[Federal Register Volume 60, Number 30 (Tuesday, February 14, 1995)]
[Proposed Rules]
[Pages 8333-8335]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3661]



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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 63

[AD-FRL-5155-2]


Hazardous Air Pollutants: Provisions Governing Constructed, 
Reconstructed or Modified Major Sources

AGENCY: Environmental Protection Agency (EPA).

ACTION: Interpretive notice.

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SUMMARY: This notice announces the EPA's revised interpretation of the 
Clean Air Act's (Act) requirements regarding the effective date of 
section 112(g) of the Act. The interpretation adopted here postpones 
the effective date of section 112(g) until after the EPA has 
promulgated a rule addressing that provision.

EFFECTIVE DATE: February 14, 1995.

FOR FURTHER INFORMATION CONTACT: Ms. Kathy Kaufman at (919) 541-0102, 
Information Transfer and Program Integration Division (MD-12), U. S. 
Environmental Protection Agency, Research Triangle Park, North Carolina 
27711.

SUPPLEMENTARY INFORMATION:

I. Summary of EPA's Policy

    The Administrator of the EPA is today announcing the EPA's 
interpretation of the Act requirements regarding the effective date of 
section 112(g) during the period prior to promulgation of a Federal 
rule addressing implementation of that section. This notice effects 
changes from the view embodied in the preamble to the proposed 
rulemaking under section 112(g), Federal Register notices of proposed 
and final approvals of operating permits programs under title V of the 
Act, and in guidance issued by the EPA's Office of Air Quality Planning 
and Standards (OAQPS).
    For the reasons set forth in this notice, the EPA now interprets 
section 112(g) not to take effect before the EPA issues notice and 
comment guidance addressing implementation of that section. In the 
interim period before this guidance is promulgated, States may, as a 
matter of State law, implement a program for the review of section 
112(g) modifications, constructions, or reconstructions. However, the 
section 112(g) requirement that major source modifications, 
constructions, or reconstructions meet the maximum achievable control 
technology (MACT)--as determined on a case-by-case basis where no 
Federal standard for a source category has been set--will not take 
effect as a matter of Federal law until the section 112(g) rule is 
promulgated.

II. Discussion

A. Requirements of Section 112(g). Previous Policy Position

    After the effective date of a title V permit program in a State, 
section 112(g) prohibits any person from constructing or reconstructing 
a major source of hazardous air pollutants (HAP), or modifying a major 
HAP's source, without a determination from ``the Administrator (or the 
State)'' that MACT will be met. The determination must be on a case-by-
case basis by ``the Administrator (or the State)'' if no MACT standard 
has been issued. Section 112(g)(1)(B) also provides that the 
Administrator ``shall, after notice and opportunity for comment and not 
later than [May 15, 1992] publish guidance with respect to 
implementation of this subsection.'' The guidance must address the 
relative hazard of HAP in a manner ``sufficient to facilitate the 
offset showing'' allowed in the definition of ``modification.''
    The EPA proposed a rule implementing section 112(g) on April 1, 
1994 (59 FR 15504). The EPA currently anticipates promulgation of this 
rule during the summer of 1995. In anticipation of the fact that many 
title V permit programs would be approved before the section 112(g) 
rule was promulgated, the OAQPS issued a guidance memorandum on June 
28, 1994\1\ to assist States in their implementation of section 112(g) 
during this transition period. The guidance states that section 112(g) 
takes effect upon approval of a title V program in a State regardless 
of whether the EPA's rule has been promulgated. The guidance also 
offers suggestions for how States may implement section 112(g) during 
the transition period.

    \1\Guidance for the Initial Implementation of Section 112(g), 
Memorandum from John S. Seitz to EPA Regional Air Division 
Directors, June 28, 1994.
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    To date, the EPA has approved several title V programs, the first 
of which was for the State of Washington on November 9, 1994 (59 FR 
55813). EPA also has proposed approval of numerous other programs. In 
each of these notices, the Agency has restated its position that the 
requirements of section 112(g) would take effect in these States upon 
approval of the title V program, and has described its understanding of 
how section 112(g) would be implemented in that State during the 
transition period.

B. Reconsideration Based on Concerns Raised

    States and the regulated community have voiced considerable concern 
with the impracticality of implementation of section 112(g) during the 
transition period.\2\ These concerns have focused on the provisions for 
determining the applicability of section 112(g), and in particular on 
provisions addressing de minimis levels and offsets for modifications, 
as well as the definition of ``major source'' for constructions and 
[[Page 8334]] reconstructions. States and the regulated community have 
noted that the applicability of the section 112(g) modification 
provisions have the potential to vary significantly depending on how 
these issues are addressed in the final section 112(g) rule, that these 
provisions are among the most complex and controversial in the section 
112(g) proposal, and that implementation of these provisions in the 
absence of a promulgated rule will present considerable uncertainty and 
legal and financial risk for States and emissions sources.

