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

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[CA 172-0205; FRL-6511-5]

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 withdrawing its proposed approval of a revision to the

California State Implementation Plan (SIP) and proposing to disapprove

the revision. This revision concerns the federal recognition of

variances from certain rule requirements. Based on comments received on

its proposal to approve this revision, EPA now believes the revision

does not meet applicable Clean Air Act requirements and is therefore

proposing to disapprove the revision.

[[Page 70653]]

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

or before January 3, 2000.

ADDRESSES: Comments may be mailed to: Ginger Vagenas, Permits Office

(AIR-3), Air Division, U.S. Environmental Protection Agency, Region IX,

75 Hawthorne Street, San Francisco, CA 94105-3901.

Copies of the rule and EPA's responses to comments received on its

proposed approval of the rule are available for public inspection at

EPA's Region IX office during normal business hours. Copies of the

submitted rule are also available for inspection at the following

locations:

Environmental Protection Agency, Air Docket (6102), 401 ``M'' Street,

S.W., Washington, D.C. 20460.

California Air Resources Board, Stationary Source Division, Rule

Evaluation Section, 2020 ``L'' Street, Sacramento, CA 95812.

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

Diamond Bar, CA 91765.

FOR FURTHER INFORMATION CONTACT: Ginger Vagenas, Permits Office (AIR-

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

Hawthorne Street, San Francisco, CA 94105, Telephone: (415) 744-1252.

SUPPLEMENTARY INFORMATION:

I. Applicability

The rule being proposed for disapproval is South Coast Air Quality

Management District (SCAQMD) Rule 518.2--Federal Alternative Operating

Conditions. Rule 518.2 was adopted on January 12, 1996 and was

submitted to EPA by the California Air Resources Board (CARB) 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

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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

This document addresses EPA's proposed disapproval for SCAQMD

Rule--Rule 518.2--Federal Alternative Operating Conditions. The rule

would allow the SCAQMD to temporarily modify certain applicable

requirements through the title V permitting process rather than through

a SIP revision. These modifications are accomplished 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 the proposed AOCs.

On September 25, 1998 (63 FR 51325) EPA proposed approval of Rule

518.2. At that time, EPA believed that the rule was consistent with the

CAA, EPA regulations, and EPA policy. However, upon further review, EPA

has reconsidered its position and now believes that certain

demonstrations and rule revisions would be required for the rule to be

proposed for approval. For additional background on EPA's original

analysis, including a detailed discussion of the CAA requirements

governing approval of Rule 518.2, please refer to the Federal Register

notice cited above.

III. EPA Evaluation and Proposed Action

In determining the approvability of Rule 518.2, EPA must evaluate

the rule for consistency with the requirements of the Clean Air Act

(CAA) and EPA regulations, including those found in sections 110, 172,

173, 182, and 193 of the CAA and 40 CFR part 51 (Requirements for

Preparation, Adoption and Submittal of Implementation Plans). EPA's

interpretation of these requirements, which forms the basis for this

action, appears in EPA policy guidance documents. In general, relevant

and applicable guidance documents have been set forth to ensure that

submitted rules meet Federal requirements, are fully enforceable, and

strengthen or maintain the SIP.

A. Compliance with Section 110(l) of the Clean Air Act

EPA received comments that Rule 518.2 does not comply with section

110(l) of the Act and cannot be approved for this reason. These

commenters oppose approval of Rule 518.2 because it will allow sources

to violate the new source review lowest achievable emission rate

(``LAER'') and offsets requirements of the Act as well as the

requirements of Title V, and therefore does not comply with section

110(l).

LAER and Offset Requirements

Section 110(l) provides that the Administrator shall not approve a

SIP revision ``if the revision would interfere with any applicable

requirement concerning attainment and reasonable further progress * *

*, or any other applicable requirement of (the Act).'' LAER is a

technology-based emission control requirement which is implemented

through the nonattainment area new source review (``NSR'') permitting

program mandated by sections 172(b)(5) and 173. LAER is defined in

section 171(3), in pertinent part, as that rate of emission which

reflects:

(A) the most stringent emission limitation which is contained in

the implementation plan of any State for such class or category of

source, unless the owner or operator of the proposed source

demonstrates that such limitations are not achievable, or

(B) the most stringent emission limitation which is achieved in

practice by such class or category of source, whichever is more

stringent * * *.

