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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 for the 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 of new and

modified stationary sources of air

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 of the August 25 proposal dealing

with "Federal enforceability" of

emissions controls and limitations at a

source. Essentially, EPA is retaining the

existing Federal enforceability

requirement. However, EPA is clarifying

its regulation to specify that stationary

source operating permits issued by a

State may 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 of the 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

8:00 a.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 of Air Quality Planning and

Standards (MD-15), Research Triangle

Park, North Carolina 27711; (919) 541-

5375, (FTS) 629-5375. For operating

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

In August 1980, EPA extensively

revised its regulations concerning the

preconstruction review of new and

modified stationary sources under the

Act, 42 U.S.C. 7401-7642, in response to

Alabama Power Company v. Castle, (the

Alabama Power case) 636 F.2d 323 (D.C.

Cir. 1979) (see 45 FR 52676, August 7

1980). Five sets of regulations resulted

from those revisions. One set, 40 CFR

51.166 (formerly 40 CFR 51.24), specifies

the minimum requirements that a

prevention of significant deterioration

(PSD) i program must contain in order to

warrant approval by EPA as a revision

to a SIP under section 110 of the Act.

Another set, 40 CFR 52.21, establishes

the Federal PSD program, which is

currently applied in many States as part

of the SIP Another set, consisting of two

regulations, 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 in, or affecting,

nonattainment areas. The fourth set, 40

CFR Part 51, Appendix S, embodies the

nonattaimment area Emissions Offset

Interpretative Ruling (Offset Ruling),

previously revised in January 1979 (44

FR 3273). The fifth set, 40 CFR 52.24,

embodies the construction moratorium

which applies in certain nonattainment

areas.

Jn the fall of 1980, numerous

organizations petitioned the U.S. Court

of Appeals for the D.C. Circuit to review

various provisions of those PSD and

nonattainment preconstruction

regulations. The court consolidated

those petitions with a collection of

challenges to the 1979 revisions to the

Offset Ruling in Chemical

Manufacturers Association (CMA) v.

EPA, No. 79-1112 (D.C. Cir.). In June

1981, EPA began negotiations with the

industry petitioners to settle the CMA

case. The EPA entered into a

comprehensive settlement agreement

with the CMA petitioners in February

1982. Subsequently, the court granted a

stay of the case pending implementation

of the settlement agreement.

In the settlement agreement, EPA

committed to propose certain

amendments set forth in Exhibit A to

eight parts of the regulations pertaining

to new source review (NSR or

A PSD program refers to requirements that must

be met in an area designated as being in attainment

of national ambient air quality standard (NAAQS) or unclassifiable (see 40 CFR 51.166 and 52.21).

Areas that are designated as nonattainment for a NAAQS must meet certain other requirements aimed at ultimate attainment of the NAAQS (see,

e.g., 40 CFR 51.165(a) (formerly 40 CFR 51.18(j)) and

52.24).

preconstruction review) 2 to provide

guidance in three additional areas, and

to take final action on the proposals. On

August 25, 1983, EPA published a notice

of proposed rulemaking 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 order to be considered in

determining whether a new or modified

source will be "major" and therefore

subject to PSD or nonattainment

permitting requirements (applicability

determination). The EPA 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 order to obtain a

nonattainment permit be federally

enforceable.3

In the August 25, 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 their merits

prior to taking any final action. The EPA

has since received extensive public

comment, including that presented at a

public hearing held on September 29,

1983.

Today EPA is taking final 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 the remaining August 25, 1983

rulemaking proposals. Accordingly,

An NSR, or preconstruction review, is required as part of a SIP under 40 CFR Part 51, Subpart I

(formerly 40 CFR 51.18 and 51.24) to ensure that

construction or modification of a source will not

cause violations of the State's control strategy or

interfere with attainment or maintenance of

NAAQS. An NSR program includes permit programs

satisfying the Act's requirements for review 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 of this rulemaking,

virtually all States have a general NSR program

applying to most minor sources.

A basic requirement of nonattamment NSR of

potential major source is that the applicant for

nonattamment construction permit must show that

its new emissions 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 of the

CMA settlement agreement.

II. Background of Federal Enforceability

Requirements

The five sets of PSD 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 of air 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 of a

stationary source to emit a pollutant

under its physical and operational

design, but any limitation 4 on the

capacity of a source to emit a pollutant

is treated as part of its design only if the

control or limitation 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 I of 40 CFR

Part 51 or 40 CFR 51.166, (3) a new

source performance standard (NSPS)

promulgated under section 111 of the

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 of limitations 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 or quantity of fuels to be used (see 40 CFR

51.165(aJ(1)(iii)}.

The EPA's primary enforcement authority in

such cases derves from section 113 of the Act,

which authorizes EPA, under certain conditions, to

enforce violations of a SIP and of certain orders and

emissions standards. The EPA may also enforce,

under section 304(a) of the Act, against any person:

(1) Who violates any emissions standard or

limitation (or order issued) 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

the potential to emit of a proposed new

source for a particular pollutant, to

assume that the source would emit the

pollutant at the maximum rate that the

source could physically emit it, unless

the source were subject to a limitation

on its operation that EPA could enforce

directly.

Each of the five sets of regulations

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 for determining such significant

increases closely parallels the one

described above for determining

whether new 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 by which the

sum of: (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)). The regulations then

provide that a contemporaneous

decrease m emissions is creditable only

to the extent that it "is federally

enforceable at and after the time that

actual construction on the particular

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 of regulations also

defines the actual emissions of any 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 for Federal

enforceability of controls and limits.

