[Federal Register Volume 61, Number 20 (Tuesday, January 30, 1996)]
[Proposed Rules]
[Pages 2983-2990]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-1712]



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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 70

[NJ001; FRL-5403-8]


Clean Air Act Proposed Interim Approval of Operating Permit 
Program; New Jersey

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed interim approval.

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SUMMARY: EPA proposes source category-limited interim approval of the 
operating permit program submitted by the State of New Jersey for the 
purpose of complying with federal requirements which mandate that 
states develop, and submit to EPA, programs for issuing operating 
permits to all major stationary sources and to certain other sources.

DATES: Comments on this proposed action must be received in writing by 
February 29, 1996.

ADDRESSES: Written comments on this action should be addressed to 
Steven C. Riva, Chief, Permitting/Toxics Supports Section, Air 
Compliance Branch, at the EPA Region 2 office listed below. Copies of 
New Jersey's submittal and other supporting information used in 
developing the proposed interim approval are available for inspection 
during normal business hours at the following location: U.S. 
Environmental Protection Agency, Region 2, 290 Broadway, 21st Floor, 
New York, NY 10007-1866.

FOR FURTHER INFORMATION CONTACT: Ms. Suilin Chan, Air and Waste 
Management Division, U.S. Environmental Protection Agency, Region 2, 
290 Broadway, 21st Floor, New York, NY 10007-1866, (212) 637-4019.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

A. Introduction

    As required under title V of the Clean Air Act (``the Act'') as 
amended by the 1990 Clean Air Act Amendments, EPA promulgated rules on 
July 21, 1992 (57 FR 32250), that define the minimum elements of an 
approvable state operating permit program and the corresponding 
standards and procedures by which EPA will approve, oversee, and 
withdraw approval of state operating permit programs. These rules are 
codified at 40 Code of Federal Regulations (CFR) Part 70. Title V and 
Part 70 require that states develop, and submit to EPA, programs for 
issuing operating permits to all major stationary sources and to 
certain other sources.
    The Act requires states to develop and submit these programs to EPA 
by November 15, 1993, and EPA to approve or disapprove such program 
within one year after receiving the complete submittal. If the State's 
submission is materially changed during the one-year review period, 40 
CFR Sec. 70.4(e)(2) allows EPA to extend the review period for no more 
than one year following receipt of the additional materials. EPA 
reviews state operating permit programs pursuant to section 502 of the 
Act and 40 CFR Part 70, which together outline the criteria for 
approval or disapproval. Where a program substantially, but not fully, 
meets the requirements of Part 70, EPA may grant the program interim 
approval for a period of up to two years. Additionally, where a state 
can demonstrate to the satisfaction of EPA that reasons exist to 
justify granting a source category-limited interim approval, EPA may so 
exercise its authority. A program with a source category-limited 
interim approval is one that substantially meets the requirements of 
Part 70 and that applies to at least 60% of all affected sources which 
account for 80% of the total emissions within the state. If EPA has not 
fully approved a program by November 15, 1995, or by the end of an 
interim program, it must establish and implement a federal operating 
permit program for that state.
    EPA received New Jersey's title V operating permit program 
submittal initially on November 19, 1993. However, EPA found that 
submittal to be incomplete. In a February 4, 1994 letter to the New 
Jersey Department of Environmental Protection (NJDEP), EPA informed New 
Jersey of the incompleteness determination and listed the deficiencies 
that must be corrected. EPA received New Jersey's 

[[Page 2984]]
August 10th, 1995, revised program submittal on August 21, 1995 which 
EPA determined to be complete on September 5, 1995.

B. Federal Oversight and Sanctions

    Following the granting of final interim approval, if New Jersey 
failed to submit a complete corrected program for full approval by the 
date six months before expiration of the interim approval or if EPA 
disapproved New Jersey's corrected program submittal, EPA would start 
an 18-month clock for mandatory sanctions in either situation. If and 
when the 18 months expire and New Jersey fails to submit a complete 
corrected program to address the deficiencies identified in the interim 
approval or identified in the disapproval, whichever the case may be, 
EPA would be required to apply one of the sanctions in section 179(b) 
of the Act. In either case, the sanction would remain in effect until 
EPA determines that New Jersey had corrected the deficiencies that 
triggered the mandatory sanctions clock. If six months after 
application of the first sanction, New Jersey still had not submitted 
the requisite complete program, a second sanction would be applied. 
Moreover, if the Administrator found a lack of good faith on the Part 
of New Jersey, both sanctions under section 179(b) would apply after 
the expiration of the 18-month period until the Administrator 
determines that New Jersey had come into compliance.
    In addition, discretionary sanctions may be applied where warranted 
any time after an interim approval expires and a state has failed to 
submit a timely and complete corrected program or EPA has disapproved a 
corrected program. Moreover, if a state does not have in place an 
approved full program by the expiration date of its interim approval or 
an approved program by the time the federal operating permit program, 
to be codified at 40 CFR Part 71, is promulgated, EPA is mandated to 
administer and enforce the federal program for that state.

II. Proposed Action and Implications

    EPA has concluded that the operating permit program submitted by 
New Jersey substantially meets the requirements of title V and Part 70. 
Based upon EPA's review of New Jersey's request for source category-
limited interim approval and the substantiation submitted thereto and 
of New Jersey's operating permit program in its entirety, EPA proposes 
to grant source category-limited interim approval to the New Jersey 
program. For detailed information on the analysis of the State's 
submission, please refer to the Technical Support Document (TSD) 
contained in the docket at the address noted above.

