consistent with the PSD provisions that refer to
other pollutants, establish the time-frame for acting on PSD
applications, and establish the overall purpose of the program.  In
addition, including GHG sources – again, under certain circumstances
-- is consistent with the legislative history that PSD be limited to
sources that cause a meaningful part of the air pollution problem and
have the resources to manage the PSD requirements.  No PSD provision
explicitly imposes any limitation of PSD to large industrial sources,
and Congress’s reasoning for focusing on large industrial sources –
which was that these sources are best suited to handle the resource
-intensive analyses required by the PSD program – could extend to GHG
sources under certain circumstances (that is, large sources first, and
smaller sources after streamlining methods are developed).  Similarly,
as discussed previously, it is reasonable to read into Congress’s
intent that the PSD program be limited to a size that permitting
authorities would be able to administer, but it is consistent with that
reading to recognize that the permitting authorities could take certain
steps – including adoption of streamlining measures and ramping up
resources – that would allow them to handle a higher volume of
permitting.  Finally, we find nothing in the PSD provisions or
legislative history that would indicate congressional intent to exclude
GHG sources.  Accordingly, we believe that Congress must be said to have
intended an affirmative response for whether PSD applies to sources of
GHGs as a general matter.  Our previous regulatory action defining the
PSD applicability provisions made this clear, and we do not reopen this
issue in this rulemaking.  Moreover, even if this long-established
regulatory position were not justifiable based on Chevron Step 1 – on
the grounds that in fact, congressional intent on this point is not
clear - then we believe that this position, that the statutory
provisions to apply PSD to GHG sources in general, was justified under
Chevron Step 2. 

As to how PSD applies to GHG sources, although, for reasons discussed
previously, the 100/250 tpy threshold provision, which establishes the
scope of PSD applicability, should not be read as applying literally to
GHG sources - and as a result, the applicability provision as a whole
cannot be said to have a plain meaning as to the scope of coverage of
GHG sources -- we believe that the applicability provisions and
legislative history nevertheless indicate a congressional intent for how
PSD should apply to GHG sources.  That is to apply PSD to as many
sources as possible as quickly as possible, at least to a certain point.
 We believe that this intent can be inferred from the inclusiveness of
the applicability provision, combined with the legislative history that
focuses on Congress’s desire to include in the PSD program sources
that have the resources to comply with the requirements and, as the
Court in Alabama Power recognized, Congress’s concern about
administrability.  That is, at first, PSD may apply to the largest GHG
sources because they may be expected to have the resources to comply
with PSD’s requirements and permitting authorities may be expected to
accommodate those sources; and over time, with streamlining and
increases in permitting authority resources, PSD may apply to more GHG
sources.  As discussed later, the tailoring approach is consistent with
congressional intent in this regard.

We recognize the tension between the applicability provisions, which are
inclusive, and the statements in the legislative history that express
Congress’s expectation that PSD be limited to large industrial
sources.  At least to a point, the applicability provisions and these
statements can be reconciled by recognizing that the reason why Congress
expected that PSD would be limited to large industrial sources was that
Congress recognized that PSD applied on a source-by-source basis, that
this would be costly to sources, and that only the large industrial
sources could afford those costs.  Taking certain actions – including
streamlining PSD requirements – can render PSD more affordable and
thereby allow its application to smaller sources in a more
cost-effective manner.  In this way, PSD’s inclusive applicability
provisions can be reconciled with the narrower scope Congress expected,
and this is part of the reason why we characterize congressional intent
as being consistent with phasing in the applicability of PSD to GHG 

sources through the tailoring approach.  

On the other hand, if Congress cannot be said to have expressed an
intent as to the manner and scope of PSD applicability to GHG sources,
then, under Chevron Stepstep 2, EPA may apply a reasonable
interpretation of the applicability provisions to determine the scope of
coverage of GHG sources that is consistent with the statutory
requirements.  The Tailoring Rule is a reasonable interpretation under
Chevron Stepstep 2.  It is consistent with (1i) the applicability
provisions, recognizing that as we have seen, those provisions cannot be
applied literally under these circumstances, (2ii) the provisions
described above concerning which pollutants the PSD provisions cover and
the timetable for permitting authority action on PSD applications;
(3iii) the purpose provisions of PSD, and the accompanying legislative
history, because it protects public health and welfare without
inhibiting economic development; and (4iv) the legislative history
indicating Congress intended that PSD be limited to sources that cause a
meaningful part of the problem and can manage its requirements, because
it will expand PSD’s applicability only after streamlining methods and
greater permitting authority resources will allow for such an expansion
in an orderly manner.

 (2)  Criteria for Establishing Phase-in Schedule

The specific phase-in schedule under the tailoring approach will depend
on several things.  The first is our progress in developing streamlining
methods that will render the permitting authority workload more
manageable by taking some sources off the table (through regulations or
guidance interpreting PTE“potential to emit”), and by allowing for
more efficient permit processing (through general permits and
presumptive BACT).  At the same time, streamlining techniques will lower
permitting costs to sources or even eliminate some sources’
obligations to obtain permits altogether.  The second is the time that
permitting authorities need to ramp up their resources in an orderly and
efficient manner to manage the additional workload.  The third is
information we have as to the sources’ abilities to meet the
requirements of the PSD program and the permitting authorities’
ability to process permits in a timely fashion.  That information will
be based on the real-world experience the permitting authorities will
accumulate as they proceed to process permit application for the larger
GHG sources.  

Thus, under our present approach, we will develop streamlining
techniques, we expect the permitting authorities to ramp up resources in
response to the additional demands placed upon them in the first two
steps, and we will gather real world- information about the GHG
permitting process; and based on all that, we will address expanding the
PSD program in a step-by-step fashion to include more sources over time.
 We intend to follow this process to establish both the PSD
applicability thresholds and, as we describe next, the significance
levels.  

(3)  Criteria for Establishing Significance Levels

	The criteria for establishing the significance levels are the same as
for establishing the “major emitting facility” thresholds.  As noted
previously, under the applicable CAA sections, any physical or
operational change at a stationary source that “increases the amount
of any air pollutant emitted by such source” or that results in the
emission of a new pollutant is treated as a “modification” that is
subject to PSD requirements.  Although the CAA, by its terms, treats as
an “increase” any amount of emissions that is greater than zero, the
D.C. Circuit held in Alabama Power v. Costle that EPA may establish a
threshold – called the significance level – on de minimis grounds
for the amount of any particular pollutant that may be increased.  636
F.2d at 400.  

Of particular importance, the Court in Alabama Power indicated that EPA
may rely on administrative considerations to establish significance
levels.  Id.  To reiterate, the Court held that “EPA does have
discretion, in administering the statute’s ‘modification’
provision, to exempt from PSD review some emission increases on grounds
of de minimis or administrative necessity.”  636 F.2d at 400.  The
Court added a more detailed exposition of its views in a subsequent part
of its opinion, where it discussed the BACT provision, under CAA section
165(a)(4), and the Court made clear that those views  applied as well to
the “modification” provision.  There, the Court invalidated an EPA
regulation that established a 100- and 250-tpy exemption from the BACT
requirement.  Both the BACT provision and the modification provision
apply by their terms to all emissions from a source, but the Court
stated that each provision must be read to incorporate an exemption
based on de minimis or administrative considerations, and explained:

We understand that the application of BACT requirements to the emission
of all pollutants from a new facility, no matter how miniscule some may
be, could impose severe administrative burdens on EPA, as well as severe
economic burdens on the construction of new facilities.  But the proper
way to resolve this difficulty is to define a de minimis standard
rationally designed to alleviate severe administrative burdens, not to
extend the statutory 100 or 250-ton threshold to a context where
Congress clearly did not apply it.  Just as for the applicability of PSD
to modifications, the de minimis exemption must be designed with the
specific administrative burdens and specific regulatory context in mind.
 This the Agency has failed to do.  We do not hold that 100 tons per
year necessarily exceeds a permissible de minimis level; only that the
Agency must follow a rational approach to determine what level of
emission is a de minimis amount.

A rational approach would consider the administrative burden with
respect to each statutory context: what level of emission is de minimis
for modification, what level de minimis for application of BACT. 
Concerning the application of BACT, a rational approach would consider
whether the de minimis threshold should vary depending on the specific
pollutant and the danger posed by increases in its emission.  The Agency
should look at the degree of administrative burden posed by enforcement
at various de minimis threshold levels.  It is relevant that our
decision requires the Agency, in its evaluation of emissions of
facilities, to take into account the facility's air pollution controls. 
It may also be relevant, though it is certainly not controlling, that
Congress made a judgment in the Act that new facilities emitting less
than 100 or 250 tons per year are not sizeable enough to warrant PSD
review.

Id. at 405.  As just quoted, the Court acknowledged the 100 and 250 tpy
thresholds for a major emitting facility, and did not indicate whether
the modification exemption level could exceed those statutory levels,
but nevertheless, the Court made clear that EPA may “consider the
administrative burden” associated with modifications to establish an
exemption level for modifications.  

EPA has established significance levels for various pollutants,
generally relying on a de minimis basis.  See, e.g., 45 FR 52,676,
52,705 – 52,710 (August 7, 1980).  In these actions, EPA generally
established the level based on the triviality of the amount of emissions
excluded.  To this point, we have not attempted to determine de minimis
– that is, trivial - levels for GHGs.  Instead, in this rulemaking,
EPA is establishing a phase-in schedule for significance levels based on
the Chevron framework, accounting for the “absurd results,” 
“administrative necessity,” and “one-step-at-a-time” doctrines. 
It is not necessary to establish a permanent de minimis level in this
rulemaking.  For one thing, the Court in Alabama Power explicitly
authorized an administrative basis for significance levels.  Moreover,
were EPA to establish a de minimis level, that amount could be below –
perhaps even well below – the “major emitting facility” thresholds
established in this rulemaking on grounds of “administrative
necessity” and the other doctrines.  Accordingly, at present, if we
were to establish a permanent significance level on a de minimis basis,
that level could result in too many small sources being required to
submit permit applications while the phase-in is occurring.  This would
give rise to the same problems concerning undue costs to the sources and
administrative burdens for the permitting authorities for which we are
fashioning a remedy.  Accordingly, the significance levels we establish
with this action are the lowest levels that sources and permitting
authorities can reasonably be expected to implement at the present time
in light of the costs to the sources and the administrative burdens to
the permitting authorities.

c.  Other Possible Approaches to Reconciling a Literal Reading of PSD
Applicability Provisions and Congressional Intent

Commenters have suggested another approach to reconciling the
inconsistency between the definition of “major emitting facility”
and congressional intent.  They urge that the “major emitting
facility” definition should be applied so that only sources that emit
NAAQS pollutants, for which the area is designated attainment or
unclassifiable, in the requisite quantities would be subject to PSD, and
sources would not be subject to PSD based solely on their emissions of
non-NAAQS pollutants or a NAAQS pollutant for which an area has been
designated nonattainment.  Some commenters argue that this approach is
mandated by several of the PSD provisions, read together or at least
that the relevant statutory provisions are ambiguous and that this
approach is a reasonable reading of them.  Under this approach, we would
not need to phase in the application of PSD by lowering the
applicability threshold for GHG emitters.  

Specifically, many commenters have questioned whether EPA has the
authority to regulate GHGs under the PSD provisions.  Although the
specific lines of reasoning vary somewhat from one commenter to another,
in general, they based their arguments largely on CAA sections 161 and
165(a).  Under CAA section 161:

In accordance with the policy of section 101(b)(1), each applicable
implementation plan shall contain emission limitations and such other
measures as may be necessary, as determined under regulations
promulgated under this part, to prevent significant deterioration of air
quality in each region (or portion thereof) designated pursuant to
section 107 as attainment or unclassifiable.

Commenters point out that section 107 applies only to NAAQS pollutants
and directs that areas be designated as attainment, nonattainment, or
unclassifiable on a pollutant-by-pollutant basis.  Under CAA section
165(a), a “major emitting facility” cannot be constructed “in any
area to which this part applies” unless it meets certain requirements.
 According to some commenters, these provisions, read together, limit
PSD’s applications to only NAAQS pollutants that are emitted from
sources in areas that are designated attainment or unclassifiable for
those pollutants.  Other comments make a similar point, except state
that PSD applies more broadly to pollutants with a local, ambient
impact.

Some commenters go on to take the position that NAAQS pollutants for
which the area is designated attainment or unclassifiable are the only
pollutants that can be regulated under any provision of the PSD
requirements; while others take the position that once PSD is triggered
for a source on the basis of its NAAQS pollutants, then other,
non-NAAQS, pollutants may be regulated under certain PSD provisions, in
particular, the BACT provision under CAA section 165(a)(4).  These
commenters agree, however, that emissions of GHGs, by themselves, cannot
trigger PSD applicability.  Finally, some commenters state that even if
the PSD provisions cannot be read by their terms to preclude GHGs from
triggering PSD, then they can be read to authorize EPA to determine that
GHG emissions do not trigger PSD.

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

Although section 165(a) makes clear that the PSD requirements apply only
to sources located in areas designated attainment or unclassifiable, it
does not, by its terms, state that the PSD requirements apply only to
pollutants for which the area is designated attainment or
unclassifiable.  Rather, section 165(a) explicitly states that the PSD
requirements apply more broadly to any pollutant that is subject to
regulation.  Moreover, another requirement requirements in CAA section
165(a) also applies to air pollutants broadly.  Under CAA section
165(a)(3), one of the requirements for securing a preconstruction permit
is to demonstrate that the source’s emissions “will not cause, or
contribute to, air pollution in excess of any (A) maximum allowable
increase or maximum allowable concentration for any pollutant in any
area [to which the PSD requirements apply], (B) [NAAQS] in any air
quality control region, or (C) any other applicable emission standard or
standard of performance under this chapter.”  As just quoted,
subparagraph (C), by its terms clearly applies to non-NAAQS pollutants. 
This is because it refers to (1i) “any other applicable emission
standard,” which distinguishes it from subparagraph (B) and therefore
from NAAQS pollutants; and (2ii) “any … standard of performance
under this chapter,” which refers to standards of performance under
section 111, several of which are for non-NAAQS pollutants.  See, e.g.,
40 CFR 60.33c(a) “municipal solid waste landfill emissions.”  By the
same token, CAA section 110(j) specifically contemplates that a source
required to hold a permit under title I of the Clean Air Act, which
includes a PSD permit, demonstrate that the source complies with
“standards of performance,” which may include requirements for
pollutants other than NAAQS.   

In addition, CAA section 163(a)(4) includes as a PSD requirement that
“the proposed facility is subject to the best available control
technology for each pollutant subject to regulation under this chapter
emitted from, or which results from, such facility.”  Section
163(a)(4)’s broad reference to  “each pollutant subject to
regulation under this chapter” clearly indicates that it applies to
non-NAAQS pollutants, as 

long as they are regulated under other provisions of the Act.  The D.C.
Circuit, in Alabama Power v. Costle, 636 F.2d 323, 361 n.90 (D.C. Cir.
1980) indicated that, under the law applicable at the time the Court
handed down the decision in 1980, PSD 

applies to HAPs.hazardous air pollutants. 

In addition, PSD requirements are part of SIPs, and although SIPs
generally are limited to provisions that implement the NAAQS, and
therefore generally are limited to controlling NAAQS pollutants (or
non-NAAQS pollutants that affect ambient air quality), see generally CAA
section 110, Congress explicitly required SIPs to include requirements
to protect visibility, under CAA section 169A-B.  See CAA sections
110(a)(2)(D)(i)(II), 169A(b)(2)(A).  Congress took much the same
approach with the PSD program, which was to require that PSD
requirements be included in the SIPs, but to explicitly require that PSD
apply to non-NAAQS pollutants.  

These provisions – sections 165(a)(3), 165(a)(4), and 110(j) - all
indicate by their terms that PSD requirements apply to non-NAAQS
pollutants.  As such, they lend credence to our view that Congress
intended the PSD applicability provisions to include GHG sources.  At
the very least, they demonstrate that Congress certainly knew how to
specifically describe certain air pollutants – e.g., “air pollution
in excess of … any other applicable emission standard or standard of
performance under this chapter,” CAA section 165(a)(3)(C) – which
indicates that its decision not to specifically describe air pollutants
in the applicability provisions suggests an intent to cover air
pollutants broadly. 

To return to sections 161 and the “in any area to which this part
applies” phrasephase in 165(a), which commenters rely on as the
cornerstone of their argument, commenters in effect take the position
that Congress intended the geographic references in these provisions –
that is, the references to areas designated as attainment or
unclassifiable – to limit the scope of the permitting provisions.  We
think it unpersuasive that Congress would have taken such an indirect,
and silently implied, route to limit the scope of the permitting
provisions.  As noted previously, the permitting provisions apply
broadly by their terms.  Had Congress intended to limit PSD permitting
in the manner urged by commenters, it certainly could have done so
directly, such as by limiting PSD permitting to “any pollutant for
which an area is designated attainment or unclassifiable.”  Indeed,
Congress did so in other PSD provisions, discussed previously. 
Similarly, in other sections of the CAA, Congress also directly limited
the scope of pollutant applicability by specifying which pollutants are
or are not subject to the provision.  See, e.g., section 111(d)
(performance standards for existing sources apply only to pollutants
other than NAAQS or HAPs), section 112(a)(1) (applying air toxics
requirements in section 112 to sources that emit above the specified
tonnage thresholds of “hazardous air pollutants”).

In addition, although section 161 requires that SIPs contain emission
limitations and other measures as necessary to prevent significant
deterioration in areas designated as attainment or unclassifiable, it
does not by its terms limit SIPs to only those measures.  

Most broadly, we read the PSD provisions and their legislative history
to evidence Congress’s intent that PSD apply throughout the country to
large sources that undertake new construction or modifications, and that
Congress’s overall purpose was to assure that, as the industrial stock
of the nation turned over, it would become cleaner for all air
pollutants emitted.  Greenhouse gasGHG sources, as a general matter, fit
readily into this overall vision.  At the time that Congress enacted the
PSD provisions in 1977, every area of the nation was designated
attainment or unclassifiable for at least one air pollutant, and that
has remained the case to the present time.  Accordingly, at all times,
PSD has applied in every area of the country.  The PSD requirements
clearly cover all air pollutants emitted by the source, and provide a
process for reviewing those emissions and determining BACT for them
under CAA section 165(a)(4).  It is true that at the time Congress
adopted the PSD provisions, it was primarily concerned about the NAAQS
pollutants – or, as some commenters assert, pollutants with local,
ambient impact -- because those pollutants represented a major component
of the air pollution problems it was aware of and was addressing.  But
its overall purpose was broad enough to cover additional pollutants; the
process it enacted for establishing BACT was broad enough to encompass
additional pollutants; and the applicability provisions it established
were phrased broadly enough to encompass additional pollutants, see
section 169(1).  As a result, we believe that the PSD applicability
provisions, which, again, refer to, as we have interpreted them, “any
air pollutant [subject to regulation under the CAA]” should be seen as
“capacious” and therefore encompass GHG sources, in much the same
manner as the U.S. Supreme Court viewed the definition of “air
pollutant” to be “capacious” and therefore encompass GHGs. 
Massachusetts v. EPA, 549 U.S. 497, 533 (2007).    

In addition, it should not be overlooked that we have applied PSD to
non-NAAQS pollutants since the inception of the program over 30 years
ago.  For example, prior to the 1990 CAA Amendments, PSD applied to HAPs
regulated under CAA section 112; and over the years, EPA has established
significance levels for fluorides, sulfuric acid mist, hydrogen sulfide,
TRStotal reduced sulfur, reduced sulfur compounds, municipal waste
combustor organics, municipal waste combustor metals, municipal waste
combustor acid gases, and municipal solid waste landfill emissions, see
40 CFR 51.166(b)(23)(i); and EPA has proposed a significance level for
ozone depleting substances.  See 61 FR 38,307/2 (July 23, 1996).  Of
course, the basis for all these actions is PSD’s applicability to
these non-NAAQS air pollutants.  We are not aware that EPA’s actions
in establishing significance levels for these pollutants gave rise to
challenges on grounds that the PSD provisions do not apply to them.  As
the U.S. Supreme Court recently stated in upholding an EPA approach in
another context:  “While not conclusive, it surely tends to show that
the EPA’s current practice is a reasonable and hence legitimate
exercise of its discretion …. . . that the agency has been proceeding
in essentially this fashion for over 30 years.”  Entergy Corp. v.
Riverkeeper, Inc., 129 S.Ct. 1498, 1509 (2009) (citations omitted).

Finally, we note that excluding GHG sources from PSD applicability would
create inequitable results.  Consider the hypothetical case of two
sources that construct in the same area, each of which emits the same
amount of GHGs, and that amount is large enough to trigger PSD
applicability.  Assume that the first one, but not the second, also
emits NAAQS pollutants amounts large enough to trigger PSD
applicability.  If GHG sources are excluded from PSD applicability, then
the first of those sources, but not the second, would be subject to PSD
requirements for its GHG emissions.  Similarly, consider the
hypothetical case of two sources that emit identical amounts of the same
NAAQS pollutant and identical amounts of GHGs, all amounts of which are
large enough to trigger PSD applicability requirements.  Assume that the
first source constructs in an area that is an attainment or
unclassifiable area for the NAAQS pollutant that it emits, and that the
second source constructs in an area that is not an attainment or
unclassifiable area for that NAAQS pollutant.  Here again, if GHG
sources are excluded from PSD applicability, then the first of those
sources, but not the second, would be subject to PSD requirements for
its GHG emissions.  These results are inequitable and would create an
uneven playing field and for this reason, too, support our view that the
PSD applicability provisions apply to GHG sources.

 Accordingly, we reject the argument that section 165 must be, or may
reasonably be, limited in scope to pollutants for which an area has been
designated as attainment or unclassifiable.  Rather, the PSD
applicability provision – the definition of “major emitting
facility” in CAA section 169(1) – applies by its terms (as we have
interpreted them narrowly through regulation) to sources emitting any
air pollutant subject to regulation, and is not limited to any NAAQS air
pollutant.  Our research has not disclosed any explicit statements in
the legislative history that Congress intended to limit PSD
applicability to sources of NAAQS pollutants.

6.  Application of the “Absurd Results” Doctrine for the Title V
Program 

Having discussed the application of the Chevron framework, taking
account of the “absurd results” doctrine, for the PSD applicability
requirements, we now turn towards applying the same approach to the
title V applicability requirements.  Because of the parallels between
the PSD and title V applicability provisions, much of the discussion
later parallels the previouspreviously discussion of PSD.  As with PSD,
we finalize, with some refinements, the “absurd results” basis we
proposed.  Specifically, we are revising our regulations to limit title
V applicability to GHG emitting sources by revising the regulatory term,
“major source,” and although our revised regulations do not accord
with a literal reading of the statutory provisions for title V
applicability, which are incorporated into the statutory definition of
“major source,” we have concluded that based on the “absurd
results” doctrine, a literal adherence to the terms of this definition
is not required.  Rather, we may apply title V to GHG sources in a
phased-in manner, as we do through the tailoring approach, because
although congressional intent is clear that title V applies to GHG
sources in general, congressional intent is unclear on the question of
how title V applies, and the tailoring approach is a reasonable
interpretation of the statute.  

	To reiterate, for convenience, the title V applicability provisions
provide that after the effective date of a title V program, it is
unlawful for any person to operate a "major source" without a title V
permit (, CAA section §502(a)), and define a "major source" to include
"any major stationary facility or source of air pollutants which
directly emits, or has the potential to emit, one hundred tons per year
or more of any air pollutant."  CAA  sections §501(2)(B) and §302(j).

Under the current interpretation of the title V applicability
provisions, EPA’s recent promulgation of the LDVR light-duty vehicle
rule will trigger the applicability of title V for GHG sources at the
100 tpy threshold levels as of January. 2, 2011.  This is because title
V applicability hinges on the definition of “major source,” which,
under EPA’s long-standing narrowing interpretation, but absent further
tailoring, applies title V to sources of any air pollutant that is
subject to regulation under another provision of the CAA.  EPA’s
promulgation of the LDVRlight-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. 

But absent tailoring, the January 2, 2011 trigger date for GHG PSD
applicability will see an extraordinarily large number of sources - some
6.1 million -- become subject to title V, an increase of over 400-fold
over the 14,700 sources that currently are subject to title V.  The
great majority of these will be small commercial or residential sources.

We believe that for many reasons, this result is contrary to
congressional intent for the title V program, and in fact would severely
undermine what Congress sought to accomplish with the program.  As a
result, under Chevron, accounting for the “absurd results” doctrine,
the statutory definition for “major source” (as EPA has already
narrowed it to refer to any air pollutant “subject to regulation”)
should not be read to apply to all GHG sources at or above the 100 tpy
threshold as of the January 2, 2011 date.  Rather, the definition of
“major source” should be tailored so that it applies to GHG sources
on a phased-in basis, with the largest sources first, as we describe in
this rule.

a.  Congressional Intent for the Title V Program 

As we said, previously, in a similar circumstance involving the PSD
program, applying title V requirements to GHG sources without tailoring
the definition of “major source” – and, as discussed later,
without streamlining the title V requirements or allowing for time for
permitting authorities to ramp up resources -- would result in a program
unrecognizable to the Congress that enacted title V, and one that would
be flatly unadministrable.  Without tailoring, the PSD program would
expand from the current 14,700 sources to some 6.1 million, with the
great majority of the sources being small commercial and residential
sources that not only have never been permitted before, but that in many
cases have no applicable requirements under the CAA to include in the
permit.  In the next several sections, we will describe some of the
specific ways that this literal application of title V would not only
differ from, but would undermine, congressional intent.  But the big
picture is readily drawn:  The influx of millions of permit applications
would do nothing less than overwhelm the program Congress finely crafted
for thousands of sources, with its multi-step deadlines measured in days
and months, its multiple mandates for expeditious permit processing, its
nuanced limitations on the need for permit revisions, its efforts to
save smaller sources permit fees.  Regulatory gridlock, precisely what
Congress strove to avoid, would result.

	Most visibly, interpreting the applicability provisions literally to
include GHG sources at the 100 tpy level immediately would revise the
program from what Congress envisioned in three major ways, the
legislative history of each of which was discussed previously:  

It would immediately expand the program to cover several-hundred-fold
more sources than Congress anticipated.

It would immediately expand the program to cover very small sources that
Congress expected would not be included in the program.

It would immediately expand the program so that a large number of
sources have empty permits, that is, permits without applicable
requirement, and undermine the implementation of the program for sources
with applicable requirements.

Revising the program in this way through a literal interpretation of the
applicability provisions – without tailoring the applicability
requirements and without streamlining the program requirements -- is
clearly inconsistent with Congress’s conception of the program’s
scope, and these inconsistencies are foundational.  Most importantly,
the program that would result would be unduly costly to sources and
impossible for permitting authorities to implement, and therefore would
frustrate the purposes that Congress intended to achieve with the
program that it did design.

As discussed previously, Congress was fully aware that with the title V
program, it was subjecting sources and permitting authorities to
additional costs and administrative burdens, and it was fully aware of
concerns that absent careful design, the program could become a formula
for regulatory gridlock.  Determined to make the program workable,
Congress crafted the provisions to be efficient and workable.  

However, if title V were to apply to GHG sources at the 100 tpy level,
until EPA could develop streamlining methods, all of these sources newly
subject to title V would need to apply for permits.  We estimate that
the commercial and residential sources would incur, on average, expenses
of $23,175, while an industrial source would incur expenses of $46,350,
to prepare a permit application and receive a permit.  The great
majority of these sources would be small commercial and residential
sources of the type that Congress did not expect would be included in
title V.  For example, as discussed above, the legislative history of
title V, including both the permit program under CAA sections 501-506
and the “small business stationary source technical and environmental
compliance assistance program” under CAA section 507, indicated that
Congress did not expect that “printers, furniture makers, dry
cleaners, and millions of other small businesses” would become subject
to title V.  House Committee Report, H.R. 101-590, at 354.  These
sources generally do not have the potential to emit conventional
pollutants at or above the 100 tpy threshold.  However, many do have the
potential to emit GHGs above that threshold.  Many printers and
furniture makers use a variety of combustion equipment that has the
potential to emit at least 100 tpy CO2, and many commercial dry cleaners
have gas-fired driers that have the potential to emit at least 100 tpy
of CO2.  All told, there are in fact “millions of … small
businesses” that would become subject to title V -- of the 6.1 million
sources that would become subject to title V, the great majority are
small businesses – if the title V applicability provisions are applied
literally to GHG sources.  

Moreover, the overall cost to all 6.1 million sources – before the
development of streamlining methods -- would be a staggering $49 billion
per year over a 3 year period.  Imposing burdens of this magnitude on
these sources – individually and in total – would of course be
contrary to Congress’s efforts to minimize the expenses of title V,
especially to small sources.  The magnitude of the costs is, in a sense,
heightened because a great many of these sources will not have
applicable requirements to include in their permits; therefore, much of
the costs will produce relatively little benefit.  

	Yet, the most important reason why applying the title V program to GHG
sources without tailoring, and before the development of streamlining
methods, would be inconsistent with congressional intent, is that the
resulting program would prove unadministrable.  Adding some 6.1 million
permit applications to the 14,700 that permitting authorities now handle
would completely overwhelm permitting authorities, and for all practical
purposes, bring the title V permitting process to a standstill.

	The costs to permitting authorities of this multi-million-source
program would again be staggering.  On average, and without
streamlining, a permitting authority would expend 214 hours, which would
cost $9,844, to issue a permit to a commercial or residential source;
and 428 hours, which would cost $19,688, to issue a permit to an
industrial source.  In all, permitting authorities would face over $21
billion in additional permitting costs each year due to GHGs, compared
to the current program cost of $62 million each year.

Beyond this disconnect with congressional expectations as to scope of
the program, the extraordinarily large number of permit applications
would overwhelm permitting authorities and slow their ability to process
permit applications to a crawl.  As described at proposal, the survey of
permitting authorities conducted by NACAA found that a literal
application of the title V applicability provisions to all GHG sources
would result in permitting delays of some 10 years.  However, as we
further noted at proposal, this estimate was based on the assumption
that the applicability threshold would be 100 tpy based on actual
emissions; in fact, the applicability threshold would be 100 tpy based
on PTEin potential to emit, which would sweep in many more sources. 
Moreover, as stated elsewhere, we currently estimate the amount of
per-permit work hours for permitting authorities in processing title V
permit applications to be several times higher than what we estimated at
proposal.  As with PSD, such a program would be beyond anything within
our experience, and it  is difficult to give a meaningful estimate for
how long the permitting process would take for each permit on average. 
But it is clear that the period would be many years longer than even the
10 years estimated by NACAA.

In addition, applying title V to all GHG sources without tailoring would
be in tension with a specific CAA requirement, that of CAA section§
503(c), which imposes a time limit of 18 months from the date of receipt
of the completed permit application for the permitting authority to
issue or deny the permit.  It would be impossible for permitting
authorities to meet this statutory requirement if their workload
increases from some 14,700 permits to 6.1 million, and without
streamlining.  Instead, as just noted, permit applications would face
multi-year delays in obtaining their permits.