Finally, for sources already in

operation, each set of regulations

provides that actual emissions, when

they cannot be determined, may be

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

of potential to emit, also requires, in

many cases, Federal enforceability of

any applicable limitations (e.g., id. at

§ 52.21(b)(16)).

The general purposes of the Federal

enforceability requirements were: (1) To

For PSD purposes, pollutants currently included

in this review are: (1) The pollutants 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 the pollutants for which NAAQS exist and their precursors (see 45

FR 52711 (August 7, 1980)(col. 3); 40 CFR

51.165(a](1)(v](A)).

corroborate, through the procedures for

obtaining SIP revisions or federally

approved construction permits, that any

voluntarily imposed limits on a source's

capacity to emit are, in fact, part of its

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 the Act that EPA be able to

enforce all relevant features of SIP's that

are necessary for attainment and

maintenance of NAAQS and PSD

increments (see 48 FR 38748, August 25,

1983).

IlI. Proposed Amendments to the

Federal Enforceability 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 SIP already

prohibits construction of a 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 of the applicable

thresholds for classification as "major,

without first obtaining such a permit,

would be in violation of the 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 or limits since, even if

EPA could not enforce the limitations, it

could enforce the prohibition against

construction or modification without a

PSD or nonattainment 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 assumed EPA

would be aware of any actual violations of

limitations and thresholds, but did not elaborate on that or on how monitoring of actual emissions

would be as effective in preventing violations as the

current regulations.

27275

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and then await whatever public procedures and EPA scrutiny were

required. As a result, industry

contended, a company could experience

substantial expense and delay just in

obtaining the necessary limitation.

In the August 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. The proposal

was based on the possibility of delay

and consequent expense that could arise

from processing certain construction

permit limitations or revising the SIP to

make the applicable limitations

federally enforceable. However, EPA

emphasized that it still intended to

achieve the purposes for which Federal

enforceability was originally designed

(48 FR 38748, August 25, 1983].

Nonetheless, EPA was rclined at that

time to think that the purposes of the

Federal enforceability requirements

could also be served by a requirement

that limitations be enforceable by State

or local 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) to replace the definition of

"federally enforceable" with an

expanded definition of "enforceable"

(including discoverable limitations

enforceable under State or local law).

IV Summary of Comments on August

1983 Proposal 1

o

A. Comments Generally Supporting the

Proposal

As expected, many industry

representatives expressed strong

support for the proposed deletion of. the

Federal enforceability requirements.

Most of these comments also supported

the proposed new definitior of "enforceable, although two industry

6 The definitions of "major modification" exempt

from applicability determnations certain increases

in operating hours and switches in fuel or material

used, unless the increase or switch is barred by a federally enforceable limit (e.g., 40 CFR

52.21(b)(2)[iii)(e)1fl.

Although external offsets are not used to avoid

nonattamment NSR, the purposes of requiring Federal enforceability of such offsets are essentially the same as for requiring Federal enforceability of

limitations used to avoid such review. 1o A more detailed "Summary of Comments" has

been pleced in the public docket for this rulemaking,

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 of the 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 of the Act that State and

local authorities be. given primary

responsibility for preventing and

controlling air pollution. Third, all the

industry commenters asserted that

elimination of the 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 of the D.C. Circuit Court of

Appeals in the Alabama Power case, 636

F.2d 323 (1979). In that case, the court

clarified that a source's potential to emit

must be based on actual emissions or

"design capacity" for emissions of a

source, including the effects of pollution

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 or local law or permits, even if they are

not federally enforceable.

Fifth, several commenters argued that

citizen enforcement of State and local

permit limitations under the citizen suit

provisions of section 304 of the Act

would be preserved, even without the.

additional requirement of Federal

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

1980 Federal enforceability requirements were procedurally invalid because, in their view, EPA did

not provide adequate prior notice or opportunity to

comment on the concept and lacked adequate record support for the requirement. The EPA

disagrees with those comments and believes that

the 1980 requirements were a logical outgrowth of

the preceding proposal (44 FR 51924. September 5,

1979) and were amply supported by the rulemaking record at the time. However, those comments are now mool. Any possible, procedural defects in the

1980 rules regarding Federal enforceability have

been cured by this rulemaking.

One commenter also suggested,

contrary to the position EPA took in the

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 it will

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 of the SIP

B. Comments Opposing the, Proposal

Several State air quality programs and

environmental groups strongly opposed

the proposed deletion of the Federal

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 of a credible Federal

enforcement program to be most

effective.

Two commenters asserted that

Federal enforceability is the only

effective means of assuring, 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 of the

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 of assuring 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 Offset Ruling

which required Federal enforceability.

Thus, the commenter concluded, legally

binding commitments probably refer to

federally enforceable commitments.

Finally, the same commenter argued

that citizen enforcement of offset

transactions under section 304 would

only be effective. as a practical matter,

if the records 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 the proposal

as it would affect Federal enforcement

efforts, since enforcement actions

against sources already constructed

could be more difficult than action taken

prior to construction.

V Decision and Response to Comments

After consideration of the comments

and reevaluation of the preliminary

statements made in the August 1983

proposal, EPA has decided to retain the

Federal enforceability requirement in all

the provisions discussed above. In

addition, to provide full internal

consistency within the Federal

enforceability provisions of 40 CFR Part

51, Appendix S (known as the "Offset

Ruling"), EPA is, in a separate document

also being published in today's Federal

Register, amending section IV.C.3. of

the Offset Ruling to clarify that

emissions offsets involving reduced

operating hours or source shutdowns

must, like all emissions offsets, be

federally enforceable (see Appendix S,

section II.A.6.(v)(b)). In light of today's

decision, EPA will not add the proposed

new definition of "enforceable" to the

regulations. However, as discussed

below, EPA is clarifying that State

operating permits may be treated as

federally enforceable under certain

conditions. This clarification will reduce

any problems which may arise from the

Federal enforceability requirements. The

clarification is formally indicated by

slight amendments to the definition of

"federally enforceable' and to 40 CFR

52.23.

