[Federal Register Volume 75, Number 214 (Friday, November 5, 2010)]
[Proposed Rules]
[Pages 68272-68279]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-28017]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R04-OAR-2010-0691-201045, FRL-9222-6]


Approval and Promulgation of Implementation Plans; Kentucky: 
Prevention of Significant Deterioration; Greenhouse Gas Permitting 
Authority and Tailoring Rule Revision

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve a draft revision to the State 
Implementation Plan (SIP), submitted by Kentucky's Energy and 
Environment Cabinet, through the Kentucky Division for Air Quality 
(KDAQ), to EPA on August 5, 2010, for parallel processing. The proposed 
SIP revision makes two changes impacting the Commonwealth of Kentucky's 
New Source Review (NSR) Prevention of Significant Deterioration (PSD) 
program. First, the proposed revision provides the Commonwealth of 
Kentucky with authority to regulate greenhouse gas (GHG) under its PSD 
program. Second, the proposed SIP revision establishes appropriate 
emission thresholds for determining which new stationary sources and 
modification projects become subject to Kentucky's PSD permitting 
requirements for their GHG emissions. The first component of the 
proposed revision is necessary because the Commonwealth of Kentucky is 
required to apply its PSD program to GHG-emitting sources, and unless 
it does so (or unless EPA promulgates a Federal implementation plan 
(FIP) to do so), such sources will be unable to receive preconstruction 
permits and therefore may not be able to construct or modify. The 
second component is necessary because without it, on January 2, 2011, 
PSD requirements would apply at the 100 or 250 tons per year (tpy) 
levels provided under the Clean Air Act (CAA or Act), which would 
overwhelm Kentucky's permitting resources. EPA is proposing approval of 
the Commonwealth of Kentucky's August 5, 2010, SIP revision relating to 
PSD requirements for GHG-emitting sources because the Agency has made 
the preliminary determination that this SIP revision is in accordance 
with the CAA and EPA regulations regarding PSD permitting for GHGs.

DATES: Comments must be received on or before December 6, 2010.

ADDRESSES: Submit your comments, identified by Docket ID No. EPA-R04-
OAR-2010-0691, by one of the following methods:
    1. http://www.regulations.gov: Follow the on-line instructions for 
submitting comments.
    2. E-mail: [email protected].
    3. Fax: (404) 562-9019.
    4. Mail: EPA-R04-OAR-2010-0691, Regulatory Development Section, Air 
Planning Branch, Air, Pesticides and Toxics Management Division, U.S. 
Environmental Protection Agency, Region 4, 61 Forsyth Street, SW., 
Atlanta, Georgia 30303-8960.
    5. Hand Delivery or Courier: Ms. Lynorae Benjamin, Chief, 
Regulatory Development Section, Air Planning Branch, Air, Pesticides 
and Toxics Management Division, U.S. Environmental Protection Agency, 
Region 4, 61 Forsyth Street, SW., Atlanta, Georgia 30303-8960. Such 
deliveries are only accepted during the Regional Office's normal hours 
of operation. The Regional Office's official hours of business are 
Monday through Friday, 8:30 to 4:30, excluding Federal holidays.
    Instructions: Direct your comments to Docket ID No. ``EPA-R04-OAR-
2010-0691.'' EPA's policy is that all comments received will be 
included in the public docket without change and may be made available 
online at http://www.regulations.gov, including any personal 
information provided, unless the comment includes information claimed 
to be Confidential Business Information (CBI) or other information 
whose disclosure is restricted by statute. Do not submit through http://www.regulations.gov or e-mail, information that you consider to be CBI 
or otherwise protected. The http://www.regulations.gov Web site is an 
``anonymous access'' system, which means EPA will not know your 
identity or contact information unless you provide it in the body of 
your comment. If you send an e-mail comment directly to EPA without 
going through http://www.regulations.gov, your e-mail address will be 
automatically captured and included as part of the comment that is 
placed in the public docket and made available on the Internet. If you 
submit an electronic comment, EPA recommends that you include your name 
and other contact information in the body of your comment and with any 
disk or CD-ROM you submit. If EPA cannot read your comment due to 
technical difficulties and cannot contact you for clarification, EPA 
may not be able to consider your comment. Electronic files should avoid 
the use of special characters, any form of encryption, and be free of 
any defects or viruses. For additional information about EPA's public 
docket visit the EPA Docket Center homepage at http://www.epa.gov/epahome/dockets.htm.
    Docket: All documents in the electronic docket are listed in the 
www.regulations.gov index. Although listed in the index, some 
information is not publicly available, i.e., CBI or other information 
whose disclosure is restricted by statute. Certain other material, such 
as copyrighted material, is not placed on the Internet and will be 
publicly available only in hard copy form. Publicly available docket 
materials are available either electronically in http://www.regulations.gov or in hard copy at the Regulatory Development 
Section, Air Planning Branch, Air, Pesticides and Toxics Management 
Division, U.S. Environmental Protection Agency, Region 4, 61 Forsyth 
Street, SW., Atlanta, Georgia 30303-8960. EPA requests that if at all 
possible, you contact the person listed in the FOR FURTHER INFORMATION 
CONTACT section to schedule your inspection. The Regional Office's 
official hours of business are Monday through Friday, 8:30 to 4:30, 
excluding Federal holidays.

