Approval and Promulgation of Implementation Plans; California State Implementation Plan Revision, South Coast Air Quality Management District

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[CA172-0103; FRL-6169-1]

Approval and Promulgation of Implementation Plans; California

State Implementation Plan Revision, South Coast Air Quality Management

District

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve a revision to the California State

Implementation Plan (SIP) that concerns the control of criteria

pollutants.

The intended effect of proposing approval of this rule is to

regulate emissions of criteria pollutants in accordance with the

requirements of the Clean Air Act, as amended in 1990 (CAA or the Act).

EPA has evaluated this rule and is proposing to approve it under

provisions of the CAA regarding EPA action on SIP submittals, SIPs for

national primary and secondary ambient air quality standards, and plan

requirements for nonattainment areas.

DATES: Comments must be received on or before October 26, 1998.

ADDRESSES: Comments may be mailed to: Erica Ruhl, Permits Office,(AIR-

3), Air Division, U.S. Environmental Protection Agency, Region IX, 75

Hawthorne Street, San Francisco, CA 94105-3901.

A copy of the rule and EPA's evaluation report of the rule are

available for public inspection at EPA's Region 9 office during normal

business hours. Copies of the submitted rule are also available for

inspection at the following locations:

California Air Resources Board, 2020 L Street, Sacramento, CA 95812

South Coast Air Quality Management District, 21865 E. Copley Drive,

Diamond Bar, CA 91765.

FOR FURTHER INFORMATION CONTACT: Erica Ruhl, Permits Office (AIR-3),

Air Division, U.S. Environmental Protection Agency, Region IX, 75

Hawthorne Street, San Francisco, CA 94105-3901, (415) 744-1171.

SUPPLEMENTARY INFORMATION:

I. Applicability

The rule being proposed for approval into the California SIP is

South Coast Air Quality Management District (``SCAQMD'' or ``the

District''), Rule 518.2, Federal Alternative Operating Conditions. This

rule was adopted on January 12, 1996 and was submitted by the

California Air Resources Board to EPA on May 10, 1996. This rule was

found to be complete on July 19, 1996 pursuant to EPA's completeness

criteria that are set forth in 40 CFR part 51, appendix V 1

and is being proposed for approval into the SIP.

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\1\ EPA adopted the completeness criteria on February 16, 1990

(55 FR 5830) and, pursuant to section 110(k)(1)(A) of the CAA,

revised the criteria on August 26, 1991 (56 FR 42216).

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II. Background

California state law includes provisions for the granting of

variances from air pollution control requirements. When granted, a

variance protects a source from enforcement under California law.

Historically, EPA has not recognized variances issued pursuant to state

law and has taken the position that such variances do not shield

sources from enforcement under federal law. If, however, a variance is

submitted to EPA and is found to meet the substantive requirements of

the Clean Air Act (CAA) governing SIP revisions, it can be approved as

a revision to the SIP, thereby receiving federal recognition. State and

federal law have coexisted in this manner for many years.

The Clean Air Act allows EPA 18 months to act on submitted SIP

revisions 2 and often, because of a large backlog, the

Agency takes that long to process them. Members of the regulated

community have complained that this method for recognizing variances

federally is too time consuming and complex. With this rule, The South

Coast Air Quality Management District (``South Coast'' or ``the

District'') is proposing to make federal recognition of variances more

expeditious by using the title V permitting process.

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\2\ 42 U.S.C. 7410(k), CAA section 110(k).

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South Coast Rule 518.2 is designed to allow federal recognition of

variances through a process that meets the procedural requirements

pertaining to SIP revisions as well as the substantive requirements of

the Clean Air Act. In a

[[Page 51326]]

nutshell, the rule temporarily modifies the applicable requirement

through the title V permit revision process rather than through the

source-specific SIP revision process. The rule accomplishes this by

establishing a mechanism for the creation of alternative operating

conditions (AOCs), a means by which to offset any emissions in excess

of the otherwise applicable requirements that would result, and

provisions for EPA and public review and EPA veto of proposed AOCs.