A. Analysis of State Submission

1. Support Materials
    Pursuant to section 502(d) of the Act, each state must develop and 
submit to the Administrator an operating permit program under state or 
local law or under an interstate compact meeting the requirements of 
title V of the Act. On November 19, 1993, EPA received the title V 
operating permit program submitted by the State of New Jersey and 
supplemental information submitted on August 10, 1995, and August 28, 
1995. The New Jersey Department of Environmental Protection (NJDEP) 
requested, under the signature of the New Jersey Governor's designee, 
Commissioner Robert C. Shinn Jr. of the NJDEP, a source category-
limited interim approval of New Jersey's operating permit program with 
full authority to administer the program in all areas of the State of 
New Jersey.
    The following documents which were submitted by the State of New 
Jersey in support of its request for a source category-limited interim 
approval have been reviewed by EPA and have been found to substantially 
meet the Part 70 requirements.
    1. Pursuant to 40 CFR Sec. 70.4(b)(1), a complete program 
description is presented under Chapter 3 of Volume I providing detailed 
discussions on how the state intends to carry out its title V 
responsibilities.
    2. Pursuant to 40 CFR Sec. 70.4(b)(2), the regulations that 
comprise the permitting program is submitted under Appendix A of Volume 
II and copies of all applicable state or local statutes and regulations 
are included in Appendix C of Volume II.
    3. Pursuant to 40 CFR Sec. 70.4(b)(3), a legal opinion from the 
State Attorney General is presented in Appendix B of Volume II. New 
Jersey has demonstrated that the NJDEP has adequate authority to carry 
out all aspects of New Jersey's operating permit program.
    4. Pursuant to 40 CFR Sec. 70.4(b)(4), copies of the permit 
application forms and relevant guidance that will assist in the State's 
implementation of the operating permit program are presented in 
Appendices F and G of Volume II. No permit form has been submitted by 
New Jersey since each permit will be issued with conditions specific to 
the source's operation. The contents of an operating permit is listed 
in N.J.A.C. 7:27-22.16.
    5. Pursuant to 40 CFR Sec. 70.4(b)(5), a complete description of 
the State's compliance tracking and enforcement program is presented in 
Chapter 6 of Volume I. This document describes how New Jersey will use 
its data management system (AIMS) to track and report enforcement 
activities. It also reaffirms New Jersey's commitment to continue to 
follow air enforcement strategies stipulated in previous enforcement 
agreements it has entered with the EPA.
    6. Pursuant to 40 CFR Sec. 70.4(b)(6) and Sec. 70.4(b)(8), a 
description of the state permit procedures and a statement on adequate 
personnel and funding is presented in Chapter 4 of Volume I. This 
chapter describes how the permit application reviews will be 
coordinated with the other offices with NJDEP and what the duties of 
the agency personnel will be for implementing the program.
    7. Pursuant to 40 CFR Sec. 70.4(b)(7), a fee demonstration and a 
workload analysis are presented in Appendices D and E of Volume II. New 
Jersey adopted the presumptive minimum fee of $25 per ton of pollutant 
per year (adjusted by the Consumer Price Index based on the 1989 value) 
and is presumed to have adequate funding for the development and 
implementation of its operating permit program.
    8. Pursuant to 40 CFR Sec. 70.4(b)(9), New Jersey committed to 
provide quarterly reports on enforcement activities via its data 
management system as discussed in Chapter 5 of Volume I.
    9. Pursuant to 40 CFR Sec. 70.4(b)(11), a transition plan is 
presented in Chapter 2 of Volume I describing the application submittal 
schedule and the permitting timeframe for the initial permits. Also 
discussed in this chapter is New Jersey's rationale for requesting 
source category-limited interim approval. New Jersey has demonstrated 
in this chapter that its operating permit program will meet the 60/80 
percent tests which require that the interim program applies to at 
least 60% of the total number of Part 70-affected sources in New Jersey 
and that these sources account for at least 80% of the total emissions.
2. Regulations and Program Implementation
    The State of New Jersey adopted regulations in Subchapter 22 of 
Chapter 27 of the New Jersey Administrative Code (N.J.A.C. 7:27-22) for 
the implementation of the requirements of 40 CFR Part 70. This rule, 
which was initially adopted on October 3, 1994, was re-proposed with 
changes and adopted in August 10, 1995. There is sufficient evidence 
such as responses to comments showing that the rule adoptions were 
procedurally correct as required by 40 CFR Sec. 70.4(b)(2). The New 
Jersey operating permit rule which 

