Clean Air Act Interim Approval of Operating Permits Program; South Coast Air Quality Management District, California

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 70

[AD-FRL-5559-1]

Clean Air Act Interim Approval of Operating Permits Program;

South Coast Air Quality Management District, California

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: The EPA is promulgating direct final interim approval of the

title V operating permits program submitted by the California Air

Resources Board, on behalf of the South Coast Air Quality Management

District (South Coast or District), for the purpose of complying with

federal requirements for an approvable state program to issue operating

permits to all major stationary sources and to certain other sources.

Today's action also promulgates direct final approval of South Coast's

mechanism for receiving delegation of section 112 standards as

promulgated.

EFFECTIVE DATE: This direct final rule is effective on October 28, 1996

unless adverse or critical comments are received by September 30, 1996.

If the effective date is changed, a timely notice will be published in

the Federal Register.

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

information used in developing this direct final rule are available for

public inspection (docket number CA-SC-96-1-OPS) during normal business

hours at the following location: Operating Permits Section (A-5-2), Air

and Toxics Division, U.S. Environmental Protection Agency, Region IX,

75 Hawthorne Street, San Francisco, CA 94105.

FOR FURTHER INFORMATION CONTACT: Ginger Vagenas (telephone 415/744-

1252), Operating Permits Section (A-5-2), Air and Toxics Division, U.S.

Environmental Protection Agency, Region IX, 75 Hawthorne Street, San

Francisco, CA 94105.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

A. Introduction

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

the Clean Air Act (Act)), and implementing regulations at 40 Code of

Federal Regulations (CFR) part 70 (part 70), require that states

develop and submit operating permits programs to EPA by November 15,

1993, and that EPA act to approve or disapprove each program within 1

year after receiving the submittal. The EPA's program review occurs

pursuant to section 502 of the Act and the part 70 regulations, which

together outline criteria for approval or disapproval. Where a program

substantially, but not fully, meets the requirements of part 70, EPA

may grant the program interim approval for a period of up to 2 years.

If EPA has not fully approved a program by 2 years after the November

15, 1993 date, or by the end of an interim program, it must establish

and implement a federal program.

The EPA is publishing this action without prior proposal because

the Agency views this as a noncontroversial action and anticipates no

adverse comments. However, in a separate document in this Federal

Register publication, the EPA is proposing interim approval of the

operating permit program submitted by South Coast should adverse or

critical comments be filed.

If EPA receives adverse or critical comments, this action will be

withdrawn before the effective date by publishing a subsequent document

that will withdraw the final action. All public comments received will

then be addressed in a subsequent final rule based on this action

serving as the proposed rule. The EPA will not institute a second

comment period. Any parties interested in commenting on this action

should do so at this time. If no such comments are received, the public

is advised that this action will be effective on October 28, 1996.

B. Federal Oversight and Sanctions

This interim approval, which may not be renewed, extends until

October 29, 1998. During this interim approval period, South Coast is

protected from sanctions, and EPA is not obligated to promulgate,

administer and enforce a federal operating permits program in the

District. Permits issued under a program with interim approval have

full standing with respect to part 70, and the 1-year time period for

submittal of permit applications by subject sources begins upon the

effective date of this interim approval, as does the 3-year time period

for processing the initial permit applications.

If South Coast fails to submit a complete corrective program for

full approval by April 29, 1998, EPA will start an 18-month clock for

mandatory sanctions. If South Coast then fails 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 South Coast has corrected the deficiency by submitting a complete

corrective program. Moreover, if the Administrator finds a lack of good

faith on the part of the District, both sanctions under section 179(b)

will apply after the expiration of the 18-month period until the

Administrator determines that South Coast has come into compliance. In

any case, if, six months after application of the first sanction, the

District still has not submitted a corrective program that EPA has

found complete, a second sanction will be required.

If EPA disapproves South Coast's complete corrective program, EPA

will be required to apply one of the section 179(b) sanctions on the

date 18 months after the effective date of the disapproval, unless

prior to that date South Coast has submitted a revised program and EPA

has determined that it corrected the deficiencies that prompted the

disapproval. Moreover, if the Administrator finds a lack of good faith

on the part of the District, both sanctions under section 179(b) shall

apply after the expiration of the 18-month period until the

Administrator determines that South Coast has come into compliance. In

all cases, if, six months after EPA applies the first sanction, the

District has not submitted a revised program that EPA has determined

corrects the deficiencies, 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 South

Coast has not timely submitted a complete corrective program or EPA has

disapproved its submitted corrective program. Moreover, if EPA has not

granted full approval to the District's program by the expiration of

this interim approval, EPA must promulgate, administer and enforce a

federal permits program for South Coast upon interim approval

expiration.

