Proposed Interim Approval of the Operating Permits Program; Michigan

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 70

[MI001; FRL-5524-6]

Proposed Interim Approval of the Operating Permits Program;

Michigan

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 Michigan for the purpose of complying

with Federal requirements for an approvable State program to issue

operating permits to all major stationary sources, and to certain other

sources, with the exception of sources on Indian lands.

DATES: Comments on this proposed action must be received in writing by

July 24, 1996.

ADDRESSES: Written comments should be addressed to: Robert Miller,

Chief, Permits and Grants Section (AR-18J), EPA, 77 West Jackson

Boulevard, Chicago, Illinois 60604.

Copies of the State'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: EPA

Region 5, Air and Radiation Division (AR-18J), 77 West Jackson

Boulevard, Chicago, Illinois 60604.

FOR FURTHER INFORMATION CONTACT: Beth Valenziano, Permits and Grants

Section (AR-18J), EPA, 77 West Jackson Boulevard, Chicago, Illinois

60604, (312) 886-2703. E-mail address: [email protected].

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

A. Introduction

As required under title V of the Clean Air Act (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 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. If the

State's submission is materially changed during the 1-year review

period, 40 CFR 70.4(e)(2) allows EPA to extend the review period for no

more than 1 year following receipt of the additional material. The EPA

received material changes to Michigan's May 16, 1995 submittal on July

20, 1995, and therefore considers EPA's review period to begin from the

latter date.

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. 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.

[[Page 32392]]

II. Proposed Action and Implications

A. Analysis of State Submission

1. Support Materials

The EPA received Michigan's title V operating permits program from

the governor's designee, the Director of the Michigan Department of

Natural Resources (MDNR) on May 16, 1995. The EPA received supplemental

program submittals from the Acting Chief of the Air Quality Division,

MDNR, on July 20, 1995, and October 6, 1995. The EPA also received

supplemental program submittals from the Chief of the Air Quality

Division of the newly formed Michigan Department of Environmental

Quality on November 7, 1995 and January 8, 1996. Based on the May 16,

1995 and the July 20, 1995 submittals, EPA deemed Michigan's program

complete in a letter to the MDNR Director dated August 16, 1995.

Together, Michigan's program submittals contain all required elements

of 40 CFR 70.4, including a description of Michigan's operating permits

program, permitting program documentation, and the Attorney General's

legal opinion that the laws of the State of Michigan provide adequate

authority to carry out all aspects of the program required by the Act.

Michigan's November 7, 1995 supplement to its title V program

submittal included Governor John Engler's Executive Order No. 1995-18.

This executive order, effective October 1, 1995, created the Michigan

Department of Environmental Quality (MDEQ) and transferred the

authority for implementation of title V from MDNR to MDEQ. Michigan's

November 7, 1995 supplemental submittal stated that this administrative

transfer does not affect Michigan's part 70 implementation program.

Section 1.1 of Michigan's program description states that MDNR (now

MDEQ) is responsible for implementing and administering the title V

program for all geographical areas of the State. The submittal includes

no further discussion of any basis under which MDEQ might assert

jurisdiction over sources on tribal lands.

Because MDEQ has not demonstrated, consistent with applicable

principles of Indian law and Federal Indian policies, legal authority

to regulate sources on tribal lands, the proposed interim approval of

Michigan's operating permits program will not extend to lands within

the exterior boundaries of any Indian reservation in the State of

Michigan.1 Title V sources located within the exterior boundaries

of Indian reservations in Michigan will be subject to either the

Federal operating permits program, to be promulgated at 40 CFR part 71,

or to a tribal operating permits program approved pursuant to title V

and the regulations that will be promulgated under section 301(d) of

the Act. The section 301(d) regulations will authorize EPA to treat

tribes in the same manner as States for appropriate Act

provisions.2

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\1\ This is not a determination that MDEQ could not possibly

demonstrate jurisdiction over sources within the exterior boundaries

of Indian reservations in Michigan. However, no such showing has

been made.

\2\ Tribes may also have inherent sovereign authority to

regulate air pollutants from sources on tribal lands.

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2. Regulations and Program Implementation

Michigan's operating permits program, including the operating

permits program regulations (found in Michigan's administrative rules

for air pollution control, R 336.1101 et. seq.) substantially meet the

requirements of 40 CFR part 70, including: sections 70.2 and 70.3 with

respect to applicability; section 70.5 with respect to application

forms, completeness requirements, and criteria for defining

insignificant activities; sections 70.4, 70.5, and 70.6 with respect to

permit content (including operational flexibility); sections 70.7 and

70.8 with respect to permit processing requirements (including minor

permit modifications and public participation); and section 70.11 with

respect to enforcement authority.

For a detailed analysis of Michigan's program submittal, please

refer to the Technical Support Document (TSD) for this proposed action,

which is available in the informal docket at the address noted above.