The rule restricts the issuance of AOCs to circumstances where the

following conditions exist/have been met:

due to conditions beyond the reasonable control of the

petitioner, requiring compliance would result in either an arbitrary or

unreasonable taking of property or the practical closing and

elimination of a lawful business;

the closing or taking would be without a corresponding

benefit in reducing air contaminants;

the petitioner for the Alternative Operating Condition has

given consideration to curtailing operations of the source in lieu of

obtaining an Alternative Operating Condition;

during the period the Alternative Operating Condition is

in effect, the petitioner will reduce excess emissions to the maximum

extent feasible;

during the period the Alternative Operating Condition is

in effect, the petitioner will monitor or otherwise quantify emission

levels from the source and report these emission levels to the District

pursuant to a schedule established by the District;

the Alternative Operating Condition will not result in

noncompliance with the requirements of any NSPS, NESHAP or other

standard promulgated by the U.S. EPA under Sections 111 or 112 of the

Clean Air Act, or any standard or requirement promulgated by the U.S.

EPA under Titles IV or VI of the Clean Air Act, or any requirement

contained in a permit issued by the U.S. EPA; and

any emissions resulting from the Alternative Operating

Condition will not, in conjunction with emissions resulting from all

other Alternative Operating Conditions established by the Hearing Board

and in effect at the time, cause an exceedance of the monthly or annual

SIP allowance established in the rule.

In addition, the rule requires that the Alternative Operating

Condition include enforceable alternative emission limits, operational

requirements that result in the source being operated in a manner that

reduces emissions to the maximum extent feasible, and/or monitoring,

record keeping, and reporting provisions that, to the extent feasible,

meet or are as stringent as the otherwise applicable requirement.

If EPA believes that the proposed AOC does not meet applicable

requirements, including the requirements of Rule 518.2, it may object.

Any AOC will be ineffective if it is not revised to meet EPA's

objection unless EPA issues a written rescission of its objection. If

EPA does not object, or if EPA's objections are resolved, the AOC

constitutes a revision to the source's title V permit and a temporary

modification to the applicable requirement.

III. EPA Evaluation and Proposed Action

In determining the approvability of this rule, EPA must evaluate

the rule for consistency with the requirements of the CAA and EPA

regulations, as found in sections 110, 182, and 193 of the CAA and 40

CFR part 51 (Requirements for Preparation, Adoption, and Submittal of

Implementation Plans).

A. CAA Requirements Governing Approval of 518.2

The Clean Air Act includes several provisions that apply to the

approval of rules, such as Rule 518.2, that would revise the SIP by

relaxing existing requirements. These provisions are discussed below.

1. States' revisions to SIPs require reasonable notice and public

hearing

Congress adopted section 110(l) as part of the 1990 CAA Amendments.

Entitled ``Plan Revisions,'' it provides that States may adopt

revisions to an implementation plan after reasonable notice and public

hearing.

2. Revisions to State Implementation Plans must be submitted to EPA for

review

CAA section 110(a)(3)(C) states that when a State or the

Administrator grants an exemption under certain limited

circumstances,3 neither the State nor the Administrator need

revise a SIP if the plan would have met the requirements of the Act

absent such exemptions. This section suggests that when a State or the

Administrator grants an exemption that does not fall under one of the

specified categories, the applicable implementation plan may require

revision. Since a variance would almost never fall under one of the

listed categories, the State must submit a plan revision for the

Administrator's approval in order for it to be effective as a matter of

federal law.

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\3\ These circumstances include:

42 U.S.C. 7418: Control of pollution from Federal

facilities. This provision permits the President to exempt any

emission source of any department, agency, or instrumentality in the

executive branch if he determines it to be in the paramount interest

of the U.S. to do so.

42 U.S.C. 7413(d): Administrative assessment of civil

penalties. This exemption provides that when the Administrator has

made a finding that a person violated a SIP, EPA need not

concurrently insist on a SIP revision.

42 U.S.C. 7410(f), (g): National or regional energy

emergencies. Both of these subsections create limited authority to

exempt sources from compliance with SIPs for limited time-periods,

provided they meet specified requirements (e.g. severe national or

regional energy emergency).

42 U.S.C. 7419: Primary nonferrous smelter orders. This

section applies only to primary nonferrous smelters in existence on

August 7, 1977.