A. Federal Enforceability Is Necessary

to Ensure That Limitations and

Reductions Are Implemented

Since sources may avoid the

protective requirements of PSD and

nonattainment NSR by relying on State

or local limitations or reductions, it is

essential to the integrity of the 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 in 1980 (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.

The EPA agrees with those

commenters, including STAPPA, who

asserted that Federal enforceability is

12 Similarly, it is important to the statutory goals

of the nonattainment permit program (e.g., that all new construction is accompanied by offsets 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 of their permit programs, it

is true-as STAPPA and some

environmental commenters pointed

out-that the level of State and local

enforcement is uneven, and that some

States and localities have been

unwilling or unable to enforce their

programs effectively. It follows that, in

the absence of a 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 for which

credit has already been given. The EPA

cannot agree, contrary to the

suggestions of some 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. 1 3 Conversely, the

presence of a Federal 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 offset reductions

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 or make

a reduction in the future. Whether the

limitation is contained in a SIP revision

or a State permit issued under

regulations approved by EPA and

included in the SIP public notice and

opportunity for participation prior to

construction is virtually guaranteed. At

Is The EPA also recognizes, as pointed out by the

California Air Resources Board, that absent a nationwide, Federal enforcement presence, industry

would be inclined to build, or move, sources to

States with the least effective enforcement efforts.

Such a possibility would give businesses more

leverage over the State governments and could

foster a competition among the States to actually

relax enforcement efforts. The legislative history of

the 1977 Act confirms that Congress intended the

PSD requirements (by setting minimum criteria to be

met in all States) to reduce 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 of public scrutiny even if Federal

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 of offsets (and,

implicitly, other limitations) under

section 304 of the Act, since all permits

and commitments meeting the definition

of Federal enforceability must undergo

some public scrutiny and are kept in

standardized files in EPA's Regional

Offices. By contrast, without such a

requirement, as under the proposed

definition of "enforceable, the only

records of many such transactions

would be scattered around various State

and local offices and would be more

difficult to obtain. At a minimum, this

could make citizen enforcement more

difficult and costly and, therefore, less

effective as a means of ensuring 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, if discoverable, would be an

adequate substitute for Federal

enforceability. The absence of potential

Federal enforcement could result in: (1)

Less incentive for sources to observe

limitations; (2) more pressure on, and

incentive for, State and local authorities

to relax enforcement; and (3) decreased

opportunities for effective citizen

enforcement. Mere discoverability of

permit limitations would not necessarily

correct any of these problems, although

it could create somewhat greater

i4 In addition, it is not certain that nonfederally

enforceable State permit limitations or other

commitments could be enforced under section 304 at

all. That section allows citizen suits against any

person who violates any limitation under the Act or any order issued by a State with respect to such a limitation, or who proposes to construct or does

construct a major new source without a PSD or nonattainment construction permit (42 U.S.C.

7604(a)(1)). While violations of federally

enforceable permit limitations may be subject to

section 304 citizen suits, violations of nonfederal

limitations or offsets arguably might not be.

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incentives for compliance than would

exist without it. Moreover,

discoverability could itself pose

practical problems, for both EPA and

citizens,, in those situations where the

State or local permit process is

incomplete or poorly orgamzed or

recorded.

The EPA also believes, contrary to

some commenters' suggestions, that

EPA's authority to enforce the

prohibitions in most SIP's and in the Act

(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 167 of the Act) is not a

completely satisfactory substitute for

the current Federal enforceability

requrements. 15 The commenters

claimed that if any sources escaped PSD

or nonattainment permit requirements

solely because of a nonfederally

enforceable State or local limitation,

and later violated that limitation, then

EPA could treat that source as major

and enforce the construction

prohibitions to maintain the integrity of

the PSD and nonattainment programs

(see 40 CFR 51.166(r)(2)) (formerly 40

CFR 51.24(r)(2)). 16 However, the

exercise of this authority depends in

large part on EPA's ability to show that

the new source or modification is

actually emitting a pollutant at levels

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 a practical

matter and may be even more difficult in

situations involving nonfederally enforceable permits or limitations where

EPA had little or no notice of, or

opportunity to participate in, that

process. In addition, courts may be less

willing to order strict compliance with

the PSD and nonattainment construction

prohibitions in those situations (e.g., to

shut down the major source until the

appropriate permit is obtained), given

the impact that such an order could

have on the source operator's

investment and operation. In short, EPA

does not believe that the ability to.

enforce PSD and nonattainment

15 The EPA did suggest in the August 1983

proposal that that authority would help make the

Federal- enforceability requirements unnecessary (48

FR 38747). However, EPA did not suggest that this

could be a complete substitute for the existing requirements. 16 In. some such cases, the State probably could

enforce the PSD and nonattainment construction

prohibitions as well. However. as discussed above,

States may be less willing or able to do so in the

absence of potential EPA enforcement than they now are.

construction prohibitions, in these cases,

in the absence of current Federal

enforceability, would be a sufficient

deterrent to prevent violation of

nonfederally enforceable limitations or

to maintain the integrity of the 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 itself in the August 1983

proposal, cannot be fully or adequately

achieved in the absence of Federal

enforceability. The EPA recogizes that

those purposes-i.e., corroboration prior

to construction or modification that

limitations will be included in a source's

design and observed in operation, and

the presence of a strong enforcement

authority capable of holding a company

to its commitments-can sometimes be

achieved by State or local authorities

implementing nonfederal limitations.

