Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule

Federal RegisterOct 27, 2009

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 51, 52, 70, and 71

[EPA-HQ-OAR-2009-0517; FRL-8966-7]

RIN 2060-AP86

Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule

AGENCY:

Environmental Protection Agency (EPA).

ACTION:

Proposed rule.

SUMMARY:

EPA is proposing to tailor the major source applicability thresholds for greenhouse gas (GHG) emissions under the Prevention of Significant Deterioration (PSD) and title V programs of the Clean Air Act (CAA or Act) and to set a PSD significance level for GHG emissions. This proposal is necessary because EPA expects soon to promulgate regulations under the CAA to control GHG emissions and, as a result, trigger PSD and title V applicability requirements for GHG emissions. If PSD and title V requirements apply at the applicability levels provided under the CAA, State permitting authorities would be paralyzed by permit applications in numbers that are orders of magnitude greater than their current administrative resources could accommodate. On the basis of the legal doctrines of “absurd results” and “administrative necessity,” this proposed rule would phase in the applicability thresholds for both the PSD and title V programs for sources of GHG emissions. The first phase, which would last 6 years, would establish a temporary level for the PSD and title V applicability thresholds at 25,000 tons per year (tpy), on a “carbon dioxide equivalent” (CO

e) basis, and a temporary PSD significance level for GHG emissions of between 10,000 and 25,000 tpy CO

e. EPA would also take other streamlining actions during this time. Within 5 years of the final version of this rule, EPA would conduct a study to assess the administrability issues. Then, EPA would conduct another rulemaking, to be completed by the end of the sixth year, that would promulgate, as the second phase, revised applicability and significance level thresholds and other streamlining techniques, as appropriate.

DATES:

Comments.

Comments must be received on or before December 28, 2009. Under the Paperwork Reduction Act, comments on the information collection provisions are best assured of having full effect if the Office of Management and Budget (OMB) receives a copy of your comments on or before November 27, 2009.

Public Hearing:

If anyone contacts us requesting to speak at a public hearing on or before November 16, 2009, we will hold a public hearing approximately 30 days after date of publication in the

Federal Register.

ADDRESSES:

Submit your comments, identified by Docket ID No. EPA-HQ-OAR-2009-0517 by one of the following methods:

•

http://www.regulations.gov.

Follow the online instructions for submitting comments. Attention Docket ID No. EPA-HQ-OAR-2009-0517.

•

E-mail:

a-and-r-docket@epa.gov.

Attention Docket ID No. EPA-HQ-OAR-2009-0517.

•

Fax:

(202) 566-9744. Attention Docket ID No. EPA-HQ-OAR-2009-0517.

•

Mail:

EPA Docket Center, EPA West (Air Docket), Attention Docket ID No. EPA-HQ-OAR-2009-0517, U.S. Environmental Protection Agency, Mailcode: 2822T, 1200 Pennsylvania Avenue, NW., Washington, DC 20460. Please include a total of 2 copies. In addition, please mail a copy of your comments on the information collection provisions to the Office of Information and Regulatory Affairs, Office of Management and Budget (OMB), Attn: Desk Officer for EPA, 725 17th Street, NW., Washington, DC 20503.

•

Hand Delivery:

U.S. Environmental Protection Agency, EPA West (Air Docket), 1301 Constitution Avenue, Northwest, Room 3334, Washington, DC 20004, Attention Docket ID No. EPA-HQ-OAR-2009-0517. Such deliveries are only accepted during the Docket's normal hours of operation, and special arrangements should be made for deliveries of boxed information.

Instructions.

Direct your comments to Docket ID No. EPA-HQ-OAR-2009-0517. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at

http://www.regulations.gov,

including any personal information provided, unless the comment includes information claimed to be Confidential Business Information (CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through

http://www.regulations.gov

or e-mail. The

http://www.regulations.gov

Web site is an “anonymous access” system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e-mail comment directly to EPA without going through

http://www.regulations.gov,

your e-mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD-ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, avoid any form of encryption, and be free of any defects or viruses. For additional information about EPA's public docket, visit the EPA Docket Center homepage at

http://www.epa.gov/epahome/dockets.htm.

Docket.

All documents in the docket are listed in the

http://www.regulations.gov

index. Although listed in the index, some information is not publicly available,

e.g.,

CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in

http://www.regulations.gov

or in hard copy at the Air and Radiation Docket and Information Center, EPA/DC, EPA 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 Air Docket is (202) 566-1742.

FOR FURTHER INFORMATION CONTACT:

Mr. Joseph Mangino, Air Quality Policy Division, Office of Air Quality Planning and Standards (C504-03), Environmental Protection Agency, Research Triangle Park, NC 27711; telephone number: (919) 541-9778; fax number: (919) 541-5509; e-mail address:

mangino.joseph@epa.gov.

To request a public hearing, please contact Pam Long, Air Quality Planning Division, Office of Air Quality Planning and Standards (C504-03), Environmental Protection Agency, Research Triangle Park, NC 27711; telephone number: (919) 541-0641; fax number: (919) 541-5509 no later than November 16, 2009 to request a hearing.

SUPPLEMENTARY INFORMATION:

I. Preamble Glossary of Terms and Abbreviations

The following are abbreviations of terms used in the preamble.

APA Administrative Procedure Act

ANPR Advance Notice of Proposed Rulemaking

APA Administrative Procedure Act

AQRV Air Quality Related Value

BACT Best Available Control Technology

CAA Clean Air Act

CAM Compliance Assurance Monitoring

CBI Confidential Business Information

CFR Code of Federal Regulations

Methane

Carbon Dioxide

e Carbon Dioxide Equivalent

CO Carbon Monoxide

EG Emission Guidelines

EPA U.S. Environmental Protection Agency

FERC Federal Energy Regulatory Commission

FIP Federal Implementation Plan

FLM Federal Land Manager

FTC Federal Trade Commission

FTE Full-Time Equivalent

GHG Greenhouse Gas

GWP Global Warming Potential

HAP Hazardous Air Pollutant

HFC Hydrofluorocarbon

HFE Hydrofluorinated Ether

ICR Information Collection Request

IPCC Intergovernmental Panel on Climate Change

MWCs Municipal Waste Combustion Facilities

NAAQS National Ambient Air Quality Standard

NESHAP National Emission Standards for Hazardous Air Pollutants

NOD Notice of Deficiency

Nitrogen Oxides

NSPS New Source Performance Standard

NSR New Source Review

OMB Office of Management and Budget

OTAQ Office of Transportation and Air Quality

PFC Perfluorocarbon

ppm Parts Per Million

PSD Prevention of Significant Deterioration

PTE Potential to Emit

RIA Regulatory Impact Analysis

SBA Small Business Administration

Sulfur Dioxide

Sulfur Hexafluoride

SIP State Implementation Plan

Tg Teragrams

TIP Tribal Implementation Plan

tpy Tons Per Year

UNFCCC United Nations Framework Convention on Climate Change

II. General Information

A. Does this action apply to me?

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

Industry Group

NAICS

Agriculture, fishing, and hunting

11.

Mining

21.

Utilities (electric, natural gas, other systems)

2211, 2212, 2213.

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

311, 312, 313, 314, 315, 316.

Wood product, paper manufacturing

321, 322.

Petroleum and coal products manufacturing

32411, 32412, 32419.

Chemical manufacturing

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

Rubber product manufacturing

3261, 3262.

Miscellaneous chemical products

32552, 32592, 32591, 325182, 32551.

Nonmetallic mineral product manufacturing

3271, 3272, 3273, 3274, 3279.

Primary and fabricated metal manufacturing

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

Machinery manufacturing

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

Computer and electronic products manufacturing

3341, 3342, 3343, 3344, 3345, 4446.

Electrical equipment, appliance, and component manufacturing

3351, 3352, 3353, 3359.

Transportation equipment manufacturing

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

Furniture and related product manufacturing

3371, 3372, 3379.

Miscellaneous manufacturing

3391, 3399.

Waste management and remediation

5622, 5629.

Hospitals/Nursing and residential care facilities

6221, 6231, 6232, 6233, 6239.

Personal and laundry services

8122, 8123.

Residential/private households

8141.

Non-Residential (Commercial)

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

North American Industry Classification System.

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

In addition to being available in the docket, an electronic copy of this proposal will also be available on the World Wide Web. Following signature by the EPA Administrator, a copy of this action will be posted on the EPA's New Source Review (NSR) Web site, under Regulations & Standards, at

http://www.epa.gov/nsr

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

Submitting CBI.

Do not submit this information to EPA through

http://www.regulations.gov

or e-mail. Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket. Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. Send or deliver information identified as CBI only to the following address: Roberto Morales, OAQPS Document Control Officer (C404-02), U.S. EPA, Research Triangle Park, NC 27711, Attention Docket ID No. EPA-HQ-OAR-2009-0517.

Tips for preparing your comments.

When submitting comments, remember to:

• Identify the rulemaking by docket number and other identifying information (subject heading,

Federal Register

date and page number).

• Follow directions—The agency may ask you to respond to specific questions or organize comments by referencing a

Code of Federal Regulations (CFR) part or section number.

• Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes.

• Describe any assumptions and provide any technical information and/or data that you used.

• If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

• Provide specific examples to illustrate your concerns, and suggest alternatives.

• Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

• Make sure to submit your comments by the comment period deadline identified.

D. How can I find information about a possible public hearing?

People interested in presenting oral testimony or inquiring if a hearing is to be held should contact Ms. Pamela S. Long, New Source Review Group, Air Quality Policy Division (C504-03), U.S. EPA, Research Triangle Park, NC 27711, telephone number (919) 541-0641. If a hearing is to be held, persons interested in presenting oral testimony should notify Ms. Long at least 2 days in advance of the public hearing. Persons interested in attending the public hearing should also contact Ms. Long to verify the time, date, and location of the hearing. The public hearing will provide interested parties the opportunity to present data, views, or arguments concerning these proposed rules.

E. How is the preamble organized?

The information presented in this preamble is organized as follows:

I. Preamble Glossary of Terms and Abbreviations

II. General Information

A. Does this action apply to me?

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

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

D. How can I find information about a possible public hearing?

E. How Is the preamble organized?

III. Overview of Proposed Rule

IV. Background

A. What are greenhouse gases and their sources?

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

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

D. What is the current treatment of GHG emissions under the title V and PSD programs and what future actions may change that treatment?

V. What would be the administrative burdens of implementing PSD and title V at the current permitting thresholds?

A. PSD Implications

B. Title V Implications

C. ANPR Comments

VI. What is the legal rationale for this proposed Action?

A. “Absurd Results” Doctrine

B. “Administrative Necessity” Doctrine

C. Step-by-Step Process

D. What were the ANPR comments received on GHG tailoring options for regulating GHG emissions under PSD and title V?

VII. Streamlining options and tools To address the administrative burdens of PSD and title V for GHGs

A. Permit Streamlining Techniques for PSD and Title V

B. Implementation of Streamlining Techniques and Overall Approach To Administering PSD and Title V Programs

C. Strategies for Obtaining GHG Reductions From Sources Under the Proposed GHG Permit Thresholds

VIII. Description and Rationale of Proposed Action

A. Proposed Permitting Thresholds for GHGs

B. What is the definition of the GHG pollutant for the proposed permitting thresholds?

C. What is the rationale for selecting the proposed GHG permitting thresholds for PSD?

D. What is the rationale for selecting the proposed first-phase GHG permitting threshold for title V?

E. how will EPA assess the GHG permitting thresholds in the first phase of the tailoring program, and how will epa develop the second phase?

IX. What would be the economic impacts of the proposed rule?

A. What entities are affected by this rule?

B. What are the estimated benefits to small sources due to regulatory relief?

C. What are the economic impacts of this rulemaking?

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

X. What implementation issues are related to this proposal?

A. CAA Provisions Concerning SIP Requirements for PSD Programs, State Submittal Requirements, and EPA Action

B. What PSD-Specific implementation considerations are there?

C. What title V-Specific implementation issues are there?

D. GHGs and title V permit fees

E. Implementation assistance and support

XI. Statutory and Executive Order Reviews

A. Executive Order 12866—Regulatory Planning and Review

B. Paperwork Reduction Act

C. Regulatory Flexibility Act

D. Unfunded Mandates Reform Act

E. Executive Order 13132—Federalism

F. Executive Order 13175—Consultation and Coordination With Indian Tribal Governments

G. Executive Order 13045—Protection of Children From Environmental Health Risks and Safety Risks

H. Executive Order 13211—Actions Concerning Regulations That Significantly Affect Energy Supply, Distribution, or Use

I. National Technology Transfer and Advancement Act

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

K. Determination Under Section 307(d)

XII. Statutory Authority

III. Overview of Proposed Rule

EPA is proposing to tailor the major source applicability thresholds for GHG emissions under the PSD and title V programs of the CAA by setting first-phase levels under both programs, setting a first-phase PSD significance level

for GHG emissions, undertaking efforts to streamline administrability of the programs, and committing to an assessment of administrability within 5 years and a second-phase rulemaking within 6 years.

“Significant levels” for regulated NSR pollutants are commonly called “significance levels” or “significance thresholds,” and these terms are used interchangeably for purposes of this proposed action.

This proposal is necessary because EPA expects soon to promulgate regulations under the CAA to control GHG emissions from light-duty motor vehicles and, as a result, trigger PSD and title V applicability requirements for GHG emissions. When the light-duty vehicle rule is finalized, the GHGs subject to regulation under that rule would become immediately subject to regulation under the PSD program, meaning that from that point forward, prior to constructing any new major source or major modifications that would increase GHGs, a source owner would need to apply for, and a permitting authority would need to issue, a permit under the PSD program that addresses these increases. Similarly, for title V it would mean that any new or existing source exceeding the major source applicability level for those regulated GHGs, if it did not have a title V permit already, would have 1 year to submit a title V permit application.