[[Page 2985]]
contains the lists of exempt activities, insignificant operations, and 
two tables of excluded emissions are included in Appendix A of Volume 
II. The other applicable state statutes and regulations are included in 
Appendix C of Volume II. Based on EPA's review, none of the applicable 
state statutes or regulations restricts implementation of the New 
Jersey operating permit program. New Jersey's rule meets the main 
requirements of Part 70 as described below:
    a. Applicability (40 CFR Sec. 70.2 and Sec. 70.3):
    (1) New Jersey's rule requires facilities with the potential-to-
emit of any pollutants at major source threshold levels to obtain 
operating permits. Facilities subject to requirements that are not 
listed in N.J.A.C. 7:27-22.2(a) will not be subject to the New Jersey 
operating permit program (i.e., non-major sources subject to Sec. 111 
or Sec. 112 of the Act (NSPS or NESHAP)). New Jersey has elected to 
defer these non-major sources until EPA completes rulemaking with 
respect to future applicability. This is consistent with 40 CFR 
Sec. 70.3(b)(1). However, 40 CFR Sec. 70.3(b)(2) states that non-major 
sources subject to standards promulgated after July 21, 1992 are 
required to obtain an operating permit unless the standard itself 
contains specific language that would exempt them from Part 70 
requirements. EPA interprets this Part 70 provision to mean that if the 
standard were promulgated without the exemption clause, a Part 70 
exemption for non-major sources is assumed not to exist and all sources 
covered under that standard are required to obtain an operating permit. 
Although New Jersey's rule in N.J.A.C. 7:27-22.2(b) alludes to an EPA 
rulemaking as the triggering factor for title V applicability to non-
major sources, it does provide NJDEP with the necessary regulatory 
authority to permit under Part 70 those non-major sources that are not 
exempt from post-1992 standards based on its reference to 40 CFR 
Sec. 70.3(b)(2). Therefore, EPA does not find this to be a problem for 
granting interim approval. In addition, section 22.5(i) of New Jersey's 
rule provides the mechanism under which non-major sources would be 
required to submit an application. To ensure that national consistency 
is maintained in the implementation of 40 CFR Sec. 70.3(b)(2), EPA will 
require New Jersey to submit a commitment in the corrected program 
asserting that New Jersey will require non-major sources subject to 
section 111 and 112 standards promulgated after July 21, 1992 to apply 
for an operating permit as required by the Administrator. Applications 
from these sources should be submitted in accordance with the schedule 
specified in the standard and/or rulemaking. This commitment must be 
submitted in order to receive full program approval.
    (2) New Jersey's rule excludes activities such as office equipment, 
water storage tanks, and other minimally emitting facilities from the 
operating permit application. The entire list of exempt activities is 
included in the definition section of the New Jersey rule (N.J.A.C. 
7:27-22.1). Since these facilities either do not emit any air 
pollutants or are not part of a source's production process, EPA finds 
it appropriate to exclude them from the operating permit application. 
EPA believes exclusion of the listed activities from the application is 
highly unlikely to interfere with determining applicability of or 
imposing any applicable requirements. In addition, N.J.A.C. 7:27-
22.6(f)(5) requires that permit applications contain all information 
needed to determine the applicability of or to impose any applicable 
requirement. Therefore, EPA proposes to approve the list of exempt 
activity as defined in N.J.A.C. 7:27-22.1 from New Jersey's operating 
permit program. This list may be expanded with prior EPA input and 
approval during the state rulemaking process for the rule revision 
consistent with 40 CFR Sec. 70.4(i).
    (3) Consistent with the Part 70 regulations, New Jersey's rule 
requires inclusion of fugitive emissions only if the source belongs to 
one of the 27 source categories listed in 40 CFR Sec. 70.2.
    (4) New Jersey's rule at N.J.A.C 7:27-22.2 did not include the 
``support facility test'' as an additional criterion for separating the 
R & D facility from the primary source operation. EPA does not find 
this to be an issue for program approval since New Jersey's R&D 
definition requires that the R&D facility not be ``engaged in the 
manufacture of products for commercial sale, except in a de minimis 
manner''. However, it is EPA's understanding of New Jersey's intention 
that if the R&D facility is not connected to the manufacturing process 
except in a de minimis capacity that the R&D facility would not be a 
support facility to the manufacturing process. Thus, if the R&D 
facility is contributing to the manufacturing process in a material, 
rather than de minimis capacity, it would be a support facility to the 
manufacturing process. Under the support facility test, co-located and 
commonly owned sources would be considered one source (and therefore 
their emissions aggregated) if the output of one is more than 50 
percent devoted to support the other.
    (5) New Jersey's rule at N.J.A.C.7:27-22.2(d) allows sources with 
equipment that can be operated in both R&D and manufacturing modes to 
segregate emissions attributable to the R&D operation from the source's 
potential to emit when determining whether the source is major. In many 
cases, the segregation could result in separating a facility into a 
minor facility and a R&D facility which would render the source as a 
whole not subject to Part 70. In order for the entire facility to be 
excluded from the Part 70 requirements, federally enforceable permit 
conditions must be obtained by the source. As in other synthetic minor 
situations, New Jersey plans to use its SIP-approved new source review 
preconstruction permit program to provide the federally enforceable 
permit limitations necessary to cap source emissions at below the title 
V major source threshold levels. New Jersey provided a supplement to 
the August 10, 1995 title V operating permit program which describes in 
detail how these sources will be capped out of the New Jersey operating 
permit program. Based upon EPA's review, the mechanism to be used by 
New Jersey to limit emissions from such ``dual equipment'' is federally 
and practicably enforceable and is sufficient to prevent Part 70 
circumvention.
    The ``dual equipment'' type sources are subject to federally 
enforceable NSR requirements if the source (and its associated process 
units) meets the criteria set out in the NSR regulations of New 
Jersey's rule (N.J.A.C. 7:27-8). Most of these types of sources become 
subject to New Jersey's NSR requirements because they process more than 
50 pounds per hour of all materials combined with the exclusion of air 
and water. The permit issued to such sources is called a ``Dual 
Permit'' which consists of two sections, one specific to the R&D 
operation and the other to the manufacturing operation. The permit also 
contains common emission caps for each pollutant with recordkeeping 
requirements to monitor when the emission limits will be reached. When 
the emission limits are reached, the source is required to cease 
operation of all equipment or process covered under the permit or apply 
for a permit revision to raise the emission limits, at which time 
additional requirements such as installation of the state-of-the-art 
controls may be required. Although it has the legal authority to do so, 
NJDEP has not issued a dual permit that covers the entire facility. It 
is EPA's belief that in situations where the facility has the 
flexibility to change operation at will, 

