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Citation: 54 Fed. Reg. 27274 1989

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### 27274 Federal Register / Vol. 54, No. 123 / Wednesday, June 28, 1989 / Rules and Regulations

ENVIRONMENTAL PROTECTION

AGENCY

40 CFR Parts 51 and 52

[AD-FRL 3603-7]

Requirements forthe Preparation, Adoption,and Submittal of Implementation Plans; Approval and Promulgation of Implementation Plans

AGENCY: Environmental Protection
Agency (EPA).

ACTION: Final rule.

SUMMARY: On August 25, 1983, EPA proposed amendments to its regulations addressing the construction ofnew and modified stationary sources ofair pollution (48 FR 38742). The EPA proposed changes in eight areas of those regulations and provided additional guidance in three other areas. Today's notice announces final action on that part ofthe August 25 proposal dealing with "Federal enforceability" of emissions controls and limitations at a

source. Essentially, EPA isretaining the existing Federal enforceability requirement. However, EPAis clarifying its regulation to specify that stationary

source operating permits issued by a Statemay be treated as federally enforceable in certain situations, provided that the State's operating permit program has been approved by EPA and incorporated into the State implementation plan (SIP) under section 110 ofthe Clean Air Act (Act).

DATES: This action is effective on June 28,1989.
ADDRESS: The public docket for this rulemaking, A-82-23, is available for public inspection and copying between 8:00a.m. and 4:00 p.m., Monday through Friday, at EPA's Central Docket Section (LE-131), Room M-1500, Waterside Mall, 401 M Street, SW Washington, DC. A reasonable fee may be charged for copying, as provided by the Act.

FOR FURTHER INFORMATION CONTACT. For Federal enforceability issues (except operating permits], Mr. David Solomon, EPA, New Source Review Section, Office ofAir Quality Planning and Standards (MD-15), Research Triangle Park, North Carolina 27711; (919) 541- 5375, (FTS)629-5375. Foroperating permit issues, Mr. Kirt Cox,EPA, Air Quality Management Division, Office of Air Quality Planning and Standards (MD-15), Research Triangle Park, North Carolina 27711: (919) 541-5399, (FTS) 629-5399. SUPPLEMENTARY INFORMATION: 

### I.Introduction

InAugust 1980, EPAextensively revised its regulations concerning the preconstruction review ofnew and modified stationary sources under the Act,42 U.S.C. 7401-7642, in response to AlabamaPowerCompanyv. Castle,(the AlabamaPowercase) 636F.2d 323 (D.C. Cir.1979) (see 45FR 52676, August 7 1980). Five sets ofregulations resulted from those revisions. One set, 40CFR 51.166 (formerly 40CFR 51.24), specifies theminimum requirements that a prevention ofsignificant deterioration (PSD) iprogram must contain in order to warrant approval by EPA as a revision to a SIPunder section 110ofthe Act. Another set,40 CFR 52.21, establishes the Federal PSD program, which is currently applied in many States as part ofthe SIP Another set,consisting oftwo regulations, 40 CFR 51.165 (a) and (b) (formerly 40CFR 51.18 

### (j)and (k)), specifies the elements ofan approvable State permit program for preconstruction review in, oraffecting, nonattainment areas. Thefourth set, 40 CFR Part 51, Appendix S, embodies the nonattaimment area Emissions Offset Interpretative Ruling (OffsetRuling), previously revised inJanuary 1979 (44 FR 3273). The fifth set, 40 CFR 52.24, embodies the construction moratorium which applies in certain nonattainment

areas.

Jnthe fall of 1980, numerous organizations petitioned the U.S.Court ofAppeals for theD.C. Circuit to review various provisions ofthose PSD and nonattainment preconstruction regulations. The court consolidated thosepetitions with a collection of challenges to the 1979 revisions to the Offset Rulingin Chemical Manufacturers Association(CMA) v. EPA, No. 79-1112 (D.C. Cir.). InJune 1981, EPAbegan negotiations with the industry petitioners to settle the CMA

case. The EPAentered into a comprehensive settlement agreement with the CMA petitioners in February 1982. Subsequently, the courtgranted a stay ofthe case pending implementation ofthe settlement agreement.

Inthe settlement agreement, EPA committed topropose certain amendments set forth inExhibit A to eight parts oftheregulations pertaining to new source review (NSR or

A PSD program refersto requirements that must be metinanarea designated as being in attainment of national ambient airquality standard (NAAQS)

or unclassifiable (see40CFR 51.166 and52.21). Areas that are designated as nonattainment for a NAAQS must meetcertain other requirements aimed atultimate attainment ofthe NAAQS (see, e.g.,40 CFR 51.165(a) (formerly 40 CFR51.18(j)) and 52.24). 

### preconstruction review) 2 

### to provide guidance in three additional areas, and to take final action on theproposals. On August 25, 1983, EPApublished a notice ofproposedrulemaking in accordance with that agreement (48 FR 38742). Among other things, EPA proposed to delete from certain provisions the requirement that controls or limitations

on a source's emissions must be "federally enforceable" (i.e., enforceable by EPA] in orderto be considered in determining whether a new or modified

source will be "major" and therefore subject to PSD ornonattainment permitting requirements (applicability determination). TheEPA also proposed to delete the requirement in §51.18(j)(3)(ii}(e) (now §51.165(a}(3}(ii}(e)) that emissions reductions obtained by one source from another (offsets)in orderto obtain a nonattainment permit be federally enforceable.3



### Inthe August25, 1983 notice of proposed rulemaking, the Administrator stated that EPA would review comments

on the proposed amendments carefully and with an open mind in order to make

an independent judgment on theirmerits prior to taking any final action. The EPA has sincereceived extensive public comment, including that presented at a public hearing held on September 29, 1983.

TodayEPA is takingfinal action on the proposed changes to the "Federal enforceability" provisions. Essentially,

as discussed in detail below, EPA is retaining the existing "Federal enforceability" requirements without change. However, EPA is amending the definition of "federally enforceable" and 40 CFR 52.23 to specify that State-issued operating permits are federally enforceable under certain circumstances. In another notice being published today, EPA is also taking final action on theremaining August 25, 1983 

### rulemaking proposals. Accordingly,

An NSR, orpreconstruction review,is required

as part ofa SIP under40 CFR Part 51, Subpart I (formerly 40 CFR 51.18 and 51.24) to ensure that construction ormodification ofa source will not

cause violations ofthe State's control strategy or interfere with attainment ormaintenance of NAAQS. An NSR program includes permit programs satisfying the Act's requirements forreview of major stationary sources in nonattainment and PSD

areas (40 CFR 51.165(a) and 51.166) under circumstances described in more detail later in this. notice. In addition to the major source NSR provisions, which are the focus ofthis rulemaking, virtually all States have a general NSRprogram applying tomost minor sources. A basic requirement ofnonattamment NSR of potential major source is that the applicant for nonattamment construction permit must show that its newemissions will be offset by emission reductions elsewhere (42 U.S.C. 7503(1)).

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today's final actions fulfill EPA's commitments under Exhibit A ofthe CMA settlement agreement.

II. Background ofFederal Enforceability Requirements

The five sets ofPSD and nonattainment regulations promulgated in 1980 aim their substantive preconstruction review requirements at

new "major stationary sources. Each
set of rules defines a "major stationary source" as any stationary source that would have the potential to emit certain specified amounts ofair pollutants (e.g., 40 CFR 51.165(a)(1)(iv) and 52.21(b)(1)). In each case, "potential to emit" is then defined as the "maximum capacity ofa stationary source to emit a pollutant under its physical and operational design, but anylimitation 4 on the capacity ofa source to emit a pollutant is treated as part ofits design only ifthe control orlimitation is federally enforceable (e.g., id. at §§ 51.165[a)(1)(iii) and 52.21(b)(4)). The regulations then define "federally enforceable" as "enforceable by the Administrator" (e.g., id. at § 52.21(b)(17)). 5 The definition of "federally enforceable" adds that limitations that are enforceable by the Administrator include (but are not limited to),limitations imposed by: (1) The SIP itself, (2) a Federal PSD construction permit issued under 40 CFR 52.21 or any construction permit issued under regulations approved by EPA in accordance with Subpart Iof40 CFR Part 51 or40 CFR 51.166, (3) a new

source performance standard (NSPS) promulgated under section 111 ofthe Act (see 40 CFR Part 00), or (4) a national emission standard for hazardous air pollutants (NESHAP) promulgated under section 112 (see 40 CFR Part 61). In practice, EPA previously has declined to consider
most other types oflimitations as being "federally enforceable, including limitations that are enforceable by the Administrator under statutes other than the Clean Air Act.

As used in the rules and throughout this notice, "limitations" on a source's capacity to emit include such things as pollution control equipment. restnctions on operating hours, and restrictions on types orquantity offuels tobe used (see 40 CFR 51.165(aJ(1)(iii)}. The EPA's primary enforcement authority in such cases derves from section 113 ofthe Act, which authorizes EPA, under certain conditions, to enforce violations ofa SIP and ofcertain orders and emissions standards. The EPA may also enforce, under section 304(a) ofthe Act, against any person: (1)Who violates any emissions standard or limitation (or orderissued) under such standards or limitations, (2) or who constructs any new or modified major stationary source without a proper PSD or nonattainment construction permit, or (3) who violates any conditions of such a permit. 

### In effect, those definitions require EPA and State authorities, in calculating thepotential to emit ofa proposed new
source for a particular pollutant, to

assume that the source would emitthe pollutant at themaximum rate that the

source could physically emit it,unless the source were subjectto a limitation

on its operation that EPA could enforce directly.

Each ofthe five sets ofregulations also aims its substantive NSR requirements at "major modifications,

a term which includes any significant net emissions increase at a major stationary source. The accounting system fordetermining such significant increases closely parallels the one described above for determining whethernew sources exceed specific emission thresholds 6(e.g., id. at §52.21(b)(2)). Specifically, the regulations define a "net emissions increase" as the amount bywhich the

sumof: (1)The increase in "actual" emissions from the proposed change, and (2)any contemporaneous and otherwise "creditable" increases and decreases in "actual" emissions at the

source would exceed zero (e.g., id. at §52.21(b)(3)(i)). Theregulations then provide that a contemporaneous decrease m emissions is creditable only to the extent that it "is federally enforceable at and after thetime that actual construction on theparticular change begins" (e.g., id. at §52.21(b)(3)(vi)(b) (emphasis added)).