The TSD shows that all operating permits program requirements of title

V of the Act, 40 CFR part 70, and relevant guidance were met by

Michigan's submittal, with the exception of those requirements

described in subpart II.B. below.

a. Delegation of State Program to Local Governments. Section

324.5523 of Michigan's Natural Resources and Environmental Protection

Act (NREPA) provides the authority to delegate the State's title V

operating permits program to certain county governments. MDEQ

acknowledges in the State's program submittal that the Wayne County

Department of Environment, Air Quality Management Division, intends to

seek delegation of the State's title V program, and that a program

revision to EPA may be necessary to address any such delegation.

b. Definition of Potential to Emit. The Michigan definition of

``potential to emit'' in R 336.1116(m) provides that physical and

operational limits on a source's capacity can be considered in

determining ``potential to emit, '' provided that such limits are

``legally enforceable. '' The 40 CFR 70.2 definition of ``potential to

emit'' requires such limits to be federally enforceable.

Although two recent court cases have challenged the ``federally

enforceable'' requirement in other Act programs, the provision is still

required by part 70.

The EPA issued a memorandum on January 22, 1996 entitled ``Release

of Interim Policy on Federal Enforceability of Limitations on Potential

to Emit'' that addresses the court cases and their effect on the Act's

programs. In response to the court cases (and a pending challenge to

the part 70 ``potential to emit'' requirements), the memorandum also

states EPA's intention to propose rulemaking actions in the spring of

1996 that would address the Federal enforceability issue as it relates

to title V and other Act programs. At this time, however, the title V

Federal enforceability requirements remain unaffected, and therefore

EPA is proposing that the State revise its definition to include the

Federal enforceability requirement in its ``potential to emit''

definition as a condition of full approval.

This interim approval condition does not affect the State's ability

to utilize the January 25, 1995 EPA memorandum entitled, ``Options for

Limiting the Potential to Emit (PTE) of a Stationary Source under

Section 112 and Title V of the Clean Air Act (Act), '' 3 which

provides a transition policy through January 25, 1997 for establishing

federally enforceable mechanisms for limiting PTE. In addition, this

issue would no longer be a condition for full approval if the final EPA

rulemaking referred to above were to no longer require Federal

enforceability in limiting ``potential to emit'' as part of the title V

program. After EPA finalizes its rulemaking on this issue, it will work

with Michigan to assure that the State's regulations are consistent

with national requirements.

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\3\ As amended by the January 22, 1996 interim policy

memorandum.

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c. Use of Old Permits to Limit Potential to Emit. R 336.1209

provides a mechanism for sources to limit their potential to emit

through certain existing permits, and therefore avoid being subject to

the title V operating permit program. The EPA notes that existing State

permits can establish

[[Page 32393]]

federally enforceable limits on potential to emit to the extent that

the permits have been issued pursuant to an approved State

Implementation Plan (SIP), and are also practically enforceable. The

EPA understands that Michigan will be submitting R 336.1209 as a SIP

revision to ensure that such permits are federally enforceable. For

additional information, see the January 25, 1995 and the January 22,

1996 EPA memoranda referenced in subpart II.A.2.b. above.

d. Definition of Title I Modification. 40 CFR part 70 uses the term

``modifications under any provision of title I of the Act'' in

establishing requirements for operational flexibility, off permit

provisions, and minor permit modifications. Because this term was not

specifically defined in Federal regulations, there have been differing

interpretations regarding whether the term includes or excludes

modifications under States' minor New Source Review (NSR) Programs. The

Michigan regulations use this term in addressing the State's

operational flexibility [R 336.1215(2)], off permit [R 336.1215(3)],

minor permit modification [R 336.1216(2)], and significant modification

[R 336.1216(3)] provisions. In addition, the State's minor permit

modification provisions specifically exclude minor State NSR

modifications in R 336.1216(2)(a)(v), which is the State's

interpretation of 40 CFR 70.7(e)(2)(i)(A)(5).

In an August 29, 1994 rulemaking proposal, EPA explained its view

that ``modifications under any provision of title I of the Act''

include minor NSR. However, EPA solicited public comment on whether the

phrase should be interpreted to mean literally any change at a source

that would trigger permitting authority review under regulations

approved or promulgated under title I of the Act. 59 FR 44572. This

would include State NSR programs approved by EPA as part of the SIP

under section 110(a)(2)(C) of the Act.

The EPA has not yet taken final action on the August 29, 1994

proposal. However, in response to public comment on that proposal, EPA

has decided that the definition of ``modifications under any provision

of title I of the Act'' is best interpreted as not including changes

reviewed under minor NSR programs. This decision was included in the

supplemental 40 CFR part 70 rulemaking proposal published on August 31,

1995. 60 FR 45545. Therefore, Michigan's interpretation of this term in

its minor permit modification provisions is consistent with the

requirements of part 70.

e. Research and Development Activities. R 336.1211(3) provides that

process and process equipment which is used exclusively for research

and development (R&D), and that is located on the same contiguous site

as other process or process equipment used for manufacturing a product

shall be treated as a separate source for purposes of determining

operating permit program applicability. The Michigan regulations define

R&D activities in R 336.1283, and specifically exclude activities that

include the production of a product for sale, unless such sale is

incidental to the process.