II. Direct Final Action and Implications

A. Analysis of State Submission

The analysis contained in this notice focuses on specific elements

of South Coast's title V operating permits program that must be

corrected to meet the minimum requirements of part 70. The full program

submittal; the Technical Support Document (TSD), which contains a

detailed analysis of the submittal; and other relevant materials are

available for inspection as part of the public docket (CA-SC-96-1-OPS).

The docket may be viewed during regular business hours at the address

listed above.

[[Page 45331]]

1. Support Materials

South Coast's title V program was submitted by the California Air

Resources Board (CARB) on December 27, 1993. The South Coast submittal

included the following implementing and supporting regulations:

Regulation XXX--Title V Permits; Rule 204--Permit Conditions; Rule

206--Posting of Permit to Operate; Rule 210--Applications; Rule 301--

Permit Fees; Rule 518--Hearing Board Procedures for Title V Facilities;

and Rule 219--Equipment not Requiring a Written Permit Pursuant to

Regulation II. The EPA found the program to be incomplete on March 4,

1994 because it lacked permit application forms. On March 6, 1995, the

District submitted its forms and EPA deemed the program complete on

March 30, 1995. On February 10, 1995, the District adopted a rule to

implement title IV. EPA deemed the South Coast acid rain program

acceptable on March 29, 1995 (see 60 FR 16127) and on April 11, 1995,

it was submitted to EPA as part of the District's title V program. On

August 11, 1995, the District amended the regulatory portion of its

submittal. On September 26, 1995, EPA received from CARB, on behalf of

the District, the revised Regulation XXX, revised Rule 518--Variance

Procedures for Title V Facilities, and a new rule, Rule 518.1--Permit

Appeal Procedures for Title V Facilities. Additional materials were

received on April 24, 1996, including draft revised application forms,

a demonstration of adequacy of the District's group processing

provisions, and several additional rules, including the following,

which are relied upon to implement the title V program: Rule 219--

Equipment not Requiring a Written Permit Pursuant to Regulation II,

adopted August 12, 1994 (supersedes previously submitted version); Rule

301--Permit Fees, adopted October 13, 1995 (supersedes previously

submitted version); and Rule 441--Research Operations, adopted May 5,

1976. In conjunction with its evaluation of the South Coast's title V

operating permits program, EPA reviewed all of the rules, including

Regulations XX and XIII, submitted by the District. While EPA is not

specifically approving rules not directly relied upon to implement part

70 as part of the District's operating permits program, changes to

these rules will be reviewed by EPA to ensure implementation of the

part 70 program is not compromised. See the TSD for a complete listing

of rules submitted by the District. Rule 518.2, Federal Alternative

Operating Conditions, adopted January 12, 1996, was also submitted and

is discussed below under II.A.2.g.

On May 6, 1996 application completeness criteria were received and

on June 5, 1996 revised application forms were received. The District

submitted a demonstration that shows South Coast will permit 60% of its

title V sources and 80% of emissions attributable to title V sources

within three years of program approval (see section II.A.2.d. below)

along with a sample of facility permit application on May 23, 1996.

Finally, on July 29, 1996, the District submitted revised application

forms and completeness criteria.

Enabling legislation for the State of California and the Attorney

General's legal opinion were submitted by CARB for all districts in

California and therefore were not included separately in South Coast's

submittal. The South Coast submission now contains a Governor's letter

requesting source category-limited interim approval, District

implementing and supporting regulations, and all other program

documentation required by section 70.4. An implementation agreement is

currently being developed between South Coast and EPA.

2. Regulations and Program Implementation

South Coast's title V implementing regulation, District Regulation

XXX, was first adopted on October 8, 1993. EPA reviewed Regulation XXX

both before and after rule adoption and identified numerous regulatory

deficiencies. These deficiencies were communicated to South Coast in

letters dated October 7, 1993, December 7, 1994, April 6, 1995, April

13, 1995, and May 1, 1995. In response, South Coast revised Regulation

XXX and Rule 518. The amended rules were adopted on August 11, 1995 and

submitted to EPA by CARB, on behalf of the District, on September 26,

1995. EPA is therefore evaluating and acting on the August 11, 1995

version of Regulation XXX and Rule 518.