[[Page 2986]]
facility-wide emission caps or summation of individual permits at a 
source is essential to prevent circumvention of the Part 70 
regulations.
    b. Permit Application (40 CFR Sec. 70.5):
    (1) Consistent with EPA's policy as discussed in the July 10th, 
1995 ``White Paper for Streamlined Development of Part 70 Permit 
Applications'', New Jersey's rule streamlines the application 
requirements for emitting activities that meet the definition of 
insignificant source operations. Such emitting activities or units are 
not required to be listed individually on the application; they may be 
listed by source type. On the application, an estimate of the total 
emissions from all of the insignificant source operations shall be 
listed for each criteria pollutant with the applicable requirements 
which generally apply to them. The list of insignificant source 
operations which EPA hereby approves is defined in N.J.A.C. 7:27-22.1. 
This list may be changed with prior EPA input and approval during the 
state rulemaking process for the rule revision consistent with 40 CFR 
Sec. 70.4(i).
    (2) New Jersey's rule also provides for some streamlining for 
significant source operations that have extremely small emissions. For 
emitting activities or units that meet the definition of significant 
source operations and have emission rates that are less than those 
listed in Tables A and B of Appendix I of New Jersey's operating permit 
rule, their emissions are only required to be listed as ``de minimis''. 
The emissions levels listed under these tables are so small that EPA 
does not have any objections to requiring a listing of these emission 
units without their specific emission rates.
    c. Permit Content (40 CFR Sec. 70.6):
    (1) Part 70 requires prompt reporting of deviations from the permit 
requirements. 40 CFR Sec. 70.6(a)(3)(iii)(B) requires the permitting 
authority to define ``prompt'' in relation to the degree and type of 
deviation likely to occur and the applicable requirements. Where 
``prompt'' is defined in the individual permit but not in the program 
regulations, EPA may veto permits that do not contain sufficiently 
prompt reporting of deviations. The State of New Jersey has defined 
``prompt'' in its regulations at N.J.A.C. 7:27-22.19 in the manner 
discussed below. Immediate reporting on the NJDEP hotline is required 
if the air contaminants are released in a quantity or concentration 
which poses a potential threat to public health, welfare or the 
environment. Where the air contaminants are released in a quantity or 
concentration which poses no potential threat to public health, 
welfare, or the environment but the permittee intends to assert an 
affirmative defense for the deviation, the instance must be reported 
within 2 days. Deviations that were discovered during source emissions 
testing must be reported in 30 days as part of the testing report. 
Other reporting obligations required by the permit including deviations 
recorded by the emissions monitors are to be submitted semi-annually. 
EPA finds New Jersey's definition of ``prompt'' reporting of deviations 
as delineated above to be inadequate. In order for EPA to consider this 
definition adequate for protecting public health and safety, New Jersey 
must add a provision requiring reporting of deviations within 10 days 
where the air contaminants are released in a quantity or concentration 
that pose no potential threat to public health, welfare, or the 
environment and the permittee does not intend to assert affirmative 
defense for the deviation.
    (2) Alternative operating scenarios may be made part of the initial 
permit or added via a significant modification, a minor modification or 
a 7-day notice change. Sources that are allowed to operate under 
different scenarios are required to operate within the range or limit 
specified for each operating parameter in the approved operating 
scenario. The New Jersey rule (N.J.A.C. 7:27-22.27(a)(2)) allows the 
addition of new alternative operating scenarios to an existing 
operating permit via a 7-day notice change provided the emission limit 
for the source operation included in the scenario does not exceed the 
maximum allowable emission limits in the existing permit. Another 
provision in N.J.A.C. 7:27-22.22(b)(5) disallows Title I modifications 
from being incorporated into the existing permit via the 7-day notice 
procedure. These two provisions in effect assure that a new NSR permit 
could not be added to the existing permit through the 7-day notice 
procedure by calling it an alternative operating scenario bypassing the 
minor or significant permit modification procedures. In addition, 
N.J.A.C. 7:27-22.26(b) rules out the possibility that a source might 
try to incorporate a MACT standard into the existing permit via a 7-day 
notice change by calling it an alternative operating scenario. Based on 
EPA's review of the New Jersey rule, the alternative operating scenario 
provisions are consistent with 40 CFR Sec. 70.6(a)(9).
    (3) New Jersey's Act permits an affirmative defense for start-ups, 
shut-downs, equipment maintenance and malfunctions. New Jersey's 
legislation (N.J.S.A. 26:2C-19.1 and 19.2) allows such a defense and 
sections 22.3(nn) and 22.16(l) of the rule discuss when it can be used. 
The Part 70 regulations allows an affirmative defense in emergency 
situations only and do not extend this defense to start-ups, shut-
downs, equipment maintenance or malfunctions per se. Because start-up, 
shut-down, and malfunction events will not always qualify as an 
``emergency,'' as defined in part 70, NJ's rule and legislation are 
inconsistent with 40 CFR Sec. 70.6(g). EPA finds this to be an 
impediment to full program approval. In addition, both NJ's legislation 
and rule are also inconsistent with 40 CFR Sec. 70.6(g) because they do 
not limit the application of the affirmative defense to technology-
based emission limits. 40 CFR Sec. 70.6(g) provides that the emergency 
affirmative defense is only applicable to technology-based emission 
limits and not health-based emission limits. Therefore, EPA has 
determined that the NJ legislation as stated in N.J.S.A. 26:2C-19.1 and 
19.2 and/or the NJ rule provisions on affirmative defenses as stated in 
N.J.A.C. 7:27-22.3(nn) and 22.16(l) must be revised to clarify its law 
to conform with 40 CFR Sec. 70.6(g).
    d. Public Participation (40 CFR Sec. 70.7): Consistent with the 
Part 70 regulations, the public will be provided with notice of, and an 
opportunity to comment on, draft permits related to initial permit 
issuance, permit renewals, and significant modifications (N.J.A.C. 
7:27-22.11).
    e. Permit Modification (40 CFR 70.7):
    (1) New Jersey's rule provides the following mechanism for 
modifying an operating permit: administrative amendments, changes to 
insignificant source operations (these are similar to Part 70's off-
permit changes), 7-day notice changes, minor modifications, and 
significant modifications. Each of these procedures requires a 
different level of review/processing time to complete. Public review is 
required for significant modifications but is discretionary for minor 
modifications. No public review is afforded within the other types of 
permit modification procedures. The criteria for determining the proper 
procedure for a modification are addressed in the specific sections of 
the New Jersey rule for each type of modification (N.J.A.C. 7:27-22.20, 
22.21, 22.22, 22.23, and 22.24). These procedures are consistent with 
the requirements of 40 CFR 70.7 and the provisions of 40 CFR 
70.4(b)(12) and 40 CFR 70.4(b)(14).
    (2) Under New Jersey's administrative amendment procedure (N.J.A.C. 
7:27-22.20(b)(7)), provisions of a 