In general, we agree with the commenters that, because Rule 518.2 would

permit a source to exceed a LAER emissions limit contained in its NSR

permit, it would violate LAER requirements and would not comply with

section 110(l).

However, because LAER is a technology-based standard, there is a

limited subset of circumstances in which an AOC could apply to a LAER

limit in compliance with the requirements of the Act. In Marathon Oil

v. EPA, 564 F.2d 1253, 1272-73 (9th Cir. 1977), the Ninth Circuit held,

in the context of a Clean Water Act case, that EPA must provide an

upset defense for technology-based effluent limits to take into account

the fact that even properly maintained technology can unexpectedly

fail. Other cases adopted this reasoning, and they formed the basis for

EPA's decision to include a malfunction provision in part 70. See 60 FR

45558-45561 and 40 CFR 70.6(g). This provision applies across the

board, even to emission limits that derive from LAER. Accordingly, we

believe that Rule 518.2 could be redrafted to allow an AOC for LAER-

based limits only in the narrow instance where the source could

demonstrate that an unavoidable malfunction caused the violation.

The commenters' second argument that Rule 518.2 does not comply

with section 110(l) focuses on the offset requirements under section

173. As part of the NSR permitting requirements of section 173, new

sources or modifications of existing sources located in nonattainment

areas must obtain:

sufficient offsetting emissions reductions * * * such that total

allowable emissions from existing sources in the region, from new or

modified sources which are not major emitting facilities, and from

the proposed source will be sufficiently less than total emissions

from existing sources * * * so as to represent * * * reasonable

further progress. Section 173(a)(1)(A).

Further, section 173(c) requires that, ``a new or modified major

stationary source may comply with any offset requirement in effect

under this part for increased

[[Page 70654]]

emissions of any air pollutant only by obtaining emission reductions of

such air pollutant from the same source or other sources in the same

nonattainment area.''

Section 182 of the CAA requires that offsets must be obtained in a

ratio determined either by the severity of the air quality in the

nonattainment area. The offset ratio required in the South Coast is 1.2

to 1. Thus, when a new or modified source applies for an NSR permit, it

must obtain offsetting emissions in an amount greater than the

emissions it will add to the air. Therefore, not only are the new

emissions not reflected in the attainment demonstration, but they

should result in a decrease in the inventory due to the offset ratio.

While the offset requirement is an entirely independent one, the offset

ratio is the link to the reasonable further progress requirement--

allowing growth to occur at the same time that air quality improves.

Based upon the above, if a source that was initially required under

section 173 to offset its emissions applies for an AOC, that source

must be required to offset the excess emissions in the same manner or

it will violate section 173(c). Because Rule 518.2 does not require

such offsets, we agree that it would violate section 173. Therefore,

the current version of Rule 518.2 cannot be approved because it would

not comply with section 110(l).

We believe that the District could address this approvability issue

by ensuring that sufficient offsets are set aside to cover any excess

emissions associated with an AOC granted to sources subject to NSR.

Title V

Finally, the commenters believe that 110(l) prohibits EPA from

approving Rule 518.2 because the rule violates title V of the Act. The

commenters make two arguments in this regard. First, they argue that

section 502(a) prohibits sources from violating terms of their title V

permits and that the AOCs contemplated by Rule 518.2 would allow

sources to do so. We disagree with the commenters on this point. We

believe that the combination of an approvable version of Rule 518.2 and

the process for approving AOCs under the title V program provides a

means by which an applicable requirement and the title V permit may be

temporarily modified and thus does not violate or circumvent the

requirements of section 502(a). This approach may, however, conflict

with the provisions of 40 CFR 70.6(a)(1)(iii), which provides for the

creation of alternatives to SIP emission limits via the title V permit

revision process. This section appears to limit the opportunities for

such flexibility to situations in which the applicable implementation

plan allows for it and in which the alternative limit is equivalent to

that contained in the plan. EPA solicits comment on this issue. See

also ``White Paper Number 2 for Improved Implementation of the part 70

Operating Permits Program, Attachment B,'' March 5, 1996.

