[Federal Register Volume 77, Number 102 (Friday, May 25, 2012)]
[Rules and Regulations]
[Pages 31200-31215]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-12500]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2012-0140; FRL-9669-8]


Revision to the South Coast Air Quality Management District 
Portion of the California State Implementation Plan, South Coast Rule 
1315

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: The Environmental Protection Agency (EPA) is taking final 
action to approve a State Implementation Plan (SIP) revision for the 
South Coast Air Quality Management District (District) portion of the 
California SIP. This SIP revision incorporates Rule 1315--Federal New 
Source Review Tracking System--into the District's SIP approved New 
Source Review (NSR) program to establish the procedures for 
demonstrating equivalency with federal offset requirements by 
specifying how the District will track debits and credits in its Offset 
Accounts for Federal NSR Equivalency for specific federal nonattainment 
pollutants and their precursors. EPA is approving this SIP revision 
because Rule 1315 provides an adequate system to demonstrate on an on-
going basis that the rule requires offsets in amounts equivalent to 
those otherwise required by the Clean Air Act (CAA) and that the 
emission reductions the District is crediting and debiting in its 
Offset Accounts meet the CAA's NSR offset requirements for federal 
major sources and modifications.

DATES: Effective Date: This rule is effective on June 25, 2012.

ADDRESSES: EPA has established docket number EPA-R09-OAR-2012-0140 for 
this action. Generally, documents in the docket for this action are 
available electronically at www.regulations.gov and in hard copy at EPA 
Region IX, 75 Hawthorne Street, San Francisco, California. Some docket 
materials, however, may be publicly available only at the hard copy 
location (e.g., voluminous records, maps, copyrighted material), and 
some may not be publicly available in either location (e.g., CBI). To 
inspect the hard copy materials, please schedule an appointment during 
normal business hours with the contact listed in the FOR FURTHER 
INFORMATION CONTACT section.

FOR FURTHER INFORMATION CONTACT: Laura Yannayon, EPA Region IX, (415) 
972-3534, [email protected].

SUPPLEMENTARY INFORMATION: Throughout this document, ``we'', ``us'', 
and ``our'' refer to EPA.

Table of Contents

I. Background
II. EPA's Evaluation of the SIP Revision
    A. What action is EPA finalizing?
    B. Public Comments and EPA Responses
III. EPA's Final Action
IV. Statutory and Executive Order Reviews

I. Background

    EPA allows and encourages local authorities to tailor SIP programs, 
including new source review permitting programs, to account for that 
community's particular needs provided that the SIP is not less 
stringent than the Act's requirements. See generally CAA Section 116, 
42 U.S.C. 7416; Train v. Natural Res. Defense Council, 421 U.S. 60, 79 
(1975); Union Electric Co. v. EPA, 427 U.S. 246, 250 (1976). The 
District's SIP-approved nonattainment permitting rules are contained in 
District Regulation XIII. See 61 FR 64291 (December 4, 1996) (final 
rule approving SCAQMD's NSR program) and 40 CFR 52.220(c)(240)(i)(1).
    When EPA approved Regulation XIII in 1996, we noted that Rule 1304 
exempted certain major sources from

[[Page 31201]]

the requirement to obtain offsets and Rule 1309.1 allowed the District 
to provide offsets for specific ``priority'' projects. We approved 
these rules because the District committed to demonstrating on an 
annual basis that it was providing an amount of offsets that was 
equivalent to the amount required to offset federal new and modified 
major sources subject to Rules 1304 and 1309.1.\1\ The District adopted 
Rule 1315's regulatory language codifying how it will account for, or 
``track'', the emission reductions that it adds into its Offset 
Accounts as credits and those which it subtracts as debits to provide 
offsets for the construction of certain federal major sources or 
modifications exempted from offset requirements pursuant to Rule 1304 
or for which the District provided offsets pursuant to Rule 1309.1. 
SCAQMD Governing Board Resolution for the Re-adoption of Rule 1315--
Federal New Source Review Tracking System, dated Feb. 4, 2011. EPA is 
now finalizing approval of Rule 1315 as a SIP revision. For a more 
detailed discussion of the District's NSR program and Rule 1315, please 
refer to our proposed approval. 77 FR 10430, 10430-31 (Feb. 22, 2012).
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    \1\ Environmental Protection Agency, Region IX Air & Toxics 
Division Technical Support Document for EPA's Notice of Final 
Rulemaking for the California State Implementation Plan South Coast 
Air Quality Management District New Source Review by Gerardo C. 
Rios, October 24, 1996 (TSD).
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II. Evaluation of SIP Revision

A. What action is EPA finalizing?

    EPA is finalizing a SIP revision for the South Coast portion of the 
California SIP. The SIP revision will be codified in 40 CFR 52.220 by 
incorporating by reference South Coast Rule 1315, as adopted February 
4, 2011 and submitted on March 2, 2011.
    The SIP revision provides a federally approved and enforceable 
mechanism for the District to transfer offsetting emissions reductions 
from the District's Offset Accounts to projects that qualify under 
District Rules 1304 and 1309.1.

B. Public Comments and EPA Responses

    In response to our February 22, 2012 proposed rule, we received six 
comments, one from the South Coast Air Quality Management District 
(District), one from a consortium of environmental groups (Coalition 
for a Safe Environment, Communities for a Better Environment, Desert 
Citizens Against Pollution and the Natural Resources Defense Council 
(collectively referred to herein as ``CSE'')), and one each from the 
County Sanitation Districts of Los Angeles County, California Small 
Business Alliance, California Council for Environmental and Economic 
Balance, and the Southern California Gas Company. Copies of each 
comment letter have been added to the docket and are accessible at 
www.regulations.gov. The comment from the District supported EPA's 
analysis and proposal to approve Rule 1315 into the SIP. With the 
exception of CSE, all of the commenters generally supported EPA's 
analysis and proposed approval. The comment from CSE opposed the SIP 
revision and raised several specific objections. We have summarized the 
comments and provided a response to each comment below.
    Comment 1: CSE's first comment provides an overview of the 
reasonable further progress (RFP) and base year requirements of the 
Clean Air Act (CAA). CSE asserts that the South Coast is prohibited 
from including pre-base year (i.e. pre-1997) emissions credits for 
particulate matter of 10 microns or less (PM10) and sulfur 
oxides (SOX) in its NSR Account under 40 CFR 
51.165(a)(3)(ii)(C)(1) because the 2003 Air Quality Management Plan 
(2003 AQMP) is not ``valid.'' Comment Letter at 3 (stating: ``In the 
absence of a valid attainment demonstration, the shutdown-unit 
requirement under 40 CFR 51.165(a)(3)(ii)(C)(2) applies, not the base-
year requirement.'') [Footnote omitted] CSE's basis for concluding the 
2003 AQMP is not ``valid'' is that EPA has not re-designated the area 
to attainment for PM10. Comment Letter at 3, n. 8 (``Whether 
[the `fully approved SIP language'] is currently in 40 [CFR] 
51.165(a)(3)(ii)(C)(1) or not is not relevant where, as here, [sic] 
attainment demonstration offered for compliance with this provision did 
not achievement [sic] attainment.'' [Citation omitted]). CSE also 
includes a discussion of the shutdown credit requirement in 40 CFR 
51.165(a)(3)(ii)(C)(2).
    Response 1: We disagree with these assertions. Although the text of 
EPA's current regulation in 40 CFR 51.165(a)(3)(ii)(C)(1) does not 
require a fully approved attainment demonstration in order to allow for 
the use of pre-base year shutdown credits as NSR offsets, in light of 
recent caselaw we have evaluated Rule 1315 for consistency with EPA's 
pre-2005 requirement for an approved attainment demonstration for these 
purposes. See NRDC v. EPA, 571 F.3d 1245, 1265 (D.C. Cir. 2009) 
(remanding, inter alia, those portions of EPA's 2005 ozone 
implementation rule that eliminated the approved attainment 
demonstration requirement in 40 CFR 51.165(a)(3)(ii)(C)). As the NRDC 
court explains, until EPA amended its regulations in 1989, emissions 
reductions from shutting down a source could only be used to offset a 
replacement for that source's production capacity. Id. at 1264 (citing 
54 FR 27286, 27290 (June 28, 1989)). EPA proposed to change this 
limitation in 1989 in response to concerns expressed by local air 
pollution authorities that the restriction would infringe on their 
authority to make growth management decisions and industry commenters 
who argued that the policy encouraged sources to continue operating to 
prevent forfeiting emissions credits. 54 FR 27286 (June 28, 1989). EPA 
also received negative comments from a consortium of environmental 
groups opposing the proposed change because they were concerned that 
sources with a limited lifetime could get large ``paper'' credits that 
would result in worsening air quality. 54 FR at 27291-92.
    EPA responded to these comments by revising the restriction on 
using emissions credits from shutdown sources, stating: ``The essence 
of the Act's offset provision is that a new source may be allowed in a 
nonattainment area only where its presence would be consistent with RFP 
toward attainment of the NAAQS.'' Id. at 27292. EPA explained in the 
preamble to the 1989 final rule: ``Thus, where a fully approved SIP 
demonstrates RFP and attainment, it is appropriate to grant that State 
maximum flexibility in its nonattainment plan, under section 173, 
within the constraint that the demonstration not be invalidated. By 
definition, any fully approved SIP has independently assured RFP and 
attainment.'' 54 FR at 27292 (emphasis added).
    EPA cited several planning scenarios ``in which EPA considers the 
SIP to be inadequate and will continue to restrict offset credits for 
prior shutdowns.'' Id. at 27294. These scenarios included (1) 
``nonattainment areas that have received a final notice of disapproval 
of their current SIP,'' (2) ``nonattainment areas that have received 
either a section 110(a)(2)(H) notice of deficiency based on failure to 
attain or maintain the primary NAAQS, or a notice of failure to 
implement an approved SIP,'' and (3) ``nonattainment areas that 
received notice from EPA that they have failed to meet conditions in 
their EPA-approved SIPs, including commitments to adopt particular 
regulations by a certain date.'' Id. at 27294-95. These are the 
relevant limited situations in which a fully approved SIP may be 
inadequate or inappropriate for allowing pre-base year shutdown credits 
to be added. In summary, EPA's pre-2005 regulations

[[Page 31202]]

