[Federal Register Volume 75, Number 63 (Friday, April 2, 2010)]
[Rules and Regulations]
[Pages 17004-17023]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-7536]



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Part V





Environmental Protection Agency





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40 CFR Parts 50, 51, 70, and 71



Reconsideration of Interpretation of Regulations That Determine 
Pollutants Covered by Clean Air Act Permitting Programs; Final Rule

  Federal Register / Vol. 75 , No. 63 / Friday, April 2, 2010 / Rules 
and Regulations  

[[Page 17004]]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 50, 51, 70, and 71

[EPA-HQ-OAR-2009-0597; FRL-9133-6]
RIN 2060-AP87


Reconsideration of Interpretation of Regulations That Determine 
Pollutants Covered by Clean Air Act Permitting Programs

AGENCY: Environmental Protection Agency.

ACTION: Final Action on Reconsideration of Interpretation.

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SUMMARY: EPA has made a final decision to continue applying the 
Agency's existing interpretation of a regulation that determines the 
scope of pollutants subject to the Federal Prevention of Significant 
Deterioration (PSD) program under the Clean Air Act (CAA or Act). In a 
December 18, 2008 memorandum, EPA established an interpretation 
clarifying the scope of the phrase ``subject to regulation'' found 
within the definition of the term ``regulated NSR pollutant.'' After 
considering comments on alternate interpretations of this term, EPA has 
decided to continue to interpret it 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. Thus, 
this action explains that EPA will continue following the 
interpretation in the December 18, 2008 memorandum with one exception. 
EPA is refining its interpretation to establish that the PSD permitting 
requirements will not apply to a newly regulated pollutant until a 
regulatory requirement to control emissions of that pollutant ``takes 
effect.'' In addition, this notice addresses several questions 
regarding the applicability of the PSD and Title V permitting programs 
to greenhouse gases (GHGs) upon the anticipated promulgation of EPA 
regulations establishing limitations on emissions of GHGs from vehicles 
under Title II of the CAA. Collectively, these conclusions result in an 
EPA determination that PSD and Title V permitting requirements will not 
apply to GHGs until at least January 2, 2011.

DATES: This final action is applicable as of March 29, 2010.

FOR FURTHER INFORMATION CONTACT: Mr. David Svendsgaard, Air Quality 
Policy Division (C504-03), U.S. Environmental Protection Agency, 
Research Triangle Park, NC 27711, telephone number: (919) 541-2380; fax 
number: (919) 541-5509, e-mail address: [email protected].

SUPPLEMENTARY INFORMATION:

I. General Information

A. Does this action apply to me?

    Entities potentially affected by this action include sources in 
various industry groups and State, local, and tribal governments.

B. How is this document organized?

    This document is organized as follows:

I. General Information
II. Background
III. This Action
    A. Overview
    B. Analysis of Proposed and Alternative Interpretations for 
Subject to Regulation
    1. Actual Control Interpretation
    2. Monitoring and Reporting Interpretation
    3. State Implementation Plan (SIP) Interpretation
    4. Endangerment Finding Interpretation
    5. Section 209 Waiver Interpretation
    C. Other Issues on Which EPA Solicited Comment
    1. Prospective Codification of Interpretation
    2. Section 821 of the Clean Air Act Amendments of 1990
    3. Timing of When a Pollutant becomes Subject to Regulation
IV. Application of PSD Interpretive Memo to Permitting for GHGs
    A. Date by Which GHGs Will Be ``Subject to Regulation''
    B. Implementation Concerns
    C. Interim EPA Policy To Mitigate Concerns Regarding GHG 
Emissions from Construction or Modification of Large Stationary 
Sources
    D. Transition for Pending Permit Applications
V. PSD Program Implementation by EPA and States
VI. Application of the Title V Program to Sources of GHGs
VII. Statutory Authority
VIII. Judicial Review

II. Background

    On December 18, 2008, then-EPA Administrator Stephen Johnson issued 
a memorandum setting forth EPA's interpretation regarding which 
pollutants were ``subject to regulation'' for the purposes of the 
Federal PSD permitting program. See Memorandum from Stephen Johnson, 
EPA Administrator, to EPA Regional Administrators, RE: EPA's 
Interpretation of Regulations that Determine Pollutants Covered by 
Federal Prevention of Significant Deterioration (PSD) Permit Program 
(Dec. 18, 2008) (``PSD Interpretive Memo'' or ``Memo''); see also 73 FR 
80300 (Dec. 31, 2008) (public notice of Dec. 18, 2008 memo). The Memo 
interprets the phrase ``subject to regulation'' to include pollutants 
``subject to either a provision in the CAA or regulation adopted by EPA 
under the CAA that requires actual control of emissions of that 
pollutant,'' while excluding pollutants ``for which EPA regulations 
only require monitoring or reporting.'' See Memo at 1. The Memo was 
necessary after issues were raised regarding the scope of pollutants 
that should be addressed in PSD permitting actions following the 
Supreme Court's April 2, 2007 decision in Massachusetts v. EPA, 549 
U.S. 497 (2007).
    In Massachusetts v. EPA, the Supreme Court held that GHGs, 
including carbon dioxide (CO2), fit within the definition of 
air pollutant in the CAA. The case arose from EPA's denial of a 
petition for rulemaking filed by more than a dozen environmental, 
renewable energy, and other organizations requesting that EPA control 
emissions of GHGs from new motor vehicles under section 202(a) of the 
CAA. The Court found that, in accordance with CAA section 202(a), EPA 
was required to determine whether or not emissions of GHGs from new 
motor vehicles cause or contribute to air pollution which may 
reasonably be anticipated to endanger public health or welfare, or 
whether the science is too uncertain to make a reasoned decision.\1\
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    \1\ On December 15, 2009, EPA published the final endangerment 
and cause or contribute findings for GHGs under section 202(a) of 
the CAA. See 74 FR 66495.
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    On November 13, 2008, the Environmental Appeals Board (EAB) issued 
a decision in a challenge to a PSD permit to construct a new electric 
generating unit in Bonanza, Utah. In re Deseret Power Electric 
Cooperative, PSD Appeal No. 07-03 (EAB Nov. 13, 2008) (``Deseret''). 
The permit was issued by EPA Region 8 in August 2007 and did not 
include best available control technology (BACT) limits for 
CO2. At the time, the Region acknowledged Massachusetts but 
found that decision alone did not require PSD permits to include limits 
on CO2 emissions. In briefs filed in the EAB case, EPA 
maintained the position that the Agency had a binding, historic 
interpretation of the phrase ``subject to regulation'' in the Federal 
PSD regulations that required PSD permit limits to apply only to those 
pollutants already subject to actual control of emissions under other 
provisions of the CAA. Response of EPA Office of Air and Radiation and 
Region 8 to Briefs of Petitioner and Supporting Amici (filed March 21, 
2008). Accordingly, EPA argued that the regulations contained in 40 CFR 
part 75, which require monitoring of CO2 at some sources, 
did not make CO2 subject

[[Page 17005]]

to PSD regulation. The order and opinion issued by the EAB remanded the 
permit after finding that prior EPA actions were insufficient to 
establish a historic, binding interpretation that ``subject to 
regulation'' for PSD purposes included only those pollutants subject to 
regulations that require actual control of emissions. However, the EAB 
also rejected arguments that the CAA compelled only one interpretation 
of the phrase ``subject to regulation'' and found ``no evidence of a 
Congressional intent to compel EPA to apply BACT to pollutants that are 
subject only to monitoring and reporting requirements.'' Thus, the 
Board remanded the permit to the Region to ``reconsider whether or not 
to impose a CO2 BACT limit in light of the `subject to 
regulation' definition under the CAA.'' The Board encouraged EPA to 
consider ``addressing the interpretation of the phrase `subject to 
regulation under this Act' in the context of an action of nationwide 
scope, rather than through this specific permitting proceeding.'' See 
Deseret at 63-64.
    EPA issued the PSD Interpretive Memo shortly after the Deseret 
decision with the stated purpose to ``establish[ ] an interpretation 
clarifying the scope of the EPA regulation that determines the 
pollutants subject to the Federal Prevention of Significant 
Deterioration (PSD) program under the Clean Air Act (CAA or Act)'' by 
providing EPA's ``definitive interpretation'' of the definition of the 
term ``regulated NSR pollutants'' found at 40 CFR 52.21(b)(50) and 
resolving ``any ambiguity in subpart ([iv]) of that paragraph, which 
includes `any pollutant that otherwise is subject to regulation under 
the Act.' '' See Memo at 1. As the Memo explains, the statute and 
regulation use similar language--the regulation defines a regulated NSR 
pollutant to include ``[a]ny pollutant that otherwise is subject to 
regulation under the Act'' and requires BACT for ``each regulated NSR 
pollutant,'' per 40 CFR 52.21(b)(50) and (j), while the Act requires 
BACT for ``each pollutant subject to regulation under this [Act],'' per 
CAA sections 165(a)(4) and 169. The EAB had determined that ``the 
meaning of the term `subject to regulation under this Act' as used in 
[CAA] sections 165 and 169 is not so clear and unequivocal as to 
preclude the Agency from exercising discretion in interpreting the 
statutory phrase'' in implementing the PSD program. See Deseret at 63.
    The PSD Interpretive Memo seeks to resolve the ambiguity in 
implementation of the PSD program by stating that ``EPA will interpret 
this definition of `regulated NSR pollutant' to exclude pollutants for 
which EPA regulations only require monitoring or reporting but to 
include each pollutant subject to either a provision in the Clean Air 
Act or regulation adopted by EPA under the Clean Air Act that requires 
actual control of emissions of that pollutant.'' The Memo states that 
``EPA has not previously issued a definitive interpretation of the 
definition of `regulated NSR pollutant' in section 52.21(b)(50) or an 
interpretation of the phrase `subject to regulation under the Act' that 
addressed whether monitoring and reporting requirements constitute 
`regulation' within the meaning of this phrase.'' The Memo, however, 
explains that the interpretation reflects the ``considered judgment'' 
of then-Administrator Johnson regarding the PSD regulatory requirements 
and is consistent with both historic Agency practice and prior 
statements by Agency officials. See Memo at 1-2.
    The PSD Interpretive Memo is not a substantive rule promulgated 
under section 307(d) of the CAA, but rather an interpretation of the 
terms of a regulation at 40 CFR 52.21(b)(50).\2\ An interpretive 
document is one that explains or clarifies, and is consistent with, 
existing statutes or regulation. See National Family Planning and 
Reproductive Health Ass'n v. Sullivan, 979 F.2d 227, 236-37 (D.C. Cir. 
1992). The PSD Interpretive Memo explains and clarifies the meaning of 
the definition of ``regulated NSR pollutant'' in section 52.21(b)(50) 
of the existing NSR regulations, and does not alter the meaning of the 
definition in any way that is inconsistent with the terms of the 
regulation. As a result, EPA concluded that the PSD Interpretive Memo 
was an interpretive rule that could be issued without a notice and 
comment rulemaking process.
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    \2\ The PSD Interpretive Memo also reflects EPA's interpretation 
of sections 165(a)(4) and 169(3) of the CAA, which use language 
similar to the EPA regulations that are based on these provisions of 
the statute. The Memo discusses the Agency's interpretation of the 
CAA and concludes that the Agency's interpretation of its 
regulations is not precluded by the terms of the CAA.
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    However, the PSD Interpretive Memo observed that the adoption of an 
interpretation of a rule without a notice and comment process does not 
preclude subsequent action by the Agency to solicit public input on the 
interpretation. Indeed, given the significant public interest in the 
issue addressed in the December 18, 2008 memorandum, EPA subsequently 
elected to seek public input on the memorandum and alternative readings 
of the regulations.
    On December 31, 2008, EPA received a petition for reconsideration 
of the position taken in the PSD Interpretive Memo from Sierra Club and 
14 other environmental, renewable energy, and citizen organizations. 
See Petition for Reconsideration, In the Matter of: EPA Final Action 
Published at 73 FR 80300 (Dec. 31, 2008), entitled ``Clean Air Act 
Prevention of Significant Deterioration (PSD) Construction Permit 
Program; Interpretation of Regulations That Determine Pollutants 
Covered by the Federal PSD Permit Program.'' Petitioners argued that 
the PSD Interpretive Memo ``was impermissible as a matter of law, 
because it was issued in violation of the procedural requirements of 
the Administrative Procedures [sic] Act * * * and the Clean Air Act * * 
*, it directly conflicts with prior agency actions and interpretations, 
and it purports to establish an interpretation of the Act that 
conflicts with the plain language of the statute.'' See Petition at 2. 
Accordingly, Petitioners requested that EPA reconsider and retract the 
PSD Interpretive Memo. Petitioners later amended their Petition for 
Reconsideration to include a request to stay the effect of the Memo 
pending the outcome of the reconsideration request. Amended Petition 
for Reconsideration (filed Jan. 6, 2009).\3\
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    \3\ On January 15, 2009, a number of environmental organizations 
that filed this Petition for Reconsideration also filed a petition 
challenging the PSD Interpretive Memo in U.S. Court of Appeals for 
the District of Columbia Circuit. Sierra Club v. E.P.A., No. 09-1018 
(D.C. Cir., filed Jan. 15, 2009). Thereafter, various parties moved 
to intervene in that action or filed similar petitions challenging 
the Memo. The consolidated D.C. Circuit cases have been held in 
abeyance pending this reconsideration process. Id., Order (filed 
March 9, 2009).
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    On February 17, 2009, EPA granted the Petition for Reconsideration, 
on the basis of the authority conferred by section 553(e) of the 
Administrative Procedure Act (APA), and announced its intent to conduct 
a rulemaking to allow for public comment on the issues raised in the 
Memo and on any issues raised by the EAB's Deseret opinion, to the 
extent they do not overlap with the issues raised in the Memo.\4\ 
Because the Memo was not a substantive rule promulgated under section 
307(d) of the APA, the reconsideration action was not a reconsideration 
under the authority of section 307(d)(7)(B) of the CAA. See Letter from 
Lisa P. Jackson, EPA Administrator, to David Bookbinder, Chief Climate 
Counsel at Sierra Club (Feb. 17, 2009). EPA did not stay the 
effectiveness of the PSD Interpretive Memo pending reconsideration, but 
the Agency did reiterate that the Memo

[[Page 17006]]

``does not bind States issuing [PSD] permits under their own State 
Implementation Plans.'' Id. at 1.
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    \4\ Because the grant of reconsideration directed the Agency to 
conduct this reconsideration using a notice and comment process, the 
proposal did not address the procedural challenge presented in the 
Petition for Reconsideration.
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    On October 7, 2009 (74 FR 51535), EPA proposed a reconsideration of 
the PSD Interpretive Memo that solicited comment on five possible 
interpretations of the regulatory phrase ``subject to regulation''--the 
``actual control'' interpretation (adopted by the Memo); the 
``monitoring and reporting'' interpretation (advocated by Petitioners); 
the inclusion of regulatory requirements for specific pollutants in 
SIPs (discussed in both the Memo and the Petition for Reconsideration); 
an EPA finding of endangerment (discussed in the Memo); and the grant 
of a section 209 waiver interpretation (raised by commenters in another 
EPA action). EPA also addressed, and requested public comment on, other 
issues raised in the PSD Interpretive Memo and related actions that may 
influence this reconsideration.
    Of the five interpretations described in the proposed 
reconsideration notice, EPA expressly favored the actual control 
interpretation, which has remained in effect since issuing the 
memorandum, notwithstanding the EPA's grant of reconsideration. The 
proposal explained that the actual control interpretation best reflects 
EPA's past policy and practice, is in keeping with the structure and 
language of the statute and regulations, and best allows for the 
necessary coordination of approaches to controlling emissions of newly 
identified pollutants. While the other interpretations may represent 
reasoned approaches for interpreting ``subject to regulation,'' no 
particular one is compelled by the statute, nor did the EAB determine 
that any one of them was so compelled. Because EPA had overarching 
concerns over the policy and practical application of each of the 
alternative interpretations, the Agency proposed to retain the actual 
control interpretation. Nevertheless, EPA requested comment on all five 
of the interpretations.