South Coast's title V implementing regulations substantially meet

the requirements of 40 CFR part 70, sections 70.2 and 70.3 for

applicability; sections 70.4, 70.5, and 70.6 for permit content,

including operational flexibility; section 70.7 for public

participation and permit modifications; section 70.5 for criteria that

define insignificant activities; section 70.5 for complete application

forms; and section 70.11 for enforcement authority. Although the

regulations substantially meet part 70 requirements, there are a few

deficiencies in the program that are outlined under section II.B.1.

below as interim approval issues and further described in the TSD.

a. Variances. South Coast's Hearing Board has the authority to

issue variances from requirements imposed by State and local law. See

California Health and Safety Code sections 42350 et seq. In the legal

opinion submitted for California operating permit programs,

California's Attorney General states that ``[t]he variance process is

not part of the Title V permitting process and does not affect federal

enforcement for violations of the requirements set forth in a Title V

permit.'' (Emphasis in original.)

EPA regards the State and District variance provisions as wholly

external to the program submitted for approval under part 70, and

consequently, is not taking action on those provisions of State and

local law. EPA has no authority to approve provisions of state or local

law, such as the variance provisions referred to, that are inconsistent

with the Act.

A part 70 permit may incorporate, via part 70 permit issuance or

modification procedures, the schedule of compliance set forth in a

variance. However, EPA reserves the right to pursue enforcement of

applicable requirements notwithstanding the existence of a compliance

schedule in a permit to operate. This is consistent with 40 CFR

Sec. 70.5(c)(8)(iii)(C), which states that a schedule of compliance

``shall be supplemental to, and shall not sanction noncompliance with,

the applicable requirements on which it is based.''

EPA does not recognize the ability of a permitting authority to

grant relief from the duty to comply with a federally enforceable part

70 permit, except where such relief is granted through procedures

allowed by part 70. A part 70 permit may be issued or revised to

incorporate those terms of a variance that are consistent with

applicable requirements.

b. Group Processing Provisions. Part 70 provides for the group

processing of minor permit modifications, providing the cumulative

emissions increases from the pending changes do not exceed 10% of

allowable emissions for the unit, 20% of the major source threshold, or

5 tons per year (tpy), which ever is lower. Section 70.7(e)(3)(i)(B)

allows the District to establish and EPA to approve alternative levels,

if such alternative levels would reasonably alleviate severe

administrative burdens and the individual processing of changes below

the levels would yield trivial environmental benefits.

South Coast allows cumulative emissions increases of up to 5 tons

per year under its group processing

[[Page 45332]]

provisions. This will in some cases exceed the levels set out in part

70. For example, 20% of the major source threshold for NOX and VOC

in the South Coast is 2 tons per year. Appendix C of the South Coast's

April 24, 1996 submittal contains a demonstration that supports the use

of a 5 ton per year cut-off for group processing. The District notes

that its requirement that sources obtain a permit revision prior to

making a change eliminates any environmental risk associated with

delays allowed by group processing. It also points out that the ability

to group several changes into one permit action alleviates the

administrative burden of multiple rounds of processing and provides for

a shorter period of time when a facility permit is in flux. EPA

believes the District has met the requirements of 70.7(e)(3)(i)(B) and

is therefore approving the alternative group processing level in the

South Coast regulation.

c. Provisions for Processing Certain Modifications Subject to Major

NSR Via the Minor Permit Revision Track. The South Coast Air Quality

Management District is the only extreme ozone nonattainment area in the

country. Because of its nonattainment status, any increase of emissions

of NOX or VOC from a discrete operation, unit or other pollutant

emitting activity is a modification subject to major NSR. Such

modifications are generally required by part 70 to undergo public

review. Potentially several hundred to several thousand major NSR

modifications can occur each year in the South Coast under applicable

definitions of major source (10 tons per year) and major modification

(any emissions increase). For perspective, a major modification in

serious or severe ozone nonattainment areas is triggered by 25 tons of

emissions accumulated over a five year period, and in most areas in the

country, a major modification does not occur unless there is an

emissions increase of 40 tons per year (tpy).

The District has included in its rule provisions allowing

modifications that result in cumulative (over the 5 year term of the

permit) emissions increases of up to 40 pounds per day (about 7.3 tpy)

of NOX and 30 pounds per day (about 5.5 tpy) of VOC to be

processed via its minor permit revision procedures. South Coast does

not allow applicants to implement minor permit revisions prior to final

action by the District on the revision. Therefore, what distinguishes

this treatment from the significant permit revision procedure that

would otherwise be required is that there would be no public comment

period during the permit issuance process. The public does have the

opportunity, however, to review the revision after it is issued and to

petition EPA to object to the permit. (See 70.8 and 3003(l).)

