Clean Air Act Final Interim Approval of Operating Permits Programs; State of Tennessee and Memphis-Shelby County, Tennessee

Federal RegisterJul 29, 1996

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 70

[TN-96-01; TN-MEMP-96-01; FRL-5542-4]

Clean Air Act Final Interim Approval of Operating Permits

Programs; State of Tennessee and Memphis-Shelby County, Tennessee

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final interim approval.

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SUMMARY: EPA is promulgating interim approval of the operating permit

programs submitted by the State of Tennessee on behalf of the Tennessee

Department of Environment and Conservation and the Memphis-Shelby

County Health Department for the purpose of complying with Federal

requirements which mandate that authorized permitting authorities

develop, and submit to EPA, programs for issuing operating permits to

all major stationary sources and to certain other sources.

EFFECTIVE DATE: August 28, 1996.

ADDRESSES: Copies of the State of Tennessee and the Memphis-Shelby

County submittals and the other supporting information used in

developing the final interim approval are available for inspection

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

Environmental Protection Agency, Region 4, 345 Courtland Street, NE.,

Atlanta, GA 30365. Interested persons wanting to examine these

documents, contained in EPA dockets numbered TN-96-01 and TN-MEMP-96-

01, should make an appointment at least 24 hours before the visiting

day.

FOR FURTHER INFORMATION CONTACT: Kelly Fortin, Title V Program

Development Team, Air Programs Branch, Air Pesticides & Toxics

Management Division, U.S. Environmental Protection Agency, Region 4,

345 Courtland Street, NE., Atlanta, GA 30365, (404) 347-3555, Ext.

4223.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

Title V of the 1990 Clean Air Act Amendments (sections 501-507 of

the Clean Air Act (``the Act'') and the implementing regulations at 40

Code of Federal Regulations (CFR) part 70 require that permitting

authorities develop and submit operating permits programs to EPA by

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

program within one year after receiving the submittal. If the program

submission is materially changed during the one-year review period, 40

CFR 70.4(e)(2) allows EPA to extend the review period for no more than

one year following receipt of the additional materials.

EPA received the State of Tennessee's (``the State'') title V

operating permit program submittal on November 10, 1994. The State

requested, under the signature of the Tennessee Governor's designee,

approval of its operating permit program with full authority to

administer the program in ninety-one of the State's ninety-five

counties. Four of the State's counties (Shelby, Davidson, Hamilton, and

Knox) are regulated by local air pollution control agencies operating

under certificates of exemption issued pursuant to Tennessee Code

Annotated (T.C.A.) Section 68-201-115. The State's jurisdiction also

does not extend to sources of air pollution over which an Indian Tribe

has jurisdiction. The State of Tennessee supplemented its initial title

V program submittal on December 5, 1994, August 8, 1995, January 17,

1996, January 30, 1996, February 13, 1996, April 9, 1996, June 4, 1996,

June 12, 1996, July 3, 1996, and July 15, 1996. Because the August 8,

1995 supplement materially changed the State's title V program

submittal, EPA extended the one-year review period.

On June 26, 1995, EPA received the Memphis-Shelby County (``the

County'') title V operating permit program submittal. The State

requested, under the signature of the Tennessee Governor's designee,

approval of the County's program on behalf of the Memphis-Shelby County

Health Department. The Memphis-Shelby County Health Department has

authority to administer the operating permit program in all areas of

Shelby County, Tennessee, including the incorporated municipalities of

Arlington, Bartlett, Collierville, Germantown, Lakeland, Memphis, and

Millington. The County's jurisdiction does not extend to sources of air

pollution over which an Indian Tribe has jurisdiction. The County

supplemented its initial program on August 22, 1995, August 23, 1995,

August 24, 1995, January 29, 1996, February 7, 1996, February 14, 1996,

March 5, 1996, and April 10, 1996.

EPA reviews title V operating permit programs pursuant to section

502 of the

[[Page 39336]]

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

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

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

approval for a period of up to two years. If EPA has not fully approved

a program by November 15, 1995, or by the end of an interim program, it

must establish and implement a Federal operating permit program for

that State or local agency.

On March 11, 1996, EPA proposed interim approval of the State of

Tennessee and Memphis-Shelby County title V operating permit programs.

See 61 FR 9661. The March 11, 1996 notice also proposed approval of the

State and County interim mechanisms for implementing section 112(g) and

for delegation of section 112 standards and programs that are unchanged

from the Federal rules as promulgated. Public comment was solicited on

these proposed actions. EPA's detailed response to the comments is

contained in the Response to Comment Document, which can be found in

the dockets at the address given above. In this document, EPA is taking

final action to promulgate interim approval of the State of Tennessee

and Memphis-Shelby County operating permit programs.

II. Final Action and Implications

A. Analysis of Approval Action and Response to Public Comments

On March 11, 1996, EPA proposed interim approval of the State of

Tennessee and Memphis-Shelby County title V operating permit programs.