The EPA stated in the preamble to the final part 70 rule that ``in

many cases States will have the flexibility to treat an R&D facility *

* * as though it were a separate source, and [the R&D facility] would

then be required to have a title V permit only if the R&D facility

itself would be a major source.'' 57 FR 32264 and 32269. Read

consistently with the major source definition in 40 CFR 70.2, this

statement means that separate source treatment would occur only in

situations where the co-located R&D portion of a source has its own

two-digit Standard Industrial Classification code and is not a support

facility. As explained in the supplemental proposal to revise part 70,

EPA believes that R&D should be treated as having its own industrial

grouping for purposes of determining major source status, and has

proposed to revise 40 CFR part 70 accordingly. 60 FR 45556-45558.

It is important to note that separate treatment will not exempt R&D

facilities in all cases. Some R&D activities may still be subject to

permitting because they are either individually major or are a support

facility that makes significant contributions to the product of a co-

located major facility. The support facility test dictates that, even

where there are two or more industrial groupings at a commonly owned

facility, these groupings should be considered together if the output

of one is more than 50 percent devoted to support of another. Although

Michigan's program does not specifically reference the support facility

test for R&D activities, EPA expects that such a test will be applied

in making major source applicability determinations as established

under the NSR program and continued under title V.

f. Insignificant Activities. Michigan's insignificant activities

rule, R 336.1212(1), lists various activities that are excluded from

calculations of potential to emit for purposes of determining whether a

source is major. The part 70 rule does not provide for such an

exception to major source determinations. Although the listed

activities might qualify as ``insignificant'' under 40 CFR 70.5(c) or

even ``trivial'' (as described in EPA's ``white paper'' on permit

applications), these concepts relate to the need to describe activities

in permit applications, and not to whether such activities need to be

considered in a major source determination. Major source determinations

are intended to be based on the potential impact of a source, as

measured by its potential to emit, and not merely on those activities

at the source which have historically been regulated. In addition, it

should be noted that any emissions from these units can have the same

effect on public health and the environment as similar amounts from the

regulated emissions units at the plant. The EPA is therefore proposing

to require the State to revise its regulations to delete these

exemptions from major source determinations as a condition of full

approval. This interim approval condition does not apply to the State's

use of R 336.1212(1) as an insignificant activities list pursuant to 40

CFR 70.5(c).

The EPA does agree with the concern underlying these provisions,

that significant resources not be expended on calculation of emissions

from activities such as these which normally do not implicate clean air

regulations. The EPA expects that emissions from activities such as

those exempted by R 336.1212(1) would only be examined where those

emissions might actually impact whether the source is major. The EPA

expects that, where EPA has not spoken to this issue precisely, sources

will exercise their judgment (as guided by the permitting authority) in

deciding the rigor of analysis appropriate to calculate PTE for

different insignificant activities at the source. For example, a rough

estimate based on engineering judgment may be all that is necessary.

The EPA believes that following such a ``rule of reason'' approach

should alleviate the concerns underlying the State's exemptions.

g. Source Category Limited Interim Approval. Michigan's permit fee

program relies on a 4 year initial permit issuance schedule to

demonstrate that the fees are sufficient to cover the State's operating

permit program costs. Because of this, the State has requested that EPA

approve a 4 year initial permit issuance schedule under source category

limited interim approval. See the EPA guidance memorandum entitled

``Interim Title V Program Approvals,'' signed by John S. Seitz,

Director of EPA's Office of Air Quality

[[Page 32394]]

Planning and Standards, August 2, 1993. In accordance with this

guidance, Michigan's program submittal demonstrates compelling reasons

why the State cannot permit initial sources in 3 years, including a

short term funding deficit that is eliminated under a 4 year permit

issuance schedule, a large and complex source population, and an

exceptional ramp up workload caused primarily by the State never having

implemented an operating permit program similar to the title V program.

The State also demonstrates that its proposed 4 year issuance schedule

substantially meets the requirements of 40 CFR part 70 by permitting 60

percent of the title V sources and 80 percent of the emissions during

the first 3 years of the program.

However, EPA cannot grant Michigan source category limited interim

approval until after Michigan finalizes revisions to its permit

issuance schedule regulation [R 336.1210(13)]. This regulation

currently requires a 3 year issuance schedule. In other words, because

the State's regulations currently meet the 40 CFR 70.4(b)(11)(ii)

requirement to issue initial permits in 3 years, source category

limited interim approval is not warranted. However, because EPA

recognizes MDEQ's proposed 4 year permit issuance schedule for the

purposes of determining fee schedule sufficiency, EPA may grant source

category limited interim approval to the State after it revises its

regulations to incorporate a 4 year permit issuance schedule, provided

that the State continues to meet the requirements for source category

limited interim approval. Therefore, EPA is proposing full approval of

the State's permit issuance schedule. In the alternative, EPA is

proposing source category limited interim approval, provided: (1) The

State finalizes regulatory revisions to its permit issuance schedule

that are consistent with the current draft revisions, and (2) the State

program continues to meet the requirements for source category limited

interim approval outlined in the August 2, 1993 guidance.

