# Federal Implementation Plan for Nonattainment New Source Review Program; Mojave Desert Air Quality Management District, California > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2024-30513 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** December 30, 2024 - **Citation:** 89 FR 106332 ## Text ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 52 [EPA-R09-OAR-2024-0228; EPA-R09-OAR-2022-0338; FRL-11830-02-R9] Federal Implementation Plan for Nonattainment New Source Review Program; Mojave Desert Air Quality Management District, California AGENCY: Environmental Protection Agency (EPA). ACTION: Final rule. SUMMARY: The Environmental Protection Agency (EPA) is finalizing a Federal Implementation Plan (FIP) under the Clean Air Act (CAA) that consists of Nonattainment New Source Review (NNSR) rules for areas within the jurisdiction of the Mojave Desert Air Quality Management District (MDAQMD or “District”) in which air pollutant concentrations are above specific National Ambient Air Quality Standards (NAAQS). The NNSR rules will apply to construction of new major stationary sources and major modifications at existing major stationary sources of air pollution. The FIP will be implemented by the EPA, unless and until it is replaced by an EPA-approved state implementation plan (SIP). In this action, the EPA is also responding to a September 5, 2024 decision of the United States Ninth Circuit Court of Appeals for the Ninth Circuit, which remanded the EPA's disapproval of a MDAQMD rule provision related to the calculation and generation of emissions offsets. This response again disapproves MDAQMD Rule 1304(C)(2)(d) and provides additional information to support that decision. DATES: This final rule is effective on February 28, 2025. ADDRESSES: The EPA has established a docket for the FIP rulemaking under Docket ID No. EPA-R09-OAR-2024-0228. The EPA established a different docket (EPA-R09-OAR-2022-0338), for its 2023 limited approval/limited disapproval of a MDAQMD state implementation plan submission, which contained provisions addressing the calculation and generation of emissions offsets for the nonattainment area permitting program. This notification will be placed in both dockets, which are each accessible via the Federal eRulemaking Portal at https://www.regulations.gov/. Although listed in the indices for these rules, some information is not publicly available, e.g., Confidential Business Information or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically at https://www.regulations.gov or in hard copy at the U.S. Environmental Protection Agency, EPA Docket Center, William Jefferson Clinton West Building, Room 3334, 1301 Constitution Ave. NW, Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is (202) 566-1744, and the telephone number for the Office of Air and Radiation Docket is (202) 566-1742. FOR FURTHER INFORMATION CONTACT: Tanya Abrahamian, Air and Radiation Division, Rules Office (AIR-3-2), Environmental Protection Agency, Region IX, telephone number: (213) 244-1849; email address: Abrahamian.Tanya@epa.gov. SUPPLEMENTARY INFORMATION: Throughout this document, “we,” “us,” and “our” refer to the EPA. The information presented in this preamble is organized as follows: Table of Contents I. Summary of the Proposed Action II. EPA Response to the Ninth Circuit's Remand III. Public Comments on FIP and EPA Responses to Comments and Court Remand IV. Final Action V. Supporting Information VI. Statutory and Executive Order Reviews Preamble Glossary of Terms and Abbreviations The following are abbreviations of terms used in the preamble. APA Administrative Procedure Act Appendix S 40 CFR part 51, appendix S BACT Best Available Control Technology CAA or Act Clean Air Act CARB California Air Resources Board CFR Code of Federal Regulations EPA we, us, or our The United States Environmental Protection Agency ERC Emission Reduction Credit FIP Federal Implementation Plan FR Federal Register LAER Lowest Achievable Emission Rate LA/LD Limited Approval-Limited Disapproval MDAQMD The Mojave Desert Air Quality Management District NAAQS National Ambient Air Quality Standards NO X Nitrogen Oxides NSR New Source Review NNSR Nonattainment New Source Review PSD Prevention of Significant Deterioration PAL Plantwide Applicability Limit PM 10 Particulate Matter with a diameter of 10 micrometers or less PTE Potential To Emit RACT Reasonably Available Control Technology RFP Reasonable Further Progress SER Simultaneous Emission Reduction SIP State Implementation Plan TSD Technical Support Document VOC Volatile Organic Compound 2023 LA/LD The EPA's rulemaking action at 88 FR 42258, which was published on June 30, 2023, in the Federal Register . I. Final Action To Establish Federal Implementation Plan On July 9, 2024 (89 FR 56237), the EPA proposed to establish a Federal Implementation Plan (FIP), pursuant to (Clean Air Act) section 110(c), for a nonattainment New Source Review (NNSR) program within the Mojave Desert Air Quality Management District (MDAQMD). 1 This FIP relates to a finding of failure to submit issued by the EPA on February 3, 2017, and EPA's action to disapprove a part of the MDAQMD's Nonattainment New Source Review (NNSR) permitting program regulations on June 30, 2023 (88 FR 42258) (“2023 LA/LD”). The latter action was a limited approval/limited disapproval action in which EPA disapproved MDAQMD's Rule 1304(C)(2)(d) because this rule failed to meet requirements for determining the quantity of offsets needed to issue a permit for a major modification. 1 The EPA's finding of failure to submit triggered an obligation under CAA section 110(c) for the EPA to promulgate a FIP within two years ( i.e., by March 6, 2019). 82 FR 9158, 9161 (February 3, 2017). This FIP implements NNSR program requirements and will apply to the construction of new major sources and major modifications at existing major sources that are located within areas that are designated as nonattainment with specific National Ambient Air Quality Standards (NAAQS). This FIP will apply to pollutants for which the area is designated nonattainment. Therefore, this action applies only in the areas within the MDAQMD's jurisdiction that are designated nonattainment, specifically, the San Bernardino County portion of the West Mojave Desert ozone nonattainment area and the San Bernardino County and Trona Planning Area Particulate Matter with a diameter of 10 micrometers or less (PM 10 ) nonattainment areas. 2 The EPA will implement the FIP in these areas until such time as the EPA approves a SIP submission from the MDAQMD that fully resolves the deficiencies identified in the EPA's June 30, 2023 limited approval/limited disapproval (“2023 LA/LD”) action on the MDAQMD's NNSR program and identifies no new deficiencies. 3 This FIP satisfies the statutory requirements for SIPs and NNSR programs in CAA sections 110(c)(1), 172(c)(5), 173, 182(c) and (d), 189(a)(1)(A) and (e), 301(a), and 302. The provisions of the FIP are also designed to meet the requirements for state plans in the EPA regulations at 40 CFR 51.165, 40 CFR 51.1114, and 40 CFR 51.1314. 2 See 40 CFR 81.305. The ozone nonattainment area is located within San Bernardino County. The PM 10 nonattainment areas consist of all of the MDAQMD portion of San Bernardino County: the Trona Planning Area and the portion of San Bernardino County that excludes both the Trona Planning Area and the portion of San Bernardino County that is located in the South Coast Air Basin. A map of this area is available in the docket for this action. 3 89 FR 56237, 56241. The FIP that is finalized in this action addresses the deficiencies the EPA identified in the MDAQMD's NNSR program by incorporating requirements from 40 CFR part 51, appendix S (“Appendix S”), as well as additional requirements to make the program administrable. Upon the effective date of this action, permit applicants will need to obtain two permits—one permit from the EPA under this FIP and one permit from the MDAQMD under the rules in the SIP. Where permit approval criteria between the MDAQMD's SIP and this FIP conflict—for example, the procedures to determine the quantity of offsets at a major modification, a deficiency in the MDAQMD's NNSR program—permit applicants need to demonstrate compliance with the requirements of this FIP, since this FIP fills the gaps in the MDAQMD's NNSR program. To the extent that there are any differences in the required permit application materials under the FIP versus the SIP, the applicant will need to comply with both requirements when submitting its permit application. The EPA will enforce the FIP as provided under CAA section 113(a). Our notification proposing this action includes further information on the implementation, purpose, components, and severability of this FIP. 4 4 89 FR 56237. II. EPA Response to the Ninth Circuit's Remand In this rulemaking, the EPA is also taking final action in response to a remand to the Agency by the U.S. Court of Appeals for the Ninth Circuit in Mojave Desert Air Quality Management District v. U.S. Environmental Protection Agency (“ MDAQMD v. EPA ”). 5 As background, on July 10, 2023, the MDAQMD filed a petition for review in the Ninth Circuit Court of Appeals of the EPA's 2023 LA/LD of the MDAQMD's NNSR program. The focus of the litigation was the EPA's disapproval of the MDAQMD's Rule 1304(C)(2)(d). The MDAQMD argued that the EPA had failed to adequately explain the disapproval in light of the Agency's 1996 approval of a substantially similar, earlier version of the rule. On September 5, 2024, the Ninth Circuit found that the EPA's disapproval of Rule 1304(C)(2)(d) was arbitrary and capricious because the Agency had failed to adequately explain “the reversal of its prior approval of a similar Mojave rule.” 6 The court granted the District's petition and remanded the matter “for further proceedings before the agency on an open record consistent with this decision.” 7 5 Mojave Desert Air Quality Mgmt. Dist. v. U.S. Env't. Prot. Agency, No. 23-1411 (9th Cir. September 5, 2024), Docket No. EPA-R09-OAR-2022-0338, available in the docket for this action and at https://cdn.ca9.uscourts.gov/datastore/memoranda/2024/09/05/23-1411.pdf. 6 Id. at 2. The court wrote that its disposition of the case “is not appropriate for publication and is not precedent. . . .” Id. at 1. 7 Id. at 5. In response to a remand from a court and agency can choose one of two paths. The agency may offer a fuller explanation of its reasoning at the time of the remanded agency action, or EPA may take a new agency action that need not be limited to its prior reasons but must comply with the procedural requirements for a new agency action. 8 The EPA is choosing to follow the second of these paths to respond to the Ninth Circuit's remand, reexamining the remanded action and providing a fresh justification for the disapproval of Rule 1304(C)(2)(d), including an explanation for the reversal of EPA's 1996 approval. 8 See, Biden v. Texas, 597 U.S. 785, 807-809 (2022); Fischer v. Pension Benefit Guarantee Corporation, 994 F.3d 664, 669-70 (D.C. Cir. 2021). The EPA also received comments referencing our 1996 rulemaking action on the proposal for the FIP. In light of the overlapping subject matter, we have elected to include the following two final actions in one rulemaking: (1) a new EPA final action to disapprove Rule 1304(C)(2)(d), as authorized under CAA sections 110(k)(3) and 301(a), that responds to the Ninth Circuit's remand of a portion of our 2023 LA/LD; and (2) EPA's final action on the FIP, as authorized under CAA section 110(c), described above. Our responses to comments in Section III of this action both respond to the comments received on the proposed FIP and provide additional explanation that supports EPA new final action to disapprove Rule 1304(C)(2)(d), consistent with the 2023 LA/LD rule. For the former action, the EPA must comply with the procedural requirement for a new agency action. Considering the grounds for the court's remand, there is no need for the EPA to provide an additional opportunity for public comment before taking final action to disapprove Rule 1304(C)(2)(d). The EPA provided notice and opportunity to comment on the disapproval of Rule 1304(C)(2)(d) in the 2023 LA/LD action. In reviewing that action, the Ninth Circuit held that EPA's response to one of the public comments on that action was not adequate. The court found that the MDAQMD had sufficiently raised in its comment the contention that EPA's 2023 action was inconsistent with the Agency's prior approval of comparable rule in 1996. Then, the court held that the EPA did not sufficiently articulate a basis for our change of position to support the 1993 disapproval of MDAQMD Rule 1304(C)(2)(d). In this action, the EPA is responding to the MDAQMD's comment in the manner that the Ninth Circuit directed. We have opened the record to the 2023 LA/LD action and provided additional information to support a new disapproval of Rule 1304(C)(2)(d). Considering that the court remanded for the EPA to provide a response to a comment, there is no need to provide an opportunity to submit comments. 9 9 See, Fischer, 994 F.3d. at 670 (additional administrative appeal not needed on remand where the factual record was fully developed). III. Public Comments on FIP and EPA Responses to Comments and Court Remand The public comment period on the proposed FIP rule opened on July 9, 2024, the date of the proposal's publication in the Federal Register , and closed on August 23, 2024. The EPA held a virtual public hearing on July 24, 2024, for members of the public to provide oral comments. This section summarizes the written and oral public comments the EPA received on the proposed FIP rule and provides responses to those comments. The written comments as well as a transcript of the public hearing are available in the docket for this action. The responses below also provide additional analysis and explanation that supports the EPA's disapproval of Rule 1304(C)(2)(d) in the 2003 LA/LD rule. Twelve written comments were submitted to https://regulations.gov. The commenters are listed in Table 1. Table 1—List of Commenters Providing Written Comments Commenter ID Commenter name Commenter organization Type of commenter Notes 01 Brad Poiriez, Executive Director MDAQMD State or Local Government Representative/Agency This is the first comment letter submitted by the MDAQMD. 02 Brad Poiriez, Executive Director MDAQMD State or Local Government Representative/Agency This is the second comment letter submitted by the MDAQMD regarding the MDAQMD's August 7, 2024 SIP submittal. 03 Garden Hills Org. & Co. Ltd This comment is not relevant to the proposed action and the EPA will therefore not be providing a response to this comment. 04 Clean Future This commenter submitted four separate comments, two that supported the proposed FIP as drafted and two that made additional recommendations. 