required an area to have a fully approved SIP, which has not been 
followed by a notice of deficiency, a notice of failure to implement 
the SIP or a notice that the area failed to meet conditions in the SIP. 
Id. at 27294-95.
    CSE provides no support for its conclusory position that an 
approved attainment plan is only ``valid'' if EPA has redesignated the 
area to attainment for the pollutant at issue prior to or upon the 
attainment date. EPA fully approved the plan submitted by California to 
provide for attainment of the particulate matter (PM10) 
NAAQS in the Los Angeles-South Coast Air Basin (2003 AQMP) in 2005. 70 
FR 69081 (November 14, 2005). EPA has not notified the South Coast of 
any deficiency, failure to implement or unsatisfied condition in the 
2003 AQMP. Moreover, although EPA has not yet re-designated the South 
Coast to attainment for PM10 (for which SOX is a 
precursor), the District has submitted a re-designation request to EPA 
along with data showing it has not had a violation of the 
PM10 NAAQS since 2008. See Final PM-10 Redesignation Request 
and Maintenance Plan for the South Coast Air Basin, December 2009. 
Because EPA has fully approved the 2003 AQMP (which contains control 
strategies for both PM10 and SOX emissions in the 
South Coast area), the District may use pre-base year PM10 
and SOX shutdown emission credits pursuant to 40 CFR 
51.165(a)(3)(ii)(C)(1).
    Accordingly, the requirements in 40 CFR 51.165(a)(3)(ii)(C)(2) 
related to emission reductions that do not meet the requirements in 
section 51.165(a)(3)(ii)(C)(1) do not apply to our action.
    Comment 2: CSE states ``In its Proposed Rule and associated TSD, 
EPA applies the base-year requirement to all pollutants deposited in 
SCAQMD's Community Bank. For PM10 and its precursor 
SOX, EPA looks to the 2003 AQMP with a 1997 base year. For 
ozone precursors VOC and NOX, EPA looks to the 2007 AQMP 
with a 2003 base year. In both instances, EPA concludes that `even if 
the District Offset Accounts rely on pre-base year emission reductions 
as offsets, the District's Plans have adequately added pre-base year 
emissions explicitly into the appropriate projected planning 
investments [sic].' '' Comment Letter at 4, quoting EPA's TSD at 13.\2\ 
CSE's comment continues, stating: ``As shown below, this conclusion 
violates 40 CFR 52.165(a)(3)(i)(C) in two ways. First, for the 
PM10 and SOX credits, EPA should have applied the 
shutdown-credit requirement, not the base-year requirement, because no 
attainment demonstration is in place for PM10. Even if it 
could apply the 2003 AQMP, it commits additional errors. Second, for 
VOC an [sic] NOX, EPA erroneously concludes that the 2007 
AQMP explicitly includes pre-base year credits that it explicitly 
excluded.'' Comment Letter at 4.
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    \2\ We note that our TSD referred to ``projected planning 
inventories'' rather than investments.
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    Response 2: This comment appears to repeat arguments CSE made above 
in Comment 1 regarding whether the District can rely on the 2003 AQMP 
and below in Comment 8 regarding whether the District added pre-base 
year credits in its plan to provide for attainment of the 1997 8-hour 
ozone NAAQS (2007 AQMP). EPA's responses to this comment are above in 
response to Comment 1 and below in response to Comment 8.
    Comment 3: CSE asserts that the 2003 AQMP is not a valid attainment 
demonstration because it did not demonstrate attainment with the 
federal PM10 NAAQS by 2006. Based on this, the South Coast 
may only allow emissions credits from shutdown sources pursuant to 40 
CFR 51.165(a)(3)(ii)(C)(2). Comment Letter at 4-5.
    Response 3: As discussed above, the CAA and 40 CFR 
51.165(a)(3)(ii)(C)(1) require the South Coast to have a fully approved 
attainment demonstration for PM10 (and SOX as a 
precursor) in order to allow the use of pre-baseline shutdown emission 
reduction credits for PM10 and its precursors. The 2003 AQMP 
was fully approved in 2005. 70 FR 69081 (November 14, 2005). EPA has 
not issued a notice of deficiency, notice of failure to implement or 
notice that the District is not meeting conditions in the 2003 AQMP. 
See 54 FR at 27294-95. The District has requested re-designation and 
submitted 3 years of data showing there has not been a violation of the 
federal PM10 NAAQS. EPA therefore disagrees with CSE's 
assertion that the District is limited to allowing emissions reductions 
for shutdown sources pursuant to 40 CFR 51.165(a)(3)(ii)(C)(2) (i.e. 
shutdowns occurring after the 1997 AQMP base year).
    Comment 4: The next several pages of the CSE's comment letter 
assert that the South Coast did not ``explicitly include[] adequate 
pre-base-year PM10 and SOX credits in its [2003 
AQMP] emissions inventories.'' It discusses ``expected growth from the 
NSR program and the need for pre-base year credits.'' Comment Letter at 
5. In reviewing Table 2-14 in the 2003 AQMP, CSE states: ``Where no 
pre-base-year credits are needed, the emissions inventories exclude 
them.'' Id.
    Response 4: Although CSE's references are to the 2007 AQMP, it 
appears from the body of the discussion that CSE intended to refer to 
the 2003 AQMP and Appendix III of the 2003 AQMP. Comment Letter at 5, 
n. 14 & 15. Given the context of these comments, we assume that the 
references to the 2007 AQMP are an inadvertent typographical error and 
that CSE meant to refer to similar tables in the 2003 AQMP and Appendix 
III of this plan.
    CSE's comment uses the phrase ``expected growth,'' which is not a 
term used in the 2003 AQMP, and then refers only to portions of the 
AQMP pertaining to expected demand. The District handles growth and 
demand separately and they are distinct in the 2003 AQMP.
    The District includes pre-base year emissions in the growth portion 
of its 2003 AQMP. See 2003 AQMP Figure 3-6 and Appendix III Table 2-8 
(Growth Impact to 2010 Annual Average Emissions in Tons Per Day). 
Appendix III, Table 2-8 shows a sum of the inventory for all emissions 
sources for each criteria pollutant with and without growth. The 2003 
AQMP forecasts the 2010 (i.e. future year) emissions inventories ``with 
growth'' through a detailed consultation process with the Southern 
California Association of Governments (SCAG). SCAG provides extensive 
data on demographics and all emissions sources in the South Coast. It 
performs an exhaustive analysis of the growth in the inventory of 
sources that is likely to occur through the planning periods of 2010. 
The District's AQMP summarizes this data in the 2003 AQMP Figure 3-6 
and provides additional details in Appendix III Table 2-8 and 
Attachments A-C.
    The District's growth projections include the pre-base year 
emissions, consistent with the requirements of 40 CFR 
51.165(a)(3)(i)(C)(1). For PM10, the District added 
PM10 emissions into its future year 2010 inventory for 
growth of both point and area sources. For point sources of 
PM10, the District added 3 tpd (from 11 tpd to 14 tpd); for 
area sources 23 tpd were added (from 77 tpd to 100 tpd) in its future 
year 2010 inventory. Appendix III, Table 2-8. This means that the 
District added a total of 26 tpd of PM10 emissions to its 
future year 2010 inventory for all point and area sources. The detailed 
inventories in the Attachments to Appendix III (2003 AQMP) separate the 
point and area sources into specific source categories (e.g. 
refineries, spray booths, charbroilers) so that the emissions with and 
without growth for each category is

[[Page 31203]]

included in the base year and future year inventories for 2010 and 
2020. Appendix III, Attachments A-C.
    However, not all point and area sources are subject to NSR permit 
requirements. Therefore, the District provided data \3\ to EPA 
indicating what portion of the baseline and growth projections are 
attributed to the point and area sources subject to NSR offset 
requirements. Docket Item III-Z and III-AA. This data shows that the 
District explicitly included 5.9 tpd of PM10 in its future 
year 2020 inventory for point and area sources subject to the 
District's NSR program. (Docket Item III-AA showing Total Emissions of 
14.5 tpd for 1997 and Docket Item III-Z showing Total Emissions of 20.4 
tpd for 2020). The District also provided data showing that it included 
3.1 tpd of PM10 (the difference between 14.5 tpd for 1997 
and 17.6 tpd for 2010) to the future year 2010 growth projection.\4\
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    \3\ The District submitted several spreadsheets containing 
emissions data related to its base year and future year emission 
inventories, which we identify herein as lettered ``Docket Items,'' 
all of which are available in the docket for today's final rule.
    \4\ This table was inadvertently left out of the docket, and has 
now been added as Docket Item III-BB.
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    In our proposed rule, after describing the 2007 AQMP's treatment of 
VOC and NOX for ensuring a sufficient amount of pre-base 
year credits had been added as growth, we stated that ``[t]he District 
used a similar approach for the 2003 Plan as it pertains to 
PM10 and SOX.'' 77 FR at 10433. EPA's proposal 
explains that the District added a certain amount of emissions as 
growth for various source categories in Table 2-8 of Appendix III. EPA 
further explained that ``[f]or Table 2.8, the District provided EPA 
with the point and area source data used to generate the summary data. 
EPA used this data to determine the amount of emissions due to growth 
at facilities subject to NSR offset requirements.'' 77 FR 10433, n.3.
    Our TSD provides a detailed discussion of these data as it relates 
to the 2003 AQMP. We state: ``For PM10, the District added 
3.1 tpd as growth. [footnote omitted].'' TSD at 12. EPA is clarifying 
in this final approval that the TSD should have said the District added 
5.9 tpd as growth because Docket Item III-Z is the District's future 
year 2020 inventory for NSR sources. To clarify, for those point and 
area sources subject to NSR, the 1997 ``no growth'' inventory was 14.5 
tpd. Docket Item III-AA. The District then included ``growth'' of 5.9 
tpd for the 2020 inventory in Docket Item III-Z and ``growth'' of 3.1 
tpd to the 2010 inventory in Docket Item III-BB, for NSR sources. EPA 
inadvertently did not post the information for the 2010 inventory with 
our proposal and is adding it to the Docket as Docket Item III-BB. 
EPA's TSD inadvertently recited the sum from the 2010 inventory (3.1 
tpd growth) rather than 5.9 tpd from the 2020 inventory. This mistake 
arising from referring to the wrong future year inventory total does 
not have any substantive consequence because the District's inclusion 
of either tonnage (3.1 tpd or 5.9 tpd) of pre-base year growth to the 
future year inventories far exceeds the amount that the District 
expects will be used.
    In summary, CSE confuses growth (3.1 tpd for future year 2010 NSR 
sources or 5.9 tpd for future year 2020 NSR sources), which is where 
the District adds expected emission increases due to growth into the 
inventories--with demand for credits. CSE looks only at demand (0.23 
tpd) for pre-base year offsets, which the District provides as a check 
to ensure its growth estimate is sufficient to account for this demand. 
This confusion leads CSE to contend that ``[t]he 2003 AQMP includes no 
pre-base year PM10 credits and 0.7 pre-base year 
SOx credits.'' Comment Letter at 5-6, referring to Table 2-
14 in 2003 Appendix III.
    CSE is incorrect. This portion of the 2003 AQMP is evaluating 
historic PM10 demand and in addition, is limited to the 
historic demand from the District NSR Accounts. See Appendix III Table 
2-14 ``2010 Net Demand for ERCs in the AQMD's NSR Accounts''. EPA's TSD 
more accurately refers to Table 2-15 that includes the District's 
estimated net demand from the NSR Accounts and the open market 
transactions, which is 0.23 tpd.
    EPA's proposal and TSD stated: ``For PM10, the District 
added 3.1 tpd as growth.'' TSD at 12. The footnote to this statement 
provided ``See 2003 Plan Appendix III, pgs. 25-35. For Table 2.8, the 
District provided EPA with the point and area source data used to 
generate the summary data. EPA used this data to determine the amount 
of emission due to growth at facilities subject to NSR offset 
requirements.'' TSD at 12, n.7. As explained above, EPA's TSD should 
have stated that the District added 5.9 tpd as growth for 2020 (Docket 
Item III-Z) and 3.1 tpd as growth for 2010 (Docket Item III-BB). CSE 
does not acknowledge that the 2003 AQMP added PM10 emissions 
growth in the future year 2010 and 2020 inventories. In fact, the 
District added emissions for growth in the 2010 (3.1 tpd) and 2020 (5.9 
tpd) inventories far in excess of the expected need for offsets on the 
open market and by the NSR Account combined. Further, CSE's comment 
that if the District did not estimate that it would need credits from 
historic supply and demand that the District has ``excluded'' emissions 
from its inventories is not supported by any facts. The 2003 AQMP 
includes pre-base year credits in its growth added to its future year 
inventories.
    Comment 5: Beginning on page 7 of its Comment Letter, CSE lists 
three comments. The first comment actually repeats several paragraphs 
of CSE's previous comments (e.g. that the only pre-base year emissions 
added in the 2003 AQMP are from Table 2-14 in Appendix III.) To the 
extent that CSE is repeating comments, EPA's responses above (and the 
statements in EPA's TSD) that the District added PM10 
emissions as growth for point and stationary sources subject to NSR, 
address these comments. CSE's comment then addresses Table 2-8. Comment 
Letter at 8. EPA considers this comment to contain three separate 
points. First, CSE states that Table 2-8 includes growth from all point 
sources without distinguishing between pre-base year and post-base year 
credits. Second, CSE states that the growth from point sources in Table 
2-8 does not distinguish between open market emissions transactions and 
the District's NSR Account transactions. Third, with respect to the 
data provided to EPA by the District (Docket Items III-Z and III-AA) 
CSE says: ``A review of those documents reveals that it is nothing more 
than identical information already attached to Appendix III of the 2003 
AQMP--but simply repackaged into a single table.'' Comment Letter at 8.
    Response 5: CSE's comment in this section confuses the District's 
and EPA's treatment of the Table 2-8 point and area sources subject to 
NSR. CSE says that it reviewed the documents prepared by the District 
and appended to EPA's TSD and found it was repackaging identical 
information regarding the future year inventories in Appendix III of 
the 2003 AQMP. CSE's review of the information is inaccurate. The 
spreadsheets contained in Docket Items III-Z and III-AA extract from 
the AQMP's base year and future year inventories (2020) those point and 
area sources subject to NSR. The point and area sources listed in 
Docket Items III-Z and III-AA are far fewer, particularly for the area 
sources, than those included in Appendix III, Attachments A-C. 
Therefore it is incorrect to say that the documents provide identical 
but repackaged information as that which is included in the 2003 AQMP.
    EPA requested the District to extract those point and area sources 
subject to

[[Page 31204]]