Since a proposed new unit at an existing source has yet to produce emissions, each set ofregulations also defines the actual emissions ofany such change as its potential to emit (e.g., id. at §52.21(b)(21)(iv)). The definition-of "potential to emit, as noted above, contains a requirement forFederal enforceability ofcontrols and limits.

Finally,for sources already in operation, each set ofregulations provides that actual emissions, when they cannot be determined, maybe presumed to equal any source-specific allowable emissions for the unit (e.g., id. at §52.21(b)(21)(iii)). The definition of allowable emissions, like the definition ofpotential to emit, alsorequires, in many cases, Federal enforceability of any applicable limitations (e.g., id. at §52.21(b)(16)).

The general purposes of theFederal enforceability requirements were: (1)To

For PSDpurposes, pollutants currently included in this review are: (1)Thepollutants for which NAAQS, NSPS, or NESHAP exists; and (2) their precursors (e.g., 40 CFR 52.21(b)12)(ij and (b)(23)(i)). For nonattainment purposes, they are thepollutants forwhich NAAQS exist and theirprecursors (see 45 FR 52711 (August 7,1980)(col. 3); 40 CFR 51.165(a](1)(v](A)). 

### corroborate, through the procedures for obtaining SIPrevisions orfederally approved construction permits, that any voluntarily imposed limits on a source's capacity to emit are, in fact,part ofits physical and operational design, and that any claimed limitations will be observed; (2)to ensure that an entity with strong enforcement capability haslegal and practical means to make sure that such commitments are actually carried out; and, generally, (3)to support the goal of theAct that EPAbe able to enforce allrelevant features of SIP'sthat

are necessary forattainment and maintenance ofNAAQS and PSD increments (see48 FR 38748, August 25, 1983).
IlI. Proposed Amendments to the FederalEnforceability Requirements

Shortly after the Federal enforceability requirements were promulgated, several parties to the CMA settlement agreement,representing industry,challenged requirements for Federal enforceability in the "potential to emit" and "net emissions increase" definitions, in court and in administrative petitions for reconsideration. They claimed that the Federal enforceability requirements

were unnecessary and unduly burdensome. Specifically, they claimed that each approved SIPalready prohibits construction ofa new major stationary source or major modification without a PSD or nonattainment construction permit. Accordingly, any company that builds a project that emits, or has the potential to emit, pollution in excess ofthe applicable thresholds for classification as "major, without first obtaining such a permit, would be inviolation ofthe law and therefore subject to subsequent enforcement action by EPA. Thus, they argued, EPA does not need the Federal enforceability requirement to deter a

source operator from using a nonFederal control or limit to escape PSD or nonattainment NSR and then violating those controls orlimits since,even if EPA could not enforce the limitations, it could enforce theprohibition against construction or modification without a PSD ornonattainment permit and shut down the source. 7



### The petitioners also pointed out that, to obtain a federally enforceable limitation, a company would have to apply to the State agency for the change

The industry parties apparently assumedEPA would be aware ofany actual violations of limitations and thresholds, but didnot elaborate on that oron how monitoring ofactual emissions would be as effective in preventing violations as the
current regulations. 

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andthen await whatever public procedures andEPA scrutiny were required.As a result, industry contended, a company could experience substantial expense and delay justin obtaining the necessary limitation.

In theAugust 25, 1983 notice.of proposed rulemaking, EPA stated preliminarily that the Federal enforceability requirement might be unnecessary to some extent and that it would consider deleting it.Theproposal

was based on the possibility ofdelay andconsequent expense that could arise fromprocessing certain construction permit limitations orrevising the SIPto make the applicable limitations federally enforceable. However, EPA emphasized that it still intended to achieve thepurposes for whichFederal enforceability was originally designed (48 FR 38748, August 25, 1983]. 

### Nonetheless, EPA was rclined at that time to thinkthat the purposes ofthe Federal enforceability requirements could also be served by a requirement that limitations be enforceable by State

orlocal governments, provided that such limitations were discoverable by EPA and the public (id).Accordingly, EPA proposed to: (1)

### Delete the word "federally" from the term "federally enforceable" in the definitions of "potential to emit, "net emissions increase," "allowable emissions, and "major modification,"$ and from §51.18(j)(3)(ii)(e) (now §51.165(a](3](ii](e)] (regarding offsets); 9 

### and (2) 

### toreplace the definition of "federally enforceable" with an expanded definition of"enforceable" (including discoverable limitations enforceable under State orlocal law).

IV Summary ofComments onAugust 1983 Proposal 1 

### o A. Comments Generally Supportingthe Proposal

As expected, many industry representatives expressed strong support for the proposed deletion of.the Federal enforceability requirements. Most ofthese comments also supported the proposed new definitior of "enforceable, although two industry

6The definitions of"major modification" exempt from applicability determnations certain increases in operating hours andswitches infuel ormaterial used,unlessthe increase orswitch isbarred bya federally enforceable limit (e.g.,40 CFR 52.21(b)(2)[iii)(e)1fl. Although external offsets are notused to avoid nonattamment NSR,the purposes ofrequiring Federal enforceability ofsuch offsets are essentially the same asfor requiringFederal enforceability of limitations used to avoid such review.

1o

Amore detailed "Summary ofComments" has been pleced inthe public docketfor thisrulemaking, associations suggested that no definition of "enforceable" was necessary.

In addition to the arguments discussed in the preceding section, the industry
commenters made several general assertions in support ofthe proposal. First, they argued that since State and local operating permits and other requirements are still enforceable by the non-Federal authorities, source operators would comply with the State and local limitations even without Federal enforcement. Second, several
commenters claimed that Federal enforceability requirements are inconsistent with the requirement in section 101 ofthe Act that State and local authorities be.given primary responsibility for preventing and controlling airpollution. Third, all the industry commenters asserted that elimination ofthe Federal enforceability requirement would substantially reduce red tape and the delays and costs of obtaining a federally enforceable permit

or SIP limitation. Fourth, several
commenters claimed that Federal enforceability in the definition of "potential to emit" is inconsistent with the decision ofthe D.C. Circuit Court of Appeals in theAlabamaPowercase, 636 F.2d 323 (1979). Inthat case, the court clarified that a source's potential to emit
must be based on actual emissions or "design capacity" foremissions ofa source, including the effects ofpollution control equipment required by law to be included in the design. The commenters argued that tius focus on actual emissions or design implicitly requires EPA to give credit, in calculating a source's emission potential, for any controls or limitations required by State

orlocal law orpermits, even ifthey are not federally enforceable.

Fifth, several commenters argued that citizen enforcement of State and local permit limitations under the citizen suit provisions ofsection 304 ofthe Act would be preserved, even without the. additional requirement ofFederal enforceability, provided that the State/ local permit processes are,"coherent" and the permits themselves remain on file.I

I I Two industry commenters also alleged that the 1980Federal enforceability requirements were procedurally invalid because, in their view,EPAdid not provide adequate prior notice oropportunity to comment on theconcept and lacked adequate record support for therequirement. The EPA disagrees with thosecomments andbelieves that the 1980 requirements were alogicaloutgrowth of the preceding proposal(44FR 51924. September 5, 1979) and were amplysupported by therulemaking record at thetime. However, those comments are
now mool.Any possible,procedural defects in the 1980 rules regardingFederal enforceability have been cured by thisrulemaking. One commenter also suggested, contrary to the position EPA tookinthe proposal, that offset credits should be considered enforceable (by a State, if
not by EPA) even if the source providing the offset is nbt bound to reduce its emissions by a permit or other State limitation, provided that the offset

source stipulates to the State that itwill reduce its emissions and that the SIP allows such stipulations. The commenter argued that a State could enforce such a stipulation under its authority to prevent violations ofthe SIP

B.Comments Opposingthe, Proposal

Several State air quality programs and environmental groups strongly opposed the proposed deletion oftheFederal enforceability requirements on several grounds. First, the association of State and Territorial Air Pollution Program Administrators (STAPPA) commented that even though State and local governments have primary pollution control responsibility, they need the support ofa credible Federal enforcement program tobe most effective.

Two commenters asserted that Federal enforceability is the only effective means ofassuring, during applicability determinations, that limitations are really intended to be observed and for assuring that offsets and limits are actually implemented. These commenters apparently felt that State and local enforcement is often less vigorous and effective than Federal enforcement, especially in light ofthe economic and other pressures some businesses can exert on State and local enforcement authorities. One
commenter felt that the procedures involved in obtaining a federally enforceable limitation or offset are the only effective means ofassuring that EPA and the public have a chance to identify and evaluate the intended limitation in advance.

With regard to offsets, one commenter pointed out that section 173 of the Act requires offset commitments to be "legally binding" and that when Congress enacted section 173, in 1977 it implicitly ratified EPA's OffsetRuling which required Federal enforceability. Thus, the commenter concluded, legally binding commitments probably refer to federally enforceable commitments.