05 Karnig Ohannessian, Deputy Assistant Secretary of the Navy (Environment and Mission Readiness) U.S. Department of Defense Government Representative/Agency 06 L. Dugan Marine Air Ground Task Force Training Command, Marine Corps Air Ground Combat Center (MAGTFTC-MCAGCC) Government Representative/Agency 07 Nicole Valentine Pacific Gas and Electric Company Industry 08 Catalina Elias, Environmental Manager CalPortland Company Industry 09 Michael Meinen, V.P. Environmental and Decarbonization Efforts Mitsubishi Cement Corporation Industry The EPA also received a total of three comments on the proposed rule during the public hearing. The commenters are listed in Table 2. Table 2—List of Commenters in July 24, 2024 Public Hearing Commenter ID Commenter name Commenter organization Type of commenter AA Brad Poiriez, Executive Director Mojave Desert Valley Air Quality Management District (MDAQMD) State or Local Government Representative/Agency. BB Pedro Dumaua Ducommun, Inc Industry. CC Daniel McGivney Southern California Gas Company (SoCalGas) Industry. As we stated in the July 24, 2024 public hearing, the EPA considers written comments and oral comments equally in reaching its final decision on the proposed FIP. For clarity, we have divided our responses to the comments we received into two sections: the written comments we received during the public comment period and the oral comments we received during the public hearing. A. Summaries of Written Comments and the EPA's Responses 1. Basis and Timing for the FIP Comment A.1.1: Commenter 01 asserts that the EPA proposed the FIP in “haste,” that the proposed FIP relates to a single issue, and that it is unnecessary because it rests on an erroneous assumption. Response to Comment A.1.1: The EPA disagrees with the characterization that the EPA proposed the FIP in haste. As explained in our proposed rulemaking, 10 the EPA's FIP authority and obligation arises from our February 3, 2017 finding of failure to submit, in which we found that the State of California had failed to submit a SIP revision for NNSR rules that apply to a “Severe” classification for the 2008 ozone NAAQS, as required under subpart 2 of part D of title 1 of the CAA and the 2008 Ozone SIP Requirements Rule. 11 The EPA's finding of failure to submit triggered an obligation under CAA section 110(c) for the EPA to promulgate a FIP no later than two years from the finding of failure to submit a complete SIP ( i.e., by March 6, 2019). 12 Specifically, the finding stated that if the State did not make the required SIP submission and the EPA did not take final action to approve the submission within two years of the effective date of the finding, the EPA would be required to promulgate a FIP for the affected nonattainment area. 13 On June 7, 2022, the Center for Biological Diversity (CBD) filed a lawsuit against the EPA alleging that the EPA had failed to promulgate a FIP or approve a SIP by the statutory deadline of March 6, 2019 (“2023 CBD Consent Decree”). 14 On June 15, 2023, the U.S. District Court of the Northern District of California entered a consent decree resolving this claim and requiring the EPA to sign a final rulemaking action to either promulgate a FIP or approve a SIP no later than November 29, 2024, although on November 8, 2024, the EPA and CBD agreed to extend the deadline to January 10, 2025. 15 The EPA proposed and is finalizing this FIP for the NNSR program in the MDAQMD to fulfill the EPA's statutory duty by the deadline established under the consent decree. 16 10 89 FR 52637, 52639. 11 82 FR 9158 (February 3, 2017). 12 Id. at 9161. 13 Id. at 9158. 14 Center for Biological Diversity et al., v. Regan, No. 3:22-cv-03309-RS (N.D. Cal.) (“2023 CBD Consent Decree”). The consent decree, as entered by the court on June 15, 2023, is available in the docket for this action. 15 Id. Prior to court's entry of the 2023 CBD Consent Decree, the EPA published a notice in the Federal Register announcing the proposed settlement and providing an opportunity for interested persons to submit comments. 88 FR 20166 (April 5, 2023). The EPA received no comments on the proposed settlement. The parties' joint stipulation to extend the consent decree deadline is available in the docket for this action. 16 2023 CBD Consent Decree, supra n. 13. Relatedly, the 2015 Ozone NAAQS Implementation Rule required the MDAQMD to submit an updated NNSR rule to the EPA by August 1, 2021, no later than three years from the effective date of its nonattainment designation. 17 On July 23, 2021, CARB submitted to the EPA the MDAQMD's revised NNSR rules for the 2015 ozone NAAQS, which the MDAQMD adopted in March 2021. 18 On June 30, 2023, the EPA finalized an LA/LD of the District's NNSR rules. 19 In this rulemaking, the EPA evaluated the SIP submission to determine its compliance with NNSR requirements for the 2008 and 2015 ozone NAAQS and for the 1987 PM 10 NAAQS. The EPA's rulemaking for the submitted rules explained that the EPA had identified six deficiencies in the submitted rules that did not fully satisfy the relevant requirements for preconstruction review and permitting in nonattainment areas under section 110 and part D of title I of the Act. These deficiencies prevented full approval. 20 As noted in that final action, this disapproval imposed an obligation on the EPA to promulgate a FIP pursuant to CAA section 110(c) within 24 months of the effective date of the action ( i.e., July 31, 2023, setting a deadline of July 31, 2025, for the EPA to promulgate a FIP), unless the EPA approved a SIP revision correcting the deficiencies. The June 2023 final action also noted the EPA's existing obligation under the 2023 CBD Consent Decree to promulgate a FIP for new source review (NSR) SIP elements that the Agency had not approved. 21 The EPA is therefore finalizing this FIP for the NNSR program in the MDAQMD to fulfill the EPA's statutory duty by the deadline established under the 2023 CBD Consent Decree. 17 83 FR 62998 (December 6, 2018). 18 88 FR 42258 (June 30, 2023). CARB's submittal stopped the sanctions clocks that started as a result of the 2017 Finding of Failure to Submit, but not the FIP clock, since the latter requires approval of the SIP submission. 19 Id. 20 Id. 21 Id. at 42268. Comment A.1.2: Commenter 08 states that it understands that the EPA is proposing the FIP under both a statutory deadline established by a consent decree resulting from its failure to act in a timely manner on various SIP submissions and under a regulatory deadline required by CAA section 110(c). Commenter 08 states that the EPA acted to propose the FIP nearly five months sooner than required by the consent decree. Commenter 08 believes that the proposed FIP presumes the outcome of the ongoing litigation, and the hasty action on the EPA's part does not demonstrate a good faith effort to allow the MDAQMD to continue to implement its own NNSR program. Response to Comment A.1.2: The EPA proposed this FIP for the MDAQMD NNSR program to fulfill the EPA's statutory duty by the deadline established under the 2023 CBD Consent Decree. 22 The terms of the consent decree require the EPA to sign a notice of final rulemaking to approve a revised SIP submission, to promulgate a FIP, or to approve in part a revised SIP submission and promulgate a partial FIP for the Severe NNSR SIP element in the MDAQMD no later than January 10, 2025. 23 Because the FIP can only be promulgated through a notice and comment rulemaking, it was necessary for the EPA to propose the FIP several months before the final signature deadline to give time for the public to review the draft rulemaking, provide comments, and allow for the EPA to consider and respond to those comments in a final agency action. 22 Id. 23 Center for Biological Diversity et al., v. Regan, No. 3:22-cv-03309-RS (N.D. Cal.). The consent decree, as entered by the court on June 15, 2023, is available in the docket for this action. On November 8, 2024, the parties stipulated to an extension of the consent decree deadline to January 10, 2025. The joint stipulation is available in the docket for this action. Commenter 08's assessment of the basis for the EPA's promulgation of the FIP and the timing of the FIP is not correct. The EPA's obligation to promulgate a FIP stems from our 2017 Finding of Failure to Submit the NNSR SIP element for a Severe-15 ozone nonattainment area. 24 Our 2017 action started the clock for when the EPA would need to promulgate a FIP, consistent with CAA section 110(c). Thus, since March 6, 2019 (two years after the effective date of the action, under CAA section 110(c)), the EPA has had an obligation to promulgate a FIP unless it approved the MDAQMD's NNSR program. Because the EPA has not fully approved the MDAQMD's NNSR program, the EPA remains obligated to promulgate a FIP unless the MDAQMD addresses the deficiencies identified in the 2023 LA/LD. 24 82 FR 9158 (February 3, 2017). After extensive coordination between the EPA and MDAQMD, the MDAQMD adopted revised NSR rules on March 22, 2021, which CARB, as the governor's designee, submitted to the EPA on July 23, 2021, for approval into the SIP. In the transmittal letter from the MDAQMD to CARB accompanying the amended NNSR rules, the MDAQMD wrote that the issue regarding MDAQMD Rule 1304(C)(2)(d) may need to be resolved in court. 25 The EPA's 2023 LA/LD was the final action on the 2021 submittal. The FIP clock that commenced with the 2023 LA/LD is separate from the FIP clock that began with the 2017 finding of failure to submit, in contrast to the statements Commenter 08 made in its comment number 1 on the proposed FIP; again, that deadline passed in 2019. 25 Cover Letter, MDAQMD March 22, 2021 Amendments to MDAQMD Regulation XIII—New Source Review and Rule 1600—Prevention of Significant Deterioration, sent from the MDAQMD to CARB. May 17, 2021, p. 2. Following the EPA's finalization of the 2023 LA/LD on June 30, 2023, the MDAQMD filed a petition for review of that action in the U.S. Court of Appeals for the Ninth Circuit Court on July 10, 2023. On September 5, 2024, the Ninth Circuit Court of Appeals in the case Mojave Desert Air Quality Management District v. EPA remanded to the EPA the Agency's determination that the MDAQMD Rule 1304(C)(2)(d) is unlawful under the CAA. The Ninth Circuit did not render a substantive ruling on the legality of the MDAQMD Rule 1304(C)(2)(d); rather, it remanded to the EPA to explain the EPA's finding that the MDAQMD rule was deficient, specifically in the context of the EPA's 1996 approval of the MDAQMD's NNSR program containing similar provisions to today's Rule 1304(C)(2)(d). The EPA therefore finds the MDAQMD SIP remains deficient with respect to Rule 1304(C)(2)(d) and inconsistent with CAA requirements. Regardless of the Ninth Circuit's remand, the EPA is required to promulgate the FIP, and it must do so by the consent decree deadline of January 10, 2025. 26 26 On November 8, 2024, CBD and the EPA filed a joint stipulation to extend the original November 29, 2024 deadline to January 10, 2025. Center for Biological Diversity et al., v. Regan, No. 3:22-cv-03309-RS (N.D. Cal.). This consent decree is also available in the docket for this action. Comment A.1.3: Commenter 02 states that since the MDAQMD made changes to address all but one of the six deficiencies the EPA identified in the 2023 LA/LD, there is no longer a need to address those particular issues in the FIP other than to note that resolution has been reached and approval of those five issues is forthcoming. Commenter 08 states that because CARB submitted the MDAQMD's revised rules to the EPA on August 7, 2024, it is the commenter's understanding that the FIP will only pertain to Simultaneous Emission Reduction (“SER”) calculations under MDAQMD Rule 1304(C)(2)(d). The commenter states that with CARB's submission of the MDAQMD's revised rules, the deficiencies in the MDAQMD's rules are no longer broad in scope, nor do they affect multiple aspects of the program. The commenter urges the EPA to work cooperatively with the MDAQMD and not put the onus of the FIP on facilities. Commenter 07 states that the MDAQMD has made many changes to its NSR rules to meet the requirements of the 1990 Clean Air Act and requests that the EPA reevaluate its decision to promulgate the FIP. Similarly, Commenter 05 states that the EPA should reconsider or postpone implementing the FIP until it can resolve its disagreement with the MDAQMD regarding Rule 1304(C)(2)(d). Commenter 09 urges the EPA to defer the FIP until the ongoing litigation between the EPA and the MDAQMD is resolved. Response to Comment A.1.3: Section III.H of our FIP proposal described how SIP replacement of all or any part of the proposed FIP would work, noting that changes to the MDAQMD's rules, if approved into the SIP, could replace the corresponding requirements of the FIP. 27 The EPA received CARB's submission of the MDAQMD's revised rules (adopted by the MDAQMD on March 25, 2024) on August 7, 2024, which was after our July 9, 2024 proposed action. For the EPA to narrow the scope of the FIP to just the remaining issue—the quantification and generation of offsets under MDAQMD Rule 1304(C)(2)(d)—the EPA would first need to approve the August 7, 2024 CARB submittal containing the MDAQMD's revised NNSR rules, which requires a 30-day notice and comment period. We are currently reviewing the submission for completeness and substance, as required under section 110(k) of the CAA. Therefore, there is not enough time before the January 10, 2025 consent decree deadline to accommodate the required notice and comment rulemaking on any action the EPA takes on the August SIP submittal. 28 27 89 FR 56237, 56243. 28 The CBD Consent Decree deadline was November 29, 2024, until CBD and the EPA agreed to extend the deadline, following the EPA's showing of need for an extension. Despite this extension, the EPA maintains that the extension of the CBD Consent Decree deadline to January 10, 2025, is still an insufficient amount of time to act on the MDAQMD's submittal and narrow the scope of the FIP before the deadline to finalize it. Case law also supports the conclusion that the EPA is not required to act on the MDAQMD's August 7, 2024 submittal prior to finalizing the FIP. As the court held in Keystone-Conemaugh Projects LLC v. EPA, a case in which the EPA promulgated a FIP before acting on a revised SIP submittal, CAA section 110(c) “contains no language requiring the EPA to act on the SIP revision before promulgating the FIP.” 29 (Emphasis in original.) Likewise, as Commenter 02 indicates in its comment letter, the MDAQMD's revised NNSR rules submitted by CARB on August 7, 2024, does not include any revisions of MDAQMD Rule 1304(C)(2)(d). 