See 61 FR 9661. The program elements receiving approval in this action

are unchanged from those discussed in the proposal notice and continue

to substantially meet the requirements of title V and part 70. For

detailed information on EPA's analysis of the State and County program

submittals, please refer to the Federal Register notice cited above and

to the technical support documents (TSD) contained in the dockets at

the address noted above.

EPA received seven letters during the 30-day public comment period

held on the proposed interim approval of the State and County programs.

Comments were received from the following agencies, companies and

firms: TENNECO Packing; the Tennessee Department of Environment and

Conservation; the Department of Energy, Oak Ridge Operations Office;

Eastman Chemical Company; the Memphis Shelby County Health Department;

the Tennessee Association of Business; and Tuke Yopp & Sweeney,

Attorneys.

All of the comments received during the public comment period were

reviewed and considered by EPA prior to taking this final action. The

original comment letters can be found in the dockets for this action,

which are available at the address given above. EPA's response to the

comments can be found in the Response to Comment Document, which is

part of the dockets. In response to the comments, a few of the

conditions for full program approval discussed in the proposal notice

are being clarified or revised and are discussed below.

Both the State and County addressed each of EPA's nine proposed

interim approval issues in their comment letters and in most cases

provided proposed language changes to address the interim approval

issue and/or a commitment to adopt the necessary changes. EPA

appreciates the State's and County's responses on these issues and will

continue to work with these agencies to facilitate the adoption of

regulatory changes necessary for full approval.

1. Certification of Compliance With Applicable Requirements

Pursuant to 40 CFR 70.5(c)(9), a certification of compliance is a

binding, regulatory requirement upon a source subject to title V. While

the State's and County's application forms require a certification of

compliance, the regulatory provisions of both programs do not

specifically require the permit application to contain a compliance

certification. As a condition of full approval, EPA requested that the

State and County clarify in supplemental legal opinions that a source

submitting an application for a title V permit is legally obligated to

certify its compliance status with regards to all applicable

requirements. Alternatively, the State and County could revise their

regulations to directly incorporate this requirement.

On April 9, 1996, the State submitted to EPA, as part of the

State's response to EPA's proposal notice, a legal opinion supporting

the State's operating permit application-based compliance certification

approach as a method resulting in a binding, legally enforceable

compliance certification. As such, EPA is removing the proposed interim

approval issue regarding compliance certification for the State of

Tennessee.

This interim approval issue remains unchanged for Shelby County.

The County indicated in their comment letter, dated April 10, 1996,

that the County would develop a opinion letter on this issue and that

they expect a conclusion similar to that of the State would be reached.

2. Insignificant Activities

In the March 11, 1996 proposed interim approval notice, EPA

discussed interim approval issues related to the State and County

``exemptions'' rule, 1200-3-9-.04, that was included in the initial

State and County title V program submittals. Until recently, EPA was

unaware that when the State and County supplemented rule 1200-3-9-.04,

in August of 1995, with a new subparagraph 1200-3-9-.04(5), entitled

``Major Source Operating Permits Insignificant Emission Units,'' that

the original subparagraphs 1200-3-9.04(1)-.04(4) were revised to

exclude their applicability to the State and County title V programs.

Because these paragraphs are no longer applicable to the State and

County title V programs and are no longer State effective rules, EPA is

withdrawing those interim approval issues related to subparagraphs

1200-3-9-.04(1)-(4).

EPA received several comments regarding the proposal to list

certain aspects of the State's insignificant activities rule as grounds

for interim approval. These comments addressed the ``gatekeeper''

issues regarding the structure of the State's exemptions, the list of

exempted activities, and the State's exemptions from permit revision

procedures.

Regarding permit revision procedures, EPA proposed to require the

State and County to eliminate the provisions in subparagraph 1200-3-9-

.04(5)(h) which would exempt insignificant activities from permit

revision procedures. One commenter asserted that this exemption is

appropriate in light of recent revisions that EPA has proposed to part

70, and that it is therefore premature for the State to change its

rules until changes to part 70 are finalized. EPA does not agree that

this provision of the State's rules finds support in recent proposed

revisions to part 70, since that proposal does not contemplate outright

exemptions from the need for a permit revision for changes that trigger

applicable requirements. However, EPA has stated elsewhere that it

shares concerns regarding the need for separate rulemakings to address

interim approval deficiencies and changes to part 70. As stated in a

memorandum issued June 13, 1996, EPA plans to allow for the granting of

extensions for interim approval periods so that these rulemakings can

be combined. If this occurs, the State and County should be able to

combine rulemakings as it requested.

[[Page 39337]]

Regarding the list of insignificant activities in the State's

rules, EPA proposed that the State and County must either demonstrate

that exclusion from applications of activities on the list would not

interfere with the determination or imposition of applicable

requirements, or else impose an emissions cap on the activities that

would be eligible for exclusion. One commenter asserted that EPA should

not require such a demonstration, since the State's rule has the

appropriate ``gatekeeper'' providing that activities may not be

excluded from the application if they are subject to an applicable

requirement. The commenter pointed out that, since the effect of this

gatekeeper is that sources will always have to make the determination

that a listed activity is in fact not subject to applicable

requirements, it is inappropriate to require the State to make a

demonstration of non-applicability at the program approval stage.

