[Federal Register Volume 61, Number 123 (Tuesday, June 25, 1996)]
[Rules and Regulations]
[Pages 32693-32699]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16126]



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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 70

[TX-FRL-5526-4]


Clean Air Act Final Interim Approval of Operating Permits 
Program; the State of Texas

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final Source Category-Limited Interim Approval.

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SUMMARY: The EPA is promulgating source category-limited interim 
approval of the Operating Permits program submitted by the Texas 
Natural Resource Conservation Commission (TNRCC) for the State of Texas 
for the purpose of complying with Federal requirements for an 
approvable State program to issue operating permits to all major 
stationary sources, except any sources of air pollution over which an 
indian tribe has jurisdiction.

EFFECTIVE DATE: July 25, 1996.

ADDRESSES: Copies of the State's submittal and other supporting 
information used in developing this source category-limited interim 
approval are available for inspection during normal business hours at 
the following location:

EPA, Region 6, Permits Section (6PD-R), 1445 Ross Avenue, Suite 700, 
Dallas, Texas 75202-2733.
TNRC
C, Office of Air Quality, 12124 Park 35 Circle, Austin, Texas 78753.

FOR FURTHER INFORMATION CONTACT: David F. Garcia, Permits Section (6PD-
R), EPA, Region 6, 1445 Ross Avenue, Suite 700, Dallas, Texas 75202-
2733, telephone (214) 665-7217.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

    Title V of the 1990 Clean Air Act Amendments (sections 501-507 of 
the Clean Air Act (the Act), and implementing regulations at 40 CFR 
part 70 require that States develop and submit Operating Permits 
programs to EPA by November 15, 1993, and that EPA act to approve or 
disapprove each program within one 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 two years. If EPA has not fully approved a program by 
two years after November 15, 1993, or by the end of an interim program, 
it must establish and implement a Federal program.
    On June 7, 1995, EPA proposed source category-limited interim 
approval of the Operating Permits program for the State of Texas. See 
60 FR 30037 (June 7, 1995). The EPA received comments on the proposal 
and compiled an updated Technical Support Document which describes the 
Operating Permits program in greater detail. In this document, EPA is 
taking final action to promulgate source category-limited interim 
approval of the Operating Permits program for the State of Texas.

II. Final Action and Implications

A. Analysis of State Submission

    The Governor of Texas submitted a title V Operating Permits program 
for the State of Texas on September 17, 1993, and supplemental 
submittals from the Executive Director of TNRCC on October 28, 1993, 
and November 12, 1993. The Texas title V Operating Permits program 
includes among other things TNRCC Regulation XII, title 30 of the Texas 
Administrative Code (TAC) Chapter 122 ``Federal Operating Permits'' 
(the Texas permit regulation) and TNRCC General Rules, title 30 of TAC, 
section 101 (the Texas fee regulation).
    The EPA identified and discussed the specific inconsistencies 
precluding full approval of the Texas program in the June 7, 1995, 
Federal Register document. It is essential that these inconsistencies 
be remedied by the State consistent with the Act and part 70 prior to 
EPA granting full approval of the State's Operating Permits program. 
The State committed to address certain of the identified inconsistences 
in a letter dated October 3, 1995, in a manner sufficient to satisfy 
EPA concerns. The State in the October 3, 1995, letter agreed to: (1) 
Revise section 122.120(4)(A-B) of the Texas permit regulation regarding 
source applicability; (2) revise section 122.010 of the Texas permit 
regulation to make the Texas definition of ``air pollutant'' consistent 
with part 70, as it relates to regulated air pollutant; (3) revise 
section 122.010 of the Texas permit regulation to make the definition 
of ``site'' consistent with part 70, as it relates to research and 
development activities; (4) revise section 122.132 of the Texas permit 
regulation in regard to compliance schedule requirements; (5) revise 
section 122.211 of the Texas permit regulation to require ``similar'' 
changes allowed under an Administrative Amendment to be approved by 
EPA; and (6) revise section 122.202 of the Texas permit regulation as 
it relates to General Permits. These particular rules will be 
acceptable for full approval if the State makes the changes in its 
rules as specified in the letter. Also, the State's criminal 
enforcement provisions meet title V and part 70. The EPA proposed in 
the June 7, 1995, notice to accept that these criminal enforcement 
statutory provisions satisfied the intent of part 70 and solicited 
comments. No adverse comments were received. The EPA's position is that 
the State's criminal enforcement provisions are acceptable for both 
interim and full approval.
    During the State's process to revise the Operating Permit 
regulation for full title V approval, EPA will comment based on the 
part 70 rule in place at the time. In the action on the State's 
submittal for full approval, EPA will use the criteria in whatever is 
the final part 70 regulation, whether it be the existing July 21, 1992, 
regulation or a later version (part 70).