29 Keystone-Conemaugh Projects LLC v. EPA, 100 F.4th 434, 447 (3d Cir. 2024). The court further stated that “. . . if the EPA were required to act on each and every SIP revision submitted before it could issue a FIP, an untenable scenario could ensue. For instance, if a state were to submit multiple inadequate SIP revisions, it could effectively nullify the EPA's ability to issue a FIP and thus delay the implementation of any emission limits.” (FN7) Similar to the situation at issue in Arizona ex rel. Darwin v. United States, there is no reason to think that, after nearly five years of discussions of the MDAQMD's NNSR program between EPA and the MDAQMD, additional time to correct Rule 1304(C)(2)(d) would lead to MDAQMD's revising its NNSR program to resolve the deficiency. 30 30 See, Ariz. ex rel. Darwin v. United States, 815 F.3d 519, 543-544 (9th Cir. 2016), in which the Ninth Circuit Court of Appeals upheld the EPA's combined partial SIP disapproval and FIP, which the agency promulgated to meet a consent decree deadline stemming from a previous finding of failure to submit. The court stated that “it is unlikely that a different outcome would have resulted if EPA had provided [the State] with additional time to correct its . . . SIP . . . [the State] made no effort to correct its SIP in light of these comments. There is no reason to think it would have done so after the Final Rule disapproving the SIP issued either.” Comment A.1.4: Commenter 09 states that the proposed FIP is not necessary because the EPA already has authority under the existing MDAQMD rules to review applications for major facilities and enforce applicable federal NNSR requirements. This commenter states that MDAQMD Rule 1203(B)(1) requires that the EPA be given an opportunity to review and comment on applications for Federal Operating Permits (FOP), Significant Modifications to FOPs, and Renewals to FOPs. The commenter states that the EPA already has the discretion and authority to deny applications for a Major Facility that it believes has not complied with applicable federal NNSR requirements. Response to Comment A.1.4: The EPA disagrees with the comment. While the EPA can comment on, and enforce, Title V permits issued under the MDAQMD's approved CAA Title V program, 31 the Title V operating permit program is not the same permitting program as a NNSR pre-construction permitting program. Title I of the CAA has a separate requirement that the MDAQMD SIP contain a fully approved NNSR permitting program for the 2008 and 2015 ozone NAAQS. 32 Federal Operating Permits issued under Title V of the CAA (and under Regulation XII of MDAQMD's approved Title V program) are not the same as pre-construction NNSR permits issued under a SIP-approved program under Title I of the CAA, and the EPA's authority to review, comment on, and object to Title V permits does not remedy the deficiencies in the MDAQMD's NSR program, nor does the EPA's authority under Title V fulfill the EPA's FIP obligation under CAA section 110(c). MDAQMD Regulation XIII, which contains the MDAQMD's NNSR program, still needs to be approved into the SIP for the 2008 and 2015 ozone NAAQS. The EPA therefore has a statutory duty to promulgate a FIP as the result of its finding of failure to submit published in the Federal Register on February 6, 2017, and the EPA is now subject to a court order to either promulgate a FIP or approve a SIP submission that corrects all the deficiencies identified in the finding of failure to submit no later than January 10, 2025. 33 31 See 40 CFR part 70, appendix A. 32 42 U.S.C. 7410(a). 33 Center for Biological Diversity et al., v. Regan, No. 3:22-cv-03309-RS (N.D. Cal.). This consent decree is also available in the docket for this action. 2. Comments on MDAQMD Rule 1304(C)(2)(d) Comment A.2.1: Commenter 01 asserts that the EPA erroneously assumed that SERs (Simultaneous Emissions Reductions) created under MDAQMD Rule 1304(C)(2)(d) (referred to by Commenter 01 as “1304(C)(2)(d) Offsets”) are unlawful under the CAA. The commenter states that 1304(C)(2)(d) Offsets are created by a reduction in a source's allowable emissions that were fully offset in a previous action. Commenter 01 states that 1304(C)(2)(d) Offsets are adjusted to reflect otherwise required reductions, may only be used to offset contemporaneous emission increases at the facility, and cannot be banked for future use. Commenter 01 further asserts that 40 CFR 51.165(a)(3)(ii)(J) does not relate to creditable emission reductions and that even that provision, through a cross-reference to the definition of “actual emissions” at 40 CFR 51.165(a)(1)(xii), allows permitting agencies to “presume that source-specific allowable emissions for the unit are equivalent to the actual emissions of the unit.” Commenter 06 similarly asserts that while 40 CFR 51.165(a)(3)(ii)(J) requires offsets to be determined by summing the difference between the allowable emissions after the modification and the actual emissions before the modification (as defined in paragraph (a)(1)(xii)), paragraph (a)(1)(xii)(C) allows the MDAQMD to presume that source-specific allowable emissions for the unit are equivalent to the actual emissions of the unit. Therefore, Commenters assert, 1304(C)(2)(d) Offsets and the potential-to-emit to potential-to-emit or potential-to-potential (PTE-to-PTE) test are valid and consistent with sections 173(c)(1), 173(c)(2), and 182 of the CAA and the implementing regulations at 40 CFR 51.160-165. Response to Comment A.2.1: The EPA disagrees with the assertion that the EPA made an erroneous finding that 1304(C)(2)(d) Offsets are inconsistent with statutory and regulatory requirements. As the EPA previously explained in the 2023 LA/LD and reiterated in our proposed action for the FIP, 1304(C)(2)(d) Offsets are inconsistent with the CAA and the EPA's regulations because they allow facilities to satisfy major NSR offset obligations using a baseline of allowable emissions before construction rather than a baseline of actual emissions before construction. We provide a more detailed explanation below. CAA sections 173(a)(1)(A) and 173(c)(1) require that NNSR permits issued by states (or local air districts) pursuant to EPA-approved SIPs must require all proposed new or modified major sources that trigger NNSR to obtain sufficient offsetting emissions reductions. For example, section 173(c)(1) requires owners or operators of new or modified major stationary sources to obtain emission reductions that “assure that the total tonnage of increased emissions of the air pollutant from the new or modified source shall be offset by an equal or greater reduction, as applicable, in the actual emissions of such air pollutant from the same or other sources in the area.” (Emphasis added.) 34 Rule 1304(C)(2)(d) is inconsistent with section 173(c)(1) because it allows sources that have offset their allowable emissions at any point in time to avoid the CAA obligation to offset future increases in actual emissions from future major modifications. The EPA also disagrees with Commenter 01's assertion that Rule 1304(C)(2)(d) is consistent with CAA section 173(c)(2). In addition to the phrase referenced by the commenter, CAA section 173(c)(2) also states that “[i]ncidental emission reductions which are not otherwise required by this chapter shall be creditable as emission reductions for such purposes if such emission reductions meet the requirements of [CAA section 173(c)(1)].” 34 In New York v. EPA, a case regarding the applicability of NSR requirements, the U.S. Court of Appeals for the District of Columbia held that “the plain language of the CAA indicates that Congress intended to apply NSR to changes that increase actual emissions instead of potential or allowable emissions,” when describing the definition of the term “modification” in CAA section 111(a)(4). 413 F.3d 3, 40 (D.C. Cir. 2005). CAA section 173(c)(1) is at least as clear as CAA section 111(a)(4) regarding the import of using actual emissions for baseline purposes—it specifically uses the term “actual emissions,” and it omits terms like “potential to emit,” “emission limitations,” or similar references when addressing the baseline. Although the D.C. Circuit did not construe the Act's offset requirement at section 173(c)(1), its interpretation of a similar statutory provision bearing on when a proposed source's emissions increases trigger the need for an NSR permit, CAA section 111(a)(4), is instructive. The regulations at 40 CFR 51.165 require the District to use actual emissions as the baseline for determining the total tonnage of offsets that must be obtained by an owner or operator of a stationary source undergoing NNSR permitting. 40 CFR 51.165(a)(3)(i) requires: [T]hat the offset baseline shall be the actual emissions of the source from which offset credit is obtained where . . . [t]he demonstration of reasonable further progress and attainment of ambient air quality standards is based upon the actual emissions of sources located within a designated nonattainment area for which the preconstruction review program was adopted. (Emphasis added.) Moreover, under 40 CFR 51.165(a)(3)(ii)(J), which the EPA codified in 2002, SIPs “shall . . . provide that” “[t]he total tonnage of increased emissions . . . that must be offset . . . shall be determined by summing the difference between the allowable emissions after the modification (as defined by paragraph (a)(1)(xi) of this section) and the actual emissions before the modification (as defined in paragraph (a)(1)(xii) of this section)[.]” (Emphasis added.) Although Commenters 01 and 06 cite 40 CFR 51.165(a)(1)(xii) as authority to assert that MDAQMD is allowed to presume that the source-specific allowable emissions for a unit are equivalent to the actual emissions of the unit, any flexibility allowed under that provision is limited by section 40 CFR 51.165(a)(3)(i), which requires states or air districts that base reasonable further progress (RFP) and attainment planning on actual emissions 35 to use actual emissions as the baseline for all offset purposes. 36 The MDAQMD's RFP and attainment demonstrations are based on actual emissions, not allowable emissions. 37 35 See 86 FR 24809, 24813 (May 10, 2021), “The 2018 SIP Update explains that 2012 `stationary source emissions reflect actual emissions reported from industrial point sources' and include stationary aggregate sources, such as gasoline dispensing facilities . . . MDAQMD Rule 107, `Certification of Submissions and Emission Statements,' require[s] all stationary sources within the nonattainment area that emit more than 25 tons per year (tpy) or more of VOC or NO X to report and certify annual emissions.” The MDAQMD does not assert or document use of allowables for RFP or attainment. 36 Furthermore, Commenter 01 states the presumption incorrectly—40 CFR 51.165(a)(1)(xii)(C) allows the permitting authority to presume that allowable emissions are equivalent to the actual emissions, it does not say that the permitting authority may presume that the actual emissions are equivalent to the allowable emissions. This is important because a source's actual emissions will almost always be lower than its allowable emissions since an exceedance of the allowable emissions could constitute a violation of the permit. 37 MDAQMD's 2008 and 2015 ozone NAAQS attainment plans are based on actual emissions. The 2008 ozone NAAQS plan is available at: https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf, pp. 7, 34 (EPA approved this plan, see 86 FR 53223 (September 27, 2021).) The 2015 ozone NAAQS is available at: https://www.mdaqmd.ca.gov/home/showpublisheddocument/9693/638131029372000000, pp. 4-5, 24, 80. The EPA also disagrees with Commenter 01's suggestion that the EPA erroneously relied on 40 CFR 51.165(a)(3)(ii)(J) in its disapproval of Rule 1304(C)(2)(d) because that paragraph “addresses calculating emission increases[,] not creditable emission reductions.” 38 Both provisions require the use of actual emissions as a baseline to calculate either the offset obligation (emission increase) or the satisfaction of that obligation (credit for emissions reductions), and the commenter does not dispute that 40 CFR 51.165(a)(3)(i) requires that emissions reductions for offset credits must use actual emissions as a baseline if actual emissions are used to demonstrate reasonable further progress and attainment. The MDAQMD's RFP and attainment demonstrations are based on actual emissions—not allowable emissions. 39 38 Commenter 01 letter, p. 4, footnote 30. 39 MDAQMD's 2008 and 2015 ozone NAAQS attainment plans are based on actual emissions. The 2008 ozone NAAQS plan is available at: https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf, pp. 7, 34 (EPA approved this plan, see 86 FR 53223 (September 27, 2021).) The 2015 ozone NAAQS is available at: https://www.mdaqmd.ca.gov/home/showpublisheddocument/9693/638131029372000000, pp. 4-5, 24, 80. Based on the requirements of the CAA and its implementing regulations regarding offsets, 40 Rule 1304(C)(2)(d) does not ensure that the required quantity of emissions associated with a major modification in the MDAQMD will be offset and the provision is therefore not approvable in the SIP. Accordingly, the EPA must promulgate a FIP that contains the requirements stated in the CAA and its implementing regulations. The MDAQMD regulates an area that is classified as a Severe ozone nonattainment area and a “Moderate” PM 10 nonattainment area. It is important that sources in the nonattainment area make real reductions in emissions to offset emissions increases consistent with the goal of bringing the area into attainment for these air pollutants. 