Clean Air Act Final Interim Approval of Operating Permits Program; Indiana

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 70

[IN001; FRL-5331-2]

Clean Air Act Final Interim Approval of Operating Permits

Program; Indiana

AGENCY: Environmental Protection Agency (USEPA).

ACTION: Final interim approval.

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SUMMARY: The USEPA is promulgating an interim approval of the operating

permits program submitted by Indiana for the purpose of complying with

Federal requirements which mandate that States develop, and submit to

USEPA, programs for issuing operating permits to all major stationary

sources, and to certain other sources.

EFFECTIVE DATE: The effective date of this action is December 14, 1995.

ADDRESSES: Copies of the State's submittal and other supporting

information used in developing the final interim approval are available

for inspection during normal business hours at the following location:

USEPA Region 5, 77 West Jackson Boulevard, AR-18J, Chicago, Illinois,

60604. Please contact Sam Portanova at (312) 886-3189 to arrange a time

if inspection of the submittal is desired.

FOR FURTHER INFORMATION CONTACT: Sam Portanova, AR-18J, 77 West Jackson

Boulevard, Chicago, Illinois, 60604, (312) 886-3189.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

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

amended (1990), USEPA has promulgated regulations which define the

minimum elements of an approvable State operating permits program and

the corresponding standards and procedures by which the USEPA will

approve, oversee, and withdraw approval of State operating permits

programs (see 57 FR 32250 (July 21, 1992)). These regulations are

codified at 40 Code of Federal Regulations (CFR) part 70. Title V

requires States to develop, and submit to USEPA, 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

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

each program within 1 year after receiving the submittal. 40 CFR

70.4(e)(2), however, allows the Administrator to extend the review

period of a State's submittal if the State's submission is materially

altered during the 1-year review period. This additional review period

may not extend beyond 1 year following receipt of the revised

submission.

The USEPA's program review occurs pursuant to section 502 of the

Act and the part 70 regulations, which together outline criteria for

approval or disapproval. Where a program substantially, but not fully,

meets the requirements of part 70, USEPA may grant the program interim

approval for a period of up to 2 years. If USEPA 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.

On May 22, 1995, USEPA proposed an interim approval of the

operating permits program for Indiana (see 60 FR 27064) and received

public comments on the proposal. In this document, USEPA is taking

final action to promulgate an interim approval of the operating permits

program for Indiana.

II. Final Action and Implications

A. Analysis of State Submission

The USEPA is promulgating an interim approval of the operating

permits program submitted by Indiana on August 10, 1994. Indiana's

program substantially meets the requirements of part 70; however,

certain issues must be addressed in the State's submittal before USEPA

can grant full approval.

For more detailed information on the analysis of the State's

submission, please refer to the May 22, 1995, proposed interim approval

of the Indiana Title V program (see 60 FR 27064) and the technical

support document (TSD) included with the docket of the proposed interim

approval.

1. Regulations and Program Implementation

a. Applicability. The Indiana program meets the requirements of 40

CFR 70.2 and 70.3 for applicability in 326 IAC 2-7-2. Please refer to

the proposed interim approval and the TSD included with the docket of

the proposed interim approval for more information regarding the

language in 326 IAC 2-7-2.

b. Permit Applications. A deficiency in the State's permit

application requirements exists concerning insignificant activities,

which are defined in 326 IAC 2-7-1(20). In the Indiana program, the

insignificant activity threshold level for sulfur dioxide (SO2) is

10 pounds per hour (lb/hr) or 50 pounds per day (lb/day) and the

insignificant activity threshold level for hazardous air pollutants

(HAP) is 4 tons per year (tpy) for one HAP or 10 tpy of any combination

of HAPs. USEPA

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proposed interim approval for these threshold levels in the May 22,

1995, Federal Register.