B. Response to Comments

    The EPA received three comment letters (including one from TNRCC) 
during the 30-day public comment period held on the proposed interim 
approval of the Texas program. The commenters requested a 90-day 
extension of the public comment period based on interest to reevaluate 
the Texas title V program and submit a plan with a redesigned Texas 
title V program. The EPA extended the comment period until October 5, 
1995, in a Federal Register notice published August 4, 1995. Comments 
were received from 27 parties during the extended period. Below is 
EPA's response to comments received on the proposed source category-
limited interim approval for the Texas Operating Permits program.
    1. Comment 1--All the comments received unanimously suggested EPA 
delay and/or defer final approval of the Texas interim program until 
such time as TNRCC is able to submit a revised Regulation XII and 
program submittal.
    EPA Response--The EPA cannot ``delay and/or defer'' an action on a 
pending title V program submittal. However, in addition to preparing a 
Response to Comments and a Federal

[[Page 32694]]

Register notice after the end of the comment period in October, EPA 
also met with TNRCC a number of times to discuss possible significant 
changes to the State's program design. Thus, EPA tried to accommodate 
the State and industry's wishes to submit a revised program design and 
yet meet its own obligation to move forward on the pending program 
submittal. The EPA has expressed fundamental concerns regarding the 
approvability of such significant changes to the existing program 
design. Mary Nichols, Assistant Administrator for the Office of Air and 
Radiation, sent a letter, dated February 7, 1996, to Mr. Barry McBee, 
Chairman of TNRCC, which outlined EPA's broad concern with such a 
program redesign as presented to EPA in discussion meetings. A copy of 
the letter has been placed in the docket and is available for public 
review.
    During this same timeframe, EPA reviewed and drafted a detailed 
response to comments received during the public comment period. In 
addition, EPA continued working on promulgation of part 71, the Federal 
operating permit rule. After the promulgation of the part 71 rule, 
States such as Texas without an approved program will be subject to a 
part 71 program. This rule is expected to be finalized and made 
effective in the summer of 1996. On March 14, 1996, EPA then received a 
request from Texas to proceed expeditiously with a final action on the 
June 7, 1995, proposal.
    2. Comment 2--A commenter noted that EPA cannot impose the three 
conditions stated in the August 29, 1994, proposal for Operating 
Permits Programs Interim Approval Criteria until that action is 
promulgated. That proposal would revise part 70 to allow interim 
approval for States such as Texas whose programs do not provide for 
permits to incorporate all requirements established through an EPA-
approved minor new source review (MNSR) program. The EPA proposed at 60 
FR 30039 three conditions a State must meet in order to be eligible for 
interim approval. Texas must: (1) include in each operating permit 
issued during the interim approval period, a statement that MNSR 
requirements are not included; (2) include a cross-reference in each 
operating permit to the MNSR permit for that source; and (3) require 
reopening of permits for incorporation of MNSR permit conditions upon 
completion of the interim approval period.
    EPA Response--The EPA agrees, and the August 29, 1994, proposal for 
Operating Permits Programs Interim Approval Criteria was finalized on 
June 20, 1996.
    3. Comment 3--A commenter said that all companies cannot meet the 
three proposed conditions outlined in the August 29, 1994, Federal 
Register notice as previously discussed in comment 2. The concern is 
that EPA is assuming companies can list modifications found in State 
MNSR permits made years before, and cross-reference the modification in 
the MNSR permit with then-applicable enabling authority.
    EPA Response--The EPA does not agree with the comment. Facilities 
that emit air pollutants are required to obtain and maintain the 
appropriate new source review authorization whether it is a major or 