40 See e.g., CAA sections 173(a)(1)(A), 173(c)(1) and 40 CFR 51.165(a)(3)(i), 40 CFR 51.165(a)(3)(ii)(G), and 40 CFR 51.165(a)(3)(ii)(J). Comment A.2.2: Commenter 01 states that although 1304(C)(2)(d) Offsets result from reductions in allowable emissions, “they produce real reductions in actual emissions.” The commenter states that to “originally secure the allowable emissions, the facility had to previously effect permanent actual emission reductions” either by curtailing its own emissions or by purchasing emission reduction credits. The commenter states that if the facility agrees to permanently reduce those offset allowable emissions, the permanent emission reductions continue to exist. Commenter 01 then states that where those emission reductions “exceed the volume of reductions required to sufficiently offset historical actual emissions ( i.e., the facility was able to curtail the source's emissions below the now eliminated allowable emission levels), those reductions exceed the obligation to assure that the total tonnage of increased emissions of an air pollutant from the new or modified source is offset by a reduction of actual emissions of that air pollutant in accordance with 42 U.S.C. 7503(c)(1) and in the quantities required by 42 U.S.C. 7511a.” Commenter 01 further states that Rule 1304(C)(2)(d) complies with 42 U.S.C. 7503(c)(2) by identifying excess emission reductions and credits that exceeds the law's requirements as an available offset. Moreover, Commenter 05 believes that emissions that were previously offset under the MDAQMD's rules represent actual emission reductions as required by CAA section 173(c)(1) and can be used for calculating emission reductions pursuant to Rule 1304(C)(2)(d). Commenter 05 asserts that fully offset emissions are not “paper reductions” because they represent actual emission reductions that are banked and used following approved regulatory procedures. Response to Comment A.2.2: The EPA does not agree with the comment that 1304(C)(2)(d) Offsets result in real reductions in actual emissions, as required by the Act. Rule 1302(C)(2)(d) requires that (i) a federally enforceable emission limitation specify the PTE for the specific Emissions Unit; (ii) the resulting emissions change result in a decrease in emissions from the emissions unit; and (iii) any excess Simultaneous Emissions Reductions (SERs) generated from a calculation using the Rule are not eligible for banking. For emissions units that have allowable emissions limits that were fully offset at some point in the past, Rule 1304(C)(2)(d) allows any reduction in a facility's allowable emissions to be used to avoid CAA requirements to offset actual emissions increases. 41 As a hypothetical example, under MDAQMD Rule 1304(C)(2)(d), a facility might at the time of its original construction, “secure the allowable emissions,” (using the commenter's phrasing) in the amount of 200 tons per year (tpy) through “permanent actual emission reductions” in that amount. If the facility subsequently submits a permit application to construct a project that would increase its actual emissions by 40 tpy, Rule 1304(C)(2)(d) allows the facility to decrease its allowable emissions limit of 200 tpy by a nominal amount, even just 1 tpy or less, to establish that the project would result in an “emissions decrease,” rather than the actual emissions increase of 40 tpy that would actually occur and that would be subject to a requirement to offset the increase in actual emissions. 42 Rule 1304(C)(2)(d) is contrary to the CAA because it allows increases in actual emissions without any offsetting reductions in actual emissions. In other words, Rule 1304(C)(2)(d) allows real increases in emissions to be added to the air without requiring any offsetting decrease in real emissions. 41 Rule 1304(C)(2)(d)(ii) requires that “the resulting Emissions Change from a calculation using this provision is a decrease in emissions from the Emissions Unit(s),” hence why a source must demonstrate a reduction in allowable emissions from the subsequent modification. 42 The example presented here is similar to a recent MDAQMD permitting action that the EPA described in the 2023 LA/LD. 88 FR 42258, 42263 (MDAQMD, “Preliminary Determination/Decision—Statement of Basis for Minor Modification to and Renewal of FOP Number: 104701849 For: High Desert Power Project, LLC.” December 21, 2022, p. 7.) It should also be noted that, in the hypothetical example presented in the previous paragraph, although the facility would have offset 200 tpy of emissions at the time of its initial construction by obtaining or surrendering 200 tpy of emissions reduction credits (“ERCs”), it used those ERCs to obtain a 200 tpy allowable emissions limit in that project. 43 Therefore, those ERCs are no longer available to offset subsequent increases in actual emissions resulting from future construction and modification projects. According to Commenter 01, Rule 1304(C)(2)(d) allows NNSR permit applicants to obtain permits by relying on previously relied upon emission reductions or previously surrendered emission reduction credits; however, because those emission reductions were used in a prior permitting action, they are not “surplus” under 40 CFR 51.165(a)(3)(ii)(G). 40 CFR 51.165(a)(3)(ii)(G) states: [The SIP] “shall further provide that . . . [c]redit for an emissions reduction can be claimed to the extent that the reviewing authority has not relied on it in issuing any [NNSR] permit . . . or the State has not relied on it in demonstrat[ing] attainment or reasonable further progress.” Thus, 40 CFR 51.165(a)(3)(ii)(G) prevents facilities from re-using credits to obtain a permit for a major modification. 43 These required offset quantities do not reflect the adjustment based on the area's nonattainment, which would require an even greater quantity of offsets for higher levels of nonattainment. CAA 182(d)(2), 40 CFR 51.165(a)(9). 3. Comments Regarding EPA's 1996 Approval of 1304(C)(2)(d) Offsets Comment A.3.1: Commenter 01 states that in 1996, EPA approved 1304(C)(2)(d) Offsets and that the associated 1995 technical support document explained that 1304(C)(2)(d) Offsets constitute real reductions in actual emissions, are not otherwise required by the CAA (once adjusted) and comply with CAA section 173. The commenter also states that since 1996 neither the relevant law nor the 1304(C)(2)(d) Offsets have materially changed. Commenter 01 further states that the proposed FIP is arbitrary and capricious because the EPA fails to explain the reversal of its 1996 position in approving the District's Rule 1304(C)(2)(d) Offsets. The commenter states that EPA's contention that 1304(C)(2)(d) Offsets allow reductions on paper that do not represent real emissions reductions and that sources must reduce actual emissions to below historic actual emission levels to generate offset credit are complete reversals of the positions the EPA took in 1996 when it determined that SERs, including 1304(C)(2)(d) Offsets, constitute real reductions in actual emissions that are not otherwise required by the CAA and offset credit could be lawfully generated from reductions of surplus, fully-offset allowable emissions. The commenter states that, while the Administrative Procedure Act (APA) allows the EPA to reverse its policy on the 1304(C)(2)(d) Offsets, the EPA must “display awareness that it is changing position and show that there are good reasons for the new policy.” 44 44 Citing Ass'n of Irritated Residents v. U.S. Env't Prot. Agency, 10 F.4th 937, 945 (9th Cir. 2021). Response to Comment A.3.1: The EPA's response to this comment serves as both our response to this comment in the context of the proposed FIP, the rulemaking for which the comment was submitted, and as the Agency's new final action to disapprove Rule 1304(C)(2)(d) in response to the Court of Appeals' ruling in the case Mojave Desert Air Quality Management District v. EPA, in which the Ninth Circuit granted petitioner MDAQMD's petition for review and remanded to the EPA “for further proceedings before the agency on an open record consistent with this decision.” 45 The MDAQMD, in its comments on the EPA's proposal of the 2023 LA/LD, criticized the EPA's proposed rulemaking for failing to explain why the EPA approved similar provisions into the SIP in 1996 that it now finds deficient. The MDAQMD sought review of EPA's 2023 LA/LD action in the Ninth Circuit. The court agreed that the EPA failed to provide sufficient explanation in that action for the change in direction after 1996 and therefore directed the EPA to address the issue through further proceedings. Commenter 01—the MDAQMD—makes the comment again in the context of the FIP. Since both matters address the same subject, the EPA has determined that it is appropriate to use one notice to both respond to the MDAQMD's comments in the context of the FIP and to respond to the court's remand regarding the 2023 LA/LD disapproval of Rule 1304(C)(2)(d). 45 Memorandum, Mojave Desert Air Quality Management District v. United States Environmental Protection Agency, 9th Circuit Court of Appeals No. 23-1411, September 5, 2024, p. 5. First, we note that significant regulatory changes occurred or were proposed in the 1990s, federally and in California, where the State and local air districts were implementing State legislation that was passed in 1988 to address air quality issues. 46 Later in this action, we discuss the CAA and regulatory requirements at the time of the EPA's October 1995 proposed approval and November 1996 final approval of the MDAQMD's NNSR rules. We then describe the Agency's contemporaneous consideration of options for regulatory flexibility during the 1990's. These documents, taken together, provide context for the regulatory landscape that existed during the EPA's review and approval of the MDAQMD's rules in 1995-1996. We also analyze our 1996 approval of MDAQMD's offset rules in light of the EPA's 2002 final rulemaking revising significant aspects of the NSR program (“2002 NSR Reform Rule). 47 In sum, this analysis is sufficient for the EPA, now, to conclude that the EPA's 1996 approval of the MDAQMD's offset rules was inconsistent with the CAA and its implementing regulations. Based on the documents discussed in this response, the EPA apparently believed in 1996 that the District's rules, which required the application of Best Available Control Technology (BACT) and offsets for a modification on the PTE of the entire facility rather than the modification alone, were sufficiently stringent to satisfy federal requirements. 48 As we explain in this response and in our responses to comments A.2.1 and A.2.2, however, our justification in 1996 for approving MDAQMD rule provisions that were similar to Rule 1304(C)(2)(d) is deficient, the EPA's 2002 NSR Reform Rule did not include revisions that would ratify or authorize MDAQMD's approach, and therefore our 2023 disapproval of Rule 1304(C)(2)(d) is correct. 46 For example, the California Clean Air Act uses different offsets thresholds than the federal regulations. See California Health and Safety Code sections 40918, 40919, 40920, and 40920.5; compare to 40 CFR 51.165. California air districts must implement State requirements under California law and satisfy the federal requirements under the CAA and its implementing regulations. Any provision that conflicts with the CAA and its implementing regulations is not approvable. 47 67 FR 80186, 80205 (December 31, 2002). 48 1995 TSD accompanying the EPA's proposed rule (60 FR 55355 (October 31, 1995)) (“1995 TSD”), p. 17. Federal Regulatory Scheme Regarding Offsets in Effect in 1996 On August 7, 1980, the EPA promulgated NSR rules for attainment and nonattainment areas. 49 The 1980 NSR rulemaking codified 40 CFR 51.18(j)(3)(i), requiring an offset baseline to be based on actual emissions of the source from which offset credit is obtained where demonstrations of reasonable further progress and attainment are based on actual emissions. 50 As stated in the rule's preamble, the EPA's rationale was, “to be consistent with RFP, sources must reduce their actual, rather than their allowable, emissions. Otherwise, sources could claim credit for offsets in situations where the offset would actually interfere with RFP.” 51 On November 7, 1986, the EPA promulgated NSR rules specifically for nonattainment areas at 40 CFR 51.165 and codified the text at 40 CFR 51.18(j)(3)(i) into 40 CFR 51.165(a)(3)(i), where it was in 1996, in 2023 (at the time of our LA/LD rulemaking), and today. 52 49 45 FR 52676 (August 7, 1980). 50 Id. at 52745. 51 Id. at 52728. 52 51 FR 40656, 40672 (November 7, 1986); 40 CFR 51.165(a)(3)(i) (1996) (a copy of the CFR as of July 1, 1996 is in the docket for this rulemaking). See also, 57 FR 13498, 13552 (April 16, 1992) (“The EPA interprets section 173(a)(1)(A) to ratify current EPA regulations requiring that the emissions baseline for offset purposes be calculated in a manner consistent with the emissions baseline used to demonstrate RFP.”) The EPA's 1980 NSR rulemaking also codified 40 CFR 51.18(j)(3)(g), allowing credit for emissions reductions only “to the extent that the reviewing authority has not relied on [the reductions] in issuing any permit under regulations approved pursuant to 40 CFR 51.18 or the state has not relied on [the reductions] in demonstrating attainment or reasonable further progress.” 53 The EPA's 1986 NNSR rulemaking codified the text at 40 CFR 51.165(a)(3)(ii)(G), where it was in 1996, in 2023 (at the time of our LA/LD rulemaking) and today. 54 53 45 FR 52746. 54 51 FR 40672; 40 CFR 51.165(a)(3)(ii)(G) (1996). Likewise, EPA guidance issued during the 1990s addressed the quantity of emissions to be offset. Specifically, in the proposed rulemaking action titled, “General Preamble for the Implementation of Title I of the Clean Air Act Amendments of 1990,” the EPA clarified that CAA section 173(c)(1) “provides that emissions increases from the new or modified source must be offset by real reductions in actual emissions.” 55 55 57 FR 13498, 13553 (April 16, 1992). The EPA further stated that if RFP and attainment plans “are based on allowable emissions, offset credit for reductions in allowable emissions . . . is appropriate, but will be deemed inadequate if there is not a real reduction in actual emissions that equals or exceeds, as applicable, the increase in emissions resulting from the operation of the major new or modified source.” Id. The EPA's 1995-1996 Rulemaking for the MDAQMD's 1993 and 1996 Adopted Versions of Rule 1304(C)(2)(d) On October 27, 1993, the MDAQMD adopted a series of NSR rules, which CARB submitted to the EPA as a SIP revision on March 29, 1994. 56 On October 31, 1995, the EPA published a proposed action in the Federal Register to approve the rules contingent upon the MDAQMD's adoption and submittal, as a SIP revision, of revised rules that would correct a number of deficiencies that EPA had identified. 57 The EPA based its proposed “approval with a contingency and disapproval in the alternative” on a set of draft rules that the MDAQMD transmitted to the EPA on October 11, 1995 (“October 11, 1995 draft rules”) that MDAQMD had not yet adopted or submitted to CARB. 58 The EPA's proposed action explained that the 1993 adopted version of the rules contained numerous deficiencies that precluded full approval but that the October 11, 1995 draft rules were intended to address those deficiencies and that the EPA's proposed approval was conditioned upon MDAQMD's adoption and submission of the revised rules. 59 Thus, the EPA's proposed rule and technical support document (TSD) summarized the rules as adopted on March 29, 1993, including bases for findings of rule deficiencies, as well as statements regarding the October 11, 1995 draft rules that the MDAQMD had committed to adopt and submit to EPA before EPA finalized its rulemaking. 56 Although EPA has not been able to locate a copy of the NSR rules as adopted by the MDAQMD in October 1993, we are able to determine the adoption date from the MDAQMD's headings on later versions of the rules that provide a chronology of adoption dates. The 1995 TSD and proposed rulemaking reference the submittal date. 1995 TSD at 2; 60 FR 55356. 