h. Startup, Shutdown, and Malfunction Provisions. R 336.1912, R

336.1913, and R 336.1914 include provisions relating to startups,

shutdowns, and malfunctions (SSM) of sources. The EPA reviewed these

regulations as a part of Michigan's title V program to determine

whether these rules affect the State's ability to meet the requirements

of 40 CFR 70.4(b)(3)(i). This provision requires that a title V program

must have the authority to issue permits and assure compliance with all

applicable requirements, including the requirements of the title V

program, by all part 70 sources.

The Michigan SSM regulations provide an affirmative defense from

violations of permit conditions which occur during SSM, provided that

sources meet the requirements in these State rules. These requirements

include the implementation of written preventative maintenance and

malfunction abatement plans and other operating, recordkeeping, and

reporting requirements. Michigan's title V Attorney General's opinion

acknowledges that the rules establish an affirmative defense for

certain violations. Structured as they are, the SSM provisions cannot

be characterized as being based on enforcement discretion.

The only affirmative defense allowed in the title V regulations

(other than any defense or other enforcement relief provided for in the

applicable requirements themselves) is the emergency defense provisions

in 40 CFR 70.6(g). The emergency defense is available only for

exceedances of technology based emission limitations attributable to an

emergency, as defined in 40 CFR 70.6(g)(1). The Michigan SSM

affirmative defense is broader than the emergency defense in these two

respects. First, the Michigan defense extends to exceedances beyond

emergency situations, and applies to exceedances caused by startups,

shutdowns, and malfunctions. Second, the Michigan defense applies to

exceedances of any emission standard and any violation of a continuous

emission, parametric monitoring, or automated recordkeeping

requirement. In contrast, the emergency defense may only apply to

exceedances of technology based emission limitations. Because

Michigan's SSM affirmative defense is broader than the defense provided

by part 70, the State does not have the authority to issue permits and

assure compliance with all applicable requirements, as required by 40

CFR 70.4(b)(3)(i). Therefore, EPA is proposing that Michigan revise its

SSM regulations to be consistent with the affirmative defense in 40 CFR

70.6(g) as a condition of full approval.

The EPA notes that Michigan's SSM regulations contain certain

provisions similar to certain SSM operating requirements found in 40

CFR part 63 (general provisions for National Emission Standards for

Hazardous Air Pollutants, section 112), 40 CFR part 60 (general

provisions for New Source Performance Standards, section 111), and

EPA's SIP policy regarding treatment of SSM. See EPA's policy

memorandum dated February 15, 1983 from Kathleen M. Bennett, Assistant

Administrator for Air, Noise, and Radiation entitled ``Policy on Excess

Emissions During Startup, Shutdown, Maintenance, and Malfunctions''.

However, these provisions of the part 60 and 63 regulations do not

apply uniformly to all Federal standards, and the 1983 policy does not

establish an affirmative defense from violations caused by SSM

conditions.

The EPA may consider alternative approaches for resolving this

condition for full approval, such as an approach that relies on

enforcement discretion (see the February 15, 1983 Bennett memorandum),

and is willing to work with the State as necessary. There may be

various ways in which to structure such an enforcement discretion

approach, and EPA will not attempt to provide detailed guidance in this

document. However, EPA notes that certain issues would have to be

addressed by the State if it were to craft such an approach using the

current State rule as a starting point. Among these, the definition of

``malfunction'' in R 336.1113(d) does not limit malfunctions to

failures that are ``infrequent'' and ``not reasonably preventable'',

and is therefore broader than the Federal definition in 40 CFR 60.2 and

63.2. The State's air pollution control bypass provisions in R

336.1913(3)(b) and R 336.1914(4)(b) are broader than that provided by

the Act. See the February 15, 1983 Bennett memorandum. The alternate

emission limitations for startups and shutdowns in R 336.1914(4)(d)

would allow relaxations of Act requirements, including NSR limitations,

New Source Performance Standards, toxics requirements (NESHAP, MACT),

etc. Finally, the State SSM regulations provide no authority for MDEQ

to review and require revisions to a source's written emission

minimization plan for normal or usual startups and shutdowns. Such

authority is appropriate to ensure that operating practices for

startups and shutdowns meet good engineering practice for minimizing

emissions, similar to the authority R 336.1911 currently provides for

State review and revision of written preventative maintenance and

malfunction abatement plans.

