Rule2024-30513
Federal Implementation Plan for Nonattainment New Source Review Program; Mojave Desert Air Quality Management District, California
Primary source
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Published
December 30, 2024
Effective
February 28, 2025
Issuing agencies
Environmental Protection Agency
Abstract
The Environmental Protection Agency (EPA) is finalizing a Federal Implementation Plan (FIP) under the Clean Air Act (CAA) that consists of Nonattainment New Source Review (NNSR) rules for areas within the jurisdiction of the Mojave Desert Air Quality Management District (MDAQMD or "District") in which air pollutant concentrations are above specific National Ambient Air Quality Standards (NAAQS). The NNSR rules will apply to construction of new major stationary sources and major modifications at existing major stationary sources of air pollution. The FIP will be implemented by the EPA, unless and until it is replaced by an EPA-approved state implementation plan (SIP). In this action, the EPA is also responding to a September 5, 2024 decision of the United States Ninth Circuit Court of Appeals for the Ninth Circuit, which remanded the EPA's disapproval of a MDAQMD rule provision related to the calculation and generation of emissions offsets. This response again disapproves MDAQMD Rule 1304(C)(2)(d) and provides additional information to support that decision.
Full Text
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<title>Federal Register, Volume 89 Issue 249 (Monday, December 30, 2024)</title>
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[Federal Register Volume 89, Number 249 (Monday, December 30, 2024)]
[Rules and Regulations]
[Pages 106332-106357]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-30513]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[EPA-R09-OAR-2024-0228; EPA-R09-OAR-2022-0338; FRL-11830-02-R9]
Federal Implementation Plan for Nonattainment New Source Review
Program; Mojave Desert Air Quality Management District, California
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.
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SUMMARY: The Environmental Protection Agency (EPA) is finalizing a
Federal Implementation Plan (FIP) under the Clean Air Act (CAA) that
consists of Nonattainment New Source Review (NNSR) rules for areas
within the jurisdiction of the Mojave Desert Air Quality Management
District (MDAQMD or ``District'') in which air pollutant concentrations
are above specific National Ambient Air Quality Standards (NAAQS). The
NNSR rules will apply to construction of new major stationary sources
and major modifications at existing major stationary sources of air
pollution. The FIP will be implemented by the EPA, unless and until it
is replaced by an EPA-approved state implementation plan (SIP). In this
action, the EPA is also responding to a September 5, 2024 decision of
the United States Ninth Circuit Court of Appeals for the Ninth Circuit,
which remanded the EPA's disapproval of a MDAQMD rule provision related
to the calculation and generation of emissions offsets. This response
again disapproves MDAQMD Rule 1304(C)(2)(d) and provides additional
information to support that decision.
DATES: This final rule is effective on February 28, 2025.
ADDRESSES: The EPA has established a docket for the FIP rulemaking
under Docket ID No. EPA-R09-OAR-2024-0228. The EPA established a
different docket (EPA-R09-OAR-2022-0338), for its 2023 limited
approval/limited disapproval of a MDAQMD state implementation plan
submission, which contained provisions addressing the calculation and
generation of emissions offsets for the nonattainment area permitting
program. This notification will be placed in both dockets, which are
each accessible via the Federal eRulemaking Portal at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>. Although listed in the indices for these rules,
some information is not publicly available, e.g., Confidential Business
Information or other information whose disclosure is restricted by
statute. Certain other material, such as copyrighted material, will be
publicly available only in hard copy. Publicly available docket
materials are available either electronically at <a href="https://www.regulations.gov">https://www.regulations.gov</a> or in hard copy at the U.S. Environmental
Protection Agency, EPA Docket Center, William Jefferson Clinton West
Building, Room 3334, 1301 Constitution Ave. NW,
[[Page 106333]]
Washington, DC. The Public Reading Room is open from 8:30 a.m. to 4:30
p.m., Monday through Friday, excluding legal holidays. The telephone
number for the Public Reading Room is (202) 566-1744, and the telephone
number for the Office of Air and Radiation Docket is (202) 566-1742.
FOR FURTHER INFORMATION CONTACT: Tanya Abrahamian, Air and Radiation
Division, Rules Office (AIR-3-2), Environmental Protection Agency,
Region IX, telephone number: (213) 244-1849; email address:
<a href="/cdn-cgi/l/email-protection#62230010030a030f0b030c4c36030c1b03220712034c050d14"><span class="__cf_email__" data-cfemail="0c4d6e7e6d646d61656d6222586d62756d4c697c6d226b637a">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us,''
and ``our'' refer to the EPA.
The information presented in this preamble is organized as follows:
Table of Contents
I. Summary of the Proposed Action
II. EPA Response to the Ninth Circuit's Remand
III. Public Comments on FIP and EPA Responses to Comments and Court
Remand
IV. Final Action
V. Supporting Information
VI. Statutory and Executive Order Reviews
Preamble Glossary of Terms and Abbreviations
The following are abbreviations of terms used in the preamble.
APA Administrative Procedure Act
Appendix S 40 CFR part 51, appendix S
BACT Best Available Control Technology
CAA or Act Clean Air Act
CARB California Air Resources Board
CFR Code of Federal Regulations
EPA we, us, or our The United States Environmental Protection Agency
ERC Emission Reduction Credit
FIP Federal Implementation Plan
FR Federal Register
LAER Lowest Achievable Emission Rate
LA/LD Limited Approval-Limited Disapproval
MDAQMD The Mojave Desert Air Quality Management District
NAAQS National Ambient Air Quality Standards
NO<INF>X</INF> Nitrogen Oxides
NSR New Source Review
NNSR Nonattainment New Source Review
PSD Prevention of Significant Deterioration
PAL Plantwide Applicability Limit
PM<INF>10</INF> Particulate Matter with a diameter of 10 micrometers
or less
PTE Potential To Emit
RACT Reasonably Available Control Technology
RFP Reasonable Further Progress
SER Simultaneous Emission Reduction
SIP State Implementation Plan
TSD Technical Support Document
VOC Volatile Organic Compound
2023 LA/LD The EPA's rulemaking action at 88 FR 42258, which was
published on June 30, 2023, in the Federal Register.
I. Final Action To Establish Federal Implementation Plan
On July 9, 2024 (89 FR 56237), the EPA proposed to establish a
Federal Implementation Plan (FIP), pursuant to (Clean Air Act) section
110(c), for a nonattainment New Source Review (NNSR) program within the
Mojave Desert Air Quality Management District (MDAQMD).\1\ This FIP
relates to a finding of failure to submit issued by the EPA on February
3, 2017, and EPA's action to disapprove a part of the MDAQMD's
Nonattainment New Source Review (NNSR) permitting program regulations
on June 30, 2023 (88 FR 42258) (``2023 LA/LD''). The latter action was
a limited approval/limited disapproval action in which EPA disapproved
MDAQMD's Rule 1304(C)(2)(d) because this rule failed to meet
requirements for determining the quantity of offsets needed to issue a
permit for a major modification.
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\1\ The EPA's finding of failure to submit triggered an
obligation under CAA section 110(c) for the EPA to promulgate a FIP
within two years (i.e., by March 6, 2019). 82 FR 9158, 9161
(February 3, 2017).
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This FIP implements NNSR program requirements and will apply to the
construction of new major sources and major modifications at existing
major sources that are located within areas that are designated as
nonattainment with specific National Ambient Air Quality Standards
(NAAQS). This FIP will apply to pollutants for which the area is
designated nonattainment. Therefore, this action applies only in the
areas within the MDAQMD's jurisdiction that are designated
nonattainment, specifically, the San Bernardino County portion of the
West Mojave Desert ozone nonattainment area and the San Bernardino
County and Trona Planning Area Particulate Matter with a diameter of 10
micrometers or less (PM<INF>10</INF>) nonattainment areas.\2\ The EPA
will implement the FIP in these areas until such time as the EPA
approves a SIP submission from the MDAQMD that fully resolves the
deficiencies identified in the EPA's June 30, 2023 limited approval/
limited disapproval (``2023 LA/LD'') action on the MDAQMD's NNSR
program and identifies no new deficiencies.\3\ This FIP satisfies the
statutory requirements for SIPs and NNSR programs in CAA sections
110(c)(1), 172(c)(5), 173, 182(c) and (d), 189(a)(1)(A) and (e),
301(a), and 302. The provisions of the FIP are also designed to meet
the requirements for state plans in the EPA regulations at 40 CFR
51.165, 40 CFR 51.1114, and 40 CFR 51.1314.
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\2\ See 40 CFR 81.305. The ozone nonattainment area is located
within San Bernardino County. The PM<INF>10</INF> nonattainment
areas consist of all of the MDAQMD portion of San Bernardino County:
the Trona Planning Area and the portion of San Bernardino County
that excludes both the Trona Planning Area and the portion of San
Bernardino County that is located in the South Coast Air Basin. A
map of this area is available in the docket for this action.
\3\ 89 FR 56237, 56241.
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The FIP that is finalized in this action addresses the deficiencies
the EPA identified in the MDAQMD's NNSR program by incorporating
requirements from 40 CFR part 51, appendix S (``Appendix S''), as well
as additional requirements to make the program administrable. Upon the
effective date of this action, permit applicants will need to obtain
two permits--one permit from the EPA under this FIP and one permit from
the MDAQMD under the rules in the SIP. Where permit approval criteria
between the MDAQMD's SIP and this FIP conflict--for example, the
procedures to determine the quantity of offsets at a major
modification, a deficiency in the MDAQMD's NNSR program--permit
applicants need to demonstrate compliance with the requirements of this
FIP, since this FIP fills the gaps in the MDAQMD's NNSR program. To the
extent that there are any differences in the required permit
application materials under the FIP versus the SIP, the applicant will
need to comply with both requirements when submitting its permit
application. The EPA will enforce the FIP as provided under CAA section
113(a). Our notification proposing this action includes further
information on the implementation, purpose, components, and
severability of this FIP.\4\
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\4\ 89 FR 56237.
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II. EPA Response to the Ninth Circuit's Remand
In this rulemaking, the EPA is also taking final action in response
to a remand to the Agency by the U.S. Court of Appeals for the Ninth
Circuit in Mojave Desert Air Quality Management District v. U.S.
Environmental Protection Agency (``MDAQMD v. EPA'').\5\ As background,
on July 10, 2023, the MDAQMD filed a petition for review in the Ninth
Circuit Court of Appeals of the EPA's 2023 LA/LD of the MDAQMD's NNSR
program. The focus of the litigation was the EPA's disapproval of the
MDAQMD's Rule 1304(C)(2)(d). The MDAQMD argued that the EPA had failed
to adequately explain the disapproval in light of the Agency's 1996
approval of a
[[Page 106334]]
substantially similar, earlier version of the rule. On September 5,
2024, the Ninth Circuit found that the EPA's disapproval of Rule
1304(C)(2)(d) was arbitrary and capricious because the Agency had
failed to adequately explain ``the reversal of its prior approval of a
similar Mojave rule.'' \6\ The court granted the District's petition
and remanded the matter ``for further proceedings before the agency on
an open record consistent with this decision.'' \7\
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\5\ Mojave Desert Air Quality Mgmt. Dist. v. U.S. Env't. Prot.
Agency, No. 23-1411 (9th Cir. September 5, 2024), Docket No. EPA-
R09-OAR-2022-0338, available in the docket for this action and at
<a href="https://cdn.ca9.uscourts.gov/datastore/memoranda/2024/09/05/23-1411.pdf">https://cdn.ca9.uscourts.gov/datastore/memoranda/2024/09/05/23-1411.pdf</a>.
\6\ Id. at 2. The court wrote that its disposition of the case
``is not appropriate for publication and is not precedent. . . .''
Id. at 1.
\7\ Id. at 5.
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In response to a remand from a court and agency can choose one of
two paths. The agency may offer a fuller explanation of its reasoning
at the time of the remanded agency action, or EPA may take a new agency
action that need not be limited to its prior reasons but must comply
with the procedural requirements for a new agency action.\8\ The EPA is
choosing to follow the second of these paths to respond to the Ninth
Circuit's remand, reexamining the remanded action and providing a fresh
justification for the disapproval of Rule 1304(C)(2)(d), including an
explanation for the reversal of EPA's 1996 approval.
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\8\ See, Biden v. Texas, 597 U.S. 785, 807-809 (2022); Fischer
v. Pension Benefit Guarantee Corporation, 994 F.3d 664, 669-70 (D.C.
Cir. 2021).
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The EPA also received comments referencing our 1996 rulemaking
action on the proposal for the FIP. In light of the overlapping subject
matter, we have elected to include the following two final actions in
one rulemaking: (1) a new EPA final action to disapprove Rule
1304(C)(2)(d), as authorized under CAA sections 110(k)(3) and 301(a),
that responds to the Ninth Circuit's remand of a portion of our 2023
LA/LD; and (2) EPA's final action on the FIP, as authorized under CAA
section 110(c), described above. Our responses to comments in Section
III of this action both respond to the comments received on the
proposed FIP and provide additional explanation that supports EPA new
final action to disapprove Rule 1304(C)(2)(d), consistent with the 2023
LA/LD rule.
For the former action, the EPA must comply with the procedural
requirement for a new agency action. Considering the grounds for the
court's remand, there is no need for the EPA to provide an additional
opportunity for public comment before taking final action to disapprove
Rule 1304(C)(2)(d). The EPA provided notice and opportunity to comment
on the disapproval of Rule 1304(C)(2)(d) in the 2023 LA/LD action. In
reviewing that action, the Ninth Circuit held that EPA's response to
one of the public comments on that action was not adequate. The court
found that the MDAQMD had sufficiently raised in its comment the
contention that EPA's 2023 action was inconsistent with the Agency's
prior approval of comparable rule in 1996. Then, the court held that
the EPA did not sufficiently articulate a basis for our change of
position to support the 1993 disapproval of MDAQMD Rule 1304(C)(2)(d).
In this action, the EPA is responding to the MDAQMD's comment in the
manner that the Ninth Circuit directed. We have opened the record to
the 2023 LA/LD action and provided additional information to support a
new disapproval of Rule 1304(C)(2)(d). Considering that the court
remanded for the EPA to provide a response to a comment, there is no
need to provide an opportunity to submit comments.\9\
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\9\ See, Fischer, 994 F.3d. at 670 (additional administrative
appeal not needed on remand where the factual record was fully
developed).
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III. Public Comments on FIP and EPA Responses to Comments and Court
Remand
The public comment period on the proposed FIP rule opened on July
9, 2024, the date of the proposal's publication in the Federal
Register, and closed on August 23, 2024. The EPA held a virtual public
hearing on July 24, 2024, for members of the public to provide oral
comments. This section summarizes the written and oral public comments
the EPA received on the proposed FIP rule and provides responses to
those comments. The written comments as well as a transcript of the
public hearing are available in the docket for this action. The
responses below also provide additional analysis and explanation that
supports the EPA's disapproval of Rule 1304(C)(2)(d) in the 2003 LA/LD
rule.
Twelve written comments were submitted to <a href="https://regulations.gov">https://regulations.gov</a>.
The commenters are listed in Table 1.
Table 1--List of Commenters Providing Written Comments
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Commenter
Commenter ID Commenter name organization Type of commenter Notes
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01.................. Brad Poiriez, MDAQMD............... State or Local This is the first
Executive Director. Government comment letter
Representative/ submitted by the
Agency. MDAQMD.
02.................. Brad Poiriez, MDAQMD............... State or Local This is the second
Executive Director. Government comment letter
Representative/ submitted by the
Agency. MDAQMD regarding the
MDAQMD's August 7,
2024 SIP submittal.
03.................. Garden Hills Org. & ..................... ..................... This comment is not
Co. Ltd. relevant to the
proposed action and
the EPA will
therefore not be
providing a response
to this comment.
04.................. Clean Future......... ..................... ..................... This commenter
submitted four
separate comments,
two that supported
the proposed FIP as
drafted and two that
made additional
recommendations.
05.................. Karnig Ohannessian, U.S. Department of Government .....................
Deputy Assistant Defense. Representative/
Secretary of the Agency.
Navy (Environment
and Mission
Readiness).
06.................. L. Dugan............. Marine Air Ground Government .....................
Task Force Training Representative/
Command, Marine Agency.
Corps Air Ground
Combat Center
(MAGTFTC-MCAGCC).
07.................. Nicole Valentine..... Pacific Gas and Industry.............
Electric Company.
08.................. Catalina Elias, CalPortland Company.. Industry.............
Environmental
Manager.
[[Page 106335]]
09.................. Michael Meinen, V.P. Mitsubishi Cement Industry.............
Environmental and Corporation.
Decarbonization
Efforts.
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The EPA also received a total of three comments on the proposed
rule during the public hearing. The commenters are listed in Table 2.
Table 2--List of Commenters in July 24, 2024 Public Hearing
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Commenter Type of
Commenter ID Commenter name organization commenter
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AA.............. Brad Poiriez, Mojave Desert State or Local
Executive Valley Air Government
Director. Quality Representative/
Management Agency.
District
(MDAQMD).
BB.............. Pedro Dumaua..... Ducommun, Inc.... Industry.
CC.............. Daniel McGivney.. Southern Industry.
California Gas
Company
(SoCalGas).
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As we stated in the July 24, 2024 public hearing, the EPA considers
written comments and oral comments equally in reaching its final
decision on the proposed FIP. For clarity, we have divided our
responses to the comments we received into two sections: the written
comments we received during the public comment period and the oral
comments we received during the public hearing.
A. Summaries of Written Comments and the EPA's Responses
1. Basis and Timing for the FIP
Comment A.1.1: Commenter 01 asserts that the EPA proposed the FIP
in ``haste,'' that the proposed FIP relates to a single issue, and that
it is unnecessary because it rests on an erroneous assumption.
Response to Comment A.1.1: The EPA disagrees with the
characterization that the EPA proposed the FIP in haste. As explained
in our proposed rulemaking,\10\ the EPA's FIP authority and obligation
arises from our February 3, 2017 finding of failure to submit, in which
we found that the State of California had failed to submit a SIP
revision for NNSR rules that apply to a ``Severe'' classification for
the 2008 ozone NAAQS, as required under subpart 2 of part D of title 1
of the CAA and the 2008 Ozone SIP Requirements Rule.\11\ The EPA's
finding of failure to submit triggered an obligation under CAA section
110(c) for the EPA to promulgate a FIP no later than two years from the
finding of failure to submit a complete SIP (i.e., by March 6,
2019).\12\ Specifically, the finding stated that if the State did not
make the required SIP submission and the EPA did not take final action
to approve the submission within two years of the effective date of the
finding, the EPA would be required to promulgate a FIP for the affected
nonattainment area.\13\ On June 7, 2022, the Center for Biological
Diversity (CBD) filed a lawsuit against the EPA alleging that the EPA
had failed to promulgate a FIP or approve a SIP by the statutory
deadline of March 6, 2019 (``2023 CBD Consent Decree'').\14\ On June
15, 2023, the U.S. District Court of the Northern District of
California entered a consent decree resolving this claim and requiring
the EPA to sign a final rulemaking action to either promulgate a FIP or
approve a SIP no later than November 29, 2024, although on November 8,
2024, the EPA and CBD agreed to extend the deadline to January 10,
2025.\15\ The EPA proposed and is finalizing this FIP for the NNSR
program in the MDAQMD to fulfill the EPA's statutory duty by the
deadline established under the consent decree.\16\
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\10\ 89 FR 52637, 52639.
\11\ 82 FR 9158 (February 3, 2017).
\12\ Id. at 9161.
\13\ Id. at 9158.
\14\ Center for Biological Diversity et al., v. Regan, No. 3:22-
cv-03309-RS (N.D. Cal.) (``2023 CBD Consent Decree''). The consent
decree, as entered by the court on June 15, 2023, is available in
the docket for this action.
\15\ Id. Prior to court's entry of the 2023 CBD Consent Decree,
the EPA published a notice in the Federal Register announcing the
proposed settlement and providing an opportunity for interested
persons to submit comments. 88 FR 20166 (April 5, 2023). The EPA
received no comments on the proposed settlement. The parties' joint
stipulation to extend the consent decree deadline is available in
the docket for this action.
\16\ 2023 CBD Consent Decree, supra n. 13.