III. This Action

A. Overview

    EPA has made a final decision to continue applying (with one 
limited refinement) the Agency's existing interpretation of 40 CFR 
52.21(b)(50) that is articulated in the PSD Interpretive Memo. For 
reasons explained below, and addressed in further detail in the 
document ``Reconsideration of Interpretation of Regulations that 
Determine Pollutants Covered by Clean Air Act Permitting Programs: 
EPA's Response to Public Comments'', after reviewing the comments, EPA 
has concluded that the ``actual control interpretation'' is a 
permissible interpretation of the CAA and is the most appropriate 
interpretation to apply given the policy implications. However, EPA is 
refining its interpretation in one respect to establish that PSD 
permitting requirements apply to a newly regulated pollutant at the 
time a regulatory requirement to control emissions of that pollutant 
``takes effect'' (rather than upon promulgation or the legal effective 
date of the regulation containing such a requirement). In addition, 
this notice addresses several outstanding questions regarding the 
applicability of the PSD and Title V permitting programs to GHGs upon 
the anticipated promulgation of EPA regulations establishing 
limitations on emissions of GHGs from vehicles under Title II of the 
CAA.\5\
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    \5\ On September 28, 2009, EPA proposed a rule establishing 
emissions standards for new motor vehicles, starting with Model Year 
2012, that would reduce GHGs and improve fuel economy from motor 
vehicles. This proposal was a joint proposal by EPA and the U.S. 
Department of Transportation (DOT), with DOT proposing to adopt 
corporate average fuel economy (CAFE) standards for model years 2012 
and after. See 74 FR 49453.
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    EPA received 71 comments on the proposed reconsideration notice 
published on October 7, 2009 (74 FR 51535).\6\ Commenters represented a 
range of interests, including State regulatory agencies, corporations 
that may need to obtain PSD permits, trade associations representing 
various industrial sectors, and environmental and public interest 
groups. Commenters representing States and regulated entities generally 
expressed support for the actual control interpretation, while 
environmental and public interest groups generally favored the 
alternative interpretations. States and regulated entities also 
supported EPA's proposed action to apply PSD requirements at the point 
in time when an actual control requirement becomes effective, with many 
entities specifically requesting that EPA interpret ``effective'' to 
mean the compliance date of a rule. Environmental stakeholders 
supported retaining the position in the existing PSD Interpretive Memo 
that PSD requirements apply to a pollutant upon the promulgation of the 
relevant requirement for that pollutant.
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    \6\ In some cases, a commenter on the proposed reconsideration 
of the PSD Interpretive Memo addressed an issue or topic that is 
under consideration in the forthcoming PSD and Title V GHG Tailoring 
Rule. Accordingly, EPA refers the reader to that rulemaking for EPA 
responses to those comments.
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    EPA has not been persuaded that the Agency is compelled by the CAA, 
the terms of EPA regulations, or prior EPA action to apply any of the 
four alternatives to its preferred interpretation described in the 
October 7, 2009 notice--monitoring and reporting requirement, EPA-
approved SIP, endangerment finding, or CAA section 209 waiver. EPA has 
likewise not been persuaded that all of the alternative interpretations 
are precluded by the CAA. However, since Congress has not precisely 
spoken to this issue, EPA has the discretion to choose among the range 
of permissible interpretations of the statutory language. Since EPA's 
interpretation of the regulations is not precluded by the statutory 
language, EPA is electing to maintain that interpretation on policy 
grounds. EPA has concluded that the ``actual control'' interpretation 
is not only consistent with decades of past practice, but provides the 
most reasonable and workable approach to developing an appropriate 
regulatory scheme to address newly identified pollutants of concern. 
Thus, except as to the one element that EPA proposed to modify, EPA is 
reaffirming the PSD Interpretive Memo and its establishment of the 
actual control interpretation as EPA's definitive interpretation of the 
phrase ``subject to regulation'' under the PSD provisions in the CAA 
and EPA regulations.
    EPA has been persuaded by public comments on the proposed 
reconsideration to modify the portion of its interpretation regarding 
the timing of when a pollutant becomes subject to regulation under the 
CAA and thus covered by the requirements of the PSD permitting program. 
Specifically, EPA is modifying its interpretation of 40 CFR 
52.21(b)(50) of its regulations, and the parallel provision in 40 CFR 
51.166(b)(49), to establish that the PSD requirements will not apply to 
a newly regulated pollutant until a regulatory requirement to control 
emissions of that pollutant ``takes effect.'' EPA has concluded that 
this approach is consistent with the CAA and a reasonable reading of 
the regulatory text.
    Based on these final determinations, EPA will continue to apply the 
interpretation reflected in the PSD Interpretive Memo with one 
refinement. For the reasons discussed in more detail below, EPA has not 
generally found cause to change the discussion or reasoning reflected 
in the Memo. As a result, EPA does not see a need to either withdraw or 
re-issue the Memo. However, this notice refines one paragraph of that 
memorandum to reflect EPA's current view that a pollutant becomes 
subject to regulation

[[Page 17007]]

at the time the first control requirements applicable to a pollutant 
take effect. Public comments raised several questions regarding the 
application of the PSD program and Title V permits to GHGs that EPA did 
not specifically raise in the October 7, 2009 proposed notice of 
reconsideration. Some of these comments raised significant issues that 
the Agency recognizes the need to address at this time to ensure the 
orderly transition to the regulation of GHGs under these permitting 
programs. Thus, this notice reflects additional interpretations and EPA 
statements of policy on topics not discussed in the October 7, 2009 
notice. These interpretations and polices have been developed after 
careful consideration of the public comments submitted to EPA on this 
action and related matters. In subsequent actions, EPA may address 
additional topics raised in public comments on this action that the 
Agency did not consider necessary to address at this time.
    Regarding GHGs, EPA has concluded that PSD program requirements 
will apply to GHGs upon the date that the anticipated tailpipe 
standards for light-duty vehicles (known as the ``LDV Rule'') take 
effect. Based on the proposed LDV Rule, those standards will take 
effect when the 2012 model year begins, which is no earlier than 
January 2, 2011. While the LDV Rule will become ``effective'' for the 
purposes of planning for the upcoming model years as of 60 days 
following publication of the rule, the emissions control requirements 
in the rule do not ``take effect''-- i.e., requiring compliance through 
vehicular certification before introducing any Model Year 2012 into 
commerce--until Jan. 2, 2011, or approximately 9 months after the 
planned promulgation of the LDV Rule. Furthermore, as EPA intends to 
explain soon in detail in the final action on the PSD and Title V GHG 
Tailoring Rule (known as the ``Tailoring Rule''),\7\ in light of the 
significant administrative challenges presented by the application of 
the PSD and Title V requirements for GHGs (and considering the 
legislative intent of the PSD and Title V statutory provisions), it is 
necessary to defer applying the PSD and Title V provisions for sources 
that are major based only on emissions of GHGs until a date that 
extends beyond January 2, 2011.
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    \7\ The proposed ``Tailoring Rule'' can be found at 74 FR 55291 
(Oct. 27, 2009).
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B. Analysis of Proposed and Alternative Interpretations for Subject to 
Regulation

1. Actual Control Interpretation
    EPA has concluded that the ``actual control'' interpretation (as 
articulated in the PSD Interpretive Memo) is permissible under the CAA 
and is preferred on policy grounds. Thus, EPA will continue to 
interpret the definition of ``regulated NSR pollutant'' in 40 CFR 
52.21(b)(50) to exclude pollutants for which EPA regulations only 
require monitoring or reporting but to include each pollutant subject 
to either a provision in the CAA or regulation promulgated by EPA under 
the CAA that requires actual control of emissions of that pollutant. As 
discussed further below, EPA will also interpret section 51.166(b)(49) 
of its regulations in this manner. This interpretation is supported by 
the language and structure of the regulations and is consistent with 
past practice in the PSD program and prior EPA statements regarding 
pollutants subject to the PSD program. The CAA is most effectively 
implemented by making PSD emissions limitations applicable to 
pollutants after a considered judgment by EPA (or Congress) that 
particular pollutants should be subject to control or limitation. The 
actual control interpretation promotes the orderly administration of 
the permitting program by allowing the Agency to first assess whether 
there is a justification for controlling emissions of a particular 
pollutant under relevant criteria in the Act before applying the 
requirements of the PSD permitting program to a pollutant.
    Because the term ``regulation'' is susceptible to more than one 
meaning, there is ambiguity in the phrase ``each pollutant subject to 
regulation under the Act'' \8\ that is used in both sections 165(a)(4) 
and 169(3) of the CAA. As discussed in the Memo, the term 
``regulation'' can be used to describe a rule contained in a legal 
code, such as the Code of Federal Regulations, or the act or process of 
controlling or restricting an activity. The primary meaning of the term 
``regulation'' in Black's Law Dictionary (8th Ed.) is ``the act or 
process of controlling by rule or restriction.'' However, an 
alternative meaning in this same dictionary defines the term as ``a 
rule or order, having legal force, usu. issued by an administrative 
agency or local government.'' The primary meaning in Webster's 
dictionary for the term ``regulation'' is ``the act of regulating: The 
state of being regulated.'' Merriam-Webster's Collegiate Dictionary 983 
(10th Ed. 2001). Webster's secondary meaning is ``an authoritative rule 
dealing with details of procedure'' or ``a rule or order issued by an 
executive authority or regulatory agency of a government and having the 
force of law.'' Webster's also defines the term ``regulate'' and the 
inflected forms ``regulated'' and ``regulating'' (both of which are 
used in Webster's definition of ``regulation'') as meaning ``to govern 
or direct according to rule'' or to ``to bring under the control of law 
or constituted authority.'' Id.
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    \8\ The CAA requires BACT for ``each pollutant subject to 
regulation under this Act.'' See CAA 165(a)(4), 169(3). The United 
States Code refers to ``each pollutant regulated under this 
chapter,'' which is a reference to Chapter 85 of Title 42 of the 
Code, where the CAA is codified. See 42 U.S.C. 7475(a)(4), 7479(3). 
For simplicity, this notice generally uses ``the Act'' and the CAA 
section numbers rather than the U.S. Code citation.
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    The PSD Interpretive Memo reasonably applies a common meaning of 
the term ``regulation'' to support a permissible interpretation that 
the phrase ``pollutant subject to regulation'' means a pollutant 
subject to a provision in the CAA or a regulation issued by EPA under 
the Act that requires actual control of emissions of that pollutant. 
Public comments have not demonstrated the dictionary meanings of the 
term ``regulation'' described in the Memo are no longer accepted 
meanings of this term. In light of the different meanings of the term 
``regulation,'' EPA has not been persuaded by public comments that the 
CAA plainly and unambiguously requires that EPA apply any of the other 
interpretations described in the October 7, 2009 notice. Moreover, the 
Memo carefully explains how the actual control interpretation is 
consistent with the overall context of the CAA in which sections 
165(a)(4) and 169(3) are found. After consideration of public comment, 
EPA continues to find this discussion persuasive. The ``subject to 
regulation'' language appears in the BACT provisions of the Act, which 
themselves require actual controls on emissions. The BACT provisions 
reference the New Source Performance Standards (NSPS) and other control 
requirements under the Act, which establish a floor for the BACT 
requirement. See 42 U.S.C. 7479(3). Other provisions in the CAA that 
authorize EPA to establish emissions limitations or controls on 
emissions provide criteria for the exercise of EPA's judgment to 
determine which pollutants or source categories to regulate. Thus, it 
follows that Congress expected that pollutants would only be regulated 
for purposes of the PSD program after: (1) The EPA promulgated 
regulations requiring control of a particular

[[Page 17008]]

pollutant on the basis of considered judgment, taking into account the 
applicable criteria in the CAA, or (2) EPA promulgates regulations on 
the basis of Congressional mandate that EPA establish controls on 
emissions of a particular pollutant, or (3) Congress itself directly 
imposes actual controls on emissions of a particular pollutant. In 
addition, considering other sections in the Act that require reasoned 
decision-making and authorize the collection of emissions data prior to 
establishing controls on emissions, it is also consistent with the 
Congressional design to require BACT limitations for pollutants after a 
period of data collection and study that leads to a reasoned decision 
to establish control requirements. Public commenters did not 
demonstrate that it was erroneous for EPA to interpret the PSD 
provisions in this manner, based on the context of the Act.
    Furthermore, the actual control interpretation is consistent with 
the terms of the regulations EPA promulgated in 2002.\9\ EPA continues 
to find the reasoning of the PSD Interpretive Memo to be persuasive. 
The structure and language of EPA's definition of ``regulated NSR 
pollutant'' at 40 CFR 52.21(b)(50) supports the actual control 
interpretation. The first three parts of the definition describe 
pollutants that are subject to regulatory requirements that mandate 
control or limitation of the emissions of those pollutants, which 
suggests that the use of ``otherwise subject to regulation'' in the 
fourth prong of the definition also intended some prerequisite act or 
process of control. The definition's use of ``subject to regulation'' 
should be read in light of the primary meanings of ``regulation'' 
described above, which each use or incorporate the concept of control.
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    \9\ See 67 FR 80186-80289.
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    One commenter stated that EPA's suggestion that its proposed 
interpretation will allow for a more practical approach to determining 
whether emissions of air pollutants endanger health and human welfare 
amounts only to a policy preference. The commenter argued that EPA's 
policy preference should be subordinate to statutory language and 
Congressional intent. Another commenter made similar comments and 
stated that EPA cannot avail itself of additional, non-statutory de 
facto extensions of time to fulfill its statutory obligations.
    Where the governing statutory authority is susceptible to more than 
one interpretation, it is not impermissible for EPA to apply policy 
preferences when determining which interpretation to apply, so long as 
the interpretation EPA elects to follow is a permissible one. The PSD 
Interpretive Memo provides a persuasive explanation for why the 
interpretation reflected in that memorandum is consistent with the 
terms of the CAA and Congressional intent. In this instance, EPA's 
policy preferences are fully consistent with that intent. As explained 
above, Congress intended for EPA to gather data before establishing 
controls on emissions and to make reasoned decisions.
    EPA continues to prefer the actual control interpretation because 
it ensures an orderly and manageable process for incorporating new 
pollutants into the PSD program after an opportunity for public 
participation in the decision making process. Several commenters who 
supported EPA's proposal to continue applying the ``actual control'' 
interpretation identified these considerations as important reasons 
that EPA should continue doing so. EPA agrees with these comments. As 
discussed persuasively in the PSD Interpretive Memo, under this 
interpretation, EPA may first assess whether there is a justification 
for controlling emissions of a particular pollutant under relevant 
criteria in the Act before imposing controls on a pollutant under the 
PSD program. In addition, this interpretation permits the Agency to 
provide notice to the public and an opportunity to comment when a new 
pollutant is proposed to be regulated under one or more programs in the 
Act. It also promotes the orderly administration of the permitting 
program by providing an opportunity for EPA to develop regulations to 
manage the incorporation of a new pollutant into the PSD program, for 
example, by promulgating a significant emissions rate (or de minimis 
level) for the pollutant when it becomes regulated. See 40 CFR 
52.21(b)(23). Furthermore, this interpretation preserves the Agency's 
ability to gather data on pollutant emissions to inform their judgment 
regarding the need to establish controls on emissions without 
automatically triggering such controls. This interpretation preserves 
EPA's authority to require control of particular pollutants through 
emissions limitations or other restrictions under various provisions of 
the Act, which would then trigger the requirements of the PSD program 
for any pollutant addressed in such an action.
    Some commenters who opposed the actual control interpretation 
argued that this deliberate approach leads to ``analysis paralysis'' 
and is subject to political manipulation. The commenter further noted 
that the case-by-case BACT requirement does not contemplate waiting 
years for EPA to conduct analyses and ``develop'' control options; 
rather, BACT must be based on control options that are available. Then, 
permitting agencies are to make ``case-by-case'' determinations 
``taking into account energy, environmental, and economic impacts and 
other costs,'' thereby ensuring that the decision is informed by the 
available solutions, their efficacy and costs.
    While this analysis may sometimes take more time than the commenter 
would prefer, a deliberative and orderly approach to regulation is in 
the public interest and consistent with Congressional intent. It would 
be premature to impose the BACT requirement on a particular pollutant 
if neither EPA nor Congress has made a considered judgment that a 
particular pollutant is harmful to public health and welfare and merits 
control.
    Once the Agency has made a determination that a pollutant should be 
controlled using one or more of the regulatory tools provided in the 
CAA and those controls take effect, EPA agrees that a BACT analysis 
must then be completed based on available information. As the commenter 
points out, the BACT process is designed to determine the most 
effective control strategies achievable in each instance, considering 
energy, environmental, and economic impacts. Thus, EPA agrees that the 
onset of the BACT requirement should not be delayed in order for 
technology or control strategies to be developed. Furthermore, EPA 
agrees with the commenter that delaying the application of BACT to 
enable development of guidance on control strategies is not necessarily 
consistent with the BACT requirement. The BACT provisions clearly 
contemplate that the permitting authority will develop control 
strategies on a case-by-case basis. Thus, EPA is not in this final 
action relying on the need to develop guidance for BACT as a 
justification for choosing to continue applying the actual control 
interpretation. However, in the absence of guidance on control 
strategies from EPA and other regulatory agencies, the BACT process may 
be more time and resource intensive when applied to a new pollutant. 
Under a mature PSD permitting program, successive BACT analyses 
establish guidelines and precedents for subsequent BACT determinations. 
However, when a new pollutant is regulated, the first permit applicants 
and permitting authorities that are faced with determining BACT for a 
new