    \2\For State and regulated community comments submitted on the 
proposed section 112(g) rule, see Docket Number A-91-64 inserts IV-
D-199, IV-D-213, IV-D-217, IV-D-219, IV-D-222, IV-D-229, IV-D-255, 
IV-D-295, IV-D-323, IV-D-333, IV-D-337, IV-D-PH217, IV-D-199, IV-D-
213, IV-D-295, IV-D-PH221, and IV-D-PH222.
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    After careful consideration, the EPA concludes that these concerns 
are valid and, as a policy matter, justify re-examining and modifying 
the Agency's interpretation concerning the effective date of section 
112(g). Moreover, the EPA believes it should announce its revised view 
now, before there is a significant expenditure of State, source, and 
Agency resources and before questions of source liability are raised. 
In light of this conclusion, the EPA has revisited its prior legal 
interpretation that section 112(g) must take effect upon approval of 
the title V program regardless of whether a rule has been promulgated. 
These practical difficulties confirm for the Agency the soundness of a 
reading that implementation of section 112(g) is to be delayed until a 
rule is promulgated.

C. Analysis of Statutory Requirements for Modifications

    On its face, the section 112(g) requirement for case-by-case MACT 
determination for new major sources, reconstructed sources, and 
modifications to existing major sources appears to be triggered upon 
the title V program effective date. However, the Act also calls for 
guidance ``with respect to the implementation of'' section 112(g) to be 
issued ``after notice and opportunity for comment and not later than'' 
May 15, 1992. Section 112(g)(1)(B). Section 112(g)(1)(A) provides 
further that a greater-than-de minimis increase ``shall not be 
considered a modification'' if it is offset by an equal or greater 
decrease in a more hazardous pollutant, ``pursuant to guidance issued 
by the Administrator under subparagraph (B).'' The guidance must 
specifically ``facilitate the offset showing'' and ``include an 
identification, to the extent practicable, of the relative hazard to 
human health resulting from emissions'' of HAP.
    Section 112(g) is analogous in certain important respects to 
statutory provisions at issue in the recent D.C. Circuit decision 
concerning inspection and maintenance (I/M) programs under the Act. 
Natural Resources Defense Council versus EPA, 22 F.3d 1125 (D.C. Cir. 
1994). Section 182(c)(3) of the Act requires States to establish 
programs for ``enhanced'' vehicle inspection and maintenance programs. 
The statute further requires that these programs must be in compliance 
with regulatory ``guidance'' published by the Administrator, and must 
be effective by Nov. 15, 1992. In NRDC versus EPA, the Court held that, 
because the EPA was late in issuing the guidance called for in the 
statute, without which it was impossible as a practical matter for 
States to create their own programs, the statutory requirement for 
States to have an effective program should be delayed.
    The section 112(g) modification provisions bear two important 
similarities to the statutory provisions at issue in NRDC versus EPA.  
First, the EPA was obligated to issue guidance on section 112(g) for 
the States well before they were expected to begin implementing section 
112(g) on the effective date of title V programs. Second, that guidance 
is intended to be binding. This is because the guidance forms an 
essential link between the statutory directives triggered on the 
effective date of permit program approval and the ability to actually 
implement these directives.
    Regarding offsets, section 112(g)(1)(A) provides that offsets are 
to be determined ``pursuant to guidance issued by the Administrator * * 
*'' It follows that the absence of guidance precludes the issuance of 
valid offset determinations by a reviewing agency. Moreover, the 
absence of guidance makes it impossible for the owner or operator of 
the source to submit a ``showing'' provided for by the last sentence 
``that such increase has been offset under the preceding sentence,'' 
that is, pursuant to the Administrator's guidance (emphasis added). 
While a State permitting authority could decide to impose offsetting 
provisions that are more stringent than those in the EPA guidance, the 
EPA believes that Congress intended the EPA guidance as integral to the 
implementation of this provision.
    The concept of de minimis values is likewise integral to the 
definition of ``modification'' in section 112(a)(5). This is because a 
``modification'' is defined in section 112(a)(5) as a ``physical change 
in, or change in the method of operation of, a major source which 
increases the actual emissions of any hazardous air pollutant * * * by 
more than a de minimis amount * * *.'' Until de minimis values are 
established in the section 112(g) rule, the definition of 
``modification'' remains incomplete, lacking the lower boundary that 
the statute contemplates will be established through a notice and 
comment process. The statute, recognizing that establishment of de 
minimis values would require the application of scientific expertise 
and judgment, called for the EPA to set these values based on a notice 
and comment process. It would be contrary to the intent of the Act to 
require the section 112(g) program for review of modifications to go 
forward when the issue of what constitutes a ``modification'' cannot be 
resolved with the degree of certainty envisioned by the statute.
    It thus appears that certain crucial elements in the section 112(g) 
program for dealing with modifications are missing until the EPA 
promulgates guidance. Under these circumstances, it is consistent with 
the statute, and with applicable precedent, to conclude that the 
obligation of States to establish the required program for review of 
modifications hinges on promulgation of the requisite ``guidance''--
which is in fact, as the statute makes clear, a binding rule--governing 
both offsets and de minimis values.

