Approval and Promulgation of Implementation Plans, State of California, San Joaquin Valley Unified Air Pollution Control District, New Source Review, 4745-4758 [2010-1838]

Agencies

• ENVIRONMENTAL PROTECTION AGENCY

[Federal Register Volume 75, Number 19 (Friday, January 29, 2010)]
[Proposed Rules]
[Pages 4745-4758]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-1838]


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

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[EPA-R09-OAR-2010-0062; FRL-9107-5]


Approval and Promulgation of Implementation Plans, State of 
California, San Joaquin Valley Unified Air Pollution Control District, 
New Source Review

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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

SUMMARY: Under section 110(k)(6) of the Clean Air Act, EPA is proposing 
to correct our May 2004 final approval of revisions to the San Joaquin 
Valley Unified Air Pollution Control District portion of the California 
State Implementation Plan. EPA is also proposing to take action on 
three amended District rules, one of which was submitted on March 7, 
2008 and the other two of which were submitted on March 17, 2009. Two 
of the submitted rules reflect revisions to approved District rules 
that provide for review of new and modified stationary sources (``new 
source review'' or NSR) within the District, and the third reflects 
revisions to an approved District rule that provides a mechanism by 
which existing stationary sources may be exempt from the requirement to 
secure a Federally-mandated operating permit. The NSR rule revisions 
relate to exemptions from permitting and from offsets for certain 
agricultural operations, to the establishment of NSR applicability and 
offset thresholds consistent with a classification of ``extreme'' 
nonattainment for the ozone standard, and to the implementation of 
EPA's NSR Reform Rules. With respect to the revised District NSR rules, 
EPA is proposing a limited approval and limited disapproval because, 
although the changes would strengthen the SIP, there are deficiencies 
in enforceability that prevent full approval. With respect to the 
operating permit rule, EPA is proposing a full approval. Lastly, EPA is 
proposing to rescind certain obsolete permitting requirements from the 
District portion of the California plan.
    If EPA were to finalize the limited approval and limited 
disapproval action, as proposed, then a sanctions clock, and EPA's 
obligation to

[[Page 4746]]

promulgate a Federal implementation plan, would be triggered because 
certain revisions to the District rules that are the subject of this 
action are required under anti-backsliding principles established for 
the transition from the 1-hour to the 8-hour ozone standard.

DATES: Any comments must arrive by March 1, 2010.

ADDRESSES: Submit comments, identified by docket number EPA-R09-OAR-
2010-0062, by one of the following methods:
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow the on-line instructions.
     E-mail: R9airpermits@epa.gov.
     Mail or deliver: Gerardo Rios (Air-3), U.S. Environmental 
Protection Agency Region IX, 75 Hawthorne Street, San Francisco, CA 
94105.
    Instructions: All comments will be included in the public docket 
without change and may be made available online at https://www.regulations.gov, including any personal information provided, 
unless the comment includes Confidential Business Information (CBI) or 
other information whose disclosure is restricted by statute. 
Information that you consider CBI or otherwise protected should be 
clearly identified as such and should not be submitted through https://www.regulations.gov or e-mail. https://www.regulations.gov is an 
``anonymous access'' system, and EPA will not know your identity or 
contact information unless you provide it in the body of your comment. 
If you send e-mail directly to EPA, your e-mail address will be 
automatically captured and included as part of the public comment. If 
EPA cannot read your comment due to technical difficulties and cannot 
contact you for clarification, EPA may not be able to consider your 
comment.
    Docket: The index to the docket for this action is available 
electronically at https://www.regulations.gov and in hard copy at EPA 
Region IX, 75 Hawthorne Street, San Francisco, California. While all 
documents in the docket are listed in the index, some information may 
be publicly available only at the hard copy location (e.g., copyrighted 
material), and some may not be publicly available in either location 
(e.g., CBI). To inspect the hard copy materials, please schedule an 
appointment during normal business hours with the contact listed in the 
FOR FURTHER INFORMATION CONTACT section below.

FOR FURTHER INFORMATION CONTACT: Laura Yannayon, Permits Office (AIR-
3), U.S. Environmental Protection Agency, Region IX, (415) 972-3534, 
yannayon.laura@epa.gov.

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

Table of Contents

I. Regulatory Context
II. Correction of EPA's May 2004 Final Approval
    A. CAA Legal Authority
    B. Background on District NSR Rules 2020 and 2201 and Related 
EPA Actions
    C. Correction of Erroneous Final Approval
III. The State's Submittals of Revised District Rules
    A. What rules did the State submit?
    B. Are there other versions of these rules?
    C. What are the purposes for revisions to these rules?
IV. EPA's Evaluation and Action on the Rule Revisions
    A. How is EPA evaluating the rules?
    B. Do the rules meet the evaluation criteria?
    1. Regulatory Context
    2. Minor Source NSR Permitting Requirements
    3. ``Extreme'' Ozone Area NSR Requirements
    4. EPA's NSR Reform Rules
    5. Other Changes to District Rules 2020 and 2201
    6. Enforceability Considerations
    7. Federally Enforceable Restriction on Potential To Emit
    8. CAA Section 110(l)
    9. Conclusion and Proposed Action on Submitted Rules
V. Deletion of Obsolete Conditions on SIP Approvals
VI. Proposed Action and Opportunity for Public Comment
VII. Statutory and Executive Order Reviews

I. Regulatory Context

    On February 20, 2008 (73 FR 9260), under sections 110(k)(2) and 
110(k)(6) of the Clean Air Act (CAA or ``Act''), we proposed to correct 
our May 2004 final approval of revisions to the San Joaquin Valley 
Unified Air Pollution Control District (``SJVUAPCD'' or ``District'') 
portion of the California State Implementation Plan (``SIP'') and to 
approve revisions to two District rules submitted to EPA by the 
California Air Resources Board (CARB) on December 29, 2006.\1\ The 
specific provisions proposed for approval included paragraph 6.20 of 
District Rule 2020 (``Exemptions'') and paragraph 4.6.9 of District 
Rule 2201 (``New and Modified Stationary Source Review Rule''). These 
provisions relate to review and permitting of new or modified 
stationary sources (``NSR'') specifically in connection with 
agricultural sources. We received substantive comments on our proposed 
rule, and, since publication of the February 2008 proposed rule, the 
District has adopted further revisions to Rules 2020 and 2201 that have 
been submitted to EPA for approval by CARB. The further amended 
District rules carry forward the revisions submitted on December 29, 
2006 but reflect more recent changes by the District as well. In light 
of the comments on our February 2008 proposed rule, and the more recent 
submittals of District Rules 2020 and 2201, we have decided not to take 
any further action on our February 2008 proposed rule, but rather to 
propose action anew. Published in today's Federal Register is a 
withdrawal of our February 20, 2008 proposed rule.
---------------------------------------------------------------------------