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Section 110(i) confirms the above interpretation of section

110(a)(3)(C). It states that with certain exceptions, including a plan

revision under subsection (a)(3), neither the State nor the EPA

Administrator may take any action, such as an order, suspension, or

plan revision, that modifies any requirement of the applicable

implementation plan with respect to any stationary source.

A number of courts, including the Supreme Court, have held that

both the State and the Agency must approve plan revisions in order for

them to be held valid under the Act.4 The Supreme Court has

also said that the Agency needs to review proposed SIP revisions to

assure that variances granted are consistent with the Act's requirement

that the national standards be attained as expeditiously as practicable

and maintained thereafter.5

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\4\ See, e.g., Train v. NRDC, 421 U.S. 60 (1975); Illinois v.

Commonwealth Edison Co., 490 F. Supp. 1145 (1980); California Tahoe

Regional Planning Agency v. Sahara Tahoe Corp., 504 F. Supp. 753,

768 (1980).

\5\ Train at 91.

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3. EPA cannot approve proposed revisions if they would cause the SIP to

fail to ensure attainment or maintenance of the NAAQS or any other

requirement included in the Act

Under section 110(l), the Administrator is not to approve a

revision of a plan ``if the revision would interfere with any

applicable requirement concerning attainment and reasonable further

progress, or any other applicable requirement of [the Act].'' Thus this

provision serves to assure that the State, in seeking a revision to its

SIP, does not impair its compliance with the statutory mandates

applicable to the SIP.

a. Attainment and Maintenance of the NAAQS. In General: Under

section 110(l) EPA must conform with the overarching general

requirement that it may not approve a revision to the SIP

[[Page 51327]]

that would cause the SIP to fail to ensure attainment or maintenance of

the NAAQS.

Post 1990 Non-RACT Rules: For non-RACT, post-1990 rules, section

110(l), in conjunction with section 110(a)(3)(C), requires EPA to

assure that the emissions resulting from the relaxation of rule

requirements will not interfere with attainment or reasonable further

progress before it can approve this type of revision.

b. Other Requirements Included in the Act--Post 1990 RACT Rules.

Section 172, which provides general rules for all nonattainment areas,

requires nonattainment areas to adopt a number of measures, including

rules requiring sources to apply reasonably available control

technology (RACT).6 Sections 182(a)(2)(A) and (b)(2) amplify

this requirement for ozone nonattainment areas. The former section

requires areas designated as nonattainment just prior to the 1990

Amendments to submit rules imposing RACT on certain existing sources of

volatile organic compounds (VOC). The latter section requires all

moderate and above nonattainment areas to impose similar control

measures. The purpose of these requirements was essentially to insure

that major sources of VOC and NOx use control measures that

amount to RACT.

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\6\ Congress has not defined RACT in the CAA, but has apparently

adopted EPA's definition of RACT as articulated in a memorandum from

Roger Strelow, Assistant Administrator for Air and Waste Management,

to Regional Administrators, Regions I-X, on ``Guidance for

Determining Acceptability of SIP Regulations in Non-attainment

Areas,'' section 1.a (December 9, 1976). EPA defined RACT as: ``the

lowest emission limitation that a particular source is capable of

meeting by the application of control technology that is reasonably

available considering technological and economic feasibility.'' RACT

for a particular source is to be determined on a case-by-case basis,

considering the technological and economic circumstances of the

individual source.'' 44 FR 53762 (1979).

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RACT requirements are especially relevant because they represent a

significant class of requirements that nonattainment areas must adopt

regardless of the other measures they have enacted as part of their

plans to achieve attainment. Accordingly, section 110(l) appears to

limit a State's ability to adopt revisions that would ``interfere''

with the mandate created by these provisions.

For a variance to a RACT rule put into effect after November 15,

1990, section 110(l) dictates that in the aggregate, the overall level

of reductions that were to be achieved through the imposition of RACT

may not be diminished.

