[Federal Register Volume 80, Number 52 (Wednesday, March 18, 2015)]
[Proposed Rules]
[Pages 14044-14062]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-06143]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR part 52

[EPA-R09-OAR-2015-0187; FRL-9924-48-Region 9]


Revisions to Air Plan; Arizona; Stationary Sources; New Source 
Review

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The Environmental Protection Agency (EPA) is proposing a 
limited approval and limited disapproval of revisions to the Arizona 
Department of Environmental Quality (ADEQ) portion of the applicable 
state implementation plan (SIP) for the State of Arizona. These 
revisions are primarily intended to serve as a replacement of ADEQ's 
existing SIP-approved rules for the issuance of New Source Review (NSR) 
permits for stationary sources, including but not limited to review and 
permitting of major sources and major modifications under the Clean Air 
Act (CAA or Act). After a lengthy stakeholder process, the State of 
Arizona developed and submitted a NSR program for SIP approval that 
satisfies most of the applicable Clean Air Act and NSR regulatory 
requirements, and will significantly update ADEQ's existing SIP-
approved NSR program. It also represents an overall strengthening of 
ADEQ's SIP-approved NSR program by clarifying and enhancing the NSR 
permitting requirements for major and minor stationary sources. This 
proposed action will update the applicable plan and set the stage for 
remedying certain deficiencies in these rules. We are seeking comment 
on our proposed action and plan to follow with a final action.

DATES: Any comments must arrive by April 17, 2015.

ADDRESSES: Submit comments, identified by docket number EPA-R09-OAR-
2015-0187, by one of the following methods:
    1. Federal eRulemaking Portal: www.regulations.gov. Follow the 
online instructions.
    2. Email: [email protected].
    3. Mail or deliver: Gerardo Rios (Air-3), U.S. Environmental 
Protection Agency, Region 9, 75 Hawthorne Street, San Francisco, CA 
94105-3901. Deliveries are only accepted during the Regional Office's 
normal hours of operation.
    Instructions: All comments will be included in the public docket 
without change and may be made available online at www.regulations.gov, 
including any personal information provided, unless the comment 
includes Confidential Business Information (CBI) or other information 
whose disclosure is restricted by statute. Information that you 
consider CBI or otherwise protected should be clearly identified as 
such and should not be submitted through www.regulations.gov or email. 
www.regulations.gov is an ``anonymous access'' system, and EPA will not 
know your identity or contact information unless you provide it in the 
body of your comment. If you send email directly to EPA, your email 
address will be automatically captured and included as part of the 
public comment. If EPA cannot read your comment due to technical 
difficulties and cannot contact you for clarification, EPA may not be 
able to consider your comment. Electronic files should avoid the use of 
special characters, any form of encryption, and be free of any defects 
or viruses.
    Docket: Generally, documents in the docket for this action are 
available electronically at www.regulations.gov and in hard copy at EPA 
Region 9, 75 Hawthorne Street, San Francisco, California. While all 
documents in the docket are listed at www.regulations.gov, some 
information may be publicly available only at the hard copy location 
(e.g., copyrighted material, large maps), 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: Lisa Beckham, EPA Region 9, (415) 972-
3811, [email protected].

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

Table of Contents

I. The State's Submittals
    A. Which rules or statutory provisions did the State submit?
    B. Are there previous versions of the statutory provisions or 
rules in the Arizona SIP?
    C. What is the purpose of this proposed rule?
II. EPA's Evaluation
    A. How is EPA evaluating the rules and statutory provisions?
    B. Do the rules meet the evaluation criteria for Minor New 
Source Review?
    1. Legally Enforceable Procedures
    2. ADEQ's Program Under 40 CFR 51.160(e)
    3. Public Availability of Information
    4. Administrative Procedures
    5. Stack Height Procedures
    C. Do the rules meet the evaluation criteria for Prevention of 
Significant Deterioration (PSD)?
    1. General PSD Program Requirements
    2. Restrictions on Area Classifications
    3. Redesignations
    4. Impacts on Class I Areas
    5. Public Participation
    6. Plantwide Applicability Limits
    7. Definitions
    8. PM2.5 Significant Monitoring Concentration
    9. Definition for Basic Design Parameter
    D. Do the rules meet the evaluation criteria for Nonattainment 
New Source Review?
    1. General Nonattainment NSR Program Requirements
    2. Plantwide Applicability Limits
    3. Definitions
    4. Definition for Basic Design Parameter
    5. Additional Provisions for Particulate Matter Nonattainment 
Areas
    E. Review of Non-NSR Related Rules and Statutory Provisions
    F. Review of Rules and Statutory Provisions Requested To Be 
Removed From the SIP
    G. Do the rules meet the evaluation criteria under Sections 
110(l) and 193 of the Act?
    H. Conclusion
III. Public Comment and Proposed Action
IV. Incorporation by Reference
V. Statutory and Executive Order Reviews

Definitions

    For the purpose of this document, we are giving meaning to certain 
words or initials as follows:

    (i) The words or initials Act or CAA mean or refer to the Clean 
Air Act, unless the context indicates otherwise.
    (ii) The initials ADEQ mean or refer to the Arizona Department 
of Environmental Quality.
    (iii) The initials A.R.S. mean or refer to the Arizona Revised 
Statutes.
    (iv) The initials BACT mean or refer to Best Available Control 
Technology.
    (v) The initials CFR mean or refer to Code of Federal 
Regulations.
    (vi) The initials CO means or refer to carbon monoxide.
    (vii) The words EPA, we, us or our mean or refer to the United 
States Environmental Protection Agency.
    (viii) The initials FIP mean or refer to Federal Implementation 
Plan.

[[Page 14045]]

    (ix) The initials GHG mean or refer to greenhouse gas.
    (x) The initials IBR mean or refer to incorporation by 
reference.
    (xi) The initials LAER mean or refer to Lowest Achievable 
Emissions Rate.
    (xii) The initials NAAQS mean or refer to National Ambient Air 
Quality Standards.
    (xiii) The initials NA-NSR mean or refer to Nonattainment New 
Source Review.
    (xiv) The initials NOX mean or refer to nitrogen 
oxides.
    (xv) The initials NSR mean or refer to New Source Review.
    (xvi) The initials PAL mean or refer to Plantwide Applicability 
Limits.
    (xvii) The initials PM10 mean or refer to particulate 
matter with an aerodynamic diameter of less than or equal to 10 
micrometers (coarse particulate matter).
    (xviii) The initials PM2.5 mean or refer to 
particulate matter with an aerodynamic diameter of less than or 
equal to 2.5 micrometers (fine particulate matter).
    (xix) The initials PSD mean or refer to Prevention of 
Significant Deterioration.
    (xx) The initials PTE mean or refer to potential to emit.
    (xxi) The initials RACT mean or refer to reasonable available 
control technology.
    (xxii) The initials SIP mean or refer to State Implementation 
Plan.
    (xxiii) The initials SMC mean or refer to significant monitoring 
concentration.
    (xxiv) The initials SO2 mean or refer to sulfur 
dioxide.
    (xxv) The words State or Arizona mean the State of Arizona, 
unless the context indicates otherwise.
    (xxvi) The initials TSD mean or refer to the technical support 
document for this action.
    (xxvii) The initials VOC mean or refer to volatile organic 
compound.

I. The State's Submittals

A. Which rules or statutory provisions did the State submit?

    On July 28, 2011 and October 29, 2012, ADEQ submitted revisions to 
the ADEQ portion of the Arizona SIP. On May 16, 2014, ADEQ supplemented 
the July 28, 2011 submittal. On September 6, 2013, July 2, 2014, and 
February 16, 2015, ADEQ supplemented the October 29, 2012 submittal. 
Collectively, these submittals generally comprise ADEQ's current 
program for preconstruction review and permitting of new or modified 
stationary sources under ADEQ's jurisdiction in Arizona (as described 
below).\1\ The NSR SIP revisions that are the subject of this action, 
\2\ referred to herein as the ``NSR SIP submittal'' represent a 
comprehensive revision to ADEQ's preconstruction review and permitting 
program and are intended to satisfy the requirements under both part C 
(prevention of significant deterioration) (PSD) and part D 
(nonattainment new source review) of title I of the Act as well as the 
general preconstruction review requirements under section 110(a)(2)(C) 
of the Act.\3\ The preconstruction review and permitting programs are 
often collectively referred to as ``New Source Review'' (NSR).
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    \1\ In addition, these submittals and our current action also 
address two rules and one statutory provision that are not directly 
related to NSR.
    \2\ We note that portions of ADEQ's SIP-approved rule R18-2-310, 
which provides affirmative defenses for excess emissions during 
malfunctions (R18-2-310(B)) and for excess emissions during startup 
or shutdown (R18-2-310(C)), are currently the subject of a separate 
rulemaking action by EPA. In a 2013 notice of proposed rulemaking, 
and a 2014 supplemental notice of proposed rulemaking that revised 
certain of the findings described in the 2013 notice, EPA proposed 
to find R18-2-310(B) and R18-2-310(C) substantially inadequate to 
meet CAA requirements and proposed to issue a SIP call with respect 
to these provisions. See 78 FR 12460, 12533-34, Feb. 22, 2013; 79 FR 
55920, 55946-47, Sept. 17, 2014. ADEQ's R18-2-310 is not part of the 
ADEQ SIP submittal that is under consideration in this action, and 
this rule is not being evaluated or otherwise addressed by EPA as 
part of our current action on ADEQ's SIP submittal.
    \3\ Rules R18-2-301 through R18-2-334 (Article 3 rules) also 
contain requirements to address the CAA title V requirements for 
operating permit programs, but we are not evaluating these rules for 
title V purposes at this time. We will evaluate the Article 3 rules 
for compliance with the requirements of title V of the Act and EPA's 
implementing regulations in 40 CFR part 70 following receipt of an 
official part 70 program revision submittal from ADEQ.
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    The proposed revisions to the SIP that are subject to this action 
cover those areas of Arizona where ADEQ has jurisdiction. Currently, 
ADEQ has permitting jurisdiction for the following stationary source 
categories in all areas of Arizona: Smelting of metal ores, coal-fired 
electric generating stations, petroleum refineries, Portland cement 
plants, and portable sources. ADEQ also has permitting jurisdiction for 
major and minor sources in the following counties: Apache, Cochise, 
Coconino, Gila, Graham, Greenlee, La Paz, Mohave, Navajo, Santa Cruz, 
Yavapai, and Yuma. Finally, ADEQ has permitting jurisdiction over major 
sources in Pinal County \4\ and the Rosemont Copper Mine in Pima 
County.
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    \4\ ADEQ has delegated implementation of the major source 
program to the Pinal County Air Quality Control District.
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    Table 1 lists the rules we are proposing for approval in today's 
action with the corresponding effective dates and submittal dates. The 
submitted rules are from the Arizona Administrative Code, Title 18--
Environmental Quality, Chapter 2--Department of Environmental Quality--
Air Pollution Control, Articles 1, 2, 3, and 4. The submitted statutory 
provision is from Title 49 of the Arizona Revised Statutes, Chapter 1, 
Article 1.

                   Table 1--Submitted Statutes and Rules Proposed for Approval in This Action
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                                                                                     State
              Rule or statute                              Title                effective  date     Submitted
----------------------------------------------------------------------------------------------------------------
A.R.S Sec.   49-107.......................  Local delegation of state                08/18/1987        07/2/2014
                                             authority.
R18-2-101 [only definitions (2), (32),      Definitions.......................       08/07/2012       10/29/2014
 (87), (109), and (122)].
R18-2-217.................................  Designation and Classification of        11/15/1993       10/29/2014
                                             Attainment Areas.
R18-2-218.................................  Limitation of Pollutants in              08/07/2012       10/29/2014
                                             Classified Attainment Areas.
R18-2-301.................................  Definitions.......................       08/07/2012       10/29/2014
R18-2-302.................................  Applicability; Registration;             08/07/2012       10/29/2014
                                             Classes of Permits.
R18-2-302.01..............................  Source Registration Requirements..       08/07/2012       10/29/2014
R18-2-303.................................  Transition from Installation and         08/07/2012       10/29/2014
                                             Operating Permit Program to
                                             Unitary Permit Program;
                                             Registration transition; Minor
                                             NSR transition.
R18-2-304.................................  Permit Application Processing            08/07/2012       10/29/2014
                                             Procedures.
R18-2-306.................................  Permit Contents...................       12/20/1999       10/29/2014
R18-2-306.01..............................  Permits Containing Voluntarily           01/01/2007       10/29/2014
                                             Accepted Emission Limitations and
                                             Standards.
R18-2-306.02..............................  Establishment of an Emissions Cap.       09/22/1999       10/29/2014
R18-2-311.................................  Test Methods and Procedures.......       11/15/1993       07/28/2011

[[Page 14046]]

 
R18-2-312.................................  Performance Tests.................       11/15/1993       07/28/2011
R18-2-315.................................  Posting of Permit.................       11/15/1993       10/29/2014
R18-2-316.................................  Notice by Building Permit Agencies       05/14/1979       10/29/2014
R18-2-319.................................  Minor Permit Revisions............       08/07/2012       10/29/2014
R18-2-320.................................  Significant Permit Revisions......       08/07/2012       10/29/2014
R18-2-321.................................  Permit Reopenings; Revocation and        08/07/2012       10/29/2014
                                             Reissuance.
R18-2-323.................................  Permit Transfers..................       02/03/2007       10/29/2014
R18-2-330.................................  Public Participation..............       08/07/2012       10/29/2014
R18-2-332.................................  Stack Height Limitation...........       11/15/1993       10/29/2014
R18-2-334.................................  Minor New Source Review...........       08/07/2012       10/29/2014
R18-2-401 [excluding definition (3)]......  Definitions.......................       08/07/2012       10/29/2014
R18-2-402.................................  General...........................       08/07/2012       10/29/2014
R18-2-403.................................  Permits for Sources Located in           08/07/2012       10/29/2014
                                             Nonattainment Areas.
R18-2-404.................................  Offset Standards..................       08/07/2012       10/29/2014
R18-2-405.................................  Special Rule for Major Sources of        08/07/2012       10/29/2014
                                             VOC or Nitrogen Oxides in Ozone
                                             Nonattainment Areas Classified as
                                             Serious or Severe.
R18-2-406.................................  Permit Requirements for Sources          08/07/2012       10/29/2014
                                             Located in Attainment and
                                             Unclassifiable Areas.
R18-2-407 [excluding subsection (H)(1)(c)]  Air Quality Impact Analysis and          08/07/2012       10/29/2014
                                             Monitoring Requirements.
R18-2-409.................................  Air Quality Models................       11/15/1993       10/29/2014
R18-2-412.................................  PALs..............................       08/07/2012       10/29/2014
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    On December 28, 2012, April 29, 2013, and December 2, 2014, ADEQ's 
July 28, 2011, October 29, 2012, and July 2, 2014 submittals, 
respectively, were deemed complete by operation of law to meet the 
completeness criteria in 40 CFR part 51, appendix V, which must be met 
before formal EPA review. Each of these submittals includes evidence of 
public notice and adoption of the regulation. Our technical support 
document (TSD) provides additional background information on each of 
the submitted rules.