[[Page 17009]]

pollutant must invest more time and resources in making an assessment 
of BACT under the statutory criteria. Given the potentially large 
number of sources that could be subject to the BACT requirement when 
EPA regulates GHGs, the absence of guidance on BACT determinations for 
GHGs presents a unique challenge for permit applicants and permitting 
authorities. EPA intends to address this challenge in part by 
deferring, under the Tailoring Rule, the applicability of the PSD 
permitting program for sources that would become major based solely on 
GHG emissions. EPA is also developing guidance on BACT for GHGs.
    Several commenters expressed concern with EPA's explanation that 
the actual control interpretation best reflects EPA's past practice. 
One commenter argued that the Deseret decision rejects the idea that 
``past policy and practice'' is a sufficient justification for EPA's 
preferred interpretation. In addition, several commenters argued that 
the memorandum was in fact not consistent with past EPA practice, based 
on their interpretation of a statement made in the preamble to a rule 
which promulgated PSD regulations in 1978.
    While the record continues to show that the actual control 
interpretation is consistent with EPA's historic practice, EPA agrees 
that continuity with past practice alone does not justify maintaining a 
position when there is good cause to change it. In this case, however, 
EPA has not found cause to change an interpretation that is consistent 
with Congressional intent and supported by the policy considerations 
described earlier. Thus, EPA is not retaining the actual control 
interpretation simply to maintain continuity with historic practice. 
The record reflects that EPA's past practice was grounded in a 
permissible interpretation of the law and supported by rational policy 
considerations. Commenters have not otherwise persuaded EPA to change 
its historic practice in this area.
    A review of numerous Federal PSD permits shows that EPA has been 
applying the actual control interpretation in practice--issuing permits 
that only contained emissions limitations for pollutants subject to 
regulations requiring actual control of emissions under other portions 
of the Act. Furthermore, in 1998, well after promulgation of the 
initial CO2 monitoring regulations in 1993, EPA's General 
Counsel concluded that CO2 would qualify as an ``air 
pollutant'' that EPA had the authority to regulate under the CAA, but 
the General Counsel also observed that ``the Administrator has made no 
determination to date to exercise that authority under the specific 
criteria provided under any provision of the Act.'' \10\ The 1978 
Federal Register notice promulgating the initial PSD regulations stated 
that pollutants ``subject to regulation'' in the PSD program included 
``any pollutant regulated in Subchapter C of Title 40 of the Code of 
Federal Regulations.'' Commenters argue this statement illustrates that 
EPA has in fact applied the PSD BACT requirement to any pollutant 
subject to only a monitoring requirement codified in this portion of 
the Code of Federal Regulations. However, this comment overlooked the 
discussion in the PSD Interpretive Memo regarding the differing 
meanings of the term ``regulation'' and ``regulate.'' The 1978 preamble 
did not amplify the meaning of the term ``regulated in.'' Thus, 
commenters have not demonstrated that EPA had concluded in 1978 that 
monitoring requirements equaled ``regulation'' within the meaning of 
sections 165(a)(4) and 169(3) of the CAA, nor have commenters provided 
any examples of permits issued by EPA after 1978 that demonstrate EPA's 
interpretation was inconsistent with the practice described in the PSD 
Interpretive Memo.
---------------------------------------------------------------------------

    \10\ Memorandum from Jonathan Z. Cannon, General Counsel to 
Carol M. Browner, Administrator, entitled EPA's Authority to 
Regulate Pollutants Emitted by Electric Power Generation Sources 
(April 10, 1998).
---------------------------------------------------------------------------

    Therefore, EPA affirms that the actual control interpretation 
expressed in the PSD Interpretive Memo continues be the operative 
statement for the EPA interpretation of the meaning of the regulatory 
phrase ``subject to regulation'' within the Federal PSD rules.
2. Monitoring and Reporting Interpretation
    EPA is not persuaded that the monitoring and reporting 
interpretation is compelled by the CAA, and the Agency remains 
concerned that application of this approach would lead to odd results 
and make the PSD program difficult to administer. EPA continues to find 
the reasoning of the PSD Interpretive Memo persuasive.
    The monitoring and reporting interpretation would make the 
substantive requirements of the PSD program applicable to particular 
pollutants based solely on monitoring and reporting requirements 
(contained in regulations established under section 114 or other 
authority in the Act). This approach would lead to the perverse result 
of requiring emissions limitations under the PSD program while the 
Agency is still gathering the information necessary to conduct research 
or evaluate whether to establish controls on the pollutant under other 
parts of the Act. Such a result would frustrate the Agency's ability to 
gather information using section 114 and other authority and make 
informed and reasoned judgments about the need to establish controls or 
limitations for particular pollutants. If EPA interpreted the 
requirement to establish emissions limitations based on BACT to apply 
solely on the basis of a regulation that requires collecting and 
reporting emissions data, the mere act of gathering information would 
essentially dictate the result of the decision that the information is 
being gathered to inform (whether or not to require control of a 
pollutant). Many commenters representing State permitting agencies and 
industry groups agree with the policy arguments advanced by EPA and 
others that EPA's critical information gathering activities will be 
constrained, with likely adverse environmental and public health 
consequences, if monitoring requirements are necessarily associated 
with the potentially significant implementation and compliance costs 
and resource constraints of the PSD program. Commenters expressed 
concern that without the ability to gather data or investigate 
unregulated pollutants, for fear of triggering automatic regulation 
under the CAA, EPA will not have the flexibility to review the validity 
of controlling new pollutants.
    EPA agrees that a monitoring and reporting interpretation would 
hamper the Agency's ability to conduct monitoring or reporting for 
investigative purposes to inform future rulemakings involving actual 
emissions control or limits. In addition, it is not always possible to 
predict when a new pollutant will emerge as a candidate for regulation. 
In such cases, the Memo's reasoning is correct in that EPA would be 
unable to promulgate any monitoring or reporting rule for such a 
pollutant without triggering PSD under this interpretation.
    An environmental organization disagreed with the proposed notice of 
reconsideration, and commented that EPA has issued monitoring and 
reporting regulations for CO2 in 40 CFR part 75, promulgated 
pursuant to section 821 of the 1990 CAA Amendments. The commenter felt 
that these monitoring and reporting rules are ``regulation'' in that 
they are contained in a legal code, have the force of law, and bring 
the subject matter under the control of law and the EPA. Furthermore, 
the commenter says that EPA itself has characterized these

[[Page 17010]]

monitoring and reporting requirements as ``regulations.'' In contrast, 
another commenter argued that an agency's interpretation of a statute 
should focus first on the ordinary dictionary meaning of the terms used 
and that monitoring emissions does not fit within any of the types of 
activities understood to constitute ``regulation'' of those emissions 
in the ordinary meaning of that term. Each of these commenters focuses 
on only one of the two potential meanings of the term ``regulation'' 
described above.
    The commenter that favors the ``monitoring and reporting'' 
interpretation appears to focus only on the dictionary meanings that 
describe a rule contained in a legal code. The commenter has not 
demonstrated that it is impermissible for EPA to construe the CAA on 
the basis of another common meaning of the term ``regulation.'' In the 
context of construing the Act, the EAB observed in the Deseret case 
that a plain meaning could not be ascertained from looking solely at 
the word ``regulation.'' The Board reached this conclusion after 
considering the dictionary definitions of the term ``regulation'' cited 
above. See Deseret slip op. at 28-29. EPA continues to find the 
reasoning of the EAB and the PSD Interpretive Memo to be persuasive. 
The EAB found ``no evidence of Congressional intent to compel EPA to 
apply BACT to pollutants that are subject only monitoring and reporting 
requirements.'' See Deseret at 63.
    Comments have not convincingly shown that Congress clearly intended 
to use the term ``regulation'' in section 165(a)(4) and 169(3) to 
describe any type of rule in a legal code. Some commenters presented 
alternative theories of Congressional intent regarding the BACT 
provisions, but they have not persuasively demonstrated that the 
interpretation of Congressional intent based on the context of the CAA 
described in the PSD Interpretive Memo is erroneous.
    For example, one commenter opposed to EPA's proposed action 
commented that the PSD Interpretive Memo ignores the Congressionally-
established purpose of PSD to protect public health and welfare from 
actual and potential adverse effects. See CAA section 160(1). 
Specifically, this commenter stated that to limit application of BACT 
until after control requirements are in place following an endangerment 
finding ignores the broad, protective purpose of the PSD program. The 
commenter said that the emphasis on ``potential adverse effect[s]'' 
distinguishes PSD the requirement from the National Ambient Air Quality 
Standards (NAAQS) and NSPS programs, which require that EPA make an 
endangerment finding before establishing generally applicable standards 
such as the NSPS or motor vehicle emissions standards. According to 
this commenter, BACT's case-by-case approach provides the dynamic 
flexibility necessary to implement an emission limitation appropriate 
to each particular source. This commenter feels that the PSD program's 
ability to address potential adverse effects is hindered by the 
position that an endangerment determination and actual control limits 
must be first established.
    EPA does not agree that the terms of section 160 cited by the 
commenter compel EPA to read sections 165(a)(4) and 169(3) to apply to 
a pollutant before the Agency has established control requirements for 
the pollutant. Section 160(1) describes PSD's purpose to ``protect 
public health and welfare from any actual or potential adverse effect 
which in the Administrator's judgment may reasonably be anticipated to 
occur from air pollution.'' Thus, this goal contemplates an exercise of 
judgment by EPA to determine that an actual or potential adverse effect 
may reasonably be anticipated from air pollution. In that sense, this 
goal is consistent with NAAQS and NSPS programs, which contemplate that 
regulation of a pollutant will not occur until a considered judgment by 
EPA that a substance or source category merits control or restriction. 
The commenter has not persuasively established that the ``potential 
adverse effect'' language in section 160(1) makes this provision 
markedly different than the language used in sections 108(a)(1)(A) and 
111(b)(1)(A). All three sections use the phrase ``may reasonably be 
anticipated.'' Furthermore, section 160 contains general goals and 
purposes and does not contain explicit regulatory requirements. The 
controlling language in the PSD provisions is the ``subject to 
regulation'' language in sections 165(a)(4) and 169(3). As discussed 
earlier, the ``actual control'' interpretation is based on a common and 
accepted meaning of the term ``regulation.'' To the extent the goals 
and purpose in section 160 are instructive as to the meaning of other 
provisions in Part C of the Act, section 160(1) is just one of several 
purposes of the PSD program that Congress specified. The Act also 
instructs EPA to ensure that economic growth occurs consistent with the 
preservation of existing clean air resources. See CAA section 160(3). 
EPA's interpretation is consistent with this goal because it allows EPA 
to look at the larger picture by coordinating control of an air 
pollutant under the PSD program with control under other CAA 
provisions.
    EPA finds the logic of the PSD Interpretive Memo more persuasive. 
The Memo considers the full context of the CAA, including the health 
and welfare criteria that generally must be satisfied to establish 
control requirements under other parts of the Act, information 
gathering provisions that contemplate data collection and study before 
pollutants are controlled, and requirements for reasoned decision 
making. While some commenters presented arguments for why it might be 
possible or beneficial to apply the BACT requirement before a control 
requirement is established for a pollutant elsewhere under the Act, 
these arguments do not demonstrate that the contextual reading of the 
CAA described in the Memo is erroneous. Thus, the comments have at most 
provided another permissible reading of the Act, but they do not 
demonstrate that EPA must require BACT limitations for pollutants that 
are not yet controlled but only subject to data collection and study.
    EPA continues to believe that the monitoring and reporting 
interpretation is inconsistent with past agency practice because, as 
the Memo notes, ``EPA has not issued PSD permits containing emissions 
limitations for pollutants that are only subject to monitoring and 
reporting requirements,'' including CO2 emissions. Further, 
the Memo determines that the monitoring and reporting interpretation is 
not required under the 1978 preamble language, explaining that the 
preamble language could be interpreted in a variety of ways and ``did 
not specifically address the issue of whether a monitoring or reporting 
requirement makes a pollutant `regulated in' [Subpart C of Title 40] of 
the Code of Federal Regulations.'' See Memo at 11-12. Commenters have 
not demonstrated that the Agency specifically intended, through this 
statement, to apply the PSD requirements to pollutants that were 
covered by only a monitoring and reporting requirement codified in this 
part of the CFR.
    One commenter questioned EPA's basis for rejecting the monitoring 
and reporting interpretation because they believe EPA has not 
identified a pollutant other than CO2 that would be affected 
by the monitoring and reporting interpretation. However, EPA's GHG 
Reporting Rule covers six GHGs, not just CO2. Further, EPA 
has promulgated regulations that require monitoring of oxygen 
(O2) in the stack of a boiler under certain circumstances. 
See 40

[[Page 17011]]

