[Federal Register Volume 59, Number 228 (Tuesday, November 29, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29267]


[[Page Unknown]]

[Federal Register: November 29, 1994]


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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 70

[CA 77-1-6650; AD-FRL-5112-6]

 

Clean Air Act Proposed Interim Approval of the Operating Permits 
Program; Proposed Approval of State Implementation Plan Revision for 
the Issuance of Federally Enforceable State Operating Permits; Bay Area 
Air Quality Management District, California

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The EPA proposes interim approval of the title V operating 
permits program submitted by the Bay Area Air Quality Management 
District (Bay Area or District) for the purpose of complying with 
federal requirements that mandate that states develop, and submit to 
EPA, programs for issuing operating permits to all major stationary 
sources and to certain other sources. There are several deficiencies in 
Bay Area's program, as specified in the Technical Support Document and 
outlined below, that must be corrected before the program can be fully 
approved. EPA is also proposing to approve a revision to Bay Area's 
portion of the California State Implementation Plan (SIP) regarding 
synthetic minor regulations for the issuance of federally enforceable 
state operating permits (FESOP). In order to extend the federal 
enforceability of state operating permits to hazardous air pollutants 
(HAP), EPA is also proposing approval of Bay Area's synthetic minor 
regulations pursuant to section 112 of the Act. Today's action also 
proposes approval of Bay Area's mechanism for receiving straight 
delegation of section 112 standards.

DATES: Comments on these proposed actions must be received in writing 
by December 29, 1994.

ADDRESSES: Comments should be addressed to Celia Bloomfield, Mail Code 
A-5-2, U.S. Environmental Protection Agency, Region IX, Air & Toxics 
Division, 75 Hawthorne Street, San Francisco, CA 94105.
    Copies of the District's submittal and other supporting information 
used in developing the proposed interim approval are available for 
inspection during normal business hours at the following location: U.S. 
Environmental Protection Agency, Region IX, 75 Hawthorne Street, San 
Francisco, CA 94105.

FOR FURTHER INFORMATION CONTACT:
Celia Bloomfield (telephone 415/744-1249), Mail Code A-5-2, U.S. 
Environmental Protection Agency, Region IX, Air & Toxics Division, 75 
Hawthorne Street, San Francisco, CA 94105.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

    As required under title V of the Clean Air Act (Act) as amended 
(1990), EPA has promulgated rules that define the minimum elements of 
an approvable state operating permits program and the corresponding 
standards and procedures by which the EPA will approve, oversee, and 
withdraw approval of state operating permits programs (see 57 FR 32250 
(July 21, 1992)). These rules are codified at 40 CFR part 70 (part 70). 
Title V requires states to develop, and submit to EPA, programs for 
issuing operating permits to all major stationary sources and to 
certain other sources.
    The Act requires that states develop and submit title V 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.
    On June 28, 1989 (54 FR 27274), EPA published criteria for 
approving and incorporating into the SIP regulatory programs for the 
issuance of federally enforceable state operating permits. Permits 
issued pursuant to an operating permit program meeting these criteria 
and approved into the SIP are considered federally enforceable. EPA has 
encouraged states to consider developing such programs in conjunction 
with title V operating permit programs for the purpose of creating 
federally enforceable limits on a source's potential to emit. This 
mechanism would enable sources to reduce their potential to emit to 
below the title V applicability thresholds and avoid being subject to 
title V. (See the guidance document entitled, ``Limitation of Potential 
to Emit with Respect to Title V Applicability Thresholds,'' dated 
September 18, 1992, from John Calcagni, Director of EPA's Air Quality 
Management Division.) On November 3, 1993, EPA announced in a guidance 
document entitled, ``Approaches to Creating Federally Enforceable 
Emissions Limits,'' signed by John S. Seitz, Director of EPA's Office 
of Air Quality Planning and Standards (OAQPS), that this mechanism 
could be extended to create federally enforceable limits for emissions 
of hazardous air pollutants (HAP) if the program were approved pursuant 
to section 112(l) of the Act.

II. Proposed Action and Implications

    This document focuses on specific elements of Bay Area's title V 
operating permits program submittal that must be corrected to meet the 
minimum requirements of 40 CFR part 70. The full program submittal, the 
Technical Support Document containing a detailed analysis of the full 
program, and other relevant materials are available as part of the 
public docket.