FOR FURTHER INFORMATION CONTACT: For information regarding the Kentucky 
SIP, contact Ms. Twunjala Bradley, Regulatory Development Section, Air 
Planning Branch, Air, Pesticides and Toxics Management Division, U.S. 
Environmental Protection Agency, Region 4, 61 Forsyth Street, SW., 
Atlanta, Georgia 30303-8960. Ms. Bradley's telephone number is (404)

[[Page 68273]]

562-9352; e-mail address: [email protected]. For information 
regarding the Tailoring Rule, contact Ms. Heather Abrams, Air Permits 
Section, at the same address above. Ms. Abrams' telephone number is 
(404) 562-9185; e-mail address: [email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

I. What action is EPA proposing in today's notice?
II. What is the background for the action proposed by EPA in today's 
notice?
III. What is the relationship between today's proposed action and 
EPA's proposed GHG SIP Call and GHG FIP?
IV. What is EPA's analysis of Kentucky's proposed SIP revision?
V. Proposed Action
VI. Statutory and Executive Order Reviews

I. What action is EPA proposing in today's notice?

    On August 5, 2010,\1\ KDAQ submitted a draft revision to EPA for 
approval into the Kentucky SIP to: (1) Provide the Commonwealth with 
the authority to regulate GHGs under its PSD program; and (2) establish 
appropriate emission thresholds for determining which new or modified 
stationary sources become subject to Kentucky's PSD permitting 
requirements for GHG emissions. Final approval of Kentucky's August 5, 
2010, SIP revision will make Kentucky's SIP adequate with respect to 
PSD requirements for GHG-emitting sources, thereby negating the need 
for a GHG FIP. Furthermore, final approval of Kentucky's August 5, 
2010, SIP revision will put in place the GHG emission thresholds for 
PSD applicability set forth in EPA's Tailoring Rule (75 FR 31514, June 
3, 2010), ensuring that smaller GHG sources emitting less than these 
thresholds will not be subject to permitting requirements when these 
requirements begin applying to GHGs on January 2, 2011. Pursuant to 
section 110 of the CAA, EPA is proposing to approve this revision into 
the Kentucky SIP.
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    \1\ While the transmittal letter for Kentucky's submission (the 
subject of this action) is dated July 15, 2010, EPA did not 
officially receive Kentucky's request for parallel processing until 
August 5, 2010.
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    Because this draft SIP revision is not yet state-effective, 
Kentucky requested that EPA ``parallel process'' the SIP revision. 
Under this procedure, the EPA Regional Office works closely with the 
state while developing new or revised regulations. Generally, the state 
submits a copy of the proposed regulation or other revisions to EPA 
before conducting its public hearing. EPA reviews this proposed state 
action and prepares a notice of proposed rulemaking. EPA publishes this 
notice of proposed rulemaking in the Federal Register and solicits 
public comment in approximately the same time frame during which the 
state is holding its public hearing. The state and EPA thus provide for 
public comment periods on both the state and the Federal actions in 
parallel.
    After Kentucky submits the formal state-effective SIP revision 
request (including a response to all public comments raised during the 
Commonwealth's public participation process), EPA will prepare a final 
rulemaking notice for the SIP revision. If changes are made to the SIP 
revision after EPA's notice of proposed rulemaking, such changes must 
be acknowledged in EPA's final rulemaking action. If the changes are 
significant, then EPA may be obliged to re-propose the action. In 
addition, if the changes render the SIP revision not approvable, EPA's 
re-proposal of the action would be a disapproval of the revision.
    In addition to the above-described changes, Kentucky's August 5, 
2010, proposed SIP revision included provisions (i.e., 401 KAR 51:001 
Section 1(80)(b) and (c)) to incorporate changes pursuant to EPA's 
Fugitive Emissions Rule.\2\ 73 FR 77882 (December 19, 2008). Also, 
Kentucky's submitted changes to exclude facilities that produce ethanol 
through a natural fermentation process from the definition of 
``chemical process plants'' in the major NSR source permitting program 
(i.e., 401 KAR 51:001 Section 1 (118)). In today's proposed rulemaking, 
EPA is not proposing to take action on Kentucky's changes to its PSD 
regulations regarding the inclusion of fugitive emissions in NSR 
applicability determinations, nor is EPA taking any action on 
Kentucky's provisions to exclude facilities that produce ethanol 
through a natural fermentation process from the definition of 
``chemical process plants'' in the major NSR permitting program.
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    \2\ On March 31, 2010, EPA stayed the Fugitive Emissions Rule 
(73 FR 77882) for 18 months to October 3, 2011, to allow the Agency 
time to propose, take comment and issue a final action regarding the 
inclusion of fugitive emissions in NSR applicability determinations. 
Therefore, the 40 CFR Part 51 and Part 52 administrative regulations 
that were amended for the Fugitive Emissions Rule are stayed through 
October 3, 2011.
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II. What is the background for the action proposed by EPA in today's 
notice?

    Today's proposed action on the Kentucky SIP relates to three 
Federal rulemaking actions. The first rulemaking is EPA's ``Prevention 
of Significant Deterioration and Title V Greenhouse Gas Tailoring 
Rule,'' Final Rule (the Tailoring Rule). 75 FR 31514 (June 3, 2010). 
The second rulemaking is EPA's ``Action to Ensure Authority to Issue 
Permits Under the Prevention of Significant Deterioration Program to 
Sources of Greenhouse Gas Emissions: Finding of Substantial Inadequacy 
and SIP Call,'' Proposed Rule (GHG SIP Call). 75 FR 53892 (September 2, 
2010). The third rulemaking is EPA's ``Action to Ensure Authority to 
Issue Permits Under the Prevention of Significant Deterioration Program 
to Sources of Greenhouse Gas Emissions: Federal Implementation Plan,'' 
Proposed Rule, 75 FR 53883 (September 2, 2010) (GHG FIP), which serves 
as a companion rulemaking to EPA's proposed GHG SIP Call. A summary of 
each of these rulemakings is described below.
    In the first rulemaking, the Tailoring Rule, EPA established 
appropriate GHG emission thresholds for determining the applicability 
of PSD requirements to GHG-emitting sources. In the second rulemaking, 
the GHG SIP Call (which is not yet final), EPA proposed to find that 
the EPA-approved PSD programs in 13 States (including Kentucky) are 
substantially inadequate to meet CAA requirements because they do not 
appear to apply PSD requirements to GHG-emitting sources. For each of 
these States, EPA proposed to require the State (through a ``SIP 
Call'') to revise its SIP as necessary to correct such inadequacies. 
EPA proposed an expedited schedule for these States to submit their SIP 
revision, in light of the fact that as of January 2, 2011, certain GHG-
emitting sources will become subject to the PSD requirements and may 
not be able to obtain a PSD permit in order to construct or modify. In 
the third rulemaking, the GHG FIP (which is not yet final), EPA 
proposed a FIP to apply in any state that is unable to submit, by its 
deadline, a SIP revision to ensure that the state has authority to 
issue PSD permits for GHG-emitting sources. Kentucky is now seeking to 
revise its SIP to make it adequate with respect to PSD requirements for 
GHG-emitting sources, thereby negating the need for a GHG FIP. 
Furthermore, Kentucky is seeking to revise its SIP to put in place the 
GHG emission thresholds for PSD applicability set forth in EPA's 
Tailoring Rule, thereby ensuring that smaller GHG sources emitting less 
than these thresholds will not be subject to permitting requirements 
when these requirements

