Clean Air Act Proposed Interim Approval of Operating Permit Program; State of Colorado

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 70

[CO-001; FRL-5090-5]

Clean Air Act Proposed Interim Approval of Operating Permit

Program; State of Colorado

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed interim approval.

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SUMMARY: The EPA proposes interim approval of the Operating Permits

Program submitted by the State of Colorado. Colorado's Operating

Permits Program was submitted 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

November 14, 1994.

ADDRESSES: Comments on this action should be addressed to Laura Farris,

8ART-AP, U.S. Environmental Protection Agency, Region 8, Air Programs

Branch, 999 18th Street, Suite 500, Denver, Colorado 80202.

Copies of the State's submittal and other supporting information

used in developing the proposed rule are available for inspection

during normal business hours at the following location: U.S.

Environmental Protection Agency, Region 8, 999 18th Street, suite 500,

Denver, Colorado 80202.

FOR FURTHER INFORMATION CONTACT: Laura Farris, (303) 294-7539.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

Introduction

As required under title V of the Clean Air Act (``the Act'') as

amended (1990), EPA has promulgated rules which define the minimum

elements of an approvable state operating permits program and the

corresponding standards and procedures by which the EPA will approve,

oversee, and withdraw approval of state operating permits programs (see

57 FR 32250 (July 21, 1992)). These rules are codified at 40 Code of

Federal Regulations (CFR) part 70. Title V requires states to develop,

and submit to EPA, programs for issuing these operating permits to all

major stationary sources and to certain other sources.

The Act requires that states develop and submit these programs to

EPA by November 15, 1993, and that EPA act to approve or disapprove

each program within 1 year after receiving the submittal. The EPA's

program review occurs pursuant to section 502 of the Act and the part

70 regulations, which together outline criteria for approval or

disapproval. Based on a material change to the State's submittal, which

consisted of a revised permit fee demonstration, the EPA is extending

the review period for an additional 3 months. 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 2 years.

If EPA has not fully approved a program by 2 years after the November

15, 1993 date, or by the end of an interim program, it must establish

and implement a Federal program.

II. Proposed Action and Implications

A. Analysis of State Submission

1. Support Materials

The Governor of Colorado submitted an administratively complete

Title V Operating Permit Program (PROGRAM) for the State of Colorado on

November 5, 1993. EPA deemed the PROGRAM administratively complete in a

letter to the Governor dated December 28, 1993. The PROGRAM submittal

includes a legal opinion from the Attorney General of Colorado stating

that the laws of the State provide adequate legal authority to carry

out all aspects of the PROGRAM, and a description of how the State

intends to implement the PROGRAM. The submittal additionally contains

evidence of proper adoption of the PROGRAM regulations, application and

permit forms, a transition plan, and a permit fee demonstration.

2. Regulations and Program Implementation

The Colorado PROGRAM, including the operating permit regulation

(part C of Regulation No. 3), substantially meets the requirements of

40 CFR 70.2 and 70.3 with respect to applicability; Secs. 70.4, 70.5,

and 70.6 with respect to permit content including operational

flexibility; Sec. 70.5 with respect to complete application forms and

criteria which define insignificant activities; Sec. 70.7 with respect

to public participation and minor permit modifications; and Sec. 70.11

with respect to requirements for enforcement authority.

Section II.E. of part C of Regulation 3 lists the insignificant

activities that sources do not have to include in their operating

permit application. This list includes emission thresholds for criteria

pollutants in nonattainment areas (less than one ton per year),

criteria pollutants in attainment areas (less than two tons per year);

lead (less than 100 pounds per year); non-criteria pollutants (less

than the de minimis levels determined by the method set forth in

Appendix A of Regulation 3); as well as other specific activities and

sources which are considered to be insignificant activities. Section

II.E. states that sources may not use any insignificant activity

exemptions from the list to avoid any applicable requirements.

Part 70 of the operating permits regulations requires prompt

reporting of deviations from the permit requirements. Section

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. Although the permit program

regulations should define ``prompt'' for purposes of administrative

efficiency and clarity, an acceptable alternative is to define

``prompt'' in each individual permit. The EPA believes that ``prompt''

should generally be defined as requiring reporting within two to ten

days of the deviation. Two to ten days is sufficient time in most cases

to protect public health and safety as well as to provide a forewarning

of potential problems. For sources with a low level of excess

emissions, a longer time period may be acceptable. However, prompt

reporting must be more frequent than the semiannual reporting

requirement, given that this is a distinct reporting obligation under

Sec. 70.6(a)(3)(iii)(A). 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. Colorado's

PROGRAM, in section V.C.7.b of part C of Regulation 3, states that

``prompt'' will be defined in each individual permit, depending on the

type and degree of deviation likely to occur and the applicable

requirements; however, ``prompt'' reporting will be required at least

every six months, except as otherwise specified by the State in the

permit.