NSR because those are the only sources in Appendix III, Attachments A-
C, for which EPA's regulations require sufficient emissions to be added 
back to the future year inventory to account for the use of pre-base 
year emissions reductions from shutdowns. EPA calculated that the 
District had added 3.1 tpd for the subset of point and area sources 
subject to NSR for the future year 2010 inventory by comparing the sum 
in Docket Item III-AA to the sum in Docket Item III-BB and 5.9 tpd when 
compared to the future year 2020 inventory (Docket Item III-Z). In the 
docket for our proposed rule, we included the spreadsheet for future 
year inventory for 2020 (Docket Item III-AA), and in response to 
comments we are adding Docket Item III-BB for the future year 2010 
inventory to the docket for this final rule.
    CSE's same comment contends that the District's Table 2-8 does not 
separate emissions into pre- and post-base year emissions. The 
spreadsheets the District provided and EPA attached to its TSD show the 
actual 1997 emission inventory for point and area sources subject to 
NSR--assuming no growth (Docket Item III-AA), the 2010 projected 
emission inventory (added to the docket as Docket Item III-BB), and the 
2020 projected inventory that was attached to the TSD (Docket Item III-
Z). Each of the future year NSR inventories (2010 and 2020) are based 
on emissions growth expected from the 1997 baseline. This means that 
the inventory for ``no growth'' is the inventory NSR subject point and 
area sources of 1997 emissions. Docket Item III-AA. The inventory 
``with growth'' is the amount of emissions added into the 1997 
inventory for purposes of showing attainment in 2010 and projecting out 
to 2020. Docket Items III-Z and III-AA. The distinctions between the 
inventories for the base year and after the base year, therefore, are 
inherent in the data itself and are summarized for NSR sources in the 
Docket Items III-Z, III-AA and III-BB. Based on the District's 
projected demand, 3.1 tpd of PM10 emissions added to the 
future year 2010 inventory and 5.9 tpd added to the future year 2020 
inventory, far exceed the amount of pre-base year PM10 
offsets that the District expected would ever be used. The District 
projected that it would not need to use any pre-base year 
PM10 emissions and 0.7 tpd of SOx emissions from 
its NSR Accounts, and that the entire projected demand including the 
open market demand would not exceed 0.23 tpd for PM10. We 
have concluded that the District has satisfied the requirements of 
51.165(a)(3)(C)(ii)(1) by adding PM10 emissions to the 1997 
base year emissions inventory and projecting these emissions as 
``growth'' for the 2010 and 2020 future year inventories for point and 
area sources subject to NSR. 77 FR 10433 n.3.
    CSE is correct that the 2003 AQMP inventories with no growth and 
with growth do not distinguish between the open market and the NSR 
Account transactions. Comment Letter at 7. However, there is no need 
for such a distinction and CSE has not provided any reason that such a 
distinction is needed. The only issue is whether the District has added 
sufficient pre-base year emissions from shutdown sources to allow for 
expected use of those emissions after the base year. As discussed 
above, the District has adequately accounted for these pre-base year 
PM10 emission reduction credits in the 2003 AQMP's future 
year (2010 and 2020) inventories.
    CSE's comment concludes: ``This leads EPA to conclude that the 
District added 3.1 tpd of PM10 credits as growth while 
admitting that that figure includes only 0.23 tpd of pre-base year 
PM10 credits for open-market transactions.'' As noted above, 
CSE has mischaracterized the District's 2003 AQMP and EPA's position. 
The 2003 AQMP provides its analysis of ``the potential 2010 emissions 
from new and modified sources.'' 2003 AQMP at III-2-29. The District 
further clarifies: ``The net demand simply represents the emission 
increases in the future years to be offset by reductions previously 
banked (i.e. prior to the AQMP base year).'' Id. The estimated 2010 
demand, however, does not equal the amount of pre-base year emission 
reductions that the District added back into the inventory. The pre-
base year PM10 emissions are included in the growth 
inventory. The District's evaluation of demand is a check to ensure 
that adequate emissions (3.1 tpd and 5.9 tpd calculated from the NSR 
subject point and area source growth in 2010 and 2020) are included. 
EPA's proposed rule and TSD specifically state: ``For PM10, 
the District added 3.1 tpd as growth.'' [footnote omitted]. TSD at 12.
    Comment 6: The section of the Comment Letter that CSE identifies as 
its second separate comment says that it was improper for EPA to allow 
the District's NSR Account to carry a larger balance (3.94 tpd) of 
PM10 credits than the total amount of emissions that were 
added as growth (3.1 tpd). Comment Letter at 8.
    Response 6: EPA's proposal and TSD acknowledged that the amount of 
PM10 emissions that the District added to its inventories 
(3.1 tpd) falls somewhat short of the starting balance in its NSR 
Account (3.94 tpd) for PM10. TSD at 12-13 (stating: ``While 
this [3.1 tpd] is not the total amount of the pre-1997 base year 
emissions reductions available as debits pursuant to Rule 1315 (3.94 
tpd) the District has demonstrated that this amount represents the 
highest amount of pre-1997 credits that are expected to be used as 
offsets prior to attainment of the ozone [sic] standard.'' We note that 
the reference to the ozone standard here was a typographical error and 
that we intended to refer to Appendix III of the 2003 AQMP for 
PM10. TSD at 13.
    As we explained in the TSD, the District's adjustment to the future 
year PM10 inventory in the 2003 AQMP is adequate, even 
though the total tonnage is somewhat lower than its NSR Account 
balance, because the District's analysis showed that it anticipated 
using significantly less than the pre-base year credits being added as 
growth. EPA's TSD stated: ``This approach is consistent with EPA 
guidance that States must include pre-base year credits to the `extent 
that the State expects that such credits will be used as offsets * * 
*.'' TSD at 13 quoting 57 FR 13498. We conclude that the District's 
addition of 3.1 pre-base year PM10 credits to cover an 
expected use of emissions offsets (0.23 from both the NSR Accounts and 
the open market) in the 2010 emissions inventory and 5.9 tpd for 2020, 
is acceptable.
    CSE's argument on this point appears to be that EPA's regulations 
require the District to include in its future year inventories all of 
the emissions offsets that could ever be available for use in the Air 
Basin (i.e. 3.94 tpd of PM10 from the NSR Account). But 
EPA's NSR regulations, as interpreted in the General Preamble, do not 
require this. See 57 FR 13498 at 13509 (stating that ``[a]ll pre-
enactment banked credits must be included in the nonattainment areas 
attainment demonstration for ozone to the extent that the State expects 
that such credits will be used for offsets or netting prior to 
attainment of the ambient standards'') (emphasis added). As CSE's 
summary sentence itself says: ``the guidance was intended to direct the 
District to include all pre-base year credits it expected to use in the 
emissions inventories because otherwise the CAA would not allow their 
usage.'' Comment Letter at 9.
    EPA proposed to approve Rule 1315 upon finding that the District 
included in its 2003 AQMP 3.1 tpd of PM10 emissions for 2010 
and 5.9 tpd for 2020, an amount that would amply cover the District's 
projected historic supply and demand of 0.23 tpd. CSE has failed to

[[Page 31205]]

demonstrate that the District has projected any circumstance in which 
it would use 3.94 tpd of pre-base year PM10 emissions by 
2010. CSE's Comment Letter fails to provide any reasoning, much less 
regulatory citation, showing why the District's AQMD should be required 
to add 3.94 tpd of pre-base year PM10 credits when the 
projected demand is only 0.23 tpd (and that demand is expected to occur 
on the open market rather than in the District's NSR Accounts.)
    Comment 7: The following comment appears to be ancillary to CSE's 
prior comment. In the portion of its comment letter that purports to 
discuss CSE's ``third'' comment, CSE contends that Section 173 and 40 
CFR 51.165(a)(3)(ii)(C)(1)(ii) requires the District to place a ``cap'' 
on the amount of pre-base year emissions offsets it may use in applying 
Rule 1315. CSE states: ``In other words approving pre-base year 
PM10 and SOX credits for withdrawal that were not 
included in the emission inventories with no limitations on their use 
based on an `expectation' they will not be used is not in accordance 
with the law.'' [footnote omitted] Comment Letter at 9.
    Response 7: This comment seems to repeat the same issue as CSE's 
Comment 6. The problem is that CSE has misconstrued EPA's regulation at 
40 CFR 51.165(a)(3)(ii)(C)(1).
    As EPA noted in Response 1 above, in 1989, EPA significantly 
revised its previous restrictions on use of offset credit for source 
shutdowns and curtailments (formerly 40 CFR 51.18(j)) to allow the 
planning agency to have more control over emissions growth in the area 
and to allow sources to shutdown without forfeiting emissions credit if 
it could not be used immediately to replace productive capacity. See 54 
FR at 27295-95. Congress substantially amended the Clean Air Act in 
1990, including the attainment planning process in Part D of Title I of 
the Act. In 1992, EPA issued guidance entitled ``State Implementation 
Plans: The General Preamble for the Implementation of Title I of the 
Clean Air Act Amendments of 1990.'' 57 FR 13498 (April 16, 1992). In 
that document, EPA stated: ``For purposes of equity, EPA encourages 
States to allow sources to use pre-enactment banked emissions 
reductions credits for offsetting purposes. States may do so as long as 
the restored credits meet all other offset creditability criteria and 
such credits are considered by States as part of the attainment 
emissions inventory when developing their post-enactment attainment 
demonstration * * *. Existing EPA regulations [40 CFR 
51.165(a)(3)(ii)(C)(1)] prohibits certain pre-enactment banked 
emissions reduction credits, i.e., reductions achieved by shutting down 
existing sources or curtailing production or operating hours, from 
being used in the absence of an EPA-approved attainment plan.'' 57 FR 
13498 at 13508. Nothing in these discussions suggests that the entire 
amount, or balance, of pre-base year banked credits must be included in 
the future year inventory of the approved attainment demonstration.
    In 1996, EPA further considered this issue as part of our proposed 
rule to revise the Prevention of Significant Deterioration (PSD) and 
NSR regulations in 40 CFR part 51, subpart I (61 FR 38250, July 23, 
1996). In that proposed rule, EPA stated: ``Passage of the 1990 
Amendments has significantly altered the landscape that confronted EPA 
at the time of the 1989 rulemaking. Congress significantly reworked the 
attainment planning requirements of part D of title I of the Act such 
that EPA now believes it is appropriate to delete the restrictions on 
crediting of emissions reductions from source shutdowns and 
curtailments that occurred after 1990. In particular, Congress enhanced 
the importance of the requirement in section 172(c)(3) that States 
prepare a `comprehensive, accurate, current inventory of actual 
emissions from all sources' in a nonattainment area as the fundamental 
tool for air quality planning.'' 61 FR 38250, 38311.
    The proposed rule in 1996 notes that the 1990 Amendments added 
specific milestones towards achieving attainment and also mandated 
sanctions that would apply to States that fail to submit an attainment 
demonstration. 61 FR at 38311-12. EPA proposed two alternatives to 
allow increased use of shutdown credits. Id. In 2005, EPA's Phase 2 8-
hour ozone implementation rule finalized the 1996 proposed alternative 
that did not require a State to have an approved attainment plan to use 
prior shutdown credits. 70 FR 71612, 71676 (November 29, 2005). On 
reconsideration of this rule in 2007, EPA disagreed with a comment that 
suggested retiring a certain quantity of pre-base year emissions each 
year, stating: ``The requirements of the NSR program provide growth 
management tools and are an integral part of the overall air quality 
attainment program.'' \5\ 72 FR 31727, 31741 (June 8, 2007).
---------------------------------------------------------------------------

    \5\ EPA notes that for purposes of the California Environmental 
Quality Act (CEQA), the District capped its account balances. See 
Chapter 4.1--Environmental Impacts And Mitigation Measures--Air 
Quality. CSE submitted this Chapter with its Comment Letter but does 
not provide any comments that address it. Although the CEQA caps are 
not part of Rule 1315 that will be included in the SIP, the 
District's commitment to limit usage of the Offset Accounts below 
these levels unless it performs additional CEQA analysis is 
significant.
---------------------------------------------------------------------------

    NRDC challenged this portion (among others) of EPA's 2005 final 
rulemaking, arguing in part that EPA's allowance of pre-base year 
shutdown credits and elimination of the requirement for an approved 
attainment demonstration were arbitrary and capricious. In 2009, the 
Court of Appeals for the D.C. Circuit rejected NRDC's challenge to 
EPA's longstanding policy allowing ``pre-application reductions'' as 
NSR offsets, as codified in 40 CFR 51.165(a)(3)(ii)(C)(1)(ii). NRDC, 
571 F.3d 1245 (DC Cir. 2009). The court held that NRDC's challenge to 
this longstanding policy was time-barred because EPA's 2005 ozone 
implementation rule did not reopen the general issue of allowing pre-
application offsets addressed in the 1989 rulemaking. However, the D.C. 
Circuit agreed with NRDC on the narrow issue that EPA's elimination of 
the requirement to have an approved attainment demonstration was not 
adequately justified. The court remanded this portion of EPA's 2005 
rule to the Agency but did not vacate it.\6\ Id.
---------------------------------------------------------------------------

    \6\ As a result, although the text of current 40 CFR 
51.165(a)(3)(ii)(C)(1) does not require a fully approved attainment 
demonstration in order to allow offset credit for prior shutdowns or 
curtailments, in light of the NRDC decision we have evaluated Rule 
1315 for consistency with EPA's pre-2005 requirement for an approved 
attainment demonstration for these purposes. The NRDC decision did 
not affect section 51.165(a)(3)(ii)(C)(1) in any other respect.
---------------------------------------------------------------------------