EPA believes that this aspect of the South Coast program is

approvable. Requiring full public participation procedures for

modifications that result in emissions increases below the levels

specified in the District's operating permits rule would be unworkable

in the South Coast. The sheer number of notices that would be required

if all major modifications were handled in this way would dilute

attention that should be focused on the more significant of the changes

that qualify as ``major.'' Although it makes sense that the scope of

changes subject to prior public review should be broadest in areas with

the greatest nonattainment problems, EPA believes that such a notice

requirement ceases to yield a benefit, and may in fact be damaging to

the purpose of a public review requirement, if applied to the smallest

changes that would qualify as ``major'' in an extreme area. EPA further

believes that the threshold levels for prior public review found in the

South Coast program are reasonable, and will strike an appropriate

balance between the need for broad public review on the one hand, and

on the other, the administrative burden on the District and the

quantitative limits on the public's ability to provide review that is

meaningful. EPA notes that it has previously considered these

``triggers'' for public notice in the context of the District's new

source review program, and believes them to be adequate.

EPA wishes to emphasize that this finding is unique to the South

Coast. As the only extreme area in the nation, the South Coast District

is subject to statutory constraints referred to above that affect NSR

and title V. These constraints, which flow directly from the provisions

of the CAA, result in both a volume and proportion of changes

classified as ``major'' that distinguish the South Coast from all other

title V programs.

See section II.B.1.(3) below for a discussion of aspects of the

South Coast permit modification procedures that are proposed for

interim approval.

d. Applicability and Duty to Apply: Two Phases of Permitting. While

the ``title V facility'' definition in South Coast's title V program

fully meets the applicability requirements of part 70, the District has

allowed sources with actual emissions below certain thresholds to defer

the obligation to apply for title V permits until no later than three

and a half years after the program effective date (3000(b)(28),

3001(b), and 3003(a)(3)). Ordinarily, part 70 requires sources to apply

within one year of the program effective date. This deferral is

effectively a request for source category-limited interim approval for

sources with actual emissions below the given thresholds.

EPA's policy on source category-limited interim approval is set

forth in a document entitled, ``Interim Title V Program Approvals,''

signed on August 2, 1993 by John Seitz. In order to meet the interim

approval criteria described in that memorandum, South Coast

demonstrated that it would permit, during the first phase of the

program, more than 60% of the District's title V sources and more than

80% of the pollutants emitted by title V sources. This requirement is

addressed in a letter from Pang Mueller, Senior Manager of Stationary

Source Compliance, dated May 16, 1996. South Coast estimated that there

are more than 1600 title V facilities located in the District and that

the workload to permit all of those sources in the initial three year

period would be ``excessively burdensome.'' The EPA believes that South

Coast has demonstrated compelling reasons for a source category-limited

interim approval. The Seitz memo also requires that source category-

limited interim approval be granted only if all sources will be

permitted within five years of the date required for EPA final action.

Because the South Coast program guarantees that all title V sources

will be permitted within five years following program approval, and

because South Coast has satisfied the criteria set forth in the August

2, 1993 memorandum, EPA finds the District's program to be eligible for

source category-limited interim approval.

e. Enhanced New Source Review. South Coast's title V permit program

provides for enhanced preconstruction review, an optional process that

allows sources to satisfy both new source review and title V permit

modification requirements at the same time. Any modification processed

pursuant to South Coast's enhanced preconstruction review procedures

may be incorporated into the title V permit as an administrative permit

amendment. These enhanced procedures obviate the need to undergo two

application, public notice, and permit issuance/revision processes for

the same change. (See 3000(b)(1)(D).)

f. Regional Clean Air Incentives Market (RECLAIM). RECLAIM is the

South Coast's emissions-limiting economic incentives program. It

targets facilities with four or more tons of NOX

[[Page 45333]]

or SOX emissions per year from permitted equipment for

participation in a pollutant-specific market with the goal of reducing

emissions at a significantly lower cost. The program subsumes fourteen

SCAQMD Air Quality Management Plan (AQMP) control measures and is

projected to reduce emissions by an equivalent amount. Sources are not,

however, relieved from the duty to comply with new source review

requirements and must comply with best available control technology

requirements established pursuant to the District's new source review

process.

For the most part, RECLAIM facilities that are subject to

Regulation XXX are treated the same as non-RECLAIM facilities. Certain

aspects of the permit modification provisions do, however, set out

different treatment for RECLAIM and non-RECLAIM facilities, and the

regulation sets out different means for establishing applicability. EPA

has evaluated the procedures for modifying part 70 operating permits

that are issued to RECLAIM facilities along with the means for

determining the applicability of Regulation XXX to RECLAIM facilities

and has found them to be adequate for approval. For additional

background and analysis, see Attachment J of the TSD.

g. Alternative Operating Conditions. EPA has no authority to

approve provisions of state or local law, such as the variance

provisions discussed above, that are inconsistent with the Act.