Colorado State law does not authorize variances from Clear Air Act

requirements. Additionally, the Attorney General's opinion that was

part of the PROGRAM submittal states that the State will not authorize

the granting of a variance from an applicable requirement or from the

terms of an operating permit.

Comments noting deficiencies in the Colorado PROGRAM were sent to

the State in a letter dated April 8, 1994. The deficiencies were

segregated into those that require corrective action prior to interim

PROGRAM approval, and those that require corrective action prior to

final PROGRAM approval. The State committed to address the deficiencies

that require corrective action prior to interim PROGRAM approval in a

letter dated May 12, 1994, and subsequently held a public hearing to

consider and finalize these changes on August 18, 1994. EPA has

reviewed these changes and has determined that they are adequate to

allow for interim approval. One issue noted in the April 8th letter

related to insignificant activities requires further corrective action

prior to full PROGRAM approval as follows: The State must revise its

administrative process in section II.D.5 of part A of Regulation 3, for

adding additional exemptions to the insignificant activities list, to

require approval by the EPA of any new exemptions before such

exemptions can be utilized by a source. An additional deficiency that

requires corrective action prior to full PROGRAM approval regarding the

implementation of section 112(r) of the Act is addressed in section 4.a

below. Refer to the technical support document accompanying this

rulemaking for a detailed explanation of each comment and the State's

corrective actions.

1994 Colorado Senate Bill 94-139, now codified at section 13-25-

126.5 of the Colorado Revised Statutes, contains an ``environmental

self-evaluation privilege'' which prevents the admission of voluntary

environmental audit reports as evidence in any civil, criminal or

administrative proceeding, with certain exceptions. It is not clear at

this time what effect, if any, this privilege might have on title V

enforcement actions. In addition, EPA is currently establishing a

national position regarding EPA approval of environmental programs in

States which adopt statutes that confer an evidentiary privilege for

environmental audit reports. The EPA regards Senate Bill 94-139 as

wholly external to the program submitted for approval under part 70,

and consequently proposes to take no action on this provision of State

law. If, during PROGRAM implementation, EPA determines that this

provision interferes with Colorado's enforcement responsibilities under

part 70, EPA will consider this grounds for withdrawing PROGRAM

approval in accordance with 40 CFR section 70.10(c).

3. Permit Fee Demonstration

The Colorado PROGRAM included an original fee structure that set

fees below the presumptive minimum set in part 70. Specific fee

provisions included $17.23 per ton fee for regulated air pollutants for

fiscal year 1994, to be increased on an annual basis to $22.17 in

fiscal year 1995, $27.01 in fiscal year 1996 and $28.30 in fiscal year

1997; an additional fee of $100 per ton for hazardous air pollutants

(HAPs), including ozone depleting substances, for fiscal year 1994 and

thereafter; a permit application processing fee of $50 per hour; and a

fee of $100 to accompany air pollution emission notices required of

new, modified and existing sources by the State which must be renewed

every five years (fees will not be charged on emissions exceeding 4,000

tons per year per pollutant at a source). Because Colorado's estimated

aggregate fee per ton (i.e. total revenues divided by annual tons of

emissions subject to fees) was below the presumptive minimum set in

part 70, it was necessary for the State to include a permit fee

demonstration in their PROGRAM submittal.

Legislation recently adopted by the Colorado Legislature (SB 217)

reduced the per ton fee for regulated air pollutants. After careful

review, the State has determined that these fees would support the

Colorado PROGRAM costs as required by 40 CFR part 70.9(a).

Subsequently, the State submitted a material change to their original

PROGRAM submittal on July 27, 1994, which consisted of a revised permit

fee demonstration and addressed how the State will adjust to the new

fees set in SB 217 and adequately fund the operation of the Colorado

PROGRAM. The revised permit fee demonstration also included a workload

analysis which estimated the annual cost of running the PROGRAM to be

$1.87 million for fiscal year 1994/1995; and a new fee structure that

consists of a $9.02 per ton fee for regulated air pollutants for fiscal

year 1994, to be increased on an annual basis to $10.87 in fiscal year

1995, $13.66 in fiscal year 1996 and $11.58 in fiscal year 1997; with

the additional HAP and permit application processing fees given above.