MNSR permit. Due to these requirements, EPA believes that companies 
will be able to list and cross reference MNSR permits modifications 
made in the past. Where adequate company records do not exist, the 
facility may use State records. Where no company or State records 
exist, the facility must take steps to obtain the required permit and 
may be subject to appropriate enforcement action.
    4. Comment 4--A commenter requested that the negative applicability 
requirement be eliminated for ``tier 3 permits.'' Only applicable 
requirements should be addressed in the application; no negative 
applicability requirements are necessary.
    EPA Response--The EPA does not consider this comment relevant to 
this action. The TNRCC has not adopted a permitting program that 
includes ``tier 3 permits,'' nor has such a proposal been submitted for 
EPA approval.
    5. Comment 5--The State commented that it does not agree with EPA 
that MNSR should be considered an ``applicable requirement'' under part 
70. Should EPA determine MNSR to be an applicable requirement in the 
final part 70 rule, the State requested EPA allow it to use the 
``program substitution'' concept presented in its comments on the EPA's 
August 29, 1994, proposed rulemaking.
    EPA Response--The EPA does not agree with the State's comment. 
First, it continues to be the EPA's position that MNSR is an applicable 
requirement. Since July 21, 1992, in the promulgated rules which define 
the minimum elements of an approvable State Operating Permits program, 
EPA has interpreted the Federal definition of ``applicable 
requirement'' to include terms and conditions of ``any preconstruction 
permits issued pursuant to regulations approved or promulgated through 
rulemaking under title I.'' Such permits include all MNSR permits. 
While the exclusion of certain MNSR provisions may be allowed under 
interim approval of the program, for full program approval, the State 
program must provide permits that include all MNSR permits.
    Second, the State can use its ``program substitution'' concept as 
long as it meets all requirements of title V, including requirements 
for annual and initial compliance certification, the EPA veto, 
compliance plans and schedules, six month reporting, and prompt 
reporting of deviations. The Texas ``program substitution'' concept as 
presented to EPA does not meet title V and part 70. Furthermore, in the 
area of compliance for all part 70 permits, EPA believes that 
compliance certification places the burden of proof on the source, not 
on the permitting agency, for certifying compliance with all applicable 
requirements. It is EPA's position the burden of proof is placed on the 
source since the Texas permit regulation 122.132(b)(1) requires the 
responsible official of a source, not of the permitting agency, to sign 
the compliance documents.
    6. Comment 6--The conditions on permits issued during the interim 
approval period were proposed in the August 1994 proposal for programs 
that do not require MNSR changes to be incorporated in the operating 
permit as applicable requirements. These conditions were subsequently 
addressed in the June 7, 1995, proposal, and were commented on by the 
State. The State proposes to: (a) Include in each operating permit a 
standardized permit provision stating ``Preconstruction authorizations 
including permits, standard permits, flexible permit, special permits, 
or special exemptions which are referenced in this permit will only be 
enforced under Regulation VI''; (b) use the permit form entitled 
``Preconstruction Authorization References'' for cross referencing; and 
(c) if MNSR is determined to be an applicable requirement in the final 
part 70 rule, the TNRCC staff will propose to use the ``program 
substitution'' concept.
    EPA Response--The final regulation revising the interim approval 
criteria (Operating Permits Program Interim Approval Criteria) requires 
any operating permit issued during an interim approval meet certain 
conditions if the permit does not incorporate minor New Source Review 
(MNSR) requirements. These conditions are:
    (1) Each permit must state that MNSR requirements are not 
incorporated.
    (2) Each permit must provide a cross reference, such as a listing 
of the permit number, for each MNSR permit