    \1\ The San Joaquin Valley includes all of San Joaquin, 
Stanislaus, Merced, Madera, Fresno, Kings and Tulare counties, and 
the western half of Kern County, in the State of California. The San 
Joaquin Valley is designated as a nonattainment area for the 1997 8-
hour ozone national ambient air quality standard (NAAQS) and the 
1997 fine particulate matter (PM2.5) NAAQS and is 
designated as attainment or unclassifiable for the other NAAQS. See 
40 CFR 81.303. The area is further classified as ``serious'' for the 
8-hour ozone NAAQS, but the State of California has submitted a 
request to reclassify the area to ``extreme.'' See 74 FR 43654 
(August 27, 2009) for EPA's proposed approval of the State's 
reclassification request. The San Joaquin Valley was further 
classified as an ``extreme'' area for the now-revoked 1-hour ozone 
NAAQS when EPA designated the area with respect to the 8-hour ozone 
NAAQS.
---------------------------------------------------------------------------

II. Correction of EPA's May 2004 Final Approval

A. CAA Legal Authority

    Section 110(k)(6) of the Clean Air Act, as amended in 1990, 
provides: ``Whenever the Administrator determines that the 
Administrator's action approving, disapproving, or promulgating any 
plan or plan revision (or part thereof), area designation, 
redesignation, classification or reclassification was in error, the 
Administrator may in the same manner as the approval, disapproval, or 
promulgation revise such action as appropriate without requiring any 
further submission from the State. Such determination and the basis 
thereof shall be provided to the State and the public.''
    We interpret this provision to authorize the Agency to make 
corrections to a promulgated regulation when it is shown to our 
satisfaction (or we discover) that (1) we clearly erred by failing to 
consider or by inappropriately considering information made available 
to EPA at the time of the promulgation, or the information made 
available at the time of promulgation is subsequently demonstrated to 
have been clearly inadequate, and (2) other information persuasively 
supports a change in the regulation. See 71 FR 75690, at 75693 
(December 18, 2006); 57 FR 56762, at 56763 (November 30, 1992).

[[Page 4747]]

B. Background on District NSR Rules 2020 and 2201 and Related EPA 
Actions

    EPA originally approved District NSR Rules 2020 (``Exemptions'') 
and 2201 (``New and Modified Stationary Source Review Rule'') into the 
California SIP on July 19, 2001 (66 FR 37587).\2\ EPA's July 19, 2001 
action was, however, a limited approval and limited disapproval 
reflecting our conclusion that District Rules 2020 and 2201 could not 
be fully approved as meeting all applicable requirements because, among 
other reasons, District Rule 2020 exempted all agricultural sources 
from District permitting requirements. 66 FR at 37590. At that time, 
District Rule 2020, citing California Health & Safety Code (CH&SC) 
section 42310(e), included a permitting exclusion for ``any equipment 
used in agricultural operations in the growing of crops or the raising 
of fowl or animals,'' except for certain orchard and citrus grove 
heaters in the southern portion of the District.\3\ Our limited 
disapproval stated that the District could not exempt major stationary 
sources or major modifications at existing major sources from NSR 
requirements and be found to meet applicable CAA requirements.\4\
---------------------------------------------------------------------------

    \2\ Rules 2020 and 2201 were adopted by the District to meet NSR 
requirements under the Clean Air Act, as amended in 1990, for areas 
that have not attained the National Ambient Air Quality Standards 
(NAAQS). District Rules 2020 and 2201 replaced existing NSR rules 
from the individual county air pollution control districts that were 
combined into the San Joaquin Valley Unified Air Pollution Control 
District (``District'') in 1991.
    \3\ For more information on the status of the state law 
exclusion from permitting for agricultural sources in the California 
SIP, please see the related proposed rule published in today's 
Federal Register.
    \4\ District NSR permitting rules do not adopt the distinction 
between minor sources and major sources as set forth under the CAA. 
District Rules 2020 and 2201 generally apply to both Federal minor 
and major stationary sources. Our limited approval and limited 
disapproval specified that the rule deficiency was exempting major 
agricultural sources and major modifications. See 65 FR 58252, at 
58254 (September 28, 2000).
---------------------------------------------------------------------------

    To correct this deficiency, the District adopted a revision to Rule 
2020 which eliminated the agricultural permitting exemption in its 
entirety, and CARB submitted the revised Rule 2020 to EPA on December 
23, 2002 as a revision to the California SIP. In response, on February 
13, 2003, EPA proposed several actions regarding the exemption of 
agricultural sources from major source NSR permitting requirements. 
First, EPA proposed approval of revised District Rule 2020. See 68 FR 
7330 (February 13, 2003).\5\ In that notice, EPA specifically noted 
that ``California Health & Safety Code 42310(e) continues to preclude 
the District, as well as all other districts in California, from 
permitting agricultural sources under either title I or title V of the 
CAA.'' See 68 FR 7330, at 7335.
---------------------------------------------------------------------------

    \5\ EPA also published an Interim Final Determination that 
SJVUAPCD had corrected the July 2001 limited approval deficiencies 
and EPA stayed or deferred the imposition of CAA sanctions on the 
District. See 68 FR 7321.
---------------------------------------------------------------------------

    To address this issue, EPA published a proposal finding that 
California's statutory exemption of agricultural sources in CH&SC 
section 42310(e) from major source NSR permitting rules violated the 
requirements of CAA section 110(a)(2)(E). See 68 FR 7327 (February 13, 
2003). This action, titled ``Finding of Substantial Inadequacy of 
Implementation Plan; Call for California State Implementation Plan 
Revision'' (hereinafter ``SIP Call''), determined that California 
lacked adequate legal authority to carry out its NSR permitting 
requirements because CH&SC section 42310(e) exempted major agricultural 
sources. EPA finalized the SIP Call on June 25, 2003, and thereby 
required California to submit the necessary assurances of authority by 
November 23, 2003 to support an affirmative finding by EPA under CAA 
section 110(a)(2)(E). If the State failed to submit the necessary 
assurances, then EPA indicated that the sanctions clock under CAA 
section 179 would be triggered.\6\ See 68 FR 37746 (June 25, 2003).
---------------------------------------------------------------------------

    \6\ On May 22, 2002, EPA issued a Notice of Deficiency for 
California's Title V program based on the exemption of agricultural 
sources from Title V permitting. See 67 FR 35990 (May 22, 2002). 
EPA's decision was upheld. See California Farm Bureau Fed'n v. EPA, 
No. 02-73371 (9th Cir. July 15, 2003) (memorandum opinion).
---------------------------------------------------------------------------

    Later that summer, the California legislature enacted Senate Bill 
(SB) 700, which the Governor of California signed on September 22, 
2003. SB 700 removed the wholesale exemption from permitting for 
agricultural sources provided under CH&SC section 42310(e) and 
subjected major agricultural sources to permitting requirements. SB 
700, however, retained exemptions for new source permitting for certain 
minor agricultural sources, and limited the ability to require minor 
agricultural sources to obtain Federal offsets.\7\ California notified 
EPA of the legislature's action by letter dated November 3, 2003 
thereby avoiding the triggering of a sanctions clock. California 
enclosed a copy of SB 700 with the November 3, 2003 letter.\8\
---------------------------------------------------------------------------