A. Analysis of State Submission

1. Title V Support Materials
    Bay Area's title V program was submitted by the California Air 
Resources Board (CARB) on November 16, 1993 and found to be complete on 
January 13, 1994. The Governor's letter requesting source category-
limited interim approval, California enabling legislation, and Attorney 
General's legal opinion were submitted by CARB for all districts in 
California and therefore were not included separately in Bay Area's 
submittal. The Bay Area submission does contain a complete program 
description, a legal opinion from the Bay Area District Counsel, 
District implementing and supporting regulations,, and all other 
program documentation required by Sec. 70.4. An implementation 
agreement is currently being developed between Bay Area and EPA.
2. Title V Operating Permit Regulations and Program Implementation
    The Bay Area's title V regulations were adopted on November 3, 1993 
and revised on October 19, 1994. They include Regulation 2, Rule 6 
(Regulation 2-6); Regulation 3, Schedule P; the Manual of Procedures, 
Volume II, Part 3 (MOP); and any rules incorporated by reference in 
those documents. These regulations ``substantially meet'' the 
requirements of 40 CFR part 70, Secs. 70.2 and 70.3 for applicability; 
Secs. 70.4, 70.5, and 70.6 for permit content, including operational 
flexibility; Sec. 70.7 for public participation and minor permit 
modifications; Sec. 70.5 for complete application forms; and Sec. 70.11 
for enforcement authority. Although the regulations substantially meet 
part 70 requirements, there are several program deficiencies that are 
outlined below as interim approval issues and detailed further in the 
Technical Support Document.
    a. Enforceability of the Manual of Procedures--Bay Area relies on 
language in the MOP to satisfy many of the detailed requirements of 
part 70. This approach is acceptable because the MOP is fully 
enforceable and a legally binding document. In other words, the 
District does not have discretion not to follow the MOP. The legal 
status of the MOP is described in a legal opinion from the Bay Area 
District Counsel dated July 5, 1994 stating that the MOP's 
```enforceability' [is] at a par with that of the District's Rules and 
Regulations.'' Specifically, the MOP goes through the same public 
notice, adoption, and revision procedures as District regulations. In 
addition, Regulation 2-6 references the requirements in the MOP under 
permit application (2-6-405.10) and permit content (2-6-409.16), thus 
reinforcing the regulatory status of the MOP. Hence, any non-compliance 
with the requirements of the MOP will be enforceable in a State court 
of law.
    b. Applicability and Duty to Apply--While the ``major facility'' 
definition in Bay Area'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 three years after program approval (2-6-403 and 
2-6-404). Ordinarily, part 70 requires sources to apply within one year 
of program approval. This deferral is effectively a request for source 
category-limited interim approval for sources with actual emissions 
below the given thresholds. Two years after initial approval, Bay Area 
will require deferred sources to submit applications within one year.
    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, Bay Area demonstrated 
that it would permit, during the interim period, 60% of the District's 
title V sources and 80% of the pollutants emitted by title V sources. 
This requirement is addressed in Section II.A. (p. 1), Section II.C. 
(p. 21), and Section IV (pp. 1-5) of Bay Area's title V program 
submittal. Furthermore, in a letter dated September 20, 1993 from Ellen 
Linder, Senior Advanced Projects Adviser, Bay Area stated its reasons 
for limiting the universe of sources covered by the initial program. 
The District estimated that there are about 5,000 sources of emissions 
within the District's title V facilities and that the workload to 
permit all of those sources in the initial three-year period would be 
``excessively burdensome.'' The EPA believes that Bay Area 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 Bay Area program guarantees that all title V sources will be 
permitted within five years following program approval, and because Bay 
Area 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.
    c. Insignificant Activities--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. Section 70.5(c) states that an 
application for a part 70 permit may not omit information needed to 
determine the applicability of, or to impose, any applicable 
requirement, or to evaluate appropriate fee amounts. Section 70.5(c) 
also 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. Under part 70, a state must request 
and EPA must approve as part of that state's program any 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.
    Bay Area provided its current District permit exemption list as its 
list of insignificant activities. The only significance criterion 
provided was a 150 lb/day emissions threshold. This emissions level 
exceeds some applicability thresholds, is a significant portion of 
others, would almost certainly exclude units with applicable 
requirements, and is not acceptable for full program approval. 
Furthermore, because Bay Area did not provide a demonstration that 
these activities are not likely to be subject to an applicable 
requirement, EPA cannot propose full approval of the list as the basis 
for determining insignificant activities.