Finally, the same commenter argued that citizenenforcement of offset transactions under section 304 would only beeffective. as a practical matter, iftherecords of all such transactions

are centrally located (i.e., at EPA's Regional Offices] in a standardized system, as they are under the existing

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Federal enforceability regulations. This commenter also criticized theproposal

as itwould affect Federal enforcement efforts, since enforcement actions against sources already constructed could be more difficult than action taken prior to construction.
V Decision andResponse to Comments

After consideration ofthe comments and reevaluation ofthe preliminary statements made in the August 1983 proposal, EPA has decided to retain the Federal enforceability requirement in all theprovisions discussed above. In addition, to provide full internal consistency within the Federal enforceability provisions of40 CFR Part 51, Appendix S (known as the "Offset Ruling"), EPAis, in a separate document alsobeing published in today's Federal Register, amending section IV.C.3. of the Offset Ruling to clarify that emissions offsets involvingreduced operating hours or source shutdowns must, like all emissions offsets, be federally enforceable (see Appendix S, section II.A.6.(v)(b)). In lightof today's decision, EPA willnot add theproposed

new definition of "enforceable" to the regulations. However, as discussed below, EPAis clarifying that State operating permitsmay be treated as federally enforceable under certain conditions. This clarification will reduce any problems which may arisefrom the Federal enforceability requirements. The clarification is formally indicated by slight amendments to the definition of "federally enforceable' and to40 CFR 52.23.
A. Federal Enforceability IsNecessary toEnsureThatLimitationsand ReductionsAreImplemented

Since sources may avoid the protective requirements ofPSD and nonattainment NSR by relyingon State

or local limitations or reductions, it is essential to the integrity ofthe PSD and nonattainment program that such State

or local limitations be actually and effectively implemented. 1 2 

### The EPA continues to believe, as it did in1980 (45 FR 52688-89), that Federal enforceability is both necessary and appropriate to

ensure that such limitations and reductions are actually incorporated into a source's design and followed in practice.

TheEPA agrees with those commenters, including STAPPA, who asserted thatFederal enforceability is

12 Similarly, it is important to the statutory goals
ofthe nonattainment permit program (e.g., that all
new construction is accompanied byoffsets to

assure "reasonable further progress" toward attainment. section 173(1)(A)) that external offsets from outside sources be actually implemented. necessary to support State and local enforcement efforts. Although EPA believes that most State and local governments are committed to effective enforcement oftheir permitprograms, it is true-as STAPPA and some environmental commenters pointed out-that the level ofState and local enforcement is uneven, and that some States and localities have been unwilling orunable to enforce their programs effectively. It follows that, in the absence ofa Federal enforcement capability to back up State and local efforts, there would be somewhat less incentive for sources to actually observe non-Federal limitations or, in the case of offsets, to make the reductions forwhich credithas already been given.The EPA
cannot agree, contrary to the suggestions ofsome source operators, that State and local enforcement alone would always provide enough incentive
to source operators to ensure adequate compliance.

The EPA also believes, as suggested by some environmental commenters, that, absent Federal enforcement capability, some State and local governments would be more susceptible
to economic and other pressures from industry that could actually make State and local enforcement less effective than it currently is. 13 Conversely, the presence of aFederal ability to enforce limitations and reductions can give State and local bodies more leverage in dealing with sources to ensure compliance and should make such bodies more effective in their enforcement efforts.

The EPA also agrees with those
commenters who pointed out that the
processes by which federally enforceable limits or offsetreductions

are imposed (e.g., public notice and comments, notification to EPA) are the best and most reliable ways to ensure, in advance, that a source actually Intends to observe a limitation ormake

a reduction in the future. Whether the limitation is contained in a SIPrevision

or a State permit issued under regulations approved by EPA and included in the SIP public notice and opportunity forparticipation prior to construction is virtuallyguaranteed. At

IsThe EPA also recognizes, as pointed outby the
California Air Resources Board, that absent a nationwide, Federal enforcement presence, industry would be inclined tobuild, or move, sources to States with the least effective enforcement efforts. Such apossibility would give businesses more leverage overthe State governments and could foster a competition among the States to actually relax enforcement efforts. The legislative history of the 1977 Actconfirms that Congress intended the PSD requirements (by setting minimum criteria to be
met in all States) toreduce such competition [H.R. Rep. No. 95-294,95th Cong., 1st Sess. 140 (1977)). that point, EPA, or anyone else, can analyze the record to determine: (1) Whether a proposed limitation or reduction will produce the benefits claimed, (2) whether the applicaht is seriously committed to the limitation, and (3)whether practical means to monitor compliance exist. Even though EPA has confidence.that most State and local procedures would allow for some sort ofpublic scrutiny even ifFederal enforceability were deleted and the proposed expanded definition of "enforceable" adopted, there would be

no assurance that every permit or limitation would receive effective scrutiny.

Similarly, as one environmental group pointed out, the current Federal enforceability requirement facilitates citizen enforcement ofoffsets (and, implicitly, otherlimitations) under section 304 oftheAct, since all permits and commitments meeting the definition ofFederal enforceability must undergo

some public scrutiny and are kept in standardized files inEPA's Regional Offices. Bycontrast, without such a requirement, as under the proposed definition of "enforceable, the only records ofmany such transactions would be scattered around various State and local offices and wouldbe more difficult to obtain. At a minimum, this could make citizen enforcement more difficult and costly and, therefore, less effective as a means ofensuring that limitations and reductions are actually implemented.14

For the reasons discussed above, EPA disagrees with those industry
commenters who claimed that nonfederally enforceable State and local permifs, ifdiscoverable, would be an adequate substitute forFederal enforceability. The absence ofpotential Federal enforcement could result in: (1) Less incentive forsources to observe limitations; (2) more pressure on, and incentive for, State and local authorities
to relax enforcement; and (3) decreased opportunities foreffective citizen enforcement. Mere discoverability of permit limitations would not necessarily
correct any of these problems, although it could create somewhat greater

i4In addition, it is notcertain that nonfederally enforceable State permit limitationsor other commitments could beenforced under section 304 at all. That section allowscitizen suits against any personwhoviolates any limitationunder theAct or any orderissued bya State with respect to such a limitation, orwho proposes to construct ordoes constructa majornew source withouta PSD or nonattainment construction permit (42U.S.C. 7604(a)(1)). While violations offederally enforceable permit limitations may be subject to section304 citizen suits, violations ofnonfederal limitationsoroffsets arguably might notbe. 

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incentives for compliance than would exist without it.Moreover, discoverability could itselfpose practical problems, for both EPA and citizens,, in those situations where the State orlocal permit process is incomplete orpoorly orgamzed or recorded.

The EPA alsobelieves, contrary to

somecommenters' suggestions, that EPA's authority to enforce the prohibitions in most SIP's andin theAct (see sections 110(a)(2)(I), 165[a)(1), 167, and 304(a)(3)) against construction of major sources without a PSD or nonattainment permit (see also sections 113 and 167oftheAct) is not a completely satisfactory substitute for the current Federal enforceability requrements. 15

### The commenters claimed that ifany sources escaped PSD

or nonattainment permit requirements solely because ofa nonfederally enforceable State or local limitation, and laterviolated that limitation, then EPA could treat that source as major and enforce the construction prohibitions tomaintain the integrity of the PSD and nonattainment programs (see40 CFR 51.166(r)(2)) (formerly 40 CFR 51.24(r)(2)). 16

### However, the exercise ofthis authority depends in large part on EPA's ability to show that the new source ormodification is actually emitting apollutant atlevels above the relevant annual threshold. This is much more difficult in practice than showing that an instantaneous emissions limitation in a federally enforceable permit has been exceeded. This is often difficult to do as apractical matter and maybe evenmore difficult in situations involving nonfederally enforceable permits orlimitations where EPA had little or no notice of,or opportunity to participate in, that process. In addition, courts maybe less willing to order strict compliance with thePSD and nonattainment construction prohibitions in those situations (e.g., to shut down themajor source until the appropriate permit is obtained), given the impact that such an ordercould have on the source operator's investment and operation. In short, EPA does notbelieve that the ability to. enforce PSD and nonattainment

15 The EPA did suggestin the August 1983 proposal that that authority would help make the Federal-enforceability requirements unnecessary (48 FR 38747). However, EPAdid not suggest thatthis could be acomplete substitute for theexisting requirements.

16In. some such cases, theState probably could enforce thePSD and nonattainment construction prohibitions as well. However. as discussedabove, States maybe lesswilling orable todo so inthe absence ofpotential EPA enforcement than they

now are. 

### construction prohibitions, in these cases, in the absence of currentFederal enforceability, would be a sufficient deterrent to prevent violation of nonfederally enforceable limitations or to maintain theintegrity ofthe PSD and nonattainment programs.' 7



### In summary, EPA has concluded that the specific purposes for which the Federal enforceability requirement was originally intended, and to which EPA recommitted itselfin theAugust 1983 proposal, cannotbe fully or adequately achieved in the absence ofFederal enforceability. TheEPA recogizes that those purposes-i.e., corroboration prior to construction ormodification that limitations willbe included in a source's design and observed in 

### operation, and the presence ofa strong enforcement authority capable ofholding a company to its commitments-can sometimes be achieved by Stateor local authorities implementing nonfederal limitations. However, in general, State and local enforceability alone willnot fully assure that those purposes are met across the nation. Rather, State and local enforcement, supplemented bypotential Federal enforcement oflimitations, is a much more effective and efficient method of achieving those goals and protecting theintegrity ofthe PSD and nonattainment NSR programs.

TheEPA also recognizes, however, as several commenters pointed out,that the Federal enforceability requirements couldresult in some lengthy and expensive delays in obtaining federally enforceable permits orSIP revisions. However, some delays can be minimized by streamlined processes for certain SIPrevisions, including the direct finalrulemaking process (47 FR 27073, June23, 1982). Thelatter procedure can oftenbe used byEPA to process and publish noncontroversial SIPrevisions inless than 6 months. More significantly, today's action clarifies that States have the option of implementing a program pursuant to which State operating permits could be treated as federally enforceable. Pursuant to this approach, States have the option ofadopting certain permit processing procedures such that operating permits issued under them would be considered federally enforceable, with no needfor the individual permits to be submitted as SIP revisions. Such a program can reduce the potential fordelay which exists in the present system, while

i7The comment ofone Industry source that stipulations by a source to reduce emissions for offset purposes should be considered enforceable by a Stateis now moot, sinceEPA hasdecided to retain the Federal enforceability requirement. 