Upon review of the revised permit fee demonstration, the EPA noted

the following concern (which is not a disapproval issue at this time):

Although the Colorado Legislature gives the State the authority to

assess and collect annual permit fees in an amount sufficient to cover

all reasonable direct and indirect costs of the PROGRAM for a two year

period of time, the State must authorize an increase in the spending of

such fees for title V activities annually. If such an increase in

spending authority is not granted, and the State is not able to fund

all the costs of the PROGRAM, the EPA would be required to disapprove

or withdraw the part 70 program, impose sanctions, and implement a

federal permitting program.

4. Provisions Implementing the Requirements of Other Titles of the Act

a. Authority and/or commitments for section 112 implementation.

Colorado has demonstrated in its PROGRAM submittal adequate legal

authority to implement and enforce all section 112 requirements through

the title V permit. This legal authority is contained in Colorado's

enabling legislation and in regulatory provisions defining ``applicable

requirements'' and stating that the permit must incorporate all

applicable requirements. EPA has determined that this legal authority

is sufficient to allow Colorado to issue permits that assure compliance

with all section 112 requirements.

EPA is interpreting the above legal authority to mean that Colorado

is able to carry out all section 112 activities. However, the following

areas of concern have been identified in the Colorado PROGRAM: The

Colorado Air Quality Control Act (25-7-109.6(5)) states that

implementation and effectiveness of an accidental release prevention

program, required under section 112(r) of the Act, is contingent on the

receipt of federal funding. This condition is unacceptable since the

State cannot put a condition on a specific requirement mandated through

EPA rulemaking. Section 25-7-109.6(5) of the Colorado Air Quality

Control Act must be revised before full PROGRAM approval can be

granted. An additional concern lies in the definition of applicable

requirement in section I.B.9. of part A of Regulation 3 which excludes

the contents of any risk management plan, and in section V.C.17 of part

C of Regulation 3 which specifies that the contents of risk management

plans shall not be incorporated into operating permits. Although the

contents of risk management plans are not an applicable requirement at

this time that must be incorporated into operating permits, section

112(r) rulemaking is ongoing in an effort to define the requirements.

Changes to the PROGRAM may be necessary in the future to comply with

any new or supplemental rulemaking concerning section 112(r).

For further rationale on this interpretation, please refer to the

Technical Support Document accompanying this rulemaking and the April

13, 1993 guidance memorandum titled ``Title V Program Approval Criteria

for Section 112 Activities,'' signed by John Seitz.

b. Implementation of 112(g) upon program approval. As a condition

of approval of the part 70 PROGRAM, Colorado is required to implement

section 112(g) of the Act from the effective date of the part 70

PROGRAM. Imposition of case-by-case determinations of maximum

achievable control technology (MACT) or offsets under section 112(g)

will require the use of a mechanism for establishing federally

enforceable restrictions on a source-specific basis. The EPA is

proposing to approve Colorado's preconstruction permitting program

found in Regulation 3, part B under the authority of title V and part

70 solely for the purpose of implementing section 112(g) during the

transition period between title V approval and adoption of a State rule

implementing EPA's section 112(g) regulations. EPA believes this

approval is necessary so that Colorado has a mechanism in place to

establish federally enforceable restrictions for section 112(g)

purposes from the date of part 70 approval. Section 112(l) provides

statutory authority for approval for the use of State air programs to

implement section 112(g), and title V and section 112(g) provide

authority for this limited approval because of the direct linkage

between implementation of section 112(g) and title V. The scope of this

approval is narrowly limited to section 112(g), and does not confer or

imply approval for purposes of any other provision under the Act. If

Colorado does not wish to implement section 112(g) through its

preconstruction permit program and can demonstrate that an alternative

means of implementing section 112(g) exists, the EPA may, in the final

action approving Colorado's PROGRAM, approve the alternative instead.

To the extent Colorado does not have the authority to regulate HAPs

through existing State law, the State may disallow modifications during

the transition period.

This approval is for an interim period only, until such time as the

State is able to adopt regulations consistent with any regulations

promulgated by EPA to implement section 112(g). Accordingly, EPA is

proposing to limit the duration of this approval to a reasonable time

following promulgation of section 112(g) regulations so that Colorado,

acting expeditiously, will be able to adopt regulations consistent with

the section 112(g) regulations. The EPA is proposing here to limit the

duration of this approval to 12 months following promulgation by EPA of

section 112(g) regulations. Comment is solicited on whether 12 months

is an appropriate period considering Colorado's procedures for adoption

of federal regulations.

c. Program for straight delegation of section 112 standards.