i. Environmental Audit Privilege and Immunity Law. Sections

502(b)(5) (A) and (E) of the Act require that approvable State title V

programs must have adequate authority to assure that sources comply

with all applicable Act requirements, as well as the authority to

enforce permits and recover minimum civil penalties and appropriate

criminal penalties. In addition, part 70 explicitly

[[Page 32395]]

requires States to have certain enforcement authorities, including the

authority to seek injunctive relief to enjoin a violation, to bring

suit to restrain persons where a facility is posing an imminent and

substantial endangerment to public health or welfare, and to recover

appropriate criminal and civil penalties. Section 113(e) of the Act

sets forth penalty factors for EPA or a court to consider in assessing

penalties for civil or criminal violations of the Act, factors which

necessarily apply to penalties for violations of title V permits. The

EPA is concerned about the potential impact of some State audit

privilege and immunity laws on the ability of the States to enforce

Federal requirements, including those under title V of the Act. Upon

review and consideration of the statutory and regulatory provisions

discussed above, EPA issued guidance on April 5, 1996, entitled

``Effect of Audit Immunity/Privilege Laws on States' Ability to Enforce

Title V Requirements''. This guidance outlines certain elements of the

State audit immunity and privilege laws which, in EPA's view, may so

hamper the State's ability to enforce as to render the Agency unable to

approve the title V operating permit program. The guidance is

consistent with EPA's December 22, 1995 audit policy, ``Incentives for

Self-Policing: Discovery, Disclosure, Correction and Prevention of

Violations''. 60 FR 66706.

On March 18, 1996, Michigan Governor John Engler signed the State's

Environmental Audit Privilege and Immunity Law, part 148 of Michigan's

Natural Resources and Environmental Protection Act (NREPA). This law

provides that sources can hold confidential broad categories of

information contained in a voluntary environmental audit report. The

law also provides sources and persons immunity from certain State civil

and criminal penalties for violations discovered through an

environmental self audit, provided the violations are promptly reported

and corrected.

In the April 5, 1996 memorandum referenced above, EPA set out

specific authorities, based upon the requirements of 40 CFR 70.11, that

cannot be affected by State privilege and immunity laws if a State is

to receive full approval of its title V program. The EPA has identified

several sections of Michigan's privilege and immunity law, described

below, which appear to conflict with the requirements of part 70.

Section 14802 of Michigan's Environmental Audit Privilege and

Immunity Law provides for the protection of factual data disclosed

during an environmental audit. In conjunction with the definition of

``environmental audit'' and ``environmental audit report'' contained in

section 14801, Michigan's audit privilege is so broad that it may be

interpreted as restricting access to data and preventing testimony

which is necessary to determine whether a civil or criminal violation

has occurred or is imminent. Similarly, the broad language of section

14809 may be interpreted as prohibiting the State from assessing civil

penalties for violations of regulations, permits, consent orders or

agreements; violations which reflect a parent company's pattern of

violations at various facilities; and violations which result in

serious harm or imminent and substantial endangerment. In addition,

section 14809 appears to allow sources to retain economic benefit from

a violation, even if substantial or deliberately obtained. Although

section 14802 appears to contain several exemptions from the otherwise

broad scope of the privilege, EPA is unable to determine the extent to

which the exemption limits the application of the privilege provisions.

Furthermore, EPA does not believe that the section 14802 exemption

applies to any portion of the penalty immunity contained in section

14809.

For these reasons, EPA believes that Michigan's privilege and

immunity law affects the State's authority to assure compliance with

part 70 permits and the requirements of the operating permit program

[40 CFR 70.4(b)(3)(i)], as well as the authority to enforce permits and

the requirement to obtain a permit [40 CFR 70.4(b)(3)(vii)]. In

addition, EPA believes that the law affects Michigan's authority to

recover civil penalties in accordance with 40 CFR 70.11(a)(3)(i).

Therefore, EPA is proposing that Michigan must revise its privilege and

immunity law, part 148 of NREPA, to ensure that the State meets these

title V enforcement requirements as a condition of full approval. The

EPA is also proposing that Michigan must submit a revised title V

Attorney General's opinion that addresses the concerns listed above,

and certifies that the State title V program meets the enforcement

requirements of 40 CFR 70.4(b)(3)(i), 40 CFR 70.4(b)(3)(vii), and 40

CFR 70.11(a)(3)(i) as a condition of full approval.

The EPA acknowledges that Michigan may have a different

interpretation of the provisions in the State's privilege and immunity

law. If Michigan believes that its current law does not affect the part

70 enforcement requirements addressed above, Michigan need only submit

a revised title V Attorney General's opinion certifying that the State

title V program meets the enforcement requirements of 40 CFR

70.4(b)(3)(i), 40 CFR 70.4(b)(3)(vii), and 40 CFR 70.11(a)(3)(i) as a

condition of full approval. The Attorney General's opinion must also

specifically address why EPA's interim approval provision requiring

revisions to the currently enacted law is not valid.