B. Are there previous versions of the statutory provisions or rules in 
the Arizona SIP?

    EPA has not approved significant revisions or updates to ADEQ's 
SIP-approved NSR program since the 1980s. The existing SIP-approved NSR 
program for new or modified stationary sources under ADEQ's 
jurisdiction generally consists of the rules identified below in Table 
2 that we are proposing to supersede in or delete from the Arizona SIP. 
Collectively, these regulations established the NSR requirements for 
both major and minor stationary sources under ADEQ jurisdiction in 
Arizona, including requirements for the generation and use of emission 
reduction credits in nonattainment areas.
    Consistent with ADEQ's stated intent to have the submitted NSR 
rules replace the existing NSR program in the SIP, EPA's approval of 
the regulations identified above in Table 1 generally would have the 
effect of superseding our prior approval of the current SIP-approved 
NSR program.\5\ Table 2 lists the existing rules in the Arizona SIP 
that would be superseded or removed from the Arizona SIP as a result of 
our proposed action. If EPA were to take final action as proposed 
herein, these rules generally would be replaced in, or otherwise 
deleted from, the SIP by the submitted set of rules listed in Table 1.
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    \5\ Except for certain sections that ADEQ requested that we not 
remove from the SIP at this time.

                    Table 2--SIP Rules Superseded or Removed From Arizona SIP in This Action
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                                                                                                     Federal
              Rule or statute                              Title                  EPA Approval       Register
                                                                                      date           citation
----------------------------------------------------------------------------------------------------------------
R9-3-101..................................  Definitions.......................          Various          Various
R9-3-217(B)...............................  Attainment Areas: Classification         04/23/1982      47 FR 17486
                                             and Standards.
R9-3-301, [excluding subsections (I), (K)]  Installation Permits: General.....       05/03/1983     48 FR 198879
R9-3-302..................................  Installation Permits in                  08/10/1988      53 FR 30220
                                             Nonattainment Areas.
R9-3-303..................................  Offset Standards..................       08/10/1988      53 FR 30220
R9-3-304, [excluding subsection (H)]......  Installation Permits in Attainment       05/03/1983      48 FR 19879
                                             Areas.
R9-3-305..................................  Air Quality Analysis and                 05/03/1983      48 FR 19879
                                             Monitoring Requirements.
R9-3-306..................................  Source Registration Requirements..       05/03/1983      48 FR 19879
R9-3-307..................................  Replacement.......................       05/05/1982      47 FR 19328
R9-3-308..................................  Permit Conditions.................       04/23/1982      47 FR 17485
R9-3-311..................................  Air Quality Models................       04/23/1982      47 FR 17485
R9-3-314..................................  Excess Emissions Reporting........       04/23/1982      47 FR 17485
R9-3-315..................................  Posting of Permits................       04/23/1982      47 FR 17485

[[Page 14047]]

 
R9-3-316..................................  Notice by Building Permit Agencies       04/23/1982      47 FR 17485
R9-3-317..................................  Permit Non-transferrable;                04/23/1982      47 FR 17485
                                             Exception.
R9-3-318..................................  Denial or Revocation of                  04/23/1982      47 FR 17485
                                             Installation or Operating Permit.
R8-3-319..................................  Permit Fees.......................       04/23/1982      47 FR 17485
R9-3-322..................................  Temporary Conditional Permits.....       10/19/1984      49 FR 41026
R9-3-1101.................................  Jurisdiction......................       05/03/1983      48 FR 19879
Appendix 4................................  Fee Schedule for Installation and        09/19/1977      42 FR 16926
                                             Operating Permits.
Appendix 5................................  Fee Schedule for Conditional             09/19/1977      42 FR 46926
                                             Permits.
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C. What is the purpose of this proposed rule?

    The purpose of this proposed rule is to present our evaluation 
under the CAA and EPA's regulations of rules and statutory provisions 
submitted by ADEQ on July 28, 2011, October 29, 2012, and July 2, 2014, 
which are identified in Table 1. We provide our reasoning in general 
terms below, and include our more detailed analysis in the TSD, which 
is available in the docket for this proposed rulemaking.

II. EPA's Evaluation

A. How is EPA evaluating the rules and statutory provisions?

    EPA has reviewed the provisions submitted by ADEQ that are the 
subject of this action, including those governing NSR for stationary 
sources under ADEQ jurisdiction for compliance with the CAA's general 
requirements for SIPs in CAA section 110(a)(2), EPA's regulations for 
stationary source permitting programs in 40 CFR part 51, sections 
51.160 through 51.166, and the CAA requirements for SIP revisions in 
CAA section 110(l) and 193.\6\
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    \6\ CAA section 110(l) requires SIP revisions to be subject to 
reasonable notice and public hearing prior to adoption and submittal 
by States to EPA and prohibits EPA from approving any SIP revision 
that would interfere with any applicable requirement concerning 
attainment and reasonable further progress, or any other applicable 
requirement of the CAA. CAA section 193, which was added by the CAA 
Amendments of 1990, includes a savings clause that provides, in 
pertinent part: ``No control requirement in effect, or required to 
be adopted by an order, settlement agreement, or plan in effect 
before November 15, 1990, in any area which is a nonattainment area 
for any air pollutant may be modified after November 15, 1990, in 
any manner unless the modification insures equivalent or greater 
emission reductions of such air pollutant.''
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    With respect to procedures, CAA sections 110(a) and 110(l) require 
that revisions to a SIP be adopted by the State after reasonable notice 
and public hearing. EPA has promulgated specific procedural 
requirements for SIP revisions in 40 CFR part 51, subpart F. These 
requirements include publication of notices, by prominent advertisement 
in the relevant geographic area, of a public hearing on the proposed 
revisions, a public comment period of at least 30 days, and an 
opportunity for a public hearing.
    Based on our review of the public process documentation included in 
the July 28, 2011, October 29, 2012 and July 2, 2014 submittals, we 
find that ADEQ has provided sufficient evidence of public notice and 
opportunity for comment and public hearings prior to adoption and 
submittal of these rules to EPA.
    With respect to substantive requirements, we have generally 
reviewed the ADEQ provisions that are the subject of our current action 
in accordance with the CAA and applicable regulatory requirements, 
focusing primarily on those that apply to: (1) General preconstruction 
review programs, including for minor sources, under section 
110(a)(2)(C) of the Act; (2) PSD permit programs under part C of title 
I of the Act; and (3) Nonattainment NSR permit programs under part D of 
title I of the Act (NA-NSR). For the most part, ADEQ's submittal 
satisfies applicable CAA requirements, specifically including the 
applicable requirements for these three preconstruction review programs 
and would strengthen the applicable SIP by updating the regulations and 
adding requirements to address new or revised NSR permitting and other 
requirements promulgated by EPA, but the submitted rules also contain 
specific deficiencies that prevent full approval. Below, we discuss 
generally our evaluation of ADEQ's submittal and the deficiencies that 
are the basis for our proposed action on these rules. Our TSD contains 
a more detailed evaluation as well as additional recommendations for 
program improvements.

B. Do the rules meet the evaluation criteria for Minor New Source 
Review?

    Section 110(a)(2)(C) requires each SIP to include a program for the 
regulation of the modification and construction of any stationary 
source within the areas covered by the plan as necessary to assure 
attainment and maintenance of the National Ambient Air Quality 
Standards (NAAQS). In addition to the permit programs required under 
parts C and D of the CAA for PSD sources and nonattainment NSR sources, 
respectively, which are discussed below, EPA's regulations at 40 CFR 
51.160-51.164 provide general programmatic requirements to implement 
this statutory mandate commonly referred to as the ``minor NSR 
program.'' These minor NSR program regulations impose requirements for 
SIP approval of State and local programs that are more general in 
nature as compared with the specific statutory and regulatory 
requirements for PSD and NA-NSR permitting programs. Under EPA's 
regulations governing the minor NSR program, States and local air 
agencies retain a level of discretion to define the types and sizes of 
sources subject to the program, whereas under the PSD and nonattainment 
NSR permitting programs, the sources subject to regulation are 
specified by EPA regulations. The substantive requirements for the 
preconstruction review and permitting of minor stationary sources under 
ADEQ jurisdiction are ADEQ rules R18-2-302.01 and R18-2-334. These 
rules, and other administrative rules included in the minor NSR portion 
of the SIP submittal, satisfy most of the statutory and regulatory 
requirements for minor NSR programs, but these rules also contain 
several deficiencies that form the basis for our proposed limited 
disapproval, as discussed below.
    We are proposing a limited approval and limited disapproval of 
ADEQ's minor NSR program because it is not fully consistent with the 
requirements of 40 CFR 51.160, 40 CFR 51.161, 40 CFR 51.163 and 40 CFR 
51.164, as described below. We find that approval

[[Page 14048]]

of ADEQ's updated minor NSR program will substantially strengthen the 
SIP overall, as the submitted minor NSR program generally has more 
extensive requirements for minor sources and non-major modifications 
than ADEQ's current SIP-approved program and lower permitting 
thresholds that will provide additional mechanisms for protecting the 
NAAQS, as well as updating the SIP with current State regulations for 
minor sources and non-major modifications. However, specific provisions 
of the minor NSR program submittal are inconsistent with federal minor 
NSR program requirements, and these deficiencies must be addressed 
before we can fully approve ADEQ's minor NSR program into the SIP. The 
deficiencies that we have identified with ADEQ's minor NSR program that 
provide the basis for our limited approval and limited disapproval are 
described below.
1. Legally Enforceable Procedures
    40 CFR 51.160 requires that each NSR program contain certain 
legally enforceable procedures. We have identified several deficiencies 
with ADEQ's program as it pertains to these requirements.
    First, as required by 40 CFR 51.160(a), ADEQ's permitting 
procedures are not enforceable in all instances. ADEQ's program allows 
certain sources to begin construction when a ``proposed final permit'' 
is issued by ADEQ, rather than preventing construction until a final 
permit has been issued. See R18-2-101(114), R18-2-302(G), R18-2-334(B), 
R18-2-402(C). The definition for ``proposed final permit'' in R18-2-101 
does not specify that such an action is a final decision for NSR 
purposes. As a result, the program does not provide ADEQ with clear 
authority to prevent construction or modification before it issues a 
final decision on the request for authority to construct as is required 
per 40 CFR 51.160(a) and (b). ADEQ has clarified that, in effect, under 
ADEQ's rules, a proposed final permit is treated as a final 
authorization to construct, and that it will treat proposed final 
permit as a final, appealable agency action under Arizona law.\7\ 
Nevertheless, a revision to ADEQ's NSR program is necessary to ensure 
that these types of permit actions clearly serve as a final authority 
to construct in order to satisfy the federal NSR program requirement 
that the agency be able to prevent construction until and unless it has 
issued a final decision on the request for authority to construct.
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    \7\ ADEQ Memo--Proposed Final Permits to be Treated as 
Appealable Agency Actions, dated February 10, 2015 and ADEQ's 
February 23, 20157 supplement at 2.
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    Second, ADEQ's program does not contain adequate enforceable 
procedures to ensure compliance by sources subject to review under its 
NSR program with the NAAQS as required by 40 CFR 51.160(a)(2) and 
(b)(2). Although NAAQS is a defined term in ADEQ's regulations, see 
R18-2-101(85), ADEQ's NSR program generally does not refer to the NAAQS 
and instead generally references the State's ambient air standards in 
Article 2 of ADEQ's air program. See R18-2-302.01, R18-2-334, and R18-
2-406.\8\ Also, in some instances, ADEQ's NSR regulations simply refer 
to Arizona ambient air quality standards with no specific reference to 
Article 2, which makes the applicable standards ambiguous.\9\ See R18-
2-218, R18-2-406, and R18-2-407. In some instances, ADEQ's NSR program 
does not ensure that a source would not interfere with attainment or 
maintenance of the NAAQS in neighboring areas outside ADEQ's permitting 
jurisdiction, as is required under 40 CFR 51.160(a) and (b), as the 
State air standards are not generally applicable in neighboring 
States,\10\ and the NSR Program submittal does not demonstrate that 
they are applicable in neighboring States for purposes of ADEQ's NSR 
program. See R18-2-302.01(C); R18-2-334(C)(2), (F), and (G); and R18-2-
406(A)(5)(a) and (b). Also, for minor sources subject to permitting 
under R18-2-334, the rule does not meet these federal requirements as 
it does not require ADEQ to evaluate whether the project under review 
will interfere with attainment or maintenance of the NAAQS in all 
cases, and instead allows sources to apply reasonably available control 
technology (RACT) in lieu of such an evaluation and, in some cases, 
appears to allow sources with lower levels of emissions to avoid both 
substantive NAAQS review and RACT requirements. See R18-2-334(C)(1)(a)-
(b). ADEQ has not demonstrated that this approach ensures that all 
sources subject to review under its NSR program will not interfere with 
attainment or maintenance of the NAAQS. While R18-2-334(G) allows 
Director's discretion to require a NAAQS analysis on a case-by-case 
basis, we find this discretion too great to ensure compliance with this 
requirement. Finally, R18-2-302.01(C)(4) needs to include a reference 
to ``or maintenance'' of a standard, instead of just ``attainment of a 
standard.''
---------------------------------------------------------------------------

    \8\ ADEQ's list of state air standards does not contain the 
current PM2.5 annual NAAQS of 12 [mu] g/m\3\ 
PM2.5. See 78 FR 3086, Jan. 13, 2013. This is not a 
disapproval issue for ADEQ's minor NSR and NA-NSR programs, which 
have three years to adopt programs implementing the new NAAQS. 
However, the new NAAQS is applied immediately upon its effective 
date to sources subject to the PSD program.
    \9\ For example, R18-2-407(B) contains ``any such pollutant for 
which no Arizona ambient air quality standard exists.'' ``Arizona 
ambient air quality standard'' is not a defined term in ADEQ's 
regulations.
    \10\ See, for example, the definition of ``attainment area'' in 
R18-2-101, limiting attainment areas to those in Arizona. A.R.S. 
Sec.  49-106 provides, in relevant part: ``The rules adopted by the 
department apply and shall be observed throughout this state, or as 
provided by their terms, and the appropriate local officer, council 
or board shall enforce them.''
---------------------------------------------------------------------------

    Third, for sources subject to ADEQ's registration program at R18-2-
302.01, ADEQ has not demonstrated that its NSR program meets the 
requirement to ensure that sources subject to NSR review comply with 
the applicable portions of the control strategy as required by 40 CFR 
51.160(b)(1).
    Fourth, ADEQ's registration program in R18-2-302.01 does not 
contain enforceable procedures for the owner or operator to submit the 
necessary information for ADEQ to determine whether a source will 
violate the applicable control strategy or interfere with attainment or 
maintenance of the NAAQS as required by 40 CFR 51.160(c). R18-2-
302.01(A)(3) requires applicants to calculate a source's uncontrolled 
potential to emit, but then references provisions in another rule, R18-
2-327(C), that are used to calculate ``actual'' emissions. As such, 
ADEQ's program contains conflicting procedures for calculating 
potential emissions. In addition, rule R18-2-327, is not in the Arizona 
SIP, and has not been submitted to EPA for SIP approval.
    Fifth, ADEQ's program does not meet the requirement that the 
applicant submit information related to the nature and amounts of 
emissions, for certain kinds of emissions units as required by 40 CFR 
51.160(c)(1). For Class I and Class II permits, R18-2-304(E)(9) allows 
sources to avoid providing emission information for ``insignificant 
activities,'' as defined in R18-2-101(68). The term ``insignificant 
activities'' is generally associated with the title V program. Many of 
the activities listed in ADEQ's definition of insignificant activity 
are activities that would not be expected to emit regulated NSR 
pollutants. However, this is not true for all activities, such as those 
listed under R18-2-101(68)(a-c) that include liquid storage tanks, 
combustion engines, and ``low-emitting processes.''
    Sixth, for sources subject to R18-2-302.01, ADEQ's program does not 
meet the requirement in 40 CFR 51.160(d) that its procedures provide 
that approval of construction or modification

