Federal Operating Permits Program

SUMMARY: This action promulgates regulations setting forth the

procedures and terms under which the Administrator will administer

programs for issuing operating permits to covered stationary sources,

pursuant to title V of the Clean Air Act as amended in 1990 (Act).

Although the primary responsibility for issuing operating permits to

such sources rests with State, local, and Tribal air agencies, EPA will

remedy gaps in air quality protection by administering a Federal

operating permits program in areas lacking an EPA-approved or

adequately administered operating permits program. Federally issued

permits will clarify which requirements apply to sources and will

enhance understanding of and compliance with air quality regulations.

EFFECTIVE DATE: July 31, 1996.

FOR FURTHER INFORMATION CONTACT: Candace Carraway (telephone 919-541-

3189) or Kirt Cox (telephone 919-541-5399), U. S. Environmental

Protection Agency, Office of Air Quality Planning and Standards,

Information Transfer and Program Integration Division, Mail Drop 12,

Research Triangle Park, North Carolina 27711.

SUPPLEMENTARY INFORMATION:

Docket

Supporting information used in developing the promulgated rules is

contained in Docket No. A-93-51. Supporting information used in

developing 40 CFR part 70 is contained in Dockets No. A-90-33 and No.

A-93-50. These dockets are available for public inspection and copying

between 8:30 a.m. and 3:30 p.m. Monday through Friday at EPA's Air

Docket, Room M-1500, Waterside Mall, 401 M Street SW, Washington, D.C.

20460. A reasonable fee may be charged for copying.

Background Information Document

A background information document (BID) for the promulgated rule

may be obtained from the docket. Please refer to ``Federal Operating

Permits Program - Response to Comments.'' The BID contains a summary of

the public comments made on the proposed Federal Operating Permits

Program rule and EPA responses to the comments.

Regulated Entities

Entities potentially regulated by this action are major sources,

affected sources under title IV of the Act (acid rain sources), solid

waste incineration units required to obtain a permit under section 129

of the Act, and those areas sources subject to a standard under section

111 or 112 of the Act which have not been exempted or deferred from

title V permitting requirements. Regulated categories and entities

include:

------------------------------------------------------------------------

Category Examples of regulated entities

------------------------------------------------------------------------

Industry.......................... Major sources under title I or

section 112 of the Act; affected

sources under title IV of the Act

(acid rain sources); solid waste

incineration units required to

obtain a permit under section 129

of the Act; area sources subject to

new source performance standards or

national emission standards for

hazardous air pollutants that are

not exempted or deferred from

permitting requirements under title

V.

------------------------------------------------------------------------

This table is not intended to be exhaustive, but rather provides a

guide for readers regarding entities likely to be regulated by this

action. This table lists the types of entities that EPA is now aware

could potentially be regulated by this action. Other types of entities

not listed in the table could also be regulated. To determine whether

your facility is regulated by this action, you should carefully examine

the applicability criteria in section 71.3(a) of the rule. If you have

questions regarding the applicability of this action to a particular

entity, consult the person listed in the preceding FOR FURTHER

INFORMATION CONTACT section or the EPA Regional Office that is

administering the part 71 permit program for the State or area in which

the relevant source or facility is located.

Outline. The information presented in this preamble is organized as

follows:

I. Background

II. Summary of Promulgated Rule

III. Significant Changes to the Proposed Rule

IV. Administrative Requirements

A. Docket

B. Executive Order 12286

C. Regulatory Flexibility Act

D. Paperwork Reduction Act

E. Unfunded Mandates Reform Act

I. Background

A. Background of EPA's Development of the Proposed Part 71 Rule

Title V of the Act requires that if a permits program meeting the

requirements of title V has not been approved for any State by November

15, 1995, EPA must promulgate, administer, and enforce a Federal title

V program for that State (42 U.S.C. section 7661a(d)(3)). Thus, from

the date of enactment of the 1990 Amendments to the Act, EPA was

subject to a 5-year deadline to establish a Federal program for States

that do not obtain EPA approval of their State programs within that

time. The Act had also placed EPA under a 1-year deadline to promulgate

regulations establishing the minimum elements of approvable State

permit programs (42 U.S.C. section 7661a(b)). The EPA promulgated its

regulations establishing these criteria, codified at 40 CFR part 70

(the part 70 rule), on July 21, 1992 (57 FR 32250). States were then to

submit their title V programs for EPA review by November 15, 1993, and

EPA was to approve or disapprove those submitted programs within 1 year

of receiving them (42 U.S.C. section 7661a(d)(1)). Thus, under the

temporal scheme of title V, EPA was to approve or disapprove timely

submitted State title V programs by November 15, 1994, exactly 1 year

before EPA's duty to establish a Federal program for unapproved States

would ripen.

Almost immediately upon promulgation of part 70, numerous industry,

State and local government, and environmentalist petitioners challenged

EPA's final rule in litigation in the Court of Appeals. See Clean Air

Implementation Project v. EPA, No. 92-1303 (D.C. Cir.). Petitioners

identified dozens of issues to which they objected in the part 70 rule,

and EPA decided to conduct broad-based settlement discussions with all

petitioners concerning these issues. These discussions occurred for

over a year following the commencement of the litigation, and resulted

in EPA, with the consultation of all of the litigants, developing

proposed revisions to many provisions in the part 70 rule. These

provisions mainly concerned the flexibility provisions of part 70,

which governed when permits would need to be revised to reflect changes

in operation at sources, and the procedures by which permits would be

revised. On August 29, 1994, EPA published proposed substantial

revisions to part 70 reflecting the outcome of these discussions (59 FR

44460) (hereafter ``August 1994 proposed revisions to part 70''). That

proposal reflected EPA's

[[Page 34203]]

most current thinking at the time concerning the proper implementation

of title V, and departed in numerous respects from positions taken in

the existing promulgated part 70 rule.

When EPA began developing part 71 in the fall of 1993, settlement

discussions concerning part 70 were still ongoing and were yielding

what appeared to be fruitful results. The Agency believed at the time

that any needed revisions to part 70 would be finalized well in advance

of the deadline for establishing any necessary Federal programs, and so

decided to develop part 71 based on contemplated proposed revisions to

part 70, as EPA wished to model part 71 on its long-term implementation

goals for title V, rather than on provisions of a part 70 rule that EPA

did not believe would remain as promulgated in the current rule.

When EPA published its proposed revisions to part 70 in August

1994, the Agency still believed that the revisions would be finalized

in time for EPA to base its part 71 Federal program rule on the revised

part 70. Consequently, when EPA published its proposed part 71

regulations on April 27, 1995, the proposal was based on the August

1994 proposed revisions to part 70 (60 FR 20804; hereafter, ``part 71

proposal''). The part 71 proposal thus contained provisions concerning

critical definitions under title V, the scope of applicability of the

program to sources, requirements governing applications and permit

content, and, most significantly, operational flexibility and permit

revisions that departed from the current part 70 rule's corresponding

provisions. In the proposal notice, the Agency specifically solicited

comment on whether the Agency had appropriately based part 71 upon the

relevant provision of the existing part 70 rule and the recently

proposed revision to part 70. See 60 FR at 20805.

At the time of proposal of part 71, the Agency was aware of many

adverse comments on the August 1994 proposed revisions to part 70, and

EPA had engaged in discussions with stakeholders to obtain

recommendations for publishing a supplemental proposal to revise the

flexibility provisions of part 70. See 60 FR at 20805, 20817. The part

71 proposal notice indicated that the Agency believed it might not be

possible to promulgate final permit revision procedures for part 71, in

light of the ongoing discussions to develop part 70 permit revision

procedures in time to meet the statutory deadline for establishing

Federal programs in States lacking approved part 70 programs. As a

result, the notice suggested that EPA may have to finalize the part 71

rule in two phases, the first without any provisions for revising

permits, which would be addressed in a later supplemental proposal. Id.

Indeed, EPA's supplemental proposal for both parts 70 and 71, published

on August 31, 1995, described how part 71's future permit revision

procedures would be modelled upon the part 70 procedures for permit

revisions proposed in that notice (60 FR 45530; hereafter, ``August

1995 supplemental proposal'').

B. The Need for Part 71 To Facilitate Transition

In the part 71 proposal notice, EPA stressed the need for

implementation of part 71 to facilitate a smooth transition to State

implementation of title V through approved part 70 programs. See 60 FR

at 20805, 20816. The EPA continues to believe that Congress envisioned

that States would have primary responsibility for implementing title V,

just as they do for implementing much of the rest of the Act. See, for

example, section 101(a)(3) of the Act, in which Congress found that air

pollution prevention and air pollution control at its source is the

primary responsibility of States and local governments (42 U.S.C.

section 7401(a)(3)). Note also that under title V of the Act, Congress

gave States the initial opportunity to develop and administer title V

programs, while directing EPA to function as a backstop if States are

unable to adopt provisions under State law to take on title V

responsibilities, rather than directing EPA to establish the Federal

program first and then allowing States to apply to take over title V

administration, as under prior permitting programs such as the

prevention of significant deterioration (PSD) and the national

pollutant discharge elimination system (NPDES) under the Clean Water

Act.

The EPA believes that granting States primary responsibility to

implement title V makes good policy sense. States are far better

positioned than EPA to administer permitting programs covering their

resident sources for several reasons. First, States are more familiar

with the operational characteristics of resident sources, and with the

applicable requirements to which they are subject. In having had the

lead on developing State implementation plans (SIP's) and implementing

other provisions of the Act that apply to these sources, States have

developed substantial expertise in, among other things, running air

permit programs that govern new construction and changes in emissions

of air pollutants such as the new source review (NSR) and PSD programs.

States have developed enforcement programs based on this structure, and

are able to coordinate their permitting programs with the goals and

needs of their overall air pollution control programs. Finally,

compared to EPA Regional offices, States are simply closer to their

sources, have greater resources, and are better able to respond to the

regulated community and its needs for expeditious permit processing.

In light of this, EPA has repeatedly stated its belief that

federally-implemented part 71 programs would be of short duration,

lasting only until the few remaining States that have not developed

approvable part 70 programs are able to submit title V programs that

meet the requirements of the Act. Rather than viewing part 71 only as a

means of exerting leverage in States that have not yet adopted adequate

part 70 programs, EPA has also viewed part 71 as an opportunity to aid

States in taking up responsibility to implement title V. To this end,

EPA has attempted to structure the rule so that States in which part 71

programs are established will be able to use the program as an aid to

adopting and implementing their own part 70 programs. For example,

today's rule provides that States can take delegation of administration

of the Federal program in their States. If a State that for whatever

reason has not been successful in developing its own statutes and

regulations to implement title V is nevertheless capable of running a

Federal program, EPA sees no reason not to offer the State the

opportunity to more efficiently run the permit program than EPA

believes the Agency could. The EPA also believes that the experience of

running the Federal program may assist States in overcoming any

remaining hurdles that have so far prevented them from adopting

adequate title V programs under State law.

C. Basing Part 71 on the Part 70 Program

In the part 71 proposal notice, EPA stated its view that it is

appropriate to model part 71 procedures on those required by part 70,

in order to promote national consistency between title V programs that

are administered throughout the country. See 60 FR at 20816. Such

national consistency would ensure that sources are not faced with

substantially different programs simply because EPA, as opposed to

State agencies, is the relevant title V permitting authority, would

promote uniformity in affected State and public participation, and

would provide a level playing field for sources. Basing part 71 on part

70 would also encourage States

[[Page 34204]]

that are still developing their title V programs to take delegation of

the part 71 program, as it would be more consistent with the programs

they are preparing to implement under State law. States taking

delegation would in turn ensure smoother transition to State

administration of part 70 programs, as sources would have already

become familiar with the State as the title V permitting authority and

would not need to restart their permit application process anew when

the State program receives EPA approval.

Since at the time the part 71 proposal was being developed it

appeared to EPA that part 70 would soon be revised in many significant

respects, EPA chose to base the proposal upon the recent proposed

revisions to part 70, rather than on the existing promulgated rule.

This was due in part to the fact that the August 1994 proposed

revisions to part 70 addressed a number of basic issues under title V

that necessarily would govern how those issues are addressed in part 71

(such as the definition of major source and the necessary provisions to

implement section 502(b)(10) of the Act), and in part to the Agency's

wish to provide in the Federal rule many of the benefits of the August

1994 proposed revisions to part 70. As noted above, however, EPA

specifically asked commenters to address whether EPA had

inappropriately either followed or departed from the approaches taken

in both the current part 70 rule and its proposed revisions.

Echoing their comments on the August 1994 proposed revisions to

part 70, industry commenters unanimously argued that the permit

revisions procedures contained in the part 71 proposal were too complex

and confusing and would hinder sources' abilities to make rapid changes

in response to market needs. In addition, most industry commenters

presented three general arguments in response to EPA's proposal to

establish a uniform national part 71 rule based on the August 1994

proposed revisions to part 70. The first type of argument was that EPA

should not promulgate a uniform national part 71 rule at all, but

rather should develop part 71 programs case-by-case, taking into

account the specific characteristics of the State's existing air

program, and basing the State's part 71 program as much as possible on

the State's part 70 program that it has developed to date and that EPA

had not found to be inadequate. According to this argument, the best

way to facilitate transition from Federal to State implementation of

title V is to make sure the Federal and State programs are virtually

identical in each relevant State, even if that means the Federal

programs would differ from State to State. It would follow that EPA

should approve whatever adequate elements a State had adopted for its

title V program, and then only fill the remaining gaps with Federal

provisions as necessary. This argument also held that section 502 of

the Act actually requires a case-by-case approach to developing part 71

programs for States, and that the Act does not authorize EPA to

promulgate a nationally uniform rule.

While EPA agrees that in theory the smoothest transition from

Federal to State implementation might occur where the Federal program

is identical to the State's, the Agency does not agree that it is

inappropriate to promulgate a nationally uniform rule for part 71. At

the outset, EPA disagrees with the assertion that the Agency lacks

legal authority to establish a nationally uniform rule for part 71.

While section 502(d)(3) of the Act does require EPA to promulgate,

administer and enforce a title V program ``for'' any State that does

not obtain part 70 approval, 42 U.S.C. section 7661a(d)(3), that

language does not compel a separate State-by-State approach to

establishing a Federal title V program; nor does it compel a Federal

program that is based on the State's existing but as yet unapproved

State program. Indeed, EPA would be hard-pressed to base a Federal

program on a State program where no State program has ever been adopted

or submitted for EPA evaluation. Even if a State had adopted and

submitted a program, EPA stresses that the Agency can only evaluate the

adequacy of State programs through notice and comment rulemaking, which

might not occur before a Federal program is due. The EPA believes

Congress must have recognized the possibility that EPA would be called

upon to establish a Federal program even where a State has never

adopted any State program of its own or where a program had not been

submitted in time for EPA to find it adequate; in such situations, it

would be impossible for EPA to base the Federal program on the State's.

The EPA also believes that the resource burden of establishing and

implementing different case-by-case programs for States would overwhelm

EPA Regional offices and establishing a generic template for part 71 is

a far more efficient use of Agency resources to get the Federal program

up and running. The EPA has consequently concluded that a nationally

uniform regulation is necessary for purposes of carrying out the

Agency's functions under title V. Section 301(a)(1) of the Act

authorizes EPA to prescribe such regulations as are necessary to carry

out the Administrator's functions under the Act (42 U.S.C. section

7601(a)(1)). Thus, EPA believes it has ample statutory authority to

establish the most efficient and nationally consistent part 71

regulation possible. Finally, EPA notes that EPA's other permitting

programs under its environmental statutes, such as the NPDES program

and the PSD program, are governed by nationally uniform regulations,

implementation of which have been very successful. The EPA sees no

reason to depart from this established approach for purposes of running

Federal title V programs, especially since Congress clearly did

anticipate that EPA would first address title V through establishing

regulations that would govern the minimum elements of title V programs

to be administered by any air pollution control agency. See section

502(b) of the Act, 42 U.S.C. section 7661a(b).