[[Page 32695]]

containing an excluded minor NSR term.
    (3) The State must reopen or use a substantially equivalent 
revision process to incorporate any excluded MNSR applicable 
requirements into each operating permit prior to or upon program 
transition to full approval.
    (4) Each permit must indicate how citizens may obtain access to 
excluded MNSR permits.
    (5) Each permit must state that the MNSR requirements which are 
excluded are not eligible for the permit shield under section 70.6(f).
    The State's comment in (a) above indicates that the title V permit 
will reference NSR permit actions as enforceable under Regulation VI. 
The EPA does not agree this response satisfies criterion (1) above. 
This provision must be revised to state that MNSR requirements are not 
incorporated in each operating permit issued during the interim 
approval period. Additionally, the State must be quite clear in any 
standardized permit provision that all its major ``preconstruction 
authorizations including permits, standard permits, flexible permit, 
special permits, or special exemptions'' are incorporated by reference 
into the operating permit as if fully set forth therein and therefore 
enforceable under regulation XII (the Texas operating permit 
regulation) as well as regulation VI (the Texas preconstruction permit 
regulation). As noted in (b) above of the comment, the State plans to 
use the ``Preconstruction Authorization Reference'' form. This form 
must list all MNSR authorizations (permit number) for each minor 
emission unit not being incorporated into the operating permit. This 
reference form which is part of the permit application and permit will 
adequately meet criterion (2). Criterion (3) requires the State to 
reopen/revise permits for incorporation of MNSR permit conditions prior 
to or upon full program approval. As noted in (c) above, the State 
proposes to use its ``program substitution'' concept. The EPA believes 
that this concept is acceptable as long as each permit issued during 
the interim period is revised to meet all requirements of title V, 
including requirements for annual and initial compliance certification, 
the EPA veto, compliance plans and schedules, six month reporting, and 
prompt reporting of deviations.
    The State must also ensure that the additional conditions of the 
final interim approval criteria rule, not addressed in its comments, 
are met during the interim period. As noted in (4) above, the State 
must indicate in the operating permit how citizens may obtain access to 
excluded MNSR permits. Finally, criterion (5) requires the State to 
document in the title V permit that excluded minor MNSR terms are not 
eligible for the permit shield under section 70.6(f).
    7. Comment 7--The State proposes to revise section 122.120(4)(C), 
pertaining to Applicability, to state ``any area source, in a source 
category designated by the Administrator'' shall obtain an operating 
permit. The TNRCC believes this revision to the Texas permit regulation 
is consistent with 40 CFR 70.3(a). The TNRCC believes this suggested 
revision to the Texas permit regulation corrects the deficiency 
identified by EPA in the June 1995 Federal Register and makes section 
122.120(4)(C) consistent with 40 CFR 70.3(a).
    EPA Response--The EPA does not agree with TNRCC's comment. The 
proposed language restricts the Administrator to only ``area sources'' 
for designation to title V permitting. Pursuant to 40 CFR 70.3(a), the 
Administrator may designate a number of different types of sources 
other than area sources subject to title V permitting. As a condition 
for full approval, TNRCC must revise section 122.120(4)(C) to be 
consistent with 40 CFR 70.3(a).
    8. Comment 8--The State commented that until a final part 70 and 
section 302(j) rulemaking become final they do not plan to correct the 
identified deficiency requiring the definition of ``major source'' to 
be revised to require the inclusion of fugitive emissions for source 
categories regulated under section 111 or 112 of the Act. Specifically, 
in the State's definition, source category xxvii only applies to ``any 
other stationary source category which as of August 7, 1980, is being 
regulated under section 111 or 112 of the Act.''
    EPA Response--Currently, part 70 requires fugitive emissions to be 
counted for all sources subject to section 111 and 112 standards, and 
does not limit the stationary source categories to those which existed 
as of August 7, 1980. However, the August 29, 1994, part 70 proposed 
revisions and the August 31, 1995, supplemental part 70 proposal, if 
finalized, would not include fugitive emissions for source categories 
subject to section 111 or section 112 standards which were promulgated 
after August 7, 1980. The August 31, 1995, supplemental proposal 
further requires the Administrator to make an affirmative determination 
under section 302(j). For full approval, the State must revise the 
Texas permit regulation to be consistent with part 70.
    9. Comment 9--The State defines in the Texas permit regulation and 
also requests that the EPA define ``title I modification'' to include 
only prevention of significant deterioration, nonattainment, new source 
performance standard and section 112(g) modifications. The State does 
not propose to change their definition which was identified by EPA as a 
deficiency in the June 1995 Federal Register notice until this issue 
has been resolved definitively and is defined in the final part 70.
    EPA Response--The EPA has proposed to define ``title I 
modification'' in the August 31, 1995, Operating Permits program and 
Federal Operating Permits program, proposed rule. The EPA proposed to 
define title I modification to mean any modification under part C and D 
of title I or sections 111(a)(4), 112(a)(5), or 112(g) of the Act and 
regulations promulgated pursuant to Sec. 61.07 of part 61. If the 
definition of ``title I modification'' is finalized as proposed in the 
August 31, 1995, proposed rule, the State's definition of ``title I 
modification'' would be consistent with part 70. If the definition of 
``title I modification'' is changed from that proposed in the August 
31, 1995, proposed rule to include MNSR changes, the State must revise 
the Texas permit regulation to be consistent with part 70.
    10. Comment 10--The State does not agree to revise section 122.138 
of the Texas permit regulation as it relates to the application shield 
for significant modifications at this time. Instead, this section will 
be revised when part 70 becomes final and the issue is resolved 
definitively.
    EPA Response--The EPA does not agree with this comment. For full 
approval, the Texas permit regulation must be revised with whatever is 
the final part 70 regulation, whether it be the existing July 21, 1992, 
regulation or a later version at the time a corrected program is 
submitted. However, EPA cannot approve a State program based on 
revisions to part 70 that have not been finalized.
    11. Comment 11--The State provided comments on the permit revisions 
process. In regard to permit additions (section 122.215) and off-permit 
(section 122.215), TNRCC does not propose to change existing language 
in the Texas permit regulation to correct the identified deficiencies 
until part 70 becomes final and these issues are resolved definitively.
    EPA Response--In order to receive full program approval, the State 
must