[[Page 14049]]

will not affect the responsibility of the owner or operator to comply 
with applicable portions of the control strategy.
    Finally, for sources subject to ADEQ's registration program under 
R18-2-302.01, ADEQ's program does not meet the requirement to use 
Appendix W to 40 CFR part 51 for air quality modeling as required by 40 
CFR 51.160(f)(1).
2. ADEQ's Program Under 40 CFR 51.160(e)
    40 CFR 51.160(e) requires ADEQ's submittal to provide a basis for 
the types and sizes of facilities, buildings, structures, or 
installations that will be subject to review under 40 CFR 51.160. Such 
exclusions are appropriate so long as such sources and modifications 
are not environmentally significant, consistent with the de minimis 
exemption criteria set forth in Ala. Power Co. v. Costle, 636 F.2d 323, 
at 360-361 (D.C. Cir. 1979). Here, we discuss our evaluation of the 
basis provided by ADEQ for the types and sizes of facilities, 
buildings, structures or installations it will subject to review under 
its minor NSR program. Historically, ADEQ's minor NSR program required 
permitting of minor sources and non-major modifications causing an 
increase in potential emissions of a criteria pollutant at or above the 
significant emission rates under the PSD program in 40 CFR 
51.166(b)(23)(i). In a May 22, 1996 letter to ADEQ, EPA Region 9 
indicated that the significant emission rates used by ADEQ for its 
minor NSR permitting program did not represent an acceptable threshold 
for applying the basic preconstruction requirements for minor NSR 
purposes. To address EPA's concerns, ADEQ assessed other potential 
permitting thresholds for its minor NSR program and selected revised 
thresholds for its minor NSR program following this assessment. A 
detailed analysis of ADEQ's assessment is provided in our TSD. ADEQ's 
new minor NSR program established a minimum preconstruction review 
threshold for new or modified stationary sources with potential 
emissions or emissions increases of: 50 tons per year (tpy) of carbon 
monoxide; 20 tpy of NOX, SO2, and VOC; 7.5 tpy 
for PM10; 5 tpy for PM2.5; and 0.3 tpy for lead. 
We find ADEQ's general approach to meeting 40 CFR 51.160(e) acceptable. 
We are proposing a limited disapproval of ADEQ's minor NSR program 
based in part on the following issues concerning the approach:
    First, ADEQ's submittal does not provide a clear basis for 
concluding that the exemption thresholds selected by ADEQ will ensure a 
sufficient percentage of minor sources are subject to review in 
nonattainment areas. As ADEQ points out in its submittal, ADEQ's 
analysis is based on data for Maricopa County \11\, which has lower NSR 
permitting thresholds than the exemption thresholds adopted by ADEQ due 
to Maricopa County's local air quality problems. In addition, (1) some 
of the other permitting programs in Table 3 above have lower permitting 
thresholds in nonattainment areas than those applicable in attainment 
areas under their jurisdiction; (2) in looking at a similar analysis of 
minor source emissions for another permitting program in Region 9, 
which has local air quality problems, the permitting agency generally 
set thresholds that include a larger percentage of emissions in the NSR 
program than the percentage included in ADEQ's program \12\; and (3) 
typically, nonattainment areas have more control requirements that 
apply to smaller minor sources, as compared to attainment areas. As 
such, ADEQ's basis does not clearly address how its adopted 
preconstruction review exemption thresholds adequately address 
nonattainment areas.\13\
---------------------------------------------------------------------------

    \11\ ADEQ does not have jurisdiction for permitting of minor 
sources in Maricopa County, AZ.
    \12\ See EPA's Technical Support Document for Revision of Air 
Quality Implementation Plan; California; Sacramento Metropolitan Air 
Quality Management District; Stationary Source Permits, 78 FR10589, 
Feb. 2, 2014, at 6-7, describing the thresholds applicable in 
Sacramento as generally excluding less than 5% of the emissions 
inventory except for SO2.
    \13\ In addressing this deficiency, ADEQ does not necessarily 
have to consider lower permitting exemption thresholds in 
nonattainment areas. For example, ADEQ could provide further 
analysis to demonstrate that the adopted thresholds are appropriate 
for nonattainment areas or consider a different approach, such as 
requiring minor sources in nonattainment areas subject to a SIP 
requirement for the nonattainment pollutant, or its precursors, to 
obtain a registration, if ADEQ can demonstrate that such an approach 
would serve to satisfy the requirements of 40 CFR 51.160.
---------------------------------------------------------------------------

    Second, while EPA agrees that, in general, certain types of 
equipment may be exempted from the minor NSR program, ADEQ must provide 
a basis under 40 CFR 51.160(e) to demonstrate that regulation of the 
equipment exempted in R18-2-302(C) and A.R.S. Sec.  49-426(B) is not 
needed for ADEQ's program to meet federal NSR requirements for 
attainment and maintenance of the NAAQS or review for compliance with 
the control strategy. Such demonstration must address: (1) An 
explanation of whether the regulatory exemption in R18-2-302(C) for 
``agricultural equipment used in normal farm operations'' constitutes 
an interpretation or refinement of the exemption for such sources in 
A.R.S. Sec.  49-426(B), and how the two provisions apply to ADEQ's NSR 
program; (2) Identification of the types of equipment ADEQ considers to 
be ``agricultural equipment used in normal farm operations'' and 
whether this type of equipment could potentially be expected to occur 
at a stationary source subject to title V of the Act, 40 CFR parts 60, 
61, or 63, or major NSR, and, if so, whether such equipment is subject 
to NSR review at such sources; (3) ADEQ's basis for determining that 
``agricultural equipment used in normal farm operations'' does not need 
to be regulated as part of ADEQ's minor NSR program under 40 CFR 
51.160(e); and (4) ADEQ's interpretation of the exemption for fuel 
burning equipment in A.R.S. Sec.  49-426(B) and how it does, or does 
not, apply in the context of its major and minor NSR programs, and, to 
the extent such equipment is not subject to NSR review, ADEQ's basis 
for determining that equipment exempted under this provision does not 
need to be reviewed as part of ADEQ's minor NSR program under 40 CFR 
51.160(e).
    Finally, ADEQ's minor NSR program sets a permitting exemption 
threshold for PM2.5 of 5 tons per year, but ADEQ's analysis 
does not provide a basis for this threshold.
3. Public Availability of Information
    40 CFR 51.161 requires that each NSR program contain certain 
procedures related to public participation. We have identified several 
deficiencies with ADEQ's program as it pertains to these requirements.
    First, ADEQ's program does not ensure that NSR review for all minor 
sources regulated under ADEQ's NSR program, as ADEQ defines it pursuant 
to 40 CFR 51.160(e), is subject to public notice and comment consistent 
with 40 CFR 51.161(a). 40 CFR 51.161(a) requires that the program under 
51.160 provide for public comment on the information submitted by 
owners or operators. In addition, the public information must include 
ADEQ's analysis of the effects of construction or modification on 
ambient air, including ADEQ's proposed approval or disapproval. ADEQ's 
program does not meet this requirement because: (1) ``modification'' of 
existing sources that become subject to the registration program under 
R18-2-302.01 (currently only ``construction'' of a source) are not 
subject to public notice (see R18-2-302.01(B)(3)); (2) R18-2-334(G) 
exempts most modifications from public notice; (3) R18-2-330 does not 
clearly define which public notice requirements apply to registrations; 
and (4) public participation does not appear to be

[[Page 14050]]

required for a proposed disapproval of an application for any portion 
of ADEQ's NSR program (registration, minor NSR, or major NSR).
    Second, ADEQ's registration program at R18-2-302.01(F) does not 
contain the necessary enforceable procedures for sources taking 
``elective limits'' to limit their potential to emit in a manner that 
allows the source to avoid the public participation requirements in 40 
CFR 51.161(a), while otherwise being subject to the registration 
program. See R18-2-302.01(B)(3)(b) and R18-2-302(E)(1). While ADEQ's 
rule contains requirements for monitoring, recordkeeping, and reporting 
of elective limits, these requirements are not sufficiently enforceable 
for purposes of limiting the source's potential to emit, and thereby 
avoiding public notice, as well other substantive requirements of 
ADEQ's minor NSR program when issuing a registration. In order to meet 
practical enforceability requirements for limiting the potential to 
emit (PTE), R18-2-302.01(F) must also contain (1) a technically 
accurate limitation and the portions of the source subject to the 
limitation and (2) the time period for the limitations (hourly, daily, 
monthly, etc.). Further, if the limitation is over a period longer than 
daily, R18-2-302.01(F) must specify when to compile daily records to 
show compliance with the elected limit. Additional detail on this issue 
is provided in our TSD.
    Third, ADEQ's NSR program does not ensure, for all sources subject 
to NSR review, the availability for public inspection, in at least one 
location in the area affected, of the information submitted by the 
owner or operator and of ADEQ's analysis on the effect on air quality 
as required by this federal regulation. R18-2-330(D)(11) requires the 
public notice to identify the nearest ADEQ office where documents can 
be inspected, but there are only two department offices for ADEQ. See 
40 CFR 51.161(b)(1). We do not interpret this provision as meeting the 
requirement to make information available in the ``area affected.'' In 
addition, the public notice requirements do not make reference to 
providing ADEQ's analysis for public inspection. Potentially, this is 
covered by ``all other materials available to the Director that are 
relevant to the permit decision''.\14\ But it is not clear that ADEQ 
would interpret this to mean the Director's own analysis.
---------------------------------------------------------------------------

    \14\ This requirement is met for ADEQ's registration program at 
R18-2-302.01(B)(3)(a).
---------------------------------------------------------------------------

    Finally, ADEQ's NSR program does provide notice to the necessary 
parties in 40 CFR 51.161(d) for sources required to obtain 
registrations under R18-2-302.01.
4. Administrative Procedures
    40 CFR 51.163 requires each NSR program to include administrative 
procedures that will be followed in making the determinations specified 
in 40 CFR 51.160(a). While ADEQ's program generally meets the 
requirements of this provision, ADEQ's submittal contains references to 
other ADEQ rules, R18-2-317 and R18-2-317.02, which are not in the SIP 
and have not been submitted for SIP approval. See R18-2-306.02(D), R18-
2-319(I), R18-2-304(J), R18-2-306(A), and R18-2-306.02(D).
5. Stack Height Procedures
    40 CFR 51.164 requires that each NSR program contain certain 
provisions related to good engineering practice for stack heights. In 
addition to reviewing ADEQ's submittal as compared with the NSR program 
requirements of 40 CFR 51.164, we also reviewed ADEQ's submittal as it 
relates to certain general SIP program requirements in 40 CFR 51.100 
and 51.118. The stack height provisions in the NSR program rely on the 
general stack height provisions in 40 CFR 51.118(b), which in turn 
references the definitions in 40 CFR 51.100(hh) through (kk). We have 
identified several deficiencies with ADEQ's program as it pertains to 
these requirements.
    First, ADEQ's submittal does not meet the public hearing 
requirements in 40 CFR 51.164 and 51.118(a). While R18-2-332(E) 
contains a reference to holding a public hearing, when required, the 
provision references ADEQ's public hearing provision in R18-1-402. R18-
1-402 is not in the SIP and has not been submitted for SIP approval.
    Second, ADEQ's submittal does not contain language that meets the 
exception in 40 CFR 51.118(b): ``except where pollutants are being 
emitted from such stacks or using such dispersion techniques by 
sources, as defined in section 111(a)(3) of the Clean Air Act, which 
were constructed, or reconstructed, or for which major modifications, 
as defined in Sec. Sec.  51.165(a)(1)(v)(A), 51.166(b)(2)(i) and 
52.21(b)(2)(i), were carried out after December 31, 1970.'' In 
addition, R18-2-332(A)(3) incorrectly references July 1, 1975 instead 
of July 1, 1957 as that date appears in 40 CFR 51.118(b).
    Third, ADEQ's submittal does not contain a requirement that owners 
or operators seeking to rely on the equation in 40 CFR 51.100(ii)(2)(i) 
produce evidence that the equation was actually relied on in 
establishing an emission limitation. See R18-2-332(B)(2).
    Finally, ADEQ's submittal contains a provision at R18-2-332(D) that 
provides additional provisions for sources ``seeking credit because of 
plume impaction which results in concentrations in violation of 
national ambient air quality standards or applicable maximum allowable 
increases.'' This provision is not contained in the federal regulations 
and appears to allow for the use of stack heights beyond GEP stack 
height, as defined in 40 CFR 51.100(ii).
    In sum, while we have identified several disapproval issues with 
ADEQ's minor NSR program requirements as they correspond to federal 
minor NSR program requirements, compared to the existing SIP, approving 
ADEQ's minor NSR program into the Arizona SIP nonetheless represents a 
significant overall strengthening of ADEQ's NSR program, as discussed 
above. Thus, we are proposing a limited approval and limited approval 
of ADEQ's minor NSR program submittal.

C. Do the rules meet the evaluation criteria for Prevention of 
Significant Deterioration (PSD)?

    Part C of title I of the Act contains the provisions for the 
prevention of significant deterioration (PSD) of air quality in areas 
designated ``attainment'' or ``unclassifiable'' for the NAAQS, 
including preconstruction permit requirements for new major sources or 
major modifications proposing to construct in such areas. EPA's 
regulations for SIP-approved PSD permit programs are found in 40 CFR 
51.166.
    ADEQ rules R18-2-402 and R18-2-406 contain the substantive 
requirements for review and permitting of PSD sources under ADEQ's 
jurisdiction. These regulations satisfy most of the statutory and 
regulatory requirements for PSD permit programs, but these and other 
rules in the NSR SIP submittal contain several deficiencies that form 
the basis for our proposed limited disapproval, or proposed 
disapprovals as discussed below.
    Although ADEQ's submittal meets most PSD program requirements, we 
are proposing to disapprove two specific aspects of ADEQ's PSD program. 
The ADEQ rule provisions that we are proposing to disapprove are 
directly comparable to federal PSD rule provisions that have been 
vacated by federal courts, and we find that they are separable from the 
remainder of ADEQ's PSD program. Accordingly, we find these provisions 
suitable for disapproval at this time. These provisions are described 
below in Sections II.C.8 and 9.