The second type of industry argument in response to basing the part

71 proposal on the proposed revisions to part 70 stressed that EPA

should delay promulgation of any part 71 rule until the revisions to

part 70 are finalized. This argument pointed out that promulgating part

71 based on the August 1994 proposed revisions to part 70 would result

in the part 71 rule being based on an approach that the Agency itself

had begun to revise in developing the supplemental proposed revisions

to part 70 (which were eventually published just 4 months after the

date of the part 71 proposal). The argument noted that since EPA is

envisioning substantial changes to the part 70 rule, the part 71 rule

should not finalize title V issues that will remain in transition until

the part 70 rule is finally revised. This argument also specifically

responded adversely to EPA's statement in the proposal that it may be

necessary to split finalization of part 71 into two phases in which the

operational flexibility and permit revision procedures would remain

reserved until a second phase. In the view of these commenters, such

provisions are critical components of any part 71 rule that is adopted,

and it would not be appropriate to leave them out of part 71 for any

unspecified time. This argument also stated that finalizing part 71 now

based upon the proposed revisions to part 70 would actually impede

transition to approved State part 70 programs, since the Federal

program, and the approved State program based on the current part 70

that replaces it, would take very different approaches to such

fundamental issues as applicability of the program, operational

flexibility

[[Page 34205]]

and permit revision procedures. Finally, this argument offered a theory

that title V actually does not require EPA to adopt part 71 programs

for States until May 15, 1997; under this theory, a commenter argued

that the Act actually gives States until May 15, 1995, rather than

November 15, 1993, to submit initial title V programs, since States

have 18 months following the first ``due date'' to submit any remedies

to deficient programs and avoid sanctions that would fall after that

18-month period. The commenter would interpret the date on which the

18-month period expires as the date referred to in section 502(d)(3)

and argues that EPA is not required to promulgate a Federal program

until 2 years after the expiration of the 18-month period.

First, EPA is not persuaded by the commenter's argument that part

71 programs are not due until May 15, 1997. Section 502(d)(1) of the

Act clearly provides that States are to submit their title V programs

``[n]ot later than 3 years after the date of enactment of the Clean Air

Act Amendments of 1990,'' 42 U.S.C. section 7661a(d)(1), which occurred

on November 15, 1990. Moreover, section 502(d)(3) clearly refers to

``the date required for submission of such a program under paragraph

(1) (of section 502),'' 42 U.S.C. section 7661a(d)(3), as the trigger

for the 2-year period after which EPA must establish Federal programs.

There is no reference to any 18-month grace-period in section

502(d)(3), and EPA disputes the assertion that the date on which a

sanctions clock expires under section 502(d)(2) can be viewed as the

``real'' deadline for submission of State programs in the face of the

plain language of section 502(d)(1) and section 502(d)(3)'s reference

to the deadline in section 502(d)(1). Thus, while EPA is sympathetic to

concerns that finalizing part 71 in advance of the Agency finally

revising part 70 could result in the Agency promulgating provisions

that are essentially moving targets in the Federal rule, EPA does not

believe it has the authority to delay issuance of part 71 beyond the

deadline prescribed by Congress. Moreover, as a policy matter, EPA

believes it is necessary to put part 71 in place to aid States that to

date have unsuccessfully struggled to develop approvable title V

programs, as it is a potential vehicle for State administration of

title V (through delegation of part 71) even where obstacles remain

that block certain States from obtaining part 70 approval. The EPA does

not believe that the environmental benefits of title V should be

delayed simply due to the fact that some States have not been

successful at developing title V programs. Moreover, EPA does not feel

it would be appropriate to attempt to justify delaying promulgation and

implementation of the Federal program because of the continuing

difficulties in revising the part 70 rule. However, EPA is persuaded by

commenters that the part 71 rule should not contain gaps to be filled

in at a second stage for provisions for operational flexibility and

permit revisions, and is sympathetic to concerns that basing these

provisions on the August 1994 proposed revisions to part 70 might even

interfere with transition to State programs approved under the current

part 70 rule. These latter points are discussed in more detail below.

The third general type of industry argument in response to basing

part 71 on the August 1994 proposal was that if EPA must establish a

Federal program now, it should do so based on the existing part 70

rule, and revise the program later when part 70 is revised. This

argument recognized that EPA may simply be unable in certain cases to

base a State-specific part 71 program on an existing State program, but

stressed the fact that any program that the State is still struggling

to adopt would be based on the existing part 70 rule, rather than on

the proposed revisions thereto. The argument pointed out the fact that

under the August 1994 proposed revisions to part 70, EPA planned to

allow States several years following final promulgation before States

would be expected to implement new part 70 programs based on the

revised rule. Thus, commenters observed, States would likely be

developing and implementing part 70 programs based on the July 1992

rule for considerable time. In light of this, it would actually

interfere with smooth transition from Federal to State implementation

to base part 71 on the future part 70 rule, especially in light of the

fact that at this point how part 70 will be ultimately revised is only

speculative; rather, transition could be facilitated only where the

Federal rule resembles the model that the State rule is expected to

follow. States might be less inclined to take delegation of a Federal

rule that does not resemble existing part 70 and the State analogues

that are being developed, and thus sources would be more likely to be

faced with different permitting authorities under part 71 and part 70

programs. Moreover, the relevant guidance that EPA had issued to date

to aid implementation of the current rule, such as the Agency's ``White

Paper for Streamlined Development of Part 70 Permit Applications''

(herein referred to as the ``first white paper'') and the March 5, 1996

guidance document entitled ``White Paper Number 2 for Improved

Implementation of the Part 70 Operating Permits Program, could be less

valuable as an aid in implementing a Federal rule that is not based on

the current part 70, and both sources and part 71 permitting

authorities could be forced to start somewhat from scratch in

implementing the program.

The EPA agrees that the most appropriate course of action is to

promulgate, on an interim basis, part 71 based on the current part 70

rule. In reaching this conclusion, EPA was persuaded by concerns about

impeding transition to part 70 approval under the current rule and by

industry concerns about issuing a rule containing gaps regarding

operational flexibility and permit revisions. Moreover, as many issues

in part 70 are still outstanding following the August 1994 and August

1995 proposals, and as many of those issues concern key definitions and

procedures under title V, it would be premature for EPA to finalize

part 71 based upon the proposed revisions to part 70 until it makes

final decisions on these issues in part 70. Thus, the only way EPA can

fulfill its mandate to step in as the title V permitting authority for

States that have not obtained part 70 approval at this time, and to do

so by establishing a complete part 71 program that provides the

flexibility needed by industry and mandated by title V, is to

promulgate the rule based upon the current part 70 regulation. The EPA

stresses, however, that by finalizing this interim approach in part 71,

the Agency does not preclude itself from revising part 71 in the future

as based on appropriate aspects of either the August 1994, April 1995,

or August 1995 proposals for parts 70 and 71. In fact, EPA intends to

issue a second round of final rulemaking for part 71 (hereafter ``phase

II rulemaking) in the future once the Agency has resolved with relevant

stakeholders the outstanding issues and is prepared to promulgate final

revisions to part 70. As a general matter, EPA stresses that the most

current reflection of the Agency's intended policy regarding many of

these provisions is the August 31, 1995 supplemental proposal.

Consequently, while the provisions adopted today in part 71 that relate

to outstanding issues under the definitions, applicability, permit

application, permit content, permit revisions and reopenings, and

affected State and EPA review sections are consistent with the

corresponding

[[Page 34206]]

provisions in the existing part 70 rule, rather than with provisions in

the proposals mentioned above, it should be expected that EPA will

issue a second final rulemaking, without a second round of proposal, to

conform part 71 to the revised part 70 rule when the Agency is prepared

to issue it.

The EPA believes that this approach is a logical outgrowth of the

part 71 proposal issued in April 1995. While that proposal only

contained regulatory provisions based on the August 1994 proposed

revisions to part 70, EPA explicitly solicited comment on whether the

proposal was in any way inappropriately inconsistent with the current

part 70 rule. Clearly, the commenters noted such inconsistencies, and

the proposal facilitated meaningful comment on what approach the Agency

should take in promulgating part 71 vis-a-vis the outstanding issues in

the part 70 revision process. As discussed above, the proposal enabled

industry commenters to fall into three basic categories in response to

the proposal--in fact, many commenters advanced more than one of the

basic types of arguments in their comments, realizing that the

different arguments might have different force depending upon the

extent to which States had actually developed and submitted their own

programs. The approach adopted today was urged by numerous industry

commenters as the most reasonable in light of the need to issue a part

71 program now, as opposed to leaving gaps to be filled in later at a

second stage of final rulemaking. In addition, today's rule is

consistent with the existing part 70 rule under which States continue

to submit programs, and under which EPA continues to approve those

programs. Thus, EPA does not believe that a second round of proposed

rulemaking is necessary before finalizing part 71 to conform to the

Agency's currently effective regulation implementing title V, part 70.

In the following sections of this notice, the specific provisions

that are being finalized based upon current part 70 rather than upon

the provisions of the part 71 proposal are identified and further

discussed. For each of them, the general governing principle is that

while the Agency has proposed to revise part 70 to modify many of the

provisions corresponding to the part 71 provisions adopted today, EPA

is not yet prepared to adopt final positions on those issues and so, in

the interests of promoting smooth transition from Federal to State

implementation of title V, is choosing to issue, on an interim basis, a

part 71 rule that matches as closely as possible the existing part 70

rule. The EPA's finalization of those provisions today in no way

reflects the Agency's ultimate decision to renounce any of the

positions articulated in the proposed revisions to part 70 or the

corresponding proposals for part 71.

II. Summary of Promulgated Rule

A. Applicability

The Federal operating permits program requires all part 71 sources

to submit permit applications to the permitting authority no later than

within 1 year of the effective date of the program. The operating

permit program applies to the following sources:

1. Major sources, defined as follows:

a. Air toxics sources, as defined in section 112 of the Act, with

the potential to emit 10 tons per year (tpy), or more, of any hazardous

air pollutant (HAP) listed pursuant to 112(b); 25 tpy, or more, of any

combination of HAP listed pursuant to 112(b); or a lesser quantity of a

given pollutant, if the Administrator so specifies (501(2)(A)).

b. Sources of air pollutants, as defined in section 302, with the

potential to emit 100 tpy, or more, of any pollutant (501(2)(B)).

c. Sources subject to the nonattainment area provisions of title I,

part D, with the potential to emit, depending on the nonattainment area

designation 10 or more tpy of volatile organic compound (VOC) or oxides

of nitrogen, 50 or more tpy of carbon monoxide, and seventy or more tpy

of particulate matter (501(2)(B)).

2. Any other sources subject to a standard under section 111 or

112.

3. Sources subject to the acid rain program (501(1)).

4. Any source subject to the PSD program or the NSR program under

title I, part C or D.

5. Any other stationary source in a category EPA designates, in

whole or in part, by regulation, after notice and comment.

For purposes of determining applicability, a source's total

emissions of a pollutant are found by summing the potential emissions

of that pollutant from all emissions units under common control at the

same plant site. If a source is a major source, even if only due to the

total emissions from one pollutant, then a source must submit (with few

exceptions) a permit application that includes all emissions of all

regulated air pollutants from all emissions units located at the plant.

Part 71 follows the approach of part 70 in deferring nonmajor

sources from permitting requirements. The permitting requirements for

nonmajor sources subject to a standard under section 111 or 112 of the

Act prior to July 21, 1992 are deferred for 5 years from the effective

date of the first approved part 70 program that deferred nonmajor

sources. The EPA may determine on a case-by-case basis permitting

requirements for nonmajor sources when they become subject to new

section 111 or 112 standards. Sources subject to the new source

performance standard for new residential wood heaters or the national

emission standards for hazardous air pollutants for asbestos as it

applies to demolition and renovation activities are permanently exempt

from permitting requirements.

B. Program Implementation

The EPA will administer a part 71 program for those portions of a

State that lack EPA approval for its operating permits program or for a

State that fails to adequately administer and enforce an approved

program. However, the requirement that EPA establish a Federal program

for States lacking a fully approved program is suspended if a State

program is granted interim approval. The EPA will also administer part

71 programs in Tribal areas. Should a part 71 program become effective

prior to the issuance of part 70 permits to all sources (under an

approved part 70 program), EPA will require part 71 permit applications

from sources that have not received part 70 permits. Applications shall

be due within a year of the effective date of the part 71 program. The

EPA will take final action on at least one-third of the applications

annually.

Section 71.4 also establishes procedures that would be used for

issuing permits to certain sources located on the Outer Continental

Shelf (OCS) and after EPA objects to a proposed or issued State permit.

The EPA may also delegate the responsibility for administering the

part 71 program to the State or eligible Tribe if the requirements of

section 71.10 have been met. However, delegation will not constitute

approval of a State or Tribal operating permits program under part 70.

The EPA will suspend the issuance of part 71 permits upon

publication of notice of approval of a State or Tribal operating

permits program under part 70. The EPA or the delegate agency will

continue to administer and enforce part 71 permits until they are

replaced by permits issued under the approved part 70 program.

The EPA will publish a notice in the Federal Register informing the

public of the effective dates or delegation of any part 71 programs for

States, Tribal areas,

[[Page 34207]]

and OCS sources. Where practicable, EPA will also publish notice in a

newspaper of general circulation within the area subject to the part 71

program and will notify the affected government.

C. Permit Applications

Each source meeting the applicability criteria of this part is

required to submit timely and complete information on standard

application forms provided by the permitting authority. Streamlined

forms for electronic formats may be provided.

An initial part 71 permit application is required within 12 months

of the later of:

1. The effective date of this part in a State, Tribal area, or OCS

area where a source is located, unless the source has an existing part

70 permit;

2. The expiration of any deferral for a nonmajor source;

3. The date a source commences operation; or

4. The date a source meets any of the applicability criteria of

section 71.3.

Sources with part 70 permits in force at the time part 71 becomes

effective in the area where they are located would not have to apply

for a part 71 permit until their part 70 permit expires. Prior to its

expiration, the part 70 permit may be modified by EPA.

Sources would be notified of the requirement to submit an

application at least 180 days prior to when the application is due.

The permitting authority will perform a completeness determination

within 60 days of receipt of an application, or the application will be

deemed complete by default. A complete application would contain all

the information needed to begin processing the permit application,

including, at a minimum, a completed standard application form (or

forms) and a compliance plan.

The compliance plan describes how the source plans to maintain or

to achieve compliance with all applicable air quality requirements

under the Act. This plan must include a schedule of compliance and a

schedule for the source to submit progress reports to the permitting

authority. Each source must submit a compliance certification report in

which it certifies its status with respect to each requirement, and the

method used to determine the status.

Each operating permit application, report, or compliance

certification submitted pursuant to part 71 must include a

certification signed by a responsible official attesting to the truth,

accuracy, and completeness of the information submitted.

Applicants may be required to update information in the application

after the filing date and prior to the release of the draft permit.