[[Page 32696]]

revise its rules to be consistent with part 70, in accordance with 
whatever is the final part 70 regulation, whether it be the existing 
July 21, 1992, regulation or a later version at the time a corrected 
program is submitted. However, EPA cannot approve a State program based 
on revisions to part 70 that have not been finalized.
    12. Comment 12--The State proposes not to further define section 
502(b)(10) as it relates to the operational flexibility provisions in 
section 122.221 of the Texas permit regulation.
    EPA Response--In order to receive full program approval, the State 
must revise its rules to be consistent with part 70, in accordance with 
whatever is the final part 70 regulation, whether it be the existing 
July 21, 1992, regulation or a later version at the time a corrected 
program is submitted. However, EPA cannot approve a State program based 
on revisions to part 70 that have not been finalized.
    13. Comment 13--The State disagrees with the EPA-identified 
deficiency that the public notification for an operating permit should 
include such information as the emission changes from any modification. 
The State believes section 122.153 of the Texas permit regulation does 
not include this requirement because its program should not be based on 
emission changes.
    EPA Response--The EPA disagrees with this comment. The EPA 
specifies in 40 CFR 70.7(h)(2) the information that the public notice 
must include. For full program approval, the State must include the 
emissions change involved in any permit modification.
    14. Comment 14--The State commented that fugitive emissions from 
units without applicable requirements need not be quantified in permit 
applications, especially if the source declares that it has major 
status.
    EPA Response--The EPA agrees with a portion of the comment. On July 
10, 1995, EPA released White Paper I from Lydia Wegman, Deputy Director 
for the Office of Air Quality Planning and Standards. A copy of this 
guidance document has been placed in the docket and is available for 
public review. Under section B.2. ``Required Emission Information and 
Source Descriptions'' of White Paper I, for fugitive emissions that are 
not subject to any applicable requirements, the source would be 
required to provide a general description of the emission units and 
their emissions in the application. However, fugitive emissions from 
units covered by an applicable requirement need to be quantified. For 
full approval, the Texas permit regulation must be revised to reflect 
this position.
    15. Comment 15--The State commented that section 122.122 (relating 
to establishment of federally enforceable restrictions on potential to 
emit) of the Texas permit regulation serves as an acceptable 
certification process for grandfathered sites who choose to limit their 
potential to emit under the Operating Permit program. The State also 
has concerns regarding the January 25, 1995, guidance memorandum which, 
among other things, announced the availability of a two-year transition 
period during which a State could give sources additional options for 
seeking federally enforceable limitations on potential to emit. The 
time period allotted--January 25, 1995, through January 25, 1997--may 
not be adequate given the expected delay of the part 70 rule and 
approval of the Texas Operating Permits program. Therefore, the State 
requests EPA to extend the transition period for two years following 
interim approval of the Texas program.
    EPA Response--The EPA will consider this request to extend the 
transition period for two years after interim approval for States such 
as Texas. However, this issue is not being addressed in this document. 
This issue will be addressed in EPA guidance and/or memorandum at a 
later date. The EPA is not addressing here whether section 122.122 of 
the Texas permit regulation is acceptable for purposes of limiting 
potential to emit other than during the transition period.
    16. Comment 16--The State believes that the notice of emergency 
required in section 70.6(g)(3)(iv) is satisfied in the TNRCC General 
Rules, section 101.6 and therefore does not agree with EPA that there 
is a deficiency for full approval. Section 101.6 has two opportunities 
to submit information to the State. First, the occurrence of a major 
upset must be reported to the agency as soon as possible. If a company 
does not have all the information available at the time of the initial 
notification, then a second report is to be submitted within two weeks 
of the upset.
    EPA Response--The EPA does not agree with this comment. The State's 
allowance of time for agency notification is inconsistent with the part 
70 regulation. The part 70 regulation, at section 70.6(g)(3), requires 
the permittee to submit notice of the emergency to the permitting 
authority within two working days. For full approval, the Texas permit 
regulation must be consistent with part 70.
    17. Comment 17--The State commented that the Texas Legislature 
convenes every two years and approves the TNRCC budget for two-year 
periods only. Therefore, the State is unable to provide a four year 
estimate of the permit program cost, as required in the June 1995 
Federal Register notice for full approval, but will continue to provide 
budgetary information when it becomes available.
    EPA Response--The EPA disagrees with this comment. Pursuant to 40 
CFR 70.4(b)(8), the State must include in the fee demonstration an 
estimate of the permit program cost for the first four years after 
approval and a plan detailing how the State plans to cover these costs. 
The EPA is not requiring a budgetary allowance from the Legislature, 
but instead a projected estimate of the permit program cost.
    18. Comment 18--The State provided in the October 3 letter a 
response to EPA regarding the requirements for interim authorization to 
clarify the ambiguity of section 122.145(e)--the ``interpretation 
shield''. The response is:
    (a) Interpretations made pursuant to section 122.145(e) will be 
limited to whether and how a rule applies to a specific unit.
    (b) The EPA has the ability to order TNRCC to reopen a permit in 
the event EPA guidance becomes available after a permit or revision is 
issued. Further, because each interpretation will be a provision of the 
permit, it will be subject to EPA review and veto during the EPA 45-day 
review period as provided by the revision section of the Texas 
regulation.
    (c) The State will develop guidance documents to assure proper 
applicability determinations for each applicable requirement. All 
interpretations will be based on the most current information 
available, including guidance already received from EPA. The State will 
request EPA's input prior to the development of the guidance documents.
    EPA Response--The EPA agrees with TNRCC's comments for interim 
approval issues. However, for full approval the State must revise the 
Texas permit regulation in accordance to the June 7, 1995, Federal 
Register notice.