USEPA is promulgating interim approval to the SO2 and HAP

insignificant activity levels and promulgating full approval to the

volatile organic compounds, particulate matter, carbon monoxide,

nitrogen oxides, and lead insignificant activity levels. The rationale

for the interim approval status is provided in the proposed interim

approval and the TSD included with the docket of the proposed interim

approval.

c. Permit issuance, renewal, reopenings and revisions. The Indiana

program meets the requirements of 40 CFR 70.7 and 70.8 for permit

issuance, renewal, reopenings, and public participation and the

requirements of 40 CFR 70.4(b)(12) for operational flexibility. Please

refer to the proposed interim approval and the TSD included with the

docket of the proposed interim approval for more information regarding

the language in 326 IAC 2-7-11 for administrative permit amendments.

In the May 22, 1995, notice, USEPA proposed interim approval with

respect to the State's threshold levels for group processing of permits

(326 IAC 2-7-12(c)). In that notice, USEPA stated that Indiana

program's threshold level for minor permit modification (MPM) group

processing eligibility was not as stringent as the part 70 threshold

level. To obtain full approval, USEPA stated that Indiana must

establish a group processing threshold consistent with 40 CFR

70.7(e)(3)(i), or demonstrate that an alternative threshold would

alleviate severe administrative burden and result in trivial

environmental impact. The May 22, 1995, notice stated that ``if EPA's

concerns are addressed by a change in the State's final regulations or

by a State demonstration before final action on this notice, then EPA

can fully approve the State's group processing threshold levels.''

In an August 30, 1995, letter to USEPA, Indiana submitted a

demonstration that an alternative threshold would alleviate severe

administrative burden and would result in trivial environmental impact.

In this letter, Indiana noted that its Title V regulation requires the

State to provide public participation for all MPMs, including group

processing MPMs. Since part 70 does not require public participation

for MPMs, the State requirement is more stringent and will require

public participation for many more permit modifications than the

Federal rule requires. Indiana's group processing threshold level will

allow the State to consolidate more of its MPM public notice and

comment periods. Although staff review of modifications as individuals

or as a group may not significantly differ, the administrative savings

incurred by the State to provide public notice of these permits on an

individual basis would be significant. Under its current permit

programs, the State processes approximately 115-125 permit exemptions

per year based on the stated group processing thresholds; and the State

estimates that a majority of these might have to undergo individual

processing under a part 70 threshold.

With regard to environmental impact, the State's letter also notes

that under its program, more modifications than required by part 70

would be subject to permitting authority review and public notice. The

level and result of permitting authority review should not be impacted

by individual or group processing. In fact, since group processing

actions must be completed within 180 days as opposed to 90 days, there

may be opportunity for greater review and consideration. In addition,

increased opportunity for public comment, whether as individual or

group modifications, could result in enhanced environmental benefits,

but at the very least will not directly result in adverse environmental

impacts. Based on these considerations, USEPA believes the State has

met the required justification for a different group processing

threshold and is promulgating full approval for the Indiana MPM group

processing threshold levels.

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

a. Authority and/or Commitments for Section 112 Implementation.

Indiana has demonstrated in its Title V program submittal adequate

legal authority to implement and enforce all section 112 requirements

through Title V permits. This legal authority is contained in Indiana's

enabling legislation and in regulatory provisions defining ``applicable

requirements'' and stating that the permit must incorporate all

applicable requirements. USEPA has determined that this legal authority

is sufficient to allow Indiana to issue permits that assure compliance

with all section 112 requirements.

The USEPA is accepting the above legal authority as an adequate

demonstration that Indiana is able to carry out all section 112

activities relative to Title V sources. For further rationale on this

interpretation, please refer to the proposed interim approval, the TSD

accompanying the proposed interim approval, and the April 13, 1993,

guidance memorandum titled ``Title V Program Approval Criteria for

section 112 activities,'' signed by John Seitz, Director of the Office

of Air Quality Planning and Standards.

b. Implementation of Section 112(g) Upon Program Approval. As a

condition of approval of the Title V program, Indiana is required to

implement section 112(g) of the Act. Indiana has promulgated a ``MACT

Rule'' in 326 IAC 2-1-3.3. The purpose of this regulation is to provide

Indiana the necessary mechanism to implement section 112(g).