    Thus, we agree with CSE's general point that approval of an 
attainment demonstration for the relevant NAAQS is a prerequisite to 
the use of prior shutdown credits in accordance with 40 CFR 
51.165(a)(3)(ii)(C)(1). We disagree, however, with CSE's assertion that 
the District is required to either add the entire pre-base year balance 
of credits to the approved future year attainment inventory or somehow 
cap the Rule 1315 NSR Account balance at the amount of projected 
demand, as this assertion is not supported by the text of 40 CFR 
51.165(a)(3)(ii)(C) or the NRDC decision.
    Comment 8: CSE titled this section of their comments ``The 2007 
AQMP Explicitly Excludes VOC and NOX Credits From Projected 
Emissions Inventories.'' CSE does not contest the ``validity'' of the 
2007 AQMP. CSE's comments about the 2007 AQMP's treatment of pre-base 
year credits largely mirrors the comments about the 2003

[[Page 31206]]

AQMP. The Comment Letter begins by characterizing Tables 2-10 and 2-11 
in Appendix III of the 2007 AQMP, and then states: ``This is where 
growth for the Community Bank portion of the NSR program is accounted 
for, and this is where the pre-base-year credits would need to be 
included for ozone precursors. The 2007 AQMP includes no pre-base-year 
credits for VOC and NOX.'' [Citation omitted] Comment Letter 
at 11. CSE's comment on the 2007 AQMP also recites three specific 
objections: (1) That EPA ``conflates total growth from all point 
sources in Table 2-8--where no distinctions are made between pre-base-
year credits and post-base-year credits nor open-market transactions 
and NSR-Account transactions--for growth based on pre-base year credits 
from the NSR Account''; (2) EPA approves starting balances in the NSR 
Account that are larger than the growth; and (3) EPA's approval does 
not require a cap on the bank that is the same as the amount of growth 
that is added. Comment Letter at 12-14. Last, CSE states that EPA was 
required to analyze whether the 1-hour ozone attainment plan included 
adequate pre-base year credits. EPA responds to this comment at 
Response 27 below.
    CSE is continuing to confuse growth and demand. Tables 2-10 and 2-
11 in Appendix 3 are evaluating historic demand for VOC and 
NOX credits. The District adds the pre-base year credits to 
its 2007 future year inventories in the growth portion of the 2007 AQMP 
which is graphically shown in Table 2-8 of the AQMP. Then, the District 
evaluates historic supply and demand as a check to ensure that adequate 
growth is added back into the future year inventories.
    Table 2-8 in the 2007 AQMP Appendix III shows the VOC and 
NOX emissions from area and point sources as ``no growth'' 
and ``with growth''. The growth that is added for the point and area 
sources in the ``with growth'' portion of Table 2-8 includes the pre-
base year credits the District is adding to its future year 
inventories. For total point sources of VOC, Table 2-8 shows that the 
District added 12 tpd as growth (35 tpd to 47 tpd) and for area sources 
of VOC, the District added 36 tpd (195 tpd to 231 tpd). For 
NOX, the District added 1 tpd for point sources (36 tpd to 
37 tpd) and 2 tpd for area sources (29 tpd to 31 tpd).
    EPA requested the District to provide data on the amount of growth 
that was included for point and area sources subject to NSR. EPA 
provided that information in Docket Items III-P (showing point and area 
NSR subject sources with growth) and III-Q (showing point and area NSR 
subject sources for no growth). These tables show that for NSR subject 
sources the District added 12 tpd for VOC (35 tpd to 47 tpd) and 2 tpd 
for NOX (36 tpd to 38 tpd). EPA's TSD says that the District 
added 27 tpd for VOC and 2 tpd for NOX. The TSD notes that 
the amount of pre-base year credits included in the growth far exceeded 
the District's projection of possible demand (3.1 tpd for VOC from the 
NSR Account and the open market) and 0 for NOX. EPA 
determined that the credits the District was including in its growth 
for its future year inventories was ``conservative and an appropriate 
way to meet the requirements of 40 CFR 51.165.'' TSD at 12.
    CSE's comment that EPA ``conflates total growth from all point 
sources in Table 2-8 * * * for growth based on pre-base-year credits 
from the NSR Account'' is not clear. CSE appears to consider only point 
sources as being subject to NSR. However, the District includes both 
point and area sources in its NSR program. Therefore, the District put 
together data on the point and area sources that are subject to NSR and 
prepared the tables in Docket Item III-P and III-Q. CSE apparently did 
not understand this information because it says that ``it is identical 
information already attached to Appendix III of the 2007 AQMP--simply 
repackaged into a single table.'' Comment Letter at 13. This is 
incorrect. EPA stated in its TSD: ``For Table 2.8 [sic], the District 
provided EPA with point and area source data used to generate the 
summary data. EPA used this data to determine the amount of emission 
due to growth at facilities subject to NSR requirements.'' TSD at 12, n 
6. Therefore, EPA correctly determined that the District added 
sufficient pre-base year credits for point and area sources subject to 
NSR. The amount added as growth far exceeded the historic demand that 
the District used as a check.
    For the two next points in CSE's comment on the 2007 AQMP, EPA 
incorporates its response from Responses 6 and 7, as applicable to the 
2007 AQMP for VOC and NOX emissions.
    Comment 9: CSE comments that EPA lacks evidence to support the 
conclusions in the proposed rule concerning retroactive rule operation: 
``Internal bank balances lack documentation.'' As an introduction to 
this section, CSE makes the following statement: ``Approving Rule 1315 
would incorporate in federal law two changes to the District's internal 
banking system: ``One retroactive, in an effort to expunge from the 
District's legers [sic] the fact that it permitted more emission 
increases than the CAA's offsetting requirements allow; and one 
prospective, so that going forward the District would operate a new 
banking or ``tracking'' scheme. The rule's attempt to change history is 
rife with flaws, including a pervasive lack of documentation.''
    Response 9: These statements are unsupported and lack sufficient 
specificity for EPA to respond. We assume the lettered subsections that 
follow this introduction contain specific comments which provide the 
factual support for these conclusions. Our response to the additional 
comments found in this subsection are provided below in response to 
each section (group of comments) provided by CSE.
    Comment 10: CSE titled this section of their comments ``Pre-1990 
Credits Lack Documentation.'' In this comment, CSE makes several 
assertions about the emission reductions that occurred prior to 1990 
and how they are tracked in Rule 1315. The first is that ``the 1990 
`starting balance' established in the Rule includes offsets for which 
the District claims to have `some or all' documentation. (Emphasis 
added by commenter.) (See Response 10A) ``Second, the EPAs approval of 
the decision to retire the pre-1990 offsets that remained in the 
Internal Bank in 2005 does not remove all invalid offsets from the 
system, since the Rule proposes to allow the facilities permitted prior 
to 2005 in reliance upon those pre-1990 offsets to ``return'' those 
offsets as ``payback of offset debt'' under Rule 1315(c)(3)(A)(v).'' 
(See Response 10B) Third, CSE states ``it is unclear why the EPA did[] 
not include the documentation that establishes the validity of the 
offsets in the ``Initial District Offset Account Balances'' set out at 
Table A in the Proposed Rule in the record for this rulemaking'' and 
that ``* * * EPA's failure to do so not only deprives the public the 
opportunity to review and comment upon that documentation, the failure 
is also a violation of the Administrative Procedures Act.'' (See 
Response 10C) And fourth that ``Proposed Rule 1315 has no mechanism to 
track how the pre-1990 credits are returned to the bank, either as 
payback of offset debt or through orphan shutdowns * * *''. (Citations 
omitted) (See Response 10D).
    Response 10: EPA disagrees with each of these assertions for the 
reasons provided below.
    Response 10A: First, CSE states that ``the 1990 `starting balance' 
established in the Rule includes offsets for which

[[Page 31207]]

the District claims to have `some or all' documentation,'' (emphasis 
added by commenter) and continue by stating that ``having `some' 
documentation to support the claim that an offset is valid is not 
sufficient.'' The District provided a full discussion of their 
evaluation of pre-1990 credits on page 12 of their Staff Report (as 
well as the prior 2005 and 2006 evaluations), all of which are included 
in the Docket. The District explains that where ``all'' documentation 
was not available (e.g., the original permit file that generated the 
emission reductions) there was still sufficient historical records to 
verify the specific information listed in the 1994 Seitz memo and 
determine that the emission reductions meet the federal integrity 
criteria for offsets. The Staff Report also explains that all pre-1990 
credits were evaluated when they were originally transferred into the 
District's initial Internal Bank. As discussed below, the District's 
2003-2005 re-evaluation of all of its banked pre-1990 emissions 
reductions eliminated (with a starting date of 1990) all credits for 
which the District no longer possessed sufficient documentation to 
determine the emission reductions meet the federal integrity criteria 
for offsets. Therefore, we disagree with CSE and CSE has not pointed to 
any specific information showing that the District retained a pre-1990 
credit without adequate documentation.
    As discussed both in the District's Staff Report and EPA's TSD, EPA 
raised the issue of availability of sufficient records for the pre-1990 
credits in the District's Offset Accounts in 2002, in light of the 
District's adoption of Rule 1309.2--Offset Budget, which would allow 
more sources access to the Offset Accounts. TSD at 4. EPA pointed to a 
1994 EPA memo regarding the use of pre-1990 offsets as guidance. See 
Memorandum dated August 26, 1994 from John S. Seitz, Director, EPA 
Office of Air Quality Planning and Standards, to David Howekamp, 
Director, EPA Region IX Air and Toxics Division, ``Response to Request 
for Guidance on Use of Pre-1990 ERC's and Adjusting for RACT at Time of 
Use'' (1994 Seitz Memo). The 1994 Seitz Memo states that pre-1990 
credits may be utilized, provided the State ``collect[s] and 
maintain[s] information on these ERC's, including, at a minimum, the 
name of the source that generated the ERC's, the source category that 
applies to this source, the quantity of ERC's generated by this source, 
the specific action that created the ERC's (e.g., a shutdown of a unit, 
process change, add-on control), the date that the ERC's were generated 
and enough other information to determine the creditability of all 
ERC's.'' 1994 Seitz Memo at 2. At EPA's request, the District reviewed 
all available records and determined that sufficient records were no 
longer available for some of pre-1990 credits, or that the effort to 
provide those records was too burdensome. See Proposed SCAQMD NSR 
Offset Tracking System, Background, February 23, 2006. Nevertheless, 
the District undertook a complete and thorough review of its offset 
records. Id. at 2. The result was the District's elimination of pre-
1990 credits for which it did not have adequate documentation. Id. 
(stating: ``In order to resolve EPA's comments, SCAQMD staff is 
proposing several modifications to the procedures used in the tracking 
system. In the revised procedures SCAQMD has proposed elimination of 
all credits for which SCAQMD no longer retains documentation.'')
    From this review, the District calculated new beginning balances 
for each of the pollutants. The District removed pre-1990 credits with 
inadequate records from the 1990 starting balance, leading to much 
lower balances for all pollutants except NOX. Id. (stating: 
``Several elements of the proposed revisions to the SCAQMD's tracking 
system contribute to these reductions, as discussed below, but the 
single element of the proposal with the greatest contribution is the 
reevaluation of pre-1990 credits and proposed elimination of all 
credits for which SCAQMD no longer retains documentation.'') 
Accordingly, the District removed this quantity of credits from the 
1990 starting balances for the Internal Bank, as shown on page I-1 of 
Appendix I of the District's staff report. Thus the District's 1990 
starting balances only contain credits for which the District possessed 
sufficient documentation, consistent with the 1994 Seitz Memo. 
Therefore, we disagree with CSE that there are pre-1990 credits in the 
District's bank that lack documentation. In approving the District's 
newly calculated starting balances (i.e those from which pre-1990 
credits without documentation were eliminated), EPA is not required to 
independently review all documentation. As noted in our TSD, EPA is 
approving a system for tracking credits. EPA acknowledges the system 
depends on the starting balances. EPA determined that the District's 
Staff Report and the preceding documents setting forth the District's 
procedures ensured accurate and conservative starting balances for each 
pollutant. CSE has not identified any information to show otherwise.
    Response 10B: Regarding CSE's second assertion that while Rule 1315 
requires ``removal of some of those offsets, [the Rule] does not 
actually require removal of all invalid offsets''; EPA disagrees. As 
stated on page 14 of the District's Staff Report, all pre-1990 credits 
for CO and PM10 were used by 1997, and the remaining balance 
of VOC, NOX and SOX credits were retired at the 
end of 2005. CSE claims that this retirement ``does not remove all 
invalid offsets from the system, since the Rule proposes to allow the 
facilities permitted prior to 2005 in reliance upon those pre-1990 
offsets to `return' those offsets as `payback of offset debt' under 
Rule 1315(c)(3)(A)(v).'' [Footnote omitted] Comment Letter at 16. 
According to CSE, as the pre-1990 internal bank offsets are returned to 
the internal bank, they are laundered, or `tracked' as if they were 
never touched by the improper crediting of those offsets in the first 
place.'' Comment Letter at 16. These statements are incorrect and 
appear to be based on a misunderstanding of the fact that once a credit 
is used to offset new emission increases, the ``credit'' is gone. When 
credits are debited from the bank to allow the construction and 
increased emissions from a new or modified source, these new emissions 
are no longer ``pre-1990'' emissions, as they are being emitted in the 
present timeframe. When such a source shuts down or has controls 
applied to reduce emissions, the reductions reduce the current emission 
inventory. In other words, pollution that is being emitted into the air 
stops being emitted into the air. These current day emission reductions 
no longer have any relationship to any pre-1990 credits. For example, 
assume a new piece of equipment was permitted in 2000 entirely with the 
use of pre-1990 credits and operated until the entire facility shutdown 
in 2011. If the facility submits an application to claim the emission 
reductions from the entire facility (where some pieces of equipment 
obtained credits from the District Offset Account and some did not), 
the District would evaluate the application under the provisions of 
Rule 1309--Emission Reduction Credits and Short Term Credits, which is 
SIP approved. Rule 1309 requires the quantity of emission reductions 
verified as meeting the federal integrity criteria to undergo an 
additional adjustment to reflect current day BACT levels,\7\ and