C. Statutory Changes Enacted After the Submittal of the State Program

    Significant changes to Texas laws were made by the Texas 
Legislature in 1995. These statutory changes raise issues of concern 
which the State must address before full approval for title V can be 
granted. The State has the obligation to address all the relevant, 
recently enacted laws and demonstrate how they meet title V and part 
70.
    This final agency action today does not waive the EPA's right to 
raise statutory concerns and any attendant

[[Page 32697]]

regulatory revisions the EPA deems necessary to the State and identify 
inconsistencies with those legislative changes which must be corrected 
for full approval. The EPA will present its position on the laws to 
TNRCC prior to the Texas 1997 legislative session, during TNRCC's 
corrective rulemaking process, and in its FRN proposing action on the 
State's submittal for full approval. Therefore, interested parties will 
have full opportunity to comment on the merits of the EPA's positions 
on the acceptability of the Texas 1995 laws (such as the Texas Senate 
Bill 14, ``Takings Impact Assessment,'' among others) for full title V 
program approval. The following is a specific discussion on the new 
audit and standing laws.
    On May 23, 1995, Texas enacted House Bill 2473, the Texas 
Environmental, Health, and Safety Audit Privilege Act (the Audit 
Privilege Act) creating an immunity from civil, administrative, and 
criminal penalties for environmental violations discovered through an 
audit as defined by the Act. The Audit Privilege Act also created a 
privilege for information associated with audits which prohibits their 
disclosure in administrative, civil, or criminal actions for violations 
of environmental law. The EPA has reviewed the Audit Privilege Act, in 
light of Clean Air Act requirements, title V delegation requirements 
set forth in 40 CFR Part 70, and guidelines for full title V approval 
issued jointly by the Office of Enforcement and Compliance Assurance 
and the Office of Air and Radiation dated April 5, 1996, entitled 
``Effect of Audit/Immunity Privilege Laws on States' Ability to Enforce 
Title V Requirements'', referred to below as the ``Guidelines''. A copy 
of the document has been placed in the docket and is available for 
public review. The EPA is concerned that the Audit Privilege Act may 
extend penalty immunity to facilities which commit repeat violations 
and violations which may cause harm to human health and the 
environment, and makes no provision for recoupment of penalties for 
economic benefit. Section 113(e) of the Clean Air Act specifically 
enumerates these three factors (among others) for consideration in 
assessing civil penalties. To the extent that the Audit Privilege Act 
provides immunity from civil penalties that does not permit 
consideration of these factors, appropriate civil penalties cannot be 
assessed by a state. It is clear, pursuant to the Guidelines, that EPA 
should not approve state title V programs in states where civil penalty 
immunity is granted to violators without consideration of compliance 
history, harm or risk of harm, and economic benefit.
    The EPA is also concerned that the Audit Privilege Act may prevent 
the State from obtaining appropriate criminal penalties. Evidence 
necessary to prove that a crime has been committed may be protected by 
privilege which may inhibit or prevent the State from assessing 
appropriate criminal penalties. The State must demonstrate that it has 
the ability to obtain appropriate criminal penalties where an audit 
report reveals evidence of prior criminal conduct on the part of 
managers or employees. Another problematic aspect of the Audit 
Privilege Act is the disparity between its provisions limiting 
disclosure of audit report information by employees and others, and the 
Clean Air Act Sections 113 and 322 which specifically protect 
whistleblowers from retaliation and provide awards for persons who 
furnish information that leads to a criminal conviction or civil 
penalty. The Texas Audit Privilege Act does not, by its terms, create 