If PSD and title V requirements apply at the applicability levels provided under the CAA, many small sources would be burdened by the costs of individualized PSD control technology requirements and permit applications. In addition, State permitting authorities would be paralyzed by enormous numbers of these permit applications; the numbers are orders of magnitude greater than the current inventory of permits and would vastly exceed the current administrative resources of the permitting authorities. Based on the long-established judicial doctrines of

“absurd results” and “administrative necessity,” this proposed rule would phase in PSD and title V applicability. As the first phase, this rule would establish applicability thresholds for both the PSD and title V programs at the level of 25,000 tpy CO

e, and would establish a PSD significance level of between 10,000 and 25,000 tpy CO

e. This rule also marks the beginning of a concerted effort by EPA to streamline administration of the PSD and title V programs as much as possible and as quickly as possible. In addition, EPA commits that, within 5 years of promulgating the first phase, EPA will conduct a study of the permitting authorities' ability to administer the programs going forward, and then, within a year, conduct rulemaking for the second phase of the program. This second phase will either confirm the first-phase permitting levels or establish revised ones or other streamlining techniques. EPA also proposes to identify as the pollutant subject to PSD and title V for applicability purposes the group of up to six GHG emissions, each one weighted for its global warming potential, that are included in regulations for their control under the CAA. EPA also proposes to conform its action on PSD State implementation plans (SIPs) and title V programs to match the proposed Federal applicability requirements.

More specifically, following this overview, section IV of this preamble provides background information as to the nature of GHG emissions and the general requirements of the PSD and title V programs. Currently, PSD applies to sources that emit at least 100 or 250 (depending on the source category) tpy of pollutants subject to regulation under the CAA, and title V generally applies to sources that emit at least 100 tpy of pollutants subject to regulation under the CAA. Currently, PSD and title V requirements apply on the basis of emissions applicability thresholds that are pollutant-specific mass emissions rates expressed in tpy. Under PSD, construction of a stationary source that has the potential to emit (PTE) a regulated NSR pollutant in an amount exceeding 100 or 250 tpy (depending on the source category) (the “major stationary source” threshold, in the terminology of EPA regulations) triggers PSD permitting requirements. PSD permitting requirements are also triggered if a major stationary source undertakes a modification that is projected to increase emissions of a regulated NSR pollutant above an emissions threshold (the “significance level”). For any particular pollutant, this level is zero unless and until EPA establishes one on the basis of

de minimis

emissions or administrative necessity. Under title V, a source with emissions exceeding a “major source” emissions threshold—generally 100 tpy on a PTE basis—triggers title V permitting requirements.

It should be noted that, as further explained in the background section, there are no geographic areas currently designated “nonattainment” for GHG pollutants; as a result, this action affects only the PSD program, and we are not proposing to amend the “nonattainment NSR” provisions of our major NSR program at this time, nor are we proposing to amend any provisions that affect minor NSR permitting.

Section IV of this preamble further describes the current and expected future treatment of GHG emissions for applicability purposes under those PSD and title V programs. In particular, section IV describes the light-duty motor vehicle rule, which EPA recently proposed and expects to promulgate by the end of March 2010, and which will control GHG emissions from certain mobile sources. Under EPA's current interpretation of PSD and title V applicability requirements, promulgation of this motor vehicle rule will trigger the applicability of PSD and title V requirements for stationary sources that emit GHGs.

In section V of this preamble, EPA describes the administrative burdens on permitting authorities if the requirements of PSD and title V programs are triggered without having this tailoring rule in place. In short, without this tailoring rule, the administrative burdens would be immense, and they would immediately and completely overwhelm the permitting authorities. Without this tailoring rule, permitting authorities would receive approximately 40,000 PSD permit applications each year—currently, they receive approximately 300—and they would be required to issue title V permits for approximately some six million sources—currently, their title V inventory is some 15,000 sources. These increases are measured in orders of magnitude. We estimate the additional resource burdens in full-time equivalents (FTEs) and time delays in processing permits, but the sheer numbers of additional permits by themselves paint the picture of the overwhelming administrative burdens.

In section VI of this preamble, we describe the legal rationale for this tailoring rule. The judicial doctrine of “absurd results” authorizes departure from a literal application of statutory provisions if it would produce a result that is inconsistent with other statutory provisions or congressional intent, and particularly one that would undermine congressional purposes. The judicial doctrine of “administrative necessity” authorizes an agency to depart from statutory requirements if the agency can demonstrate that the statutory requirements, as written, are impossible to administer. However, the agency must first attempt to mitigate administrative problems through techniques consistent with the statutory requirements, and, if variance from the statutory requirements nevertheless is necessary to allow administrability, the variance must be limited as much as possible.

As discussed in section VI of this preamble, to apply the statutory PSD and title V applicability thresholds to sources of GHG emissions would bring tens of thousands of small sources and modifications into the PSD program each year, and millions of small sources into the title V program. This extraordinary increase in the scope of the permitting programs, coupled with the resulting burdens on the small sources and on the permitting authorities, were not contemplated by Congress in enacting the PSD and title V programs. Moreover, the administrative strains would lead to multi-year backlogs in the issuance of PSD and title V permits, which would undermine the purposes of those programs. Sources of all types—whether they emit GHGs or not—would face long delays in receiving PSD permits, which Congress intended to allow construction or expansion. Similarly, sources would face long delays in receiving title V permits, which Congress intended to promote enforceability. For these reasons, the absurd results doctrine applies to avoid a literal application of the thresholds.

By the same token, the impossibility of administering the permit programs brings into play the administrative necessity doctrine. This doctrine also justifies EPA to avoid a literal application of the threshold provisions.

Instead, these doctrines authorize EPA to apply the PSD and title V applicability provisions through a phased program. The first phase would establish the applicability thresholds at the 25,000-tpy levels and vigorously develop streamlining measures that would facilitate applying PSD and title V on a broader scale with overburdening sources and administrators. In this manner, the phased approach reconciles the language of the statutory provisions with the results of their application and with congressional intent.

In section VII of this preamble, we describe the streamlining techniques—short of limiting the applicability of PSD and title V to higher-emitting sources—that may be available to improve administrability. These techniques range from defining “potential to emit”—which is the basis for calculating the statutory thresholds—to be closer to actual emissions, to general permits and presumptive best available control technology (BACT), which is the principal control requirement under the PSD program. Although these techniques offer promise over the long term to improve administrability, they cannot be in place by March 2010, when we expect PSD and title V requirements to be triggered for GHG emitters, or within a several-year period thereafter. Accordingly, this tailoring rule is necessary at this time.

In section VIII of this preamble, we describe in detail our proposed tailoring rule. For the PSD program, we are proposing to establish, as the first phase, the GHG “major stationary source” emissions applicability threshold level at 25,000 tpy on a CO

e basis. That is, sources that emit at this level or higher would be considered “major stationary sources” and therefore would become subject to PSD requirements when they construct or modify. We are also proposing to establish in this first phase a PSD “significance level” emissions rate for GHGs and are proposing a range for that value of 10,000 to 25,000 tpy CO

e for comment. The “significance” level is important for determining whether existing sources that make physical or operational changes become subject to PSD and for determining whether sources that are subject to PSD for other pollutants are also subject to PSD for their GHG emissions.

As further described in section VIII of this preamble, for the title V operating permits program, we are also proposing to establish the GHG emissions applicability threshold level at 25,000 tpy CO

e for this first phase. That is, sources that emit at this level or higher would be considered “major sources” and therefore would become subject to title V requirements.

As further described in section VIII of this preamble, as an integral part of the tailoring rule, EPA proposes to commit to complete, within 5 years of a final rule, a study to evaluate the actual administrative burden resulting from the proposed GHG permitting thresholds and possible other thresholds, and the progress of developing streamlining techniques and augmentation of permitting authorities' resources. In addition, EPA commits to propose and promulgate a rulemaking—informed by the study—within 6 years from the effective date of a final version of this rulemaking (

i.e.,

1 year from the completion of the study) that would establish the second phase, which would either reaffirm the GHG permitting thresholds, promulgate alternative thresholds, adopt other streamlining techniques, and/or take other action consistent with the goal of expeditiously meeting CAA requirements in light of the administrative burden that remains at that time.

During this first phase of the tailoring program, EPA proposes to make a concerted effort to assess and implement streamlining options, tools, and guidance—some of which we describe in section VII of this preamble—to reduce the administrative burden on permitting authorities when implementing PSD and title V for GHGs. EPA proposes to undertake as many of these streamlining actions as possible and to do so as quickly as possible. In addition, for larger sources that would be subject to PSD and title V requirements during the first phase, EPA intends to work closely with the stakeholders to develop efficient methods for implementing those requirements. For smaller sources for which PSD and title V requirements would not apply during the first phase due to the increase in the major source applicability threshold, EPA intends to identify cost-effective opportunities available as soon as possible to achieve GHG reductions through means other than PSD and title V (

e.g.,

energy efficiency and other appropriate measures).

Section VIII of this preamble further describes our proposal to define the relevant pollutants as the group of up to six GHG emissions that have been regulated for control, calculated on the basis of global warming potential (GWP).

The Intergovernmental Panel on Climate Change (IPCC) describes GWP as an index, based upon radiative properties of well-mixed GHGs, measuring the radiative forcing of a unit mass of a given well-mixed greenhouse gas in the present-day atmosphere integrated over a chosen time horizon, relative to that of CO

. The GWP represents the combined effect of the differing times these gases remain in the atmosphere and their relative effectiveness in absorbing outgoing thermal infrared radiation. (Intergovernmental Panel on Climate Change (IPCC), Glossary of Terms used in the IPCC Fourth Assessment Report, WG1).

http://www.ipcc.ch/

Section IX of this preamble describes the burden and economic impacts of the proposed rule.

Section X of this preamble discusses implementation issues related to this proposal. These include conforming EPA approval of the PSD programs in SIPs and EPA approval of the State title V programs to be consistent with the proposed applicability threshold levels. By way of background, as soon as EPA promulgates a rule regulating for control of GHG emissions—which we expect to occur with the proposed light-duty motor vehicle rule, scheduled for promulgation at the end of March 2010—stationary sources will become subject to PSD and title V requirements. The major source thresholds for PSD and title V, significance level for PSD, and identification of GHGs subject to PSD and title V as proposed in this tailoring rule would each take effect immediately in the Federal PSD program (codified at 40 CFR 52.21) and in the Federal operating permits program (codified at 40 CFR 71), as applicable. To conform EPA action on PSD SIPs and State title V programs, EPA intends to limit its previous approval of those SIPs and title V programs to cover only the permitting of sources of GHG emissions at or above the proposed threshold levels. EPA will take no action on—that is, EPA will not disapprove—the PSD SIPs and title V programs to the extent they require permitting of GHG emitters at levels below the proposed thresholds. EPA proposes to take this action by virtue of its authority to reconsider its previous regulatory actions. Section X of this preamble also explains how we propose to address the treatment of GHGs in the fee programs under title V.

IV. Background

A. What are greenhouse gases and their sources?

Gases that trap heat in the atmosphere are often called GHGs. Some GHGs such as carbon dioxide (CO

) are emitted to the atmosphere through natural processes as well as human activities. Other gases, such as fluorinated gases, are created and emitted solely through human activities. The primary GHGs of concern directly emitted by human activities include CO

, methane (CH

), nitrous oxide (N

O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride (SF

). These six primary GHGs will, for the purposes of this proposal, be referred to collectively as “the six primary GHGs.” These six gases, once emitted, remain in the atmosphere for decades to centuries. Thus, they become well-mixed globally in the atmosphere and their concentrations accumulate when emissions exceed the rate at which natural processes remove them from the atmosphere. The heating effect caused by the human-induced buildup of GHGs

in the atmosphere is very likely the cause of most of the observed global warming over the last 50 years. A detailed explanation of climate change and its impact on health, society, and the environment is included in EPA's technical support document for the endangerment finding proposal (Docket ID No. EPA-HQ-OAR-2009-0171-0137).

“Document for Endangerment and Cause or Contribute Findings for Greenhouse Gases under Section 202(a) of the Clean Air Act,” Climate Change Division, Office of Atmospheric Programs, U.S. Environmental Protection Agency, Washington, DC. April 17, 2009.

In the U.S., the combustion of fossil fuels (

e.g.,

coal, oil, gas) is the largest source of CO

emissions and accounts for 80 percent of total GHG emissions. More than half the energy-related emissions come from large stationary sources such as power plants, while about a third come from transportation. Of the six primary GHGs, four (CO

, CH

, N

O, and HFCs) are emitted by motor vehicles. Industrial processes (such as the production of cement, steel, and aluminum), agriculture, forestry, other land use, and waste management are also important sources of GHG emissions in the U.S. These emissions are inventoried at a national level by EPA in the Inventory of U.S. Greenhouse Gas Emissions and Sinks.

For additional information about the Inventory of U.S. Greenhouse Gas Emissions and Sinks, and for more information about GHGs, climate change, climate science,

etc., see

EPA's climate change Web site at

http://

www.epa.gov/climatechange/.

Different GHGs have different heat-trapping capacities. It is useful to compare them to each other through the use of the CO

e metric. This metric incorporates both the heat-trapping ability and atmospheric lifetime of each GHG and can be used to adjust the quantities, in tpy, of all GHGs relative to the GWP of CO

. When quantities of the different GHGs are multiplied by their GWPs, the different GHGs can be summed and compared on a CO

e basis. Depending on which GWP values are used, the calculated GHG emissions on a CO

e basis will vary. Throughout this preamble, we are applying the GWP values established by the Intergovernmental Panel on Climate Change (IPCC) in its Second Assessment Report (SAR) (IPCC 1996).

For example, CH

has a GWP of 21, meaning each ton of CH

emissions would have 21 times as much impact on global warming over a 100-year time horizon as 1 ton of CO

emissions. Thus, on the basis of heat-trapping capability, 1 ton of CH

would equal 21 tons of CO

e. The GWPs of the six primary GHGs range from 21 (for CH

) up to 23,900 (for SF

). Aggregating all GHGs on a CO

e basis at the source level allows a facility to evaluate its total GHG emissions contribution based on a single metric. For a complete list of the applicable GWP values for each GHG, please refer to EPA's Inventory of U.S. Greenhouse Gas Emissions and Sinks.

“Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2007,” U.S. Environmental Protection Agency, EPA 430-R-09-004, April 15, 2009. Table 1-2, p. 1-6.

http://www.epa.gov/climatechange/emissions/usinventoryreport.html.

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

1. Overview of the PSD Program

The PSD program is a preconstruction review and permitting program applicable to “new major stationary sources” and “major modifications” at existing major stationary sources, in the terminology of EPA's implementing regulations. The PSD program applies in areas meeting the health-based National Ambient Air Quality Standards (NAAQS) or for which there is insufficient information to determine whether they meet the NAAQS (“unclassifiable” areas). The PSD program is contained in part C of title I of the CAA. The “nonattainment NSR” program applies in areas not meeting the NAAQS and in the Ozone Transport Region, and is implemented under the requirements of part D of title I of the CAA. Collectively, we also commonly refer to these two programs as the major NSR program. The governing EPA rules are contained in 40 CFR 51.165, 51.166, 52.21, 52.24, and part 51, appendices S and W. There is no NAAQS for CO

or any of the other primary GHGs, nor does EPA plan to promulgate one; therefore, we do not anticipate that the “nonattainment” major NSR program will apply to GHGs.

The applicability of the PSD program to a particular source must be determined in advance of construction or modification and is pollutant-specific. The primary criterion in determining PSD applicability is whether the proposed project is sufficiently large (in terms of its emissions) to be a major stationary source or major modification, both of which are described below.

a. Major Stationary Sources

Under PSD, a “major stationary source” is any source type belonging to a specified list of 28 source categories which emits or has a PTE of 100 tpy or more of any pollutant subject to regulation under the CAA, or any other source type which emits or has the potential to emit such pollutants in amounts equal to or greater than 250 tpy.

See, e.g.,

40 CFR 52.21(b)(1). We may refer to these levels as the 100/250-tpy thresholds. A new source with a PTE at or above the applicable “major stationary source threshold” amount is subject to major NSR. These limits originate from section 169 of the CAA, which applies PSD to any “major emitting facility”

and defines the term to include any source with a PTE of 100 or 250 tpy, depending on source category.

EPA's regulations employ the term “major stationary source” in lieu of “major emitting facility.”

e.g.,

40 CFR 52.21(a)(2)(i), (b)(1)(i).

b. Major Modifications

PSD applies to not only new construction but also to existing sources that undertake a “major modification,” which is defined in terms of the following three criteria:

(1) A physical change in, or change in the method of operation of, a “major stationary source” must occur;

(2) The change must result in an increase in emissions that is “significant,” that is, equal to or above the significance level defined for the pollutant in question,

e.g.,

in 40 CFR 52.21(b)(23)); and

(3) The increase in emissions resulting from the change must be a significant net emissions increase. In other words, when the increase from the project is added to other contemporaneous increases or decreases in actual emissions at the source, the net emissions increase must be significant (equal to or above the significance level defined,

e.g.,

in 40 CFR 52.21(b)(23)).

Generally, significance levels for PSD are pollutant-specific emissions rates. For example, the significance level for emissions of nitrogen oxides (NO

) is 40 tpy.

See, e.g.,

40 CFR 52.21(b)(23)(i). However, for a regulated NSR pollutant for which no specific significance level is listed, PSD applies to “any increase.”

See, e.g.,

40 CFR 52.21(b)(23)(ii). Thus, if GHGs were to become subject to regulation and PSD review, and no significance levels for GHGs had been established, the default value would be “zero.”

EPA has promulgated significance levels for criteria pollutants and certain other pollutants, which EPA generally based on levels that represent a

de minimis

contribution to air quality problems. For example, for certain pollutants regulated under the new source performance standards (NSPS), EPA generally based significance levels at 20 percent of the NSPS. These concentrations were compared to available health and welfare data to assure that significant adverse effects

were avoided.

To this point, EPA has not established a significance level for GHGs, and we currently do not have an adequate supporting record to establish a similar health and welfare-based

de minimis

level for significance for GHGs.

EPA established significance levels for hazardous air pollutants on a similar basis, but subsequently, in the 1990 Clean Air Act Amendments, Congress mooted them by exempting hazardous air pollutants from PSD, under CAA section 112(b)(6).

2. General Requirements for PSD

Under the PSD program, one of the principal requirements is that a new major source or major modification must apply BACT, which is determined on a case-by-case basis taking into account, among other factors, the cost and effectiveness of the control. EPA has developed a “top-down” approach for BACT review which involves a decision process that includes identification of all available control technologies, elimination of technically infeasible options, ranking of remaining options by control and cost effectiveness, and then selection of BACT. Under PSD, once a source is determined to be major for any regulated pollutant, a BACT review is performed for each attainment pollutant whose emissions exceed its PSD significance level as part of new construction or modification projects at the source.

In addition to performing a BACT review, the source must analyze the impact of the project on ambient air quality to assure that no violation of any NAAQS or PSD increments will result, and must analyze impacts on soil, vegetation, and visibility. Sources or modifications that would impact Class I areas (

e.g.,

national parks) may be subject to additional requirements to protect air quality related values (AQRVs) that have been identified for such areas. Under PSD, if a source proposes to locate within 100 kilometers of a Class I area, the Federal Land Manager (FLM) is notified and is responsible for evaluating a source's projected impact on the AQRVs and recommending either approval or disapproval of the source's permit application based on anticipated impacts. There are currently no NAAQS or PSD increments established for GHGs, and therefore these PSD requirements would not apply to GHG emissions sources, even when PSD is triggered for GHG emissions sources. However, as noted previously, if PSD is triggered for a GHG emissions source, all regulated NSR pollutants which the new source emits in significant amounts would be subject to PSD requirements. Therefore, if a facility triggers review for regulated NSR pollutants that are non-GHG pollutants for which there are established NAAQS or increments, the air quality, additional impacts, and Class I requirements would apply to those pollutants.

When the reviewing authority reaches a preliminary decision to authorize construction of a proposed new major source or major modification, it must provide notice of the preliminary decision and an opportunity for comment by the general public, industry, and other interested persons. After considering and responding to the comments, the reviewing authority may issue a final determination on the construction permit in accordance with the PSD regulations.

Usually NSR permits are issued by State or local air pollution control agencies. In these cases, State and local air pollution control agencies may have their own permit programs that are approved by EPA in the SIP or they may be delegated the authority to issue permits on behalf of EPA. In some areas, the EPA issues the permits.

3. Minor NSR Program

The permitting program for minor stationary sources is addressed by section 110(a)(2)(C) of the CAA. We commonly refer to this program as the minor NSR program. A minor stationary source means a source whose PTE is lower than the major source applicability threshold for a particular pollutant as defined in the applicable nonattainment major NSR program or PSD program. As with nonattainment NSR requirements, the CAA does not require that minor source programs apply to GHGs because there are no NAAQS for GHGs.

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

1. Overview of Title V

The title V operating permits program was added to the CAA by Congress in 1990. The operating permits program requirements under title V are intended to improve sources' compliance with the requirements of the CAA. In summary, the title V program requires major sources (generally defined as sources that actually emit or have the potential to emit 100 tpy) and certain other sources to obtain operating permits that: Consolidate all CAA requirements into a single document; provide for review of these documents by EPA, States, and the public; and require permit holders to track, report, and annually certify their compliance status with respect to their permit requirements.

Title V will be triggered for GHG emissions when EPA regulates them for control under another provision of the CAA. Section 502(a) of the Act sets forth the sources required to obtain operating permits under title V. These sources include: (1) Any affected source subject to acid rain rules under title IV of the Act; (2) any major source; (3) any source required to have a permit under part C or D (PSD/NSR) of title I of the Act; (4) “any source subject to section 111 [NSPS] or section 112 [NESHAP];” and (5) any other source designated by rule.

See

also 40 CFR 70.3(a) and 71.3(a). The requirements of section 502(a) are primarily implemented through the operating permit program rules at 40 CFR part 70, which sets out the minimum requirements for title V operating permit programs administered by State, local, and tribal permitting authorities (57 FR 32261; July 21, 1992); and part 71, the Federal operating permit program requirements that apply where EPA or a delegate agency authorized by EPA to carry out a Federal permit program is the title V permitting authority (61 FR 34228, July 1, 1996).

Title V generally does not add new substantive requirements for pollution control, but it does require that each permit contain all of a facility's “applicable requirements” under the CAA, and that certain procedural requirements be followed, especially with respect to compliance with these requirements. “Applicable requirements” for title V purposes include all stationary source requirements, but do not include mobile source requirements.

2. Title V Permit Requirements

When a source becomes subject to title V, it must apply for a permit within 1 year of the date it became subject. The application must include identifying information, a description of emissions and other information necessary to determine applicability of CAA requirements, identification and certification of the source's compliance status with these requirements (including a schedule to come into compliance for any requirements for which the source is currently out of compliance), a statement of the methods for determining compliance, and other information. The permitting authority then uses this information to issue the source a permit to operate, as appropriate. A title V source may not operate without a permit, except that if it has submitted a complete application, the submission acts as a “shield” that

authorizes it to operate while awaiting issuance of its permit.

Title V permits must contain the following main elements: (1) Emissions standards to assure compliance with all applicable requirements; (2) a duration of no more than 5 years, after which the permit must be renewed; (3) monitoring, recordkeeping, and reporting requirements necessary to assure compliance, including a semiannual report of all required monitoring and a prompt report of each deviation from a permit term; (4) provisions for payment of permit fees as established by the permitting authority such that total fees collected are adequate to cover the costs of developing and implementing the program; and (5) a requirement for an annual compliance certification by a responsible official at the source. An additional specific monitoring requirement, compliance assurance monitoring (CAM), also applies to some emissions units operating at major sources with title V permits. The CAM rule requires source owners to design and conduct monitoring of the operation of add-on control devices used to control emissions from moderately large emissions units. Source owners use the monitoring data to evaluate, verify, and certify the compliance status for applicable emissions limits. The CAM rule is implemented in conjunction with the schedule of the operating permits program. While these are the main elements relevant to a discussion of GHGs, there are numerous other permit content requirements and optional elements, as set forth in the title V regulations at 40 CFR 70.6.

In addition to the permit content requirements, there are procedural requirements that permitting authorities (typically States) must follow in issuing title V permits, including (1) determining and notifying the applicant that its application is complete; (2) providing public notice and a 30-day public comment period on the draft permit, as well as the opportunity for a public hearing; (3) giving notice to EPA and affected States; and (4) preparing and providing to any requester a statement of the legal and factual basis of the draft permit. The permitting authority must take final action on permit applications within 18 months of receipt. EPA also has 45 days from receipt of a proposed permit to object to its issuance, and citizens have 60 days to petition EPA to object. Permits may also need to be revised or reopened if new requirements come into effect or if the source makes changes that conflict with, or necessitate changes to, the current permit. Permit revisions and reopenings follow procedural requirements which vary depending on the nature of the necessary changes to the permits.

D. What is the current treatment of GHG emissions under the title V and PSD programs and what future actions may change that treatment?

This section of the preamble describes the current treatment of GHG emissions under the PSD and title V programs—under which GHG emissions are not included for purposes of determining applicability—including recent regulatory and legal developments related to this action, and then describes what future action may change that treatment.

1. Regulation of GHGs Under the CAA

a. The

Massachusetts

U.S. Supreme Court Decision

On April 2, 2007, in

Massachusetts

EPA,

549 U.S. 497 (2007), the U.S. Supreme Court held that GHGs are air pollutants covered by the CAA. Therefore, the Court further held that GHG emissions are subject to CAA section 202(a) under which the Administrator must determine whether or not emissions of GHGs from new motor vehicles or motor vehicle engines cause or contribute to air pollution which may reasonably be anticipated to endanger public health or welfare, or whether the science is too uncertain to make a reasoned decision. This decision resulted from a petition for rulemaking under section 202(a) filed by more than a dozen environmental, renewable energy, and other advocacy organizations. As a result of this decision, EPA decided to issue an advance notice of proposed rulemaking (ANPR), discussed later in this preamble, soliciting comment on how GHG emissions should be regulated under the CAA.

b. The EPA ANPR

On July 30, 2008, EPA published an ANPR in the

Federal Register

entitled, “Regulating Greenhouse Gas Emissions under the CAA.” 73 FR 44354, July 30, 2008. This ANPR presented information relevant to, and solicited public comment on how to respond to, the U.S. Supreme Court's decision in

Massachusetts

EPA,

holding that GHGs are air pollutants subject to the CAA. The notice reviewed the various CAA provisions (including the PSD and title V requirements) that may be applicable to sources of GHGs, examined the issues that regulating GHGs under those provisions may raise, provided information regarding potential regulatory approaches and technologies for reducing GHG emissions, and raised issues relevant to possible legislation and the potential for overlap between legislation and CAA regulation.

In addition, the notice described and solicited comment on petitions the EPA had received to regulate GHG emissions from ships, aircraft, and nonroad vehicles such as farm and construction equipment. Finally, the notice discussed several other actions concerning stationary sources for which EPA has received comment regarding the regulation of GHG emissions, including promulgation of performance standards or guidelines under CAA section 111 for new and existing sources in various source categories. The EPA included options for phasing in the PSD program and title V programs to mitigate burdens that would occur if GHGs were to be regulated under the CAA and solicited comments on those actions. Section V.C of this preamble summarizes some of the substantive comments received on the ANPR. In issuing the ANPR, EPA made clear that it believed that the best way to address the problems posed by GHG emissions would be through legislation directly addressing GHG emissions, rather than through use of the tools in the CAA.