CFR 60.49Da(d). These examples help demonstrate why monitoring and 
reporting requirements alone should not be interpreted to trigger PSD 
and BACT requirements.
    For the reasons discussed above, EPA affirms the Memo's rejection 
of the monitoring and reporting interpretation for triggering PSD 
requirements for a new pollutant.
3. State Implementation Plan (SIP) Interpretation
    In discussing the application of the actual control interpretation 
to specific actions under the CAA, the PSD Interpretive Memo rejects an 
interpretation of ``subject to regulation'' in which regulatory 
requirements for a particular pollutant in the EPA-Approved State 
Implementation Plan (SIP) for a single State would ``require regulation 
of that pollutant under the PSD program nationally.'' (Hereinafter, 
referred to as the ``SIP interpretation.'') In this action, EPA affirms 
and supplements the rationale for rejecting the SIP interpretation 
provided in the PSD Interpretive Memo and the reconsideration proposal. 
Since the meaning of the term ``subject to regulation'' is ambiguous 
and susceptible to multiple interpretations, the SIP interpretation is 
not compelled by the structure and language of the Act. Furthermore, 
there would be negative policy implications if EPA adopted this 
interpretation.
    The Memo reasons that application of the SIP interpretation would 
convert EPA's approval of regulations applicable only in one State into 
a decision to regulate a pollutant on a nationwide scale for purposes 
of the PSD program. The Memo explains that the establishment of SIPs is 
better read in light of the ``cooperative federalism'' underlying the 
Act, whereby Congress allowed individual States to create and apply 
some regulations more stringently than Federal regulations within its 
borders, without allowing individual States to set national regulations 
that would impose those requirements on all States. See Ellis v. 
Gallatin Steel Co., 390 F.3d 461, 467 (6th Cir. 2004). In rejecting the 
SIP interpretation, the Memo also explains that EPA adopted a similar 
position in promulgating the NSR regulations for fine particulate 
matter (or ``PM2.5''), without any public comments opposing 
that position. See Memo at 15-16.
    EPA continues to believe that the CAA and EPA's implementing 
regulations are intended to provide States flexibility to develop and 
implement SIPs to meet the air quality goals of their individual State. 
Each State's implementation plan is a reflection of the air quality 
concerns in that State, allowing a State significant latitude in the 
treatment of specific pollutants of concern (or their precursors) 
within its borders based on air quality, economic, and other 
environmental concerns of that State. As such, pollutant emissions in 
one State may not present the same problem for a State a thousand miles 
away. As expressed in the PSD Interpretive Memo, EPA continues to have 
concerns that the SIP interpretation would improperly limit the 
flexibility of States to develop and implement their own air quality 
plans, because the act of one State to establish regulatory 
requirements for a particular pollutant would drive national policy. If 
EPA determined that a new pollutant becomes ``subject to regulation'' 
nationally within the meaning of section 165 based solely on the 
provisions of an EPA-approved SIP, then all States would be required to 
subject the new pollutant to PSD permitting whether or not control of 
the air pollutant was relevant for improving that State's air quality. 
Whether one State, five States, or 45 States make the decision that 
their air quality concerns are best addressed by imposing regulations 
on a new pollutant, EPA does not think those actions should trump the 
cooperative federalism inherent in the CAA. While several States may 
face similar air quality issues and may choose regulation as the 
preferred approach to dealing with a particular pollutant, EPA is 
concerned that allowing the regulatory choices of some number of States 
to impose PSD regulation on all other States would do just that.
    Some commenters support the SIP interpretation, and fault the 
Agency's rejection of the interpretation by stating that neither the 
Act, nor the Memo, provides a basis for a position that regulation by a 
single State is not enough to constitute ``regulation under the Act'' 
on a nationwide basis for purpose of section 165. Petitioners and 
another commenter also assert that CO2 is already ``subject 
to regulation under the Act'' and take the position that any 
requirement EPA adopts and approves in an implementation plan makes the 
covered pollutant ``subject to regulation under the Act'' because it is 
approved by the EPA ``under the Act,'' and because it becomes 
enforceable by the State, by EPA and by citizens ``under the Act'' upon 
approval.
    EPA disagrees with the Petitioner and with this commenter that this 
reasoning necessarily means that a pollutant regulated in one SIP 
approved by EPA must automatically be regulated through the PSD program 
nationally. In fact, Congress demonstrated intent, in the language and 
structure of the Act, for SIP requirements to have only a local or 
regional effect.
    In section 102(a) of the CAA, Congress directs EPA to encourage 
cooperative activities among States, and the adoption of uniform State 
and local laws for the control of air pollution ``as practicable in 
light of the varying conditions and needs.'' This language informs the 
issue of whether SIP requirements have nationwide applicability in two 
ways. First, there would be no need for EPA to facilitate uniform 
adoption of standards in different air quality control regions, if the 
regulation of an air pollutant by one region would automatically cause 
that pollutant to be regulated in another region. Second, Congress 
bounded its desire to promote uniformity by recognizing that addressing 
local air quality concerns may preempt national uniformity of 
regulation.
    Indeed, section 116 of the CAA grants States the right to adopt 
more stringent standards than the uniform, minimum requirements set 
forth by EPA. See 42 U.S.C. 7416. The legislative history of the 1977 
CAA Amendments shows that Congress understood that States may adopt 
different and more stringent standards then the Federal minimum 
requirements. See, e.g., 122 Cong. Rec. S12456 (daily ed. July 26, 
1976) (statement of Sen. Randolph) (``[T]he States are given latitude 
in devising their own approaches to air pollution control within the 
framework of broad goals. * * * The State of West Virginia has 
established more stringent requirements than those which, through the 
Environmental Protection Agency, are considered as adequate * * *''); 
122 Cong. Rec. S12458 (daily ed. July 26, 1976) (statement of Sen. 
Scott) (``The States have the right, however, to require higher 
standards, and they should have under the police powers.'') Congress 
could not have intended States to have latitude to implement their own 
approaches to air pollution control, and simultaneously, require that 
air pollutants regulated by one State automatically apply in all other 
States.
    Importantly, the legislative history also shows that Congress 
intended to limit the EPA's ability to disapprove a State's decision to 
adopt more stringent requirements in setting forth the criteria for 
approving State submissions under section 110. This intent is supported 
by the following passage:

    State implementation plans usually contain a unified set of 
requirements and frequently do not make distinctions between the 
controls needed to achieve one kind of

[[Page 17012]]

ambient standard or another. To try to separate such emission 
limitations and make judgments as to which are necessary to 
achieving the national ambient air quality standards assumes a 
greater technical capability in relating emissions to ambient air 
quality than actually exists.
    A federal effort to inject a judgment of this kind would be an 
unreasonable intrusion into protected State authority. EPA's role is 
to determine whether or not a State's limitations are adequate and 
that State implementation plans are consistent with the statute. 
Even if a State adopts limits which may be stricter than EPA would 
require, EPA cannot second guess the State judgment and must enforce 
the approved State emission limit.\11\
---------------------------------------------------------------------------

    \11\ Notably, the legislative record refers to ``State'' 
emission limit, and makes no note of this State emission limitation 
having broader applicability.

123 Cong. Rec. S9167 (daily ed. June 8, 1977) (statement of Sen. 
Muskie).
    This Congressional intent is reflected within the statutory 
language. Under section 110(k)(3), the EPA Administrator ``shall 
approve'' a State's submittal if it meets the requirements of the Act, 
and under section 110(l) ``shall not'' approve a plan revision ``if the 
revision would interfere with any other applicable requirement of this 
Act.'' Courts have similarly interpreted this language to limit EPA's 
discretion to approve or disapprove SIP requirements. See, e.g., State 
of Connecticut v. EPA, 656 F.2d 902, 906 (2d. Cir. 1981) (``As is 
illustrated by Congress's use of the word `shall,' approval of an SIP 
revision by the EPA Administrator is mandatory if the revision has been 
the subject of a proper hearing and the plan as a whole continues to 
adhere to the requirements of section 110(a)(2)'') (referencing Union 
Electric Co. v. EPA, 427 U.S. 246, 257 (1976); and Mission Indus., Inc. 
v. EPA, 547 F.2d 123 (1st Cir. 1976)). These provisions of the statute 
do not establish any authority or criteria for EPA to judge the 
approvability of a State's submission based on the implications such 
approval would have nationally. The absence of such authority or 
criteria in the applicable standard argues against nationwide 
applicability of SIP requirements and the SIP interpretation.
    Moreover, under section 307(b) of the CAA, Congress assigns review 
of specific regulations promulgated by EPA and ``any other nationally 
applicable regulations promulgated or final action taken, by the 
Administrator under this Act'' only to the U.S. Court of Appeals for 
the District of Columbia Circuit (``D.C. Circuit''). In contrast, ``the 
Administrator's action in approving and promulgating any implementation 
plan under Section 110 * * * or any other final action of the 
Administrator under this Act * * * which is local or regionally 
applicable may be filed only in the United States Court of Appeals for 
the appropriate circuit.'' 42 U.S.C. 7607(b) (emphasis added). Thus, 
Congress set forth its intended applicability of these regulations in 
assigning judicial venue and clearly articulated that requirements in a 
SIP are generally ``local or regionally applicable.''
    Even if the Act could be read to support EPA review of the national 
implications of State SIP submissions, such an approach would be 
undesirable for policy reasons. As highlighted in the reconsideration 
proposal, one practical effect of allowing State-specific concerns to 
create national regulation is that EPA's review of SIPs would likely be 
much more time-consuming, because EPA would have to consider each 
nuance of the SIP as a potential statement of national policy. Thus, 
EPA would have heightened oversight of air quality actions in all 
States--even those regarding local and State issues that are best 
decided by local agencies. EPA approval of SIPs would be delayed, which 
would in turn, delay State's progress toward improving air quality. 
And, EPA would be required to defend challenges to the approval of a 
SIP with national implications in the D.C. Circuit Court of Appeals 
rather than the local Circuit Court of Appeals. The potential increased 
burden of reviewing and approving SIPs to analyze the national 
implications of each SIP, and the associated delay in improving air 
quality, creates a compelling policy argument against adoption of the 
SIP interpretation.
    Petitioners also fault EPA's reliance on Connecticut v. EPA, 656 
F.2d 902 (2d Cir. 1981) and assert that this case has nothing to do 
with the issue of whether a pollutant is ``subject to regulation under 
the Act.'' In the PSD Interpretive Memo, EPA cited Connecticut to 
support the notion that while a State is free to adopt air quality 
standards more stringent than required by the NAAQS or other Federal 
law provisions, Congress precludes those stricter requirements from 
applying to other States. The Agency agrees with commenter that the 
circumstances involved in that case are not directly analogous, but, 
nevertheless, the case supports the inference that EPA has drawn from 
it. The Court concluded that ``[n]othing in the Act, however, indicates 
that a State must respect its neighbor's air quality standards (or 
design its SIP to avoid interference therewith) if those standards are 
more stringent than the requirements of Federal law.'' If a State is 
not required to respect the more stringent requirements of a 
neighboring State in developing its own implementation plan, then by 
inference, the State would also not be compelled to follow the more 
stringent standards.
    In sum, after reconsidering the legal and policy issues, EPA 
declines to adopt the SIP interpretation.
4. Endangerment Finding Interpretation
    The PSD Interpretive Memo states that the fourth part of the 
regulated NSR pollutant definition (``[a]ny pollutant that otherwise is 
subject to regulation'') should not be interpreted ``to apply at the 
time of an endangerment finding.'' See Memo at 14 (hereinafter, 
referred to as the ``endangerment finding interpretation.''). After 
considering public comments, EPA is affirming the position expressed in 
the PSD Interpretative Memo that an endangerment finding alone does not 
make the requirements of the PSD program applicable to a pollutant. EPA 
maintains its view that the terms of EPA's regulations and the relevant 
provisions of the CAA do not compel EPA to conclude that an air 
pollutant becomes ``subject to regulation'' when EPA finds that it 
endangers public health or welfare without contemporaneously 
promulgating control requirements for that pollutant.
    As explained in EPA's Endangerment and Cause or Contribute Findings 
for GHGs under section 202(a) of the CAA, there are actually two 
separate findings involved in what is often referred to as an 
endangerment finding. 74 FR 66496 (Dec. 15, 2009). The first finding 
addresses whether air pollution may reasonably be anticipated to 
endanger public health or welfare. The second finding involves an 
assessment of whether emissions of an air pollutant from the relevant 
source category cause or contribute to this air pollution. In this 
notice, EPA uses the phrase ``endangerment finding'' to refer to EPA 
findings on both of these questions. The EPA interpretation described 
here applies to both findings regardless of whether they occur together 
or separately.
    As explained in the proposed reconsideration, an interpretation of 
``subject to regulation'' that does not include endangerment findings 
is consistent with the first three parts of the definition of 
``regulated NSR pollutant'' in section 52.21(b)(50) of EPA's 
regulations. Unlike the first three parts of the definition, an 
endangerment finding does not itself contain any restrictions (e.g., 
regarding the level of air pollution or emissions or use). Moreover, 
two parts of the definition involve actions that can occur only after

[[Page 17013]]

an endangerment finding of some sort has taken place. In other words, 
other parts of the definition already bypass an endangerment finding 
and apply the PSD trigger to a later step in the regulatory process.
    Specifically, under the first part of that definition, PSD 
regulation is triggered by promulgation of a NAAQS under CAA section 
109. However, in order to promulgate NAAQS standards under section 109, 
EPA must first list, and issue air quality criteria for a pollutant 
under section 108, which in turn can only happen after EPA makes an 
endangerment finding and a version of a cause or contribute finding, in 
addition to meeting other requirements. See CAA sections 108(a)(1) and 
109(a)(2). Thus, if EPA were to conclude that an endangerment finding, 
cause or contribute finding, or both would make a pollutant ``subject 
to regulation'' within the meaning of the PSD provisions, this would 
read all meaning out of the first part of the ``regulated NSR 
pollutant'' definition because a pollutant would become subject to PSD 
permitting requirements well before the promulgation of the NAAQS under 
section 109. See 40 CFR 52.21(b)(50)(i).
    Similarly, the second part of the definition of ``regulated NSR 
pollutant'' includes any pollutant that is subject to a standard 
promulgated under section 111 of the CAA. Section 111 requires the EPA 
Administrator to list a source category, if in his or her judgment, 
``it causes, or contributes significantly to, air pollution which may 
reasonably be anticipated to endanger public health or welfare.'' See 
CAA section 111(b)(1)(A). After EPA lists a source category, it 
promulgates NSPS for that source category. For a source category not 
already listed, if EPA were to list it on the basis of its emissions of 
a pollutant that was not previously regulated, and such a listing made 
that pollutant ``subject to regulation'' within the meaning of the PSD 
provisions, this chain of events would result in triggering PSD 
permitting requirements for that pollutant well in advance of the point 
contemplated by the second prong of the regulated NSR pollutant 
definition. See 40 CFR 52.21(b)(50)(ii).
    Furthermore, as discussed in the Memo, waiting to apply PSD 
requirements at least until the actual promulgation of control 
requirements that follow an endangerment finding is sensible. The Memo 
explains that when promulgating the final regulations establishing the 
control requirements for a pollutant, EPA often makes decisions that 
are also relevant to decisions that must be made in implementing the 
PSD program for that pollutant. See Memo at 14. For example, EPA often 
does not make a final decision regarding how to identify the specific 
pollutant subject to an NSPS standard until the NSPS is issued, which 
occurs after both the endangerment finding and the source category 
listing.
    Public comments echoed these concerns. One commenter said that 
subjecting the pollutant to PSD requirements, including imposition of 
BACT emission limits, before the Agency has taken regulatory action to 
establish emission controls would turn the CAA process on its head. 
Another commenter indicated that triggering PSD review upon completion 
of an endangerment finding, but potentially before the specific control 
requirement that flows directly from the endangerment finding, clearly 
undermines the orderly process created by Congress for regulation of 
new air pollutants. A third commenter added that establishing controls 
without having a standard to be achieved leads to uncertainty in the 
permitting program.
    In further support of EPA's interpretation that an endangerment 
finding does not make an air pollutant ``subject to regulation'' is the 
fact that an endangerment finding is not a codified regulation; it does 
not contain any regulatory text. The PSD Interpretive Memo explains, 
and numerous commenters agree, that an endangerment finding should not 
be construed as ``regulating'' the air pollutant(s) at issue because 
there is no actual regulatory language applicable to the air pollutant 
at this time in the Code of Federal Regulations. Rather, the finding is 
a prerequisite to issuing regulatory language that imposes control 
requirements. This is true even if the endangerment finding is a 
``rule'' for purposes of administrative processes; that does not alter 
the fact that there is no regulation or regulatory text attached to the 
endangerment finding itself. Since an endangerment finding does not 
establish ``regulation'' within the common meaning of the term applied 
by EPA, EPA does not believe the CAA compels EPA to apply PSD 
requirements to a pollutant on the basis of an endangerment finding 
alone.
    EPA's interpretation is also consistent with the Supreme Court's 
decision in Massachusetts. In its decision, the Court acknowledged that 
EPA ``has significant latitude as to the manner, timing, content and 
coordination'' of the regulations that would result from a positive 
endangerment finding under section 202(a). See 549 U.S. at 532. Just as 
EPA has discretion regarding the timing of the section 202(a) control 
regulations that would flow from an endangerment finding under that 
section, it also has some discretion regarding the timing of the 
triggering of PSD controls that the statute requires based on those 
section 202(a) regulations. EPA has reasonably determined that PSD 
controls should not precede any other control requirements. Some 
commenters cited Massachusetts in support of EPA's position.
    For the foregoing reasons, EPA affirms that the prerequisite act of 
making an endangerment finding, a cause or contribute finding, or both, 
does not make a pollutant ``subject to regulation'' for the purposes of 
the PSD program. This interpretation applies to both steps of the 
endangerment finding--the finding that air pollution may reasonably be 
anticipated to endanger public health or welfare, and the finding that 
emissions of an air pollutant from a particular source category causes 
or contributes to this air pollution--regardless of whether the two 
findings occur together or separately. As explained above, EPA believes 
that there are strong legal and policy reasons for rejecting the 
endangerment finding interpretation.
5. Section 209 Waiver Interpretation
    EPA is affirming its position that an Agency decision to grant a 
waiver to a State under section 209 of the CAA does not make the PSD 
program applicable to pollutants that may be regulated under State 
authority following a grant of such a waiver. For the reasons discussed 
below, the granting of a waiver does not make the pollutants that are 
regulated by a State after obtaining a section 209 waiver into 
pollutants regulated under the CAA. Furthermore, EPA is also affirming 
the position that PSD requirements are not applicable to a pollutant in 
all States when a handful of States besides the one obtaining the 
waiver adopt identical standards under section 177 of the CAA that are 
then approved into State SIPs by EPA.
    As explained in the proposal, neither the PSD Interpretive Memo nor 
the Petition for Reconsideration raise the issue of whether a decision 
to grant a waiver under the section 209 of the CAA triggers PSD 
requirements for a pollutant regulated by a State after obtaining a 
waiver. EPA received comments in response to the notice of an 
application by California for a CAA section 209 waiver to the State of 
California to adopt and enforce GHG emission standards for new motor 
vehicles that suggested that arguments might be made that the grant of 
the waiver made GHGs subject to regulation