Districts, however, have always had the ability to make the terms of a

variance federally enforceable by submitting a source-specific SIP

revision to EPA that demonstrates, pursuant to section 110(l) of the

Clean Air Act, that the proposed change will not interfere with any

applicable requirement concerning attainment of the ambient air quality

standards and reasonable further progress.

As noted above, it is possible for a permitting authority to grant

relief from the duty to comply with a federally enforceable part 70

permit, where such relief is granted through procedures allowed by part

70 and is consistent with applicable requirements, including section

110(l) of the Act. South Coast has adopted and submitted Rule 518.2--

Federal Alternative Operating Conditions which, if approved, will

enable the District to incorporate alternative operating conditions for

certain requirements into part 70 permits. Alternative operating

conditions are not available for federally promulgated rules,

regulations, or permit conditions, including standards promulgated

pursuant to section 111 or 112 of the Clean Air Act, title IV or title

VI requirements, or requirements to obtain an operating permit or an

authority to construct.

Rule 518.2 is based on two fundamental concepts. First, in order to

preserve the opportunity for public and EPA review, the SIP will be

revised to incorporate Rule 518.2, which combines district variance

procedures with the significant permit revision procedures of part 70.

Second, to ensure that a federally enforceable alternative operating

condition does not interfere with Clean Air Act progress or attainment

requirements, the rule establishes an emissions bank. This bank

provides the District with the ability to offset excess emissions

resulting from the granting of an alternative operating condition.

EPA believes Rule 518.2 meets the requirements of sections 110(l)

and 193 of the Clean Air Act for approval in the SIP and is not

inconsistent with the requirement under part 70 that operating permits

must assure compliance with applicable requirements. EPA therefore will

propose approval of this revision to the South Coast portion of the

California State Implementation Plan in the near future.

3. Permit Fee Demonstration

Section 502(b)(3) of the Act requires that each permitting

authority collect fees sufficient to cover all reasonable direct and

indirect costs required to develop and administer its title V operating

permits program. Each title V program submittal must contain either a

detailed demonstration of fee adequacy or a demonstration that

aggregate fees collected from title V sources meet or exceed $25 per

ton per year (adjusted annually based on the Consumer Price Index

(CPI), relative to 1989 CPI). The $25 per ton amount is presumed, for

program approval, to be sufficient to cover all reasonable program

costs and is thus referred to as the ``presumptive minimum'' (40 CFR

70.9(b)(2)(i)).

South Coast has opted to make a presumptive minimum fee

demonstration. By dividing the fees charged to facilities it believes

will be subject to its title V program by those facilities' emissions,

the District calculates its effective fee rate is $323 per ton of

emissions. This amount is appreciably higher than the current

presumptive minimum of $30.93.

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

a. Authority and Commitments for Section 112 Implementation. South

Coast has demonstrated in its title V program submittal adequate legal

authority to implement and enforce all section 112 requirements through

the title V permit. This legal authority is contained in the State of

California enabling legislation and in regulatory provisions defining

federal ``applicable requirements'' and requiring each permit to

incorporate conditions that assure compliance with all applicable

requirements. EPA has determined that this legal authority is

sufficient to allow South Coast to issue permits that assure compliance

with all section 112 requirements. For further discussion, please refer

to the TSD accompanying this action and the April 13, 1993 guidance

memorandum entitled, ``Title V Program Approval Criteria for Section

112 Activities,'' signed by John Seitz.

b. Authority for Title IV Implementation. On February 11, 1995,

South Coast incorporated by reference part 72, the federal acid rain

permitting regulations. The incorporation by reference was codified in

Regulation XXXI. EPA determined Regulation XXXI to be acceptable on

March 29, 1995 (See 60 FR 16127).

B. Proposed Interim Approval and Implications

1. Title V Operating Permits Program

The EPA is promulgating direct final interim approval of the

operating permits program submitted by the California Air Resources

Board, on behalf of the South Coast Air Quality Management District, on

December 27, 1993 and amended on March 6, 1995, April 11, 1995,

September 26, 1995, April 24, 1996, May 6, 1996, May 23, 1996, June 5,

1996, and July 29, 1996. Areas in which South Coast's program is

deficient and requires corrective action prior to full approval are as

follows:

(1) California State law currently exempts agricultural production

sources from permit requirements. CARB has requested source category-

limited interim approval for all California districts. In order for

South Coast's program to receive full approval (and to avoid a

disapproval upon the expiration of this interim approval), the

California Legislature must revise the Health and Safety Code to

eliminate the exemption of agricultural production sources from the

requirement to obtain a permit.