    For other state and district programs, EPA has proposed to accept, 
as sufficient for full approval, emission levels for insignificant 
activities of 2 tons per year for criteria pollutants and the lesser of 
1000 pounds per year, section 112(g) de minimis levels, or other title 
I significant modification levels for hazardous air pollutants (HAP) 
and other toxics (40 CFR 52.21(b)(23)(i)). EPA believes that these 
levels are sufficiently below the applicability thresholds of many 
applicable requirements to assure that no unit potentially subject to 
an applicable requirement is left off a title V application. EPA is 
requesting comment on the appropriateness of these emission levels for 
determining insignificant activities in the Bay Area. This request for 
comment is not intended to restrict the ability of other states and 
districts to propose, and EPA to approve, different emission levels if 
the state or district demonstrates that such alternative emission 
levels are insignificant compared to the level of emissions from and 
types of units that are permitted or subject to applicable 
requirements.
    d. Variances--Bay Area has authority under State and local law to 
issue a variance from State and local requirements. Sections 42350 et 
sec. of the California Health and Safety Code and District Regulation 
1, sections 431-433 allow the District to grant relief from enforcement 
action for permit violations. The EPA regards these provisions as 
wholly external to the program submitted for approval under part 70, 
and consequently, is proposing to take no action on these provisions of 
State and local law.
    The 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. The 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 (consistent with part 70 permitting procedures) to incorporate 
those terms of a variance that are consistent with applicable 
requirements. A part 70 permit may also 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 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.''
    e. Definition of Title I Modification--Bay Area defines 
``significant permit modification'' in such a way as to only include 
major modifications subject to parts C and D of title I of the Act. 
Part 70 requires all modifications under title I of the Act to be 
processed as significant permit modifications 
(Sec. 70.7(e)(2)(i)(A)(5)). The effect is that Bay Area's implied 
definition of ``title I modification'' does not include changes 
reviewed under a minior source preconstruction review program (``minor 
NSR changes''). The EPA is currently in the process of determining the 
proper definition of ``title I modification.'' As further explained 
below, EPA has solicited public comment on whether the phrase 
``modification under any provision of title I of the Act'' in 40 CFR 
70.7(e)(2)(i)(A)(5) should be interpreted to mean literally any change 
at a source that would trigger permitting authority review under 
regulations approved or promulgated under title I of the Act. This 
would include state preconstruction review programs approved by EPA as 
part of the State implementation Plan under section 110(a)(2)(C) of the 
Clean Air Act.
    On August 29, 1994, EPA proposed revisions to the interim approval 
criteria in 40 CFR 70.4(d) to, among other things, allow state programs 
with a more narrow definition of ``title I modification'' to receive 
interim approval (59 FR 44572). The Agency explained its view that the 
better reading of ``title I modification'' includes minor NSR, and 
solicited public comment on the proper interpretation of that term (59 
FR 44573). The Agency stated that if, after considering the public 
comments, it continued to believe that the phrase ``title I 
modification'' should be interpreted as including minor NSR changes, it 
would revise the interim approval criteria as needed to allow states 
with a narrower definition to be eligible for interim approval.
    The EPA hopes to finalize its rulemaking revising the interim 
approval criteria under 40 CFR 70.4(d) expeditiously.\1\ If EPA 
establishes in its rulemaking that the definition of ``title I 
modification'' can be interpreted to exclude changes reviewed under 
minor NSR programs, Bay Area's definition of ``significant permit 
modification'' would be fully consistent with part 70. Conversely, if 
EPA establishes through the rulemaking that the definition of ``title I 
modification'' must include changes reviewed under minor NSR, Bay 
Area's definition of ``significant permit modification'' will become a 
basis for interim approval. If the definition becomes a basis for 
interim approval as a result of EPA's rulemaking, Bay Area would be 
required to revise its definition to conform to the requirements of 
part 70.
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    \1\Publication of the proposed interim approval criteria 
revisions was delayed until August 29, 1994, and EPA received 
several requests to extend the public comment period until November 
27, 1994. Given the importance of the issues in that rulemaking to 
states, sources and the public, but mindful of the need to take 
action quickly, EPA agreed to extend the comment period until 
October 28, 1994 (see 59 FR 52122 (October 14, 1994)).
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    Accordingly, today's proposed approval does not identify Bay Area's 
definition of ``significant permit modification'' as necessary grounds 