[[Page 17014]]

across the country for the purposes of PSD. See 74 FR 32744, 32783 
(July 8, 2009). Those commenters requested that EPA state clearly that 
granting the California Waiver did not render GHGs subject to 
regulation under the CAA, while others commented that the question of 
when and how GHGs should be addressed in the PSD program or otherwise 
regulated under the Act should instead be addressed in separate 
proceedings. At that time, EPA stated that these interpretation issues 
were not a part of the waiver decision and would be more appropriately 
addressed in another forum.
    In the proposed reconsideration notice, EPA proposed to affirm the 
following position that EPA previously explained to Congress: ``a 
decision to grant a waiver under section 209 of the Act removes the 
preemption of State law otherwise imposed by the Act. Such a decision 
is fundamentally different from the decisions to establish requirements 
under the CAA that the Agency and the [EAB] have considered in 
interpreting the provisions governing the applicability of the PSD 
program.'' Letter from Lisa P. Jackson, EPA Administrator, to Senator 
James M. Inhofe (March 17, 2009). Specifically, EPA proposed to find 
that neither the CAA nor the Agency's PSD regulations make the PSD 
program applicable to pollutants that may be regulated by States after 
EPA has granted a waiver of preemption under section 209 of the CAA. 
Accordingly, EPA said that the Agency's decision to grant a section 209 
waiver to the State of California to establish its own GHG emission 
standards for new motor vehicles does not trigger PSD requirements for 
GHGs.
    Several commenters disagreed with EPA's proposed position on the 
section 209 waiver provisions, and assert that EPA's granting of the 
waiver results in ``actual control.'' According to these commenters, 
even under EPA's interpretation of ``subject to regulation,'' 
CO2 is now subject to BACT. One of these commenters argues 
that EPA's granting of a waiver is an EPA regulatory action that 
``controls'' CO2 by allowing California and 10 other States 
to ``regulate'' CO2 under the Act. Another one of these 
commenters states that 10 States used section 177 of the CAA to adopt 
the California Standards into their SIPs, thus making these provisions 
enforceable by both EPA and citizens under the CAA. See, e.g., 42 
U.S.C. 7413; 42 U.S.C. 7604(a)(1), (f)(3). EPA has not been persuaded 
to change its proposed position based on these comments.
    EPA does not disagree that the regulations promulgated by the State 
pursuant to the waiver will require control of emissions and thus 
constitute ``regulation'' of GHGs under the meaning applied by EPA. 
However, the principal issue here is whether this regulation occurs 
under the authority of the Clean Air Act (i.e., ``under the Act.'').
    In the proposed reconsideration notice, EPA explained that a waiver 
granted under CAA section 209(b)(1) simply removes the prohibition 
found in section 209(a) that forbids States from adopting or enforcing 
their own standards relating to control of emissions from new motor 
vehicles or new motor vehicle engines. Thus, the grant of the waiver 
does not lead to regulation ``under the Act'' because it simply allows 
California to exercise the same authority to adopt and enforce State 
emissions standards for new motor vehicles that California could have 
exercised without the initial prohibition in section 209(a). Several 
other commenters agreed with EPA's position and reasoning. They 
explained that a waiver constitutes a withdrawal of Federal preemption 
that allows a State to develop its own State standards to regulate 
vehicle emissions; the waiver does not transform these State standards 
into Federal standards. Other supporting commenters also assert that 
there is nothing in the legislative history that supports a conclusion 
that Congress intended section 209 waivers to result in application of 
PSD requirements. The opposing comments have not convincingly 
articulated a mechanism through which EPA's action granting the waiver 
in fact requires control of emissions (as opposed to the States action 
under State law). If EPA granted the waiver alone and the State 
ultimately decided not to implement its regulation, there would be no 
control requirement in effect under the CAA.
    As explained in the proposed reconsideration notice, EPA also finds 
it instructive that enforcement of any emission standard by the State 
after EPA grants a section 209 waiver would occur pursuant to State 
enforcement authority, not Federal authority. EPA would continue to 
enforce the Federal emission standards EPA promulgates under section 
202. EPA does not enforce the State standard. EPA only conducts testing 
to determine compliance with the Federal standard promulgated by EPA 
and any enforcement would be for violation of EPA standards, not the 
State standards. As one commenter noted, CAA section 209(b)(3) provides 
that where a State has adopted standards that have been granted a 
waiver ``compliance with such State standards shall be treated as 
compliance with applicable Federal standards for purposes of this 
subchapter,'' but does not say that such State standards actually 
become the Federal standards. Accordingly, EPA finds the absence of 
legislative history supporting the contrary position, and the language 
in section 209(b)(3) instructive as Congress clearly recognized the co-
existence of the Federal and State standards. This shows Congress did 
not intend that State regulations replace, or transform State standards 
into Federal regulations ``under the Act.'' EPA agrees with supporting 
commenters' conclusions summarized here, and is not persuaded to change 
the proposed position.
    EPA has also concluded that the adoption of identical standards by 
several States under section 177 does not make a pollutant covered by 
those standards ``subject to regulation under the Act'' in all States. 
Like section 209, section 177 only grants States authority to regulate 
under State authority by removing Federal preemption. Adoption of 
California standards by other States does not change the fact that 
those standards are still State standards enforced under State law and 
Federal law is approved in a SIP. However, EPA agrees that when a State 
adopts alternate vehicle standards into its SIP pursuant to section 
177, and EPA approves the SIP, these standards become enforceable by 
EPA and citizens under the CAA. Nonetheless, EPA does not agree that 
this compels an interpretation that any pollutant included in an 
individual State SIP requirement becomes ``subject to regulation'' in 
all States under the CAA. As discussed earlier, EPA rejects the theory 
that a regulation of a pollutant in one or more States in an EPA-
approved implementation plan necessarily makes that pollutant subject 
to regulation in all States. Such an approach is inconsistent with the 
fundamental principle of cooperative federalism embodied in the CAA.
    In summary, EPA concludes that neither the act of granting a 
section 209 waiver of preemption for State emission standards nor the 
EPA-approval of standards adopted into a SIP pursuant to section 177 
makes a pollutant ``subject to regulation under the Act'' in all States 
for the purposes of the PSD program.

C. Other Issues on Which EPA Solicited Comment

1. Prospective Codification of Interpretation
    Through the proposed reconsideration notice, EPA requested comment 
on whether the Agency should codify its final interpretation of the 
``subject to regulation'' in the statute and regulation

[[Page 17015]]

by amending the Federal PSD rules at 40 CFR 52.21. EPA received a 
number of comments both in support of and opposing codification.
    EPA does not believe it is necessary to codify its interpretation 
in the regulatory text. EPA feels it is important to promptly 
communicate and apply these final decisions regarding the applicability 
of the PSD program in light of recent and upcoming actions related to 
GHGs. More specifically, EPA recently finalized the ``Mandatory 
Reporting of Greenhouse Gases'' rule (known as the ``Reporting 
Rule''),\12\ which added monitoring requirements for additional GHGs 
not covered in the Part 75 regulations. Further, EPA is poised to 
finalize by the end of March 2010 the LDV Rule that will establish 
controls on GHGs that take effect in Model Year 2012, which starts as 
early as January 2, 2011. Thus, these actions make it important that 
EPA immediately apply its final interpretation of the PSD regulations 
on this issue (as refined in this action). Furthermore, even if EPA 
modified the text of the Federal rules, many States may continue to 
proceed under an interpretation of their rules. EPA thus believes 
overall implementation of PSD permitting programs is facilitated by 
this notice that describes how existing requirements in Federal 
regulations at 40 CFR 52.21 are interpreted by EPA and how similar 
State provisions may be interpreted by States.
---------------------------------------------------------------------------

    \12\ See 74 FR 56259 (Oct. 30, 2009).
---------------------------------------------------------------------------

    Likewise, EPA does not believe it is necessary to re-issue the PSD 
Interpretive Memorandum. The Agency has not identified any legal 
requirement for the Agency to re-issue an interpretive rule after a 
process of reconsideration. No comparable procedure is required after 
the reconsideration of substantive rule. In the latter situation, a 
notice of final action is sufficient to conclude the reconsideration 
process and an Agency may simply decline to revise an existing 
regulation that remains in effect. EPA has therefore concluded that 
this notice of final action is sufficient to conclude the 
reconsideration process initiated on February 17, 2009 and that there 
is no need to re-issue the entire memorandum in order for EPA to 
continue applying the interpretation reflected therein, as refined in 
this notice.
2. Section 821 of the Clean Air Act Amendments of 1990
    In the October 7, 2009 notice, EPA also solicited comment on the 
question of whether section 821 of the Clean Air Act Amendments of 1990 
is part of the Clean Air Act. EPA indicated that the Agency was 
inclined against continuing to argue that section 821 was not a part of 
the CAA, as the Office of Air and Radiation and Region 8 had done in 
briefs submitted to the EAB in the Deseret matter. This question bears 
on the determination of whether the CO2 monitoring 
requirements in EPA's Part 75 regulations are requirements ``under the 
Act.'' In the proposed reconsideration notice, EPA explained that it 
would be necessary to resolve whether or not the CO2 
monitoring and reporting regulations in Part 75 were promulgated 
``under the Act'' if EPA adopted the monitoring and reporting 
interpretation. EPA received public comments on both sides of this 
issue, with one environmental organization pressing EPA to drop the 
position that section 821 is not a part of the CAA and several industry 
parties requesting that EPA affirm it.
    EPA has not yet made a final decision on this question, and it is 
not necessary for the Agency to do so at this time. Since EPA is not 
adopting the monitoring and reporting interpretation, the status of 
section 821 is not material to the question of whether and when 
CO2 is ``subject to regulation under the Act.'' Because 
there are currently no controls on CO2 emissions, the 
pollutant is not ``subject to regulation.'' Given that the provisions 
in Part 75 do not ``regulate'' emissions of CO2, it is 
unnecessary determine whether such provisions are ``under the Act'' or 
not to determine PSD applicability. Furthermore, the promulgation of 
EPA's Reporting Rule makes this issue even less material. In that rule, 
which became effective in December 2009 and required monitoring to 
begin in January of this year, EPA established monitoring and reporting 
requirements for CO2 and other GHGs under sections 114 and 
208 of the CAA. Thus, there can be no dispute that monitoring and 
reporting of CO2 (as well as other GHGs) is now occurring 
under the CAA, regardless of the status of section 821 of the 1990 
amendments. At this point, the section 821 issue would only become 
relevant if a court were to find that the monitoring and reporting 
interpretation is compelled by the CAA and a party subsequently seeks 
to retroactively enforce such a finding against sources that had not 
obtained a PSD permit with any limit on CO2 emissions. If 
this situation were to arise, EPA will address the section 821 issue as 
necessary.
3. Timing of When a Pollutant Becomes Subject to Regulation
    The October 7, 2009 notice also solicited comment on whether the 
interpretation of ``subject to regulation'' should also more clearly 
identify the specific date on which PSD regulatory requirements would 
apply. In the PSD Interpretive Memo, EPA states that the language in 
the definition of ``regulated NSR pollutant'' should be interpreted to 
mean that the fourth part of the definition should ``apply to a 
pollutant upon promulgation of a regulation that requires actual 
control of emissions.'' See Memo at 14. After evaluating the underlying 
statutory requirement in the CAA and the language in all parts of the 
regulatory definition more closely, EPA proposed to modify its 
interpretation of the fourth part of the definition with respect to the 
timing of PSD applicability. The Agency proposed to interpret the term 
``subject to regulation'' in the statute and regulation to mean that 
PSD requirements apply when the regulations addressing a particular 
pollutant become final and effective.
    Based on public comments and other considerations raised in the 
proposal, EPA has determined that it is necessary to refine the portion 
of the PSD Interpretive Memo that addresses the precise point in time 
when a pollutant becomes subject to regulation for purposes of the PSD 
program. As a result, while the Memo is otherwise unchanged by the 
reconsideration proceeding, this final notice will adjust the first 
paragraph of section II.F of the Memo (bottom of page 14) to reflect 
EPA's conclusion that it is more appropriate and consistent with the 
reasoning of the Memo to construe EPA regulations and the CAA to make a 
pollutant subject to PSD program requirements when the first controls 
on a pollutant take effect. This refines the approach proposed in the 
October 7, 2009 notice.
    Like the PSD Interpretive Memorandum itself, the refinement to 
EPA's interpretation described in this final notice is an 
interpretation of the regulation at 40 CFR 52.21 and the CAA provisions 
that provide the statutory foundation for EPA's regulations. The 
refinement reflected in this notice explains, clarifies, and is 
consistent with existing statutes and the text of regulatory provisions 
at 40 CFR 52.21(b)(50)(ii) through (iv). Some commenters argued that 
courts have limited an Agency's ability to fundamentally change a long-
standing, definitive, and authoritative interpretation of a regulation 
\13\ without

[[Page 17016]]

engaging in a notice and comment rulemaking. See, e.g., Alaska 
Professional Hunters Association v. FAA, 177 F.3d 1030, 1033-34 (D.C. 
Cir. 1999); Paralyzed Veterans of America v. D.C. Arena L.P., 117 F.3d 
579, 586 (D.C. Cir. 1997). Since EPA's interpretation of the PSD 
program regulations is unchanged in most respects by this action, it is 
not clear that the particular refinement to that interpretation that 
EPA is making in this action would invoke the doctrine described in 
these cases. Even if this refinement is viewed as a fundamental change, 
EPA has completed the revision reflected in this action after a notice 
and comment process. Furthermore, since EPA initiated a process of 
reconsidering and soliciting comment on the PSD Interpretive Memo 
within three months of its issuance, the memorandum had not yet become 
particularly well-established or long-standing. See MetWest Inc. v. 
Secretary of Labor, 560 F.3d 506, 511 n.4 (D.C. Cir. 2009). Thus, the 
doctrines reflected in these cases do not preclude the action EPA has 
taken here to refine its interpretation of the regulations.
---------------------------------------------------------------------------

    \13\ To EPA's knowledge, no court has required a rulemaking 
procedure when the Agency seeks to issue or change its 
interpretation of a statute. Nevertheless, EPA has completed this 
notice and comment proceeding before deciding to adopt the revised 
interpretation of the CAA described in this notice.
---------------------------------------------------------------------------