    \7\ As explained in Section II.C below, sources with emissions 
below 50 percent of the major source threshold are exempt from 
permitting unless the District makes certain findings, while sources 
at or above 50 percent of the major source threshold are subject to 
permitting unless the District makes certain findings. See CH&SC 
section 42301.16(b) and (c). In addition, offsets may not be 
required unless they meet the criteria for real, permanent, 
quantifiable, and enforceable emission reductions. See CH&SC section 
42301.18(c).
     It is worth noting that EPA and California interpret CH&SC 
section 42301.16(a) to require all sources that emit or have the 
potential to emit at or above the major source threshold to be 
subject to new source permitting and offset requirements, as 
required by the Clean Air Act, without regard to the provisions of 
sections 42301.16(c) or 42301.18(c). Thus, an agricultural source 
with actual emissions less than 50 percent of the major source 
threshold but potential emissions above the major source threshold 
is subject to new source permitting and offset requirements.
    \8\ See Letter from Bill Lockyer, Attorney General, California 
Office of the Attorney General, to Marianne Horinko, Acting 
Administrator, EPA, dated November 3, 2003.
---------------------------------------------------------------------------

    On May 17, 2004, EPA took final action approving the District's 
permitting rules, Rules 2020 and 2201, as proposed in February 2003. 
See 69 FR 27837 (May 17, 2004). These rules, as approved by EPA, did 
not on their face exempt any agricultural sources from permitting or 
limit the applicability of offset requirements. EPA's final approval 
stated that the District had removed its exemption for agricultural 
sources and that the state had also ``removed a similar blanket 
exemption, thereby providing the District with authority to require air 
permits for agricultural sources, including Federally required NSR 
permits.'' See 69 FR 27837, at 27838. EPA's final approval cited SB 700 
in a footnote, but did not note the limited scope of authority for 
permitting and offset requirements under SB 700, which allowed 
permitting of only certain minor agricultural sources.

C. Correction of Erroneous Final Approval

    In this instance, we believe that our May 2004 final full approval 
of District Rules 2020 and 2201 was erroneous. For all SIP revisions, 
States must provide evidence that the State has the necessary legal 
authority under State law to adopt and implement the plan. See CAA 
section 110(a)(2)(E); 40 CFR part 51, appendix V, section 2.1(c). Thus, 
to support the approval CARB was required in December 2002 to provide 
evidence that the District had the necessary legal authority under 
State law to implement Rules 2020 and 2201, which purported to require 
permits and offsets for all agricultural sources. CARB could not have 
done so because CH&SC section 42310(e), applicable at that time, 
continued to preclude such authority under State law with respect to 
all agricultural sources.
    Nonetheless, we proposed to fully approve Rules 2020 and 2201 on 
February 13, 2003, with the expectation that the California legislature 
would act to remove CH&SC section 42310(e)'s exemption for agricultural 
sources

[[Page 4748]]

thereby aligning Rule 2020 with District authority under State law. 68 
FR 7330 (Feb. 13, 2003). While the legislature did act shortly 
thereafter to remove the exemption for major agricultural sources and 
major modifications at existing major agricultural sources, the 
legislature also retained the exemption from permitting for certain 
minor agricultural sources, leaving the words of Rule 2020 broader than 
the District's authority under State law. The legislature also exempted 
minor agricultural sources from obtaining offsets pending a 
determination that emissions reductions from such sources meet certain 
criteria, leaving Rule 2201, on its face, also at odds with State law.
    As noted above, on May 17, 2004, EPA took final action to approve 
District Rules 2020 and 2201, as proposed in February 2003. See 69 FR 
27837 (May 17, 2004). We now understand that our final approval action 
on Rules 2020 and 2201 should have ensured that the authority in those 
rules was consistent with the authority granted by SB 700. At that 
time, since the District had made no findings to broaden (above 50 
percent of the major source threshold) or narrow the permitting 
exemption (below 50 percent of the major source threshold), as allowed 
under SB 700 and now codified in CH&SC sections 42301.16(b) and (c), 
the permitting exemption provided by State law applied to minor 
agricultural sources with actual emissions less than 50 percent of the 
major source threshold. Thus, we should have limited our approval of 
Rule 2020 to exclude applicability to agricultural sources exempt from 
new source permitting under SB 700 (i.e., minor sources with actual 
emissions less than 50 percent of the major source threshold). Our 
approval of Rule 2201 should have been limited to provisions requiring 
offsets for major agricultural sources, because at the time, the 
District had not found emissions reductions from agricultural sources 
to meet the criteria for real, permanent, quantifiable, and enforceable 
emissions reductions and thus did not invoke the authority otherwise 
provided in SB 700 (and codified in CH&SC section 42301.18(c)) to 
impose an offset requirement on new or modified minor agricultural 
sources. Given that California submitted a copy of SB 700 in November 
2003, we had information indicating that the District did not have the 
authority to implement Rules 2020 and 2201 to the extent that the 
language of the rule appeared to allow (i.e., to require permits and 
offsets from all new or modified agricultural sources, including those 
exempt under SB 700) prior to the time we took final action. We should 
have limited our approval of Rules 2020 and 2201 to conform with SB 
700, and promulgated language in 40 CFR part 52 codifying that 
limitation on our approval.
    We note that recent enforcement actions have been brought pursuant 
to the CAA's citizen suit provisions against minor agricultural sources 
in the District that have emissions less than 50 percent of the major 
source threshold for failure to apply for and receive a new or modified 
source permit. The District, however, does not have the authority under 
State law to issue such permits. The fact that such cases are being 
brought persuasively supports the need to correct our error in 
approving Rules 2020 and 2201 in 2004.
    Therefore, pursuant to CAA section 110(k)(6), we are proposing to 
correct our error by limiting our approval of Rules 2020 and 2201 to 
apply only to the extent the District has authority under state law to 
require permits and offsets. Specifically, with respect to agricultural 
sources, we are approving Rule 2020 only to the extent it applies to 
agricultural sources subject to permitting under SB 700. Also and again 
with respect to agricultural sources, we are approving Rule 2201 only 
to the extent it requires offsets for new major sources and major 
modifications until certain criteria set forth in state law are met. To 
codify this proposed error correction, we are proposing the following 
language to be added as a new section, 52.245, of 40 CFR part 52, 
subpart F (``California''):

52.245 New Source Review Rules

    (a) Approval of the New Source Review rules for the San Joaquin 
Valley Unified Air Pollution Control District Rules 2020 and 2201 as 
approved May 17, 2004, is limited, as it relates to agricultural 
sources, to apply the permit requirement only (1) to agricultural 
sources with potential emissions at or above a major source 
applicability threshold and (2) to agricultural sources with actual 
emissions at or above 50 percent of a major source applicability 
threshold. The offset requirement, as it relates to agricultural 
sources, does not apply to new minor agricultural sources and minor 
modifications to agricultural sources.