[[Page 68274]]

begin applying to GHGs on January 2, 2011.
    Below is a brief overview of GHGs and GHG-emitting sources, the CAA 
PSD program, minimum SIP elements for a PSD program, and EPA's recent 
actions regarding GHG permitting. Following this section, EPA 
discusses, in sections III and IV, the relationship between the 
proposed Kentucky SIP revision and EPA's other national rulemakings as 
well as EPA's analysis of Kentucky's SIP revision.

A. What are GHGs and their sources?

    A detailed explanation of GHGs, climate change and the impact on 
health, society, and the environment is included in EPA's technical 
support document for EPA's GHG endangerment finding final rule 
(Document ID No. EPA-HQ-OAR-2009-0472-11292 at http://www.regulations.gov). The endangerment finding rulemaking is discussed 
later in this rulemaking. A summary of the nature and sources of GHGs 
is provided below.
    GHGs trap the Earth's heat that would otherwise escape from the 
atmosphere into space and form the greenhouse effect that helps keep 
the Earth warm enough for life. GHGs are naturally present in the 
atmosphere and are also emitted by human activities. Human activities 
are intensifying the naturally occurring greenhouse effect by 
increasing the amount of GHGs in the atmosphere, which is changing the 
climate in a way that endangers human health, society, and the natural 
environment.
    Some GHGs, such as carbon dioxide (CO2), are emitted to 
the atmosphere through natural processes as well as human activities. 
Other gases, such as fluorinated gases, are created and emitted solely 
through human activities. The well-mixed GHGs of concern directly 
emitted by human activities include CO2, methane 
(CH4), nitrous oxide (N2O), hydrofluorocarbons 
(HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride 
(SF6), hereafter referred to collectively as ``the six well-
mixed GHG,'' or, simply, GHGs. Together these six well-mixed GHGs 
constitute the ``air pollutant'' upon which the GHG thresholds in EPA's 
Tailoring Rule are based. These six gases remain in the atmosphere for 
decades to centuries where they become well-mixed globally in the 
atmosphere. When they are emitted more quickly than natural processes 
can remove them from the atmosphere, their concentrations increase, 
thus increasing the greenhouse effect.
    In the U.S., the combustion of fossil fuels (e.g., coal, oil, gas) 
is the largest source of CO2 emissions and accounts for 80 
percent of the total GHG emissions by mass. Anthropogenic 
CO2 emissions released from a variety of sources, including 
through the use of fossil fuel combustion and cement production from 
geologically stored carbon (e.g., coal, oil, and natural gas) that is 
hundreds of millions of years old, as well as anthropogenic 
CO2 emissions from land-use changes such as deforestation, 
perturb the atmospheric concentration of CO2, and the 
distribution of carbon within different reservoirs readjusts. More than 
half of the energy-related emissions come from large stationary sources 
such as power plants, while about a third come from transportation. Of 
the six well-mixed GHGs, four (CO2, CH4, 
N2O, and HFCs) are emitted by motor vehicles. In the U.S., 
industrial processes (such as the production of cement, steel, and 
aluminum), agriculture, forestry, other land use, and waste management 
are also important sources of GHGs.
    Different GHGs have different heat-trapping capacities. The concept 
of Global Warming Potential (GWP) was developed to compare the heat-
trapping capacity and atmospheric lifetime of one GHG to another. The 
definition of a GWP for a particular GHG is the ratio of heat trapped 
by one unit mass of the GHG to that of one unit mass of CO2 
over a specified time period. When quantities of the different GHGs are 
multiplied by their GWPs, the different GHGs can be summed and compared 
on a carbon dioxide equivalent (CO2e) basis. For example, 
CH4 has a GWP of 21, meaning each ton of CH4 
emissions would have 21 times as much impact on global warming over a 
100-year time horizon as 1 ton of CO2 emissions. Thus, on 
the basis of heat-trapping capability, 1 ton of CH4 would 
equal 21 tons of CO2e. The GWPs of the non-CO2 
GHG range from 21 (for CH4) up to 23,900 (for 
SF6). Aggregating all GHG on a CO2e basis at the 
source level allows a facility to evaluate its total GHG emissions 
contribution based on a single metric.