    The regulatory language of 40 CFR 52.21(b)(50)(iv) does not specify 
the exact time at which the PSD requirements should apply to pollutants 
in the fourth category of the definition of ``regulated NSR 
pollutant.'' In the PSD Interpretive Memo, EPA states that EPA 
interprets the language in this definition to mean that the fourth part 
of the definition should ``apply to a pollutant upon promulgation of a 
regulation that requires actual control of emissions.'' See Memo at 14. 
However, after continuing to consider the underlying statutory 
requirement in the CAA and the language in all parts of the regulatory 
definition more closely, EPA proposed in the October 7, 2009 notice to 
modify its interpretation of the fourth part of the definition with 
respect to the timing of PSD applicability. In the proposed notice of 
reconsideration, EPA observed that the term ``subject to regulation'' 
in the statute and regulation is most naturally interpreted to mean 
that PSD requirements apply when the regulations addressing a 
particular pollutant become final and effective. In addition, EPA 
expressed a desire to harmonize the application of the PSD requirements 
with the limitation in the Congressional Review Act (CRA) that a major 
rule cannot take effect until 60 days after it is published in the 
Federal Register.
    In this final notice on reconsideration, based on information 
provided in public comments, EPA is refining its interpretation of the 
time the PSD requirements will apply to a newly-regulated pollutant. 
Under the PSD program, EPA will henceforth interpret the date that a 
pollutant becomes subject to regulation under the Act to be the point 
in time when a control or restriction that functions to limit pollutant 
emissions takes effect or becomes operative to control or restrict the 
regulated activity. As discussed further below, this date may vary 
depending on the nature of the first regulatory requirement that 
applies to control or restrict emissions of a pollutant.
    Several public comments observed that a date a control requirement 
becomes ``final and effective'' and the date it actually ``takes 
effect'' may differ. Some commenters supported these points with 
reference to Federal court decisions that suggest the date that the 
terms of a regulation become effective can take more than one form. In 
one case involving the Congressional Review Act, the United States 
Court of Appeals for the Federal Circuit observed that the date a 
regulation may ``take effect'' in accordance with the CRA is distinct 
from the ``effective date'' of the regulation. See Liesegang v. Sec'y 
of Veterans Affairs, 312 F.3d 1368, 1374-75 (Fed. Cir. 2002), amended 
on reh'g in part on other grounds, 65 Fed. Appx. 717 (Fed. Cir. 2003). 
In this opinion, the court observed that ``[t]he ordinary meaning of 
`take effect' is `[t]o be in force; go into operation' '' Id. at 1375 
(quoting Black's Law Dictionary at 1466 (7th ed. 1999). Based on this, 
the court reasoned that the CRA does not ``change the date on which the 
regulation becomes effective'' but rather ``only affects the date when 
the rule becomes operative.'' Id. In another case, the Second Circuit 
Court of Appeals described a distinction between the date a rule may 
``take effect'' under the CRA, the ``effective date'' for application 
of the rule to regulated manufacturers, and the ``effective date'' for 
purposes of modifying the Code of Federal Regulations. See Natural 
Resources Defense Council v. Abraham, 355 F.3d 179, 202 (2d Cir. 2004).
    The Office of the Federal Register (OFR) uses the term ``effective 
date'' to describe the date that amendments in a rulemaking document 
affect the current Code of Federal Regulations. See Federal Register 
Document Drafting Handbook, at p. 2-10 (Oct. 10, 1998). However, OFR 
draws a contrast between such a date and the compliance or 
applicability date of a rule, which is described as ``the date that the 
affected person must start following the rule.'' Id. at 2-11. Thus, the 
``effective date'' of a regulation is commonly used to describe the 
date by which a provision in the Code of Federal Regulations is enacted 
as law, but it is not necessarily the same as the time when provision 
enacted in the Code of Federal Regulations is operative on the 
regulated activity or entity. The latter may be described as the 
``compliance,'' ``applicability,'' or ``takes effect'' date.
    The terms of the CAA also recognize a similar distinction in some 
instances. CAA section 112(i)(3)(A) provides that ``after the effective 
date of any emissions standard, limitation or regulation promulgated 
under this section and applicable to a source, no person may operate 
such source in violation of such standard, limitation, or regulation 
except, in the case of an existing source, the Administrator shall 
establish a compliance date or dates for each category or subcategory 
of existing sources, which shall provide for compliance as 
expeditiously as practicable, but in no event later than 3 years after 
the effective date of such standard.'' Another example in section 202 
of the Act is discussed in more detail below.
    Another formulation may be found in Section 553(c) of the APA (5 
U.S.C. 553(c)), which provides, with some exceptions, that ``[t]he 
required publication or service of a substantive rule shall be made not 
less than 30 days before its effective date.'' The APA does not define 
the term ``effective date'' or make precisely clear whether it is 
referring to the date a regulation has the force of law or the date by 
which a regulatory requirement applies to a regulated entity or 
activity. The APA also separately recognizes the concept of finality of 
Agency action for purposes of judicial review. See 5 U.S.C. 704.
    In the October 7, 2009 notice, EPA did not clearly distinguish 
between the various forms of the date when a regulatory requirement may 
become effective. One commenter observed that the EPA analysis in the 
proposed reconsideration notice appeared to blur the distinction 
between the ``effective date'' set by EPA and the date that Congress 
allows a regulation to become effective under the CRA. EPA in fact 
discussed all of these concepts in its notice, with part of the 
discussion focused on the date a regulation becomes ``final'' and 
``effective'' and a part on when a regulation may ``take effect'' under 
the CRA. EPA viewed these forms of the date when a regulation becomes 
``effective'' to be essentially the same, but the case law

[[Page 17017]]

suggests that administrative agencies do not necessarily need to 
harmonize the date that regulatory requirements take effect with the 
``effective date'' of a regulation, meaning the date a regulation has 
the force of law and amends the Code of Federal Regulations. Since 
these are distinct concepts, the effective date of a regulation for 
purposes of amending the CFR may precede the date when a regulatory 
requirement ``takes effect'' or when a regulated entity must comply 
with a regulatory requirement. A regulation may ``take effect'' 
subsequent to its stated ``effective date'' where it has been published 
in final form but does not require immediate implementation by the 
agency or compliance by regulated entities.
    The key issue raised by EPA in the October 7, 2009 notice was 
determining which date should be determined by EPA to be the date when 
a pollutant becomes ``subject to regulation'' and, thus, the date when 
the requirements of the PSD permitting program apply to that pollutant. 
In recognition of the distinction between the ``effective date'' of the 
regulation for purposes of amending the CFR and the point at which a 
regulatory restriction may ``take effect,'' EPA has considered whether 
it is permissible to construe sections 165(a)(4) and 169(3) of the CAA 
to mean that a pollutant becomes ``subject to regulation'' at the point 
that a regulatory restriction or control ``takes effect.'' In the 
October notice, EPA observed that the use of ``subject to'' in the Act 
suggests that PSD requirements are intended to be triggered when those 
standards become effective for the pollutant. EPA also said that no 
party is required to comply with a regulation until it has become final 
and effective. Prior to that date, an activity covered by a rule is not 
in the ordinary sense ``subject to'' any regulation. Regardless of 
whether one interprets regulation to mean monitoring or actual control 
of emissions, prior to the effective date of a rule there is no 
regulatory requirement to monitor or control emissions.
    The same reasoning applies to the date that a regulation ``takes 
effect,'' as that term is used in the judicial decisions described 
above. Regulated entities are not required to comply with a regulatory 
requirement until it takes effect. Prior to the date a regulatory 
requirement takes effect, the activity covered by a rule is not in the 
ordinary sense subject to any regulation.
    As discussed in the PSD Interpretive Memo, as used in the context 
of the PSD provisions in EPA regulations and the CAA, EPA interprets 
the term ``regulation'' in the context of sections 165(a)(4) and 169 of 
the CAA to mean the act or process of controlling or restricting an 
activity. This interpretation applies a common meaning of the term 
regulation reflected in dictionaries.
    Thus, EPA agrees with commenters that the term ``subject to 
regulation'' used in both the CAA and EPA's regulations may be 
construed to mean the point at which a requirement to control a 
pollutant takes effect. The CAA does not necessarily preclude 
construing a pollutant to become subject to regulation upon the 
promulgation date or the date that a regulation becomes final and 
effective for purposes of amending the CFR or judicial review. However, 
EPA has been persuaded by public comments that the phrase ``subject to 
regulation'' may also be interpreted to mean the date by which a 
control requirement takes effect.
    Indeed, EPA has concluded that the latter interpretation is more 
consistent with the actual control interpretation reflected in the PSD 
Interpretive Memo. As one commenter observed, a regulation would have 
to have become actually effective, in the sense that actual legal 
obligations created by the regulation have become currently applicable 
for regulated entities and are no longer merely prospective 
obligations, before that regulation could make a pollutant subject to 
actual control. Another commenter noted that a regulated entity has no 
immediate compliance obligations and cannot be held in violation of the 
regulation until a legal obligation becomes applicable to them on the 
``takes effect'' date. Thus, based on this reasoning, EPA has decided 
that it will construe the point at which a pollutant becomes ``subject 
to regulation'' within the meaning of section 52.21(b)(50)(iv) of EPA's 
regulations to be when a control or restriction is operative on the 
activity regulated. EPA agrees with commenters that there is generally 
no legally enforceable obligation to control a pollutant when a 
regulation is promulgated or, in some instances, even when a regulation 
becomes effective for some purposes.
    Thus, EPA currently interprets the time that a pollutant becomes a 
``regulated NSR pollutant'' under section 52.21(b)(50)(iv) to be the 
time when a control or restriction on emissions of the pollutant takes 
effect or becomes operative on the regulated activity. Given EPA's 
conclusion that this is a permissible interpretation of the ``subject 
to regulation'' language in sections 165(a)(4) and 169(3) of the CAA, 
EPA will also interpret other parts of section 52.21(b)(50) to make a 
pollutant a regulated NSR pollutant on the date that a control 
requirement takes effect, provided such an interpretation is not 
inconsistent with the existing language of the regulations.
    EPA does not agree with several commenters who suggested that EPA 
determine that a pollutant does not become subject to regulation until 
the time that an individual source engages in the regulated activity. 
EPA does not believe such a reading is consistent with the ``subject to 
regulation'' language in the CAA. Even if no source is actually engaged 
in the activity, once a standard or control requirement has taken 
effect, no source may engage in the regulated activity without 
complying with the standard. At this point, the regulated activity and 
the emissions from that activity are controlled or restricted, thus 
being subject to regulation within the common meaning of the term 
regulation used in EPA's regulations and section 165(a)(4) and 169(3) 
of the CAA.
    Likewise, EPA does not agree with commenters who argued that a 
pollutant does not become subject to regulation until the date when a 
source must certify compliance with regulatory requirements or submit a 
compliance report. In some instances, a compliance report or 
certification of compliance may not be required until well after the 
point that a regulation operates to control or restrict the regulated 
activity. Thus, EPA does not feel that it would be appropriate as a 
general rule to establish the date when a source certifies compliance 
or submits its compliance report as the date that a pollutant becomes 
subject to regulation.
    Since the fourth part of the definition of ``regulated NSR 
pollutant'' functions as a catch-all provision, it may cover a variety 
of different types of control requirements established by EPA under the 
CAA. These different types of regulations may contain a variety of 
different mechanisms for controlling emissions and have varying amounts 
of lead time before controls take effect under the particular 
regulatory framework. Thus, whenever the Agency adopts controls on a 
new pollutant under a portion of the CAA covered by the fourth part of 
the definition, EPA anticipates that it will be helpful to States and 
regulated sources for EPA to identify the date when a new pollutant 
becomes subject to regulation. In section IV.A of this notice, EPA 
provides such an analysis for the forthcoming LDV Rule that is 
anticipated to establish the first controls on GHGs.
    EPA has also concluded that it is appropriate to extend the 
reasoning of this interpretation across all parts of the definition of 
the term ``regulated NSR

[[Page 17018]]

pollutant.'' The reasoning described above is equally applicable to the 
regulation of additional pollutants under the specific sections of the 
Act delineated in the first three parts of the definition of 
``regulated NSR pollutant.'' While the date a control requirement may 
take effect could vary across sections 109, section 111, and Title VI, 
EPA does not see any distinction in the applicability of the legal 
reasoning above to these provisions of the CAA. There should be less 
variability among rules promulgated under the same statutory section, 
so EPA does not expect that it will be necessary for EPA to identify 
the date that a new pollutant becomes subject to regulation each time 
EPA regulates a new pollutant in a NAAQS or NSPS. EPA can more readily 
identify the specific dates when controls under such rules take effect.
    By way of example, the NSPS under section 111 of the Act preclude 
operation of a new source in violation of such a standard after the 
effective date of the standard. See 42 U.S.C. 7411(e). Thus, the 
control requirements in an NSPS take effect on the effective date of 
the rule. Once such a standard takes effect and operates to preclude 
operations in violation of the standards, then EPA interprets the 
statute and EPA's PSD regulations to also require that the BACT 
requirement apply to a pollutant that is subject to NSPS. Consistent 
with the October 7, 2009 proposal, EPA has determined that the existing 
language in section 52.21(b)(50)(ii) of its regulations may be 
construed to apply to a new pollutant upon the effective date of an 
NSPS. This part of the definition covers ``[a]ny pollutant that is 
subject to any standard promulgated under section 111 of the Act.'' See 
40 CFR 52.21(b)(50)(ii). While the word ``promulgated'' appears in this 
part of the definition, this term modifies the term ``standard'' and 
does not directly address the timing of PSD requirements. Under the 
language in this part of the definition, the PSD requirements apply 
when a pollutant becomes ``subject to'' the underlying standard, which 
is ``promulgated under'' section 111 of the Act. Thus, this language 
can be interpreted to make an NSPS pollutant a regulated NSR pollutant 
upon the effective date of an NSPS. EPA did not receive any public 
comments that opposed reading this portion of the definition to invoke 
PSD requirements upon the effective date of an NSPS. This can logically 
be extended to be consistent with the general view described above that 
the time a pollutant becomes subject to regulation is the time when a 
control requirement ``takes effect.'' As discussed above, the effective 
date of an NSPS is also that date when the controls in an NSPS ``take 
effect.''
    Likewise, under section 169(a)(3) of the Act, a source applying for 
a PSD permit must demonstrate that it will not cause or contribute to a 
violation of the NAAQS in order to obtain the permit. Once a NAAQS is 
effective with respect to a pollutant, the standard operates through 
section 169(a)(3) of the Act and section 52.21(k) of EPA's regulations 
to preclude construction of a new source that would cause or contribute 
to a violation of such standard.
    Using the effective date of a NAAQS to determine when a pollutant 
covered by a NAAQS becomes a regulated NSR pollutant is more consistent 
with EPA's general approach for determining when a new NAAQS applies to 
pending permit applications. EPA generally interprets a revised NAAQS 
that establishes either a lower level for the standard or a new 
averaging time for a pollutant already regulated to apply upon the 
effective date of the revised NAAQS. Thus, unless EPA promulgates a 
grandfathering provision that allows pending applications to apply 
standards in effect when the application is complete, a final permit 
decision issued after the effective date of a NAAQS must consider such 
a NAAQS. As described above, the effective date of the NAAQS is also 
the date a NAAQS takes effect through the PSD permitting program to 
regulate construction of a new or modified source.
    Since a NAAQS covering a new pollutant would operate through the 
PSD permitting program to control emissions of that pollutant from the 
construction or modification of a major source upon the effective date 
of the NAAQS, a NAAQS covering a new pollutant takes effect on the 
effective date of the regulation promulgating the NAAQS. EPA does not 
agree with one commenter's suggestion that such a NAAQS would not take 
effect until the time a State first promulgates limitations for the 
pollutant in a SIP. Under section 165(a)(3) of the Act and the Federal 
PSD permitting regulations at 52.21(k), to obtain a PSD permit, a major 
source must demonstrate that the proposed construction will not cause 
or contribute to a violation of a NAAQS. Due to these requirements, the 
PSD program operates to incorporate the NAAQS as a governing standard 
for permitting construction of large sources. Thus, under the Federal 
PSD program regulations at least, a new pollutant covered by a NAAQS 
becomes subject to regulation at a much earlier date. These PSD 
provisions require emissions limitations for the NAAQS pollutant before 
construction at a major source may commence and thereby function to 
protect the NAAQS from new source construction and modifications of 
existing major sources in the SIP development period before a 
completion of the planning process necessary to determine whether 
additional standards for a new NAAQS pollutant need to be developed. 
The timing when the NAAQS operates in this manner under SIP-approved 
programs is potentially more nuanced and depends on whether State laws 
are sufficiently open-ended to call for application of a new NAAQS as a 
governing standard for PSD permits upon the effective date. EPA 
believes that State laws that use the same language as in EPA's PSD 
program regulations at 52.21(k) and 51.166(k) are sufficiently open-
ended and allow such a NAAQS to ``take effect'' through the PSD program 
upon the effective date of the NAAQS. Notwithstanding this complexity 
in SIP-approved programs, the applicability of the Federal PSD program 
regulations to a new NAAQS pollutant upon the effective date of the 
NAAQS is sufficient to determine that a new pollutant is subject to 
regulation on this date.
    In the October 7, 2009 notice, EPA observed that one portion of its 
existing regulations was not necessarily consistent with this reading 
of the CAA. For the first class of pollutants described in the 
definition of ``regulated NSR pollutant,'' the PSD requirements apply 
once a ``standard has been promulgated'' for a pollutant or its 
precursors. See 40 CFR 52.21(b)(50)(i). The use of ``has been'' in the 
regulation indicates that a pollutant becomes a ``regulated NSR 
pollutant,'' and hence PSD requirements for the pollutant are 
triggered, on the date a NAAQS is promulgated. Thus, EPA observed in 
the October 7, 2009 notice that it may not be possible for EPA to read 
the regulatory language in this provision to make PSD applicable to a 
NAAQS pollutant upon the effective date of the NAAQS. EPA did not 
propose to modify the language in 40 CFR 52.21(b)(50)(i) in the October 
2009 notice because EPA had not yet reached a final decision to 
interpret the CAA to mean that a pollutant is subject to regulation on 
the date a regulatory requirement becomes effective. Since EPA was not 
proposing to establish a NAAQS for any additional pollutants, the 
timing of PSD applicability for a newly identified NAAQS pollutant did 
not appear to be of concern at the time. No public comments on the 
October 2009 notice addressed this issue. Since EPA is now

[[Page 17019]]

adopting a variation of the proposed interpretation with respect to the 
timing of PSD applicability, EPA believes it will be appropriate to 
propose a revision of the regulatory language in section 
52.21(b)(50)(i) at such time as EPA may consider promulgation of a 
NAAQS for an additional pollutant. Until that time, EPA will continue 
to apply the terms of section 52.21(b)(50)(i) of the regulation. This 
is permissible because, even though EPA believes the better reading of 
the Act is to apply PSD upon the date that a control requirement 
``takes effect,'' the Agency has not determined in this action that the 
CAA precludes applying PSD requirements upon the promulgation of a 
regulation that establishes a control requirement (as a NAAQS does 
through the PSD provisions).