[[Page 2987]]
preconstruction permit may be incorporated into the operating permit if 
the preconstruction permit was issued through public participation 
requirements substantially equivalent to those for operating permits as 
stipulated in N.J.A.C. 7:27-22.11 (public comment) and 22.12 (EPA 
comment). As written, New Jersey's rule is inconsistent with 40 CFR 
Sec. 70.7(d)(1)(v). Instead of requiring the preconstruction permit to 
have gone through procedures of N.J.A.C. 7:27-22.11 and 22.12, it only 
requires the permit to have undergone procedures that are 
``substantially equivalent.'' This might allow New Jersey to decide 
what ``substantially equivalent'' means on a case by case basis. This 
discretion is not contemplated by 40 CFR Sec. 70.7(d)(1)(v). In fact, 
it expressly contravenes the language of that section, which says that 
the preconstruction review ``program'' can be substantially equivalent. 
In other words, incorporation by administrative amendment can occur 
even if the procedures of the NSR program do not match part 70 exactly, 
if they are nevertheless approved by EPA as being substantially 
equivalent. Therefore, in order to receive full program approval, New 
Jersey must either:
    i. Specify in Sec. 7:27-22.20(b)(7) the procedures under which 
preconstruction permits must have been issued (Secs. 70.7 and .8) and 
permit content (Sec. 70.6) requirements the permit must meet in order 
to be eligible for incorporation by administrative amendment, or
    ii. Codify those procedural and permit content requirements into 
the preconstruction review regulations and obtain EPA's approval of 
those regulations.
    (3) One characteristic of New Jersey's minor and significant 
modification procedures, which is not prohibited or required by the 
Part 70 regulations, is the integration of the preconstruction permit 
review process with the operating permit review. For significant 
modifications, draft permits covering respectively, the preconstruction 
and operating permit requirements will be issued for public review at 
the same time. At the conclusion of the public comment period, the 
final preconstruction approval will be issued to the applicant and the 
proposed operating permit will be submitted to EPA for a 45-day review. 
For minor modifications, public review is not required but the EPA and 
affected states will have 45 days to object to the proposed minor 
modification. If no objection is received, New Jersey will issue the 
preconstruction approval and the revised portion of the operating 
permit in final.
    f. EPA oversight (40 CFR Sec. 70.8): Each permit, renewal, and 
minor or significant modification is subject to EPA review/veto prior 
to issuance. New Jersey's rule states that if NJDEP fails to revise a 
permit based on an EPA objection or if EPA objects (in response to a 
public petition) to the proposed permit after final permit issuance, 
EPA would take action to issue the revised permit or re-issue the 
permits under federal operating permit regulations to be promulgated at 
40 CFR Part 71. In these situations, before EPA takes any action 
pursuant to the Part 71 regulations, NJDEP must take action to withdraw 
approval of the operating permit upon receipt of EPA's veto. EPA will 
then revise and re-issue such permits in accordance with 40 CFR Part 
71.
    g. Enforcement authority (40 CFR Sec. 70.11): New Jersey's Air 
Pollution Control Act provides NJDEP with adequate enforcement 
authority and penalties for civil and criminal violations of permits 
and rules. Penalties may be assessed in the maximum amount of $10,000 
per day per violation. This also covers violations associated with the 
applicant's failure to pay the required fees.
    h. Initial application submittal and issuance (40 CFR 
Sec. 70.4(b)(11) (i) and (ii): While 40 CFR 70 requires all 
applications to be submitted within the first 12 months after state 
program approval, New Jersey has divided its subject sources into seven 
groups in an effort to maintain a smooth phase-in at the beginning of a 
new program. With an interim program approval, New Jersey is required 
to receive, during the first year, applications from 60% of the sources 
subject to the interim program. Permits for these sources will be 
issued one-third (of the 60%) each year during the first three years of 
program approval. The remaining 40% of the subject sources will submit 
applications during the first year of full program approval. The 
permits for these source will be issued one-third (of the 40%) each 
year during the initial three years after full approval. Based on Table 
2-3 of page 2-8 of Chapter 2, New Jersey would have received four 
``waves'' of applications from subject sources by November 15, 1996. 
This would cover 57.2 percent of all sources as opposed to 60%. To 
ensure that the 60% is met, New Jersey encouraged early submission of 
applications in February 1995 (6 months prior to program submittal). 
Also, since New Jersey's interim approval will not take place until at 
least February 1996, two months into the fifth waves of application 
submittal, it is certain that New Jersey would have received 60% of all 
applications by February 1997. As such, EPA does not consider this to 
be an issue for program approval.
3. Permit Fee Demonstration
    New Jersey's title V fee program consists of four types of fees 
which includes an emissions based fee, an initial application fee, 
permit modification fee, and a surcharge for rebuilding the 
infrastructure of its Air Programs. New Jersey has adopted the 
presumptive minimum of $25 per ton per year (to be adjusted by the 
consumer price index annually) as its emissions based fee.
    It should be noted, however that the actual appropriation for the 
New Jersey program has been limited by the fee legislation to $9.51 
million dollars per year from the collected fees. EPA acknowledges that 
the program costs and fee revenue figures submitted in New Jersey's fee 
demonstration are only projections based on New Jersey's current 
experience with similar permitting programs. A more accurate assessment 
of the actual program costs will not be possible until the state has 
had the opportunity to implement the program. Therefore, EPA is 
requiring New Jersey to re-submit a more refined fee demonstration that 
assures sufficient funding for the operating permit program prior to 
EPA granting full approval. Should the revised fee demonstration show 
that the $9.51 million dollar funding level is insufficient, New Jersey 
must correct the deficiency prior to submitting the corrected program. 
New Jersey is aware of the need to revisit the fee demonstration and 
has committed to re-evaluate the fee program during the interim 
approval period and take all necessary steps to ensure sufficient 
funding for the operating permit program.
    With respect to New Jersey's intention to use fees collected in 
excess of $9.51 million in reengineering NJDEP's Air Program, EPA does 
not find that to be a problem for interim approval for two reasons. 
First of all, based on the restricted use of the ``Air Surcharge 
Reengineering Fund'' as stipulated in New Jersey's legislation, the 
``excess title V fees are not used for activities that are totally 
unrelated to title V. EPA has thoroughly reviewed the activities listed 
in the legislation that are earmarked for the ``Air Surcharge 
Reengineering Fund'' and found them to be related to the development 
and maintenance of the infrastructure for implementing New Jersey's 
operating permit program. The costs associated with those activities 
are indirect costs to 