or impose special sanctions on informants, but it asserts that a 
``Party to a confidentiality agreement . . . who violates that 
agreement is liable for damages caused by the disclosure. . . '' In 
addition, sanctions are created with regard to government officials who 
disclose privileged information. Pursuant to the Guidelines, EPA is 
concerned that both of these provisions may have a negative impact on 
disclosures well beyond the intended reach of the privilege. 
Confidential informants are an important source of leads for state and 
federal enforcement programs.
    The above analysis of the Audit Privilege Act is intended to be 
illustrative and does not preclude EPA from raising additional issues 
of concern. The analysis is solely limited to title V of the Act and 
does not relate to any other environmental program. As noted 
previously, all interested parties will have opportunity to comment on 
the acceptability of this law for full title V approval.
    The Act authorizes States to implement title V Operating Permit 
programs in section 502(d). The statute also sets forth the minimum 
elements of a State permit program, including the requirement that the 
permitting authority have adequate authority to assure that sources 
comply with all applicable Act requirements, as well as authority to 
enforce permits, including recovering minimum civil penalties and 
appropriate criminal penalties, Sec. 502(b)(5) (A) and (E). Pursuant to 
title V, EPA promulgated regulations specifying the minimum required 
elements of State Operating Permit programs, found at 40 CFR Part 70. 
These regulations explicitly require States to have certain enforcement 
authorities, including authority to seek injunctive relief to enjoin a 
violation, to bring suit to restrain persons where a facility is posing 
an imminent and substantial endangerment to public health or welfare, 
and suit to recover appropriate criminal and civil penalties. Section 
113(e) of the Act sets forth penalty factors for EPA or a court to 
consider in assessing penalties for civil or criminal violations of the 
Act, factors which necessarily apply to penalties for violations of 
title V permits. The EPA is concerned about the potential impact of 
some State audit privilege and immunity laws on the ability of the 
States to enforce Federal requirements, including those under title V 
of the Act. Upon review and consideration of the statutory and 
regulatory provisions discussed above, EPA issued guidance on April 5, 
1996, entitled ``Effect of Audit Immunity/Privilege Laws on States' 
Ability to Enforce Title V Requirements.'' This guidance outlines 
certain elements of the State audit immunity and privilege laws which, 
in EPA's view, may so hamper the State's ability to enforce as to 
render the Agency unable to delegate the title V Operating Permit 
program. The guidance is consistent with EPA's audit policy, 
``Incentives for Self-Policing: Discovery, Disclosure, Correction and 
Prevention of Violations'' (60 FR 246, December 22, 1995).
    Section 502(b)(6) of the Act requires an approvable State title V 
program to include an opportunity for judicial review in State court of 
the final permit action by the applicant, any person who participated 
in the public comment process, and any other person who could obtain 
judicial review under applicable law. The EPA interprets the statute to 
require, at a minimum, that States provide judicial review of 
permitting decisions to any person who would have standing under 
Article III of the United States Constitution. See 59 FR 31183 (June 
17, 1994). In the 1993 program submittal, Texas included an Attorney 
General (AG) Opinion which set forth State laws and court decisions and 
certified that Texas State laws on standing were no narrower than the 
Federal ones under Article III. Since the time of the submittal in 
November 1993, the Texas State Legislature met in January 1995 and 
adopted revisions to the existing standing law (Senate Bill 1546, an 
Act relating to persons affected by matters in hearings before the 
Texas Natural Resource Conservation