According to the Federal Register interpretive notice published on

February 14, 1995 (60 FR 8333), the requirements of section 112(g) will

not become effective until after USEPA has promulgated a regulation

addressing that provision. The Federal Register notice sets forth in

detail the rationale for this interpretation. At the time of Indiana's

program submittal and USEPA's subsequent review period, USEPA had not

promulgated a federal regulation containing the specific requirements

of section 112(g).

The section 112(g) interpretive notice explains that USEPA is still

considering whether the effective date of section 112(g) should be

delayed beyond the date of promulgation of the Federal regulation so as

to allow States time to adopt regulations implementing the Federal

regulation, and that USEPA will provide for any such additional delay

in the final section 112(g) rulemaking. Unless and until USEPA provides

for such an additional postponement of section 112(g), Indiana must be

able to implement section 112(g) during the period between promulgation

of the Federal section 112(g) regulation and adoption of implementing

State regulations. 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.

For this reason, USEPA is promulgating approval of Indiana's MACT

regulation (326 IAC 2-1-3.3) under the authority of Title V and part 70

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

transition period between promulgation of the section 112(g) regulation

and adoption by Indiana of regulations implementing the provisions of

section 112(g). However, since the approval is for the single purpose

of providing a mechanism to implement section 112(g) during the

transition period, the approval itself will be without effect if USEPA

decides in the final section 112(g) regulation that sources are not

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subject to the requirements of the regulation until State regulations

are adopted. The USEPA is limiting the duration of this proposal to 18

months following promulgation by USEPA of the section 112(g)

regulation. Once promulgated by USEPA, the 112(g) regulation will serve

as the mechanism for establishing federally enforceable case-by-case

MACT emission limits for HAPs. USEPA is interpreting Indiana's legal

authority and commitment (Enclosure H, page 33 of the Indiana program

submittal) to mean that, upon promulgation of the section 112(g)

regulation, the State will expeditiously adopt regulations consistent

with the provisions of 112(g).

Although section 112(l) generally provides authority for approval

of State air toxics programs, 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 section 110 or any other provision under

the Act.

c. Program for Delegation of Section 112 Standards as Promulgated.

The requirements for a Title V program approval, specified in 40 CFR

70.4(b), also encompass section 112(l)(5) requirements for approval of

a State program for delegation of section 112 standards as promulgated

by USEPA 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 USEPA is

promulgating approval, under section 112(l)(5) and 40 CFR 63.91, of

Indiana's program for receiving delegation of section 112 standards

that are unchanged from the Federal standards as promulgated. This

program approval applies to both existing and future standards, but is

limited to sources covered by the part 70 program.

Indiana has informed USEPA that it intends to accept delegation of

section 112 standards through rule adoption. The details of this

delegation mechanism will be set forth in a Memorandum of Agreement

between Indiana and USEPA expected to be completed prior to approval of

Indiana's section 112(l) program for delegations.

d. Limiting HAP Emissions Through a Federally Enforceable State

Operating Permit (FESOP) Program. On August 18, 1995, USEPA published a

Federal Register notice promulgating a direct-final approval of the

Indiana FESOP regulation which would establish federally enforceable

limits on sources' potential to emit. If USEPA does not receive any

comments on this notice by September 18, 1995, the approval will become

effective on October 17, 1995, and Indiana will have the ability to

place federally enforceable limits on HAPs in addition to criteria

pollutants through a FESOP permit. The federal enforceability of HAP

limits in a FESOP permit is addressed in the August 18, 1995, Federal

Register notice.

e. Title IV. Indiana's program contains adequate authority to issue

permits which reflect the requirements of Title IV and its implementing

regulations. 326 IAC 21-1-1 incorporates by reference 40 CFR part 72,

75, 76, 77, and 78. Indiana's program submittal contains a commitment

to revise its regulations as necessary to accommodate federal revisions

and additions to Title IV and the Acid Rain regulations once they are

promulgated.