for either interim approval or disapproval. Again, although EPA has 
reasons for believing that the better interpretation of ``title I 
modification'' is the broader one, EPA does not believe that it is 
appropriate to determine whether this is a program deficiency until EPA 
completes its rulemaking on this issue.
3. Title V 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 of emissions per year (adjusted from 1989 by the Consumer Price 
Index (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'' (Sec. 70.9(b)(2)(i)).
    Bay Area has opted to make a presumptive minimum fee demonstration. 
Bay Area's existing fee schedule (including Schedule P) requires title 
V facilities to pay an amount equivalent to $77 per ton in annual 
operating fees. This amount exceeds the $25 per ton presumptive minimum 
(CPI adjusted). The $77 per ton amount is based on a calculation of 
1992 fee revenues per ton of emissions plus a supplemental title V fee 
that covers the additional costs posed by title V. Bay Area will 
maintain an accounting system and is prepared to increase fees, as 
needed, to reflect actual program implementation costs.
4. Provisions Implementing the Requirements of Other Titles of the Act
    a. Section 112--Bay Area 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 ``applicable requirements'' and 
``federally enforceable'' and mandating that all federal air quality 
requirements must be incorporated into permits. EPA has determined that 
this legal authority is sufficient to allow Bay Area to issue permits 
that assure compliance with all section 112 requirements. For further 
discussion, please refer to the Technical Support Document 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. Title IV--Bay Area's Air Pollution Control Officer (APCO) 
provided a letter dated March 22, 1994 committing to incorporate by 
reference by January 1, 1995 the pertinent provisions of part 72. EPA 
interprets ``pertinent provisions'' to include all provisions necessary 
for the permitting of affected sources. The letter further indicates 
that the incorporation by reference will automatically incorporate 
federal revisions to part 72.

B. Proposal for and Implications of Interim Approval

1. Title V Operating Permits Program
    a. Proposed Interim Approval--The EPA is proposing to grant interim 
approval to the operating permits program submitted by CARB on behalf 
of Bay Area on November 16, 1993. Following interim approval, Bay Area 
must make the following changes to receive full approval.
    (1) Revise 2-6-211, 2-6-217, and 2-6-220 definitions of 
``Independent Power-Production Facility,'' ``Phase II Acid Rain 
Facility,'' and ``Qualifying Facility'' to meet the definitions and 
applicability requirements of title IV and part 72 or incorporate by 
reference the definitions from part 72. (Definition of ``affected 
source'', Sec. 70.2)
    (2) Revise Regulation 2, Rule 6 to state that activities subject to 
an applicable requirement cannot be classified as insignificant 
activities. Provide a demonstration that activities that are exempt 
from part 70 permitting are truly insignificant and are not likely to 
be subject to an applicable requirement. Alternatively, the District 
may restrict the exemptions to activities that are not likely to be 
subject to an applicable requirement and emit less than District-
established emission levels. The District should establish separate 
emission levels for HAP and for other regulated pollutants and 
demonstrate that these emission levels are insignificant compared to 
the level of emissions from and type of units that are required to be 
permitted or subject to applicable requirements. (Secs. 70.5(c) and 
70.4(b)(2))
    (3) Bay Area's program must be revised to include a term consistent 
with the part 70 definition of ``applicable requirement,'' and that 
term must be used consistently in Rules 2-6-409.1, 2-6-409.2 and 
throughout the regulation. As currently written, Bay Area's regulation 
requires that ``all federal . . . air quality requirements'' be 
incorporated into permits (2-6-409.1); yet, the term is never defined. 
Bay Area's program does define ``applicable requirement'' (2-6-202), 
but the term deviates from the federal definition and includes non-
federally enforceable District and State requirements. Bay area's 
definition of ``federally enforceable'' (2-6-207) appears to address 
the federal definition of ``applicable requirement''; however, it does 
not include the entire list of applicable requirements, and it is not 
clearly used in the permit content section of Regulation 2-6.
    (4) Revise 2-6-409.1 to include permit terms and conditions that 
assure compliance with all applicable requirements 
(Sec. 70.7(a)(1)(iv)). As Regulation 2-6 is currently written, the 
District's title V permits must contain all applicable requirements and 
requirements for testing, monitoring, reporting, and recordkeeping 
sufficient to assure compliance with the terms and conditions of the 
permit (2-6-409.1 and 2-6-409.2). However, Rule 2-6-409 must also 
require that permits contain emission limitations and standards 
(Sec. 70.6(a)(1)) and compliance certification requirements 
(Sec. 70.6(c)(1)) that assure compliance with all applicable 
requirements.
    (5) Certifications by the responsible official must include the 
following two elements: (1) based on truth, accuracy, and completeness; 
and (2) based on information and belief formed after reasonable 