IV. Application of PSD Interpretive Memo to PSD Permitting for GHGs

A. Date by Which GHGs Will Be ``Subject to Regulation''

    Although the PSD Interpretive Memo and this reconsideration reflect 
a broad consideration of the most appropriate legal interpretation and 
policy for all pollutants regulated under the CAA, the need to clarify 
this issue as a general matter has been driven by concerns over the 
effects of GHG emissions on global climate and the contention made by 
some parties in permit proceedings that EPA began regulating 
CO2 as early as the promulgation of monitoring and reporting 
requirements in EPA's Part 75 rules to implement section 821 of the CAA 
Amendments of 1990. The vast majority of public comments on the October 
7, 2009 notice focused on the regulation of GHGs under the PSD program. 
As a result, EPA recognizes that it is critically important at this 
time for the Agency to make clear when the requirements of the PSD 
permitting program for stationary sources will apply to GHGs. For the 
reasons discussed below, GHGs will initially become ``subject to 
regulation'' under the CAA on January 2, 2011, assuming that EPA issues 
final GHG emissions standards under section 202(a) applicable to model 
year 2012 new motor vehicles as proposed. As a result, with that 
assumption, the PSD permitting program would apply to GHGs on that 
date. However, the Tailoring Rule, noted above, proposed various 
options for phasing in PSD requirements for sources emitting GHGs in 
various amounts above 100 or 250 tons per year. Since EPA has not yet 
completed that rulemaking, today's action concludes only that, under 
the approach envisioned for the vehicle standards, GHGs would not be 
considered ``subject to regulation'' (and no source would be subject to 
PSD permitting requirements for GHGs) earlier than January 2, 2011. The 
final Tailoring Rule will address the applicability of PSD requirements 
for GHG-emitting sources that are not presently subject to PSD 
permitting.
    EPA's determination that PSD will begin to apply to GHGs on January 
2, 2011 is based on the following considerations: (1) The overall 
interpretation reflected in the PSD Interpretive Memo; (2) EPA's 
conclusion in this notice that a pollutant becomes subject to 
regulation when controls ``take effect,'' and (3) the assumption that 
the agency will establish emissions standards for model year 2012 
vehicles when it completes the proposed LDV Rule.
    As proposed, the LDV Rule consists of two kinds of standards--fleet 
average standards determined by the emissions performance of a 
manufacturer's fleet of various models, and separate vehicle standards 
that apply for the useful life of a vehicle to the various models that 
make up the manufacturer's fleet. CAA section 203(a)(1) prohibits 
manufacturers from introducing a new motor vehicle into commerce unless 
the vehicle is covered by an EPA-issued certificate of conformity for 
the appropriate model year. Section 206(a)(1) of the CAA describes the 
requirements for EPA issuance of a certificate of conformity, based on 
a demonstration of compliance with the emission standards established 
by EPA under section 202 of the Act. A certification demonstration 
requires emission testing, and must be done for each model year.
    The certificate covers both fleet average and vehicle standards, 
and the manufacturer has to demonstrate compliance with both of these 
standards for purposes of receiving a certificate of conformity. The 
demonstration for the fleet average is based on a projection of sales 
for the model year, and the demonstration for the vehicle standard is 
based on emissions testing and other information.
    Both the fleet average and vehicle standards in the LDV Rule will 
require that automakers control or limit GHG emissions from the 
tailpipes of these vehicles. As such, they clearly constitute 
``regulation'' of GHGs under the interpretation in the PSD Interpretive 
Memo. This view is consistent with the position originally expressed by 
EPA in 1978 that a pollutant regulated in a Title II regulation is a 
pollutant subject to regulation. See 42 FR at 57481. However, the 
regulation of GHGs will not actually take effect upon promulgation of 
the LDV Rule or on the effective date of the LDV Rule when the 
provisions of the rule are incorporated into the Code of Federal 
Regulations.
    Under the LDV Rule, the standards for GHG emissions are not 
operative until the 2012 model year, which may begin as early as 
January 2, 2011. In accordance with the requirements of Title II of the 
CAA and associated regulations, vehicle manufacturers may not introduce 
a model year 2012 vehicle into commerce without a model year 2012 
certificate of conformity. See CAA section 203(a)(1). A model year 2012 
certificate only applies to vehicles produced during that model year, 
and the model year production period may begin no earlier than January 
2, 2011. See CAA section 202(b)(3)(A) and implementing regulations at 
40 CFR 85.2302 through 85.2305. Thus, a vehicle manufacturer may not 
introduce a model year 2012 vehicle into commerce prior to January 2, 
2011.
    There will be no controls or limitations on GHG emissions from 
model year 2011 vehicles. The obligation on an automaker for a model 
year 2012 vehicle would be to have a certificate of conformity showing 
compliance with the emissions standards for GHGs when the vehicle is 
introduced into commerce, which can occur on or after January 2, 2011. 
Therefore, the controls on GHG emissions in the Light Duty Rule will 
not take effect until the first date when a 2012 model year vehicle may 
be introduced into commerce. In other words, the compliance obligation 
under the LDV Rule does not occur until a manufacturer may introduce 
into commerce vehicles that are required to comply with GHG standards, 
which will begin with MY 2012 and will not occur before January 2, 
2011. Since CAA section 203(a)(1) prohibits manufacturers from 
introducing a new motor vehicle into commerce unless the vehicle is 
covered by an EPA-issued certificate of conformity for the appropriate 
model year, as of January 2, 2011, manufacturers will be precluded from 
introducing into commerce any model year 2012 vehicle that has not been 
certified to meet the applicable standards for GHGs.
    This interpretation of when the GHG controls in the LDV Rule take 
effect, and therefore, make GHGs subject to regulation under the Act 
for PSD purposes, is consistent with the statutory language in section 
202(a)(2) of the CAA. This section provides that ``any regulation 
prescribed under paragraph (1) of this subsection (and

[[Page 17020]]

any revision thereof) shall take effect after such period as the 
Administrator finds necessary to permit the development and application 
of the requisite technology, giving appropriate consideration to the 
cost of compliance within such period.'' See 42 U.S.C. 7521(a)(2) 
(emphasis added). The final LDV Rule will apply to model years 2012 
through 2016. The time leading up to the introduction of model year 
2012 is the time that EPA ``finds necessary to permit the development 
and application of the requisite technology, giving appropriate 
consideration to the cost of compliance within such period.'' Model 
year 2012 is therefore when the GHG standards in the rule ``take 
effect.''
    EPA does not agree with several commenters who have suggested that 
the GHG standards in the proposed LDV Rule would not take effect until 
October 1, 2011. The latter date appears to be based on how the 
National Highway Traffic Safety Administration (NHTSA) determines the 
beginning of the 2012 model year under the Energy Policy and 
Conservation Act (EPCA). Under EPCA, a more stringent CAFE standard 
must be prescribed by NHTSA at least 18 months before the beginning of 
the model year. For purposes of this EPCA provision, NHTSA has 
historically construed the beginning of the model year to be October 1 
of the preceding calendar year. See 49 U.S.C. 32902(g)(2); 74 FR 49454, 
49644 n.447 (Sep. 28, 2009). Although EPA has endeavored to harmonize 
its section 202(a) standards with the NHTSA CAFE standards, EPA's 
standards are promulgated under distinct legal authority in the CAA. 
Thus, the section 202(a) standards promulgated in the LDV Rule are not 
subject to EPCA or NHTSA's interpretation of when a model year begins 
for purposes of EPCA. Under EPA's planned LDV Rule, model year 2012 
vehicles may be introduced into commerce as early as January 2, 2011. 
Although as a practical matter, some U.S. automakers may not begin 
introducing model year 2012 vehicles into commerce until later in 2011, 
they may nevertheless do so as early as January 2, 2011 under EPA's 
regulations. Consistent with the discussion above, EPA construes the 
phrase ``subject to regulation'' in section 165(a)(4) and 169(3) of the 
Act to mean that the BACT requirement applies when controls on a 
pollutant first apply to a regulated activity, and not the point at 
which an entity first engages in the regulated activity. In this 
instance, the regulated activity is the introduction of model year 2012 
vehicles into commerce. As of January 2, 2011, a manufacturer may not 
engage in this activity without complying with the applicable GHG 
standards.
    Likewise, EPA does not agree with commenters who argued that EPA 
should not consider the GHG controls in the LDV Rule to take effect 
until automakers have to demonstrate compliance with the fleet average 
standards at the end of the model year, based on actual vehicle model 
production. As discussed above, the LDV Rule includes both fleet 
average standards and vehicle standards that apply to individual 
vehicles throughout their useful lives. As discussed above, both of 
these standards for GHG emissions are operative on model year 2012 
vehicles introduced into commerce on or after January 2, 2011. Thus, 
controls on GHG emissions from automobiles will take effect prior to 
the date that a manufacturer must demonstrate compliance with the fleet 
average standards. The fact that the manufacturer demonstrates final 
compliance with the fleet average at a later date, based on production 
for the entire year, does not change the fact that their conduct was 
controlled by both the fleet average and the vehicle standards, and 
subject to regulation, prior to that date.

B. Implementation Concerns

    A substantial number of commenters requested that EPA defer 
application of the PSD program requirements to GHGs based on various 
practical implementation considerations, and several of these comments 
argued that the CAA affords EPA the discretion to set an implementation 
date based on such concerns. EPA agrees that application of PSD program 
requirements to GHGs presents several significant implementation 
challenges for EPA, States and other entities that issue permits, and 
the sources that must obtain permits. Indeed, many of the public 
comments have illustrated the magnitude of the challenge beyond what is 
described in the proposed notice on reconsideration of the PSD 
Interpretive Memo and the proposed Tailoring Rule.
    In recognition of the substantial challenges associated with 
incorporating GHGs into the PSD program, EPA's preference would be to 
establish a specific date when the PSD permitting requirements 
initially apply to GHGs based solely on these practical implementation 
considerations. However, EPA has not been persuaded that it has the 
authority to proceed in this manner. While EPA may have discretion as 
to the manner and time for regulating GHG emissions under the CAA, once 
EPA has determined to regulate a pollutant in some form under the Act 
and such regulation is operative on the regulated activity, the terms 
of the Act make clear that the PSD program is automatically applicable.
    Nonetheless, given the substantial magnitude of the PSD 
implementation challenges presented by the regulation of GHGs, EPA 
proposed in the Tailoring Rule to at least temporarily limit the scope 
of GHG sources covered by the PSD program to ensure that permitting 
authorities can effectively implement it. EPA based the proposal 
primarily on two legal doctrines: The ``absurd results'' doctrine, 
which EPA proposed to apply on the basis that Congress did not envision 
that the PSD program would apply to the many small sources that emit 
GHGs; and the ``administrative necessity'' doctrine, which EPA proposed 
to apply because of the extremely large administrative burdens that 
permitting authorities would confront in permitting the GHG sources. In 
comment on that action, as well as in comments on the PSD Interpretive 
Memo reconsideration proposal, EPA received numerous suggestions that 
it is necessary to limit the scope of sources covered at the time GHGs 
become subject to regulation. Commenters further stated that it is 
necessary to select a ``trigger date'' for GHG permitting that takes 
into account the time needed for permitting authorities to adopt any 
scope-limiting measures (including the need to amend State law), to 
secure the necessary additional financial and other resources, and to 
hire and train the staff needed to respond to the increase in 
permitting workload. These comments make clear that more time will be 
needed beyond January 2, 2011 before permitting of many GHG stationary 
sources can begin. Thus, EPA will be taking additional action in the 
near future in the context of the Tailoring Rule to address GHG-
specific circumstances that will exist beyond January 2, 2011.

C. Interim EPA Policy To Mitigate Concerns Regarding GHG Emissions From 
Construction or Modification of Large Stationary Sources

    While EPA has concluded that GHGs will not become subject to 
regulation (and hence the PSD BACT requirement will not apply to them) 
earlier than January 2, 2011, permitting authorities that issue permits 
before January 2, 2011 are already in a position to, and should, use 
the discretion currently available under the BACT provisions of the PSD 
program to promote technology choices for control of criteria 
pollutants that will also facilitate the reduction of GHG emissions. 
More specifically, the CAA

[[Page 17021]]

BACT definition requires permitting authorities selecting BACT to 
consider the reductions available through application of not only 
control methods, systems, and techniques, but also through production 
processes, and requires them to take into account energy, 
environmental, and economic impacts. Thus, the statute expresses the 
need for a comprehensive review of available pollution control methods 
when evaluating BACT that clearly requires consideration of energy 
efficiency. The consideration of energy efficiency is important because 
it contributes to reduction of pollutants to which the PSD requirements 
currently apply and have historically been applied. Further, although 
BACT does not now apply to GHG, BACT for other pollutants can, through 
application of more efficient production processes, indirectly result 
in lower GHG emissions.
    Neither the statute nor EPA regulations specify precisely how to 
address energy efficiency in BACT determinations, nor has EPA fully 
articulated how to take climate considerations into account under the 
``energy, environmental, and economic impacts'' considerations of BACT. 
Further, while EPA's BACT guidance for currently regulated pollutants 
has addressed some facets of these issues, EPA believes that, given the 
potential importance of the indirect GHG benefits, it will be useful 
for EPA to summarize this guidance and further clarify it as necessary 
in order to further illustrate where PSD permitting authorities should 
be using existing BACT authority for pollutants that are presently 
regulated in ways that can indirectly address concerns about GHG 
emissions from large stationary sources. EPA is developing such 
guidance and plans to issue it in the near future.