    In section IV of this document, we are proposing a limited 
approval/limited disapproval on subsequent submittals of District Rules 
2020 and 2201 that carry forward the agricultural-source-related 
provisions for which we proposed action in February 2008, but that 
reflect subsequent additional changes made by the District to the 
rules. If we finalize this action, as proposed, we intend to codify the 
above language to clarify the status of affected sources that were 
constructed or were modified during the period extending from the 
effective date of our February 2004 final rule (i.e., June 16, 2004) 
through the effective date of our action on revised District Rules 2020 
and 2201 as described in section IV of this document.

III. The State's Submittals of Revised District Rules

A. What rules did the State submit?

    Table 1 lists the rules on which we are proposing action in this 
document with the dates that they were revised by the District and 
submitted to EPA by CARB.

                                            Table 1--Submitted Rules
----------------------------------------------------------------------------------------------------------------
             Local agency                Rule No.            Rule title               Amended        Submitted
----------------------------------------------------------------------------------------------------------------
SJVUAPCD.............................         2020  Exemptions..................        12/20/07        03/07/08
SJVUAPCD.............................         2201  New and Modified Stationary         12/18/08        03/17/09
                                                     Source Review Rule.
SJVUAPCD.............................         2530  Federally Enforceable               12/18/08        03/17/09
                                                     Potential to Emit.
----------------------------------------------------------------------------------------------------------------

    On April 17, 2008, we found that the submittal of District Rule 
2020 met the completeness criteria in 40 CFR part 51 appendix V, which 
must be met before formal EPA review. On April 20, 2009, we found the 
submittal of District Rules 2201 and 2530 to be complete.

B. Are there other versions of these rules?

    As discussed above, we approved a version of Rule 2020 into the SIP 
on May 17, 2004 (69 FR 27837). On December 29, 2006, CARB submitted an 
amended version of District Rule 2020. On December 20, 2007, the 
District adopted further amendments to Rule 2020, and CARB submitted 
the further amended rule to us on March 7, 2008. The revision to 
District Rule 2020 that CARB submitted on December 29, 2006 was carried 
forward with the version

[[Page 4749]]

that was submitted on March 7, 2008 and for which we propose action 
today.
    We also approved a version of Rule 2201 into the SIP on May 17, 
2004 (69 FR 27837). Since our May 2004 approval of Rule 2201 into the 
SIP, the District has amended the rule on four occasions. One of those 
amendments added paragraph 4.6.9 to the rule. On December 29, 2006, 
CARB submitted only paragraph 4.6.9 from District Rule 2201 to EPA. On 
December 18, 2008, the District adopted the latest amendments to Rule 
2201. On March 17, 2009, CARB submitted this latest version of District 
Rule 2201 to us. This latest version of District Rule 2020 that CARB 
submitted on March 17, 2009 carries forward with it all of the changes, 
including new paragraph 4.6.9, that the District has made in the rule 
since our May 2004 approval.
    Prior to our 2004 approval of Rules 2020 and 2201, the SJVUAPCD 
portion of the California SIP included a broad exemption from 
permitting for all agricultural sources, citing CH&SC section 42310(e). 
See section 4.0 of District Rule 2020, as amended on September 17, 
1998, submitted on October 27, 1998, and approved on July 19, 2001 at 
66 FR 37587.
    Lastly, we approved a version of Rule 2530 into the SIP on April 
26, 1996 (61 FR 18500). Since EPA's 1996 approval of Rule 2530 into the 
SIP, the District has amended Rule 2530 twice, once on April 25, 2002 
and then again on December 18, 2008. On March 17, 2009, CARB submitted 
this latest version of District Rule 2530 to us, and it includes all 
amendments to the rule by the District to date.

C. What are the purposes for revisions to these rules?

    Section 110(a) of the CAA requires states to submit regulations 
that control volatile organic compounds, nitrogen oxides, particulate 
matter, and other air pollutants which harm human health and the 
environment. Permitting rules were developed as part of the local air 
district's programs to control these pollutants.
    The purpose of District Rule 2020 (``Exemptions'') is to specify 
emission units that are not required to obtain an Authority to 
Construct or Permit to Operate. Rule 2020 also specifies the 
recordkeeping requirements to verify such exemptions and outlines the 
compliance schedule for emission units that lose the exemption.
    Relative to the version of Rule 2020 that is approved into the SIP, 
the changes would revise and clarify certain exemptions and conform the 
rule to existing state law by explicitly exempting certain agricultural 
sources from permitting requirements. Specifically, the changes in 
District Rule 2020 would:
     Revise the existing exemption for steam generators, steam 
superheaters, water boilers, water heaters, steam cleaners, and closed 
indirect heat transfer systems that have a maximum input heat rating of 
five million Btu per hour or less and that are fired exclusively on 
natural gas or liquefied petroleum gas (LPG) (see paragraph 6.1.1 of 
the submitted rule). The existing exemption is limited to the types of 
equipment described above but also establishes the following 
specifications for both natural gas and LPG combusted by the equipment: 
``provided the fuel contains no more than five percent by weight 
hydrocarbons * * * and no more than 0.75 grains of total sulfur per 100 
standard cubic feet of gas * * *.'' The revised exemption would 
establish separate specifications for natural gas and for LPG. The 
hydrocarbon content limit would remain five percent for natural gas but 
would drop to two percent for LPG. The sulfur content limit would 
increase from 0.75 grains, to 1.0 grain for natural gas, and to 15 
grains (per 100 standard cubic feet of gas). The revised exemption 
would require use of the latest versions of the relevant ASTM test 
methods.
     Clarify and tighten the existing exemption for certain 
types of transfer equipment, such as loading and unloading racks, and 
equipment used exclusively for the transfer of refined lubricating oil 
(see paragraph 6.7 of the submitted rule). Specifically, with respect 
to crude oil, the existing exemption establishes a limiting 
specification in terms of specific gravity, and the revised exemption 
would add a second limiting specification in terms of True Vapor 
Pressure (TVP) and would establish certain test methods for determining 
the TVP of crude oil; and
     Conform District permit requirements to State law by 
explicitly exempting agricultural sources to the extent such sources 
are exempt pursuant to CH&SC section 42301.16 (see paragraph 6.20 of 
the submitted rule). Section 42301.16(a) requires local air permitting 
authorities to require permits for agricultural sources subject to the 
requirements of title I or title V of the Federal Clean Air Act. 
Section 42301.16(b) similarly requires permits for all agricultural 
sources unless specified findings are made at a public hearing or 
except as provided in section 42301.16(c). Section 42301.16(c) requires 
the District to make specified findings at a public hearing prior to 
requiring permits for agricultural sources with emissions that are less 
than one-half of any major source threshold. The net effect of this 
section is that all agricultural sources with actual emissions or a 
potential to emit at or above a major source applicability threshold 
are required to obtain a District permit pursuant to CH&SC section 
42301.16(a). Agricultural sources with actual emissions at or above 50 
percent of a major source applicability threshold are required to 
obtain a District permit, unless the District makes the findings 
specified by subsection (b). No permits are required for agricultural 
sources with actual emissions of less than 50 percent of any major 
source applicability thresholds, unless the District makes the findings 
specified in subsection (c), subject to the limitation in CH&SC section 
42301(a).
    The purpose of District Rule 2201 (``New and Modified Stationary 
Source Review Rule'') is to provide for the review of new and modified 
stationary sources of air pollution and to provide mechanisms including 
emission trade-offs by which Authorities to Construct such sources may 
be granted, without interfering with the attainment or maintenance of 
ambient air quality standards. District Rule 2201 is also intended to 
provide for no net increase in emissions above specified thresholds 
from new and modified stationary sources of all nonattainment 
pollutants and their precursors.
    Key features of District Rule 2201 include:
     Best Available Control Technology (BACT) \9\: Mandates 
emission controls to minimize emission increases above de minimis 
values.
---------------------------------------------------------------------------