Moreover, these delays would undermine the overall statutory design that
promotes the smooth-running of the permitting process, and the
underlying purpose of the title V program itself.  As noted elsewhere,
Congress intended through title V to facilitate sources’ compliance
with their CAA obligations by establishing an operating permit program
that requires the source to combine all of its CAA requirements, and
explain how it will assure compliance with such requirements.  Congress
established a comprehensive process to implement the operating permit
program.  Through this process, following the date that sources become
subject to title V, they have 1 year to submit their permit
applications.  CAA section §503(c).  As noted, the permitting authority
then has 18 months to issue or deny the permit.  CAA section §503(c). 
Permitting authorities must provide an opportunity for public comment
and a hearing.  CAA section §502(b)(6).  If the permitting authority
proposes to issue the permit, the permitting authority must submit the
permit to EPA for review, and notify affected states.  CAA section
§505(a)(1).  EPA then has 45 days to review the permit and, if EPA
deems it appropriate, to object to the permit.  CAA section §503(b)(1).
 If EPA does object, then the permitting authority must, within 90 days,
revise it to meet the objections, or else EPA becomes required to issue
or deny the permit.  CAA section §503(c).  If EPA does not object,
then, within 60 days of the close of the 45-day review period, any
person may petition EPA to object, and EPA must grant or deny the
petition within 60 days.  CAA section §505(b)(2).  This set of
applicant, permitting authority, and EPA actions and deadlines
establishes the process for the prompt and efficient issuance of
operating permits for the appropriate universe of sources.

But at least for an initial period, until resources could be ramped up
and streamlining methods could be developed, the extraordinary numbers
of these permit applicants would sweep aside this carefully constructed
program, and instead, backlog the permit authorities.  This initial
period would last for many years.  As discussed elsewhere, it would take
several years to develop and apply streamlining measures – in
particular, general permits – and during that time, the permit backlog
would grow so large that it would take many more years for permitting
authorities to catch up by raising the requisite funds and hiring and
training the necessary employees.  

What’s more, only a fraction of these millions of sources newly
covered by title V will be subject to any CAA requirements due to their
GHG emissions, and we suspect that a larger number will not be subject
to any CAA requirements at all.  As a result, for most of these sources,
although they would need to apply for and receive a permit, there would
be no applicable requirements to include in the permit and thus the
exercise would not improve compliance.  

The picture that emerges from a literal application of title V’s
requirements to all GHG sources - at the 100 tpy level, beginning on
January 2, 2011 ––- shows multi-year delays in issuance of all
permits, for both the sources that have applicable requirements and that
Congress clearly intended the program to cover, and for the millions of
sources that may not be subject to any applicable requirements.  In
short, this literal interpretation would apply title V to millions of
sources that Congress did not expect be covered, and the ensuing
administrative burdens – at least initially -- would impede the
issuance of permits to the thousands or perhaps tens of thousands of
sources that Congress did expect be covered.  This is the type of
“absurd results” from a literal application of statutory provisions
that the courts have held should be avoided.  And even beyond all that,
the sheer magnitude of the numbers involved – millions of permits
requiring thousands of FTEs at a cost to the permitting authorities of
billions of dollars, all this beginning immediately at the time that
GHGs become subject to regulation – makes clear that this result of a
literal application of the title V provisions to GHG sources cannot be
what Congress intended.

b.  EPA’s Reconciliation of Applicability Provisions With
Congressional Intent

For the reasons just described, we should not consider the literal
meaning of the applicability provisions to be determinative of
congressional intent as to the applicability of title V to all GHG
sources; rather, we should examine other provisions of the statute and
the legislative history to determine congressional intent on that
question.  If congressional intent is clear, we must adopt and implement
an applicability approach that is as close as possible to congressional
intent; and if congressional intent is not clear, then we must select an
interpretation that is reasonable and consistent with the statutory
requirements.  This section explains EPA’s view of congressional
intent for the applicability of the title V program to GHG sources and
the principles and approach EPA is using for tailoring.  In addition, we
also respond to other approaches that were suggested by commenters.

To determine congressional intent, we consider the statutory provisions
and legislative history, and this analysis is similar to that for PSD. 
The most important title V provisions and legislative history for this
purpose are the following:  

The applicability provisions themselves, which, as we have interpreted
them, apply title V to all sources that emit at least 100 tpy of any air
pollutant subject to regulation.  CAA sections 502(a), 501(2)(B),
302(j).  Although we do not believe these provisions should be applied
literally to GHG sources, their broad phrasing indicates, directionally,
a congressional intent towards inclusiveness of sources in title V,
including GHG sources.  

The provisions for general permits, CAA section 504(d); and title V
fees, CAA section 502(b)(3)(A).  These provisions give title V an
important measure of flexibility as to its scope.  The explicit
authorization of general permits means that title V may be applied to
more sources and more efficiently, thereby saving costs to both source
and permitting authority.  The requirements for permit fees provide a
mechanism for permitting authorities to, over time, develop their
programs to cover more sources.  In this sense, these provisions could
be construed to indicate congressional intent to apply title V
inclusively, to the extent that permitting authorities can accommodate
additional sources through general permits and permit fees.  

The detailed procedural requirements - including time periods, such as
the 18-month time period for action on permit applications -- for title
V permit processing.  CAA sections 503, 505.  Although these
requirements are consistent with applying title V to GHG sources - in
the sense that at least in theory, there is nothing intrinsic to GHG
sources that would mean that permitting authorities could not comply
with these requirements ––- these requirements cast doubt on whether
Congress can be said to have intended that title V cover the many small
GHG sources (at least immediately) in light of the risk that including
all those sources in title V would strain the process.  

The provisions and legislative history concerning applicable
requirements, which indicate that a purpose of title V is to include
sources’ applicable requirements in their permits.  CAA sections
503(b)(2), 504(a).  

These provisions, and the accompanying legislative history, discussed
previouslyabove, suggest an intent to include within title V GHG sources
that have applicable requirements, but may also suggest that Congress
would not have intended to include in title V the large numbers of GHG
sources that have “empty permits,” at least where their inclusion
would undermine implementation of the program for sources with
applicable requirements.  

(5) The small-business-assistance provisions of section 507 and the
legislative history of title V – both the permitting program and the
small-business-assistance program -- concerning the scope of the
permitting program and small businesses.  These indicate that Congress
intended title V to cover some tens of thousands of sources, and did not
intend that title V apply to small businesses.  These provisions and
legislative history suggest that Congress did not intend for title V to
apply to include large numbers of small GHG sources.  

Finally, the legislative history of title V does not explicitly mention
GHG sources, which could suggest that Congress did not have occasion to
focus on whether and how title V would apply to GHG sources.   

With all this, we believe that Congress had a clear intent on the
question of whether title V generally applies to GHG sources, and that
was that it does.  to apply title V to GHG sources.  As with PSD, the
most important indication of congressional intent in this regard is the
applicability provisions, which provide, in part, that title V applies
to “any stationary facility or source of air pollutants which directly
emits, or has the potential to emit, [the requisite quantity] of any air
pollutant.”  CAA sections§§ 502(a), 501(2)(B), 302(j).  This term is
quite broad, and should be read to include GHG sources.  See
Massachusetts v. EPA, 549 U.S. 497, 533 (2007) (“Because greenhouse
gases fit well within the Clean Air Act's capacious definition of
‘“air pollutant,’” we hold that EPA has the statutory authority
to regulate the emission of such gases from new motor
vehicles.”)..”):  Moreover, including GHG sources – under certain
circumstances – is consistent with the various statutory provisions
and statements in the legislative history described previously.

In the alternative, if it is concluded that Congress did not express a
clear intent on that question, then, under Chevron Step 2, EPA exercises
its discretion to conclude that title V applies to GHG sources as a
general matter.  This is a reasonable policy because applying the title
V program to at least the larger GHG sources will assure promote
accountability and enforceability for those sources, which is a key goal
of the title V program, and will not impose obligations that are beyond
the resources of those sources or insurmountable burdens on the
permitting authorities.  This policy is a reasonable interpretation of
the statutory provisions for the same reasons just discussed. 

As to the question of how title V applies to GHG sources, we believe
that Congress cannot be said to have expressed a clear intent.  A
central aspect of how title V is to apply to GHG sources concerns
“empty permits,” and on this aspect, some of the above-described
provisions and statements in the legislative history point in different
directions.  This is particularly true of, on the one hand the title V
applicability provisions, which apply by their terms inclusively and, on
the other hand, the requirement that sources include applicable CAA
requirements in their permits, and the statements in the legislative
history indicating that Congress intended title V to cover sources
subject to other CAA requirements. 

 Because Congress cannot be said to have expressed an intent as to the
manner and scope of title V applicability to GHG sources, then, under
Chevron Stepstep 2, EPA may apply a reasonable interpretation of the
applicability provision to determine the scope of coverage of GHG
sources that is consistent with the statutory requirements.  The
Tailoring Rule qualifies as such an interpretation.  The Tailoring Rule
in effect reads the applicability provisions not to apply title V to GHG
sources at or above the 100 tpy level, but instead to apply title V to
as many of the GHG sources at or above that level as possible and as
quickly as possible, starting with the largest sources first, that is
consistent with both the permitting authorities’ ability to administer
the program and with a sensible imposition of costs to sources.  This
tailoring approach is consistent with the inclusive direction of the
applicability provision, the flexibility in title V’s scope that is
inherent in the provisions authorizing general permits and requiring
permit fees, the detailed process requirements, and the legislative
history that focuses on Congress’s concern about costs to sources and
administrability.  With the tailoring approach, over time, more sources
may be included in title V, consistent with those provisions and
legislative history.  This reconciles the inclusiveness of the
applicability provisions with Congress’s expectations of a more
limited scope for the 

title V program.  However, as part of the tailoring approach, we
recognize that we may at some point determine that it is appropriate to
exclude certain sources, such as the smallest of the GHG sources.  In
addition, we intend to address the issue of sources with “empty
permits” in a later rulemaking, as discussed previously. 

The specific phase-in schedule will depend on the following:  We will
gather information about the permitting authorities’ ability to
process permits, and we will develop streamlining techniques.  Based on
that information, we will address expanding the title V program in a
step-by-step fashion to include more sources over time.  Each step will
be based on our assessment of the permitting authorities’ and
sources’ ability to comply with their respective obligations under the
title V program.

	We recognize that the availability of permit fees to support title V
permit actions creates a potentially important source of resources, and
that this has implications for the permitting authorities’ ability to
implement the title V program for sources of GHGs.  At least in theory,
permitting authorities could assess and collect sufficient fees to
support hiring and training sufficient personnel so that they could
expand their programs to match the expansion in the number of sources
covered by the program.

Even so, title V fees cannot be considered a panacea that will resolve
all resource problems that permitting authorities will have, for several
reasons.  Permitting authorities will likely be constrained as to the
rate in which they can increase fees in light of the costs to sources. 
As indicated elsewhere, at least at the outset of the program before
streamlining techniques have been developed, a literal application of
the title V applicability provisions to GHG sources would, on average,
cost each industrial source $46,400 and each commercial or residential
source $23,200 to complete the permit application and take other
associated actions; and it would cost each permitting authority, on
average, $19,688 to process the industrial source permit and $9,844 to
process the commercial or residential source permit.  Particularly in
light of the high costs to sources of applying for a permit, it is not
likely that permitting authorities would be able to pass on to the
sources in the form of fees, the entirety of the permitting
authorities’ own high costs for processing those permits, at least not
right away.  Even to the extent it would be possible to raise permit
fees, permitting authorities would have to undergo a process to assess,
impose, and collect those fees, and then hire and train personnel.  The
survey from the state and local agencies described previously forecast a
2-year period for hiring and training, without counting time for the fee
process.  For these reasons, we do not believe that the authorization
for fees will allow the permitting authorities either to accelerate
Steps 1 or 2 of the tailoring schedule or to permit a larger number of
sources at those steps.  Step 1 will take effect on January 2, 2011,
Stepstep 2 will take effect on July 1, 2011, and the process for
determining and collecting fees, and then hiring and training personnel
will take at least several years after July 1, 2011. 

Moreover, we do not believe that the authorization for fees means that
permitting authorities can reasonably be expected to permit title V
sources at levels below 50,000 tpy CO2e before 2016.  The next level
below 50,000 tpy CO2e for which we have data is 25,000 tpy CO2e, and the
costs to permitting authorities to run their programs at that level
($126 million) is more than double their current costs ($62 million). 
We do not consider it reasonable to expect permitting authorities to
more than double their program within the first 6 years of title V
applicability to GHG sources.  That it is not reasonable to expect that
is made even clearer when the permitting authorities’ burdens in
implementing their PSD programs are considered.  The ability of
permitting authorities to impose fees may have more important
implications for subsequent steps, and as we address those subsequent
steps in future rulemakings, we will consider the fees.  EPA’s
approach to fees in this rulemaking is discussed elsewhere.

c.  Other Possible Approaches to Reconciling Literal Reading of Title V
Applicability Provisions and Congressional Intent

Having described how the Chevron framework, accounting for the ”absurd
results” doctrine, applies to title V requirements in this case and
why it supports this Tailoring Rule - under which we expect to apply
title V to more sources, in a step-by-step fashion, over time -- we turn
to the last part of our discussion of this doctrine.  Here, we address
another possible approach suggested by comments, which is that EPA
should apply the title V program only to sources that are subject to
applicable requirements, so that sources should not be required to hold
“empty permits” (e.g., permits issued to a source that is not
subject to any applicable requirement for any pollutant).  To the extent
that commenters argue that the statute requires EPA to adopt a
“no-empty–permits” theory, we disagree.  We believe that although
various provisions of title V indicate that one of title V’s purposes
is to gather a source’s applicable requirements into a single
permitting mechanism, see CAA sections§§ 503(b)(1), 504(a), we do not
read those provisions as expressly limiting, as a matter of Chevron
Stepstep 1, title V to sources with applicable requirements.  The
applicability provisions, by their terms, include sources based on
amount of emissions, and do not include any explicit limits to
applicability based on whether the sources has applicable requirements. 
As described previously, we believe that Congress, although clearly
expressing an intent that title V apply to GHG sources generally, did
not express a clear intent as to how title V applies to GHG sources. 
The tension between these two sets of provisions, which we identified in
the proposal and commenters further discussed, provides further support
for that conclusion.  Accordingly, we have discretion under Chevron
Stepstep 2 to determine a reasonable approach, consistent with the
statutory requirements, concerning the application of title V to GHG
sources with empty permits.

 We note that to date, we have issued permits to sources without
applicable requirements, albeit on rare occasions.  We have little
reason to believe that the “empty-permits” issue will arise in
Stepssteps 1 and 2 of our tailoring approach because we believe there
will be no “empty permits” in Stepstep 1 or Stepstep 2 or, if there
are, that they will be very few in number.  As stated elsewhere, we
believe that the tailoring approach we adopt in this rulemaking for
Stepssteps 1 and 2 is a reasonable approach that is consistent with
statutory requirements.  

We need to gather more information concerning the potential number and
utility of “empty permits” for GHG sources, in light of the fact
that the need for requirements in title V permits will vary based on the
requirements of each SIP, and the fact that some SIPs contain broadly
applicable requirements.  As stated elsewhere, we intend to consider the
issue of the applicability of title V to GHG sources with “empty
permits” in Stepstep 3 of our tailoring approach.  When we do so, we
will further assess the potential for the approach of excluding empty
permits from title V to relieve burden consistent with statutory
requirements. 

7.  Additional Rulemaking for the PSD and Title V Programs

	The previous sections 5 and 6 discussed our application of the Chevron
framework, accounting for the “absurd results” doctrine, to the PSD
and title V applicability requirements, respectively.  As another point
in this regard, which is relevant for both PSD and title V purposes, we
also commit to subsequent rulemakings in which we may further address
the “absurd results” doctrine.  

Specifically, we will propose or solicit comment on establishing a
further phase-in, that is, a Stepstep 3, that would apply PSD and title
V to additional sources, effective July 1, 2013, and on which we commit
to take final action, as supported by the record, by no later than July
1, 2012.  We further commit to completing another round of rulemaking
addressing smaller sources by April 30, 2016.  Our action in that
rulemaking would take into account the severity of the remaining
problems associated with permitting authority burden and source costs.

While committing to future action, we do not decide in this rule when
the phase-in process will ultimately end, or at what threshold level,
because all that depends on uncertain variables such as our progress in
developing streamlining approaches and on permitting authorities’
progress in developing permitting expertise and acquiring more
resources.  We may continue the phase-in process with further
rulemaking(s) after 2016.  Alternatively, we may make a final
determination through future rulemaking that, under the “absurd
results” doctrine, PSD and/or title V do not apply to GHG sources
that, while small and relatively inconsequential in terms of GHG
contribution, are above the statutory tonnage thresholds for these
programs, and thereby end the phase-in process.  In addition, we may
consider whether to limit title V applicability to GHG sources in order
to minimize the number of GHG sources with “empty” permits. 

8. Rationale for the Phase-In Schedule for Applying PSD and Title V to
GHG Sources

	Having discussed in sections V.B.5, V.B.6, and V.B.7 the reasons for
tailoring the PSD and title V programs, we now describe our rationale
for selecting the specific phase-in schedule in this rule for applying
PSD and title V to GHG-emitting sources.  To reiterate for convenience, 
under Step 1 of this schedule, which begins on January 2, 2011, (1i) PSD
applies to the GHG emissions of “anyway” PSD sources, that is,
sources that are subject to PSD anyway due to their emissions of
conventional pollutants and that undertake a modification that results
in an increase of at least 75,000 tpy CO2e; and (2ii) title V applies to
“anyway” title V sources, that is, sources that are subject to title
V anyway due to their emissions of conventional pollutants.  Under Step
2, which begins on July 1, 2011, (1a) sources will be subject to PSD on
account of their GHG emissions if they newly construct and emit at least
100,000 tpy CO2e, or if they are existing sources that emit at least
100,000 tpy CO2e of GHGs and make a modification that results in the
emission of at least 75,000 tpy CO2e; and (2b) existing and new sources
will be subject to title V on account of their GHG emissions if they
emit 100,000 tpy CO2e in GHG emissions.  In addition, EPA intends to
begin another round of rulemaking – Step 3 – in 2011 and commits to
complete it by July 1, 2012.  In that rulemaking, we will propose or
solicit comment on a further phase-in of GHG sources for PSD and title V
applicability, and we may propose or solicit comment on another
application of the “absurd results” doctrine that excludes
categories of sources from PSD or title V.  However, under this rule, in
no event will EPA apply PSD or title V to sources below the 50,000 tpy
CO2e levels in Step step 3, or any other step we might promulgate prior
to April 2016.  In addition, EPA commits to conduct a study, to be
concluded by April 30, 2015, evaluating the status of PSD and title V
applicability to GHG sources, and, based on the study, complete a
rulemaking by April 30, 2016 that addresses another round of a phase-in.
 

a. Rationale for Step 1

	In Step 1 of our tailoring approach, which begins on January 2, 2011,
PSD and title V requirements will apply to only those sources that are
subject to PSD or title V requirements anyway due to their conventional
pollutants (“anyway” sources) and that, in the case of PSD, make
modifications that result in an increase in GHG emissions of at least
75,000 tpy CO2e.  No sources would become major for PSD or title V under
this step based on their GHG emissions alone.  This section describes
our proposal, comments on the proposal and our response to those
comments, and our rationale for Step 1.

(1) Proposal

In our proposal, we proposed (1i) the application of PSD and title V
requirements to sources that emit at least 25,000 tpy CO2e, (2ii) a PSD
significance level of between 10,000 and 25,000 tpy CO2e, and (3iii) a
commitment to undertake a study to be followed by further rulemaking
after 6 years.  In addition, we solicited comment on the alternative of
limiting PSD and title V applicability to “anyway” sources for at
least the first 6six years.  Under this approach, PSD and title V
applicability would be determined based on non-GHG pollutants, and
without regard to GHGs, but those sources subject to PSD would also be
subject to BACT requirements for GHGs if their GHG emissions exceeded
the significance level established in the final rule, and those sources
subject to title V would be required to include any applicable
requirements for GHGs in their permits.

(2) Comments

Many commenters supported this “anyway”-source approach, and offered
a variety of reasons:  According to the commenters, (1i) this approach
is a better reading of Congress’s intent in the Act and is consistent
with Alabama Power v. Costle, 636 F.2d 323 (D.C. Cir. 1980); (2ii) this
approach would reduce the permitting workload on sources currently
considered minor and focus PSD and title V requirements on large sources
of non-GHG pollutants, as intended by Congress; (3iii) it is appropriate
to base PSD and title V applicability on non-GHG emissions until data on
GHG emissions are available from the mandatory GHG reporting rule;
(4Reporting Rule; (iv) in the initial phase, this approach would be more
straightforward to administer, would provide a more predictable
permitting workload, and would prevent a flood of newly regulated
sources from overburdening state agencies; (5v) this approach would
provide permitting agencies time to develop experience handling GHG
sources and requirements under the PSD and title V programs; (6vi) this
approach would provide EPA and the permitting agencies the time needed
to develop streamlining techniques; (7vii) this approach is consistent
with the “absurd results” and “administrative necessity”
doctrines because the scope of the permitting programs would remain
consistent with both congressionalcCongressional intent and current
administrative practice, but EPA and state agencies would still be
allowed  to begin regulating GHG emissions from existing PSD and title V
sources; and (8viii) sources already required to obtain PSD permits are
best equipped to work through BACT issues with permitting authorities.

Commenters added that if BACT is applied for GHGs GHG due to permit
actions involving non-GHG pollutants, EPA would need to set a
significance threshold for the application of BACT, without which BACT
could apply to very small (e.g., 1 ton) GHG increases associated with
projects that otherwise triggered PSD for increases of non-GHG.  

(3) Determination as to Step 1, PSD and Title V Applicability and PSD
Significance Level

After considering the administrative burdens from increased permitting
actions and the need for permitting authorities to have sufficient time
to develop necessary expertise and staffing resources to address that
burden, we have decided in this final action to establish the
“anyway” source approach as Step 1.  Beginning on January 2, 2011,
sources subject to PSD requirements for their conventional pollutants
anyway will be required to apply BACT to their GHG emissions if they
construct or modify and in so doing, emit at least 75,000 tpy CO2e in
GHGs.  Similarly, sources subject to title V requirements anyway due to
their conventional pollutants will be required to meet certain
requirements for their GHGs, as described elsewhere.  These requirements
at Step 1 for PSD and title V will not expire.  On July 1, 2011, a
further phase-in of PSD and title V applicability – Step 2 – will
kick in.  

At Step step 1, by definition, all of the covered sources are already
subject to PSD and title V permitting requirements, and will simply be
adding a GHG component to what would be an otherwise occurring
permitting action for conventional pollutants.  These sources include
fossil fuel-fired power plants, petroleum refineries, cement plants,
iron and steel plants, pulp and paper plants, petroleum refineries,
large landfills, and other large industrial sources.  These sources will
need to perform some additional analysis that is unique to GHG emission
units, particularly related to the BACT review and selection process,
but they will likely be able to utilize information developed as part of
other permitting requirements for conventional pollutants, such as
equipment fuel usage and operational parameters.  Also, because these
facilities are familiar with the case-by-case permitting processes,
including all the steps from the application to the final review
process, they will not confront a high PSD or title V learning curve.

The “anyway”-” source approach has particular appeal during the
first step of the phase-in approach because it begins to apply key PSD
and title V program requirements as soon as January 2, 2011 to large
sources of emissions, but because it applies only to sources that are
already subject to PSD for other pollutants, it can be implemented
efficiently and with an administrative burden that is manageable in the
next 8 months.  We expect that under this approach, the sources and
permitting authorities will still face substantial additional work to
address the GHG emissions.  In addition to the activities discussed
elsewhere, there will be significant and complex policy questions about
how BACT will be implemented for GHGs that must be resolved.  These
issues will include how to determine BACT for GHGs, how to do netting,
and other similar issues.  Even with EPA guidance, many case-specific
policy issues will arise and will have to be resolved by the permitting
authority in the context of a specific permit application. 
Nevertheless, with the “anyway” source approach, this work will be
manageable because the associated permitting burden will be limited to
adding a GHG component to each existing permit action for which it will
be required, and will avoid the significantly greater burdens associated
with large numbers of new permit actions that would be required for
sources and modifications that would be subject to PSD for the first
time.  Instead, this “anyway” source approach allows permitting
authorities sufficient time to develop necessary expertise and staffing
resources to address GHG BACT.

We agree with commenters that the establishment of a significance level
– which, in effect, is a BACT threshold -- is appropriate, and we have
decided to establish this level at 75,000 tpy CO2e because, for reasons
discussed later, that is the level that will apply during Stepstep 2. 
At this level, the administrative burdens, described later, will be
manageable.  Importantly, we believe a consistent significance level
between Steps 1 and 2, as opposed to a lower significance level in Step
1, will provide for a smoother transition and avoid the problems that
would arise if PSD applied to modifications during Step 1 that PSD would
not apply to in Step 2.  Otherwise, we would create a perverse incentive
for companies to delay such projects until Step 2 to avoid BACT.   

We estimate that Step 1 will result in a 23 percent increase in
permitting authority work hours and a $3 million increase – which
amounts to a 25 percent increase from the current program cost of $12
million -- in their annual costs for running PSD programs.  This is
primarily due to the GHG BACT review requirements.  For title V
programs, we estimate a 2 percent increase in permitting authority work
hours and a $1 million increase in the title V annual program costs for
permitting authorities under Step 1 as compared to the current program
cost of $62 million.  These work hours and costs will be needed
primarily to review GHG emissions information, add any GHG-related
requirements to title V revisions and renewal actions that would
otherwise be occurring, respond to comments and petitions from the
public, as well as develop fee requirements and make fee determinations
associated with issuing new or revised title V permits that add
GHG-related information.  For both the PSD and title V programs on a
combined basis, the additional costs for Step 1 will be $4 million,
which amounts to a 5 percent increase in the current combined program
cost of $74 million.

In addition to these workload and monetary costs, permitting authorities
will confront additional burdens before and during Step 1, which we have
not attempted to quantify.  One of the most significant of these is
training staff in the PSD-related areas of GHG emissions calculations
and BACT evaluations.  In addition, permitting staff will need to build
staff expertise and capacity for addressing GHG requirements in
preparation for Step 2, which will begin only 6 months after Step 1; and
in communicating and providing outreach to sources addressing GHG
emissions for the first time.  Based on comments we received on the
proposal from permitting authorities, we believe these additional
training and outreach requirements – for both the PSD and title V
programs -- will add significantly to the permitting authorities’
burden during the initial 6-month period under Step 1.   

	We believe that these administrative burdens are substantial but
manageable.  Following this action, permitting authorities will have
only 8 months to prepare for Step 1, when they will need to increase
their resources by 5 percent for both the PSD and title V programs
combined, and be able to implement BACT requirements for GHG sources. 
During Step 1, they will need to prepare for Step 2, when, as discussed
later, they will need to process over 900 additional PSD permits each
year and begin to process over 1,100 additional title V permit actions. 


We have decided to limit Step 1 to the “anyway” source approach, and
not apply PSD or title V to sources based on their GHG emissions, for
several reasons.  First, we believe that the administrative burdens
described previously are the most that the permitting authorities can
reasonably be expected to manage before and during Step 1.  Tighter PSD
and title V applicability requirements would mean greater administrative
burdens.  

Second, we believe that the costs of GHG permitting to the sources, as
described previously, are substantial and as a result, necessitate that
we wait for the permitting authorities to develop the PSD and title V
programs for GHG sources during the first 6 months of 2011 before
subjecting sources to PSD and title V requirements on account of their
GHG emissions.  By July 1, 2011, when Step 2 takes effect, the PSD and
title V programs will be better developed.  For example, the permitting
authorities will have more experience making BACT determinations.  In
addition, by that time, sources will have had more time to prepare for
the permitting processes.  In addition, as suggested by one commenter,
the additional time will allow sources and permitting authorities to
address the current uncertainty surrounding how to measure high-GWP
gases.  

Third, we estimate that “anyway” sources account for approximately
65 percent of total national stationary source GHG emissions.  As a
result, limiting Step 1 to these sources will still capture a large
portion of the GHG inventory.

A large number of commenters urged us to leave this “anyway” source
approach in place until such time as we complete an assessment and
conduct further rulemaking, which we proposed would be 6 years from now.
 We are not taking this action; rather, for the reasons discussed next,
we believe it is reasonable to use GHG thresholds to begin to phase in
PSD and title V applicability to additional sources in Step 2. 

b.  Rationale for Step 2

(1)  Proposal

We proposed to establish the applicability level for PSD and title V to
GHG sources at 25,000 tpy CO2e, and we proposed a PSD significance level
in the range of 10,000 to 25,000 tpy CO2e.  Our burden estimates at
proposal led us to conclude that at those threshold levels, for the PSD
program, “approximately 400 additional new or modified facilities
would be subject to PSD review in a given year.  These include
approximately 130 new facilities and approximately 270
modifications….” 74 FR 55,331, col. 1.  We estimated that processing
these numbers of additional permits, along with doing the additional
work associated with GHG emissions from sources subject to PSD anyway
due to their conventional emissions, would increase permitting authority
burdens by “approximately 112,000 staff hours at an additional cost of
approximately $8 million.  This workload amount represents an increase
of about 1.3 times, or 32 percent, in the current burden for permitting
authorities on a nationwide basis.”  Id. col. 3.  We concluded that
“this additional burden is manageable,” but that “any threshold
lower than 25,000 tpy CO2e, would create undue administrative
burdens.”  Id.  

	For the title V program, we estimated that at a 25,000-tpy CO2e
permitting threshold, “about 13,600 existing facilities” would
become subject to title V, and that to manage the additional workload
associated with permitting those sources and with the other permit
revisions and modifications that would result from the 25,000 tpy CO2e
threshold, permitting authorities would require an additional 492 FTEs,
which would be an estimated 50 percent increase over current title V
staffing levels.  74 FR 55,335, cols. 1-2.

(2)  Comments

We received a significant number of comments from both permitting
authorities and industry representatives that our proposed GHG threshold
of 25,000 tpy CO2e for major source applicability was too low and would
result in an unmanageable amount of permitting actions in the near term.
 Many offered evidence that we severely underestimated both the number
of permitting actions and the per-permit administrative burden, for both
PSD and title V programs.  

	Commenters also asserted that the proposed 25,000 tpy threshold is too
low because it will subject small sources (including many small
businesses) to PSD and title V, which is not in keeping with
Congress’s intent to limit PSD and title V to large sources when
Congress set the 100/250 tpy thresholds for the permitting programs. 
EPA, in collaboration with the Small Business Administration (SBA),
conducted an outreach meeting designed to exchange information with
small entities that may be interested in these regulations.  The EPA
took this small business outreach effort into account when finalizing
this rule.  Many commenters from this outreach effort said that there
were many more small businesses that would become subject to PSD and
title V due to the proposed permitting thresholds than EPA estimated at
proposal.