D. Transition for Pending Permit Applications

    Some commenters requested that EPA address the question of how the 
application of PSD requirements to GHGs will affect applications for 
PSD permits that are pending on the date GHGs initially become 
``subject to regulation.'' These commenters generally asked that EPA 
establish an exclusion for any PSD permit application that was 
submitted in complete form before the date on which PSD begins to apply 
to GHGs.
    In light of EPA's conclusion that pollutants become subject to 
regulation for PSD purposes when control requirements on that pollutant 
take effect and that such requirements will not take effect for GHGs 
until January 2, 2011 if EPA finalizes the proposed LDV Rule as 
anticipated, EPA does not see any grounds to establish a transition 
period for permit applications that are pending before GHGs become 
subject to regulation. As a general matter, permitting and licensing 
decisions of regulatory agencies must reflect the law in effect at the 
time the agency makes a final determination on a pending application. 
See Ziffrin v. United States, 318 U.S. 73, 78 (1943); State of Alabama 
v. EPA, 557 F.2d 1101, 1110 (5th Cir. 1977); In re: Dominion Energy 
Brayton Point, LLC, 12 E.A.D. 490, 614-616 (EAB 2006); In re Phelps 
Dodge Corp., 10 E.A.D. 460, 478 n.10 (EAB 2002). Thus, in the absence 
of an explicit transition or grandfathering provision in the applicable 
regulations (and assuming EPA finalizes the LDV Rule as planned), each 
PSD permit issued on or after January 2, 2011 would need to contain 
provisions that satisfy the PSD requirements that will apply to GHGs as 
of that date.
    Under certain circumstances, EPA has previously allowed proposed 
new major sources and major modifications that have submitted a 
complete PSD permit application before a new requirement becomes 
applicable under PSD regulations, but have not yet received a final and 
effective PSD permit, to continue relying on information already in the 
application rather than immediately having to amend applications to 
demonstrate compliance with the new PSD requirements. In such a way, 
these proposed sources and modifications were ``grandfathered'' or 
exempted from the new PSD requirements that would otherwise have 
applied to them.
    For example, EPA adopted a grandfathering provision when it changed 
the indicator for the particulate matter NAAQS from total suspended 
particulate matter (TSP) to particulate matter less than 10 microns 
(PM10). The Federal PSD regulations at 40 CFR 52.21(i)(1)(x) provide 
that the owners or operators of proposed sources or modifications that 
submitted a complete permit application before July 31, 1987, but did 
not yet receive the PSD permit, are not required to meet the 
requirements for PM10, but could instead satisfy the requirements for 
TSP that were previously in effect.
    In addition, EPA has allowed some grandfathering for permit 
applications submitted before the effective date of an amendment to the 
PSD regulations establishing new maximum allowable increases in 
pollutant concentrations (also known as PSD ``increments''). The 
Federal PSD regulations at 40 CFR 52.21(i)(10) provide that proposed 
sources or modifications that submitted a complete permit application 
before the effective date of the increment in the applicable 
implementation plan are not required to meet the increment requirements 
for PM10, but could instead satisfy the increment requirements for TSP 
that were previously in effect. Also, 40 CFR 52.21(i)(9) provides that 
sources or modifications that submitted a complete permit application 
before the provisions embodying the maximum allowable increase for 
nitrogen oxides (NOX) \14\ took effect, but did not yet 
receive a final and effective PSD permit, are not required to 
demonstrate compliance with the new increment requirements to be 
eligible to receive the permit.
---------------------------------------------------------------------------

    \14\ The increments for emissions of the various oxides of 
nitrogen are expressed as concentrations of nitrogen dioxide 
(NO2).
---------------------------------------------------------------------------

    Under the particular circumstances presented by the forthcoming 
application of PSD requirements to GHGs, EPA does not see a 
justification for adopting an explicit grandfathering provision of the 
nature described above. Permit applications submitted prior to the 
publication of this notice should in most cases be issued prior to 
January 2, 2011 and, thus, effectively have a transition period of nine 
months to complete processing before PSD requirements become 
applicable. Additional time for completion of action on applications 
submitted prior to the onset of PSD requirements for GHGs therefore 
does not appear warranted to ensure a smooth transition and avoid 
delays for pending applications. To the extent any pending permit 
review cannot otherwise be completed within the next nine months based 
on the requirements for pollutants other than GHGs, it should be 
feasible for permitting authorities to begin incorporating GHG 
considerations into permit reviews in parallel with the completion of 
work on other pollutants without adding any additional delay to permit 
processing.
    Furthermore, the circumstances surrounding the onset of 
requirements for GHGs are distinguishable from prior situations where 
EPA has allowed grandfathering of applications that were deemed 
complete prior to the applicability new PSD permitting requirements. 
First, this action and the PSD Interpretive Memo do not involve a 
revision of the PSD permitting regulations but rather involves 
clarifications of how EPA interprets the existing regulatory text. This 
action articulates what has, in most respects, been EPA's longstanding 
practice. It has been EPA's consistent position since

[[Page 17022]]

1978 that regulation of a pollutant under Title II triggers PSD 
requirements for such a pollutant. See 42 FR 57481. Thus, permitting 
authorities and permit applicants could reasonably anticipate that 
completion of the LDV Rule would trigger PSD and prepare for this 
action. Many commenters interpreted EPA's October 7, 2009 notice as 
proposing to trigger PSD requirements within 60 days of the 
promulgation of the LDV Rule rather than the January 2, 2011 date that 
EPA has determined to be the date the controls in that rule take 
effect. Second, there are presently no regulatory requirements in 
effect for GHGs. On the other hand, at the time EPA moved from using 
TSP to using PM10 as the indicator for the particulate matter NAAQS, 
grandfathered sources were still required to satisfy PSD requirements 
for particulate matter based on the TSP indicator. Likewise, when EPA 
later updated the PSD increment for particulate matter to use the PM10 
indicator, the grandfathered sources were still required to demonstrate 
that they would not cause or contribute to a violation of the 
particulate matter increment based on TSP. In the case of the adoption 
of the NO2 increment, grandfathered sources were still 
required to demonstrate that they would not cause or contribute to a 
violation of the NO2 NAAQS. In contrast, for GHGs, there are 
no measures currently in effect that serve to limit emission of GHGs 
from stationary sources.
    For these reasons, EPA does not intend to promulgate a transition 
or grandfathering provision that exempts pending permit applications 
from the onset of GHG requirements in the PSD program. As discussed 
above, in the absence of such a provision, PSD permits that are issued 
on or after January 2, 2011 (in accordance with limitations promulgated 
in the upcoming Tailoring Rule) will be required to contain provisions 
that fulfill the applicable program requirements for GHGs.

V. PSD Program Implementation by EPA and States

    Consistent with the PSD Interpretive Memo, the refined 
interpretation reflected in this notice (that a pollutant subject to 
actual control becomes subject to regulation at the time such controls 
take effect) is an interpretation of the language in 40 CFR 
52.21(b)(50) of EPA's regulations. EPA will apply the PSD Interpretive 
Memo, with the refinement described above, when implementing the 
Federal permitting program under 40 CFR 52.21. Furthermore, EPA will 
expect that States that implement the Federal PSD permit program under 
delegation from an EPA Regional Office will do the same.
    In addition, EPA will apply the interpretation reflected in this 
notice and the PSD Interpretive Memo in its oversight of existing State 
programs and review and approval of new program submissions. Many 
States implement the PSD program pursuant to State laws that have been 
approved by EPA as part of the SIP, pursuant to a determination by EPA 
that such laws meet the PSD program criteria set forth in 40 CFR 
51.166. The EPA regulation setting forth PSD program requirements for 
SIPs also includes the same definition of the term ``regulated NSR 
pollutant'' as the Federal program regulation. See 40 CFR 
51.166(b)(49). Because this regulation uses the same language as 
contained in 40 CFR 52.21 and the same considerations apply to 
implementation of the PSD program under State laws, EPA will interpret 
section 51.166(b)(49) in the same manner as section 52.21(b)(50). 
However, in doing so, EPA will be mindful that permitting authorities 
in SIP-approved States have some independent discretion to interpret 
State laws, provided those interpretations are consistent with minimum 
requirements under the Federal law.
    To the extent approved SIPs contain the same language as used in 40 
CFR 52.21(b)(50) or 40 CFR 51.166(b)(49), SIP-approved State permitting 
authorities may interpret that language in State regulations in the 
same manner reflected in the PSD Interpretive Memo and this notice. 
However, EPA will not seek to preclude actions to address GHGs in PSD 
permitting actions prior to January 2, 2011 where a State permitting 
authority feels it has the necessary legal foundation and resources to 
do so.
    EPA has not called on any States to make a SIP submission that 
addresses the interpretive issues addressed in this notice and the PSD 
Interpretive Memo. As long as States are applying their approved 
program regulations consistent with the minimum program elements 
established in 40 CFR 51.166, EPA does not believe it will be necessary 
to issue a SIP call for all States to address this issue. However, 
permitting authorities in SIP-approved States do not have the 
discretion to apply State laws in a manner that does not meet the 
minimum Federal standards in 40 CFR 51.166, as interpreted and applied 
by EPA. Thus, if a State is not applying the PSD requirements to GHGs 
for the required sources after January 2, 2011, or lacks the legal 
authority to do so, EPA will exercise its oversight authority as 
appropriate to call for revisions to SIPs and to otherwise ensure 
sources do not commence construction without permits that satisfy the 
minimum requirements of the Federal PSD program.
    To enable EPA to assess the consistency of a State's action with 
any PSD program requirements for GHGs, States should ensure that the 
record for each PSD-permitting decision addresses whether the State has 
elected to follow EPA's interpretation or believes it is appropriate to 
apply a different interpretation of State laws that is nonetheless 
consistent with the requirements of EPA's PSD program regulations. In 
light of additional actions to be taken by EPA in the Tailoring Rule, 
States that issue permits in the near term may want to preserve the 
discretion to modify their approach after other EPA actions are 
finalized. In light of this contingency, one option States may consider 
is to establish that the State will not interpret its laws to require 
PSD permits for sources that are not required to obtain PSD permits 
under EPA regulations.

VI. Application of the Title V Program to Sources of GHGs

    Although the PSD Interpretive Memorandum and the October 7, 2009 
proposed reconsideration notice addressed only PSD permitting issues, 
EPA received several comments on the proposed reconsideration that also 
addressed the application of Title V permitting requirements to GHGs. 
Most of these comments urged EPA to apply the same approach for 
determining major source applicability for Title V permitting that EPA 
applies to PSD. EPA has in fact been following the PSD approach in many 
respects. As with the PSD program, currently GHGs are not considered to 
be subject to regulation and have not been considered to trigger 
applicability under Title V. EPA discussed this in the preamble to the 
proposed Tailoring Rule as described below. See 74 FR at 55300 n.8.
    Title V requires, among other things, that any ``major source''--
defined, as relevant here, under CAA sections 302(j) and 501(2)(b), as 
``any stationary facility or source of air pollutants which directly 
emits, or has the potential to emit, one hundred tons per year or more 
of any air pollutant * * *''--apply for a Title V permit. EPA 
interprets this requirement to apply to sources of pollutants ``subject 
to regulation'' under the Act. EPA previously articulated its 
interpretation that this Title V permitting requirement applies to 
``pollutants subject to regulation'' in a 1993 memorandum from EPA's 
air

[[Page 17023]]

program. Memorandum from Lydia N. Wegman, Deputy Director, Office of 
Air Quality Planning and Standards, U.S. EPA, ``Definition of Regulated 
Air Pollutant for Purposes of Title V'' (Apr. 26, 1993) (``Wegman 
Memo''). 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) 
consistency with the approach under the PSD program. While the specific 
narrow interpretation in the Wegman Memo of the definition of ``air 
pollutant'' in CAA section 302(g) is in question in light of 
Massachusetts (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 the 
provisions governing Title V applicability for ``a major stationary 
source'' can only be triggered by emissions of pollutants subject to 
regulation. This interpretation is based primarily on the purpose of 
Title V to collect all regulatory requirements applicable to a source 
and to assure compliance with such requirements--see, e.g., CAA section 
504(a)--and on the desire to promote consistency with the approach 
under the PSD program.
    In applying this interpretation under Title V, the Wegman Memo also 
explains that EPA does not consider CO2 to be a pollutant 
subject to regulation based on the monitoring and reporting 
requirements of section 821 of the Clean Air Act Amendments of 1990. As 
articulated in numerous orders issued by EPA in response to petitions 
to object to Title V permits, EPA views the Title V operating permits 
program as a vehicle for ensuring that air quality control requirements 
are appropriately applied to facility emission units and that 
compliance with these requirements is assured. See, e.g., In the Matter 
of Fort James Camas Mill, Petition No. X-1999-1 at 3-4 (Dec. 22, 2000); 
In the Matter of Cash Creek Generation, LLC, Petition Nos. IV-2008-1 & 
IV-2008-2 at 2 (Dec. 15, 2009). The Wegman Memo points out that section 
821 involves reporting and study of emissions, but is not related to 
actual control of emissions. Since the reporting requirements of 
section 821 have no connection to existing air quality control 
requirements, it is appropriate not to treat them as making 
CO2 ``subject to regulation'' for purposes of Title V. Cf. 
Section 504(b) (providing EPA authority to specify requirements for 
``monitoring and analysis of pollutants regulated under this Act.'').
    EPA has not previously explicitly considered the question of when a 
pollutant becomes ``subject to regulation'' under this established 
interpretation of the Title V requirements.\15\ EPA received comments 
in this reconsideration proceeding specifically on the question of when 
a pollutant becomes subject to regulation for purposes of Title V. In 
light of these comments, and the decision to adopt a ``takes effect'' 
approach for PSD, EPA believes it is appropriate to address this issue 
for Title V with respect to GHG.
---------------------------------------------------------------------------

    \15\ The preamble to the proposed Tailoring Rule implicitly 
assumed that a pollutant will become ``subject to regulation'' for 
PSD and Title V at the same time (and, in one case, suggests that 
time will be on promulgation of the LDV Rule). The latter statement 
was based on the interpretation in the current PSD Interpretive 
Memorandum, but failed to note that EPA had proposed to change that 
interpretation in the October 7, 2009 notice (signed the same day as 
the proposed Tailoring Rule). See 74 FR at 55300 and 55340-41.
---------------------------------------------------------------------------

    EPA is mindful of the different purposes for the PSD and Title V 
programs under the statute. While PSD results in substantive control 
requirements as necessary to meet air quality goals, Title V is focused 
on identifying, collecting, and assuring compliance with other Act 
requirements (including PSD), and generally does not itself result in 
new control requirements. Nevertheless, as reflected in the Wegman 
Memo, the two programs have historically followed the same approach for 
determining when a pollutant is ``subject to regulation.'' \16\ EPA 
believes that a ``takes effect'' approach to the triggering of new 
pollutants is desirable and appropriate for Title V, for many of the 
reasons described above for PSD. EPA is therefore generally inclined to 
follow the approach adopted today for PSD, and concludes that GHGs are 
``subject to regulation,'' for purposes of determining whether a source 
of GHGs is a ``major source'' for Title V, no earlier than the date on 
which a control requirement for GHGs ``takes effect.'' EPA currently 
anticipates that the LDV Rule will be the first control requirement for 
GHGs to take effect. Under this approach, as with PSD, if the LDV Rule 
takes effect as of January 2, 2011, a source that is not currently 
subject to Title V for its GHG emissions could become so no earlier 
than January 2, 2011.\17\
---------------------------------------------------------------------------

    \16\ Wegman Memo at 5.
    \17\ This date is also when EPA expects the first CAA control 
program addressing GHGs at stationary sources (i.e., the PSD 
program) to be in place.
---------------------------------------------------------------------------

    Finally, as with PSD, EPA expects that, beyond January 2, 2011, 
there will remain significant administrative and programmatic 
considerations associated with permitting of GHGs under Title V. In 
light of this, as discussed above with regard to PSD permitting, EPA 
will be further addressing in the final Tailoring Rule (to be 
promulgated in the near future) the manner in which sources can become 
subject to Title V as a result of their GHG emissions.

VII. Statutory Authority

    The statutory authority for this action is provided by section 553 
of the Administrative Procedure Act (5 U.S.C. 553) and the Clean Air 
Act (CAA), as amended (42 U.S.C. 7401 et seq.). Relevant portions of 
the CAA include, but are not necessarily limited to, sections 101, 165, 
169, 301, 302, 307, 501, 502, and 504 (42 U.S.C. 7401, 7475, 7479, 
7601, 7602, 7607, 7661, 7661a, and 7661d).

VIII. Judicial Review

    This action is a nationally applicable final action under section 
307(b) of the Act. As a result, any legal challenges to this action 
must be brought to the United States Court of Appeals for the District 
of Columbia Circuit by June 1, 2010.

    Dated: March 29, 2010.
Lisa P. Jackson,
Administrator.
[FR Doc. 2010-7536 Filed 4-1-10; 8:45 a.m.]
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