    \9\ While the District uses the term BACT as the level of 
control required, a review of the definition has shown that it is 
equivalent to the requirements for Federal LAER.
---------------------------------------------------------------------------

     Emission offsets: Requires emissions above specified 
offset threshold levels to be mitigated with either concurrent 
reductions or past reductions which have been banked as emission 
reduction credits (ERCs).
     Public notification: A 30- or 45-day notice period prior 
to issuance of an Authority to Construct (ATC) to accept comments on 
projects that result in emissions above specified levels.
     Required elements for Authority to Construct, Permit to 
Operate and administrative requirements for processing NSR 
applications.
    As submitted on March 17, 2009, District Rule 2201 incorporates 
three major changes relative to the version of Rule 2201 that is 
approved into the SIP. First, amended District Rule 2201 would replace 
the term, ``Major Modification,''

[[Page 4750]]

with two terms, ``Federal major modification'' and ``SB 288 major 
modification.'' (See paragraphs 3.17 and 3.34 of the amended rule.) The 
former term incorporates EPA's NSR reform principles, and the latter 
term retains the pre-NSR reform approach to determining whether a 
modification is a major modification. Second, amended District Rule 
2201 would incorporate the lower ``major source'' and ``Federal major 
modification'' emissions thresholds, and higher offset ratios, for the 
ozone precursors, VOC and NOX, consistent with an 
``extreme'' ozone classification. (See paragraphs 3.17, 3.23, and 3.34 
of the amended rule). Lastly, changes to District Rule 2201 would 
conform the rule to existing state law by exempting new or modified 
agricultural sources from offset requirements, unless the offsets are 
required by Federal CAA requirements. (See paragraph 4.6.9 of the 
amended rule.)
    Other changes in amended Rule 2201 would:
     Tighten one of the conditions that qualify a replacement 
of ``any article, machine, equipment, or other contrivance'' as a 
``Routine Replacement;'' the existing rule requires that such a 
replacement, among other conditions, not result in an increase in 
permitting emissions from the ``stationary source,'' whereas, the 
modified definition of the term ``routine replacement'' requires no 
such increase from the ``replacement unit(s) (see paragraph 3.33.1 of 
the amended rule);
     Expressly extend the existing emission offset exemption 
for portable equipment to equipment registered in accordance with the 
provisions of District Rule 2250 (Permit-Exempt Equipment Registration) 
(see paragraph 4.6.3 of the amended rule). The existing exemption 
covers portable equipment registered under District Rule 2280 (Portable 
Equipment Registration) or under the Statewide Portable Equipment 
Registration Program. Existing District Rule 2020 provides a permitting 
exemption for portable emissions units covered by a valid registration 
under the above registration programs ``or other equipment registration 
program approved by the APCO.'' District Rule 2250 is such a program, 
and thus, portable equipment registered under District Rule 2250 are 
exempt, not just from the emission offset requirement, but also from 
the requirement for a permit. However, the District expressly added a 
reference to equipment registered under District Rule 2250 in the 
emission offset exemption portion of Rule 2201 to provide consistency 
with similar exemptions for portable equipment and to avoid confusion; 
and
     Provide for a lower offset ratio (from 1.5 to 1.2) in the 
event EPA approves a demonstration that all existing major sources of 
VOC and NOX in the San Joaquin Valley are equipped with BACT 
as defined in CAA section 169(3) (see paragraph 4.8.2 of the amended 
rule). This change amends the SIP to add the lower offset ratio 
provision contained in CAA section 182(e)(1). The lower offset ratio 
referred to in paragraph 4.8.2 has no current effect, because the 
required demonstration has not been submitted to EPA. Moreover, EPA 
would be reviewing any such demonstration, most likely as a SIP 
revision, and that review would include a review for compliance with 
the relevant statutory provision in CAA section 182(e)(1).
    Unlike District Rules 2020 and 2201, District Rule 2530 
(``Federally Enforceable Potential to Emit'') is not an NSR rule, but 
is a rule that relies on thresholds based on certain percentages of the 
major source thresholds established for NSR purposes as a basis to 
exempt sources from the requirements of Rule 2520 (``Federally Mandated 
Operating Permits''). Relative to the corresponding rule in the 
existing SIP, the amended rule would lower the thresholds below which 
sources of VOC or NOX are exempt from the requirements of 
Rule 2520 (see paragraph 6.1 of the amended rule), would lower the 
thresholds below which sources are exempt from certain recordkeeping 
and reporting requirements under Rule 2530 (see paragraph 5.4.1.2 of 
the amended rule); and would lower certain alternative operational 
limits (see, e.g., paragraph 6.2.4 of the amended rule).

IV. EPA's Evaluation and Action on the Rule Revisions

A. How is EPA evaluating the rules?

    The rules that are the subject of this proposed action amend rules 
that EPA has previously approved as meeting the statutory and 
regulatory requirements for SIPs regarding minor NSR, major 
nonattainment NSR, and enforceability of permit conditions. Therefore, 
we have focused our review on the changes in the rules relative to the 
versions of the rules in the existing SIP to ensure the amended rules 
continue to meet the applicable requirements, taking into account that, 
in some instances, such as the ``major source'' threshold requirement, 
the applicable requirements have changed since we last acted on these 
rules.
    The relevant statutory provisions for our review of the submitted 
rules include CAA section 110(a), section 110(l), and section 182(e) 
and (f). Section 110(a) requires that SIP rules be enforceable, while 
section 110(l) precludes EPA approval of SIP revisions that would 
interfere with any applicable requirement concerning attainment and 
reasonable further progress or any other applicable requirement of the 
Act. Section 182(e) (together with section 182(f) for NOX), 
requires NSR SIPs in ``extreme'' nonattainment areas to define ``major 
sources'' in terms of 10 tons per year of VOC or NOX, to 
lower the threshold for ``major modifications'' to zero, and to 
increase the offset ratio to 1.5 to 1. In addition, we have reviewed 
the submitted rules for compliance with EPA implementing regulations 
for NSR, including 40 CFR 51.160 through 40 CFR 51.165.