EPA agrees that the gatekeeper language in 70.5(c), to the extent

it is reflected in the State's rule, should function in this manner.

Notwithstanding the existence of an insignificant activities list, a

source remains obliged to submit an application that properly accounts

for all applicable requirements, even where units subject to

requirements can be found on the list.1 Given that applicable

requirements may change, this will to some extent always be a

situation-specific exercise, and EPA does not believe it appropriate to

require States to show at program approval that conflicts between

applicable requirements and activities listed as insignificant could

never arise. At the same time, however, EPA believes that insignificant

activities lists should avoid the potential for confusion created when

an activity that is plainly subject to an applicable requirement is

included. In the TSD for the proposed approval, EPA noted instances

where it believes such a conflict exists, and other instances where the

listed activities are so vaguely described that conflicts with

applicable requirements appear likely. EPA believes that where problems

such as these can be identified at the time of program approval, their

correction should be a condition for receiving full approval.

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\1\ As EPA explained in its first ``White Paper'' guidance, this

obligation to account for all applicable requirements in the

application does not necessarily entail a description of every

emissions unit that is subject. The more ``generic'' the

requirement, the less need there is for a detailed description of

the subject emissions units. For further explanation, see the White

Paper guidance on streamlined treatment of applications.

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There is more than one way to remedy this deficiency. As suggested

in the proposal, the State may be able to retain its activities list as

is, but demonstrate that the listed items (at least those about which

EPA is concerned) do not in fact conflict with applicable requirements.

Preliminarily, EPA believes such a demonstration would have to account

for the size of these activities in terms of potential emissions. One

commenter pointed out that such a demonstration would be burdensome,

and that the applicability of requirements frequently does not depend

on size of the emissions unit. EPA does not rule out that such a

demonstration might be made in a manner that does not quantify

emissions. Whether this is possible will depend on the activity and the

applicable requirements potentially implicated. EPA is willing to work

with the State to arrive at a satisfactory method for such

demonstrations.

Another alternative proposed by EPA was that the State could impose

an emissions cap on the listed activities. In response to the comment

that the applicability of requirements does not necessarily depend on

the potential emissions, EPA notes that this is a valid point, and one

which underscores the need for appropriate gatekeeper language that

obliges the source to make a determination of applicability

notwithstanding the listing of an activity by the State as

insignificant, or, for that matter, the use of a generic insignificant

activities threshold like that found in Sec. 1200-3-9-.04(5)(a)(4)(i).

Again, EPA's main objection to activities on the State's list were that

several appeared on their face to implicate applicable requirements.

EPA believes a reasonable approach for limiting the confusion that

could result from this situation is to impose an emissions cap which,

in combination with the appropriate gatekeeper language, would help

ensure that applicable requirements are accounted for in the

application and permit. Again, EPA is not mandating this as the only

acceptable approach to resolving problems it perceives with the

existing list.

EPA's proposal for a quantification of emissions from the State,

and the alternative for a tons per year cap, was not solely due to a

concern over conflicts with applicable requirements, but also

encompassed a concern that some of the listed activities could be quite

large, possibly approaching major source levels. EPA is maintaining its

position that the State must demonstrate that very large activities are

not being listed as insignificant. Here again, EPA is willing to work

with the State to narrow the group of activities for which an emissions

quantification would be necessary.

The final insignificant activities issue concerns the State's

exemption from monitoring, recordkeeping, reporting, and compliance

certification requirements for insignificant activities that are

subject only to generic SIP requirements. EPA proposed that the State

must remove this exemption in order to receive full approval.

Commenters objected to this condition, asserting, first, that this

condition was inconsistent with guidance issued by EPA, second, that

the State rules did not create an exemption but instead were designed

to meet these part 70 requirements, and third, that elimination of this

exemption would create an unreasonable permitting burden.

The commenters are correct that EPA's guidance entitled ``White

Paper #2'' does specifically address the issue of how title V permits

may be written with regard to insignificant activities subject to

generally applicable SIP requirements.2 Briefly summarized, the

guidance states that it is within the permitting authority's discretion

to decide that no additional monitoring (beyond that provided in the

applicable requirement itself) will be required in the title V permit

for insignificant activities subject to generally applicable

requirements, if there is little or no likelihood that a violation

could occur from those activities. 3 However, this is in part a

factual finding, and so White Paper #2 contemplates that this

discretion would be exercised on a permit by permit basis, where the

finding can be reviewed in a context that is specific enough to be

meaningful. EPA does not rule out that a State might structure an

insignificant activities list narrowly enough that such a finding could

be made programmatically, thereby allowing for a categorical exemption

from part 70 monitoring, recordkeeping, and reporting. However, EPA

does not find this to be the case for the current Tennessee

insignificant activities provisions.

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\2\ ``Generally applicable requirements'' are those that apply

universally to all emissions units and activities, as opposed to

requirements that focus on a category of units or activities.