57 61 FR 58133 (November 13, 1996). In the proposed rulemaking, the EPA proposed “to approve with a contingency, and disapprove in the alternative.” 60 FR 55355 (October 31, 1995). 58 60 FR 55355. 59 Id. (“The submitted rules contain a number of deficiencies that prevent EPA from approving them as revisions to the SIP. However, MDAQMD has agreed to correct these deficiencies, and has sent draft rules . . . to EPA which contain acceptable language. This proposed approval is therefore contingent upon MDAQMD adopting and submitting to EPA revised rules which correct the deficiencies identified in this document before EPA promulgates a final rulemaking on the submitted rules.”) In the EPA's proposed action on this submission, the EPA concluded that MDAQMD's Rule 1306 “Calculating Emissions Changes” as adopted in March 1993 was deficient because the rule uses a source's pre-modification PTE rather than pre-modification actual emissions, as the baseline to calculate the offset requirement and that the method is not acceptable unless the source has already offset its entire pre-modification PTE. 60 60 Id. at 55356 (“This section uses a source's pre-modification potential to emit (PTE), rather than its pre-modification actual emissions, as the baseline for calculating the offset requirement for major modifications in nonattainment areas. This method is not acceptable unless the source has already offset its entire pre-modification PTE. The District must amend the rule to calculate the offset requirement in this case as the source ' s new PTE minus the source ' s pre-modification actual emissions.”) In the 1995 TSD accompanying the EPA's proposed rule, the EPA further explained that Rule 1306 as adopted in March 1993 “has several deficiencies that prevent its full approvability by EPA” and provided a list of deficiencies, “along with the changes which would make the rule approvable.” As stated in the 1995 TSD: The rule uses a source's potential to emit as a baseline for calculating emissions changes, rather than its actual emissions. In general, use of potential to emit in this calculation is unacceptable, however, for most purposes in this rule it is acceptable. For example, the submitted rules require the application of BACT and offset for a modification if the PTE of the entire source (not just the increase caused by the modification) would exceed the applicable threshold after the modification. Thus, applicability is determined by the total PTE of the source, not the size of the calculated emissions change resulting from the modification. However, this method is not acceptable for calculating the amount of offsets required as the result of an increase, unless the source has already offset its entire PTE. 61 61 1995 TSD, p. 17. Section 1305(A)(2)(b)(iii) of the proposed revision of the District's rules contains the necessary changes to these provisions. 62 62 Id. at 17. In March 1996, the MDAQMD adopted Rule 1305(A)(2)(b)(iii), which the EPA approved into the California SIP in November 1996, and is the equivalent of current Rule 1304(C)(2)(d). Rule 1305(A)(2)(b)(iii) stated: “For emissions increases from a Modification to a Major Facility the base quantity of Offsets shall be determined as follows: (a) When the Modification is a Major Modification to a Major Facility within a nonattainment area, the base quantity of Offsets shall be the amount equal to the difference between the Facility's Proposed Emissions and the HAE [historic actual emissions] unless the Facility's HPE [Historic Potential Emissions] has been completely offset in prior permitting actions pursuant to this Regulation; or (b) The amount equal to the difference between the Facility's Proposed Emissions, as modified, and the HPE.” (Emphasis in original.) The statements in the EPA's proposed rule and TSD are brief. It appears, however, that we concluded that the MDAQMD's approach—using PTE ( i.e., allowable emissions) rather than actual emissions as a baseline to evaluate NNSR applicability for modifications—would be acceptable because it would require the MDAQMD to impose BACT and offsets requirements for any modification at a major source, regardless of whether the modification qualified as “significant,” whereas the EPA's regulations apply BACT and Lowest Achievable Emission Rate (LAER) to facility modifications only if the source is already major and the emissions increase from the modification itself is “significant,” or if the modification is itself above the applicable major source threshold. Therefore, it appears that applying this rationale, the EPA found that the MDAQMD's approach to determining NNSR applicability for modifications was at least as stringent as the federal approach and therefore was approvable. As described in the EPA's final rulemaking, the MDAQMD adopted revised NSR rules on March 25, 1996, that CARB submitted as a SIP revision to the EPA on July 23, 1996. 63 The EPA's final rulemaking contains no additional analysis, but it simply states: “The submitted rules contain the changes necessary for approval, in a manner that is identical to that described in the TSD for the proposed approval.” 64 As part of this final action, the EPA approved MDAQMD rules, such as 1304(C)(1)(b), that allow SERs to be based on reductions in PTE (allowable emissions) and that allow such SERs to satisfy federal offset obligations. 63 61 FR 58133. 64 Id. at 58134. Thus, we have been unable to discern in the EPA's 1995-1996 rulemaking documents any legal rationale or support for the MDAQMD's use of a PTE baseline to determine that the amount of offsets is acceptable if a “source has already offset its entire PTE.” The statement is inconsistent with statutory and regulatory requirements that existed at the time (and are still in effect), such as CAA section 173, 40 CFR 51.165(a)(3)(i) and 40 CFR 51.165(a)(3)(ii)(G). 65 Furthermore, the EPA appears to have mistakenly concluded in 1995-1996 that the MDAQMD's approach for applicability would be sufficient to consistently ensure issuance of NNSR permits that would be at least as stringent as required by federal law. First, as we have explained in our response to comment A.2.2, MDAQMD Rule 1304(C)(2)(d) allows facilities that are “fully offset” at any time in the past to increase actual emissions without having to offset those actual emission increases. These increases would be impermissible if MDAQMD applied the federal requirements. 66 Second, we note that the EPA's regulations at 40 CFR 51.165(a)(2)(ii) allow states to use different calculation methodologies to determine applicability upon the state's demonstration that its approach is at least as stringent as the EPA's approach. The EPA's regulations do not contain a similar provision that would allow states to apply an alternative methodology to calculate the quantity of required offsets based on a demonstration that the alternative is more stringent. 65 As noted elsewhere, the provision is also inconsistent with 40 CFR 51.165(a)(3)(ii)(J), which the EPA promulgated in 2002. 66 We provide a hypothetical example in our response to comment A.2.2 and reference the real-world example that we described in our 2023 LA/LD, wherein a facility that should have been required to obtain offsets under the federal requirements was exempted from doing so under MDAQMD Rule 1304(C)(2)(d). The 80 Percent Compromise for Calculating Emissions Increases In a letter dated October 30, 1995, from the EPA to the MDAQMD, transmitting the 1995 TSD that provided the EPA's analysis of the MDAQMD's October 1993 NSR rules, the EPA referenced an NSR flexibility option that the EPA, the MDAQMD, and CARB had discussed since at least 1993. The flexibility option pertains to how an applicant could calculate emissions changes at its facility, and it is therefore relevant to the offset generation and quantification issues in 1304(C)(2)(d). This portion of the EPA's response to comment A.3.1 focuses on that flexibility option, beginning with the earliest document EPA staff were able to locate on the subject. A letter dated September 8, 1993, from CARB to MDAQMD documents that the EPA had provided a comment regarding the MDAQMD's calculation procedures during MDAQMD's process of amending its NSR rules. 67 Specifically, the letter documents that the EPA had identified a conflict in determining “historic emissions” ( i.e., emissions that could be used as a baseline in evaluating emissions changes resulting from facility modifications) between federal requirements requiring the use of actual emissions and California guidelines that allowed PTE. In an apparent attempt to resolve this conflict, the letter references a “compromise” that “will allow potential to emit to be used in some instances but actual emissions in others.” 68 The letter included an enclosure with text for the MDAQMD to include in its Rule 1306 stating that the EPA had “tentatively” agreed to the draft text. Included in the draft text are definitions for the terms “historic emissions” and “normal operations” as follows: 67 CARB Letter to MDAQMD, dated September 8, 1993. 68 Id. Historic Emissions: The potential to emit of an existing emissions unit prior to modification. In determining the potential to emit, daily emission limitations shall be treated as part of an emission unit's design only if the limitations are representative of normal operations, or, if the facility has provided offsets for previous permitting actions . . . Normal Operations: Usual or typical daily operating of an emissions unit resulting in actual emissions which are at least 80% of the specific limits contained in the unit's authority to construct or permit to operate. Based on this letter, it appears that the EPA agreed to allow emissions changes from facility modifications to be calculated using a baseline of 80 percent of a facility's allowable emissions, rather than actual emissions, which, as the letter acknowledges, was the federal requirements for such calculations. The letter does not provide sufficient detail to determine whether the calculations in question were for the purpose of determining emissions changes for applicability or for determining the offset obligation or both. The letter also does not provide any legal analysis or support to justify the use of allowable emissions as a baseline in situations in which actual emissions are at least 80 percent of allowable emissions, in contrast to the EPA's statutory and regulatory requirements to use actual emissions to calculate emissions changes when the air district uses actual emissions for reasonable further progress and attainment planning purposes. Later, in the 1995 TSD transmittal letter, the EPA wrote: The proposed rules contain one provision that should be removed prior to adoption and submittal of the rules. This provision, located at 1304(C)(3)(a) and 1305(B)(2)(b)(i), allows for reductions in a facility's potential to emit to be used as simultaneous emission offsets if the facility's actual emissions were equal to or greater than 80% of its potential emissions. EPA has discussed this provision with the California Air Resources Board and both agencies agree that it should not be included in the District's rules. 69 69 1995 TSD, Transmittal Letter. As explained earlier in this response, the EPA's 1995 TSD (transmitted with this letter) also discussed the use of PTE as a baseline to calculate offset obligations, but it allowed that approach if a source had already offset its entire PTE. There is no explanation in the October 30, 1995 letter or the 1995 TSD to reconcile the EPA's apparent position that PTE could not be used to calculate the offset requirement if actual emissions were equal to or greater than 80 percent of PTE (as expressed in the October 30, 1995 letter) with the EPA's stated position that PTE could be used to calculate the offset requirement if the source's PTE had been fully offset in a previous permitting decision (as stated in the 1995 TSD). A subsequent document with the handwritten notation “Mojave Compromise,” is possibly relevant. This document appears to have been sent by CARB to the MDAQMD on November 14, 1995, and reflects discussions between EPA and the MDAQMD (“November 14, 1995 Memo”). 70 The document states: 70 CARB Memo, November 14, 1995. The November 14, 1995, CARB Memo appears substantially similar to an October 20, 1995, CARB Memo, apparently transmitted by CARB to the EPA, that reflects CARB's comments regarding the MDAQMD's draft rules, specifically Rule 1304 “Emissions Calculations” and Rule 1305 “Emissions Offsets.” The October 20, 1995, CARB memo also references communications between the EPA, CARB, and the MDAQMD regarding MDAQMD Rules 1304, “Emissions Calculations” and 1305, “Emissions Offsets.” General: Rule 1304, Section (C)(3)(a), states that “actual emissions reductions may be calculated using a facility's “historic potential to emit” if the “historic actual emissions” of the emissions unit(s) prior to modification is greater than or equal to 80 percent of the “historic potential to emit” for that emission unit. The ARB and the U.S. Environmental Protection Agency have agreed that in one specific case a facility may use an emission unit's “historic potential to emit” in lieu of the emission unit's “historic actual emissions.” Both agencies agreed that districts could use this “compromise” when determining the applicability of federal New Source Review. The intention of this “compromise” was to give a facility more flexibility when making this determination. It was not intended to be used when calculating the quantity of offsets required for mitigation by a facility. The use of “historic potential to emit” in lieu of “historic actual emissions” should only be used in the “federal netting process,” and it only applies to quantifying emissions increases. As you know, 40 CFR 51.165 (a)(1)(vi), which defines “net emissions increase,” in general stipulates that all increases/decreases must be actual emissions. This compromise allowed a facility to reduce the increase in emissions by a factor no greater than 20 percent. Unfortunately, the District has also applied the “compromise” provision when calculating emission decreases in the netting process. The District has included the above provision in both Rules 1304 and 1305. The net effect of using the “compromise” when calculating emission decreases is that it generates “paper credits.” Further, Rule 1305, Section (B)(2)(b) proposes to allow the use of these credits to offset “actual” emission increases. We strongly recommend that the District delete Subsection (C)(3)(a) from Rule 1304, and Subsection (B)(2)(b)(i) from Rule 1305. In addition, we recommend that definitions (V) “Historic Potential Emissions” and (DD) “Normal Operation” in your current Rule 1302 (Amended 10/27/93) be added to your proposed Rule 1301. Once these changes have been made, the District should apply the “compromise” provision as intended by the ARB and U.S. EPA. 71 71 November 14, 1995, CARB staff comments on 1995 MDAQMD draft Regulation XIII. Based on the November 14, 1995 Memo, it appears that the EPA generally objected to the MDAQMD's use of PTE as a baseline when calculating emissions decreases, either in the context of determining NSR applicability or calculating an offset obligation, but would allow the use of PTE as a baseline when calculating emissions increases if PTE was within 80 percent of actual emissions. However, these documents (CARB's September 8, 1993 letter to the MDAQMD, the EPA's October 30, 1995 TSD transmittal letter, and the November 14, 1995 Memo) contain no explanation to reconcile (i) the objection by CARB and the EPA to use of PTE to calculate emissions decreases because such an approach would “generate `paper credits,' ” which could then be used to offset actual emission increases” (as stated in the November 14, 1995 Memo) with (ii) the acceptance by CARB and the EPA of the MDAQMD's use of PTE to calculate simultaneous emission reductions if an emissions unit's PTE had been fully offset in a previous permit action (as stated in the 1995 TSD). 