B. Do the rules meet the evaluation criteria?

1. Regulatory Context
    Other than rule clarifications and other minor revisions, the 
changes to the District's rules that are the subject of this action 
fall into four broad categories: Changes affecting minor source NSR 
permitting requirements; changes relating to the area's extreme 
classification for the 1-hour ozone standard; changes relating to NSR 
Reform; and changes affecting the mechanism used by sources to avoid 
title V requirements.
    First, however, to provide the proper context for evaluating the 
submitted changes in the District's rules, it is important to consider 
the designations and plan status for the valley with respect to the 
relevant national ambient air quality standards. Area designations for 
California are set forth in 40 CFR 81.305 and shown in table 2, below. 
As shown in table 2, the San Joaquin Valley Air Basin is designated 
``nonattainment'' for the 1997 8-hour ozone standard. With respect to 
particulate matter, the valley is designated ``attainment'' for 
PM10 and ``nonattainment'' for PM2.5.

[[Page 4751]]



              Table 2--San Joaquin Valley Area Designations
------------------------------------------------------------------------
           Pollutant                 Designation         Classification
------------------------------------------------------------------------
(Revoked) Ozone--1-hour         Nonattainment........  Extreme (at the
 standard.                                              time of
                                                        designation for
                                                        the 1997 8-hour
                                                        ozone standard).
Ozone--1997 8-hour standard...  Nonattainment........  Serious.\a\
Respirable Particulate Matter   Attainment...........  Not Applicable.
 (PM10).
Fine Particulate Matter         Nonattainment........  Not Applicable.
 (PM2.5).
Carbon Monoxide...............  Attainment (4 urban    Not Applicable.
                                 areas);
                                 Unclassifiable/
                                 Attainment (rest of
                                 valley).
Nitrogen Dioxide..............  Unclassifiable/        Not Applicable.
                                 Attainment.
Sulfur Dioxide................  Unclassifiable/        Not Applicable.
                                 Attainment.
------------------------------------------------------------------------
\a\ The State of California has requested reclassification of the San
  Joaquin Valley to ``extreme'' for the 1997 8-hour ozone standard. See
  74 FR 43654 (August 27, 2009).

    As to ozone, the valley is classified as a ``serious'' ozone 
nonattainment area for the 1997 8-hour ozone standard, but the State of 
California has requested reclassification of the area to ``extreme.'' 
See 74 FR 43654 (August 27, 2009). The designation of an area as 
``nonattainment'' triggers certain SIP planning requirements, and on 
November 16, 2007, the State of California responded to those 
requirements by submitting the San Joaquin Valley 2008 Ozone Plan to 
EPA as a revision to the California SIP. EPA has not yet acted on the 
plan. Significantly, because, as a general matter, the SIP requirements 
that applied by virtue of an area's classification for the now-revoked 
1-hour ozone standard continue to apply to an 8-hour ozone 
nonattainment area, we note that the San Joaquin Valley was designated 
as an ``extreme'' nonattainment area for the 1-hour ozone standard at 
the time of designation for the 8-hour ozone standard. Recently, EPA 
approved the San Joaquin Valley 2004 Ozone Plan, which had been 
developed to address the SIP requirements for ``extreme'' areas for the 
1-hour ozone standard.
    As to PM10, in 2008, EPA approved a redesignation 
request for the area from ``nonattainment'' to ``attainment'' for the 
PM10 standard and also approved the San Joaquin Valley 2007 
PM10 Maintenance Plan as a revision to the California SIP. 
See 73 FR 66759 (November 12, 2008).
    As to PM2.5, in 2005, EPA designated the valley 
``nonattainment'' for the 1997 PM2.5 standards. In response, 
on June 30, 2008, the State of California submitted the San Joaquin 
Valley 2008 PM2.5 Plan as a revision to the California SIP. 
EPA has not yet taken action on the plan. More recently, EPA designated 
the valley as nonattainment for the more stringent 24-hour 
PM2.5 standard promulgated by EPA in 2006. See 74 FR 58688 
(November 13, 2009)(Air Quality Designations for the 2006 
PM2.5 NAAQS).
    With respect to carbon monoxide, the valley, outside of four urban 
areas, is designated as ``unclassifiable/attainment.'' Bakersfield, 
Fresno, Modesto, and Stockton, the four urban areas where violations of 
the carbon monoxide standard had been monitored during the 1970s and 
1980s, were redesignated from ``nonattainment'' to ``attainment'' in 
1998. Lastly, the valley is designated as unclassifiable or attainment 
for the nitrogen dioxide and sulfur dioxide standards.
2. Minor Source NSR Permitting Requirements
a. General Considerations
    The amended rules would affect minor source NSR (``minor NSR'') by 
revising an existing permitting exemption for certain natural-gas- or 
LPG-fired combustion and heat transfer systems (see paragraph 6.1 in 
submitted District Rule 2020), by exempting minor agricultural sources 
with emissions less than 50 percent of the major source threshold (see 
paragraph 6.20 in submitted District Rule 2020) from permitting, and by 
exempting all new or modified minor agricultural sources from the 
offset requirement (see paragraph 4.6.9 of submitted District Rule 
2201).
    The requirements in 40 CFR 51.160 (``Legally enforceable 
procedures''), subsections (a) and (e) provide the basis for evaluating 
exemptions from NSR permitting. The basic purpose of NSR permitting is 
set forth in 40 CFR 51.160(a). Section 51.160(a) requires NSR SIPs to 
set forth legally enforceable procedures that enable the State or local 
agency to determine whether the construction or modification of a 
stationary source would result in a violation of applicable portions of 
the control strategy; or would result in interference with attainment 
or maintenance of a national standard in the State in which the 
proposed source or modification is located or in a neighboring state. 
Section 51.160(e) provides that the procedures must identify types and 
sizes of stationary sources, which will be subject to review. We view 
this provision as allowing a State to exempt certain types and sizes of 
stationary sources so long as the program continues to serve the 
purposes outlined in 40 CFR 51.160(a). Thus, the revised exemption for 
certain natural gas or LPG-fired boilers, and the exemption from 
permitting for non-major agricultural sources whose actual emissions 
(excluding fugitive dust) are less than 50 percent of the major source 
thresholds are approvable so long as the minor source permitting 
program (i.e., including the exemption) continues to provide the 
necessary information to allow the District to determine whether new or 
modified stationary sources would result in a violation of applicable 
portions of the control strategy or would result in interference with 
attainment or maintenance of a national standard. In other words, 
exemptions are approvable if it can be shown that it is not necessary 
to review exempt sources in order to meet the purposes of 40 CFR 
51.160(a).
    Under 40 CFR 51.160, the District has discretion in conducting its 
minor source permitting program to exempt certain small sources and, 
under Federal law, minor sources are not required to obtain offsets. 
Congress directed the States to exercise the primary responsibility 
under the CAA to tailor air quality control measures, including minor 
source permitting programs, to the State's needs. See Train v. NRDC, 
421 U.S. 60, 79 (1975) (States make the primary decisions over how to 
achieve CAA requirements); Union Electric Co. v. EPA, 427 U.S. 246 
(1976); Greenbaum v. EPA, 370 F.3d 527 (6th Cir. 2006).
b. Analysis
    With respect to certain smaller combustion and heat transfer 
systems (steam generators, water boilers, etc.), amended Rule 2020 
revises the existing permitting exemption in paragraph 6.1.1