D. Permit Content

Part 71 permits must meet all applicable requirements of the Act

and, among other things, must contain:

1. A 5-year term for acid rain sources, up to a 12-year term for

certain municipal waste combustors, and up to a 5-year term for all

other sources.

2. Limits and conditions to assure compliance with all applicable

requirements under the Act.

3. A schedule of compliance, where applicable.

4. Inspection, entry, monitoring, compliance certification,

recordkeeping, and reporting requirements to assure compliance with the

permit terms and conditions.

5. A provision describing permit reopening conditions.

6. Provisions under which the permit can be revised, terminated,

modified, or reissued for cause.

7. Provisions ensuring operational flexibility so that certain

changes can be made within a permitted facility without a permit

revision.

8. A provision that nothing in the permit or compliance plan

affects allowances under the acid rain program.

All terms and conditions in a part 71 permit, including any

provisions designed to limit a source's potential to emit, are

enforceable by the Administrator and citizens under the Act.

Like part 70, part 71 would allow sources to apply for a permit

shield, i.e., a provision in the permit that states that if the source

complies with terms and conditions of the permit, the source shall be

deemed in compliance with any applicable requirements reflected in the

permit as of the date of permit issuance.

E. Permit Issuance and Review

Regulations concerning the processes for permit issuance, review,

renewal, revision, and reopening are found in sections 71.7 and 71.11.

Briefly, these include:

1. Action on Applications for Permit Issuance and Permit Renewal

Section 71.7(a) describes the conditions that must be satisfied

before EPA or a delegate agency may issue a permit. These include

receipt of a complete application, compliance with public participation

requirements, and notification of affected States, Indian Tribes, and

EPA (if the program has been delegated). Except during the initial

phase-in of the program, the permitting authority is required to act on

permit applications within 18 months after receiving a complete

application.

The timely submittal of a complete application and any additional

required information creates a ``shield'' against enforcement for

failure to have a part 70 or part 71 permit. Permits being renewed are

subject to the same procedural requirements that apply to initial

permit issuance, as provided in section 71.7(c). The administrative

procedures for permit issuance are contained in section 71.11 and are

generally based on analogous provisions governing other EPA permitting

programs at 40 CFR part 124.

2. Permit Revisions

Sections 71.7 (d) and (e) outline the mechanisms for permit

modification and administrative amendments that are needed to revise

part 71 permits to accommodate changes that would otherwise violate

terms and conditions of the permit.

Administrative amendments can be accomplished by the permitting

authority without public or EPA review. These permit revisions include

correction of typographical errors, changes in address or source

ownership, as well as incorporation of requirements established under

State preconstruction review that meet certain procedural and

compliance requirements.

If a change is not prohibited or addressed by the permit, the

permittee may make the change after submitting a notice, and the permit

is revised at renewal.

The regulations establish minor and significant permit modification

procedures for changes that go beyond the activities allowed in the

original permit or that increase the total emissions allowed under the

permit.

Minor permit modifications reflect increases in permitted emissions

that do not amount to modifications under any requirement of title I

and that do not meet certain other requirements. Minor permit

modification procedures require a source to provide advance notice of

the proposed change, but allow a change to take effect prior to the

conclusion of the revision procedures.

A source that makes a change before the minor permit modification

has been issued does so at its own risk. It is not protected from

underlying applicable requirements by any shield. It is only afforded a

temporary exemption from the formal requirement that it operate in

accordance with the permit terms that it seeks to change in its

modification application. Should the proposed permit modification be

rejected, the source would be subject to enforcement

[[Page 34208]]

proceedings for any violation of these requirements.

Significant permit modifications are inherently more complex, and

will require additional time to accomplish. Permitting authorities will

initiate their review of the proposed changes after receipt of an

application.

Sources subject to requirements of the acid rain program must hold

allowances to cover their emissions of sulfur dioxide (SO2).

Allowance transactions registered by the Administrator will be

incorporated into the source's permit as a matter of law, without

following either the permit modification or amendment procedures

described above.

3. Reopening for Cause

The permitting authority may terminate, modify, or revoke and

reissue a permit for cause. Reopening and reissuing procedures follow

the same procedures as apply to initial issuance. Advance notice is

required before permit reopenings may be initiated.

Section 71.7(f) requires that permits issued to major sources with

3 or more years remaining in the permit's term be reopened to

incorporate applicable requirements which are promulgated after the

issuance of the permit. Revisions must be made as expeditiously as

practicable, but no later than 18 months after the promulgation of such

additional requirements.

4. Permit Notification to EPA and Affected States

Consistent with 40 CFR section 70.8(b), EPA or the delegate agency

would be required to provide notice of draft permits to all affected

States and to certain Indian Tribes.

Affected States are those whose air quality may be affected and

that are contiguous to the State in which the source is located, or

that are within 50 miles of the source. The permitting authority must

give affected States an opportunity to submit written recommendations

for the permit and notify any affected State in writing of any refusal

to accept all of its recommendations.

Although Indian Tribes are not considered affected States unless

they establish their compliance with criteria for being treated in the

same manner as States pursuant to section 301(d) of the Act, the Agency

believes federally recognized Tribes should be given notice of draft

permits that may be issued to sources that could affect Tribal air

quality. The regulation requires that the permitting authority send

such notices.

The Act authorizes EPA to object to any permit that would not be in

compliance with the applicable requirements of the Act. In the case of

a delegated program, the permitting authority may not issue a part 71

permit if the Administrator has objected to its issuance in writing

within 45 days of receipt of the proposed permit.

5. Administrative and Judicial Review

After the close of the public comment period on a draft permit, the

permitting authority will issue a final permit decision. Within 30 days

of the final permit decision, anyone who filed comments on the draft

permit or participated in the public hearing may petition the

Environmental Appeals Board (EAB) to review any condition of the

permit. In general, the objections in the petition must have been

raised during the public participation period on the permit. The

petition will stay the effectiveness of the specific terms of the

permit which are the subject of the request for review, pending

conclusion of the appeal proceedings.

The EAB will issue an order either granting or denying the petition

for review. To the extent review is denied, the conditions of the final

permit decision become final agency action and are subject to judicial

review in the United States Court of Appeals under section 307(b) of

the Act. The decision of the EAB to issue or deny the permit is also

subject to judicial review.

Interested persons (including permitees) are authorized to petition

the Administrator to reopen an already issued permit for cause.

Petitions would be required to be in writing and to contain facts or

reasons supporting the request.

F. Permit Fees

Section 71.9 establishes the Federal operating permits program fee

requirements for owners or operators of part 71 sources. The fees must

be sufficient to cover the permits program costs, including the

following:

1. Reviewing and acting on any permit, permit revision, or permit

renewal, and processing permit reopenings.

2. Administering the permit program.

3. Implementing and enforcing the terms of any part 71 permit.

4. Monitoring, modeling, manipulating, and tracking emissions.

5. Providing support to small business stationary sources.

Consistent with the two-phased approach to part 71 promulgation

described in this notice, EPA is today implementing a two-phased

approach to part 71 fee requirements. Phase I fee collection will be

sufficient to cover Phase I costs. Since Phase II fee collection is

associated with permit revision procedures, a fee amount for Phase II

cannot be finalized in today's rule. The Phase II fee will add the

costs for the permit revision procedures that are finalized in that

rulemaking.

The dollar per ton fee will vary depending on the implementation

mechanism EPA uses to administer a part 71 program. A program that is

administered completely by EPA would charge $32 per ton per year (ton/

yr). Permit fees for a program for which EPA relies on contractor

assistance to the greatest extent possible would be approximately $57

per ton/yr. Program costs (and fees) would vary among part 71 programs

depending on the hourly rate paid to the contractor for its work on the

particular State's part 71 program. The costs of a program that is

staffed in part by EPA employees and in part by contractors or by the

delegate agency would vary in accordance with the percentage of

personnel time allocated to non-EPA staff and the hourly rate paid to

the contractor for its work on the State's part 71 program.

The EPA may suspend collection of part 71 fees for part 71 programs

which are fully delegated to States and for which EPA incurs no

administrative costs.

The EPA may promulgate a separate fee schedule for a particular

part 71 program if the Administrator determines that the fee schedule

in the rule does not adequately reflect the cost of administering the

program.

Sources are required to submit fee calculation worksheets and fees

at the same time as their initial permit applications are due and

thereafter on an annual basis.

Part 71 program costs and permit fees will be reviewed by the

Administrator at least every 2 years, and changes will be made to the

fee schedule as necessary to reflect permit program costs.

G. Federal Oversight of Delegated Programs

Section 71.10 establishes the procedures EPA would follow when

delegating the authority to administer a part 71 program to a State,

eligible Indian Tribe, or other air pollution control agency. The EPA

will delegate authority to run the program where possible in order to

take advantage of existing expertise of the delegate agency or where it

seems probable that the delegate agency's submitted part 70 program

will be approved within a short time by EPA, provided in both cases

that the delegate agency has the authority to administer the program

that would be delegated.

[[Page 34209]]

A delegate agency must submit a formal request for delegation and

other documentation that shows the agency or eligible Tribe has

adequate legal authority and capacity to administer and enforce the

part 71 program. If the request for delegation is accepted, EPA and the

delegate agency will enter into an agreement that sets forth the terms

and conditions of the delegation.

As part of its oversight of delegated programs, EPA would review

copies of applications, compliance plans, proposed permits and final

permits that the delegate agency would be required to send to EPA. The

EPA would have 45 days in which to review proposed permits. If EPA

objects to the issuance of a permit within that time, the delegate

agency would be required to revise and resubmit the proposed permit to

EPA.

Delegation of a part 71 program would not relieve a State of its

obligation to submit an approvable part 70 program, nor from any

sanctions that the Administrator may apply for the State's failure to

have an approved part 70 program.

H. Enforcement

The Federal enforcement authority available under section 113 of

the Act for violations of title V and the regulations thereunder

provides broader enforcement authority than States are required to have

under the part 70 regulations. Examples of the Federal enforcement

authorities available under the Act include, but are not limited to,

the authority to: (1) restrain or enjoin immediately any person by

order or by suit in court from engaging in any activity in violation of

the Act that is presenting an imminent and substantial endangerment to

the public health or welfare, or the environment; (2) seek injunctive

relief in court to enjoin any violation of the Act; (3) issue

administrative orders that assess civil administrative penalties; (4)

assess and recover civil penalties; and (5) assess criminal fines.

III. Significant Changes to the Proposed Regulations

A. Section 71.2--Definitions

The Agency has adopted definitions in today's rulemaking that are

consistent with and are mainly modelled on corresponding definitions in

the current part 70 rule, rather than on the part 71 proposal.

Consequently, many of the definitions adopted today differ from those

contained in the part 71 proposal which were largely based upon the

August 1994 proposed revisions to corresponding definitions in part 70

which the Agency is not yet prepared to finalize.

Several definitions found in the proposed section 71.2 have been

revised to conform more closely to the definitions used in the current

part 70 rule. These include ``affected State,'' ``applicable

requirements,'' ``final permit,'' ``major source,'' ``permit

revision,'' ``permitting authority,'' and ``responsible official,''

each of which is discussed briefly below. Similarly, EPA adopted

definitions for ``permit modification'' and ``section 502(b)(10)

change'' from the current part 70 rule, because these terms are

integral parts of today's rulemaking, which is based on the existing

part 70 regulations. Also, several definitions in the part 71 proposal

describe terms and concepts that the Agency has concluded are either

not necessary or are not ready to be finalized in today's rulemaking.

The terms for which EPA has not adopted a definition include

``insignificant activity or emissions,'' ``major new source review,''

``minor new source review,'' ``potential to emit,'' ``title I

modification,'' and ``Tribal area.'' To the extent these proposed terms

were based on the August 1994 proposed revisions to part 70, EPA will

finally address them in the Phase II rulemaking.

In addition, the Agency has retained several definitions found in

the part 71 proposal that are not found in the current part 70 rule,

but are needed for part 71. These include definitions for ``delegate

agency,'' ``part 71 permit,'' ``part 71 program,'' and ``part 71

source.'' The Agency has also adopted definitions for ``eligible Indian

Tribe,'' ``Federal Indian reservation,'' and ``Indian Tribe,'' which

were added to clarify which Tribes would be eligible to receive

delegation of the part 71 program and to be considered ``affected

States.''

The part 71 proposal and the August 1995 supplemental proposal

reflect the Agency's position on what definitions would be appropriate

in conjunction with the permit revision procedures, operational

flexibility provisions, and other provisions that have been proposed

for finalization in the Phase II rulemaking. Subsequent to reviewing

all of the comments on both of these proposals, EPA may finalize

definitions that differ from those adopted today.

1. Affected States

a. Indian Tribes. The EPA received numerous comments from Indian

Tribes suggesting that federally recognized Indian Tribes should be

considered to be ``affected States'' if their air quality may be

affected or the Tribal area is contiguous to the State in which the

permittee is located or is within 50 miles of the permittee. They

contended that Tribes should not have to meet any type of eligibility

criteria in order to be considered an ``affected State.'' Contrary to

the view of these commenters, the EPA interprets section 301(d)(2) of

the Act as authorizing the Agency to treat Indian Tribes in the same

manner as a State for purposes of being an ``affected State'' only when

EPA has determined that the Indian Tribe has demonstrated that it has

met the eligibility criteria of section 301(d)(2) of the Act. The

second paragraph of the proposed definition of ``affected State'' was

inconsistent with this interpretation in that it would have treated

Tribes in the same manner as States if the permitting action concerned

a source located in a Tribal area, regardless of the Tribe's

eligibility status. Therefore, EPA has amended this paragraph to

include the same eligibility requirement as the first paragraph. That

is, that the Indian Tribe must have demonstrated that it has met the

eligibility criteria of section 301(d)(2). However, in the interest of

furthering government-to-government relationships with Tribes, EPA has

adopted a provision in section 71.8 that requires the part 71

permitting authority to provide notice of draft permits to any

federally recognized Indian Tribe whose air quality may be affected by

the permitting actions and whose reservation or Tribal area is

contiguous to the jurisdiction in which the part 71 permit is proposed

or is within 50 miles of the permitted source. (See discussion at

section III.G. of this notice.)

b. Local agencies. The proposed definition of ``affected State'' in

the part 71 proposal added language not found in the current part 70

definition of ``affected State'' to the effect that, when a part 71

permit, permit modification, or permit renewal is proposed for a source

located within the jurisdiction of a local agency, that agency would be

considered an affected State. Today's rulemaking retains this approach

because it pertains to a situation which is unique to part 71, i.e.,

when EPA administers a part 71 program in an area where the local

agency would normally be the permitting authority of record under an

approved part 70 program. The proposal also differed from today's

rulemaking in that under the proposal, local agencies would not

otherwise be considered affected States. Since the approach taken to

such jurisdictions is an issue for both parts 70 and 71, it will be

addressed in the Phase II rulemaking. In the interim, the proposed

language has been deleted to comport with the current part 70

definition.

[[Page 34210]]

2. Applicable Requirements

The part 71 proposal expanded the part 70 definition of

``applicable requirement'' to include the provision that any

requirement enforceable by the Administrator and by citizens under the

Act which limits emissions for the purpose of creating offset credits

or avoiding any applicability requirement is itself an applicable

requirement. This addition, while helpful for understanding what

constitutes an applicable requirement, was based on the August 1994

proposed revisions to part 70, which EPA is not yet prepared to finally

promulgate. As such, EPA believes it is not appropriate to finalize

this change for purposes of part 71 at this time, but intends to

address this issue in the Phase II rulemaking. It was therefore deleted

to comport with the current part 70 definition.