\3\ If no monitoring is required, it would follow that the

permit can also dispense with recordkeeping and reporting for those

units, since there is no compliance data being regularly generated.

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EPA thinks that more often than not it will be the case that part

70 monitoring, recordkeeping, and reporting requirements will not be

[[Page 39338]]

necessary where the State's insignificant activities are subject only

to generally applicable requirements. Therefore, Tennessee and Shelby

County may address this interim approval condition by modifying the

exemption from these requirements to a regulatory presumption that the

monitoring, recordkeeping, and reporting requirements will not apply in

those instances, but leaving the State with the authority to prescribe

those requirements as needed on a permit by permit basis.

White Paper #2 does not suggest that activities subject to

applicable requirements may be exempted from compliance certification,

even on a permit by permit basis. To the contrary, White Paper #2

discusses a streamlined way in which compliance certifications may be

made for these types of activities.

Industry commenters and the State assert that the provisions being

discussed here do not create an exemption from compliance

certification, but rather meet it by requiring a certification of

compliance to accompany applications for initial permit issuance,

revision, or renewal. EPA disagrees. Both title V and part 70 (at

Sec. 70.6(c)(5)(i)) require certification of compliance to be performed

at least annually. The commenters fail to explain how a certification

of compliance which could be as infrequent as once every five years

meets this requirement.

EPA also disagrees with the view, strongly asserted by State and

industry commenters, that title V permitting will be unreasonably

burdensome if an exemption of the sort currently contained in

Tennessee's rules is not allowed. The commenters may have been under

the impression that a strict monitoring, recordkeeping, and compliance

regime would be needed for each insignificant activity subject to a

generally applicable requirement. However, EPA has clarified in White

Paper #2 that part 70 does not mandate this result.

Part 70 does require sources to certify compliance at least

annually with all applicable requirements, even as they apply to

smaller activities subject to generally applicable requirements.

However, EPA fails to see how an additional burden is created when a

source must certify compliance with a requirement that it would be

legally obligated to comply with even in the absence of title V. A

burden would result only if, as a result of part 70, sources were

required to expend additional effort to determine compliance. As White

Paper #2 explains, if no additional compliance data is being generated,

then the source is not expending any additional effort to determine

compliance, and the compliance certification will be based on available

information. The commenters did not suggest anything to counter this

reasoning.

Since EPA proposed interim approval, the Ninth Circuit Court of

Appeals has decided a case addressing this same issue. Western States

Petroleum Association v. EPA, No. 95-70034 (June 17, 1996) (``WSPA'').

Because of the similarities between that case and this action, EPA

believes it appropriate to address here how it plans to respond to that

decision. EPA wishes to emphasize that the WSPA decision is very

recent, and that EPA is still in the process of developing a more

thorough response that addresses other title V programs. However, given

the State's desire to avoid imposition of the Federal Part 71 operating

permits program, EPA decided it is in the State's best interest not to

delay approval until a more thorough response could be articulated.

The WSPA case concerned EPA's approval of the Washington State

program, which also contained an exemption from permit content

requirements for insignificant activities subject to generic SIP

requirements. Industry petitioners challenged EPA's identification of

this exemption as grounds for interim approval, asserting that such an

exemption was allowed by part 70, and that EPA had acted inconsistently

by approving other title V programs with similar provisions. The 9th

Circuit did not opine on whether EPA's position was consistent with

part 70. It did, however, find that EPA had acted inconsistently in its

title V approvals, and had failed to explain the departure from

precedent that it perceived in the Washington approval.

EPA accepts the broader holding of the WSPA decision, namely, that

it should act consistently in its program approvals or else explain any

departures. However, EPA does not necessarily agree with the specific

findings of the Court regarding inconsistent actions in other State

programs. Nor does EPA necessarily agree that the Washington interim

approval constituted a departure from the precedent established

generally in the title V program approvals nationwide. Just as

importantly, EPA maintains that part 70 does not allow for outright

exemptions from permit content requirements for activities subject to

applicable requirements. EPA therefore plans to respond to the WSPA

decision by determining exactly where inconsistencies may exist among

title V programs and by addressing these programs as necessary to

arrive at a nationally consistent approach in harmony with the part 70

rule.

The WSPA court found that EPA had acted to approve title V programs

with exemptions from permit content requirements in eight instances.

EPA at this time does not necessarily agree with the Court's finding

that each of these eight programs represents an inconsistency. In some

cases, the Court based its conclusion on language in the State rules or

in EPA's approval notice that was merely ambiguous or imprecise. EPA is

now in the process of investigating whether these programs present true

inconsistencies. EPA expects that in some cases this will be answered

from the plain meaning of the State's regulations. Where the State

regulations at issue are ambiguous, EPA will seek confirmation from the

States themselves as to how these regulations have been interpreted.