D. Analysis of Statutory Requirements for Major Source Construction and 
Reconstruction

    The guidance required to be published under section 112(g)(1)(B) 
addressing implementation of ``subsection'' 112(g) must extend not only 
to modifications under section 112(g)(2)(A), but also to major source 
constructions and reconstructions addressed in section 112(g)(2)((B). 
This general directive aside, the statutory linkage between the section 
112(g) guidance and implementation is not as detailed for constructions 
and reconstructions as it is for modification requirements. 
Notwithstanding this, the EPA believes that even with regard to 
constructions and reconstructions, guidance is necessary to resolve 
issues critical to the scope of applicability of these provisions, and 
that delaying the effectiveness of these provisions therefore 
represents a permissible reading of the Act.
    In the April 1, 1994 proposal, the EPA solicited comment on two 
alternative interpretations of the phrase ``construct a major source.'' 
See 59 FR 15517. One interpretation would treat new major-emitting 
equipment at existing major source plant sites as ``modifications,'' 
while the other interpretation would treat such additions as 
``constructions.'' Under the ``modification'' alternative, such 
equipment could be offset by a decrease elsewhere at the plant site. 
Under the ``construction'' alternative, [[Page 8335]] such equipment 
would be required to install new source technology and offsets would 
not be available.
    Similarly, the April 1, 1994 proposal contained two alternative 
definitions of major source ``reconstruction.'' The alternative 
definitions are similar in that, for each, the replacement of 
components, where the cost of the replacement components is greater 
than 50 percent of the capital cost of ``constructing a major source,'' 
would trigger reconstruction requirements. The alternatives differ in 
that one alternative treats the entire plant site as the basis for 
comparison, while the other alternative treats a major-emitting 
``emission unit'' as the basis for comparison.
    The ambiguities surrounding the term ``construction'' have 
potentially significant impacts on the nature and scope of the Federal 
program, particularly in a transition period during which the 
modification provisions of section 112(g) are delayed. While there are 
likely to be few constructions of ``greenfield'' facilities emitting 
major amounts of HAPs prior to promulgation of the section 112(g) rule, 
there will be a far greater number of additions of major-emitting units 
at existing major source plant sites. Until the issue of whether these 
additions constitute a ``construction'' is clarified through 
rulemaking, there will be uncertainty as to how these additions must be 
treated as a matter of Federal law. For similar reasons, the scope of 
the section 112(g) requirements for ``reconstructions'' will continue 
to be in doubt until the section 112(g) rule is promulgated.
    These implementation difficulties demonstrate that, as is the case 
for the section 112(g) modification provisions, rulemaking is needed to 
provide the degree of certainty EPA believes was intended by Congress 
regarding the applicability of the provisions for major source 
construction and reconstruction. For this reason, EPA believes it would 
be unreasonable to require the implementation of the section 112(g) 
provisions relating to construction and reconstruction prior to 
completion of the rulemaking.

F. Additional Clarifications

    The EPA's interpretation, announced today, regarding the timing for 
implementation of section 112(g), applies to every title V program that 
has been or will be approved prior to promulgation of a Federal rule 
implementing section 112(g). The interpretation concerns the effective 
date of a Federal requirement set forth in the Act. In this sense, this 
interpretation need not be addressed in individual title V approvals. 
The EPA has indicated in a number of title V approval actions that the 
State would use its existing SIP-approved preconstruction review 
program to implement section 112(g) during the transition period. 
However, there have been no approvals of State programs designed 
specifically to implement section 112(g). Therefore, there is no need 
to revisit any EPA rulemaking action in order to implement today's 
notice.
    This interpretation should not require significant changes to any 
title V program submittal. Each State program reviewed by EPA to date 
has included a general commitment to implement section 112(g), in 
accordance with the EPA regulations and/or guidance, upon approval of 
their title V program. However, those commitments were fashioned 
broadly enough to accommodate today's announced interpretation, and so 
no program revisions should be necessary for those States.
    The EPA is aware of concerns that States may need additional time 
following the promulgation of the section 112(g) rule before they can 
begin implementing section 112(g). The EPA believes the statute may be 
read to allow for an additional period of delay so that States may 
adopt conforming rules if it would otherwise be impossible for States 
to implement the program. However, the EPA has not determined whether 
additional time will in fact be needed. If it is decided that 
additional time should be provided before the provisions of section 
112(g) become effective, the EPA will so provide in the final section 
112(g) rulemaking.
    Finally, certain States have already promulgated regulations 
designed to implement section 112(g). The EPA wishes to emphasize that 
nothing in this notice is intended to preclude or discourage States 
from implementing a program similar to section 112(g) as a matter of 
State law prior to promulgation by the EPA of the section 112(g) 
guidance.

    Dated: February 8, 1995.
Carol M. Browner,
Administrator.
[FR Doc. 95-3661 Filed 2-13-95; 8:45 am]
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