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Relatedly, the 2015 Ozone NAAQS Implementation Rule required the
MDAQMD to submit an updated NNSR rule to the EPA by August 1, 2021, no
later than three years from the effective date of its nonattainment
designation.\17\ On July 23, 2021, CARB submitted to the EPA the
MDAQMD's revised NNSR rules for the 2015 ozone NAAQS, which the MDAQMD
adopted in March 2021.\18\ On June 30, 2023, the EPA finalized an LA/LD
of the District's NNSR rules.\19\ In this rulemaking, the EPA evaluated
the SIP submission to determine its compliance with NNSR requirements
for the 2008 and 2015 ozone NAAQS and for the 1987 PM<INF>10</INF>
NAAQS. The EPA's rulemaking for the submitted rules explained that the
EPA had identified six deficiencies in the submitted rules that did not
fully satisfy the relevant requirements for preconstruction review and
permitting in nonattainment areas under section 110 and part D of title
I of the Act. These deficiencies prevented full approval.\20\ As noted
in that final action, this disapproval imposed an obligation on the EPA
to promulgate a FIP pursuant to CAA section 110(c) within 24 months of
the effective date of the action (i.e., July 31, 2023, setting a
deadline of July 31, 2025, for the EPA to promulgate a FIP), unless the
EPA approved a SIP revision correcting the deficiencies. The June 2023
final action also noted the EPA's existing obligation under the 2023
CBD Consent Decree to promulgate a FIP for new source review (NSR) SIP
elements that the Agency had not approved.\21\ The EPA is therefore
finalizing this FIP for the NNSR program in the MDAQMD to fulfill the
EPA's statutory duty by the deadline
[[Page 106336]]
established under the 2023 CBD Consent Decree.
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\17\ 83 FR 62998 (December 6, 2018).
\18\ 88 FR 42258 (June 30, 2023). CARB's submittal stopped the
sanctions clocks that started as a result of the 2017 Finding of
Failure to Submit, but not the FIP clock, since the latter requires
approval of the SIP submission.
\19\ Id.
\20\ Id.
\21\ Id. at 42268.
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Comment A.1.2: Commenter 08 states that it understands that the EPA
is proposing the FIP under both a statutory deadline established by a
consent decree resulting from its failure to act in a timely manner on
various SIP submissions and under a regulatory deadline required by CAA
section 110(c). Commenter 08 states that the EPA acted to propose the
FIP nearly five months sooner than required by the consent decree.
Commenter 08 believes that the proposed FIP presumes the outcome of the
ongoing litigation, and the hasty action on the EPA's part does not
demonstrate a good faith effort to allow the MDAQMD to continue to
implement its own NNSR program.
Response to Comment A.1.2: The EPA proposed this FIP for the MDAQMD
NNSR program to fulfill the EPA's statutory duty by the deadline
established under the 2023 CBD Consent Decree.\22\ The terms of the
consent decree require the EPA to sign a notice of final rulemaking to
approve a revised SIP submission, to promulgate a FIP, or to approve in
part a revised SIP submission and promulgate a partial FIP for the
Severe NNSR SIP element in the MDAQMD no later than January 10,
2025.\23\ Because the FIP can only be promulgated through a notice and
comment rulemaking, it was necessary for the EPA to propose the FIP
several months before the final signature deadline to give time for the
public to review the draft rulemaking, provide comments, and allow for
the EPA to consider and respond to those comments in a final agency
action.
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\22\ Id.
\23\ Center for Biological Diversity et al., v. Regan, No. 3:22-
cv-03309-RS (N.D. Cal.). The consent decree, as entered by the court
on June 15, 2023, is available in the docket for this action. On
November 8, 2024, the parties stipulated to an extension of the
consent decree deadline to January 10, 2025. The joint stipulation
is available in the docket for this action.
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Commenter 08's assessment of the basis for the EPA's promulgation
of the FIP and the timing of the FIP is not correct. The EPA's
obligation to promulgate a FIP stems from our 2017 Finding of Failure
to Submit the NNSR SIP element for a Severe-15 ozone nonattainment
area.\24\ Our 2017 action started the clock for when the EPA would need
to promulgate a FIP, consistent with CAA section 110(c). Thus, since
March 6, 2019 (two years after the effective date of the action, under
CAA section 110(c)), the EPA has had an obligation to promulgate a FIP
unless it approved the MDAQMD's NNSR program. Because the EPA has not
fully approved the MDAQMD's NNSR program, the EPA remains obligated to
promulgate a FIP unless the MDAQMD addresses the deficiencies
identified in the 2023 LA/LD.
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\24\ 82 FR 9158 (February 3, 2017).
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After extensive coordination between the EPA and MDAQMD, the MDAQMD
adopted revised NSR rules on March 22, 2021, which CARB, as the
governor's designee, submitted to the EPA on July 23, 2021, for
approval into the SIP. In the transmittal letter from the MDAQMD to
CARB accompanying the amended NNSR rules, the MDAQMD wrote that the
issue regarding MDAQMD Rule 1304(C)(2)(d) may need to be resolved in
court.\25\ The EPA's 2023 LA/LD was the final action on the 2021
submittal. The FIP clock that commenced with the 2023 LA/LD is separate
from the FIP clock that began with the 2017 finding of failure to
submit, in contrast to the statements Commenter 08 made in its comment
number 1 on the proposed FIP; again, that deadline passed in 2019.
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\25\ Cover Letter, MDAQMD March 22, 2021 Amendments to MDAQMD
Regulation XIII--New Source Review and Rule 1600--Prevention of
Significant Deterioration, sent from the MDAQMD to CARB. May 17,
2021, p. 2.
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Following the EPA's finalization of the 2023 LA/LD on June 30,
2023, the MDAQMD filed a petition for review of that action in the U.S.
Court of Appeals for the Ninth Circuit Court on July 10, 2023. On
September 5, 2024, the Ninth Circuit Court of Appeals in the case
Mojave Desert Air Quality Management District v. EPA remanded to the
EPA the Agency's determination that the MDAQMD Rule 1304(C)(2)(d) is
unlawful under the CAA. The Ninth Circuit did not render a substantive
ruling on the legality of the MDAQMD Rule 1304(C)(2)(d); rather, it
remanded to the EPA to explain the EPA's finding that the MDAQMD rule
was deficient, specifically in the context of the EPA's 1996 approval
of the MDAQMD's NNSR program containing similar provisions to today's
Rule 1304(C)(2)(d). The EPA therefore finds the MDAQMD SIP remains
deficient with respect to Rule 1304(C)(2)(d) and inconsistent with CAA
requirements. Regardless of the Ninth Circuit's remand, the EPA is
required to promulgate the FIP, and it must do so by the consent decree
deadline of January 10, 2025.\26\
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\26\ On November 8, 2024, CBD and the EPA filed a joint
stipulation to extend the original November 29, 2024 deadline to
January 10, 2025. Center for Biological Diversity et al., v. Regan,
No. 3:22-cv-03309-RS (N.D. Cal.). This consent decree is also
available in the docket for this action.
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Comment A.1.3: Commenter 02 states that since the MDAQMD made
changes to address all but one of the six deficiencies the EPA
identified in the 2023 LA/LD, there is no longer a need to address
those particular issues in the FIP other than to note that resolution
has been reached and approval of those five issues is forthcoming.
Commenter 08 states that because CARB submitted the MDAQMD's
revised rules to the EPA on August 7, 2024, it is the commenter's
understanding that the FIP will only pertain to Simultaneous Emission
Reduction (``SER'') calculations under MDAQMD Rule 1304(C)(2)(d). The
commenter states that with CARB's submission of the MDAQMD's revised
rules, the deficiencies in the MDAQMD's rules are no longer broad in
scope, nor do they affect multiple aspects of the program. The
commenter urges the EPA to work cooperatively with the MDAQMD and not
put the onus of the FIP on facilities.
Commenter 07 states that the MDAQMD has made many changes to its
NSR rules to meet the requirements of the 1990 Clean Air Act and
requests that the EPA reevaluate its decision to promulgate the FIP.
Similarly, Commenter 05 states that the EPA should reconsider or
postpone implementing the FIP until it can resolve its disagreement
with the MDAQMD regarding Rule 1304(C)(2)(d). Commenter 09 urges the
EPA to defer the FIP until the ongoing litigation between the EPA and
the MDAQMD is resolved.
Response to Comment A.1.3: Section III.H of our FIP proposal
described how SIP replacement of all or any part of the proposed FIP
would work, noting that changes to the MDAQMD's rules, if approved into
the SIP, could replace the corresponding requirements of the FIP.\27\
The EPA received CARB's submission of the MDAQMD's revised rules
(adopted by the MDAQMD on March 25, 2024) on August 7, 2024, which was
after our July 9, 2024 proposed action. For the EPA to narrow the scope
of the FIP to just the remaining issue--the quantification and
generation of offsets under MDAQMD Rule 1304(C)(2)(d)--the EPA would
first need to approve the August 7, 2024 CARB submittal containing the
MDAQMD's revised NNSR rules, which requires a 30-day notice and comment
period. We are currently reviewing the submission for completeness and
substance, as required under section 110(k) of the CAA. Therefore,
there is not enough time before the January 10, 2025 consent decree
deadline to accommodate the required notice and comment rulemaking on
any action the
[[Page 106337]]
EPA takes on the August SIP submittal.\28\
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\27\ 89 FR 56237, 56243.
\28\ The CBD Consent Decree deadline was November 29, 2024,
until CBD and the EPA agreed to extend the deadline, following the
EPA's showing of need for an extension. Despite this extension, the
EPA maintains that the extension of the CBD Consent Decree deadline
to January 10, 2025, is still an insufficient amount of time to act
on the MDAQMD's submittal and narrow the scope of the FIP before the
deadline to finalize it.
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Case law also supports the conclusion that the EPA is not required
to act on the MDAQMD's August 7, 2024 submittal prior to finalizing the
FIP. As the court held in Keystone-Conemaugh Projects LLC v. EPA, a
case in which the EPA promulgated a FIP before acting on a revised SIP
submittal, CAA section 110(c) ``contains no language requiring the EPA
to act on the SIP revision before promulgating the FIP.'' \29\
(Emphasis in original.) Likewise, as Commenter 02 indicates in its
comment letter, the MDAQMD's revised NNSR rules submitted by CARB on
August 7, 2024, does not include any revisions of MDAQMD Rule
1304(C)(2)(d).
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\29\ Keystone-Conemaugh Projects LLC v. EPA, 100 F.4th 434, 447
(3d Cir. 2024). The court further stated that ``. . . if the EPA
were required to act on each and every SIP revision submitted before
it could issue a FIP, an untenable scenario could ensue. For
instance, if a state were to submit multiple inadequate SIP
revisions, it could effectively nullify the EPA's ability to issue a
FIP and thus delay the implementation of any emission limits.''
(FN7)
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Similar to the situation at issue in Arizona ex rel. Darwin v.
United States, there is no reason to think that, after nearly five
years of discussions of the MDAQMD's NNSR program between EPA and the
MDAQMD, additional time to correct Rule 1304(C)(2)(d) would lead to
MDAQMD's revising its NNSR program to resolve the deficiency.\30\
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\30\ See, Ariz. ex rel. Darwin v. United States, 815 F.3d 519,
543-544 (9th Cir. 2016), in which the Ninth Circuit Court of Appeals
upheld the EPA's combined partial SIP disapproval and FIP, which the
agency promulgated to meet a consent decree deadline stemming from a
previous finding of failure to submit. The court stated that ``it is
unlikely that a different outcome would have resulted if EPA had
provided [the State] with additional time to correct its . . . SIP .
. . [the State] made no effort to correct its SIP in light of these
comments. There is no reason to think it would have done so after
the Final Rule disapproving the SIP issued either.''
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Comment A.1.4: Commenter 09 states that the proposed FIP is not
necessary because the EPA already has authority under the existing
MDAQMD rules to review applications for major facilities and enforce
applicable federal NNSR requirements. This commenter states that MDAQMD
Rule 1203(B)(1) requires that the EPA be given an opportunity to review
and comment on applications for Federal Operating Permits (FOP),
Significant Modifications to FOPs, and Renewals to FOPs. The commenter
states that the EPA already has the discretion and authority to deny
applications for a Major Facility that it believes has not complied
with applicable federal NNSR requirements.
Response to Comment A.1.4: The EPA disagrees with the comment.
While the EPA can comment on, and enforce, Title V permits issued under
the MDAQMD's approved CAA Title V program,\31\ the Title V operating
permit program is not the same permitting program as a NNSR pre-
construction permitting program. Title I of the CAA has a separate
requirement that the MDAQMD SIP contain a fully approved NNSR
permitting program for the 2008 and 2015 ozone NAAQS.\32\ Federal
Operating Permits issued under Title V of the CAA (and under Regulation
XII of MDAQMD's approved Title V program) are not the same as pre-
construction NNSR permits issued under a SIP-approved program under
Title I of the CAA, and the EPA's authority to review, comment on, and
object to Title V permits does not remedy the deficiencies in the
MDAQMD's NSR program, nor does the EPA's authority under Title V
fulfill the EPA's FIP obligation under CAA section 110(c). MDAQMD
Regulation XIII, which contains the MDAQMD's NNSR program, still needs
to be approved into the SIP for the 2008 and 2015 ozone NAAQS. The EPA
therefore has a statutory duty to promulgate a FIP as the result of its
finding of failure to submit published in the Federal Register on
February 6, 2017, and the EPA is now subject to a court order to either
promulgate a FIP or approve a SIP submission that corrects all the
deficiencies identified in the finding of failure to submit no later
than January 10, 2025.\33\
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\31\ See 40 CFR part 70, appendix A.
\32\ 42 U.S.C. 7410(a).
\33\ Center for Biological Diversity et al., v. Regan, No. 3:22-
cv-03309-RS (N.D. Cal.). This consent decree is also available in
the docket for this action.
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2. Comments on MDAQMD Rule 1304(C)(2)(d)
Comment A.2.1: Commenter 01 asserts that the EPA erroneously
assumed that SERs (Simultaneous Emissions Reductions) created under
MDAQMD Rule 1304(C)(2)(d) (referred to by Commenter 01 as
``1304(C)(2)(d) Offsets'') are unlawful under the CAA. The commenter
states that 1304(C)(2)(d) Offsets are created by a reduction in a
source's allowable emissions that were fully offset in a previous
action. Commenter 01 states that 1304(C)(2)(d) Offsets are adjusted to
reflect otherwise required reductions, may only be used to offset
contemporaneous emission increases at the facility, and cannot be
banked for future use. Commenter 01 further asserts that 40 CFR
51.165(a)(3)(ii)(J) does not relate to creditable emission reductions
and that even that provision, through a cross-reference to the
definition of ``actual emissions'' at 40 CFR 51.165(a)(1)(xii), allows
permitting agencies to ``presume that source-specific allowable
emissions for the unit are equivalent to the actual emissions of the
unit.''
Commenter 06 similarly asserts that while 40 CFR
51.165(a)(3)(ii)(J) requires offsets to be determined by summing the
difference between the allowable emissions after the modification and
the actual emissions before the modification (as defined in paragraph
(a)(1)(xii)), paragraph (a)(1)(xii)(C) allows the MDAQMD to presume
that source-specific allowable emissions for the unit are equivalent to
the actual emissions of the unit.
Therefore, Commenters assert, 1304(C)(2)(d) Offsets and the
potential-to-emit to potential-to-emit or potential-to-potential (PTE-
to-PTE) test are valid and consistent with sections 173(c)(1),
173(c)(2), and 182 of the CAA and the implementing regulations at 40
CFR 51.160-165.
Response to Comment A.2.1: The EPA disagrees with the assertion
that the EPA made an erroneous finding that 1304(C)(2)(d) Offsets are
inconsistent with statutory and regulatory requirements. As the EPA
previously explained in the 2023 LA/LD and reiterated in our proposed
action for the FIP, 1304(C)(2)(d) Offsets are inconsistent with the CAA
and the EPA's regulations because they allow facilities to satisfy
major NSR offset obligations using a baseline of allowable emissions
before construction rather than a baseline of actual emissions before
construction. We provide a more detailed explanation below.
CAA sections 173(a)(1)(A) and 173(c)(1) require that NNSR permits
issued by states (or local air districts) pursuant to EPA-approved SIPs
must require all proposed new or modified major sources that trigger
NNSR to obtain sufficient offsetting emissions reductions. For example,
section 173(c)(1) requires owners or operators of new or modified major
stationary sources to obtain emission reductions that ``assure that the
total tonnage of increased emissions of the air pollutant from the new
or modified source shall be offset by an equal or greater reduction, as
applicable, in the actual emissions of such air pollutant from the same
or other sources in the area.''
[[Page 106338]]
(Emphasis added.) \34\ Rule 1304(C)(2)(d) is inconsistent with section
173(c)(1) because it allows sources that have offset their allowable
emissions at any point in time to avoid the CAA obligation to offset
future increases in actual emissions from future major modifications.
The EPA also disagrees with Commenter 01's assertion that Rule
1304(C)(2)(d) is consistent with CAA section 173(c)(2). In addition to
the phrase referenced by the commenter, CAA section 173(c)(2) also
states that ``[i]ncidental emission reductions which are not otherwise
required by this chapter shall be creditable as emission reductions for
such purposes if such emission reductions meet the requirements of [CAA
section 173(c)(1)].''
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\34\ In New York v. EPA, a case regarding the applicability of
NSR requirements, the U.S. Court of Appeals for the District of
Columbia held that ``the plain language of the CAA indicates that
Congress intended to apply NSR to changes that increase actual
emissions instead of potential or allowable emissions,'' when
describing the definition of the term ``modification'' in CAA
section 111(a)(4). 413 F.3d 3, 40 (D.C. Cir. 2005). CAA section
173(c)(1) is at least as clear as CAA section 111(a)(4) regarding
the import of using actual emissions for baseline purposes--it
specifically uses the term ``actual emissions,'' and it omits terms
like ``potential to emit,'' ``emission limitations,'' or similar
references when addressing the baseline. Although the D.C. Circuit
did not construe the Act's offset requirement at section 173(c)(1),
its interpretation of a similar statutory provision bearing on when
a proposed source's emissions increases trigger the need for an NSR
permit, CAA section 111(a)(4), is instructive.
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The regulations at 40 CFR 51.165 require the District to use actual
emissions as the baseline for determining the total tonnage of offsets
that must be obtained by an owner or operator of a stationary source
undergoing NNSR permitting. 40 CFR 51.165(a)(3)(i) requires:
[T]hat the offset baseline shall be the actual emissions of the
source from which offset credit is obtained where . . . [t]he
demonstration of reasonable further progress and attainment of ambient
air quality standards is based upon the actual emissions of sources
located within a designated nonattainment area for which the
preconstruction review program was adopted. (Emphasis added.)
Moreover, under 40 CFR 51.165(a)(3)(ii)(J), which the EPA codified
in 2002, SIPs ``shall . . . provide that'' ``[t]he total tonnage of
increased emissions . . . that must be offset . . . shall be determined
by summing the difference between the allowable emissions after the
modification (as defined by paragraph (a)(1)(xi) of this section) and
the actual emissions before the modification (as defined in paragraph
(a)(1)(xii) of this section)[.]'' (Emphasis added.)
Although Commenters 01 and 06 cite 40 CFR 51.165(a)(1)(xii) as
authority to assert that MDAQMD is allowed to presume that the source-
specific allowable emissions for a unit are equivalent to the actual
emissions of the unit, any flexibility allowed under that provision is
limited by section 40 CFR 51.165(a)(3)(i), which requires states or air
districts that base reasonable further progress (RFP) and attainment
planning on actual emissions \35\ to use actual emissions as the
baseline for all offset purposes.\36\ The MDAQMD's RFP and attainment
demonstrations are based on actual emissions, not allowable
emissions.\37\
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\35\ See 86 FR 24809, 24813 (May 10, 2021), ``The 2018 SIP
Update explains that 2012 `stationary source emissions reflect
actual emissions reported from industrial point sources' and include
stationary aggregate sources, such as gasoline dispensing facilities
. . . MDAQMD Rule 107, `Certification of Submissions and Emission
Statements,' require[s] all stationary sources within the
nonattainment area that emit more than 25 tons per year (tpy) or
more of VOC or NO<INF>X</INF> to report and certify annual
emissions.'' The MDAQMD does not assert or document use of
allowables for RFP or attainment.