[[Page 31208]]

only then is the quantity of any ``payback of offset debt'' credited to 
the District Offset Accounts. The remaining balance of emission 
reductions is issued to the source as an ERC certificate. If the source 
did not claim any emission reductions from the shutdown of their 
facility, the District would then evaluate the emission reductions 
pursuant to Rule 1315, which imposes different requirements than Rule 
1309, but also ensures that all credits meet the federal integrity 
criteria. It is important to note that all crediting of emission 
reductions in either example are based on real reductions of emissions 
that were recently emitted into the air but are no longer being 
emitted. The association with the pre-1990 credits no longer exists. 
Thus CSE is incorrect to claim that the pre-1990 credits are 
``laundered'' in the tracking system, since the tracking system only 
collects as credits the quantity of actual emission reductions 
calculated pursuant to Rule 1309 that were originally lent to the 
source from the District's Offset Accounts. In addition, orphan 
shutdown credits are collected in accordance with Rule 1315, which 
requires that permitted emission limits be adjusted by an 80% factor to 
estimate actual emissions. See Rule 1315(c)(3)(B)(i).
---------------------------------------------------------------------------

    \7\ The District imposes this more stringent current day BACT 
adjustment at the time of credit creation in lieu of current and 
future surplus adjustments to the quantity of emission reductions. 
See 61 FR 64292, Dec. 4, 1996 and Environmental Protection Agency, 
Region IX Air & Toxics Division Technical Support Document for EPA's 
Notice of Final Rulemaking for the California State Implementation 
Plan South Coast Air Quality Management District New Source Review 
by Gerardo C. Rios, October 24, 1996 (TSD).
---------------------------------------------------------------------------

    Response 10C: CSE's third comment claims that EPA must review 
documentation for each of the thousands of individual transactions that 
contributed to the 1990 starting balance, otherwise our approval of 
Rule 1315, including our determination that the 1990 starting balance 
meets the federal integrity criteria for offsets is improper. EPA does 
not believe it was Congress's intent that we review each individual 
action carried out by a local air District to ensure compliance with 
the CAA. As the Court's have recognized, the Clean Air Act establishes 
a system of cooperative federalism. The federal EPA establishes the 
National Ambient Air Quality Standards, but the States have primary 
authority for ensuring that their air quality meets the NAAQS. 42 
U.S.C. 7407(a), 7401(a)(3). The CAA requires States to develop SIPs to 
implement, maintain and enforce the NAAQS and to submit these SIPs to 
EPA, and EPA must approve a submitted SIP that meets the CAA's 
requirements. 42 U.S.C. 7410, 7410(k)(3). In this case, the District 
adopted and submitted a rule that provides detailed methodologies for 
reviewing and quantifying specific types of emission reductions prior 
to crediting such reductions to their Offset Accounts. It is the 
overall program that EPA must review to ensure it contains the 
necessary provisions to ensure (1) that the District is providing an 
adequate quantity of emission reductions to make up for all required 
federal emission reductions not required by the District's NSR program 
(CAA Section 173), and (2) to ensure the federal offset criteria for 
offsets debited to be permanent, surplus, quantifiable, and enforceable 
are met (40 CFR 51.165((a)(3)(ii)(C)(1)(i)). For the reasons explained 
in EPA's proposed rule and TSD, we have determined that Rule 1315 
satisfies these statutory and regulatory criteria for approval. CSE's 
broad assertion that EPA should have reviewed the extensive 
documentation for each pound of emissions credits in the District's 
Offset Accounts is without merit.
    CSE claims that since ``EPA failed to review the documentation that 
the SCAQMD relied upon to establish its Offset Account balance, then 
EPA[ ] is in no position to find * * *'' that the credits in the Offset 
Accounts meet the requirements of the CAA. As discussed on page 10 of 
the TSD, EPA made a determination as to the whether the credits 
contained in the District's Offset Accounts meet the federal integrity 
criteria of being permanent, surplus, quantifiable, and enforceable and 
therefore meet the requirements of the CAA. It is not necessary for EPA 
to review documentation for every single credit and debit in the 
District's Offset Account to make this determination. Instead EPA has 
reviewed and evaluated the mechanisms contained within Rule 1315 to 
ensure that at the time of use, all credits used to offset new emission 
increases meet the federal integrity criteria. Further discussion of 
how EPA evaluated the rule is provided below in response to specific 
comments made by CSE.
    Response 10D: CSE's fourth assertion is based on the misconception 
that pre-1990 credits remain classified as pre-1990 credits even after 
they have been used to construct a new project. As discussed above in 
EPA's response to CSE's second assertion, this is incorrect. (See 
Response 10B) Once a credit is used by a source, the credit is retired. 
Any credits generated later from emissions reductions at that source 
are new credits from actual reductions that meet the federal criteria. 
See EPA's response to CSE's second assertion under this comment for a 
more detailed discussion.
    Comment 11: CSE titled this section of their comments ``Annual 
Balances Lack Documentation''. In this comment, CSE correctly points 
out that Rule 1315 relies on permitted emission limits, discounted by 
20% to account for actual emissions from a shutdown source, rather than 
relying on actual emissions information for major or minor source 
orphan shutdowns. They claim that ``This presents three problems 
inherent to this rulemaking.''
    The first problem identified by CSE is that ``the CAA's plain 
language requires `actual' emissions be used to meet its offsetting 
requirement * * *'' They then cite 40 CFR 51.165(a)(1) which reads 
``All such plans shall use the specific definitions. Deviations from 
the following wording will be approved only if the State specifically 
demonstrates that the submitted definition is more stringent, or at 
least as stringent, in all respects as the corresponding definition 
below.'' While not stated explicitly, it appears that CSE's intended 
comment is that the rule must use the term and meaning of ``actual'' as 
defined in 51.165 and not an alternative determination of ``actual'' 
emissions.
    Response 11: As CSE points out in their comment, the CAA does allow 
deviations from defined terms if the definition is ``at least as 
stringent, in all respects as the corresponding definition * * *'' 
Except for orphan shutdowns, all credits are first evaluated pursuant 
to the requirements of Rule 1309, which in turns specifies that the 
Rule 1306 emission calculation methods be used to calculate emission 
reductions. Rule 1306(c)(1) states that emission decreases are ``The 
sum of actual emissions, * * * which have occurred each year during the 
two-year period immediately preceding the date of permit application, 
or other appropriate period, determined by the Executive Officer or 
designee to be representative of the source's cyclical operation, and 
consistent with federal requirements; * * *'' In turn, Rule 1302 
defines Actual emissions as ``the emissions of a pollutant from an 
affected source determined by taking into account actual emission rates 
and actual or representative production rates (i.e., capacity 
utilization and hours of operation).'' Thus, except for reductions from 
Orphan Shutdowns, the quantity of emission reductions credited to the 
District Offset Accounts is based on the same definition of ``Actual 
Emissions'' as in 40 CFR 51.165.

[[Page 31209]]

    The only remaining question is whether the District's use of 80% of 
permitted emission limits for orphan shutdowns provides a result that 
is ``at least as stringent as'' the result of using the 40 CFR 51.165 
definition of the term Actual Emissions when quantifying the amount of 
emission reductions to be credited to the District Offset Accounts. The 
TSD and proposal for the proposed approval of Rule 1315 both provide a 
discussion on this topic and explain why the provisions of Rule 1315 
provide an acceptable method (i.e. at least as stringent as the federal 
requirement) to calculate actual emissions from orphan shutdowns as 
required by Rule 1315. (See TSD pgs 9-10) CSE's comments do not 
question the reasoning behind EPA's determination, but simply state in 
their next comment that actual emission data is available, therefore it 
should be used. EPA's responds to this assertion in our response to 
Comment 13, that also makes this point.
    Comment 12: CSE also states in this comment that Rule 1315 contains 
a definition for ``Net Emission Increase'' that differs from the 
language in the regulation.
    Response 12: This definition is not included in the version of Rule 
1315 that we are approving, as the District has specifically excluded 
this definition from the SIP submittal. See Rule 1315(h). Therefore, we 
do not need to evaluate this definition as part of our action on Rule 
1315.
    Comment 13: CSE states that ``While some very small sources do not 
report emissions, major sources and sources that emit over 4 tons per 
year of certain pollutants all report annually. Yet under Rule 
1315(c)(3)(B), all orphan shutdowns and reductions are treated as if 
they were very small sources, with no emissions information. Actual 
emissions information cannot be ignored in favor of assuming 80% of 
permitted emissions.''
    Response 13: While District Rule 301--Permitting and Associated 
Fees, requires all sources with a potential to emit greater than 4 tpy 
to submit an annual emission report, these reports do not always 
include emission data for individual pieces of equipment. Instead, 
since the annual report covers the entire facility, many sources, such 
as combustion sources and coating operations are often grouped together 
for the report. Annual emissions from these units are based on the 
equipment group's total material usage multiplied by an appropriate 
default emission factor. The default emission factors are designed to 
be conservative and may not be as accurate as the emission factors used 
for permitting of equipment or the calculation of ERCs. For these 
reasons, EPA disagrees with CSE that the use of annual emission reports 
would provide a better (more accurate?) way to calculate actual 
emission reductions from orphan shutdowns. As stated in the TSD and 
proposal, we have determined that the method provided in Rule 1315 is 
at least as stringent as using actual emissions records for determining 
the actual emission reductions from orphan shutdowns. See TSD at 9, 10.
    Comment 14: CSE states that there is no evidence that any of the 
Orphan Reduction/Orphan Shutdown credits meet the definitions for these 
terms because the District does not evaluate whether these reductions 
are ``not otherwise required by rule, regulation, law, approved Air 
Quality Management Plan Control Measure, or the State Implementation 
Plan.''
    Response 14: This statement is incorrect. As part of the process 
for collecting orphan shutdowns the District reviews existing rules and 
laws to ensure the reduction or shutdown (or equivalent such as 
electrification) is not required as of the date of the reduction. The 
requirement to perform this check and make any necessary adjustments is 
inherent in the definition of orphan shutdown, which is defined as 
follows: ``Any reduction in actual emissions from a permitted source 
within the District resulting from removal of the source from service 
and inactivation of the permit without subsequent reinstatement of such 
permit provided such reduction is not otherwise required by rule, 
regulation, law, approved Air Quality Management Plan Control Measure, 
or the State Implementation Plan and does not result in issuance of an 
ERC.'' Rule 1315(b)(5). To the extent CSE intended to comment on the 
District's implementation of the rule, such comments are outside of the 
scope of our action on this rule under CAA 110(k).
    Comment 15: This comment states that ``[CSE] knows[ ] that the 
SCAQMD has made mistakes in determining what can lawfully be credited 
to its Internal Bank,'' and offers two examples. First they cite the 
District's action of removing pre-1990 credit balances for which 
sufficient records were no longer available. Second they claim that the 
documentation the District provided for the CPV Sentinel Energy Project 
source-specific SIP revision proves that the District has claimed some 
offsets for their Internal Bank that were not valid. Last, CSE claims 
that the rulemaking lacks the record required for EPA to make a finding 
``* * * that the emission reductions the District is crediting and 
debiting in its Offset Accounts meet the requirements of the CAA and 
can be used to provide the offsets otherwise required for Federal major 
sources and modification.'' CSE bases this claim primarily on that fact 
that the same type of documentation provided for the CPV Sentinel 
Energy Project source-specific SIP revision was not made available for 
Rule 1315.
    Response 15: As EPA stated earlier in Response 10C, there is no 
requirement for EPA to review and approve every transaction that was or 
will be undertaken pursuant to Rule 1315. Instead EPA has carefully 
reviewed each of the provisions of Rule 1315 and determined that it 
provides an adequate method for tracking and quantifying emission 
reductions which meet all of the federal integrity criteria for 
offsets. The TSD provided a full discussion on each aspect of these 
criteria. (See TSD pgs 7-10)
    As stated in the District's Staff Report, the District has 
implemented an NSR tracking system to demonstrate programmatic 
equivalence between its NSR program and the offset requirements of the 
Federal program since EPA's 1996 approval of the Districts NSR program. 
District staff have prepared and presented to the AQMD Governing Board 
at public meetings a series of reports that track credits and debits 
from August 1990 through July 2002. While the rulemaking process for 
Rule 1315 was in flux (adopted, challenged in court, repealed, re-
adopted * * *) the District submitted additional reports in 2007 that 
also tracked the credits and debits from the District's Offset 
Accounts. Each of these reports demonstrated that in the aggregate, the 
District provided an equivalent number of offsets as would have 
otherwise been required by the federal CAA. Each of these reports is 
included in the docket for this rulemaking.
    Comment 16: CSE titled this section of their comments ``The Rule 
1315 Approach to Surplus Adjustment Does Not Capture Reductions as 
Required by Federal Law'' CSE claims that ``the provisions of Proposed[ 
] Rule 1315(c)(4) are inadequate to capture all the reductions needed 
to ensure banked reductions remain surplus at time of use'' because 
when offsets are deposited from any source listed in 1315(c)(3)(A) 
there is no provision that requires those emission reductions to be 
surplus adjusted prior to deposit; and ``once the emissions reductions 
are deposited, there is no mechanism for ensuring that the proper 
annual reduction is

