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

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 63

[AD-FRL-5155-2]

Hazardous Air Pollutants: Provisions Governing Constructed,

Reconstructed or Modified Major Sources

AGENCY: Environmental Protection Agency (EPA).

ACTION: Interpretive notice.

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SUMMARY: This notice announces the EPA's revised interpretation of the

Clean Air Act's (Act) requirements regarding the effective date of

section 112(g) of the Act. The interpretation adopted here postpones

the effective date of section 112(g) until after the EPA has

promulgated a rule addressing that provision.

EFFECTIVE DATE: February 14, 1995.

FOR FURTHER INFORMATION CONTACT: Ms. Kathy Kaufman at (919) 541-0102,

Information Transfer and Program Integration Division (MD-12), U. S.

Environmental Protection Agency, Research Triangle Park, North Carolina

27711.

SUPPLEMENTARY INFORMATION:

I. Summary of EPA's Policy

The Administrator of the EPA is today announcing the EPA's

interpretation of the Act requirements regarding the effective date of

section 112(g) during the period prior to promulgation of a Federal

rule addressing implementation of that section. This notice effects

changes from the view embodied in the preamble to the proposed

rulemaking under section 112(g), Federal Register notices of proposed

and final approvals of operating permits programs under title V of the

Act, and in guidance issued by the EPA's Office of Air Quality Planning

and Standards (OAQPS).

For the reasons set forth in this notice, the EPA now interprets

section 112(g) not to take effect before the EPA issues notice and

comment guidance addressing implementation of that section. In the

interim period before this guidance is promulgated, States may, as a

matter of State law, implement a program for the review of section

112(g) modifications, constructions, or reconstructions. However, the

section 112(g) requirement that major source modifications,

constructions, or reconstructions meet the maximum achievable control

technology (MACT)--as determined on a case-by-case basis where no

Federal standard for a source category has been set--will not take

effect as a matter of Federal law until the section 112(g) rule is

promulgated.

II. Discussion

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

After the effective date of a title V permit program in a State,

section 112(g) prohibits any person from constructing or reconstructing

a major source of hazardous air pollutants (HAP), or modifying a major

HAP's source, without a determination from ``the Administrator (or the

State)'' that MACT will be met. The determination must be on a case-by-

case basis by ``the Administrator (or the State)'' if no MACT standard

has been issued. Section 112(g)(1)(B) also provides that the

Administrator ``shall, after notice and opportunity for comment and not

later than [May 15, 1992] publish guidance with respect to

implementation of this subsection.'' The guidance must address the

relative hazard of HAP in a manner ``sufficient to facilitate the

offset showing'' allowed in the definition of ``modification.''

The EPA proposed a rule implementing section 112(g) on April 1,

1994 (59 FR 15504). The EPA currently anticipates promulgation of this

rule during the summer of 1995. In anticipation of the fact that many

title V permit programs would be approved before the section 112(g)

rule was promulgated, the OAQPS issued a guidance memorandum on June

28, 1994\1\ to assist States in their implementation of section 112(g)

during this transition period. The guidance states that section 112(g)

takes effect upon approval of a title V program in a State regardless

of whether the EPA's rule has been promulgated. The guidance also

offers suggestions for how States may implement section 112(g) during

the transition period.

\1\Guidance for the Initial Implementation of Section 112(g),

Memorandum from John S. Seitz to EPA Regional Air Division

Directors, June 28, 1994.

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To date, the EPA has approved several title V programs, the first

of which was for the State of Washington on November 9, 1994 (59 FR

55813). EPA also has proposed approval of numerous other programs. In

each of these notices, the Agency has restated its position that the

requirements of section 112(g) would take effect in these States upon

approval of the title V program, and has described its understanding of

how section 112(g) would be implemented in that State during the

transition period.

B. Reconsideration Based on Concerns Raised

States and the regulated community have voiced considerable concern

with the impracticality of implementation of section 112(g) during the

transition period.\2\ These concerns have focused on the provisions for

determining the applicability of section 112(g), and in particular on

provisions addressing de minimis levels and offsets for modifications,

as well as the definition of ``major source'' for constructions and

[[Page 8334]] reconstructions. States and the regulated community have

noted that the applicability of the section 112(g) modification

provisions have the potential to vary significantly depending on how

these issues are addressed in the final section 112(g) rule, that these

provisions are among the most complex and controversial in the section

112(g) proposal, and that implementation of these provisions in the

absence of a promulgated rule will present considerable uncertainty and

legal and financial risk for States and emissions sources.