Requirements for approval, specified in 40 CFR Sec. 70.4(b), encompass

section 112(l)(5) requirements for approval of a program for delegation

of section 112 General Provisions Subpart A and standards as

promulgated by EPA as they apply to part 70 sources. Section 112(l)(5)

requires that the State's PROGRAM contain adequate authorities,

adequate resources for implementation, and an expeditious compliance

schedule, which are also requirements under part 70. Therefore, the EPA

is also proposing to grant approval under section 112(l)(5) and 40 CFR

Part 63.91 of the State's program for receiving delegation of section

112 standards that are unchanged from the Federal standards as

promulgated. Colorado has informed EPA that it intends to accept

delegation of section 112 standards through a combination of case-by-

case rulemaking and incorporation by reference. This program applies to

both existing and future standards but is limited to sources covered by

the part 70 program.

The radionuclide national emission standard for HAPs (NESHAP) is a

section 112 regulation and therefore, also an applicable requirement

under the State PROGRAM. Sources which are currently defined as part 70

sources and emit radionuclides are subject to federal radionuclide

standards. Additionally, sources which are not currently part 70

sources may be defined as major sources under forthcoming federal

radionuclide regulations. The EPA will work with the State in the

development of its radionuclide program to ensure that permits are

issued in a timely manner.

d. Program for implementing title IV of the Act. Colorado's PROGRAM

contains adequate authority to issue permits which reflect the

requirements of Title IV of the Act, and commits to adopt the rules and

requirements promulgated by EPA to implement an acid rain program

through the title V permit.

B. Options for Approval/Disapproval and Implications

The EPA is proposing to grant interim approval to the operating

permits program submitted by the State of Colorado on November 5, 1993.

The State must make the following changes, as discussed above, to

receive full PROGRAM approval: (1) The State must revise its

administrative process in section II.D.5 of part A of Regulation 3, for

adding additional exemptions to the insignificant activities list, to

require approval by the EPA of any new exemptions before such

exemptions can be utilized by a source. (2) The State must revise the

Colorado Air Quality Control Act (25-7-109.6(5)) to remove the

condition that an accidental release prevention program will only be

implemented if federal funds are available. Evidence of these statutory

and regulatory revisions must be submitted to the EPA within 18 months

of the EPA's interim approval of the Colorado PROGRAM.

This interim approval, which may not be renewed, extends for a

period of up to two years. During the interim approval period, the

State is protected from sanctions for failure to have a program, and

EPA is not obligated to promulgate a Federal permits 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 EPA is proposing to disapprove the operating permits program

submitted by Colorado if the specified changes are not made within 18

months of the effective date of final interim approval. If promulgated,

this disapproval would constitute a disapproval under section 502(d) of

the Act (see generally 57 FR 32253-54). As provided under section

502(d)(1) of the Act, Colorado would have up to 180 days from the date

of EPA's notification of disapproval to the Governor of Colorado to

revise and resubmit the PROGRAM. The EPA will apply sanctions to

Colorado if the Governor fails to submit a corrected PROGRAM within 18

months following EPA disapproval of the PROGRAM. If the State has not

come into compliance within 6 months after EPA applies the first

sanction, a second sanction is required. In addition, discretionary

sanctions may be applied any time during the 18-month period following

PROGRAM disapproval. If the State has not received full PROGRAM

approval within two years after final interim PROGRAM approval, the EPA

must promulgate, administer, and enforce a Federal permits program for

the State.

Requirements for approval, specified in 40 CFR 70.4(b), encompass

section 112(l)(5) requirements for approval of a program for delegation

of section 112 standards as promulgated by EPA as they apply to part 70

sources. Section 112(l)(5) requires that the State's program contain

adequate authorities, adequate resources for implementation, and an

expeditious compliance schedule, which are also requirements under part

70. Therefore, the EPA is also proposing to grant approval under

section 112(l)(5) and 40 CFR Part 63.91 of the State's program for

receiving delegation of section 112 standards that are unchanged from

federal standards as promulgated. This program for delegations only

applies to sources covered by the part 70 program.

III. Administrative Requirements

A. Request for Public Comments

The EPA is requesting comments on all aspects of this proposed

rule. Copies of the State's submittal and other information relied upon

for the proposed interim approval are contained in a docket 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 rulemaking. 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 rulemaking

process, and

(2) To serve as the record in case of judicial review. The EPA will

consider any comments received by November 14, 1994.

B. Executive Order 12866

The Office of Management and Budget has exempted this action from

Executive Order 12866 review.

C. Regulatory Flexibility Act

The EPA's actions under section 502 of the Act do not create any

new requirements, but simply address operating permits 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.

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. 7401-76719.

Dated: September 30, 1994.

Jack W. McGraw,

Acting Regional Administrator.

[FR Doc. 94-25388 Filed 10-13-94; 8:45 am]

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