2. Current Applicability of the PSD Program to Sources of GHG Emissions

As explained earlier in this preamble, EPA treats sources as subject to PSD requirements only if they emit “regulated NSR pollutants” at specified threshold levels. Currently, EPA does not consider GHG emissions to be “regulated NSR pollutants” under the PSD program because GHG emissions have not, thus far, been subject to regulation requiring control under the CAA. As discussed later in this preamble, EPA is in the process of reviewing its approach to PSD applicability and is in the process of developing a rulemaking—the light-duty motor vehicle rule—that will trigger PSD applicability for GHG emissions.

a. PSD Interpretive Memorandum

EPA is currently reconsidering the PSD Interpretive Memorandum (previously referred to as the “Johnson Memorandum”), which describes the circumstances under which EPA considers a pollutant subject to PSD requirements.

See

memorandum (in docket for this rulemaking) from Administrator Stephen L. Johnson to Regional Administrators, “EPA's Interpretation of Regulations that Determine Pollutants Covered by Federal Prevention of Significant Deterioration (PSD) Permit Program,” December 18, 2008. The PSD

Interpretive Memorandum followed a decision by the Environmental Appeals Board (EAB) in

In re Deseret Power Electric Cooperative,

on November 13, 2008. PSD Appeal No. 07-03 (EAB 2008) (

In re Deseret

). There, the Board remanded a PSD permit that EPA Region VIII issued on August 30, 2007, to Deseret Power Electric Cooperative, authorizing the latter to construct a new waste-coal-fired electric generating unit near its existing Bonanza Power Plant, in Bonanza, Utah. The primary issue before the Board was whether the permit had to include BACT limits for CO

, which depended on whether CO

meets the definition of a “regulated NSR pollutant” under 40 CFR 52.21(b)(50), which in turn interprets the provisions in CAA sections 165 and 169 that apply the BACT requirement to “each pollutant subject to regulation” under the CAA. The Board rejected arguments by the petitioner, the Sierra Club, that the CAA compelled a broad interpretation of the phrase “subject to regulation,” which, according to the petitioner, required EPA to apply BACT to pollutants as long as they are subject to monitoring and reporting requirements. Currently, and since 1993, sources covered by the Acid Rain program have been required to monitor and report CO

emissions pursuant to the CAA. The Board also rejected the view advanced by the EPA offices involved in the case—Region VIII and the Office of Air and Radiation—that EPA had already established an interpretation of “subject to regulation,” which was that this term authorized BACT only for pollutants subject to actual regulatory controls. Thus, the Board remanded the permit to the Region to “reconsider whether or not to impose a CO

BACT limit in light of the ‘subject to regulation’ definition under the CAA.”

In re Deseret,

slip op. at 63.

On December 18, 2008, EPA's then-Administrator Stephen Johnson issued a memorandum establishing an interpretation clarifying the scope of the PSD program under the CAA (the PSD Interpretive Memorandum). This memorandum interprets the definition of “regulated NSR pollutant” to include each pollutant subject to either a provision in the CAA or regulation adopted by EPA under the CAA that requires actual control of emissions of that pollutant, and to exclude pollutants for which EPA regulations only require monitoring or reporting.

On February 17, 2009, EPA Administrator Lisa Jackson responded to an amended petition for reconsideration dated January 6, 2009, filed on behalf of the Sierra Club and other parties (petitioners), seeking reconsideration of the PSD Interpretive Memorandum. In Administrator Jackson's response, she granted the petition for reconsideration in order to allow for public comment on issues raised in the memorandum and stated that EPA will also seek public comment on any issues raised by the opinion of the EAB with regard to the

In re Deseret

decision (as discussed in the PSD Interpretive Memorandum), to the extent they are not coextensive with the issues raised in the memorandum. However, Administrator Jackson made clear that the current interpretations in the PSD Interpretive Memorandum remain in effect during the reconsideration process.

Because the PSD Interpretive Memorandum concerns PSD applicability, its reconsideration will identify the circumstances under which GHG emissions are treated as “subject to regulation under the CAA” and, therefore, are “regulated NSR pollutants.” Once GHG emissions are considered “regulated NSR pollutants,” PSD program requirements for existing thresholds (100/250 tpy) are triggered. The PSD Interpretive Memorandum reconsideration is being addressed in a proposed rule published in the

Federal Register

on October 7, 2009 (74 FR 51535).

Although several possible triggering events may be considered in that action, the latest of these events would be the one that applies under EPA's current interpretation: A nationwide rule controlling or limiting GHG emissions. Presently, the EPA expects that the first such rule will be the light-duty motor vehicle rule.

b. Light-Duty Vehicle Rule

EPA is currently developing a rule to regulate GHGs from mobile sources under title II of the CAA (74 FR 24007; May 22, 2009). EPA expects to promulgate this rule by the end of March 2010. As described in the PSD Interpretive Memorandum, it is EPA's position that new pollutants become subject to PSD and title V when a rule controlling those pollutants is promulgated (and even before that rule takes effect). Accordingly, as soon as GHGs become regulated under the light-duty motor vehicle rule, GHG emissions will be considered pollutants “subject to regulation” under the CAA and will become subject to PSD and title V requirements.

3. Current Applicability of Title V Program to GHGs

CAA section 502(a) and related definitions under sections 302 and 501, require that specified types of sources have operating permits. These include any source that emits or has a potential to emit 100 tpy of a pollutant subject to regulation (consistent with EPA's policy interpretation)

, any source with a NSR or PSD permit, any major source of a hazardous air pollutant (HAP), any source subject to acid rain requirements, and certain minor sources subject to section 111 or section 112 standards. As with the PSD program, currently GHGs are not considered to be subject to regulation and have not been considered to trigger title V applicability.

EPA included this policy interpretation that title V addresses 100-tpy sources of “pollutants subject to regulation” in a memorandum from Lydia Wegman. Memorandum from Lydia N. Wegman, Deputy Director, Office of Air Quality Planning and Standards, U.S. EPA, “Definition of Regulated Air Pollutant for Purposes of Title V” (Apr. 26, 1993). EPA continues to maintain this interpretation. The interpretation in this memorandum was based on: (1) EPA's reading of the definitional chain for major source under title V, including the definition of “air pollutant” under section 302(g) and the definition of “major source” under 302(j); (2) the view that Congress did not intend to require a variety of sources to obtain title V permits if they are not otherwise regulated under the Act, (

see also

CAA section 504(a), providing that title V permits are to include and assure compliance with applicable requirements under the Act); and (3) promoting consistency with the approach under the PSD program. While the specific narrow interpretation in the Wegman Memorandum of the definition of “air pollutant” in CAA section 302(g) is in question in light of the

Massachusetts

EPA

decision (finding this definition to be “sweeping”), EPA believes the core rationale for its interpretation of the applicability of title V remains sound. EPA continues to maintain its interpretation, consistent with CAA sections 302(j), 501, 502 and 504(a), that title V applies to 100 tpy sources of pollutants subject to regulation. This interpretation is based primarily on the purpose of title V to include all regulatory requirements applicable to the source in one document to assure compliance,

see, e.g.,

CAA section 504(a), and to promote consistency with the approach under the PSD program.

V. What would be the administrative burdens of implementing PSD and title V at the current permitting thresholds?

This section of the preamble describes the additional administrative burdens for the PSD and title V programs in terms of staffing needs, time for processing permits, and costs that permitting authorities would incur if sources of GHG emissions were to trigger PSD and title V at the statutory thresholds, which we shorthand as the 100/250-tpy thresholds. Evidence we have collected to this point makes it clear that if PSD and title V applicability requirements are triggered at those threshold levels, an enormous influx of permits would occur—tens of thousands of PSD permits and millions of title V permits—which would create enormous administrative burdens for permitting authorities that would far exceed their current capacity to administer the PSD and title V programs. It is also worth noting here that, under a scenario where

State or local permitting authorities do not have the resources to implement the title V or PSD programs for GHG sources at current CAA permitting applicability thresholds, EPA may withdraw its approval, in which case, EPA would become the permitting authority and the enormous resource requirements would shift to EPA to implement these programs.

A. PSD Implications

We evaluated the additional administrative burden and cost of including GHG emitters in the PSD program at the current 250-tpy major source permitting threshold (but not at 100 tpy

). To calculate the administrative burdens and cost, we first estimated the number of new sources and modifications that would be subject to PSD if GHGs were included at the 250-tpy threshold level. We developed these estimates of number of new sources and modifications as part of our GHG threshold data analyses. For more information on these analyses,

see

the technical support documents entitled “Technical Support Document for Greenhouse Gas Emissions Thresholds Evaluation” and “Methodology for Estimating Modified Sources That Would Be Subject to PSD Permitting for GHGs;” Prepared by EPA Staff; August 2009 in the docket for this rulemaking.

In light of time and resource constraints, we did not calculate the additional administrative burden and cost of including in the PSD program sources that emit between 100 tpy and 250 tpy and that are among the 28 source categories identified in CAA section 169(l). Including these sources in the calculation would increase the administrative burdens and costs of implementing PSD at the statutory thresholds.

After estimating the number of affected facilities and sources, we then evaluated the additional administrative burden and cost of including these numbers of new and modified GHG emitters in the PSD program. Our burden estimates are based on labor and cost information from the existing Information Collection Requests (ICRs) for PSD programs.

“Summary of ICR-based Data Used to Estimate Avoided Burden and Evaluate Resource Requirements at Alternative GHG Permitting Thresholds;” Prepared by EPA Staff; August 2009.

Based on our GHG threshold data analysis, we estimate that almost 41,000 new and modified facilities per year would be subject to PSD review, based on the current rate of modifications at major sources, if a GHG major source threshold of 250 tpy CO

e were applied. Compared to the 280 PSD permits currently issued per year, this would be an increase in permits of more than 140-fold.

We estimated the number of workload hours and cost a permitting authority would expend on each new source and each modification. We based these estimates on the workload hours and cost for processing permits for new sources of non-GHG emissions, which we derived from labor and cost information from the existing ICRs for PSD programs. The ICRs show that permitting authorities expend 301 hours to permit a new or modified industrial source. For more detail on information used from the PSD ICR for this evaluation, please refer to the docket for this rulemaking.

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

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

In addition to conducting our burden analysis, we also reviewed summary information from State and local air permitting agencies regarding additional resources and burden considerations if GHG sources that emit above the 100/250-tpy thresholds were subjected to the PSD and title V programs. This information covered 43 State and local permitting agencies, representing programs from different regions of the country and various permitting program sizes (in terms of geographic and source population coverage). A summary of this information can be found in the docket for this rulemaking.

This information showed significant burdens projected by permitting agencies with adding sources of GHG emissions in terms of staffing, budget, and other associated resource needs. Importantly, the agencies based their analysis on the assumption that, for purposes of determining whether a source is major, its emissions would be calculated on an actual emissions (“actuals”) basis, and not on a PTE basis. On an actuals basis, the agencies estimated a 10-fold increase in the number of permits.

“NACAA Summary on Permitting GHGs Under the Clean Air Act”; Memorandum from Mary Stewart Douglas, National Association of Clean Air Agencies to Juan Santiago, EPA/OAQPS, September 3, 2009.

Specifically, the agencies estimated that:

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

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

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

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

• Ninety percent of the permitting agencies indicated that their staff would need training in all aspects of permitting for sources of GHG emissions; and

• A quarter of the permitting agencies reported that they were currently under a hiring freeze.

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

The GHG threshold analyses used to identify the number of facilities that would be affected at current PSD permitting thresholds, and which is also used later in Section VIII for evaluating

alternative thresholds, are based on the PTE of GHG sources. PTE is defined as the maximum capacity of a stationary source to emit a pollutant under its physical and operational design, including certain legal limitations, for example, on emissions or hours of operation. PSD and title V programs both use PTE for defining major sources. Our threshold analyses begin with actual emissions estimates, but we then adjust the numbers upward to account for potential-to-emit. PTE adjustments for industrial sources are generally based on industry-specific capacity utilization factors, while those used for commercial and residential sources are based on general sector-based information on heating equipment and appliance usage in these sectors. While these PTE adjustments are important for estimating affected facilities in all sectors, they are a particularly relevant concern for determining the number of facilities in the commercial and residential sector that may be affected, where CO

emissions are primarily due to space heating/appliance usage and combustion units are likely to be used at levels well below constant operation at maximum capacity. For example, our PTE adjustment for commercial and residential sources resulted in an upwards adjustment ranging from 85 to 90 percent in emissions from their actual emission values. The basis for our PTE adjustments is described in the “Technical Support Document for Greenhouse Gas Emissions Thresholds Evaluation” found in the docket for this proposal. We ask for specific comment on the reasonableness of these PTE adjustments as they apply to the different sectors and source categories, in particular, the commercial and residential sectors where there is limited information available on equipment capacity utilization.

There are multiple sources of uncertainty in our approaches for estimating emissions, and thus for estimating numbers of sources. For example, the PTE adjustment factors just described may overstate or understate the maximum emissions from sources particularly for the commercial and residential sectors. In addition, there are inherent uncertainties in developing source counts from nationally aggregated statistics, as was done for the estimates for commercial and residential sources which rely on the allocation of national level statistics for energy consumption. The allocation factors we used, based on U.S. Energy Information Administration statistical sampling procedures, are likely the best available to estimate the population of residential and commercial sources exceeding different GHG thresholds. Again, these uncertainties may result in either overestimates or underestimates. The uncertainty is less for industrial categories, where we generally utilized facility-based methodologies, but because it was necessary to use varying methodologies for different source types, as described in the Technical Support Document, the uncertainties will not be uniform across all categories. We request comment on all aspects of our threshold analysis, possible sources of error, suggestions for reducing uncertainties, and alternate approaches to estimating emissions from commercial and residential sources.