B. Response to Public Comments

The USEPA received comments from two parties. The USEPA's responses

to these comments are summarized in this section.

1. Comment by Mobil Oil Company

Mobil Oil Company commented that it supports the proposed interim

approval of the Indiana Title V program. Mobil, however, urges USEPA to

expeditiously approve a federally enforceable state operating permit

(FESOP) program for the State of Indiana so that sources will have a

federally enforceable mechanism to limit potential to emit so as to

stay below the Title V threshold level.

USEPA agrees that a FESOP program may provide a useful mechanism

for reducing the permitting burden on sources that can limit potential

to emit to below the Title V threshold level. Indiana has submitted a

FESOP program to USEPA as a proposed revision to the State

implementation plan and USEPA has published a direct-final approval

notice for the Indiana FESOP program in the August 18, 1995, Federal

Register.

2. Comment by Eli Lilly and Company

Eli Lilly and Company (Lilly) commented that it supports the

proposed interim approval of the Indiana Title V program. Lilly,

however, commented on a definition that was not addressed in the

proposed interim approval. Lilly wants USEPA to clarify that the

definitions of ``Title I modification'' and ``case-by-case

determination of an emission limit or other standard,'' as used in 326

IAC 2-7, do not include minor new source review (NSR) requirements.

This is commonly known as the ``narrow definition of a Title I

modification.'' Such a definition would allow minor NSR modifications

to be processed through the minor permit modification (MPM) procedure

of 326 IAC 2-7-12 or the operational flexibility procedures of 326 IAC

2-7-20.

In an August 29, 1995, letter to USEPA, Indiana has stated that, it

developed the State Title V regulation to allow flexibility in this

definition. Indiana also stated that it did not indicate at any time

during the regulation development process that it would include minor

NSR modifications as ``Title I modifications.'' The August 29, 1995,

letter states that, since the use of the narrow definition of ``Title I

modification'' is not a USEPA interim approval issue and USEPA stated

in a June 20, 1995, letter that it plans to adopt the narrow definition

in upcoming supplemental rulemaking, Indiana will be employing the

narrow definition in the implementation of its Title V program.

Consistent with actions taken on other Title V programs, USEPA is

accepting Indiana's intention to use the narrow definition of ``Title I

modification'' and is not identifying this interpretation as an interim

approval issue in this notice.

C. Options for Approval/Disapproval and Implications

The USEPA is promulgating an interim approval to the operating

permits program submitted by Indiana on August 10, 1994. The State must

make the following changes to receive full approval: The State must

amend its insignificant activities levels for SO2 and HAPs to

levels which assure that large sources are included in Title V review.

Indiana's program is not fully approvable because of this deficiency.

The program, however, substantially meets the requirements of part 70

because Indiana's regulations and legislation comply with all other

part 70 requirements.

D. Federal Oversight and Sanctions

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

period of up to 2 years from the effective date of this promulgation.

During the interim approval period, the State is protected from

sanctions for failure to have a program, and USEPA 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 1-year time period for submittal of permit applications by

subject sources begins upon interim approval, as does

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the 3-year time period for processing the initial permit applications.

Because the interim approval automatically expires 2 years after

promulgation of a final interim approval, the State may submit its

interim corrections at any time. However, the State may not submit its

corrections any later than 18 months after promulgation of final

interim approval. The USEPA will then have 6 months to promulgate a

final action.

Following final interim approval, if the State failed to submit a

complete corrective program for full approval by 6 months before

expiration of the interim approval, USEPA would start an 18-month clock

for the mandatory imposition of section 179(b) sanctions. Section

179(b) of the Act mandates the impositions of the following sanctions:

(1) 2 to 1 emission offsets for new construction in nonattainment areas

and (2) restriction on federal funding of highway projects.