\2\For State and regulated community comments submitted on the

proposed section 112(g) rule, see Docket Number A-91-64 inserts IV-

D-199, IV-D-213, IV-D-217, IV-D-219, IV-D-222, IV-D-229, IV-D-255,

IV-D-295, IV-D-323, IV-D-333, IV-D-337, IV-D-PH217, IV-D-199, IV-D-

213, IV-D-295, IV-D-PH221, and IV-D-PH222.

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After careful consideration, the EPA concludes that these concerns

are valid and, as a policy matter, justify re-examining and modifying

the Agency's interpretation concerning the effective date of section

112(g). Moreover, the EPA believes it should announce its revised view

now, before there is a significant expenditure of State, source, and

Agency resources and before questions of source liability are raised.

In light of this conclusion, the EPA has revisited its prior legal

interpretation that section 112(g) must take effect upon approval of

the title V program regardless of whether a rule has been promulgated.

These practical difficulties confirm for the Agency the soundness of a

reading that implementation of section 112(g) is to be delayed until a

rule is promulgated.

C. Analysis of Statutory Requirements for Modifications

On its face, the section 112(g) requirement for case-by-case MACT

determination for new major sources, reconstructed sources, and

modifications to existing major sources appears to be triggered upon

the title V program effective date. However, the Act also calls for

guidance ``with respect to the implementation of'' section 112(g) to be

issued ``after notice and opportunity for comment and not later than''

May 15, 1992. Section 112(g)(1)(B). Section 112(g)(1)(A) provides

further that a greater-than-de minimis increase ``shall not be

considered a modification'' if it is offset by an equal or greater

decrease in a more hazardous pollutant, ``pursuant to guidance issued

by the Administrator under subparagraph (B).'' The guidance must

specifically ``facilitate the offset showing'' and ``include an

identification, to the extent practicable, of the relative hazard to

human health resulting from emissions'' of HAP.

Section 112(g) is analogous in certain important respects to

statutory provisions at issue in the recent D.C. Circuit decision

concerning inspection and maintenance (I/M) programs under the Act.

Natural Resources Defense Council versus EPA, 22 F.3d 1125 (D.C. Cir.

1994). Section 182(c)(3) of the Act requires States to establish

programs for ``enhanced'' vehicle inspection and maintenance programs.

The statute further requires that these programs must be in compliance

with regulatory ``guidance'' published by the Administrator, and must

be effective by Nov. 15, 1992. In NRDC versus EPA, the Court held that,

because the EPA was late in issuing the guidance called for in the

statute, without which it was impossible as a practical matter for

States to create their own programs, the statutory requirement for

States to have an effective program should be delayed.

The section 112(g) modification provisions bear two important

similarities to the statutory provisions at issue in NRDC versus EPA.

First, the EPA was obligated to issue guidance on section 112(g) for

the States well before they were expected to begin implementing section

112(g) on the effective date of title V programs. Second, that guidance

is intended to be binding. This is because the guidance forms an

essential link between the statutory directives triggered on the

effective date of permit program approval and the ability to actually

implement these directives.

Regarding offsets, section 112(g)(1)(A) provides that offsets are

to be determined ``pursuant to guidance issued by the Administrator * *

*'' It follows that the absence of guidance precludes the issuance of

valid offset determinations by a reviewing agency. Moreover, the

absence of guidance makes it impossible for the owner or operator of

the source to submit a ``showing'' provided for by the last sentence

``that such increase has been offset under the preceding sentence,''

that is, pursuant to the Administrator's guidance (emphasis added).

While a State permitting authority could decide to impose offsetting

provisions that are more stringent than those in the EPA guidance, the

EPA believes that Congress intended the EPA guidance as integral to the

implementation of this provision.

The concept of de minimis values is likewise integral to the

definition of ``modification'' in section 112(a)(5). This is because a

``modification'' is defined in section 112(a)(5) as a ``physical change

in, or change in the method of operation of, a major source which

increases the actual emissions of any hazardous air pollutant * * * by

more than a de minimis amount * * *.'' Until de minimis values are

established in the section 112(g) rule, the definition of

``modification'' remains incomplete, lacking the lower boundary that

the statute contemplates will be established through a notice and

comment process. The statute, recognizing that establishment of de

minimis values would require the application of scientific expertise

and judgment, called for the EPA to set these values based on a notice

and comment process. It would be contrary to the intent of the Act to

require the section 112(g) program for review of modifications to go

forward when the issue of what constitutes a ``modification'' cannot be

resolved with the degree of certainty envisioned by the statute.

It thus appears that certain crucial elements in the section 112(g)

program for dealing with modifications are missing until the EPA

promulgates guidance. Under these circumstances, it is consistent with

the statute, and with applicable precedent, to conclude that the

obligation of States to establish the required program for review of

modifications hinges on promulgation of the requisite ``guidance''--

which is in fact, as the statute makes clear, a binding rule--governing

both offsets and de minimis values.