### serving to enhance the permitting process generally.

B.Federal Enforceability Is Consistent With theRequirementsoftheAct and theAlabamaPowerCase

Several industry commenters claimed thatFederal enforceability is inconsistent withvarious provisions of theAct andwith the decision in 

### the AlabamaPowercase. The EPA disagrees.

First, EPA disagrees with those commenters who claimed that Federal enforceability is inconsistent with section 101(a)(2) oftheAct, which states that regulation ofairpollution sources is theprimary responsibility ofStates and local governments. TheEPA has always recognized this and encouraged and assisted theStates in 

### exercising their responsibility.The fact is, however, that theFederal enforceability requirements do not supersede orinterfere with State and local governments' responsibility or their ability to take theprimary role in regulating sources. Rather, as STAPPA recogmzed, theFederal enforceability requirements supplement and provide necessary support to State/local enforcement efforts. Indeed, as discussed above, Federal enforceability maypromote more effective State/local enforcement by giving sources more incentive to comply and providing the States and localities more leverage over industrial sources. In any case, consistent with the primary role of State/local governments, EPA generally would not get involved in enforcing limitations unless those otherbodies failed to enforce adequately.

Moreover, the Act itself,farfrom requiring EPA to remove itselffrom the enforcement oflimitations or offsets, expressly authorizes EPA to enforce violations ofSIP's by any person (which includes many source limitations under the definition offederally enforceable), with duedeference to State/local primacy (see sections 113 and 167 ofthe Act). Thus,Congress intended that EPA play an important role in the enforcement ofSIP requirements, and theFederal enforceabilityrequirements

are consistent with that intent.

The EPA also disagrees with those commenters who claimed that the Federal enforceability oflimitations in thepotential to emit definition is inconsistent with Congress' intentin using that term in section 169 ofthe Act.is Those commenters pointed out

18 Thedefinition of"major emitting facility" in section 169,which is based on a.source's potential to emit, onits faceapplies onlyto the PSD program. Continued

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that the court in theAlabamaPower

case found that a source's potential to emit mustbe based on its design capacity, including pollution control equipment required by law to be installed and used at the source (636 F.2d at 354). However, the court declined to express any opinion on whether, and to what extent, legal limitations on the operation ofa source should be included in a source's design capacity (id. at 355 n.73). The industry
commenters suggested, nonetheless, that Congress intended any legal limitations, including operational limits, whether or not enforceable by EPA, to be included in a source's design capacity.

However, EPA does not believe that anything in the court's opinion, or in the language, or in the legislative history, of section 169 requires that every legal limitation, ofany type, be included in a source's design capacity. In fact, the
court implicitly left it to EPA's discretion (in the first instance)'to determine what type ofoperational limits,if any, should be credited to a source (id.). The EPA believes that it is within its discretion in requiring Federal enforceability of an operational limitbefore including it in a source's design, consistent with the court's analysis of "potential to emit" (see 45 FR 52688, August 7 1980).

In theAlabamaPowercase, the court concluded thatwhether a source is major depends on its maximum actual emissions or its design capacity, which includes anticipated functioning of pollution controls (636 F.2d at 353). It then referred to pollution controls required by law as examples where the functioning ofsuch controls can be anticipated. Essentially, the court said that EPA must predict a source's future maximum emissions in determining design capacity and thatpollution controls required by law are a reasonable means ofpredicting such future emissions. Although the court did
not otherwise indicate how EPA should make such predictions, the court was evidently referring to predictions of actual emissions (id.). The EPA believes, therefore, that Congress (and the court) intended, or would have intended, such predictions to be reliable and reasonably accurate projections of

However, those terms are equally applicable to NSR under the Offset Ruling, nonattainment requirements under PartDofTitle Iofthe Act, and the construction prohibitions ofsections 110(a)[2)(I) and 173(4) (see 45 FR52689, August 7, 1980). Therefore, EPA's "potential toemit" definition is the

same in allthe PSD and nonattainment regulations, andEPA's analysis ofwhat Congress (andthe court] meant by potential to emit applies to all those regulations. future emissions. 19 As discussed above, EPA does not believe that nonfederally enforceable limitations are as likely to be as uniformly observed as federally enforceable limits and thatrequiring Federal enforceability is the best and
most effective way to ensure maximum compliance by sources with limits. Thus, EPA believes that the Federal enforceability requirement is the most appropriate and reliable way topredict maximum future emissions and that it is, therefore, consistent with section 169 to define "potential to emit" to include that requirement (see 45 FR 52688).20

Similarly, EPAbelieves (as one commenter pointed out) that the Federal enforceability requirement in 40 CFR 51.165(a)(3)(ii)(e), requiring all emissions offsets used to satisfy the nonattainment preconstruction review requirements to be federally enforceable, is consistent with the requirement of section 173 that such offsets must be "legally binding. The 1977legislative history of the Act supports that interpretation ofsection 173. It is clear that Congress was well

aware at the time that EPA was then operating under an early (1976) version of an Offset Ruling (41 FR 55524, December 21, 1976) (see, e.g., 42 U.S.C. 7502 note (1982) H.R. Rep. No 95-294,
supra, at 13-14, 208). Congress implicitly ratified the 1976 OffsetRuling approach by giving each nonattainment State the option of choosing to remain under that Offset Ruling indefinitely, and by requiring that that Offset Rulingremain in effect 21 in every State, unless and

is In fact,the twoexamples the court gave (636
F.2d at 353) of controls required by law-i.e., NSPS andSIP provisions-are included in EPA's definition of "federally enforceable. Moreover, as the court indicated, Congress meant for major

sources to be those that actually emit certain
amounts ofa pollutant, either at present or in the future (id.). It would not make sense for a source to be given credit for future enussion limitations if there is no reasonable expectation that those limitations will actually be observed.

2e For essentially the same reasons Federal enforceability is an appropriate part ofthe definition ofallowable emissions, which may be used to define a new unit's actual emissions in applicability determinations (e.g., 40 CFR 52.21 (b){21)iii}}. Since Congress meant for the statutory PSD and nonattamment requirements to apply only to sources actually emitting major quantities of pollutants, (see theAlabamaPower case, 636 F.2d
at 352-53), it follows that any methodused to estimate actual emissions (other than direct measurement) should be as reliable and accuratb as possible. Federal enforceability ofemissions limitations is the best available means of estimating actual emissions for a new unit which has yet to produce any emissions.

21 Congress intended that EPA have authority to amend the Offset Ruling (see 42 U.S.C. 7502; H.R. Rep. No. 95-294, supra, at 211) as EPA did in 1979 and 1980. A few areas are subject to that Offset Ruling. 

### until the State revised its SIPto comply with the nonattainment provisions in sections 172-173 (See 42 U.S.C. 7502 note; H.R. Rep. No.95-294, supra, at 208; H.R. Rep. No. 95-564 (Conf.Rep.), 95th Cong., 1st Sess. 156 (1977)). The 1976 OffsetRuling, in turn, required that offsets be enforceable by EPA as well as by States and private parties (41 FR 55530). As one commenter correctly observed, since there is no indication in the legislative history that Congress intended to revise that early Federal enforceability requirement in the Offset Ruling, it is likely that the reference to legally binding offsets in section 173

was based on that same concept, Thus, 40 CFR 51.166(a)(3)(ii)(e) is consistent 

### with section 173.22

Moreover, Federal enforceability is often even more appropriate and more important foroffsets in nonattainment permits than it is forlimitations that are used by a source to avoid nonattainment permits. In the latter situations, even if the limitations were not federally enforceable, EPA would still have potential power to enforce construction prohibitions against sources that subsequently become major by virtue of their failure to observe-such limitations. By contrast,without Federal enforceability ofoffsets, EPA would have no such leverage against an external offset source where that source fails to make the pronused emissions reduction. For the samereasons that State and local enforcement are not,in general, an adequate substitute for Federal enforceability in the context of making applicability determinations, they are even less satisfactory in the
context ofoffsets.

C.Responseto OtherComments

One industry commenter, although urging EPA to drop the Federal enforceability requirement in general, argued that EPA should retain Federal enforceability in the definition of "major modification. That definition exempts certain fuel switches and increases in operating hours frombeing considered

as modifications, even ifthey would increase emissions from the source,

22 For essentially the same reasons that Federal enforceability ofexternal offsets is consistent with the Act. Federal enforceability ofinternal emission reductions as an element ofavoiding nonattainment

orPSD permits is alsoconsistent with the Act. Under the definition of"netemissions increase" (e.g. 40 CFR 52.21(b)(3)J, a modification at a source may escape classification as "major" ifits creditable (i.e., federally enforceable) emission decreases arelarge enough. Ifemission offsets in nonattamment permits mustbe federally enforceable, itmakes sense that internalreductions used toescape such permit requirements should be

no lessenforceable. 

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unless those changes were prohibited by

a federally enforceable (construction) permit condition. The industry
cummenter apparently feared that deletion ofthe requirement forFederal enforceability ofsuchprohibitions in that definition, as proposed in the 1983 notice ofproposed rulemaking, would work against industry since it would require many more fuel switches and operating hour changes to be counted as modifications than under the current rules. In fact, the commenter suggested that EPAincrease thenumber of changes exempt fromthe modification definition by completely eliminating any reference to prohibited changes.

The EPAhas decided notto amend the definition ofmajor modification. The EPAbelieves that all NSR definitions should be as consistent as possible and that deleting therequirement for Federal enforceability in the definition ofmajor modification would be inconsistent with its decision to retain Federal enforceability elsewhere. Moreover, the proposedrevision ofthat definition could have created confusion and uncertainty as towhich State and local prohibitions were enforceable. TheEPA also agrees with the commenter that deletion ofthe word "federally" potentially could increase the numberof prohibited fuel switches and other changes dramatically and could largely defeat the purpose for which the exemption was originally intended.

On theother hand, EPAmust reject the commenter's suggestion that the definition be revised to exclude all fuel switches and operating hourchanges frombeing considered modifications. One ofthepurposes oftheFederal. enforceability provision in thecurrent definition is to support theprohibitions against such changes in SIPconstruction permits bymaking a violation ofsuch a prohibition grounds, ifthe modification is major, forrequiring a new PSD or nonattainment permit. The EPAbelieves thisprovision provides valuable added incentive to sources to comply with their permit limitations, and EPA is not persuaded that it shouldgive up that leverage.