inquiry. Revise 2-6-405.9, 2-6-502, MOP (4.5 and 4.7), and any other 
certification provisions to ensure that both elements are explicitly 
required. (Sec. 70.5(d))
    (6) Define, and provide notice to, affected states. Regulation 2-6 
provisions that must include affected state notification are clearly 
marked on the Technical Support Document along with part 70 citations. 
Although emissions from the Bay Area are not currently affecting any 
neighboring states, Native American tribes may in the future apply for 
treatment as affected states, and therefore would be entitled to 
affected state notification.
    (7) Eliminate the phrase ``but not limited to'' from the definition 
of ``administrative permit amendment'' (2-6-201). Only changes 
identified in the rule and approved as part of Bay Area's program may 
be processed as administrative amendments. (Sec. 70.7(d)(1)(vi))
    (8) Revise 2-6-404.3 to limit the universe of significant permit 
modification applications due 12 months after commencing operations to 
only those applications for revisions pursuant to section 112(g) and 
title I, parts C and D of the Act that are not prohibited by an 
existing part 70 permit. Except in the above circumstances, a source is 
not allowed to operate the proposed change until the permitting 
authority has revised the source's part 70 permit. 
(Sec. 70.5(a)(1)(ii))
    (9) In minor permit modification procedures, eliminate the extended 
review period (2-6-414.2) that is inconsistent with 2-6-410.2 and 
Sec. 70.7(e)(2)(iv). This extension inappropriately lengthens the time 
that the source can operate under new conditions without a formal 
permit revision.
    (10) Revise 2-6-412.1 to include notice ``by other means if 
necessary to assure adequate notice to the affected public,'' 
(Sec. 70.7(h)(1)).
    (11) Eliminate or revise section 4.1 of the MOP which allows the 
permit to contain alternative emission limits approved pursuant to a 
District rule. Alternative emission limits may only be incorporated 
into the permit if they are issued pursuant to the applicable SIP or 
FIP (Sec. 70.6(a)(1)(iii)).
    (12) Add emissions trading provisions consistent with 
Sec. 70.6(a)(10), which require that trading must be allowed where an 
applicable requirement provides for trading increases and decreases 
without a case-by-case approval.
    (13) Add a requirement to regulation 2-6 that any document 
submitted in conjunction with a permit must be certified by a 
responsible official (Sec. 70.6(c)(1)).
    (14) Revise 2-6-224 and 2-6-409.10 to specify that all progress 
reports must include: (1) dates when activities, milestones, or 
compliance required in the schedule of compliance were achieved; and 
(2) an explanation of why any dates in the schedule of compliance were 
not or will not be met and any preventive or corrective measures 
adopted (Sec. 70.6(c)(4)(i) and (ii)).
    (15) Revise section 4.5 of the MOP, and add a provision to 2-6-409 
that requires compliance certifications to be submitted more frequently 
than annually if specified in an underlying applicable requirement 
(Sec. 70.6(c)(4)).
    (16) Bay Area has indicated in its program description that it 
intends to process new units that do not affect any federally 
enforceable permit condition ``off-permit'' (Section II, p.21 and Staff 
Report, pp. 3-4). However, Regulation 2-6 does not include any of the 
off-permit provisions required by Sec. Sec. 70.4(b)(14) and (15). The 
part 70 off-permit provisions provide several safeguards such as notice 
to EPA and recordkeeping requirements that must be incorporated into 
Bay Area's program. In order to receive full approval in this regard, 
Bay Area may submit a letter revising its program description to 
indicate that it will not process new units ``off-permit'' or revise 
its rule to include the part 70 off-permit provisions.
    (17) Revise 2-6-222 defining ``regulated air pollutant'' to be 
consistent with the federal definition (Sec. 70.2) and include 
pollutants subject to any requirement established under section 112 of 
the Act, including sections 112(g), (j), and (r).
    b. Legislative Source Category-Limited Interim Approval Issue--In 
addition to the District-specific issues arising from Bay Area's 
program submittal and locally adopted regulations, California State law 
currently exempts agricultural production sources form permit 
requirements. Because of this exemption, California programs are only 
eligible for source category-limited interim approval. In Bay Area's 
case, EPA is proposing source category-limited interim approval on two 
bases: the agricultural exemption and the deferral of sources emitting 
low actual emissions. (See II.A.2.b. in this notice.) In order for this 
program to receive full approval (and 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.
    c. Implications of Interim Approval--The above described program 
and legislative deficiencies must be corrected before Bay Area can 
receive full program approval. For additional information, please refer 
to the Technical Support Document, which contains a detailed analysis 
of Bay Area's operating permits program, and California's enabling 
legislation.
    Interim approval, which may not be renewed, would extend for a 
period of 2 years. During the interim approval period, the District 
would be protected from sanctions, and EPA would not be obligated to 
promulgate a federal permits program in the Bay Area. Permits issued 