D. Analysis of Statutory Requirements for Major Source Construction and

Reconstruction

The guidance required to be published under section 112(g)(1)(B)

addressing implementation of ``subsection'' 112(g) must extend not only

to modifications under section 112(g)(2)(A), but also to major source

constructions and reconstructions addressed in section 112(g)(2)((B).

This general directive aside, the statutory linkage between the section

112(g) guidance and implementation is not as detailed for constructions

and reconstructions as it is for modification requirements.

Notwithstanding this, the EPA believes that even with regard to

constructions and reconstructions, guidance is necessary to resolve

issues critical to the scope of applicability of these provisions, and

that delaying the effectiveness of these provisions therefore

represents a permissible reading of the Act.

In the April 1, 1994 proposal, the EPA solicited comment on two

alternative interpretations of the phrase ``construct a major source.''

See 59 FR 15517. One interpretation would treat new major-emitting

equipment at existing major source plant sites as ``modifications,''

while the other interpretation would treat such additions as

``constructions.'' Under the ``modification'' alternative, such

equipment could be offset by a decrease elsewhere at the plant site.

Under the ``construction'' alternative, [[Page 8335]] such equipment

would be required to install new source technology and offsets would

not be available.

Similarly, the April 1, 1994 proposal contained two alternative

definitions of major source ``reconstruction.'' The alternative

definitions are similar in that, for each, the replacement of

components, where the cost of the replacement components is greater

than 50 percent of the capital cost of ``constructing a major source,''

would trigger reconstruction requirements. The alternatives differ in

that one alternative treats the entire plant site as the basis for

comparison, while the other alternative treats a major-emitting

``emission unit'' as the basis for comparison.

The ambiguities surrounding the term ``construction'' have

potentially significant impacts on the nature and scope of the Federal

program, particularly in a transition period during which the

modification provisions of section 112(g) are delayed. While there are

likely to be few constructions of ``greenfield'' facilities emitting

major amounts of HAPs prior to promulgation of the section 112(g) rule,

there will be a far greater number of additions of major-emitting units

at existing major source plant sites. Until the issue of whether these

additions constitute a ``construction'' is clarified through

rulemaking, there will be uncertainty as to how these additions must be

treated as a matter of Federal law. For similar reasons, the scope of

the section 112(g) requirements for ``reconstructions'' will continue

to be in doubt until the section 112(g) rule is promulgated.

These implementation difficulties demonstrate that, as is the case

for the section 112(g) modification provisions, rulemaking is needed to

provide the degree of certainty EPA believes was intended by Congress

regarding the applicability of the provisions for major source

construction and reconstruction. For this reason, EPA believes it would

be unreasonable to require the implementation of the section 112(g)

provisions relating to construction and reconstruction prior to

completion of the rulemaking.

F. Additional Clarifications

The EPA's interpretation, announced today, regarding the timing for

implementation of section 112(g), applies to every title V program that

has been or will be approved prior to promulgation of a Federal rule

implementing section 112(g). The interpretation concerns the effective

date of a Federal requirement set forth in the Act. In this sense, this

interpretation need not be addressed in individual title V approvals.

The EPA has indicated in a number of title V approval actions that the

State would use its existing SIP-approved preconstruction review

program to implement section 112(g) during the transition period.

However, there have been no approvals of State programs designed

specifically to implement section 112(g). Therefore, there is no need

to revisit any EPA rulemaking action in order to implement today's

notice.

This interpretation should not require significant changes to any

title V program submittal. Each State program reviewed by EPA to date

has included a general commitment to implement section 112(g), in

accordance with the EPA regulations and/or guidance, upon approval of

their title V program. However, those commitments were fashioned

broadly enough to accommodate today's announced interpretation, and so

no program revisions should be necessary for those States.

The EPA is aware of concerns that States may need additional time

following the promulgation of the section 112(g) rule before they can

begin implementing section 112(g). The EPA believes the statute may be

read to allow for an additional period of delay so that States may

adopt conforming rules if it would otherwise be impossible for States

to implement the program. However, the EPA has not determined whether

additional time will in fact be needed. If it is decided that

additional time should be provided before the provisions of section

112(g) become effective, the EPA will so provide in the final section

112(g) rulemaking.

Finally, certain States have already promulgated regulations

designed to implement section 112(g). The EPA wishes to emphasize that

nothing in this notice is intended to preclude or discourage States

from implementing a program similar to section 112(g) as a matter of

State law prior to promulgation by the EPA of the section 112(g)

guidance.

Dated: February 8, 1995.

Carol M. Browner,

Administrator.

[FR Doc. 95-3661 Filed 2-13-95; 8:45 am]

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