[[Page 2988]]
the title V program. Therefore, EPA finds it acceptable for New Jersey 
to use ``excess'' title V fees to fund those activities. In addition, 
this is consistent with guidance issued by EPA on August 4, 1993 and 
July 21, 1994, which stated that ``Title V does not limit a 
jurisdiction's discretion to collect fees pursuant to independent state 
authority beyond the minimum amount required by Title V''. These 
guidance documents clearly allow a state to charge fees in excess of 
that which are needed to run the operating permit program.
    EPA also notes that New Jersey requires fee payments from all title 
V affected sources including title IV Phase I units. There is one Phase 
I unit in the State of New Jersey. The Part 70 regulation (40 CFR 
Sec. 70.9(b)(4)) states that ``during the years 1995 through 1999 
inclusive, no fee for purposes of title V shall be required to be paid 
with respect to emissions from any affected unit under section 404 of 
the Act''. This Part 70 provision, however, does not restrict the state 
from collecting title V fees from Phase I units based on emissions that 
occurred prior to January 1, 1995 or after December 31, 1999. It also 
does not restrict a state from collecting non-title V related emissions 
based fee or non-emission based title V related fees from these units. 
Therefore, in this notice, EPA is proposing to grant interim approval 
to New Jersey's fee program. New Jersey may assess fees from any title 
IV Phase I units provided these fees are not used for purposes of title 
V.
4. Provisions Implementing the Requirements of Other Titles of the Act
a. Authority for Section 112 Implementation
    New Jersey has demonstrated in its program submittal adequate legal 
authority to implement and enforce all section 112 requirements through 
its title V operating permit program. The implementing rule which is 
found in N.J.A.C. 7:27-22 includes section 112 requirements in the 
definition of applicable federal requirements with which all subject 
sources must comply. New Jersey has sufficient legislative and 
regulatory authorities to issue permits that assure compliance with the 
following section 112 requirements:
    i. Early reductions: N.J.A.C 7:27-22.34 authorizes New Jersey to 
allow sources that achieved sufficient early reductions of hazardous 
air pollutants (HAP) emissions to delay compliance with the MACT or 
GACT standard for six years from the original compliance date if all of 
the conditions of the operating permit are met and the reductions are 
maintained throughout the six-year period.
    ii. Case-by-case MACT determinations: In the event that no 
applicable emissions limitations have been established by the 
Administrator, N.J.A.C. 7:27-22.26 allows New Jersey to make case-by-
case MACT determinations as required under section 112 (g) and (j) of 
the Act.
    iii. Implementation of section 112(r): N.J.A.C 7:27-22.9 requires 
applicants submitting an initial operating permit application to 
include in its proposed compliance plan a statement certifying that the 
permittee will ensure the compliance of the facility with the 
accidental release provisions at 42 U.S.C. 7412(r). Annual 
certification of compliance with each applicable requirement that 
pertains to the facility is required under N.J.A.C. 7:27-22.19.
b. Implementation of Section 112(g) Upon Program Approval
    Case-by-case MACT determinations: In the event that no applicable 
emissions limitations for the hazardous air pollutants have been 
established by the Administrator, NJDEP will make case-by case Maximum 
Achievable Control Technology (MACT) determinations as required under 
Sections 112(j) and (g) of the Act. The EPA issued an interpretive 
notice on February 14, 1995 (60 FR 8333), which outlines EPA's revised 
interpretation of 112(g) applicability. The notice postpones the 
effective date of 112(g) until after EPA has promulgated a rule 
addressing that provision. The notice sets forth in detail the 
rationale for the revised interpretation.
    The Section 112(g) interpretive notice explains that EPA is still 
considering whether the effective date of Section 112(g) should be 
delayed beyond the date of promulgation of the Federal rule so as to 
allow states time to adopt rules implementing the Federal rule, and 
that EPA will provide for any such additional delay in the final 
Section 112(g) rulemaking. NJDEP has provided broad language in its 
regulation that will allow the implementation of 112(g) immediately 
after EPA promulgates its rule. The permitting mechanism to be used by 
the state of New Jersey to implement these requirements during the 
period before EPA promulgates the final federal rule and after New 
Jersey's title V program becomes effective is the State's 
preconstruction process (as stated in N.J.A.C. 7:27-22.33). In the 
event that EPA's final rulemaking under Sec. 112(g) requires changes in 
New Jersey's operating permit rule/program to assure compliance with 
federal requirements, New Jersey has committed to making all necessary 
changes in a timely manner.
    In this notice, EPA proposes to approve New Jersey's 
preconstruction review program found in N.J.S.A.26:2C-1 et. seq. under 
the authority of title V and Part 70 solely for the purpose of 
implementing section 112(g) of the Act. However, this approval does not 
have any effect on previous actions taken by EPA on the New Jersey 
preconstruction review program found in N.J.S.A.26:2C-1 et. seq. Also, 
this approval will be without effect if EPA decides in the final 
section 112(g) rule that sources are not subject to the requirements of 
the rule until State regulations are adopted. The duration of this 
approval is limited to 18 months following promulgation by EPA of the 
section 112(g) rule to provide adequate time for the State to adopt 
regulations consistent with the federal requirements.
c. Program for Delegation of Section 112 Standards as Promulgated
    Section 112(l): Requirements for approval specified in 40 CFR 
Sec. 70.4(b), encompass Section 112(l)(5) approval requirements for 
delegation of Section 112 standards as they apply to Part 70 sources. 
Section 112(l)(5) requires that the state's program contain adequate 
authorities, adequate resources for implementation, an expeditious 
compliance schedule, and adequate enforcement ability, which are also 
requirements under Part 70. In a letter dated November 15, 1995, from 
William O'Sullivan, Administrator of the Air Quality Permitting Program 
of the NJDEP requested delegation through 112(l) of all existing 112 
standards for Part 70 sources and infrastructure programs. With respect 
to future section 112 standards, NJDEP intends to review every standard 
within 45 days of receiving notice from EPA and determine whether to 
accept the delegation of a standard on a case-by-case basis. In this 
letter, NJDEP demonstrated that it has sufficient legal authorities, 
adequate resources, capability for automatic delegation of future 
standards, and adequate enforcement ability for implementation of 
Section 112 of the Act for Part 70 sources. Therefore, the EPA is 
proposing to grant approval under Section 112(l)(5) and 40 CFR Part 
63.91 to New Jersey for its program mechanism for receiving delegation 
of all existing and future 112(d) standards for Part 70 sources.
d. Commitment To Implement Title IV of the Act
    As stated in N.J.A.C. 7:27-22.29, the state of New Jersey has 
already adopted 