\36\ Furthermore, Commenter 01 states the presumption
incorrectly--40 CFR 51.165(a)(1)(xii)(C) allows the permitting
authority to presume that allowable emissions are equivalent to the
actual emissions, it does not say that the permitting authority may
presume that the actual emissions are equivalent to the allowable
emissions. This is important because a source's actual emissions
will almost always be lower than its allowable emissions since an
exceedance of the allowable emissions could constitute a violation
of the permit.
\37\ MDAQMD's 2008 and 2015 ozone NAAQS attainment plans are
based on actual emissions. The 2008 ozone NAAQS plan is available
at: <a href="https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf">https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf</a>, pp. 7, 34 (EPA approved this
plan, see 86 FR 53223 (September 27, 2021).) The 2015 ozone NAAQS is
available at: <a href="https://www.mdaqmd.ca.gov/home/showpublisheddocument/9693/638131029372000000">https://www.mdaqmd.ca.gov/home/showpublisheddocument/9693/638131029372000000</a>, pp. 4-5, 24, 80.
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The EPA also disagrees with Commenter 01's suggestion that the EPA
erroneously relied on 40 CFR 51.165(a)(3)(ii)(J) in its disapproval of
Rule 1304(C)(2)(d) because that paragraph ``addresses calculating
emission increases[,] not creditable emission reductions.'' \38\ Both
provisions require the use of actual emissions as a baseline to
calculate either the offset obligation (emission increase) or the
satisfaction of that obligation (credit for emissions reductions), and
the commenter does not dispute that 40 CFR 51.165(a)(3)(i) requires
that emissions reductions for offset credits must use actual emissions
as a baseline if actual emissions are used to demonstrate reasonable
further progress and attainment. The MDAQMD's RFP and attainment
demonstrations are based on actual emissions--not allowable
emissions.\39\
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\38\ Commenter 01 letter, p. 4, footnote 30.
\39\ MDAQMD's 2008 and 2015 ozone NAAQS attainment plans are
based on actual emissions. The 2008 ozone NAAQS plan is available
at: <a href="https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf">https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf</a>, pp. 7, 34 (EPA approved this
plan, see 86 FR 53223 (September 27, 2021).) The 2015 ozone NAAQS is
available at: <a href="https://www.mdaqmd.ca.gov/home/showpublisheddocument/9693/638131029372000000">https://www.mdaqmd.ca.gov/home/showpublisheddocument/9693/638131029372000000</a>, pp. 4-5, 24, 80.
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Based on the requirements of the CAA and its implementing
regulations regarding offsets,\40\ Rule 1304(C)(2)(d) does not ensure
that the required quantity of emissions associated with a major
modification in the MDAQMD will be offset and the provision is
therefore not approvable in the SIP. Accordingly, the EPA must
promulgate a FIP that contains the requirements stated in the CAA and
its implementing regulations. The MDAQMD regulates an area that is
classified as a Severe ozone nonattainment area and a ``Moderate''
PM<INF>10</INF> nonattainment area. It is important that sources in the
nonattainment area make real reductions in emissions to offset
emissions increases consistent with the goal of bringing the area into
attainment for these air pollutants.
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\40\ See e.g., CAA sections 173(a)(1)(A), 173(c)(1) and 40 CFR
51.165(a)(3)(i), 40 CFR 51.165(a)(3)(ii)(G), and 40 CFR
51.165(a)(3)(ii)(J).
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Comment A.2.2: Commenter 01 states that although 1304(C)(2)(d)
Offsets result from reductions in allowable emissions, ``they produce
real reductions in actual emissions.'' The commenter states that to
``originally secure the allowable emissions, the facility had to
previously effect permanent actual emission reductions'' either by
curtailing its own emissions or by purchasing emission reduction
credits. The commenter states that if the facility agrees to
permanently reduce those offset allowable emissions, the permanent
emission reductions continue to exist. Commenter 01 then states that
where those emission reductions ``exceed the volume of reductions
required to sufficiently offset historical actual emissions (i.e., the
facility was able to curtail the source's emissions below the now
eliminated allowable emission levels), those reductions exceed the
obligation to assure that the total tonnage of increased emissions of
an air pollutant from the new or modified source is offset by a
reduction of actual emissions of that air pollutant in accordance with
42 U.S.C. 7503(c)(1) and in the quantities required by 42 U.S.C.
7511a.'' Commenter 01 further states that Rule 1304(C)(2)(d) complies
with 42 U.S.C.
[[Page 106339]]
7503(c)(2) by identifying excess emission reductions and credits that
exceeds the law's requirements as an available offset.
Moreover, Commenter 05 believes that emissions that were previously
offset under the MDAQMD's rules represent actual emission reductions as
required by CAA section 173(c)(1) and can be used for calculating
emission reductions pursuant to Rule 1304(C)(2)(d). Commenter 05
asserts that fully offset emissions are not ``paper reductions''
because they represent actual emission reductions that are banked and
used following approved regulatory procedures.
Response to Comment A.2.2: The EPA does not agree with the comment
that 1304(C)(2)(d) Offsets result in real reductions in actual
emissions, as required by the Act. Rule 1302(C)(2)(d) requires that (i)
a federally enforceable emission limitation specify the PTE for the
specific Emissions Unit; (ii) the resulting emissions change result in
a decrease in emissions from the emissions unit; and (iii) any excess
Simultaneous Emissions Reductions (SERs) generated from a calculation
using the Rule are not eligible for banking. For emissions units that
have allowable emissions limits that were fully offset at some point in
the past, Rule 1304(C)(2)(d) allows any reduction in a facility's
allowable emissions to be used to avoid CAA requirements to offset
actual emissions increases.\41\ As a hypothetical example, under MDAQMD
Rule 1304(C)(2)(d), a facility might at the time of its original
construction, ``secure the allowable emissions,'' (using the
commenter's phrasing) in the amount of 200 tons per year (tpy) through
``permanent actual emission reductions'' in that amount. If the
facility subsequently submits a permit application to construct a
project that would increase its actual emissions by 40 tpy, Rule
1304(C)(2)(d) allows the facility to decrease its allowable emissions
limit of 200 tpy by a nominal amount, even just 1 tpy or less, to
establish that the project would result in an ``emissions decrease,''
rather than the actual emissions increase of 40 tpy that would actually
occur and that would be subject to a requirement to offset the increase
in actual emissions.\42\ Rule 1304(C)(2)(d) is contrary to the CAA
because it allows increases in actual emissions without any offsetting
reductions in actual emissions. In other words, Rule 1304(C)(2)(d)
allows real increases in emissions to be added to the air without
requiring any offsetting decrease in real emissions.
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\41\ Rule 1304(C)(2)(d)(ii) requires that ``the resulting
Emissions Change from a calculation using this provision is a
decrease in emissions from the Emissions Unit(s),'' hence why a
source must demonstrate a reduction in allowable emissions from the
subsequent modification.
\42\ The example presented here is similar to a recent MDAQMD
permitting action that the EPA described in the 2023 LA/LD. 88 FR
42258, 42263 (MDAQMD, ``Preliminary Determination/Decision--
Statement of Basis for Minor Modification to and Renewal of FOP
Number: 104701849 For: High Desert Power Project, LLC.'' December
21, 2022, p. 7.)
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It should also be noted that, in the hypothetical example presented
in the previous paragraph, although the facility would have offset 200
tpy of emissions at the time of its initial construction by obtaining
or surrendering 200 tpy of emissions reduction credits (``ERCs''), it
used those ERCs to obtain a 200 tpy allowable emissions limit in that
project.\43\ Therefore, those ERCs are no longer available to offset
subsequent increases in actual emissions resulting from future
construction and modification projects. According to Commenter 01, Rule
1304(C)(2)(d) allows NNSR permit applicants to obtain permits by
relying on previously relied upon emission reductions or previously
surrendered emission reduction credits; however, because those emission
reductions were used in a prior permitting action, they are not
``surplus'' under 40 CFR 51.165(a)(3)(ii)(G). 40 CFR
51.165(a)(3)(ii)(G) states: [The SIP] ``shall further provide that . .
. [c]redit for an emissions reduction can be claimed to the extent that
the reviewing authority has not relied on it in issuing any [NNSR]
permit . . . or the State has not relied on it in demonstrat[ing]
attainment or reasonable further progress.'' Thus, 40 CFR
51.165(a)(3)(ii)(G) prevents facilities from re-using credits to obtain
a permit for a major modification.
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\43\ These required offset quantities do not reflect the
adjustment based on the area's nonattainment, which would require an
even greater quantity of offsets for higher levels of nonattainment.
CAA 182(d)(2), 40 CFR 51.165(a)(9).
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3. Comments Regarding EPA's 1996 Approval of 1304(C)(2)(d) Offsets
Comment A.3.1: Commenter 01 states that in 1996, EPA approved
1304(C)(2)(d) Offsets and that the associated 1995 technical support
document explained that 1304(C)(2)(d) Offsets constitute real
reductions in actual emissions, are not otherwise required by the CAA
(once adjusted) and comply with CAA section 173. The commenter also
states that since 1996 neither the relevant law nor the 1304(C)(2)(d)
Offsets have materially changed.
Commenter 01 further states that the proposed FIP is arbitrary and
capricious because the EPA fails to explain the reversal of its 1996
position in approving the District's Rule 1304(C)(2)(d) Offsets. The
commenter states that EPA's contention that 1304(C)(2)(d) Offsets allow
reductions on paper that do not represent real emissions reductions and
that sources must reduce actual emissions to below historic actual
emission levels to generate offset credit are complete reversals of the
positions the EPA took in 1996 when it determined that SERs, including
1304(C)(2)(d) Offsets, constitute real reductions in actual emissions
that are not otherwise required by the CAA and offset credit could be
lawfully generated from reductions of surplus, fully-offset allowable
emissions. The commenter states that, while the Administrative
Procedure Act (APA) allows the EPA to reverse its policy on the
1304(C)(2)(d) Offsets, the EPA must ``display awareness that it is
changing position and show that there are good reasons for the new
policy.'' \44\
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\44\ Citing Ass'n of Irritated Residents v. U.S. Env't Prot.
Agency, 10 F.4th 937, 945 (9th Cir. 2021).
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Response to Comment A.3.1: The EPA's response to this comment
serves as both our response to this comment in the context of the
proposed FIP, the rulemaking for which the comment was submitted, and
as the Agency's new final action to disapprove Rule 1304(C)(2)(d) in
response to the Court of Appeals' ruling in the case Mojave Desert Air
Quality Management District v. EPA, in which the Ninth Circuit granted
petitioner MDAQMD's petition for review and remanded to the EPA ``for
further proceedings before the agency on an open record consistent with
this decision.'' \45\ The MDAQMD, in its comments on the EPA's proposal
of the 2023 LA/LD, criticized the EPA's proposed rulemaking for failing
to explain why the EPA approved similar provisions into the SIP in 1996
that it now finds deficient. The MDAQMD sought review of EPA's 2023 LA/
LD action in the Ninth Circuit. The court agreed that the EPA failed to
provide sufficient explanation in that action for the change in
direction after 1996 and therefore directed the EPA to address the
issue through further proceedings. Commenter 01--the MDAQMD--makes the
comment again in the context of the FIP. Since both matters address the
same subject, the EPA has determined that it is appropriate to use one
notice
[[Page 106340]]
to both respond to the MDAQMD's comments in the context of the FIP and
to respond to the court's remand regarding the 2023 LA/LD disapproval
of Rule 1304(C)(2)(d).
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\45\ Memorandum, Mojave Desert Air Quality Management District
v. United States Environmental Protection Agency, 9th Circuit Court
of Appeals No. 23-1411, September 5, 2024, p. 5.
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First, we note that significant regulatory changes occurred or were
proposed in the 1990s, federally and in California, where the State and
local air districts were implementing State legislation that was passed
in 1988 to address air quality issues.\46\ Later in this action, we
discuss the CAA and regulatory requirements at the time of the EPA's
October 1995 proposed approval and November 1996 final approval of the
MDAQMD's NNSR rules. We then describe the Agency's contemporaneous
consideration of options for regulatory flexibility during the 1990's.
These documents, taken together, provide context for the regulatory
landscape that existed during the EPA's review and approval of the
MDAQMD's rules in 1995-1996. We also analyze our 1996 approval of
MDAQMD's offset rules in light of the EPA's 2002 final rulemaking
revising significant aspects of the NSR program (``2002 NSR Reform
Rule).\47\ In sum, this analysis is sufficient for the EPA, now, to
conclude that the EPA's 1996 approval of the MDAQMD's offset rules was
inconsistent with the CAA and its implementing regulations. Based on
the documents discussed in this response, the EPA apparently believed
in 1996 that the District's rules, which required the application of
Best Available Control Technology (BACT) and offsets for a modification
on the PTE of the entire facility rather than the modification alone,
were sufficiently stringent to satisfy federal requirements.\48\ As we
explain in this response and in our responses to comments A.2.1 and
A.2.2, however, our justification in 1996 for approving MDAQMD rule
provisions that were similar to Rule 1304(C)(2)(d) is deficient, the
EPA's 2002 NSR Reform Rule did not include revisions that would ratify
or authorize MDAQMD's approach, and therefore our 2023 disapproval of
Rule 1304(C)(2)(d) is correct.
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\46\ For example, the California Clean Air Act uses different
offsets thresholds than the federal regulations. See California
Health and Safety Code sections 40918, 40919, 40920, and 40920.5;
compare to 40 CFR 51.165. California air districts must implement
State requirements under California law and satisfy the federal
requirements under the CAA and its implementing regulations. Any
provision that conflicts with the CAA and its implementing
regulations is not approvable.
\47\ 67 FR 80186, 80205 (December 31, 2002).
\48\ 1995 TSD accompanying the EPA's proposed rule (60 FR 55355
(October 31, 1995)) (``1995 TSD''), p. 17.
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Federal Regulatory Scheme Regarding Offsets in Effect in 1996
On August 7, 1980, the EPA promulgated NSR rules for attainment and
nonattainment areas.\49\ The 1980 NSR rulemaking codified 40 CFR
51.18(j)(3)(i), requiring an offset baseline to be based on actual
emissions of the source from which offset credit is obtained where
demonstrations of reasonable further progress and attainment are based
on actual emissions.\50\ As stated in the rule's preamble, the EPA's
rationale was, ``to be consistent with RFP, sources must reduce their
actual, rather than their allowable, emissions. Otherwise, sources
could claim credit for offsets in situations where the offset would
actually interfere with RFP.'' \51\ On November 7, 1986, the EPA
promulgated NSR rules specifically for nonattainment areas at 40 CFR
51.165 and codified the text at 40 CFR 51.18(j)(3)(i) into 40 CFR
51.165(a)(3)(i), where it was in 1996, in 2023 (at the time of our LA/
LD rulemaking), and today.\52\
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\49\ 45 FR 52676 (August 7, 1980).
\50\ Id. at 52745.
\51\ Id. at 52728.
\52\ 51 FR 40656, 40672 (November 7, 1986); 40 CFR
51.165(a)(3)(i) (1996) (a copy of the CFR as of July 1, 1996 is in
the docket for this rulemaking). See also, 57 FR 13498, 13552 (April
16, 1992) (``The EPA interprets section 173(a)(1)(A) to ratify
current EPA regulations requiring that the emissions baseline for
offset purposes be calculated in a manner consistent with the
emissions baseline used to demonstrate RFP.'')
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The EPA's 1980 NSR rulemaking also codified 40 CFR 51.18(j)(3)(g),
allowing credit for emissions reductions only ``to the extent that the
reviewing authority has not relied on [the reductions] in issuing any
permit under regulations approved pursuant to 40 CFR 51.18 or the state
has not relied on [the reductions] in demonstrating attainment or
reasonable further progress.'' \53\ The EPA's 1986 NNSR rulemaking
codified the text at 40 CFR 51.165(a)(3)(ii)(G), where it was in 1996,
in 2023 (at the time of our LA/LD rulemaking) and today.\54\
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\53\ 45 FR 52746.
\54\ 51 FR 40672; 40 CFR 51.165(a)(3)(ii)(G) (1996).
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Likewise, EPA guidance issued during the 1990s addressed the
quantity of emissions to be offset. Specifically, in the proposed
rulemaking action titled, ``General Preamble for the Implementation of
Title I of the Clean Air Act Amendments of 1990,'' the EPA clarified
that CAA section 173(c)(1) ``provides that emissions increases from the
new or modified source must be offset by real reductions in actual
emissions.'' \55\
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\55\ 57 FR 13498, 13553 (April 16, 1992). The EPA further stated
that if RFP and attainment plans ``are based on allowable emissions,
offset credit for reductions in allowable emissions . . . is
appropriate, but will be deemed inadequate if there is not a real
reduction in actual emissions that equals or exceeds, as applicable,
the increase in emissions resulting from the operation of the major
new or modified source.'' Id.
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The EPA's 1995-1996 Rulemaking for the MDAQMD's 1993 and 1996 Adopted
Versions of Rule 1304(C)(2)(d)
On October 27, 1993, the MDAQMD adopted a series of NSR rules,
which CARB submitted to the EPA as a SIP revision on March 29,
1994.\56\ On October 31, 1995, the EPA published a proposed action in
the Federal Register to approve the rules contingent upon the MDAQMD's
adoption and submittal, as a SIP revision, of revised rules that would
correct a number of deficiencies that EPA had identified.\57\ The EPA
based its proposed ``approval with a contingency and disapproval in the
alternative'' on a set of draft rules that the MDAQMD transmitted to
the EPA on October 11, 1995 (``October 11, 1995 draft rules'') that
MDAQMD had not yet adopted or submitted to CARB.\58\ The EPA's proposed
action explained that the 1993 adopted version of the rules contained
numerous deficiencies that precluded full approval but that the October
11, 1995 draft rules were intended to address those deficiencies and
that the EPA's proposed approval was conditioned upon MDAQMD's adoption
and submission of the revised rules.\59\ Thus, the EPA's proposed rule
and technical support document (TSD) summarized the rules as adopted on
March 29, 1993, including bases for findings of rule deficiencies, as
well as statements regarding the October 11, 1995 draft rules that the
MDAQMD had
[[Page 106341]]
committed to adopt and submit to EPA before EPA finalized its
rulemaking.
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\56\ Although EPA has not been able to locate a copy of the NSR
rules as adopted by the MDAQMD in October 1993, we are able to
determine the adoption date from the MDAQMD's headings on later
versions of the rules that provide a chronology of adoption dates.
The 1995 TSD and proposed rulemaking reference the submittal date.
1995 TSD at 2; 60 FR 55356.
\57\ 61 FR 58133 (November 13, 1996). In the proposed
rulemaking, the EPA proposed ``to approve with a contingency, and
disapprove in the alternative.'' 60 FR 55355 (October 31, 1995).
\58\ 60 FR 55355.
\59\ Id. (``The submitted rules contain a number of deficiencies
that prevent EPA from approving them as revisions to the SIP.
However, MDAQMD has agreed to correct these deficiencies, and has
sent draft rules . . . to EPA which contain acceptable language.
This proposed approval is therefore contingent upon MDAQMD adopting
and submitting to EPA revised rules which correct the deficiencies
identified in this document before EPA promulgates a final
rulemaking on the submitted rules.'')
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In the EPA's proposed action on this submission, the EPA concluded
that MDAQMD's Rule 1306 ``Calculating Emissions Changes'' as adopted in
March 1993 was deficient because the rule uses a source's pre-
modification PTE rather than pre-modification actual emissions, as the
baseline to calculate the offset requirement and that the method is not
acceptable unless the source has already offset its entire pre-
modification PTE.\60\
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\60\ Id. at 55356 (``This section uses a source's pre-
modification potential to emit (PTE), rather than its pre-
modification actual emissions, as the baseline for calculating the
offset requirement for major modifications in nonattainment areas.
This method is not acceptable unless the source has already offset
its entire pre-modification PTE. The District must amend the rule to
calculate the offset requirement in this case as the source's new
PTE minus the source's pre-modification actual emissions.'')