(2) Section 70.5(c) states that EPA may approve, as part of a state

program, a list of insignificant activities and emissions levels which

need not be included in permit applications. Section 70.5(c) also

states that an application for a part 70 permit may not omit

information needed to determine the

[[Page 45334]]

applicability of, or to impose, any applicable requirement, or to

evaluate appropriate fee amounts. Section 70.4(b)(2) requires states to

include in their part 70 programs any criteria used to determine

insignificant activities or emission levels for the purpose of

determining complete applications.

Under part 70, a state must request and EPA may approve as part of

that state's program the activity or emission level that the state

wishes to consider insignificant. Part 70, however, does not establish

appropriate emission levels for insignificant activities, relying

instead on a case-by-case determination of appropriate levels based on

the particular circumstances of the part 70 program under review. South

Coast submitted an extensive list of insignificant activities in the

form of Rule 219--Equipment Not Requiring a Written Permit Pursuant to

Regulation II. The District did not provide criteria that were used to

determine that the listed activities are appropriately treated as

insignificant. The regulation does not ensure that activities to which

non-general applicable requirements apply are excluded from the list of

insignificant activities, nor does the program demonstrate that

emissions from the listed activities are truly insignificant.

While many of the listed activities do appear to be reasonable

candidates for such treatment, some do not. For instance, paragraph

(d)(2) of Rule 219 exempts most refrigeration units regardless of size.

Such units, if they have a charge rate of 50 pounds or more of a Class

I or II ozone-depleting compound, may be subject to unit-specific

applicable requirements and could not, therefore, be considered

insignificant. EPA believes that, for the insignificant activities

provisions to be fully approvable, the list must not create confusion

regarding the regulated community's obligation to provide all

information needed to determine the applicability of, or to impose, any

applicable requirement, nor may the list interfere with the permitting

authority's obligation to issue permits that assure compliance with all

applicable requirements.

For interim approval, EPA is relying on certain provisions in

Regulation XXX that affect the scope and usage of insignificant

activities. Specifically, paragraph (b) of Rule 3003 requires that

applicants shall submit ``* * * all information necessary to evaluate

the subject facility and the application, including all information

specified in 40 CFR 70.5(c), to determine the applicability of and to

impose any regulatory requirement * * *.'' The application forms

require the listing of all equipment that is exempt from permitting. In

addition, Rule 3001(b), (c) and (d), and Rule 3000(b)(15) ensure that

the source's potential to emit, which does not exclude unpermitted

activities, will generally determine title V applicability.

For full approval, South Coast must provide supporting criteria and

revise its list of insignificant activities, as appropriate. The

District must remove any activities from its list of insignificant

activities that are subject to a unit-specific applicable requirement

and adjust or add size cut-offs to ensure that the listed activities

are truly insignificant. (See sections 70.4(b)(2) and 70.5(c).)

(3) The South Coast rule (3005(b)(1)) allows the following types of

changes, which are required under part 70 to be processed as

significant permit modifications, to be processed under minor

modification procedures:

(1) NSPS and NESHAP (parts 60 and 61) modifications that result in

emissions increases up to ``de minimis'' emissions thresholds (the de

minimis levels are: HAP, VOC and PM10--5.5 tpy; NOX--7.3 tpy;

SOX--11 tpy; and CO--40 tpy). (Any emissions increase resulting

from an NSPS or NESHAP modification should be processed under the

significant modification procedures);

(2) Establishment of or changes to case-by-case emissions

limitations, providing the changes do not result in emissions increases

above the de minimis thresholds. (Part 70 requires that such actions

must be processed as significant modifications, regardless of any

resulting changes in emissions); and

(3) Changes to permit conditions that the facility has assumed to

avoid an applicable requirement, providing the changes do not result in

emissions increases above the de minimis thresholds. (Part 70 requires

that all such changes must be processed as significant modifications,

regardless of any resulting changes in emissions.)

The District must modify its program so that these changes will be

subject to the procedural requirements of the significant modification

track. (See 70.7(e)(2)(i)(3),(4), and (4)(A).)

(4) Because the initial implementation of the South Coast program

will not include all title V sources (see section II.A.2.d. above), the

District is receiving a source category limited interim approval. The

District's regulation, however, does include language that expands the

applicability of the program after three years and ensures that all

title V sources will be permitted within five years. Although this

phase-in is considered to be an interim approval issue, no change to

the regulation is required to resolve it.

(5) The South Coast's group processing provisions are set out in

paragraph (c) of Rule 3005. Subparagraph (c)(1)(B) provides that when

emissions increases resulting from pending revisions exceed 5 tons per

year for a given pollutant, the pending revisions must be processed.

Rule 3005(c)(2), however, references 3000(b)(6) (South Coast's higher

de minimis significant permit revision levels) when instructing the

applicant of its responsibilities. This reference conflicts with

3005(c)(1)(B) and must be amended. In order to properly implement its

program, South Coast must adhere to the levels specified in

3005(c)(1)(B).