B. Title V Implications

The triggering of title V requirements for GHG would result in administrative burdens that stem from sources' obligation to apply for permits. These obligations apply differently depending on whether the source already has a title V permit. Most significant are the more than six million sources of GHGs that would become newly subject to title V requirements because they exceed the 100-tpy threshold for GHG but did not for previously regulated pollutants. Although there are generally not applicable requirements for GHGs that apply to such sources, these six million sources would be required to submit a title V permit application within 1 year. Permitting authorities would need to issue these permits within 18 months of receipt of a complete application, and these permits would need to include any requirements for non-GHGs that may apply to the source, such as provisions of an applicable SIP. For any such requirements, permitting authorities would also need to develop terms addressing the various compliance assurance requirements of title V, including monitoring, deviation reporting, six-month monitoring reports, and annual compliance certifications.

Adding to the burden described above would be the burden to add GHG terms to the 14,700 existing title V permits. While, in general, existing title V permits would not immediately need to be revised or reopened to incorporate GHG (because as noted above, there are generally not applicable requirements for GHGs that apply to such sources), permitting authorities may face burdens to update existing title V permits for GHG under two possible scenarios: (1) EPA promulgates or approves any applicable requirements for GHGs that would apply to such a source, which would generally require a permit reopening or renewal application, or (2) the source makes a change that would result in an applicable requirement for GHGs to newly apply to the source, such as PSD review, which would generally require an application for a permit revision. Permitting authorities will also need to process permit renewal applications, generally on a 5-year cycle, and such renewals would need to assure that the permit properly addresses GHG. Finally they would have to process title V applications for new sources (including all the PSD sources previously discussed).

Obviously, this massive influx of permit applications would overwhelm permitting authorities' administrative resources. Indeed, permitting authorities report that they currently are having difficulty keeping up with their existing permit workloads. The Title V Operating Permits System database, which tracks permit issuance, confirms that issuance of many permits is already delayed. By increasing the volume of permits by over 400 times, the administrative burden would be unmanageable.

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

As noted in this preamble's discussion of PSD burdens, we also reviewed summary information from State and local permitting agencies, which showed significant burdens associated with adding GHGs in their title V programs in terms of staffing, budget, and other associated resource

needs.

Again, note that the permitting agencies based their estimates on numbers of permits that would be required from sources subject to the 100-tpy title V applicability threshold on an actuals-not PTE-basis. Based on that level, the agencies assumed a 40-fold increase in numbers of permits, and estimated that:

“NACAA Summary on Permitting GHGs Under the Clean Air Act”; Memorandum from Mary Stewart Douglas, National Association of Clean Air Agencies to Juan Santiago, EPA/OAQPS, September 3, 2009.

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

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

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

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

• Eighty percent of the permitting authorities indicated that their staff would need training in all aspects of permitting for sources of GHG emissions; and

• A quarter of the permitting authorities reported that they were currently under a hiring freeze.

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

C. ANPR Comments

We examined the ANPR comments received for further information on the additional administrative burdens that permitting programs would carry if PSD requirements for sources of GHG emissions were triggered at the current 100/250-tpy thresholds and title V requirements were triggered at the current 100-tpy threshold. Most industry stakeholders who commented on the ANPR believe that triggering title V and PSD applicability for GHG emissions sources would be disastrous and that a regulatory gridlock would ensue. Many of these industry commenters agreed with the U.S. Chamber of Commerce's study

which found that regulating GHGs under the CAA would cause 1,000,000 commercial buildings, nearly 200,000 manufacturing operations, and about 20,000 large farms to become CAA-regulated stationary sources. In fact, most of the industry commenters believed that these estimates underestimated the impacts. Commenters expressed that the implications of all these sources becoming CAA-regulated stationary sources would cause a large permitting backlog, as States do not have the staff or training to take on such a large burden. In addition, commenters stressed that many of these sources have never needed an air permit before and would have to obtain basic knowledge of the permitting regulations and how to comply with them, which would also impose more burdens on the permitting authorities. Many of the new sources would be small emitters not previously regulated under the CAA.

“A Regulatory Burden: The Compliance Dimension of Regulating CO

as a Pollutant”; Prepared for the U.S. Chamber of Commerce; September 2008.

See

Docket ID No. EPA-HQ-OAR-2008-0318-0402.1.

VI. What is the legal rationale for this proposed action?

This section of the preamble discusses the legal rationale for phasing in the applicability thresholds for PSD and title V purposes as proposed, which are two doctrines that courts have relied on in interpreting and applying statutory requirements: The “absurd results” doctrine and the “administrative necessity” doctrine. These doctrines are related, apply in this case because of the same factual circumstances, and justify the same application—that is, the phased approach—of the PSD and title V applicability provisions. But they are independent justifications, and therefore will be discussed independently.

A. “Absurd Results” Doctrine

This proposed action establishing the first phase of the PSD and title V applicability thresholds, in lieu of applying the statutory 100/250 tpy thresholds literally for GHG sources, is supported by a judicial doctrine that may be termed the “absurd results” doctrine. Applying the threshold provisions literally for the period immediately after PSD and title V are triggered for GHG emissions would lead to results that contravene congressional intent and, in fact, undermine Congress's purposes for both permitting programs.

1. Overview

As discussed in detail below, the courts are reluctant to invoke this doctrine precisely because it entails departing from the literal application of statutory provisions, but they nevertheless do so when the literal application produces results that are inconsistent with other statutory provisions, run contrary to expressed congressional intent or actually undermine congressional intent, or are otherwise so illogical or contrary to sensible policy as to be beyond anything that Congress could reasonably have intended. This is one of the rare cases in which the doctrine applies because the extraordinary increases in PSD and title V permit applications that would result from a literal application of the 100/250 tpy threshold requirements would, at least during the near term—until EPA and the permitting authorities can develop streamlining methods and ramp up resources—extensively disrupt the two permitting programs and impose undue regulatory burdens in the aggregate on the sources newly subject to PSD and title V permit requirements. These results would create tensions with other explicit requirements of the PSD and title V provisions, run contrary to expressed congressional intent for the PSD and title V provisions, and, in fact, severely undermine both programs.

The applicability of the absurd results legal doctrine to this proposal should be reviewed with EPA's proposed action in mind: EPA proposes to establish a process for implementing the PSD and title V applicability requirements, including a first phase that would consist of establishing the specified thresholds and vigorously developing streamlining methods; then, after 5 years, preparing an assessment; and then, by the sixth year, promulgating a rulemaking for further action. In addition, during this first phase, we expect the permitting authorities to ramp up resources for permit issuance.

With respect to PSD, a literal application of the applicability thresholds in CAA sections 165(a)(1) and 169(2)(C) of 100 or 250 tpy for GHG emitters would create significant tensions with two other PSD provisions during at least the first phase in period after the triggering of PSD applicability by the light-duty vehicle rule, and before the development of streamlining

methods and the addition of permitting resources. First, a literal application would render it impossible for permitting authorities to meet the requirement in CAA section 165(c) to process permit applications within 12 months. During this initial period, the number of permit applications would increase by 150-fold, an unprecedented increase that would far exceed administrative resources. Permitting authorities have estimated that it would take 10 years to process a PSD permit application, on average, and the resulting backlog would affect the permit applications for all sources, not just the GHG emitters.

This backlog would grow by tens of thousands each year following the triggering of PSD applicability—again, for at least the first few years—and thereby undermine a second express PSD provision, section 160(3). This provision describes, as one of the purposes of the PSD program, “to insure that economic growth will occur in a manner consistent with the preservation of existing clean air resources.” Because the PSD requirements apply on a preconstruction basis—that is, they require permits before sources may construct or modify—tens of thousands of sources seeking to construct or modify during at least the first few years after the triggering of PSD would instead face many years of delay. This delay would impede economic growth by precluding any type of source—whether it emits GHGs or not—from constructing or modifying for years after its business plan contemplates.

In addition, a literal application of the 100/250 tpy threshold in the PSD provisions during at least the first few years after PSD is triggered for GHG emitters would be contrary to, and in fact would undermine, expressed congressional intent in several important ways: As just noted, it would undermine congressional intent to authorize economic growth, albeit with environmental safeguards. In addition, the PSD requirements entail significant regulatory costs to affected sources because the sources must identify and implement BACT on a source-specific basis. The legislative history of the PSD provisions makes clear that Congress intended the PSD program to apply only to larger sources, and not to smaller sources, in light of the larger sources' relatively greater ability to bear the costs of PSD and their greater responsibility for the pollution problems. In enacting the PSD requirements during the 1977 Clean Air Act Amendments, Congress, focused as it was on sources of conventional pollutants and not global warming pollutants, expected that the 100/250 tpy applicability thresholds would limit PSD to larger sources. But because very small sources emit CO

in quantities as low as 100/250 tpy, a literal application of the threshold to GHG emitters, without streamlining, would sweep in large numbers of small sources and subject them to the high costs of determining and meeting individualized BACT requirements, while also overwhelming permitting authorities' capacity to process those applications. Thus, a literal application of the 100/250 tpy thresholds would sweep into the PSD program tens of thousands of smaller sources that Congress did not intend to include, and the resulting strain on administrative resources would preclude the hundreds of larger sources that Congress did intend to be subject to the program from obtaining permits at least for an initial period. In time, the development of streamlining methods and the ramping up of administrative resources would bridge the gap between the literal language and congressional intent, and make it possible to expand the PSD program in a sensible manner that would make sense from the standpoint of the sources and the permitting authorities. But at least for the initial period, these circumstances qualify as “absurd results” that merit avoiding a literal application of the threshold provision.

We reach similar conclusions for title V. A literal application of the applicability threshold in CAA sections 502(a), 501(2)(B), and 302(j) of 100 tpy for GHG sources would bring some 6.1 million sources into the title V program. For at least the first few years after title V is triggered, until streamlining methods are developed and administrative resources are ramped up, this would create significant tensions with other title V provisions. The extraordinary number of permit applications would render it impossible for permitting authorities to meet the requirements of section 503(c) to process title V permit applications within 18 months. Further, this number of permit applications would severely disrupt implementation of the rest of the carefully calibrated set of statutory requirements that Congress set out in title V. These requirements set out specific—and brief—time frames for EPA review and for public participation, and they simply could not be complied with at least initially for this number of permit applications.

A literal application of the 100 tpy threshold would also be inconsistent with express congressional intent concerning title V. The statutory provisions by their terms, supported by the legislative history, indicate that Congress designed the title V program to promote compliance by compiling into a single document all of the requirements applicable to the source under the Act. The legislative history indicates that some in Congress expected the title V permit program to approximate the size of the Federal water permit program. However, applying the 100 tpy threshold for GHG emitters would lead to permit applications in numbers—some 6.1 million—that are almost 100 times greater than what Congress expected. The large permit backlog and inevitable multi-year delays in permit issuance that would ensue would thwart Congress's purposes in enacting title V to promote compliance with CAA requirements. As with PSD, this disruption would affect all sources covered by the provisions, whether or not they emit GHGs.

Moreover, the great majority of the 6.1 million additional permittees would not be subject to any CAA requirements and, as a result, would be issued permits that do not include any applicable requirements. Because Congress designed title V to require permits to address applicable requirements, and because Congress envisioned a much smaller program, immediately sweeping these sources into the program is contrary to congressional intent. Yet, their inclusion in the program would overwhelm administrative resources for at least an initial period, until streamlining methods are developed, and preclude the timely issuance and reissuance of permits to sources that Congress clearly contemplated should be included in the program. Thus, a literal application of the title V threshold provisions would bring in millions of sources that Congress did not intend to cover, and thereby interfere with the administration of the program for the thousands of sources that Congress did intend to cover. As with PSD, in time, the development of streamlining methods and the ramping up of administrative resources would bridge the gap between the literal language and congressional intent, and make it possible to include more of these sources in the title V program in a manner that makes sense for both the permittees and the permitters. But for the initial period, as with PSD, these circumstances qualify as “absurd results” that merit avoiding a literal application of the threshold provisions.

In the cases that apply the “absurd results” doctrine, the courts go on to apply the statutory provisions in question in a manner that—while not in

accordance with their literal reading—effectuates congressional intent as much as possible. We believe that the process we propose in this notice, which includes a first phase that establishes thresholds at the specified levels while allowing time to develop streamlining approaches and ramp up resources, followed by a study and further rulemaking, is consistent with this caselaw.

2. Tailoring Approach

In discussing the absurd results caselaw and its applicability in this case, it is important to keep in mind EPA's proposed action. As discussed in detail elsewhere in this notice, EPA proposes a phased plan designed to achieve full compliance with the PSD and title V threshold requirements. The first phase entails the establishment of applicability thresholds at the 25,000 tpy CO

e levels, and significance levels at between 10,000 and 25,000 tpy CO

e. In addition, the first phase entails development of streamlining methods—including potential revisions to the definition of potential to emit, general permits, and presumptive BACT—that allow us to craft the application of PSD and title V in ways that are achievable and effectively balance the burdens on both the permitting authorities and the regulated community with the reductions achievable. The first phase also includes the collection of information and further assessments in a report, to be completed within 5 years, and culminates in a rulemaking to be promulgated by the sixth year that will establish further action.

3. PSD and Title V Threshold Provisions

Several PSD and title V provisions are relevant for present purposes because of the specific requirements that they establish and the window that they provide into congressional intent. These provisions start with the PSD and title V applicability provisions. For PSD purposes, the key applicability provisions are found in CAA sections 165(a) and 169(1), which identify the new sources subject to PSD, and CAA § 111(a)(4), which describes the modifications of existing sources that are subject to PSD. CAA section 165(a), 42 U.S.C. 7475, provides:

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

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

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

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

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

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

The thresholds in CAA section 169(1) of 100-tpy for sources in the 28 listed categories and 250-tpy for all other sources may be referred to as the 100/250-tpy thresholds.