The definition of ``applicable requirement'' in the part 71

proposal also differed from the definition in the current part 70 rule

in that it limited the title VI requirements that would have to be

included in a title V permit. This proposed language, while consistent

with the August 1994 proposed revisions to part 70, which, again, EPA

is not yet prepared to finalize, was removed so that the definition

would conform to the definition in the current part 70 regulation.

3. Final Permit

The proposal contained a proposed definition of ``final action or

final permit action.'' The final rule changes this term to ``final

permit'' in order to better harmonize the definition with the term

``final permit'' in the current part 70 regulation promulgated at

section 70.2.

4. Major Source

The proposed part 71 rule contained a definition of ``major

source'' that was based on the proposed change to the term contained in

the August 1994 proposed revisions to part 70. Since publication of the

part 71 proposal, EPA has also proposed additional changes to the term

in the August 1995 supplemental proposal for parts 70 and 71. The EPA

is currently in the process of reviewing, evaluating and developing

positions in response to comments on this very important term and other

issues raised in the August 1995 proposal. Consequently, EPA is not yet

prepared to promulgate part 71 in general, or the major source

definition in particular, as based on the August 1994, April 1995 or

August 1995 proposals. The only exception to this approach is in regard

to source categories for which fugitive emissions are to be counted in

determining whether a source is a major source under section 302 of the

Act.

Consistent with PSD and nonattainment NSR, current part 70 requires

the counting of fugitive emissions from source categories which have

been listed pursuant to section 302(j) in major source applicability

determinations. See the definition of ``major source'' at 40 CFR

section 70.2. The one difference, however, between the list of source

categories under PSD and nonattainment NSR and current part 70 is in

regard to the 27th category of sources that are required to count

fugitive emissions. In parts 51 and 52, the 27th category is stated as

follows:

Any other stationary source category which, as of August 7,

1980, is being regulated under section 111 or 112 of the Act.

In current part 70, the 27th category reads as follows:

All other stationary source categories regulated by a standard

promulgated under section 111 or 112 of the Act, but only with

respect to those air pollutants that have been regulated for that

category;

As can be seen from the above, one of the principal differences

between these two paragraphs is the date of August 7, 1980, which is

specified in the PSD and nonattainment NSR regulations, but is absent

from the current part 70 regulation. The result of this difference is

that part 70 literally requires sources to count fugitives even where

those sources are not required to do so in determining whether they are

major for purposes of PSD or nonattainment NSR. As stated in the

preamble to the August 1994 part 70 proposal, EPA acknowledges that it

did not follow the procedural steps necessary under section 302(j) to

expand the scope of sources in this category for which fugitives must

be counted in part 70 major source determinations. See memorandum of

June 2, 1995, entitled ``EPA Reconsideration of Application of

Collocation Rules to Unlisted Sources of Fugitive Emissions for

Purposes of Title V Permitting,'' from Lydia Wegman, Deputy Director,

Office of Air Quality Planning and Standards, to Regional Air

Directors. Instead of perpetuating this problem by following this

aspect of current part 70, and even though the Agency is not yet ready

to finalize the approach taken in the August 1995 supplemental proposal

for parts 70 and 71, EPA believes that an appropriate interim solution

is to finalize this category similar to how it was proposed in the

April 1995 part 71 proposal and consistent with the provisions in the

PSD and nonattainment NSR regulations. As a result, the 27th category

will read as follows:

Any other stationary source category which, as of August 7,

1980, is being regulated under section 111 or 112 of the Act.

Use of the above language best ensures that, until EPA is prepared to

finalize part 70's proposed revisions, there will be no discrepancy

between the treatment of fugitive emissions under PSD and nonattainment

NSR and the corresponding provision in this phase I part 71 rule. This

language further ensures that sources which are considered major

sources under PSD and nonattainment NSR are also major sources under

part 71. This consistency is compelled by section 501(2) which requires

any stationary source to be considered major under title V if it is a

major source under section 112 or a major stationary source under

section 302 or part D of title I.

It is important to remember that EPA has proposed additional

modifications to the list of source categories, including this 27th

category, in the August 1995 proposal for parts 70 and 71. However, as

EPA is currently in the process of reviewing and evaluating comments

regarding these revisions, EPA cannot at this time finalize any of

these proposed modifications.

The EPA stresses that the definition of major source in today's

rulemaking does not constitute a decision to reject other proposed

changes to the term contained in the recent proposals. Rather, EPA

expects the Phase II part 71 rulemaking to make whatever changes to the

term are necessary in order to maintain harmonization with part 70, if

the part 70 definition of major source is ultimately revised as the

Agency intends. In the meantime, however, in order to avoid delay in

fulfilling the Agency's responsibilities under title V, and in order to

avoid repeating a procedural mistake that occurred in the development

of the first part 70 rule, EPA has concluded, in response to the

commenters, that at this point it is most reasonable to promulgate a

definition that is consistent with the major source definition

contained in the current part 70 rule, except for the 27th category of

sources listed pursuant to section 302(j). As EPA has already told

States that they may receive interim approval of their State programs

even if they do not literally match with current part 70's 27th

category, due to EPA's concession that the Agency did not take the

procedural steps necessary in part 70 to constitute a section 302(j)

rulemaking, EPA believes it is reasonable to take this limited

departure from part 70. The EPA will respond to specific comments on

[[Page 34211]]

the major source definition as proposed in April 1995 and August 1995

in the context of finalizing the Phase II part 71 rule.

5. Permit Modification and Permit Revision

For the purposes of this rulemaking, EPA adopted the definition of

permit modification in the current part 70 regulation and revised the

definition of ``permit revision'' to be consistent with the current

part 70 definition.

6. Permitting Authority

The final rule changes the proposed definition of ``permitting

authority'' to more closely match the definition of the term currently

promulgated at section 70.2.

7. Potential to Emit

Today's rule does not include a final regulatory definition of the

term ``potential to emit.'' The part 71 proposal contained a proposed

definition of potential to emit that was based on the August 1994

proposed revisions to part 70. The current part 70 definition of the

term provides that physical or operational limits on a source's

capacity to emit an air pollutant shall be considered part of the

source's design if the limitation is enforceable by the Administrator.

Under the proposed definition, the phrase ``and by citizens under the

Act'' would have been added. The EPA is still in the process of

evaluating comments on the proposed revisions to part 70 with respect

to this issue, and is not yet prepared to adopt the revision to the

definition into a final rule. Consequently, it is premature to adopt

this change into the final part 71 rule at this time.

In addition, EPA also received substantial adverse comment on the

proposed requirement that limitations on potential to emit be

enforceable by the Administrator (i.e., ``federally enforceable'').

Industry commenters noted that EPA's policy on Federal enforceability

was the subject of several pending lawsuits against the Agency in the

Court of Appeals. These commenters have long held that emissions

limitations enforceable under State law should not have to be federally

enforceable in order to be considered part of a source's physical or

operational design and a valid limit on potential to emit. These

commenters also urged EPA to codify the Agency's January 25, 1995,

memorandum in which EPA stated it would not require certain sources

that otherwise have the potential to emit an air pollutant in major

amounts to obtain permits under state part 70 programs. See, memorandum

of January 25, 1995, 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),'' from John Seitz, Director, Office of Air Quality

Planning and Standards, to Regional Air Division Directors (hereafter

``January 25, 1995 memorandum from John Seitz'').

Since the close of the comment period, the U.S. Court of Appeals

for the District of Columbia Circuit has ruled on two occasions that

EPA in two separate regulations had failed to explain why the Agency

had adopted a restrictive interpretation of ``potential to emit.'' See

National Mining Association v. EPA, 59 F.3d 1351 (D.C. Cir. July 21,

1995), and Chemical Manufacturers Association v. EPA, No. 89-1514 (D.C.

Cir. Sept. 15, 1995). In response to these rulings, EPA has begun a

rulemaking effort that would consistently apply to all of its

regulations and programs that base applicability on sources' potential

to emit. This rulemaking will address potential to emit not only in the

regulations that were the subject of the two court rulings (EPA's

``General Provisions'' regulations under section 112 of the Act

promulgated at 40 CFR part 63, and the NSR and PSD regulations at parts

51 and 52), but also to parts 70 and 71.

In the meantime, however, the Agency believes it would not be

appropriate to delay issuance of the part 71 regulation (and

implementation of the Federal operating permit program in States that

have not yet obtained part 70 approval) due to the pendency of the

Agency's general potential to emit rulemaking. At the same time, EPA

does not believe it would be appropriate to merely recodify the part 70

definition of potential to emit in this Phase I part 71 rule, in light

of the recent court decisions concerning the section 112 and NSR and

PSD regulations. Consequently, for this interim part 71 rule, EPA is

not adopting a regulatory definition of potential to emit for purposes

of part 71. This definition will be added to part 71 at a later time,

when the Agency completes its general rulemaking to define potential to

emit for its various stationary source programs under the Act.

Nevertheless, the absence of a regulatory definition of potential

to emit in today's rule should not prevent sources from being able to

determine whether they are subject to the part 71 program because they

are major sources. The EPA stresses that the term ``major source'' is

already defined as a statutory matter in title V at section 501(2) of

the Act to mean a major source as defined in section 112 and a major

stationary source as defined in section 302 or part D of title I of the

Act. Moreover, the definition of major source adopted today also tracks

these statutory provisions, and, as discussed in the recent memorandum

entitled ``Interim Policy on Federal Enforceability Requirement for

Limitations on Potential to Emit,'' from John Seitz, Director, Office

of Air Quality Planning and Standards (hereafter January 22, 1996

memorandum from John Seitz), most current regulatory requirements and

policies regarding potential to emit, including the interim policy

discussed in the January 25, 1995 Seitz memorandum, remain in effect

while EPA conducts expedited rulemaking to address these issues in

detail. Consequently, in determining whether a source is major, the

part 71 permitting authority and source operator should look to the

regulatory definition of major source adopted in today's rule and the

statutory definitions in section 112, section 302, and part D of title

I (as those provisions are implemented by applicable regulations

thereunder) as controlling for purposes of this Phase I part 71 rule.

In National Mining Association v. EPA, 59 F.3d 1351 (D.C. Cir. July

21, 1995), the Court dealt with the potential to emit definition under

the hazardous air pollutant programs promulgated pursuant to section

112. In this decision, the Court agreed with EPA that only

``effective'' State-issued controls should be cognizable in limiting

potential to emit. In addition, the Court did not question the validity

of current federally enforceable mechanisms in limiting potential to

emit. However, the Court found that EPA had not adequately explained

why only federally enforceable measures should be considered in

assessing the effectiveness of State-issued controls. Accordingly, the

Court remanded the section 112 General Provisions regulation to EPA for

further proceedings. Thus, EPA must either provide a better explanation

as to why Federal enforceability promotes the effectiveness of State

controls, or remove the exclusive Federal enforceability requirement.

The Court did not vacate the section 112 regulations, and they remain

in effect pending completion of EPA rulemaking proceedings in response

to the Court's remand.

The EPA reiterates that independent from the decision in National

Mining, current EPA policy already recognizes State-enforceable

potential to emit limits under section 112 and title V in many

circumstances under the

[[Page 34212]]

transition policy discussed in the January 25, 1995 John Seitz

memorandum, as recently revised by the January 22, 1996 John Seitz

memorandum. In recognition of the absence in some States of suitable

federally enforceable mechanisms to limit potential to emit applicable

to sources that might otherwise be subject to section 112 major source

requirements or to title V, EPA's policy provides for the consideration

of State-enforceable limits as a gap-filling measure during a

transition period that extends until January 1997. Under this policy,

restrictions contained in State permits issued to sources that actually

emit more than 50 percent, but less than 100 percent, of a relevant

major source threshold are treated by EPA as acceptable limits on

potential to emit, provided that the permit and the restriction in

particular are enforceable as a practical matter. In addition, sources

with consistently low levels of actual emissions relative to major

source thresholds can avoid section 112 major source requirements even

absent any permit or other enforceable limit on potential to emit.

Specifically, the policy provides that sources which maintain their

emissions at levels that do not exceed 50 percent of any applicable

major source threshold are not treated as major sources and do not need

a permit to limit potential to emit, so long as they maintain adequate

records to demonstrate that the 50 percent level is not exceeded.

Under today's Phase I part 71 rule, sources that are not treated as

major under this policy would also not be treated as major for purposes

of part 71. However, if a source would be treated as major under the

applicable regulations implementing section 112 and this policy, the

source would be required to obtain a part 71 permit. The EPA notes that

this policy is to end in January 1997. In conjunction with the general

rulemaking on potential to emit, EPA will consider whether it is

appropriate to extend the transition period beyond January 1997.

In Chemical Manufacturers Association v. EPA, No. 89-1514 (D.C.

Cir. Sept. 15, 1995), the Court addressed the potential to emit

definition in the PSD and NSR programs. Specifically, this case

challenged the June 1989 rulemaking in which EPA reaffirmed the

requirement for Federal enforceability of potential to emit limits

taken to avoid major source permitting requirements in these programs.

In a briefly worded judgment, the Court, in light of National Mining,

remanded the PSD and NSR regulations to EPA. In addition, in contrast

to its disposition of the section 112 regulations in National Mining,

the Court in Chemical Manufacturers vacated the federal enforceability

requirement of the potential to emit definitions in the PSD and NSR

regulations.

The EPA interprets the Court's decision to vacate the PSD/NSR

Federal enforceability requirement as causing an immediate change in

how EPA regulations should be read, although EPA expects that the

effect of this change will be limited. Specifically, regarding

provisions of the definitions of potential to emit and related

definitions requiring that physical or operational changes or

limitations be ``federally enforceable'' to be taken into account in

determining PSD/NSR applicability, the term ``federally enforceable''

should now be read to mean ``federally enforceable or legally and

practically enforceable by a State or local air pollution control

agency.''

However, the effects of the vacatur will be limited during the

period prior to completion of new EPA rulemaking on this issue. Thus,

during this interim period, Federal enforceability is still required to

create ``synthetic minor'' new and modified sources in most

circumstances pending completion of EPA rulemaking. This is because EPA

interprets the order vacating certain provisions of the PSD/NSR

regulations as not affecting the provisions of any current State or

Federal implementation plan (SIP or FIP), or of any permit issued under

any current SIP or FIP. Thus, previously issued federally enforceable

permits issued under such programs remain in effect.

Moreover, new or modified sources that seek to lawfully avoid

compliance with the major source requirements of PSD or nonattainment

NSR by limiting potential to emit to achieve synthetic minor status

must still obtain a general or ``minor'' NSR preconstruction permit

under section 110(a)(2)(C) of the Act and 40 CFR section 52.23. (This

requirement was not at issue in the Chemical Manufacturers case, and is

unaffected by the Court's ruling.) Every SIP contains a minor NSR

program that applies generally to new or modified sources of air

pollutants, and permits issued under such programs are, like all other

SIP measures, federally enforceable. In sum, the precise impact of the

vacatur on PSD/NSR applicability in any State, and hence the

applicability of part 71 under the section 302 and part D of title I

prongs of the definition of major source adopted in part 71, can be

definitively established only by reviewing the provisions of the

particular SIP or FIP to which the source is subject.