[[Page 14051]]

    For the remainder of ADEQ's PSD program submittal, we are proposing 
limited approval and limited disapproval. We find that approval of 
ADEQ's updated PSD program, aside from the two aspects that are 
separable and will be disapproved as mentioned above, will 
substantially strengthen the SIP overall, particularly as the current 
SIP-approved PSD program is significantly out of date when compared 
with current federal PSD regulatory requirements as well as current 
State regulations. See our discussion in Section G below. However, 
specific provisions of the PSD SIP program submittal are inconsistent 
with PSD program requirements, and these deficiencies must be addressed 
before we can fully approve ADEQ's PSD program. The deficiencies that 
we have identified with ADEQ's PSD program that provide the basis for 
our limited disapproval are described below in Sections II.C.1 through 
7.
1. General PSD Program Requirements
    First, ADEQ's submittal often refers to Articles 9 and/or 11 of 
ADEQ's regulations where the federal regulations refer to 40 CFR parts 
60, 61, or 63; or, similarly, sections 111 or 112 of the Act. See R18-
2-101(53)(a), (122)(b); R18-2-401(10); R18-2-402(G)(2); and R18-2-
406(A)(4). Articles 9 and 11 are where ADEQ incorporates by reference 
the federal regulations in 40 CFR part 60, 61, and 63 (which EPA 
implements under sections 111 and 112 of the Act). However, these 
Articles are not in the SIP, have not been submitted for SIP approval, 
and do not contain provisions equivalent to all of the subparts in 
parts 60, 61, and 63. See 40 CFR 51.166(b)(1)(iii)(aa), (b)(12), 
(b)(16)(i), (b)(17), (b)(47)(ii)(c), (b)(49)(ii), (i)(1)(ii)(aa), and 
(j).
    Second, ADEQ's submittal uses the term ``increment'' or 
``incremental ambient standard,'' but does not specifically define 
these terms or otherwise identify what is meant by these terms. While 
the PSD program does not specifically define the term ``increment'' 
either, the term is introduced at 40 CFR 51.166(c)--Ambient air 
increments and other measures. (emphasis added) 40 CFR 51.166(c) then 
goes on to identify the specific increment values as ``maximum 
allowable increases.'' ADEQ appears to have taken the approach of using 
the term ``maximum allowable increase'' to refer to the increments, 
which is acceptable. ADEQ adopted the increments, or maximum allowable 
increases, in R18-2-218--Limitation of Pollutants in Classified 
Attainment Areas. However, in other rules ADEQ uses ``increment'' or 
``incremental ambient standard'' where it appears the intent is to 
refer to the increments established in R18-2-218 and identified in 
ADEQ's rules as the ``maximum allowable increases.'' See R18-2-406(E), 
R18-2-412(G)(b), R18-2-101(51), R18-2-319, R18-2-320.
    Third, on January 15, 2013, EPA issued a final rule revising the 
NAAQS for PM2.5 for the annual averaging period, lowering 
the level of the NAAQS from 15.0 to 12.0 mg/m\3\, effective March 18, 
2013 (see 78 FR 3086). This new NAAQS is required to be implemented for 
PSD sources (unless otherwise grandfathered under provisions at 40 CFR 
51.166(i)(10)) beginning with the effective date of the NAAQS. However, 
ADEQ's PSD program does not provide for the review of new or modified 
sources for compliance with this new NAAQS as required in 40 CFR 
51.166(b)(2)(iii)(i)(2), (b)(35), (d), (g)(3)(iii), (k), and (m)(1). 
Instead, ADEQ's PSD program currently references state ambient air 
quality standards, which are set at levels that are equivalent to all 
of the current NAAQS, except for this newly adopted PM2.5 
NAAQS. See R18-2-218(F)(b)(ii), R18-2-401(25), R18-2-406(A) and R18-2-
407(B). Because of the general approach used in ADEQ's NSR program with 
respect to incorporating the NAAQS, i.e., the program's reference to 
state air quality standards instead of the NAAQS, any changes EPA makes 
to the NAAQS will not be included in ADEQ's program until ADEQ revises 
its air quality standards rules to adopt the revised NAAQS as state air 
quality standards. This does not relieve any owner or operator from the 
requirement to comply with all NAAQS at the time a final PSD permit is 
issued, including the recently revised new PM2.5 NAAQS 
(unless otherwise grandfathered under 40 CFR 51.166). See CAA section 
165(a)(3).
    Fourth, R18-2-406(A) contains a reference to R18-2-408, but R18-2-
408 is not in the SIP and has not been submitted for SIP approval.
    Fifth, ADEQ's submittal allows a source at R18-2-302(G) and R18-2-
402(C) to begin actual construction upon the issuance of a proposed 
final permit. As previously discussed, ADEQ's program is ambiguous as 
to whether a proposed final permit, as defined in R18-2-101(114), 
constitutes final action by the Director. While ADEQ has issued 
guidance clarifying that it treats ``proposed final permits'' as final 
actions for purposes of preconstruction permitting \15\, to obtain full 
PSD program approval, ADEQ's regulations must make clear that a source 
may not begin actual construction before a final determination on a PSD 
permit application is made by the Director.
---------------------------------------------------------------------------

    \15\ See ADEQ memo dated February 10, 2015 related to proposed 
final permits, and ADEQ's February 23, 2015 Supplement at 2.
---------------------------------------------------------------------------

    Sixth, ADEQ's NSR submittal contains provisions that allow for 
exclusions from increment consumption, for certain temporary emissions, 
that do not conform to the requirements in the analogous federal rule. 
First, ADEQ's rule at R18-2-218(F)(5) requires only the ADEQ Director's 
approval for temporary emissions beyond two years, but the federal 
program requirements at 40 CFR 51.166(f)(i)(v) and 51.166(f)(4) require 
the Administrator's approval to allow temporary emissions that exceed 
two years. In addition, ADEQ's program language does not reference a 
specific time period beyond two years that it would allow for 
exclusions from increment consumption, which is not consistent with the 
federal regulation's requirement at 40 CFR 51.166(f)(4) that the time 
for such exclusions be specified in the plan. Finally, the provision at 
R18-2-218(F)(5)(b)(ii), which references the state ambient air quality 
standards, must be applied to ``any'' air quality control region. As 
currently written this provision does not clearly apply to areas 
outside of Arizona where Arizona's standards would not generally apply.
    Seventh, ADEQ's submittal contains a provision at R18-2-406(E) 
providing an exemption for certain portable stationary sources with a 
prior permit that contains requirements equivalent to the PSD 
requirements in 40 CFR 51.166 (j) through (r), as allowed by 40 CFR 
51.166(i)(1)(iii). However, ADEQ's rule at R18-2-406(E) is worded 
broadly to also allow an exemption for portable sources that have been 
permitted under Article 4 of ADEQ's regulations, which also includes 
nonattainment NSR permits and PAL permits. We do not interpret this 
federal exemption as generally applying to such permits, as it is not 
clear that such permits contain requirements ``equivalent'' to those in 
40 CFR 51.166(j) through (r).
    Eight, ADEQ's submittal contains conditions generally meeting the 
requirements of 40 CFR 51.166(k)(1) in rule R18-2-406(A)(5)(a). 
However, R18-2-406(A)(5) contains an ``or'' between subsections (a) and 
(b) that could be interpreted as allowing a source to demonstrate it 
will not contribute to an

[[Page 14052]]

increase above the significance levels in an adjacent nonattainment 
area in lieu of the demonstration required by R18-2-406(A)(5)(a). The 
provisions of subsection (b) relate to requirements under a different 
portion of the NSR program--specifically under 40 CFR 51.165. As such, 
it is likely ADEQ would interpret subsections (a) and (b) as separate 
requirements with which a source must demonstrate compliance. 
Nevertheless, the potential for misinterpretation of this substantive 
requirement of the PSD program provides a basis for our limited 
disapproval of the PSD program submittal. In addition, R18-2-
406(A)(5)(a) requires that a person applying for a PSD permit 
demonstrate that the project would not cause a violation of any maximum 
allowable increase over the baseline concentration in ``any attainment 
or unclassifiable area.'' However, ADEQ's definition for ``attainment 
area'' in the SIP at R18-2-101(19) limits attainment areas to those 
``in the state.'' In addition, as discussed previously, it is not clear 
that ADEQ's references to the state's ambient air standards would apply 
in areas outside of Arizona.
    Ninth, ADEQ's submittal includes R18-2-406(A)(6)(b), which 
specifies that the use of a modified or substituted model must be 
subject to public notice and the opportunity for public comment, but 
neither the rule nor the submittal makes clear the procedures that 
would be used for notice and comment for this purpose or demonstrates 
that such procedures would be consistent with 40 CFR 51.102, as 
required by 40 CFR 51.166(l)(2).
    Tenth, ADEQ's PSD SIP submittal does not appear to specifically 
address the requirements of 40 CFR 51.166(n)(1) and (3), which require 
that the SIP must require that (1) the owner or operator of a proposed 
source or modification shall submit all information necessary to 
perform any analysis or make any determination required under 
procedures established in accordance with 40 CFR 51.166, and (2) upon 
request of the state, the owner or operator shall also provide 
specified information concerning air quality impacts and growth. ADEQ's 
submittal at R18-2-304, R18-2-402(G) and R18-2-407 identifies the 
information necessary for a complete application under this program and 
requires applicants to respond to deficiencies in the application, but 
these provisions do not appear to fully address the requirements of 40 
CFR 51.166(n)(1) and (3).
    Eleventh, ADEQ's submittal contains an apparent typographical error 
in R18-2-402(F)(1)(c), which includes a cross-reference to R18-2-
401(20)(b)(iii) rather than R18-2-401(20)(b)(iv). See 40 CFR 
51.166(r)(6).
    Finally, ADEQ's submittal does not require owners or operators to 
make information required under 40 CFR 51.166(r)(6) available for 
review upon request by the Director or the general public pursuant to 
the requirements in 40 CFR 70.4(b)(3)(viii) as is required by 40 CFR 
51.166(r)(7).
2. Restrictions on Area Classifications
    40 CFR 51.166(e) contains provisions related to restrictions on 
area classifications (Class I, II, or II). We have identified several 
deficiencies in ADEQ's program with respect to these provisions.
    First, ADEQ's submittal contains requirements for area 
classifications in R18-2-217. However, ADEQ's submittal does not 
completely meet the requirements of 40 CFR 51.166(e) and section 162(a) 
of the Act, which require certain areas in existence on August 7, 1977 
to be designated as Class I areas. Such designations apply to any 
boundary changes made to those Class I areas after August 7, 1977. 
While ADEQ generally includes this requirement at R18-2-217(B), its 
rule limits such boundary changes to those made prior to March 12, 
1993.
    Second, ADEQ's NSR submittal at R18-2-217 does not contain a 
provision consistent with the federal regulatory requirement for Class 
I area redesignations prior to August 7, 1977 in rule R18-2-217 or 
elsewhere as required by 40 CFR 51.166(e)(2). Even if it is the case 
that there are no areas in Arizona that were redesignated Class I prior 
to August 7, 1977, ADEQ's program must recognize Class I area 
designations under this provision that may have been made in other 
states for which sources within ADEQ may have an impact. See 40 CFR 
51.166(e)(2).
    Finally, ADEQ's NSR submittal does not include a provision that is 
fully consistent with 40 CFR 51.166(e)(3). While ADEQ's rules generally 
meet this requirement at R18-2-217(D), this rule does not fully meet 
the requirements of 40 CFR 51.166(e)(3) because (1) it is not clear 
what is meant in ADEQ's rule by ``all other areas'' and (2) it does not 
contain a provision that ensures that ADEQ recognizes federal 
legislation that specified the area classification of a particular 
area.
3. Redesignations
    40 CFR 51.166(g) contains provisions allowing certain areas 
classified as Class I, II, or III to be redesignated to another 
classification. We have identified several deficiencies in ADEQ's 
program with these provisions.
    First, ADEQ's submittal contains provisions at R18-2-217(A) 
identifying that attainment and unclassifiable areas in the State shall 
be designated as Class I, II, or III. However, this portion of the PSD 
program applies to all areas of the State. That is, all areas of the 
State must be designated as Class I, II, or III irrespective of their 
attainment designation under Section 107 of the Act. See 40 CFR 
51.166(g)(1).
    Second, ADEQ's submittal contains provisions at R18-2-217(E) for 
allowing the state to redesignate certain areas, but the submittal does 
not adequately meet the public participation requirements specified in 
the federal regulation at 40 CFR 51.166(g)(2)(i), which requires a 
public hearing consistent with the procedures in 40 CFR 51.102. ADEQ's 
redesignation provisions do not specify the public hearing procedures 
that will be used. See 40 CFR 51.166(g)(2)(i).
    Third, ADEQ's provisions for redesignating areas to Class III do 
not clearly identify which areas may be designated as Class III as 
specified in 40 CFR 51.166(g)(3).
    Fourth, R18-2-217(E) allows for the redesignation to be approved by 
the Governor or the Governor's designee. However, the federal program 
at 40 CFR 51.166(g)(3)(ii) specifically requires the Governor's 
approval and does not allow for this approval to be delegated. See 40 
CFR 51.166(g)(3)(ii).
    Fifth, R18-2-217(F)(4) contains a reference to ``maximum allowable 
concentration'' which appears to refer to R18-2-218(E). However, R18-2-
218(E) references the ``ambient air quality standards in this 
Article.'' The state's ambient air quality standards do not generally 
apply in areas outside of Arizona, and ADEQ's NSR submittal does not 
demonstrate that they would apply outside of Arizona for purposes of 
R18-2-217(F)(4). See 40 CFR 51.166(g)(3)(iii).
    Finally, ADEQ's provisions do not clearly require that a permit 
application that can only be approved if an area is redesignated to 
Class III, and material submitted as part of that application, must be 
available for public inspection prior to the public hearing on the 
redesignation to Class III. See 40 CFR 51.166(g)(3)(iv).
4. Impacts on Class I Areas
    40 CFR 51.166(p) contains additional requirements related to 
protection of Federal Class I areas. We have identified several 
deficiencies in ADEQ's program with these provisions.

[[Page 14053]]

    First, ADEQ's submittal does not address the requirements of 40 CFR 
51.166(p)(1), but they are generally addressed by existing SIP 
requirements in R9-3-304(H). However, the existing SIP only requires 
application information to be submitted to the Federal Land Manager, 
and does not require that this information be provided to EPA as 
required by this provision. Consistent with 40 CFR 51.166(p)(2), the 
Federal Land Manager works in consultation with EPA on the protection 
of Class I lands.
    Second, ADEQ's submittal does not address the requirement under 40 
CFR 51.166(p)(3), but it is addressed by the existing SIP requirement 
in R9-3-304(H)(1). However, the existing SIP contains outdated maximum 
allowable increases that must be updated. See 40 CFR 51.166(p)(3).
    Finally, ADEQ's submittal generally includes the provisions of 40 
CFR 51.166(p)(4) at R18-2-406(F)(2), but contains the phrase ``no 
significant adverse impacts,'' which is inconsistent with the federal 
regulation which requires a demonstration of ``no adverse impacts.'' 
The addition of the word ``significant'' is somewhat ambiguous in this 
context, but appears to allow variances under circumstances not allowed 
under the analogous federal regulation.
5. Public Participation
    40 CFR 51.166(q) contains several specific public participation 
requirements for issuing PSD permits. We have identified several public 
participation deficiencies in ADEQ's program.
    First, ADEQ's submittal does not ensure that materials available 
during the public comment period are available in each region in which 
the proposed source would be constructed as required by 40 CFR 
51.166(q)(2)(ii). While ADEQ's program at R18-2-330(D)(11) requires 
these materials to be available at the nearest Department office, ADEQ 
only has two Department offices. As such, it is not clear that in all 
instances the public affected by a proposed project would have 
reasonable access in their region to the materials specified in 40 CFR 
51.166(q)(2)(ii).
    Second, ADEQ's submittal does not require ADEQ to notify the public 
of (1) the degree of increment consumption that is expected from the 
source or modification, or (2) the Director's preliminary 
determination, as required by 40 CFR 51.166(q)(2)(iii).
    Third, ADEQ's submittal does not require ADEQ to make the public 
comments and the written notification of its final determination 
available in the same location as the preliminary documents as required 
by 40 CFR 51.166(q)(2)(vi) and (viii).
    Finally, ADEQ's submittal requires the Director to take final 
action on an application within one year of receipt of a complete 
application--R18-2-402(I)(3). See 40 CFR 51.166(q)(2)(vii). However, 
ADEQ's program also indicates that a source may begin actual 
construction once a ``proposed final permit'' is obtained. See R18-2-
402(C) and R18-2-302(G). ADEQ's regulations are ambiguous as to whether 
a proposed final permit, as defined in R18-2-101(114), constitutes 
final action by the Director that is subject to administrative and/or 
judicial review. As EPA has stated previously in the context of our 
actions on other State SIP submittals, we interpret the CAA to require 
an opportunity for judicial review of a decision to grant or deny a PSD 
permit, whether issued by EPA or by a State under a SIP-approved or 
delegated PSD program. 77 FR 65305, 65306, Oct. 26, 2012 (EPA's 
approval of the San Joaquin Valley Unified Air Pollution Control 
District's PSD program into the California SIP); see also 61 FR 1880, 
1882. Jan. 24, 1996 (EPA's proposed disapproval of Virginia's PSD 
program SIP revision due to State law standing requirements that 
limited judicial review); 72 FR 72617, 72619, Dec. 21, 2007 (in 
approving South Dakota's PSD program, EPA stated that it interprets the 
CAA and regulations to require at minimum an opportunity for state 
judicial review of PSD permits). EPA continues to interpret the 
relevant provisions of the Act as described in these prior rulemaking 
actions. While ADEQ has issued guidance clarifying that it treats 
``proposed final permits'' as ``appealable agency actions,'' under 
Arizona law,\16\ in order to obtain full PSD program approval, ADEQ's 
regulations must make clear that a source may not begin actual 
construction before a final determination on a PSD permit application 
is made by the Director, which would be subject to administrative and/
or judicial review.
---------------------------------------------------------------------------