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

1. Overview of the PSD Program
    The PSD program is a preconstruction review and permitting program 
applicable to new major stationary sources and major modifications at 
existing stationary sources. The PSD program applies in areas that are 
designated ``attainment'' or ``unclassifiable'' for a national ambient 
air quality standard (NAAQS). The PSD program is contained in part C of 
title I of the CAA. The ``nonattainment NSR'' program applies in areas 
not in attainment of a NAAQS or in the Ozone Transport Region, and it 
is implemented under the requirements of part D of title I of the CAA. 
Collectively, EPA commonly refers to these two programs as the major 
NSR program. The governing EPA rules are contained in 40 CFR 51.165, 
51.166, 52.21, 52.24, and part 51, Appendices S and W. There is no 
NAAQS for CO2 or any of the other well-mixed GHGs, nor has 
EPA proposed any such NAAQS; therefore, unless and until EPA takes 
further such action, the nonattainment NSR program does not apply to 
GHGs.
    The applicability of PSD to a particular source must be determined 
in advance of construction or modification and is pollutant-specific. 
The primary criterion in determining PSD applicability is whether the 
proposed project is sufficiently large (in terms of its emissions) to 
be a major stationary source or modification, both of which are 
described below. EPA has implemented these requirements in its 
regulations, which use somewhat different terminology than the CAA 
does, for determining PSD applicability.
a. Major Stationary Source
    Under PSD, a ``major stationary source'' is any source belonging to 
a specified list of 28 source categories that emits or has the 
potential to emit 100 tpy or more of any air pollutant subject to 
regulation under the CAA, or any other source type that emits or has 
the potential to emit such pollutants in amounts equal to or greater 
than 250 tpy. See, e.g., 40 CFR 52.21(b)(1). We refer to these levels 
as the 100/250-tpy thresholds. A new source with a potential to emit 
(PTE) at or above the applicable ``major stationary source threshold'' 
is subject to major NSR. These limits originate from section 169 of the 
CAA, which applies PSD to any ``major emitting facility'' and defines 
the term to include any source that emits or has a PTE of 100 or 250 
tpy, depending on the source category. Note that the major source 
definition incorporates the phrase ``subject to regulation,'' which, as 
described later, will begin to include GHGs on January 2, 2011, under 
EPA's interpretation of that phrase as discussed in the recent 
memorandum entitled, '' EPA's Interpretation of Regulations that 
Determine Pollutants Covered by Federal Prevention of Significant 
Deterioration (PSD) Permit Program.'' 75 FR 17004 (April 2, 2010).
b. Major Modifications
    PSD also applies to existing sources that undertake a ``major 
modification,'' which occurs when: (1) There is a

[[Page 68275]]

physical change in, or change in the method of operation of, a ``major 
stationary source;'' (2) the change results in a ``significant'' 
emissions increase of a pollutant subject to regulation (equal to or 
above the significance level that EPA has set for the pollutant in 40 
CFR 52.21(b)(23)); and (3) there is a ``significant net emissions 
increase'' of a pollutant subject to regulation that is equal to or 
above the significance level (defined in 40 CFR 52.21(b)(23)). 
Significance levels, which EPA has promulgated for criteria pollutants 
and certain other pollutants, represent a de minimis contribution to 
air quality problems. When EPA has not set a significance level for a 
regulated NSR pollutant, PSD applies to an increase of the pollutant in 
any amount (that is, in effect, the significance level is treated as 
zero).
2. General Requirements for PSD
    This section provides a very brief summary of the main requirements 
of the PSD program. One principal requirement is that a new major 
source or major modification must apply best available control 
technology (BACT), which is determined on a case-by-case basis taking 
into account, among other factors, the cost effectiveness of the 
control and energy and environmental impacts. EPA has developed a 
``top-down'' approach for BACT review, which involves a decision 
process that includes identification of all available control 
technologies, elimination of technically infeasible options, ranking of 
remaining options by control and cost effectiveness, and then selection 
of BACT. Under PSD, once a source is determined to be major for any 
regulated NSR pollutant, a BACT review is performed for each attainment 
pollutant that exceeds its PSD significance level as part of new 
construction or for modification projects at the source, where there is 
a significant increase and a significant net emissions increase of such 
pollutant.\3\
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    \3\ EPA notes that the PSD program has historically operated in 
this fashion for all pollutants--when new sources or modifications 
are ``major,'' PSD applies to all pollutants that are emitted in 
significant quantities from the source or project. This rule does 
not alter that for sources or modifications that are major due to 
their GHG emissions.
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    In addition to performing BACT, the source must analyze impacts on 
ambient air quality to assure that sources do not cause or contribute 
to violation of any NAAQS or PSD increments and must analyze impacts on 
soil, vegetation, and visibility. In addition, sources or modifications 
that would impact Class I areas (e.g., national parks) may be subject 
to additional requirements to protect air quality related values 
(AQRVs) that have been identified for such areas. Under PSD, if a 
source's proposed project may impact a Class I area, the Federal Land 
Manager is notified and is responsible for evaluating a source's 
projected impact on the AQRVs and recommending either approval or 
disapproval of the source's permit application based on anticipated 
impacts. There are currently no NAAQS or PSD increments established for 
GHGs, and therefore these PSD requirements would not apply for GHGs, 
even when PSD is triggered for GHGs. However, if PSD is triggered for a 
GHG-emitting source, all regulated NSR pollutants that the new source 
emits in significant amounts would be subject to PSD requirements. 
Therefore, if a facility triggers NSR for non-GHG pollutants for which 
there are established NAAQS or increments, the air quality, additional 
impacts, and Class I requirements would apply to those pollutants.
    Pursuant to existing PSD requirements, the permitting authority 
must provide notice of its preliminary decision on a source's 
application for a PSD permit and must provide an opportunity for 
comment by the public, industry, and other interested persons. After 
considering and responding to comments, the permitting authority must 
issue a final determination on the construction permit. Usually NSR 
permits are issued by a State or local air pollution control agency 
that has its own authority to issue PSD permits under a permit program 
that has been approved by EPA for inclusion in its SIP. In some areas, 
EPA has delegated its authority to issue PSD permits under Federal 
regulations to the State or local agency. In other areas, EPA issues 
the permits under its own authority.

C. What are the CAA requirements to include the PSD Program in the SIP?

    The CAA contemplates that the PSD program be implemented in the 
first instance by the states and requires that states include PSD 
requirements in their SIPs. CAA section 110(a)(2)(C) requires that--

    Each implementation plan * * * shall * * * include a program to 
provide for * * * regulation of the modification and construction of 
any stationary source within the areas covered by the plan as 
necessary to assure that national ambient air quality standards are 
achieved, including a permit program as required in part[ ] C * * * 
of this subchapter.

CAA section 110(a)(2)(J) requires that--
    Each implementation plan * * * shall * * * meet the applicable 
requirements of * * * part C of this subchapter (relating to 
significant deterioration of air quality and visibility protection).