Many commenters recommended specific major source thresholds for PSD and
title V, including levels of 25,000 (as proposed), 40,000, 50,000,
100,000, 150,000, 250,000, and 1,000,000 tpy CO2e.  A majority of the
commenters – including both industry and state agency commenters --
recommended major source thresholds of 100,000 tpy CO2e.  However,
several state agency commenters recommended thresholds of 50,000 tpy
CO2e.  Other commenters recommended sector-specific thresholds.  For
example, solid waste industry commenters suggested thresholds of 820,000
tpy CO2e for PSD [which they calculate to be equivalent to the existing
PSD threshold for “municipal solid waste landfill emissions,” i.e.,
250 tpy non-methane organic compounds emissions (NMOC)] and 320,000 tpy
CO2e for title V (calculated to be equivalent to the existing major
source applicability threshold of 100 tpy NMOC).  Other commenters urged
EPA to set the GHG thresholds at levels that correspond to emissions of
conventional pollutants at the 100/250 tpy level.

Many of the commenters that recommended increasing the thresholds cited
EPA’s estimates that a particular threshold would significantly reduce
the number of sources subject to the rule while causing only a slight
reduction in the percentage of GHGs captured.  Several of these
commenters noted that Table VIII-2 in the proposal preamble indicates
that shifting the major source threshold for PSD from 25,000 to 100,000
tpy CO2e would reduce the number of major sources from 13,661 to 4,850
while reducing the coverage of U.S. stationary source GHG emissions by
only about 4 percent.  Other commenters referred to the regulatory
impact analysis (RIA) for the mandatory GHG reporting ruleReporting Rule
to conclude that raising the threshold from 25,000 to 100,000 tpy CO2e
would exclude thousands of entities that, on a combined basis, emit only
one percent of the nation’s GHG emissions.  See the RTCResponse to
Comments document for this final rulemaking for more detailed
description of comments received on our proposed burden assessment.   

	Many commenters also recommended specific PSD GHG significance
thresholds, including levels of 10,000 (as proposed), 15,000 (within the
proposed range), 25,000 (also as proposed), 40,000, 50,000, and 100,000,
and 150,000 tpy CO2e, as well as suggesting sector-specific thresholds. 
These recommendations were based on the view that we had underestimated
the number of modifications and that the burden of permitting at the
proposed levels would therefore be much worse than we projected.  A
number of the commenters argued that the significance threshold should
be no less than the major source threshold, at whatever level that is
set.  The largest number of commenters recommended a PSD significance
threshold of 100,000 tpy CO2e, although significant numbers also support
25,000 and 50,000 tpy CO2e. 

(3)  Rationale for Stepstep 2

	Based on these comments, we reassessed our original burden estimates
from our proposal.  This reassessment is discussed at the beginning of
this section.  We decided that, once this adjustment is taken into
account, the burdens at the proposed 25,000 threshold and the proposed
10,000-25,000 significance levels would be unmanageable.  We therefore
evaluated higher thresholds ranging from a 25,000 tpy CO2e major source
applicability level for PSD and title V to a 50,000, 75,000, or 100,000
tpy CO2e level, with associated PSD GHG significance levels of equal or
lesser magnitude; and we selected the 100,000/75,000 tpy CO2e level. 
Central to our decision to promulgate higher thresholds than what we
proposed is our recognition, based on comments and further analysis,
that applying PSD to GHG sources at the statutory or any other threshold
level or significance level that we have considered would result in (1i)
a greater number of sources, and significantly greater number of
modifications than we first estimated becoming subject to those
programs; and (2ii) a greater per-permit cost than we first estimated to
the permitting authority of processing those permit actions.  We
discussed our revised estimates and reasoning at the beginning of this
section.

We now estimate that the 25,000/25,000 tpy level would result in 250
additional PSD permit actions for new construction (either for GHG-only
sources or additions to otherwise occurring permits) and an additional
9,200 PSD permits for modifications each year (compared to our estimate
at proposal of 130 for new construction and 270 for modifications). 
This level of permitting would require an additional 2,815,927 work
hours, or 1,400 FTEs (compared to our estimate at proposal of 112,000
additional work hours, or 57 FTEs); and would cost an additional $217
million each year (compared to our estimate at proposal of an additional
$8 million).  See 74 FR 55,331 (proposal).  This $217 million amount
represents approximately a 1,800 percent increase over current
permitting authority annual cost of $12 million for the major NSR
programs   

	For title V, under our final burden analysis at a 25,000 tpy CO2e
threshold, we estimate a $64 million annual increase in program costs to
permitting authorities to add GHG emission sources, which reflects a
greater than 100 percent increase over current programs costs of $62
million.  We estimate that this increased burden would result in the
need for almost 700 new FTEs nationwide at permitting authorities
(compared to our estimate at proposal of 492 additional FTEs, or about a
50 percentperent increase in existing program size).  This increase in
burden is due to an estimated annual increase of 2,500 new title V
permits, over 9,500 permit revisions, and over 2,600 permit renewal
actions due to GHG emission sources.  These additional title V actions
compare to current annual program actions of approximately 50 new title
V permits, 1,394 significant revisions, and 3,267 permit renewals.   

	Based on this information, we have decided not to finalize our proposal
to apply a 25,000 tpy CO2e applicability threshold to GHG sources at the
time that PSD and title V take effect.  At that level, too many sources
– many more than we thought at proposal – would be subject to high
permitting costs.  In addition, permitting at that level and at that
time would not be administratively feasible.  The resulting increase in
the number of PSD and title V permitting actions and workload would
create insurmountable resource demands for permitting agencies in the
near term, which would jeopardize the functioning of these permitting
programs.  We are mindful that not only would the permitting programs
have to bear the costs that our estimates are able to monetize, but they
would also incur burdens associated with hiring and training staff to
make and implement GHG BACT determinations, GHG emissions evaluations,
and other evaluations required under the PSD program for a wide variety
of formerly unpermitted sources, including significant numbers and types
of small manufacturing and commercial or residential establishments. 
They would also incur burdens associated with reviewing applications,
citizen comment and petitions, and the need to communicate and provide
outreach to new categories of sources, including, again, significant
numbers and types of small manufacturing and commercial or residential
sources.  Thus, the increased administrative burdens at the
25,000/25,000 tpy CO2e levels are so great that we have concluded that
they would not be consistent with the goals of avoiding absurd results
that contravene congressionalCongressional intent, including avoiding a
permitting burden that would overwhelm the capacity of permitting
authorities to effectively implement their programs.  

Based on our revised burden analysis, in this final action, we have
decided to establish a multi-step, phase-in approach that contains a
significantly higher initial threshold level.  We have determined that a
100,000 tpy CO2e major source threshold level for PSD and title V
purposes, and a 75,000 tpy CO2e significance level, produce a level of
permitting activity that would certainly be an increase over current
workload, but that would be administratively feasible by July 1, 2011. 
As a result, we have decided to finalize these thresholds as Step 2.

In reaching this conclusion, we needed to consider both the sources’
abilities to manage the permitting process and the permitting
authorities’ capacity to address newly-major sources as expeditiously
as possible.  As to the former, sources subject to Stepstep 2 will, for
the most part, continue to include the “anyway” sources subject to
Stepstep 1.  In addition, we estimate that Stepstep 2 will include about
500 additional sources that are not already subject to permitting.  Most
of them will become subject to PSD and title V because of fuel burning. 
In order to meet the 100,000/75,000 threshold, they will have to burn a
significant quantity of fuel, and that means they will be a significant
size.  In general, these sources include municipal or commercial
landfills that are large, but not large enough to be covered by the
NSPSnew source performance standards, pulp and paper facilities,
electronics manufacturing plants, chemical production plants, and
beverage producers.  Although these sources have not been subject to PSD
permitting before, some of them have already been subject to minor
source permitting, and so will have some familiarity with the permitting
process.  In addition, in general, these sources are in source
categories that have larger sources that are already subject to PSD and
title V.  As a result, they are in industries that have experience in
the permitting process.  Because of their relatively large size and
access to knowledge about the permitting processes, we believe these
sources will be able to manage the permitting requirements.

As to the permitting authorities’ capacity to handle the Stepstep 2
workload, we note first that our Stepstep 1 approach does not cover
newly-major sources.  As a result, the Stepstep 2 threshold and timing
has to be established in a way that takes into account permitting
authority challenges in addressing many sources and categories that
would be subject to major source permitting for the first time.  

	We considered the various PSD and title V threshold applicability and
significance level options in our final burden analysis, summarized in
Table VI-1, including levels at 50,000 CO2e, and 100,000 CO2e.  As Table
VI-1 indicates, we estimate that a 100,000 tpy CO2e major source
applicability threshold would result in approximately 550 sources
becoming newly classified as major sources for PSD based on their GHG
emissions, while a 50,000 tpy CO2e threshold would result in 3,500 newly
classified major sources.  

	We then considered the impact on both PSD and title V programs of
different PSD significance level options for GHGs.  The choice of a PSD
significance level has a direct impact on title V burdens because PSD
permit requirements resulting from modification activities will result
in required title V permit revisions.  We developed PSD and title V
burden estimates based on significance levels of 50,000 tpy, 75,000 tpy
and 100,000 tpy CO2e, combined with a major source applicability level
of 100,000 tpy CO2e.  

At a 50,000 tpy CO2e significance level, we estimated an annual increase
of approximately 1,800 PSD permitting actions and almost 2,000
additional title V permitting actions, as compared to Step 1.  At a
75,000 tpy CO2e significance level, we estimated an annual increase of
approximately 900 PSD permitting actions and just over 1,000 additional
title V permitting actions as compared to Step 1.  At a 100,000 tpy CO2e
significance level we estimated an annual increase of approximately 25
PSD permitting actions and 210 additional title V permitting actions as
compared to Step 1.  For title V, under these different scenarios, the
major source applicability level of 100,000 tpy CO2e results in
approximately 200 new permits annually, but, as noted, the choice of
significance levels affects the number of required permit revisions. 

	Based on this information, we have decided to set our final Step 2
thresholds at 100,000 tpy CO2e for major source applicability under PSD
and title V and at a 75,000 tpy CO2e significance level for PSD. 
Overall, we estimate that the almost 900 additional PSD permitting
actions (virtually all of which would be modifications) per year at
these levels will result in an approximately a $21 million increase
(from Step 1) in states’ annual costs for running PSD programs.  In
addition, we estimate that the 1,000 additional title V permit actions
will cause the total title V burden for permitting authorities to
increase by $6 million annually from Step 1.  This total increase in
permit program burdens of $27 million represents a 34 percent increase
over the $78 million in total cost of PSD and title V programs at Step
1.  We consider this a substantial increase particularly because Step
2’s start date of July 1, 2011 is only 6 months after Step 1’s start
date of January 2, 2011.  What’s more, Step 1 will entail a
substantial increase in permitting authority obligations, so that adding
the costs of Step 1 and Step 2 together - $31 million ––- means that
permitting authorities will be required to increase their permitting
resources by approximately 42 percent between now and Step 2.  In
addition to the administrative burdens we have been able to monetize, we
must be mindful that permitting authorities will incur other burdens,
including the significant support and outreach activities by permitting
staff for the many newly permitted sources.  We believe that any lower
thresholds in this timeframe, whether in the PSD and title V
applicability levels or in the significance level, would give rise to
administrative burdens that are not manageable by the permitting
authorities.  

Although the burdens at the 100,000 tpy CO2e/75,000 tpy CO2e levels are
steep, we consider them manageable.  Step 2 permitting for GHGs will
mostly involve source categories in which some sources have
traditionally been subject to permitting, which should render applying
even the new GHG requirements more manageable.  These source categories
include fossil fuel-fired power plants, petroleum refineries, cement
plants, iron and steel plants, and petroleum refineries, in addition to
other large industrial type source categories.  A full description of
the type of sources that we expect will have GHG emissions that exceed
the 100,000 tpy CO2e threshold is provided in the “Technical Support
Document for Greenhouse Gas Emissions Thresholds Evaluation” located
in the public docket for this rulemaking.  In addition, because Step 2
does not begin until July 1, 2011, permitting authorities have about 14
months to prepare for it.   

	In addition, we believe that the sources that will become subject to
PSD and title V requirements at the 100,000/75,000 tpy CO2e levels will
be able to accommodate the additional costs of permitting.  For the most
part, these sources will be of a comparable size and activity level as
those sources that are already subject to those requirements.

	Because the administrative burdens at the 100,000/75,000 tpy CO2e level
are as heavy as the permitting authorities can reasonably be expected to
carry, adopting these threshold levels is consistent with our legal
basis under the “absurd results” doctrine.  Under this basis, we are
reconciling the statutory levels with congressional intent by requiring
that the PSD and title V requirements be applied to GHG sources at
levels as close as possible to the statutory thresholds, and as quickly
as possible, in light of costs to sources and administrative burdens.   

	Because the administrative burdens at the 100,000/75,000 tpy CO2e level
are manageable, we do not believe that higher threshold levels are
justifiable for Step 2.  Specifically, at the 100,000/100,000 level –
which would entail a 100,000 tpy CO2e significance level, rather than a
75,000 tpy CO2e level – permitting sources would need to handle only
20 additional modifications beyond current levels, and thus would not
incur substantial additional costs.  By the same token, we disagree with
commenters who suggested that we needed to set permanent GHG permitting
thresholds for major sources at a rate equivalent to the amount of GHGs
GHG that would be emitted by conventional pollutants at the 100 and 250
tpy level in order to meet the legal bases of the “absurd results”
and “administrative necessity” doctrines.  These levels would likely
be well above 300,000 tpy CO2e, depending on fuel types and assumptions
regarding the relative emissions of GHGs compared to the conventional
pollutants.  Our data show that none of the levels above 100,000/75,000
tpy CO2e would result in significant increases in administrative
burdens.  As a result, establishing these levels would not apply PSD or
title V requirements to GHG sources as quickly as possible, and thus
would not be consistent with our approach in the Tailoring Rule.   

We estimate that facilities meeting the Step 2 major source
applicability thresholds account for approximately 67 percent of total
national stationary source GHG emissions.  Many commenters felt that
this should be an important basis for our selection of a threshold,
stating that there is no significant loss in GHG emissions coverage of
source categories at the 100,000 tpy CO2e threshold, and in some cases
arguing that as a result, we should set the level even higher.  We agree
that it is important that the coverage in Stepstep 2 represents 86
percent of the coverage at full implementation of the statutory 100/250
thresholds. 

c.  Rationale for EPA’s Plan Beyond Step 2

	EPA commits that after Step 2, EPA will begin another rulemaking in
2011 and complete it by July 1, 2012, and in that rulemaking take
comment on a further phase-in of GHG sources for PSD and title V
applicability (Step 3).  However, under this rule, in no event will EPA
apply PSD or title V to sources below the 50,000 tpy CO2e levels prior
to 2016.  In addition, EPA commits to conduct a study, to be concluded
by April 30, 2015, evaluating the status of PSD and title V
applicability to GHG sources, and, based on the study, complete a
rulemaking by April 30, 2016 that addresses another round of a phase-in.
 

(1)  Proposal

In our proposal, we noted that following implementation of the first
phase of PSD and title V applicability to GHG sources, generally at the
25,000 tpy CO2e threshold, additional action would be required over time
to assure full compliance with the statute.  We did not establish more
steps in the schedule, but we did commit to conduct a study, to be
completed by 5 years after promulgation, evaluating the status of PSD
and title V applicability to GHG sources, and, based on the study,
complete a rulemaking by 6 years after promulgation that addressed an
additional step of the phase-in. 

(2)  Comments

	A number of commenters supported the proposal’s overall approach to
phase in the permitting of GHGs, mainly because this approach will allow
permitting of the largest sources of GHGs immediately while collecting
more information about smaller sources and more fully considering
streamlining options for subsequent phases.  Many of these commenters
made clear that they do not support implementation of the statutory
100/250 tpy thresholds, even through a phase-in approach.  On the other
hand, one commenter asserted that EPA has failed to demonstrate that it
needs 6 years to study and implement NSR and title V for sources
emitting less than 25,000 tpy.  The commenter contends that EPA has not
analyzed, among other things, what combined effect the full
implementation of its streamlining proposals in the 15 months before the
due-date for title V permit applications would be to reduce the cost,
complexity, and number of title V permit applications that would have to
be submitted.

(3)  Rationale for Further Steps

We agree with commenters who support a phased-in approach to the GHG
Tailoring Rule.  Our final action reflects a multi-step process that we
believe will facilitate a manageable expansion of PSD and title V
applicability, as appropriate, to GHG-emitting sources.  In our final
action, we have established the initial two steps of a multi-step
phase-in of lower threshold applicability with a commitment to take
further regulatory activity to consider adopting lower thresholds.  We
believe this process will provide substantial opportunity for permitting
authorities and sources to establish enough experience and information,
and to provide significant real-world feedback to EPA, so as to better
inform decisions on future phase-in steps. 

With this overall phase-in approach in mind, in this final rule, EPA
includes an enforceable commitment to undertake a notice-and-comment
rulemaking that would begin with an SNPR a supplemental notice of
proposed rulemaking that we expect to be issued in 2011 and that we
commit will be finalized in 2012.  The notice will propose or solicit
comment on further reductions in the applicability levels.  This
rulemaking will take effect by July 1, 2013 and therefore, in effect,
constitute Step 3.  In this action, we are committing to a rulemaking
for Step 3, but are not promulgating Step 3, because it is important to
allow EPA and the permitting authorities to gain experience permitting
sources under Steps 1 and 2, and to allow time to develop streamlining
methods, before attempting to determine what would be the next phase-in
levels for PSD and title V applicability.  While committing to future
action, we do not decide in this rule when the phase-in process will
ultimately end, or at what threshold level, because all that depends on
uncertain variables such as our progress in developing streamlining
approaches and on permitting authorities’ progress in developing
permitting expertise and acquiring more resources.  We may continue the
phase-in process with further rulemaking(s) after 2016.  Alternatively,
we may make a final determination through future rulemaking that, under
a Chevron analysis, accounting for the “absurd results” doctrine,
PSD and/or title V do not apply to GHG sources that, while small and
relatively inconsequential in terms of GHG contribution, are above the
statutory tonnage thresholds for these programs, and thereby end the
phase-in process.

In addition, in this action, we are determining that in no event –
whether through Step 3 or a subsequent step – will we apply PSD or
title V to sources at the 50,000/50,000 tpy CO2e level or lower prior to
May 1, 2016.  We have several reasons for making this determination at
this time.  Most importantly, our examination of the expected burdens to
the permitting authorities of applying PSD and title V to GHG sources
convinces us that extending the permitting programs to sources at or
below the 50,000/50,000 tpy CO2e level within 6 years of promulgation
would result in prohibitively heavy burdens.  This threshold option
would result in close to 2,000 additional annual PSD permitting actions
per year over the current program and more than 1,000 over Step 2,
including both new construction and modifications.  For title V, we
estimated an increase of over 1,000 new title V permits (all newly
permitted sources because of GHG emissions) over 2,000 permit revisions
per year over the current program, and about 980 new title V permits and
900 permit revisions more than the Step 2 amounts. 

These increases, which could occur between 2013 and 2016 under our
approach depending on the outcome of the Stepstep 3 rulemaking,
represent very substantial additions to the permitting program.  In
terms of cost, we estimate that these additional actions would result in
a $73 million per year increase in joint PSD and title V program costs
over the current programs – which is almost a doubling of costs –
and $42 million annual cost increase over Step 2 for the current
programs.  We believe that it would take permitting authorities some
time to adjust to this workload.  This is particularly true because at
the 50,000/50,000 tpy CO2e level, smaller sources – including ones not
previously subject to permitting requirements – will become subject to
PSD and title V.  It will take some time for both the permitting
authorities and the sources to absorb these new obligations. 

Importantly, the next lower cut-off – below 50,000 tpy CO2e for the
major threshold level – is the 25,000/25,000 tpy CO2e level.  For the
reasons discussed previously, this level is clearly not manageable
within the first 6 years after this action.  This applicability level
would bring in over 7,000 sources that would be newly subject to title V
permitting and result in close to 10,000 new PSD permitting actions. 
This would result in a 380 percent increase over current program costs
for PSD and title V to run these programs.  Based on comments we
received from state and local permitting agencies on our proposed
Tailoring Rule, these levels of permitting activities would far exceed
the administrative capabilities of the permitting agencies for at least
the near future.  Thus, the 6-year exclusion is necessary to provide
these agencies and their permittees certainty that this will not occur. 
 

We recognize that at present, we do not have data that would allow us to
compile administrative burden estimates for specific levels between the
50,000/50,000 and 25,000/25,000 tpy CO2e levels we assessed.  However,
it is clear that the burdens begin to rise sharply below the
50,000/50,000 tpy CO2e level.  To reiterate, the combined PSD and title
V administrative burdens at the 50,000/50,000 tpy CO2e level cost almost
twice as much as the current programs, but the burdens at the
25,000/25,000 tpy CO2e level cost almost four times as much as the
current programs.  As a result, we conclude that dropping the level
below 50,000/50,000 tpy CO2e too soon would quickly expose the
permitting authorities to unacceptably high burdens.  

As a further reason for concluding that we will not reduce thresholds
beyond 50,000/50,000 tpy CO2e during the first 6 years, we recognize
that the PSD permitting process in particular carries important
ramifications for the permitting authorities and the affected sources. 
If we have underestimated the permitting burden or the ability of states
to respond to their additional workload, then permitting backlogs will
result, and PSD permit issuance will be delayed, and sources seeking a
PSD permit will not be able to construct or modify.  If this were to
happen on a large enough scale, it could have potentially serious
consequences for the national economy.  

Moreover, we need to be mindful that the best information we currently
have as to permitting authority burdens represents a national average,
as described previously.  Our information at the individual state and
local level, where permitting occurs, is not as robust.  Accordingly, we
recognize that a particular state may encounter permitting costs that
are higher than average, and this may result in permitting backlogs in
that state, with the consequence that sources in that state will face
long delays in constructing or modifying.  Similarly, even if a
particular state’s costs are in line with the national average, that
state may not be able to find the additional resources to cover those
costs as readily as other states.  For this reason, too, sources in that
state could face long delays in constructing or modifying.

Beyond the administrative burdens to permitting authorities, we
recognize that the costs of PSD and title V permitting to sources may be
high, and we are not inclined to  allow their imposition at this time on
sources smaller than the 50,000/50,000 tpy CO2e threshold.  At that
level, the permitting programs will apply to a significant number of
newly permitted sources, including a variety of small manufacturing,
commercial and residential categories.  The next level that we have
analyzed is the 25,000/25,000 tpy CO2e threshold.  At that level, more
than 7,000 more sources would become subject to PSD each year – almost
all due to modifications – and another 4,000 sources would become
subject to title V each year.  These sources would be even smaller than
those that already will have become subject to PSD and title V due to
their GHG emissions.  We do not think it reasonable to subject more of
those types of sources, and smaller ones, to permitting costs within the
next 6 years.  

Finally, we note that moving from a 50,000 tpy CO2e threshold to 25,000
tpy CO2e will increase the emissions coverage of GHG stationary sources
from 70 percent to 75 percent nationwide, which we consider to be a
relatively small amount.  

 We recognize that our progress in developing streamlining methods will
be a key determinant to the ability of permitting authorities to
administer, and sources to comply with, PSD and title V at GHG emission
levels below 50,000/50,000 tpy CO2e.  Although we commit to pursue
streamlining, we cannot predict our progress.  This uncertainty may be
problematic for stakeholders, primarily permitting authorities and
industry.  That is, permitting authorities will face uncertainty in
planning the scope of their programs over the next few years, and
industry will face uncertainty as to what new construction projects and
modifications will be subject to PSD for GHGs.  By determining now that
for the next 6 years we will not impose PSD requirements below a floor
at the 50,000/50,000 tpy CO2e level, we add a measure of needed
certainty.  

We also recognize that selecting a level that is too high or keeping a
level for too long means that some sources may construct or modify
without implementing BACT level controls, and this could result in
additional emissions of GHGs.  We need to be vigilant and to protect
against this outcome.  Even so, all things considered, we believe that
our determination not to apply the PSD or title V permitting
requirements to sources below the 50,000/50,000 tpy CO2e level for the
first 6 years also represents a reasonable balancing of protection of
the environment with promotion of economic development.  This type of
balancing is consistent with our authority under the PSD provisions.

We also raised the issue of “hollow” or “empty” permits in
discussing our rationale for why it may make sense to delay title V
permitting under our proposal.  We were concerned that many title V
permits for GHG sources would contain no applicable requirements, and
their issuance would therefore be of little value and would not be the
best use of scarce resources.  Several commenters agreed that
implementing title V for GHGs GHG will, at least initially, require
“empty permits” to be issued to GHG sources because such sources
will not be subject to “substantive” requirements, and that this
would not be the best use of scarce resources.  

 	We believe that the amount of resources that would be spent on, and
the limited value that would result from, “empty permits” does
warrant consideration under the Chevron analysis, taking account of the
“absurd results” doctrine.  Therefore, we intend to consider the
role of “empty permits” when we undertake future rulemaking. 
However, we believe the issue of “empty permits” has limited or no
relevance to the first two steps of the phase- in that we are
promulgating in this rule.  During Stepstep 1, permitting for GHGs is
only required if the source is otherwise subject to permitting for its
emissions of non-GHGs.  Those sources very likely will be subject to
existing substantive applicable requirements for non-GHGs (e.g., NSPS,
Maximum Achievable Control Technology (MACT), and SIP requirements,
including PSD).  Thus, there should be no, or at least no additional,
“empty permits” during Stepstep 1.  For Stepstep 2, it is possible
that sources that become subject to title V requirements for GHG
emissions may not be subject to other requirements, but our assessment
suggests that this is very unlikely.  We estimate that virtually all of
the 550 newly-major sources in Stepstep 2 will be subject to applicable
requirements under the CAA because they are from categories that have
been traditionally subject to regulations, such as smaller industrial
sources from already regulated categories, large landfills, and
oil/gas/coal production.  Even the approximately 50 newly-subject
commercial sources in Stepstep 2, which we estimate to be comprised of
very large hospitals, are likely to be covered by standards for medical
waste incinerators.  In addition, we expect these sources may well be
subject to SIP requirements.  Thus, we do not expect any, or at most
very few “empty permits” during Stepstep 2.

In later stages of implementation (e.g., prospective Stepstep 3) or in
the event that we permit smaller, non-traditional sources of GHGs that
have never otherwise been subject to major source permitting, there
would be a greater potential for “empty permits” to be issued under
title V.  Cognizant of this, we intend to further explore in the
rulemaking for Stepstep 3 “empty permit” theories under the
“absurd results” rationale that may serve to permanently narrow the
scope of title V to exclude sources that would potentially be required
to obtain an “empty permit” due to GHG emissions.  

In this action, EPA is also finalizing its proposal to commit to conduct
an assessment of the threshold levels – to be completed in 2015, 5
years after this action -- that will examine the permitting
authorities’ progress in implementing the PSD and title V programs for
GHG sources as well as EPA’s and the permitting authorities’
progress in developing streamlining methods.  We further commit to
undertake another round of rulemaking - beginning after the assessment
is done, and to be completed by April 30, 2016 ––- to address
smaller sources. 

We disagree with the commenter who asserted that we do not need 6 years
to study and implement PSD and title V for smaller sources.  As we
discussed in the proposal, and reiterate in this final action, we do not
have sufficient information at this time to determine the applicability
and effectiveness of the various permitting streamlining techniques. 
For reasons discussed in more detail in section V.E.1 regarding
streamlining, we are not now able to determine how such techniques will
be implemented or whether they will prove viable or effective.  We agree
with the commenter that these measures may reduce the scope, cost, and
complexity of these programs, but there is considerable uncertainty as
to the extent of this effect.  We do commit in this action to fully
investigate, propose, and evaluate permit streamlining techniques to
determine where they may have applications, how they would be applied,
and whether they can withstand legal challenge.  Even for those
techniques that may ultimately be deemed viable, there is a significant
time period necessary for rulemaking and state adoption, all of which
could take up to 3 years or more.  We also note that we will be required
to complete our study of the effectiveness of these techniques within 5
years, meaning that, in order to complete it in time, we will
essentially need to begin the study as soon as relevant data are
starting to become available.  Finally, the sixth year, in which EPA
must complete rulemaking, requires proposal and promulgation of a rule
within 1 year, which is an ambitious schedule.  Therefore we believe
that 6 years is appropriate for this type of effort.  We also have
received a substantial number 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 RTCResponse to Comments
document.  One comment was overarching, and so we respond to it here: 
Commenters have asserted that under Some commenters argued that the
“absurd results” doctrine, EPA does not have authority to, or at
least should not, promulgate the endangerment/cause or contribute
findings (which we will sometimes refer to as the “findings”) or the
LDVR because doing so would trigger the PSD and title V requirements,
which in turn would give rise to “absurd results”.  According to
commenters, under the “absurd results” caselaw, EPA is obliged to
avoid taking any action that would trigger absurd results and in this
case that means foregoing the endangerment/cause or contribute findings
and/or the LDVR, or at least deferring finalizing them until EPA has
time to streamline PSD and title V requirements so as to avoid “absurd
results”.  Commenters made the related comment that if we promulgate
the LDVR, and thereby trigger PSD, we cannot rely on the “absurd
results” doctrine because it is our own actions – the promulgation
of the LDVR -- that will have given rise to the “absurd results,”
and under those circumstances, the doctrine is not available.

	The comments that EPA had no authority to promulgate, or should not
have promulgated, the endangerment/cause or contribute findings or the
LDVR at the times that EPA did are not relevant to this rule, the
Tailoring Rule.  EPA has already promulgated the findings and the LDVR,
and the LDVR triggers PSD and title V applicability, as we have seen. 
These comments would have been relevant only to the proposed findings
and LDVR, and we are not, in this rulemaking, revisiting or reopening
the findings or the LDVR.

Commenters claim that if EPA promulgates the LDVR, the “absurd
results” doctrine will no longer apply to the Tailoring Rule because
it will have been EPA’s own action – promulgation of the LDVR –
that gives rise to the “absurd results”.  We disagree for several
reasons.  For one thing, commenters have not cited caselaw, and our
research has disclosed none, in which a court specifically addressed a
similar situation and issued a holding along the lines of what
commenters urge.  Moreover, commenters’ approach would be punitive
because the absurd results would occur absent this rule going final. 
Such an outcome would be counter to the purpose of the doctrine.  That
is, it would mean that PSD and title V would apply  could not be applied
because EPA had other approaches for resolving the problems raised by
applying PSD to GHG sources by their terms – at the statutory levels,
as of January 2, 2011 – with all the adverse consequences described
elsewhere.  	.  In any event, and although we are particular, the
commenters insisted that we were not obligated to respond to these
comments on the merits, they are incorrect on the merits, for the
reasons that follow.  This discussion should not be viewed as reopening
the endangerment/cause or contribute findings or the LDVR because, as
stated previously, we are not  reconsidering or reopening those two
actions in this rule.