72 72 See 1995 TSD, p. 17 (regarding MDAQMD Rule 1306 (as adopted in March 1993). In a letter dated January 26, 1996 from the MDAQMD to CARB, with a courtesy copy to the EPA, the MDAQMD proposes an alternative to the compromise that had previously been discussed among the three agencies. 73 The letter references the MDAQMD's new text for Rules 1303 and 1304 as “attached,” but the EPA has not been able to locate these attachments. The EPA is also unable to locate copies of the October 11, 1995 draft rules; therefore, the EPA is unable to track revisions to the rules MDAQMD adopted in October 1993 to the rules MDAQMD adopted in March 1996, which the EPA approved in November 1996. Although it is apparent from the correspondence among the EPA, CARB and the MDAQMD that the agencies were involved in multi-year discussions over the calculation of emissions increases and decreases and the application of emissions decreases to new projects, it is not clear why the EPA and CARB objected to the use of PTE to calculate offsets (as well as emissions decreases related to the applicability analysis) but allowed the use of PTE to calculate offsets if emissions units had been fully offset as part of previous permitting action. 73 Letter from the MDAQMD to CARB, dated January 26, 1996. 1996 Proposal To Revise the Federal NSR Rules and 2002 NSR Reform Rule While EPA Region 9 was reviewing the MDAQMD's proposed revisions to its NSR program in 1993-1996, the EPA was also in the process of revising its nationally applicable NSR regulations for major stationary sources in both attainment and nonattainment areas based on input from stakeholders from industry, state and local agencies, and environmental organizations. Towards this end, in July 1996, the EPA published in the Federal Register a proposed rulemaking to comprehensively overhaul the federal NSR program for the first time in 15 years. 74 The proposal provides a roughly contemporaneous insight to concepts that the EPA was exploring to provide states greater flexibility to customize their own NSR programs. 75 One such concept was a revision to the NSR regulations to allow the use of the PTE-to-PTE test for NSR applicability as well as for calculating offsets, netting credits, and other emissions reductions credits. 76 This proposal, referred to as the “Exhibit B approach,” would provide sources with the alternative of using their hourly potential emissions to determine baselines for NSR applicability and other NSR purposes. 77 The EPA acknowledged in the proposed rulemaking that the Exhibit B approach would provide flexibility requested by industry, but we expressed concern for environmental consequences, providing examples of how the proposal could lead to increases in actual emissions that would escape NSR review. 78 The EPA's analysis of potential environmental impacts of the proposal revealed that, in the two states studied, actual emissions comprised 30 to 86 percent of allowable emissions, depending on source category and pollutant. 79 Because the analysis showed actual emissions were substantially below allowable emissions levels, the use of an emissions baseline based on actual or allowable emissions could significantly impact whether a source would need to comply with NSR requirements. 74 61 FR 38250, 38251 (July 23, 1996). 75 Id. 76 Id. at 38268. 77 Id. at 38268-69. 78 Id. at 38269. The EPA also acknowledged, however, that the “magnitude of the environmental impact of Exhibit B, if promulgated, is difficult to predict.” Id. at 38270. 79 Id. at 38270. The EPA's 1996 proposed rulemaking included the following analysis of a PTE-to-PTE test for calculation of offsets: [Exhibit B's] proposal on offsets may conflict with the 1990 Amendments. That is, section 173(c) of the Act requires that a source secure sufficient emissions reductions to assure that “the total tonnage of increased emissions of the air pollutant from the new or modified source shall be offset by an equal or greater reduction . . . in the actual emissions of such air pollutants.” Thus, offsetting emissions reductions (including emissions reduction credits used for offsets) must be calculated in terms of actual emissions. 80 80 Id. at 38269, footnote 31. (Emphasis in original.) The EPA sought comment in the 1996 proposed rulemaking as to whether the Exhibit B proposal “is consistent with the air quality planning goals of the NSR program. That is, while Exhibit B could allow significant increases in actual emissions to be unreviewed, section 173 of the Act required offsets to be based on actual emissions.” 81 81 Id. at 38270. After seeking comment on the Exhibit B proposal in 1996, the EPA ultimately decided not to adopt it for reasons explained in the 2002 NSR Reform Rule (which also added 40 CFR 51.165(a)(3)(ii)(J)). The EPA reiterated that the Exhibit B proposal would allow sources to “use this potential-to-potential test for NSR applicability, as well as for calculating offsets, netting credits, and other ERCs.” 82 While acknowledging the “maximum flexibility” the PTE-to-PTE test would provide to existing sources, the EPA also re-stated concerns associated with the calculation methodology for calculating emission reductions to be used for netting or ERCs, stating that Exhibit B would allow facilities to generate netting credits and ERCs for offsets based on potential hourly emissions, even if never actually emitted, which could allow greater actual emissions increases without any preconstruction review. 83 82 67 FR 80186, 80205. 83 Id. In the 2002 NSR Reform Rule, the EPA acknowledged that it was unable to determine the specific environmental impact from using a PTE-to-PTE test, but we observed that its analysis showed that typical source operation frequently results in actual emissions that are below allowable emission levels. 84 This observation reinforces concerns that a calculation methodology that relies on allowable emissions will fail to regulate actual emissions increases. Regarding the offsets implications of Exhibit B specifically, the EPA wrote in the response to comments that: 84 Id. [The Exhibit B] methodology would also be problematic for generating ERCs, particularly for use as offsets. The use of potential emissions for offset credits is in direct conflict with the Act. Under section 172(c) of the Clean Air Act, emissions offsets must be based on reductions in actual emissions. Allowing sources to get credit for reductions in potential emissions would result in “paper” credits, and could allow sources to receive credit for reducing emissions that never actually occurred. Thus, our rules have not changed with regard to the calculation of reductions in actual emissions for offsetting purposes. 85 85 “Technical Support Document for the Prevention of Significant Deterioration and Nonattainment Area New Source Review Regulations,” November 2002, page I-6-11. It is important to note that, along with rejecting Exhibit B, the 2002 NSR Reform Rule also codified at 40 CFR 51.165(a)(3)(ii)(J) a specific requirement that, for each major modification, a source must offset the difference between the allowable emissions after the modification and the actual emissions before the modification for each emissions unit. 86 The EPA's statement in the response to comments that it was not changing regulatory requirements for offset calculations establishes that the addition of new section 40 CFR 51.165(a)(3)(ii)(J) was merely a codification of an existing requirement for calculating offsets. 87 86 See 67 FR 80186, 80249. 87 “Technical Support Document for the Prevention of Significant Deterioration and Nonattainment Area New Source Review Regulations,” November 2002, page I-6-11. The need to establish a regulatory requirement for calculating offsets was perhaps necessary in light of the numerous changes to NSR applicability promulgated throughout the 2002 NSR Reform Rule. See, e.g., 67 FR 80186, 80189-91; see also, 67 FR 80241 (“Our decision is based primarily on our belief that the NSR program will work better as a practical matter and will produce better environmental results if all five of the new applicability provisions are adopted and implemented.”) Conclusion: The EPA's 1996 SIP Action Was Inconsistent With the Act and Regulations For the reasons we articulate today, and that we articulated in the 2023 LA/LD, the MDAQMD's program that we approved in 1996 is not consistent with the requirements of the Act and its implementing regulations. The EPA acknowledges that its 2023 disapproval of Rule 1304(C)(2)(d) is at odds with its 1996 approval of the MDAQMD's rules that allowed facilities to use emissions reductions that were previously relied upon as a basis for using a PTE-to-PTE test to not require a project to obtain offsets. The EPA's 1995 TSD and 1995-1996 rulemaking approving the MDAQMD's NNSR program do not explain how the EPA reconciled the MDAQMD's program's departure from the requirements that existed at the time (and continue to exist) in CAA section 173(c)(1), 40 CFR 51.165(a)(3)(i), 40 CFR 51.165(a)(3)(ii)(G), and the not-yet-codified 40 CFR 51.165(a)(3)(ii)(J), which the EPA promulgated in 2002. The EPA's 2023 LA/LD, however, does explain our disapproval of Rule 1304(C)(2)(d) in light of applicable statutory and regulatory requirements. The preceding paragraphs describe the EPA's interest in exploring options for flexibility contemporaneously with our 1995-1996 rulemaking to approve MDAQMD's NNSR program. For example, from at least 1993 to 1996, the EPA, CARB, and the MDAQMD discussed how to calculate emissions changes for applicability, netting, and ERC purposes. The changes to the MDAQMD program, and the EPA's approval of them, occurred during the years following the passage of the California Clean Air Act (1988), the Federal Clean Air Act Amendments of 1990, and the numerous associated statutory deadlines for the EPA to act on revised NSR programs in the 1990s (similar to today, there were nearly three dozen air districts in California in the 1990s). In July 1996, between the EPA's proposed contingent approval of the MDAQMD's NNSR rules in October 1995 and its final approval of those rules in November 1996, the EPA proposed changes to the federal NSR program that contemplated a PTE-PTE test for NSR applicability and offsets. The timing of the many regulatory changes and proposals that occurred around the same time as the EPA's approval of the MDAQMD's NNSR program is thus helpful context for understanding the EPA's unexplained approval of MDAQMD's provisions that conflict with CAA requirements. However, the EPA did not approve any regulatory revisions during the 1990s or thereafter that would allow the MDAQMD's program, as it existed in 1996 or 2023, to be approved. In 2002, the EPA clarified in its rejection of the 1996 Exhibit B proposal that we were not revising our rules regarding the calculation of reductions in actual emissions for offsetting purposes. 88 Furthermore, in 2002, the EPA codified 40 CFR 51.165(a)(3)(ii)(J) to make explicit in its regulations a requirement for major stationary sources to calculate their offset obligation using a pre-modification baseline of actual emissions (at least when the air district uses actual emissions for reasonable further progress and attainment planning purposes). 88 “Technical Support Document for the Prevention of Significant Deterioration and Nonattainment Area New Source Review Regulations,” November 2002, page I-6-11. The MDAQMD's 1994, 2008, and 2015 attainment plans demonstrate RFP and attainment based on actual emissions, not allowable emissions. 89 Under 40 CFR 51.165(a)(3)(i), which was promulgated by the EPA in 1980, substantially predating the EPA's 1996 approval of the MDAQMD's NNSR rules, the offset baseline must be the actual emissions of the source from which the credit is obtained. Likewise, 40 CFR 51.165(a)(3)(ii)(G) prevents sources in the MDAQMD from relying on emissions reductions that were utilized in a prior permitting action. The EPA's 1996 approval of the MDAQMD's rules does not provide a justification for its conclusions that the MDAQMD's rules satisfied the offsetting requirements of the CAA or its implementing regulations. The EPA recognizes that we are changing our position as stated in our 1995-1996 rulemaking on the MDAQMD's rules on the specific question of whether Rule 1304(C)(2)(d) is consistent with the Act and the NSR regulations. This change in position is because the provisions that we approved in 1996 (which, as noted above, are substantially similar to Rule 1304(C)(2)(d)) were not consistent with the CAA or our regulations at that time. As we wrote in the 1996 and 2002 NSR Reform rules, we are concerned about the potential environmental impacts of an NNSR program such as MDAQMD's that would use the PTE-PTE test along with or because of a unique offset generating scheme. The codification of 51.165(a)(3)(ii)(J) in 2002 meant that, when the EPA analyzed the MDAQMD's NNSR program for approvability in the context of the 2008 ozone NAAQS implementation rule, the program's inconsistency was apparent. MDAQMD Rule 1304(C)(2)(d) is not approvable, even though the EPA approved similar text in 1996. 89 MDAQMD 1994 ROP Plan, October 5, 1994. MDAQMD's 2008 and 2015 ozone NAAQS attainment plans are based on actual emissions. MDAQMD's 2008 and 2015 ozone NAAQS attainment plans are based on actual emissions. The 2008 ozone NAAQS plan is available at: https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf, pp. 7, 34 (EPA approved this plan, see 86 FR 53223 (September 27, 2021).) The 2015 ozone NAAQS is available at: https://www.mdaqmd.ca.gov/home/showpublisheddocument/9693/638131029372000000, pp. 4-5, 24, 80. 