However, in general, State and local

enforceability alone will not fully assure

that those purposes are met across the

nation. Rather, State and local

enforcement, supplemented by potential

Federal enforcement of limitations, is a

much more effective and efficient

method of achieving those goals and

protecting the integrity of the PSD and

nonattainment NSR programs.

The EPA also recognizes, however, as

several commenters pointed out, that the

Federal enforceability requirements

could result in some lengthy and

expensive delays in obtaining federally

enforceable permits or SIP revisions.

However, some delays can be

minimized by streamlined processes for

certain SIP revisions, including the

direct final rulemaking process (47 FR

27073, June 23, 1982). The latter

procedure can often be used by EPA to

process and publish noncontroversial

SIP revisions in less 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 of adopting certain permit

processing procedures such that

operating permits issued under them

would be considered federally

enforceable, with no need for the

individual permits to be submitted as

SIP revisions. Such a program can

reduce the potential for delay which

exists in the present system, while

i7 The comment of one Industry source that

stipulations by a source to reduce emissions for

offset purposes should be considered enforceable

by a State is now moot, since EPA has decided to

retain the Federal enforceability requirement.

serving to enhance the permitting

process generally.

B. Federal Enforceability Is Consistent

With the Requirements of the Act and

the Alabama Power Case

Several industry commenters claimed

that Federal enforceability is

inconsistent with various provisions of

the Act and with the decision in the

Alabama Power case. The EPA

disagrees.

First, EPA disagrees with those

commenters who claimed that Federal

enforceability is inconsistent with

section 101(a)(2) of the Act, which states

that regulation of air pollution sources is

the primary responsibility of States and

local governments. The EPA has always

recognized this and encouraged and

assisted the States in exercising their

responsibility. The fact is, however, that

the Federal enforceability requirements

do not supersede or interfere with State

and local governments' responsibility or

their ability to take the primary role in

regulating sources. Rather, as STAPPA

recogmzed, the Federal enforceability

requirements supplement and provide

necessary support to State/local

enforcement efforts. Indeed, as

discussed above, Federal enforceability

may promote 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 other bodies

failed to enforce adequately.

Moreover, the Act itself, far from

requiring EPA to remove itself from the

enforcement of limitations or offsets,

expressly authorizes EPA to enforce

violations of SIP's by any person (which

includes many source limitations under

the definition of federally enforceable),

with due deference to State/local

primacy (see sections 113 and 167 of the

Act). Thus, Congress intended that EPA

play an important role in the

enforcement of SIP requirements, and

the Federal enforceability requirements

are consistent with that intent.

The EPA also disagrees with those

commenters who claimed that the

Federal enforceability of limitations in

the potential to emit definition is

inconsistent with Congress' intent in

using that term in section 169 of the

Act.is Those commenters pointed out

18 The definition of "major emitting facility" in

section 169, which is based on a.source's potential

to emit, on its face applies only to the PSD program.

Continued

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that the court in the Alabama Power

case found that a source's potential to

emit must be 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 of a 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, of any 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 of operational 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 limit before 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 the Alabama Power case, the court

concluded that whether 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 of such controls can be

anticipated. Essentially, the court said

that EPA must predict a source's future

maximum emissions in determining

design capacity and that pollution

controls required by law are a

reasonable means of predicting 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 Part D of Title I of the Act, and

the construction prohibitions of sections 110(a)[2)(I)

and 173(4) (see 45 FR 52689, August 7, 1980).

Therefore, EPA's "potential to emit" definition is the

same in all the PSD and nonattainment regulations,

and EPA's analysis of what Congress (and the

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 that requiring

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 to predict

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, EPA believes (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 1977 legislative history of the Act

supports that interpretation of section

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 Offset Ruling approach

by giving each nonattainment State the

option of choosing to remain under that

Offset Ruling indefinitely, and by

requiring that that Offset Ruling remain

in effect 21 in every State, unless and

is In fact, the two examples the court gave (636

F.2d at 353) of controls required by law-i.e., NSPS

and SIP 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 of a 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 of the

definition of allowable 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 the Alabama Power case, 636 F.2d

at 352-53), it follows that any method used to

estimate actual emissions (other than direct

measurement) should be as reliable and accuratb as

possible. Federal enforceability of emissions

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 SIP to 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

Offset Ruling, 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 for offsets in nonattainment

permits than it is for limitations 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 of offsets, EPA would

have no such leverage against an

external offset source where that source

fails to make the pronused emissions

reduction. For the same reasons 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 of offsets.

C. Response to Other Comments

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 from being considered

as modifications, even if they would

increase emissions from the source,

22 For essentially the same reasons that Federal

enforceability of external offsets is consistent with

the Act. Federal enforceability of internal emission

reductions as an element of avoiding nonattainment or PSD permits is also consistent with the Act.

Under the definition of "net emissions increase"

(e.g. 40 CFR 52.21(b)(3)J, a modification at a source may escape classification as "major" if its

creditable (i.e., federally enforceable) emission

decreases are large enough. If emission offsets in

nonattamment permits must be federally

enforceable, it makes sense that internal reductions

used to escape such permit requirements should be no less enforceable.

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unless those changes were prohibited by

a federally enforceable (construction)

permit condition. The industry

cummenter apparently feared that

deletion of the requirement for Federal

enforceability of such prohibitions in

that definition, as proposed in the 1983

notice of proposed 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 EPA increase the number of

changes exempt from the modification

definition by completely eliminating any

reference to prohibited changes.