under a program with interim approval would have full standing with 
respect to part 70, and the 1-year time period for submittal of permit 
applications by subject sources would begin upon EPA's final rulemaking 
granting interim approval, as would the 3-year time period for 
processing initial permit applications.
    Following final interim approval, if Bay Area should fail to submit 
a complete corrective program for full approval by the date 6 months 
before expiration of the interim approval, EPA would start an 18-month 
clock for mandatory sanctions. Then, if Bay Area should fail to submit 
a corrective program that EPA found complete before the expiration of 
that 18-month period, EPA would be required to apply one of the 
sanctions in section 179(b) of the Act, which would remain in effect 
until EPA determined that the District corrected the deficiency by 
submitting a complete corrective program. If, six months after 
application of the first sanction, the Bay Area still had not submitted 
a corrective program that EPA found complete, a second sanction would 
be required.
    If, following final interim approval, EPA were to disapprove Bay 
Area's complete corrective program, EPA would 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 the 
District submitted a revised program and EPA determined that it 
corrected the deficiencies that prompted the disapproval. Again, if, 
six months after EPA applied the first sanction, Bay Area had not 
submitted a revised program that EPA determined corrected the 
deficiencies, a second sanction would be required.
    In addition, discretionary sanctions may be applied where warranted 
any time after the end of an interim approval period if a state or 
district has not submitted a timely and complete corrective program or 
EPA has disapproved a submitted corrective program. Moreover, if EPA 
has not granted full approval to a state or district program by the 
expiration of an interim approval and that expiration occurs after 
November 15, 1995, EPA must promulgate, administer and enforce a 
federal permits program for that state or district upon interim 
approval expiration.
2. District Preconstruction Permit Program Implementing Section 112(g)
    As a condition of approval of the part 70 program, Bay Area is 
required to implement section 112(g) of the Act from the effective date 
of the part 70 program. Imposition of case-by-case determinations of 
MACT or offsets under section 112(g) will require the use of a 
mechanism for establishing federally enforceable restrictions on a 
source-specific basis. The EPA is proposing to approve Bay Area's 
preconstruction permitting program found in Regulation 2, Rule 2 under 
the authority of title V and part 70 solely for the purpose of 
implementing section 112(g) during the transition period between title 
V approval and adoption of a District rule implementing EPA's section 
112(g) regulations. EPA believes this approval is necessary so that Bay 
Area has a mechanism in place to establish federally enforceable 
restrictions for section 112(g) purposes from the date of part 70 
approval. Although section 112(l) generally provides the authority for 
approval of state air toxics programs, title V and section 112(g) 
provide authority for this limited approval because of the direct 
linkage between implementation of section 112(g) and title V. The scope 
of this approval is narrowly limited to section 112(g), and does not 
confer or imply approval for purposes of any other provisions under the 
Act. If Bay Area does not wish to implement section 112(g) through its 
preconstruction permit program and can demonstrate that an alternative 
means of implementing section 112(g) exists, the EPA may, in its final 
action, approve the alternative instead.
    This approval of Bay Area's preconstruction permit program as a 
section 112(g) mechanism is for an interim period only, until the 
District is able to adopt regulations consistent with regulations 
promulgated by EPA to implement section 112(g). Accordingly, EPA is 
proposing to limit the duration of this approval to a reasonable time 
following EPA's final promulgation of section 112(g) regulations so 
that Bay Area, acting expeditiously, will be able to adopt regulations 
consistent with the section 112(g) regulations. The EPA is proposing 
here to limit the duration of this approval to 12 months following 
promulgation by EPA of section 112(g) regulations. Comment is solicited 
on whether 12 months is an appropriate period considering Bay Area's 
procedures for adoption of regulations.
3. Program for Delegation of Section 112 Standards as Promulgated
    Requirements for part 70 program 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 the 
District's program contain adequate authorities, adequate resources for 
implementation, and an expeditious compliance schedule, which are also 
requirements under part 70. Therefore, the EPA is also proposing to 
grant approval under section 112(l)(5) and 40 CFR 63.91 of Bay Area's 
program for receiving delegation of section 112 standards that are 
unchanged from the 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, Bay Area 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 a Memorandum of Agreement between Bay Area and EPA, 
expected to be completed prior to approval of Bay Area's section 112(l) 
program for straight delegations. This program applies to both existing 
and future standards but is limited to sources covered by the part 70 
program.