(6) The language in rule 3004(a)(3)(C) must be amended to conform

with the part 70 language. It currently requires that the permit

include ``periodic monitoring or recordkeeping * * * representative of

the source's compliance for the term of the permit'' rather than ``with

the terms of the permit.'' (See 70.6(a)(3)(i)(B).)

(7) Rule 3004(a)(9) must be revised to specify that any trading of

emissions increases and decreases allowed without changes to the permit

must meet the requirements of the part 70 program. (See

70.6(a)(10)(iii).)

(8) The South Coast program must be amended to provide that a

source that is granted a general permit shall be subject to enforcement

action for operating without a permit if the source is later determined

not to qualify for the conditions and terms of the general permit,

regardless of any application shield provisions. (See 70.6(d)(1).)

(9) 3002(g)(1) allows an emergency to constitute an affirmative

defense if ``properly signed, contemporaneous operating logs or other

credible evidence are kept at the facility.'' The rule must be amended

to require that the logs or other evidence demonstrate that the

conditions set out in the rule were met by the facility. (See

70.6(g)(3).)

(10) The definition of ``renewal'' in 3000(b)(22) must be modified

to clarify that permits will be renewed at least every 5 years,

regardless of whether renewal is necessary to incorporate new

regulatory requirements.

(11) Paragraph (g)(1) of Rule 3005 provides for Section 502(b)(10)

changes (changes that violate an express permit term or condition). The

South Coast rule appropriately limits the types of changes that can

qualify for this treatment, except 3005(g)(1)(C)(i) excludes compliance

plan requirements instead of compliance certification

[[Page 45335]]

requirements. The rule must be revised to state that changes that would

violate compliance certification requirements are not allowed.

(12) Paragraph (g) of Rule 3005 must be amended to specify that the

District and the source must attach a copy of any notice of 502(b)(10)

changes to the permit. (See 70.4(b)(12).)

(13) Provisions must be added to Rule 3005(i) that specify the

following: (1) Any change allowed under this section must meet all

applicable requirements and shall not violate existing permit terms;

(2) the source must provide contemporaneous notice to the District and

EPA; and (3) the source must keep a record of the change. (See

70.4(b)(14).)

(14) Rule 3002(g) provides that, in addition to meeting the

Regulation XXX requirements implementing 70.6(g), a source must comply

with District Rule 430--Breakdown Provisions in order to avail itself

of the affirmative defense set out in 70.6(g). Paragraph (5) of 70.6(g)

states that the provisions of 70.6(g) are in addition to any emergency

or upset provisions contained in any applicable requirement. Because

Rule 430 is not SIP approved, however, it is not an applicable

requirement. In order to resolve this issue, South Coast is required to

either submit an approvable version of Rule 430 to EPA for inclusion in

the SIP or to delete the reference to Rule 430. Note that the cross

reference to Rule 430 included in 3002(g) does not alter the provisions

of 70.6(g) and that Rule 430 is wholly external to the part 70 program.

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

period of up to two years. During the interim approval period, South

Coast is protected from sanctions for failure to have a program, and

EPA is not obligated to promulgate a federal permits program in the

District. 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 upon interim

approval, as does the three-year time period for processing the initial

permit applications.

The scope of South Coast's part 70 program that EPA is acting on in

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

program) within South Coast's jurisdiction. The approved program does

not apply to any part 70 sources over which an Indian tribe has

jurisdiction. See, e.g., 59 FR 55813, 55815-18 (Nov. 9, 1994). The term

``Indian tribe'' is defined under the Act as ``any Indian tribe, band,

nation, or other organized group or community, including any Alaska

Native village, which is federally recognized as eligible for the

special programs and services provided by the United States to Indians

because of their status as Indians.'' See section 302(r) of the CAA;

see also 59 FR 43956, 43962 (Aug. 25, 1994); 58 FR 54364 (Oct. 21,

1993).

2. State Preconstruction Permit Program Implementing Section 112(g)

The EPA has published an interpretive notice in the Federal

Register regarding section 112(g) of the Act (60 FR 8333; February 14,

1995) that postpones the effective date of section 112(g) until after

EPA has promulgated a rule addressing that provision. The interpretive

notice also 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 states time to adopt rules implementing

the federal rule, and that EPA will provide for any such additional

delay in the final section 112(g) rulemaking. Unless and until EPA

provides for such an additional postponement of section 112(g), South

Coast must be able to implement section 112(g) during the period

between promulgation of the federal section 112(g) rule and adoption of

implementing State regulations.