4. The modification of any control requirement in effect before

November 15, 1990 in an area which is a nonattainment area for any air

pollutant is prohibited, unless the modification insures equivalent or

greater emission reductions of such air pollutants

CAA section 193, also known as the General Savings Clause,

preserves the validity of regulations, standards, rules, notices,

orders, and guidance in effect before November 15, 1990. Moreover, it

prohibits the modification of any control requirement in effect before

November 15, 1990 in an area which is a nonattainment area for any air

pollutant, unless the modification insures equivalent or greater

emission reductions of such air pollutants. In nonattainment areas,

section 193 provides that EPA may not approve a variance submitted as a

revision to a control requirement in effect prior to November 1990

unless the submitted revision ensures equivalent or greater emission

reductions.

5. EPA may permit a relaxation of standards or a limited exemption from

compliance with regulations where the effects of the relaxation or

exemption are insignificant and may be deemed de minimis

The D.C. Circuit held that the granting of certain exemptions may

be a permissible exercise of agency power to overlook circumstances

that in context may be considered de minimis. This ability constitutes

not a right to depart from the statute, but rather a tool to be used in

implementing the legislative design. Alabama Power Co. v. Costle, 636

F. 2d 323, 360 (1979). Further, the Court held that:

Unless Congress has been extraordinarily rigid, there is likely

a basis or an implication of de minimis authority to provide

exemption when the burdens of regulation yield a gain of trivial or

no value. That implied authority is not available for a situation

where the regulatory function does provide benefits, in the sense of

furthering the regulatory objectives, but the agency concludes that

the acknowledged benefits are exceeded by the costs. For such a

situation any implied authority to make cost-benefit decisions must

be based on a fair reading of the specific statute, its aims and

legislative history'' Alabama Power Co. v. Costle, 636 F. 2d at 360-

61 (D.C. Cir 1979).

Thus, according to the de minimis rule laid out in Alabama Power,

the EPA may excuse unavoidable excess emissions where these are

insignificant in light of total permissible emissions and where the

applicable statutory provisions are not extraordinarily rigid.

B. EPA Evaluation of Rule 518.2

Given the CAA provisions described above, federal recognition of

state-issued variances can be problematic. First, procedurally, a

variance cannot be federally recognized unless it is submitted as a

revision. Section 110(a)(3)(C), 110(i), Train, and the other cases

discussed above impose this requirement in order to obligate the Agency

to enforce its mandate of ensuring that States are attaining or

maintaining the NAAQS. Second, the Act's substantive requirements limit

EPA's ability to approve variances.

In determining the approvability of this rule, EPA has evaluated

the rule for consistency with the requirements of the CAA and EPA

regulations, as found in sections 110, 172, 182, and 193 of the CAA and

40 CFR part 51 (Requirements for Preparation, Adoption, and Submittal

of Implementation Plans).

1. States' revisions to SIPs require reasonable notice and public

hearing.

The District's rule adoption procedures and EPA's process for SIP

action on rules provide opportunity for public comment on Rule 518.2,

which sets out the process and criteria for establishing AOCs. In

addition, Rule 518.2 meets the CAA section 110(l) requirements for

reasonable notice and public hearing by subjecting each alternative

operating condition to EPA and public review for 45 days.

2. Revisions to State Implementation Plans must be submitted to EPA for

review

To meet the requirements of section 110(i), Rule 518.2 substitutes

the Title V permit modification process for the source-specific SIP

revision process. In effect, Rule 518.2 would be a SIP rule that allows

the local district board to set temporary alternative requirements in

accordance with the criteria spelled out in the rule. The State then

submits the alternative limit to EPA as a proposed Title V permit

modification, which by statute EPA has 45 days to review with the

option of vetoing it if the modification does not meet applicable

requirements. Using this procedural tool, EPA is able to meet the

requirements of section 110(i) because all of the changes occur within

the context of a rule that has already been approved into the SIP and

each alternative operating condition will be submitted to EPA for

review.

[[Page 51328]]

3. EPA cannot approve proposed revisions if they would cause the SIP to

fail to ensure attainment or maintenance of the NAAQS

Rule 518.2 was also designed to meet the requirements of sections

110(l) and 110(a)(3)(C) through the development of an emissions bank.