In determining and implementing congressional intent, it is important
that  the statutory provisions at issue be considered together – (1)
the obligation to make a determination on endangerment and contribution 
under CAA section 202(a); (2) if  affirmative endangerment/cause or
contribute findings are made,  the obligation to promulgate standards
applicable to the emission of any air pollutant from new motor vehicles
or new motor the light-duty vehicle engines under CAA section 202(a);
and (3) the PSD and title V applicability provisions.  The most
appropriate reading, and certainly a reasonable reading, is that we are
required to take the action we have taken, and are taking with this
rule, and that is to issue the findings, promulgate the LDVR, and
promulgate the Tailoring Rule.  Our approach gives effect to as much of
Congress’s intent for each of these provisions, and the CAA as whole,
as possible.  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.

With respect to the endangerment/cause or contribute findings under CAA
section 202(a), congressional intent is clear that, as we stated in
making the findings and the Supreme Court held in Massachusetts v. EPA,
we are precluded from considering factors other than the science based
factors relevant to determining the health and welfare effects of the
air pollution in question.  Accordingly,  EPA determined that under
Massachusetts v. EPA, 549 U.S. 497 (2007) we were precluded from
deferring or foregoing the findings due to concern over impacts on
stationary sources affected by PSD or title V requirements.  See 74 FR
at 66496, 66500-01 (“Taken as a whole, the Supreme Court’s decision
clearly indicates that policy reasons do not justify the Administrator
avoiding taking further action on the questions here.”); see also
Massachusetts v. EPA, 549 U.S. at 533; see also 74 FR at 66515-16
(December 9, 2009).  (The Administrator “must base her decision about
endangerment on the science, and not on the policy considerations about
the repercussions or impact of such a finding).  Moreover, as EPA also
noted, “EPA has the ability to fashion a reasonable and common-sense
approach to address greenhouse gas emissions and climate change.”  74
FR at 66516.

Regarding the timing of the LDVR, Congress’s intent was that
endangerment/cause or contribute findings under section 202(a) would in
fact lead to control of the air pollutants from new motor vehicles and
new motor vehicle engines contributing to the harm.  The primary goal of
section 202(a) is to achieve such reductions by requiring that EPA adopt
emissions standards, and as a result, proceeding with the LDVR is
consistent with that goal.  In contrast, deferring the LDVR and thereby
delaying achievement of the public health and welfare benefits Congress
expected and required under section 202(a) would run directly counter to
what Congress intended under section 202(a) - EPA issuing emissions
standards to address the public health and welfare problems that were
identified, not EPA refusing to do so.

Moreover, we have compelling reasons to proceed with the LDVR, in the
manner that we did.  As we stated in the LDVR, in response to similar
comments	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 25,402 cols. 1-3____ (May 7, 2010) (footnote omitted).

With respect to both the endangerment/cause or contribute findings and
the LDVR, it would require speculation and conjecture to defer – or,
certainly, to forego altogether - the findings or LDVR until EPA
completed streamlining the PSD and title V requirements on grounds that
doing so would allow full compliance in the future with all PSD and
title V statutory provisions.  That is the gist of commenters argument
– that EPA should defer or forego issuance of the findings and the
LDVR to avoid causing an absurd result from implementation of the
separate PSD and title V programs.  Underlying this claim is the
assumption that this would allow EPA to avoid the “absurb results”. 
As we discuss elsewhere in this rulemaking, there is no basis at this
point to determine that streamlining will ultimately allow full
compliance with the PSD and title V requirements.  Rather, it is
possible that EPA may conclude that none of the available streamlining
techniques will allow all GHG sources at the statutory thresholds to
comply with PSD and title V requirements in a manner that does not
impose undue costs on the sources or undue administrative burdens on the
permitting authorities.  Under these circumstances, EPA may then
permanently exclude GHG source categories from PSD or title V
applicability under the absurd results doctrine.  Moreover, it may well
take many years before EPA is in a position to come to a conclusion
about the extent to which streamlining will be effective and therefore
be able to come to a conclusion as to whether any source categories
should be permanently excluded from PSD or title V applicability.  In
our rulemaking today, we describe what actions we expect to take in the
first 6 years after PSD and title V are triggered for GHG sources, and
we may well be in a situation in which we continue to evaluate
streamlining measures and PSD and title V applicability to GHG sources
after this 6-year period.  

Accordingly, deferring the endangerment/cause or contribute findings and
LDVR until such time that PSD and title V streamlining would allow full
implementation of these programs at the  statutory limits would serve
only to delay the benefits of the LDVR, as well as the benefits that
come from phasing in implementation of the PSD program to cover larger
sources first.  It would rely on an assumption that is unfounded at this
point, that is, that such full compliance will be required at some point
in the future.  Delaying the emissions benefits of the LDVR and the
related emissions benefits from partial implementation of the PSD
program fails to implement Congress’ intent that the
endangerment/cause or contribute findings “shall” lead to emissions
standards for new motor vehicles contributing to the endangerment, and
related emissions controls for the same air pollutant under the PSD
program.  EPA need not determine at this time what approach would be
appropriate if there was a determination that full compliance with PSD
and title V would in fact occur at some point in the future.  In this
case, absent such a determination, it would be improper to rely on
speculation of such a future possibility as a basis under section 202(a)
to defer or forego issuance of the LDVR on the grounds that EPA should
defer or forego the LDVR to avoid causing an absurd result.  Likewise
there is no basis to defer proceeding at this time with the streamlining
of the PSD and title V programs.

With respect to the PSD and title V applicability requirements, as we
discuss elsewhere, we believe that Congress expressed a clear intent to
apply PSD and title V to GHG sources and that the phase-in approach
incorporated in the Tailoring Rule is fully appropriate.  Proceeding now
with the endangerment/contribution findings and LDVR, even if phasing-in
of the PSD and title V programs is required, is consistent with our
interpretation of the PSD and title V applicability requirements. 
Delaying the endangerment/contribution findings or LDVR, and thereby
delaying the triggering of PSD and title V requirements for GHG sources,
would lead to the loss of a practicable opportunity to implement the PSD
and title V requirements in important part, and thereby lead to the loss
of important benefits.  As discussed elsewhere, promulgating the LDVR
and applying the PSD and title V requirements to the largest GHG
sources, as we do in this Tailoring Rule, is practicable because the
sources that would be affected by the initial implementation steps we
promulgate in this rule are able to bear the costs and the permitting
authorities are able to bear the associated administrative burdens. 
Promulgating the LDVR now provides important advantages because the
sources that would be affected by the initial steps are responsible for
most of the GHG emissions from stationary sources.  

It should also be noted that as discussed elsewhere in this rulemaking,
our ability to develop appropriate streamlining techniques for PSD and
title V requirements is best done within the context of actual
implementation of the permitting programs, and not in isolation of them.
 That is, because the great majority of GHG sources have not been
subject to PSD and title V requirements, we will need to rely on the
early experience in implementing the permitting requirements for the
very large sources that initially will be subject to those requirements
in order to develop streamlining techniques for smaller sources.  It is
the real world experience gained from this initial phase that will allow
EPA to develop any further modifications that might be necessary.  This
would not and could not occur if the LDVR were delayed indefinitely or
permanently, so that PSD and title V requirements were not triggered. 
It is unrealistic to expect that delaying action until a future
tailoring rule could resolve all of the problems identified in this
rulemaking, absent any real world implementation experience.  

At its core, commenters’ argument is that EPA should delay (if not
forego altogether) doing anything to address GHG emissions and the
problems they cause until it can do so in a way that does not cause any
implementation challenges, even if that delay results in continued
endangerment to public health and welfare.  EPA does not take such a
myopic view of its duties and responsibilities under the CAA.  Congress
wrote the CAA to, among other things, promote the public health and
welfare and the productive capacity of the population.  CAA §101(b)(1).
 EPA’s path forward does just this.  Thus, proceeding with the
endangerment/cause or contribute findings, the LDVR, and with PSD and
title V through the phase-in approach of the Tailoring Rule maximizes
the ability of EPA to achieve the Congressional goals underlying
sections 202(a) and the PSD and title V provisions, and the overarching
CAA goal of protecting public health and welfare.  Congress called for
EPA (1) to determine whether emissions from new motor vehicles
contribute to air pollution that endangers, (2) if that the
determination is affirmative, to issue emissions standards for new motor
vehicles to address the endangerment, and (3) to implement the PSD and
Title V program to address similar emissions in their permitting program
as another tool to address the air pollutant at issue.  Delaying both
the LDVR and PSD/title V implementation, as commenters have called for,
would run directly counter to these Congressional expectations. 
Commenters’ calls for deferral or foregoing of the findings or LDVR
are generally phrased in a conclusory fashion, and do not demonstrate
how EPA could take the required CAA actions concerning GHGs while
remaining within the requirements of each of the various CAA provisions,
and achieving the overall goals of the CAA.  As such the comments do not
provide a valid basis for the deferral of agency action they suggest. 

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 this 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 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, except that in this rulemaking we
place the doctrine more clearly in the Chevron analytical framework, we
revise our assessment of the administrative burdens due to new analysis
we have conducted and information we have received since proposal, and
we make certain revisions to the tailoring approach.  This analysis and
information, as well as the revisions to the tailoring approach, have
already been presented previously, in the discussion of the “absurd
results” basis.  In addition, it is not necessary to reiterate the
lengthy discussion of the “administrative necessity” doctrine that
we included in the proposal or the factual data presented previously; as
a result, this section  briefly highlights the conclusions we have
reached about the application of this doctrine.

	As noted previously, under the PSD and title V applicability provision
– read literally, as we have long interpreted them -- EPA’s recent
promulgation of the LDVR light-duty vehicle rule will trigger the
applicability of PSD and title V for GHG sources at the 100/250 tpy and
100 tpy threshold levels, respectively, as of January 2, 2011.  This is
because PSD applicability hinges on the definition of “major emitting
facility” and title V applicability hinges on the definition of
“major sources,” and those terms, read literally, and under EPA’s
long-standing narrowing interpretation, apply PSD and title V,
respectively, to sources of any air pollutant that is subject to
regulation under another provision of the CAA.  EPA’s promulgation of
the LDVRlight-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 give rise to 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.  The permitting
authorities will find it impossible to administer programs of these
sizes as of that date.

	All this results from a literal application of the PSD and title V
applicability provisions to GHG sources.  However, under Chevron, we
must interpret and apply statutory requirements on the basis of
congressional intent.  Although the literal meaning of the statutory
provisions is the first and generally the best indicator of
congressional intent, there are cases in which that is not so.  As
discussed previously, we believe that as a general matter, statutory
directives should be considered to incorporate Congress’s intent that
they be administrable, and we believe that this proposition is implicit
in the “administrative necessity” doctrine that the D.C. Circuit has
established and that we believe applies here.  See Alabama Power v.
Costle, 636 F.2d 323, 356-57 (D.C. Cir. 1980).  This doctrine authorizes
EPA to undertake a process for rendering the PSD and title V
requirements administrable.  Indeed, the Court in Alabama Power
established this doctrine specifically in the context of the PSD
provisions, including, in particular, the modification provision.  As
noted elsewhere, the Court held that EPA may “consider the
administrative burden” associated with applying PSD for emissions
increases, and establish significance levels designed to avoid “severe
administrative burdens on EPA, as well as severe economic burdens” on
sources.  Id. at 405.

	As we said in the proposal, we read the caselaw to establish a
three-step approach for implementing the “administrative necessity”
doctrine:  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. 
See 74 FR 55315 – 55316,315/1 – 55,316/3.

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 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 2 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.  See 74 FR 55,317/3.

	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 previously, and no more than a brief recitation is
necessary here.  On the PSD side, annual permit applications would
increase by over 300-fold, from 280 to almost 82,000; 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 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 this notice.  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.  In this
manner, we adhere most closely to the statutory requirements.  See 74 FR
55318/2.  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 previously
concerning the “absurd results” basis.  That is, we believe that our
tailoring approach – including Stepstep 1, to be implemented as of
January 2, 2011; Stepstep 2, to be implemented as of July 1, 2011; the
additional rulemaking that we commit to finalize by July 1, 2012, and
that will address further threshold reductions as a Stepstep 3; the
study and subsequent rulemaking to address smaller sources by April 30,
2016; and the determination not to lower the threshold below
50,000/50,000 tpy CO2e before April 30, 2016 at the earliest -  is the
most that we can do to expand the PSD and title V programs, based on
administrative resources and the information we currently have about the
prospects for streamlining and increasing permitting resources.

	As noted previously, at some point in the process of additional
rulemaking, we may conclude under the “absurd results” doctrine that
we will not apply PSD or title V to GHG sources below a certain size
level.  The same conclusion may be supportable under the
“administrative necessity” doctrine if we decide, based on the
information available to us, that even with all of the streamlining that
we are able to accomplish and even with a significant expansion of
permitting resources, it may not be administratively feasible to
implement PSD or title V to sources below that level.  See Alabama Power
v. Costle, 636 F.2d at 358 (acknowledging, in discussing the
“administrative necessity” doctrine, that “[c]ategorical
exemptions from the clear commands of a regulatory statute [are]
sometimes permitted,” although emphasizing that such exemptions “are
not favored”).

	In addition, as noted above, in a subsequent rulemaking, we may
conclude that title V should not apply to GHG sources with “empty
permits,” under the “absurd results” doctrine.  The basis for this
conclusion could be a determination that (1i) although the applicability
provisions apply by their terms to sources on the basis of their
emissions, and without regard to whether the sources would hold “empty
permits”, those provisions cannot be read literally under the
“absurd results” doctrine; and (2ii) it is not clear whether
Congress intended that title V apply to such sources, and EPA has
reasonably determined, under Chevron Stepstep 2, that title V does not. 
If we come to that conclusion, then, at that point in time, the
“administrative necessity” doctrine would remain relevant for title
V purposes only if is necessary, for administrative reasons, to phase
-in the application of title V to GHG sources that have applicable
requirements, and that therefore do not have “empty permits.””. 
This is because the “administrative necessity” doctrine is relevant
only when a statutory directive, read literally, imposes impossible
administrative obligations, and Congress may be presumed to have
intended that the directive be administrable.  The “administrative
necessity” doctrine would not come into play if it is concluded either
that under the “absurd results” doctrine Congress did not intend the
statutory directive or that, under that doctrine, Congress’s intent
was not clear and EPA reasonably decided that the directive does not
apply. 

10. “One-Step-at-a-Time” Basis for Tailoring Rule 

	In addition to the “absurd results” and “administrative
necessity” doctrines, the “one-step-at-a-time” judicial doctrine,
within the Chevron framework, supports EPA’s Tailoring Rule.  The
caselaw under this doctrine, described previously, indicates that the
doctrine justifies an agency’s step-by-step approach under the
following circumstances or conditions: (1i) the agency’s ability to
comply with a statutory directive depends on facts, policies, or future
events that are uncertain; (2ii) the agency has estimated the extent of
its remaining obligation; (3iii) the agency’s incremental actions are
structured in a manner that is reasonable in light of the uncertainties;
and (4iv) the agency is on track to full compliance with the statutory
requirements.  EPA’s Tailoring Rule fulfills each of those four.  

	First, as the D.C. Circuit stated in National Association of
Broadcaster v. FCC, 740 F.2d 1190, 1210 (D.C. Cir. 1984) (“National
Association of Broadcasters”), incremental agency action is most
readily justifiable “against a shifting background in which facts,
predictions, and policies are in flux and in which an agency would be
paralyzed if all the necessary answers had to be in before any action at
all could be taken.”  Those circumstances are present here, and so is
that fact that the task at hand is extraordinarily demanding.  As
discussed previously, EPA and the permitting authorities’ progress in
implementing the PSD and title V programs for GHG sources will depend in
large measure on the development of streamlining measures and increases
in permitting authorities’ resources, and those things carry some
uncertainty and in any event, under the best of circumstances, cannot
have much impact for at least several years.  It will take EPA that long
to develop streamlining measures, and it will take permitting
authorities that long to begin to raise money and hire and train FTEs.  

	Second, as the Court stated in National Association of Broadcasters,
“the agency [should] ma[k]e some estimation, based upon evolving
economic and technological conditions, as to the nature and magnitude of
the problem it will have to confront when it comes to [undertake the
remaining steps]” and that estimation must be “plausible and flow
from the factual record compiled.”  Id. at 1210.  Here, EPA has done
this by estimating the number of PSD and title V permits and the costs
of issuing them, and has provided as much information as possible about
the development of streamlining methods and permitting authority
resources.

	Third, again as the Court stated in National Association of
Broadcasters, it must be “reasonable, in the context of the decisions
made in the proceeding under review, for the agency to have deferred the
issue to the future.  With respect to that question, postponement will
be most easily justified when an agency acts against a background of
rapid technical and social change and when the agency’s initial
decision as a practical matter is reversible should the future
proceedings yield drastically unexpected results.”  Id. at 1211. 
Here, our tailoring approach is reasonable in light of changes in
permitting authority capacity that may occur with the development of
streamlining methods and increased resources.  In addition, the first
two steps that EPA promulgates today are reasonable initial steps that
we expect to build on by lowering thresholds, as appropriate, in the
future.  We have no reason to suspect that we may need to reverse either
of the first two steps.  Having received and analyzed extensive comment
on the number of permitting actions to expect and on permitting
authority resources, we consider it unlikely that we would need to
establish a higher threshold level than what we have established in
Stepssteps 1 and 2.  In addition, if we were to adopt an “empty
permits” approach for title V, we would not need to reverse either of
Stepssteps 1 and 2, as explained above.

Finally, as the D.C. Circuit stated in Grand Canyon Air Tour Coalition
v. F.A.A., 154 F.3d 455, 477-78 (D.C. Cir. 1998), the 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.  This rulemaking constitutes a package of initial steps
towards that full compliance, and, seen in that light, is supported by
the “one-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 in this
notice would be considered valid under the one-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 “one-step-at-a-time”
doctrine would allow PSD and title V applicability to be phased in, and
the first two steps we promulgate in this notice 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 steps 1 and 2.  Nor
is applicability of the PSD and title V requirements at levels below
50,000 tpy CO2e reasonable before 6 years from promulgation of this
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
this action, or as part of subsequent actions.  See Grand Canyon Air
Tour, 891 F.2d at 476-77 (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 – that is, the specific way we are revising the PSD and title
V applicability provisions to incorporate the tailoring approach – and
our rationale.  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 proposal to limit approval of both
SIP-approved PSD programs and title V programs, and we request certain
information from states on both of their programs and their actions in
response to this rule.  

In brief, we proposed to exempt sources emitting GHGs below certain
threshold levels from the definition of the regulatory terms “major
stationary source” and “major modification” in PSD programs and
the definition of the regulatory term “major source” in title V
programs.  We further proposed to effectuate this change in SIP-approved
PSD programs (as included in SIPs) and EPA-approved part 70 title V
programs by limiting our prior approval of those programs to the revised
applicability thresholds for GHGs.  These changes would have the effect
of putting the higher thresholds adopted under the Tailoring Rule in
place in states PSD and title V programs as a matter of federal law. 
However, 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 although this approach
is not substantively different in effect from the proposed rule, it will
facilitate more rapid adoption and implementation of the Tailoring Rule
by states through interpretation of language in existing state
regulations.  We believe these differences are a logical outgrowth of
our proposed rule.  We are also delaying action on our proposed limited
approval of EPA-approved PSD programs and part 70 title programs to
determine how each state will implement the final rules.  

1.  PSD Approach:  Background and Proposal

Under CAA section §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 section §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 define 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 interprets the statutory definition more narrowly to read “one
hundred [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 …. . .” CAA section 165(a),
169(2)(c), and 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 a
significant net emissions increase in emissions 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), and (d).  We also proposed a significance threshold, which is the
amount of an increase needed to trigger PSD for a modification or to
require BACT for a new source, at a level between 10,000 and 25,000 tpy
CO2e.  74 FR 55351; 40 CFR 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 as a result,
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.  The effect of our proposal would be that EPA would have
approved the SIP PSD programs only to the extent they apply PSD and
requirements to GHG sources at or above the thresholds established in
the Tailoring Rule (which, generally, were 25,000 tpy CO2e), and EPA
would have taken no action on the SIP PSD programs to the extent they
apply PSD requirements to GHG sources below that threshold.  We relied
on the authority of the APA and the general authority of CAA section
§301 and, in the alternative, on the error correction mechanism under
CAA section 110(k)(6).  Our limited approval would revise existing
EPA-approved SIP PSD programs to authorize permitting under the CAA 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 significant concern. 
They observed that our proposed approach 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 EPA approval of SIPs consistent with these thresholds, the
state rules containing the originally- approved SIP thresholds would
continue to apply as a matter of state law.  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,
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,
their state process requires that they promulgate a rulemaking, or in
some cases, a legislative change, to incorporate the higher thresholds
for GHG sources in their SIPs.  These processes would require many
months and in some cases as long as 2 years.  As a result, sources that
emit GHGs below the federally established levels in the final rule, but
at above the 100/250 tpy levels in state laws and rules, would still be
required to obtain PSD permits under state law.  As a result, states, in
attempting to implement state permitting requirements, would be faced
with the same administrative difficulties that EPA recognized in the
proposed rule as impossible.  Commenters emphasized that this situation
was untenable.  

In addition to the state comments just described, we received comments
that took issue with our view that we were in effect revising the
numerical thresholds for PSD applicability as the legal mechanism for
the tailoring approach.  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, and that is to adopt a
definitioninterpret, within our PSD regulations, the phrase “subject
to regulation,” as found within the phrase “any regulated NSR
pollutant,” which, in turn, is part of the definitions of “major
stationary source” and “major modification.”  To implement this
mechanism, we are defining the phrasecodifying in our regulations an
interpretation of “subject to regulation” so that the GHGs emitted
by sources that fall below the thresholds or scope established in
Stepssteps 1 and 2 are not treated as “subject to regulation,” and
therefore do not trigger PSD for the sources that emit them.  As
discussed in section V.B.3., the term “subject to regulation” is one
of four terms that should be considered not to apply literally in the
case of GHG sources. 

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 previously, 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 quote 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.”  40 CFR
51.166(b)(1)(i)(a)-(b).  Applying our definition of “subject to
regulation” to exclude GHG sources that emit below specified
thresholds, the definition may now be paraphrased as follows:  A
“major stationary source” is any source of air pollutants, which
emits, or has the potential to emit, depending on the source category,
either 100 or 250 tpytons per year or more of any air pollutant subject
to regulation under the CAA, except that the source’s GHGs are
considered to be subject to regulation under the CAA only the extent
indicated under Stepssteps 1 and 2 of the Tailoring Rule, e.g., for
Stepstep 2, only if the source’s GHG emissions exceed the threshold
established in Stepstep 2.  We adopt the same approach for the
definition of the regulatory term “major modification.” 

Although EPA is codifying its interpretation of “subject to
regulation” by revising its regulations to apply the phrase subject to
regulation in this manner, we have been advised that states may be able
to adopt our approach without having to undertake a rulemaking action to
revise their stateSIP regulations or without requiring an act of the
state legislature.  Instead, it is our understanding that states may
adopt our approach by interpreting the term “subject to regulation”
reflected in their regulationsSIPs to have the same meaning for the term
“subject to regulation” that we are assigning to that termincluding
in our regulations in this rulemaking.  We believe that States can rely
on an interpretation because we view the term “subject to
regulation” as open-ended, and therefore amenable to interpretation. 
This is particularly – although not exclusively -- the case in a state
that has taken the position, or determines now, that the state’s
definition of “subject to regulation,” or, more broadly,
“regulated NSR pollutant” or “major stationary source” or
“major modification, is intended to be interpreted in a way that
tracks the meanings that EPA has assigned to these phrases.  Such states
can adopt the meaning of “subject to regulation” that we establish
in this rule by 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.  The following
explains our basis for concluding that states may apply EPA’s approach
under existing regulations that use the term “subject to
regulation.”the phrase “subject to regulation” is open-ended. 

First, we recently stated this position in our reconsideration of the
Interpretive Memo.  On December 18, 2008, EPA issued the Interpretive
Memorandum, establishing EPA’s interpretation of the definition
“regulated NSR pollutant” found at 40 CFR 52.21(b)(50).  EPA
intended this memorandum to resolve ambiguity in subparagraphsubpart
(iv) of this definition, which includes “any pollutant that otherwise
is subject to regulation under the Act.”  Specifically, the memorandum
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 pollutants 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.  

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
previously, because 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 titleTitle
II of the CAA.  Id.  

	In the RTC 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 (emphasis added).  (Docket ID No.
EPA-HQ-OAR-2009-0597-0128).  

Because the state regulations SIP provisions that include EPA’s
definition of the term “subject to regulation” in the
reconsideration of the Interpretive Memo PSD interpretive memorandum are
“sufficiently open-ended to incorporate greenhouse gases as a
regulated pollutant,” those state regulationsSIP provisions are also
sufficiently open-ended to incorporate the further refinement to the
meaning of the phrase “subject to regulation” that we make in this
rulemaking.

	By the same token, EPA has historically interpreted certain state
SIP-approved 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 rules approved in SIPs to provide
for the automatic removal of a pollutant when such pollutant is no
longer “subject to regulation.”  For example, the 1990 CAA
Amendmentsamendments exempted HAPs listed in sectionSection 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 PSD
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 PSD rule could also take the position that its SIP-approved
rule automatically ceased 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 states with SIP-approved rules that contain
the same language as used in 40 CFR 52.21(b)(50) or 40 CFR
51.166(b)(49), or that otherwise have sufficiently open-ended PSD
regulations, would be able to implement our Tailoring Rule approach to
permitting by interpreting their regulations, and without needing to
promulgate a regulation or seek state legislative action.  This is
particularly – although not exclusively -- the case for states that
take the position that they intend their rules to apply in the same
manner meaning as EPA's counterpart rules.  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 or for making a
major modification.  

During our consideration of this action, we participated in
teleconferences with one local and six state states agency permitting
authoritiesauthority to discuss this issue of whether they could
implement the proposed rule without the need for state law or regulation
changes or a revision of the provisions of state law that are a part of
the SIP.  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” 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 their rules contain
the term “subject to regulation” and that term has not been
previously interpreted in ways that would preclude application of the
adoption of EPA’s meaning assigned toof the term by EPAinterpretation
to allow for adoption.  We therefore concluded it is likely the state
rules are sufficiently open-ended to apply EPA’s approach by
interpretation (although some states indicated they may elect to pursue
rulemaking in addition to or instead of interpretation).  Accordingly,
we selected the “subject to regulation” regulatory approach as the
mechanism for implementingcodifying the final rule.  

3.  Other Mechanisms

As just described, we selected the “subject to regulation” mechanism
because it most readily accommodated the needs of statesStates to
expeditiously revise – through interpretation or otherwise -- their
state rules.  Even so, it is important to recognize that this mechanism
has the same substantive effect as the mechanism we considered in the
proposed rule, which was revising numerical thresholds in the
definitions of major stationary source and major modification.  Most
importantly, although we are codifying the “subject to regulation”
mechanism, that approach is driven by the needs of the states, and our
action in this rulemaking should be interpreted to rely on any of
several legal mechanisms to accomplish this result.  Thus, our action in
this rule should be understood as revising the meaning of several terms
in these definitions, including:  (1i) the numerical thresholds, as we
proposed; (2ii) the term, “any source,” which some commenters
identified as the most relevant term for purposes of our proposal;
(3iii) the term, “any air pollutant; or (4iv) the term, “subject to
regulation.”  The specific choice of which of these constitutes the
nominal mechanism does not have a substantive legal effect because each
mechanism involves one or another of the components of the terms
“major stationary source” - which embodies the statutory term,
“major emitting facility” -- and “major modification,” which
embodies the statutory term, “modification,” and it is those
statutory and regulatory terms that we are defining to exclude 

the indicated GHG-emitting sources.   

4.  Codification of Interpretive Memo

As noted previously, we recently affirmed and refined our interpretation
of the term “subject to regulation” as it applies broadly to the PSD
program through a formal notice and comment process.  “Interpretation
of Regulations that Determine Pollutants Covered by Clean Air Act
Permitting Programs,” 75 FR 17004.  In the proposal associated with
that action, we requested comment on whether we should codify our
interpretation in the regulatory text.  74 FR 51535, 51547 (October. 7,
2009).  We elected not to codify out interpretation in the final action
on reconsideration of the Interpretive Memo because we concluded such an
action was not necessary and that it was important to apply the refined
interpretation immediately.  75 FR at 17015.  However, in the RTC
document response to comments for that action, we indicated that we had
not ruled out the option of codifying our interpretation at a later
time.  Since we are otherwise adopting a definition of “subject to
regulation” in this rule as the mechanism for implementing the
phase-in, it makes sense in this final rule to codify the interpretation
reflected in the Interpretive MemoMemorandum and the final action on
reconsideration at the same time to bring clarity to our rules. 
Specifically, the definitions of the term “subject to regulation”
contain a paragraph that reflects our existing interpretation of that
term (i.e., prior to adopting the provisions that implement the phase-
in).  Codification of the Interpretive MemoMemorandum in this action
makes sense to ensure the regulations reflect a complete picture of the
meaning of “subject to regulation” applied by EPA.  We also are
moving existing exceptions (e.g., section 112 HAPs) to a new paragraph
within the definition of "subject to regulation."".  This minor
reorganization of these regulations is not intended to effect any change
in how they are to be implemented, but merely simplifies and clarifies
the regulations by clearly delineating different terms and concepts.

This codification of this interpretation of “subject to regulation”
from the reconsideration for the Interpretive Memo is not necessary to
assure the effectiveness of the interpretation, and it does not disturb
states’States’ existing authority to adopt the definition through
interpretation of their existing rules.  Codifying our existing
interpretation in this action will ensure that parties reading the
regulations have a full understanding of how EPA applies the PSD program
requirements.  Since the interpretation described in the Interpretive
MemoMemorandum and the April 2, 2010 final action are otherwise
applicable at this time, the particular time sensitivity discussed in
the latter action is not the same for this final action tailoring the
PSD requirements.  

5. Delaying Limited Approvals and Request for Submission of Information
from States Implementingimplementing a SIP-Approved PSD Program

approved PSD program

Because we now anticipate that many states will be able to implement our
tailoring approach through interpretation of the term “subject to
regulation,” and without the need to revise their SIPs, we are
delaying further action on our proposal to limit our approval of SIPs
until we better understand how permitting authorities will, in fact,
implement our tailoring approach.  For this purpose, we ask each state
to submit a letter to the appropriate EPA Regional Administrator no
later than [INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL
REGISTERPROMULGATION].  In that letter, the state should explain whether
it 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 through interpretation, and without undertaking a regulatory or
legislative process.  If a state must undertake a regulatory or
legislative process, then the letter should provide an estimate of the
time needed to adopt the final rules.  If a state chooses not to adopt
EPA’s meaning by interpretation, the letter should address whether the
state has alternative authority to implement either our tailoring
approach or some other approach that is at least as stringent, whether
the state intends to use that authority.  If the state does not intend
to interpret or revise its SIP to adopt the tailoring approach or such
other approach, then the letter should address the expected shortfalls
in personnel and funding that will arise if the state attempts to carry
out PSD permitting for GHG sources under the existing SIP and
interpretation.  