4. Comments Regarding Reliance Comment A.4.1: Commenter 01 states that while the EPA may reverse its policy on 1304(C)(2)(d) Offsets, the APA requires the EPA “ `to assess whether there were reliance interests, determine whether they were significant, and weigh any such interests against competing policy concerns,' considering alternatives to accommodate such interests.” 90 The commenter states that the EPA is effectively nullifying valuable 1304(C)(2)(d) Offsets that were purchased with costly reductions in actual emissions on the EPA's promise that they could later be used to offset certain emission increases. The commenter also states that the proposed FIP does not consider these reliance interests or alternatives to the immediate invalidation of the 1304(C)(2)(d) Offsets that have existed with EPA's blessing for over 25 years. 90 Citing Dep't of Homeland Sec. v. Regents of the Univ. of California, 591 U.S. 1, 30, 33 (2020). Response to Comment A.4.1: The EPA has provided a comprehensive explanation in our response to comment A.3.1 regarding our changed position on the approvability of MDAQMD Rule 1304(C)(2)(d). Moreover, the EPA disagrees with the comment to the extent it is asserting that this action invalidates significant reliance interests. Commenter 01 cites Dep't of Homeland Sec. v. Regents of the Univ. of California as support for its assertion that there are reliance interests stemming from Rule 1304(C)(2)(d) and that the EPA failed to consider them in disapproving the provision. 91 In Regents, the Supreme Court ruled against the government, finding that the government's decision to rescind the Deferred Action on Childhood Arrivals (“DACA”) program was arbitrary and capricious under the APA. 92 DACA recipients (as well as their parents, under the related “DAPA” program) “enjoy[ed] . . . forbearance, work eligibility, and other benefits” under the programs. 93 The Supreme Court held that the government failed to provide a “reasoned explanation for its action” because it “failed to consider the conspicuous issues of whether to retain forbearance and what if anything to do about the hardship to DACA recipients.” 94 91 591 U.S. 1, 30, 33 (2020). 92 Id. at 33. 93 Id. at 2. 94 Id. at 35. Regents, however, is materially distinguishable from the EPA's disapproval of Rule 1304(C)(2)(d); the case does not support the MDAQMD's assertions regarding reliance interests. In Regents, while the Attorney General had determined that the work-authorization aspect of the DACA program was illegal following an adverse judicial decision about the DAPA program, the Attorney General's opinion was not comprehensive; i.e., the Attorney General had “neither addressed the [deportation] forbearance policy at the heart of DACA nor compelled [the government] to abandon that policy.” 95 Further, as the Supreme Court found, the government had offered “no reason for terminating forbearance.” 96 95 Id. at 28. 96 Id. In contrast, the EPA, in disapproving Rule 1304(C)(2)(d), proposed and finalized a comprehensive, outcome-controlling legal determination that Rule 1304(C)(2)(d) fails to comply with federal law. Regents does not stand for the proposition that agencies must consider reliance interests when federal law compels the outcome. Also, unlike the situation in Regents, the EPA provided an opportunity for public comment and has provided reasoned responses to all comments received. Thus, EPA fulfilled its obligations under the APA. Furthermore, the commenter's characterization of 1304(C)(2)(d) Offsets as “valuable” and as “purchased with costly reductions in actual emissions” is fundamentally a claim that sources hold compensable property rights in 1304(C)(2)(d) Offsets. 97 The EPA has repeatedly rejected similar assertions in the past and has never recognized a property right associated with emission reductions to be used as offsets. 98 Also, it is unclear to what extent 1304(C)(2)(d) Offsets were, in fact, “purchased.” In the MDAQMD, as in all nonattainment areas, construction of a new major stationary source requires the facility owner to obtain emission reduction credits to offset the emissions from the new construction. Nonattainment NSR permits issued by the MDAQMD to such sources are contingent on the surrender of credits to offset emissions up to the allowable limits in the permits. The EPA acknowledges that facility owners purchase emission reduction credits and surrender them to obtain permits with allowable emissions limits to allow them to proceed with construction. The MDAQMD, however, claims that its rules should additionally allow those same emission reduction credits, which facility owners have already surrendered to obtain allowable emissions limits that authorized the facility to emit up to those levels, to be re-used to offset emissions increases associated with future construction projects. This system is inconsistent with federal NNSR requirements in multiple respects and therefore further delegitimizes any claim that 1304(C)(2)(d) Offsets are a property right with a compensable value. 97 MDAQMD has made similar assertions in the past. See, e.g., MDAQMD Regulation XIII Final Staff Report, March 22, 2021, page 44, footnote 188: “If the amount of offsets needed is calculated using the HAE of the emissions unit(s) involved many Facilities view this as a taking of property (namely the previously allowed PTE that was fully offset) without just compensation.” 98 See, e.g., Letter from John S. Seitz, Director, EPA Office of Air Quality Planning and Standards to Peter F. Hess, President, California Air Pollution Control Officers Association Joint Commission of Regulators & Business, July 8, 1996 (“Finally, your letter states that it is unfair for owners of banked ERC's not to be able to sell or use them. However, please note that although ERCs are a limited authorization to emit, they are not and never have been an absolute property right.”); EPA, Office of Air and Radiation, “Improving Air Quality with Economic Incentive Programs,” January 2001, p. 80 (“Emission reductions and emission allowances generated, traded, and used in emission trading EIPs do not have property rights associated with them. They simply represent a limited authorization to emit for the entity holding the tradable reduction or allowance.”); see also South Coast Air Quality Management District (SCAQMD) Rule 2007, “Trading Requirements,” most recently approved into the California SIP at 73 FR 38122 (July 3, 2008), which states, in relevant part, at subsection (b)(3) that a RECLAIM Trading Credit “shall not constitute a security or other form of property . . .” First, as explained our response to comment A.2.2, the EPA's regulations at 40 CFR 51.165(a)(3)(G) do not allow emission reduction credits to be re-used in subsequent permitting actions of, for example, facility modifications. The MDAQMD's rules allow emission reduction credits that have already been applied to initial construction of a new facility to be used to offset emissions increases in the future and are therefore inconsistent with NNSR requirements. Second, as also explained in our response to comment A.2.1, the EPA's regulations at 40 CFR 51.165(a)(3)(i) allow the use of allowable emissions to be used as a baseline to calculate emission reductions that will be used as offsets only if demonstrations of RFP and attainment are also based on allowable emissions. MDAQMD's RFP and attainment demonstrations are based on actual emissions; therefore, MDAQMD's calculation of reductions to be used as offsets must also be based on actual emissions. Third, since 2002, the EPA's regulations have clearly specified that emissions increases resulting from major modifications must be offset through a calculation that uses actual emissions before the modification. In fact, as explained above in our response to comment A.3.1, as part of the 2002 NSR Reform Rule, the EPA explicitly rejected a calculation that would use potential emissions as a baseline in this calculation. MDAQMD's provision for 1304(C)(2)(d) Offsets clearly allow sources to offset emissions increases through reductions in allowable emissions and therefore fail to ensure compliance with the requirement that sources offset emissions increases through reductions in actual emissions. The fact that 1304(C)(2)(d) Offsets are inconsistent with federal law invalidates any claim of property right or compensable value. Comment A.4.2: Commenter 05 states that the removal of Rule 1304(C)(2)(d) would “create a discriminatory situation, where a facility that has previously provided offsets for emission sources/processes is not differentiated from one that has received a permit without providing offsets.” Response to Comment A.4.2: As explained in the response to comment A.4.1, Rule 1304(C)(2)(d) Offsets do not comply with CAA 173 and federal NNSR requirements for offsetting emissions increases at major stationary sources. The permit application process should be sufficient to enable the reviewing authority to determine the quantity and status of offset credits and reductions; diligent implementation of the federal requirements will avoid confusion and unfair outcomes. Rule 1304(C)(2)(d) Offsets are not valid under the CAA or the federal NNSR regulations. The FIP will bring the MDAQMD's offset regulations into compliance with the CAA and federal regulations. The EPA disagrees that the removal of Rule 1304(C)(2)(d) would create a discriminatory situation. Comment A.4.3: Commenter 08 states that MDAQMD Rule 1304(C)(2)(d) has developed a provision for major facilities to utilize existing allowable emissions as a mechanism to generate simultaneous emissions reductions during another permitting action and that this provision has been in effect since the 1990s. Commenter 08 urges the EPA to consider how the sudden change of a provision in effect for years will impact regulated facilities. Response to Comment A.4.3: As explained above in the responses to comments A.2.1 and A.2.2, the MDAQMD's Rule 1304(C)(2)(d) is not consistent with the CAA or the EPA's NNSR regulations. The EPA disagrees with the commenter's suggestion that the FIP represents a “sudden change,” because the calculation method in Rule 1304(C)(2)(d) was specifically prohibited in the EPA's 2002 NSR Reform rule, which included 40 CFR 51.165(a)(3)(ii)(J). 99 Moreover, the MDAQMD and regulated entities in its jurisdiction have been aware of the EPA's position regarding Rule 1304(C)(2)(d) and the MDAQMD's practices regarding its emissions offset calculations since at least March 2021, when the MDAQMD responded to the EPA's concerns about Rule 1304(C)(2)(d) in the “Appendix G to Staff Report” document (an appendix to its 2021 final staff report and rules that the MDAQMD adopted), which is a public document. In December 2019, prior to the release of that document, the EPA wrote to the MDAQMD to inform the MDAQMD of its concern regarding the offset calculation method allowed under what is currently Rule 1304(C)(2)(d). 100 The EPA, the District, and CARB then committed significant resources to meeting, on a bi-weekly basis from approximately March 2020 to June 2021, for detailed discussions to address the deficiencies in the MDAQMD's NSR program. The EPA's obligation to promulgate a FIP is a consequence of a finding of failure to submit published in the Federal Register in February 2017; the subject of a lawsuit filed in the U.S. District Court for the Northern District of California in June 2022; and a court-ordered obligation as the result of a consent decree that was subject to a 30-day comment period as announced in the Federal Register on April 5, 2023. 99 Rule 1304(C)(2)(d) is also inconsistent with the federal regulations promulgated in 1980. 100 Memorandum, Lisa Beckham, EPA Region IX, to Brad Poiriez, MDAQMD, “Re: Mojave Desert Air Quality Management District New Source Review Program,” December 19, 2019. A copy of the letter is available in the docket for this rulemaking action. Finally, the EPA notes that the FIP will apply prospectively, that is, to new major stationary sources and major modifications at existing major sources that commence construction after the effective date of the FIP. 5. Comments on Potential Impacts and Implementation of the FIP Comment A.5.1: Commenter 01 states that the proposed FIP is arbitrary and capricious because the EPA fails to consider important aspects of the problem before the Agency, including the impacts of the proposed FIP on air quality. The commenter states that the EPA fails to substantiate its claim that the proposed FIP will result in greater emission reductions. The commenter states that this claim is false because Rule 1304(C)(2)(d) Offsets incentivize operators to voluntarily lower actual emissions to ensure the greatest volume of creditable emissions reductions for future projects. The commenter states that the EPA's disapproval of offset calculations allowed under Rule 1304(C)(2)(d) encourages source operators to retain older, dirty units and to replace those old and dirty units with comparably dirty units when the units fail. The commenter states that, under the proposed FIP, operators are particularly incentivized to run equipment to produce the maximum amount of emissions for the two years prior to applying for a modification to secure creditable emissions reductions. Similarly, commenters 07, 08, and 09 state that MDAQMD Rule 1304(C)(2)(d) enables permit holders to plan for equipment upgrades and modernizations that will ultimately reduce actual major source emissions in the ozone nonattainment area. These commenters state that that removal of these offset provisions will hinder emission reduction projects and burden facilities with significant increased costs. Commenter 05 adds that the loss of previous offsets would create a disincentive for facilities to be upgraded to new technology. Commenter 09 states that regulated facilities may elect to cancel business expansions, facility improvements, or other major capital investments that would modernize equipment or otherwise benefit air quality. Response to Comment A.5.1: The EPA disagrees with the comments. Preliminarily, we note that the commenters do not provide any analysis or support for their assertions that Rule 1304(C)(2)(d)'s approach to calculating offsets results in greater emission reductions than the federal requirements for offsets. We also note that in the 2002 NSR Reform Rule, we rejected an option similar to Rule 1304(C)(2)(d) that would have allowed sources “to generate netting credits and ERCs for offsets based on potential hourly emissions, even if never actually emitted,” because we had determined that such an approach “could sanction greater actual emission increases to the environment, often from older facilities, without any preconstruction review.” 