8. Regulated Air Pollutant

In the August 1995 supplemental proposal, EPA proposed a less

inclusive definition than is currently promulgated in part 70 or was

proposed for part 71 in the April 1995 notice. However, for purposes of

today's rulemaking, EPA is retaining the definition in the part 71

proposal, which is consistent with the current part 70 definition. The

EPA intends to take final action on the term as proposed in the

supplemental proposal in the Phase II rulemaking.

9. Responsible Official

Although EPA has proposed, in the August 1994 proposed revisions to

part 70, to clarify that the criteria for selecting the designated

representative is the same at an affected source as at other sources,

the Agency has adopted a definition of this term for purposes of

today's rulemaking that is consistent with the definition in current

part 70. The EPA will take final action in Phase II consistent with the

Agency's final resolution of this issue in response to comments on the

August 1994 notice.

10. Section 502(b)(10) Changes

The part 71 proposal, in omitting the definition of ``section

502(b)(10) changes'' from section 71.2, followed the approach used in

the August 1994 proposed revisions to part 70. The Agency's reasons for

the omission are articulated in that proposal at 59 FR 44467-8. As

indicated in the August 1995 supplemental proposal, this is still the

Agency position. However, EPA will not adopt a final position on

proposed revisions regarding operational flexibility for part 70 or 71

until the Phase II rulemaking. For purposes of today's rulemaking, EPA

has adopted a definition of the section 502(b)(10) changes that

comports with the current part 70 regulation, in order to better

harmonize the Phase I part 71 rule and the current part 70 regulation.

11. Title I Modification

The part 71 proposal, based on the August 1994 proposed revision to

part 70, contained a proposed definition of the phrase ``Title I

modification or modification under any provision of title I of the

Act.'' Subsequently, EPA issued a revised proposed definition in the

August 1995 supplemental proposal for parts 70 and 71. The EPA is in

the process of reviewing and developing a position in response to the

comments on the several proposals with respect to this issue, and is

not yet prepared to define the term in a final rule. The EPA will add a

definition in the Phase II rulemaking that is consistent with how

[[Page 34213]]

EPA ultimately defines the term under part 70.

A detailed discussion of the history of this definition is

contained in the preamble to the August 1995 part 70 proposal (60 FR

45545). At issue is whether the phrase ``modifications under any

provision of title I'' as used in section 502(b)(10) of the Act

includes not only modifications subject to major NSR requirements of

parts C and D of title I but also modifications subject to minor NSR

programs established by the States pursuant to section 110(a)(2)(C).

In August 1994, EPA proposed to interpret the title I modification

language of part 70 to include minor as well as major NSR modifications

(55 FR 44527). The EPA received many comments from industry and States

contesting this interpretation. The commenters argued that EPA had

defined title I modification in the preamble to the May 1991 proposed

part 70 rule to exclude minor NSR (56 FR 21746-47 and footnote 6) and

did not redefine it in the final July 1992 rule. As a result, they

argued that they were relying on the current rule to be interpreted

consistent with the proposed rule preamble and that EPA could not

change its interpretation without undertaking further rulemaking.

Based in part on the arguments raised by commenters, EPA revised

its proposed interpretation of the definition of title I modification

in the August 1995 supplemental notice to exclude modifications subject

to minor NSR. In addition, EPA proposed regulatory language defining

title I modification which excluded the reference to section 110(a)(2)

of the Act.

While EPA is not yet prepared to adopt a final definition for the

term, in implementing the Phase I part 71 program EPA will treat the

issue consistently with the approach the Agency has advised States to

take under the current part 70 regulation. Consequently, it will not

consider title I modifications to include changes subject to State

minor NSR programs.

B. Section 71.3--Sources Subject to Permitting Requirements

The final rule promulgates provisions regarding applicability of

the program at section 71.3. These provisions are based on their

counterparts in the currently promulgated part 70 rule at section 70.3.

Consequently, in several aspects, they differ from section 71.3 as

proposed, which was based on the August 1994 proposed revisions to

section 70.3 which the Agency is not yet prepared to finalize.

Paragraph (a)(1) of the part 71 proposal contained an exemption

from title V for major sources that would be subject to title V only if

they have the potential to accidentally release pollutants listed

pursuant to section 112(r)(3) in major amounts. This exemption has been

deleted, even though it garnered reviewer support, consistent with the

decision to match the part 70 requirements except where unique

circumstances make a change necessary. If EPA ultimately revises part

70 to add the deleted language, the Agency would intend to revise part

71 consistently.

Proposed section 71.3(a)(4) which was modelled upon the August 1994

proposed revisions to part 70 and would have stated that any source

subject to title I parts C or D would be required to obtain a permit

was also deleted from the final regulation to comport with the part 70

regulation. The purpose of this provision was to ensure that all

sources subject to preconstruction permitting as major sources under

parts C or D of the Act are also subject to title V permitting. Again,

if part 70 is ultimately revised to add this provision, EPA would

intend to revise part 71 to add it as well.

Similarly, paragraph (b)(2) has been changed to conform with

section 70.3(b)(2), which addresses applicability for sources subject

to section 111 or 112 standards promulgated after July 21, 1992.

Proposed section 71.3(b)(2) differed from both existing section

70.3(b)(2) and the August 1994 proposed revisions thereto. If section

70.3(b)(2) is ultimately revised, EPA would expect to revise section

71.3(b)(2) to harmonize it with part 70.

Paragraphs (c) and (d) of this section, found in the proposal at

sections 71.6(a)(1)(iv) and 71.5(f)(3)(i), respectively, were moved to

this section for compatibility with the current part 70 provisions at

sections 70.3 (c) and (d).

C. Section 71.4--Program Implementation

The major issues raised by commenters on proposed section 71.4

related to the need to base part 71 on finalized (as opposed to

proposed) provisions of part 70, how the part 71 program should be

customized to fit the unique needs of the State or area for which the

program is administered, and jurisdictional issues with respect to

programs on Tribal lands. The Agency's approach to the first issue is

discussed at length in section II of this document. This section

addresses the second and third issues in addition to several minor

changes to the proposed rule that were adopted today.

1. National Template Approach

With respect to the second issue, EPA received divergent comments.

For example, commenters suggested that a national template should be

flexible, that a national template should be used only to fill in the

gaps of deficient State programs, and that there should be no national

template because title V does not authorize EPA to develop such a rule.

The Agency carefully considered the statutory framework for the

program and interprets title V as authorizing a national template

approach. For a further discussion of this issue, see section II of

this document. The EPA chose a national template approach because EPA

believes the national template is flexible enough to be an effective

program in nearly all areas, and individual rulemakings for each area

that has a part 71 program would be needlessly burdensome on the

Agency. Since the national template will serve the needs of most areas,

it is more efficient to promulgate the program once while allowing for

separate rulemakings, as needed, in some areas. The EPA recognizes the

desirability of providing a flexible approach to administering the

program, as the commenters have suggested, when the national template

does not adequately fit the unique State or Tribal situation. Such

flexibility is already contained in section 71.4. When EPA determines

that the national template rule is not appropriate for a State, EPA may

adopt, through a separate rulemaking, appropriate portions of a State

or Tribal program in combination with provisions of part 71 in order to

craft a suitable part 71 program, as provided in section 71.4(f).

Furthermore, section 71.9(c)(7) provides that when the national fee

structure would not reflect the cost of administering a part 71

program, the Administrator shall through a separate rulemaking set an

appropriate fee. Finally, as provided in section 71.5 and as discussed

in section III.D of this document, EPA has designed part 71 to provide

significant flexibility to accommodate the localized air quality

issues. For example, EPA will use State application forms whenever

possible and will try to match the list of trivial activities which may

be left off application forms to the lists established in the State

operating permit program.

2. Part 71 Programs in Tribal Areas

The EPA is deferring promulgation of regulations that would

describe how the Agency would determine the boundaries of a part 71

program for a

[[Page 34214]]

Tribal area. The EPA has published a proposed rule, pursuant to section

301(d)(2) of the Act, specifying the provisions of the Act for which

EPA believes it is appropriate to treat Indian Tribes in the same

manner as States and outlining the Agency's position on the authority

of Indian Tribes to administer air programs under the Act. See 59 FR

43956 (Aug. 25, 1994)(``Indian Tribes: Air Quality Planning and

Management,'' hereafter ``proposed Tribal rule''). As indicated in the

part 71 proposal, EPA intends to follow the approach of the Tribal rule

with respect to issues of jurisdiction and resolution of jurisdictional

disputes. The EPA agrees that it would be more practical to defer

addressing jurisdictional issues until the promulgation of the Tribal

rule. The Agency will finalize an approach to jurisdiction as well as a

definition of Tribal area in the Phase II rulemaking or in conjunction

with finalizing the Tribal rule. In the interim, the Agency will not be

able to implement part 71 programs in Tribal areas unless it completes

a rulemaking that establishes the boundaries of the part 71 program in

the Tribal area. Rulemakings for the Tribal rule and Phase II will be

completed well in advance of the November 1997 deadline for EPA to

implement part 71 programs on Tribal lands. Therefore, EPA does not

expect that the deferral of jurisdictional issues will delay

implementation of the part 71 program. Although part 71 contains no

definition of ``Tribal area,'' EPA will provide (and will require

delegate agencies to provide) notice of proposed permitting actions

pursuant to section 71.8(d) even prior to the Phase II rulemaking. In

the interim, federally recognized Indian Tribes will receive notice

with respect to permitting actions related to sources whose emissions

may affect Tribal air quality and that are located in contiguous

jurisdictions or are within 50 miles of the exterior boundaries of the

reservation.

3. Expiration of Part 71 Permits

The Agency received comments suggesting that part 71 permits should

be rescinded automatically, without the Agency taking any action, when

they are replaced by a part 70 permit. The EPA agrees that no separate

agency action should be required when a part 71 permit is replaced by a

part 70 permit issued under the approved part 70 program because unless

the rescission happens simultaneously with the issuance of the part 70

permit, a source could be subject to a part 70 and a part 71 permit

which may contain different requirements. Accordingly, EPA has deleted

proposed section 71.4(l)(3) which provided that the Administrator would

rescind part 71 permits when they were replaced with part 70 permits.

Further, the EPA has adopted section 71.6(a)(11) which provides that

part 71 permits shall contain a provision to ensure that a part 71

permit will expire when the source is issued a part 70 permit.

4. Suspension of Issuance of Part 71 Permits

The EPA revised the first paragraph of proposed section 71.4(l) to

clarify, consistent with EPA's original intent, that EPA may suspend

issuance of part 71 permits whenever the Agency has granted full or

interim approval to a State part 70 program. Section 502(e), which

addresses suspension of the issuance of part 71 permits, provides that

the triggering event for suspension is publication of notice of

approval. Thus, there is no statutory requirement that a State program

must ``fully'' meet the requirements of part 70 or be fully approvable

in order for EPA to suspend permit issuance. The Agency believes it is

appropriate to suspend issuance of part 71 permits when a State program

substantially meets the requirements of part 70 and has received

interim approval because it would be confusing and burdensome to have

two title V permit programs operating simultaneously in the same

jurisdiction. Therefore, EPA has deleted the word ``fully'' from the

first paragraph of proposed section 71.4(l).

5. Delegation Agreements

The final rule makes a minor change to proposed section 71.4(j) in

parallel with a change to proposed section 71.10(b) to reflect the fact

that under the final rule, EPA will not publish its delegation

agreement with a delegate agency. Therefore, section 71.4(j) provides

that the roles of the delegate agency and EPA in administering the part

71 program will be defined in a delegation agreement, not in a Federal

Register notice. The EPA will follow the procedures for delegation

agreements established for the PSD program under which EPA does not

publish its delegation agreements. Delegation agreements reflect the

understanding of EPA and the delegate agency as to their respective

responsibilities and are not subject to any notice requirement. This

approach allows EPA and the delegate agency to modify their agreement

as circumstances change, without the burden of publishing a Federal

Register notice.

6. Early Reductions Permits

The Agency retained in section 71.4(i)(3) the requirement that the

permitting authority take action on complete permit applications

containing an early reduction demonstration within 12 months of receipt

of the complete application. Although the current part 70 regulation

sets a 9 month deadline for State action, EPA Regional offices are

allowed 12 months to take action on the permit applications submitted

under the interim permitting rule for early reduction sources that EPA

adopted prior to the approval of any State part 70 programs. See 40 CFR

section 71.26(a)(2). The Agency believes that this time frame is

reasonable given the effort required to process the permits and the

need for sources qualifying for a compliance extension under the Early

Reductions Rule to obtain a permit prior to certain deadlines set by

the rule.

D. Section 71.5--Permit Applications

The part 71 proposal addressed permit applications at proposed

section 71.5 (a) through (i). This proposed section was based upon a

combination of corresponding provisions in the existing part 70 rule

and in the August 1994 proposed revisions to part 70, and was presented

in a slightly different structure from the part 70 rule. In light of

EPA's decision to promulgate part 71 on an interim basis, more

consistently with the existing part 70 rule, the provisions based upon

the August 1994 proposal are not being adopted today. Moreover, in

order to facilitate transition from implementing part 71 to part 70

programs, the final rule is being adopted in a structure that is more

consistent with that of the current part 70 rule.

1. Timely Application

Under section 71.5(b)(1) of the proposal all initial permit

applications would have to be submitted within 12 months or an earlier

date after the source becomes subject to part 71. The proposal would

have required that the permitting authority provide notice of the

earlier date to the source and that this notice would be given at least

120 days in advance of the application submittal date.

Several commenters argued that the 120 days (4 months) minimum

notice would not give sources sufficient time to prepare an

application. They also argued that 4 months was insufficient time for

sources to submit their applications early for purposes of addressing

deficiencies and ensuring they receive the application shield.

In response to these comments, EPA has lengthened the notice period

from 4

[[Page 34215]]

months to 6 months. Section 503(c) of the Act requires the submittal of

all applications within 12 months of the effective date of a permit

program or such earlier date as the permitting authority may establish

and that one-third of these applicants be issued permits in this first

year. In order to issue one-third of the permits in the first year, EPA

must receive at least one-third of the applications prior to 12 months

after the effective date of the program.

The EPA considered and rejected commenters' suggestions for 8 to 12

months' advance notice because they would interfere with EPA's

requirement to issue one-third of the permits in the first year. The

EPA believes that the 6 month alternative will allow EPA enough time to

process and issue permits. The EPA believes that 6 months is sufficient

time for sources to prepare applications for several reasons that had

not been announced at time of proposal. First, on July 10, 1995, EPA

issued the first white paper that examines options for simplifying part

70 permit applications and sets minimum expectations concerning how

much information must be included in order for the application to be

found complete. In today's notice EPA announces its intention to

implement both of the white papers for part 71 program purposes.

Second, EPA has revised the rule to clarify that part 71 permit

application forms may be developed by the delegate agency or the EPA

allowing a part 71 application form to be based on a State form

developed for part 70 purposes, as long as the form meets the minimum

requirements of part 71 (discussed in more detail below). Third,

because the final rule more closely follows the part 70 program upon

which most State operating programs are based, sources will be familiar

with most part 71 permit application requirements.

In addition, proposed sections 71.5(b) (2) and (3) have been

deleted because they referred to off-permit changes and a four-track

permit revision system which the Agency is not finalizing today.

2. Complete Applications

The final rule adopts the language from the current part 70 rule

concerning complete applications. However, EPA believes that several

clarifications will help applicants understand the flexibility

available for submitting simplified permit applications that can be

found complete. The terms ``simplified permit application'' or

``streamlined permit application'' refer to applications that require

less information.