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

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

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

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

Other provisions of particular relevance are the requirements in the PSD and title V programs for timely issuance of permits. For PSD, the permitting authority must “grant[ ] or den[y] [any completed permit application] not later than one year after the date of filing of such completed application.” CAA § 165(c). For title V, “the permitting authority shall approve or disapprove a completed application * * * and shall issue or deny the permit, within 18 months after the date of receipt thereof * * *.” CAA section 503(c). Title V goes on to include several provisions designed to support this 18-month requirement. First, the permitting authority must develop “adequate, streamlined, and reasonable procedures for expeditiously determining when applications are complete, for processing such applications, for public notice * * * and for expeditious review of permit actions, including * * * judicial review in State court of the final permit action by [specified persons].” CAA section 502(b)(6). Second, title V includes a “hammer” provision designed to reinforce timely permit issuance, which is that the permitting authority's program must include:

To ensure against unreasonable delay by the permitting authority, adequate authority and procedures to provide that a failure of such permitting authority to act on a permit application or permit renewal application (in accordance with the time periods specified in [CAA § 503] * * *) shall be treated as a final permit action solely for purposes of obtaining judicial review in State court of an action brought by any person referred to in paragraph (6) to require that action be taken by the permitting authority on such application without additional delay. CAA § 502(b)(7).

Third, the permit program must include “[a]uthority and reasonable procedures consistent with the need for expeditious action by the permitting authority on permit applications and related matters, to make available to the public [certain permit-related documents]”. CAA section 502(b)(8).

In addition, PSD includes a set of provisions that specifically state “the purposes of [the PSD program],” which are to balance environmental protection and growth. CAA § 160. One of the purposes, in subsection (1), is specifically “to protect public health and welfare,” and another, in subsection

(3), is “to insure that economic growth will occur in a manner consistent with the preservations of existing clean air resources.” Title V does not have a parallel set of provisions describing its purpose, but it is clear from its provisions and its legislative history, discussed below, that its key goal is to gather into a single document the Clean Air Act requirements applicable to a source and impose conditions necessary to assure compliance with such requirements, and thereby promote the enforceability of CAA requirements applicable to the covered sources. CAA § 503(b)(1) requires that the source's permit application must assure “compl[iance] with all applicable requirements” of the CAA, and § 504(a) requires that “[e]ach permit issued under [title V] shall include * * * such * * * conditions as are necessary to assure compliance with applicable requirements of [the Clean Air Act].”

See

H.R. Rep. No. 101-490, at 351 (1990) (“It should be emphasized that the operating permit to be issued under this title is intended by the Administration to be the single document or source of all of the requirements under the Act applicable to the source.”).

In addition, both PSD and title V include detailed procedures for implementation. The PSD provisions most relevant for sources of GHG are that the proposed permit for each source must be the subject of a public hearing with opportunity for interested persons to comment, CAA § 165(a)(2), and each source must be subject to best available control technology, as determined by the permitting authority on a source-by-source basis, CAA § 165(a)(4), 169(3). Title V includes a comprehensive and finely detailed implementation schedule that mandates timely issuance of permits while building in EPA and affected State review, public participation, and timely compliance by the source with reporting requirements. Following the date that sources become subject to title V, they have 1 year to submit their permit applications. CAA § 503(c). As noted above, the permitting authority then has 18 months to issue or deny the permit. CAA § 503(c). Permitting authorities must provide an opportunity for public comment and a hearing. CAA § 502(b)(6). If the permitting authority proposes to issue the permit, the permitting authority must submit the permit to EPA, and notify affected States, for review. CAA § 505(a)(1). EPA then has 45 days to review the permit and, if EPA deems it appropriate, to object to the permit. CAA § 505(b)(1). If EPA does object, then the permitting authority must, within 90 days, revise it to meet the objections, or else EPA becomes required to issue or deny the permit. CAA § 505(c). If EPA does not object, then, within 60 days of the close of the 45-day review period, any person may petition EPA to object, and EPA must grant or deny the petition within 60 days. CAA § 505(b)(2). If a permit is issued, it must include a permit compliance plan, under which the permittee must “submit progress reports to the permitting authority no less frequently than every 6 months,” and must “periodically (but no less frequently than annually) certify that the facility is in compliance with any applicable requirements of the permit, and [ ] promptly report any deviations from permit requirements to the permitting authority.” CAA § 503(b).

4. “Absurd Results” Doctrine

The familiar

Chevron

two-step analysis provides the starting point for EPA's interpretation of these statutory provisions. Under

Chevron

step 1, an agency must determine whether Congress's intent in a particular provision on a particular question is clear; if so, then the agency must follow that intent. If the intent of a provision is not clear, then the agency may, under step 2, fashion a reasonable interpretation of the provision.

Chevron U.S.A. Inc.

NRDC

, 467 U.S. 837, 842-43 (1984).

Here, the applicability provisions for PSD and title V are clear on their face. However, the U.S. Supreme Court has held that the plain meaning of a statutory provision is not conclusive “in the `rare cases [in which] the literal application of a statute will produce a result demonstrably at odds with the intentions of the drafters' * * * [in which case] the intention of the drafters, rather than the strict language, controls.”

Ron Pair

, 489 U.S. at 242 (citations omitted).

Judge Learned Hand's formulation of the doctrine is often quoted in the caselaw:

Of course, it is true that the words used, even in their literal sense, are the primary and ordinarily the most reliable, source of interpreting the meaning of any writing. * * * But it is one of the surest indexes of a mature and developed jurisprudence not to make a fortress out of the dictionary; but to remember that statutes always have some purpose or object to accomplish, whose sympathetic and imaginative discovery is the surest guide to their meaning.

Cabell

Markham

, 148 F.2d 737, 738 (2d Cir.), aff'd 326 U.S. 404 (1945). See

Giuseppi

Walling

, 144 F.2d 608, 624 (2d Cir. 1944) (opinion by Judge Hand) (“There is no surer way to misread any document than to read it literally”).

In describing these cases as “rare,” the U.S. Supreme Court seemed to be referring to the small percentage of statutory-construction cases that are decided on the basis of the doctrine. The D.C. Circuit, in surveying the doctrine over more than a century of jurisprudence, characterized the body of law in absolute numbers as comprising “legions of court decisions.”

In re Franklyn C. Nofziger

, 925 F.2d 428, 434 (D.C. Cir. 1991). The U.S. Supreme Court cases include, among others,

Nixon

Missouri Municipal League

, 541 U.S. 125, 132-33 (2004) (“any entity” includes private but not public entities);

Raygor

Regents of Univ. of Minn.

, 534 U.S. 533, 542-45 (2002) (“implying a narrow interpretation of * * * `any claim asserted' so as to exclude certain claims dismissed on Eleventh Amendment grounds”);

Ron Pair

, 48 U.S. at 242;

Green

Bock Laundry Machine Company

, 490 U.S. 504 (1989) (provision in Federal Rule of Evidence that protects “the defendant” against potentially prejudicial evidence, but not the plaintiff, refers to only criminal, and not civil, defendants);

Train

Colorado Public Interest Research Group, Inc.

, 426 U.S. 1, 23-24 (1976) (prohibition in Federal Water Pollution Control Act against discharging into navigable waters “pollutants,” which are defined to include “radioactive materials,” does not apply to three specific types of radioactive materials);

Lynch

Overholser, 369 U.S. 705, 710, (1962)

(statutory construction is not confined to the “bare words of a statute”);

Utah Junk Co.

Porter, 328 U.S. 39, 44 (1946)

(“literalness may strangle meaning”);

Markham

Cabell, 326 U.S. 404, 409

(1945) (“The policy as well as the letter of the law is a guide to decision.”);

United States

American Trucking Associations, Inc.

310 U.S. 534 (1940) (the term “employees” in the Federal Motor Carrier Act, is limited to employees whose activities affect safety);

C.V. Sorrels

U.S.

, 287 U.S. 435, 446-49 (1932) (provisions of National Prohibition Act that criminalize possessing and selling liquor do not apply if defendant is entrapped; Court declines to apply the “letter of the statute” because doing so “in the circumstances under consideration is foreign to its purpose”);

Holy Trinity Church

U.S.

, 143 U.S. 457, 516-17 (1892) (“any alien” does not include a foreign pastor; Court stated, “It is a familiar rule, that a thing may be within the letter of the statute and yet not within the statute, because not within its spirit, nor within the intention of its makers * * * If a literal construction of the words be absurd, the Act must be construed as to avoid the absurdity”);

United States

Kirby, 7

Wall, 482, 486, 19 L.Ed. 278 (1868)

(the statute punishing obstruction of the mails is not to be applied to obstruction for the lawful purpose of arresting a mail carrier indicted for murder).

The D.C. Circuit has also handed down several decisions that applied the absurd results doctrine to avoid a literal interpretation or application of statutory provisions.

See Buffalo Crushed Stone, Inc.

Surface Transportation Board

, 194 F.3d 125, 129-30 (D.C. Cir. 1999) (regulation of Surface Transportation Board providing that if a notice of exemption “contains false or misleading information, the use of the exemption is void

ab initio

” does not apply to a notice containing false information when declaring the notice void

ab initio

would undermine the goals of the governing statute; a conflict between the “literal application of statutory language” and maintaining the integrity of the regulatory scheme should be resolved by construing the text in accordance with its purpose);

U.S.

Stewart

, 104 F.3d 1377, 1388 (D.C. Cir. 1997)

Environmental Defense Fund

EPA

, 82 F.3d 451, 468-69 (D.C. Cir. 1996) (although Clean Air Act requires that a Federal action conform to the State implementation plan that is currently in place, EPA may instead require conformity to a revised implementation plan that State commits to develop; “[t]his is one of those rare cases * * * [that] requires a more flexible, purpose-oriented interpretation if we are to avoid `absurd or futile results.' ”);

In re Nofziger

, 925 F.2d 428, 434-35 (D.C. Cir. 1991) (provision authorizing payment of attorney fees to the subject of an investigation conducted by an independent counsel of the Department of Justice only if “no indictment is brought” against such individual does not preclude payment of attorney fees when an indictment is brought but is determined to be invalid).

To determine whether “the intentions of the drafters” differ from the result produced from “literal application” of the statutory provisions in question, the courts may examine the overall context of the statutory provisions, including whether there are related statutory provisions that either conflict or are consistent with that interpretation,

and including whether there is legislative history that exposes what the legislature meant by the terms in question. In addition, the courts may examine whether a literal application of the provisions produces a result that the courts characterize variously as absurd, futile, strange, or indeterminate, and therefore so illogical or otherwise contrary to sensible public policy as to be beyond anything Congress would reasonably have intended. After concluding this examination, the courts uphold an application of the provisions that, albeit not the literal application, is one that is nevertheless as consistent with congressional intent as possible.

A related line of cases addresses statutory provisions that directly, on their face, conflict with other statutory provisions. In these cases, as with the “absurd result” cases, the courts may decline to interpret literally the statutory provisions in question, and instead interpret them to give as much effect as possible to all of the relevant provisions.

See, e.g., Mountain States Telephone and Telegraph Co.

Pueblo of Santa Ana

, 472 U.S. 237 (1985);

Clark

Uebersee Finanz-Korporation

, 332 U.S. 480 (1947);

Citizens to Save Spencer County

EPA

, 600 F.2d 844 (D.C. Cir. 1977).

The U.S. Supreme Court applied the absurd results doctrine in

Green

Bock Laundry Machine Company

, 490 U.S. 504 (1989). There, the Court considered Federal Rule of Evidence 609(a), which provides:

General Rule. For the purpose of attacking the credibility of a witness, evidence that the witness has been convicted of a crime shall be admitted * * * but only if the crime (1) [is of a specified type] and the court determines that the probative value of admitting this evidence outweighs its prejudicial effect to the

defendant

(Emphasis added.) The Court recognized that read literally, Rule 609(a) applies in both criminal and civil litigation and gives an advantage to defendants. Specifically, the rule extends to both the criminal and civil defendants the protection of weighing the probative value of evidence of certain crimes against its prejudicial effect, but as for plaintiffs, the rule requires that evidence of those crimes be admitted without weighing against prejudicial effect. The Court found that for criminal litigation, this result makes sense because it is consistent with the greater protections generally afforded to defendants. However, for civil litigation, the Court found that this “literal reading would compel an odd result” because, among other things, civil defendants are not accorded greater protections than civil plaintiffs and, in any event, whether a litigant is designated plaintiff or defendant often is happenstance. The Court emphasized that “[n]o matter how plain the text of the Rule may be,” it could not accept this result, and concluded that “as far as civil trials are concerned, Rule 609(a)(1) `can't mean what it says.' ” 490 U.S. at 509-11 (citations omitted). The Court reviewed the legislative history, and concluded that notwithstanding the plain language, Congress “intended that only the accused in a criminal case should be protected from unfair prejudice by the balance set out in Rule 609(a)(1).”

. at 523-24.

In cases in which the “absurd results” doctrine of statutory constructions authorizes an agency to depart from the literal meaning of the statute, the agency must do so in as limited a manner as possible to effectuate underlying congressional intent. As the D.C. Circuit has stated:

The rule that statutes are to be read to avoid absurd results allows an agency to establish that seemingly clear statutory language does not reflect the “unambiguously expressed intent of Congress,” * * * and thus to overcome the first step of the

Chevron

analysis. But the agency does not thereby obtain a license to rewrite the statute. When the agency concludes that a literal reading of a statute would thwart the purposes of Congress, it may deviate no further from the statute than is needed to protect congressional intent.

Mova Pharmaceutical Corp.

Shalala

, 140 F.3d 1060, 1068 (D.C. Cir. 1998).

5. PSD and Title V Applicability Requirements

The plain meaning of the PSD applicability provisions in CAA §§ 165(a)(1) and 169(1) is clear that once PSD is triggered for GHG emissions, a source will be subject to PSD if it either belongs to one of 28 specifically identified source categories and “emit[s], or ha[s] the potential to emit, one hundred tons per year or more of any air pollutant,” including GHGs, or does not belong to one of those source categories and has “the potential to emit two hundred and fifty tons per year or more of any air pollutant,” including GHGs. Similarly, the plain meaning of the title V applicability requirements in CAA §§ 501(2)(B) and 302(j) is clear that once the title V requirements are triggered, they would apply to a source that “directly emits, or has the potential to emit, one hundred tons per year or more of any air pollutant,” including GHGs.