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In the 1995 TSD accompanying the EPA's proposed rule, the EPA
further explained that Rule 1306 as adopted in March 1993 ``has several
deficiencies that prevent its full approvability by EPA'' and provided
a list of deficiencies, ``along with the changes which would make the
rule approvable.'' As stated in the 1995 TSD:
The rule uses a source's potential to emit as a baseline for
calculating emissions changes, rather than its actual emissions. In
general, use of potential to emit in this calculation is
unacceptable, however, for most purposes in this rule it is
acceptable. For example, the submitted rules require the application
of BACT and offset for a modification if the PTE of the entire
source (not just the increase caused by the modification) would
exceed the applicable threshold after the modification. Thus,
applicability is determined by the total PTE of the source, not the
size of the calculated emissions change resulting from the
modification. However, this method is not acceptable for calculating
the amount of offsets required as the result of an increase, unless
the source has already offset its entire PTE.\61\
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\61\ 1995 TSD, p. 17.
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Section 1305(A)(2)(b)(iii) of the proposed revision of the
District's rules contains the necessary changes to these
provisions.\62\
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\62\ Id. at 17. In March 1996, the MDAQMD adopted Rule
1305(A)(2)(b)(iii), which the EPA approved into the California SIP
in November 1996, and is the equivalent of current Rule
1304(C)(2)(d). Rule 1305(A)(2)(b)(iii) stated: ``For emissions
increases from a Modification to a Major Facility the base quantity
of Offsets shall be determined as follows: (a) When the Modification
is a Major Modification to a Major Facility within a nonattainment
area, the base quantity of Offsets shall be the amount equal to the
difference between the Facility's Proposed Emissions and the HAE
[historic actual emissions] unless the Facility's HPE [Historic
Potential Emissions] has been completely offset in prior permitting
actions pursuant to this Regulation; or (b) The amount equal to the
difference between the Facility's Proposed Emissions, as modified,
and the HPE.''
(Emphasis in original.)
The statements in the EPA's proposed rule and TSD are brief. It
appears, however, that we concluded that the MDAQMD's approach--using
PTE (i.e., allowable emissions) rather than actual emissions as a
baseline to evaluate NNSR applicability for modifications--would be
acceptable because it would require the MDAQMD to impose BACT and
offsets requirements for any modification at a major source, regardless
of whether the modification qualified as ``significant,'' whereas the
EPA's regulations apply BACT and Lowest Achievable Emission Rate (LAER)
to facility modifications only if the source is already major and the
emissions increase from the modification itself is ``significant,'' or
if the modification is itself above the applicable major source
threshold. Therefore, it appears that applying this rationale, the EPA
found that the MDAQMD's approach to determining NNSR applicability for
modifications was at least as stringent as the federal approach and
therefore was approvable.
As described in the EPA's final rulemaking, the MDAQMD adopted
revised NSR rules on March 25, 1996, that CARB submitted as a SIP
revision to the EPA on July 23, 1996.\63\ The EPA's final rulemaking
contains no additional analysis, but it simply states: ``The submitted
rules contain the changes necessary for approval, in a manner that is
identical to that described in the TSD for the proposed approval.''
\64\ As part of this final action, the EPA approved MDAQMD rules, such
as 1304(C)(1)(b), that allow SERs to be based on reductions in PTE
(allowable emissions) and that allow such SERs to satisfy federal
offset obligations.
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\63\ 61 FR 58133.
\64\ Id. at 58134.
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Thus, we have been unable to discern in the EPA's 1995-1996
rulemaking documents any legal rationale or support for the MDAQMD's
use of a PTE baseline to determine that the amount of offsets is
acceptable if a ``source has already offset its entire PTE.'' The
statement is inconsistent with statutory and regulatory requirements
that existed at the time (and are still in effect), such as CAA section
173, 40 CFR 51.165(a)(3)(i) and 40 CFR 51.165(a)(3)(ii)(G).\65\
Furthermore, the EPA appears to have mistakenly concluded in 1995-1996
that the MDAQMD's approach for applicability would be sufficient to
consistently ensure issuance of NNSR permits that would be at least as
stringent as required by federal law. First, as we have explained in
our response to comment A.2.2, MDAQMD Rule 1304(C)(2)(d) allows
facilities that are ``fully offset'' at any time in the past to
increase actual emissions without having to offset those actual
emission increases. These increases would be impermissible if MDAQMD
applied the federal requirements.\66\ Second, we note that the EPA's
regulations at 40 CFR 51.165(a)(2)(ii) allow states to use different
calculation methodologies to determine applicability upon the state's
demonstration that its approach is at least as stringent as the EPA's
approach. The EPA's regulations do not contain a similar provision that
would allow states to apply an alternative methodology to calculate the
quantity of required offsets based on a demonstration that the
alternative is more stringent.
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\65\ As noted elsewhere, the provision is also inconsistent with
40 CFR 51.165(a)(3)(ii)(J), which the EPA promulgated in 2002.
\66\ We provide a hypothetical example in our response to
comment A.2.2 and reference the real-world example that we described
in our 2023 LA/LD, wherein a facility that should have been required
to obtain offsets under the federal requirements was exempted from
doing so under MDAQMD Rule 1304(C)(2)(d).
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The 80 Percent Compromise for Calculating Emissions Increases
In a letter dated October 30, 1995, from the EPA to the MDAQMD,
transmitting the 1995 TSD that provided the EPA's analysis of the
MDAQMD's October 1993 NSR rules, the EPA referenced an NSR flexibility
option that the EPA, the MDAQMD, and CARB had discussed since at least
1993. The flexibility option pertains to how an applicant could
calculate emissions changes at its facility, and it is therefore
relevant to the offset generation and quantification issues in
1304(C)(2)(d). This portion of the EPA's response to comment A.3.1
focuses on that flexibility option, beginning with the earliest
document EPA staff were able to locate on the subject.
A letter dated September 8, 1993, from CARB to MDAQMD documents
that the EPA had provided a comment regarding the MDAQMD's calculation
procedures during MDAQMD's process of amending its NSR rules.\67\
Specifically, the letter documents that the EPA had identified a
conflict in determining ``historic emissions'' (i.e., emissions that
could be used as a baseline in evaluating emissions changes resulting
from facility modifications) between federal requirements requiring the
use of actual
[[Page 106342]]
emissions and California guidelines that allowed PTE. In an apparent
attempt to resolve this conflict, the letter references a
``compromise'' that ``will allow potential to emit to be used in some
instances but actual emissions in others.'' \68\ The letter included an
enclosure with text for the MDAQMD to include in its Rule 1306 stating
that the EPA had ``tentatively'' agreed to the draft text. Included in
the draft text are definitions for the terms ``historic emissions'' and
``normal operations'' as follows:
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\67\ CARB Letter to MDAQMD, dated September 8, 1993.
\68\ Id.
Historic Emissions: The potential to emit of an existing
emissions unit prior to modification. In determining the potential
to emit, daily emission limitations shall be treated as part of an
emission unit's design only if the limitations are representative of
normal operations, or, if the facility has provided offsets for
previous permitting actions . . .
Normal Operations: Usual or typical daily operating of an
emissions unit resulting in actual emissions which are at least 80%
of the specific limits contained in the unit's authority to
construct or permit to operate.
Based on this letter, it appears that the EPA agreed to allow
emissions changes from facility modifications to be calculated using a
baseline of 80 percent of a facility's allowable emissions, rather than
actual emissions, which, as the letter acknowledges, was the federal
requirements for such calculations. The letter does not provide
sufficient detail to determine whether the calculations in question
were for the purpose of determining emissions changes for applicability
or for determining the offset obligation or both. The letter also does
not provide any legal analysis or support to justify the use of
allowable emissions as a baseline in situations in which actual
emissions are at least 80 percent of allowable emissions, in contrast
to the EPA's statutory and regulatory requirements to use actual
emissions to calculate emissions changes when the air district uses
actual emissions for reasonable further progress and attainment
planning purposes.
Later, in the 1995 TSD transmittal letter, the EPA wrote:
The proposed rules contain one provision that should be removed
prior to adoption and submittal of the rules. This provision,
located at 1304(C)(3)(a) and 1305(B)(2)(b)(i), allows for reductions
in a facility's potential to emit to be used as simultaneous
emission offsets if the facility's actual emissions were equal to or
greater than 80% of its potential emissions. EPA has discussed this
provision with the California Air Resources Board and both agencies
agree that it should not be included in the District's rules.\69\
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\69\ 1995 TSD, Transmittal Letter.
As explained earlier in this response, the EPA's 1995 TSD
(transmitted with this letter) also discussed the use of PTE as a
baseline to calculate offset obligations, but it allowed that approach
if a source had already offset its entire PTE. There is no explanation
in the October 30, 1995 letter or the 1995 TSD to reconcile the EPA's
apparent position that PTE could not be used to calculate the offset
requirement if actual emissions were equal to or greater than 80
percent of PTE (as expressed in the October 30, 1995 letter) with the
EPA's stated position that PTE could be used to calculate the offset
requirement if the source's PTE had been fully offset in a previous
permitting decision (as stated in the 1995 TSD).
A subsequent document with the handwritten notation ``Mojave
Compromise,'' is possibly relevant. This document appears to have been
sent by CARB to the MDAQMD on November 14, 1995, and reflects
discussions between EPA and the MDAQMD (``November 14, 1995
Memo'').\70\ The document states:
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\70\ CARB Memo, November 14, 1995. The November 14, 1995, CARB
Memo appears substantially similar to an October 20, 1995, CARB
Memo, apparently transmitted by CARB to the EPA, that reflects
CARB's comments regarding the MDAQMD's draft rules, specifically
Rule 1304 ``Emissions Calculations'' and Rule 1305 ``Emissions
Offsets.'' The October 20, 1995, CARB memo also references
communications between the EPA, CARB, and the MDAQMD regarding
MDAQMD Rules 1304, ``Emissions Calculations'' and 1305, ``Emissions
Offsets.''
General: Rule 1304, Section (C)(3)(a), states that ``actual
emissions reductions may be calculated using a facility's ``historic
potential to emit'' if the ``historic actual emissions'' of the
emissions unit(s) prior to modification is greater than or equal to
80 percent of the ``historic potential to emit'' for that emission
unit.
The ARB and the U.S. Environmental Protection Agency have agreed
that in one specific case a facility may use an emission unit's
``historic potential to emit'' in lieu of the emission unit's
``historic actual emissions.'' Both agencies agreed that districts
could use this ``compromise'' when determining the applicability of
federal New Source Review. The intention of this ``compromise'' was
to give a facility more flexibility when making this determination.
It was not intended to be used when calculating the quantity of
offsets required for mitigation by a facility. The use of ``historic
potential to emit'' in lieu of ``historic actual emissions'' should
only be used in the ``federal netting process,'' and it only applies
to quantifying emissions increases.
As you know, 40 CFR 51.165 (a)(1)(vi), which defines ``net
emissions increase,'' in general stipulates that all increases/
decreases must be actual emissions. This compromise allowed a
facility to reduce the increase in emissions by a factor no greater
than 20 percent. Unfortunately, the District has also applied the
``compromise'' provision when calculating emission decreases in the
netting process.
The District has included the above provision in both Rules 1304
and 1305. The net effect of using the ``compromise'' when
calculating emission decreases is that it generates ``paper
credits.'' Further, Rule 1305, Section (B)(2)(b) proposes to allow
the use of these credits to offset ``actual'' emission increases.
We strongly recommend that the District delete Subsection
(C)(3)(a) from Rule 1304, and Subsection (B)(2)(b)(i) from Rule
1305. In addition, we recommend that definitions (V) ``Historic
Potential Emissions'' and (DD) ``Normal Operation'' in your current
Rule 1302 (Amended 10/27/93) be added to your proposed Rule 1301.
Once these changes have been made, the District should apply the
``compromise'' provision as intended by the ARB and U.S. EPA.\71\
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\71\ November 14, 1995, CARB staff comments on 1995 MDAQMD draft
Regulation XIII.
Based on the November 14, 1995 Memo, it appears that the EPA
generally objected to the MDAQMD's use of PTE as a baseline when
calculating emissions decreases, either in the context of determining
NSR applicability or calculating an offset obligation, but would allow
the use of PTE as a baseline when calculating emissions increases if
PTE was within 80 percent of actual emissions. However, these documents
(CARB's September 8, 1993 letter to the MDAQMD, the EPA's October 30,
1995 TSD transmittal letter, and the November 14, 1995 Memo) contain no
explanation to reconcile (i) the objection by CARB and the EPA to use
of PTE to calculate emissions decreases because such an approach would
``generate `paper credits,' '' which could then be used to offset
actual emission increases'' (as stated in the November 14, 1995 Memo)
with (ii) the acceptance by CARB and the EPA of the MDAQMD's use of PTE
to calculate simultaneous emission reductions if an emissions unit's
PTE had been fully offset in a previous permit action (as stated in the
1995 TSD).\72\
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\72\ See 1995 TSD, p. 17 (regarding MDAQMD Rule 1306 (as adopted
in March 1993).
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In a letter dated January 26, 1996 from the MDAQMD to CARB, with a
courtesy copy to the EPA, the MDAQMD proposes an alternative to the
compromise that had previously been discussed among the three
agencies.\73\ The letter references the MDAQMD's new text for Rules
1303 and 1304 as ``attached,'' but the EPA has not been
[[Page 106343]]
able to locate these attachments. The EPA is also unable to locate
copies of the October 11, 1995 draft rules; therefore, the EPA is
unable to track revisions to the rules MDAQMD adopted in October 1993
to the rules MDAQMD adopted in March 1996, which the EPA approved in
November 1996. Although it is apparent from the correspondence among
the EPA, CARB and the MDAQMD that the agencies were involved in multi-
year discussions over the calculation of emissions increases and
decreases and the application of emissions decreases to new projects,
it is not clear why the EPA and CARB objected to the use of PTE to
calculate offsets (as well as emissions decreases related to the
applicability analysis) but allowed the use of PTE to calculate offsets
if emissions units had been fully offset as part of previous permitting
action.
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\73\ Letter from the MDAQMD to CARB, dated January 26, 1996.
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1996 Proposal To Revise the Federal NSR Rules and 2002 NSR Reform Rule
While EPA Region 9 was reviewing the MDAQMD's proposed revisions to
its NSR program in 1993-1996, the EPA was also in the process of
revising its nationally applicable NSR regulations for major stationary
sources in both attainment and nonattainment areas based on input from
stakeholders from industry, state and local agencies, and environmental
organizations. Towards this end, in July 1996, the EPA published in the
Federal Register a proposed rulemaking to comprehensively overhaul the
federal NSR program for the first time in 15 years.\74\ The proposal
provides a roughly contemporaneous insight to concepts that the EPA was
exploring to provide states greater flexibility to customize their own
NSR programs.\75\ One such concept was a revision to the NSR
regulations to allow the use of the PTE-to-PTE test for NSR
applicability as well as for calculating offsets, netting credits, and
other emissions reductions credits.\76\ This proposal, referred to as
the ``Exhibit B approach,'' would provide sources with the alternative
of using their hourly potential emissions to determine baselines for
NSR applicability and other NSR purposes.\77\ The EPA acknowledged in
the proposed rulemaking that the Exhibit B approach would provide
flexibility requested by industry, but we expressed concern for
environmental consequences, providing examples of how the proposal
could lead to increases in actual emissions that would escape NSR
review.\78\ The EPA's analysis of potential environmental impacts of
the proposal revealed that, in the two states studied, actual emissions
comprised 30 to 86 percent of allowable emissions, depending on source
category and pollutant.\79\ Because the analysis showed actual
emissions were substantially below allowable emissions levels, the use
of an emissions baseline based on actual or allowable emissions could
significantly impact whether a source would need to comply with NSR
requirements.
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\74\ 61 FR 38250, 38251 (July 23, 1996).
\75\ Id.
\76\ Id. at 38268.
\77\ Id. at 38268-69.
\78\ Id. at 38269. The EPA also acknowledged, however, that the
``magnitude of the environmental impact of Exhibit B, if
promulgated, is difficult to predict.'' Id. at 38270.
\79\ Id. at 38270.
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The EPA's 1996 proposed rulemaking included the following analysis
of a PTE-to-PTE test for calculation of offsets:
[Exhibit B's] proposal on offsets may conflict with the 1990
Amendments. That is, section 173(c) of the Act requires that a
source secure sufficient emissions reductions to assure that ``the
total tonnage of increased emissions of the air pollutant from the
new or modified source shall be offset by an equal or greater
reduction . . . in the actual emissions of such air pollutants.''
Thus, offsetting emissions reductions (including emissions reduction
credits used for offsets) must be calculated in terms of actual
emissions.\80\
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\80\ Id. at 38269, footnote 31.
(Emphasis in original.)
The EPA sought comment in the 1996 proposed rulemaking as to
whether the Exhibit B proposal ``is consistent with the air quality
planning goals of the NSR program. That is, while Exhibit B could allow
significant increases in actual emissions to be unreviewed, section 173
of the Act required offsets to be based on actual emissions.'' \81\
---------------------------------------------------------------------------
\81\ Id. at 38270.
---------------------------------------------------------------------------
After seeking comment on the Exhibit B proposal in 1996, the EPA
ultimately decided not to adopt it for reasons explained in the 2002
NSR Reform Rule (which also added 40 CFR 51.165(a)(3)(ii)(J)). The EPA
reiterated that the Exhibit B proposal would allow sources to ``use
this potential-to-potential test for NSR applicability, as well as for
calculating offsets, netting credits, and other ERCs.'' \82\ While
acknowledging the ``maximum flexibility'' the PTE-to-PTE test would
provide to existing sources, the EPA also re-stated concerns associated
with the calculation methodology for calculating emission reductions to
be used for netting or ERCs, stating that Exhibit B would allow
facilities to generate netting credits and ERCs for offsets based on
potential hourly emissions, even if never actually emitted, which could
allow greater actual emissions increases without any preconstruction
review.\83\
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\82\ 67 FR 80186, 80205.
\83\ Id.
---------------------------------------------------------------------------
In the 2002 NSR Reform Rule, the EPA acknowledged that it was
unable to determine the specific environmental impact from using a PTE-
to-PTE test, but we observed that its analysis showed that typical
source operation frequently results in actual emissions that are below
allowable emission levels.\84\ This observation reinforces concerns
that a calculation methodology that relies on allowable emissions will
fail to regulate actual emissions increases. Regarding the offsets
implications of Exhibit B specifically, the EPA wrote in the response
to comments that:
---------------------------------------------------------------------------
\84\ Id.
[The Exhibit B] methodology would also be problematic for
generating ERCs, particularly for use as offsets. The use of
potential emissions for offset credits is in direct conflict with
the Act. Under section 172(c) of the Clean Air Act, emissions
offsets must be based on reductions in actual emissions. Allowing
sources to get credit for reductions in potential emissions would
result in ``paper'' credits, and could allow sources to receive
credit for reducing emissions that never actually occurred. Thus,
our rules have not changed with regard to the calculation of
reductions in actual emissions for offsetting purposes.\85\
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\85\ ``Technical Support Document for the Prevention of
Significant Deterioration and Nonattainment Area New Source Review
Regulations,'' November 2002, page I-6-11.
It is important to note that, along with rejecting Exhibit B, the
2002 NSR Reform Rule also codified at 40 CFR 51.165(a)(3)(ii)(J) a
specific requirement that, for each major modification, a source must
offset the difference between the allowable emissions after the
modification and the actual emissions before the modification for each
emissions unit.\86\ The EPA's statement in the response to comments
that it was not changing regulatory requirements for offset
calculations establishes that the addition of new section 40 CFR
51.165(a)(3)(ii)(J) was merely a codification of an existing
requirement for calculating offsets.\87\
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\86\ See 67 FR 80186, 80249.
\87\ ``Technical Support Document for the Prevention of
Significant Deterioration and Nonattainment Area New Source Review
Regulations,'' November 2002, page I-6-11. The need to establish a
regulatory requirement for calculating offsets was perhaps necessary
in light of the numerous changes to NSR applicability promulgated
throughout the 2002 NSR Reform Rule. See, e.g., 67 FR 80186, 80189-
91; see also, 67 FR 80241 (``Our decision is based primarily on our
belief that the NSR program will work better as a practical matter
and will produce better environmental results if all five of the new
applicability provisions are adopted and implemented.'')