CAA section 161 provides that--
    [E]ach applicable implementation plan shall contain emission 
limitations and such other measures as may be necessary, as 
determined under regulations promulgated under this part [C], to 
prevent significant deterioration of air quality in each region * * 
* designated * * * as attainment or unclassifiable.

    These provisions, read in conjunction with the PSD applicability 
provisions as well as other provisions such as the BACT provision under 
CAA Section 165(a)(4), mandate that SIPs include PSD programs that are 
applicable to, among other things, any air pollutant that is subject to 
regulation. As discussed below, this includes GHGs on and after January 
2, 2011.\4\
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    \4\ In the Tailoring Rule, EPA noted that commenters argued, 
with some variations, that the PSD provisions applied only to NAAQS 
pollutants, and not GHG, and EPA responded that the PSD provisions 
apply to all pollutants subject to regulation, including GHG. See 75 
FR 31560-62 (June 3, 2010). EPA maintains its position that the PSD 
provisions apply to all pollutants subject to regulation, and the 
Agency incorporates by reference the discussion of this issue in the 
Tailoring Rule.
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    A number of states do not have PSD programs approved into their 
SIPs. In those states, EPA's regulations at 40 CFR 52.21 govern, and 
either EPA or the state as EPA's delegatee acts as the permitting 
authority. However, most states have PSD programs that have been 
approved into their SIPs, and these states implement their PSD programs 
and act as the permitting authority. Kentucky has a SIP-approved PSD 
program.

D. What actions has EPA taken concerning PSD requirements for GHG-
emitting sources?

1. What are the Endangerment Finding, the Light Duty Vehicle Rule, and 
the Johnson memo reconsideration?
    By notice dated December 15, 2009, and pursuant to CAA section 
202(a), EPA issued two findings regarding GHGs that are commonly 
referred to as the ``Endangerment Finding'' and the ``Cause or 
Contribute Finding.'' ``Endangerment and Cause or Contribute Findings 
for Greenhouse Gases Under Section 202(a) of the Clean Air Act,'' 74 FR 
66496. In the Endangerment Finding, the Administrator found that six 
long-lived and directly emitted GHGs--CO2, CH4, 
N2O, HFCs, PFCs, and SF6--may reasonably be 
anticipated to endanger public health and welfare. In the Cause or 
Contribute Finding, the Administrator ``defin[ed] the air pollutant as 
the aggregate group of the

[[Page 68276]]

same six * * * greenhouse gases,'' 74 FR at 66536, and found that the 
combined emissions of this air pollutant from new motor vehicles and 
new motor vehicle engines contribute to the GHG air pollution that 
endangers public health and welfare.
    By notice dated May 7, 2010, EPA published what is commonly 
referred to as the ``Light-Duty Vehicle Rule'' (LDVR), which for the 
first time established Federal controls on GHGs emitted from light-duty 
vehicles. ``Light-Duty Vehicle Greenhouse Gas Emission Standards and 
Corporate Average Fuel Economy Standards; Final Rule.'' 75 FR 25324. In 
its applicability provisions, the LDVR specifies that it ``contains 
standards and other regulations applicable to the emission * * * of six 
greenhouse gases,'' including CO2, CH4, 
N2O, HFCs, PFCs, and SF6. 75 FR at 25686 (40 CFR 
86.1818-12(a)).
    On December 18, 2008, EPA issued a memorandum, ``EPA's 
Interpretation of Regulations that Determine Pollutants Covered by 
Federal Prevention of Significant Deterioration (PSD) Permit Program'' 
(known as the ``Johnson Memo'' or the ``PSD Interpretive Memo,'' and 
referred to in this preamble as the ``Interpretive Memo''), that set 
forth EPA's interpretation regarding which EPA and state actions, with 
respect to a previously unregulated pollutant, cause that pollutant to 
become ``subject to regulation'' under the Act. Whether a pollutant is 
``subject to regulation'' is important for the purposes of determining 
whether it is covered under the Federal PSD permitting program. The 
Interpretive Memo established that a pollutant is ``subject to 
regulation'' only if it is subject to either a provision in the CAA or 
regulation adopted by EPA under the CAA that requires actual control of 
emissions of that pollutant (referred to as the ``actual control 
interpretation''). On February 17, 2009, EPA granted a petition for 
reconsideration on the Interpretive Memo and announced its intent to 
conduct a rulemaking to allow for public comment on the issues raised 
in the memorandum and on related issues. EPA also clarified that the 
Interpretive Memo would remain in effect pending reconsideration.
    On March 29, 2010, EPA signed a notice conveying its decision to 
continue applying (with one limited refinement) the Interpretive Memo's 
interpretation of ``subject to regulation,'' ``Interpretation of 
Regulations that Determine Pollutants Covered by Clean Air Act 
Permitting Programs.'' 75 FR 17004. EPA concluded that the ``actual 
control interpretation'' is the most appropriate interpretation to 