EPA's investigation, though still in the early stages, has revealed

that of the eight States identified by the 9th Circuit as subject to

inconsistent treatment by EPA, three can be eliminated from this list

based on the language of the State rules alone. The North Dakota

program regulations contain no exemption from permit content

requirements for activities subject to applicable requirements, and so

EPA's statement in the approval notice, read by the Court as suggesting

otherwise, appears to have been merely an imprecise statement of the

effect of the State's insignificant activity provisions. Similarly,

since the Knox County, Tennessee, rules exempt insignificant activities

from permit applications but not permit content, EPA's statements in

that approval notice appear likewise overbroad.

The Massachusetts program does, in fact, exempt certain listed

insignificant activities as exempt from title V permitting altogether.

In analyzing this provision under its Part 70 regulations, EPA assessed

each of the listed activities and determined that they either named

activities that are not subject to applicable requirements, or that any

applicable requirement implicated by the activity was not designed to

be implemented by addressing emission units in the permit (i.e., open

burning). EPA has reexamined this assumption, and continues to believe

it is accurate.

The Florida program regulations also appear to exempt insignificant

activities from title V permitting. The Court concluded that EPA had

not identified this provision as grounds for interim approval. EPA does

not necessarily agree. In EPA's view, in order to remedy

[[Page 39339]]

the deficiencies identified by EPA in the Florida interim approval

notice, which included the State's failure to include gatekeeper

language that assured the completeness of permit applications, the

State would necessarily have to address the exemption created from

permit content requirements. It follows that, to the extent Florida's

regulations can be read as creating an exemption from permit content,

this should also be considered grounds for interim approval. EPA has

yet to reach a tentative conclusion regarding Ohio, Hawaii, North

Carolina, or Jefferson County, KY, all identified by the Court as

inconsistent with EPA's action in Washington State. EPA is including a

somewhat more detailed explanation of the preceding points in the

Response to Comments document for this action.

The WSPA opinion states that:

The EPA may not depart, sub silentio, from its usual rules of

decision to reach a different, unexplained result in a single case *

* * To the contrary, the EPA must clearly set forth the ground for

its departure from prior norms so that we may understand the basis

of the EPA's action and judge the consistency of that action with

EPA's mandate. Slip Op., at 6990 (emphasis added).

EPA reads this to mean that a regulatory interpretation proffered by

the Agency is not entitled to judicial deference if it conflicts with

the de facto policy established through the Agency's actions on

specific programs. That is, if the ``norms'' established through

program approvals are other than the Agency's articulated policy,

courts will not uphold the Agency's efforts to impose the latter.

EPA acknowledges that its investigation may reveal a small number

of inconsistencies on this issue among approved title V programs.

However, EPA believes that these inconsistencies, even when construed

liberally and aggregated together, still would represent a relatively

minor set of deviations from the normal policy manifested in the vast

majority of title V program approvals.

The Court in WSPA appeared to base its specific holding of

inconsistency on its assumption that EPA had approved eight programs

with exemptions from permit content, but had acted to impose the policy

against permit content exemptions in only two instances.4 This

assumption is incorrect. At the time the Washington State program

received interim approval, EPA had approved 22 State and 39 local

programs, and had proposed approval of another 13 State and 13 local

programs. As of today, EPA has approved 38 State and 55 local programs,

and has proposed approval of another seven State and four local

programs.5 Each program submitted to EPA necessarily addresses

this issue (though most do so simply by providing for permit content

language consistent with part 70--that is, by not affirmatively

establishing any permit content exemption). Of 104 title V programs

approved or in the process of approval, EPA believes that there are at

most four with regulations that present inconsistencies on this issue.

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\4\ ``[T]he EPA has identified only two Title V programs that in

fact apply permitting requirements to IEU's * * *.'' Slip Op., at

6988.

\5\ Altogether, 116 State and local agencies will have title V

programs.

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EPA believes it is clear from these totals that its ``prior norm''

has been to grant full approval only where activities subject to

applicable requirements are not exempted from the permit, and that its

interpretation of part 70, as manifested both in its articulated policy

and in actual program approvals, is consistent with the position being

taken in today's action. In those few instances where inconsistencies

are confirmed to exist, EPA plans to take appropriate action to follow

the WSPA Court's mandate that it act consistently or explain any

departures.

3. Applicable Federal Requirements

Subparagraph 1200-3-9-.02(11)(b) in the State and County programs

restricts the domain of applicable Federal requirements referenced in

Paragraph 1200-3-9-.02(11) to those in effect on December 15, 1993. As

a result, neither program ensures that title V permits will address all

applicable requirements in accordance with 40 CFR 70.6(a). As specified

in the proposal notice, subparagraph 1200-3-9-.02(11)(b) of the State

and County regulations must be revised so that the definition of

applicable requirements is consistent with part 70. The State and

County regulations must provide that all applicable requirements, as

defined in 40 CFR 70.2 and as provided generally in the Clean Air Act

and part 70, are included in the permit such that they can be

implemented and enforced by the State and County.

EPA received several comments on this interim approval issue, and

hence we believe further clarification is necessary. Several

commenters, including the State and County, concurred that the

indicated change was necessary for the program to meet the requirements

of part 70. However, one commenter stated that the regulation could not

be revised because the State has specific requirements that Federal

regulations cannot be adopted by reference to the Federal rule citation

and because all new Federal requirements must be adopted by the

Tennessee Air Pollution Control Board before becoming State effective.