South Coast demonstrated to EPA that when it created its base-year

inventory, it used actual emission estimates from its sources, some of

which were excess. Further, South Coast showed that its plan to achieve

attainment, required under sections 110 and 182 of the Act, took these

emissions into account. South Coast then argued that as long as the

emissions from variances do not exceed the amount of ``excess

emissions'' already included in the inventory, the requirements of

section 110(l) should be satisfied. Accordingly, South Coast went on to

quantify the amount of emissions included in the base-year inventory

from excess emissions, and then created annual and monthly caps within

Rule 518.2 equivalent to that inventory quantification. This approach

satisfies section 110(a)(3)(C) because as long as the cap is not

exceeded, no variance (or ``alternative operating condition or AOC,''

as denominated in Rule 518.2) would cause a deviation from South

Coast's plan for attainment.

4. EPA cannot approve proposed revisions if they would cause the SIP to

fail to ensure attainment or maintenance of * * * any other requirement

included in the Act

For variances sought from post-1990 RACT standards, EPA must ensure

that the AOC meets the non-interference requirement of section 110(l).

That is, in the aggregate, the overall level of reductions that were to

be achieved through the imposition of RACT may not be diminished. This

indicates that in ordinary circumstances, if RACT standards are to be

relaxed, the equivalent emissions reductions must be obtained from

other sources subject to RACT rules.

As stated above, unless Congress has been extraordinarily rigid,

EPA has an implied de minimis authority to provide exemption when the

burdens of regulation yield but a trivial gain. Alabama Power, 636 F.

2d at 360. While Congress intended EPA to ensure that nonattainment

plans provide for the implementation of RACT, it left the definition of

RACT to EPA's discretion. The legislative history for the 1990 Clean

Air Act Amendments associated with section 172 reveals that while

Congress discussed adding a stringent definition of RACT to the

Act,7 the version it ultimately adopted did not define RACT.

Accordingly, EPA concludes that Congress has given it considerable

flexibility in implementing the RACT program. Therefore, as long as

Rule 518.2 does not significantly affect the reductions to be obtained

from the aggregation of all RACT rules, Rule 518.2 passes, with respect

to RACT, the non-interference requirement of Section 110(l). Turning to

the rule, for all pollutants under 518.2, both the annual and monthly

caps established by 518.2 equal less than one-tenth of one percent of

the total stationary source emissions inventory. Since EPA anticipates

that excess emissions from RACT rules will be a subset of the total

excess emissions covered by the program, EPA believes that ``RACT''

excess emissions are essentially de minimis and do not significantly

impact the reductions expected from RACT in the aggregate.

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\7\ See Report No. 100-231, Committee on Environment and Public

Works (100th. Cong., 1st. Sess., 1987).

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5. The modification of any control requirement in effect before

November 15, 1990 in an area which is a nonattainment area for any air

pollutant is prohibited, unless the modification ensures equivalent or

greater emission reductions of such air pollutants

For variances sought from standards adopted prior to 1990, EPA must

ensure that the AOC meets the CAA section 193 requirement that the

modification of any control requirement in effect before November 15,

1990 in an area which is a nonattainment area for any air pollutant,

must ensure equivalent or greater emission reductions of such air

pollutants. In other words, in nonattainment areas, section 193

provides that EPA may not approve a variance submitted as a revision to

a control requirement in effect prior to November 1990 unless the

submitted revision ensures equivalent or greater emission reductions.

Offsetting excess emissions from variances with the Rule 518.2 bank

does not insure equivalent emission reductions because that bank is

``funded'' with excess emissions included in the inventory rather than

from real reductions.

Under the de minimis rule that the D.C. Circuit established in

Alabama Power, unless Congress has been extraordinarily rigid, EPA may

provide an exemption for minimal increases in emissions. Congress

adopted rigid language when it enacted section 193. It stated: ``No

control requirement in effect * * * before November 15, 1990 in any

area which is a nonattainment area for any air pollutant may be

modified after November 15, 1990, in any manner unless the modification

insures equivalent or greater emission reductions of such air

pollutant.'' 42 U.S.C. 193 (emphasis added). Thus, Congress appears to

have left EPA with little or no discretion to permit the modification

of any pre-1990 control requirement, unless the modification ensures at

least equivalent, if not greater, reductions of such air pollutant.