apply given the policy implications. However, EPA refined the Agency's 
interpretation in one respect: EPA established that PSD permitting 
requirements apply to a newly regulated pollutant at the time a 
regulatory requirement to control emissions of that pollutant ``takes 
effect'' (rather than upon promulgation or the legal effective date of 
the regulation containing such a requirement). In addition, based on 
the anticipated promulgation of the LDVR, EPA stated that the GHG 
requirements of the vehicle rule would take effect on January 2, 2011, 
because that is the earliest date that a 2012 model year vehicle may be 
introduced into commerce. In other words, the compliance obligation 
under the LDVR does not occur until a manufacturer may introduce into 
commerce vehicles that are required to comply with GHG standards, which 
will begin with model year 2012 and will not occur before January 2, 
2011.
2. What is EPA's Tailoring Rule?
    On June 3, 2010 (effective August 2, 2010), EPA promulgated a final 
rulemaking, the Tailoring Rule, for the purpose of relieving 
overwhelming permitting burdens that would, in the absence of the rule, 
fall on permitting authorities and sources. 75 FR 31514. EPA 
accomplished this by tailoring the applicability criteria that 
determine which GHG emission sources become subject to the PSD program 
\5\ of the CAA. In particular, EPA established in the Tailoring Rule a 
phase-in approach for PSD applicability and established the first two 
steps of the phase-in for the largest GHG-emitters. Additionally, EPA 
committed to certain follow-up actions regarding future steps beyond 
the first two, discussed in more detail later in this notice.
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    \5\ The Tailoring Rule also applies to the title V program, 
which requires operating permits for existing sources. However, 
today's action does not affect Kentucky's title V program.
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    For the first step of the Tailoring Rule, which will begin on 
January 2, 2011, PSD requirements will apply to major stationary source 
GHG emissions only if the sources are subject to PSD anyway due to 
their emissions of non-GHG pollutants. Therefore, in the first step, 
EPA will not require sources or modifications to evaluate whether they 
are subject to PSD requirements solely on account of their GHG 
emissions. Specifically, for PSD, Step 1 requires that as of January 2, 
2011, the applicable requirements of PSD, most notably, the BACT 
requirement, will apply to projects that increase net GHG emissions by 
at least 75,000 tpy CO2e, but only if the project also 
significantly increases emissions of at least one non-GHG pollutant.
    The second step of the Tailoring Rule, beginning on July 1, 2011, 
will phase in additional large sources of GHG emissions. New sources 
that emit, or have the potential to emit, at least 100,000 tpy 
CO2e will become subject to the PSD requirements. In 
addition, sources that emit or have the potential to emit at least 
100,000 tpy CO2e and that undertake a modification that 
increases net GHG emissions by at least 75,000 tpy CO2e will 
also be subject to PSD requirements. For both steps, EPA notes that if 
sources or modifications exceed these CO2e-adjusted GHG 
triggers, they are not covered by permitting requirements unless their 
GHG emissions also exceed the corresponding mass-based triggers in tpy.
    EPA believes that the costs to the sources and the administrative 
burdens to the permitting authorities of PSD permitting will be 
manageable at the levels in these initial two steps and that it would 
be administratively infeasible to subject additional sources to PSD 
requirements at those times. However, EPA also intends to issue a 
supplemental notice of proposed rulemaking in 2011, in which the Agency 
will propose or solicit comment on a third step of the phase-in that 
would include more sources, beginning on July 1, 2013. In the Tailoring 
Rule, EPA established an enforceable commitment that the Agency will 
complete this rulemaking by July 1, 2012, which will allow for 1 year's 
notice before Step 3 would take effect.
    In addition, EPA committed to explore streamlining techniques that 
may well make the permitting programs much more efficient to administer 
for GHG, and that therefore may allow their expansion to smaller 
sources. EPA expects that the initial streamlining techniques will take 
several years to develop and implement.
    In the Tailoring Rule, EPA also included a provision, that no 
source with emissions below 50,000 tpy CO2e, and no 
modification resulting in net GHG increases of less than 50,000 tpy 
CO2e, will be subject to PSD permitting before at least 6 
years (i.e., April 30, 2016). This is because EPA has concluded that at 
the present time, the administrative burdens that would accompany 
permitting sources below this level would be so great that even with 
the streamlining actions that EPA may be able to develop and implement 
in the next several years, and even with the increases in permitting 
resources that EPA can reasonably expect the