To further ensure that Michigan's privilege and immunity law does

not affect other requirements of the title V program, EPA believes that

it is also necessary for the State to submit a supplemental Attorney

General's opinion as a condition of full approval. This supplemental

Attorney General's opinion must certify that any other title V

requirements that may be affected by the privilege and immunity law are

met, including: Michigan's authority to bring suit to restrain any

person from engaging in any activity in violation of a permit that is

presenting an imminent and substantial endangerment [40 CFR

70.11(a)(1)]; Michigan's authority to seek injunctive relief to enjoin

any violation of any program requirement, including permit conditions

[40 CFR 70.11(a)(2)]; Michigan's authority to recover criminal fines

[40 CFR 70.11(a)(3) (ii) and (iii)]; and the requirement that the

burden of proof for establishing civil and criminal violations is no

greater than the burden of proof required under the Act [40 CFR

70.11(b)]. The EPA intends to work with Michigan to ensure that the

supplemental Attorney General's opinion specifically addresses all

potential areas of concern regarding the State's privilege and immunity

law.

3. Permit Fee Demonstration

Michigan's operating permits program fee schedule is established in

section 324.5522, NREPA. The State's program submittal includes a

detailed demonstration that Michigan's fee schedule is sufficient to

cover the State's operating permit program costs. Because the

sufficiency of the fee schedule is based on a 4 year initial permit

issuance schedule, Michigan has requested that EPA approve a 4 year

initial permit issuance schedule under source category limited interim

approval (see the discussion on source category limited interim

approval in subpart II.A.2.g. above).

Michigan's fee schedule consists of an annual fee equal to a

facility charge plus an emissions charge. The facility charge is

$2,500.00 for major sources of criteria pollutants, and $1,000.00 for

major sources of hazardous air pollutants. The emissions charge is

$25.00 per ton of

[[Page 32396]]

actual emissions, with a facility cap of 4,000 tons. Sources with total

actual emissions less than 4,000 tons have a 1,000 ton per pollutant

cap.

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

a. Authority for Section 112 Implementation. Michigan has

demonstrated in its title V program submittal adequate legal authority

to implement and enforce all section 112 toxics requirements through

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

enabling legislation and in regulatory provisions that define

``applicable requirements'' and provide that the permit must

incorporate all applicable requirements. The EPA has determined that

this legal authority is sufficient to allow Michigan to issue permits

to part 70 sources that assure compliance with all section 112

requirements.

The EPA is interpreting the above legal authority to mean that

Michigan is able to carry out all section 112 activities for part 70

sources. For further rationale on this interpretation, please refer to

the TSD for this proposed action.

b. Implementation of Section 112(g). Section 112(g) of the Act

requires States to issue case-by-case Maximum Achievable Control

Technology (MACT) determinations to sources that modify, construct, or

reconstruct, if EPA has not established MACT for that particular source

category. According to the interpretive notice published in the Federal

Register on February 14, 1995, the requirements of section 112(g) will

not become effective until after EPA has promulgated a regulation

addressing that provision. The notice sets forth in detail the

rationale for this interpretation. See 60 FR 8333. At the time of

Michigan's program submittal and EPA's subsequent review period, EPA

has not promulgated a Federal regulation containing the specific

requirements of section 112(g).

The section 112(g) interpretative 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. Unless and until EPA provides for such an

additional postponement of section 112(g), Michigan must be able to

implement section 112(g) during the transition period between

promulgation of the Federal section 112(g) rule and adoption of

implementing State regulations.

The EPA is aware that Michigan lacks a program designed

specifically to implement section 112(g). However, Michigan does have a

preconstruction review program that can serve as an adequate

implementation vehicle during the transition period. Therefore, EPA is

proposing approval under title V and part 70, of the use of Michigan's

preconstruction permit program as the procedural mechanism for

establishing federally enforceable case-by-case MACT emission limits

for hazardous air pollutants (HAP) during the transition period.

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 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. This proposed approval is

limited solely to the issuance of federally enforceable HAP emission

limits to comply with the requirements of section 112(g), and is not an

approval under section 110 of the Act.

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

State adopts 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 Michigan, 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 18 months following promulgation by EPA of

section 112(g) regulations.

Michigan's construction permit regulations [R 336.1205(2)] assume

that section 112(g) authority is delegated to the State by EPA. The

implementation of section 112(g) by the State for sources subject to

title V is a requirement for approval of the State's title V program,

and is therefore not a delegated program. To address the requirements

in R 336.1205(2), the State should refer instead to EPA's forthcoming

final rulemaking on Michigan's title V program and to the section

112(g) implementation requirements to be promulgated in the final

section 112(g) regulations.

c. Program for Straight Delegation of Section 112 Standards.

Requirements for operating permits program approval, specified in 40

CFR 70.4(b), also address 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, EPA is also proposing to grant approval under section

112(l)(5) and 40 CFR 63.91 of Michigan's program for receiving

delegation of section 112 standards that are unchanged from the Federal

standards as promulgated. Because Michigan has the authority under

section 324.5506(6), NREPA, to include any conditions in an operating

permit that are necessary to assure compliance with the Act (including

section 112 requirements), EPA proposes to approve the delegation of

section 112 standards through straight delegation. The details of this

delegation mechanism will be set forth in a Memorandum of Agreement

between Michigan and EPA. The State of Michigan requested delegation of

section 112 standards in a letter from Russell J. Harding, Director,

MDEQ, dated October 12, 1995. This proposed approval of Michigan's

program for delegations applies to both existing and future standards,

but is limited to sources covered by the part 70 program.

d. Implementation of Title IV. Michigan's operating permits program

contains adequate authority to issue permits that include the

requirements of the title IV acid rain program. The State has

incorporated the requirements of 40 CFR part 72 by reference in R

336.1299(d).