[[Page 31210]]

calculated and applied.'' Comment Letter at 19.
    Response 16: EPA disagrees. Rule 1306 requires all actual emission 
reductions to be BACT adjusted at the time of creation. South Coast 
Rule 1306(c). This means that only reductions that exceed the level of 
control required by BACT are allowed to be credited under the Districts 
NSR program. As EPA discussed in our 1996 approval of the District's 
NSR program (61 FR 64292), we approved this requirement in lieu of the 
requirement to surplus adjust credits at the time of use based on our 
conclusion that the District's BACT adjustment at time of creation was 
at least as stringent as a requirement to adjust at the time of use. 
For the same reasons, we believe that all credits deposited under 
paragraph (c)(3)(A), except clauses (c)(3)(A)(i), (c)(3)(A)(ii), and 
(c)(3)(A)(vi) are adequately surplus adjusted both at the time of 
creation and use. Paragraph (c)(4) entitled ``Surplus at the Time of 
Use'' only applies to these three clauses because they are the only 
ones not automatically adjusted to account for a surplus adjustment at 
the time of use. Instead, paragraph (c)(4) requires credits deposited 
into the District Offset Accounts, pursuant to clauses (c)(3)(A)(i), 
(c)(3)(A)(ii), and (c)(3)(A)(vi), to be annually discounted in the 
aggregate to ensure they remain surplus at the time of use.
    Typically credits are adjusted at the time of use by reviewing the 
source category and type of reduction that created the emission 
reduction and determining if any new requirements requiring additional 
reductions have become applicable. This method would be extremely 
difficult and administratively burdensome if applied to the District's 
tracking system. Therefore the District proposed an alternative which 
we believe is equivalent to the case by case application of surplus 
adjustment at the time of use. Rule 1315 paragraph (c)(4) requires the 
District to determine the quantity of emission reductions expected from 
the adoption of new regulations for each non-attainment pollutant. The 
District then determines what percentage of permitted emissions these 
reductions represent. The same percentage of emission reductions is 
then applied to the Offset Account balance for that pollutant. For 
example, if the District adopts two rules that will achieve 200 tpy of 
PM10 emission reductions, these 200 tpy represents a 
specific percentage of the total PM10 stationary source 
inventory. This percentage is applied to (multiplied by) the Offset 
Account balance and the resulting figure is subtracted from the Offset 
Account Balance, which in effect reduces the total Offset Account 
balance by a percentage equal to the total amount of emission 
reductions achieved by new or revised control measures, as a percentage 
of the total PM10 stationary source inventory. This means 
that the degree of emission reduction achieved by any rules implemented 
in a year are applied to the entire Offset Account balance, not just to 
sources that would otherwise be subject to the new rules, which will 
result in a greater downward adjustment in the total Offset Account 
balance compared to source category-specific adjustments. We conclude 
that this surplus adjustment requirement in Rule 1315 is at least as 
stringent as other, more traditional methods for surplus adjustments at 
time of use.
    Comment 17: CSE's comment states that while Rule 403, a fugitive 
dust rule, was adopted to control PM10 emissions, no surplus 
reductions appear in the District Offset Account balance sheet for that 
year. Comment Letter at 19.
    Response 17: CSE is correct that no surplus reductions were made 
for Rule 403. This rule regulates fugitive dust from any active 
operation--such as earth-moving activities, construction/demolition 
activities, disturbed surface areas, or heavy- and light-duty vehicular 
movement and open storage piles. It does not apply to permitted 
emission units. If a source subject to this rule was to shut down, no 
emission reductions would be collected for the reduced fugitive 
emissions subject to Rule 403. Since there are no emission reductions 
in the District's Offset Accounts that are subject to Rule 403, the 
Offset Account balance does not need to be surplus adjusted for Rule 
403.
    Comment 18: CSE's comment continues by stating that this system is 
not equivalent because the credits in the District's internal bank do 
not reflect the District's rules as a whole and offers as an example 
that spray coating operations are more likely to occur at minor, rather 
than federal major facilities. And finally that ``Spray coating 
operations became subject to a new PM regulation in 2002, when the 
District adopted Rule 481. The District made no discount to the 
internal bank PM10 account in 2002-2003.'' Comment Letter at 
19.
    Response 18: This statement is not correct. Since the balance of 
both minor and major orphan shutdowns undergo annual surplus 
adjustments, it does not matter at which type of facility the emission 
reductions occur. In addition, since Rule 1315 requires the amount of 
emission reductions achieved from the entire permitted stationary 
source inventory to be applied to the total Offset Account balances, it 
does not matter at which source categories the emission reductions from 
new rules occur, nor does it matter what source categories generated 
the credits in the District's Offset Accounts. The Offset Account 
balances are surplus adjusted annually, in the aggregate, so that all 
credits meet the surplus at time of use requirement prior to being 
debited from these accounts. The revisions to Rule 481, which were 
adopted in 2002, were all administrative in nature and did not achieve 
any PM10 emission reductions, therefore no surplus 
adjustment was made to the District's Offset Accounts for 
PM10 in 2002-03.
    Comment 19: Finally CSE offers an example of an instance where the 
District failed to surplus adjust at time of use some of the emission 
reductions listed in the AB 1318 Tracking System. Comment Letter at 19. 
EPA notes that credits transferred from the Rule 1315 Offset Accounts 
into the AB 1318 Tracking System had already been surplus adjusted to 
account for the emission reductions of Rule 1157--in the aggregate, as 
represented by the 0.31 tpd surplus adjustment the District made to 
their PM10 Offset Account balance at the end of 2006. While 
CSE is correct that Rule 1157 reduced emissions from the 389 affected 
facilities by 60%, the effect on the entire permitted stationary source 
emission inventory was only 2.8%.
    Response 19: It appears, based on CSEs comments, that CSE did not 
fully understand the requirements of Rule 1315 (c)(4). Section (c)(4) 
of the rule requires an ``in the aggregate'' adjustment of the Offset 
Account balances, which reduces emissions by the same overall 
percentage achieved by any new rules, whether or not credits in the 
District's accounts came from source categories affected by the new 
rules. For the reasons provided in our TSD in Section IV.A.2. and in 
Response 16 above, we conclude that Rule 1315 contains adequate 
provisions to ensure all Offset Account balances are surplus adjusted 
annually to satisfy the surplus adjustment at the time of use 
requirement.
    Comment 20: CSE asserts that ``Proposed Rule 1315 Does not 
Incorporate the Federal Validity Requirements.'' Specifically, CSE 
states that ``To meet the requirements of federal law, the Proposed 
Rule must incorporate the definitions for validity found in federal law 
* * *'' and that ``While Proposed Rule 1315 (6) is titled ``Federal 
Offset Criteria,'' it does nothing more than reference other parts of 
the Proposed Rule and those parts

[[Page 31211]]

neither contain nor reference the requirements of federal law. Proposed 
Rule 1315(6) instead is circular and self-referential.'' Comment Letter 
at 20.
    Response 20: CSE does not provide any citations to support this 
alleged requirement. While EPA agrees that all emission reductions used 
to offset the emissions from new and modified sources must meet the 
federal integrity criteria of being permanent, surplus, quantifiable, 
and enforceable, it is not necessary for the rule to specifically 
define these terms. See 40 CFR 51.165(a)(3)(ii)(C)(1)(i). Instead the 
rule must include provisions that ensure that the credits being used as 
offsets meet these criteria. Paragraph (c)(6) of Rule 1315 is not 
intended to be a requirement that the criteria be met, but instead 
points to the rule section(s) that ensure each of these criteria are 
met. Section IV.A. of our TSD discusses EPA's evaluation of how the 
rule ensures each of these criteria are being met, consistent with the 
requirements of 40 CFR 51.165(a)(3)(ii)(C)(1)(i). CSE's comment is 
conclusory and unsupported.
    Comment 21: CSE's comments that the SCAQMD's existing SIP approved 
NSR program establishes certain requirements on emissions that this 
Rule attempts to set aside. CSE cites sections of Rule 1315 which allow 
some of the offsets provided from the open market, pursuant to the 
requirements of Rule 1303, to be collected as credits for the 
District's Offset Accounts. They claim that since Rule 1303 requires 
these offsets to be provided to obtain a permit, they are not surplus 
to the requirements of the SIP, and may not be credited into the 
District's Offset Accounts. Comment Letter at 21.
    Response 21: The purpose of Rule 1315 is to provide a tracking 
system to demonstrate that in the aggregate, the District is providing 
at least as many offsets under their approved NSR program as would 
otherwise be required by a program that contained no exemptions from 
federal offset requirements. The requirement in Rule 1303 for minor 
sources (>4 tpy but less than major source emission thresholds) to 
provide offsets for emission increases is more stringent than federal 
requirements which only apply to major sources. South Coast Rule 
1303(b)(2). Likewise, the general requirement to provide offsets at a 
ratio of 1.2:1 is more stringent than the CAA's general requirement in 
subpart 1 of part D, title I to provide offsets at a ratio of 1:1 for 
all non-attainment pollutants except ozone precursors (VOC and 
NOX), which are subject to more stringent offset ratios 
under subpart 2 of part D. When the District collects offsets (or 
portions thereof) that were already determined to be surplus, they are 
collecting a greater quantity of offsets than required by the federal 
NSR program. Rule 1315 collects some of the offsets surrendered to the 
District that are in excess of federal requirements to balance against 
the offsets not collected by the District, which would have been 
required under federal requirements. Before any emission reductions can 
be credited to the District's Offset Accounts, the emission reductions 
must first meet the federal integrity criteria, which these credits--
offsets collected for minor sources and the additional 0.2 offset 
ratio, have already met. They are ``credits'' i.e., pluses to the 
tracking system because they are in excess of federal offset 
requirements.
    Comment 22: CSE states that the provisions of Section (c)(3)(A)(v) 
are problematic for two reasons: (1) ``Once a facility uses an ERC (or 
ERC equivalent) to meet its NSR offsetting requirement, that ERC no 
longer exists.''; (2) ``* * * there is no provision in Proposed Rule 
1315 that requires a surplus adjustment for those emissions * * *''. 
Comment Letter at 21. CSE then provides the following example of how 
they believe this process would work:

    As the Rule is currently proposed, a manufacturing facility 
operating now could have received a Community Bank or Priority 
Reserve allocation for emissions in 1994 [check], based upon the 
shutdown of a boiler that operated between 1987 and 1993. Then, the 
manufacturing facility shuts down in 2010 and submits a 1306 banking 
application. This proposed rule would allow the SCAQMD to bank the 
entire Community Bank or Priority Reserve allocation even though the 
intervening facility has already used that allocation to meet its 
1303 obligation and there have been rules adopted between 1987 and 
2010 that would have required emission reductions for boilers.