Another industry commenter suggested that ifEPA deleted the Federal enforceability requirements and substituted a broader definition of "enforceable, as proposed, that the definition be narrowed to include only enforceability under Federal, State, or local airpollution control laws. Since EPAhas decided not to adopt the proposed definition of enforceable, that comment is now moot. D. General EnforcementIssues Although EPA today concludes that it is appropriate to retain theFederal enforceability requirement, EPA agrees with the suggestions ofsome commenters that its authority to enforce prohibitions against construction of major sources which lack PSD or nonattainment permits through the "source obligation" regulations (e.g. 40 CFR 52.21(r) (1)-(4)) is an important 

### deterrent to sources which might otherwise construct without a PSD or nonattainment NSR permit.Moreover, EPA believes that these regulations are significantly enhanced by thepresence oftheFederal enforceability requirement. Ifthe permit obtained by a
source is to be given status as federally enforceable in order to avoid NSR, it must have met thenotice, source information, practical enforceability, and other strictures set forth in this document.

These same qualities ofa federally enforceable permit make it much easier to determine, at a later date, whether the terms orintent ofthe permit have been violated and,ifso, what enforcement action is appropriate. There

are three options available to EPA for when a federally enforceable State permit has been or willbe violated.

One option is simply to enforce, under section 113, the limitations in the permit which enabled the source to avoid NSR in the first instance,with the resultthat the source retainsits minor status.This is appropriate where, despite thepermit violations, it appears that the source intends to adhere to the enussions limitationsin the future. However, EPA retains theright to enforce the PSD or nonattainment NSR violation as well.

The second option is to invoke the "source obligation" regulations, e.g., 40 CFR 52.21(r)(4), and treat the source as major by requiring it to obtain a PSD or nonattainment major source permit. This

course is appropriate where the source, through a change in business plans, or through thebelated realization that its original plans cannot accommodate the design or operational limitations reflected in its minor source permit, can
no longer adhere to the limitations in that permit, and so exceeds them. As discussed in the preamble to the 1980 regulations, this optionis also appropriate where the source (after receipt ofits minor source permit) notifies the permitting authority in advance ofits changed plans or expectations and the needfor a future relaxation ofthe limitations in its current permit,without actually violating those limitations before obtaining a major source permit (see 45 FR 52689). Under either set of circumstances, pursuant to the "source obligation" regulations, EPA treats the

source "as though construction had not yet commenced" forPSD and nonattainment permitting purposes.

The EPAbelieves that the exceedance

or relaxation ofa minor source permit, and the subsequent obtaining ofa major

source permit through compliance with the "source obligation" regulation, may not routinely involve penalties or additional sanctions other than those provided in section 113 for any period in which the source actually exceeded the limitations in its minor source permit. The EPA today clarifies, though, that a third general enforcement option is
necessary and available under the Act and EPA's regulations in certain situations.

This third enforcement option is appropriate where EPA determines that

a source obtained a permit containing limitations allowing it to escape preconstruction review as a major new

source or major modification, not for the
purpose ofadhering to those limitations for an appreciable period oftime in accordance with some legitimate business plan, but primarily with an intent to construct, and possibly begin operation of, a major new source or majormodification without first obtaining a PSD or nonattainment permit. In such circumstances, EPA enforces the "source obligation" regulations, as in option two above, and requires the source to obtain a PSD or nonattainment permit "as though construction had not yet commenced. Inkeeping with the retrospective orientation of the "source obligation" regulations, however, EPA also looks to the beginning ofactual construction on the new source ormodification for
purposes ofadditional enforcement action under sections 113 and 167 as well. Thus, under these circumstances, EPA treats the original permit obtained by the source, which previously allowed it to enjoy minor status, as not "federally enforceable" from the time construction begins on the new source

ormodification in question. It follows thatEPA also treats the source's "potential to emit, as defined in40 CFR 52.21(b)(4), as not being limited by the restrictions in the original permit. The
netresult is that EPA deems the new

source ormodification to have been major ab mitio, and EPA considers seeking injunctive relief,civil penalties, and criminal sanctions, as appropriate, against the source under sections 113 and 167 from thebeginning ofactual construction.

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The EPA today also wishes to briefly discuss the need and appropriate circumstances for resort to the third enforcement option. As a general matter, it is abundantly clear that Congress intended the NSR provisions in Parts C and D torequire preconstruction review ofmajor new sources and modifications. See, e.g., sections 160(5), 165(a), 165(e)(1) and (2), 110(a)(2)(I), 172(a)(1), 172(b)(6), and 173. The evident air quality planning and technology-forcing
purposes ofthe Act's NSR provisions make the reasons forCongress' choice ofstatutory framework equally obvious. It is much easier, both in technical and practical terms, to consider the air quality impacts andpollution control requirements ofa major new source of air pollution before it has been constructed and has begun operation rather than after. Nevertheless, there is

a need to accommodate sources which, forlegitimate business reasons, have constructed and begun operation as minor sources, but later discover that they now do, or in the future will, emit air pollutants at levels thatwill require them to be treated as major.In those circumstances, postconstruction review is unavoidable, and the "source obligation" regulations in_40 CFR 52.21(r)(4) and elsewhere are designed
to fulfill this need.

At the same time, in keeping with the general legislative purpose, it is necessary thatEPA take steps to prevent owners oroperators from turning the statutory scheme on its head by using federally enforceable minor

source permits in a manner,inconsistent with the statute and with EPA's intention. In particular, EPA must discourage sources that would manipulate the NSR system-by improperly obtaining minor statusfor a
new source or modification. This could
occur, for example, where the owner or operator's purpose is, from the start, to construct a new source ormodification that would not be economically viable for any appreciable period of time ifit

were restricted to emitting at minor levels. If the source could construct, and

even begin operation,under a minor

source permit, and shortly thereafter obtain a postconstruction PSD or nonattainment permit when it is convement to exceed minor emissions levels, with no possibility ofother sanctions, it might encourage many

owners oroperators to proceed in this fashion. The resultwould be that the exception-postconstruction review in
narrow, unavoidable circumstancescould swallow the general rule of preconstruction review.This result was not intended by Congress orEPA, and
cannot be allowed.

It is not possible to setforth, in detail, the circumstances in which EPA considers an owner or operator to have evaded preconstruction review in this
way, and thus subjected itselfto enforcement sanctions under sections 113 and 167 from the beginning of construction. This is ultimately a question of intent. However, EPA will look to objective indicia to establish that intent. Forexample, ifan application for a Federal PSD permit is filed at or near the same time as a State minor source permit, EPA will carefully scrutinize the transaction. The EPA will also look carefully at the economic realities surrounding a transaction. For instance, where it appears obvious that

a proposed source ormodification, by its physical and operational design characteristics, could not economically be run at minor source levels for an appreciable length oftime,EPA will take notice. Examples include the construction of an electric power generating unit, which by its nature can onlybe economical ifit is used as a base-load facility, that is proposed tobe operated as a peaking unit, and the construction ofa manufacturing facility with a physical capacity far greater than the limits specified in a minor source permit, The EPA may consider how a project's projected level ofoperation

was portrayed to lending institutions, and may examine other records concerning projected demand or output. Significant discrepancies between operating levels as.portrayed in these documents and operating restrictions in

a minor source permit wouldjustify consideration ofenforcement action.

The EPA wants to emphasize, that under the third enforcement option, it does not generally seek monetary penalties, or any remedies otherthan those provided in the "source obligation" regulations, except in those

cases where it believes it could show to the satisfaction ofa court that a source
owner or operator had obtained a minor

source permit with the purpose of obtaining, after construction, a major

source permit, so as to evade preconstruction review. The EPA in no way seeks to discourage orintends to penalize those owners or operators who accept emissions limitations in pursuit oflegitimate business purposes, and who in good faith later seek a relaxation ofthose limitations. As discussed above, the "source obligation" regulations and section 113 enforcement sanctions (for any periodin which minor source permit limits are actually exceeded] provide a complete remedy in those situations. There is no need to revise the text of the NSR rules to explicitly provide for this third enforcement option. The "source obligation" regulations do not by their terms preclude-or even address-the issue ofcivil penalties or other enforcement action under sections 113 and 167 Similarly, it is not necessary to specify m the definitional provisions that a minor source permit obtained in order to evade theAct's preconstruction review requirements is invalid forthe purpose of "federally enforceable" limitations on a source's "potential to emit, and cannot be used

as a shield against enforcement action. Implicit in any regulatory scheme is the unwillingness to countenance fraud, misrepresentation, or othermisuse, particularly where the result would
contravene the underlying statutory or regulatory purposes. Today's action clarifies the purposes served by the EPA regulations in question and outlines the circumstances in which their misuse
may lead to enforcement action. 2 3

VI. State Operating PermitProgram

A. Introduction

As noted above, today's final action includes clarification of EPA'spolicy on implementing its definition ofFederal enforceability. Under thispolicy clarification, all terms and conditions contained in State operating permits will be considered federally enforceable, provided that the State's operating permit program is approved by EPA and incorporated into the applicable SIP under section 110 ofthe Act, and provided that the operating permit meets certain requirements.2 4 This clarification ofthe Federal enforceability definition can minimize the time and expense required to obtain federally enforceable limitations. The EPAbelieves thatby encouraging States
to adopt federally enforceable operating permit programs, EPA has largely satisfied certain objections to the
current definition of "federally enforceable" voiced by industry
commenters.

23 Today's action also servesto clarify that EPA

never intended that the source obligation regulations would serve to insulate a source owner
oroperator-from penalties orother enforcement sanctions in casesoffraud orother misuse involving minor source permits.Any contrary interpretation that might be drawn from the preambleto the 1980 regulations (see45 FR52689) is thus inaccurate, and is hereby rejected.

24 Vanous localair pollution programs operate airquality programs under their ownregulations, which are approved into the SIP. The reader should understand that "State" operating permitprograms encompass those local programs withjunsdiction

overonlypart of State as well as to statewide programs. 