Another commenter indicated that new Federal standards that have not

yet been adopted into State regulation and delegated to the State for

implementation are Federally enforceable but not State enforceable

unless the source has signed a mutual agreement letter giving the State

enforcement authority.

The commenters' statements are likely correct for new Federal

requirements that have not been adopted by the State and have not been

incorporated into a title V permit. Many State laws require that

Federal requirements be adopted by the State prior to implementation

and enforcement or may prevent incorporation by reference. Such

requirements are generally intended to provide the public and regulated

community with adequate notice of the new requirements and to allow the

State and regulated sources access to the State court system for

enforcement and appeals. However, the title V permitting program also

provides a mechanism for new Federal requirements to be implemented and

enforced by a State or local agency. In fact, one of the goals of title

V is to consolidate all of the various air pollution control

requirements that a source is subject to into one document that can be

enforced by the designated State or local air pollution control agency.

EPA would like to clarify that, although title V requires that

applicable requirements be enforceable as a matter of State law, it

does not require that they be adopted by the State or municipality

through rulemaking prior to incorporation into a title V permit.

State's generally have broad legal authority to incorporate permit

conditions into properly issued State (or local) permits. The public

notice and comment procedures, required by the title V permitting

programs, provide the mechanism to ensure that the permit terms are

necessary and reasonable; these procedures are in a sense analogous to

the notice and comment rulemaking procedures under State law, to which

the commenter alluded. In States with this broad authority, any permit

term or applicable requirement incorporated into a valid title V permit

can be enforced by the permitting agency. In any case, correction of

the applicable requirements definition to eliminate the cutoff date

will not constitute the adoption into State law of any additional

requirements. That adoption will only occur in a separate

[[Page 39340]]

process, either rulemaking or permit issuance, that should afford

whatever level of process is due.

In an opinion submitted to EPA, in support of the State's title V

program, the Tennessee Attorney General indicated that the State of

Tennessee has broad legal authority to incorporate all applicable

Federal requirements, as defined by part 70, into the title V permit

and to enforce those requirements. In a letter to EPA, dated June 12,

1996, the State reaffirmed that the State does indeed have such

authority and that during the interim approval period and until the

necessary changes are made to the State regulations, the State will use

such authority to include all applicable Federal requirements in the

title V permit and to enforce those requirements.

4. Implementation of Section 112(g) During Transition Period

As discussed in the proposal notice, on February 14, 1995, EPA

issued an interpretive notice which outlines the Agency's revised

interpretation of section 112(g) applicability (60 FR 8333). The notice

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

promulgated a rule addressing that provision. The notice explains that

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

be delayed beyond the date of promulgation of the Federal rule so as to

allow permitting authorities time to adopt rules implementing the

Federal rule, and that EPA will provide for any such additional delay

in the final section 112(g) rulemaking.

Unless and until EPA provides for an additional postponement of the

section 112(g) effective date, the State of Tennessee and Memphis-

Shelby County must have Federally enforceable mechanisms for

implementing section 112(g) during the period between promulgation of

the Federal section 112(g) rule and adoption of implementing State and

County regulations. Both program submittals contain Chapter 1200-3-31

entitled ``Case by Case Determinations of Hazardous Air Pollutant

Control Requirements'', which will serve as an adequate implementation

vehicle during the transition period.

The proposal notice also discussed that Chapter 1200-3-31 contains

several discrepancies with respect to the provisions of section 112(g)

of the Act. EPA proposed that as a condition of full title V program

approval, the State and the County must correct the identified

discrepancies. Several commenters indicated that, while they agreed

that these changes would likely be necessary for approval of the

State's and County's 112(g) programs, it is premature to condition the

title V program approvals on these changes. EPA concurs with the

commenters and is removing the proposed interim approval issues

regarding the 112(g) transition period.

EPA is approving the use of the State of Tennessee and Memphis-

Shelby County Chapter 1200-3-31 as a mechanism to implement section

112(g) during the transition period between promulgation of EPA's

section 112(g) rule and adoption by the State and County of rules

specifically designed to implement section 112(g). This action does not

approve Chapter 1200-3-31, in general, for purposes of 112(g), nor does

it imply that Chapter 112(g) will be consistent with the final Federal

112(g) rule, when it is promulgated. The duration of this approval is

limited to 18 months following promulgation by EPA of the section

112(g) rule to provide adequate time for the State and the County to

adopt regulations consistent with the Federal requirements. This

approval will be without effect if EPA decides in the final section

112(g) rule that sources are not subject to the requirements of the

rule until State or local regulations are adopted.

5. Conflict of Interest

The Clean Air Act requires that States implementing and enforcing

permitting programs approved pursuant to the Act must adopt

requirements regarding conflict of interest that are at least as

stringent as those set forth in the Act. CAA 128(a)(1)-(2), 129(e).