    Response 22: There are several errors in this example. If an 
existing facility shutdown in 2010 and submits a banking application 
pursuant to Rule 1306, then the District will first determine how much 
of the emission reduction meets the federal offset integrity criteria, 
including the required BACT surplus adjustment. After this 
determination has been made, the District will then review its records 
to determine if the source ever obtained any offsets from the District 
(e.g., Priority Reserve, Community Bank, NSR Balance). If so, then the 
District will subtract this amount from the total creditable amount of 
emission reductions calculated pursuant to Rule 1306, and credit only 
the amount originating from the District accounts back to the Rule 1315 
tracking system. To the extent the District provided these credits to 
the source in the first place, the District is simply returning the 
same amount of credits to the District NSR Account. These credits are 
still surplus adjusted.
    Comment 23: Based on the example provided in the earlier comment, 
CSE also claims these emission reductions are not surplus when they are 
credited back to the District offset accounts because they were already 
relied upon by the shutdown source. Comment Letter at 22.
    Response 23: EPA agrees that such a facility would have relied on 
these credits at the time their permit was issued, but since that time, 
the facility has been emitting its own emissions into the air. When the 
facility shuts down, it is creating new emission reductions when 
compared to the baseline inventory. These new emission reductions are 
evaluated pursuant to Rule 1306 to verify that they meet all of the 
federal integrity criteria, including the requirement that the 
reduction be surplus.
    Comment 24: CSE claims that ``Similarly, for Proposed Rule 
1315(3)(A)(vi)[ ] Rule 1306 does not allow ERCs to be generated for the 
activities described therein.''
    Response 24: CSE's comment does not provide an explanation or basis 
for this claim. The provision contained in section (c)(3)(A)(vi) of 
Rule 1315 allows, upon EPA concurrence, the amount of the BACT 
adjustment required by Rule 1306(c) to be credited to the District's 
Offset Accounts if this amount ``is not otherwise required by rule, 
regulation, law, approved Air Quality Management Plan Control Measure, 
or the State Implementation Plan.'' This provision has only been used 
once since the District created its Internal Bank in 1990.\8\ EPA 
intends to approve such use only in cases where the credits are to be 
used immediately for a specifically identified project (and therefore 
the credits would not be subject to an additional at time of use 
surplus adjustment) and where EPA determines that the construction of 
the identified project would not interfere with any applicable 
requirement concerning attainment and RFP or any other applicable 
requirement of the Act.
---------------------------------------------------------------------------

    \8\ See Appendix A of Rule 1315 Staff Report, entry entitled 
``1990-97 BACT Discount ERCs [(c)(3)(A)(vi)]''.
---------------------------------------------------------------------------

    Comment 25: CSE states in this comment ``As a broader, more 
universal matter the SCAB and the Coachella Valley's failure to attain 
the PM10 NAAQS and the 1 hour ozone NAAQS

[[Page 31212]]

coupled with the massive black box in the 8 hour ozone plan show that 
no emission reductions that have occurred or will occur as part of the 
NSR program are actually surplus. In fact, the Air Basins need all the 
reductions of the NSR program and more for attainment. The currently 
approved SIP Rules set out a rigorous process for banking emission 
reductions that was developed at the direction of the Clean Air Act 
because the Air Basins are nonattainment areas. The EPA cannot now 
approve a Rule that, in effect, sets aside parts the SIP approved NSR 
program.'' Comment Letter at 22.
    Response 25: It appears that CSE is using the term ``surplus'' in 
this comment to mean something different from the requirement in 40 CFR 
51.165((a)(3)(ii)(C)(1)(i) that emission reductions be ``surplus'' to 
any other requirement of the CAA. In the context of evaluating the 
integrity of an NSR offset, EPA uses the term ``surplus'' to refer to 
any emission reduction that is not otherwise required by the CAA. See 
CAA 173(c); see also TSD at 7-9. Whether the District has attained any 
particular NAAQS or needs additional emission reductions as part of its 
plan for attaining a particular NAAQS is not relevant to the question 
whether a particular emission reduction is ``surplus'' to other CAA 
requirements consistent with 40 CFR 51.165(a)(3)(ii)(C)(1). Contrary to 
CSE's contention that Rule 1315, ``sets aside parts the SIP approved 
NSR program,'' we are approving Rule 1315 based on our conclusion that 
it strengthens the SIP-approved NSR program by providing a detailed 
methodology for tracking credits within the District's Offset Accounts.
    Comment 26: CSE titled this section of their comments ``Allowing 
the District to Shift from a 1.5 to 1.0 Offset Ratio to a 1.2 to 1.0 
Offset Ratio Violates the Act''. CSE claims that ``EPA has not 
determined that California BARCT and federal BACT are equivalent'' and 
that ``federal BACT is a facility by facility approach and BARCT uses 
classes of categories'' and therefore, they cannot be equivalent. 
Approval of a 1.2:1, rather than 1.5:1 offset ratio is an illegal shift 
and is therefore arbitrary and capricious.
    Response 26: We disagree as we are not approving any change in the 
offset ratios established in the District's SIP-approved NSR program. 
Rule 1303--Requirements, currently requires all sources of VOC and 
NOX to provide offsets at a 1.2:1 ratio. EPA approved this 
ratio as part of our 1996 approval of the Districts NSR program based 
on our conclusion that the District's program met the criteria for 
exemption from the requirement in CAA section 182(e)(1) for a 1.5:1 
offset ratio in extreme ozone nonattainment areas (61 FR 64291, 
December 4, 1996). Nothing in our action today affects our prior action 
with respect to Rule 1303. To the extent CSE intended to challenge our 
approval of the 1.2:1 ratio in Rule 1303 into the SIP in 1996, such a 
challenge is late.
    As CSE notes, Section 182(e)(1) of the CAA provides an exception to 
the requirement of a 1.5:1 offset ratio for ozone precursors in extreme 
non-attainment areas. This Section reads as follows:

``* * * shall be at least 1.5 to 1, except that if the State plan 
requires all existing major sources in the NA areas to use BACT as 
defined in section 7479(3) for the control of VOC, the ratio shall 
be at least 1.2:1.''

    We note that California state law requires all nonattainment areas 
to implement Best Available Retrofit Control Technology (BARCT).\9\ The 
District has adopted rules which require BARCT for all source 
categories that include major sources and many that apply to minor 
sources as well. These rules have been submitted and approved (or in 
the process of being approved) into the South Coast portion of the 
California SIP. Therefore the District does have requirements in their 
plan that require all existing major sources to use BARCT as defined in 
Rule 1302--Definitions. CSE provides the definitions of both terms--
Federal BACT and California BARCT in their Comment Letter. A review of 
both terms shows that the definition of BARCT contains the same key 
elements of the Federal BACT definition, as noted below by the 
underlined text of the definition of BARCT:
---------------------------------------------------------------------------

    \9\ Health & Safety Code Sec.  40440(a)(1).

    An air emission limitation that applies to existing sources and 
is based on the maximum degree of reduction achievable, taking into 
account environmental, energy, and economic impacts by each class or 
---------------------------------------------------------------------------
category of source.

The application of both BACT and BARCT each result in ``an air emission 
limitation,'' ``based on the maximum degree of reduction,'' ``taking 
into account environmental, energy, and economic impact,'' ``for such 
facility'' (BACT) or ``each class or category of source'' (BARCT).
    The definition of BACT referenced in Section 182(e)(1) is from the 
new source review regulations, which only apply when a facility is new 
or makes a modification that increases emissions. The language in 
Section 182(e)(1) therefore specifically states that the requirement--
to apply the Best Available Control Technology--also applies to 
existing major sources. This inherently means that any additional 
control must be applied on a retrofit basis, which is exactly what the 
California requirement to apply Best Available Retrofit Control 
Technology does. Since the District requires the implementation of 
BARCT on all major ozone pre-cursor sources, we continue to find that 
the provisions of Section 182(e)(1) allow for approval of a NSR program 
that requires a 1.2:1, rather than 1.5:1 offset ratio of ozone 
precursors in the South Coast.
    Comment 27: CSE titled this section of their comments ``EPA Failed 
to Show That This SIP Amendment Does Not Interfere With Attainment of 
the 1-hour Ozone Standard. CSE comments that EPA's proposed approval of 
Rule 1315 ``fails to make the assessment that this SIP revision will 
not interfere with attainment of the 1-hour ozone standard,'' citing 
CAA section 110(l) and Hall v. EPA, 273 F.3d 1146, 1158 (9th Cir. 
2001). The comment states that the absence of such a ``finding'' 
violates ``bedrock statutory provisions and longstanding NSR case law * 
* *'' CSE believes that EPA's failure to assess this SIP revision for 
potential interference with the 1-hour ozone standard is particularly 
troubling in light of a recent Ninth Circuit decision that the current 
1-hour ozone plan is deficient to actually attain the 1-hour ozone 
standard, citing Association of Irritated Residents v. EPA. Comment 
Letter at 24.
    Response 27: EPA acknowledges that, for the proposed rule, the 
Agency did not evaluate whether the SIP revision would interfere with 
attainment of the 1-hour ozone standard under CAA section 110(l). Given 
that the 1-hour ozone standard was revoked in 2005 [see 40 CFR 
50.9(b)], the potential issue to address under section 110(l) is not 
whether the SIP revision would interfere with attainment or RFP of the 
1-hour ozone NAAQS because the 1-hour ozone standard is no longer one 
of the NAAQS. Instead the issue to be addressed is whether the SIP 
revision would interfere with any other applicable requirement of the 
CAA, which in this case refers to the ``anti-backsliding'' requirements 
[found in 40 CFR 51.905(a)(1)(i)], which continue to apply in 8-hour 
ozone nonattainment areas (such as the South Coast) that had been a 
nonattainment area for the 1-hour ozone standard. Among the anti-
backsliding requirements is the requirement to have an approved 1-hour 
ozone attainment demonstration plan.

[[Page 31213]]

    The South Coast Air Basin has a 1-hour ozone attainment plan 
(referred to as the ``1997/1999 South Coast Ozone SIP'') that EPA 
approved in 2000 (65 FR 18903, April 10, 2000) and this SIP revision 
would not interfere with that plan. However, the commenter is correct 
that a recent Ninth Circuit decision raises the possibility that, in 
light of deficiencies in the 1997/1999 South Coast Ozone SIP brought to 
EPA's attention in 2003 (i.e., prior to revocation of the 1-hour ozone 
standard) and having nothing to do with NSR, EPA may find it necessary 
to develop and adopt a new 1-hour ozone attainment plan or require the 
State of California to do so, in response to the remand of that case. 
See, generally, Association of Irritated Residents v. EPA, No. 09-71383 
and 09-71404, rehearing denied and amended opinion filed Jan. 27, 2012. 
EPA has not yet decided how the Agency intends to respond to the 
decision in Association of Irritated Residents, and although this SIP 
revision would not interfere with such a future plan, it would need to 
be taken into account in developing the emissions inventories and 
control strategies for such a 1-hour ozone attainment plan in much the 
same manner as has been done for the now-approved South Coast 8-hour 
ozone and PM2.5 plans.
    Comment 28: CSE titled this section of their comments ``It is 
Arbitrary and Capricious for This SIP Amendment to Allow for Vast 
Increases in Pollution Credits Given the Reliance on a Large `Black 
Box'.'' CSE's final comment is that EPA cannot approve Rule 1315 
because the District has emissions reductions in its AQMPs ``black 
box''. Comment Letter at 24. CSE comments that the 2007 AQMP has 55% of 
the emission reductions needed to attain the 8-hour ozone NAAQS in the 
``black box''. CSE then states: ``Given that there really is not a true 
framework for attaining the 8-hour ozone standard (e.g. reliance on 
speculative, undefined measures) on time combined with the recent 
failure of the region to attain the 1-hour ozone standard, [footnote 
omitted] it is arbitrary and capricious for EPA to allow 1315 to move 
forward with the myriad of newly minted offsets that will be allowed to 
impede the already formidable task of actually closing the ``black 
box'' gap that currently exists. Even if the rosy assumptions in the 
TSD are accurate, adding 29 tpd (27 tpd VOC and 2 tpd NOX) 
of pre-2002 credits is approximately 10% of the emissions reductions 
needed to be met through black box reductions. This represents a 
significant amount of pollution that could be prevented, which would 
actually help push the region to attain the standard on time.'' Comment 
Letter at 24-25.
    Response 28: We disagree with these assertions. First, with respect 
to the commenter's contentions that the ``black box'' (which we refer 
to herein as the ``long-term strategy'') in the 2007 AQMP accounts for 
55% of the reductions needed to attain the 1997 8-hour ozone standard 
and that pre-2002 credits account for approximately 10% of these 
``black box'' reductions, these statements are factually incorrect. As 
we explained in our responses to similar comments on our proposal to 
approve the 2007 AQMP (referred to in that action as the ``South Coast 
2007 Ozone SIP''), the correct amounts of the needed emission 
reductions attributed to the long-term strategy in the 2007 AQMP are 
26% for NOX (241 of 910 tons per day (tpd) needed to attain) 
and 9% for VOC (40 of 461 tpd needed to attain). See 77 FR 12674, 12686 
(March 1, 2012). Thus, the pre-2002 base year emission reduction 
credits (2 tpd of NOX and 27 tpd of VOC) that the District 
added as growth into its projected inventories for the 2007 AQMP 
constitute roughly 0.83% of the NOX reductions and 68% of 
the VOC reductions attributed to the long-term strategy in the 2007 
AQMP.\10\
---------------------------------------------------------------------------