    \16\ See ADEQ memo dated February 10, 2015 related to proposed 
final permits. ADEQ submitted this memo in its February 23, 2015 
supplement.
---------------------------------------------------------------------------

6. Plantwide Applicability Limits
    ADEQ's rules contain provisions for using plantwide applicability 
limits (PALs) in R18-2-412. We have identified the following 
deficiencies with ADEQ's PALs provisions program as they relate to the 
PSD program.
    First, neither the ADEQ regulatory provisions for PALs at R18-2-412 
nor the ADEQ regulatory definitions in R18-2-401 that apply in the 
context of major sources and major modifications contain a definition 
for major emissions unit as is required by 40 CFR 51.166(w)(2)(iv). 
(This term is also not included in the definitions at R18-2-101 or R18-
2-301 that ADEQ submitted for approval as part of this action.)
    Second, ADEQ's PAL provision for calculating baseline emissions at 
R18-2-412(B)(2) does not specify that baseline actual emissions are to 
include emissions associated not only with operation of the unit, but 
also emissions associated with startup, shutdown and malfunction, as is 
required by 40 CFR 51.166(w)(3)(ii).
    Third, ADEQ's PAL provisions at R18-2-412(H) contain an incorrect 
reference to (H)(4) instead of the definition for major modification, 
and R18-2-412(H)(5) uses ``eliminated'' where the federal regulation 
uses ``established.'' See 40 CFR 51.166(w)(9).
    Finally, ADEQ's PAL renewal provisions at R18-2-412(I)(1) must 
contain a reference to subsection (D) of R18-2-412 instead of (F). In 
addition, R18-2-(I)(4)(a) must reference subsection (E) of R18-2-412. 
See 40 CFR 51.166(w)(10).
7. Definitions
    ADEQ's submittal contains definitions applicable to the PSD program 
that do not fully meet the requirements of 40 CFR 51.166(b)(1), which 
requires each State plan to contain specific definitions for the PSD 
program. Deviations from the wording are approvable if the State 
specifically demonstrates that the submitted definition is more 
stringent, or at least as stringent, in all respects as the 
corresponding definition in 40 CFR 51.166(b). We have carefully 
reviewed the definitions used in ADEQ's PSD program as compared with 
the federal PSD definitions in 40 CFR 51.166(b) and have found that, 
generally, ADEQ's submittal contains the definitions necessary to 
implement a PSD program. However, a number of ADEQ's definitions do not 
meet the requirements of 40 CFR 51.166(b)(1) because their wording 
deviates from the wording in the corresponding federal regulatory 
definitions in 40 CFR 51.166(b)(1) in a manner that may be less 
stringent than the federal definitions, and the State has not 
demonstrated otherwise.
    Major stationary source at 40 CFR 51.166(b)(1)--language from 
subparagraph 40 CFR 51.166(b)(1)(i)(c) not included in the definition 
at R18-2-101(75). See also discussion below of the definition of 
``stationary source'' in 40 CFR 51.166(b)(5).

[[Page 14054]]

    Net emissions increase at 40 CFR 51.166(b)(3)--ADEQ's definition at 
R18-2-101(87)(c) identifies that an increase or decrease in actual 
emissions is creditable only to the extent that the Director has not 
relied on it in issuing a permit. However, this definition is broader 
than the definition in the PSD program, which only specifies that the 
reviewing authority has not relied on the increase or decrease in 
issuing a PSD permit. In some respects this makes ADEQ's definition 
more stringent (decreases), but in other respects less stringent 
(increases). In addition, the equivalent of paragraph 40 CFR 
51.166(b)(3)(viii) is not included in ADEQ's definition at R18-2-
101(87).
    Stationary source at 40 CFR 51.166(b)(5)--the federal regulation at 
40 CFR 51.166(b)(5) defines this term as ``any building, structure, 
facility or installation which emits or may emit a regulated NSR 
pollutant,'' with ``regulated NSR pollutant'' also being a federally 
defined term at 40 CFR 51.166(b)(49), whereas ADEQ's regulation at R18-
2-101(39) defines ``stationary source'' as ``any building, structure, 
facility or installation subject to regulation pursuant to A.R.S. Sec.  
49-426(A) which emits or may emit any air pollutant,'' with ``air 
pollutant'' being an undefined term in ADEQ's regulation. We note that 
A.R.S. Sec.  49-426(A) provides a cross-reference to certain exemptions 
from permitting identified in A.R.S. Sec.  49-426(B), specifically 
agricultural equipment used in normal farm operations and certain fuel 
burning equipment, which do not appear to be consistent with the 
federal PSD definition. The federal definition for stationary source is 
very broad and does not exclude these source categories. We agree that 
it is acceptable for ADEQ to limit its NSR program to certain kinds of 
stationary sources, as specified in 40 CFR 51.160(e), but the federal 
definition for a stationary source in the context of the PSD program is 
not the appropriate place for such an exclusion, as it does not allow 
exclusions for certain source categories.
    Major source baseline date at 40 CFR 51.166(b)(14)--language 
equivalent to paragraph 40 CFR 51.166(b)(14)(iv) is not included at 
ADEQ's definition in R18-2-218(B)(1).
    Baseline area 40 CFR 51.166(b)(15)--ADEQ's definition at R18-2-
218(D) contains an incorrect reference to R18-2-217 rather than 
referring to section 107(d)(1)(A)(ii) or (iii) of the Act or the 
equivalent; also, language equivalent to that in paragraph 40 CFR 
51.166(b)(15)(iii) is not included.
    Allowable emissions at 40 CFR 51.166(b)(16)--ADEQ's definition at 
R18-2-101(13)(b) does not include the ``future compliance date'' 
language that is in 40 CFR 51.166(b)(16)(ii) and ADEQ has not 
demonstrated that its regulatory language is at least as stringent as 
the federal definition.
    Federally enforceable at 40 CFR 51.166(b)(17)--ADEQ's definition at 
R18-2-101(53)(d) identifies that requirements included in permits 
pursuant to R18-2-306.01 or R18-2-306.02 are included in the definition 
of federally enforceable requirements, but excludes those requirements 
that are identified as ``enforceable only by the state.'' With this 
action, we approving R18-2-306.01 and R18-2-306.02 into the SIP, making 
requirements pursuant to these rules federally enforceable. As such, 
ADEQ does not have the discretion to identify some of those 
requirements as only enforceable by the state.
    Complete at 40 CFR 51.166(b)(22)--ADEQ's definition at R18-2-401(4) 
is missing the second sentence of the federal definition.
    Significant at 40 CFR 51.166(b)(23)- ADEQ definition at R18-2-
101(130)(e) uses ``milligrams'' instead of ``micrograms'' as required 
in paragraph 40 CFR 51.166(b)(23)(iii).
    Projected actual emissions at 40 CFR 51.166(b)(40)--ADEQ's 
definition at R18-2-401(20)(b)(iii) does not specifically require 
inclusion of emissions from malfunctions in the determination of 
projected actual emissions, and exempts emissions from a shutdown 
associated with a malfunction from such determination, while the 
federal definition at 40 CFR 51.166(b)(40)(ii)(b) requires that 
emissions from both shutdowns and malfunctions be included.
    Subject to regulation at 40 CFR 51.166(b)(48)--this definition is 
not included in ADEQ's NSR SIP submittal. ADEQ did not adopt a 
definition for the term ``subject to regulation'' or include such 
definition as part of the NSR SIP submittal, presumably because the 
federal definition of the term contains the requirements of the 
Greenhouse Gas (GHG) Tailoring Rule, and GHGs cannot be regulated under 
Arizona state law.\17\ We note, however, that while the GHG program 
requirements are contained as part of the definition of the term 
``subject to regulation,'' the federal definition of this term also 
contains non-GHG-specific program elements for determining when a 
pollutant is ``subject to regulation.'' As such, ADEQ must add a 
definition to its PSD regulations to address these elements of the term 
``subject to regulation'' in order to obtain full program approval.
---------------------------------------------------------------------------

    \17\ ADEQ is currently subject to a Federal Implementation Plan 
under the PSD program for GHGs because ADEQ did not adopt a PSD 
program for the regulation of GHGs. See 40 CFR 52.37. ADEQ's NSR SIP 
submittal does not attempt to correct this program deficiency, as 
regulation of GHG emissions currently is not permitted under State 
law. See A.R.S. Sec.  49-191.
---------------------------------------------------------------------------

    Regulated NSR pollutant at 40 CFR 51.166(b)(49)--ADEQ's regulatory 
definition at R18-2-101(122) does not include the final two sentences 
of 40 CFR 51.166(b)(49)(i)(a)or the language at 40 CFR 
51.166(b)(49)(iv); ADEQ's definition also includes an incorrect cross-
reference to hazardous air pollutants listed under R18-2-1101 that is 
not consistent with the requirements in 40 CFR 51.166(b)(49)(v); and 
ADEQ's regulatory definition needs to update the July 1, 2010 date in 
the cross-reference to CAA section 108.
8. PM2.5 Significant Monitoring Concentration
    On January 22, 2013, the U.S. DC Circuit Court of Appeals in Sierra 
Club v. EPA, 705 F.3d 458, vacated the parts of two federal PSD rules 
(40 CFR 51.166(i)(5)(i)(c) and 40 CFR 52.21(i)(5)(i)(c)) establishing a 
PM2.5 significant monitoring concentration (SMC), finding 
that EPA was precluded from using the PM2.5 SMC to exempt 
permit applicants from the statutory requirement to compile and submit 
preconstruction monitoring data as part of a complete PSD application. 
On December 9, 2013, revisions to 40 CFR 51.166 and 52.21 were 
published in the Federal Register to remove these vacated rule 
elements, effective as of that date. See 78 FR 73698.
    ADEQ's submittal at R18-2-407(H)(1)(c) contains the equivalent of 
the PM2.5 SMC that was vacated by the Court of Appeals and 
which has been removed from the federal PSD regulations. As the Court 
of Appeals found application of this SMC impermissible, and because 
ADEQ's regulation incorporating this SMC is a separable portion of 
ADEQ's PSD program, we are proposing a partial disapproval of ADEQ's 
submitted PSD program, to disapprove R18-2-407(H)(1)(c).
9. Definition for Basic Design Parameter
    ADEQ's submittal contains a definition for basic design parameter 
at R18-2-401(3) that reflects the definition that EPA originally 
developed as part of its Equipment Replacement Provisions. See 68 FR 
61248 Oct. 27, 2003. However, the definition for basic design 
parameter, and other elements related to the Equipment Replacement 
Provisions, were vacated by the DC Circuit Court of Appeals in State of 
New York v. EPA,

[[Page 14055]]

443 F.3d 880 (D.C. Cir. 2006). While the federal PSD regulations still 
contain a reference to ``basic design parameter,'' this term is no 
longer specifically defined under the federal PSD regulations, and 
application of the definition contained in the Equipment Replacement 
Provisions that were vacated by the Court of Appeals is inconsistent 
with federal PSD requirements. As the Court of Appeals found this 
Equipment Replacement Provisions and, therefore, this definition, 
impermissible, and because ADEQ's regulation incorporating this 
definition is a separable portion of ADEQ's PSD program, we are 
proposing a partial disapproval of ADEQ's submitted PSD program, to 
disapprove R18-2-401(3).

D. Do the rules meet the evaluation criteria for Nonattainment New 
Source Review?

    Part D of title I of the Act contains the general requirements for 
areas designated ``nonattainment'' for the NAAQS, including 
preconstruction permit requirements for new major sources or major 
modifications proposing to construct in such nonattainment areas, 
commonly referred to as ``Nonattainment New Source Review'' or ``NA-
NSR.'' EPA's regulations for NA-NSR permit programs are found in 40 CFR 
51.165. Most areas under ADEQ's jurisdiction are currently designated 
as ``attainment'' or ``unclassifiable/attainment'' for all NAAQS 
pollutants. However, there are some areas under ADEQ's jurisdiction 
that are nonattainment and warrant a NA-NSR program. See 40 CFR 81.303.
    R18-2-402 through 405 contain the substantive NA-NSR requirements 
for review and permitting of major sources and major modifications in 
nonattainment areas under ADEQ jurisdiction in Arizona. These 
regulations satisfy most of the statutory and regulatory requirements 
for NA-NSR permit programs, but these rules contain several 
deficiencies that that do not allow us to fully approve the NA-NSR 
program submittal that is the subject of this action, as discussed 
below.
    Although ADEQ's NA-NSR program submittal meets most NA-NSR program 
requirements, we are proposing to disapprove one specific aspect of 
ADEQ's NA-NSR program relating to the definition of ``basic design 
parameter.'' The ADEQ rule provision that we are proposing to 
disapprove is directly comparable to a federal NA-NSR rule provision 
that has been vacated by a federal court, and we find that it is 
separable from the remainder of ADEQ's NA-NSR program. Accordingly, we 
find this provision suitable for disapproval at this time. This issue 
is described in more detail below in Section II.D.4.
    For most of the remainder of ADEQ's NA-NSR program submittal, we 
are proposing limited approval and limited disapproval. We find that 
approval of ADEQ's updated NA-NSR program, aside from the aspect that 
is separable and is proposed for disapproval as mentioned above, will 
substantially strengthen the SIP overall, particularly as the current 
SIP-approved NA-NSR program is significantly out of date when compared 
with current federal NA-NSR regulatory requirements as well as current 
State regulations. See our discussion in Section G below. However, 
specific provisions of the NA-NSR SIP program submittal are 
inconsistent with NA-NSR program requirements, and these deficiencies 
must be addressed before we can fully approve ADEQ's NA-NSR program 
into the SIP. The deficiencies that we have identified with ADEQ's NA-
NSR program that provide the basis for our limited approval and limited 
disapproval are described immediately below in Sections II.D.1 through 
3.\18\
---------------------------------------------------------------------------