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As discussed above, EPA recognizes that its previous application ofthe definition of "federally enforceable" could sometimes cause delay orexpense in obtaining a limitation or control that EPA considers federally enforceable. That application ofthe definition treats,

as federally enforceable, PSD construction permits issued under 40 CFR 51.166 (formerly 40 CFR 51.24) or 52.21, as well as all construction permits issued under regulations approved pursuant to 40 CFR 51.160-165 (formerly 40 CFR 51.18).25 Under §52.23, "[flailure
to comply with any permit condition or permit denial issued pursuant to approved orpromulgated regulations for thereview ofnew or modified stationary orindirect sources" is a violation ofthe implementation plan and may result inenforcement action under section 113 oftheAct.

TheEPA has always been concerned with theprompt processing ofSIP revisions and permits. For example, to minimize delay in processing certain types of SIPrevisions, EPA previously set up a streamlined process called direct final rulemaking (47 

### FR27073 (June 23, 1982)). That process can 

### shorten EPA's timefor processing SIP revisions, in noncontroversial cases, to less than 6months. The EPA will continue to use that procedure to process source-specific SIP limitations whenever possible.

TheEPA is today emphasizing a more fundamental way to minimize delay and expense. Specifically, EPA is expressly expanding its definition of"federally enforceable" to include limitations and controls imposed in State operating permits, provided that the applicable State operating permit program has been approved by EPA as meeting certain conditions and has been incorporated in

an appropriate SIP and that the permit in fact conforms to the requirements of the approved program.
B.Discussion

State operating permit programs, although in common use in many States, have not beenrequired to be included in

25 Sections 51.160-163 [formerly §51.18 (a}-(i}] specify criteria for allnew sources under section 110 (a)(2)(D) and (a)(4)ofthe Act that NSR programs must meet to be included in a SIP, Sections 51.165 (a) and (b) (formerly § 51.18 (j)and (k) respectively, establish additional criteria that
must bemet forapproval ofconstruction permit programs under PartDofthe Act for majornew
sources innonattainment areas. However, EPAmay also approve construction permit programs meeting §§51.160-51.163 that donot satisfy §51.165(a) or (b), including construction permit programs for nonmajor sources. Permits issued under programs approved pursuant to I§ 51.160-51.103 arefederally enforceable. 

### the SIP 26 

### although some States have voluntarily submitted various types of operating permit programs to EPA for approval and inclusion in a SIP The EPA has authority to approve such
programs into SIP's under section 110(a)(2) (B) and (D) ofthe Act. A few of these programs (e.g., Oregon's, 49 FR 36843 

### (September 20, 1984) and 51 FR 12324 (April 10, 1986) and Idaho's, 51 FR 22811 (June 23, 1986)) provide for sophisticated permit review and procedural safeguards. The EPAhas already concluded that permits issued under those programs are federally enforceable. In addition, some States have operating permit programs that are not included in a SIP

Traditionally, with a few exceptions such as Oregon and Idaho, EPA has not considered State operating permits, per
se, to be federally enforceable.2 7
However, EPA believes it has the authority to enforce limitations m certain types ofoperating permits and to consider operating permits as federally enforceable if they are issued pursuant to permitting programs (approved into the SIP) that meet the following criteria:

(1] The State operating permit program (i.e., the regulations or other administrative framework describing how such permits are issued) is submitted to and approved by EPA into the SIP 28

(2) The SIPimposes a legal obligation that operating permit holders adhere to the terms and limitations ofsuch permits (orsubsequent revisions ofthe permit made in accordance with the approved operating permit program) and provides that permits which do not conform to the operating permit program

26 Section 110(al(21(D) of the Act doesrequire that a SIPinclude a "program to provide for regulation ofthe modification, construction, and operation ofany stationary source including" permitting programs for majorsources. Similarly, section 172(b)(6] requires that anonattamment SIP "require permits for the construction and operation ofnew ormodified major stationary sources. However, those statutoryprovisions regarding operation of a source are satisfied by the requirement inEPA's rules that the termsof PSD

ornonattainment construction permit remain in effect throughout thelife ofthe source (unless modified lawfully) (40CFR 52.21(w)(1)) (see also section 173 oftheAct (treats nonattainment permits to construct and operate as ifthey were one)).

27 Although certain operatingpermits have not been considered federally enforceable, some ofthe terms and conditions appearing in such permits may be federally enforceable through other means. For example, ifthe terms ofan operating permit are the

same as those in a federally enforceable construction permit or the same as the limitations in

a SIPoran NSPS, those terms are federally enforceable byvirtue ofEPA'sauthority to enforce the construction permit, the SIP, and the NSPS, but, not the operating permit.

28 EPA wishes to make it clear that no State is required toinclude operating permit programs in its SIP Participation is voluntary. 

### requirements and the requirements of EPA's underlying regulations may be deemed not "federally enforceable" by EPA.

(3)The State operating permit program requires that all emissions limitations, controls, and other requirements imposed by such permits willbe at least as stringent as any other applicable limitations and requirements contained in the SIPor enforceable underthe SIP and that theprogram may notissue permits that waive, ormake less stringent, any limitations or requirements contained in orissued pursuant to the SIP orthat are otherwise "federally enforceable" (e.g. standards establishedunder sections 111 and 112 ofTheAct).

(4)Thelimitations, controls, and requiirments in the operating permits

are permanent, quantifiable, and otherwise enforceable as a practical
matter.

(5)The permits are issued subject to public participation. This means that the State agrees, as part ofits program, to provide EPA andthe public with timely notice ofthe proposal and issuance of such permits, and to provide EPA, on a timely basis, with a copy ofeach proposed (ordraft) and final permit intended to be federally enforceable. This process must alsoprovide for an opportunity for public comment on the permit applications prior to issuance of the finalpermit.

States are free to continue issuing operating permits that do not meetthe above requirements. However, such permits would not be "federally enforceable" forNSR and other SIP purposes. The EPA anticipates that

some States may choose to continue current practices rather than alter their permit programs so as to render operating permits federally enforceable, particularly with respect to small

sources. Other States may wish to subject only certain types or classes of permits to these requirements. For example, a Statemay decide to not follow public participation procedures for, andnot submit to EPA, large numbers ofpermits for very small
sources, because the State has no intention ofusing such permits as external emissions offsets, to qualify as
a minor source or "net out" ofNSR, orto demonstrate attainment ofthe NAAQS. The EPA expects that States will, for purposes ofclarity and administrative efficiency, indicate within the federally enforceable permits that they are being accorded such status.

The above five criteria are modeled

on the requirements forissuance of federally enforceable construction

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permits. The first two general requirements outlined above are necessary so that EPA can invoke sections 113 and 167 of the Act and 40 CFR 52.23 to enforce the terms ofthe operating permit. These provisions essentially allow EPA to enforce against violations ofan applicable SIP By making the operating permit program part ofthe SIP and legally requiring, in the SIP that permittees comply with such permits, any violation ofsuch a permit will be enforceable under the SIP and subject to EPA enforcement.2 9 In addition, by providing that an operating permit which does not conform to a SIPapproved program and EPA's underlying regulations may be deemed not "federally enforceable" by EPA, sources and States are placed on notice that EPA may find that such nonconforming permits cannot be used as external emissions offsets orto "net out" ofPSD

ornonattainment permitting requirements, orbe considered as part ofa State's demonstration ofreasonable further progress toward attainment and maintenance ofthe NAAQS. Thus, for example, a State may issue an operating permit placing emissions limitations on

an existing emissions unit at a source forthe purpose ofaccommodating a new emissions unit at the source without triggering PSD review ofthe new emissions unit. IfEPA later determines that permit conditions do not comport with EPA standards for enforceability, it
may notify the permit-issuing agency and the source that EPA intends to enforce against the source forviolations ofPSD requirements regarding the new emissions unit ifthe operating permit conditions for the existing unit are not changed to EPA's satisfaction. For example, should EPA find that the limitations on the existing unit are not, in practical terms, enforceable (e.g., because ofexcessively long averaging times), EPA may deem those limitations
not federally enforceable for purposes of the netting transaction, thereby triggering PSD review ofthe new unit.

The third condition is appropriate for
two reasons. First,operating permit conditions that are at least as tight as existing SIP limitations will be consistent with, and promote the purposes of,section 110(a)(2)(B) ofthe Act, which requires all approvable SIP's
to include "such measures as may be necessary to ensure attainment and maintenance" ofnational ambient

29

Section 52.23 also provides that a violation of condition in a permit issued pursuant to an approved regulation for review of new or modified

sources is also a violation ofthe SIP. standards. 3 0 Moreover, section 116 provides that where an emissions limitation is in effect under an applicable SIP a State "may not adopt

orenforce any emissions standard or limitation which is less stnngent.

The permitting process may not be used to create exemptions from any requiremencontained in the SIP Any such waiver orvariance must be created through a formal SIPrevision. The EPA also recognizes that, in some cases, individuals could differ as to whether a particular limitationis "as stringent as" another limitation. The EPA encourages review authorities to express new limitations in terms similar to those m the SIP (e.g., with respect to averaging times)to facilitate comparison with the existing SIP limitation.Where compelling reasons weigh heavilyin favor ofexpressing the new limitation in different terms than the current SIP limit,the burden to demonstrate the equal or greater stringency ofthe new limit rests with the State. Such demonstrations must accompany the proposed and final versions of any applicable permit action.

The fourth condition forFederal enforceability-that the permit limitations be enforceable as a practical matter-is an essential element in EPA's implementation ofthe existing Federal enforceability requirement. Ifpermit limitations,whether in operating or construction permits, were not practical
to enforce, the purposes forwhich Federal enforceability was intended could not be met.Thus, all emissions unitsmust be reasonably described, and verifiable, enforceable emissions limits
mustbe assigned to them.For example,

an emissions limit expressed only in
tons ofpollution per year would not be considered practically enforceable. Useful guidance as to what makes a permit condition enforceable is, however, contained in a document issued by EPA on September 23, 1987 entitled "Review ofState Implementation Plans and Revisions for Enforceability and Legal Sufficiency. That guidance contains a checklist which lists key areas to consider in determining enforceability. These areas include applicability, compliance date, specificity of conduct, anyincorporation by reference, recordkeeping requirements, and exemptions and exceptions.