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[[Page 106344]]
Conclusion: The EPA's 1996 SIP Action Was Inconsistent With the Act and
Regulations
For the reasons we articulate today, and that we articulated in the
2023 LA/LD, the MDAQMD's program that we approved in 1996 is not
consistent with the requirements of the Act and its implementing
regulations. The EPA acknowledges that its 2023 disapproval of Rule
1304(C)(2)(d) is at odds with its 1996 approval of the MDAQMD's rules
that allowed facilities to use emissions reductions that were
previously relied upon as a basis for using a PTE-to-PTE test to not
require a project to obtain offsets. The EPA's 1995 TSD and 1995-1996
rulemaking approving the MDAQMD's NNSR program do not explain how the
EPA reconciled the MDAQMD's program's departure from the requirements
that existed at the time (and continue to exist) in CAA section
173(c)(1), 40 CFR 51.165(a)(3)(i), 40 CFR 51.165(a)(3)(ii)(G), and the
not-yet-codified 40 CFR 51.165(a)(3)(ii)(J), which the EPA promulgated
in 2002. The EPA's 2023 LA/LD, however, does explain our disapproval of
Rule 1304(C)(2)(d) in light of applicable statutory and regulatory
requirements.
The preceding paragraphs describe the EPA's interest in exploring
options for flexibility contemporaneously with our 1995-1996 rulemaking
to approve MDAQMD's NNSR program. For example, from at least 1993 to
1996, the EPA, CARB, and the MDAQMD discussed how to calculate
emissions changes for applicability, netting, and ERC purposes. The
changes to the MDAQMD program, and the EPA's approval of them, occurred
during the years following the passage of the California Clean Air Act
(1988), the Federal Clean Air Act Amendments of 1990, and the numerous
associated statutory deadlines for the EPA to act on revised NSR
programs in the 1990s (similar to today, there were nearly three dozen
air districts in California in the 1990s). In July 1996, between the
EPA's proposed contingent approval of the MDAQMD's NNSR rules in
October 1995 and its final approval of those rules in November 1996,
the EPA proposed changes to the federal NSR program that contemplated a
PTE-PTE test for NSR applicability and offsets. The timing of the many
regulatory changes and proposals that occurred around the same time as
the EPA's approval of the MDAQMD's NNSR program is thus helpful context
for understanding the EPA's unexplained approval of MDAQMD's provisions
that conflict with CAA requirements. However, the EPA did not approve
any regulatory revisions during the 1990s or thereafter that would
allow the MDAQMD's program, as it existed in 1996 or 2023, to be
approved. In 2002, the EPA clarified in its rejection of the 1996
Exhibit B proposal that we were not revising our rules regarding the
calculation of reductions in actual emissions for offsetting
purposes.\88\ Furthermore, in 2002, the EPA codified 40 CFR
51.165(a)(3)(ii)(J) to make explicit in its regulations a requirement
for major stationary sources to calculate their offset obligation using
a pre-modification baseline of actual emissions (at least when the air
district uses actual emissions for reasonable further progress and
attainment planning purposes).
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\88\ ``Technical Support Document for the Prevention of
Significant Deterioration and Nonattainment Area New Source Review
Regulations,'' November 2002, page I-6-11.
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The MDAQMD's 1994, 2008, and 2015 attainment plans demonstrate RFP
and attainment based on actual emissions, not allowable emissions.\89\
Under 40 CFR 51.165(a)(3)(i), which was promulgated by the EPA in 1980,
substantially predating the EPA's 1996 approval of the MDAQMD's NNSR
rules, the offset baseline must be the actual emissions of the source
from which the credit is obtained. Likewise, 40 CFR 51.165(a)(3)(ii)(G)
prevents sources in the MDAQMD from relying on emissions reductions
that were utilized in a prior permitting action. The EPA's 1996
approval of the MDAQMD's rules does not provide a justification for its
conclusions that the MDAQMD's rules satisfied the offsetting
requirements of the CAA or its implementing regulations. The EPA
recognizes that we are changing our position as stated in our 1995-1996
rulemaking on the MDAQMD's rules on the specific question of whether
Rule 1304(C)(2)(d) is consistent with the Act and the NSR regulations.
This change in position is because the provisions that we approved in
1996 (which, as noted above, are substantially similar to Rule
1304(C)(2)(d)) were not consistent with the CAA or our regulations at
that time. As we wrote in the 1996 and 2002 NSR Reform rules, we are
concerned about the potential environmental impacts of an NNSR program
such as MDAQMD's that would use the PTE-PTE test along with or because
of a unique offset generating scheme. The codification of
51.165(a)(3)(ii)(J) in 2002 meant that, when the EPA analyzed the
MDAQMD's NNSR program for approvability in the context of the 2008
ozone NAAQS implementation rule, the program's inconsistency was
apparent. MDAQMD Rule 1304(C)(2)(d) is not approvable, even though the
EPA approved similar text in 1996.
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\89\ MDAQMD 1994 ROP Plan, October 5, 1994. MDAQMD's 2008 and
2015 ozone NAAQS attainment plans are based on actual emissions.
MDAQMD's 2008 and 2015 ozone NAAQS attainment plans are based on
actual emissions. The 2008 ozone NAAQS plan is available at: <a href="https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf">https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf</a>, pp. 7, 34 (EPA approved this plan, see
86 FR 53223 (September 27, 2021).) The 2015 ozone NAAQS is available
at: <a href="https://www.mdaqmd.ca.gov/home/showpublisheddocument/9693/638131029372000000">https://www.mdaqmd.ca.gov/home/showpublisheddocument/9693/638131029372000000</a>, pp. 4-5, 24, 80.
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4. Comments Regarding Reliance
Comment A.4.1: Commenter 01 states that while the EPA may reverse
its policy on 1304(C)(2)(d) Offsets, the APA requires the EPA `` `to
assess whether there were reliance interests, determine whether they
were significant, and weigh any such interests against competing policy
concerns,' considering alternatives to accommodate such interests.''
\90\ The commenter states that the EPA is effectively nullifying
valuable 1304(C)(2)(d) Offsets that were purchased with costly
reductions in actual emissions on the EPA's promise that they could
later be used to offset certain emission increases. The commenter also
states that the proposed FIP does not consider these reliance interests
or alternatives to the immediate invalidation of the 1304(C)(2)(d)
Offsets that have existed with EPA's blessing for over 25 years.
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\90\ Citing Dep't of Homeland Sec. v. Regents of the Univ. of
California, 591 U.S. 1, 30, 33 (2020).
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Response to Comment A.4.1: The EPA has provided a comprehensive
explanation in our response to comment A.3.1 regarding our changed
position on the approvability of MDAQMD Rule 1304(C)(2)(d). Moreover,
the EPA disagrees with the comment to the extent it is asserting that
this action invalidates significant reliance interests. Commenter 01
cites Dep't of Homeland Sec. v. Regents of the Univ. of California as
support for its assertion that there are reliance interests stemming
from Rule 1304(C)(2)(d) and that the EPA failed to consider them in
disapproving the provision.\91\ In Regents, the Supreme Court ruled
against the government, finding that the government's decision to
rescind the Deferred Action on Childhood Arrivals (``DACA'') program
was arbitrary and capricious under the
[[Page 106345]]
APA.\92\ DACA recipients (as well as their parents, under the related
``DAPA'' program) ``enjoy[ed] . . . forbearance, work eligibility, and
other benefits'' under the programs.\93\ The Supreme Court held that
the government failed to provide a ``reasoned explanation for its
action'' because it ``failed to consider the conspicuous issues of
whether to retain forbearance and what if anything to do about the
hardship to DACA recipients.'' \94\
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\91\ 591 U.S. 1, 30, 33 (2020).
\92\ Id. at 33.
\93\ Id. at 2.
\94\ Id. at 35.
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Regents, however, is materially distinguishable from the EPA's
disapproval of Rule 1304(C)(2)(d); the case does not support the
MDAQMD's assertions regarding reliance interests. In Regents, while the
Attorney General had determined that the work-authorization aspect of
the DACA program was illegal following an adverse judicial decision
about the DAPA program, the Attorney General's opinion was not
comprehensive; i.e., the Attorney General had ``neither addressed the
[deportation] forbearance policy at the heart of DACA nor compelled
[the government] to abandon that policy.'' \95\ Further, as the Supreme
Court found, the government had offered ``no reason for terminating
forbearance.'' \96\
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\95\ Id. at 28.
\96\ Id.
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In contrast, the EPA, in disapproving Rule 1304(C)(2)(d), proposed
and finalized a comprehensive, outcome-controlling legal determination
that Rule 1304(C)(2)(d) fails to comply with federal law. Regents does
not stand for the proposition that agencies must consider reliance
interests when federal law compels the outcome. Also, unlike the
situation in Regents, the EPA provided an opportunity for public
comment and has provided reasoned responses to all comments received.
Thus, EPA fulfilled its obligations under the APA.
Furthermore, the commenter's characterization of 1304(C)(2)(d)
Offsets as ``valuable'' and as ``purchased with costly reductions in
actual emissions'' is fundamentally a claim that sources hold
compensable property rights in 1304(C)(2)(d) Offsets.\97\ The EPA has
repeatedly rejected similar assertions in the past and has never
recognized a property right associated with emission reductions to be
used as offsets.\98\ Also, it is unclear to what extent 1304(C)(2)(d)
Offsets were, in fact, ``purchased.'' In the MDAQMD, as in all
nonattainment areas, construction of a new major stationary source
requires the facility owner to obtain emission reduction credits to
offset the emissions from the new construction. Nonattainment NSR
permits issued by the MDAQMD to such sources are contingent on the
surrender of credits to offset emissions up to the allowable limits in
the permits. The EPA acknowledges that facility owners purchase
emission reduction credits and surrender them to obtain permits with
allowable emissions limits to allow them to proceed with construction.
The MDAQMD, however, claims that its rules should additionally allow
those same emission reduction credits, which facility owners have
already surrendered to obtain allowable emissions limits that
authorized the facility to emit up to those levels, to be re-used to
offset emissions increases associated with future construction
projects. This system is inconsistent with federal NNSR requirements in
multiple respects and therefore further delegitimizes any claim that
1304(C)(2)(d) Offsets are a property right with a compensable value.
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\97\ MDAQMD has made similar assertions in the past. See, e.g.,
MDAQMD Regulation XIII Final Staff Report, March 22, 2021, page 44,
footnote 188: ``If the amount of offsets needed is calculated using
the HAE of the emissions unit(s) involved many Facilities view this
as a taking of property (namely the previously allowed PTE that was
fully offset) without just compensation.''
\98\ See, e.g., Letter from John S. Seitz, Director, EPA Office
of Air Quality Planning and Standards to Peter F. Hess, President,
California Air Pollution Control Officers Association Joint
Commission of Regulators & Business, July 8, 1996 (``Finally, your
letter states that it is unfair for owners of banked ERC's not to be
able to sell or use them. However, please note that although ERCs
are a limited authorization to emit, they are not and never have
been an absolute property right.''); EPA, Office of Air and
Radiation, ``Improving Air Quality with Economic Incentive
Programs,'' January 2001, p. 80 (``Emission reductions and emission
allowances generated, traded, and used in emission trading EIPs do
not have property rights associated with them. They simply represent
a limited authorization to emit for the entity holding the tradable
reduction or allowance.''); see also South Coast Air Quality
Management District (SCAQMD) Rule 2007, ``Trading Requirements,''
most recently approved into the California SIP at 73 FR 38122 (July
3, 2008), which states, in relevant part, at subsection (b)(3) that
a RECLAIM Trading Credit ``shall not constitute a security or other
form of property . . .''
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First, as explained our response to comment A.2.2, the EPA's
regulations at 40 CFR 51.165(a)(3)(G) do not allow emission reduction
credits to be re-used in subsequent permitting actions of, for example,
facility modifications. The MDAQMD's rules allow emission reduction
credits that have already been applied to initial construction of a new
facility to be used to offset emissions increases in the future and are
therefore inconsistent with NNSR requirements. Second, as also
explained in our response to comment A.2.1, the EPA's regulations at 40
CFR 51.165(a)(3)(i) allow the use of allowable emissions to be used as
a baseline to calculate emission reductions that will be used as
offsets only if demonstrations of RFP and attainment are also based on
allowable emissions. MDAQMD's RFP and attainment demonstrations are
based on actual emissions; therefore, MDAQMD's calculation of
reductions to be used as offsets must also be based on actual
emissions. Third, since 2002, the EPA's regulations have clearly
specified that emissions increases resulting from major modifications
must be offset through a calculation that uses actual emissions before
the modification. In fact, as explained above in our response to
comment A.3.1, as part of the 2002 NSR Reform Rule, the EPA explicitly
rejected a calculation that would use potential emissions as a baseline
in this calculation. MDAQMD's provision for 1304(C)(2)(d) Offsets
clearly allow sources to offset emissions increases through reductions
in allowable emissions and therefore fail to ensure compliance with the
requirement that sources offset emissions increases through reductions
in actual emissions. The fact that 1304(C)(2)(d) Offsets are
inconsistent with federal law invalidates any claim of property right
or compensable value.
Comment A.4.2: Commenter 05 states that the removal of Rule
1304(C)(2)(d) would ``create a discriminatory situation, where a
facility that has previously provided offsets for emission sources/
processes is not differentiated from one that has received a permit
without providing offsets.''
Response to Comment A.4.2: As explained in the response to comment
A.4.1, Rule 1304(C)(2)(d) Offsets do not comply with CAA 173 and
federal NNSR requirements for offsetting emissions increases at major
stationary sources. The permit application process should be sufficient
to enable the reviewing authority to determine the quantity and status
of offset credits and reductions; diligent implementation of the
federal requirements will avoid confusion and unfair outcomes. Rule
1304(C)(2)(d) Offsets are not valid under the CAA or the federal NNSR
regulations. The FIP will bring the MDAQMD's offset regulations into
compliance with the CAA and federal regulations. The EPA disagrees that
the removal of Rule 1304(C)(2)(d) would create a discriminatory
situation.
Comment A.4.3: Commenter 08 states that MDAQMD Rule 1304(C)(2)(d)
has developed a provision for major facilities to utilize existing
allowable emissions as a mechanism to generate simultaneous emissions
reductions during another permitting action and
[[Page 106346]]
that this provision has been in effect since the 1990s. Commenter 08
urges the EPA to consider how the sudden change of a provision in
effect for years will impact regulated facilities.
Response to Comment A.4.3: As explained above in the responses to
comments A.2.1 and A.2.2, the MDAQMD's Rule 1304(C)(2)(d) is not
consistent with the CAA or the EPA's NNSR regulations. The EPA
disagrees with the commenter's suggestion that the FIP represents a
``sudden change,'' because the calculation method in Rule 1304(C)(2)(d)
was specifically prohibited in the EPA's 2002 NSR Reform rule, which
included 40 CFR 51.165(a)(3)(ii)(J).\99\ Moreover, the MDAQMD and
regulated entities in its jurisdiction have been aware of the EPA's
position regarding Rule 1304(C)(2)(d) and the MDAQMD's practices
regarding its emissions offset calculations since at least March 2021,
when the MDAQMD responded to the EPA's concerns about Rule
1304(C)(2)(d) in the ``Appendix G to Staff Report'' document (an
appendix to its 2021 final staff report and rules that the MDAQMD
adopted), which is a public document. In December 2019, prior to the
release of that document, the EPA wrote to the MDAQMD to inform the
MDAQMD of its concern regarding the offset calculation method allowed
under what is currently Rule 1304(C)(2)(d).\100\ The EPA, the District,
and CARB then committed significant resources to meeting, on a bi-
weekly basis from approximately March 2020 to June 2021, for detailed
discussions to address the deficiencies in the MDAQMD's NSR program.
The EPA's obligation to promulgate a FIP is a consequence of a finding
of failure to submit published in the Federal Register in February
2017; the subject of a lawsuit filed in the U.S. District Court for the
Northern District of California in June 2022; and a court-ordered
obligation as the result of a consent decree that was subject to a 30-
day comment period as announced in the Federal Register on April 5,
2023.
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\99\ Rule 1304(C)(2)(d) is also inconsistent with the federal
regulations promulgated in 1980.
\100\ Memorandum, Lisa Beckham, EPA Region IX, to Brad Poiriez,
MDAQMD, ``Re: Mojave Desert Air Quality Management District New
Source Review Program,'' December 19, 2019. A copy of the letter is
available in the docket for this rulemaking action.
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Finally, the EPA notes that the FIP will apply prospectively, that
is, to new major stationary sources and major modifications at existing
major sources that commence construction after the effective date of
the FIP.
5. Comments on Potential Impacts and Implementation of the FIP
Comment A.5.1: Commenter 01 states that the proposed FIP is
arbitrary and capricious because the EPA fails to consider important
aspects of the problem before the Agency, including the impacts of the
proposed FIP on air quality. The commenter states that the EPA fails to
substantiate its claim that the proposed FIP will result in greater
emission reductions. The commenter states that this claim is false
because Rule 1304(C)(2)(d) Offsets incentivize operators to voluntarily
lower actual emissions to ensure the greatest volume of creditable
emissions reductions for future projects. The commenter states that the
EPA's disapproval of offset calculations allowed under Rule
1304(C)(2)(d) encourages source operators to retain older, dirty units
and to replace those old and dirty units with comparably dirty units
when the units fail. The commenter states that, under the proposed FIP,
operators are particularly incentivized to run equipment to produce the
maximum amount of emissions for the two years prior to applying for a
modification to secure creditable emissions reductions.
Similarly, commenters 07, 08, and 09 state that MDAQMD Rule
1304(C)(2)(d) enables permit holders to plan for equipment upgrades and
modernizations that will ultimately reduce actual major source
emissions in the ozone nonattainment area. These commenters state that
that removal of these offset provisions will hinder emission reduction
projects and burden facilities with significant increased costs.
Commenter 05 adds that the loss of previous offsets would create a
disincentive for facilities to be upgraded to new technology. Commenter
09 states that regulated facilities may elect to cancel business
expansions, facility improvements, or other major capital investments
that would modernize equipment or otherwise benefit air quality.
Response to Comment A.5.1: The EPA disagrees with the comments.
Preliminarily, we note that the commenters do not provide any analysis
or support for their assertions that Rule 1304(C)(2)(d)'s approach to
calculating offsets results in greater emission reductions than the
federal requirements for offsets. We also note that in the 2002 NSR
Reform Rule, we rejected an option similar to Rule 1304(C)(2)(d) that
would have allowed sources ``to generate netting credits and ERCs for
offsets based on potential hourly emissions, even if never actually
emitted,'' because we had determined that such an approach ``could
sanction greater actual emission increases to the environment, often
from older facilities, without any preconstruction review.'' \101\ In
the 1996 NSR proposal, the EPA stated that its analysis of actual and
allowable emissions in two states showed that ``typical source
operation frequently does result in actual emissions that are
substantially below allowable emissions levels.'' \102\ In other words,
the difference between actual and potential emissions may be up to 70
percent, depending on source category and pollutant.\103\ Using actual
emissions as a baseline to calculate emissions will reflect emissions
increases and require offsets that would not be captured or regulated
if allowable emissions were used as a baseline. As the EPA also stated
in response to comments in the rulemaking for the 2002 NSR Reform Rule,
``The use of potential emissions for offset credits is in direct
conflict with the Act. Under section 172(c) of the Clean Air Act,
emissions offsets must be based on reductions in actual emissions.
Allowing sources to get credit for reductions in potential emissions
would result in `paper' credits, and could allow sources to receive
credit for reducing emissions that never actually occurred.'' \104\
Similarly, the MDAQMD Rule 1304(C)(2)(d) would allow sources to receive
credit for ``reductions'' in emissions that do not actually occur and
use them to offset actual emissions increases.
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\101\ 67 FR 80186, 80205.
\102\ 61 FR 38250, 38270.
\103\ Id.
\104\ U.S. EPA Office of Air Quality Planning and Standards,
Technical Support Document for the Prevention of Significant
Deterioration and Nonattainment Area New Source Review Regulations
(November 2002) at page I-6-11, available at <a href="https://www.epa.gov/sites/default/files/2015-12/documents/nsr-tsd_11-22-02.pdf">https://www.epa.gov/sites/default/files/2015-12/documents/nsr-tsd_11-22-02.pdf</a>.