101 In the 1996 NSR proposal, the EPA stated that its analysis of actual and allowable emissions in two states showed that “typical source operation frequently does result in actual emissions that are substantially below allowable emissions levels.” 102 In other words, the difference between actual and potential emissions may be up to 70 percent, depending on source category and pollutant. 103 Using actual emissions as a baseline to calculate emissions will reflect emissions increases and require offsets that would not be captured or regulated if allowable emissions were used as a baseline. As the EPA also stated in response to comments in the rulemaking for the 2002 NSR Reform Rule, “The use of potential emissions for offset credits is in direct conflict with the Act. Under section 172(c) of the Clean Air Act, emissions offsets must be based on reductions in actual emissions. Allowing sources to get credit for reductions in potential emissions would result in `paper' credits, and could allow sources to receive credit for reducing emissions that never actually occurred.” 104 Similarly, the MDAQMD Rule 1304(C)(2)(d) would allow sources to receive credit for “reductions” in emissions that do not actually occur and use them to offset actual emissions increases. 101 67 FR 80186, 80205. 102 61 FR 38250, 38270. 103 Id. 104 U.S. EPA Office of Air Quality Planning and Standards, Technical Support Document for the Prevention of Significant Deterioration and Nonattainment Area New Source Review Regulations (November 2002) at page I-6-11, available at https://www.epa.gov/sites/default/files/2015-12/documents/nsr-tsd_11-22-02.pdf. Moreover, we note that the federal regulations, such as 40 CFR 51.165(a)(3)(ii)(J) and 40 CFR 51.165(a)(3)(ii)(G), are more protective than Rule 1304(C)(2)(d). For example, 40 CFR 51.165(a)(3)(ii)(J) requires facilities to offset the difference between pre-project actual emissions and post-project allowable emissions that are associated with each major modification, and 40 CFR 51.165(a)(3)(ii)(G) requires those actual emissions reductions to be reductions that the facility has not relied upon in a prior permitting action. The EPA also disagrees with comments claiming that the EPA's disapproval of Rule 1304(C)(2)(d) will encourage retention of older greater-emitting units and incentivize sources to operate and emit more. Rather, the FIP encourages sources to take enforceable limits that reflect the source's actual emissions. We note in addition that the CAA does not require sources to offset emissions that they do not emit or intend to emit. Regarding commenters' concern that the FIP would discourage emissions-reduction projects, we note that a project that reduces actual emissions would not be subject to NSR requirements to offset and install pollution controls. Installation of cleaner equipment is therefore not in jeopardy under the FIP. Only projects at major stationary sources that would increase emissions will be required to undergo review to determine if emissions increases will trigger requirements to install emissions controls and to offset emissions increases. It is therefore unclear how sources would be incentivized to retain older, dirtier equipment if the installation of newer, cleaner equipment would result in emissions decreases. Finally, we disagree that Commenter 01's quotations from the 2002 NSR Reform Rule support its claims that Rule 1304(C)(2)(d) Offsets “incentivize operators to voluntarily lower actual emissions to ensure the greatest volume of creditable emissions reductions for future projects.” The statements quoted by Commenter 01 are irrelevant to this action, because they do not involve offsets. Comment A.5.2: Commenter 01 states that the EPA fails to address the practical impacts the proposed FIP will have on facilities. More specifically, the commenter states that it is unclear what a new minor facility, existing minor facility remaining under the applicability threshold, or a synthetic minor facility retaining its permitted limitation on PTE would need to submit to the EPA to show that it is not subject to the FIP requirements. The commenter requests that the EPA clarify whether all new or modified facilities would need to submit applications to the EPA and that it appears every permit application would be required to be duplicated in EPA Region 9's electronic permit application system to ensure that a minor facility has not become subject to the FIP. The commenter also states that while the MDAQMD has the staffing and expertise to properly analyze and process applications under the current SIP, it has neither the time nor the resources to devote to analyzing each application for FIP applicability purposes. Response to Comment A.5.2: As explained in the EPA's proposed action, the FIP will apply “(i) If you propose to construct a new major stationary source and your source is a major source of nonattainment pollutant(s)” or “(ii) If you own or operate a major stationary source and propose to construct a major modification, where your source is a major source of nonattainment pollutant(s) and the proposed modification is a major modification for the nonattainment pollutant.” 105 The relevant terms in the quoted provisions are defined in the definitions section of the FIP, in section 40 CFR 52.285(b). If the applicant believes that its proposed project would constitute a new major source or a major modification under the FIP, it is required to submit an application to the EPA or the designated reviewing authority (if not the EPA) to obtain a permit under the FIP. It is the permit applicant's responsibility to comply with the FIP provisions. Failure to obtain a permit in accordance with the FIP prior to construction and operation of the new or modified source would be a federally enforceable violation of the FIP and the CAA. Under the FIP, existing minor facilities remaining under the applicability threshold and synthetic minor facilities retaining the permitted limitation on PTE would not need to apply for a permit under the FIP unless they make a modification that would constitute a major stationary source by itself. 106 105 89 FR 56237, 56247; 40 CFR 52.285(c)(1)(i)-(ii) (as proposed). 106 Appendix S, section II.A.4(i)( c ). Regarding Commenter 01's concern over the MDAQMD's time and resources to devote to analyzing applications, the EPA would be responsible for implementation of the FIP unless and until the MDAQMD is delegated authority to implement it. The MDAQMD would only be delegated authority to implement the proposed FIP if it requested delegation. Under the FIP as implemented by the EPA, applicants would need to submit their applications to the EPA, not to the MDAQMD. Comment A.5.3: Commenter 04 states that this action is crucial for ensuring that regions with air pollutant concentrations above the NAAQS are protected from further environmental degradation. This commenter presents information on the detrimental impact of air pollution to health and notes that these effects are felt mainly by minority communities, such as low-income families or people of color, who are more likely to live in areas with higher pollution levels. The commenter supports approval of the FIP and states that the FIP will provide a necessary regulatory framework to manage and reduce emissions, enhancing efforts to meet and maintain NAAQS in the region. Response to Comment A.5.3: The EPA has noted the commenter's support of this action. Comment A.5.4: Commenters 01, 05, 06, 07, and 08 express concern about the permit processing timeline under the proposed FIP. Commenter 01 states that pursuant to these timelines, approximately 90 percent of permit applications submitted to the MDAQMD are processed and issued within 90 days but that no similar timelines are proposed in the FIP and that this may result in a detrimental impact to sources, especially minor facilities, to the extent they cannot proceed with their modifications due to the necessity of awaiting an EPA determination. Commenter 05 states that the FIP creates the potential for delays in permit issuances due to conflicts between California law and the FIP on items such as the completeness determination, BACT determinations, and offsetting and the use of SERs, and Commenter 06 adds that the differences between the requirements under the SIP and the FIP will add a level of complexity to the permit application process and in ensuring facilities comply with the permits. Commenters 05 and 06 state that potential timing issues would have an adverse impact on the national security mission at Department of Defense facilities because a facility cannot proceed with construction until it receives two permits—one from MDAQMD, and one from EPA. Commenters 01, 07, and 08 request that the EPA provide timeline estimates for the proposed permit processing. Response to Comment A.5.4: Neither the CAA nor the existing NNSR FIP that applies in tribal areas, which is very similar to the FIP, includes a requirement for the reviewing authority to render a decision on a permit application within a certain period of time. Likewise, the EPA has not incorporated any temporal requirement to the issuance of permits under this FIP. Under the CAA, the EPA is required to make a permit decision on a Prevention of Significant Deterioration (PSD) permit application within one year after the application is determined complete by the EPA. 107 While no analogous provision exists in Part D of Title I of the CAA, which governs Plan Requirements for Nonattainment Areas, the EPA will endeavor to follow the PSD permit application processing timeline when we review applications submitted under the finalized FIP. Also, should the MDAQMD receive delegation as a reviewing authority of the FIP, it could consolidate its review under the FIP with its review under the SIP. 107 CAA section 165(c) (42 U.S.C. 7465(c)). Finally, it is not clear how applicants for minor source permits—either new or modified sources—would be affected by the timing issue because the proposed FIP does not affect minor NSR. 108 108 See 40 CFR 52.285(c)(1)(i)-(ii); 89 FR 56237, 56247. Comment A.5.5: Commenter 01 states that the proposed FIP includes “de minimis” provisions that allow emissions increases of less than 25 tons per year aggregated with all other net increases from the facility over five consecutive calendar years to not require BACT or offsets. Commenter 01 states further that this provision is contrary to California law, which requires any emission unit that emits or has the potential to emit over 25 lbs per day to be equipped with BACT. The commenter also states that the Protect California Air Act of 2003 prohibits California air districts, including the MDAQMD, from “backing off” their NNSR programs to allow the implementation of requirements less stringent than those in place as of December 30, 2002. The commenter states that because the MDAQMD's current SIP rules have been in place since before 1996, they cannot now be avoided, and that the FIP creates the potential for massive confusion and misunderstanding among regulated facilities that are located in the MDAQMD. Response to Comment A.5.5: If the MDAQMD believes that the provisions in its current SIP, which EPA acted upon in the 2023 LA/LD, 109 will result in greater emissions reductions than the application of the de minimis provisions proposed in the FIP, there should be no conflict between the FIP and the MDAQMD's SIP. The EPA is not required to apply state-level requirements even if, in some cases, the application of the state-level requirements would result in a scenario where emissions reductions would be greater than under federal requirements. Likewise, in the situation described in the comment, a permit applicant's compliance with a more stringent MDAQMD requirement would enable the applicant to satisfy the federal requirement. The de minimis requirement that the commenter references, which is in CAA section 182(c)(6), states that a source cannot be considered “de minimis” for NNSR applicability purposes unless its net emissions increases over the past five consecutive calendar years are less than 25 tons per year. 110 It is not clear how the federal requirement is “directly contrary” to the California law that, according to the commenter, “requir[es] any emissions unit which emits or has the potential to emit over 25 LBS per day to be equipped with BACT;” the California requirement sets a threshold for BACT, based on potential emissions of 25 pounds per day, whereas the federal requirement says that the source must undergo NNSR ( e.g., satisfy BACT and offsets requirements) if net emissions increases over the last five consecutive calendar years exceed 25 tons per year. It would appear that in most, if not all, cases a source's compliance with the California requirement would also comply with the federal requirement. 109 88 FR 42258 (June 30, 2023). 110 The de minimis requirement at CAA section 182(c)(6) was a part of the 1990 CAA Amendments. Finally, the EPA finds this comment from the MDAQMD confusing given that the MDAQMD stated elsewhere in its comments that its August 7 SIP submittal addresses all but one of the deficiencies EPA identified in the 2023 LA/LD, which the EPA understands to be a reference to Rule 1304(C)(2)(d). 111 The EPA's 2023 LA/LD rulemaking also found the MDAQMD's rules as adopted in 2021 to be deficient because they did not ensure compliance with CAA 182(c)(6). Based on discussions with the MDAQMD after we finalized the 2023 LA/LD, we had understood that the MDAQMD intended that its revised rules as adopted on March 25, 2024, and submitted to the EPA on August 7, 2024, would address the concerns identified in our LA/LD, including adding the missing de minimis provision. While our full review of those rules will be attentive to this issue, it is not clear why the MDAQMD would object to the inclusion of the de minimis provision in the FIP. 111 MDAQMD August 8, 2024 comment letter: “USEPA and MDAQMD reached resolution of all but one of the purported deficiencies and the MDAQMD thereafter modified its NNSR rules on 3/25/2024.” In the comments Brad Poiriez, on behalf of the MDAQMD, provided during the July 24, 2024 public hearing, Mr. Poiriez mentioned the “pending SIP submission containing revisions to the NNSR rules that were agreed upon by the District and US EPA.” (Transcript page 16). Comment A.5.6: Commenters 05, 06, 07, 08 and 09 state that permit holders may also face increased permit fees, increased permit processing times, and possible inconsistencies between the duplicate EPA permits and district permits. The commenters state that dual permits and [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2024-30513. Public record. Not legal advice.