B. Options for Approval/Disapproval and Implications

The EPA is proposing to grant interim approval to the State of

Michigan's operating permits program received on May 16, 1995, July 20,

1995, October 6, 1995, November 7, 1995, and January 8, 1996. This

interim approval of Michigan's operating permits program applies to all

title V sources, with the exception of any sources of air pollution

over which an Indian Tribe has jurisdiction. See, e.g., 59 FR 55813,

55815-18 (Nov. 9, 1994). The term ``Indian Tribe'' is defined under the

Act as ``any Indian tribe, band, nation, or other organized group or

community, including any Alaska Native village, which is Federally

recognized as eligible for the special programs and services provided

by the United States to Indians because of their status as Indians.''

See section 302(r) of the Act; see also 59 FR 43956, 43962 (Aug. 25,

1994); 58 FR 54364 (Oct. 21, 1993).

[[Page 32397]]

1. Proposal in the Alternative

The EPA proposes full approval of the State's 3 year initial permit

issuance schedule. In the alternative, EPA proposes source category

limited interim approval of the State's 4 year permit issuance

schedule, provided: (1) the State finalizes regulatory revisions to its

permit issuance schedule that are consistent with the State's November

7, 1995 supplemental title V program submittal, and (2) the State

program continues to meet the requirements for source category limited

interim approval.

2. Proposed Interim Approval Issues

If interim approval of Michigan's operating permits program is

promulgated as proposed today, the State must make the following

changes to receive full approval.

a. Revise the definition of ``potential to emit'' in R 336.1116(m)

to require that physical and operational limits on a source's capacity

must be federally enforceable. Federal enforceability is required by

the definition of ``potential to emit'' in 40 CFR 70.2. However, this

issue would cease to be a condition of full approval if EPA revises the

40 CFR 70.2 definition to no longer require Federal enforceability in

limiting ``potential to emit.''

b. Revise the definition of ``schedule of compliance'' in R

336.1119(a) to provide that the schedule of compliance for sources that

are not in compliance shall resemble and be at least as stringent as

that contained in any judicial consent decree or administrative order

to which the source is subject. This provision is required by 40 CFR

70.5(c)(8)(iii)(C).

c. Revise the definition of ``stationary source'' in R 336.1119(q)

to provide that the definition includes all of the process and process

equipment which are located at one or more contiguous or adjacent

properties. The emphasized phrase is not currently included in the

State regulation. This provision is required in the definition of

``major source'' in 40 CFR 70.2.

d. Revise R 336.1211(l) to provide that nonmajor solid waste

incineration units required to obtain a permit pursuant to section

129(e) of the Act are subject to the title V permits program. The

permitting deferral for nonmajor section 111 sources in 40 CFR 70.3(b)

does not apply to solid waste incineration units required to obtain a

permit pursuant to section 129(e) of the Act.

e. Revise R 336.1212(l) to delete the exemption of certain

activities from determining major source status. Part 70 and other

relevant Act programs do not provide for such exemptions from major

source determinations. This interim approval issue does not apply to

the State's use of R 336.1212(l) as an insignificant activities list

pursuant to 40 CFR 70.5(c).

f. Revise the State statutes or regulations, as appropriate, to

require that permit applications include a certification of compliance

with all applicable requirements and a statement of the methods used

for determining compliance, as specified in 40 CFR 70.5(c)(9). Although

Michigan's permit application forms include compliance certification

requirements, EPA believes that neither the State statutes nor the

State regulations clearly require applications to include this

information.

g. Revise the definition of ``emergency'' in section 324.5527(1),

NREPA, to ensure that the State's definition is not broader than that

provided by 40 CFR 70.6(g)(1). The definition of ``emergency'' in 40

CFR 70.6(g)(1) includes, in part, ``any situation arising from sudden

and reasonably unforeseeable events beyond the control of the source,

including acts of God.''

h. Remove the provisions of section 324.5534, NREPA, which provide

for exemptions from penalties or fines for violations caused by an act

of God, war, strike, riot, catastrophe, or other condition as to which

negligence or willful misconduct was not the proximate cause. Title V

does not provide for such broad penalty and fine exemptions.

i. Revise R 336.1913 and R 336.1914 to be consistent with either

the affirmative defense provisions in 40 CFR 70.6(g), or EPA's

enforcement discretion policy. These State regulations provide an

affirmative defense that is broader than that provided by 40 CFR

70.6(g), and therefore affect State's ability to assure compliance with

all applicable requirements and the requirements of part 70 [40 CFR

70.4(b)(3)(i)].