The EPA has decided not to amend

the definition of major modification. The

EPA believes that all NSR definitions

should be as consistent as possible and

that deleting the requirement for Federal

enforceability in the definition of major

modification would be inconsistent with

its decision to retain Federal

enforceability elsewhere. Moreover, the

proposed revision of that definition

could have created confusion and

uncertainty as to which State and local

prohibitions were enforceable. The EPA

also agrees with the commenter that

deletion of the word "federally"

potentially could increase the number of

prohibited fuel switches and other

changes dramatically and could largely

defeat the purpose for which the

exemption was originally intended.

On the other hand, EPA must reject

the commenter's suggestion that the

definition be revised to exclude all fuel

switches and operating hour changes

from being considered modifications.

One of the purposes of the Federal.

enforceability provision in the current

definition is to support the prohibitions

against such changes in SIP construction

permits by making a violation of such a

prohibition grounds, if the modification

is major, for requiring a new PSD or

nonattainment permit. The EPA believes

this provision provides valuable added

incentive to sources to comply with their

permit limitations, and EPA is not

persuaded that it should give up that

leverage.

Another industry commenter

suggested that if EPA 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 air pollution control laws. Since

EPA has decided not to adopt the

proposed definition of enforceable, that

comment is now moot.

D. General Enforcement Issues

Although EPA today concludes that it

is appropriate to retain the Federal

enforceability requirement, EPA agrees

with the suggestions of some

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 the presence

of the Federal enforceability

requirement. If the permit obtained by a

source is to be given status as federally

enforceable in order to avoid NSR, it

must have met the notice, source

information, practical enforceability,

and other strictures set forth in this

document.

These same qualities of a federally

enforceable permit make it much easier

to determine, at a later date, whether

the terms or intent of the permit have

been violated and, if so, what

enforcement action is appropriate. There

are three options available to EPA for

when a federally enforceable State

permit has been or will be 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 result that

the source retains its minor status. This

is appropriate where, despite the permit

violations, it appears that the source

intends to adhere to the enussions

limitations in the future. However, EPA

retains the right 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 the belated 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 option is also

appropriate where the source (after

receipt of its minor source permit)

notifies the permitting authority in

advance of its changed plans or

expectations and the need for a future

relaxation of the 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" for PSD and

nonattainment permitting purposes.

The EPA believes that the exceedance

or relaxation of a minor source permit,

and the subsequent obtaining of a 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 of adhering to those limitations

for an appreciable period of time in

accordance with some legitimate

business plan, but primarily with an

intent to construct, and possibly begin

operation of, a major new source or

major modification 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.

In keeping with the retrospective

orientation of the "source obligation"

regulations, however, EPA also looks to

the beginning of actual construction on

the new source or modification for

purposes of additional 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

or modification in question. It follows

that EPA also treats the source's "potential to emit, as defined in 40 CFR

52.21(b)(4), as not being limited by the

restrictions in the original permit. The

net result is that EPA deems the new

source or modification 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 the beginning of actual

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 to require preconstruction review

of major 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 of the Act's NSR provisions

make the reasons for Congress' choice

of statutory framework equally obvious.

It is much easier, both in technical and

practical terms, to consider the air

quality impacts and pollution control

requirements of a 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,

for legitimate 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 that will 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 that EPA take steps to

prevent owners or operators 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 status for 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 or modification

that would not be economically viable

for any appreciable period of time if it 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 of other

sanctions, it might encourage many

owners or operators to proceed in this

fashion. The result would be that the

exception-postconstruction review in

narrow, unavoidable circumstancescould swallow the general rule of

preconstruction review.This result was

not intended by Congress or EPA, and

cannot be allowed.

It is not possible to set forth, in detail,

the circumstances in which EPA

considers an owner or operator to have

evaded preconstruction review in this

way, and thus subjected itself to

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. For example, if an

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 or modification, by its

physical and operational design

characteristics, could not economically

be run at minor source levels for an

appreciable length of time, EPA will

take notice. Examples include the

construction of an electric power

generating unit, which by its nature can

only be economical if it is used as a

base-load facility, that is proposed to be

operated as a peaking unit, and the

construction of a 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 of operation

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 would justify

consideration of enforcement action.

The EPA wants to emphasize, that

under the third enforcement option, it

does not generally seek monetary

penalties, or any remedies other than

those provided in the "source

obligation" regulations, except in those cases where it believes it could show to

the satisfaction of a 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 or intends to

penalize those owners or operators who

accept emissions limitations in pursuit

of legitimate business purposes, and

who in good faith later seek a relaxation

of those limitations. As discussed above,

the "source obligation" regulations and

section 113 enforcement sanctions (for

any period in 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 of civil 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 the Act's

preconstruction review requirements is

invalid for the 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 other misuse,

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 Permit Program

A. Introduction

As noted above, today's final action

includes clarification of EPA's policy on

implementing its definition of Federal

enforceability. Under this policy

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 of the Act, and

provided that the operating permit meets

certain requirements.2 4 This

clarification of the Federal

enforceability definition can minimize

the time and expense required to obtain

federally enforceable limitations. The

EPA believes that by 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 serves to clarify that EPA never intended that the source obligation

regulations would serve to insulate a source owner or operator-from penalties or other enforcement

sanctions in cases of fraud or other misuse

involving minor source permits. Any contrary

interpretation that might be drawn from the

preamble to the 1980 regulations (see 45 FR 52689) is

thus inaccurate, and is hereby rejected. 24 Vanous local air pollution programs operate

air quality programs under their own regulations,

which are approved into the SIP. The reader should

understand that "State" operating permit programs

encompass those local programs with junsdiction over only part of State as well as to statewide

programs.

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As discussed above, EPA recognizes

that its previous application of the

definition of "federally enforceable"

could sometimes cause delay or expense

in obtaining a limitation or control that

EPA considers federally enforceable.