[[Page 2989]]
and incorporated by reference the provisions of 40 CFR Part 72, and any 
subsequent amendments thereto, for purposes of implementing an acid 
rain program that meets the requirements of title IV of the Act. It 
further stated that if provisions or requirements of 40 CFR Part 72 
conflict with or are not included in New Jersey's rule that the Part 72 
provision and requirements shall apply and take precedence.

B. Proposed Actions

    EPA proposes source category-limited interim approval of the 
operating permit program initially submitted by the state of New Jersey 
on November 15, 1993, and revised on August 10, 1995. Under this 
approval, New Jersey may collect fees from any title IV Phase I 
facilities, provided that these are not used to meet the presumptive 
title V fee level for the interim program.
    In accordance with 40 CFR Sec. 70.4(b), this approval encompasses 
EPA's approval under section 112(l)(5) and 40 CFR Sec. 63.91 to the 
state of New Jersey for its program mechanism for receiving delegation 
of all existing and future section 112(d) standards for all Part 70 
sources. In order to receive full program approval, the State of New 
Jersey must submit a corrected program that addresses the following 
deficiencies six months before expiration of the interim approval:
1. Deferral of Non-Major Sources
    As a condition for full program approval, New Jersey must submit a 
commitment in the corrected program asserting that New Jersey will 
require non-major sources subject to Sec. 111 or Sec. 112 standards 
promulgated after July 21, 1992 to apply for an operating permit under 
New Jersey's full program unless EPA exempts such sources in future 
rulemaking or promulgation of future requirements. Applications from 
these sources should be submitted in accordance with the schedule found 
under N.J.A.C. 7:27-22.5(i).
2. Definition of Prompt Reporting of Deviations
    In order to receive full program approval, the reporting 
requirement in N.J.A.C. 7:27-22.19 must be revised to ensure adequate 
protection of public health and safety. New Jersey must add a provision 
requiring reporting of deviations within 10 days if the air 
contaminants are released in a quantity or concentration that poses no 
potential threat to public health, welfare, or the environment and the 
permittee does not intend to assert an affirmative defense for the 
deviation.
3. Affirmative Defense
    In order to receive full program approval, the New Jersey 
legislation as stated in N.J.S.A. 26:2C-19.1 and 19.2 and/or the New 
Jersey rule provisions on affirmative defenses as stated in N.J.A.C. 
7:27-22.3(nn) and 22.16(l) must be revised to clarify its law to 
conform with 40 CFR Sec. 70.6(g).
4. Administrative Amendments
    In order to receive full program approval, New Jersey must revise 
its operating permit rule to ensure that the administrative amendment 
procedure is properly used for incorporating preconstruction permits 
into the operating permit. Specifically, New Jersey must either:
    i. Specify in Sec. 7:27-22.20(b)(7) the procedures under which 
preconstruction permits must have been issued (Secs. 70.7 and .8) and 
permit content (Sec. 70.6) requirements the permit must meet in order 
to be eligible for incorporation by administrative amendment, or
    ii. Codify those procedural and permit content requirements into 
the preconstruction review regulations and obtain EPA's approval of 
those regulations. the following changes must be made to N.J.A.C. 7:27-
22.20(b)(7)(i) and (ii):
5. Permit Fees
    In order to receive full program approval, New Jersey must submit a 
revised fee demonstration showing that $9.51 million is adequate to 
administer the operating permit program during the initial four years 
of full program implementation. Should the cap of $9.51 million fall 
short of the actual program costs, New Jersey must take all necessary 
actions (including legislative changes) to correct the problem prior to 
submitting the corrected program.

C. Options for Approval/Disapproval and Implications