For any state that is unable or unwilling to adopt the tailoring
approach by January 2, 2011, and that otherwise is unable to demonstrate
adequate personnel and funding, we will move forward with finalizing our
proposal to limit our approval of the existing SIP.  Although we
received comments questioning our authority to limit approval as
proposed, using our general rulemaking and CAA section 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 apply PSD to GHG sources when at
the appropriate time.  This is generally because these SIPs specifically
list the pollutants subject to the SIP PSD program requirements, and do
not include GHGs in that list, rather than include a definition of NSR
regulated pollutant that mirrors the federal rule, or because the 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 to
notify the EPA Regional Administrator by letter, and to do so no later
than [INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL
REGISTERPROMULGATION].  This letter should indicate whether the state
intends to undertake rulemaking to revise its rules to apply PSD to the
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 this final rule.  For any
stateState that lacks the ability to issue PSD permits for GHG sources
consistent with this final rule, we intend to undertake a separate
action to issue a SIP call, under CAA section 110(k)(5).  As
appropriate, we may also impose a FIP through 40 CFR section 52.21 to
ensure that GHG sources will be permitted consistent with this 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 CFR 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 longstanding interpretation that
applicability for a “major stationary source” under CAA sections
501(2)(B) and 302(j) and 40 CFR 70.2 and 71.2 is triggered by sources of
pollutants “subject to regulation,” and (2) addsadding a definition
of “subject to regulation.”  Further, we are delaying our action to
move forward with limiting our previous approval of existing state part
70 programs.

	We are finalizingfinalize 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 GHGGHGs
sources.  

After considering the commenters’ concerns, we are finalizing an
approach designed to address the state law concerns for states.  As a
result, it is unnecessary to move forward at this time 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 70.2 and
71.2 defines a major source as  “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.”  Wegman 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” (April 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 Memo reconsideration final
actionMemorandum 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 CFR 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, 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 Memorandum 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 previously, 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 previously for PSD,
while we adopt the “subject to regulation” mechanism for
implementing GHG tailoring in the final rule, the thrust of our
rulemaking 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
Stepssteps 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 (1i) the numerical
thresholds, as we proposed; (2ii) the term “any air pollutant,”
(3iii) the term “a major stationary source,” (4iv) the term
“subject to regulation,” which, as discussed previously, 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” –
which embodies the meaning of the statutory 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 limit our
previous 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 CAA 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 previously, 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 previously on SIP-approved PSD
permit programs, we ask each state to submit a letter to the appropriate
EPA Regional Administrator no later than [INSERT DATE 60 DAYS AFTER DATE
OF PUBLICATION IN THE FEDERAL REGISTERPROMULGATION] 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” or any of its
component terms – “a major stationary source,” “any air
pollutant,” or “subject to regulation,” or the numericalnumeral
thresholds -- that is consistent with EPA’s regulatory interpretation
of the these terms as codified at 40 CFR 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 these terms is intended to track EPA’s
interpretation, resulting in title V permitting for sources of GHGs as
described in EPA’s regulations adopted in this rule.  If a state must
revise its title V regulations or statutes to implement the
interpretation, we ask that it provides 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 and delays in permitting that would exist if the state
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 narrowed limited approval of the
state’s existing part 70 program.  If we do so, then we will respond
in that action to comments on our proposal.  

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, and the provisions do not specifically identify
GHGs.  In these cases, 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 EPA Regional Administrator
by letter as to whether the state intends to undertake rulemaking to
revise its rules consistent with these 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
intend to 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 also intend to 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 GHGs 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 this final action establishing Steps 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 Stepstep 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 40 CFR §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 40 CFR §70.4(i)(3) or issue a notice of
deficiency under the process described in 40 CFR §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 GHGs.  Currently under the statute and our rules, the
presumptive minimum is based on a subset of air pollutants (i.e., VOCs,
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 in this notice 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 decision 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
previously, we expect states to see a revenue increase from emissions of
listed pollutants at newly-major sources for GHGs, 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 previously, 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 GHGs.  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 2 years, and make changes to the fee
schedule as necessary to reflect permit program costs.  40 CFR
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 GHGs 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 GHGs.  As noted
previously, 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 approximately $45/ton of GHG) would be
inappropriate because it would likely result in huge over-collection. 
Because of this challenge, we note that 40 CFR §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 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 our legal basis for this rule.  While
implementation of Stepssteps 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 larger 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 1 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 in order to assess
which of these measures are viable to pursue further.  Even if a
rulemaking were done expeditiously, it would likely require 1 year. 
Finally, unlike lean and electronic permitting, these approaches, once
finalized by EPA, will likely require additional time of up to 2 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 Stepstep 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 1 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 Stepstep 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 Stepstep 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 this 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 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 Stepstep 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 Stepstep 3.    

	Third, it is clear that the potential availability of streamlining
measures does not call into question our decision 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 Stepssteps 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 CO2e levels.  We believe that the 6-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 6-year period will give us the
necessary time to make the best decisions about the actions we should
take beyond Stepstep 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 previously, 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 possible rulemakings addressing
approaches such as PTE, presumptive BACT, and/or general permits.  We
expect to be able to use these data to support possible rulemakings on
these topics, as appropriate, at about the same time as our Stepstep 3
rulemaking.  There may also be available streamlining options that were
not described in our proposal that warrant further consideration. 
Because of the uncertainty surrounding such approaches, we are not
committing to finalize rules on any particular approach, but we do plan
to explore 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 Stepstep 3 rulemaking, a set of
those measures that we determine are viable to pursue further.

2.   Guidance for BACTBest Available Control Technology Determinations 

The CAA requires that a PSD permit contain, among other things,
emissions limits based on the 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 of newly regulated pollutants, such as 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 CO2e 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 its
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 BACT for 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 of 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 Stepssteps 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 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.  Commenters representing 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 sources, residential sources, and
small businesses.  In general, these commenters 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 state that we have not
carefully considered the environmental and economic consequences of this
action because if we had, we would have exempted them for several
reasons, including (1i) other countries typically exempt similar sources
from GHG cap and trade programs because the industries are making
significant energy efficiency improvements even in the absence of GHG
regulation, and (2ii) 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 its 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 its GHG emission estimates.  Representatives of the
landfill industry pointed to the relationship between current statutory
thresholds that apply to their regulated emissions, primarily 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 generally addressed how the
statutory requirements for major source applicability (100/250 tpy
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 by
establishing 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 or
temporary exemptions based on source category.  Also, note that the
proposal discussed energy efficiency, process efficiency improvements,
recovery and beneficial use of process gases, 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 previously, we are still considering whether permanent
exemptions from the statute are justified for GHG permitting based on
the “absurd results” legal doctrine.  We do not have a sufficient
basis to take final action at this time to promulgate any of the
suggested exclusions on the grounds, described previously, suggested by
the commenters.  We note, however, that nothing in this rule forecloses
the opportunities we may have to explore such options in the future. 
Therefore, we are taking no action in this rule on these various
commenters’ requests for exclusions.

Some commenters also recommended that we create exclusions for their
particular source categories for the specific purpose of avoiding
overwhelming permitting burdens.  We did solicit comment on alternative
approaches to burden relief in the proposal.  Some commenters suggested
that the “administrative necessity” or “absurd results”
rationale, each of which would be based on extraordinary administrative
burdens, could be used to create at least temporary exclusions that
would allow more sources to escape permitting than what we proposed. 
However, commenters have not, to date, provided specific information
about the costs and administrative burdens associated with permitting
their source categories.  

Regarding the specific concerns about the need for a small business
exclusionIn addition, we note that the Office of Advocacy of the SBA
made several recommendations on the proposal to address concerns about
large numbers of small businesses becoming subject to the permit
programs.  For example they recommended that EPA adopt major source
thresholds of 100,000 tpy and major modification thresholds of 50,000
tpy CO2e.  They also recommended that we adopt an interpretation of the
effective date of the LDVR to provide additional time to prepare.  We
took action consistent with the latter recommendation in the
Interpretive Memo, and we are taking action consistent with the former
recommendation in this rule (although the threshold for modifications we
are adopting is higher, for reasons explained previously).  We are
finalizing Stepshave finalized steps 1 and 2 using the threshold-based
approach, which applies the various legal doctrines, in the context of
the Chevron framework, in a way that effectively exempts all small
sources during this part of the phase-in, while assuring the
administrability of the permitting programs for the sources that remain
subject to them.  We anticipate that virtually all small businesses not
already subject to PSD and title V would be excluded under this
approach.  Similarly, Furthermore, specifically with respect to high GWP
gases as discussed previously, we are maintaining the statutory
mass-based threshold, and this should address commenters’ concerns
regarding the inclusion of those gases.  Therefore, we reiterate that we
are not finalizing any such exclusions in this rule and, as noted above,
we are not taking final action in the commenters’ requests for
exclusions. 

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 in this notice for Stepssteps 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 Stepssteps 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 uses 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).  SomeOther commenters oppose the
exemption of biogenic/biomass activities, claiming the  because they
opine that carbon neutrality of biomass combustion is an incorrect
assumption that stems from what they call 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 and expressing concern that we should not assume all biomass
combustion were carbon neutral.

The proposed Tailoring Rule did not address this issue of exemptions for
biomass combustion or biogenic emissions.  We are mindful of the role
that biomass or biogenic fuels and feedstocks could play in reducing
anthropogenic GHG emissionsGHGs, and we do not dispute the commenters’
observations that many state, federal, and international rules and
policies treat biogenic and fossil sources of CO2 emissions differently.
 We note that EPA's technical support document for the endangerment
finding final rule (Docket ID No. EPA-HQ-OAR-2009-0472-11292) states
that “recognize carbon dioxide has a very different life cycle
compared to the other GHGs, which have well-defined lifetimes.  Instead,
unlike the other gases, CO2 is not destroyed by chemical, photolytic, or
other reaction mechanisms, but rather the carbon in CO2 cycles between
different reservoirs in the atmosphere, ocean, land vegetation, soils,
and sediments.  There are large exchanges between these reservoirs,
which are approximately balanced such that the net source or sink is
near zero.”  

Nevertheless-neutrality in various ways.  However, we have determined
that our application of the “absurd results,” “administrative
necessity,” and one-step-at-a-time legal rationales that support this
rule, which are based on the overwhelming permitting burdens described
previously, we do not provide have sufficient basis to exclude emissions
of CO2 from biogenic sources in determining create an exclusion from the
permitting applicability provisions at this time.  This is because such
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 abovepreviously,
and a threshold-based approach would still be needed.  As noted above,
we have not examined burdens with respect to specific categories and
thus we have not analyzed Once we adopt a threshold-based approach, we
do not have information regarding the administrative burden of
permitting projects that specifically involve biogenic CO2 emissions
taking account of the threshold-based approachthese source types, nor
did the commenters provide information to any that demonstrate that an
overwhelming permitting burden would still exist, justifying that
justifies even a temporary exclusion for biomass sources.  

At the same time, the decision not to provide this type of an exclusion
at this time does not foreclose EPA’s ability to either (1) provide
this type of an exclusion at a later time when we have additional
information about overwhelming permitting burdens due to biomass
sources, or (2) provide another type of exclusion or other treatment
based on some other rationale.  Although we do not take a final position
here, we believe that some commenters’ observations about a different
treatment of biomass combustion warrant further exploration as a
possible rationale.  Therefore, although we did not propose any sort of
permanent exclusion from 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 applicability based on lifecycle considerations of
biogenic CO2, we plan to seek further comment on how we might address
emissions of biogenic carbon dioxide under the PSD and title V programs
through a future action, such as a separate Advance Notice of Proposed
Rulemaking (ANPR).  This action would seek comment on how to address
biogenic carbon under PSD and title V, the specific legal and policy
issues raised by options regarding rationale and specify details
regarding our implementation.  We will approach (e.g. an approach to
carbon accounting), and would need to provide an opportunity for public
comment before adopting any final such exclusion.  Therefore we are not
able to finalize such an approach.  here.  We note, however, that we are
not taking final action on commenters’ request for exclusion, and that
nothing in this 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.  These recommendations are 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 . 
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. Without prejudging the outcome of our process
to seek comment whether and how we might address emissions of biogenic
carbon under the PSD and title V programs through a future action, this 
This issue warrants further exploration in the BACTthat context as well,
and we plan to fully explore it and take action if 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 CAA 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 previously, 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 who stated that we should clarify how to
count fugitives in determining applicability under this rule.  In
response, we note that we are not taking final action with respect to
commenters’ request, and 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 CAA
section 302(j) rulemaking is required before fugitive emissions may be
counted, we disagree.  As we read section 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 section 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, and the caselaw makes clearnor does case law suggest that
we could 

adopt a permanent exclusion in the future.  To the extent that the
commenters seek .  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 previously for other requested exclusions, we take no
action on this request in this rulemaking.  Although such an exclusion
may have positive features, it would not address the overwhelming
permitting burdens that justify the tailoring approach.  

4.  Transitional Issues Includingincluding 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 GHGsgreenhouse 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 GHGsgreenhouse 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 FR 17021.  This action addressed the applicability of PSD permitting
requirements for GHGsgreenhouse gases to pending PSD permit applications
that were (or will be) submitted prior to January 2, 2011 based on
emissions of pollutants other than GHGsgreenhouse 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 Stepstep 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 Stepstep 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 GHGsgreenhouse gases.

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

In our 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 for GHGsgreenhouse gases for another 9 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 9 months to complete processing
before PSD requirements become applicable to GHGsgreenhouse gases.  We
also observed that, in the case of any PSD permit application review
that cannot otherwise be completed within the next 9 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 Stepstep 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 GHGsgreenhouse 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
Stepstep 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.

While we do not provide for grandfathering of PSD applications, we do
note that there are more than 7 months left before GHG BACT requirements
will be triggered at anyway sources for projects that increase GHG
emissions by more than 75,000 tpy CO2e and more than a year before the
requirements would be triggered at sources solely because of emissions
of GHGs (more than 100,000 tpy of CO2e).  We intend to work
constructively and affirmatively with permitting authorities to use this
time to ensure expeditious processing of pending permits and to further
assure that the triggering of BACT requirements at such sources will not
result in adverse impacts on pending projects.  We have separately
described our plans to expeditiously issue GHG BACT guidance, but we
understand that for pending projects that will be permitted soon after
January 2, 2011, an opportunity for earlier engagement with EPA on BACT
issues would be beneficial for permitting authorities to issue these
permits without delay.  

Therefore, following the issuance of this rule, we will contact
permitting authorities that have pending PSD permit applications to
identify those applications with a reasonable likelihood that final
issuance will occur after January 2, 2011, and therefore will be
required to contain GHG BACT limits.  We will then work closely with
those permit agencies to provide technical, legal or policy assistance
to help prepare BACT analysis and provide additional support as
necessary to expedite permitting for those pending applications. 
Similarly, when EPA is the permitting authority, we will provide
assistance to applicants with pending permits to ensure that GHG
permitting decisions are made promptly, and that administrative
processes move forward expeditiously.   

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 National Pollutant
Discharge Elimination System (NPDES)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 CFR 52.21(r)(2); 40 CFR 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 GHGsgreenhouse 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 CFR 51.166(a)(7)(iii);
40 CFR 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 CFR 51.166(b)(11); 40 CFR 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
previously 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
that 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 CFR 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
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 (March. 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
sourcesources 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 Stepstep 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 to 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 previously, 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 CFR 51.166(a)(7)(iii); 40
CFR 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 40 CFRsections 51.166 and 52.21 of the regulation do not generally
apply to a source 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 PTEpotential to emit.  40 CFR 51.166(r)(2); 40 CFR
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 Stepstep 2 to obtain
a PSD permit to continue construction that actually begins before
Stepstep 2 begins.   

However, we will expect StepPhase 2 sources that begin actual
construction in Stepphase 2 (i.e., beginning July 1, 2011) to do so only
after obtaining a PSD permit in accordance with 40 CFRsections 52.21 or,
51.166, or any applicable state regulation that meets the requirements
of 40 CFRsection 51.166.  We recognize the potential for the triggering
of Stepstep 2 to result in a change in status where a project may
legally have begun actual construction before Stepstep 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 Stepstep 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 Stepstep 2 plans to begin actual construction before Stepstep 2,
it has more than a year to obtain the applicable preconstruction
approvals and begin actual construction.  Likewise, a Stepstep 2 source
that does not anticipate the ability to begin actual construction before
Stepstep 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 Stepstep 2 sources from PSD permitting requirements that will
apply based on construction that begins after Stepstep 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 previously for source that obtained a PSD permit
prior to Step 1.  As described previously, 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
necessary to authorize construction prior to Step 2.  This is because
such a Step 2 source that begins actual construction after Step 2 would
likely be doing so without having any permit meeting the requirements of
paragraphs (j) through (r)(5) of 40 CFRsection 52.21 or, 51.166, or a
state equivalent.  A source that has obtained only a minor source permit
prior to Step 2 but that begins actual construction after July 1, 2011
would violate the requirements of 40 CFRsection 52.21(a)(2)(iii) or),
51.166(a)(7)(iii), or a state equivalent, unless the source took care to
ensure that it was authorized to construct under a PSD permit or could
demonstrate that the source’s minor source construction permit makes
clear that requirement of paragraphs (j) through (r)(5) of 40
CFRsections 52.21 or, 51.166, or a state equivalent, would be met by the
source even though such a permit was not nominally a PSD permit.  This
difference in approach for non-PSD sources is driven by the terms of 40
CFRsections 52.21(a)(2)(iii) and 51.166(a)(7)(iii).  Since we have not
provided any prior notice that we might be considering revisions to 40
CFRsections 52.21 and 51.166 to address this topic, we are unable to
revise the regulations in this action to achieve the same result for
non-PSD sources as for PSD sources.  Furthermore, at the present time,
we see no indication that this difference in approach is not
unreasonable since non-PSD sources will not trigger permitting for GHG
until Stepstep 2 (only anyway PSD source trigger in Stepstep 1).  Thus
sources will have until July 1, 20112010, an additional 6 months of lead
time (for a total of more than 14 months), to prepare for the transition
described here.  Nevertheless, we recognize that the transition to the
increased coverage of new sources and modifications that occurs in July
will represent an unusual occurrence that may have unanticipated
impacts.  For this reason it is important to note that nothing in this
rule forecloses our ability to further address such impacts, as
necessary, by adopting rule changes or using other available tools.   

EPA has previously promulgated exemptions that have authorized some
sources that were not previously subject to the PSD regulations to
commence construction on the basis of minor source permits after the
date new PSD requirements have took effect in 1978 and 1980.  See, e.g.,
40 CFR 52.21(i)(1)(iv)-(v).   There is a notable distinction between
these provisions, which use the term “commence construction,” and
the terms of 40 CFRsections 52.21(a)(2)(iii) and 51.166(a)(7)(iii),
which use the term “begin actual construction.”  “CommenceCommerce
construction” is defined more broadly than “begin actual
construction” to include obtaining all necessarily preconstruction
approvals and either beginning actual on-site construction or entering
into binding contracts to undertake a program of actual construction. 
40 CFR 52.21(b)(9); 40 CFR 51.166(b)(9).  The term “commence
construction” is also defined in the CAA.  42 U.S.C.SC 7479(2)(A). 
Among other purposes, the term “commence construction” is generally
used in the Act and EPA regulations to distinguish construction
activities that are exempt from new PSD permitting requirements from
those that are not.  See, e.g., 42 U.S.C.SC 7475(a); 40 CFR
52.21(i)(1)(i)-(v).  In the absence an explicit exemption in the CAA or
the PSD regulations that uses the term “commence construction,” we
do not believe we can use the date a source “commences construction”
under a minor source construction permit approval as a demarcation point
for Step 2 sources that may continue ongoing construction activities
without having to obtain a PSD permit based on emissions of GHGs.  Since
we did not provide prior notice of an intention to adopt transition
provisions applicable to this situation, we are unable to adopt such an
exemption in this action that applies the term commence construction in
this context.  Consequently, the approach described previously applies
the term “begin actual construction” based on the language in 40
CFRsections 52.21(a)(2)(iii) and 51.166(a)(7)(iii).

d.  Transitional Issues for Title V Permitting

Since the title V permitting regulations already include a robust set of
provisions to address the incorporation of new applicable requirements
and other transitional considerations, we do not see grounds to
establish unique transition or grandfathering provisions for GHGs in
this action.  Furthermore, since the purpose of title V is to collect
all regulatory requirements applicable to a source and ensure
compliance, we do not believe special exemptions for GHG requirements
are likely to be justified.  The existing title V rules do not provide
any exemptions that relieve the obligation to incorporate all applicable
requirements into a title V permit.  However, the title V regulations
contain numerous provisions that allow a reasonable period of time for
incorporating new applicable requirements or applying for a title V
permit that was not previously required.  Transitional issues for
incorporation of GHG requirements into title V permitting generally
involve questions in the following categories:  (1) permit application
requirements for sources not previously subject to title V that will
become subject to title V requirements in Stepstep 2 of the phase-in;
(2) the need for updates or amendments to title V permit applications
that are pending when GHGs become subject to regulation in Step 1 of the
phase-in; and (3) the incorporation of new applicable requirements for
GHGs into existing permits for sources currently subject to title V.  

With respect to the first category, a title V source applying for the
first time must submit its permit application within 12 months after the
source “becomes subject to the [operating] permit program” or such
earlier time that the permitting authority may require (see 40 CFR
§70.5(a)(1)).  Sources not otherwise subject to title V can become
major sources subject to title V due to emissions of GHG no sooner than
July 1, 2011.  If a source becomes “subject to the [operating] permit
program” on July 1, 2011, then its permit application under the title
V operating permit program would typically have to be submitted no later
than July 1, 2012.  

There are also existing regulations relevant for the second category of
GHG transition issues, where sources currently subject to title V have
title V permit applications pending with a permitting authority as of
January 2, 2011.  Where additional applicable requirements become
applicable to a source after it submits its application, but prior to
release of a draft permit, the source is obligated to supplement its
permit application.  See 40 CFR 70.5(b); 71.5(b).  Furthermore, title V
permits are generally required to contain provisions to assure
compliance with all applicable requirements at the time of permit
issuance.  See CAA section 504(a); 40 CFR 70.6(a)(1) and); 71.6(a)(1). 
If a permitting authority determines that additional information is
necessary to evaluate or take final action on an application (e.g.,
because of uncertainty over whether a draft permit assures compliance
with all applicable requirements), it may, and should, request
additional information from the source in writing and set a reasonable
deadline for a response.  See 40 CFR 70.5(a)(2); 71.5(a)(2).  

Likewise, the existing title V regulations provide sufficient transition
for the third category of issues, where a source has additional
GHG-related applicable requirements (such as the terms of a PSD permit)
that must be incorporated into its existing title V permit.  Where a
source is required to obtain a PSD permit, the source must apply for a
title V permit or permit revision within 12 months of commencing
operation or on or before such earlier date as the permitting authority
may establish (or prior to commencing operation if an existing title V
permit would prohibit the construction or change in operation).  See 40
CFR  70.5(a)(1)(ii); 71.5(a)(1)(ii); see also 40 CFR §§70.7(d) and
(e); 71.7(d) and (e) (permit modifications).  In addition, where a
source becomes subject to additional applicable requirements, the
permitting authority is required to reopen the permit to add those
applicable requirements if the permit term has three or more years
remaining and the applicable requirements will be in effect prior to the
date the permit is due to expire.  See 40 CFR 70.7(f)(1)(i);
71.7(f)(1)(i).  

Finally, EPA notes that the existing title V regulations require sources
to furnish permitting authorities, within a reasonable time, any
information the permitting authority may request in writing to determine
whether cause exists for modifying, revoking, and reissuing, or
terminating the permit, and for other reasons, and further provide that
permitting authorities shall reopen and revise permits if EPA or the
permitting authority determine that the permit must be revised or
revoked to assure compliance with applicable requirements.  See 40 CFR
§§70.6(a)(6)(v);71.6(a)(6)(v) and §§ 70.7(f)(1)(iv); 71.7(f)(1)(iv).

Thus, EPA believes that the existing title V regulations provide an
adequate regulatory framework for managing the transition to
incorporating GHG requirements in title V permits and additional
specific exemptions or transition rules for title V are not currently
warranted.

VI. What are the economic impacts of the final rule?  

This section of the preamble examines the economic impacts of the final
rule including the expected benefits and costs for affected sources and
permitting authorities.  The final rule uses a phased-in approach for
requiring sources of GHG emissions to comply with title V operating
permit and PSD statutory requirements, essentially lifting this burden
for the phase-in a period of at least 6 years for a large number of
smaller sources of GHG.  Thus, this rule provides regulatory relief
rather than regulatory requirements for these smaller GHG sources.  For
larger sources of GHGs GHG that will be required to obtain title V
permits and/or comply on PSD requirements, there are no direct economic
burdens or costs as a result of this final rule, because these
requirements are not imposed as a result of this rulemaking.  Statutory
requirements to obtain a title V operating permit or to adhere to PSD
requirements are already mandated by the CAA and by existing rules, not
by this rule.  Similarly, this rule will impose costs to society in the
form of foregone environmental benefits resulting from GHG emission
reductions that, absent this rule, might otherwise have occurred at
sources deferred from permitting during the phase-in period.

The regulatory impact analysis (RIA) conducted for this final rule
provides details of the benefits or regulatory relief that smaller GHG
sources will experience in terms of costs avoided as a result of this
final rule and the potential for social costs in terms of foregone
environmental benefits during this 6-year period.  Complete details of
the RIA conducted for this final rule may be found in the document
"Regulatory Impact Analysis for the Final Prevention of Significant
Deterioration and Title V Greenhouse Gas Tailoring Rule," in the docket
for this rulemaking.

This rulemaking provides permitting thresholds for sources of GHG that
exceed levels contained in the CAA, and these levels are phased- in
steps based upon application of the “administrative necessity” and
“absurd results” doctrines as explained in section V.B.  For Step
step 1, which  that is effective from January 2, 2011 through June 30,
2011, only sources required to undergo title V or PSD permitting based
upon non-GHG air pollutants are required to obtain an operating permit
or PSD permit to include GHG emissions (referred to as the “anyway”
threshold).  Step 2, effective from July 1, 2011 until such time as EPA
acts on a rule to amend it (which for reasons described previously, we
assume is June 30, 2013 for the purposes of this analysis), will phase
in title V permit requirements for larger sources emitting GHG above
100,000 tpy CO2e tpy (if they do not already have one) and phase in for
such sources, PSD requirements when they are newly constructed or modify
in a way that increases emissions by more than a 75,000 tpy CO2e tpy
significance level.  Step 2 is referred to as the 100,000 tpy CO2e
threshold.  Thereafter, EPA makes an enforceable commitment to consider
a possible Stepstep 3 to further lower thresholds below 100,000 tpy CO2e
tpy and/or permanently exclude some sources from the program(s), but
only after a regulatory process is conducted addressing
“administrative necessity” and “absurd results” considerations
based upon the actual permitting experiences in the first two steps of
the phase-in.  In addition, EPA provides a deferral of permitting until
we take required action in April 2016 for sources and modifications that
emit below 50,000 tpy CO2e tpy.  The deferral will end when a required
study is conducted of the permitting process for sources of GHG and EPA
acts, based on the study, to promulgate a rule that describes the
additional GHG permitting requirements beyond 2016.  In the 6 years
following promulgation of this rule, the EPA estimates that compared to
baseline estimates that do not include the effects of this rule, over
six million sources of GHG emissions in total will be allowed to
continue to operate without a title V operating permit.  During this
period, tens of thousands of new sources or modifying sources each year
will not be subject to PSD requirements for GHG.  For this large number
of smaller sources, this rule alleviates the regulatory burden
associated with obtaining an operating or PSD permit or complying with
NSR BACT requirements.  Therefore, this final action may be considered
beneficial to these small sources because it provides relief from
regulation that would otherwise be required.  

This decision does potentially have environmental consequences in the
form of higher emissions during the 6-year period of time (generally
because emissions increases would have been lower if BACT were applied).
 These consequences are limited due to the fact that sources between
100/250 and 100,000 tpy CO2e tpy account for an estimated 11 percent of
the six directly emitted GHG nationally from industrial, commercial, and
residential source categories, while representing over 95 percent of the
total number of sources potentially requiring an operating or PSD permit
for GHG under current permitting thresholds in the CAA.  Moreover,
requiring such a large number of small sources to obtain permits for the
first time would overtax the permitting authorities' abilities to
process new permits and would therefore interfere with any such benefits
actually being achieved.  Moreover, reductions from these small sources
will still be occurring, notwithstanding the fact that permitting
requirements would not apply to them.  These smaller sources of GHGs GHG
will be the focus of voluntary emission reduction programs and energy
efficiency measures that lead to reductions in GHGs.  We will also
reevaluate this decision after a 6-year period and complete a study of
the implications for those sources and permitting authorities of
permitting smaller GHG sources beyond 2016.

In reaching the preceding decisions for this final rule, we carefully
considered comments received on the Tailoring Rule proposal.  We
received several comments specifically on our description of the impacts
of this rule.  Most of these comments disagreed with our assertion that
the rule is a “relief” rule.  Others assert that we should have
prepared a more comprehensive RIA than prepared for the rule proposal. 
Those commenting contend: (1) we understated the burdens of the rule
while overstating its relief at proposal; (2) we erroneously omitted the
impacts for “larger sources” of GHGsGHG  from the proposal RIA and
should have recognized the burden to “larger sources” due to other
GHG actions; (3) the economic impacts the rule will have on industry and
the U.S.nited States economy and society in general will be burdensome,
especially given the current state of the economy; and (4) we need to
propose a full RIA or a complete estimation of impacts to comply with
CAA section 307(d) and the APA.   

	EPA has carefully considered the comments addressing the issue of
whether the Tailoring Rule is a regulatory “relief rule,””, and we
are not persuaded that we erred in concluding that the effect of the
Tailoring Rule is to provide regulatory relief to a large number of
sources of GHG for a period of up to 6 years.  This final rule will
provide relief from title V permitting to over 6 million sources of GHG
in this country.  Likewise tens of thousands of sources potentially
subject to PSD permitting requirements annually for GHG will have
regulation postponed for a period of up to 6 years under this rule,
followed by an additional required rule addressing the period beyond 6
years.  While larger sources of GHG may be required to obtain title V
permits or modify existing permits and to comply with PSD requirements,
these burdens result not from the Tailoring Rule but rather from the CAA
requirements to apply PSD and title V to each pollutant subject to
regulation, which are triggered when the LDVR takes effect.  To clearly
illustrate this, consider what would occur if EPA did not complete the
Tailoring Rule.  Sources would not be relieved of the requirement to
obtain permits addressing each pollutant subject to regulation when they
construct or modify, nor would they be relieved of their obligation to
obtain title V permits.  Instead, these requirements would simply apply
to a much larger population of sources and modifications, and would lead
to the absurd results and severe impairment to program implementation
that this rule is designed to address.