That application of the 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 or promulgated

regulations for the review of new or

modified stationary or indirect sources"

is a violation of the implementation plan

and may result in enforcement action

under section 113 of the Act.

The EPA has always been concerned

with the prompt processing of SIP

revisions and permits. For example, to

minimize delay in processing certain

types of SIP revisions, EPA previously

set up a streamlined process called

direct final rulemaking (47 FR 27073

(June 23, 1982)). That process can

shorten EPA's time for processing SIP

revisions, in noncontroversial cases, to

less than 6 months. The EPA will

continue to use that procedure to

process source-specific SIP limitations

whenever possible.

The EPA 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 been required to be included in

25 Sections 51.160-163 [formerly § 51.18 (a}-(i}]

specify criteria for all new sources under section

110 (a)(2)(D) and (a)(4) of the 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 be met for approval of construction permit

programs under Part D of the Act for major new

sources in nonattainment areas. However, EPA may

also approve construction permit programs meeting

§ § 51.160-51.163 that do not 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 are federally

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) of the 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 EPA has

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 of operating 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 SIP imposes a legal obligation

that operating permit holders adhere to

the terms and limitations of such

permits (or subsequent revisions of the

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 does require

that a SIP include a "program to provide for

regulation of the modification, construction, and

operation of any stationary source including"

permitting programs for major sources. Similarly,

section 172(b)(6] requires that a nonattamment SIP

"require permits for the construction and operation

of new or modified major stationary sources. However, those statutory provisions regarding

operation of a source are satisfied by the

requirement in EPA's rules that the terms of PSD

or nonattainment construction permit remain in

effect throughout the life of the source (unless

modified lawfully) (40 CFR 52.21(w)(1)) (see also

section 173 of the Act (treats nonattainment permits

to construct and operate as if they were one)).

27 Although certain operating permits have not

been considered federally enforceable, some of the

terms and conditions appearing in such permits may

be federally enforceable through other means. For

example, if the terms of an operating permit are the

same as those in a federally enforceable

construction permit or the same as the limitations in

a SIP or an NSPS, those terms are federally

enforceable by virtue of EPA's authority 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 to include 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

will be at least as stringent as any other

applicable limitations and requirements

contained in the SIP or enforceable

under the SIP and that the program may

not issue permits that waive, or make

less stringent, any limitations or

requirements contained in or issued

pursuant to the SIP or that are

otherwise "federally enforceable" (e.g.

standards established under sections

111 and 112 of The Act).

(4) The limitations, 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 of its program, to

provide EPA and the public with timely

notice of the proposal and issuance of

such permits, and to provide EPA, on a

timely basis, with a copy of each

proposed (or draft) and final permit

intended to be federally enforceable.

This process must also provide for an

opportunity for public comment on the

permit applications prior to issuance of

the final permit.

States are free to continue issuing

operating permits that do not meet the

above requirements. However, such

permits would not be "federally

enforceable" for NSR 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 State may decide to not

follow public participation procedures

for, and not submit to EPA, large

numbers of permits for very small

sources, because the State has no

intention of using such permits as

external emissions offsets, to qualify as

a minor source or "net out" of NSR, or to

demonstrate attainment of the NAAQS.

The EPA expects that States will, for

purposes of clarity 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 for issuance 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 of the

operating permit. These provisions

essentially allow EPA to enforce against

violations of an applicable SIP By

making the operating permit program

part of the SIP and legally requiring, in

the SIP that permittees comply with

such permits, any violation of such 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 or to "net out" of PSD

or nonattainment permitting

requirements, or be considered as part

of a State's demonstration of reasonable

further progress toward attainment and

maintenance of the NAAQS. Thus, for

example, a State may issue an operating

permit placing emissions limitations on

an existing emissions unit at a source

for the purpose of accommodating a new

emissions unit at the source without

triggering PSD review of the new

emissions unit. If EPA 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 for violations

of PSD requirements regarding the new

emissions unit if the 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 of excessively long averaging

times), EPA may deem those limitations

not federally enforceable for purposes of

the netting transaction, thereby

triggering PSD review of the 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) of the

Act, which requires all approvable SIP's

to include "such measures as may

be necessary to ensure attainment and

maintenance" of national 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 of the SIP.

standards. 30 Moreover, section 116

provides that where an emissions

limitation is in effect under an

applicable SIP a State "may not adopt

or enforce 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 or variance must be created

through a formal SIP revision. The EPA

also recognizes that, in some cases,

individuals could differ as to whether a

particular limitation is "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 of expressing the new limitation in

different terms than the current SIP

limit, the burden to demonstrate the

equal or greater stringency of the new

limit rests with the State. Such

demonstrations must accompany the

proposed and final versions of any

applicable permit action.

The fourth condition for Federal

enforceability-that the permit

limitations be enforceable as a practical

matter-is an essential element in EPA's

implementation of the existing Federal

enforceability requirement. If permit

limitations, whether in operating or

construction permits, were not practical

to enforce, the purposes for which

Federal enforceability was intended

could not be met. Thus, all emissions

units must be reasonably described, and

verifiable, enforceable emissions limits

must be assigned to them. For example,

an emissions limit expressed only in

tons of pollution 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 of State

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, any incorporation

by reference, recordkeeping

requirements, and exemptions and

exceptions.