[[Page 68277]]

permitting authorities to acquire, it would be impossible to administer 
the permit programs for these sources until at least 2016.
    As EPA explained in the Tailoring Rule, the threshold limitations 
are necessary because without them, PSD would apply to all stationary 
sources that emit or have the potential to emit more than 100 or 250 
tons of GHG per year beginning on January 2, 2011. This is the date 
when EPA's recently promulgated LDVR takes effect, imposing control 
requirements for the first time on CO2 and other GHGs. If 
this January 2, 2011, date were to pass without the Tailoring Rule 
being in effect, PSD requirements would apply to GHG emissions at the 
100/250 tpy applicability levels provided under a literal reading of 
the CAA as of that date. From that point forward, a source owner 
proposing to construct any new major source that emits at or higher 
than the applicability levels (and which therefore may be referred to 
as a ``major'' source) or modify any existing major source in a way 
that would increase GHG emissions would need to obtain a permit under 
the PSD program that addresses these emissions before construction or 
modification could begin.
    Under these circumstances, many small sources would be burdened by 
the costs of the individualized PSD control technology requirements and 
permit applications that the PSD provisions, absent streamlining, 
require. Additionally, state and local permitting authorities would be 
burdened by the extraordinary number of these permit applications, 
which are orders of magnitude greater than the current inventory of 
permits and would vastly exceed the current administrative resources of 
the permitting authorities. Permit gridlock would result since the 
permitting authorities would likely be able to issue only a tiny 
fraction of the permits requested.
    In the Tailoring Rule, EPA adopted regulatory language codifying 
the phase-in approach. As explained in that rulemaking, many state, 
local and tribal area programs will likely be able to immediately 
implement the approach without rule or statutory changes by, for 
example, interpreting the term ``subject to regulation'' that is part 
of the applicability provisions for PSD permitting. EPA has requested 
permitting authorities to confirm that they will follow this 
implementation approach for their programs, and if they cannot, then 
EPA has requested that they notify the Agency so that we can take 
appropriate follow-up action to narrow Federal approval of their 
programs before GHGs become subject to PSD permitting on January 2, 
2011.\6\ On July 27, 2010, Kentucky provided a letter to EPA explaining 
that it cannot interpret its SIP-approved PSD program as applying to 
GHGs. Kentucky informed EPA that it would undertake a rulemaking to 
include GHGs in its PSD program and presented EPA with a projected 
rulemaking schedule. See the docket for this proposed rulemaking for a 
copy of Kentucky's letter.
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    \6\ Narrowing EPA's approval will ensure that for Federal 
purposes, sources with GHG emissions that are less than the 
Tailoring Rule's emission thresholds will not be obligated under 
Federal law to obtain PSD permits during the gap between when GHG 
PSD requirements go into effect on January 2, 2011 and when either 
(1) EPA approves a SIP revision adopting EPA's tailoring approach, 
or (2) if a state opts to regulate smaller GHG-emitting sources, the 
state demonstrates to EPA that it has adequate resources to handle 
permitting for such sources. EPA expects to finalize the narrowing 
action prior to the January 2, 2011 deadline with respect to those 
States for which EPA will not have approved the Tailoring Rule 
thresholds in their SIPs by that time.
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    The thresholds that EPA established in the Tailoring Rule are based 
on CO2e for the aggregate sum of six GHGs that constitute 
the pollutant that will be subject to regulation, which we refer to as 
GHG.\7\ These gases are: CO2, CH4, 
N2O, HFCs, PFCs, and SF6. Thus, in EPA's 
Tailoring Rule, EPA provided that PSD applicability is based on the 
quantity that results when the mass emissions of each of these gases is 
multiplied by the GWP of that gas, and then summed for all six gases. 
However, EPA further provided that in order for a source's GHG 
emissions to trigger PSD requirements, the quantity of the GHG 
emissions must equal or exceed both the applicability thresholds 
established in the Tailoring Rule on a CO2e basis and the 
statutory thresholds of 100 or 250 tpy on a mass basis.\8\ Similarly, 
in order for a source to be subject to the PSD modification 
requirements, the source's net GHG emissions increase must exceed the 
applicable significance level on a CO2e basis and must also 
result in a net mass increase of the constituent gases combined.
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    \7\ The term ``greenhouse gases'' is commonly used to refer 
generally to gases that have heat-trapping properties. However, in 
this notice, unless noted otherwise, we use it to refer specifically 
to the pollutant regulated in the LDVR.
    \8\ The relevant thresholds are 100 tpy for title V, and 250 tpy 
for PSD, except for 28 categories listed in EPA regulations for 
which the PSD threshold is 100 tpy.
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3. What is the GHG SIP Call?
    By Federal Register notice dated September 2, 2010, EPA proposed 
the GHG SIP Call. In that action, along with the companion GHG FIP 
rulemaking published at the same time, EPA took steps to ensure that in 
the 13 States that do not appear to have authority to issue PSD permits 
to GHG-emitting sources at present, either the state or EPA will have 
the authority to issue such permits by January 2, 2011. EPA explained 
that although for most states, either the State or EPA is already 
authorized to issue PSD permits for GHG-emitting sources as of that 
date, our preliminary information shows that these 13 States have EPA-
approved PSD programs that do not appear to include GHG-emitting 
sources and therefore do not appear to authorize these States to issue 
PSD permits to such sources. Therefore, EPA proposed to find that these 
13 States' SIPs are substantially inadequate to comply with CAA 
requirements and, accordingly, proposed to issue a SIP Call to require 
a SIP revision that applies their SIP PSD programs to GHG-emitting 
sources. In the companion GHG FIP rulemaking, EPA proposed a FIP that 
would give EPA authority to apply EPA's PSD program to GHG-emitting 
sources in any State that is unable to submit a corrective SIP revision 
by its deadline. The Commonwealth of Kentucky is included in the list 
of areas for which EPA proposed a SIP Call.

III. What is the relationship between today's proposed action and EPA's 
proposed GHG SIP Call and GHG FIP?

    As noted above, by notice dated September 2, 2010, EPA proposed the 
GHG SIP Call. At the same time, EPA proposed a FIP to apply in any 
state that is unable to submit, by its deadline, a SIP revision to 
ensure that the state has authority to issue PSD permits to GHG-
emitting sources.\9\ As discussed in section IV of this rulemaking, 
Kentucky does not interpret its current PSD regulations as providing it 
with the authority to regulate GHGs, and as such, Kentucky is included 
on the list of areas for the proposed SIP call. Kentucky's August 5, 
2010, proposed SIP revision (the subject of this rulemaking) addresses 
this authority. EPA will not take final action on the GHG SIP Call for 
Kentucky if the Commonwealth submits its final SIP revision to EPA 
prior to the final rulemaking for the GHG SIP Call. Additionally, 
Kentucky would not be subject to the FIP if EPA finalizes

[[Page 68278]]

today's proposed approval of the Commonwealth's SIP revision.
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    \9\ As explained in the proposed GHG SIP Call (75 FR 53892, 
53896), EPA intends to finalize its finding of substantial 
inadequacy and the SIP call for the 13 listed states by December 1, 
2010. EPA requested that the states for which EPA is proposing a SIP 
call identify the deadline--between 3 weeks and 12 months from the 
date of signature of the final SIP Call--that they would accept for 
submitting their corrective SIP revision.
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IV. What is EPA's analysis of Kentucky's proposed SIP revision?