State law must provide that no State board or body that approves

operating permits, either in the first instance or upon appeal, shall

be constituted of less than a majority of members who represent the

public interest and who do not derive a significant portion of their

income from persons subject to operating permits. State law must also

provide that any potential conflicts of interest by members of such

board or body or the head of any executive agency with similar powers

be adequately disclosed. Pursuant to section 129(e) of the Act and

section 70.4(b)(3)(iv) of the Federal operating permit regulation,

State law must also provide that no permit for a solid waste

incinerator unit may be issued by an agency, instrumentality or person

that is also responsible, in whole or in part, for the design and

construction or operation of the unit.

In the State of Tennessee Attorney General's opinion that was

submitted to EPA as part of the State's application for the title V

program, and in a subsequent letter, dated September 29, 1994, the

State made a commitment to submit a Board adopted rule that would

satisfy the provisions of sections 128 and 129(e) of the Act to the

Tennessee Attorney General for approval no later than March 30, 1995.

In responding to a public comment addressing conflict of interest, it

was brought to EPA's attention that the State conflict of interest

rules are not yet State effective. While the necessary regulations were

reviewed by EPA and adopted by the Board in April 1995, the rules have

not yet been signed by the State Attorney General. The State has

indicated to EPA that they expect such regulations to be made State

effective in the near term. Hence, as a condition of full approval, the

State must complete the adoption procedure and submit to EPA

regulations that satisfy the provisions of section 128 and 129(e) of

the Act.

6. Third Party Standing

One commenter raised the issue of whether the State's title V

program met the program approval requirements for standing, as outlined

in Section 502(b)(6) of the Clean Air Act, 42 U.S.C. 7661a(b)(6).

Standing is a critical component of the title V program. The United

States Court of Appeals for the Fourth Circuit recently held, in the

title V context, that States at a minimum, must extend judicial review

rights to participants in the State public comment process who satisfy

the standards for standing for the purposes of Article III of the U.S.

Constitution. Commonwealth of Virginia v. Browner, 1996 U.S. App. LEXIS

5334, *23 (March 26, 1996).

In the commenter's opinion, the Tennessee Air Pollution Control

Board's (``the Board'') relatively recent decision in In the Matter of

Bayou Steel Corporation (Tennessee), Division of Air Pollution Control

Case No. 95-0132, Docket No. 04.09-45-10788A (October 2, 1995), holds

that the Board will require a party to demonstrate that the party had

suffered an actual injury before it could ``appeal'' a permit to the

Board, thereby effectively preventing third party ``appeals'' for

permit actions.

In response to the comment, EPA re-examined the State Attorney

General's opinion submitted with the State's title V program. In

addition, in a letter to the State dated May 22, 1996, EPA requested

further clarification of the State law and interpretation of the

State's standing requirements. The State's response to EPA's inquiries,

dated June 4, 1996 and July 3, 1996, clarified the State's position on

standing. These letters are available for public review in the dockets

for this

[[Page 39341]]

action. In brief, the State made clear that the law of standing in

Tennessee does anticipate situations where there is a threatened

injury. Based on the State's responses to EPA's inquiries and the State

Attorney General's opinion, EPA continues to believe that the State of

Tennessee meets the title V requirements for standing. This analysis

does not reflect an opinion on the State's Bayou Steel case.

B. Final Action

1. Title V Operating Permit Programs

EPA is promulgating interim approval of the operating permit

program submitted by the Tennessee Department of Environment and

Conservation on November 10, 1994, and supplemented on December 5,

1994, August 8, 1995, January 17, 1996, January 30, 1996, February 13,

1996, April 9, 1996, June 4, 1996, June 12, 1996, July 3, 1996, and

July 15, 1996. EPA is also promulgating interim approval of the title V

program submitted by the Memphis-Shelby County Health Department on

June 26, 1995, and supplemented on August 22, 1995, August 23, 1995,

August 24, 1995, January 29, 1996, February 7, 1996, February 14, 1996,

March 5, 1996, and April 10, 1996. The following changes must be made

for full approval of the State and County programs.

a. Opt-in Provision for Exempted Sources

Neither the State or the County program addressed 40 CFR

70.3(b)(3), which allows exempted sources to apply for a permit.

Justification of the omission of this part 70 provision is requested

from the State and the County.

b. Certification of Compliance With Applicable Requirements

The County must clarify in a supplemental legal opinion that the

County's permitting program requires a source submitting an application

for a title V permit to certify its compliance status with regards to

all applicable requirements. In the alternative, the County regulations

could be revised to directly incorporate this requirement.

c. Insignificant Activities

The State and the County must complete the following:

i. Remove the exemption from permitting requirements contained in

Subparagraph 1200-3-9-.04(5)(f).

ii. Revise subparagraph 1200-3-9-.04(5) to specify, consistent with

40 CFR 70.5(c), that the application may not omit information needed to

evaluate the fee amount required.

iii. Revise Subparagraph 1200-3-9-.04(5)(c)(3) to eliminate the

exemption from the certification requirements of 40 CFR 70.6(c) and to

allow the permitting authority to require additional monitoring,

recordkeeping, and reporting, as necessary, for sources subject to

generally applicable SIP requirements.