As described in detail elsewhere, applying the plain meaning of these provisions once PSD and title V are triggered for GHG emissions would impose PSD and title V permitting requirements on an extraordinarily large number of sources: The number of sources subject to PSD permits would increase from less than 300 per year to some 41,000 per year, and the number of sources subject to the title V requirements would grow from less than 14,000 to some 6.1 million. For at least an initial period of time, before permitting authorities could develop streamlining mechanisms, these obligations would have severe effects. From the permitting authorities' standpoint, the number of permit applications would far exceed their

administrative capacity, and would inevitably result in delays in issuance of permits to all sources—whether emitting conventional pollutants or GHGs—that would be measured in many years. From the sources' standpoints, thousands of sources that are quite small and that have never been confronted with CAA obligations would incur the expenses of PSD permitting requirements, including, most importantly, indentifying and developing BACT controls on a source-by-source basis. As for title V, millions of sources would be required to submit permit applications that meet title V requirements, even though the great majority of them would not be subject to any applicable CAA requirements. During this initial period, permitting authorities could develop streamlining approaches and ramp up administrative resources so that afterwards, they would be better able to accommodate the large numbers of permit applications and sources would be better able to comply. But, again, during the initial period, severe problems would ensue.

We believe that these effects of a literal application of the PSD and title V applicability thresholds and their collateral consequences are well beyond anything that Congress envisioned when it drafted the PSD and title V requirements, and indeed undermine both permitting programs. As a result, these effects bring into play the “absurd results” doctrine.

a. PSD

(1) Tensions With Other Statutory Requirements

Turning first to PSD, an important indication that Congress would not have intended that the threshold provisions be applied literally under the present circumstances may be found in the tensions that this literal application would create with other PSD provisions. CAA § 165(c) is particularly important in this regard. It requires that the permitting authority grant or deny “[a]ny completed permit application for a major emitting facility * * * not later than one year after the date of filing of such completed application.” A literal interpretation of CAA sections 165(a)(1) and 169(1) to apply at the 100/250 tpy levels for GHG sources would render compliance with this provision impossible by requiring far more permit applications than permitting authorities could process under this 12-month deadline, for at least an initial period of time until streamlining methods are developed. As noted elsewhere, States have estimated that the number of PSD permits that would be required under a 100/250 tpy threshold on an actuals basis would result in an average processing time of 10 years.

As noted elsewhere, because the applicability provisions apply on a potential-to-emit basis, as well as an actuals basis, the number of permit applications would be much greater than the permitting authorities assumed, and therefore the processing times would be much longer than 10 years.

A literal interpretation of CAA sections 165(a)(1) and 169(1) to apply at the 100/250 tpy levels would also be directly inconsistent with the PSD-purpose provision in CAA § 160, in particular, § 160(3), which is “to insure that economic growth will occur in a manner consistent with the preservation of existing clear air resources.” As the legislative history makes clear, Congress enacted the PSD provisions to resolve issues arising when sources of criteria pollutants seek to build or expand in areas with air quality that meets the national ambient air quality standards, but that would deteriorate with the addition of such new or expanded sources. Congress designed the PSD provisions to provide a mechanism for allowing sources to construct or modify in those clean-air areas, but with safeguards that both protected health and welfare, and that also left enough room in the airshed for still more economic growth.

See, e.g.

, H. Rpt. 95-294, 95th Cong., 1st Sess., at 154 (legislation “not only protect[s] public health and welfare but also assur[es] future air resources will be available for continuing the industrial and energy development so necessary for the growth of the Nation”). Because PSD is a preconstruction requirement, increasing permitting authorities' workload from 300 to 41,000 permits would severely undermine this purpose of facilitating economic growth, at least initially, until permitting authorities can develop streamlining methods and ramp up resources. Each year, many thousands of sources would face multi-year delays in receiving their permits, and as a result, for all practical purposes, they would be forced to place on hold indefinitely their plans to construct or modify.

(2) Inconsistency With Congressional Intent

The legislative history of the PSD provisions—enacted, again, in the 1977 Clean Air Act Amendments—also makes clear that a literal application of the applicability provisions would lead to results that are diametrically inconsistent with Congress's expressed intent. In reviewing the legislative history, it should be borne in mind that Congress was focused on sources of criteria pollutants—primarily sulfur dioxide (SO

), particulate matter, nitrogen oxides (NO

), and carbon monoxide (CO)—and not GHG emissions. This focus stems from the basic purpose of the PSD program, which is to safeguard maintenance of the NAAQS, combined with the limited awareness at that time of the problem of climate change.

See

S 95-127 (95th Cong., 1st Sess.), at 27.

Congress designed the PSD provisions to impose significant regulatory requirements, on a source-by-source basis, to identify and implement BACT and, for criteria pollutant, to also undertake certain studies. Congress was well aware that because these requirements are individualized to the source, they are expensive. Accordingly, Congress designed the applicability provisions to apply these requirements to industrial sources of a certain type and a certain size—sources within 28 specified source categories and that emit at least 100 tpy—as well as all other sources that emit at least 250 tpy, and, by the same token, to exempt other sources from these requirements. The legislative history shows that Congress's limitation of PSD to larger sources was quite deliberate, and was based on its determination to limit the costs that PSD permitting entails to the larger sources in certain industries. The D.C. Circuit has had occasion, in

Alabama Power,

to acknowledge this legislative history: “Congress's intention was to identify facilities which, due to their size, are financially able to bear the substantial regulatory costs imposed by the PSD provisions and which, as a group, are primarily responsible for emissions of the deleterious pollutants that befoul our nation's air.”

Alabama Power,

636 F.2d at 353. The Court added, “Though the costs of compliance with [the PSD] requirements are substantial, they can reasonably be borne by facilities that actually emit, or would actually emit when operating at full capacity, the large tonnage thresholds specified in section 169(1).”.

Id.

at 354.

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

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

Id.

at 24548-50.

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

The enacted legislation differs from the Senate bill by replacing the authorization to EPA to include by regulation source categories in addition to the listed 28 source categories with an inclusion of all other sources if they exceed 250 tpy, and with an authorization for the States to exempt hospitals and educational institutions. But Congress's overall intention remains clear, as the D.C. Circuit described in

Alabama Power:.

“Congress's intention was to identify facilities which, due to their size, are financially able to bear the substantial regulatory costs imposed by the PSD provisions and which, as a group, are primarily responsible for emissions of the deleterious pollutants that befoul our nation's air * * * [With respect to] the heating plant operating in a large high school or in a small community college * * * [w]e have no reason to believe that Congress intended to define such obviously minor sources as 'major' for the purposes of the PSD provision.”

636 F.2d at 353-54. However, applying the 100/250 tpy threshold literally to CO

emissions would frustrate congressional intent by subjecting to PSD sources that Congress specifically intended not to include. This occurs simply because although Congress evaluated whether sources should be included in PSD by reference to the amount of the emissions of conventional pollutants, many sources combust fossil fuels for heat or electricity, and the combustion process produces quantities of CO

that are far in excess of the sources' quantities of conventional pollutants and, in many cases, Congress's carefully considered 100 and 250 tpy thresholds. As a result, many of the “typical plant[s]” identified in the Steigerwald-Strelow memorandum that Congress thought would be excluded from PSD due to the relatively small amounts of their conventional pollutants would in fact be included due to the CO

emissions from their heating or electricity generating equipment.But the clearest and most important indication that applying the 100/250 thresholds literally in the case of GHG emissions would undermine congressional intent comes in considering the emissions profile of the small-sized boilers. Congress focused closely on identifying which sources with emissions in excess of 100 tpy should not be subject to PSD even though they are subject to CAA requirements generally. But Congress viewed a large set of sources as emitting below 100 tpy and therefore not included in the PSD program and, indeed, not even subject to debate as to whether they should be included in the PSD program. Chief among these sources, in terms of absolute numbers of sources, were small boilers. The Steigerwald-Strelow memorandum identified two categories of these boilers, differentiated by size. The first ranges in size from 10 to 250 × 10

Btu/hr, and has a “typical plant” size of 10

Btu/hr, with “BACT emissions from typical plant” of 53 tpy, and a total of 1,446 sources in the category. The second category ranges in size from 0.3 to 10 × 10

Btu/hr, and has a “typical plant” size of 1.3 × 10

Btu/hr, with “BACT emissions from typical plant” of 2 tpy, and a total of 11,215 sources in the category. The memorandum discusses these two categories in the context of explaining which source categories exceed a size of 100 tpy—and therefore would be subject to PSD if a 100 tpy threshold were set—by stating, “Fortunately, most truly small boilers and typical space heating operations would not be covered.” 122 Cong. Rec. 24549 (July 29, 1976). However, if the CO

emissions of these small boilers are considered, then most of them would be subject to PSD. In general, most boilers of these small sizes are fired with natural gas, and a natural gas boiler greater than 0.5 × 10

Btu/hr emits at least 250 tpy CO

. As a result, the small commercial and residential sources that include these boilers would become subject to PSD, and this would directly contravene Congress's intention to limit PSD to “industrial plants of significant impact.” 122

Cong. Rec.

24548-49 (statement of Sen. McClure). The legislative history also provides a window into the scope of the program that Congress anticipated and related administrability concerns. According to the Steigerwald-Strelow memorandum, the number of new sources each year whose “BACT emissions from typical plant” exceed 100 for the 28 listed source categories and 250 for all other source categories is less than 100 per year. Although the Steigerwald-Strelow memorandum does not attempt to estimate the number of modifications, it appears that based on this information, Congress had reason to expect the total size of the PSD program to be measured in the hundreds of permits each year. A program of this size would be manageable by EPA and the permitting authorities.

Note that although Congress specifically authorized the States to exempt “nonprofit health or education institutions” from the definition of “major emitting facility,” this statement by the D.C. Circuit should be taken as the Court's view that Congress did not design PSD to cover sources of the small size described.

The D.C. Circuit based its holding in

Alabama Power

that potential-to-emit for purposes of the applicability thresholds should be defined as

emissions at full capacity with implementation of control equipment, in part on its view that with this definition, the number of sources subject to PSD would be manageable:

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

Alabama Power,

636 F.2d at 354 (emphasis added). However, applying the thresholds literally to GHG emissions would increase the size of the PSD program far beyond what Congress had reason to expect and what the D.C. Circuit evidently had in mind. Returning to the Steigerwald-Strelow table, applying the thresholds literally would bring into PSD the great majority of the small boilers constructed each year, which numbered, in total, 12,661. Adding more sources from other source categories, and, most importantly, modifications, indicates that the size of the PSD program would very likely be at least an order of magnitude greater than what Congress intended. At least for an initial period of time, until streamlining methods could be developed, these numbers of sources would be well beyond the “administrative capability” that the D.C. Circuit described EPA as having.

(3) Absurd Results

Applying the PSD thresholds to sources of GHG emissions literally results in a PSD program that is so contrary to what Congress had in mind—and that in fact so undermines what Congress attempted to accomplish with the PSD requirements—that it should be avoided under the “absurd results” doctrine. As described above, Congress designed the PSD program as a mechanism to allow construction of new sources and expansion of existing sources in areas meeting the NAAQS, but only after those sources, on a source-by-source basis, undertook analyses to demonstrate that their emissions would not significantly deteriorate air quality and implemented controls representing BACT. Recognizing that PSD imposed significant costs on sources, Congress constructed a statutory scheme that it viewed as limiting PSD to large industrial sources that could bear the financial costs and that caused most of the pollution problem. These limits were the 100/250 tpy thresholds. Congress had reason to expect that with these thresholds, the program would approximate the size of the current PSD program, which numbers in the hundreds of sources each year. Throughout its deliberations, Congress focused primarily on emissions of conventional pollutants.

But applying the 100/250 tpy thresholds literally to sources of CO

would sweep aside this carefully designed construct by bringing in tens of thousands of sources of a different type and much smaller size than Congress had in mind: Commercial and residential sources whose primary—if not sole—source of emissions is CO

from small boilers that primarily provide heat. Moreover, applying the thresholds literally would bring in many additional sources in the source categories Congress expected PSD to apply to, but of a size Congress expected to be below the cut-off. Congress did not intend to apply PSD to these sources because of the expenses that compliance with PSD entails and because Congress did not view these sources as causing a sufficiently great part of the pollution problem. Including these sources would also expand the PSD program to well beyond what Congress had reason to expect, and what permitting authorities can administer.

The administrability problems lead the results of applying the thresholds literally beyond contravening congressional intent and into actually undermining congressional intent. At least for an initial period, until streamlining methods could be developed, the extraordinary number of sources subject to PSD would preclude the permitting authorities from processing permit applications for all sources, including those that Congress intended be subject to PSD. Because PSD is a preconstruction program, those sources would face many years of delay before they could construct or modify, which would undermine congressional intent to allow economic growth in PSD areas. These results are the types of “absurd results” from a literal reading of statutory provisions that courts have declined to sanction.

b. Title V

For title V, the application of the absurd results doctrine parallels that of PSD. First, a literal application of the 100 tpy threshold requirement in CAA §§ 502(a), 501(2)(B), and 302(j) would be in tension with a specific CAA requirement, that of CAA § 503(c), which imposes a time limit of 18 months from the date of receipt of the completed permit application for the permitting authority to issue or deny the permit. It would be flatly impossible for permitting authorities to meet this statutory requirement if their workload increases from some 14,000 permits to 6.1 million. Instead, permit applications would face multi-year delays in obtaining their permits.

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

The legislative history of title V, enacted by Congress in the 1990 CAA Amendments, indicates that Congress expected the provisions to apply to a much smaller set of sources than would become subject at a 100-tpy GHG threshold level. The Senate Committee report noted that under the title V provisions that would be enacted, “the additional workload in managing the air pollution permit system is estimated to be roughly comparable to the burden that States and EPA have successfully managed under the Clean Water Act[,]” under which “some 70,000 sources receive permits, including more than 16,000 major sources.” S. Rep. 101-228,

at 353. Applying title V to GHG emitters at the 100-tpy threshold would result in approximately 6.1 million sources becoming subject to title V, which is far in excess of the number that Congress contemplated.