4. State Operating Permit Program for Synthetic Minors
    On February 28, 1994, CARB submitted for approval into the Bay 
Area's portion of the California State Implementation Plan (SIP) a 
local operating permit program designed to create federally enforceable 
limits on a source's potential to emit. The submittal was supplemented 
on April 29, 1994. This District program is referred to as a synthetic 
minor operating permit program, and it consists of regulations that 
will be integrated with the District's existing, non-federally 
enforceable, operating permit program. Such programs are also referred 
to as federally enforceable state operating permit programs or FESOP. 
This synthetic minor or FESOP mechanism will allow sources to reduce 
their potential to emit to below the title V applicability thresholds 
and avoid being subject to title V.
    Bay Area's synthetic minor regulations were adopted on November 3, 
1993 and codified in District Regulation 2, Rule 6. EPA found the 
initial SIP submittal complete on March 22, 1994. Because the April 29, 
1994 submittal was a supplement to the February 28, 1994 submittal, a 
separate completeness determination was not necessary.
    The five criteria for approving a state operating permit program 
into a SIP were set forth in the June 28, 1989 Federal Register 
document (54 FR 27282). Permits issued under an approved program are 
federally enforceable and may be used to limit the potential to emit of 
sources of criteria pollutants. Bay Area's synthetic minor provisions 
of Regulation 2, Rule 6 meet the June 28, 1989 criteria by ensuring 
that the limits will be permanent, quantifiable, and practically 
enforceable and by providing adequate notice and comment to EPA and the 
public. Please refer to the Technical Support Document for a thorough 
analysis of the June 28, 1989 criteria as applied to the Bay Area's 
synthetic minor program.
    EPA is proposing to approve pursuant to part 52 and the approval 
criteria specified in the June 28, 1989 Federal Register document the 
following regulations that were submitted either to create the 
synthetic minor operating permit program or to make the SIP consistent 
with Bay Area's title V implementing regulation, Regulation 2-6; 
Regulation 2, Rule 6, Sections 206, 207, 210, 212, 213, 214, 218, 222, 
230, 231, 301, 310, 311, 401, 402, 403, 404, 420, 421, 422, 423, 602; 
and Regulation 2, Rule 1, Sections 102, 129, 204, 213, 214, 215, 216, 
217, 218, 219, 302, 408, 411.\2\
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    \2\Bay Area and CARB also included the following rules as part 
of the February 28 and April 29, 1994 submittals: Regulation 1, 
Section 110 and Regulation 2, Rule 2, Sections 215, 218, 220, 236, 
237, 238, and 239. Because these provisions are outside the scope of 
the synthetic minor and title V programs, EPA will take action on 
them in a separate Federal Register notice.
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    On April 29, 1994, CARB requested approval of Bay Area's synthetic 
minor program, consisting of the rules specified above, under section 
112(l) of the Act for the purpose of creating federally enforceable 
limitations on the potential to emit of hazardous air pollutants (HAP). 
The separate request for approval under section 112(l) is necessary 
because the proposed SIP approval discussed above only provides a 
mechanism for controlling criteria pollutants. While federally 
enforceable limits on criteria pollutants (i.e., VOC's or PM-10) may 
have the incidental effect of limiting certain HAP listed pursuant to 
section 112(b),\3\ section 112 of the Act provides the underlying 
authority for controlling HAP emissions that are not criteria 
pollutants. As a legal matter, no additional program approval by EPA is 
required in order for these criteria pollutant limits to be recognized 
as federally enforceable.
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    \3\The EPA intends to issue guidance addressing the technical 
aspects of how these criteria pollutant limits may be recognized for 
purposes of limiting a source's potential to emit of HAP to below 
section 112 major source levels.
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    EPA has determined that the five approval criteria for approving 
FESOP programs into the SIP, as specified in the June 28, 1989 Federal 
Register notice, are also appropriate for evaluating and approving the 
programs under section 112(l). The June 28, 1989 notice does not 
address HAP because it was written prior to the 1990 amendments to 
section 112 (which injected the concept of major HAP sources versus 
non-major or area HAP sources into the permit) and not because it 
establishes requirements unique to criteria pollutants. Hence, the 
following five criteria are applicable to FESOP approvals under section 
112(l): (1) The program must be submitted to and approved by EPA; (2) 
The program must impose a legal obligation on the operating permit 
holders to comply with the terms and conditions of the permit, and 
permits that do not conform with the June 28, 1989 criteria shall be 
deemed not federally enforceable; (3) The program must contain terms 
and conditions that are at least as stringent as any requirements 
contained in the SIP or enforceable under the SIP or any other section 
112 or other Clean Air Act standard or requirement; (4) Permits issued 
under the program must contain conditions that are permanent, 