Second, the commenters argue that because section 502(a) provides

EPA with discretion to exempt certain nonmajor sources from the title V

program entirely, but prohibits EPA from doing so for major sources,

EPA is prohibited from approving the AOC process for major sources.

However, Rule 518.2 does not in any way exempt major sources from the

title V program. Rather, it provides a process for temporarily revising

an applicable requirement and the related title V permit conditions.

The source remains subject to title V and must comply with the

conditions of the AOC and all remaining conditions of the Title V

permit.

B. Compliance With Section 193 of the Act

In its 1998 FR document proposing to approve Rule 518.2, EPA

solicited comment on whether allowing relaxations to pre-1990 rules

2 would violate the requirements of section 193 of the CAA,

which 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 ensures equivalent or

greater emission reductions of such air pollutants. EPA noted that

offsetting excess emissions from variances with the Rule 518.2 bank

does not ensure equivalent emission reductions because the bank is

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

from real reductions.

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\2\ By ``pre-1990 rules'' we mean rules in effect before

November 15, 1990, the date of the enactment of the Clean Air Act

Amendments of 1990.

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

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

provide exemptions when the burdens of regulations yield a gain of

trivial or no value. In its 518.2 proposal EPA noted that the language

of section 193 and the legislative history associated with section 193

appear to be quite rigid and expressed concern that application of the

de minimis exemption under Alabama Power might not be appropriate. EPA

has considered the comments submitted and has concluded that the de

minimis rule does not apply in this situation.

Does the de minimis Rule Apply to Section 193?

One commenter wrote that section 193 is clear on its face and that

no backsliding from pre-1990 requirements is allowable. The commenter

noted that the language in section 193 is very straightforward and

rigid, and that any attempt to discount variances from pre-1990

requirements as ``de minimis'' is contrary to the Act and to case law

interpreting it. The commenter concluded that Rule 518.2 does not

comply with section 193.

After further consideration of this issue, EPA believes that the

language of 193 is in fact ``extraordinarily rigid'' in its requirement

to provide equivalent or greater emission reductions to offset

relaxations to pre-1990 rules. The de minimis rationale for approving

relaxations to pre-1990 rules is therefore unavailable.

Two commenters wrote in support of interpreting section 193 as not

being ``extraordinarily rigid'' and therefore allowing a de minimis

exemption to pre-1990 requirements. One of these commenters went on to

state that section 193 is an ambiguous statute and that EPA could

easily support an interpretation that allows a de minimis exemption

from the emissions at issue under rule 518.2.

EPA believes that section 193 unambiguously requires any

relaxations to control requirements or plans in effect prior to

enactment of the CAA amendments of 1990 to be offset by equivalent or

greater emission reductions. The clarity of the statutory language

supported by the legislative history 3 evidences intent by

Congress that relaxations to pre-1990 requirements should occur only

where compensating strengthenings will result in no increase in

emissions.

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\3\ The Report on the House Energy and Commerce Committee on the

1990 Clean Air Act Amendments noted that the ``anti-backsliding''

language in section 193 ``prohibits 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 put in place, as well as those additional measures

required under this Act, in order to assure attainment as

expeditiously as practical.''

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Does Rule 518.2 Relax pre-1990 Standards?

In the Federal Register document proposing approval of Rule 518.2,

EPA

[[Page 70655]]

stated that it believes ``inclusion of pre-1990 rules in Rule 518.2 is

justified because the variance bank is so small that any excused

emissions would essentially be insignificant such that, in effect, no

relaxation has occurred.'' Four commenters concurred with that

statement, but others asserted that the statement was tantamount to

saying those emissions increases are de minimis. EPA has reconsidered

this issue and has concluded that it is not possible to draw a

meaningful distinction between de minimis and insignificant in the

context of this rule. EPA disagrees with the premise that Rule 518.2

will not relax rules. Alternative operating conditions issued under

518.2 do in fact modify the underlying requirement. The issuance of a

variance, or in the case of 518.2, an AOC, temporarily allows a source

to operate under a different set of requirements. For that particular

source, the control requirement has been modified, regardless of the

size of the emissions change allowed by the AOC.

Does the Emissions Bank in 518.2 Prevent Backsliding?