If the State then failed to submit a corrective program that USEPA

found complete before the expiration of that 18-month period, USEPA

would be required to apply the emission offset sanction, which would

remain in effect until USEPA determined that the State had submitted a

complete corrective program. Moreover, if the Administrator found a

lack of good faith on the part of the State, both sanctions under

section 179(b) would apply after the expiration of the 18-month period

until the Administrator determined that the State had come into

compliance. In any case, if, 6 months after the application of the

first sanction, the State still had not submitted a corrective program

that USEPA found complete, the highway sanction would be required.

If, following final interim approval, USEPA were to disapprove the

State's complete corrective program, USEPA would be required to apply

the emission offset sanction on the date 18 months after the effective

date of the disapproval, unless, prior to that date, the State had

submitted a revised program and USEPA had determined that it corrected

the deficiencies that prompted the disapproval. Moreover, if the

Administrator found a lack of good faith on the part of the State, both

sanctions under section 179(b) would apply after the expiration of the

18-month period until the Administrator determined that the State had

come into compliance. In all cases, if, 6 months after USEPA applied

the first sanction, the State had not submitted a revised program that

USEPA had determined corrected the deficiencies that prompted

disapproval, the highway sanction would be required.

In addition, discretionary sanctions may be applied where warranted

any time after the end of an interim approval period if a State has not

timely submitted a complete corrective program or USEPA had disapproved

a submitted corrective program. Moreover, if USEPA has not granted full

approval to a State program by the expiration of an interim approval

USEPA must promulgate, administer and enforce a Federal permits program

for that State upon interim approval expiration.

III. Administrative Requirements

A. Executive Order 12866

The Office of Management and Budget has exempted this action from

Executive Order 12866 review.

B. Regulatory Flexibility Act

Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., USEPA

must prepare a regulatory flexibility analysis assessing the impact of

any proposed or final regulation on small entities. 5 U.S.C. sections

603 and 604. Alternatively, USEPA may certify that the regulation will

not have a significant impact on a substantial number of small

entities. Small entities include small businesses, small not-for-profit

enterprises, and government entities with jurisdiction over populations

of less than 50,000.

Operating permits program approvals under section 502 of the Act do

not create any new requirements, but simply approve requirements that

the State is already imposing. Therefore, because the federal operating

permits program approval does not impose any new requirements, I

certify that it does not have a significant impact on any small

entities affected. Moreover, due to the nature of the federal-state

relationship under the Act, preparation of a regulatory flexibility

analysis would constitute federal inquiry into the economic

reasonableness of State action. The Act forbids USEPA to base its

actions concerning operating permits programs on such grounds. Union

Electric Co. v. U.S. E.P.A., 427 U.S. 246, 256-66 (S.Ct 1976); 42

U.S.C. 7410(a)(2).

C. Unfunded Mandates

Under Section 202 of the Unfunded Mandates Reform Act of 1995

(``Unfunded Mandates Act''), signed into law on March 22, 1995, USEPA

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 tribunal governments in the aggregate, or to

the private sector, of $100 million or more. In such cases, under

Section 205, USEPA must select the most cost-effective and least

burdensome alternative that achieves the objectives of the rule and is

consistent with statutory requirements. Also in such cases, Section 203

requires USEPA to establish a plan for informing and advising any small

governments that may be significantly or uniquely impacted by the rule.

USEPA has determined that the final 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.

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.

Dated: October 27, 1995.

Valdas V. Adamkus,

Regional Administrator.

40 CFR part 70 is amended as follows:

PART 70--[AMENDED]

1. The authority citation for part 70 continues to read as follows:

Authority: 42 U.S.C. 7401 et seq.

2. Appendix A to part 70 is amended by adding the entry for Indiana

in alphabetical order to read as follows:

Appendix A to Part 70--Approval Status of State and Local Operating

Permits Programs

* * * * *

Indiana

(a) The Indiana Department of Environmental Management:

submitted on August 10, 1994; interim approval effective on November

14, 1995; interim approval expires November 14, 1997.

(b) (Reserved)

* * * * *

[FR Doc. 95-28067 Filed 11-13-95; 8:45 am]

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