In the part 71 proposal, EPA proposed to adopt language from the

August 29, 1994 part 70 revision notice (59 FR 44518) that would have

clarified that an application would be found complete if it contained

information ``sufficient to begin processing the application.'' As

stated previously, today's rulemaking is based on provisions of current

part 70; therefore, this language does not appear in today's

rulemaking. However, EPA believes, as stated more fully in the first

white paper, that considerable flexibility already exists in the part

70 rule to find simplified permit applications complete. Since the

white papers will be implemented for part 71 purposes, this flexibility

also exists in the part 71 permit program.

Furthermore, the proposed revisions to part 70 (August 29, 1994)

and the part 71 proposal discussed several additional options currently

available to States for developing simplified permit applications and

finding them complete, and did not propose any rule changes necessary

to implement these options. These options were: (1) a two-step

application completeness determination process for simplified

applications and (2) simplified application content requirements for

applicable requirements with future compliance dates. After the

publication of these proposal notices, the first white paper included

these two flexibility options, as well as many additional options, and

reaffirmed EPA's interpretation that implementation of these options

does not depend on making changes to the part 70 rule or State part 70

programs.

The EPA believes this approach will provide flexibility for sources

to prepare simplified permit applications and for permitting

authorities to find them complete. This approach will also promote

consistency between the part 71 and part 70 programs, which in turn,

will provide for a smoother transition between the programs. Guidance

on the implementation of the white papers and other flexibility options

for completeness determinations for a part 71 program implemented in a

particular State may be provided by the EPA or delegate agency soon

after the program takes effect.

Additionally, proposed section 71.5(d), concerning the treatment of

business confidential information, has been revised in the final rule.

The language of the proposal discussed the responsibilities of

permitting authorities to process requests for confidential treatment

and included a general reference to 40 CFR part 2. Considering the

structure of these regulations and this section's position in these

regulations, the Agency believes that the promulgated language

clarifies the procedures that applicants must follow to request

confidential treatment for business information in applications,

provides a more precise cross-reference to those procedures, and does

not add any new requirements regarding the treatment of confidential

information not intended by the proposal.

Note also that certain technical changes are being made to part

71's completeness provisions as a result of the final rule's greater

harmonization with the existing part 70 rule. First, the completeness

criteria are being promulgated at section 71.5(a)(2) while the proposal

addressed completeness at section 71.5(c). In addition, the final rule

references section 71.5(c) as the provision setting out required

information in permit applications, while the proposal referenced

proposed section 71.5(f). Moreover, the final rule cites section

71.5(d) as the provision concerning certification by a responsible

official, while the proposal cited proposed section 71.5(i). Finally,

the citation in the proposal to section 71.7(a)(3) has been changed in

the final rule to section 71.7(c)(4) as a result of the changes to

section 71.7.

3. Standard Application Form and Required Application

Proposed section 71.5(f) would have required part 71 sources to

submit ``applications provided by the permitting authority, or if

provided by the permitting authority, an electronic reporting method''

and did not include any preamble discussion of the interpretation of

this phase. One commenter on the proposal encouraged EPA to use

existing State forms in States where EPA assumes part 71 authority.

Final section 71.5(c) has been revised to more closely follow the

corresponding language of section 70.5(c). The EPA agrees with the

commenter and will provide forms developed by delegate agencies

(States), or the EPA, including electronic application methods, for

purposes of applying for part 71 permits. This approach to application

development is possible because ``permitting authority'' is defined in

section 71.2 as including the EPA or the delegate agency. This approach

to providing part 71 forms will lead to less disruption and a smoother

transition for sources preparing initial part 71 applications because,

in many cases, sources will be familiar with the State form on which

the part 71 form is based. For example, sources may already be

collecting information and drafting an operating permit using the State

form in expectation of part 70 program approval by EPA. In addition,

commenters asked

[[Page 34216]]

that EPA clarify and simplify the requirements for emissions-related

information in part 71 applications consistent with EPA's guidance in

the first white paper. In response to these comments, EPA intends to

implement the white paper guidance with respect to the collection and

reporting of emission-related information and EPA believes that no

changes to part 71 are necessary to do so.

Numerous technical changes have been made to the final rule

regarding information to be required in permit applications to better

match the current part 70 rule. In the proposal, information

requirements were addressed at proposed sections 71.5(f) through (i),

while the final rule follows part 70 by covering these requirements in

sections 71.5(c) and (d). New citations to other provisions of part 71

are also due to the final rule's harmonization with part 70.

4. Insignificant Activities and Emission Levels

Extensive comments were received on the proposed insignificant

activity and emission levels provisions of proposed section 71.5(g).

Commenters argued, in part, that activities subject to applicable

requirements should be eligible for the exemption for insignificant

activities and emission levels, that the requirement that applications

not exclude information needed to determine whether a source is subject

to the requirement to obtain a part 71 permit would be too restrictive,

that the list of insignificant activities in the final rule should be

expanded, that the list of trivial activities in the first white paper

should be codified in part 71, that the exemption for mobile sources as

insignificant activities should be removed, that the single emissions

unit emissions thresholds for insignificant emissions should be raised,

and that the aggregate source-wide emission thresholds for

insignificant emissions should be deleted.

a. Eligibility for Insignificant Treatment and Information Required

in Applications. Section 71.5(c) of the final rule addresses, in part,

information that must not be omitted from permit applications. These

requirements have special relevance for applicants when determining

what information must be included in applications for emission units

that are eligible for insignificant treatment. To be consistent with

current part 70, final section 71.5(c) deletes certain proposed

provisions that do not follow the corresponding language of section

70.5(c) and that were based upon the proposed revisions to part 70

published in August 1994. Accordingly, deleted from final section

71.5(c) is the proposed language that would have not allowed the

application to omit information needed to: (1) Determine whether a

source is major, and (2) determine whether a source is subject to the

requirement to obtain a part 71 permit. Notwithstanding these

deletions, EPA continues to believe that the definition of major source

at section 71.2 controls the determination of which units are counted

for major source applicability purposes and that emissions of units

that qualify for insignificant treatment in the application are not

exempt from these determinations. Consistent with the Agency's approach

in implementing the current part 70 rule, the EPA is reversing its

interpretation, first expressed in the proposed preamble, that would

have excluded the eligibility of activities for treatment as

insignificant when such activities are subject to applicable

requirements. The EPA believes that no change to the final rule is

necessary to implement this new interpretation.

Industry commenters were particularly concerned that EPA's

interpretation that proposed section 71.5(g) would not allow activities

with applicable requirements to be eligible for insignificant treatment

would render the insignificant activity and emissions level provisions

meaningless because few sources would be eligible for streamlined

treatment in the application.

The EPA now believes that it was overly broad in stating that

emission units were precluded from eligibility as ``insignificant'' if

such units would be subject to applicable requirements. As discussed

below, EPA believes there are circumstances in which an emission unit

or activity can be treated as ``insignificant'' under a Federal

operating permits program, even if it is subject to an applicable

requirement. However, a title V application must still contain

information needed to determine the applicability of or to impose any

applicable requirement or any required fee and a permit must still meet

the requirements of section 71.6 for all emission units subject to

applicable requirements, including those eligible for insignificant

treatment.

Both sections 71.5(c) and 71.5(c)(3)(i) require sufficient

information to verify the requirements applicable to the source and to

collect appropriate permit fees.

This means that some of the information required by sections

71.5(c) (3) through (9) may be needed in the permit application for

insignificant activities in order for the permitting authority to draft

an adequate operating permit. As an example, where an insignificant

activity is not in compliance with an applicable requirement at the

time of permit issuance, the permit application would need to contain a

compliance plan, including a compliance schedule, for achieving

compliance with the applicable requirement. As another example, if a

source has some insignificant activities within a category that are

subject to an applicable requirement and some within that same category

that are not subject to that applicable requirement because the

applicability criteria for the applicable requirement are different

from the applicability criteria for insignificant activities, the

permit application would generally be required to include sufficient

information on the insignificant activity for the permitting authority

to determine which units are subject to the applicable requirement and

to include that applicable requirement in the permit for the subject

insignificant activity. The EPA believes that a part 71 permit

application may simply list the applicable requirements that apply to

insignificant activities generally, rather than requiring the permit

application to explicitly identify which insignificant activities are

subject to which applicable requirements. The permitting authority

would then issue a permit imposing the applicable requirements in the

permit, but not specifically identifying which insignificant activities

are subject to those applicable requirements. (For a more detailed

discussion, see the first white paper and the proposed interim approval

and proposed notice of correction for the State of Washington's part 70

program, 60 FR 50166 (September 28, 1995).)

b. Insignificant Activity Lists. Section 70.5(c), in part, allows

States to develop lists of insignificant activities and emission levels

that need not be included in applications and requires activities (or

equipment) exempted due to size or production rate to be listed in the

application. State part 70 program submittals were approved by EPA that

implement this provision in a variety of ways. The structure of the

proposed regulations was based on the structure of these State

implementing regulations, and included a short list of insignificant

activities and provisions setting insignificant emissions levels. The

proposed list of insignificant activities, section 71.5(g)(1), included

a list of specific source categories, activities, or equipment that

could be left off the application. The proposed insignificant

[[Page 34217]]

emissions provisions, section 71.5(g)(ii), allowed sources the

flexibility to treat additional source categories, equipment, or

activities as insignificant, provided certain eligibility criteria were

met, including not exceeding certain emissions levels, and provided

that the activities were listed in the application. The EPA believed

that the proposed insignificant emissions approach was flexible enough

that extensive lists of insignificant activities would not be needed in

the final rule. The EPA reasoned that no list of insignificant

activities would ever be so inclusive as to list every type of activity

potentially eligible for insignificant treatment at industrial sources,

and therefore, additions to the list would require resource-intensive

notice and comment rulemaking on an ongoing basis. The proposal asked

for comment on its approach and asked whether the proposed approach

would be compatible with approaches developed by States.

Numerous industry commenters argued, in general, that the proposed

part 71 list was not extensive enough to provide meaningful relief for

industry from the administrative burdens associated with submitting

detailed information for emission units or activities that pose little

or no environmental risk and that the part 71 list was not as extensive

as lists developed by States for their part 70 programs.

The EPA is finalizing the proposed list of insignificant activities

with one revision. The EPA believes that the commenters' concerns that

there be more opportunities for streamlining the information required

by part 71 permit applications is best addressed by implementing the

white papers for part 71 purposes, and that no changes to the final

rule are necessary to implement this approach. The EPA believes that

the white papers provide for application streamlining that is

comparable and, in many ways, superior to approaches based on omitting

certain emission unit or activities from the application only when

eligibility for insignificant treatment is established in a rule. In

general, the white papers allow sources to provide little or no

detailed source-specific information for emissions units or activities

where the information is not reasonably available and to the extent the

information is not needed to resolve disputed questions of major source

status, applicability of requirements, compliance with applicable

requirements, or needed to calculate fees.

For example, section B.3. Insignificant Activities of the first

white paper allows trivial activities to be completely omitted from

applications. The white paper defines trivial activities as activities

without specific applicable requirements (although they may have

``generic'' applicable requirements, explained below) and with

extremely small emissions and included a list of trivial activities in

Appendix A. Many of the trivial activities identified in the first

white paper are common to State lists of insignificant activities.

Under part 71, sources may rely on this list, and EPA or the delegate

agency may add to it without the need for Federal rulemaking. This

allows EPA to expand the list of trivial activities for a part 71

program in a specific location, consistent with trivial activity lists

established in the State operating permit program, thus tailoring the

program for a specific program implemented in a State.

Also providing considerable streamlining is section B.4 Generic

Grouping of Emission Units and Activities of the first white paper

which allows emissions units or activities with ``generic'' applicable

requirements to be omitted from the application, independent of

eligibility for insignificant treatment. Under this section, sources

may provide little or no detailed source-specific information, even for

units with ``generic'' requirements, provided that the ``generic''

requirements are described in the application such that their scope and

manner of enforcement are clear. ``Generic'' requirements are certain

broadly applicable requirements that apply and are enforced in the same

manner for all subject units or activities and that are often found in

the SIP. Examples of such requirements include requirements that apply

identically to all emissions units at a facility (e.g., source-wide

opacity limits), general housekeeping requirements, and requirements

that apply identical emissions limits to small units (e.g., certain

process weight requirements). Where the applicable requirement is

amenable to this approach, part 71 permitting authorities may follow

this approach regardless of whether subject activities have been listed

as trivial or insignificant. A lengthy list of the types of

requirements suitable for this treatment is not possible here because,

among other reasons, the examples of which EPA is aware are SIP

requirements, and so vary from State to State. The EPA or delegate

agency will decide which SIP requirements can be treated in this

generic fashion for specific locations where part 71 programs are

implemented.

The EPA has determined that the insignificant activity exemption

for air-conditioning units used for human comfort at final section

71.5(c)(11)(i)(B) should be changed to clarify that substances other

than class I or II substances may be regulated under title VI of the

Act. This change is necessary because effective November 15, 1995,

title VI requires recycling or recovery of substitute refrigerants

regardless of whether or not they are ozone depleting substances (Class

I and Class II substances) unless EPA makes a refrigerant-specific

decision that the substitute will not harm human health or the

environment and can, therefore, be vented.

c. Insignificant Emissions Levels. In response to comments, EPA has

revised proposed section 71.5(g)(2)(i), which is section

71.5(c)(11)(ii)(A) of the final rule, to increase the insignificant

emissions threshold for regulated air pollutants other than (HAP) from

a single emissions unit from 1 tpy to 2 tpy and to delete the 1,000

pounds (lb) per year threshold in extreme ozone nonattainment areas.

The EPA believes this decision is appropriate since, as commenters

pointed out, EPA has previously stated in part 70 approval notices that

insignificant emissions thresholds set at 2 tpy would be approvable in

most locations. The EPA believes that due to the similarity between

part 70 and part 71 programs it can logically conclude that this level

is also appropriate for a part 71 program, regardless of where it is

located. This level will provide a measure of additional flexibility

for sources to exempt insignificant activities, thus simplifying the

application, with little additional risk that significant emission

units will be excluded from the application. As further discussed

below, there are several safeguards available in the final rule that

should ensure that significant units are not excluded from applications

due to their eligibility for insignificant treatment. In addition, EPA

is deleting the proposed 1,000 lb per year threshold for extreme ozone

nonattainment areas. This will simplify the rule by setting the same

tpy emission thresholds for attainment and nonattainment pollutants,

while requiring the thresholds in relative terms to be no more than 20

percent of the major source threshold for nitrogen oxides and VOC and 2

percent of the major source threshold for the remaining criteria

pollutants. Two tpy is considered trivial by EPA for all pollutants

other than HAP in relation to major source thresholds in all attainment

or

[[Page 34218]]

nonattainment areas and will not prevent the EPA from collecting

information of a consequential or significant nature. In addition,

these levels are more commonly found in State part 70 programs and

therefore should help to ease the transition from part 71 to part 70

operating permit programs.