30 Requinng federally enforceable permit

limitations to be at least as stringent as other SIP

limitations is also consistent with the existing rules

for NSR construction permits which require that

such vermits not result in violations of the SIP

control strategy or interfere with attainment or maintenance of the ambient standards (e.g.. 40 CFR

51.16Ulal Iormeriv 40 CFR 51.18tal)

Similarly, thd fifth condition-that

EPA and the public be notified and

given opportunity to comment on the

issuance of operating permits-is

consistent with EPA's current practice

for construction permits (e.g., 40 CFR

51.161 (formerly 40 CFR 51.18(h))) and

would make enforcement by EPA and

private citizens much more effective and

practical. Public notice and opportunity

for comment are important parts of an

operating permit program, but the form

of such notice is subject to debate. Some

States regard 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

the use of State administrative registers,

notice and distribution mailing lists, or

monthly multiple application notices. In

reviewing SIP submittals for operating

permit programs, EPA will consider

these and other techniques for meeting

the twin goals of procedural

completeness and admimstrative

efficiency as long as ample opportunity

is provided for comment on permits

prior to their final issuance.

It is important that EPA maintain an

effective oversight of permit decisions

made pursuant to these programs. The

EPA is not now implementing a formal

review program 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 on proposed permits as may

be reasonable. The EPA stresses that, in

order to implement this review, States

will be required to provide draft permits

to EPA for comment. In addition, the

State must provide EPA with copies of

all final permits upon their issuance. If

permits are issued inconsistent with the

SIP as discussed above, EPA will

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. The EPA intends

to work with State programs to minimize

any delay or intrusiveness from this

activity.

The EPA realizes that the above five

program criteria are general and do not

address many details of implementation.

This is, in part, desirable: the EPA

invites States to develop programs that

are consistent with their program needs

and resources. The EPA will consult

with States on the approvability of their

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particular plan proposals. (It should be

noted that an operating permit program

will not become effective for the

purposes described in this document

until it is specifically so approved.) The

EPA plans to issue further, more

detailed, guidance as needed to assist

States in developing and implementing

approvable programs.

C. Policy and Regulation

The EPA believes that the definition

of "federally enforceable" is broad

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 of clarity, EPA is

amending the definition of federally

enforceable to specify that operating

permits issued under programs

approved by-EPA and incorporated into a SIP are federally enforceable.31

Similarly, even though 40 CFR 52.23--

confirming that violations of SIP

regulatory provisions and certain

permits are subject to enforcement by

EPA under section 113 of the 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 other hand,

EPA does not believe that it is necessary

to amend the "source obligation"

regulations at 40 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 to PSD permit

requirements because of any

enforceable limitation, and that later

becomes "major" solely because of a relaxation in such a limitation, to

undergo NSR as if it had not yet been

constructed. This is in addition to

possible enforcement action for

violation of federally enforceable permit

terms or circumvention of the

preconstruction review requirements of

the NSR program. The source obligation

regulations extend, as written, to any

source that used a federally enforceable

operating permit limitation to avoid PSD

NSR and later obtained a rescission or relaxation of that limitation. However,

EPA will review each existing PSD SIP

for any State seeking EPA approval of

its operating permit program to ensure

that the SIP contains a provision

01 The subiect proposal of August 25, 1983,

although not specifically addressing this particular regulatory language, described the subjects and

issues involved in detail Today's regulatory clarification to reflect the policy on Federal, enforceability is a logical outgrowth of the 1983

proposal for which EPA concludes that further

notice and comment are unnecessary.

meeting the requirements of 40 CFR

51.166(r)(2) with respect to operating

permits. In such cases, if the current SIP

provision does not extend to operating

permits, EPA would require an

appropriate SIP revision as a

prerequisite to approval of the operating

permit program.

The EPA will respond to questions

from the public on all of the 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 must be described in

detail. The programs also provide for

notice to the public of permit

applications and an opportunity to

comment prior to permit issuance. The

process is not available for permits that

would constitute, relaxations of the SIP

Copies of each 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 that EPA

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 as revisions to the SIP

Such revisions could be processed in

much less time than if each 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, a State might simply choose to

wait until it has an approved operating permit

program included in its SIP and then either renew or reissue existing permits under the approved

program.

preparation of a Regulatory Impact

Analysis.'This action is not a major rule

because it merely retains the current

regulatory requirements, while offering

States a more efficient means of

complying with those requirements. It,

thus, will not have any significant new

economic impacts.

As required by Executive Order 12291,

this action has been submitted to the

Office of Management and Budget

(OMB) for review. Any written

comments from OMB on this action and

any EPA written responses have been

placed in the docket for this proceeding.

.B. Since today's action merely retains

or clarifies the existing regulations and

does not promulgate significant changes

to any rules, section 317 of the Act

regarding an economic impact

assessment does not apply.

C. In accordance with the Regulatory

Flexibility Act, 5 U.S.C. 605(b), I hereby

certify that this action will not have a

significant adverse impact on a

substantial number of small entities,

primarily because it retains the existing

rules and creates no new burdens.

Accordingly, no regulatory flexibility

analysis is required.

D. The EPA has determined that this

final EPA action has nationwide

applicability. Accordingly, under section

307(b) of the Act, judicial review of this

final action may be obtained only by

filing a petition for review in the U.S.

D.C. Circuit Court of Appeals within 60

days from the date of this notice. This

action is not subject to judicial review in

any subsequent civil or criminal

proceedings for enforcement.

E. As provtded by section 307(d)(1) of

the Act, this rule is not subject to section

553(d) of the Administrative Procedure

Act. Section 553(d) requires that

substantive rules not take effect until 30

days after their publication unless they

relieve a restriction or an agency finds

good cause to make them effective

sooner. Nevertheless, there is good

cause to make this action effective

immediately since it merely retains

existing regulations while offering a

more efficient means of implementation.

Persons affected by the "Federal

enforceability" requirements need not

change their activities or plans in any

way as a result of today's action, and a

30-day waiting period would serve no

purpose.