    \18\ For one other aspect of ADEQ's NA-NSR SIP submittal, we are 
proposing limited approval at this time. We cannot determine at this 
time whether ADEQ's NA-NSR SIP submittal adequately addresses all of 
elements necessary to satisfy the CAA's title I, part D, subpart 4 
requirements regarding NSR permitting of PM2.5 and 
PM10 precursors under CAA section 189(e). This issue is 
discussed in detail in Section II.D.5 below.
---------------------------------------------------------------------------

1. General Nonattainment NSR Program Requirements
    First, as discussed above with respect to ADEQ's PSD program 
submittal, ADEQ's NA-NSR program submittal often refers to Articles 9 
and/or 11 of ADEQ's regulations where the federal regulations refer to 
40 CFR parts 60, 61, or 63; or, similarly, sections 111 or 112 of the 
Act. See R18-2-101(122)(b); R18-2-401(10); R18-2-402(G)(2); and R18-2-
406(A)(4). Articles 9 and 11 are where ADEQ incorporates by reference 
the federal regulations in 40 CFR parts 60, 61, and 63 (which EPA 
implements under sections 111 and 112 of the Act). However, these 
Articles are not in the SIP, have not been submitted for SIP approval, 
and do not necessarily contain provisions equivalent to all of the 
subparts in parts 60, 61, and 63. See 40 CFR 51.165(a)(1)(xiii)--lowest 
achievable emission rate, (a)(1)(xxxvii)--regulated NSR pollutant, and 
(a)(1)(xl)--best available control technology.
    Second, the nonattainment NSR program requirements at 40 CFR 
51.165(a)(2) require each plan to have a preconstruction review program 
to satisfy the requirements of sections 172(c) and 173 of the Act. 
However, as previously discussed in this preamble, ADEQ's submittal 
allows a source at R18-2-302(G) and R18-2-402(C) to begin actual 
construction upon the issuance of a proposed final permit. ADEQ's 
program is ambiguous as to whether a proposed final permit, as defined 
in R18-2-101(114), constitutes final action by the Director. While ADEQ 
has issued guidance clarifying that it treats ``proposed final 
permits'' as final actions for purposes of preconstruction 
permitting,\19\ to obtain full NA-NSR program approval, ADEQ's 
regulations must make clear that a source may not begin actual 
construction before a final determination on an NA-NSR permit 
application is made by the Director.
---------------------------------------------------------------------------

    \19\ See ADEQ Memo dated February 10, 2015 related to proposed 
final permits and ADEQ's February 23, 2015 Supplement at 2.
---------------------------------------------------------------------------

    Third, 40 CFR 51.165(a)(3)(ii)(G) requires that credit for emission 
reductions can be claimed only to the extent that the reviewing 
authority has not relied on it in issuing any permit under regulations 
approved pursuant to 40 CFR 51 subpart I or the State has not relied on 
it in demonstration of attainment or reasonable further progress. 
ADEQ's NSR submittal generally addresses this requirement at R18-2-
404(H), but also needs to include references to rules R18-2-302.01 and 
R18-2-334, which are to be approved as part of ADEQ's NSR regulations 
under Subpart I.
    Fourth, ADEQ's submittal contains an apparent typographical error 
in R18-2-402(F)(1)(c), which includes a cross-reference to R18-2-
401(20)(b)(iii) rather than R18-2-401(20)(b)(iv). This error must be 
corrected to ensure that the requirement in 40 CFR 51.165(a)(6)(i)(c) 
for owners and operators to document and maintain a record of certain 
applicability-related information is satisfied.
    Fifth, ADEQ's submittal does not require owners or operators to 
make information required under 40 CFR 51.165(a)(6) available for 
review upon request by the Director or the general public pursuant to 
the requirements in 40 CFR 70.4(b)(3)(viii) as is required by 40 CFR 
51.165(a)(7).
    Sixth, 40 CFR 51.165(a)(9)(i) requires that increases in emissions 
shall be offset by reductions in emissions using a ratio of emission 
decreases to emission increases of at least 1 to 1. ADEQ's NA-NSR 
submittal contains this requirement at R18-2-404(A), but could

[[Page 14056]]

be interpreted as establishing the ratio as increases to decreases, 
instead of decreases to increases--``emission increases shall be offset 
by emission decreases at a ratio of at least 1 to 1.'' In addition, 
R18-2-404(A) refers to additional offset requirements in R18-2-405, but 
does not refer to the offset requirement in R18-2-404(J).
    Seventh, 40 CFR 51.165(a)(11) requires emission offsets to be 
obtained for the same regulated NSR pollutant, unless interprecursor 
offsetting is permitted for a particular pollutant, as further 
specified in the rule. ADEQ's NA-NSR SIP submittal does not address 
interprecursor offsets, and it is not required to, but the submittal 
does not contain a specific requirement that offsets must be for the 
same regulated pollutant.
    Eighth, 40 CFR 51.165(b) requires that ADEQ have a preconstruction 
program that satisfies the requirements of section 110(a)(2)(D)(i) of 
the Act for any new major stationary source or major modification that 
would locate in an attainment area, but would cause or contribute to a 
violation of a NAAQS in any adjacent area. ADEQ's program contains 
provisions for 40 CFR 51.165(b) at R18-2-406(A)(5)(a)-(b) that 
generally meet this requirement. However, ADEQ's regulations at R18-2-
406(A)(5)(b) refer to the ``Arizona primary or secondary ambient air 
quality standards,'' which is not a defined term, whereas the analogous 
federal program provisions refer to the NAAQS. As a result, ADEQ's 
program does not fully meet the requirements in 40 CFR 51.165(b)(1) and 
(2) as ADEQ's regulations do not make clear which standards are being 
referred to, and the submittal does not demonstrate that such standards 
would apply to areas outside of Arizona for purposes of ADEQ's NSR 
review. Similarly, ADEQ's regulation at R18-2-406(A)(5)(a) references 
the state's ambient air quality standards in Article 2, which would not 
clearly apply to areas outside of Arizona.
    Finally, Section 173(a)(4) of the Act requires that NA-NSR permit 
programs shall provide that permits to construct and operate may be 
issued if ``the Administrator has not determined that the applicable 
implementation plan is not being adequately implemented for the 
nonattainment area in which the proposed source is to be constructed or 
modified.'' However, ADEQ's program does not contain a provision that 
would prohibit the issuance of NA-NSR permits in areas where the 
Administrator has made this determination or that requires that ADEQ 
conduct a review to ensure that this requirement is met. To obtain full 
program approval, ADEQ must add a provision to its NA-NSR program 
requirements that ensures compliance with CAA section 173(a)(4).
2. Plantwide Applicability Limits
    ADEQ's rules contain provisions for using plantwide applicability 
limits (PALs) in R18-2-412. We have identified the following 
deficiencies with ADEQ's PALs provisions program as they relate to the 
NA-NSR program.
    First, ADEQ's provision for PALs does not specify that 
modifications under a PAL do not need approval through the 
nonattainment major NSR program. Only the PSD program is mentioned. 
ADEQ's submittal does not contain a definition for nonattainment major 
NSR program (see 40 CFR 51.165(a)(1)(xxx)). ADEQ should either add this 
definition or considering referencing R18-2-403. See 40 CFR 
51.165(f)(1)(iii)(B).
    Second, neither the ADEQ regulatory provisions for PALs at R18-2-
412 nor the ADEQ regulatory definitions in R18-2-401 that apply in the 
context of major sources and major modifications contain a definition 
for major emissions unit as is required by 40 CFR 51.165(f)(2)(iv).
    Third, ADEQ's PAL provision for calculating baseline emissions at 
R18-2-412(B)(2) does not specify that baseline actual emissions are to 
include emissions associated not only with operation of the unit, but 
also emissions associated with startup, shutdown and malfunction, as is 
required by 40 CFR 51.165(f)(3)(ii).
    Fourth, ADEQ's PAL provisions at R18-2-412(H) contain an incorrect 
reference to R18-2-412(H)(4) instead of the definition for major 
modification, and R18-2-412(H)(5) uses ``eliminated'' where the federal 
regulation uses ``established.'' See 40 CFR 51.165(f)(9).
    Finally, ADEQ's program contains incorrect cross-references in 
meeting the requirements of 40 CFR 51.165(f)(1), as follows: ADEQ's PAL 
renewal provisions at R18-2-412(I)(1) must contain a reference to 
subsection (D) of R18-2-412 instead of (F), and R18-2-(I)(4)(a) must 
reference subsection (E) of R18-2-412.
3. Definitions
    ADEQ's submittal contains definitions applicable to the 
nonattainment NSR program that do not fully meet the requirements of 40 
CFR 51.165(a)(1), which requires each State plan to contain specific 
definitions for the nonattainment NSR program. Deviations from the 
wording are approvable if the State specifically demonstrates that the 
submitted definition is more stringent, or at least as stringent, in 
all respects as the corresponding definition in 40 CFR 51.165(a)(1). We 
have carefully reviewed the definitions used in ADEQ's nonattainment 
NSR program as compared with the federal PSD definitions in 40 CFR 
51.165(a)(1) and have found that generally, ADEQ's submittal contains 
the definitions necessary to implement a NA-NSR program. However, a 
number of ADEQ's definitions do not meet the requirements of 40 CFR 
51.165(a)(1) because their wording deviates from the wording in the 
corresponding federal regulatory definitions in 40 CFR 51.165(a)(1) in 
a manner that may be less stringent than the federal definitions, and 
the State has not demonstrated otherwise.
    Stationary source at 40 CFR 51.165(a)(1)(i)--the federal regulation 
at 40 CFR 51.165(a)(1)(i) defines this term as ``any building, 
structure, facility or installation which emits or may emit a regulated 
NSR pollutant,'' with ``regulated NSR pollutant'' also being a 
federally defined term at 40 CFR 51.165(a)(1)(xxxvii), whereas ADEQ's 
regulation at R18-2-101(139) defines ``stationary source'' as ``any 
building, structure, facility or installation subject to regulation 
pursuant to A.R.S. Sec.  49-426(A) which emits or may emit any air 
pollutant,'' with ``air pollutant'' being an undefined term in ADEQ's 
regulation. However, A.R.S. Sec.  49-426(A) provides a cross-reference 
to certain exemptions from permitting identified in A.R.S. Sec.  49-
426(B), specifically agricultural equipment used in normal farm 
operations and certain fuel burning equipment, which do not appear to 
be consistent with federal NA-NSR definition. The federal definition of 
stationary source at 40 CFR 51.165(a)(1)(i) is very broad and does not 
exclude these source categories from the definition. We agree that it 
is acceptable for ADEQ to limit its NSR program to certain kinds of 
stationary sources, as discussed in detail above with respect to 40 CFR 
51.160(e), but the federal definition for a stationary source in the 
context of the major NA-NSR program is not the appropriate place for 
such an exclusion, as it does not allow exclusions for certain source 
categories. ADEQ must demonstrate that its definition of stationary 
source is at least as stringent as the federal definition at 40 CFR 
51.165(a)(1)(i) in all respects.
    Major stationary source at 40 CFR 51.165(a)(1)(iv)--language from 
subparagraph 40 CFR 51.165(a)(1)(iv)(A)(3) not included in the 
definition at R18-2-101(75); also see comments above on definition of

[[Page 14057]]

``stationary source'' in 40 CFR 51.165(a)(1)(i).
    Net emissions increase at 40 CFR 51.165(a)(1)(vi)--The requirement 
of paragraph 40 CFR 51.165(a)(1)(vi)(E)(3) is not met because not all 
requirements to be approved under subpart I are listed (i.e., R18-2-
302.01) in the definition at R18-2-101(87). In addition, the equivalent 
of paragraph 40 CFR 51.165(a)(1)(vi)(G) is not included in ADEQ's 
definition at R18-2-101(87).
    Significant at 40 CFR 51.165(a)(1)(x)--ADEQ's definition at R18-2-
101(130)(b) refers to R18-2-405 for determining significant emissions 
in serious and severe ozone nonattainment areas. The definition for 
``significant'' at R18-2-405(B) does not use the term ``net emissions 
increase,'' which is a term defined by the federal regulations at 40 
CFR 51.165(a)(1)(vi).
    Allowable emissions at 40 CFR 51.165(a)(1)(xi)--ADEQ's definition 
at R18-2-101(13)(b) does not include the ``future compliance date'' 
language that is in 40 CFR 51.165(a)(1)(xi)(B) and (C) and ADEQ has not 
demonstrated that its regulatory language is at least as stringent as 
the federal definition.
    Federally enforceable at 40 CFR 51.165(a)(1)(xiv)--ADEQ's 
definition at R18-2-101(53)(d) identifies that requirements included in 
permits pursuant to R18-2-306.01 or R18-2-306.02 are included in the 
definition of federally enforceable requirements, but excludes those 
requirements that are identified as ``enforceable only by the state.'' 
With this action, we are approving R18-2-306.01 and R18-2-306.02 into 
the SIP, making requirements pursuant to these rules federally 
enforceable. As such, ADEQ does not have the discretion to identify 
some of those requirements as only enforceable by the state.
    Regulated NSR pollutant at 40 CFR 51.165(a)(1)(xxxvii)--ADEQ's 
definition is missing this language from paragraph 40 CFR 
51.165(a)(1)(xxxvii)(C): ``provided that such constituent or precursor 
pollutant may only be regulated under NSR as part of regulation of the 
general pollutant'' at R18-2-101(122)(a).
    Projected actual emissions at 40 CFR 51.165(a)(1)(xxviii)--ADEQ's 
definition at R18-2-401(20)(b)(iii) does not specifically require 
inclusion of emissions from malfunctions in the determination of 
projected actual emissions, and exempts emissions from a shutdown 
associated with a malfunction from such determination, while the 
federal definition at 40 CFR 51.165(a)(1)(xxxvii)(C) requires that 
emissions from both shutdowns and malfunctions be included.
4. Definition for Basic Design Parameter
    ADEQ's submittal contains a definition for basic design parameter 
at R18-2-401(3) that reflects the definition that EPA originally 
developed as part of its Equipment Replacement Provisions. See 68 FR 
61248, Oct. 27, 2003. However, the definition for basic design 
parameter, and other elements related to the Equipment Replacement 
Provisions, were vacated by the DC Circuit Court of Appeals in State of 
New York v. EPA, 443 F.3d 880 (D.C. Cir. 2006). While the federal NA-
NSR regulations still contain a reference to ``basic design 
parameter,'' this term is no longer specifically defined under the 
federal NA-NSR regulations, and application of the definition contained 
in the Equipment Replacement Provisions that were vacated by the Court 
of Appeals is inconsistent with federal NA-NSR requirements. As the 
Court of Appeals found this Equipment Replacement Provisions and, 
therefore, this definition, impermissible, and because ADEQ's 
regulation incorporating this definition is a separable portion of 
ADEQ's NA-NSR program, we are proposing a partial disapproval of ADEQ's 
submitted NA-NSR program, to disapprove R18-2-401(3).
5. Additional Provisions for Particulate Matter Nonattainment Areas
    On January 4, 2013, the U.S. Court of Appeals for the District of 
Columbia Circuit, in Natural Resources Defense Council v. EPA,\20\ 
issued a decision that remanded the EPA's 2007 and 2008 rules 
implementing the 1997 PM2.5 NAAQS. EPA's 2008 implementation 
rule addressed by the court decision, ``Implementation of New Source 
Review (NSR) Program for Particulate Matter Less Than 2.5 Micrometers 
(PM2.5)'' (the 2008 NSR PM2.5 Rule),\21\ 
promulgated NSR requirements for implementation of PM2.5 in 
both nonattainment areas (under the NA-NSR program) and attainment/
unclassifiable areas (under the PSD program). The Court of Appeals 
found that EPA erred in implementing the PM2.5 NAAQS in 
these rules for nonattainment areas solely pursuant to the general 
implementation provisions of subpart 1 of part D of title I of the CAA, 
rather than pursuant to the additional implementation provisions 
specific to particulate matter nonattainment areas in subpart 4. The 
Court of Appeals ordered the EPA to ``repromulgate these rules pursuant 
to Subpart 4 consistent with this opinion.'' 706 F.3d at 437. Although 
the Court of Appeals declined to establish a deadline for EPA's 
response to the remand, EPA intends to promulgate new generally 
applicable implementation regulations for the PM2.5 NAAQS in 
accordance with the requirements of subpart 4. In the interim, however, 
states and EPA still need to proceed with implementation of the 
PM2.5 NAAQS in a timely and effective fashion in order to 
meet statutory obligations under the CAA and to assure the protection 
of public health intended by those NAAQS.
---------------------------------------------------------------------------