Moreover, the great majority of these sources will not be subject to any CAA requirements, so that although they would need to apply for and receive a permit, there would be no applicable requirements to include in the permit and the exercise would not improve compliance. But at least for an initial period, until streamlining methods could be developed, the extraordinary numbers of these sources would sweep aside Congress' carefully constructed program, with its multi-step process and deadlines of as short as 45 days—and instead, backlog the permit authorities for many years. Multi-year delays in issuance of all permits would ensue, those for sources that have applicable requirements and that Congress clearly intended the program to cover, and for the millions of sources that are not subject to any applicable requirements. Thus, as with PSD, a literal interpretation of the title V threshold provisions would apply title V to millions of sources that Congress did not intend be covered, and the ensuing administrative burdens—at least initially—would impede the issuance of permits to the thousands of sources that Congress did intend be covered. This result is the type of “absurd results” from a literal application of statutory provisions that the courts have held should be avoided.

c. Application of PSD and Title V Thresholds

Because a literal application of both the PSD and title V threshold requirements produces absurd results, EPA may develop a different application that promotes consistency with other statutory provisions and is consistent with congressional intent. We believe that this proposal would achieve these objectives by establishing a threshold for the first phase at the level of 25,000 tpy CO

e, and committing to vigorous efforts to streamline implementation of both programs' requirements and to complete a study and then conduct further rulemaking.

A first phase 25,000-tpy CO

e major source GHG threshold, combined with vigorous efforts to develop streamlining methods, is consistent with congressional intent for the PSD provisions for several reasons. The 25,000-tpy CO

e threshold reconciles the PSD provisions that, absent this regulation, would be in tension with each other, and thereby maintains the overall functioning of the PSD program. The threshold maintains the environmental purposes of the PSD program, while allowing economic growth, as set forth in CAA § 160. As discussed elsewhere in this preamble, a majority of stationary source GHG emissions in the U.S. come from a relatively small number of high-emitting sources that would remain subject to PSD because they emit at or above the 25,000-tpy CO

e threshold. By comparison, about 75 percent of stationary source GHG emissions come from all sources above 250 tpy. Accordingly, the 25,000-tpy CO

e threshold would, during this first phase, exempt from PSD numerous small sources that emit only about 7 percent of GHGs, and that smaller amount of emissions coverage would not jeopardize the environmental protection goals of PSD. Moreover, the program will remain of a manageable size, so that permitting authorities will be able to process permit applications and issue permits, which sources must have to construct or expand. As discussed elsewhere, the information available to us indicates that the 25,000-tpy CO

e level is the level closest to the statutory levels that permitting authorities can reasonably administer during this initial phase. The “absurd results” caselaw requires that if a statutory provision cannot be applied literally, then it should be applied as close to literally as possible, consistent with congressional intent. With this level of 25,000-tpy CO

e, permitting authorities would be able to reasonably comply with the 12-month deadline requirement for acting on PSD permit applications under CAA § 165(c). Further, the first phase threshold of 25,000 tpy and the development of streamlining methods is consistent with congressional intent to limit the PSD program—with the high costs that result from its source-by-source applications—to sources that can bear the costs. The first phase would allow for the implementation of streamlining methods, which could facilitate the orderly development of the program by reducing the costs of compliance for sources of GHG emissions. In addition, the first phase threshold maintains the program at a manageable size so that permitting authorities will be able to continue to timely issue permits to sources seeking to construct or expand.

The first phase 25,000-tpy CO

e threshold, combined with the development of streamlining methods and the study and subsequent regulations, is also consistent with the purposes of the title V provisions. This first phase would assure a manageable size for the program so that permitting authorities could continue to issue permits to sources with applicable CAA requirements, as Congress intended. The implementation of streamlining methods—in particular, general permits—could facilitate the orderly development of the title V program to include a broader set of sources based on their GHG emissions.

B. “Administrative Necessity” Doctrine

1. Overview

Once EPA takes regulatory action to trigger PSD and title V requirements for GHG emitters, a literal application of the PSD and title V applicability requirements (

i.e.,

the 100/250-tpy PSD major stationary source threshold and a “zero” significance level threshold, and the 100-tpy title V threshold) would result in a volume of permit applications that is so high that the PSD and title V programs would become impossible for State and Federal authorities to administer. The PSD and title V permitting processes would become overwhelmed and essentially paralyzed.

Under these circumstances, the judicial doctrine of administrative necessity authorizes EPA to undertake a process for rendering the PSD and title V requirements administrable. As part of this process, EPA must consider ways to streamline the PSD and title V definitions and operative requirements so that the permitting authorities may more efficiently process the expected influx of GHG permit applications. These streamlining methods may include refinements to the definition of PTE and issuance of some form of general permits with presumptive BACT.

See

section VII.A of this preamble for a description of what these streamlining methods entail for PSD and title V programs, respectively.

However, the development, adoption, and implementation of these streamlining approaches would take several years, and, upon their completion, would still leave permitting authorities confronting a sufficiently large increase in workload that, absent a corresponding increase in resources, would continue to render the PSD and title V programs impossible to administer.

See

section VII of this preamble for an explanation of the procedures and timeframes necessary to develop these streamlining techniques.

As a result, under the doctrine of administrative necessity, EPA is authorized to phase in the PSD and title V requirements in as refined a manner as possible, so as to allow

administration of the PSD and title V programs. As part of the first phase, EPA proposes to establish the thresholds at the levels proposed, as well as undertake streamlining as much as possible and as quickly as possible, and explore with permitting authorities methods to ramp up resources for processing GHG permit applications. EPA also commits to conduct an assessment of the administrability issue within 5 years and, by the end of 1 year later, promulgate the second phase of the tailoring process, which would include the thresholds and streamlining methods determined at that time to be appropriate.

2. Chevron Standard for Statutory Interpretation

As noted above, the PSD requirements apply to the construction and modification of a “major emitting facility,” CAA §§ 165(a)(1), 169(2)(C), which is defined as a “stationary source[ ] [in one of 28 listed categories of sources] of air pollutants which emit[s], or ha[s] the potential to emit, one hundred tons per year or more of any air pollutant” or “any other source with the potential to emit two hundred and fifty tons per year or more of any air pollutant,” with certain exceptions. CAA § 169(1). The title V requirements apply to any “major source,” CAA § 502(a), which is defined to include “any stationary facility or source of air pollutants which directly emits, or has the potential to emit, one hundred tons per year or more of any air pollutant.” CAA §§ 501(2)(b), 302(j).

Although these applicability provisions are clear by their terms, the Courts have held that the

Chevron

approach of applying the literal language of the provisions may not apply when the administrability of the provisions is at issue.

3. Doctrine of Administrative Necessity

a. Administrative Necessity Doctrine in the Context of

Chevron

The Courts have acknowledged the administrative necessity doctrine as an overlay on the

Chevron

doctrine of statutory construction, so that even when a statutory requirement expresses a clear congressional intent, if the provision is impossible for the agency to administer, then the agency is not required to follow the literal requirements, and instead, the agency may adjust the requirements in as refined a manner as possible to assure that the requirements are administrable, while still achieving Congress's overall intent. As discussed below, the D.C. Circuit set out the doctrine of “administrative necessity” in a line of cases that most prominently includes

Alabama Power

Costle,

636 F.2d 323 (D.C. Cir. 1980). The Court cited the doctrine most recently in

New York

EPA,

443 F.3d 880, 884, 888 (D.C. Cir. 2006).

It should be noted that numerous cases have held that an agency may consider administrative factors in choosing regulatory policies under statutory provisions that authorize choices.

See, e.g., National Mining Association

EPA,

59 F.3d 1351, 1364 (D.C. Cir. 1995);

Phillips Petroleum Co.

EPA,

803 F.2d 545, 562 (D.C. Cir. 1986);

National Wildlife Federation

Gorsuch,

693 F.2d 156, 182 (D.C. Cir. 1982). While these cases support the general proposition that administrative considerations are important, they differ from the “administrative necessity” doctrine because in those cases, the Agency's actions were within the ambit of the statutory language; whereas under the “administrative necessity” doctrine, the Agency's actions depart from the statutory language.

b. Alabama Power

The Court provided its most robust expression of the “administrative necessity” doctrine in the seminal decision,

Alabama Power Co.

Costle,

636 F.2d 323 (D.C. Cir. 1980) (

Alabama Power

), a case that resolved industry and citizens group challenges to many aspects of the regulations EPA promulgated shortly after enactment of the 1977 CAA Amendments to implement the newly enacted statutory provisions. One regulatory provision purported to exempt sources that qualified as major emitting facilities if their actual emissions were 50 tpy or less. EPA sought to justify this provision on grounds that some 2,400 major emitting facilities emit 50 tpy or less, and that the large burdens on the agency and industry of permit development and review would outweigh the small benefits of permitting. The Court invalidated this regulatory exemption as not authorized by the statute, but in so doing, recognized EPA's concerns about administrative burdens and, anticipating future agency efforts to adjust statutory mandates to administrative realities, went on to articulate the basis for the administrative necessity doctrine.

636 F.2d at 356-57.

The Court also explained that in that case, EPA's concern that large numbers of small sources would be subject to PSD was misplaced because it was based on an erroneous interpretation of the requirement that the threshold for determining whether a source was a major emitting facility (and thereby subject to PSD) was the source's PTE. EPA erroneously believed that PTE had to be calculated without reference to pollution controls, an interpretation that would have meant that many sources of a low level of actual emissions would be treated as major emitting facilities. The Court held, in another part of the

Alabama Power

opinion, that PTE must be calculated with reference to pollution controls, and went on to observe that this holding effectively mooted EPA's concerns that underlay its effort to exempt 50-tpy-or-less sources from PSD requirements.

First, the D.C. Circuit described the basis for the administrative necessity doctrine as, in effect, an overlay on clear statutory intent. Specifically, in a section of the opinion titled, “Exemptions Born of Administrative Necessity,” the Court stated:

Certain limited grounds for the creation of exemptions are inherent in the administrative process, and their unavailability under a statutory scheme should not be presumed, save in the face of the most unambiguous demonstration of congressional intent to foreclose them.

Id.

at 357.

Second, the Court identified several types of administrative relief that may be available to an agency. One is “[c]ategorical exemptions from the clear commands of a regulatory statute,” which the court stated are “sometimes permitted,” but emphasized “are not favored.”

Id.

at 358. A second is “an administrative approach not explicitly provided in the statute,” such as “streamlined agency approaches or procedures where the conventional course, typically case-by-case determinations, would, as a practical matter, prevent the agency from carrying out the mission assigned to it by Congress.”

Id.

A third is a delay of deadlines upon “a showing by [the agency] that publication of some of the guidelines by that date is infeasible.”

Id.

at 359 (quoting

NRDC

Train,

510 F.2d 692, 712 (D.C. Cir. 1974).

Finally, the Court explained it would evaluate whether the agency faced an administrative impossibility, and the acceptability of the agency's choices, based on the essential circumstances confronting the agency, including the volume and nature of the tasks required of the agency, its financial and personnel resources, and the time available to it. Specifically, the Court observed that the administrative necessity doctrine would apply based on the “administrative need to adjust to available resources * * * where the constraint was imposed * * * by a shortage of funds * * *, by a shortage of time, or of the technical personnel needed to administer a program.”

Id.

at 358. The Court added that another administrative constraint could be “the degree of administrative burden posed by enforcement.”

Id.

at 405.

See NRDC

Train,

510 F.2d 692, 712 (D.C. Cir. 1974) (recognizing constraints imposed by budgetary commitments, manpower demands, or inability to evaluate sufficiently the necessary scientific and technical determinations).

Even so, the Court went on to caution that “administrative necessity” is a high hurdle: “[T]he agency [bears] a heavy

burden to demonstrate the existence of an impossibility.”

Id.

at 359. The Court particularly noted its reticence to uphold agency claims of administrative impossibility when those claims are made in advance of actual efforts to administer or enforce: “The agency's burden of justification in such a case is especially heavy.”

Id.

at 359.

Alabama Power,

the D.C. Circuit emphasized that its exposition of the administrative necessity doctrine was consistent with U.S. Supreme Court decisions holding that administrative considerations could factor into agency decisions. The D.C. Circuit noted that the Supreme Court, in

Permian Basin Area Rate Cases,

390 U.S. 747 (1968), “approv[ed] the adopting by the FPC of area rate regulation as the practical means to regulate thousands of natural gas producers,” and quoted the Supreme Court as explaining, “[c]onsiderations of feasibility and practicality are certainly germane to the issues before us. * * * We cannot, in these circumstances, conclude that Congress has given authority inadequate to achieve with reasonable effectiveness the purpose for which it has acted.”

Alabama Power,

636 F.2d at 359 (citing

Permian Basin Area Rate Cases,

390 U.S. at 777). The Court in

Alabama Power

also cited

Morton

Ruiz,

415 U.S. 199, 230-31 (1973), in which the Supreme Court “acknowledged the substantive authority of the Secretary [of the Bureau of Indian Affairs] to take appropriate action to cope with the administrative impossibility of applying the commands of the substantive statute.

Alabama Power,

636 F.2d at 359.

Although

Alabama Power

presented the D.C. Circuit's most robust exposition of the administrative necessity doctrine, the Court first identified the doctrine, albeit in the relatively narrow application of a deadline extension, in the 1974 decision,

NRDC

Train,

510 F.2d 692 (D.C. Cir. 1974). There, the Court considered EPA objections that it would be unable to meet a statutory requirement that established a deadline for promulgating effluent limitations. While declining to grant extensions of the deadline in that case, the Court acknowledged that under certain circumstances, judicial relief in the form of a deadline extension would be warranted in light of administrative considerations. The Court observed that “budgetary commitments and manpower demands” needed to meet a deadline could be “beyond the agency's capacity or would undu

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