30 Requinng federally enforceable permit limitations to be at least as stringent asother SIP limitations is also consistent with the existing rules for NSR construction permitswhich require that such vermits not result in violations of the SIP control strategy or interfere with attainment or maintenance of theambient standards (e.g.. 40CFR 51.16Ulal Iormeriv 40 CFR 51.18tal) 

### Similarly, thdfifth condition-that EPA and thepublic be notified and given opportunity to comment on the issuance ofoperating permits-is consistent with EPA's current practice for construction permits (e.g., 40CFR 51.161 (formerly 40 CFR 51.18(h))) and would make enforcement byEPA and private citizens muchmore effective and practical. Public notice and opportunity for comment are important parts of an operating permit program, but the form ofsuch notice is subject to debate. Some Statesregard individual newspaper notices for permit applications as needlessly expensive and time consuming, especially since they process many permit applications but few are controversial. Several States have addressed these concerns through theuse ofState administrative registers, notice and distribution mailing lists, or monthly multiple application notices. In reviewing SIPsubmittals foroperating permit programs, EPA will consider these and other techniques formeeting the twin goals ofprocedural completeness and admimstrative efficiency as long as ample opportunity is provided for comment onpermits prior to theirfinal issuance.

It is important that EPA maintain an effective oversight ofpermit decisions made pursuant to these programs. The EPA is not nowimplementing a formal reviewprogram with procedural tools such as a veto provision to address inappropriate permitting actions (see, e.g., 40 CFR 123.44 with respect to certain permits issued under the Clean Water Act). However, EPA will comment onproposed permits as may be reasonable. The EPA stresses that,in order to implement this review, States will be required to provide draftpermits to EPA for comment. In addition,the State mustprovide EPA with copies of all finalpermits upon their issuance. If permits are issued inconsistent with the SIP as discussed above, EPAwill consider those permits to be invalid and will pursue such enforcement action as may be appropriate. It should be noted that EPA's intent is to review these permitting actions in parallel with, and within the same schedule as,routine State procedural steps. TheEPA intends to work with State programs to minimize any delay orintrusiveness from this activity.

TheEPA realizes that the above five program criteria aregeneral and do not address many details ofimplementation. This is,in part, desirable: the EPA invites States to develop programs that

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particular plan proposals. (It should be noted that an operating permit program will not become effective for the purposes described inthis document until it is specifically so approved.) The EPA plans to issue further, more detailed, guidance as needed toassist States in developing and implementing approvable programs.
C.Policyand Regulation
The EPA believes that the definition of "federally enforceable" isbroad enough to include operating permit limitations under the conditions discussed above, since it includes "all limitations and conditions which are enforceable by the Administrator" (id.). However, for the sake ofclarity, EPAis amending the definition offederally enforceable to specify that operating permits issued under programs approved by-EPA and incorporated into

a SIP are federally enforceable.3 1

Similarly, even though 40 CFR 52.23-- confirming that violations ofSIP regulatory provisions and certain permits are subject to enforcement by EPA under section 113 ofthe Act-is broad enough to cover operating permit violations (under the previous conditions), EPA is also amending that section to clarify its applicability to operating permits. On the otherhand, EPA does not believe that it is necessary to amend the "source obligation" regulations at40 CFR 51.166(r)(2) (formerly 40 CFR 51.24(r)(2)) and 52.21(r)(4). As discussed previously, those sections require any source that

was not subject toPSD permit requirements because ofany enforceable limitation, and that later becomes "major" solely because of a relaxation in such a limitation, to undergo NSR as ifit had not yet been constructed. This is in addition to possible enforcement action for violation offederally enforceable permit
terms orcircumvention ofthe preconstruction review requirements of the NSR program. The source obligation regulations extend, as written, to any
source thatused a federally enforceable operating permit limitation to avoid PSD NSR and later obtained a rescission or relaxation ofthat limitation. However, EPAwill review each existing PSD SIP for any State seeking EPA approval of its operating permit program to ensure that the SIP contains a provision

01The subiect proposal ofAugust25, 1983, although not specifically addressing this particular regulatory language, described thesubjects and issuesinvolved indetail Today's regulatory clarification toreflect thepolicy on Federal, enforceability isa logical outgrowth ofthe 1983 proposal for whichEPA concludesthat further notice and comment areunnecessary. meeting therequirements of40 CFR 51.166(r)(2) with respect to operating permits. In such cases, ifthe current SIP provision does not extend to operating permits, EPA would require an appropriate SIPrevision as a prerequisite to approval of the operating permit program.

The EPA will respond to questions from the public onall ofthe operating permit issues discussed in this notice. In particular, EPA will respond to views on the need for further guidance specifying in greater detail the substantive and procedural elements that should be contained in an approvable operating permits program. In this regard, EPA points out that any State program that contains essentially the same provisions indicated above as conditions "1"-"5" would almost certainly be approved by EPA.Useful examples of a State operating permit program are offered by Oregon and Idaho. Those programs provide that the proposed source and its projected emissions and pollution control techniques mustbe described in detail. The programs also provide for notice to the public ofpermit applications and an opportunity to comment priorto permit issuance. The process is not available for permits that would constitute,relaxations ofthe SIP Copies ofeach permit are submitted to EPA (e.g., Oregon Administrative Rules, Chapter 340-20). The EPA is not now suggesting that every State program would need to be substantially the same

as Oregon's or Idaho's, only that those programs could be used as models for

an operating permit program thatEPA likely will approve for federal enforceability purposes.

The EPA will also consult with States

on methods by which existing operating permits could be made federally enforceable under a subsequently approved State operating permits program. The EPA suggests that in these
cases, where a State can show that the existing operating permits were issued pursuant to a program later approved by EPA, the State could also submit such permits in bulk asrevisions to the SIP Such revisions could be processed in much less time than ifeach permit were processed separately.3 2

VII. Miscellaneous

A. Under Executive Order 12291, EPA
must determine whether a regulatory action would be a major rule and therefore subject to the requirement for

32 Alternatively, aState might simply choose to wait until it has an approved operating permit program included initsSIPand then either renew or reissue existing permits under the approved program. 

### preparation of aRegulatory Impact Analysis.'This action is not a major rule because it merelyretains the current regulatory requirements, while offering States a more efficient means of complying with thoserequirements. It, thus, will nothave any significant new economic impacts.

As required by Executive Order 12291, this action has been submitted to the Office ofManagement andBudget (OMB) for review.Any written comments from OMB on this action and any EPA written responses have been placed in the docket forthis proceeding.

.B.Since today's action merely retains

or clarifies the existingregulations and does not promulgate significant changes to any rules, section 317 oftheAct regarding an economic impact assessment does not apply.

C.In accordance with theRegulatory Flexibility Act, 5U.S.C. 605(b), Ihereby certify that this action willnothave a significant adverse impact on a substantial number ofsmall entities, primarilybecause it retains the existing rules and creates no new burdens. Accordingly, noregulatory flexibility analysis is required.

D. The EPAhas determined that this final EPA action has nationwide applicability. Accordingly, under section 307(b) ofthe Act,judicial review ofthis final action maybe obtained only by filing a petition for review in the U.S. D.C. Circuit Court ofAppeals within 60 days from the date ofthisnotice. This actionis not subject tojudicial review in any subsequent civil orcriminal proceedings forenforcement.

E.Asprovtded by section307(d)(1) of theAct, this rule is not subject to section 553(d) ofthe Administrative Procedure Act. Section 553(d)requires that substantive rulesnot take effect until 30 days after theirpublication unless they relieve a restriction or anagency finds good cause to make them effective

sooner. Nevertheless, there is good

cause to make this action effective immediately sinceit merely retains existing regulations while offering a
more efficient means ofimplementation. Persons affected bythe "Federal enforceability" requirements need not change their activities orplans in any way as a result oftoday's action, and a 30-daywaiting period wouldserve no purpose.

F Under Executive Order 12612, EPA mustdetermine ifa rule has federalism implications. Federalism implications refer to substantial direct effects on the States, on the relationship between the national government and the States, or
on the distribution ofpower and responsibilities among the various levels

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### Federal Register / Vol. 54, No. 123 °/ Wednesday, June 28, 1989 / Rules and Regulations

ofgovernment. For those rules which 

### have federalism implications, a Federalism Assessment is to be made.

The Executive Order also requires that agencies, to the extent possible, refrain from limiting State policy options, consult with States priorto taking any actions that would restrict State policy options, and take such actions only when there is clear constitutional authority and the presence ofa problem ofnational scope. The Executive order provides for preemption ofStatelaw, however, if there is a clear congressional intent for the agency to do so. Any such preemption, however, is to be limited to the extent possible.

This final rule essentially retains the
current rule as written.The action provides an opportunity for certain State operating permits tobe considered federally enforceable, thus increasing State options for addressing the applicability ofNSR rules to modified existing sources. Previously, the federally enforceable limits recognized by EPA forexisting sources generally consisted ofmore time-consuming SIP revisions.
List ofSubjects in40 CFR

Part 51 

### Administrative practice and procedures, airpollution control, intergovernmental relations, reporting and recordkeeping requirements, ozone, sulfur oxides, nitrogen dioxide, lead, particulate matter,hydrocarbons, carbon monoxide.

Part 52 

### Airpollution control, ozone, sulfur oxides, nitrogen dioxide, lead, particulate matter, carbon monoxide, hydrocarbons.

Date: June 12,1989. William K. Reilly, Administrator.



### For reasons set forth in the preamble, Parts 51 and 52 ofChapter I ofTitle 40 of the Code ofFederal Regulations are amended as follows:

PART 51-REQUIREMENTS FOR PREPARATION, ADOPTION, AND SUBMITTAL OF IMPLEMENTATION PLANS

1.The authority citation forPart 51 continues to read as follows:

Authority: Secs. 101(b)(1), 160-169, 171-178, and 301(a) ofthe Clean AirAct.42 U.S.C. 7401(b)(1), 7410, 7470-7479, 7501-7508, and 7601(a).