    \10\ It appears that CSE simply summed the NOX and 
VOC emissions estimates to arrive at its 55% and 10% figures, but 
this approach entirely overlooks the significant differences in the 
NOX reductions and VOC reductions attributed to the long-
term strategy in the 2007 AQMP, as well as the respective 
contributions of reductions in each pollutant to attainment of the 
ozone standards in the South Coast.
---------------------------------------------------------------------------

    Second, we disagree with the commenter's suggestion that the South 
Coast's inclusion of a long-term strategy in the 2007 AQMP precludes 
our approval of Rule 1315 into the SIP or somehow renders our approval 
arbitrary and capricious. CAA section 182(e)(5) authorizes EPA to 
``approve provisions of an implementation plan for an Extreme Area 
which anticipate development of new control techniques or improvement 
of existing control technologies * * *'' provided certain conditions 
have been met. 42 U.S.C. 7511a(e)(5). EPA fully approved the 2007 AQMP 
based, in part, on our conclusion that California had met the criteria 
for approval of a long-term strategy under CAA section 182(e)(5) for 
purposes of attaining the 1997 8-hour ozone standard (77 FR 12674 at 
12686-12689) and our conclusion that the SCAQMD had accounted for 
existing pre-base year ERCs in the reasonable further progress (RFP) 
and attainment year inventories in the plan, consistent with the 
applicable requirements of part D, title I of the CAA and EPA's 
implementing regulations in 40 CFR part 51 (77 FR 12674 at 12682). CSE 
provides no support for its contention that these elements of the 2007 
AQMP preclude or undermine our approval of Rule 1315 into the SIP, nor 
any information indicating that approval of Rule 1315 would interfere 
with any applicable requirement concerning attainment and RFP or any 
other applicable requirement of the Act (see CAA 110(l)).
    Finally, to the extent the commenter intended to argue that the 
South Coast area's failure to attain the 1-hour ozone NAAQS by the 
applicable attainment date precludes our approval of Rule 1315 or 
somehow renders our approval arbitrary and capricious, we disagree. 
EPA's recent determination that the South Coast area failed to attain 
the 1-hour ozone standards by its applicable attainment date of 
November 15, 2010 (76 FR 82133, December 30, 2011) has no bearing on 
our action on Rule 1315, and the commenter provides no support for any 
argument otherwise.
    Comment 29: In CSE's last portion of this comment, CSE reproduces 
Table 4.1-4 from Subchapter 4.1 of the Districts Final Program 
Environmental Assessment (CEQA analysis) prepared for adoption of Rule 
1315. Comment Letter at 25. Using data from this table, CSE states that 
the amount of potential ozone emissions increases from Rule 1315 (16.99 
tpd VOC in 2014 and 34.52 tpd in 2023 and 1.29 tpd in NOX in 
2014 and 2.38 tpd in 2023) is ``important because they represent a 
significant increase in the total projected emissions''. (emphasis 
added) CSE then provides the total projected emission inventory for 
years 2014, 2020 and 2023 from the 2007 AQMP, apparently to show that 
the values in Table 4.1.4 are a large percentage of the total projected 
emission inventory. CSE then states that EPA must ``demonstrate what 
measures will replace this backsliding in emission reductions that will 
lead to attainment of all relevant standards,'' and finally that ``it 
is arbitrary and capricious for EPA to ignore the significant analysis 
prepared by the SCAQMD for the California Environmental Quality Act 
document for Rule 1315 that details the emissions and impacts 
associated with adopting this Rule.''
    Response 29: EPA disagrees with CSE's characterization of the 
information provided in Subchapter 4.1 of the District's CEQA analysis. 
See ``Final Program Environmental Assessment for Re-Adoption of

[[Page 31214]]

Proposed Rule 1315--Federal New Source Review Tracking System, Volume 
I, Subchapter 4.1, ``Environmental Impacts and Mitigation Measures--Air 
Quality'' (January 7, 2011) (Rule 1315 CEQA Analysis). The emissions 
data in Table 4.1-4 of this CEQA analysis, which CSE reproduced in 
Table 4.1-4 of its comment letter, provide conservative (high) 
estimates of total NOX and VOC stationary source emissions 
expected from implementation of Rule 1315. See Rule 1315 CEQA Analysis 
at 4.1-9. The 2007 AQMP includes all of these projected NOX 
and VOC emissions in the future projected inventories ``with growth'' 
for 2014, 2020 and 2023. See 2007 AQMP, Table 2-8 of Appendix III. To 
the extent CSE intended to argue that implementation of Rule 1315 will 
increase the projected NOX and VOC emission inventories in 
the 2007 AQMP by the amounts specified in Table 4.1-4, this assertion 
is factually incorrect, as the emissions impacts identified in Table 
4.1-4 of the Rule 1315 CEQA Analysis are already accounted for in the 
2007 AQMP projected emission inventories. Alternatively, to the extent 
CSE intended to challenge the District's inclusion of these additional 
NOX and VOC emissions in the projected emissions inventories 
underlying the 2007 AQMP, such a challenge to the 2007 AQMP is outside 
the scope of our action on Rule 1315.
    Comment 30: The South Coast Air Quality Management District 
submitted a comment letter in which the District stated that the 
legislative history of the 1990 Amendments to the CAA specifically 
addressed the ability of a district to promulgate a rule that, in the 
aggregate produces equivalent or greater emissions reductions. Comment 
Letter at 1-2. The District also included a discussion of the 
importance of Rule 1315 to the economic issues in the area and that 
many of the projects in the area that will use credits from the 
District's Offset Accounts are environmentally beneficial. Comment 
Letter at 2-3. The District's comment also referenced the Ninth 
Circuit's decision in Natural Resources Defense Council v. South Coast 
Air Quality Management District, 651 F.2d 1066 (9th Cir. 2011) which 
evaluated the District's treatment of pre-1990 credits in its Offset 
Accounts and ``concluded that the challenge to the pre-1990 offsets was 
moot''. [citation omitted] The District stated: ``Therefore, we 
conclude that EPA need not be concerned with any issues relating to 
pre-1990 offsets.'' Comment Letter at 5. Finally, the District pointed 
to some specific language in EPA's TSD that the District considered 
inaccurate. TSD at p. 11.
    The District requested EPA to include in its final approval the 
following clarification: ``The AQMP growth projections do not 
distinguish between new or modified sources and increased operations at 
existing sources. Therefore, the growth projections represent a maximum 
projected amount of demand for pre-base-year offsets. All growth from 
new and modified sources must necessarily be offset by pre-base-year 
emission reductions. This is because post-base-year reductions could at 
most be used to replace themselves, and would not be available to 
support growth. Therefore, the AQMP growth projections represent 
maximum projected use of pre-base-year offsets.'' Comment Letter at 5. 
The District's comment also attached copies of hundreds of letters from 
local municipalities, organizations and businesses that supported State 
legislation that would allow the District to continue to issue credits 
from its Offset Accounts during preparation of CEQA documents.
    Response 30: EPA agrees with the District that Congress intended to 
allow the District to adopt a rule that in the aggregate that 
demonstrates an equivalent amount or greater emission reductions than 
would be required by the 1990 Amendments to the CAA. EPA appreciates 
the District's statements about the importance of Rule 1315. These 
considerations may inform the policy choices that the District makes in 
choosing how to implement the requirements of the CAA. EPA makes note 
of the Ninth Circuit's decision in NRDC v. SCAQMD. As discussed in a 
prior Response, EPA has also determined that the District's treatment 
of pre-1990 credits in Rule 1315 is approvable. Finally, EPA agrees 
that the District's language clarifies EPA's intent with respect to 
approving the District's inclusion of pre-base year credits in its 
inventories. Accordingly, we agree that ``[t]he AQMP growth projections 
do not distinguish between new or modified sources and increased 
operations at existing sources. Therefore, the growth projections 
represent a maximum projected amount of demand for pre-base-year 
offsets. All growth from new and modified sources must necessarily be 
offset by pre-base-year emission reductions. This is because post-base-
year reductions could at most be used to replace themselves, and would 
not be available to support growth. Therefore, the AQMP growth 
projections represent maximum projected use of pre-base-year offsets.'' 
EPA agrees that in both the 2003 and 2007 AQMPs, the growth that the 
District adds represents the maximum projected use of pre-base year 
credits. EPA also takes note of the hundreds of pages attached to the 
District's comment letter.
    Comment 31: California Council for Environmental and Economic 
Balance, the County Sanitation Districts of Los Angeles County and the 
Southern California Gas Company submitted comments on our proposed 
approval of Rule 1315. These comment letters express support for EPA's 
proposed approval of Rule 1315. The comment letters also state that 
Rule 1315 is important for the area to continue to operate essential 
public services, such as installation of emergency generators at 
wastewater pumping plants. Finally, these comment letters ask EPA to 
finalize approval of Rule 1315 with an effective date that is shorter 
than 30 days based on the good cause exception in section 553(d) of the 
Administrative Procedures Act.
    Response 31: EPA takes note of the support for final approval of 
Rule 1315. EPA also understands that as a result of State legislation 
the District may be precluding from issuing permits pursuant to Rule 
1315 for a short period of time until the effective date of EPA's final 
approval of Rule 1315. Although EPA understands that waiting for a 30 
day effective date to expire may place a burden on the District and 
local municipalities, utilities and business, EPA is declining at this 
time to provide a shorter effective date based on 5 U.S. C. 553(d)(3).

III. EPA's Final Action

    Under section 110(k)(3) of the Act, EPA is fully approving Rule 
1315, as adopted February 4, 2011 and submitted on March 2, 2011, into 
the South Coast portion of the California SIP based on our conclusion 
that this SIP revision satisfies all applicable CAA requirements.

IV. Statutory and Executive Order Reviews

    Under the Clean Air Act, 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 Clean Air Act. 
Accordingly, this action merely approves State law as meeting Federal 
requirements and does not impose additional requirements beyond those 
imposed by State law. For that reason, this action:

[[Page 31215]]

     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 Clean Air Act; 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 State and EPA notes that it will not impose substantial direct 
costs on tribal governments or preempt tribal law.
    The Congressional Review Act, 5 U.S.C. 801 et seq., as added by the 
Small Business Regulatory Enforcement Fairness Act of 1996, generally 
provides that before a rule may take effect, the agency promulgating 
the rule must submit a rule report, which includes a copy of the rule, 
to each House of the Congress and to the Comptroller General of the 
United States. EPA will submit a report containing this action and 
other required information to the U.S. Senate, the U.S. House of 
Representatives, and the Comptroller General of the United States prior 
to publication of the rule in the Federal Register. A major rule cannot 
take effect until 60 days after it is published in the Federal 
Register. This action is not a ``major rule'' as defined by 5 U.S.C. 
804(2).
    Under section 307(b)(1) of the Clean Air Act, petitions for 
judicial review of this action must be filed in the United States Court 
of Appeals for the appropriate circuit by July 24, 2012. Filing a 
petition for reconsideration by the Administrator of this final rule 
does not affect the finality of this action for the purposes of 
judicial review nor does it extend the time within which a petition for 
judicial review may be filed, and shall not postpone the effectiveness 
of such rule or action. This action may not be challenged later in 
proceedings to enforce its requirements. (See CAA section 307(b)(2).)

List of Subjects in 40 CFR Part 52

    Air pollution control, Environmental protection, Incorporation by 
reference, Intergovernmental relations, Nitrogen dioxide, Ozone, 
Particulate matter, Reporting and recordkeeping requirements, Volatile 
organic compounds.

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

    Dated: April 26, 2012.
Jared Blumenfeld,
Regional Administrator, Region IX.

    Part 52, chapter I, title 40 of the Code of Federal Regulations is 
amended as follows:

PART 52--[AMENDED]

0
1. The authority citation for part 52 continues to read as follows:

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

Subpart F--California

0
2. Section 52.220 is amended by adding paragraph (c)(403) to read as 
follows:


Sec.  52.220  Identification of plan.

* * * * *
    (c) * * *
    (403) A new rule for the following APCD was submitted on March 2, 
2011, by the Governor's designee.
    (i) Incorporation by reference.
    (A) South Coast Air Quality Management District.
    (1) Rule 1315, ``Federal New Source Review Tracking System,'' 
excluding paragraph (b)(2) and subdivisions (g) and (h), adopted on 
February 4, 2011.
* * * * *
[FR Doc. 2012-12500 Filed 5-24-12; 8:45 am]
BILLING CODE 6560-50-P