    This interim approval, which may not be renewed, extends for a 
period of up to two years. During the interim approval period, New 
Jersey is protected from sanctions for failure to have a program, and 
EPA is not obligated to promulgate a federal operating permit program 
in the State. Permits issued under a program with interim approval have 
full standing with respect to Part 70, and the one-year time period for 
submittal of permit applications by subject sources begins upon interim 
approval, as does the three-year time period for processing the initial 
permit applications.
    The scope of New Jersey's Part 70 program that EPA proposes to 
grant interim approval in this notice would apply to all Part 70 
sources as listed in New Jersey's operating permit rule (N.J.A.C. 7:27-
22.5) and transition plan.
    As discussed above in section II.A.4.c., EPA also proposes to grant 
approval under section 112(l)(5) and 40 CFR 63.91 to New Jersey's 
program for receiving delegation of section 112 standards that are 
unchanged from federal standards as promulgated. In addition, EPA 
proposes to delegate existing standards under 40 CFR Parts 61 and 63.

III. Administrative Requirements

A. Request for Public Comments

    EPA requests comments on all aspects of this proposed interim 
approval. Copies of the State's submittal and other information relied 
upon for the proposed interim approval are contained in docket number 
NJ-95-01 maintained at the EPA Regional Office. The docket is an 
organized and complete file of all the information submitted to, or 
otherwise considered by, EPA in the development of this proposed 
interim approval. The principal purposes of the docket are:
    (1) To allow interested parties a means to identify and locate 
documents so that they can effectively participate in the approval 
process; and
    (2) To serve as the record in case of judicial review. EPA will 
consider any comments received by February 29, 1996.

B. Executive Order 12866

    The Office of Management and Budget has exempted this action from 
Executive Order 12866 review.

C. Regulatory Flexibility Act

    EPA's actions under section 502 of the Act do not create any new 
requirements, but simply address operating permit programs submitted to 
satisfy the requirements of 40 CFR Part 70. Because this action does 
not impose any new requirements, it does not have a significant impact 
on a substantial number of small entities.

D. Unfunded Mandates Act

    Under section 202 of the Unfunded Mandates Reform Act of 1995 
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA 
must prepare a budgetary impact statement to accompany any proposed or 
final rule that includes a federal mandate that may result in estimated 
costs to State, local, or tribal governments in the aggregate; or to 
the private sector, of $100 million or more. Under section 205, EPA 
must select the most cost effective and least burdensome 

[[Page 2990]]
alternative that achieves the objectives of the rule and is consistent 
with statutory requirements. Section 203 requires EPA to establish a 
plan for informing and advising any small governments that may be 
significantly or uniquely impacted by the rule.
    EPA has determined that the proposed approval action promulgated 
today does not include a federal mandate that may result in estimated 
costs of $100 million or more to either State, local, or tribal 
governments in the aggregate, or to the private sector. This federal 
action approves pre-existing requirements under State or local law, and 
imposes no new federal requirements. Accordingly, no additional costs 
to State, local, or tribal governments, or to the private sector, 
result from this action.

List of Subjects in 40 CFR Part 70

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Intergovernmental relations, Operating permits, 
Reporting and recordkeeping requirements.

    Authority: 42 U.S.C. 7401-7671q.

    Dated: December 18, 1996.
Jeanne M. Fox,
Regional Administrator.
[FR Doc. 96-1712 Filed 1-29-96; 8:45 am]
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