2. Section 51.165 is amended by revising paragraph (a)(1)(xiv) to read as follows: 

### §51.165 Permit requirements. 

### (a) (1) (xiv) "Federally enforceable" means all limitations and conditions which are enforceable by the Administrator, including those requirements developed pursuant to40 CFR Parts 60 and 61, requirements within any applicable State implementation plan, any permit requirements established pursuant to 40 CFR 52.21 orunder regulations approved pursuant to40 CFR Part 51, Subpart I, including operating permits issued under

anEPA-approved program that is incorporated into the State implementation plan and expressly requires adherence to any permit issued under suchprogram.

3.Section 51.166 is amended by revising paragraph (b)(17) to read as follows: §51.166 Prevention ofsignificant deteriorationof airquality.

(b) (17) "Federally enforceable" means all limitations and conditions which are enforceable bythe Administrator, including thoserequirements developed pursuant to 40 CFR Parts60 and 61, requirements within any applicable State implementation plan, any permit requirements established pursuant to40 CFR 52.21 or under regulations approved pursuant to 40 CFR Part 51, Subpart I, including operating permits issued under

an EPA-approved program that is incorporated into the State implementation plan and expressly requires adherence to any permit issued under such program.

4. Appendix Sis amended by revising paragraph II.A.12 to read as follows:
APPENDIX S-EMISSION OFFSET INTERPRETATIVE RULING

II. 

### A. 12. "Federally enforceable" means all limitations andconditions which are enforceable by the Administrator, including 

### those requirements developed pursuant to 40 CFR Parts 60 and 61, requirements within any 

### applicable State implementation plan, any permit requirements established pursuant to 40 CFR 52.21 orunderregulations approved pursuant to 40 CFRPartZ1, Subpart I, including operating permits issuedunder an EPA-approved program that isincorporated into the State implementation planand expressly requires adherence toany permit issued under such program. PART 52-APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

1. The authority citation forPart 52 continues to read as follows:

Authority: 42 U.S.C. 7401-7642.

2.Section 52.21 is amended by revising paragraph (b)(17) to read as follows: §52.21 Prevention of significant deterioration ofairquality.



### (b) (17) "Federally enforceable" means all limitations and conditions which are enforceable by theAdministrator, including those requirements developed pursuant to 40 CFR Parts 60 and 61, requirements within any applicable State implementation plan, anypermit requirements established pursuant to40 CFR 52.21 orunder regulations approved pursuant to 40 CFR Part 51, Subpart I, including operating permits issued under

an EPA-approved program that is incorporated into the State implementation plan and expressly requires adherence to any permit issued under such program.

3. Section 52.23 is amended by revising the first sentence to read as follows: §52.23 Violation and enforcement.

Failure to comply with any provisions ofthispart, or with any approved regulatory provision ofa State implementation plan, or with any permit condition orpermit denial issued pursuant to approved or promulgated regulations for the review ofnew or modified stationary or indirect sources,

orwith any permit limitation or condition contained within an operating permit issued under an EPA-approved
program that is incorporated into the State implementation plan, shall render the person or governmental entity so failing to comply in violation ofa requirement ofan applicable implementation plan and subject to enforcement action under section 113 of the Clean Air Act.

4. Section 52.24 is amended by revising paragraph (f)(12) to read as follows: §52.24 Statutory restrictionon new sources.

(f) (12) "Federally enforceable" means all limitations and conditions which are enforceable by the Administrator, including those requirements developed 

### 27285

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pursuant to40 CFR Parts 60and 61, requirements within any applicable State implementation plan, any permit requirements established pursuant to 40 CFR 52.21 orunder regulations approved pursuant to 40 CFR Part 51, Subpart I, including operating permits issued under

an EPA-approved program that is incorporated into the State implementation plan and expressly requires adherence to any permit issued under such program.

IFR Doc. 89-14681 Filed6-27-89; 8:45am]

BILWNG CODE 8560-50-M

40 CFR Parts 51 and 52
[AD-FRL-3511-2a]
Requirements for Implementation PlansAir Quality New Source Review

AGENCY. Environmental Protection Agency (EPA). ACTION: Final rule.

SUMMARY: On August 25, 1983,EPA proposed amendments to its regulations addressing the construction ofnew and modified stationary sources of air pollution which appear at 40 CFR 51.24 (now40 CFR 51.166), 52.21, Appendix S
to Part 51, 51.18(j) (now51.165(a)) and 52.24 (see 48 FR 38742). That document presented eight areas ofproposed rulemaking and additional guidance in three other areas. TheEPA proposed those amendments and provided guidance m order to meetthe terms ofa settlement agreement between EPA and various industries and trade associations challenging the particular regulations in Chemical Manufactures Association(CMA) v.EPA, D.C. Cir.No. 79-1112 (settlement agreement entered into February 22, 1982).

On October 26, 1984 (49FR 43202), EPA took action on the component of the August 25, 1983 proposal dealing with fugitive emissions. This document constitutes final action on six of the

seven otherremaining issues in the August 25 proposal: (1)The definition of "significant" as it affects Class I area protection, (2) the innovative control technology waiver for sources which would impact Class I areas, (3) secondary emissions, (4) the crediting of

source shutdowns and curtailments as emissions offsets in nonattamment
areas, (5) banking ofemissions offsets under 40 CFR Part51, Appendix S, and (6) the requirement forhealth and welfare equivalence for netting. In addition, final action with respect to the otherremaining issue, the Federal enforceability requirement, is being 

### published in parallel with this document.

DATES: 

### This rule takes effect on June 28, 1989.Under section 307(b)(1) ofthe Clean Air Act (Act), 42 U.S.C. 7607(b)(1), petitions forjudicial review must be filed on or before August 28, 1989, in the U.S. Court ofAppeals for the D.C. Circuit. ADDRESSES: Material relevant to this rulemaking may be found in Public Docket A-82-23. This docket islocated in U.S. EPA's Central Docket Section (LE-131), Waterside Mall, M-1500, 401 M Street, SW Washington, DC 20460. The docket may be inspected between 8:00 a.m. and 3:00 p.m. on weekdays and

a reasonable fee may be charged for copying.

FOR FURTHER INFORMATION CONTACT: Mr. David Solomon, New Source Review Section, Office ofAir Quality Planning and Standards (MD-15), Research Triangle Park, North Carolina 27711; (919) 541-5375; FTS 629-5375.

SUPPLEMENTARY INFORMATION:

I. Introduction

On August 7 1980, EPA extensively revised its regulations concerning the preconstruction review ofnew and modified stationary sources "new

source review" (NSR)) under the Act, 42 U.S.C. 7401-7642, in response to AlabamaPowerCompanyv. Castle,636 F.2d 323 (D.C.Cir. 1979) (see 45 FR 52676). Five sets ofregulations resulted from those revisions. The first set, 40 CFR 51.166 (formerly 40 CFR 51.24), specifies the niinimum requirements that

aprevention ofsignificant deterioration (PSD) air quality permit program under Part C ofthe Actmust contain in order
to warrant approval by EPA as a revision to a State implementation plan (SIP). The second set, 40 CFR 52.21, delineates the Federal PSD permit
program, which currently applies, as part ofthe SIP in the roughly 20 States that have not submitted a PSD program meeting the requirements of40 CFR 51.166. The third set, 40 CFR 51.165(a) and (b) (formerly 40 CFR 51.18 (j)and (k)), specifies the elements of an approvable State permit program for preconstruction review for nonattainment purposes under Part D of the Act. It elaborates on section 173 of the Act,42 U.S.C. 7503. The fourth set, 40 CFR Part 51, Appendix S. embodies the "Emissions Offset Interpretative Ruling" (OffsetRuling), which EPA revised previously in January 1979 (44 FR 3274). The fifth set, 40 CFR 52.24, embodies the construction moratorium which EPA implements in certain nonattainment

areas. In the fall of1980, numerous 

### organizations petitioned theU.S. Court ofAppeals for theD.C. Circuit to review various provisions ofthosePSD and nonattainment preconstruction regulations. Subsequently, the court consolidated those petitions into CMA,

a collection ofchallenges to the 1979 revisions to the Offset Ruling. In June 1981, EPA began negotiations with the industry petitioners to settle the CMA

case. The EPA entered into a comprehensive settlement agreement with those petitioners in February 1982. Subsequently, the court granted a stay ofthe case pending implementation of the agreement.

Inthe settlement agreement, EPA committed topropose certain amendments (set forth as Exhibit Aof the agreement) to eightportions ofthe NSR regulations and to provide guidance in three additional areas, and to take final action on those proposals. Accordingly, EPApublished a notice of proposed rulemaking in the August 25, 1983 Federal Register (48 FR 38742). The EPAnoted thatit would review the
comments carefully and with an open mind and that it would take a new look
at theproposals in orderto make an independent judgment on themerits. The EPA received extensive public
commentregarding the August25, 1983 document, including that presented at a publichearing. Inlight ofthe public
comments and on the basis offurther evaluation, EPA has determined that it is appropriate to retainvarious portions of the regulations thathad been proposed for deletion or revision, while making final certain other portions of the proposed changes.

TheEPA addressed fugitive emissions ina separate Federal Register notice that waspublished on October 26, 1984 (49FR 43202). This document constitutes 

### final action on six oftheremaining

seven issues in theAugust 25, 1983 proposal.

With respect to the other remaining issue,Federal enforceability, EPA is today announcing, in a separate Federal Register itempublished in conjunction with this one, its decision to retain the Federal enforceability requirement.

Accordingly, today's final actions fulfill EPA's commitmente under Exhibit A ofthe CMA settlement agreement.
II.

Final Actionon Proposal

A. Definitionof"Significant"
1.Background

In revising theNSR regulations on August 7 1980, EPA introduced provisions which use the term "significant. One ofthose provisions

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