For this reason, EPA is approving the use of South Coast's

preconstruction review program as a mechanism to implement section

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

112(g) rule and adoption by South Coast of rules specifically designed

to implement section 112(g). However, since the sole purpose of this

approval is to confirm that the District has a mechanism to implement

section 112(g) during the transition period, the approval itself will

be without effect if EPA decides in the final section 112(g) rule that

there will be no transition period. The EPA is limiting the duration of

this approval to 18 months following promulgation by EPA of the section

112(g) rule.

3. Program for Delegation of Section 112 Standards as Promulgated

Requirements for approval, specified in 40 CFR 70.4(b), encompass

section 112(l)(5) requirements for approval of a program for delegation

of section 112 standards as promulgated by EPA as they apply to part 70

sources. Section 112(l)(5) requires that a state's program contain

adequate authorities, adequate resources for implementation, and an

expeditious compliance schedule, which are also requirements under part

70. Therefore, EPA is also promulgating approval under section

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

delegation of section 112 standards that are unchanged from federal

standards as promulgated. California Health and Safety Code section

39658 provides for automatic adoption by CARB of section 112 standards

upon promulgation by EPA. Section 39666 of the Health and Safety Code

requires that districts then implement and enforce these standards.

Thus, when section 112 standards are automatically adopted pursuant to

section 39658, South Coast will have the authority necessary to accept

delegation of these standards without further regulatory action by the

District. The details of this mechanism and the means for finalizing

delegation of standards will be set forth in an implementation

agreement between South Coast and EPA. This program applies to both

existing and future standards but is limited to sources covered by the

part 70 program.

III. Administrative Requirements

A. Docket

Copies of South Coast's submittal and other information relied upon

for this direct final action is contained in docket number CA-SC-96-1-

OPS maintained at the EPA Regional Office. The docket is an organized

and complete file of all the information submitted to, or otherwise

considered by, EPA in the development of this direct final rulemaking.

The docket is available for public inspection at the location listed

under the ADDRESSES section of this document.

B. Regulatory Flexibility Act

The EPA's actions under section 502 of the Act do not create any

new requirements, but simply address operating permits programs

submitted to satisfy the requirements of 40 CFR part 70. Because this

action does not impose any new requirements, it does not have a

significant impact on a substantial number of small entities.

C. Unfunded Mandates

Under section 202 of the Unfunded Mandates Reform Act of 1995

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

must prepare a budgetary impact statement to accompany any proposed or

final rule that includes a federal mandate that may result in estimated

costs to state, local, or tribal governments in the aggregate; or to

the private sector, of $100 million or more. Under section 205, EPA

must select the most cost-effective and least burdensome alternative

that achieves the objectives of the rule and is consistent with

[[Page 45336]]

statutory requirements. Section 203 requires EPA to establish a plan

for informing and advising any small governments that may be

significantly or uniquely impacted by the rule.

EPA has determined that the approval action promulgated today does

not include a federal mandate that may result in estimated costs of

$100 million or more to either state, local, or tribal governments in

the aggregate, or to the private sector. This federal action approves

pre-existing requirements under state or local law, and imposes no new

federal requirements. Accordingly, no additional costs to state, local,

or tribal governments, or to the private sector, result from this

action.

D. Small Business Regulatory Enforcement Fairness Act

Under 5 U.S.C. 801(a)(1)(A) as added by the Small Business

Regulatory Enforcement Fairness Act of 1996, EPA submitted a report

containing this rule and other required information to the U.S. Senate,

the U.S. House of Representatives and the Comptroller General of the

General Accounting Office prior to publication of the rule in today's

Federal Register. This rule is not a ``major rule'' as defined by 5

U.S.C. 804(2).

E. Executive Order 12866

The Office of Management and Budget has exempted this action from

review under Executive Order 12866.

List of Subjects in 40 CFR Part 70

Environmental protection, Administrative practice and procedure,

Air pollution control, Intergovernmental relations, Operating permits,

Reporting and recordkeeping requirements.

Dated: August 9, 1996.

Felicia Marcus,

Regional Administrator.

Part 70, title 40 of the Code of Federal Regulations is amended as

follows:

PART 70--[AMENDED]

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

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

2. Appendix A to part 70 is amended by adding paragraph (dd) to the

entry for California to read as follows:

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

Permits Programs

* * * * *

(dd) South Coast Air Quality Management District: submitted on

December 27, 1993 and amended on March 6, 1995, April 11, 1995,

September 26, 1995, April 24, 1996, May 6, 1996, May 23, 1996, June 5,

1996 and July 29, 1996; approval effective on October 28, 1996 unless

adverse or critical comments are received by September 30, 1996.

* * * * *

[FR Doc. 96-21950 Filed 8-28-96; 8:45 am]

BILLING CODE 6560-50-P