F Under Executive Order 12612, EPA

must determine if a 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 of power and

responsibilities among the various levels

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

of government. 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 prior to

taking any actions that would restrict

State policy options, and take such

actions only when there is clear

constitutional authority and the

presence of a problem of national scope.

The Executive order provides for

preemption of State law, 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 to be considered

federally enforceable, thus increasing

State options for addressing the

applicability of NSR rules to modified

existing sources. Previously, the

federally enforceable limits recognized

by EPA for existing sources generally

consisted of more time-consuming SIP

revisions.

List of Subjects in 40 CFR

Part 51

Administrative practice and

procedures, air pollution control,

intergovernmental relations, reporting

and recordkeeping requirements, ozone,

sulfur oxides, nitrogen dioxide, lead,

particulate matter, hydrocarbons,

carbon monoxide.

Part 52

Air pollution 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 of Chapter I of Title 40 of

the Code of Federal Regulations are

amended as follows:

PART 51-REQUIREMENTS FOR

PREPARATION, ADOPTION, AND

SUBMITTAL OF IMPLEMENTATION

PLANS

1. The authority citation for Part 51

continues to read as follows:

Authority: Secs. 101(b)(1), 160-169, 171-178,

and 301(a) of the Clean Air Act. 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 to 40 CFR Parts 60 and 61,

requirements within any applicable

State implementation plan, any permit

requirements established pursuant to 40

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.

3. Section 51.166 is amended by

revising paragraph (b)(17) to read as

follows:

§ 51.166 Prevention of significant deterioration of air quality.

(b)

(17) "Federally enforceable" means all

limitations and conditions 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 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 S is 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 and conditions 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 or under regulations approved

pursuant to 40 CFR Part Z1, 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.

PART 52-APPROVAL AND

PROMULGATION OF

IMPLEMENTATION PLANS

1. The authority citation for Part 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 of air quality.

(b)

(17) "Federally enforceable" means all

limitations and conditions 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 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.

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

of this part, or with any approved

regulatory provision of a State

implementation plan, or with any permit

condition or permit denial issued

pursuant to approved or promulgated

regulations for the review of new or

modified stationary or indirect sources,

or with 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 of a

requirement of an 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 restriction on new

sources.

(f)

(12) "Federally enforceable" means all

limitations and conditions which are

enforceable by the Administrator,

including those requirements developed

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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 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.

IFR Doc. 89-14681 Filed 6-27-89; 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 of new and

modified stationary sources of air

pollution which appear at 40 CFR 51.24

(now 40 CFR 51.166), 52.21, Appendix S

to Part 51, 51.18(j) (now 51.165(a)) and

52.24 (see 48 FR 38742). That document

presented eight areas of proposed

rulemaking and additional guidance in

three other areas. The EPA proposed

those amendments and provided

guidance m order to meet the terms of a

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 (49 FR 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 other remaining 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 of emissions offsets

under 40 CFR Part 51, Appendix S, and

(6) the requirement for health and

welfare equivalence for netting. In

addition, final action with respect to the

other remaining 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) of the

Clean Air Act (Act), 42 U.S.C. 7607(b)(1),

petitions for judicial review must be

filed on or before August 28, 1989, in the

U.S. Court of Appeals for the D.C.

Circuit.

ADDRESSES: Material relevant to this

rulemaking may be found in Public

Docket A-82-23. This docket is located

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 of Air 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 of new and

modified stationary sources "new

source review" (NSR)) under the Act, 42

U.S.C. 7401-7642, in response to

Alabama Power Company v. Castle, 636

F.2d 323 (D.C. Cir. 1979) (see 45 FR

52676). Five sets of regulations resulted

from those revisions. The first set, 40

CFR 51.166 (formerly 40 CFR 51.24),

specifies the niinimum requirements that

a prevention of significant deterioration

(PSD) air quality permit program under

Part C of the Act must 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 of the SIP in the roughly 20 States

that have not submitted a PSD program

meeting the requirements of 40 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"

(Offset Ruling), 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 of 1980, numerous

organizations petitioned the U.S. Court

of Appeals for the D.C. Circuit to review

various provisions of those PSD and

nonattainment preconstruction

regulations. Subsequently, the court

consolidated those petitions into CMA,

a collection of challenges 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

of the case pending implementation of

the agreement.

In the settlement agreement, EPA

committed to propose certain

amendments (set forth as Exhibit A of

the agreement) to eight portions of the

NSR regulations and to provide

guidance in three additional areas, and

to take final action on those proposals.

Accordingly, EPA published a notice of

proposed rulemaking in the August 25,

1983 Federal Register (48 FR 38742). The

EPA noted that it would review the

comments carefully and with an open

mind and that it would take a new look

at the proposals in order to make an

independent judgment on the merits.

The EPA received extensive public

comment regarding the August 25, 1983

document, including that presented at a

public hearing. In light of the public

comments and on the basis of further

evaluation, EPA has determined that it

is appropriate to retain various portions

of the regulations that had been

proposed for deletion or revision, while

making final certain other portions of

the proposed changes.

The EPA addressed fugitive emissions

in a separate Federal Register notice

that was published on October 26, 1984

(49 FR 43202). This document constitutes

final action on six of the remaining

seven issues in the August 25, 1983

proposal.

With respect to the other remaining

issue, Federal enforceability, EPA is

today announcing, in a separate Federal

Register item published 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 of the CMA settlement agreement.

II. Final Action on Proposal

A. Definition of "Significant"

1. Background

In revising the NSR regulations on

August 7 1980, EPA introduced

provisions which use the term

"significant. One of those provisions

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