    On August 5, 2010, KDAQ provided a revision to Kentucky's SIP to 
EPA for parallel processing and eventual approval. This revision to 
Kentucky's SIP is necessary because without it: (1) The Commonwealth 
would not have authority to issue PSD permits to GHG-emitting sources, 
and as a result, absent further action, those sources may not be able 
to construct or undertake modifications beginning January 2, 2011; and 
(2) assuming that the Commonwealth attains authority to issue PSD 
permits to GHG-emitting sources, PSD requirements would apply, as of 
January 2, 2011, at the 100- or 250-tpy levels provided under the CAA. 
This would greatly increase the number of required permits, imposing 
undue costs on small sources; which would overwhelm Kentucky's 
permitting resources and severely impair the function of the program.
    The Commonwealth's August 5, 2010, proposed SIP revision: (1) 
Provides the Commonwealth with the authority to regulate GHG under the 
PSD program of the CAA, and (2) establishes thresholds for determining 
which stationary sources and modification projects become subject to 
permitting requirements for GHG emissions under Kentucky's PSD program. 
Specifically, Kentucky's August 5, 2010, proposed SIP revision includes 
changes to Kentucky's Air Quality Regulations, 401 KAR 51:001--
Definitions for 401 KAR Chapter 51,\10\ revising Kentucky's regulations 
by updating the ``subject to regulation'' provision to provide 
authority for the Commonwealth to regulate GHG and addressing the 
thresholds for GHG permitting applicability.
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    \10\ Kentucky's submittal also revises definitions for 401 KAR 
52:001--Definitions for 401 KAR Chapter 52; however, these 
definitions relate to title V and are not included in the SIP. As 
such, EPA is not proposing to take action to approve Kentucky's 
update to these definitions in this rulemaking.
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    The Commonwealth of Kentucky is currently a SIP-approved state for 
the PSD program, and has incorporated the EPA's 2002 NSR reform 
revisions for PSD into its SIP. However, Kentucky does not interpret 
its current rules, which are generally consistent with the Federal 
rules, to be automatically updating to include newly designated 
regulated air pollutants such as GHG.\11\ In a letter provided to EPA 
on July 27, 2010, Kentucky notified EPA that the Commonwealth does not 
currently have the authority to regulate GHG and thus is in the process 
of revising its regulation (the subject of this proposed action) to 
provide this authority. To provide this authority, Kentucky is updating 
the definitions for ``regulated NSR pollutant'' and ``subject to 
regulation'' to explicitly include GHG as a regulated NSR pollutant 
under the CAA. Specifically, while Kentucky revises its SIP provisions 
in its August 5, 2010, submittal by establishing its own regulatory 
language, it adopts relevant GHG definitions as ``defined in 40 CFR 
51.166 or 52.21'' as amended by the Tailoring Rule promulgated on June 
3, 2010. EPA has preliminarily determined that this change to 
Kentucky's regulation is consistent with the CAA and its implementing 
regulations regarding GHG.
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    \11\ On July 23, 2010, Lynorae Benjamin, Region 4 EPA Chief of 
the Regulatory Development Section, confirmed with John Lyons, the 
Director of KDAQ, that it is the Commonwealth of Kentucky's 
interpretation that Kentucky does not have the authority to regulate 
GHG without the revision that is the subject of today's proposed 
rulemaking.
---------------------------------------------------------------------------

    The changes included in Kentucky's PSD program are substantively 
the same as EPA's Tailoring Rule. The Kentucky rules have been 
formatted to conform to Kentucky's rule drafting standards for 401 KAR 
51:001--Definitions for 401 KAR Chapter 51, but in substantive content 
the rules that address the Tailoring Rule provisions are the same as 
the Federal rules. As part of its review of the Kentucky submittal, EPA 
performed a line-by-line review of Kentucky's proposed changes to its 
regulations and has preliminarily determined that they are consistent 
with the Tailoring Rule. Furthermore, EPA preliminarily determined that 
this revision to Kentucky's SIP is consistent with section 110 of the 
CAA. See, e.g., Tailoring Rule, 75 FR at 31561.

V. Proposed Action

    EPA is proposing to approve the Commonwealth of Kentucky's August 
5, 2010, SIP revision, relating to PSD requirements for GHG-emitting 
sources. Specifically, Kentucky's August 5, 2010, proposed SIP 
revision: (1) Provides the Commonwealth with the authority to regulate 
GHGs under its PSD program, and (2) establishes appropriate emissions 
thresholds for determining PSD applicability with respect to new and 
modified GHG-emitting sources in accordance with EPA's Tailoring Rule. 
EPA has made the preliminary determination that this SIP revision is 
approvable because it is in accordance with the CAA and EPA regulations 
regarding PSD permitting for GHGs.

VI. Statutory and Executive Order Reviews

    Under the CAA, the Administrator is required to approve a SIP 
submission that complies with the provisions of the Act and applicable 
Federal regulations. 42 U.S.C. 7410(k); 40 CFR 52.02(a). Thus, in 
reviewing SIP submissions, EPA's role is to approve state choices, 
provided that they meet the criteria of the CAA. Accordingly, this 
proposed action merely approves the Commonwealth's law as meeting 
Federal requirements and does not impose additional requirements beyond 
those imposed by the Commonwealth's law. For that reason, this proposed 
action:
     Is not a ``significant regulatory action'' subject to 
review by the Office of Management and Budget under Executive Order 
12866 (58 FR 51735, October 4, 1993);
     Does not impose an information collection burden under the 
provisions of the Paperwork Reduction Act (44 U.S.C. 3501 et seq.);
     Is certified as not having a significant economic impact 
on a substantial number of small entities under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.);
     Does not contain any unfunded mandate or significantly or 
uniquely affect small governments, as described in the Unfunded 
Mandates Reform Act of 1995 (Pub. L. 104-4);
     Does not have Federalism implications as specified in 
Executive Order 13132 (64 FR 43255, August 10, 1999);
     Is not an economically significant regulatory action based 
on health or safety risks subject to Executive Order 13045 (62 FR 
19885, April 23, 1997);
     Is not a significant regulatory action subject to 
Executive Order 13211 (66 FR 28355, May 22, 2001);
     Is not subject to requirements of Section 12(d) of the 
National Technology Transfer and Advancement Act of 1995 (15 U.S.C. 272 
note) because application of those requirements would be inconsistent 
with the CAA; and
     Does not provide EPA with the discretionary authority to 
address, as appropriate, disproportionate human health or environmental 
effects, using practicable and legally permissible methods, under 
Executive Order 12898 (59 FR 7629, February 16, 1994).
    In addition, this proposed rule does not have tribal implications 
as specified by Executive Order 13175 (65 FR 67249, November 9, 2000), 
because the SIP is not approved to apply in Indian country located in 
the Commonwealth, and EPA notes that it will not impose substantial

[[Page 68279]]

direct costs on tribal governments or preempt tribal law.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Incorporation by 
reference, Intergovernmental relations, and Reporting and recordkeeping 
requirements.

    Authority:  42 U.S.C. 7401 et seq.

    Dated: October 25, 2010.
A. Stanley Meiburg,
Acting Regional Administrator, Region 4.
[FR Doc. 2010-28017 Filed 11-4-10; 8:45 am]
BILLING CODE 6560-50-P