In response to comments asserting that the RIA completed for proposal of
this rulemaking: (1) understated the burdens of the rule and overstated
the benefits, (2) did not fully recognize the rule will be burdensome,
especially given the current state of the economy; and (3) does not
consider a complete estimation of impacts to comply with the
APAAdministrative Procedure Act and CAA section 307(d) and needs to
correct flawed or erroneous assumptions, EPA did make improvements and
modifications to the RIA completed for this final rule.  Based upon
comments, EPA modified estimates of the number of sources affected at
various threshold levels upward.  EPA also improved the burden estimates
associated with obtaining permits for sources and permitting
authorities.  

After consideration of the burden imposed by the proposed rule with
these improved estimates for affected sources, the EPA modified the
steps of the phase-in period to include two initial steps, described in
section V, that are higher, and therefore cover fewer sources and are
less burdensome than the proposal threshold of 25,000 tpy CO2e tpy
emissions.  EPA also increased the threshold below which permitting
would not apply for 6 years from 25,000 to 50,000 tpy CO2e.  After the
initial two step period, EPA has committed to consider lower thresholds
but only down to 50,000 tpy CO2e, and only after a regulatory process
that uses information gathered on actual permitting activity during the
first two steps of the phase-in period.  The RIA conducted for the final
rule also incorporates improvements in our estimates of the number of
sources affected at alternative thresholds and improved estimates of the
costs of obtaining permits by sources and processing permits by
permitting authorities.  The EPA acknowledges that the regulatory relief
associated with the control costs due to BACT requirements for PSD new
and modifying sources is not included in the RIA for the final rule due
to the lack of sufficient data about the nature of those requirements. 
However, it is the case that, as it relates to burden, those estimates
would simply increase the amount of regulatory relief associated with
this final rule.  	

Finally, with regard to comments that the RIA should have been a more
comprehensive analysis to include the larger sources of GHG that will be
required to obtain permits when GHG are regulated, the EPA maintains as
previously explained that there are no direct economic burdens or costs
as a result of this rule for these sources.  Requirements for larger GHG
sources to obtain title V or PSD permits are already mandated by the Act
and by existing rules and are not imposed as a result of the Tailoring
Rule.  Thus the economic impacts for larger sources of GHG do not occur
because of this Tailoring Rule.  To include these larger sources in the
RIA would actually be an inaccurate assessment of how this rule affects
sources and would ignore the fact that this rule provides regulatory
relief.

A.  What entities are affected by this final rule?

As previously stated, this final rule does not itself result in the
application of permitting requirements to any industrial, commercial, or
residential entities.  Entities affected by this rule are those who
experience regulatory relief due to the higher thresholds and deferred
applicability set forth in this rule.  This action increases the
threshold to obtain a title V and PSD permitting from statutory CAA
levels using a phased-in step process as previously discussed.  As
Tabletable VI-1 shows, this action lifts permitting requirements for
over six million potential title V sources in total and tens of
thousands of potential PSD new sources annually that would be otherwise
required by the CAA to obtain permits.  Under Stepstep 1, over six
million title V sources in total and approximately 20 thousand new PSD
sources per year will not be required to obtain permits.  Under Stepstep
2, requiring sources over a 100,000 tpy CO2e to obtain a permit, over
six million title V sources in total and approximately 19.9 thousand new
PSD sources per year will obtain regulatory relief.  While the threshold
approach differs for Stepssteps 1 and 2 of the phase-in plan, the
estimated number of sources affected does not differ greatly as shown in
Table VI-1. Sectors experiencing this regulatory relief include
electricity, industrial, energy, waste treatment, agriculture,
commercial and residential.Table VI-1.  Estimated Number of Affected
Sources Experiencing Regulatory Relief1,2

	Number of Sources Experiencing Regulatory Relief

	Step 1 AnwayNon-GHG Based	Step 2 <100,000 tpytoy

Sector	Title V	New PSD	Title V	New PSD

Electricity	285	93	285	33

Industrial	170,910	604	170,654	599

Energy	2,588	48	2,536	44

Waste Treatment	3,358	2	3,165	1

Agriculture	37,351	299	37,351	299

Commercial	1,355,921	12,041	1,355,870	12,039

Residential 	4,535,500	6,915	4,535,500	6,915

Totals	6,105,913	20,002	6,105,361	19,930

% Emissions Covered3 	

13%	

11%

Notes: (1) Number of sources is determined on a PTEpotential to emit
basis.  Estimates for title V are the total number of sources expected
to experience regulatory relief.  PSD sources are annual estimates of
newly constructed facilities and do not include modifications at
existing facilities that may also be subject to PSD requirements.  (2)
See appendices to “Appendices to ‘Regulatory Impact Analysis of the
Final Prevention of Significant Deterioration and Title V Greenhouse Gas
Tailoring Rule”’ for more details of how thresholds and sources
affected are developed.  (3) Percentage of emissions covered represent
estimated actual emissions from sources expected to experience
regulatory relief as a percentage of total stationary source GHG
emissions.

B.  What are the estimated annual benefits to sources due to regulatory
relief from the statutory requirements?

EPA estimated the annual benefits (avoided costs) to sources of GHG
emissions and permitting authorities anticipated from this final rule. 
In addition, an accounting of the benefits from this action as measured
by avoided permit processing costs for state, local, and tribal
permitting authorities is provided.  These benefits or avoided costs
relate specifically to permit information collection costs or burden
costs postponed for smaller sources of GHG emissions otherwise required
to obtain an operating permit under title V or required to modify an
existing permit to address GHG emissions.  Avoided costs shown also
include permit burdens information collection requirements for
additional PSD permits postponed for new or modifying smaller sources of
GHG, as well as the avoided costs to state, local and tribal permitting
authorities.  We are providing an illustrative monetary estimate of
statutory permitting requirements to show the magnitude of the savings
that hypothetically result from this rulemaking.  While we believe it is
impossible to implement these permit requirements by January 2, 2011,
for the reasons laid out in this preamble, it is useful to understand
the scale of what the burden may have been.  For sake of simplicity, we
refer to this illustrative monetary estimate as the monetized benefits
of the regulatory relief presented by this rulemaking or regulatory
relief benefits for brevity.

 These benefit estimates do not consider avoided emission control costs
associated with PSD requirements for potential BACT requirements. 
Estimates for BACT are unavailable at this time because of the
difficulty predicting the results of the BACT process as it would be
applied to new pollutants and classes of sources for which there is no
previous BACT experience on which to rely. 

1.  What are annual estimated benefits or avoided burden costs for title
V permits? 

Table VI-2 shows that the estimated annual title V benefits to sources
and to permitting authorities in terms of avoided information collection
cost resulting from this final action to be approximately $70,535
million under Stepstep 1 of the phase-in, the non-GHG based requirements
threshold.  These avoided costs become $70,520509.9 million annually
under Stepstep 2 of the phase-in. where permitting is required for
sources at or above the 100,000 tpy CO2e threshold.  Under the anyway
threshold Stepnon-GHG based phase-in step 1, approximately $49,457.3
million in regulatory relief will accrue to sources and approximately
$21,078 million to permitting authorities annually in the form of
avoided permit processing costs.  With the <100,000 tpy CO2e threshold
for phase-in Stepstep 2, these annual regulatory relief benefits are
expected to be quite similar at $49,447.4 million for sources of GHG
emissions and $21,072062.5 million for permitting authorities. 
Industrial sources permitting costs are estimated to be $46.4 thousand
per permit for a new permit and $1.7 thousand for a permit revision. 
The EPA estimates that over tens of thousands of industrial sources per
year will avoid incurring these permitting costs under Stepssteps 1 and
2 of the phase-in period.  The cost for a permit for new commercial and
residential sources is estimated to be $23.2 thousand per permit with
approximately 2 million of these permits avoided annually.

State, local, and tribal permitting authorities will also benefit in
terms of avoided permitting administrative costs of over $21 billion as
a result of the decisions final in this action.  For industrial sources,
the cost for permitting authorities to process a new industrial title V 

permit is approximately $19.7 thousand per permit and $1.8 thousand for
a permit revision.  Similarly, permitting authority avoided permit
processing costs are approximately $9.8 thousand per permit for a new
commercial or residential title V permit.  All estimates are stated in
2007 dollars.   

Table VI-2.  Annual Title V Regulatory Relief for Sources and
Permitting Authorities1, 2 

 

 	Step One 

AnywayNon-GHG Based	Step Two 

<100,000 tpy CO2e

Activity	Cost per Permit (2007$)	Number of Permits	Avoided Costs
(millions 2007$)	Number of Permits	Avoided Costs (millions 2007$)

Sources	 

New Industrial	$46,350	71,829	$3,329.3	71,657	$3,321.3

New Commercial/ Residential	$23,175	1,985,948	$46,024.3	1,985,930
$46,024023.9

Permit revisions due to GHG	$1,677	61,836	$104103.7	60,921	$102.2

Source Total	 	2,119,613	$49,457.3	2,118,508	$49,447.4

Permitting Authority	 

New Industrial	$19,688	71,829	$1,414.2	71,657	$1,410.8

New Commercial/ Residential	$9,844	1,985,948	$19,550549.7	1,985,930
$19,550539.6

Permit revisions due to GHG	$1,840	61,836	$114113.8	60,921	$112.1

Permitting Authority Total	 	2,119,613	$21,078077.7	2,118,508
$21,072062.5

  

Total Title V Regulatory Relief	$70,535	 	$70,520509.9

Notes:  Sums may not add due to rounding. (1) Annual title V avoided
costs estimates represent information collection costs for one third of
the total number of title V sources obtaining regulatory relief shown in
Table VI-1 potentially requiring permits or permit revisions for GHG. 

(2) More details on these estimated regulatory relief benefits are
available in the appendicesAppendices to the “Regulatory Impact
Analysis for the Final Prevention of Significant Deterioration and Title
V Greenhouse Gas Tailoring Rule.””.

2.	What are annual benefits or avoided costs associated with NSR
permitting regulatory relief? 

Table VI-3 summarizes the estimated annual permit burdeninformation
collection costs avoided by sources and permitting authorities for PSD
permitting due to this Tailoring Rule.  The benefits associated with
avoided cost of compliance for BACT for these sources is not included in
these estimates due to a lack of available data.  The estimated avoided
burden or reporting and recordkeeping cost that would occur absent this
rule for new industrial sources to obtain permits is estimated to be
$84.5 thousand for a modifying PSD industrial source and $59.2 thousand
for a modifying commercial or multi-family residential source.  New PSD
sources will also be required to obtain a title V permit increasing
these costs to $130.9 thousand per permit for new industrial sources and
to $82.3 thousand per permit for new commercial or multi-family
residential sources.  (Note the title V costs for these new PSD sources
have been included in title V estimates shown in Table VI-2.)  New and
modifying sources avoid approximately $5.5 billion annually in PSD
permitting costs with this rule under the phase-in Stepstep 1, non-GHG
based threshold.  Under the phase-in Stepstep 2, <100,000 tpy CO2e tpy
threshold and <75,000 tpy CO2e significance level, this avoided PSD
permitting cost estimate becomes $5.4 billion annually.  State, local,
and tribal permitting authorities are expected to avoid about $1.51
billion annually in administrative expenditures associated with
postponing PSD program requirements for these GHG sources under Stepstep
1 and $1.49 billion under Stepstep 2.  All estimates are shown in 2007
dollars.  Table VI-3.  Annual PSD Regulatory Relief for Sources and
Permitting Authorities1,2

 

 	Step One

AnywayNon-GHG Based	Step Two

<100,000 tpy Threshold, <75,000 Significance Level

Activity	Cost per Permit (2007$)	Number of Permits	Avoided Costs
(millions 2007$)	Number of Permits	Avoided Costs (millions 2007$)

Sources 

New Industrial	$84,530	26,089	$2,205.3	25174	$2,128.0

New Commercial/Residential	$59,152	55,509	$3,283.5	55505	$3,283.2

Source Total	 	81,598	$5,489488.8	80679	$5,411.2

Permitting Authority

	New Industrial	$23,243	26,089	$606.4	25174	$585.1

New Commercial/Residential	$16,216	55,509	$900.1	55505	$900.1

Permitting Authority Total	 	 81,598	$1,506.5	80679	$1,485.2

  

Total Title V Regulatory Relief	 	$6,995.3	 	$6,896.4

Notes: Sums may not add due to rounding.  (1) All estimates are based
upon PTE.potential to emit.  Regulatory relief shown represents annual
estimates of PSD permitting costs avoided under Stepssteps 1 and 2 of
the phase-in period.  (2) More details on these estimated regulatory
relief benefits are available in the appendicesAppendices to the
“Regulatory Impact Analysis for the Final Prevention of Significant
Deterioration and Title V Greenhouse Gas Tailoring Rule.””.

C.  What are the economic impacts of this rulemaking?

This final rulemaking does not impose economic burdens or costs on any
sources or permitting authorities, but should be viewed as regulatory
relief for smaller GHG emission sources and for permitting authorities. 
Although sources above the thresholds set in this rule will become
subject to permitting on January 2, 2011, those impacts are not
attributable to the present rulemaking.  Rather they are mandated by the
CAA and existing regulations and automatically take effect independent
of this action. 

In addition to considering the regulatory relief expected for affected
entities as a result of this final rule, the EPA considered the impact
of this rulemaking to small entities (small businesses, governments and
non-profit organizations) as required by the Regulatory Flexibility Act
(RFA) and the Small Business Regulatory Enforcement Fairness Act
(SBREFA).  For informational purposes, the RIA includes the Small
Business Administration (SBA) definition of small entities by industry
categories for stationary sources of GHG and potential regulatory relief
from title V and NSR permitting programs for small sources of GHG. 
Since this rule does not impose regulatory requirements but rather
lessens the regulatory burden of the CAA requirements to smaller sources
of GHG, no economic costs are imposed upon small sources of GHG as a
result of this final rule.  Rather this action provides regulatory
relief for small sources.  These avoided costs or benefits accrue
because small sources of GHG are not required to obtain a title V permit
and new or modifying small sources of GHG are not required to meet PSD
requirements.  Some of the small sources benefitting from this action
are small entities, and these entities will benefit from the regulatory
relief finalized by this rule.  For discussion of comments received and
EPA responses regarding small entities impacts, see section VIIVIII. of
this preamble.

D.  What are the costs of the final rule for society?

EPA examined the social costs of this final rule.  These social costs
represent the foregone environmental benefits that will occur as a
result of the regulatory relief offered to sources of GHG emissions. 
This action is one of regulatory relief since it increases the emissions
thresholds for the title V and PSD programs, as they apply to sources of
GHG emissions, to levels above those in the CAA.  In this preamble
section, the benefits or avoided regulatory costs of such relief are
discussed, but there is also a social cost imposed by such relief,
because this rule may forego some of the possible benefits associated
with title V and PSD programs for sources of GHG emissions below the
permitting thresholds established.  These benefits are those attributed
to title V and PSD permitting programs in general.  These benefits are
based upon the relevance of these programs to policymaking, transparency
issues, and market efficiency, and therefore are very difficult to
quantify and monetize.  For title V, they include the benefits of
improved compliance with CAA requirements that stem from (1) improved
clarity regarding applicability of requirements, (2) discovery and
required correction of noncompliance prior to receiving a permit, (3)
improving monitoring, recordkeeping, and reporting concerning compliance
status, (4) self-certification of compliance with applicable
requirements initially and annually, and prompt reporting of deviations
from permit requirements, (5) enhanced opportunity for the public to
understand and monitor sources’ compliance obligations, and (6)
improved ability of EPA, permitting authorities, and the public to
enforce CAA requirements.  However, it is important to remember that a
title V permit generally does not add new requirements for pollution
control itself, but rather collects all of a facility’s applicable
requirements under the CAA in one permitting mechanism.  Therefore, the
compliance benefits above are less when title V permits contains few or
no CAA applicable requirements.  During the initial steps of the
phase-in plan established under this action, we expect that the vast
majority of sources excluded from title V would be sources that have no
CAA applicable requirements for GHG emissions and few or no requirements
for other pollutants because their emissions of those pollutants are so
small.  For this reason while it is extremely difficult to measure the
degree of improved compliance, if any, that would be foregone, or to
quantify the social costs that would be imposed, we expect that they
would be small.  We will be evaluating this issue further during
subsequent phases.

	For PSD, the primary social cost imposed by the Tailoring Rule stems
from the foregone benefit of applying BACT to the tens of thousands of
small new sources and modifications that will be below our final
thresholds during the first steps of the phase-in.  This social cost
potentially weighs against the cost savings described previously that
stem (in part) from avoiding the administrative and control costs of
applying BACT to these sources.  The BACT requirement assures that new
and modified sources, when they increase their emissions are using
state-of-the-art emission controls and affords the public an opportunity
to comment on the control decision.  It does not prohibit increases but
it assures that such controls are applied.  Delaying the BACT
requirement for numerous small sources during the first steps of the
phase-in for this final rule could allow increases from these smaller
sources that are greater than they would be if BACT were applied.  A
detailed analysis of this difference is beyond the scope of this rule,
because we do not have detailed information on the universe of these
tens of thousands of small PSD actions, the candidate BACT technologies
for each of them, how permitting authorities would make the BACT
decisions, and how the BACT limit would compare to what would otherwise
be installed absent BACT.

It is not possible at this time to quantify the social costs of avoided
BACT.  However, we note that the universe of possible emissions that
would be regulated by sources excluded under the Tailoring Rule is small
compared to those that would remain subject to PSD.  The sources
excluded in these first two steps of the phase-in plan of this action
comprise only 11 percent of total stationary source GHG emissions, while
67 percent remain subject to regulation.  Furthermore, we expect the
emissions differences due to BACT controls for such sources to be
relatively small due to the lack of available capture and control
technologies for GHG at such sources that are akin to those that exist
for conventional pollutants and sources, as well as the likelihood that
even in the absence of BACT such sources would already be installing
relatively efficient GHG technologies to save on fuel costs.  Thus,
while potential benefits would be foregone by excluding smaller sources
from the permitting programs, these benefits are likely to be small. 
Under the Tailoring Rule, we will be working during the 6-year period to
greatly improve our understanding of both the administrative costs of
regulating and the social costs of not regulating smaller sources under
PSD and title V, and we will be relying on that information to support
our future threshold analyses called for under the action.   

In reaching the decisions for this GHG Tailoring Rule, the EPA
recognizes that GHG emissions can remain in the atmosphere for decades
to centuries, meaning that their concentrations become well-mixed
throughout the global atmosphere regardless of emission origin, and
their effects on climate are long lasting and significant.  A detailed
explanation of climate change and its impact on health, society, and the
environment is included in EPA's TSDtechnical support document for the
endangerment finding action (Docket ID No. EPA-HQ-OAR-2009-0171).  The
EPA recognizes the importance of reducing climate change emissions for
all sources of GHG emissions including those sources afforded regulatory
relief in this rule and plans to address potential emission reductions
from these small sources using voluntary and energy efficiency
approaches.  Elsewhere, we have discussed EPA's interest in continuing
to use regulatory and/or non-regulatory tools for reducing emissions
from smaller GHG sources because we believe that these tools will likely
result in more efficient and cost-effective regulation than would
case-by-case permitting.

E.  What are the net benefits of this final rule?

The net benefits of this GHG tailoring rule represent the difference
between the benefits and costs of this rule to society.  As discussed in
this preamble, this rule is one of regulatory relief and the benefits to
society are estimates the regulatory relief (avoided permit burden
costs) to sources and permitting authorities for Steps 1 and 2 of the
phase-in period.  The social costs of the rule are the foregone
environmental benefits in the form of potential GHG emission reductions
that could occur during the phase-in period and are discussed
qualitatively.

	This rulemaking provides regulatory relief for a phase-in period to
smaller sources of GHG by phasing in the statutory permitting threshold
at levels above statutory requirements.  This final rule establishes
thresholds and PSD significance levels for Steps 1 and 2 of the phase-in
period (the 2.5 year period between January 2, 2011 and July 1, 2013),
commits to considering a further Step 3, and indicates floor title V and
PSD threshold levels from July 1, 2013 through April 30, 2016.  The net
benefits of the final rule for Steps 1 and 2 are $193,598+B-C million
for the 2 and one-half year period where B denotes the unquantified
benefits and C the quantified costs of this final rule.  These
unquantified benefits of this rule include the avoided PSD BACT costs
for new and modifying sources.  The unquantified costs previously
discussed relate to the foregone environment benefits or GHG emission
reductions that might be possible during the 2.5 year Step 1 and 2
phase-in period.  These estimates are subject to significant
uncertainties that are discussed at length in the Regulatory Impact
Analysis for the Prevention of Significant Deterioration and Title V GHG
Tailoring Rule contained in the docket to this final rule.  All dollar
estimates shown are based upon 2007$. 

Table VI-4.  Net Benefits of the Rule for Steps 1 and 2 of the Phase-in
Period

 

 

 	Final Rule Amounts 

(millions of 2007$)

Benefits - Regulatory Relief

 

	Sources

 

	   Title V1	$123,624

   PSD2	$13,567

Total Source Regulatory Relief	$137,190

Permitting Authority	 

   Title V1	$52,684

   PSD2	$3,724

Total Permitting Authority 	$56,407

Total Regulatory Relief	$193,598+B

 	 

Costs - Foregone GHG Emission Reductions	 

   Title V & PSD	C

 	 

Net Benefits3	$193,598+B-C

Benefits represent regulatory relief for sources with the annual
potential to emit below the thresholds shown.

B - unquantified benefits of the rule include regulatory relief from
BACT requirements for PSD sources

C - unquantified social costs of tailoring rule represents economic
value of foregone environmental benefits (potential GHG emission
reductions) during Step 1 and 2 of the phase in period.  Foregone GHG
emission reductions are not known at this time.  

1Reflects estimates of regulatory relief or avoided permit burden costs
for title V GHG sources and permitting authorities.

2 Shows estimates of regulatory relief or avoided permit burden costs
for GHG PSD sources and permitting authorities.

3 Includes one-half year of Step 1 (anyway threshold), 2 years  of Step
2 (100,000 threshold), 





VII.   Comments on Statutory and Executive Orders Reviews 

In this section, we provide responses to comments we received for
various Executive Orders (EOs).  

A.  Comments on Executive Order 12866 - Regulatory Planning and Review

At proposal, EPA prepared an analysis of the potential costs and
benefits associated with EPA’s Tailoring Rule proposal in an RIA. 
Several commenters state that EPA’s failure to estimate the full costs
of the effects of its interpretation of PSD applicability in the
proposed Tailoring Rule violates Executive OrderEO 12866.  Some of these
commenters maintain that Executive OrderEO 12866 directs EPA to submit
to the Office of Management and Budget (OMB) new significant regulations
under consideration by the EPA.  These commenters assert that, in the
section 202 rule, EPA failed to analyze the effect on stationary sources
in the cost benefit analysis and there is no indication that EPA
included these impacts in its submission to OMB.  According to the
commenters, in EPA’s proposal for this rulemaking, EPA has similarly
failed to analyze the costs and benefits of triggering PSD for
stationary sources.  The commenters assert that without this key
information, OMB could not fully review the impacts of the proposed
rule.  The commenters believe that EPA’s failure to account for known
costs that will occur as a direct result of the promulgation of the
proposed rule in conjunction with the section 202 rule violates several
applicable requirements of Executive OrderEO 12866, including sections
6(B)(ii) and 6(C)(iii), which require assessments of the potential costs
and benefits of the regulatory action and “reasonably feasible
alternatives to the planned regulation, identified by the Agencies or
the public . . .” thereby violating both the APA and CAA section
307(d) because they deprive businesses and permitting authorities alike
of a meaningful opportunity to comment on the rule.

	The EPA has prepared a revised RIA assessing the benefits and costs of
the final Tailoring Rule to support this rulemaking in accordance with
Executive OrderEO 12866, as was done with the proposal for this
rulemaking.  Similarly, the RIA completed for this action is subject to
review by an Inter-agency review panel that includes OMB,the
President’s Office of Management and Budget as was the case with the
proposal RIA.  Further, the RIA completed for this final rule fully
assesses the known benefits and costs associated with the Tailoring
Rulemaking.  This final rule is one of regulatory relief from statutory
requirements in which a large number of sources of GHGs will be relieved
of the burden of title V and PSD permitting for a period of at least 6
years.  This final rule will provide relief from title V permitting to
over 6 million sources of GHG in this country.  Likewise tens of
thousands of sources potentially subject to PSD permitting requirements
for GHGs will have regulation postponed for a period of at least 6
years.  While larger sources of GHG may still be required to obtain
title V permits or modify existing permits and to comply with PSD
requirements, these burdens result from existing statutory requirements,
not from this final Tailoring Rule.

B.  Comments on the Paperwork Reduction Act

At proposal, we stated in the preamble that we did not believe that the
proposal would impose any new information collection burden.  We
concluded that the proposed action would reduce costs incurred by
sources and permitting authorities relative to the costs that would be
incurred if EPA did not revise the rule and provided estimates of those
reduced costs.  Further, we stated that, despite our estimated burden
reductions, it was unnecessary for us to submit a new information
collection request (ICR) to the OMB because the ICR contained in the
existing regulations for PSD (see, e.g., 40 CFR 52.21) and title V (see
40 CFR parts 70 and 71) had already been approved under the provisions
of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and washas
assigned OMB control number 2060–0003 and OMB control number
2060–0336, respectively.

However, several commenters disagree that it was unnecessary for us to
submit a new ICR for the proposed action.  These commenters believe that
(1) prior approval of an ICR for the PSD and title V programs ignores
the fact that there would be an increase in the paperwork burden as a
result of applying PSD and title V permitting requirements; and (2)
unless EPA resubmits the information collection approval request to OMB
with a proper and fully-inclusive analysis, EPA will lack authority to
collect information from stationary sources for PSD and title V GHG
emissions permitting.

As we stated in the proposal, this is a burden relief rule and as such
it does not impose any new requirements for the NSR or title V programs
that are not currently required.  For that reason, we concluded that for
purposes of this rule it was unnecessary for us to submit a new ICR to
the OMB and that the ICR contained in the existing regulations for PSD
(see, e.g., 40 CFR 52.21) and title V (see 40 CFR parts 70 and 71) that
had already been approved under the provisions of the Paperwork
Reduction Act, 44 U.S.C. 3501 et seq. and was assigned OMB control
number 2060–0003 and OMB control number 2060–0336, respectively,
still applies.

Nevertheless, we understand that once GHGs are regulated under the PSD
and title V programs, there might be an increase in the overall
paperwork burden for these programs.  EPA will have to assess this
possible burden during the normal course of 3-year renewal ICR process. 

C.  Comments on the RFARegulatory Flexibility Act

At proposal, EPA certified that the proposed rule would not have a
significant impact on a substantial number of small entities and
therefore we are not obligated to convene a formal Small Business
Advocacy Review (SBAR) panel.  This certification was based upon the
fact that the proposed action would relieve the regulatory burden
associated with the major PSD and title V operating permits programs for
new or modified major sources that emit GHGs, including small
businesses.  Nevertheless, EPA was aware at proposal that many small
entities would be interested in the various GHG rulemakings currently
under development and might have concerns about the potential impacts of
the statutory imposition of PSD requirements that may occur as a result
of the group of EPA actions, notwithstanding the relief provided to
small businesses by the Tailoring Rule.  For these reasons, and in
collaboration with the SBA, EPA conducted an outreach meeting designed
to exchange information with small entities that may be interested in
these regulations.  The outreach effort was organized and led by
representatives from EPA’s Office of Air Quality Planning and
Standards within the Office of Air and Radiation, EPA’s Office of
Policy Economics and Innovation, the Office of Information and
Regulatory Affairs within OMB, and the Office of Advocacy of the
SBA.Small Business Administration.  This meeting was conducted on
November 17, 2009 in Arlington, VA, and documentation of this meeting,
which includes a summary of the advice and recommendations received from
the small entity representatives identified for the purposes of this
process, can be obtained in the docket for this rulemaking.  (See Docket
No. EPA-HQ-OAR-2009-0517-19130.)).  

During the comment period, several commenters alleged that EPA
inappropriately limited its RIA and RFARegulatory Flexibility Act/SBREFA
analysis, and that had we done a comprehensive analysis, we would not
have been able to certify that any of the proposed rules will not have a
significant economic impact on a “substantial number of small
entities.”  Thus they conclude that EPA failed to prepare and
publicize an initial regulatory flexibility analysis (IRFA).  Additional
commenters stated that EPA’s failure to conduct an IRFA to assess the
full costs of the effects of its interpretation of PSD applicability in
the proposedProposed Tailoring Rule violates a host of statutes and
Executive Orders requiring analysis and public review of regulatory
burdens.  These commenters conclude that EPA should have convened one or
more SBAR Panels.  

	We are not persuaded that we should have taken into account effects
beyond those caused by the Tailoring Rule when we made our certification
of no significant economic impact on a substantial number of small
entities for this rule.  No permitting requirements are imposed by this
final Tailoring Rule.  Instead, this final Tailoring Rule offers
regulatory relief to over an estimated six million sources of GHG
emissions that would otherwise be required to obtain a title V permit
and tens of thousands of sources of GHG emissions subject to PSD
permitting requirements that would otherwise be required statutorily to
obtain permit.  The RFA does not require that an agency complete a
regulatory flexibility analysis or conduct an SBAR panel where the rule
does not have any negative impact on small entities.  For more
discussion of RFA issues, please see the RTC document.

D.  Comments on the Unfunded Mandates Reform Act

At proposal, EPA asserted that the Tailoring Rule does not impose
unfunded mandates on any entities including sources and permitting
authorities.  Since the proposed Tailoring Rule is one of regulatory
relief, it alleviates the burden of adhering to statutorily required
permitting thresholds and does not impose regulatory requirements. 

Some commenters on the proposed rule assert that EPA has failed to
comply with the requirements of the Unfunded Mandates Reform Act (URMA),
pursuant to which EPA must assess the effects of the proposed
ruleProposed Rule on state, local, and tribal governments and the
private sector.  Specifically, these commenters state that section 202
of the UMRA requires EPA to prepare a written statement, including a
cost-benefit analysis, for proposed rules with “federal mandates”
that may result in expenditures to state, local, and tribal governments,
in the aggregate, or to the private sector, of $100 million or more in
any 1 year.  According to the commenters, in concluding that “the
revisions would ultimately reduce the PSD and title V program
administrative burden that would otherwise occur in the absence of this
rulemaking,” EPA did not account for the billions of dollars that
permitting authorities and stationary sources will soon be required to
spend once PSD is triggered for GHGs.  Additionally, a few commenters
contend that the EPA underestimated the impacts to public utilities
which are owned/operated by local governments and also to state
regulatory agencies.  