Three commenters argued that the inclusion of an excess emissions

credit bank would ensure that any temporary emissions increases allowed

under 518.2 would be offset, and that therefore, the anti-backsliding

provisions of section 193 would not be violated. Because of the nature

of the bank, EPA must disagree with this comment. Offsetting excess

emissions from variances with the Rule 518.2 bank does not ensure

equivalent emission reductions because that bank is ``funded'' with

excess emissions included in the inventory rather than from real

reductions.

Does 518.2 Modify or Relax Underlying Requirements?

Two commenters stated that Rule 518.2 would not delete any control

measures that were already in place or scheduled to be put in place at

the time of the 1990 CAA amendments. They argued that although Rule

518.2 provides federal recognition of temporary AOCs, the underlying

control measures would stay in place and no modification or relaxation

of those measures would occur.

EPA notes that the deletion of control measures is not at issue

here: section 193 addresses the relaxation of pre-1990 control

measures. The premise of Rule 518.2 is that it temporarily modifies a

requirement with which a source is out of compliance by creating an

alternative, less stringent set of conditions with which the source

will comply. This will result in an increase of emissions beyond those

allowed under the applicable requirement. Further, for the duration of

the AOC, the underlying requirement is not enforceable against the

source. This amounts to a relaxation.

Can EPA Provide de minimis Exemptions to pre-1990 Control Requirements?

Two commenters said that the EPA had authority before and after

November 15, 1990 to recognize de minimis exceptions to pre-1990

requirements and that this authority was and is an integral part of

each control requirement in effect on November 15, 1990. EPA disagrees

with the premise that its authority to provide de minimis exemptions

was or is an integral part of state or district adopted control

requirements. Under Alabama Power, EPA may, under certain

circumstances, approve control requirements that provide de minimis

exemptions. EPA does not, however, agree that noncompliance with

adopted control requirements can be overlooked because the violation

resulted in relatively low excess emissions.

Can EPA Approve Variances From Control Requirements on a Case-by-Case-

Basis?

Two commenters noted that EPA could approve a variance from a

control requirement as a SIP revision on a case-by-case basis before

1990, and still can. One of those commenters also said that CAA section

193 does not prevent the recognition by EPA of variances from pre-1990

requirements.

EPA believes that if the appropriate procedural and substantive

requirements 4 are met, including a demonstration that

relaxations to pre-1990 rules will be offset by equivalent or greater

emissions reductions, it can approve such variances. As discussed in

this notice, Rule 518.2 does not fully meet these requirements. EPA is

therefore proposing to disapprove it.

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\4\ For a complete discussion of the procedural and substantive

requirements that apply to EPA approval of relaxations to the SIP,

see EPA's proposed approval of Rule 518.2. (63 FR 51325, September

25, 1998).

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Are Variances an Integral Part of the Pre-1990 Rules?

Several commenters noted that SCAQMD's variance rules were in the

SIP in 1990. Two of those commenters said that variances were an

integral part of the pre-1990 SIP rules relating to the SCAQMD.

EPA acknowledges that variance rules were approved into the SIP in

error. EPA has corrected this error by removing them. The fact that

these rules were in the SIP is irrelevant and would not be recognized

under section 193. Under Train, a variance would have to be submitted

to EPA as an individual SIP revision to be effective. See Train v.

NRDC, 421 U.S. 60 (1975).

Does the Anti-Backsliding Language of Section 193 Apply to Short-Term

Variances?

EPA received comment from one party that the ``anti-backsliding''

language of section 193 was not intended to prevent short-term,

carefully controlled issuance of alternative operating requirement,

such as those contemplated by rule 518.2.

EPA believes the language of section 193 is very clear and that it

does not allow for relaxations to pre-1990 rules without equivalent or

greater emission reductions. There is no evidence that Congress

intended to exempt alternative operating conditions from this statutory

provision. Any AOCs that would relax pre-1990 rules are subject to

section 193.

Would the Failure To Allow a de minimis Exemption Be Contrary to the

Primary Legislative Goal of Section 193?

One commenter stated that the literal meaning of section 193 need

not be followed where failure to allow a de minimis exemption is

contrary to the primary legislative goal. The commenter said that the

purpose of section 193 is to prevent backsliding in a manner that will

interfere with attainment or rate of progress in reducing emissions and

that the carefully circumscribed provisions of rule 518.2 will not have

any negative air quality impact.