In response to comments, EPA has decided to delete the aggregate

source-wide emissions criteria for insignificant emissions of regulated

air pollutants (sections 71.5(c)(11)(ii) (A) and (B) of the final

rule). The EPA proposed these aggregate source-wide emissions criteria

as an additional means to ensure that emissions that might otherwise

trigger the applicability of applicable requirements or major source

status would not be excluded from applications. However, EPA now

believes that the proposed aggregate emissions thresholds would have

significantly limited the value of the insignificant emissions

provisions for most medium to large sources. This deletion should not

impede the permitting authority's ability to write permits which assure

compliance with applicable requirements and the requirements of part

71. The EPA also believes that the utility of aggregate plant-wide

thresholds is negligible because of various other safeguards already

provided in the rule; in particular, section 71.5(c)(11) requires

applications to not exclude information needed to determine the

applicability of, or to impose, any applicable requirement. In

addition, the requirement of section 71.5(c)(11)(ii) that units or

activities with insignificant emissions be listed in the application

provides an opportunity for the permitting authority to review the

source's decision to treat emissions as insignificant, while the

single-unit emissions thresholds of sections 71.5(c)(11)(ii) (A) and

(B) limit the size of emissions to levels that would normally ensure

that the units are not covered by extensive control requirements.

5. Compliance Certification

The part 71 proposal would have required sources to submit

certifications that they were in compliance with all applicable

requirements. Commenters requested further clarification of the

certification requirements and argued that it was not clear exactly

what efforts a source was required to make to determine its compliance

status prior to certifying that it was in compliance with all

applicable requirements, and that it was unclear whether or not a

source was obliged to reconsider past applicability determinations

prior to making such a certification. The EPA does not believe that any

revisions to the rule are necessary to address the commenters' points.

This is true because the white papers for part 70 address these issues

and sources may follow that guidance for purposes of completing part 71

permit applications.

E. Section 71.6--Permit Content

Today's permit content provisions more closely track the provisions

contained in current 70.4 and 70.6 than did those in the proposal.

Thus, the order of the paragraphs in section 71.6 is more similar to

the permit content section of current part 70 than to the part 71

proposal. For example, the provisions dealing with the permitting

authority's duty to address emissions units in the permit has been

moved from section 71.6(a)(iv) to section 71.3(c), consistent with

current part 70. In addition, using current part 70 as the template for

permit content means that the provisions for ``off-permit'' contained

in today's rulemaking mirror those found at section 70.4(b), while the

off-permit provisions of the proposed rule tracked those contained in

the August 1994 proposed revisions to part 70. Similarly, today's

rulemaking adopts the requirements for emissions trading and

operational flexibility that are found in current part 70.

In addition, EPA retains a provision related to the prompt

reporting of deviations from permit conditions from the part 71

proposal. Current part 70 requires States to define ``prompt'' in their

own programs, and today's rulemaking defines the term for the part 71

program and closes this gap in the proposed rule. Today's rulemaking

also establishes a part 71 permit expiration date.

The EPA reiterates that today's rulemaking finalizes provisions for

permit content on an interim basis in order to better facilitate smooth

transition from implementation of part 71 to approved State programs

established pursuant to the current part 70 rule. With respect to

permit content provisions, the April 1995 and August 1995 proposals

contain provisions which reflect the Agency's current best thinking,

and subsequent to reviewing all of the comments on both proposals, EPA

may finalize provisions for permit content that differ from those

adopted today consistent with the approaches EPA eventually takes in

promulgating final revisions to part 70.

1. Off-permit Operations

Under today's rulemaking, sources are allowed to make changes at a

facility that are not addressed or prohibited by the permit terms,

provided they meet the requirements of section 71.6(a)(12). The

provision adopted today is patterned on 70.4(b) (14) and (15), the

analogous provisions in current part 70. Like part 70, part 71 requires

that the source provide the permitting authority with contemporaneous

written notification for these types of changes, that these changes be

incorporated into the permit at renewal, and that the source keep

certain records of these changes. Consistent with current part 70,

section 71.6(a)(12) limits off-permit changes to those that do not

constitute title I modifications, are not subject to any requirements

under title IV of the Act, and meet all applicable requirements of the

Act. In applying this provision, the Agency will use the interpretation

of the term ``title I modification'' that States are allowed to use

under the current part 70 rule. EPA expects that allows a significant

number of minor NSR changes, to the extent that they are not prohibited

by the title V permit, to qualify for off-permit treatment.

Like part 70, part 71 does not allow off-permit changes to alter

the permitted facility's obligation to comply with the compliance

provisions of its title V permit and does not grant the permit shield

to off-permit changes. For a more thorough discussion of the concept of

off-permit changes, see the rationale for part 70's off-permit

provision found at 57 FR 32269.

The part 71 proposal contained a modified off-permit provision at

proposed section 71.6(q) that was designed in light of the four-track

permit revision procedures contained in the proposal and modeled on the

off-permit provision contained in the August 1994 proposed revisions to

part 70. Proposed section 71.6(q) would have allowed certain changes to

remain off-permit but would have required the source to submit an

application to revise its permit to reflect that change within 6 months

of commencing operation of that change. In the August 1995 supplemental

proposal to parts 70 and 71, the Agency indicated that off-permit

provisions may be unnecessary if the streamlined permit revisions

procedures for parts 70 and 71 are adopted as proposed therein. After

reviewing comments on both proposals, EPA will decide whether to retain

an off-permit provision in the Phase II rulemaking, consistent with the

approach EPA takes in finalizing permit revisions procedures. Off-

permit treatment is available in the interim, consistent with that

provided by current part 70, but EPA does not believe that many permits

[[Page 34219]]

will be issued prior to the Phase II rulemaking and that the off-permit

provision therefore will not be greatly utilized.

2. Operational Flexibility

Under the rule adopted today, sources will enjoy the same

operational flexibility as is provided to part 70 sources under current

part 70. Section 502(b)(10) of the Act requires that the minimum

elements of an approvable permit program include provisions to allow

changes within a permitted facility without requiring a permit

revision. In the current part 70 rule at section 70.4(b)(12) (i)-(iii),

and the rule adopted today, there are three different methods for

implementing this mandate. Accordingly, section 71.6(a)(13)(i) provides

for sources to make certain changes within a permitted facility that

contravene specific permit terms without requiring a permit revision,

as long as the source does not exceed the emissions allowable under the

permit and the change is not a title I modification. Under the

interpretation of the term ``title I modification'' that EPA is

allowing States to take under the current part 70 rule, section

502(b)(10) changes may include changes subject to minor NSR, provided

the change does not exceed the emissions allowable under the permit.

Section 71.6(a)(13)(ii) also allows emissions trading at the facility

to meet limits in the applicable implementation plan when the plan

provides for such trading on 7-days notice in cases where trading is

not already provided for in the permit. Additionally, section

71.6(a)(13)(iii) allows emissions trading for the purpose of complying

with a federally-enforceable emissions cap that is established in the

permit independent of otherwise applicable requirements. For a thorough

discussion of the flexibility allowed under the analogous part 70

provisions, see 57 FR 32266.

The part 71 proposal contained an approach to operational

flexibility that was modeled on the August 1994 proposed revisions to

part 70, not current part 70. The August 1995 supplemental proposal

suggested further refinements to the concept. After reviewing comments

on both proposals, EPA may adopt an approach to operational flexibility

that is different from the one found in today's rulemaking, consistent

with the approach EPA takes in finally revising part 70. While the

approach adopted today differs significantly from that of the proposal,

the Agency is adopting it on an interim basis in order to better

facilitate transition to the State part 70 programs that are similarly

based on the provisions governing operational flexibility under the

current part 70 rule.

3. Affirmative Defense

In order to remain consistent with current part 70, EPA is adopting

a provision from the part 71 proposal that would allow sources to

assert an affirmative defense to an enforcement action based on

noncompliance with certain requirements due to an emergency. Such a

defense would be independent of any emergency or upset provision

contained in an applicable requirement. See section 71.6(g). This

provision is consistent with that found in the current part 70 rule at

section 70.6(g).

As a result of concerns identified in legal challenges to part 70,

the Agency, in the August 1995 supplemental proposal, solicited comment

on the need for, scope and terms of an emergency affirmative defense

provision. The Agency is reviewing those comments, but has not yet made

a decision on whether or not to modify or remove this additional

affirmative defense provision from part 70. The Agency will make part

71 consistent with the decision reached for part 70 in the part 71

Phase II promulgation. In the interim, sources may rely on the

affirmative defense offered by section 71.6(g).

4. Definition of Prompt Reporting

The proposal contained provisions concerning prompt reporting of

deviations from permitting requirements at proposed sections 71.6(f)

(3) and (4). The final rule at section 71.6(a)(3)(iii) requires that

each permit contain provisions for prompt notification of deviations.

Two commenters requested that the prompt reporting deadlines in

part 71 be adjusted to reflect other environmental regulation timelines

or to reflect State program guidelines that have been approved by the

Agency for part 70 programs. The Agency disagrees with the request.

Section 503(b)(2) of the Act requires permittees to promptly report any

deviations from permit requirements to the permitting authority. Since

individual permitting authorities are responsible for having programs

to attain and/or maintain air quality within their geographical

boundaries, they are obligated under the operating permits program to

determine, among other things, what constitutes a prompt notification.

Included as factors in determining prompt notification would be

elements such as pollutant concentration, deviation duration, and

authority response time. Because sources and pollutants of concern vary

among permitting authorities, States have adopted differing prompt

reporting schedules. The Agency has reviewed its obligation to protect

air quality on a national level, and has determined that its prompt

reporting deadline is appropriate for this obligation. Therefore the

deadlines contained in part 71 remain unchanged from the proposal.

Two commenters requested that part 71 clarify prompt reporting

requirements for deviations other than those associated with hazardous,

toxic, or regulated air pollutants, as described in sections

71.6(a)(3)(iii)(B)(1) and (2). The Agency believes that the requirement

contained in section 71.6(a)(3)(iii)(A), in which sources are to report

all instances of deviations from permit requirements at least every 6

months, provides the basis for prompt reporting of all other

deviations. However, the Agency is willing to clarify this reporting

requirement and has modified section 71.6(a)(3)(iii)(B) by adding a

statement that directs sources to submit all other deviation reports in

accordance with the timeframe given in section 71.6(a)(3)(iii)(A).

5. Inclusion of Federally Enforceable Applicable Requirements in

Permits

Two commenters requested that EPA include in part 71 the analogue

to section 70.6(b)(2), a provision that requires the permitting

authority to identify in the permit any applicable requirements that

are not federally enforceable. The EPA disagrees with this request

because part 71 permits will not include any non-federally enforceable

applicable requirements; therefore, a requirement for the Agency to

identify such terms as non-federally enforceable would be moot, and a

part 71 analogue to section 70.6(b)(2) is not needed. Part 71 differs

from part 70 in this respect. However, section 71.6(b) is consistent

with the first paragraph of section 70.6(b), which provides that part

70 permit terms and conditions are to otherwise be federally

enforceable.

6. General Permits

The proposal contained provisions at proposed section 71.6(l)

addressing general permits, which were based on the proposed revisions

to the general permits provisions in the August 1994 notice. Under part

70, the EPA afforded other permitting authorities the choice of

utilizing general permits, and the Agency intended to provide this

flexibility to itself. The Agency believes that general permits offer

cost-effective means of issuing permits for certain

[[Page 34220]]

source categories. The Agency has not yet decided on the proper

approach concerning opportunities for public review and judicial review

associated with general permits, and in the interim, has decided to

remain consistent with the current part 70 rule. Therefore, under

today's notice, EPA's authorization to allow a source to operate

pursuant to a general permit may proceed without public notice and does

not constitute final permit action for judicial review purposes.

Today's part 71 general permit provisions are found at section 71.6(d)

and are patterned after the analogous provisions at current section

70.6(d). In the Phase II rulemaking, EPA intends to revise the part 71

general permit provisions if necessary to remain consistent with the

approach the Agency ultimately takes in the final revisions to part 70.

7. Permit Expiration

The proposed rule contained a provision for rescinding part 71

permits at proposed section 71.4(l)(3). Under today's rulemaking at

section 71.6(a)(11), part 71 permits would contain a provision that

automatically cancels the part 71 permit upon expiration of the initial

permit term or upon issuance of a part 70 permit, without the need for

separate action to rescind the permit. The Agency believes that a clear

expiration date is necessary in order to avoid potential confusion over

which title V permit terms and conditions are valid. The majority of

permitting authorities are moving towards final approval of part 70

programs. In those few instances where a particular permitting

authority may not have final part 70 program acceptance by the deadline

for implementation of part 71, the Agency expects that final program

approval will occur well before the 5-year part 71 permit term (12

years for certain municipal waste combustors) has expired. Once the

part 70 program is approved, sources and permitting authorities may

desire to begin implementation as soon as possible. The Agency has no

desire to be a stumbling block in those efforts, nor does the Agency

wish to promote confusion over which permit (part 71 or 70) would be in

effect at a particular time.

One of the purposes of title V was to provide sources with

certainty as to their applicable requirements. Part 71 and part 70

permits will be similar, but not necessarily congruent, e.g., part 71

permits would contain only federally-enforceable requirements,

insignificant activities could differ, and reporting provisions would

differ. In order to prevent the potential confusion stemming from an

unexpired part 71 permit remaining in effect concurrent with a part 70

permit, the Agency has decided to preclude the event from occurring. No

such comparable provisions are needed in part 70 because that program

provides just one title V permit per source. Consequently, section

71.6(a)(11) provides that a part 71 permit automatically expires upon

the earlier of the expiration of its term or the issuance of a part 70

permit to the source.

F. Section 71.7--Permit Review, Issuance, Renewal, Reopenings, and

Revisions

As discussed above, EPA is, on an interim basis, promulgating final

regulations regarding permit issuance, renewal, reopenings, and

revisions for part 71 that are based upon the existing provisions

governing State title V programs at 40 CFR, section 70.7. Consequently,

the provisions adopted today differ from those contained in the part 71

proposal, which were based upon the August 1994 proposed revisions to

part 70. The EPA is still in the process of adopting revisions to part

70, and thus is not able at this time to base part 71's provisions on

the expected future changes to part 70. As a result, EPA has concluded,

in response to comments, that the most reasonable approach is to model

part 71's permit issuance, renewal, reopenings, and revisions

procedures on the corresponding provisions in the existing part 70

rule. These changes from the proposal, in addition to other changes in

response to comments, are identified below.

1. Permitting Authority's Action on Permit Application

First, the organization of the paragraphs has been changed from the

proposal to be consistent with 40 CFR section 70.7(a). In addition, in

section 71.7(a)(1), the word ``modification'' is now used in place of

the word ``revisions,'' which was used in the proposal. This is a

technical change to the rule to make it conform with the language used

in corresponding provisions in the current part 70 rule. Also, section

71.7(a)(1)(ii) has been changed to track section 70.7(a)(1)(ii) by

explicitly providing that changes subject to minor permit modification

procedures need not comply with the public participation requirements

of sections 71.7 and 71.11. This change from the proposal is a result

of the Agency's adoption in today's rule of permit revision procedures

modelled on those contained in the existing part 70 rule. Moreover,

section 71.7(a)(1)(iv) has been adopted without the language providing

that, in some cases, the terms of the permit need not provide for

compliance with all applicable requirements that are in force as of the

date of permit issuance. Again, this change is necessary to make

section 71.7(a)(1)(iv) consistent with the corresponding provision at

section 70.7(a)(1)(iv), which does not contain the proposal's language.

That language was first proposed in the August 1994 proposed revisions

to part 70, and the Agency is not yet prepared to adopt it into a final

title V rule. Likewise, section 71.7(a)(1)(v) is being promulgated

without references to the administrative amendment and de minimis

permit revision procedures contained in the proposal in order to better

match the current part 70 provisions at section 70.7(a)(1)(v).