The EPA has carefully considered the comments on unfunded mandates
expressed by commenters to the proposed rule.  The EPA did complete a
RIA for the final rule assessing the benefits and costs of the Tailoring
Rule, including any unfunded mandates.  As previously discussed, the
Tailoring Rule is one of regulatory relief because it increases the GHG
emissions threshold for NSR and title V permitting substantially above
otherwise statutory requirements.  As such, the EPA has determined that
this Tailoring Rule does not impose unfunded mandates on any entities. 
This RIA of the final rule incorporates the extensive changes made in
this final rule, including increased threshold levels for title V and
PSD above those contained in the proposed rule.  While we also
incorporated improved estimates of the costs for sources to obtain
permits and for permitting authorities to process permits, they do not
change our conclusion that this final rule does not impose unfunded
mandates on any entities.  

E.  Comments on Executive Order 13132 – Federalism

Some comments received on the proposed rule assert that federalism
concerns were ignored, in violation of Executive Order No. 13132. 
According to the commenters, EPA cannot maintain that the Tailoring Rule
"will not have a substantial direct effect on the states, on the
relationship between the national government and the states, or on the
distribution of power and responsibilities between various levels of
government," such that Executive Order No. 13132 does not apply.  Some
of these commenters assert that the proposed rulemaking would require
radical changes in state laws, interjects GHGs into permit programs
never once conceived for that purpose (any more than was EPA's),
requires massive staff hiring at state agencies, and rewrites SIPs in
place for years or even decades.

As we stated previously, this is a burden relief rule and as such it
does not impose any requirements for the NSR or title V programs that
are not currently required.  In addition, this action does not interject
GHGs into the permit programs, nor does it change state laws or SIPs to
impose any new permitting requirements.  Instead, this action will
significantly reduce the burden and costs incurred by sources and
permitting authorities relative to the burden and costs that would be
incurred if EPA did not revise the permitting provisions to account for
higher applicability thresholds for GHG emissions.  	

However, since this rule finalizes burden reducing thresholds that will
not otherwise apply to the PSD and title V programs, we are aware that a
few states may have to amend their SIPs to incorporate these new
thresholds if they do not incorporate federal rules by reference and
cannot adopt our approach through interpretation.  Executive Order 13132
is still not implicated by this rule because it finalizes burden
reducing thresholds that would not otherwise apply to the PSD and title
V programs.    

F.  Comments on Executive Order 13175 - Consultation and Coordination
with Indian Tribal Governments

The National Tribal Air Association (NTAA) supports EPA’s proposed
rule but requests that tribal air grant funding be increased to reflect
the air quality-related needs of tribes across the nation, and to allow
these tribes the opportunity to implement the CAA’s PSD and title V
programs.  The NTAA states that, not only are tribesTribes eligible for
section 103 grant funding to conduct air quality monitoring, emissions
inventories, and other studies and assessments, but they may also obtain
section 105 grant funding to implement CAA regulatory programs. 
According to the NTAA, tribesTribes are facing many of the same
air-related issues that neighboring state and local jurisdictions are
facing, but are significantly underfunded to address such issues.

	The Agency is aware and concerned about the resource needs for the
tribal Tribal air program and we are working to see how grant funding
might be increased in the future.  Nevertheless and for the purpose of
the permitting programs, we want to clarify that tribes that develop
Tribal Implementation Plans (TIPs) can charge for permits and
tribesTribes with delegation or authorization would develop permit fee
programs under their authority (e.g., Navajo’s permit fee program for
their delegated title V permit program) to fund both the NSR and title V
programs.  For these reasons, there are a number of ways we would like
to work with tribes to address the funding concern, including
encouraging delegation or authorization of permitting programs and
having model codes available for tribesTribes that want to do TIPs for
NSR and title V permitting.

G.  Comments on Executive Order 13211 - Actions That Significantly
Affect Energy Supply, Distribution, or Use

Other commenters assert that EPA’s analysis under Executive Order
13211 is insufficient because it addresses only smaller sources.  These
commenters contend that EPA has not meaningfully examined the energy
implications of its proposed actions and interpretations of the CAA. 
The commenters disagree with EPA’s conclusion that the imposition of
costly PSD obligations on power plants would have no impact on power
supply, distribution, or use, when those plants will have had no time to
prepare for compliance and no idea what BACT may be for GHG emissions. 
Other commenters opine that the adoption of BACT for some industries
newly-subject to PSD permitting requirements for GHGs could involve
fuel-switching, and increased energy costs (due to the need for a source
to convert from coal to natural gas to meet BACT).

Again, this action is a burden relief rule and as such it does not
create any new requirements for sources in the energy supply,
distribution, or use sectors.  For the purpose of the BACT
determinations for GHGs, the long-standing top-down BACT selection
process still applies.  Under the CAA and EPA’s implementing
regulations, BACT is still an emission limitation based on the maximum
degree of emission reduction achievable through application of
production processes and available methods, systems, and techniques that
considers energy, environmental, and economic impacts.  In other words,
BACT determinations for GHGs will still have to consider energy,
environmental and economic feasibility for the various control
technologies under consideration before selecting a particular
technology as BACT for a specific source.  For that reason, what BACT
may be for GHG emissions will vary by source, and the technology that is
ultimately selected has to be one that is feasible based on the current
energy, environmental and economic impacts that the planned technology
might have.  Thus, we do not believe that this action is likely to have
a significant adverse effect on the supply, distribution, or use of
energy.

VIII.   Statutory and Executive Orders Reviews 

A.  Executive Order 12866 - Regulatory Planning and Review

	Under section 3(f)(1) of Executive OrderEO 12866 (58 FR 51735, October
4, 1993), this action is an "economically a "significant regulatory
action”" because it is likely to have an annual effect on the economy
of $100 millionraises novel legal or more.policy issues.  Accordingly,
EPA submitted this action to the OMB for review under Executive OrderEO
12866 and any changes made in response to OMB recommendations have been
documented in the docket for this action.

	In addition, EPA prepared an analysis of the potential costs and
benefits associated with this action.  This analysis is contained in the
RIA for this final rule.  A copy of the analysis is available in the
docket for this action and the analysis is briefly summarized in section
VIIVIII of this preamble. 

	This rule uses a phased-in approach for requiring larger sources of GHG
emissions to comply with title V operating permit and PSD statutory
requirements, essentially lifting this burden for a period of at least 6
years for a large number of sources of GHG.  Thus, this rule provides
regulatory relief rather than regulatory requirements for these GHG
sources.  For sources of GHG that will be required to obtain title V
permits and/or comply with PSD requirements, there are no direct
economic burdens or costs as a result of this final rule, because these
requirements are not imposed as a result of this rulemaking.  Statutory
requirements to obtain a title V operating permit or to adhere to PSD
requirements are already mandated by the CAA and by existing rules, not
by this rule.  As a result, this Tailoring Rule annual effect on the
economy will be positive because it will result in billions of dollars
of regulatory relief during the phase-in period. 

B.  Paperwork Reduction Act

	This action does not impose any new information collection burden. 
Instead, this action will significantly reduce costs incurred by sources
and permitting authorities relative to the costs that would be incurred
if EPA did not revise the rule.  Based on our revised GHG threshold data
analysis, we estimate that over 80,000 new and modified facilities per
year would be subject to PSD review based on applying a GHG emissions
threshold of 100/250 tpy using a CO2e metric.  This is compared to 280
PSD permits currently issued per year, which is an increase of more than
280-fold.  Similarly, for title V, we estimate that over six million new
sources would be affected at the 100-tpy threshold for GHGs using the
CO2e metric.  By increasing the volume of permits by over 400 times, the
administrative burden would be unmanageable without this rule.

	However, OMB has previously approved the information collection
requirements contained in the existing regulations for PSD (see, e.g.,
40 CFR 52.21) and title V (see 40 CFR parts 70 and 71) under the
provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. and
has assigned OMB control number 2060-0003 and OMB control number
2060-0336.  The OMB control numbers for EPA’s regulations in 40 CFR
are listed in 40 CFR part 9.	

C.  Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency to
prepare a regulatory flexibility analysis of any rule subject to notice
and comment rulemaking requirements under the APA or any other statute
unless the agency certifies that the rule will not have a significant
economic impact on a substantial number of small entities.  Small
entities include small businesses, small organizations, and small
governmental jurisdictions.

For purposes of assessing the impacts of this final action on small
entities, small entity is defined as: (1) a small business that is a
small industrial entity as defined in the U.S. SBA size standards (see
13 CFR 121.201); (2) a small governmental jurisdiction that is a
government of a city, county, town, school district, or special district
with a population of less than 50,000; or (3) a small organization that
is any not-for-profit enterprise that is independently owned and
operated and is not dominant in its field.

After considering the economic impacts of this final rule on small
entities, I certify that this final action will not have a significant
economic impact on a substantial number of small entities.  In
determining whether a rule has a significant economic impact on a
substantial number of small entities, the impact of concern is any
significant adverse economic impact on small entities, since the primary
purpose of the regulatory flexibility analyses is to identify and
address regulatory alternatives “which minimize any significant
economic impact of the rule on small entities.”  5 U.S.C.SC 603 and
604.  Thus, an agency may certify that a rule will not have a
significant economic impact on a substantial number of small entities if
the rule relieves regulatory burden, or otherwise has a positive
economic effect on all of the small entities subject to the rule.  

We have therefore concluded that this final rule will relieve the
regulatory burden for most affected small entities associated with the
major PSD and title V operating permits programs for new or modified
major sources that emit GHGs, including small businesses.  This is
because this rule raises the major source applicability thresholds for
these programs for the sources that emit GHGs.  As a result, the program
changes provided in this rule are not expected to result in a
significant economic impact on a substantial number of small entities.  

D.  Unfunded Mandates Reform Act

This rule does not contain a federal mandate that may result in
expenditures of $100 million or more for state, local, and tribal
governments, in the aggregate, or the private sector in any 1 year. 
Only those few states whose permitting authorities do not implement the
federal PSD and title V rules by reference in their SIPs will have a
small increase in burden.  These states will have to amend their
corresponding SIPs to incorporate the new applicability thresholds,
since the burden reducing thresholds that we are finalizing with this
rule will not otherwise apply to the PSD and title V programs.  Thus,
this rule is not subject to the requirements of sections 202 or 205 of
UMRA.

	This rule is also not subject to the requirements of section 203 of
UMRA because it contains no regulatory requirements that might
significantly or uniquely affect small governments.  As discussed
earlier, this rule is expected to result in cost savings and an
administrative burden reduction for all permitting authorities and
permittees, including small governments.

E.  Executive Order 13132 – Federalism

This action does not have federalism implications.  It will not have
substantial direct effects on the states, on the relationship between
the national government and the states, or on the distribution of power
and responsibilities among the various levels of government, as
specified in Executive Order 13132.  These final amendments will
ultimately simplify and reduce the burden on state and local agencies
associated with implementing the PSD and title V operating permits
programs, by providing that a source whose GHG emissions are below the
proposed levels will not have to obtain a PSD permit or title V permit. 
Thus, Executive Order 13132 does not apply to this action.

In the spirit of Executive Order 13132, and consistent with EPA policy
to promote communications between EPA and state and local governments,
EPA specifically solicited comment on the proposed rule from state and
local officials.

F.  Executive Order 13175 - Consultation and Coordination with Indian
Tribal Governments

Subject to the Executive Order 13175 (65 FR 67249, November 9, 2000) EPA
may not issue a regulation that has tribal implications, that imposes
substantial direct compliance costs, and that is not required by
statute, unless the federal government provides the funds necessary to
pay the direct compliance costs incurred by tribal governments, or EPA
consults with tribal officials early in the process of developing the
proposed regulation and develops a tribal summary impact statement.  

EPA has concluded that this action may have tribal implications. 
However, it will neither impose substantial direct compliance costs on
tribal governments, nor preempt tribalTribal law.  There are no tribal
authorities, currently issuing major NSR permits; however, this may
change in the future.  

EPA consulted with tribal officials early in the process of developing
this regulation to allow them to have meaningful and timely input into
its development by publishing an ANPR that included GHG tailoring
options for regulating GHGs under the CAA.  (73 FR 44354, July 30, 2008)
 As a result of the ANPR, EPA received several comments from tribal
officials on differing GHG tailoring options presented in the ANPR which
were considered in the proposal and this final rule.  Additionally, we
also specifically solicited comment from tribal officials on the
proposed rule (74 FR 55292, October 27, 2009).  

As required by section 7(a) of Executive Order 13175, EPA’s Tribal
Consultation Official has certified that the requirements of the
Executive Order have been met in a meaningful and timely manner.  A copy
of the certification is included in the docket for this action.

G.  Executive Order 13045 - Protection of Children from Environmental
Health and Safety Risks

	EPA interprets Executive OrderEO 13045 (62 FR 19885, April 23, 1997) as
applying only to those regulatory actions that concern health or safety
risks, such that the analysis required under section 5-501 of the
Executive OrderEO has the potential to influence the regulation.  This
action is not subject to Executive OrderEO 13045 because it does not
establish an environmental standard intended to mitigate health or
safety risks.

H.  Executive Order 13211 - Actions That Significantly Affect Energy
Supply, Distribution, or Use

This action is not a “significant energy action” as defined in
Executive Order 13211 (66 FR 28355 (May 22, 2001)), because it is not
likely to have a significant adverse effect on the supply, distribution,
or use of energy.  Further, we have concluded that this rule is not
likely to have any adverse energy effects because this action would not
create any new requirements for sources in the energy supply,
distribution, or use sectors.  

I.  National Technology Transfer and Advancement Act

Section 12(d) of the National Technology Transfer and Advancement Act of
1995 ("NTTAA"), Public Law No. 104-113, 12(d) (15 U.S.C. 272 note)
directs EPA to use voluntary consensus standards in its regulatory
activities unless to do so would be inconsistent with applicable law or
otherwise impractical.  Voluntary consensus standards are technical
standards (e.g., materials specifications, test methods, sampling
procedures, and business practices) that are developed or adopted by
voluntary consensus standards bodies.  The NTTAA directs EPA to provide
Congress, through OMB, explanations when the Agency decides not to use
available and applicable voluntary consensus standards. 

This action does not involve technical standards.  Therefore, EPA did
not consider the use of any voluntary consensus standards.

J.  Executive Order 12898 – Federal Actions to Address Environmental
Justice in Minority Populations and Low-Income Populations

	Executive Order 12898 (59 FR 7629 (Feb. 16, 1994)) establishes federal
executive policy on environmental justice.  Its main provision directs
federal agencies, to the greatest extent practicable and permitted by
law, to make environmental justice part of their mission by identifying
and addressing, as appropriate, disproportionately high and adverse
human health or environmental effects of their programs, policies, and
activities on minority populations and low-income populations in the
United States.  

		EPA has concludeddetermined that it is not practicable to determine
whether there would be this final rule will not have disproportionately
high and adverse human health or environmental effects on minority
and/or low -income populations from this rule.  This rule is necessary
in order to allow for because it increases the continued implementation
of permitting requirements established in the statute.  Specifically,
without this rule, the CAA permitting programs (PSD and title V) would
become overwhelmed and unmanageable by the millions of GHG sources that
would become newly subject to them.  This would result in severe
impairment of the functioning of these programs with potentially adverse
human health and environmental effects nationwide.  Under this rule and
the legal doctrines of “absurd results,” administrative necessity,
and one-step-at-a-time, EPA is ensuring that the CAA permitting programs
continue to operate by limiting their applicability to the maximum
number of sources the programs can possibly handle.  This approach is
consistent with congressional intent as it allows PSD applicability to
at least the largest sources initially, at least to as many more sources
as possible, and as promptly as possible over time.  By doing so, this
rule allows for the maximum degreelevel of environmental protection
possible while providing regulatory relief for the unmanageable burden
that would otherwise exist.  Therefore, we believe it is not practicable
to identify and addressfor all affected populations without having any
disproportionately high and adverse human health or environmental
effects on any population, including any minority populations andor low
-income populations in the United States under this final rule. Any
impact that this final rule will have will be global in nature and will
increase the level of protection provided to all human health and the
environment. 

K.  Congressional Review Act

The Congressional Review Act, 5 U.S.C. 801 et seq., as added by
SBREFAthe Small Business Regulatory Enforcement Fairness Act of 1996,
generally provides that before a rule may take effect, the agency
promulgating the rule must submit a rule report, which includes a copy
of the rule, to each House of the Congress and to the Comptroller
General of the United States.  EPA will submit a report containing this
rule and other required information to the U.S. Senate, the U.S. House
of Representatives, and the Comptroller General of the United States
prior to publication of the rule in the Federal Register. A majorMajor
rule cannot take effect until 60 days after it is published in the
Federal Register.  This action is a “major rule” as defined by 5
U.S.C. 804(2).  This rule will be effective [INSERT DATE 60 DAYS FROM
DATE OF PUBLICATION IN THE FEDERAL REGISTER].

L.  Judicial Review

Under section 307(b)(1) of the Act, petitions for judicial review of
this action must be filed in the United States Court of Appeals for the
District of Columbia Circuit by [INSERT DATE 60 DAYS FROM DATE OF
PUBLICATION IN THE FEDERAL REGISTER].  Any such judicial review is
limited to only those objections that are raised with reasonable
specificity in timely comments.  Filing a petition for reconsideration
by the Administrator of this final rule does not affect the finality of
this rule for the purposes of judicial review nor does it extend the
time within which a petition for judicial review may be filed, and shall
not postpone the effectiveness of such rule or action.  Under section
307(b)(2) of the Act, the requirements of this final action may not be
challenged later in civil or criminal proceedings brought by us to
enforce these requirements. Pursuant to section 307(d)(1)(V) of the Act,
the Administrator determines that this action is subject to the
provisions of section 307(d).  Section 307(d)(1)(V) provides that the
provisions of section 307(d) apply to “such other actions as the
Administrator may determine.”  This action finalizes some, but not
all, elements of a previous proposed action – the Prevention of
Significant Deterioration and Title V Greenhouse Gas Tailoring Rule
Proposed Rule (74 FR 55292, October 27, 2009). 

IX. Statutory Authority

The statutory authority for this action is provided by sections
307(d)(7)(B), 101, 111, 114, 116, and 301 of the CAA as amended (42
U.S.C. 7401, 7411, 7414, 7416, and 7601).  This action is also subject
to section 307(d) of the CAA (42 U.S.C. 7407(d)).

List of Subjects

40 CFR Part 51  

Environmental protection, Administrative practice and procedure, Air
pollution control, Carbon dioxide, Carbon dioxide equivalents,
Environmental protection, Greenhouse gases, Hydrofluorocarbons,
Intergovernmental relations, Methane, Nitrous oxide, Perfluorocarbons,
Reporting and recordkeeping requirements, Sulfur hexafluoride.

40 CFR Part 52 

Environmental protection, Administrative practice and procedure, Air
pollution control, Carbon dioxide, Carbon dioxide equivalents,
Environmental protection, Greenhouse gases, Hydrofluorocarbons,
Intergovernmental relations, Methane, Nitrous oxide, Perfluorocarbons,
Reporting and recordkeeping requirements, Sulfur hexafluoride.

40 CFR Part 70

Environmental protection, Administrative practice and procedure, Air
pollution control, Carbon dioxide, Carbon dioxide equivalents,
Environmental protection, Greenhouse gases, Hydrofluorocarbons,
Intergovernmental relations, Methane, Nitrous oxide, Perfluorocarbons,
Reporting and recordkeeping requirements, Sulfur hexafluoride.Page
478481 of 495498 - Prevention of Significant Deterioration and Title V
Greenhouse Gas Tailoring Rule

40 CFR Part 71

Environmental protection, Administrative practice and procedure, Air
pollution control, Carbon dioxide, Carbon dioxide equivalents,
Environmental protection, Greenhouse gases, Hydrofluorocarbons, Methane,
Nitrous oxide, Perfluorocarbons, Reporting and recordkeeping
requirements, Sulfur hexafluoride.

___________________________________________ 

Dated: 

___________________________________________ 

Lisa P. Jackson, 

Administrator.

For reasons stated in the preamble, title 40, chapter I of the Code of
Federal Regulations is amended as set forth below.

PART 51 – [AMENDED]

1.  The authority citation for part 51 continues to read as follows:

Authority:  23 U.S.C. 101; 42 U.S.C. 7401–7671q, et seq.

Subpart I - [Amended]

2.  Section 51.166 is amended:

a.  By adding paragraph (b)(48)

b.  By revising paragraph (b)(49)(iv); and

c.  By adding paragraph (b)(49)(v).

The revisions and additions read as follows:); 

§51.166  Prevention of significant deterioration of air quality.

* * * * *

	(b)  *  *  *  

	(48)  Subject to regulation means, for any air pollutant, that the
pollutant is subject to either a provision in the Clean Air Act, or a
nationally-applicable regulation codified by the Administrator in
subchapterSubchapter C of this chapterTitle 40 of the Code of Federal
Regulations, that requires actual control of the quantity of emissions
of that pollutant, and that such a control requirement has taken effect
and is operative to control, limit or restrict the quantity of emissions
of that pollutant released from the regulated activity.  Except that: 

	(i)  Greenhouse gases (GHGs), the air pollutant defined in §40 CFR
86.1818-12(a) of this chapter as the aggregate group of six greenhouse
gases: carbon dioxide, nitrous oxide, methane, hydrofluorocarbons,
perfluorocarbons, and sulfur hexafluoride, shall not be subject to
regulation except as provided in paragraphs (b)(48)(iv) through (v) of
this section.

	(ii) For purposes of paragraphs (b)(48)(iii) through (v) of this
section, the term tpy CO2 equivalent emissions (CO2e) shall represent an
amount of GHGs emitted, and shall be computed as follows:

	(a)  Multiplying the mass amount of emissions (tpy), for each of the
six greenhouse gases in the pollutant GHGs, by the gas’s associated
global warming potential published at 40 CFR Part 98, Table A-1 to
subpart A of part 98 of this chapter – Global Warming Potentials.

	(b)  Sum the resultant value from paragraph (b)(48)(ii)(a) of this
section for each gas to compute a tpy CO2e. 

	(iii)  The term emissions increase as used in paragraphs (b)(48)(iv)
through (v) of this section shall mean that both a significant emissions
increase (as calculated using the procedures in (a)(7)(iv) of this
section) and a significant net emissions increase (as defined in
paragraphs (b)(3) and (b)(23) of this section) occur.  For the pollutant
GHGs, an emissions increase shall be based on tpy CO2e, and shall be
calculated assuming the pollutant GHGs is a regulated NSR pollutant, and
“significant” is defined as 75,000 tpy CO2e instead of applying the
value in paragraph (b)(23)(ii) of this section. 

	(iv)  Beginning January 2, 2011, the pollutant GHGs is subject to
regulation if:

	(a)  The stationary source is a new major stationary source for a
regulated NSR pollutant that is not GHGs, and also will emit or will
have the potential to emit 75,000 tpy CO2e or more; or 

	(b)  The stationary source is an existing major stationary source for a
regulated NSR pollutant that is not GHGs, and also will have an
emissions increase of  a regulated NSR pollutant, and an emissions
increase of 75,000 tpy CO2e or more; and,   

	(v)  Beginning July 1, 2011, in addition to the provisions in paragraph
(b)(48)(iv) of this section, the pollutant GHGs shall also be subject to
regulation:  

	(a)  At a new stationary source that will emit or have the potential to
emit 100,000 tpy CO2e; or

	(b)  At an existing stationary source that emits or has the potential
to emit 100,000 tpy CO2e, when such stationary source undertakes a
physical change or change in the method of operation that will result in
an emissions increase of 75,000 tpy CO2e or more.

	(49)  * * * 

	(i)* * *

(iv)  Any pollutant that otherwise is subject to regulation under the
Act as defined in paragraph (b)(48) of this section. 

	(v)  Notwithstanding paragraphs (b)(49)(i) through (iv) of this
section, the term regulated NSR pollutant shall not include any or all
hazardous air pollutants either listed in section 112 of the Act, or
added to the list pursuant to section 112(b)(2) of the Act, and which
have not been delisted pursuant to section 112(b)(3) of the Act, unless
the listed hazardous air pollutant is also regulated as a constituent or
precursor of a general pollutant listed under section 108 of the Act.

PART 52 – [AMENDED]

3.1.  The authority citation for part 52 continues to read as follows:

Authority:  42 U.S.C. 7401, et seq.

Subpart A - [Amended]

4.2.  Section 52.21 is amended:

a. By adding paragraph (b)(49);

b. By revising paragraph (b)(50)(iv); and

c. By adding paragraph (b)(50)(v). 

The revisions and additions read as follows:); 	

§52.21  Prevention of significant deterioration of air quality.

* * * * *

	(b)  * * *

	(49)  Subject to regulation means, for any air pollutant, that the
pollutant is subject to either a provision in the Clean Air Act, or a
nationally-applicable regulation codified by the Administrator in
subchapterSubchapter C of this chapterTitle 40 of the Code of Federal
Regulations, that requires actual control of the quantity of emissions
of that pollutant, and that such a control requirement has taken effect
and is operative to control, limit or restrict the quantity of emissions
of that pollutant released from the regulated activity.  Except that: 

	(i)  Greenhouse gases (GHGs), the air pollutant defined in §40 CFR
86.1818-12(a) of this chapter as the aggregate group of six greenhouse
gases: carbon dioxide, nitrous oxide, methane, hydrofluorocarbons,
perfluorocarbons, and sulfur hexafluoride, shall not be subject to
regulation except as provided in paragraphs (b)(49)(iv) through (v) of
this section .

	(ii)  For purposes of paragraphs (b)(49)(iii) through (v) of this
section, the term tpy CO2 equivalent emissions (CO2e) shall represent an
amount of GHGs emitted, and shall be computed as follows:

	(a) Multiplying the mass amount of emissions (tpy), for each of the six
greenhouse gases in the pollutant GHGs, by the gas’s associated global
warming potential  published at 40 CFR Part 98, Table A-1 to subpart A
of part 98 of this chapter – Global Warming Potentials.

	(b)  Sum the resultant value from paragraph (b)(49)(ii)(a) of this
section for each gas to compute a tpy CO2e., 

	(iii)  The term emissions increase as used in paragraphs (b)(49)(iv)
through (v) of this section shall mean that both a significant emissions
increase (as calculated using the procedures in paragraph(a)(2)(iv) of
this section) and a significant net emissions increase (as defined in
paragraphs (b)(3) and (b)(23) of this section) occur.  For the pollutant
GHGs, an emissions increase shall be based on tpy CO2e, and shall be
calculated assuming the pollutant GHGs is a regulated NSR pollutant, and
“significant” is defined as 75,000 tpy CO2e instead of applying the
value in paragraph (b)(23)(ii) of this section. 

	(iv)  Beginning January 2, 2011, the pollutant GHGs is subject to
regulation if:

	(a)  The stationary source is a new major stationary source for a
regulated NSR pollutant that is not GHGs, and also will emit or will
have the potential to emit 75,000 tpy CO2e or more; or 

	(b)  The stationary source is an existing major stationary source for a
regulated NSR pollutant that is not GHGs, and also will have an
emissions increase of a regulated NSR pollutant, and an emissions
increase of 75,000 tpy CO2e or more; and,   

	(v)  Beginning July 1, 2011, in addition to the provisions in paragraph
(b)(49)(iv) of this section, the pollutant GHGs shall also be subject to
regulation  

	(a)  At a new stationary source that will emit or have the potential to
emit 100,000 tpy CO2e; or

	(b)  At an existing stationary source that emits or has the potential
to emit 100,000 tpy CO2e, when such stationary source undertakes a
physical change or change in the method of operation that will result in
an emissions increase of 75,000 tpy CO2e or more. 

	(50) * * * 

	(i)* * *

(iv)  Any pollutant that otherwise is subject to regulation under the
Act as defined in paragraph (b)(49) of this section. 

	(v)  Notwithstanding paragraphs (b)(50)(i) through (iv) of this
section, the term regulated NSR pollutant shall not include any or all
hazardous air pollutants either listed in section 112 of the Act, or
added to the list pursuant to section 112(b)(2) of the Act, and which
have not been delisted pursuant to section 112(b)(3) of the Act, unless
the listed hazardous air pollutant is also regulated as a constituent or
precursor of a general pollutant listed under section 108 of the Act.

* * * * *

5.*   *   *   *   *

PART 52 – [AMENDED]

	1.  The authority citation for part 52 continues to read as follows:

Authority:  42 U.S.C. 7401, et seq.

Subpart A – [AMENDED]

2.  A new §52.22 is added to read as follows: 

§52.22  Enforceable Commitments for Further Actions Addressing the
Pollutant Greenhouse Gases (GHGs).

	(a)  Definitions.

	(1)  Greenhouse Gases (GHGs) means the air pollutant as defined in §40
CFR 86.1818-12(a) of this chapter as the aggregate group of six
greenhouse gases: carbon dioxide, nitrous oxide, methane,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.

	(2)  All other terms used in this section shall have the meaning given
in §52.21 of this chapter.

	(b)  Further action to regulate GHGs under the PSD program.

	(1)  Near term Action on GHGs.  The Administrator shall solicit
comment, under section 307(b) of the Act, on promulgating lower GHGs
thresholds for PSD applicability.  Such action shall be finalized by
July 1, 2012 and become effective July 1, 2013.   

	(2)  Further Study and Action on GHGs.

	(i)  No later than April 30, 2015 the Administrator shall complete a
study projecting the administrative burdens that remain with respect to
stationary sources for which GHGs do not constitute a regulated NSR
pollutant.  Such study shall account, among other things, for permitting
authorities ability to secure resources, hire and train staff;
experiences associated with GHG permitting for new types of sources and
technologies; and, the success of streamlining measures developed by EPA
(and adopted by the states) for reducing the permitting burden
associated with such stationary sources.  

	(ii)  Based on the results of the study described in paragraph
(b)(2)(i) of this section, the Administrator shall propose a rule
addressing the permitting obligations of such stationary sources under
§§52.21 and §51.166 of this chapter.  The Administrator shall take
final action on such a rule no later than April 30, 2016.

	(iii)  Before completing the rule described in paragraph (b)(2)(ii) of
this section, the Administrator shall take no action to make the
pollutant GHGs subject to regulation at stationary sources that emit or
have the potential to emit less than 50,000 tpy CO2e, or for physical
changes or changes in the method of operations at stationary sources
that result in an emissions increase of less than 50,000 tpy CO2e (as
determined using the methodology described in §52.21(b)(49)(ii)) of
this chapter.)

PART 70 - [AMENDED]

6.1.  The authority citation for part 70 continues to read as follows:

Authority: 42 U.S.C. 7401, et seq.

7 2  Section 70.2 is amended to read as follows: 

	a.  By revising the introductory text of paragraph (2) of the
definition for “major source”; and

b. By adding a definition for “subject to regulation” in
alphabetical order.

The revision and addition read as follows:

§70.2  Definitions.