quantifiable, and enforceable as a practical matter; and (5) Permits 
issued under the program must be subject to public participation.
    In addition to meeting the criteria in the June 28, 1989 notice, a 
FESOP program must meet the statutory criteria for approval under 
section 112(1)(5). Section 112(l)(5) allows EPA to approve a program 
only if it: (1) contains adequate authority to assure compliance with 
any section 112 standard or requirement; (2) provides for adequate 
resources; (3) provides for an expeditious schedule for assuring 
compliance with section 112 requirements; and (4) is otherwise likely 
to satisfy the objectives of the Act.
    The EPA plans to codify the approval criteria for programs limiting 
potential to emit of HAP in subpart E of part 63 (Subpart E), the 
regulations promulgated to implement section 112(l) of the Act. The EPA 
currently anticipates that these criteria, as they apply to FESOP 
programs, will mirror those set forth in the June 28, 1989 notice, with 
the addition that the state's authority must extend to HAP instead of 
or in addition to VOC's and PM-10. The EPA currently anticipates that 
FESOP programs that are approved pursuant to section 112(l) prior to 
the Subpart E revisions will have had to meet these criteria, and 
hence, will not be subject to any further approval action.
    The EPA believes it has authority under section 112(l) to approve 
programs to limit potential to emit of HAP directly under section 
112(l) prior to this revision to Subpart E. Section 112(l)(5) requires 
EPA to disapprove programs that are inconsistent with guidance required 
to be issued under section 112(l)(2). This might be read to suggest 
that the ``guidance'' referred to in section 112(l)(2) was intended to 
be a binding rule. Even under this interpretation, the EPA does not 
believe that section 112(l) requires this rulemaking to be 
comprehensive. That is, it need not address all instances of approval 
under section 112(l). The EPA has already issued regulations under 
section 112(l) that would satisfy this requirement. Given the severe 
timing problems posed by impending deadlines set forth in MACT 
standards and for submittal of title V applications, EPA believes it is 
reasonable to read section 112(l) to allow for approval of programs to 
limit potential to emit prior to issuance of a rule specifically 
addressing this issue.
    EPA proposes approval of Bay Area's synthetic minor program 
pursuant to section 112(l) because the program meets all of the 
approval criteria specified in the June 28, 1989 Federal Register 
document and in section 112(l)(5) of the Act. Please refer to the 
Technical Support Document for a complete discussion of how the June 
28, 1989 criteria are met by the Bay Area. Regarding the statutory 
criteria of section 112(l)(5) referred to above, the EPA believes Bay 
Area's synthetic minor program contains adequate authority to assure 
compliance with section 112 requirements since the third criterion of 
the June 28, 1989 document is met, that is, since the program does not 
provide for waiving any section 112 requirement. Sources would still be 
required to meet section 112 requirements applicable to non-major 
sources. Regarding adequate resources, Bay Area has included in its 
synthetic minor regulations provisions for collecting fees according to 
the same fee schedule as that used for title V sources. Furthermore, 
EPA believes that Bay Area's synthetic minor program provides for an 
expeditious schedule for assuring compliance because it allows a source 
to establish a voluntary limit on potential to emit and avoid being 
subject to a federal Clean Air Act requirement applicable on a 
particular date. Nothing in Bay Area's program would allow a source to 
avoid or delay compliance with a federal requirement if it fails to 
obtain the appropriate federally enforceable limit by the relevant 
deadline. Finally, Bay Area's synthetic minor program is consistent 
with the objectives of the section 112 program because its purpose is 
to enable sources to obtain federally enforceable limits on potential 
to emit to avoid major source classification under section 112. The EPA 
believes this purpose is consistent with the overall intent of section 
112.

III. Administrative Requirements

A. Request for Public Comments

    The EPA is requesting comments on all aspects of this proposed 
interim approval. Copies of Bay Area's submittal and other information 
relied upon for the proposed interim approval are contained in a docket 
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 proposed interim 
approval. The principal purposes of the docket are:
    (1) To allow interested parties a means to identify and locate 
documents so that they can effectively participate in the approval 
process; and
    (2) To serve as the record in case of judicial review. The EPA will 
consider any comments received by December 29, 1994.

B. Executive Order 12866

    The Office of Management and Budget has exempted this action from 
Executive Order 12866 review.

C. Regulatory Flexibility Act

    The EPA's actions under sections 502, 110, and 112 of the Act do 
not create any new requirements, but simply address operating permit 
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.

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

    Dated: November 16, 1994.
John Wise,
Acting Regional Administrator.
[FR Doc. 94-29267 Filed 11-28-94; 8:45 am]
BILLING CODE 6560-50-M