    \20\ 706 F.3d 428 (D.C. Cir. 2013).
    \21\ 73 FR 28321 May 16, 2008.
---------------------------------------------------------------------------

    ADEQ's NSR SIP submittal generally includes requirements for the 
PM2.5 NA-NSR program consistent with the provisions 
promulgated in the 2008 NSR PM2.5 Rule. Specifically, ADEQ's 
NSR SIP submittal includes the PM2.5 significant emission 
rates at R18-2-101(130), regulation of certain PM2.5 
precursors (SO2 and NOX) at R18-2-101(130), the 
regulation of PM10 and PM2.5 condensable 
emissions at R18-2-101(122)(f), and the emissions offset requirements 
at R18-2-403(A)(3). Separate and aside from the issues identified above 
that have resulted in our proposing limited approval and limited 
disapproval of ADEQ's NA-NSR submittal, EPA has determined that it is 
not prepared at this time to grant full approval to ADEQ's NSR SIP 
submittal as to the PM2.5 NA-NSR program requirements, in 
light of the Court's remand of the 2008 NSR PM2.5 Rule, and 
for the reasons explained below.
    EPA is in the process of evaluating the requirements of subpart 4 
as they pertain to NA-NSR. In particular, subpart 4 includes section 
189(e) of the CAA, which requires the control of major stationary 
sources of PM10 precursors (and hence under the court 
decision, PM2.5 precursors) ``except where the Administrator 
determines that such sources do not contribute significantly to PM-10 
levels which exceed the standard in the area.'' Although ADEQ's NSR SIP 
submittal does include regulation of SO2 and NOX 
as PM2.5 precursors, it does not include the regulation of 
VOCs or ammonia. Nor does the NSR SIP submittal include a demonstration 
as to whether or not the regulation of VOCs or ammonia is necessary 
under section 189(e). The evaluation of which precursors need to be 
controlled to achieve the standard in a particular area is typically 
conducted in the context of the state's preparing and the EPA's 
reviewing an area's attainment plan SIP. In this case, there are two 
designated PM2.5 nonattainment areas in Arizona, the Nogales 
(portion of Santa Cruz County, AZ) and West Central Pinal (portion of 
Pinal County, AZ) areas. Both are designated

[[Page 14058]]

nonattainment for the 2006 annual PM2.5 NAAQS. However, on 
January 7, 2013 and September 4, 2013, EPA finalized determinations of 
attainment for these areas, respectively (78 FR 887 and 78 FR 54394), 
which suspended the requirement for the state to submit, among other 
things, an attainment plan SIP for the area.\22\ Accordingly, 
PM2.5 attainment plans for SIP approval are not currently 
before Region 9 for these areas. As Region 9 does not have before it 
the state's analysis as to which precursors need to be controlled in 
these areas pursuant to section 189(e) of the Act, as would be 
generally contained in an attainment plan SIP, it cannot fully approve 
as complying with the CAA a nonattainment NSR SIP that only addresses a 
subset of the scientific PM2.5 precursors recognized by EPA.
---------------------------------------------------------------------------

    \22\ Prior to the Court's decision, EPA would not have reviewed 
PM2.5 attainment plan submittals for compliance with 
Section 189.
---------------------------------------------------------------------------

    On the other hand, while ADEQ's submittal may not yet contain all 
of the elements necessary to satisfy the CAA requirements when 
evaluated under subpart 4, the NA-NSR SIP submittal represents a 
considerable strengthening of the currently approved Arizona SIP, which 
does not address NSR permitting for PM2.5 at all. Therefore, 
EPA is proposing to grant limited approval to the PM2.5 NA-
NSR provisions in ADEQ's NSR submittal for the Nogales and West Central 
Pinal PM2.5 nonattainment areas.
    For the reasons explained above, EPA is not evaluating at this time 
whether ADEQ's NA-NSR submittal will require additional revisions 
relating to PM2.5 to satisfy the subpart 4 requirements. 
Once EPA re-promulgates the Federal PM2.5 regulations with 
respect to NA-NSR permitting in response to the Court's remand, EPA 
will consider whether a limited disapproval should also be proposed for 
ADEQ's PM2.5 NA-NSR program based on this issue.
    In addition, section 189(e) of the CAA requires that ADEQ's NSR 
program for PM10 nonattainment areas apply to major 
stationary sources of PM10 precursors, except where the 
Administrator determines that such sources do not contribute 
significantly to PM10 levels which exceed the standard in 
the area. As discussed below, we have identified one area under ADEQ's 
jurisdiction, the West Pinal PM10 nonattainment area, for 
which we are proposing a limited approval with respect to 
PM10 under section 189(e) of the Act.
    On September 4, 2013, the West Pinal area was redesignated to 
nonattainment for the 1987 p.m.10 standard. ADEQ's NSR SIP 
submittal generally includes NA-NSR requirements for PM10 
nonattainment areas such as the PM10 significant emission 
rate at R18-2-101(130), the regulation of PM10 and 
PM2.5 condensable emissions at R18-2-101(122)(f), and the 
emissions offset requirements at R18-2-403(A)(3). However, separate and 
aside from the issues identified above that have resulted in our 
proposing limited approval and limited disapproval of ADEQ's NA-NSR 
submittal, EPA has determined that it is not prepared at this time to 
grant full approval to ADEQ's NSR SIP submittal as to the 
PM10 nonattainment NSR program requirements for the West 
Pinal nonattainment area. The evaluation of which precursors need to be 
controlled to achieve the standard in a particular area is typically 
conducted in the context of the state's preparing and the EPA's 
reviewing of an area's attainment plan SIP. On February 19, 2014, ADEQ 
withdrew from EPA's consideration the Arizona State Implementation Plan 
Revision for the West Pinal County PM10 Nonattainment Area 
(submitted on December 30, 2013). Accordingly, a PM10 
attainment plan for West Pinal is not currently before Region 9. As 
such, Region 9 does not have before it the state's analysis as to which 
precursors need to be controlled in this area pursuant to section 
189(e) of the Act, as would be generally contained in an attainment 
plan SIP, and cannot fully approve as complying with the CAA a 
nonattainment NSR SIP that does not address scientific PM10 
precursors recognized by EPA.
    While ADEQ's submittal may not yet contain all of the elements 
necessary to satisfy the CAA NA-NSR requirements when evaluated under 
subpart 4, the proposed revisions to ADEQ's NA-NSR program represent a 
considerable strengthening of the currently approved Arizona SIP, which 
does not address NSR requirements for PM10 at all. 
Therefore, EPA is proposing to grant limited approval to the 
PM10 NA-NSR provisions in ADEQ's NSR submittal as they apply 
to the West Pinal nonattainment area. Once ADEQ submits a new 
PM10 attainment plan for this area, EPA will consider 
whether a limited disapproval should also be proposed based on this 
issue.

E. Review of Non-NSR Related Rules and Statutory Provisions

    In addition to ADEQ's NSR SIP submittal, we are taking action on 
rules R18-2-311 and R18-2-312. These rules were submitted to EPA for 
SIP approval in a separate submittal on July 28, 2011. We delayed 
acting on rules R18-2-311 and R18-2-312 in a previous action, and are 
therefore now evaluating and taking action on the rules. We are also 
taking action on A.R.S. Sec.  49-107, an Arizona statutory provision 
concerning local delegation of state authority.
    First, ADEQ's rule R18-2-311 specifies the test methods and 
procedures which can be used to determine compliance with requirements 
established under ADEQ's air program. On October 19, 1984, EPA approved 
an earlier version of this rule into the SIP.\23\ See 49 FR 41026. The 
current submittal, adopted effective November 15, 1993, renumbers the 
earlier rule and expands on the previous version by listing additional 
test methods that may be used to determine compliance. While the 
current rule improves on the earlier version, we cannot recommend it 
for full approval into the SIP. We are proposing a limited disapproval 
because Section D of the rule allows the State to approve alternatives 
to the applicable SIP without EPA approval, in conflict with the 
requirements of CAA sections 110(a)(2)(A) and 110(i).\24\
---------------------------------------------------------------------------

    \23\ The rule was previously numbered R9-3-310.
    \24\ See, e.g., ``Guidance Document for Correcting VOC Rule 
Deficiencies,'' U.S. EPA Region 9, April 1991, revised August 21, 
2001 (Little Bluebook).
---------------------------------------------------------------------------

    Second, ADEQ's rule R18-2-312 requires stationary sources to 
conduct a performance test within 60 days of achieving the capability 
to operate at its maximum production rate, but no later than 180 days 
after initial start-up. The rule also specifies that testing shall be 
conducted under such conditions specified by State, including, but not 
limited to appropriate test methods, notification to the State, data 
reduction, records, and number of test runs. On April 23, 1982 (47 FR 
17485) EPA approved a version of this rule into the SIP.\25\ The 
current submittal, adopted effective November 15, 1993, renumbers the 
earlier rule and expands on the previous version by including 
conditions when a test may be stopped and allows compliance to be 
determined with continuous emission monitoring as long as the 
applicable quality assurance procedures are followed. While the current 
rule improves on the earlier version, we cannot recommend it for full 
approval into the SIP. We are proposing a limited disapproval because 
Section B of the rule allows the State to approve the use of equivalent 
and alternative test methods without EPA approval, in conflict with CAA 
sections 110(a)(2)(A) and 110(i).\26\
---------------------------------------------------------------------------

    \25\ The rule was previously numbered R9-3-312.
    \26\ See, e.g., Little Bluebook.

---------------------------------------------------------------------------

[[Page 14059]]

    Third, A.R.S. Sec.  49-107 is the current Arizona state law that 
provides ADEQ with authority to ``delegate to a local environmental 
agency, county health department, public health services district or 
municipality any functions, powers or duties which the director 
believes can be competently, efficiently and properly performed by the 
local agency if the local agency accepts the delegation and agrees to 
perform the delegated functions, powers and duties according to the 
standards of performance required by law and prescribed by the 
director,'' and other related authorities. This statutory provision 
establishes that ADEQ has clear authority to delegate various functions 
under the CAA, including NSR permitting, to county and other local 
government agencies and, as such, we find it to be approvable and 
propose to approve it into the SIP. This provision will replace 7-1-
8.3(R9-3-803)--Delegation of Authority, an older ADEQ currently in the 
SIP, which we are proposing to remove from the SIP as part of this 
action.

F. Review of Rules and Statutory Provisions Requested To Be Removed 
From the SIP

    In Table 2 of this preamble we identify the rules and statutory 
provisions we are proposing to remove or supersede from the SIP as part 
of this action. ADEQ's existing SIP-approved NSR rules are generally 
outdated, as we have not acted to approve substantial revisions to 
ADEQ's NSR rules since the 1980s. Further, the ADEQ NSR rules currently 
in the SIP have been repealed for purposes of State law by ADEQ. 
Significant changes have been made to the Act and the underlying 
implementing federal NSR regulations since our last substantial action 
on ADEQ's NSR SIP. Therefore, replacing the existing, outdated NSR SIP 
rules with the updated ADEQ rules in this submittal that we propose to 
approve into the SIP is appropriate and generally serves as an overall 
strengthening of Arizona's SIP. In some cases, we approved updated 
versions of these rules into the SIP in previous rulemaking actions, 
and a few of the rules proposed for removal are no longer necessary for 
other reasons. Our TSD provides additional detail.

G. Do the rules meet the evaluation criteria under Section 110(l) and 
193 of the Act?

    CAA Section 110(l) states: ``Each revision to an implementation 
plan submitted by a State under this chapter shall be adopted by such 
State after reasonable notice and public hearing. The Administrator 
shall not approve a revision of a plan if the revision would interfere 
with any applicable requirement concerning attainment and reasonable 
further progress (as defined in section 7501 of this title), or any 
other applicable requirement of this chapter.''
    With respect to the procedural requirements of CAA section 110(l), 
based on our review of the public process documentation included in the 
July 28, 2011, October 29, 2012 and July 2, 2014 submittals, we find 
that ADEQ has provided sufficient evidence of public notice and 
opportunity for comment and public hearings prior to submittal of this 
SIP revision and has satisfied these procedural requirements under CAA 
section 110(l).
    With respect to the substantive requirements of section 110(l), as 
discussed further below, we have determined that our approval of the 
ADEQ NSR SIP Submittal and the other rules and statutory provisions 
that we are proposing to act on in this action (including but not 
limited to the rescission of numerous existing NSR SIP rules), as 
described above in this preamble, would strengthen the applicable SIP 
in most respects. Taken in its entirety, we find that the SIP revision 
represents a strengthening of ADEQ's minor NSR, PSD, and NA-NSR 
programs as compared to the existing SIP-approved NSR program for ADEQ 
that was last substantially revised in the SIP in the early 1980s, and 
that our approval of this SIP submittal would not interfere with any 
applicable requirement concerning attainment and reasonable further 
progress (RFP) or any other applicable requirement of the Act.
    First, this proposed action would correct a number of deficiencies 
in ADEQ's current SIP-approved NSR program. ADEQ's existing SIP-
approved program does not currently contain these significant program 
elements: (1) Implementation of NSR requirements for PM10; 
(2) implementation of NSR requirements for PM2.5; (3) 
regulation of NOX as a precursor to ozone; (4) inclusion of 
condensable particular matter in NSR permitting for determining 
PM10 and PM2.5 emissions; and (5) ensuring that 
the construction or modification of certain non-major sources and non-
major modifications will (1) not interfere with attainment or 
maintenance of the NAAQS and (2) comply with the applicable SIP.
    Further, ADEQ has also updated its program to provide for 
additional permitting flexibilities that have been added to the federal 
NSR program, such as PALs and the 2002 NSR Reforms.
    Second, most of the deficiencies identified with the ADEQ rule 
provisions on which we are taking action fit into one of two 
categories: (1) Deficiencies that relate to an NSR program element that 
has been added since ADEQ's NSR program was approved into the SIP 
(e.g., the deficiency related to the omission of the definition for 
major emissions unit in the PALs provisions), or (2) deficiencies that 
exist in the current SIP that were not identified as deficiencies when 
the provisions were approved into the SIP (e.g., ensuring protection of 
the NAAQS in areas outside of Arizona from stationary source emissions 
regulated under the NSR program). Therefore, in considering whether our 
proposed approval of the NSR SIP submittal will interfere with 
attainment or reasonable further progress, we only consider those 
deficiencies in the first category, as the deficiencies in the second 
category are already a part of the current applicable requirements for 
attainment and RFP in the Arizona SIP. In many cases, the deficiencies 
in the second category occurred because of the numerous changes to the 
NSR program since ADEQ's NSR rules were last approved into the SIP. 
That is, language that may have been approvable previously is no longer 
approvable.
    The most significant deficiency that we have identified, as 
discussed in detail above in this notice, is the absence of provisions 
that ensure protection of the 2012 PM2.5 NAAQS for the PSD 
program. This deficiency is the most likely to affect the substantive 
requirements of the overall application of the PSD program, compared to 
other deficiencies that we do not expect would significantly affect the 
review of emission impacts (e.g., administrative requirements for 
permit issuance). However, the 2012 PM2.5 NAAQS came into 
effect after ADEQ submitted the NSR SIP submittal to EPA. In addition, 
although such standard is currently applicable in the context of the 
PSD program, the implementation requirements for this standard are not 
due until 2016. Accordingly, there are no applicable requirements in 
the existing ADEQ SIP-approved NSR program related to this NAAQS that 
would be affected by the deficiencies in the submitted NSR rules we are 
approving.
    In addition, ADEQ has relaxed its definition of ``major stationary 
source.'' ADEQ's previous definition applied the PSD and NA-NSR program 
requirements to existing non-major sources when a project would cause 
such a stationary source to become a ``major stationary source.'' ADEQ