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Moreover, we note that the federal regulations, such as 40 CFR
51.165(a)(3)(ii)(J) and 40 CFR 51.165(a)(3)(ii)(G), are more protective
than Rule 1304(C)(2)(d). For example, 40 CFR 51.165(a)(3)(ii)(J)
requires facilities to offset the difference between pre-project actual
emissions and post-project allowable emissions that are associated with
each major modification, and 40 CFR 51.165(a)(3)(ii)(G) requires those
actual emissions reductions to be reductions that the facility has not
relied upon in a prior permitting action.
The EPA also disagrees with comments claiming that the EPA's
disapproval of Rule 1304(C)(2)(d) will encourage retention of older
greater-emitting units and incentivize sources
[[Page 106347]]
to operate and emit more. Rather, the FIP encourages sources to take
enforceable limits that reflect the source's actual emissions. We note
in addition that the CAA does not require sources to offset emissions
that they do not emit or intend to emit. Regarding commenters' concern
that the FIP would discourage emissions-reduction projects, we note
that a project that reduces actual emissions would not be subject to
NSR requirements to offset and install pollution controls. Installation
of cleaner equipment is therefore not in jeopardy under the FIP. Only
projects at major stationary sources that would increase emissions will
be required to undergo review to determine if emissions increases will
trigger requirements to install emissions controls and to offset
emissions increases. It is therefore unclear how sources would be
incentivized to retain older, dirtier equipment if the installation of
newer, cleaner equipment would result in emissions decreases.
Finally, we disagree that Commenter 01's quotations from the 2002
NSR Reform Rule support its claims that Rule 1304(C)(2)(d) Offsets
``incentivize operators to voluntarily lower actual emissions to ensure
the greatest volume of creditable emissions reductions for future
projects.'' The statements quoted by Commenter 01 are irrelevant to
this action, because they do not involve offsets.
Comment A.5.2: Commenter 01 states that the EPA fails to address
the practical impacts the proposed FIP will have on facilities. More
specifically, the commenter states that it is unclear what a new minor
facility, existing minor facility remaining under the applicability
threshold, or a synthetic minor facility retaining its permitted
limitation on PTE would need to submit to the EPA to show that it is
not subject to the FIP requirements. The commenter requests that the
EPA clarify whether all new or modified facilities would need to submit
applications to the EPA and that it appears every permit application
would be required to be duplicated in EPA Region 9's electronic permit
application system to ensure that a minor facility has not become
subject to the FIP. The commenter also states that while the MDAQMD has
the staffing and expertise to properly analyze and process applications
under the current SIP, it has neither the time nor the resources to
devote to analyzing each application for FIP applicability purposes.
Response to Comment A.5.2: As explained in the EPA's proposed
action, the FIP will apply ``(i) If you propose to construct a new
major stationary source and your source is a major source of
nonattainment pollutant(s)'' or ``(ii) If you own or operate a major
stationary source and propose to construct a major modification, where
your source is a major source of nonattainment pollutant(s) and the
proposed modification is a major modification for the nonattainment
pollutant.'' \105\ The relevant terms in the quoted provisions are
defined in the definitions section of the FIP, in section 40 CFR
52.285(b). If the applicant believes that its proposed project would
constitute a new major source or a major modification under the FIP, it
is required to submit an application to the EPA or the designated
reviewing authority (if not the EPA) to obtain a permit under the FIP.
It is the permit applicant's responsibility to comply with the FIP
provisions. Failure to obtain a permit in accordance with the FIP prior
to construction and operation of the new or modified source would be a
federally enforceable violation of the FIP and the CAA. Under the FIP,
existing minor facilities remaining under the applicability threshold
and synthetic minor facilities retaining the permitted limitation on
PTE would not need to apply for a permit under the FIP unless they make
a modification that would constitute a major stationary source by
itself.\106\
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\105\ 89 FR 56237, 56247; 40 CFR 52.285(c)(1)(i)-(ii) (as
proposed).
\106\ Appendix S, section II.A.4(i)(c).
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Regarding Commenter 01's concern over the MDAQMD's time and
resources to devote to analyzing applications, the EPA would be
responsible for implementation of the FIP unless and until the MDAQMD
is delegated authority to implement it. The MDAQMD would only be
delegated authority to implement the proposed FIP if it requested
delegation. Under the FIP as implemented by the EPA, applicants would
need to submit their applications to the EPA, not to the MDAQMD.
Comment A.5.3: Commenter 04 states that this action is crucial for
ensuring that regions with air pollutant concentrations above the NAAQS
are protected from further environmental degradation. This commenter
presents information on the detrimental impact of air pollution to
health and notes that these effects are felt mainly by minority
communities, such as low-income families or people of color, who are
more likely to live in areas with higher pollution levels. The
commenter supports approval of the FIP and states that the FIP will
provide a necessary regulatory framework to manage and reduce
emissions, enhancing efforts to meet and maintain NAAQS in the region.
Response to Comment A.5.3: The EPA has noted the commenter's
support of this action.
Comment A.5.4: Commenters 01, 05, 06, 07, and 08 express concern
about the permit processing timeline under the proposed FIP. Commenter
01 states that pursuant to these timelines, approximately 90 percent of
permit applications submitted to the MDAQMD are processed and issued
within 90 days but that no similar timelines are proposed in the FIP
and that this may result in a detrimental impact to sources, especially
minor facilities, to the extent they cannot proceed with their
modifications due to the necessity of awaiting an EPA determination.
Commenter 05 states that the FIP creates the potential for delays in
permit issuances due to conflicts between California law and the FIP on
items such as the completeness determination, BACT determinations, and
offsetting and the use of SERs, and Commenter 06 adds that the
differences between the requirements under the SIP and the FIP will add
a level of complexity to the permit application process and in ensuring
facilities comply with the permits. Commenters 05 and 06 state that
potential timing issues would have an adverse impact on the national
security mission at Department of Defense facilities because a facility
cannot proceed with construction until it receives two permits--one
from MDAQMD, and one from EPA. Commenters 01, 07, and 08 request that
the EPA provide timeline estimates for the proposed permit processing.
Response to Comment A.5.4: Neither the CAA nor the existing NNSR
FIP that applies in tribal areas, which is very similar to the FIP,
includes a requirement for the reviewing authority to render a decision
on a permit application within a certain period of time. Likewise, the
EPA has not incorporated any temporal requirement to the issuance of
permits under this FIP. Under the CAA, the EPA is required to make a
permit decision on a Prevention of Significant Deterioration (PSD)
permit application within one year after the application is determined
complete by the EPA.\107\ While no analogous provision exists in Part D
of Title I of the CAA, which governs Plan Requirements for
Nonattainment Areas, the EPA will endeavor to follow the PSD permit
application processing timeline when we review applications submitted
under the finalized FIP. Also, should the MDAQMD receive delegation as
a
[[Page 106348]]
reviewing authority of the FIP, it could consolidate its review under
the FIP with its review under the SIP.
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\107\ CAA section 165(c) (42 U.S.C. 7465(c)).
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Finally, it is not clear how applicants for minor source permits--
either new or modified sources--would be affected by the timing issue
because the proposed FIP does not affect minor NSR.\108\
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\108\ See 40 CFR 52.285(c)(1)(i)-(ii); 89 FR 56237, 56247.
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Comment A.5.5: Commenter 01 states that the proposed FIP includes
``de minimis'' provisions that allow emissions increases of less than
25 tons per year aggregated with all other net increases from the
facility over five consecutive calendar years to not require BACT or
offsets. Commenter 01 states further that this provision is contrary to
California law, which requires any emission unit that emits or has the
potential to emit over 25 lbs per day to be equipped with BACT. The
commenter also states that the Protect California Air Act of 2003
prohibits California air districts, including the MDAQMD, from
``backing off'' their NNSR programs to allow the implementation of
requirements less stringent than those in place as of December 30,
2002. The commenter states that because the MDAQMD's current SIP rules
have been in place since before 1996, they cannot now be avoided, and
that the FIP creates the potential for massive confusion and
misunderstanding among regulated facilities that are located in the
MDAQMD.
Response to Comment A.5.5: If the MDAQMD believes that the
provisions in its current SIP, which EPA acted upon in the 2023 LA/
LD,\109\ will result in greater emissions reductions than the
application of the de minimis provisions proposed in the FIP, there
should be no conflict between the FIP and the MDAQMD's SIP. The EPA is
not required to apply state-level requirements even if, in some cases,
the application of the state-level requirements would result in a
scenario where emissions reductions would be greater than under federal
requirements. Likewise, in the situation described in the comment, a
permit applicant's compliance with a more stringent MDAQMD requirement
would enable the applicant to satisfy the federal requirement. The de
minimis requirement that the commenter references, which is in CAA
section 182(c)(6), states that a source cannot be considered ``de
minimis'' for NNSR applicability purposes unless its net emissions
increases over the past five consecutive calendar years are less than
25 tons per year.\110\ It is not clear how the federal requirement is
``directly contrary'' to the California law that, according to the
commenter, ``requir[es] any emissions unit which emits or has the
potential to emit over 25 LBS per day to be equipped with BACT;'' the
California requirement sets a threshold for BACT, based on potential
emissions of 25 pounds per day, whereas the federal requirement says
that the source must undergo NNSR (e.g., satisfy BACT and offsets
requirements) if net emissions increases over the last five consecutive
calendar years exceed 25 tons per year. It would appear that in most,
if not all, cases a source's compliance with the California requirement
would also comply with the federal requirement.
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\109\ 88 FR 42258 (June 30, 2023).
\110\ The de minimis requirement at CAA section 182(c)(6) was a
part of the 1990 CAA Amendments.
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Finally, the EPA finds this comment from the MDAQMD confusing given
that the MDAQMD stated elsewhere in its comments that its August 7 SIP
submittal addresses all but one of the deficiencies EPA identified in
the 2023 LA/LD, which the EPA understands to be a reference to Rule
1304(C)(2)(d).\111\ The EPA's 2023 LA/LD rulemaking also found the
MDAQMD's rules as adopted in 2021 to be deficient because they did not
ensure compliance with CAA 182(c)(6). Based on discussions with the
MDAQMD after we finalized the 2023 LA/LD, we had understood that the
MDAQMD intended that its revised rules as adopted on March 25, 2024,
and submitted to the EPA on August 7, 2024, would address the concerns
identified in our LA/LD, including adding the missing de minimis
provision. While our full review of those rules will be attentive to
this issue, it is not clear why the MDAQMD would object to the
inclusion of the de minimis provision in the FIP.
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\111\ MDAQMD August 8, 2024 comment letter: ``USEPA and MDAQMD
reached resolution of all but one of the purported deficiencies and
the MDAQMD thereafter modified its NNSR rules on 3/25/2024.'' In the
comments Brad Poiriez, on behalf of the MDAQMD, provided during the
July 24, 2024 public hearing, Mr. Poiriez mentioned the ``pending
SIP submission containing revisions to the NNSR rules that were
agreed upon by the District and US EPA.'' (Transcript page 16).
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Comment A.5.6: Commenters 05, 06, 07, 08 and 09 state that permit
holders may also face increased permit fees, increased permit
processing times, and possible inconsistencies between the duplicate
EPA permits and district permits. The commenters state that dual
permits and their separate requirements will increase the complexity
and potential for conflicting or unclear requirements and that this may
lead to unintended compliance issues and conflicts, which could
compromise a source's ability to comply as well as result in
significant penalties. Commenters 05, 07, and 08 request that the EPA
work with the MDAQMD to develop a solution that would remove the
requirement that sources obtain two permits.
Commenter 05 requests that the EPA confirm which agency (the MDAQMD
or the EPA) will be the permitting authority under the proposed FIP
rule or if the intention is for both the MDAQMD and the EPA to issue
and enforce separate permits independently, including facility
inspections and processing fees.
Response to Comment A.5.6: Unless the MDAQMD requests, and the EPA
approves, delegation to implement the FIP or the MDAQMD addresses the
deficiency in MDAQMD Rule 1304(C)(2)(d), major stationary sources and
sources undergoing major modifications in areas within the jurisdiction
of MDAQMD will need to obtain two permits--one under the EPA's FIP, and
one under the MDAQMD's SIP. The MDAQMD, if delegated to implement the
FIP, could consolidate its review under the FIP and its review under
its SIP-approved NNSR program. The EPA considered options to avoid
permit applicants having to obtain two permits, such as delegating the
FIP to MDAQMD. However, the MDAQMD is not interested in implementing
the FIP at this time. We also considered regulatory approaches that
would reduce or eliminate the MDAQMD's role in issuing permits to major
stationary sources, but those options seemed likely to have
unnecessarily disruptive outcomes and uncertain impacts on permitting
for minor sources. We anticipate that applications for projects subject
to the FIP will require essentially the same information as
applications to be submitted to the MDAQMD, which should reduce the
permitting burden on permit applicants. We also anticipate that the
most significant difference between the two permit programs will be
evaluation of offset obligations and requirements. We also hope that
the MDAQMD's newly submitted NNSR rules will narrow the scope of the
FIP once we have approved these rules into the SIP, reducing EPA's role
in permitting major stationary sources within MDAQMD's jurisdiction.
In response to Commenter 05's inquiry regarding which agency will
be the permitting authority, both the EPA and MDAQMD will be permitting
authorities for major stationary sources. As explained previously,
major sources subject to the FIP will need to obtain
[[Page 106349]]
two permits--one under the EPA's FIP and one under the MDAQMD's SIP.
Comment A.5.7: Commenters 07 and 09 state that the proposed FIP
will likely cause increased demand and prices for ERCs of nonattainment
area pollutants. The commenters state that the proposed FIP may have
significant impacts on local ERC demand and prices for emission offsets
at a time where there are a few private holders of ERCs with relatively
low quantities of available credits within the MDAQMD. Commenter 09
provides examples of the prices of credits for PM<INF>10</INF> and
Nitrogen Oxides (NO<INF>X</INF>) in the South Coast Air Quality
Management District to support its assertion that it is unclear how the
FIP will address such potentially restrictive and unsustainable ERC
market conditions within the MDAQMD. Commenter 09 states that there has
been insufficient study of these potential ERC market conditions,
additional emission offset costs, and related concerns on regulated
facilities.
Commenter 04 recommends that the EPA work with the MDAQMD to ensure
that the proposed FIP complements existing state and local efforts and
states that coordination will help avoid any errors in the process.
This commenter states that the NNSR rules should provide flexibility to
accommodate the needs of businesses and economic development in the
region.
Response to Comment A.5.7: The EPA is promulgating this FIP as
required by a consent decree because the MDAQMD does not have a fully
approved NNSR SIP, as required by the 2008 ozone NAAQS implementation
rule.\112\ The requirements that entities would be subject to under the
FIP, which implements Appendix S, are the same requirements that
regulated entities in other jurisdictions across the country are
currently subject to and have been subject to for decades under SIP-
approved programs that meet the minimum requirements of the CAA. The
EPA recognizes the scarcity of offsets in the nonattainment area that
would be covered by this FIP. The EPA will continue to work with the
MDAQMD to assist in identifying offsets from sources in the
nonattainment area that will be covered by this FIP.
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\112\ Center for Biological Diversity et al., v. Regan, No.
3:22-cv-03309-RS (N.D. Cal.). This consent decree is also available
in the docket for this action.
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Comment A.5.8: Commenter 08 states that the proposed FIP puts the
time, monetary, and compliance burdens on facilities. Similarly,
Commenter 09 states that the burdensome conditions that the FIP will
cause will make it difficult for it and other regulated facilities to
make capital investments, equipment purchases, facility expansions, new
employee hires, and other business decisions.
Response to Comment A.5.8: The EPA disagrees with the commenters'
characterizations of the impacts of the FIP. Facilities in the MDAQMD
are required to comply with federal NNSR requirements, including the
requirements for offset quantification and generation, in the same
manner as any other facilities in other jurisdictions that are located
in areas not attaining the NAAQS. The FIP applies only when new or
existing major stationary sources undertake facility modifications that
will increase emissions above the applicable thresholds. The FIP is
necessary to ensure that air quality in the MDAQMD, which is currently
classified as Severe nonattainment for the 2008 and 2015 ozone NAAQS,
as well as Moderate nonattainment for the PM<INF>10</INF> NAAQS,
improves toward attainment of the NAAQS over time. At present, the
MDAQMD's current rules allow for applicants to be excused from certain
NNSR requirements, as described in the proposed FIP rulemaking and in
the 2023 LA/LD.\113\
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\113\ 88 FR 42258, 42260; 89 FR 56237, 56240.
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B. Summaries of Oral Comments Received During the Public Hearing and
EPA's Responses
1. Comments on the Timing and Implementation of the FIP
Comment B.1.1: Commenter AA states that while he understands that
the EPA is under a consent decree to act on the MDAQMD's NNSR
provisions, the EPA's promulgation of a FIP seems to be rushed given
the pending SIP submission that contains revisions to the NNSR rules
that the MDAQMD, and the EPA agreed to during mediation following the
MDAQMD's petition for review of the EPA's 2023 LA/LD action.\114\ The
commenter states that EPA was copied on the submission of the MDAQMD's
rules to CARB and thus has constructive notice of the MDAQMD's
submission.
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\114\ 88 FR 42258.
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Commenter AA states that, to the extent that the EPA's rush to
promulgate the FIP is spurred by the dispute between the MDAQMD the EPA
over the use of fully offset allowable emissions as SERs at an existing
major facility, the EPA should reconsider its disapproval of the
MDAQMD's SER provision. The commenter states that the EPA has
previously approved the MDAQMD's offset provision and that there is a
reasonable reliance by industry and the MDAQMD on this approval.
Response to Comment B.1.1: The EPA disagrees with the commenter's
characterization that ``the EPA's promulgation of a FIP seems to be
rushed.'' In fact, the EPA's obligation to promulgate a FIP is more
than five years overdue. As explained in our proposed rulemaking, on
February 3, 2017, the EPA found that the State of California failed to
submit a SIP revision for NNSR rules that apply to a Severe
classification for the 2008 ozone NAAQS, as required under subpart 2 of
part D of title 1 of the CAA and the 2008 Ozone SIP Requirements
Rule.\115\ In addition to establishing deadlines for the imposition of
sanctions, the EPA's finding of failure to submit triggered an
obligation under CAA section 110(c) for the EPA to promulgate a FIP no
later than two years from the finding, i.e., by March 6, 2019.\116\ The
EPA did not meet this deadline and was subsequently sued over its
failure to do so.\117\ The lawsuit was resolved by a consent decree
that underwent a 30-day public comment period before it was entered by
the court on June 15, 2023. Under the terms of the consent decree, no
later than November 29, 2024, the EPA must sign a notice of final
rulemaking to approve a revised SIP submission, promulgate a FIP, or
approve in part a revised SIP submission and promulgate a partial FIP
for the Severe NNSR SIP element. On November 8, 2024, the EPA and CBD
agreed to extend the deadline to January 10, 2025.\118\
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\115\ 82 FR 9158 (February 3, 2017).
\116\ Id.
\117\ Center for Biological Diversity et al., v. Regan, No.
3:22-cv-03309-RS (N.D. Cal.). The consent decree, as entered by the
court on June 15, 2023, is available in the docket for this action.
\118\ Id. Prior to court's entry of the 2023 CBD Consent Decree,
the EPA published a notice in the Federal Register announcing the
proposed settlement and providing an opportunity for interested
persons to submit comments. 88 FR 20166 (April 5, 2023). The EPA
received no comments on the proposed settlement. The parties' joint
stipulation to extend the consent decree deadline is available in
the docket for this action.
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As the commenter notes, MDAQMD adopted revised rules on March 25,
2024, and submitted them to CARB for transmittal to the EPA. On August
7, 2024, CARB submitted the revised rules to the EPA. The EPA is
currently reviewing the submission as required under section 110(k) of
the CAA. The EPA has confirmed that the submission still contains the
deficiency associated with MDAQMD Rule 1304(C)(2)(d) that EPA has
previously identified. For the EPA to discharge its obligation to
promulgate a FIP, it would need to fully approve the MDAQMD's NNSR
[[Page 106350]]
submission, which is not possible due to the deficiency associated with
MDAQMD Rule 1304(C)(2)(d). The EPA provides additional information that
is relevant to this comment both specifically in our response to
Comment A.1.1 in this Response to Comments and generally in our
responses to the comments summarized in section A.1 of this Response to
Comments, where we address the written comments we received that
pertain to the EPA's obligation under the applicable consent decree.