EPA does not believe that the literal meaning of section 193 is

contrary to its primary legislative goal. The purpose of section 193 is

to prevent backsliding and it sets out the means to do so: By requiring

relaxations to pre-1990 control measures to be offset by equivalent or

greater emission reductions.

Has EPA Previously Approved de minimis Exemptions of Much Greater

Impact?

EPA received one comment that case law and U.S. EPA policy indicate

that the magnitude of excess emission previously excused by the de

minimis exemption is much greater than the variance emissions allowed

under Rule 518.2. This commenter went on to say that U.S. EPA itself

has utilized the de minimis exemption to allow ``nonmajor'' sources to

avoid substantial CAA requirements such as conformity and new source

review requirements.

[[Page 70656]]

As noted previously, because section 193 is rigid, the de minimis

rule under Alabama Power cannot be applied to this situation;

therefore, other cases where EPA has applied the de minimis rule are

not relevant.

Do the Reductions Required Under Section 193 Need To Come From Sources

Regulated by the Same Rule From Which the AOC Is Being Sought?

EPA received comment from one party regarding the source of

emission reductions used to offset any increases allowed under Rule

518.2. This commenter noted that, while some of the emission reductions

will likely come from different sources than would occur (sic) under

the rules under which the alternative operating condition is sought,

this is also true of market trading programs. The commenter said that

EPA has already approved market trading programs, such as RECLAIM,

without insisting that emissions at each facility remain below levels

authorized in 1990 and urged EPA to interpret section 193 similarly in

this case.

EPA finds this comment unclear. We have interpreted the comment to

address the requirement under section 193 that any modification that

would relax a pre-1990 control requirement, settlement agreement, or

plan must provide for equivalent emission reductions. Specifically, it

appears that the commenter is arguing that the offsetting reductions

need not come from a strengthening of the same control requirement that

the AOC will modify. The comment also seems to imply that the emission

bank established in Rule 518.2 is funded with real reductions, however,

this is not the case.

EPA believes that the correct interpretation of section 193 is

that, overall, the SIP must be strengthened so that increased emissions

that result from any relaxations to pre-1990 requirements will be

offset by decreases from modifications to other parts of the SIP.

Because the statute prohibits modifications to pre-1990 requirements

unless the modification ensures equivalent emissions reductions, the

compensating reductions must be contemporaneous with the relaxation. If

the district still wants rules enacted prior to 1990 to be a part of

this program, we believe that the rule could be amended to cure this

problem by funding the emissions bank with real emission reductions.

EPA solicits comment on this proposal.

C. Criteria for Granting AOCs

EPA received comments opposing approval of the California Health

and Safety Code standards for granting variances as the basis for

approving AOCs under Rule 518.2. These standards, which are

incorporated into Rule 518.2(e)(2), are as follows:

The petitioner is or will be in violation of any

applicable requirement(s) listed in paragraph (c)(1) of this rule;

Due to conditions beyond the reasonable control of the

petitioner, requiring compliance would result in either (1) an

arbitrary or unreasonable taking of property or (2) the practical

closing and elimination of a lawful business. In making those findings

pursuant to paragraph (4) where the petitioner is a public agency, the

Hearing Board shall consider whether or not requiring immediate

compliance would impose an unreasonable burden upon an essential public

service. For purposes of this subparagraph, ``essential public

service'' means a prison, detention facility, police or fire-fighting

facility, school, health care facility, landfill gas control or

processing facility, sewage treatment works, or water delivery

operation, if owned and operated by a public agency;

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, or other requirement contained in paragraph (c)(2); and

Any emissions (calculated pursuant to subparagraph

(h)(3)(B) of this rule) resulting from the Alternative Operating

Condition will not, in conjunction with emissions (calculated pursuant

to subparagraph (h)(3)(B)) 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 pursuant to subdivision (i) of this rule.

The commenters argue that these criteria are too vague, grant

unfettered discretion to the district hearing board, and

inappropriately focus on economic considerations. In addition, they

argue, in practice these standards have failed to protect public health

and to limit emissions growth.