* * * * *

Major source * * *

(2)  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 subject to regulation (including any
major source of fugitive emissions of any such pollutant, as determined
by rule by the Administrator).  The fugitive emissions of a stationary
source shall not be considered in determining whether it is a major
stationary source for the purposes of section 302(j) of the Act, unless
the source belongs to one of the following categories of stationary
source:

* * * 

Subject to regulation  means, for any air pollutant, that the pollutant
is subject to either a provision in the Clean Air Act, or a
nationally-applicable regulation codified by the Administrator in
Subchapter C of Title 40 of the Code of Federal Regulations, that
requires actual control of the quantity of emissions of that pollutant,
and that such a control requirement has taken effect and is operative to
control, limit or restrict the quantity of emissions of that pollutant
released from the regulated activity.  Except that:

(1) Greenhouse gases (GHGs), the air pollutant defined in 40 CFR
86.1818-12(a) as the aggregate group of six greenhouse gases: carbon
dioxide, nitrous oxide, methane, hydrofluorocarbons, perfluorocarbons,
and sulfur hexafluoride, shall not be subject to regulation unless, as
of July 1, 2011, the GHG emissions are at a stationary source emitting
or having the potential to emit 100,000 tpy CO2 equivalent emissions.

(2) The term tpy CO2 equivalent emissions (CO2e) shall represent an
amount of GHGs emitted, and shall be computed by multiplying the mass
amount of emissions (tpy), for each of the six greenhouse gases in the
pollutant GHGs, by the gas’s associated global warming potential
published at 40 CFR Part 98, Table A-1– Global Warming Potentials, and
summing the resultant value for each to compute a tpy CO2e.  

* * * * *

Part 70 – [AMENDED]

	1. The authority citation for part 70 continues to read as follows:

Authority: 42 U.S.C. 7401, et seq.	

2. A new section 70.12 is added to read as follows:

70.12 Enforceable Commitments for Further Actions Addressing Greenhouse
Gases (GHGs)

(a) Definitions.

(1) Greenhouse Gases (GHGs) means the air pollutant as defined in 40 CFR
86.1818-12(a) as the aggregate group of six greenhouse gases: carbon
dioxide, nitrous oxide, methane, hydrofluorocarbons, perfluorocarbons,
and sulfur hexafluoride.

(2) All other terms used in this section shall have the meaning given in
§70.2 of this chapter.

(b) Further action to regulate GHGs under the Title V program.

(1) Near term Action on GHGs. The Administrator shall solicit comment,
under 307(b) of the Act, on promulgating lower GHGs thresholds for
applicability under §70.2 of this chapter.  Such action shall be
finalized by July 1, 2012 and become effective July 1, 2013.   

(2) Further Study and Action on GHGs.

(i) No later than April 30, 2015 the Administrator shall complete a
study projecting the administrative burdens that remain with respect to
stationary sources for which GHGs do not constitute a pollutant subject
to regulation.  Such study shall account, among other things, for
permitting authorities ability to secure resources, hire and train
staff; experiences associated with GHG permitting for new types of
sources and technologies; and, the success of streamlining measures
developed by EPA (and adopted by the states) for reducing the permitting
burden associated with such stationary sources.  

(ii) Based on the results of the study described in paragraph (b)(2)(i)
of this section, the Administrator shall propose a rule addressing the
permitting obligations of such stationary sources under §70.2 of this
chapter.  The Administrator shall take final action on such a rule no
later than April 30, 2016.

(iii) Before completing the rule described in paragraph (b)(2)(ii) of
this section, the Administrator shall take no action to make the
pollutant GHGs subject to regulation at stationary sources that emit or
have the potential to emit less than 50,000 tpy CO2e (as determined
using the methodology described in §70.2 of this chapter.)

* * * * *

	Subject to regulation  means, for any air pollutant, that the pollutant
is subject to either a provision in the Clean Air Act, or a
nationally-applicable regulation codified by the Administrator in
subchapter C of this chapter, that requires actual control of the
quantity of emissions of that pollutant, and that such a control
requirement has taken effect and is operative to control, limit or
restrict the quantity of emissions of that pollutant released from the
regulated activity.  Except that:

	(1)  Greenhouse gases (GHGs), the air pollutant defined in
§86.1818-12(a) of this chapter as the aggregate group of six greenhouse
gases: carbon dioxide, nitrous oxide, methane, hydrofluorocarbons,
perfluorocarbons, and sulfur hexafluoride, shall not be subject to
regulation unless, as of July 1, 2011, the GHG emissions are at a
stationary source emitting or having the potential to emit 100,000 tpy
CO2 equivalent emissions.

	(2)  The term tpy CO2 equivalent emissions (CO2e) shall represent an
amount of GHGs emitted, and shall be computed by multiplying the mass
amount of emissions (tpy), for each of the six greenhouse gases in the
pollutant GHGs, by the gas’s associated global warming potential
published at Table A-1 to subpart A of part 98 of this chapter –
Global Warming Potentials, and summing the resultant value for each to
compute a tpy CO2e.  

* * * * *

8.  A new section 70.12 is added to read as follows:

§70.12 Enforceable Commitments for Further Actions Addressing
Greenhouse Gases (GHGs).

	(a)  Definitions.

	(1)  Greenhouse Gases (GHGs) means the air pollutant as defined in
§86.1818-12(a) of this chapter as the aggregate group of six greenhouse
gases: carbon dioxide, nitrous oxide, methane, hydrofluorocarbons,
perfluorocarbons, and sulfur hexafluoride.

	(2)  All other terms used in this section shall have the meaning given
in §70.2.

	(b)  Further action to regulate GHGs under the title V program.

	(1)  Near term Action on GHGs. The Administrator shall solicit comment,
under section 307(b) of the Act, on promulgating lower GHGs thresholds
for applicability under §70.2.  Such action shall be finalized by July
1, 2012 and become effective July 1, 2013.   

	(2)  Further Study and Action on GHGs.

	(i)  No later than April 30, 2015 the Administrator shall complete a
study projecting the administrative burdens that remain with respect to
stationary sources for which GHGs do not constitute a pollutant subject
to regulation.  Such study shall account, among other things, for
permitting authorities ability to secure resources, hire and train
staff; experiences associated with GHG permitting for new types of
sources and technologies; and, the success of streamlining measures
developed by EPA (and adopted by the states) for reducing the permitting
burden associated with such stationary sources.  

	(ii)  Based on the results of the study described in paragraph
(b)(2)(i) of this section, the Administrator shall propose a rule
addressing the permitting obligations of such stationary sources under
§70.2.  The Administrator shall take final action on such a rule no
later than April 30, 2016.

	(iii)  Before completing the rule described in paragraph (b)(2)(ii) of
this section, the Administrator shall take no action to make the
pollutant GHGs subject to regulation at stationary sources that emit or
have the potential to emit less than 50,000 tpy CO2e (as determined
using the methodology described in §70.2.)

PART 71 - [AMENDED]

	9.1.  The authority citation for part 71 continues to read as follows:

Authority: 42 U.S.C. 7401, et seq.

Subpart A – [AMENDED]

10.  Section 2.  §71.2 is amended as follows: 

	a.  By revising the introductory text of paragraph (2) of the
definition for “major source”; and

b.  By adding a definition for “subject to regulation” in
alphabetical order.;

The revision and addition read as follows:

§71.2  Definitions.

* * * * *

Major source * * * 

(2)  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 subject to regulation (including any
major source of fugitive emissions of any such pollutant, as determined
by rule by the Administrator).  The fugitive emissions of a stationary
source shall not be considered in determining whether it is a major
stationary source for the purposes of section 302(j) of the Act, unless
the source belongs to one of the following categories of stationary
source:

* * * * *

	Subject to regulation means, for any air pollutant, that the pollutant
is subject to either a provision in the Clean Air Act, or a
nationally-applicable regulation codified by the Administrator in
subchapterSubchapter C of this chapterTitle 40 of the Code of Federal
Regulations, that requires actual control of the quantity of emissions
of that pollutant, and that such a control requirement has taken effect
and is operative to control, limit or restrict the quantity of emissions
of that pollutant released from the regulated activity.  Except that:

	(1)  Greenhouse gases (GHGs), the air pollutant defined in §40 CFR
86.1818-12(a) of this chapter as the aggregate group of six greenhouse
gases: carbon dioxide, nitrous oxide, methane, hydrofluorocarbons,
perfluorocarbons, and sulfur hexafluoride, shall not be subject to
regulation unless, as of July 1, 2011, the GHG emissions are at a
stationary source emitting or having the potential to emit 100,000 tpy
CO2 equivalent emissions.  

	(2)  The term tpy CO2 equivalent emissions (CO2e) shall represent an
amount of GHGs emitted, and shall be computed by multiplying the mass
amount of emissions (tpy), for each of the six greenhouse gases in the
pollutant GHGs, by the gas’s associated global warming potential
published at 40 CFR Part 98, Table A-1 to subpart A of part 98 of this
chapter – Global Warming Potentials, and summing the resultant value
for each to compute a tpy CO2e.  

	11. * * * * *

PART 71 – [AMENDED]

1. The authority citation for part 71 continues to read as follows:

Authority: 42 U.S.C. 7401, et seq.

Subpart A – [AMENDED]

	2. A new §section 71.13 is added as follows:

§71.13 Enforceable commitments for further actions
addressingCommitments for Further Actions Addressing Greenhouse Gases
(GHGs)

	(a)  Definitions.

	(1)  Greenhouse Gases (GHGs) means the air pollutant as defined in §40
CFR 86.1818-12(a) of this chapter as the aggregate group of six
greenhouse gases: carbon dioxide, nitrous oxide, methane,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.

	(2)  All other terms used in this section shall have the meaning given
in §71.2 of this part.

	(b)  Further action to regulate GHGs under the titleTitle V program.

	(1)  Near term Action on GHGs. The Administrator shall solicit comment,
under 307(b) of the Act, on promulgating lower GHGs thresholds for
applicability under §71.2 of this part.  Such action shall be finalized
by July 1, 2012 and become effective July 1, 2013.   

	(2) Further Study and Action on GHGs.

	(i) No later than April 30, 2015, the Administrator shall complete a
study projecting the administrative burdens that remain with respect to
stationary sources for which GHGs do not constitute a pollutant subject
to regulation.  Such study shall account, among other things, for
permitting authorities ability to secure resources, hire and train
staff; experiences associated with GHG permitting for new types of
sources and technologies; and, the success of streamlining measures
developed by EPA (and adopted by the states) for reducing the permitting
burden associated with such stationary sources.  

	(ii) Based on the results of the study described in paragraph (b)(2)(i)
of this section, the Administrator shall propose a rule addressing the
permitting obligations of such stationary sources under §71.2 of this
chapter.  The Administrator shall take final action on such a rule no
later than April 30, 2016.

 Unless otherwise indicated, references in this preamble to “title
V,” “title V requirements,” the “title V program,” and similar
references are to the operating permit provisions in CAA sections
501-506, and not the “small business stationary source technical and
environmental compliance assistance program” under CAA section 507.

 Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984).

   Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 842-43 (1984).

 In this preamble and the response to comments document we fully address
arguments that commenters and others have presented about congressional
intent and coverage of GHGs.  We do so to be fully responsive, even
though we believe that this is a settled matter for which the time for
judicial review has past.  

 The term “greenhouse gases” is commonly used to refer generally to
gases that have heat-trapping properties.  However, in this notice,
unless noted otherwise, we use it to refer to specifically to the
pollutant regulated in the LDVR.

 The relevant thresholds are 100 tpy for title V, and 250 tpy for PSD,
except for 28 categories listed in EPA regulations for which the PSD
threshold is 100 tpy.

 This rule has not yet been published in the Federal Register.  The
signed version of the rule is available at   HYPERLINK
"http://epa.gov/otaq/climate/regulations.htm" 
http://epa.gov/otaq/climate/regulations.htm . [update when published]

 We note that the PSD program has historically operated in this fashion
for all pollutants – when new sources or modifications are
“major,” PSD applies to all pollutants that are emitted in
significant quantities from the source or project.  This rule does not
alter that for sources or modifications that are major due to their GHG
emissions.

 We note that the PSD program has historically operated in this fashion
for all pollutants – when new sources or modifications are
“major”, PSD applies to all pollutants that are emitted in
significant quantities from the source or project.  This rule does not
alter that for sources or modifications that are major due to their GHG
emissions.

 See 74 FR 66496, 66499, 66536-7.  December 15, 2009.

 See 74 FR 66496, 66499, 66536-7.  December 15, 2009.

 40 CFR 86.1818-12 (a) (“Applicability.  This section contains
standards and other regulations applicable to the emission of the air
pollutant defined as the aggregate group of six greenhouse gases: 
carbon dioxide, nitrous oxide, methane, hydrofluorocarbons,
perfluorocarbons, and sulfur hexafluoride”).

 Table A-1 to subpartSubpart A of 40 CFR partPart 98 – Global Warming
Potentials, FR, Vol.74 FR, No. 209, p. 56395.

 Although we commit to propose or solicit comment on lower thresholds
and to take final action on that proposal by July 1, 2012, we cannot, at
present, commit to promulgate lower thresholds.  It will not be until
the Step 3 rulemaking itself that we will gather and analyze data and
receive comments that determine whether we have basis for promulgating
lower thresholds.

 EPA notes, however, that many sources subject to title V under
Stepssteps 1 and 2 will also be subject to the GHG mandatory reporting
rule.  For these sources, the emissions description requirements in the
title V regulations will generally be satisfied by referencing
information provided under the reporting rule.

 In the alternative, we also proposed to use our 110(k)(6) error
correction authority to revise SIP-approved PSD programs.

  By the same token, CAA section 165(a)(4) requires that a source
subject to PSD impose best available control technology for “each
pollutant subject to regulation under this chapter” that the source
emits.  

 The applicability provision of the LDVR is found in 40 CFR
§86.1818-12(a), which provides as follows:

Greenhouse gas emission standards for light-duty vehicles, light-duty
trucks, and medium-duty passenger vehicles.  Applicability.  This
section contains standards and other regulations applicable to the
emission of the air pollutant defined as the aggregate group of six
greenhouse gases: carbon dioxide, nitrous oxide, methane,
hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.

 We note that our approach does not entirely avoid the possibility that
a GWP change can occur while a permit is in progress although it will
ensure advance notice of such a change.  In the event that we plan to
propose a change to GWP values, we will work with permitting authorities
as necessary to provide guidance to sources on transitional issues.  

 “Summary of Methodology and Data Used to Estimate Burden Relief and
Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG)
Permitting Thresholds;” Prepared by EPA Staff; March 2010. 

 “Summary of Methodology and Data Used to Estimate Burden Relief and
Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG)
Permitting Thresholds;” Prepared by EPA Staff; March 2010.

 “Summary of Methodology and Data Used to Estimate Burden Relief and
Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG)
Permitting Thresholds;” Prepared by EPA Staff; March 2010.

 “Summary of Methodology and Data Used to Estimate Burden Relief and
Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG)
Permitting Thresholds;” Prepared by EPA Staff; March 2010.

 “NACAA Summary on Permitting GHGs Under the Clean Air Act”;
Memorandum from Mary Stewart Douglas, National Association of Clean Air
Agencies to Juan Santiago, EPA/OAQPS, September 3, 2009. 

 “Summary of Methodology and Data Used to Estimate Burden Relief and
Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG)
Permitting Thresholds;” Prepared by EPA Staff; March 2010.

 “Summary of Methodology and Data Used to Estimate Burden Relief and
Evaluate Resource Requirements at Alternative Greenhouse Gas (GHG)
Permitting Thresholds;” Prepared by EPA Staff; March 2010.

 Although we set out an analysis of how the three doctrines fit into the
Chevron framework, we note that even if the doctrines are viewed
independently of the Chevron framework, they support this action.

 For early cases in which the U.S. Supreme Court applied the “absurd
results” doctrine, see Holy Trinity Church v. U.S., 143 U.S. 457,
516-17  TA \s "Rector of Holy Trinity Church v. U.S., 143 U.S. 457
(1892)"   (1892)   TA \l "Rector of Holy Trinity Church v. U.S., 143
U.S. 457 (1892)" \s "Rector of Holy Trinity Church v. U.S., 143 U.S. 457
(1892)" \c 1  (“any alien” does not include a foreign pastor; Court
stated, “It is a familiar rule, that a thing may be within the letter
of the statute and yet not within the statute, because not within its
spirit, nor within the intention of its makers….  If a literal
construction of the words be absurd, the Act must be construed as to
avoid the absurdity”); Chew Heong v. United States, 112 U.S. 536, 555
(1884) (rejecting a literal interpretation of treaty that would have
prevented the re-entry of a person into the U.S. upon the ground that he
did not possess a certificate which did not exist prior to his
departure, and which could not possibly have been issued); Heyenfeldt v.
Daney Gold Mining Co., 93 U.S. 634, 638 (1877) (statutory language
expressly referred to past land sales and dispositions, “but evidently
they were not employed in this sense, for no lands in Nevada had been
sold or disposed of by any act of Congress,” and the language of the
statute “could not …. . . apply to past sales or dispositions, and,
to have any effect at all, must be held to apply to the future”).

  For other U.S. Supreme Court cases, see  HYPERLINK
"http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=708&FindType
=Y&ReferencePositionType=S&SerialNum=1946115791&ReferencePosition=892"
Utah Junk Co. v. Porter,  HYPERLINK
"http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=708&FindType
=Y&ReferencePositionType=S&SerialNum=1946115791&ReferencePosition=892" 
328 U.S. 39, 44 (1946)  (“literalness may strangle meaning”); 
HYPERLINK
"http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=708&FindType
=Y&ReferencePositionType=S&SerialNum=1945117466&ReferencePosition=195"
Markham v. Cabell,  HYPERLINK
"http://www.westlaw.com/Find/Default.wl?rs=dfa1.0&vr=2.0&DB=708&FindType
=Y&ReferencePositionType=S&SerialNum=1945117466&ReferencePosition=195" 
326 U.S. 404, 409  (1945) (“The policy as well as the letter of the
law is a guide to decision.”); United States v. American Trucking
Associations, Inc. 310 U.S. 534 (1940) (the term “employees” in the
Federal Motor Carrier Act, is limited to employees whose activities
affect safety)  TA \l "United States v. American Trucking Associations,
Inc. 310 U.S. 534 (1940)" \s "United States v. American Trucking
Associations, Inc. 310 U.S. 534 (1940)" \c 1  ; C.V. Sorrels v. U.S.,
287 U.S. 435, 446-49 (1932) (provisions of National Prohibition Act that
criminalize possessing and selling liquor do not apply if defendant is
entrapped; Court declines to apply the “letter of the statute”
because doing so “in the circumstances under consideration is foreign
to its purpose”); United States v. Katz, 271 U.S. 354, 362 (1926)
(holding that the statutory words “no person” refer only to persons
authorized under other provisions of the Act to traffic alcohol, thus
rejecting a literal application of general terms descriptive of a class
of persons made subject to a criminal statute); Hawaii v. Mankichi, 190
U.S. 197, 212-14 (1903) (refusing to adopt a literal application of the
“Newlands resolution” which would have entitled every criminal in
the State of Hawaii convicted of an offense between 1898 – 1900 to be
set at large, as “surely such a result could not have been within the
contemplation of Congress”). 

 For other cases, see Arizona Public Service Co. v. EPA, 562 F.3d 1116,
1125-26 (10th Cir. 2009); General American Transp. Corp. v. ICC, 872
F.2d 1048, 1058 (D.C. Cir. 1989PLACEHOLDER); Hazardous Waste Treatment
Council v. EPA, 861 F.2d 277, 287 (D.C. Cir. 1988);  Western Union
International, Inc. v. FCC, 725 Fl2d 732, 754 (D.C. Cir. 1984).

  We recognize that we described the relationship between the Chevron
framework and the “administrative necessity” doctrine somewhat
differently in the proposal, 74 FR 5531,312/1-2, and that, after further
analysis, we are refining our view of that relationship as described
previously.

  As discussed later, EPA may, in future rulemaking, make a final
determination that under the “absurd results” doctrine, Congress did
not intend for EPA to apply PSD to very small sources, that is, those,
with emissions at or near the 100/250 tpy statutory levels.

 A physical or operational change is treated as a “modification”
that is subject to PSD if it either “increases the amount of any air
pollutant emitted” by the source or “results in the emission of any
air pollutant not previously emitted.”  For convenience, unless
otherwise indicated, when we refer to changes that “increase[] the
amount of any air pollutant emitted,” we mean both to those types of
changes and changes that “result[] in the emission of any air
pollutant not previously emitted.”

  We do not believe that this term is ambiguous with respect to the need
to cover GHG sources under either the PSD or title V program, only with
respect to what sources of GHG should be covered under the circumstances
presented here.

 In this preamble and the response to comments document we fully address
arguments that commenters and others have presented about congressional
intent and coverage of GHGs.  We do so to be fully responsive, even
though we believe that this is a settled matter for which the time for
judicial review has past.  

  Coverage of modifications by the PSD program was addressed by a
technical amendment which added a cross reference in section 169 to
section 111.  The legislative history of this provision is scant and
there is no suggestion that Congress would have contemplated sweeping in
large number of changes from smaller sources through the addition of
this provision.

 Beginning in 1974, EPA implemented a program that required sources of
certain NAAQS pollutants seeking to construct in attainment or
unclassifiable areas to implement emission controls for the purpose of
preventing deterioration in the ambient air quality in those areas. 
This program was the precursor to the PSD program Congress enacted in
1977.

 Note that although Congress specifically authorized the states to
exempt "nonprofit health or education institutions" from the definition
of "major emitting facility," this statement by the D.C. Circuit should
be taken as the Court's view that Congress did not design PSD to cover
sources of the small size described.

 As noted elsewhere in this notice, in Alabama Power, the D.C. Circuit
noted that the definition of “major emitting facility” under CAA
section 169(1) could apply to air pollutants not regulated under other
provisions of the Act, and discussed the contrast of this broad
definition to the narrower application of the BACT provisions.  636 F.2d
at 352-53 & n. 60.  In its rulemaking notices responding to Alabama
Power, EPA discussed at length certain issues, such as the applicability
of NSR to pollutants emitted below the “major” thresholds, that are
based on the reference in “major emitting facility” to “any air
pollutant.”  However, throughout its discussion, EPA interpreted that
reference as “any regulated air pollutant,” again without
specifically acknowledging the difference or without acknowledging the
above-noted statements in Alabama Power.  See 45 FR 52710 – 52711.at
52,710 – 52,711.  EPA did not indicate that it had received comments
on this issue. 

 The House Committee on Energy and Commerce acknowledged that it was
“uncertain about the magnitude of permit applications likely to be
submitted under the bill initially and thereafter in each State or to
EPA,” H. Rep. 101-490 p. 346.   

  Title V can apply to certain small businesses in some circumstances. 
Under CAA sections 502(a) and 501(2)(A), title V applies to major
sources of hazardous air pollutants (HAPs), which includes sources that
may emit as little as 10 tpy of a single HAPs, and which may includes
some dry cleaners and other small businesses.  In addition, under CAA
section 502(a), title V applies to area sources subject to standards
under CAA sections 111 or 112 (or required to have a PSD or
nonattainment NSR permit), unless the Administrator exempts those
sources from title V because compliance would be impracticable,
infeasible, or unnecessarily burdensome.

 Specifically, of the 28 source categories under CAA section 169(1),
information available to EPA indicates that all of the sources in the
following categories emit at least 100 tpy of CO2 annually:  fossil-fuel
fired steam electric plants of more than 250 million Btu per hour heat
input, Portland Cement plants, primary zinc smelters, iron and steel
mill plants, primary aluminum ore reduction plants, municipal
incinerators capable of charging more than 50 tons of refuse per day,
nitric acid plants, petroleum refineries, lime plants, primary lead
smelters, fossil-fuel boilers of more than 250 Btus per hour heat input.
 In addition, all but a few kraft pulp mills and glass fiber processing
plants emit at least 100 tpy CO2 annually.  Our information is
incomplete with respect to the remaining source categories, but with the
possible exception of petroleum storage and transfer facilities with a
capacity exceeding three hundred thousand barrels, we suspect that
virtually all sources emit at least 100 tpy CO2 annually.  See
“"Technical Support Document for Greenhouse Gas Emissions Thresholds
Evaluation”;"; Office of Air Quality Planning and Standards; March 29,
2010.

 EPA did receive a smaller number of comments that asserted in
conclusory fashion that permitting authorities could administer the
100/250 tpy levels.

  Reconciling the applicability provisions with the statements in the
legislative history in this manner is also consistent with the U.S.
Supreme Court’s view that the Clean Air Act has inherent flexibility,
as it stated in Massachusetts v. EPA, 549547 U.S. 497, 532.__, ___
(2007):

While the Congresses that drafted §202(a)(1) might not have appreciated
the possibility that burning fossil fuels could lead to global warming,
they did understand that without regulatory flexibility, changing
circumstances and scientific developments would soon render the Clean
Air Act obsolete.  The broad language of §202(a)(1) reflects an
intentional effort to confer the flexibility necessary to forestall such
obsolescence.  See Pennsylvania Dept. of Corrections v. Yeskey,  
HYPERLINK "http://supreme.justia.com/us/524/206/case.html"  524 U. S.
206 , 212 (1998) (“[T]he fact that a statute can be applied in
situations not expressly anticipated by Congress does not demonstrate
ambiguity.  It demonstrates breadth” (internal quotation marks
omitted)).

  For the reasons discussed above, we believe that Stepstep 2 of the
Chevron framework, which authorizes the exercise of agency discretion as
long as the agency remains consistent with a reasonable construction of
the statute, does not require a literal construction of the statute in a
case such as this one, in which the “absurd results” doctrine
applies so that the statutory requirements cannot be read literally.  

 It should be noted that strictly speaking, we do not, in our drafting
of the regulatory revisions that are part of this rulemaking, establish
a significance level for GHG emissions based on CO2e.  Rather, we
establish an applicability criteria for determining whether GHGs are
subject to regulation with respect to the particular source.  We explain
our approach in more detail in the Response to Comments document. 
Throughout this preamble, we refer to this action, for convenience, as a
significance level.

 We find no support for the proposition raised by some commenters that
this provision is limited to “NAAQSNAAQs” pollutants.  To the
contrary, “under this chapter” unambiguously signals an intent to
cover any pollutant regulated under the Act.  Had Congress intended a
narrower focus, they would have specified “any NAAQSNAAQs pollutant”
or any pollutant subject to regulation under this Part (PSD).

  In the 1990 CAA Amendments, Congress added section 112(b)(6), which
provides that PSD “shall not apply to pollutants listed under this
section,” that is, HAPs.hazardous air pollutants.  

  As noted previously, the fact that some small sources are subject to
title V because they are “major sources” of HAPs or certain area
sources and therefore are covered under CAA sections 502(a) and
501(2)(A) does not alter the conclusion from the legislative history
that Congress did not expect large numbers of small sources to become
subject to title V.  The fact that Congress authorized the Administrator
to exempt area sources from the title V program where compliance with
title V would be “impracticable, infeasible, or unnecessarily
burdensome” reinforces the conclusion that Congress did not intend the
program to be “impracticable, infeasible or unnecessarily
burdensome” for small sources.

  As with PSD, this way of reconciling the PSD applicability provisions
with Congress’s expectations for a narrower PSD program is consistent
with the U.S. Supreme Court’s view that the CAA should be read to
include “regulatory flexibility, [without which] changing
circumstances and scientific developments would soon render the Clean
Air Act obsolete.”  Massachusetts v. EPA, 549547 U.S. 532.at ___
(2007).

 EPA does have pending before it ten petitions to reconsider the
endangerment and cause or contribute findings.  EPA is carefully
evaluating those petitions and expects to issue its decision(s) on or
about July 30, 2010.

 Note, that at least one petition for reconsideration on the
endangerment/contribution findings raises the same arguments related to
the timing of decisions and absurd results.  As noted before, EPA is
carefully evaluating all the pending petitions for reconsideration.

 In addition, we base our reliance on the “administrative necessity”
doctrine on the administrative burdens to the permitting authorities of
permitting smaller GHG sources, but not on the relatively small amount
of GHG emissions associated with the smaller sources.  See  Alabama
Power v. Costle, 636 F.2d 323, 357 (D.C. Cir. 1980) (establishing the
“administrative necessity” doctrine as “inherent in the
administrative process” and presumptively available under the
statutory scheme, absent clear congressional intent to the contrary; but
adding that in contrast, “there exists no general administrative power
to create exemptions to statutory requirements based upon the agency’s
perceptions of costs and benefits”).

  We recognize that in a few states, we are the permitting authority. 
We do not think that this changes the calculation of administrative
burdens.  We do not believe that we could reasonably be expected to
adjust our budget to accommodate the large new permitting burdens, and
even if we could, the administrative burdens would remain in most of the
rest of the nation where it is the state or local agencies that bear
permitting responsibility.

 For reasons explained elsewhere, our reference to the literal terms of
the applicability provisions means the literal terms of the definition
of “major emitting facility” for PSD and “major source” for
title V, as EPA has narrowed those definitions to refer to “any
pollutant” that is subject to regulation under the CAA.

  In the alternative, we also proposed to use our section 110(k)(6)
error correction authority to revise SIP-approved PSD program.  We are
also delaying action on this proposal.

    We also think that this approach better clarifies our long standing
practice of interpreting open-ended SIP regulations to automatically
adjust for changes in the regulatory status of an air pollutant, because
it appropriately assures that the Tailoring Rule applies to both the
definition of “major stationary source” and “regulated NSR
pollutant.”  

 The fee provisions are set forth in CAA sectionSection 502(b)(3) and in
our regulations at 40 CFR 70.9 and 71.9.

 We do not attempt to address or resolve the various opinions about what
legal or policy direction we must take regarding any of these
streamlining options.  The proper forum for doing that will be in the
action(s) where we apply a given option.  Nonetheless, our RTC response
to comments document provides additional detail about the options we
described and what commenters said about our proposed options.  In
addition, the comments themselves can be accessed in the docket for this
action. 

 The CAAAC is a senior-level policy committee established in 1990 to
advise the U.S. EPA on issues related to implementing the CAA Amendments
of 1990.  The committee is chartered under the Federal Advisory
Committee Act and has been renewed every 2 years since its creation. 
The membership is approximately 40 members and experts representing
state and local government, environmental and public interest groups,
academic institutions, unions, trade associations, utilities, industry,
and other experts.  The CAAAC meets three3 times a year, normally in
Washington, D.C.  It provides advice and counsel to EPA on a variety of
important air quality policy issues.  The committee has formed several
subcommittees to provide more detailed discussion and advice on many
technical issues.

 On June 24, 2005, the United States Court of Appeals for the District
of Columbia Circuit vacated the portions of the 2002 and 1992 NSR rules
that pertained to pollution control projects, among other provisions. 
In response to this Court action, on June 5, 2007, EPA removed these
provisions from the NSR regulations.  (See 72 FR 32526).  These
provisions were added as part of EPA’s NSR improvement rule that was
issued on December 31, 2002.  

 On June 24, 2005, the United States Court of Appeals for the District
of Columbia Circuit vacated the portions of the 2002 and 1992 NSR rules
that pertained to PCP, among other provisions.  In response to this
Court action, on June 5, 2007, EPA removed these provisions from the NSR
regulations.  (See 72 FR 32526).  These provisions were added as part
of EPA’s NSR improvement rule that was issued on December 31, 2002.  

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