[[Page 14060]]

revised its program to instead subject existing non-major sources to 
the major NSR program only if the project constitutes a ``major 
stationary source'' in and of itself, consistent with federal NSR 
program requirements. We do not find this relaxation to interfere with 
attainment or reasonable further progress because ADEQ is also 
strengthening its minor NSR program to address emissions from larger 
modifications that do not qualify as major modifications under ADEQ's 
revised NSR program. While these modifications would no longer be 
subject to the major NSR program, ADEQ's minor NSR program would 
nonetheless apply and ensure the modification does not interfere with 
attainment or RFP.
    In summary, we find that, on balance, the improvements ADEQ is 
making to its NSR program and other portions of the SIP that are the 
subject of this section outweigh the deficiencies discussed above as 
compared to ADEQ's existing SIP-approved NSR program. In addition, we 
are unaware of any reliance by ADEQ on the continuation of any specific 
aspect of the permit-related rules currently in the ADEQ portion of the 
Arizona SIP for the purpose of continued attainment or maintenance of 
the NAAQS. Given all these considerations, we propose to conclude that 
our approval of the ADEQ regulations and statute that are the subject 
of this action into the Arizona SIP would not interfere with any 
applicable requirement concerning attainment and RFP or any other 
applicable requirement of the Act.\27\
---------------------------------------------------------------------------

    \27\ Our analysis and conclusion here also apply to our approval 
of R18-2-311 and R18-2-312, which are not generally related to NSR 
permitting. We note that these rules do not contain any substantive 
changes in the procedures for performance tests or test methods as 
compared with the analogous rules in the current SIP. Similarly, our 
analysis and conclusion here also extends to our approval of A.R.S. 
Sec.  49-107 into the SIP. The provisions in this state statute 
relate specifically to local delegation of state authority and thus 
would not interfere with any applicable requirement concerning 
attainment and RFP or any other applicable requirement of the Act.
---------------------------------------------------------------------------

    Conclusion. For the reasons set forth above, we can approve the 
ADEQ SIP revision as proposed in this action under section 110(l) of 
the Act.
    Section 193 of the Act, which was added by the CAA Amendments of 
1990, includes a savings clause that provides, in pertinent part: ``No 
control requirement in effect, or required to be adopted by an order, 
settlement agreement, or plan in effect before November 15, 1990, in 
any area which is a nonattainment area for any air pollutant may be 
modified after November 15, 1990, in any manner unless the modification 
insures equivalent or greater emission reductions of such air 
pollutant.''
    We find that the provisions included in ADEQ's NSR SIP submittal 
would ensure equivalent or greater emission reductions compared to the 
SIP-approved NSR program in the nonattainment areas under ADEQ's 
jurisdiction. In particular, the NSR provisions in ADEQ's NSR SIP 
submittal cover stationary sources in areas that are nonattainment for 
the PM10, PM2.5 and 1-hr SO2 NAAQS. 
ADEQ's current SIP-approved NSR program was approved prior to EPA 
establishing these NAAQS and the current NSR provisions in the SIP do 
not reference the current, recently SIP-approved Arizona air quality 
standards that are comparable to these NAAQS. In addition, ADEQ's 
updated NSR rules and our action to approve them into the SIP will 
expand ADEQ's review of minor sources in nonattainment areas to require 
review of smaller sources. We therefore conclude that ADEQ's NSR SIP 
submittal will provide for equivalent or greater emissions reductions 
as compared to the existing SIP-approved ADEQ NSR program for the 
nonattainment pollutants PM10, PM2.5 and 
SO2.
    Conclusion. For the reasons set forth above, we can approve the 
submitted NSR program under section 193 of the Act.

H. Conclusion

    For the reasons stated above and explained further in our TSD, we 
find that the submitted NSR rules satisfy most of the applicable CAA 
and regulatory requirements for minor NSR, PSD, and nonattainment NSR 
permit programs under CAA section 110(a)(2)(C) and parts C and D of 
title I of the Act but also contain certain deficiencies that prevent 
us from proposing a full approval of the NSR SIP submittal. Therefore, 
we are proposing a limited approval and limited disapproval of the 
submitted NSR rules. We do so based also on our finding that, while the 
rules do not meet all of the applicable requirements, the rules would 
represent an overall strengthening of the SIP by clarifying and 
enhancing the NSR permitting requirements for major and minor 
stationary sources under ADEQ's jurisdiction in Arizona. In addition, 
we are also proposing to remove the existing statutes and rules listed 
in Table 2 from the SIP, which are outdated and mostly being superseded 
by our proposed action. As discussed above, we are proposing a partial 
disapproval of two elements of ADEQ's program, which have been vacated 
from the PSD program (and is one case also from the NA-NSR program) by 
the courts. We are also proposing a limited approval of ADEQ's 
nonattainment NSR program for the Nogales and West Central Pinal 
PM2.5 nonattainment areas and the West Pinal PM10 
nonattainment area under section 189(e) of the Act. Finally, we are 
proposing a limited approval and limited disapproval of two ADEQ rules 
relating to test methods and procedures and performance tests, and 
proposing to approve into the SIP an Arizona statutory provision 
relating to local delegation of state authority.

III. Public Comment and Proposed Action

    Pursuant to section 110(k) of the CAA and for the reasons provided 
above, EPA is proposing a limited approval and limited disapproval of 
revisions to the ADEQ portion of the Arizona SIP that govern 
preconstruction review and the issuance of preconstruction permits for 
stationary sources, including the review and permitting of major 
sources and major modifications under parts C and D of title I of the 
CAA. Specifically, EPA is proposing a limited approval and limited 
disapproval of the new and amended ADEQ regulations listed in Table 1, 
above, as a revision to the ADEQ portion of the Arizona SIP. We are 
also proposing to remove the existing statutes and rules listed in 
Table 2 from the SIP, which are outdated and mostly being superseded by 
our proposed action. In addition, we are also proposing to partially 
disapprove two provisions of ADEQ's NSR program that have been vacated 
by the courts. We are proposing a limited approval of ADEQ's 
nonattainment NSR program in certain nonattainment areas under section 
189 of the Act related to PM10 and PM2.5 
precursors. Finally, we are proposing a limited approval and limited 
disapproval of two ADEQ rules relating to test methods and procedures 
and performance tests, and proposing to approve into the SIP an Arizona 
statutory provision relating to local delegation of state authority.
    EPA is proposing this action because, although we find that the new 
and amended rules meet most of the applicable requirements for such 
permit programs and that the SIP revisions improve the existing SIP, we 
have found certain deficiencies that prevent full approval, as 
explained further in this preamble and in the TSD for this rulemaking. 
The intended effect of our proposed limited approval and limited 
disapproval action is to update the applicable SIP with current ADEQ

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regulations and to set the stage for remedying deficiencies in these 
regulations.
    If finalized as proposed, our limited disapproval action would 
trigger an obligation on EPA to promulgate a Federal Implementation 
Plan unless the State of Arizona corrects the deficiencies, and EPA 
approves the related plan revisions, within two years of the final 
action. Additionally, for those deficiencies that relate to the 
Nonattainment NSR requirements under part D of title I of the Act, the 
offset sanction in CAA section 179(b)(2) would apply in the ADEQ 
nonattainment areas 18 months after the effective date of a final 
limited disapproval, and the highway funding sanctions in CAA section 
179(b)(1) would apply in these areas six months after the offset 
sanction is imposed. Neither sanction will be imposed under the CAA if 
Arizona submits and we approve, prior to the implementation of the 
sanctions, SIP revisions that correct the deficiencies that we identify 
in our final action. The EPA intends to work with ADEQ to correct the 
deficiencies identified in this action in a timely manner.
    We will accept comments from the public on this proposed action for 
the next 30 days.

IV. Incorporation by Reference

    In this rule, the EPA is proposing to include in a final EPA rule 
regulatory text that includes incorporation by reference. In accordance 
with requirements of 1 CFR 51.5, the EPA is proposing to incorporate by 
reference the ADEQ rules and Arizona statutory provisions listed in 
Table 1 of this preamble. The EPA has made, and will continue to make, 
these documents generally available electronically through 
www.regulations.gov and/or in hard copy at the appropriate EPA office 
(see the ADDRESSES section of this preamble for more information).

V. Statutory and Executive Order Reviews

A. Executive Order 12866: Regulatory Planning and Review and Executive 
Order 13563: Improving Regulation and Regulatory Review

    This proposed action is not a ``significant regulatory action'' 
under the terms of Executive Order 12866 (58 FR 51735, October 4, 1993) 
and is therefore not subject to review under Executive Orders 12866 and 
13563 (76 FR 3821, January 21, 2011).

B. Paperwork Reduction Act

    This action does not impose an information collection burden under 
the provisions of the Paperwork Reduction Act, 44 U.S.C. 3501 et seq. 
Burden is defined at 5 CFR 1320.3(b).

C. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. Small entities include small 
businesses, small not-for-profit enterprises, and small governmental 
jurisdictions.
    This rule will not have a significant impact on a substantial 
number of small entities because SIP approvals or disapprovals under 
section 110 and subchapter I of the Clean Air Act do not create any new 
requirements but simply approve or disapprove requirements that the 
State is already imposing. Therefore, because EPA's proposed limited 
approval/limited disapproval does not create any new requirements, I 
certify that this action will not have a significant economic impact on 
a substantial number of small entities.
    Moreover, due to the nature of the Federal-State relationship under 
the Clean Air Act, preparation of flexibility analysis would constitute 
Federal inquiry into the economic reasonableness of State action. The 
Clean Air Act forbids EPA to base its actions concerning SIPs on such 
grounds. Union Electric Co., v. U.S. EPA, 427 U.S. 246, 255-66 (1976); 
42 U.S.C. 7410(a)(2).

D. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), 2 
U.S.C. 1531-1538, requires Federal agencies, unless otherwise 
prohibited by law, to assess the effects of their regulatory actions on 
State, local, and tribal governments and the private sector. Federal 
agencies must also develop a plan to provide notice to small 
governments that might be significantly or uniquely affected by any 
regulatory requirements. The plan must enable officials of affected 
small governments to have meaningful and timely input in the 
development of EPA regulatory proposals with significant Federal 
intergovernmental mandates and must inform, educate, and advise small 
governments on compliance with the regulatory requirements.
    This proposed rule does not include a Federal mandate that may 
result in estimated costs of $100 million or more to either State, 
local, or tribal governments in the aggregate, or to the private sector 
in any one year. Thus, this rule is not subject to the requirements of 
section 202 or 205 of UMRA. This Federal action proposes to approve and 
disapprove pre-existing requirements under State or local law, and 
imposes no new requirements.
    This proposed rule is also not subject to the requirements of 
section 203 of UMRA because it contains no regulatory requirements that 
might significantly or uniquely affect small governments. This proposed 
rule does not impose regulatory requirements on any government entity.

E. Executive Order 13132, Federalism

    This action does not have federalism implications. It will not have 
substantial direct effects on the states, on the relationship between 
the national government and the states, or in the distribution of power 
and responsibilities among the various levels of government, as 
specified in Executive Order 13132. In the spirit of Executive Order 
13132, and consistent with EPA policy to promote communications between 
EPA and State and local governments, EPA specifically solicits comment 
on this proposed action from State and local officials.

F. Executive Order 13175, Coordination With Indian Tribal Governments

    Under Executive Order 13175 (65 FR 67249, November 9, 2000), EPA 
may not issue a regulation that has tribal implications, that imposes 
substantial direct compliance costs, and that is not required by 
statute, unless the federal government provides the funds necessary to 
pay the direct compliance costs incurred by tribal governments, or EPA 
consults with tribal officials early in the process of developing the 
proposed regulation and develops a tribal summary impact statement.
    This proposed rule does not have tribal implications, as specified 
in Executive Order 13175. Thus, Executive Order 13175 does not apply to 
this rule. EPA specifically solicits additional comment on this 
proposed rule from tribal officials. The SIP is not approved to apply 
on any Indian reservation land or in any other area where EPA or an 
Indian tribe has demonstrated that a tribe has jurisdiction. In those 
areas of Indian country, the rule does not have tribal implications and 
will not impose substantial direct costs on tribal governments or 
preempt tribal law as specified by Executive Order 13175.

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

    EPA interprets Executive Order 13045 (62 FR 19885, April 23, 1997) 
as

[[Page 14062]]

applying only to those regulatory actions that concern health or safety 
risks, such that the analysis required under section 5-501 of the 
Executive Order has the potential to influence the regulation. This 
rule is not subject to Executive Order 13045, because it proposes to 
approve a State rule implementing a Federal standard.

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

    This rule is not subject to Executive Order 13211, ``Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use'' (66 FR 28355, May 22, 2001) because it is not a 
significant regulatory action under Executive Order 12866.

I. National Technology Transfer and Advancement Act

    Section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (NTTAA), Public Law 104-113, 12 (10) (15 U.S.C. 272 note) 
directs EPA to use voluntary consensus standards (VCS) in its 
regulatory activities unless to do so would be inconsistent with 
applicable law or otherwise impractical. VCS are technical standards 
(e.g., materials specifications, test methods, sampling procedures, and 
business practices) that are developed or adopted by the VCS bodies. 
The NTTAA directs EPA to provide Congress, through annual reports to 
OMB, with explanations when the Agency decides not to use available and 
applicable VCS. EPA believes that VCS are inapplicable to this action. 
Today's action does not require the public to perform activities 
conducive to the use of VCS.

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

    Executive Order (EO) 12898 (59 FR 7629 (Feb. 16, 1994)) establishes 
federal executive policy on environmental justice. Its main provision 
directs federal agencies, to the greatest extent practicable and 
permitted by law, to make environmental justice part of their mission 
by identifying and addressing, as appropriate, disproportionately high 
and adverse human health or environmental effects of their programs, 
policies, and activities on minority populations and low-income 
populations in the United States.
    EPA has determined that this proposed rule will not have 
disproportionately high and adverse human health or environmental 
effects on minority or low-income populations because it does not 
change the level of environmental protection for any affected 
populations.

    Dated: March 4, 2015.
Jared Blumenfeld,
Regional Administrator, Region IX.
[FR Doc. 2015-06143 Filed 3-17-15; 8:45 am]
 BILLING CODE 6560-50-P