As stated in Section III.H of the proposed rulemaking action, if
the EPA approves CARB's recent SIP submittal, the approved MDAQMD rules
would apply rather than the FIP, except for the portion of the FIP that
had not been replaced by the approved SIP.\119\
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\119\ 89 FR 56237, 56243.
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Lastly, for the reasons we explain in our responses to comments
A.4.1 through A.4.3 in this Response to Comments, we disagree with
Commenter AA's assertion that the EPA should reconsider the FIP because
of industry's reliance upon MDAQMD's Rule 1304(C)(2)(d).
Comment B.1.2: Commenter BB states that the EPA should postpone
promulgating the FIP until after the EPA and the MDAQMD resolve their
differences. Commenter BB states that there is only one pending issue
that the two agencies need to resolve. Having to apply to two
jurisdictions for permits will cause an undue burden to facilities like
the one at which Commenter BB works.
Response to Comment B.1.2: It is not possible for the EPA to
postpone finalizing the FIP while we attempt to resolve our differences
with the MDAQMD. Section 110(c) of the CAA requires the EPA to
promulgate a FIP for a deficient NNSR program. As the EPA wrote in the
proposed action, the purpose of this NNSR FIP, which will regulate
sources within the MDAQMD's jurisdiction, is to fulfill the EPA's
statutory duty by the deadline established under a consent decree in a
lawsuit brought against the EPA.\120\ The consent decree compels the
EPA to promulgate a FIP by November 29, 2024, unless the EPA can fully
approve the MDAQMD's NNSR SIP program before that date.\121\ On
November 8, 2024, the EPA and CBD agreed to extend the deadline to
January 10, 2025.\122\ We provide additional information on this issue
in our responses to comments A.1.2 and A.1.3 in this Notice.
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\120\ Id. at 56240-56241.
\121\ Center for Biological Diversity et al., v. Regan, No.
3:22-cv-03309-RS (N.D. Cal.). This consent decree is also available
in the docket for this action.
\122\ Id. Prior to court's entry of the 2023 CBD Consent Decree,
the EPA published a notice in the Federal Register announcing the
proposed settlement and providing an opportunity for interested
persons to submit comments. 88 FR 20166 (April 5, 2023). The EPA
received no comments on the proposed settlement. The parties' joint
stipulation to extend the consent decree deadline is available in
the docket for this action.
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Regarding the burdens associated with compliance with the FIP and
the MDAQMD's NNSR program, we direct the reader to our response to
written comment A.5.6, where we respond to similar assertions from
other commenters. Unless the EPA delegates authority to implement the
FIP to the MDAQMD, permit applicants will need to apply to the EPA for
an NNSR permit under the FIP and to the MDAQMD for a permit under the
SIP. If, however, the MDAQMD requests delegation authority to implement
the FIP, the EPA is willing to work with the MDAQMD for MDAQMD to
obtain this delegation authority.
2. Comments on the 2023 LA/LD of the MDAQMD's NNSR SIP Submission
Comment B.2.1: Commenter AA states that the EPA previously approved
the use of SERs, as offsets, which it subsequently disapproved in the
2023 LA/LD action. The commenter states that neither the 2023 LA/LD
action nor the proposed FIP fully explain the EPA's policy reversal of
MDAQMD Rule 1304(C)(2)(d), which regulates the use of SERs. The
commenter states that allowable emissions reflected in a permit were
backed by real reductions when the permit was issued and that the EPA
has not explained why these reductions are no longer real, especially
when the SERs are surplus adjusted and adjusted for Reasonably
Available Control Technology (RACT) upon use. The commenter states that
any leftover SERs created in the permitting action would never again be
available for use, since SERs cannot be put into the ERC bank. Finally,
the commenter states that CAA section 173(c)(2) expressly mandates that
these SERs are creditable emission reductions (i.e., offsets), that EPA
recognized this in 1996, and that there has been no relevant change in
the CAA or the implementing regulations since then.
Response to Comment B.2.1: Rule 1304(C)(2)(d) is not approvable
under the CAA or the requirements for NNSR SIPs at 40 CFR 51.160-
51.165. As we explain in our responses to comments A.2.1 and A.2.2,
MDAQMD Rule 1304(C)(2)(d) is not consistent with section 173(c)(1) of
the CAA, and it is not consistent with the requirements at 40 CFR
51.165(a)(3)(i), 40 CFR 51.165(a)(3)(ii)(G), or 40 CFR
51.165(a)(3)(ii)(J) because it allows facilities in the MDAQMD's
jurisdiction to use reductions in past potential emissions, even if
actual emissions associated with a modification would not be reduced at
all, to offset emissions increases from construction of modified
emissions units. This arrangement creates a loophole in the actual
emissions accounting system established by the CAA and in place in the
MDAQMD, which uses an attainment plan that is based on actual
emissions.\123\ The currency of the CAA is actual emissions, and that
is true at each major modification undertaken at a facility.
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\123\ MDAQMD's 2008 and 2015 ozone NAAQS attainment plans are
based on actual emissions. The 2008 ozone NAAQS plan is available
at: <a href="https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf">https://ww2.arb.ca.gov/sites/default/files/classic/planning/sip/planarea/wmdaqmp/2016sip_mdplan.pdf</a>, pp. 7, 34 (EPA approved this
plan, see 86 FR 53223 (September 27, 2021).) The 2015 ozone NAAQS is
available at: <a href="https://www.mdaqmd.ca.gov/home/showpublisheddocument/9589/638084392297570000">https://www.mdaqmd.ca.gov/home/showpublisheddocument/9589/638084392297570000</a>, pp. 4-5, 24, 80.
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As we explained in our response to comment A.2.1 in this
rulemaking, Rule 1304(C)(2)(d) is inconsistent with CAA section
173(c)(1), 40 CFR 51.165(a)(3)(i), 40 CFR 51.165(a)(3)(ii)(G), and 40
CFR 51.165(a)(3)(ii)(J) because it allows a facility to offset
emissions from a major modification with previously-relied upon offsets
associated with a prior, distinct, project. Because Rule 1304(C)(2)(d)
is at odds with these requirements, it is not approvable.
3. Comments on the Impact of the FIP on Reliance Interests
Comment B.3.1: Commenter AA is concerned that the EPA, in proposing
the FIP, failed to recognize and assess the impact of the FIP on the
MDAQMD and regulated industry. The commenter states that the MDAQMD and
sources subject to the FIP have a reliance interest in the MDAQMD's
Rule 1304(C)(2)(d) because, for over 25 years, the MDAQMD and its
constituents have operated under the EPA's previously approved Rule
1304(C)(2)(d) procedures. The commenter states that SERs allowed under
Rule 1304(C)(2)(d) may not be allowed under the FIP, and that this will
impede the permitting process and the timeline for projects that have
proceeded based on the understanding that MDAQMD's Rule 1304(C)(2)(d)
was acceptable. Now, the commenter states, the EPA is reversing its
position to eliminate these SERs without explanation or consideration
of readily apparent alternative measures that could reduce the severity
of its impact. The commenter states that the EPA's action does not
reflect the
[[Page 106351]]
cooperation between agencies that should be strived for, nor is it in
compliance with the EPA's obligations under the APA.
Response to Comment B.3.1: As explained in our response to comment
A.4.1, the EPA disagrees with the commenter's assertion regarding
reliance interests. The EPA must promulgate a FIP because the MDAQMD
has not adopted NSR rules that the EPA can fully approve.
Furthermore, it is not clear what the commenter means by the
statement that EPA's proposed FIP fails to comply with EPA's
obligations under the Administrative Procedure Act. To the extent that
this comment is the same as comment A.3.1, the EPA's response is
already stated in our response to that comment.
4. Comments on Other Potential Impacts of the FIP
Comment B.4.1: Commenter AA states that the proposed FIP is
primarily silent about practical implementation issues, elaborating
that the only discussion on that topic seems to be that two permits
will be necessary and that the new permit for modified major facilities
will need to use the EPA Region IX's electronic format.
Response to Comment B.4.1: Section 40 CFR 52.285(d)(3) of the FIP
identifies the information that an applicant must provide to the EPA
(or other reviewing authority, if delegated by the EPA) when submitting
an application under the FIP.
Comment B.4.2: Commenter AA states that the EPA has expressed
orally to the MDAQMD on a number of different occasions that it is
concerned about various minor sources that will somehow escape NNSR.
The commenter states that the EPA has especially expressed this concern
for synthetic minor sources, where a permit limitation is the only
thing rendering the facility ``minor.'' The commenter states that,
given the EPA's concern, it seems to be a bit of an oversight that
specific provisions regarding review of minor sources are not addressed
either directly or by reference.
Response to Comment B.4.2: The FIP and 40 CFR 51.165 generally
apply to major stationary sources of air pollution, though synthetic
minor sources must comply with definitions of ``potential to emit'' and
provisions relating to the relaxation of these limits. At such time
that a particular source or modification becomes a major stationary
source or major modification solely by virtue of a relaxation in any
enforceable limitation that was established after August 7, 1980, on
the capacity of the source or modification otherwise to emit a
pollutant, such as a restriction on hours of operation, then the
requirements of the FIP shall apply to the source or modification as
though construction had not yet commenced on the source or
modification.\124\ The FIP also requires sources to identify any
emission limitations taken by the source.\125\ The FIP incorporates the
definitions used in Appendix S to Part 51, including the definition of
``Potential to Emit.'' \126\ Synthetic minor sources that take a limit
on their PTE are required to comply with this definition and the
provisions relating to the relaxation of limits.
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\124\ 40 CFR 52.285(c)(2) (incorporating Appendix S, section
IV.F.).
\125\ 40 CFR 52.285(b)(referencing the definitions in Appendix S
including the definition of PTE in 40 CFR 52.285(e)(2)(ii)(C)).
\126\ Appendix S section II.A.3.
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Comment B.4.3: Commenter BB states that, in contrast to the
MDAQMD's requirement for a response or issuance of permits within 90
days of application, the EPA's permitting process lacks a specific
timeline. The commenter states that this potential delay could
significantly impact manufacturing facilities applying for permits,
which could impact facility operation and planning. The commenter
states that facilities want to comply, but adding layers to the
already-approved SIP that is implemented by the MDAQMD will cause an
added layer of undue burden on the facility.
Response to Comment B.4.3: We refer the reader to our response to
comment A.5.4 for this comment.
Comment B.4.4: Commenter CC states that five out of the six issues
the EPA identified in the 2023 LA/LD of the MDAQMD's NNSR program have
apparently been resolved and that after CARB takes its action only one
issue remains. The commenter states that it appears that issue is more
based on interpretation, which does not seem resolvable by a FIP as far
as the implications and impacts it will have on industry for submitting
dual permits, having different permitting timelines, additional costs,
and impacts on projects moving forward that maybe benefit clean air.
The commenter suggests not implementing the FIP and instead encourages
that it would be more beneficial for the EPA and the MDAQMD to work
through their issues.
Response to Comment B.4.4: The EPA directs the reader to our
responses to comments A.1.3, A.5.6, and A.5.8. The EPA received CARB's
submission of the MDAQMD's most recent NNSR SIP on August 7, 2024. The
EPA is currently reviewing the submittal. Because the MDAQMD did not
address one of the deficiencies that the EPA identified in the 2023 LA/
LD, even if it did address all of the other deficiencies, the EPA would
still need to promulgate a FIP by January 10, 2025, as required under
the consent decree, because the EPA would still not be able to fully
approve the MDAQMD's NNSR program into the SIP.\127\
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\127\ On November 8, 2024, CBD and the EPA filed a joint
stipulation to extend the original November 29, 2024 deadline to
January 10, 2025. Center for Biological Diversity et al., v. Regan,
No. 3:22-cv-03309-RS (N.D. Cal.). This consent decree and the
parties' joint stipulation to extend the consent decree deadline is
also available in the docket for this action.
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To the extent that the disagreement between the EPA and the MDAQMD
is based upon interpretation of legal requirements, the FIP is a gap-
filling tool that the EPA is required to promulgate when states or air
districts do not implement CAA requirements into their permitting
requirements. Because the MDAQMD refuses to implement CAA requirements
regarding offsets, the EPA must implement a FIP that effectuates those
requirements.
IV. Final Action
In this rulemaking, the EPA is taking final action in response to
the court remand of EPA's June 30, 2023 LA/LD action.\128\ The EPA is
disapproving MDAQMD's Rule 1304(C)(2)(d) because this rule continues to
be insufficient to meet requirements for determining the quantity of
offsets needed to issue a permit for a major modification.\129\ In this
rulemaking, the EPA has provided additional explanation to support this
disapproval of Rule 1304(C)(2)(d). This includes an analysis of the
EPA's prior action in 1996, which shows that the EPA did not fully
consider applicable requirements at that time and that there have also
since been intervening changes to EPA regulations. These responses
supplement the EPA's rationale provided for the 2023 LA/LD action.\130\
EPA affirms its disapproval of Rule 1304(C)(2)(d) in the 2023 LA/LD
action \131\ in this new final action based on the additional reasoning
provided in this rulemaking and the record the EPA compiled to support
the 2023 LA/LD action.
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\128\ 88 FR 42258.
\129\ The EPA's disapproval of Rule 1304(C)(2)(d) in this
action, as in the 2023 LA/LD, is limited; the provision remains a
part of the SIP, as justified under CAA sections 110(k)(3) and
301(a).
\130\ Id.
\131\ Id.
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In addition, in accordance with CAA section 110(c), the EPA is
finalizing a FIP for the NNSR program for the MDAQMD portion of the
West Mojave Desert ozone nonattainment area and the San Bernardino
County and Trona
[[Page 106352]]
Planning Area PM<INF>10</INF> nonattainment areas. The EPA is
finalizing the FIP as proposed except for one change to address an
oversight error that is in the proposed rule text: in 40 CFR
52.285(b)(1)(i), the definition of ``actual emissions,'' the EPA is
inserting the text ``, or for establishing a PAL under paragraph IV.K
of 40 CFR part 51, appendix S'' to the first sentence of the
definition. The added text clarifies the terms that are to be used in
establishing a Plantwide Applicability Limit (PAL), as described in
Appendix S, which the FIP incorporates by reference.\132\ The EPA is
not requesting public comment on the fix to this minor typographical
error since it merely applies the text that is in Appendix S.\133\
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\132\ See 40 CFR 52.285(d), ``Permit approval criteria.''
\133\ Furthermore, the EPA notes that the PAL provisions in the
FIP are not likely to be utilized by any permit applicants because
the MDAQMD no longer has a PAL program in its NSR rules.
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The FIP applies only to construction of new major stationary
sources and major modifications at existing major stationary source in
these nonattainment areas. The FIP implements statutory requirements in
CAA sections 110(c)(1), 172(c)(5), 173, 179(b), 182(c) and (d),
189(a)(1)(A) and (e), 301(a), and 302.
The FIP will be directly implemented and enforced by the EPA. The
FIP authorizes the EPA to delegate implementation of the FIP to the
MDAQMD if the District requests such delegation. The FIP will apply
until the MDAQMD revises its SIP to address deficiencies identified by
the EPA and the EPA fully approves the MDAQMD's NNSR SIP.
As we explained in the proposal for this action, should the MDAQMD
submit a SIP revision that corrects some, but not all, of the
deficiencies identified in our June 30, 2023 rulemaking, the permit
approval criteria for this FIP could be limited to the remaining
deficiencies that the EPA identified.\134\ As described in the proposal
for this action, permit applicants would still need to comply with any
portions of the FIP that remain after the EPA approves the MDAQMD's
revised rules in the SIP. Likewise, if a court invalidates any one of
these elements of the FIP, the EPA intends the remainder of this action
to remain effective, as the EPA finds each portion of it to be
appropriate even if one or more parts of it have been set aside.
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\134\ 88 FR 42264-42266; See also 87 FR 72434, 72438 (November
25, 2022).
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V. Supporting Information
A. Policy on Children's Health
In 2021, the EPA updated its Policy on Children's Health to reflect
that ``children's environmental health refers to the effect of
environmental exposure during early life: from conception, infancy,
early childhood and through adolescence until 21 years of age.'' In
addition, the policy applies to ``effects of early life exposures
[that] may also arise in adulthood or in later generations.'' In this
action, the EPA is finalizing a program that would implement our
federal regulations in the nonattainment areas under the MDAQMD. In so
far as there is an impact from this action, it will be positive since
the deficiencies in the District's program it is meant to rectify would
likely result in increased emissions as compared to this FIP and our
federal NNSR regulations.
B. Judicial Review
Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of this action must be filed in the United States Court
of Appeals for the appropriate circuit by February 28, 2025.
Filing a petition for reconsideration by the Administrator of this
final rule does not affect the finality of this rule for the purposes
of judicial review nor does it extend the time within which a petition
for judicial review may be filed, and shall not postpone the
effectiveness of such rule or action. This action may not be challenged
later in proceedings to enforce its requirements (see section
307(b)(2)).
VI. Statutory and Executive Order Reviews
Additional information about these statutes and Executive Orders
can be found at <a href="https://www.epa.gov/laws-regulations/laws-and-executive-orders">https://www.epa.gov/laws-regulations/laws-and-executive-orders</a>.
A. Executive Order 12866: Regulatory Planning and Review and Executive
Order 14094: Modernizing Regulatory Review
This action is not a significant regulatory action as defined in
Executive Order 12866 (58 FR 51735, October 1993), as amended by
Executive Order 14094 (88 FR 21879, April 11, 2023), and was,
therefore, not subject to a requirement for Executive Order 12866
review.
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.)
because this final rule implements existing requirements under the CAA
and 40 CFR 51.160-165. The Office of Management and Budget (OMB) has
previously approved the information collection activities in the
existing PSD and NNSR regulations under OMB control number 2060-0003.
The burden associated with obtaining an NNSR permit for a major
stationary source undergoing a major modification is already accounted
for under the approved information collection requests. Thus, the EPA
is not conducting an information collection request for this action.
C. Regulatory Flexibility Act (RFA)
I certify that this action will not have a significant economic
impact on a substantial number of small entities under the RFA. This
action is unlikely to impact small entities because the permitting
requirements implemented through this action are applicable only to
construction or modification of major stationary sources of air
pollution. In the MDAQMD, major sources are those that emit, or have
the potential to emit 25 tons per year or more of NO<INF>X</INF>,
Sulfur Oxides, or volatile organic compounds (VOCs); or 15 tons per
year or more of PM<INF>10</INF>. To the extent that any small entities
would own or operate sources capable of emitting this much air
pollution, the requirements of this action apply only to construction
of new major sources, or major modifications to existing major sources,
located in the portions of the MDAQMD that are subject to the
requirements of this action. The EPA does not have information to
suggest that there currently are a substantial number of major
stationary sources located in the MDAQMD that are owned or operated by
small entities. The Agency also does not have any information on future
modifications that any such existing major sources may engage in after
the effective date of this FIP. Further, the Agency does not have
information that suggests one or more small entities will seek to
construct a new major stationary source in the MDAQMD.
Even if the federal permitting requirements established in this FIP
could be applicable to one or more small entities, these requirements
would not have significant economic impact on such a small entity.
Furthermore, any impact would not affect a substantial number of small
entities. This FIP ensures that such small entities and other sources
subject to the FIP requirements meet CAA requirements to which these
sources should have already been subject. Upon finalization of this
action, sources applying for a
[[Page 106353]]
permit will be required to submit application materials to the EPA in
compliance with the FIP. These sources are already subject to NNSR
requirements under the District's SIP, including the requirements to
submit applications, to obtain offsets, and to install pollution
control technology that satisfies Federal standards. Consequently, the
incremental impact associated with application of the specific
requirements of the NNSR regulations for certain sources emitting
nonattainment criteria pollutants or its precursors is expected to be
de minimis, primarily pertaining to the amount of offsets needed.
D. Unfunded Mandates Reform Act (UMRA)
This action does not contain an unfunded mandate of $100 million or
more, as described in UMRA, 2 U.S.C. 1531-1538, and does not
significantly or uniquely affect small governments. This action imposes
no enforceable duty on any state, local or tribal governments or the
private sector.