[[Page 4752]]

of the rule by providing separate fuel specifications for natural gas 
and LPG for those types of equipment eligible for the exemption. The 
hydrocarbon specification would remain unchanged for natural gas but 
would be tightened for LPG from five percent to two percent (by 
weight). With respect to sulfur content, the fuel specification would 
be relaxed from 0.75 grains (of total sulfur per 100 standard cubic 
feet of gas) to 1.0 grain (for natural gas) and 15 grains (for LPG). 
Theoretically, the effect of this change would be that certain 
combustion and heat transfer systems, that otherwise would be covered 
by the permit requirement, would avoid NSR, and would not be subject to 
the applicable controls, such as BACT and offsets, thereby resulting in 
emissions increases that may or may not be accounted for in regional 
plans intended to attain or maintain the national standards.
    In response to a query from EPA concerning potential emissions 
impacts in the relaxation of the sulfur content specifications, the 
District explained how, notwithstanding the permitting exemption, 
certain prohibitory rules, such as Rule 4308 (Boilers, Steam 
Generators, and Process Heaters 0.075 to 2 MMBtu/hr) and Rule 4307 
(Boilers, Steam Generators, and Process Heaters 2 to 5 MMBtu/hr) would 
still apply. See the District's November 13, 2009 memorandum, which we 
have placed in the docket for this rulemaking. Moreover, the District 
explained how, even if the BACT requirement were triggered by a source 
that otherwise would be exempt due to the relaxed sulfur content 
specification, BACT for emissions of sulfur oxides has historically 
been the use of LPG or natural gas, which is already a precondition for 
application of the exemption in the first place.\10\ We find the 
District's explanation sufficient to find that the relaxed sulfur 
content specification in amended Rule 2020, paragraph 6.1, would have 
no significant impact on emissions in the valley.
---------------------------------------------------------------------------

    \10\ If, in the future, use of natural gas or LPG no longer 
represents BACT for sulfur emissions, then this exemption may need 
to be re-evaluated.
---------------------------------------------------------------------------

    In evaluating the limited permitting exemption for agricultural 
sources for consistency with 40 CFR 51.160(a), EPA is taking into 
account the specific pollutants emitted from agricultural operations, 
relevant non-permitting requirements, and regional air quality plans. 
First, California law defines ``agricultural source'' as a source of 
air pollution or group of sources used in the production of crops or 
the raising of fowl or animals located on contiguous property under 
common ownership or control that is a confined animal facility (e.g., 
barn, corral, coop); is an internal combustion engine used in the 
production of crops or the raising of fowl or animals (e.g., irrigation 
pumps, but excluding nonroad vehicles such as tractors); or is a title 
V source or is a source that is otherwise subject to regulation by a 
district or the Federal Clean Air Act. See CH&SC section 39011.5. As 
such, agricultural sources include both combustion sources (such as, 
internal combustion engines and boilers) and non-combustion sources 
[e.g., confined animal facilities and on- and off-field vehicular 
activity (e.g., tilling and harvesting)]. Among the non-combustion 
agricultural sources, some by their nature generate fugitive emissions 
such as tilling, harvesting, and vehicle travel over unpaved farm 
roads.
    Agricultural sources, as described above, emit volatile organic 
compounds (VOC), oxides of nitrogen (NOX), particulate 
matter (PM10 and PM2.5), and carbon monoxide. As 
precursors for ozone, PM10 and PM2.5, emissions 
of NOX and VOC from agricultural sources are not a local 
concern but are logically evaluated from the standpoint of regional air 
quality planning efforts. Direct PM10 and PM2.5 
are both of local and regional concern and thus our evaluation must 
consider both the potential for local exceedances of the standard due 
to the exemption, and for inconsistency with regional control 
strategies for these pollutants. Carbon monoxide is typically a 
pollutant of localized concern, and emissions of carbon monoxide from 
exempt agricultural sources would not be significant given the rural 
location of agricultural sites, which are well away from the urban 
centers and high traffic densities historically associated with high 
ambient concentrations of carbon monoxide in the valley, and the long 
record of attainment of the carbon monoxide standard even within the 
urban centers of the valley. A pollutant-specific evaluation of the 
exemption for particulate matter and ozone is provided in the following 
paragraphs.
    Particulate Matter. With respect to PM10 and 
PM2.5, paragraph 6.20 of amended Rule 2020 would exempt 
agricultural operations with emissions up to 50 tons per year (assuming 
that 100 tons per year is the current applicable major source threshold 
based on the valley's current area designations for PM10 and 
PM2.5). This threshold value, however, excludes fugitive 
dust, and thus, the permitting exemption would extend to agricultural 
sources with overall actual emissions of PM10 and 
PM2.5 greater than 50 tons per year. Without application of 
some types of control measures, we would have no basis to categorically 
conclude that such sources would under no reasonably foreseeable 
circumstances cause or contribute to an exceedance of the 
PM10 or PM2.5 standard.
    However, because the District has adopted other rules that serve to 
control the fugitive dust emissions from agricultural sources, 
including those that would not require a permit due to the exemption in 
amended District Rule 2020, paragraph 6.20, we believe the exemption 
can be approved consistent with 40 CFR 51.160(a) and (e). Specifically, 
District Rule 4550 (``Conservation Management Practices'') and the 
District's Regulation VIII (``Fugitive PM10 Prohibitions'', 
particularly, Rules 8011 and 8081) act as non-permitting means to 
reduce fugitive dust emissions at agricultural sources that fall under 
the exemption and reduce the potential for localized exceedances of the 
PM10 and PM2.5 standards. As explained further 
below, as a general matter, District Rule 4550 covers on-field 
agricultural operations and is implemented through an application and 
District approval process, whereas District Rules 8011 and 8081 cover 
off-field agricultural operations and are implemented as prohibitory 
rules.
    District Rule 4550 (``Conservation Management Practices'') applies 
to agricultural operation sites located within the San Joaquin Valley 
Air Basin and is intended to limit fugitive dust emissions from such 
sites. EPA approved Rule 4550 and associated List of Conservation 
Management Practices (CMP List) into the California SIP in 2006. See 71 
FR 7683 (February 14, 2006). Under the rule, an owner/operator must 
implement the applicable CMPs selected pursuant to section 6.2 (one CMP 
from the CMP list for each of the applicable CMP categories for each 
agricultural parcel of an agricultural operation site). An owner/
operator must prepare and submit a CMP Application for each 
agricultural operation site to the APCO for approval. A CMP Application 
approved by the APCO constitutes a CMP Plan, and owner/operators must 
implement the CMPs as contained in the CMP Plan.
    Exemptions in District Rule 4550 include agricultural operation 
sites where the total acreage of all agricultural parcels is less than 
100 acres and exempts Animal Feeding Operations (AFOs) involving less 
than a certain number of animals: Less than 500 mature dairy cows, less 
than 190