j. Address all of the following issues relating to the State's

audit privilege and immunity law, part 148 of NREPA. These conditions

are proposed interim approval issues to the extent that they affect the

State's title V operating permits program and the requirements of part

70.

i. Narrow the applicability of the privilege provided in section

14802, part 148 of NREPA, and narrow the applicability of the immunity

provided by section 14809, part 148 of NREPA, to ensure that the State

title V program has the authority to: assure compliance with part 70

permits and the requirements of the operating permits program [40 CFR

70.4(b)(3)(i)]; enforce permits and the requirement to obtain a permit

[40 CFR 70.4(b)(3)(vii)]; and recover civil penalties in accordance

with 40 CFR 70.11(a)(3)(i).

ii. Submit a revised title V Attorney General's opinion that

addresses EPA's concerns in subpart II.A.2.i. above, and certifies that

the revised part 148 does not affect Michigan's ability to meet the

enforcement requirements of 40 CFR 70.4(b)(3)(i), 40 CFR

70.4(b)(3)(vii), and 40 CFR 70.11(a)(3)(i).

iii. In lieu of subparts i. and ii. above, submit a revised title V

Attorney General's opinion certifying that the current part 148 does

not affect the enforcement requirements of 40 CFR 70.4(b)(3)(i), 40 CFR

70.4(b)(3)(vii), and 40 CFR 70.11(a)(3)(i). The Attorney General's

opinion must also specifically address why EPA's interim approval

provision requiring revisions to the currently enacted law is not

valid.

iv. Submit a supplemental Attorney General's opinion certifying

that all other title V authorities that may be affected by part 148 are

met, including: Michigan's authority to bring suit to restrain any

person from engaging in any activity in violation of a permit that is

presenting an imminent and substantial endangerment [40 CFR

70.11(a)(1)]; Michigan's authority to seek injunctive relief to enjoin

any violation of any program requirement, including permit conditions

[40 CFR 70.11(a)(2)]; Michigan's authority to recover criminal fines

[40 CFR 70.11(a)(3) (ii) and (iii)]; and the requirement that the

burden of proof for establishing civil and criminal violations is no

greater than the burden of proof required under the Act [40 CFR

70.11(b)]. The supplemental Attorney General's opinion must

specifically address these requirements in light of the provisions

contained in the State's privilege and immunity law.

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

period of up to 2 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 1-year time period for submittal of

permit applications by subject sources begins upon interim approval, as

does the 3-year time period for processing the initial permit

applications.

3. Other Proposed Actions

As outlined in subpart II.A.4.c., EPA is proposing to grant

approval under section 112(1)(5) and 40 CFR 63.91 of

[[Page 32398]]

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.

As outlined in subpart II.A.4.b., EPA is also proposing to grant

approval of Michigan's preconstruction permit program, found in R

336.1201, under the authority of title V and part 70 solely for the

purpose of implementing section 112(g) to the extent necessary during

the transition period between promulgation of the Federal section

112(g) rule and adoption of any necessary State rules to implement

EPA's section 112(g) regulations. The EPA proposes to limit the

duration of this approval to 18 months following promulgation by EPA of

section 112(g) regulations, to provide Michigan adequate time to adopt

any necessary regulations consistent with the Federal requirements.

C. Federal Oversight and Sanctions

If EPA were to finalize this proposed interim approval, it would

extend for 2 years following the effective date of final interim

approval, and could not be renewed. During the interim approval period,

Michigan would be protected from sanctions, and EPA would not be

obligated to promulgate, administer and enforce a Federal permits

program for 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 the effective date of interim approval, as does the 3-year

time period for processing the initial permit applications.

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

complete corrective program for full approval by the date 6 months

before expiration of the interim approval, EPA would start an 18-month

clock for mandatory sanctions. If the State then failed to submit a

corrective program that EPA found complete before the expiration of

that 18-month period, EPA would be required to apply one of the

sanctions in section 179(b) of the Act, which would remain in effect

until EPA determined that the State had corrected the deficiency by

submitting 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 application of

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

program that EPA found complete, a second sanction would be required.

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

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

of the section 179(b) sanctions 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 EPA 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 EPA applied

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

EPA had determined corrected the deficiencies that prompted

disapproval, a second 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 EPA has disapproved a

submitted corrective program. Moreover, if EPA has not granted full

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

and that expiration occurs after November 15, 1995, EPA must

promulgate, administer and enforce a Federal permits program for that

State upon interim approval expiration.

III. Administrative Requirements

A. Request for Public Comments

The EPA is requesting 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 an

informal docket maintained at the EPA Regional Office. This 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 this 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. The EPA will

consider any comments received by July 24, 1996.

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.

D. Unfunded Mandates

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 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.

The EPA has determined that the proposed 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: June 13, 1996.

Margaret McCue,

Acting Regional Administrator.

[FR Doc. 96-15886 Filed 6-21-96; 8:45 am]

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