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 on the distribution of power
and responsibilities among the various levels of government.
F. Executive Order 13175: Consultation and Coordination With Indian
Tribal Governments
This action does not have tribal implications, as specified in
Executive Order 13175, because this proposed rule would not apply on
any Indian reservation land or in any other area where the EPA or an
Indian tribe has demonstrated that the tribe has jurisdiction, and it
will not impose substantial direct costs on tribal governments or
preempt tribal law. Thus, Executive Order 13175 does not apply to this
action.
G. Executive Order 13045: Protection of Children From Environmental
Health Risks and Safety Risks
Executive Order 13045 directs federal agencies to include an
evaluation of the health and safety effects of the planned regulation
on children in Federal health and safety standards and explain why the
regulation is preferable to potentially effective and reasonably
feasible alternatives. This action is not subject to Executive Order
13045 because it is not a significant regulatory action under section
3(f)(1) of Executive Order 12866. The EPA does not believe the
environmental health or safety risks addressed by this action present a
disproportionate risk to children because it implements specific
standards established by Congress in statutes.
However, EPA's Policy on Children's Health applies to this action.
Information on how the Policy was applied is available under
``Children's Environmental Health'' in the Supporting Information
section of this preamble.
H. Executive Order 13211: Actions Concerning Regulations That
Significantly Affect Energy Supply, Distribution, or Use
This action is not subject to Executive Order 13211 (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 (NTTAA)
This rulemaking does not involve technical standards.
J. Executive Order 12898: Federal Actions To Address Environmental
Justice in Minority Populations and Low-Income Populations and
Executive Order 14096: Revitalizing Our Nation's Commitment to
Environmental Justice for All
The EPA believes that it is not practicable to assess whether the
human health or environmental conditions that exist prior to this
action result in disproportionate and adverse effects on communities
with environmental justice concerns. The EPA performed an EJ analysis,
as is described in the proposed action, 89 FR 56237, July 9, 2024, in
the section titled, ``Environmental Justice Considerations.'' The
analysis was done for the purpose of providing additional context and
information about this rulemaking to the public, not as a basis for the
action. While the EPA can identify the existing major sources in the
nonattainment areas that would be impacted by this action, the EPA
cannot quantify the number or types of sources that will undertake
major modifications in the future. Additionally, the EPA cannot know
whether new major sources will locate in the nonattainment area and
what emissions these sources may have. The impacts of the action are
likely to vary greatly depending on the source category, number and
location of facilities, and the pollutants and potential controls
addressed. Therefore, while the EPA cannot quantify the precise
baseline conditions and impacts, to the extent that this action will
have impacts, it will not result in disproportionate and adverse
effects on communities with EJ concerns as compared with baseline human
health and environmental conditions.
In finalizing this action, the EPA will replace the MDAQMD in
implementation of the District's NNSR program through the FIP.
Therefore, the EPA does not anticipate that this action will result in
any negative impacts to human health and the environment negative
impacts. If this action has any impact on human health or the
environment it will be beneficial in so far as the FIP action will
address deficiencies associated with the calculation of emission
offsets in the NNSR program. As explained in section II of the preamble
of the proposal of this action, this FIP is being promulgated to
address several deficiencies with the MDAQMD's NNSR program. See 89 FR
56237, 56239. While the EPA has not analyzed the health impacts nor the
emissions impacts from these deficiencies, the deficient provisions are
less stringent than the Federal NNSR requirements that the EPA will be
applying if this proposed FIP is finalized. Therefore, in so far as the
EPA can qualitatively identify impacts to human health and the
environment, the EPA expects this action will ensure the protections
provided by the CAA and that the EPA's implementing regulations will be
fully realized.
K. Congressional Review Act (CRA)
This action is subject to the CRA, and the EPA will submit a rule
report to each House of the Congress and to the Comptroller General of
the United States. This action is not a ``major rule'' as defined by 5
U.S.C. 804(2).
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Ammonia,
Incorporation by reference, Intergovernmental relations, Nitrogen
oxides, Ozone, Particulate matter, Reporting and recordkeeping
requirements, Volatile organic compounds.
Michael Regan,
Administrator.
For the reasons stated in the preamble, part 52 of title 40 of the
Code of Federal Regulations is amended as follows:
PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS
0
1. The authority citation for part 52 continues to read as follows:
[[Page 106354]]
Authority: 42 U.S.C. 7401 et seq.
Subpart F--California
0
2. Section 52.285 is added to read as follows:
Sec. 52.285 Review of new sources and modifications--Mojave Desert
Air Quality Management District.
(a) Plan overview--(1) What is the purpose of the Federal
Implementation Plan (FIP or ``plan'')?
(i) The FIP has the following purposes: It establishes the Federal
preconstruction permitting requirements for new major sources and major
modifications located in nonattainment areas within the Mojave Desert
Air Quality Management District (MDAQMD or ``District'') that are major
for a nonattainment pollutant.
(ii) The plan serves as the Federal nonattainment new source review
(NNSR or ``nonattainment major NSR'') plan for the area described in
paragraph (a)(1)(i) of this section, which the EPA has determined does
not meet all of the Clean Air Act (CAA or ``Act'') title I part D
requirements for NNSR programs. Sources subject to the plan must comply
with the provisions and requirements of 40 CFR part 51, appendix S. The
FIP also sets forth the criteria and procedures that the reviewing
authority (as defined in paragraph (b)(1)(v) of this section) must use
to issue permits under the plan. For the purposes of the plan, the term
SIP means any EPA-approved implementation plan for the area
administered by the MDAQMD.
(iii) Paragraph (f)(3) of this section sets forth procedures for
appealing a permit decision issued under the plan.
(iv) The plan does not apply in Indian country, as defined in 18
U.S.C. 1151 and 40 CFR 49.167, located within the MDAQMD.
(2) Where does the plan apply? (i) The provisions of the plan apply
to the proposed construction of any new major stationary source or
major modification in the MDAQMD that is major for a nonattainment
pollutant, if the stationary source or modification is located anywhere
in the designated nonattainment area.
(3) What general provisions apply under the plan? The following
general provisions apply to you as an owner or operator of a source:
(i) If you propose to construct a new major source or a major
modification in a nonattainment area in the MDAQMD, you must obtain a
Federal NNSR permit (``permit'') under the plan before beginning actual
construction. You may not begin actual construction after the effective
date of the plan without applying for and receiving a Federal NNSR
permit that authorizes construction pursuant to the plan.
(ii) You must construct and operate your source or modification in
accordance with the terms of your permit issued under the plan.
(iii) Issuance of a permit under the plan does not relieve you of
the responsibility to fully comply with applicable provisions of any
EPA-approved implementation plan or FIP, and any other requirements
under applicable law. This includes obligations to comply with any EPA-
approved SIP provisions that satisfy Federal new source review (NSR)
requirements.
(b) Definitions. For the purposes of the plan, the definitions in
40 CFR part 51, appendix S, paragraph II.A, and 40 CFR 51.100 apply,
except for paragraphs (b)(1) through (6) of this section, which replace
the corresponding definitions found in part 51, appendix S:
(1) Actual emissions means the actual rate of emissions of a
regulated NSR pollutant from an emissions unit, as determined in
accordance with paragraphs (b)(1)(i) and (ii) of this section, except
that this paragraph (b)(1) shall not apply for calculating whether a
significant emissions increase has occurred, or for establishing a PAL
under paragraph IV.K of 40 CFR part 51, appendix S. Instead, 40 CFR
part 51, appendix S, paragraphs II.A.24 and 30, shall apply for those
purposes.
(i) In general, actual emissions as of a particular date shall
equal the average rate, in tons per year, at which the unit actually
emitted the pollutant during a consecutive 24-month period that
precedes the particular date and that is representative of normal
source operation. The reviewing authority shall allow the use of a
different time period upon a determination that it is more
representative of normal source operation. Actual emissions shall be
calculated using the unit's actual operating hours, production rates,
and types of materials processed, stored, or combusted during the
selected time period.
(ii) For any emissions unit that has not begun normal operations on
the particular date, actual emissions shall equal the potential to emit
of the unit on that date.
(2) Enforceable as a practical matter means that an emission
limitation or other standard is both legally and practicably
enforceable as follows:
(i) An emission limitation or other standard is legally enforceable
if the reviewing authority has the legal power to enforce it.
(ii) Practical enforceability for an emission limitation or for
other standards (design standards, equipment standards, work practices,
operational standards, pollution prevention techniques) in a permit for
a source is achieved if the permit's provisions specify:
(A) A limitation or standard and the emissions units or activities
at the source subject to the limitation or standard;
(B) The time period for the limitation or standard (e.g., hourly,
daily, monthly and/or annual limits such as rolling annual limits); and
(C) The method to determine compliance, including appropriate
monitoring, recordkeeping, reporting, and testing.
(3) Environmental Appeals Board means the Board within the EPA
described in 40 CFR 1.25(e).
(4) Nonattainment pollutant means any regulated NSR pollutant for
which the MDAQMD, or portion of the MDAQMD, has been designated as
nonattainment, as codified in 40 CFR 81.305, as well as any precursor
of such regulated NSR pollutant specified in 40 CFR part 51, appendix
S, paragraph II.A.31.(ii)(b).
(5) Reviewing authority means the Administrator of EPA Region IX,
but it may include the MDAQMD if the Administrator delegates the power
to administer the FIP under paragraph (g) of this section.
(6) Significant means, in reference to an emissions increase or a
net emissions increase, and notwithstanding the definition of
``significant'' in 40 CFR part 51, appendix S, paragraph II.A.10, any
increase in actual emissions of volatile organic compounds or oxides of
nitrogen that would result from any physical change in, or change in
the method of operation of, a major stationary source locating in a
serious or severe ozone nonattainment area if such emissions increase
of volatile organic compounds or oxides of nitrogen exceeds 25 tons per
year when aggregated with all other net emissions increases from the
source over any period of 5 consecutive calendar years that includes
the calendar year in which such increase occurred.
(c) Does the plan apply to me? (1) In any MDAQMD nonattainment
area, the requirements of the plan apply to you under the following
circumstances:
(i) If you propose to construct a new major stationary source and
your source is a major source of nonattainment pollutant(s).
(ii) If you own or operate a major stationary source and propose to
construct a major modification, where your source is a major source of
nonattainment pollutant(s) and the
[[Page 106355]]
proposed modification is a major modification for the nonattainment
pollutant.
(2) At such time that a particular source or modification becomes a
major stationary source or major modification solely by virtue of a
relaxation in any enforceable limitation that was established after
August 7, 1980, on the capacity of the source or modification otherwise
to emit a pollutant, such as a restriction on hours of operation, then
the requirements of the plan shall apply to the source or modification
as though construction had not yet commenced on the source or
modification.
(d) Permit approval criteria--(1) What are the general criteria for
permit approval? The criteria for approval of applications for permits
submitted pursuant to the plan are provided in part D of title I of the
Act and in 40 CFR 51.160 through 51.165 and 40 CFR part 51, appendix S.
(2) What are the plan-specific criteria for permit approval?
Consistent with the requirements in 40 CFR part 51, appendix S, the
reviewing authority shall not approve a permit application unless it
meets the following criteria:
(i) The lowest achievable emission rate (LAER) requirement for any
NSR pollutant subject to the plan and monitoring, recordkeeping,
reporting, and testing as necessary to assure compliance with LAER.
(ii) Certification that all existing major sources owned or
operated by the applicant in California are in compliance or, on a
schedule for compliance, with all applicable emission limitations and
standards under the Act.
(iii) Any source or modification subject to the plan must obtain
emission reductions (offsets) from existing sources in the area of the
proposed source (whether or not under the same ownership) such that
there will be reasonable progress toward attainment of the applicable
NAAQS. Notwithstanding 40 CFR part 51, appendix S, paragraph IV.G.5,
interprecursor offsetting is not permitted between precursors of ozone.
A demonstration of reasonable progress toward attainment shall include:
(A) A demonstration that the emission offsets will provide a net
air quality benefit in the affected area, as required under 40 CFR part
51, appendix S, paragraph IV.A, Condition 4.
(B) A demonstration that emissions reductions otherwise required by
the Act are not credited for purposes of satisfying the offset
requirements in this paragraph (d)(2)(iii) and part D of title I of the
Act.
(iv) An analysis of alternative sites, sizes, production processes
and environmental control techniques for such proposed major source or
major modification that demonstrates that the benefits of the proposed
major source or major modification significantly outweigh the
environmental and social costs imposed as a result of its location,
construction, or modification.
(3) What are the application requirements? The owner or operator of
any proposed new major stationary source or major modification shall
submit a complete application using EPA Region IX's electronic system,
which is described in paragraph (d)(3)(ii) of this section. The
application must include the information listed in this paragraph
(d)(3) as well as the demonstrations to show compliance with paragraphs
(d)(2)(i) through (iv) of this section. The reviewing authority's
designation that an application is complete for purposes of permit
processing does not preclude the reviewing authority from requesting or
accepting any additional information.
(i) Application content requirements. (A) Identification of the
permit applicant, including contact information.
(B) Address and location of the new or modified source.
(C) Identification and description of all emission points,
including information regarding all nonattainment pollutants emitted by
all emissions units included in the new source or modification.
(D) A process description of all activities, including design
capacity, that may generate emissions of nonattainment pollutants, in
sufficient detail to establish the basis for the applicability of
standards.
(E) A projected schedule for commencing construction and operation
for all emissions units included in the new source or modification.
(F) A projected operating schedule for each emissions unit included
in the new source or modification.
(G) A determination as to whether the new source or modification
will result in any secondary emissions.
(H) The emission rates of all regulated NSR pollutants, including
fugitive and secondary emission rates, if applicable. The emission
rates must be described in tons per year (tpy). If necessary, shorter-
term rates must be described to allow for compliance using the
applicable standard reference test method or other methodology
specified (i.e., grams/liter, parts per million volume (ppmv) or parts
per million weight (ppmw), lbs/MMBtu).
(I) The calculations on which the emission rate information is
based, including fuel specifications, if applicable, and any other
assumptions used to determine the emission rates (e.g., higher heating
value (HHV), sulfur content of natural gas, VOC content).
(J) The calculations, pursuant to 40 CFR part 51, appendix S,
paragraph IV.I and IV.J, that are used to determine applicability of
the plan, including the emission calculations (increases or decreases)
for each project that occurred during the contemporaneous period, as
applicable.
(K) The calculations, pursuant to 40 CFR part 51, appendix S,
paragraph IV.A, used to determine the quantity of offsets required for
the new source or modification.
(L) Identification of actual emission reductions that meet the
offset integrity criteria of being real, surplus, quantifiable,
permanent and federally enforceable.
(M) If applicable, a description of how performance testing will be
conducted, including test methods and a general description of testing
protocols.
(N) Information necessary to determine whether issuance of such
permit:
(1) May adversely affect federally-listed threatened or endangered
species or the designated critical habitat of such species; or
(2) Has the potential to cause adverse effects on historic
properties.
(ii) Application process requirements. To submit an application
required under the plan, applicants may submit electronically through
the Central Data Exchange (CDX)/Compliance and Emissions Data Reporting
Interface (CEDRI) or submit by mail.
(A) CDX/CEDRI is accessed through <a href="https://cdx.epa.gov">https://cdx.epa.gov</a>. First-time
users will need to register with CDX. The CDX platform will also be
used for any permit reporting requirements.
(B) Applicants that do not apply using CDX/CEDRI shall mail a
signed application using certified mail (do not request signature) to:
Air and Radiation Division, Permits Office (Air-3-1), U.S. EPA, Region
9, 75 Hawthorne Street, San Francisco, CA 94105.
(C) Applicants that apply using certified mail must email a copy of
the application and the certified mail tracking number to provide
notification of delivery receipt to <a href="/cdn-cgi/l/email-protection#c694ff87afb496a3b4abafb2b586a3b6a7e8a1a9b0"><span class="__cf_email__" data-cfemail="80d2b9c1e9f2d0e5f2ede9f4f3c0e5f0e1aee7eff6">[email protected]</span></a>.
(4) What are the requirements for monitoring, recordkeeping, and
reporting? The reviewing authority shall require in the conditions of a
permit such monitoring, recordkeeping, and reporting as necessary to
facilitate
[[Page 106356]]
compliance with the terms of a permit and to make them enforceable as a
practical matter.
(e) Public participation requirements--(1) What permit information
will be publicly available? With the exception of any confidential
information as defined in 40 CFR part 2, subpart B, the reviewing
authority must make available for public inspection the documents
listed in paragraphs (e)(1)(i) through (iv) of this section. The
reviewing authority must make such information available for public
inspection at the appropriate EPA Regional Office and in at least one
location in the area affected by the source, such as the MDAQMD
headquarters location or a local library.
(i) All information submitted as part of your permit application as
required under paragraph (d)(3) of this section.
(ii) Any additional information requested by the reviewing
authority.
(iii) The reviewing authority's analysis of the application and any
additional information submitted by you, including the LAER analysis
and, where applicable, the analysis of your emissions reductions
(offsets), your demonstration of a net air quality benefit in the
affected area and your analysis of alternative sites, sizes, production
processes and environmental control techniques.
(iv) A copy of the draft permit or the draft decision to deny the
permit with the justification for denial.
(2) How will the public be notified and participate? (i) Before
issuing a permit under the plan, the reviewing authority must prepare a
draft permit and provide adequate public notice to ensure that the
affected community and the general public have reasonable access to the
application and draft permit information, as set out in this paragraph
(e)(2)(i) and paragraph (e)(2)(ii) of this section. The public notice
must provide an opportunity for public comment and notice of a public
hearing, if any, on the draft permit.
(A) The reviewing authority must mail a copy of the notice to you
(the permit applicant), the MDAQMD (or the EPA if there is a delegation
under paragraph (g) of this section), and the California Air Resources
Board (CARB).
(B) The reviewing authority must comply with the methods listed in
paragraph (e)(2)(i)(B)(1) or (2) of this section:
(1) The reviewing authority must post the notice on its website.
(2) The reviewing authority must publish the notice in a newspaper
of general circulation in the area affected by the source.
(3) The reviewing authority may also include other forms of notice
as appropriate. This may include posting copies of the notice at one or
more locations in the area affected by the source, such as at post
offices, libraries, community centers or other gathering places in the
community.
(ii) The notices required pursuant to paragraph (c)(2)(i) of this
section must include the following information at a minimum:
(A) Identifying information, including the name and address of the
permit applicant (and the plant name and address if different);
(B) The name and address of the reviewing authority processing the
permit application;
(C) The regulated NSR pollutants to be emitted, and identification
of the emissions unit(s) whose emissions of a regulated NSR pollutant
could be affected by the project, including any emission limitations
for these emissions unit(s);
(D) The emissions change involved in the permit action;
(E) Instructions for requesting a public hearing;
(F) The name, address and telephone number of a contact person in
the reviewing authority's office from whom additional information may
be obtained;
(G) Locations and times of availability of the information, listed
in paragraph (e)(1) of this section, for public inspection; and
(H) A statement that any person may submit written comments, a
written request for a public hearing or both, on the draft permit
action. The reviewing authority must provide a period of at least 30
days from the date of the public notice for comments and for requests
for a public hearing.
(3) How will the public comment and will there be a public hearing?
(i) Any person may submit written comments on the draft permit and may
request a public hearing. The comments must raise any reasonably
ascertainable issue with supporting arguments by the close of the
public comment period (including any public hearing). The reviewing
authority must consider all comments in making the final decision. The
reviewing authority must keep a record of the commenters and of the
issues raised during the public participation process, and such records
must be available to the public.
(ii) The reviewing authority must extend the public comment period
under paragraph (e)(2) of this section to the close of any public
hearing under this section. The hearing officer may also extend the
comment period by so stating at the hearing.
(iii) A request for a public hearing must be in writing and must
state the nature of the issues proposed to be raised at the hearing.
(iv) If requested, the reviewing authority may hold a public
hearing at its discretion to give interested persons an opportunity for
the oral presentation of data, views, or arguments, in addition to an
opportunity to make written statements. The reviewing authority may
also hold a public hearing at its discretion, whenever, for instance,
such a hearing might clarify one or more issues involved in the permit
decision. The reviewing authority must provide notice of any public
hearing at le
[…truncated; see source link]Indexed from Federal Register on December 30, 2024.
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