A review of the legislative history associated with Section 193

supports the interpretation that Congress was being quite rigid when it

enacted this provision. In spite of all the other requirements designed

to bring the South Coast into attainment, Congress still enacted

section 193. The Report on the House Energy and Commerce Committee on

the 1990 Amendments noted that the ``anti-backsliding language'' in

section 193:

[P]rohibits the relaxation of control requirements currently in

effect, or required to be adopted. * * * Although many nonattainment

areas are allotted additional years before they must attain ambient

air quality standards under these amendments, all areas must

continue to use pollution control measures already in place or

scheduled to be put in place, as well as those additional measures

required under this Act, in order to assure attainment as

expeditiously as practical.

Because of Congress's evident intent not to allow relaxation of

section 193 rules, it is possible that 518.2 would violate the

requirements of section 193. However, EPA believes that the inclusion

of pre-1990 rules in Rule 518.2 is justified because the variance bank

in the rule is so small that any excused excess emissions would

essentially be insignificant such that in effect, no relaxation has

occurred. However, given the de minimis rule of Alabama Power, and that

the language of 193 appears to be ``rigid,'' EPA is soliciting comment

on this issue.

EPA has evaluated the submitted rule and has determined that it is

consistent with the CAA, EPA regulations, and EPA policy. Therefore,

South Coast Rule 518.2, Federal Alternative Operating Conditions is

being proposed for approval under section 110(k)(3) of the CAA as

meeting the requirements of section 110(a) and part D.

Nothing in this action should be construed as permitting or

allowing or establishing a precedent for any future request for

revision to any state implementation plan. Each request for revision to

the state implementation plan shall be considered separately in light

of specific technical, economic, and environmental factors and in

[[Page 51329]]

relation to relevant statutory and regulatory requirements.

IV. Administrative Requirements

A. Executive Orders 12866 and 13045

The Office of Management and Budget (OMB) has exempted this

regulatory action from E.O. 12866 review.

The proposed rule is not subject to E.O. 13045, entitled

``Protection of Children from Environmental Health Risks and Safety

Risks,'' because it is not an ``economically significant'' action under

E.O. 12866.

B. Regulatory Flexibility Act

Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., EPA

must prepare a regulatory flexibility analysis assessing the impact of

any proposed or final rule on small entities. 5 U.S.C. 603 and 604.

Alternatively, EPA may certify that the rule will not have a

significant impact on a substantial number of small entities. Small

entities include small businesses, small not-for-profit enterprises,

and government entities with jurisdiction over populations of less than

50,000.

SIP approvals under section 110 and subchapter I, part D of the

Clean Air Act do not create any new requirements but simply approve

requirements that the State is already imposing. Therefore, because the

Federal SIP approval does not impose any new requirements, the

Administrator certifies that it does not have a significant impact on

any small entities affected. Moreover, due to the nature of the

Federal-State relationship under the CAA, preparation of a flexibility

analysis would constitute Federal inquiry into the economic

reasonableness of state action. The Clean Air Act forbids EPA to base

its actions concerning SIPs on such grounds. Union Electric Co. v. U.S.

EPA, 427 U.S. 246, 255-66 (1976); 42 U.S.C. 7410(a)(2).

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

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

select the most cost-effective and least burdensome alternative that

achieves the objectives of the rule and is consistent with statutory

requirements. Section 203 requires EPA to establish a plan for

informing and advising any small governments that may be significantly

or uniquely impacted by the rule.

EPA has determined that the approval action proposed does not

include a Federal mandate that may result in estimated costs of $100

million or more to either State, local, or tribal governments in the

aggregate, or to the private sector. This Federal action approves pre-

existing requirements under State or local law, and imposes no new

Federal requirements. Accordingly, no additional costs to State, local,

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

action.

List of Subjects in 40 CFR Part 52

Environmental protection, Air pollution control, Hydrocarbons,

Intergovernmental relations, Ozone, Reporting and recordkeeping

requirements, Volatile organic compound.

Authority: 42 U.S.C. 7401-7671q.

Dated: September 17, 1998.

David P. Howekamp,

Regional Administrator, Region 9.

[FR Doc. 98-25760 Filed 9-24-98; 8:45 am]

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