[[Page 4753]]

cattle, less than 55,000 turkeys, less than 125,000 chickens (other 
than laying hens), or less than 82,000 laying hens. The District's 
staff report on Rule 4550 (dated August 19, 2004) concludes that Rule 
4550 (with its 100-acre exemption level) will apply to approximately 91 
percent of all irrigated farmland in the SJV. The District also 
estimated emissions from 100-acre farms to determine the emission 
impact of an exemption. District staff analyzed different commodities 
and determined that PM10 emissions would be quite low for 
smaller farms, less than 1 ton per year. See 71 FR 7683, at 7685 
(February 14, 2006). The District also calculated the emissions impact 
of the size-based exemptions for animal feeding operations. Rule 4550 
is expected to apply to 73% of dairy cows, 94% of feedlot cattle, and 
nearly all poultry operations in the valley. The District also 
determined that any sites qualifying for the size-based cut-offs would 
have emissions no greater than 1 ton per year. See 71 FR 7683, at 7685 
(February 14, 2006). Such small farms would not be expected to cause or 
contribute to localized exceedances of the PM10 or 
PM2.5 standard.
    The District's Regulation VIII (``Fugitive PM10 
Prohibitions'') is intended to reduce ambient concentrations of 
PM10 by requiring actions to prevent, reduce or mitigate 
anthropogenic fugitive dust emissions from specified outdoor fugitive 
dust sources. Rule 8011 establishes generally applicable definitions, 
exemptions, requirements, administrative requirements, recordkeeping 
requirements, and test methods under Regulation VIII. Rule 8081 
(``Agricultural Sources'') establishes specific requirements for off-
field agricultural sources. EPA approved Regulation VIII, including 
Rules 8011 and 8081, into the California SIP in 2003 (68 FR 8830, 
February 26, 2003) and approved Regulation VIII amendments into the 
California SIP in 2006 (71 FR 8461, February 17, 2006).
    District Rule 8081 applies to off-field agricultural sources, which 
includes any agricultural source that meets the definition of: Outdoor 
handling, storage and transport of bulk material; paved road; unpaved 
road; or unpaved vehicle/equipment traffic area. Under Rule 8081, an 
owner/operator must sufficiently implement at least one of the control 
measures indicated in the rule to limit visible dust emissions (VDE) to 
20% opacity or to stabilize the affected surface consistent with the 
requirements in Rule 8011. Together, implementation of the fugitive 
dust control measures required under District Rule 4550 and Rules 8011 
and 8081 provide EPA with a reasonable basis to conclude that 
agricultural operations that escape permitting under paragraph 6.20 of 
amended District Rule 2020 would not cause or contribute to an 
exceedance of the PM10 or PM2.5 standard.
    With respect to the regional planning context, we have reviewed the 
various approved and submitted San Joaquin Valley attainment or 
maintenance plans cited above, and note that none of these plans rely 
upon NSR for agricultural sources less than 50 percent of the major 
source threshold. Further, for attainment planning purposes, growth in 
emissions from agricultural sources has been established by CARB's area 
source inventory growth methodologies, and no mitigation of that growth 
from an offsets requirement has been considered when determining the 
impact of the growth on the District's ability to achieve attainment 
with the standards.\11\ In contrast, emissions reductions from the 
prohibitory rules affecting agricultural sources, discussed above, are 
taken into account in the plan inventory projections. Because the plans 
do not rely on emission reductions from permitting of agricultural 
sources less than 50% of the major source threshold and not rely on 
offsets for new or modified minor agricultural sources, approval of the 
amended Rules 2020 and 2201 would be consistent with regional planning 
efforts to attain and maintain the NAAQS.
---------------------------------------------------------------------------

    \11\ Also see the District's Clean Air Act section 110(l) 
analysis, entitled ``San Joaquin Valley Unified Air Pollution 
Control District Rules 2020 and 2201, as amended September 21, 2006, 
District's Clean Air Act 110(l) Analysis,'' dated November 20, 2007.
---------------------------------------------------------------------------

    Ozone. With respect to ozone precursors (VOC AND NOX), 
paragraph 6.20 of amended District Rule 2020 would exempt agricultural 
operations with ``actual'' emissions (i.e., including fugitive 
emissions) \12\ of less than 5 tons per year based on an applicable 
major source threshold of 10 tons per year. As such, the scope of the 
exemption therefore is limited to small-scale agricultural operations 
and is acceptable so long as the ozone plans for the valley do not 
count on permitting of such sources. As noted above, the regional plans 
do not rely on emission reductions from permitting of agricultural 
sources less than 50% of the major source threshold nor do the plans 
rely on offsets for new or modified minor agricultural sources.\13\
---------------------------------------------------------------------------

    \12\ The District's view on the whether CH&SC section 42301.16 
(and cited in District Rule 2020, section 6.20) covers fugitive VOC 
emissions is found in the District's Final Staff Report (page B-13, 
response to comment 19) on proposed amendments to Rule 2201 
and Rule 2530 (dated December 18, 2008): ``The District appreciates 
the opportunity to reiterate that, for the purposes of implementing 
CH&SC sections 40724.6(c) and 42301.16(c), all emissions, except for 
fugitive dust, must be included in calculations to determine 
district permitting requirements based on one-half of the major 
source thresholds. The statutory language of these sections is 
consistent, which read separately or in the interrelated nature in 
which they were intended to be read, and [sic] District's 
implementation adheres to this statutory language.'' Thus, fugitive 
VOC emissions are included in the determination of whether actual 
emissions from a minor agricultural operation are greater than 50% 
of the applicable major source threshold which, for VOC, is 10 tons 
per year, or, in other words, greater than 5 tons per year.
    \13\ Like fugitive dust and District Rules 4550, 8011, and 8081, 
emissions of NOX from certain types of equipment found at 
agricultural sources, such as boilers and internal combustion 
engines, are covered by District prohibitory rules regardless of 
whether a given agricultural source is subject to permitting. Two 
such rules include District Rules 4308 and 4702. SIP-approved 
District Rule 4308 (``Boilers, Steam Generators, and Process 
Heaters'') limit NOX emissions from boilers between 
75,000 Btu/hour and 2 million Btu/hour. See 72 FR 29886 (May 30, 
2007). SIP-approved District Rule 4702 (``Internal Combustion 
Engines--Phase 2'') limits NOX, VOC, and carbon monoxide 
from internal combustion engines with rated brake horsepower greater 
than 50 horsepower. See 73 FR 1819 (January 10, 2008). Such 
prohibitory rules further reduce the chance that agricultural 
sources that would be exempt from permitting under District Rule 
2020, paragraph 4.6.9, might interfere with attainment or 
maintenance of the national standards.
---------------------------------------------------------------------------

3. ``Extreme'' Ozone Area NSR Requirements
    The most recent version of the District's NSR rules that EPA has 
approved into the SIP was adopted by the District on December 19, 2002. 
Since