We believe that these comments are well-taken. Section 110(a)(1) of

the Act requires SIPs to provide for attainment and maintenance of the

national ambient air quality standards (NAAQS). Because the NAAQS are

health and welfare-based standards, Congress intended that they must be

met continuously, not just intermittently. Accordingly, section

110(a)(2) of the Act requires SIPs to contain enforceable emission

limitations, and section 302(k) of the Act defines ``emission

limitations'' as a requirement ``which limits the quantity, rate, or

concentration of emissions of air pollutants on a continuous basis''

(emphasis added).

EPA explained its interpretation of the term ``continuous

compliance'' in a June 21, 1982 memorandum from Kathleen M. Bennett,

Assistant Administrator for Air, Noise, and Radiation, to the Regional

Air Division Directors. That guidance states that ``continuous

compliance is essentially the avoidance of preventable excess emissions

over time as a result of the proper design, operation, and maintenance

of an air pollution source.'' The guidance also emphasizes that excess

emissions resulting from malfunctions or other emergency situations

must be minimized and terminated quickly.

On September 28, 1982, February 15, 1983, and September 20, 1999,

EPA issued policy statements regarding the treatment of excess

emissions arising during startup, shutdown, and malfunction. These

memoranda are based on EPA's interpretation of the Act's requirements

for continuous compliance and attainment and maintenance of the

NAAQS.5 These

[[Page 70657]]

policies indicate that all excess emissions must be considered

violations, although they clarify that SIPs may contain affirmative

defenses that may excuse, under certain limited, unavoidable

circumstances, the payment of civil penalties.

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\5\ See September 28, 1982 and February 15, 1983 memorandums,

both entitled ``Policy on Excess Emissions During Startup, Shutdown,

and Malfunctions,'' from Kathleen M. Bennett, Assistant

Administrator for Air, Noise, and Radiation, to the Regional

Administrators and September 20, 1999 memorandum entitled ``State

Implementation Plans: Policy Regarding Excess Emissions During

Malfunctions, Startup, and Shutdown,'' from Steven A. Herman,

Assistant Administrator for Enforcement and Compliance and Robert

Perciasepe, Assistant Administrator for Air and Radiation, to the

Regional Administrators.

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These policy statements are consistent with EPA's view that SIP

limits must be met continuously because they are intended to protect

the NAAQS; any exceptions should be narrowly drawn and clearly place

the burden on the source to demonstrate that an exceedance was

unavoidable. In responding to petitioner's comments, we have

reevaluated the AOC criteria and have concluded that they are

inconsistent with the requirements for SIPs in section 110 of the Act

regarding enforceability and continuous compliance. For this reason, we

agree that the criteria for granting AOCs in section 518.2(e)(2) must

be revised before the rule can be approved.

Currently, the criteria in section 518.2(e)(2) provide that if, for

reasons beyond the control of the petitioner, it would cause ``an

arbitrary or unreasonable taking of property'' for the source to come

into compliance, then the source should be able to obtain a variance.

The criteria do not focus on the cause of the noncompliance. The lack

of focus on the cause of noncompliance is a critical flaw because,

given the words of the criteria, a variance can be granted even if the

petitioner could have avoided the noncompliance in the first place.

This lack of focus in the criteria on the cause of the violation is

problematic because variances are, by their very nature, allowed

periods of noncompliance, or in other words, exceptions to the

continuous compliance requirement imposed by the statute on emission

limitations. EPA has recognized that it is appropriate to interpret

this requirement to allow sources not to be penalized when periods of

noncompliance are caused by unavoidable circumstances, but beyond that,

exceptions to the continuous compliance requirement are not allowed.

Therefore, in order for Rule 518.2 to comport with the continuous

compliance requirement, it must ensure that AOC's are only granted when

the underlying cause of the violation is unavoidable. EPA's September

20, 1999 policy on excess emissions provides helpful guidance on the

precise provisions that should be added to Rule 518.2 to make it

approvable.

The changes suggested above will correct what EPA sees as a flaw in

the South Coast's variance program. Under the variance program, the

District can excuse a violation based on the adverse consequences that

a source might suffer it had to come into compliance. Given the

statute's mandate that emission limitations provide for continuous

compliance, EPA addresses this issue of economic inability to comply in

other ways.