Section 71.7(a)(2) is being adopted without the language in the

proposal which would have required permitting authorities to take final

action within 12 months after receipt of a complete application for

early reductions permits under section 112(i)(5) of the Act because

regulatory language addressing this requirement was moved to section

71.4(i)(3). Furthermore, this provision is being adopted without the

language in the proposal that would have allowed permitting authorities

to delay final action where an applicant fails to provide additional

information in a timely manner as requested by the permitting

authority, as section 70.7(a)(2) currently does not provide such

authority.

A new section 71.7(a)(3) is being promulgated to require the

permitting authority to ensure that priority is given to taking action

on applications for construction or modification under title I of the

Act. This change is made to make part 71 consistent with the

corresponding provision in current part 70 at section 70.7(a)(3).

Section 71.7(a)(4) (section 71.7(a)(3) in the proposal) deletes the

references in the proposal to the proposed regulatory provisions

addressing administrative amendments, de minimis permit revisions, and

minor permit revisions, and tracks current section 70.7(a)(4) by

providing that permitting authorities need not make completeness

determinations for applications for minor permit modifications. This

change is a result of EPA's basing section 71.7 on the current section

70.7. In addition, sections 71.7(a) (5) and (6) (sections 71.7(a) (4)

and (5) in the proposal) are renumbered in order to track existing

sections 70.7(a) (5) and (6).

[[Page 34221]]

The proposal contained a provision at proposed section 71.7(a)(6)

addressing how draft and final permits may be issued with respect to

applicable requirements that are approved or promulgated by EPA during

the permit process. This provision was proposed in the August 1994

proposed revisions to part 70 and is not contained in the current part

70 rule. For the reasons stated above, EPA is not yet prepared to adopt

it into part 71, and so is deleting the proposed provision from today's

final rule.

2. Requirement To Apply for a Permit

One commenter suggested revising 71.7(b) regarding the application

shield to say that the permitting authority must set a reasonable

deadline for the submission of additional information, and commented

that EPA should not be able to request information that is ``needed to

process the application'' but only that which is ``reasonable and

necessary to issue the permit''. The Agency disagrees that the

regulation should set a specific deadline for the submission of

additional information because the determination of what is a

reasonable time will vary depending on the information requested. Also,

EPA disagrees that there is a distinction between information needed to

process the application and information that is reasonable and

necessary to issue the permit.

One commenter suggested revising section 71.7(b) to allow sources

to operate subsequent to submission of a complete, but late,

application or application for renewal. The Agency believes that

extending an application shield to sources that fail to submit timely

applications is inconsistent with the Act. The proposal for part 70

contained a provision that would have provided a grace period of up to

three months to submit applications after the required submittal date.

The EPA deleted this provision from the final part 70 rule because

extending the application shield to sources that did not submit a

timely application would have been inconsistent with section 503(c) of

the Act. The Agency is promulgating section 71.7(b) to closely track

the corresponding provision at current section 70.7(b). Consequently,

the references in proposed section 71.7(b) to the proposed provisions

addressing administrative amendments, de minimis permit revisions, and

minor permit revisions have been deleted and replaced by references to

provisions addressing section 502(b)(10) changes and minor permit

modifications. In addition, the proposal's reference to section

71.7(a)(3) has been replaced with a reference to section 71.7(a)(4),

due to the restructuring of section 71.7(a).

3. Permit Renewal and Expiration

Section 71.7(c) is being promulgated to more closely match the

corresponding provision under current section 70.7(c) than did the

proposal. The references in proposed section 71.7(c)(2) to proposed

sections 71.5(b) and 71.5(c) have been replaced by a reference to

section 71.5(a)(1)(iii), due to the restructuring of section 71.5.

Moreover, section 71.7(c)(2) (section 71.7(c)(3) in the proposal) is

being promulgated without the language that would have provided that,

where the permitting authority fails to act on a timely renewal

application before the end of the term of title V permit, the permit

shall remain in effect until the permitting authority does take final

action. Instead that language (which is based upon the existing section

70.4(b)(10) of the current part 70 rule) is being promulgated at

section 71.7(c)(3).

4. Permit Revisions

Commenters remarked that the Federal title V permit program as

proposed in April 1995 would establish a new, added layer of permitting

which would add unacceptably to the amount of time needed before a

source could implement process changes. They suggested that even though

the April 1995 permit revision tracks attempt to build on existing

preconstruction programs, they still pose substantial new requirements

(e.g., new criteria for adequate prior review in NSR). These commenters

opined that if EPA believes that insufficient public review is afforded

by existing programs, the Agency should address those shortcomings, not

start a new process. Another commenter suggested that clerical changes

should be handled through notification of the change by an amendment

letter to the permitting authority that would then be attached to the

permit without any EPA review until permit renewal. The commenter

further suggested that all minor source changes which do not violate

any permit term and do not render the source newly subject to an

applicable requirement should be allowed to follow this amendment

procedure. Other commenters opined that the April 1995 proposed four

track permit revision procedures were fundamentally flawed and must be

replaced with simpler procedures. One commenter suggested that EPA

Regions, not just delegated States, should be authorized to conduct

``merged processing'' to add NSR or section 112(g) terms to title V

permits, if such processing is retained in the final rule. Some

suggested that EPA promote consistency between part 70 and part 71

permit programs to reduce confusion for sources that have to make a

transition between different regulatory programs.

In light of these and other comments, EPA proposed in August 1995 a

revised permit revision process, developed with extensive stakeholder

input, which proposes several ways of streamlining permit revisions,

particularly for those changes subject to prior State review (e.g., NSR

changes). In the interim, as discussed earlier in this preamble, rather

than adopting the four-track permit revision system that the Agency

proposed for part 71 on April 25, 1995, the EPA has decided to adopt,

for the first phase of part 71, the permit revision system in the

current (July 1992) part 70 rule. Current part 70 provides three ways

to revise a permit: the administrative amendment process, the minor

permit modification process and the significant permit modification

process. The specific regulatory changes to proposed part 71 taken to

adopt these procedures are described below.

One commenter requested that EPA not follow the approach to ``title

I Modification'' in the August 1994 proposed revisions to part 70 in

defining the term for part 71. In implementing the current part 70

permit revision procedures during the interim period, EPA would apply

the interpretation of ``title I modifications'' that States are allowed

to apply under the current part 70 rule. Under this interpretation,

minor NSR actions may be incorporated into the title V permit using the

minor permit modification procedures of current part 70, or

alternatively, may be made as off-permit changes if they are eligible.

a. Rationale for Providing Interim Permit Revision Procedures. The

proposal indicated that due to the ongoing discussions with

stakeholders regarding permit revision procedures under title V, EPA

was considering finalizing part 71 in the interim without provisions

for permit revision procedures. Several commenters suggested that EPA

not finalize any portion of part 71 until permit revision procedures

are finalized because they will influence how sources design their

initial permit applications. The commenters argued that sources will

need the ability to obtain expeditious revisions to permits, and that

there is thus a need for provisions governing modifications. As

discussed previously, EPA has decided to include the permit revision

procedures of current part 70 in

[[Page 34222]]

this interim part 71 rule, while reserving the right to adopt

procedures based upon future changes to part 70, when part 70 revisions

are promulgated and Phase II of this rule is completed.

The EPA agrees with commenters that including current part 70

revision procedures is most appropriate for several reasons. First, EPA

believes that it is premature to adopt the procedures proposed in April

1995 for part 71, or in August 1995 for part 70, because both of these

proposals involve outstanding issues. Although the August 1995 proposal

contains the latest thinking on streamlined permit revision procedures,

it would be inappropriate to rush to promulgate a proposed system

before the Agency has taken time to consider comments on the August

1995 proposal and arrive at a final position. In the meantime, the

Agency has at its disposal the permit procedures of the current part 70

rule under which the Agency continues to approve State programs.

Second, industry commenters note that a clear understanding of

permit revision procedures is important as sources prepare their part

71 permit applications. The revision procedures of part 70 are more

clearly understood than any proposed procedures, having been

promulgated by EPA and adopted by many State programs. Third, adopting

the existing part 70 permit revision procedures insures a smooth

transition from a Federal operating permits program to a State program

due to the similarity between the two programs.

Finally, the Agency does not believe that many permit revisions

will occur during Phase I of this program. The timing of permit

issuance under part 71 is such that the Agency believes that few part

71 permits will be issued and fewer will need to be revised before

States receive part 70 approval or before Phase II of part 71 is

promulgated. Permit revision procedures in Phase I of the part 71 rule

become more essential the longer part 71 programs are in place without

a Phase II rule, which is possible if the Phase II rulemaking is

delayed.

b. Description of Permit Revision Procedures. The part 71 proposal

addressed permit revisions at proposed sections 71.7(d)-(h) using

proposed provisions from the August 1994 part 70 notice. Proposed

section 71.7(d) would have defined when a permit revision is necessary;

proposed section 71.7(e) would have addressed administrative

amendments; proposed sections 71.7 (f) and (g) would have addressed de

minimis permit revisions and minor permit revisions, respectively; and

proposed section 71.7(h) would have covered significant permit

revisions. All of these provisions have been deleted in today's rule,

and replaced with new provisions at sections 71.7 (d) and (e) that

track the corresponding provisions in the current part 70 rule

governing administrative amendments, minor permit modifications, and

significant permit modifications. The EPA directs interested persons to

the preamble to the final part 70 rule, 57 FR 32250 (July 21, 1992) for

a detailed description of these permit revision procedures.

Under section 71.7(d), changes eligible to be processed as

administrative amendments include administrative changes such as

correction of typographical errors, changes in mailing address,

ownership of the source (or part of the source) unless restricted by

title IV, contact persons, and changes in individuals who have assigned

responsibilities, (including the responsibility to sign permit

applications). Administrative permit amendments can be handled by

direct correspondence from the permitting authority to the facility

after the appropriate information related to the changes has been

supplied by the facility. As under current part 70, administrative

amendments could also be used to address ``enhanced NSR'' changes, to

which the permitting authority could also extend the permit shield.

Sections 71.7(e) (1) and (2), which address minor permit modification

procedures, are designed for small changes at a facility which will not

involve complicated regulatory determinations. A source may make a

change immediately upon filing an application for a minor permit

modification, prior to the time the permitting authority, affected

States, and EPA (in the case of a program delegated pursuant to section

71.10) review the application. Eligible changes could be processed

individually or in groups, but the permit shield may not extend to

these changes. Section 71.7(e)(3) covers significant modifications. In

this track, the public, the permitting authority, affected States, and

EPA (in the case of a program delegated pursuant to section 71.10) will

review the modification in the same manner as review during permit

issuance. The permit shield may extend to changes processed under this

track.

5. Permit Reopenings

The proposal addressed permit reopenings at proposed 71.7 (i) and

(j). These provisions were modeled on the existing provisions at

section 70.7 (f) and (g), as proposed to be revised in the August 1994

notice. One of the features of that approach was a specific provision

for reopening permits to incorporate new maximum achievable control

technology (MACT) standards promulgated under section 112 of the Act.

As part 70 has not yet been finally revised to adopt this approach, it

is premature at this time to adopt it for part 71. Consequently, in

order to more closely track the current part 70 rule and promote

consistency with State programs developed and approved under the

current rule, the part 71 provisions for permit reopenings adopted

today at sections 71.7 (f) and (g) are modeled on the existing

provisions at sections 70.7 (f) and (g), and do not include the

proposed provisions concerning reopening permits to incorporate new

MACT standards.

G. Section 71.8--Affected State Review

The provisions of section 71.8 differ from provisions proposed in

the part 71 proposal in several respects. First, because today's

rulemaking adopts permit revision procedures based on the current part

70 rule, rather than those that were proposed in April, the cross

references to section 71.7 were changed and the reference to de minimis

permit revisions has been deleted. In addition, the final rule

specifically provides, consistent with part 70, that timing of notice

to affected States of major permit modifications is not tied to the

timing of notice to the public.

Second, section 71.8(b) is being adopted to more consistently

follow section 70.8(b)(2) in providing that where EPA delegates

administration of a part 71 program, the permitting authority shall

transmit notice of refusal to accept recommendations of an affected

State as part of the permitting authority's submittal of the proposed

permit to EPA.

Third, as discussed in section III.B of this document, a new

paragraph (d) has been added to section 71.8 that requires that part 71

permitting authorities provide notice of certain permitting actions to

federally recognized Indian Tribes. While this is a departure from what

part 70 currently requires of State permitting authorities, EPA agrees

with commenters who suggested that federally recognized Indian Tribes

should not be required to establish compliance with any eligibility

criteria in order to be entitled to notice of Federal permitting

decisions that may affect Tribal air quality. One commenter suggested

that applying for treatment in the same manner as a State was a time

consuming and burdensome process for Indian Tribes and urged the

elimination of that requirement for Tribes to receive notice of

permitting actions. Consistent

[[Page 34223]]

with the Agency's policy of maintaining government-to-government

relationships with Indian Tribes, EPA (and delegate agencies) will

notify federally recognized Indian Tribes of draft permits that may be

issued to sources that could affect Tribal air quality, including all

draft permits issued by EPA for the Tribal area and all draft permits

for sources that are within 50 miles of the reservation boundary or the

Tribal area. Accordingly, the Agency has added a new paragraph that

provides that the part 71 permitting authority shall send notices of

draft permits to federally recognized Indian Tribes whose air quality

may be affected by the permitting action. The EPA is imposing upon

itself this responsibility in order to further its government-to-

government relationship with Tribes.

H. Section 71.9--Permit Fees

1. Two-Phase Promulgation of Fee Requirements

Consistent with the two-phased approach to part 71 promulgation

described in this notice, EPA is today adopting a two-phased approach

to part 71 fee requirements. Upon Phase I promulgation, collection of

fees should be sufficient to cover the anticipated program costs of

Phase I. On the other hand, because the cost of Phase II is tied to

procedures which will not be finalized until the Phase II rulemaking

(i.e., revised and streamlined permit revision procedures), a fee

amount for Phase II cannot be finalized in today's rule. Thus, the

Phase I fee covers all program costs except those associated with

permit revisions which are excluded because the Phase II rulemaking

will finalize streamlined permit revision procedures that will

ultimately differ substantially from those contained in today's rule.

Instead, the Phase II rulemaking will add to the fee the costs for the

new permit revision procedures when they are finalized. More

information on the determination of specific activities and costs

associated with each phase is contained in the document entitled

``Federal Operating Permits Program Costs and Fee Analysis (Revised),''

which is contained in the docket for this rulemaking.

The two-phased approach to fee requirements will not impact the

ultimate fee amount owed by a source. For the majority of sources, EPA

expects that the part 71 application and associated fee submittal will

occur after the Phase II rulemaking. For these sources, the fee will be

paid all at once. Sources that submit their applications prior to the

Phase II rulemaking will pay a Phase I fee in full at the time of

application. The balance of the fee necessary to cover the costs of the

Phase II provisions will be collected once the Phase II rule is

promulgated. The specific timing and amount of the Phase II fee

collection will be discussed in the Phase II rulemaking.

The EPA fully expects that the Phase II rulemaking finalizing

permit revision procedures will be completed before any part 71 permits

are issued and that no program costs will be incurred in the interim

period as a result of permit revisions. However, EPA recognizes that in

the unlikely event that a part 71 permit is both issued and revised

(under the interim revision procedures in today's rule) fees will not

have yet been collected

This text is long and has been trimmed here. Open the source document for the complete record.