iv. Address EPA's concerns, as discussed in the TSD, about

potential conflicts of certain activities and emission units, listed in

Paragraph 1200-3-9-.04(5), with applicable requirements.

v. Provide a description of the activities and emission units, and

their associated emissions, listed in subparagraphs 1200-3-9-.04(5)(f)

and (g), sufficient to allow EPA to determine that exclusion of the

activities and units from permit applications will not interfere with

the determination and imposition of applicable requirements and

collection of fees. In the alternative, the State and the County could

specifically limit or ``cap'' the emissions from the listed activities

and emissions units to levels that are insignificant compared to the

level of emissions that are required to be permitted or subject to

applicable requirements.

vi. Subparagraph 1200-3-9-.04(5)(h) must be revised, consistent

with the criteria in 40 CFR 70.7 for administrative permit amendments

and permit modifications, to eliminate the provisions that would exempt

certain emission increases from permit amendment and modification

requirements.

d. Applicable Federal Requirements

Subparagraph 1200-3-9-.02(11)(b) in the State and County programs

restricts the domain of Federal requirements referenced in paragraph

1200-3-9-.02(11) to those in effect on December 15, 1993. Subparagraph

1200-3-9-.02(11)(b) must be revised, consistent with part 70.6(a), to

ensure that title V permits address all applicable requirements.

e. General Permits

Subparagraph 1200-3-9-.02(11)(e)4, which provides for the issuance

of general permits, allows a source to operate without a title V permit

and not be subject to enforcement action. This provision must be

revised in both the State and County programs to be consistent with the

requirements of 40 CFR 70.6(d)(1).

f. Excess Emissions Due to Malfunction, Startup, and Shutdown

The State must revise Chapter 1200-3-20 to make clear that it

applies only to requirements in the Tennessee SIP. The revised rule

must be submitted to EPA for approval in the SIP.

g. Permit Reopenings

Subparagraph 1200-3-31-.04(1)(a) must be revised in both the State

and County programs to be consistent with the permit reopening

requirements in 40 CFR 70.7(f)(1)(i), which requires completion of

permit reopenings not later than 18 months after promulgation of a new

applicable requirement in cases of permits with remaining permit terms

of three or more years.

h. Use of Title V Fees

Memphis-Shelby County's fee provisions allow for use of operating

permit fees for any purpose rather than solely for the funding of title

V program activities, as required by 40 CFR 70.9(a). In addition, the

County's program does not specify that the fees used to cover the

direct and indirect costs of the operating permit program will be

collected only from part 70 sources, as required by 40 CFR 70.9(a).

Memphis-Shelby County, therefore, must revise its fee provisions to be

consistent with the 40 CFR 70.9(a).

i. Conflict of Interest

The State must adopt regulations, which at a minimum, satisfy the

provisions of section 128 and 129(e) of the Act.

The scope of the State and County's title V programs approved in

this notice applies to all part 70 sources (as defined in the approved

programs) within the ninety-one counties under the State's jurisdiction

and in Shelby County, except any sources of air pollution over which an

Indian Tribe has jurisdiction. See, e.g., 59 FR 55813, 55815-18

(November 9, 1994).6

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\6\ The term ``Indian Tribe'' is defined under the Act as ``any

Indian tribe, band, nation, or other organized group or community,

including any Alaska Native village, which is Federally recognized

as eligible for the special programs and services provided by the

United States to Indians because of their status as Indians.'' See

section 302(r) of the CAA; see also 59 FR 43956, 43962 (August 25,

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

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This interim approval extends until August 31, 1998. During this

interim approval period, the State of Tennessee and Memphis-Shelby

County are protected from sanctions for failure to have a program, and

EPA is not obligated to promulgate, administer, and enforce Federal

operating permit programs in the State or the County. Permits issued

under a program with interim approval have full standing with respect

to part 70, and the one-year time period for submittal of permit

applications by subject sources begins

[[Page 39342]]

upon the effective date of this final interim approval, as does the

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

If the State or the County fail to submit complete corrective

programs for full approval by March 2, 1998, EPA will start an 18-month

clock for mandatory sanctions. If the State or the County fail to

submit a corrective program that EPA finds complete before the

expiration of that 18-month period, EPA will be required to apply one

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

effect until EPA determines that the State or the County has corrected

the deficiency. If EPA disapproves the State or County corrective

programs, and has not granted full approval within 18 months after the

disapproval, the EPA must impose mandatory sanctions. In both cases, if

the State or County has not come into compliance within 6 months after

EPA applies the first sanction, a second sanction is required. In

addition, discretionary sanctions may be applied where warranted any

time after the expiration of an interim approval period. If EPA has not

granted full approval to an operating permit program by the expiration

of an interim approval and that expiration occurs after November 15,

1995, EPA must promulgate, administer, and enforce a Federal operating

permit program for that State or County.

2. Implementation of Section 112(g) During Transition Period