EPA has stated many times in several of its enforcement policy

documents that it believes in enforcement responses that are

commensurate with the seriousness of violations. In short, punishment

should fit the crime. Minor violations might be addressed with a Notice

of Violation, while more serious violations might be subject to civil

or even criminal enforcement. Second, the focus of EPA's enforcement

policies over the years has been returning sources to compliance as

expeditiously as practicable, not shutting down companies.6

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\6\ See Price, Courtney M., Assistant Administrator for

Enforcement and Compliance Monitoring, Memorandum (Subject: Clean

Air Act Enforcement Policy Respecting Sources Complying By Shutdown)

Nov. 27, 1985) (``EPA has consistently interpreted the Act as

requiring compliance as expeditiously as practicable.'').

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At the same time, EPA does not let companies in violation of

environmental laws completely off the hook just because immediate

compliance might cause a financial hardship. Rather, when EPA has taken

action against financially troubled companies, it has required them to

come into compliance in accordance with a set schedule laid out in a

consent decree and required them to pay a penalty they can afford, if

appropriate.

D. Compliance and Enforcement

EPA received comments expressing concerns that Rule 518.2 would

have adverse effects on enforcement, both by government entities and

citizens, and that the rule might act as a disincentive to voluntary

compliance. We believe these concerns would be addressed by the changes

necessary for approval outlined elsewhere in this document.

E. Title III

One commenter pointed out that, on its face, Rule 518.2(c)(2) does

not prohibit the issuance of AOCs from title III requirements in

situations where EPA has deemed a state or local rule to be equivalent

to the federal requirements. While we believe that the intent of the

rule is to include these requirements in the list of exemptions from

applicability, we agree that the language is unclear and must be

revised.

F. Environmental Justice

One commenter opposes approval of Rule 518.2 on the basis that it

would violate Executive Order 12898, ``Federal Actions to Address

Environmental Justice in Minority Populations and Low-Income

Populations.'' The commenter argues that communities of color and low

income communities in the South Coast are disproportionately impacted

by existing sources of air pollution, and by allowing existing sources

to emit air pollutants in excess of their permitted levels, Rule 518.2

will have disproportionate impacts on these communities.

In the context of a workgroup drafting a version of Rule 518.2 to

apply statewide, CARB has suggested addressing this issue by

incorporating language based California Health and Safety Code section

41700. This language would provide that no AOC shall be granted if:

operation under the AOC will result in the source discharging such

quantities of air contaminants or other material which cause injury,

detriment, nuisance, or annoyance to any considerable number of

persons or to the public, or which endanger the comfort, repose,

health, or safety of any such persons or the public, or which cause,

or have a natural tendency to cause, injury or damage to business or

property.

We believe that this language, incorporated into Rule 518.2, would

address the commenter's concerns.

In conclusion, rules submitted to EPA for approval as revisions to

the SIP must conform with the CAA and EPA policy in order to be

approved by EPA. As described above, SCAQMD Rule 518.2 is deficient

because it is inconsistent with sections 110(a)(2), 110(l), 302(k), and

193 of the CAA. Because of the identified deficiencies, EPA cannot

grant approval of SCAQMD Rule 518.2 under section 110(k)(3) and part D.

Therefore, in order to maintain the SIP, EPA is proposing a disapproval

of this rule.

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

relation to relevant statutory and regulatory requirements.

IV. Administrative Requirements

A. Executive Order 12866

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

regulatory

[[Page 70658]]

action from Executive Order 12866, Regulatory Planning and Review.

B. Executive Order 13132

Federalism (64 FR 43255, August 10, 1999) revokes and replaces

Executive Orders 12612, Federalism and 12875, Enhancing the

Intergovernmental Partnership. Executive Order 13132 requires EPA to

develop an accountable process to ensure ``meaningful and timely input

by State and local officials in the development of regulatory policies

that have federalism implications.'' ``Policies that have federalism

implications'' is defined in the Executive Order to include regulations

that have ``substantial direct effects on the States, on the

relationship between the national government and the States, or on the

distribution of power and responsibilities among the various levels of

government.'' Under Executive Order 13132, EPA may not issue a

regulation that has federalism implications, that imposes substantial

direct compliance costs, and that is not required by statute, unless

the Federal government provides the funds necessary to pay the direct

compliance costs incurred by State and local governments, or EPA

consults with State and local officials early in the process of

developing the proposed regulation. EPA also may not issue a regulation

that has federalism implications and that preempts State law unless the

Agency consults with State and local officials early in the process of

developing the proposed regulation.

This proposed action will not have substantial direct effects on

the States, on the relationship between the national government and the

States, or on the distribution of power and responsibilities among the

various levels of government, as specified in Executive Order 13132 (64

FR 43255, August 10, 1999), because it does not affect state

enforceability, and does not alter the relationship or the distribution

of power and responsibilities established in the Clean Air Act. Thus,

the requirements of section 6 of the Executive Order do not apply to

this rule.

C. Executive Order 13045

Protection of Children from Environmental Health Risks and Safety

Risks (62 FR 19885, April 23, 1997), applies to any rule that: (1) is

determined to be ``economically significant'' as defined under

Executive Order 12866, and (2) concerns an environmental health or

safety risk that EPA has reason to believe may have a disproportionate

effect on children. If the regulatory action meets both criteria, the

Agency must evaluate the environmental health or safety effects of the

planned rule on children, and explain why the planned regulation is

preferable to other potentially effective and reasonably feasible

alternatives considered by the Agency. This rule is not subject to

Executive Order 13045 because it is does not involve decisions intended

to mitigate environmental health or safety risks.

D. Executive Order 13084

Under Executive Order 13084, Consultation and Coordination with

Indian Tribal Governments, EPA may not issue a regulation that is not

required by statute, that significantly or uniquely affects the

communities of Indian tribal governments, and that imposes substantial

direct compliance costs on those communities, unless the Federal

government provides the funds necessary to pay the direct compliance

costs incurred by the tribal governments, or EPA consults with those

governments. If EPA complies by consulting, Executive Order 13084

requires EPA to provide to the Office of Management and Budget, in a

separately identified section of the preamble to the rule, a

description of the extent of EPA's prior consultation with

representatives of affected tribal governments, a summary of the nature

of their concerns, and a statement supporting the need to issue the

regulation. In addition, Executive Order 13084 requires EPA to develop

an effective process permitting elected officials and other

representatives of Indian tribal governments ``to provide meaningful

and timely input in the development of regulatory policies on matters

that significantly or uniquely affect their communities.'' Today's rule

does not significantly or uniquely affect the communities of Indian

tribal governments. Accordingly, the requirements of section 3(b) of

Executive Order 13084 do not apply to this rule.

E. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) generally requires an agency

to conduct a regulatory flexibility analysis of any rule subject to

notice and comment rulemaking requirements unless the agency certifies

that the rule will not have a significant economic impact on a

substantial number of small entities. Small entities include small

businesses, small not-for-profit enterprises, and small governmental

jurisdictions. This proposed rule will not have a significant impact on

a substantial number of small entities because EPA's disapproval of the

state request under section 110 and subchapter I, part D of the Clean

Air Act does not affect any existing requirements applicable to small

entities. Any pre-existing federal requirements remain in place after

this disapproval. Federal disapproval of the state submittal does not

affect state-enforceability. Moreover, EPA's disapproval of the

submittal does not impose any new Federal requirements. Therefore, I

certify that this action will not have a significant economic impact on

a substantial number of small entities. Moreover, due to the nature of

the Federal-State relationship under the Clean Air Act, preparation of

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).

F. 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

annual 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 disapproval action being proposed does

not include a Federal mandate that may result in estimated annual costs

of $100 million or more to either State, local, or tribal governments

in the aggregate, or to the private sector. This proposed disapproval

would not change existing requirements under State or local law, and

would include no Federal mandate. If EPA were to disapprove the State

SIP submittal, pre-existing requirements would remain in place and

State enforceability of the submittal would be unaffected. The action

would impose no new requirements. Accordingly, no additional costs to

State, local, or tribal governments, or to the private sector, result

from this action.

[[Page 70659]]

List of Subjects in 40 CFR Part 52

Environmental protection, Air pollution control, Intergovernmental

relations, Reporting and recordkeeping requirements.

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

Dated: December 10, 1999.

David P. Howekamp,

Acting Regional Administrator, Region IX.

[FR Doc. 99-32762 Filed 12-16-99; 8:45 am]

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