[[Page 32698]]

Commission). The bill was enacted on June 16, 1995, and became 
effective September 1, 1995.
    On the bill's face, it does not impact standing in a title V 
permitting decision. This is because the bill applies only to those 
State administrative actions requiring an evidentiary hearing. The bill 
on its face does not apply to State administrative actions subject to a 
legislative hearing (presentation of comments with no right to cross-
examination). Title V permit decisions are only required to be subject 
to a legislative hearing. Nevertheless, since there had been a change 
which could possibly impact the judicial review of title V permit 
decisions, EPA required the State to provide an Attorney General 
Opinion setting forth all laws and court decisions issued since the 
1993 Opinion and recertifying that State laws on standing were still no 
narrower than the Federal ones.
    This Opinion was submitted on May 6, 1996. In addition, EPA 
required the General Counsel and the Executive Director to submit a 
letter committing to implementing a permitting process that provides 
for a standing test no narrower than the Federal one. The letter also 
describes in greater detail the public participation process which is 
outlined in sections 122.150 to 122.155 and sections 122.310 to 122.316 
of Regulation XII. This letter was submitted on May 6, 1996.
    The EPA received on March 18, 1996, a Petition to Reopen the 
Comment Period for Texas Application for Delegation of title V Programs 
under the CAA. The Petition was submitted on behalf of the Sierra Club, 
the Environmental Defense Fund, Galveston-Houston Area Smog Prevention, 
and Clean Water Action. The Request to Reopen was specifically on the 
standing issue. The Petitioners requested EPA to require that a new 
certification be submitted by the Texas Attorney General. The Opinion 
should address the legislation passed in 1995 and all court opinions 
issued since the 1993 Attorney General's Opinion. The EPA was urged to 
obtain an explanation from the Attorney General's (AG) office of its 
actual positions and to obtain a written commitment from the AG to take 
a position in future TNRCC appeals that the Federal test be used. They 
also asked EPA to require TNRCC to promulgate rules that define the 
term ``person who may be affected'' (the term used in the Texas title V 
regulations for a person who may request a hearing and therefore has 
the right to appeal a title V permit decision). They also asked that 
the rules explain how and when TNRCC will give public notice, how and 
when TNRCC will respond to comments, and how and when TNRCC will 
provide new notice and an opportunity for comments when the application 
or proposed permit is changed significantly because of public input.
    The EPA believes that the above concerns of the Petitioners have 
already been addressed by EPA's requiring a revised Attorney General's 
Opinion and the TNRCC letter. Although EPA did not request the State to 
address the above issues in exactly the same manner as requested by 
Petitioners, EPA does believe that all the concerns have been addressed 
satisfactorily. Therefore, it is EPA's position that the Petition to 
Reopen the Standing Issue has been rendered moot.
    A Motion to Deny the Petition was filed April 9, 1996, on behalf of 
the Texas title V Planning Committee. Movants pleaded that the comment 
period of 120 days should be sufficient and that it has been over five 
months since that lengthy comment period ended. They also disagree that 
any of the information is new and that reopening of the comment period 
would be prejudicial to the commenters that prepared and submitted 
their comments under the October 5, 1995, deadline. Nevertheless, if 
EPA decides to consider the Petitioners' allegations either officially 
or unofficially, they ask that they be notified and provided an 
opportunity to respond to the merits of the Petition. The EPA again 
believes that the Motion to Deny the Petition has been rendered moot by 
EPA's earlier actions of requiring a revised AG Opinion and a TNRCC 
letter.
    Both Petitioner and Movant will have the opportunity to provide 
their comments on the merits of EPA's positions on the laws enacted in 
the 1995 legislative session during the 1997 legislative session, the 
TNRCC's corrective rulemaking public comment period, and EPA's comment 
period on the corrective Texas title V program submittal.
    Petitioners raised another issue of concern but did not 
specifically request a reopening of the comment period on it. The issue 
concerned TNRCC's laws and procedures governing public availability of 
emissions data. This area will be reviewed by EPA during the State's 
rulemaking process, and EPA will determine if rule revisions and/or a 
Program Implementation Agreement specific to confidentiality are 
necessary for full approval.

D. Final Action

    The EPA is promulgating source category-limited interim approval of 
the Operating Permits program submitted by the State on September 17, 
1993, and supplemental submittals on October 28, 1993, and November 12, 
1993. The submittals have been reviewed for adequacy to meet the 
requirements of 40 CFR part 70. The results of this review are included 
in the updated technical support document, which will be available in 
the docket in the locations noted above. The submittal has adequately 
addressed all 11 elements required for interim approval as discussed in 
part 70. However, there are inconsistencies between the submittal and 
the part 70 regulations which have been generally discussed in this 
notice and are described in greater detail in the June 7, 1995, notice. 
These inconsistencies involve the Texas permit regulation and program 
implementation particularly with regard to applicability, permit 
application requirements, and permit issuance and revisions. It is 
essential that all the inconsistencies specifically identified in the 
June 7, 1995, notice be remedied by the State prior to EPA granting 
full approval of the State's Operating Permits program.
    The part 70 revisions are projected to be promulgated in the fall 
of 1996. These revisions may in some respects be used as the criteria 
for granting full approval and may require the State to make regulatory 
and statutory changes.
    The scope of the Texas part 70 program approved in this notice 
applies to all part 70 sources (as defined in the approved program) 
within the State of Texas, except any sources of air pollution over 
which an indian tribe has jurisdiction. See, e.g., 59 FR 55813, 55815-
55818 (November 9, 1994). The term ``indian tribe'' is defined under 
the Act as ``any indian tribe, band, nation, or other organized group 
or community, including any Alaska Native village, which is Federally 
recognized as eligible for the special programs and services provided 
by the United States to indians because of their status as indians.'' 
See section 302(r) of the CAA; see also 59 FR 43956, 43962 (August 25, 
1994); 58 FR 54364 (October 21, 1993).
    Requirements for approval, specified in 40 CFR 70.4(b), encompass 
section 112(l)(5) requirements for approval of a program for delegation 
of section 112 standards as promulgated by EPA as they apply to part 70 
sources. Section 112(l)(5) requires that the State's program contain 
adequate authorities, adequate resources for implementation, and an 
expeditious compliance schedule, which are also requirements under part 
70. Therefore, EPA is also promulgating approval under section 
112(l)(5) and 40 CFR 63.91 of the State's program for receiving 
delegation of

[[Page 32699]]

section 112 standards that are unchanged from Federal standards as 
promulgated. This program for delegations only applies to sources 
covered by the part 70 program.
    This interim approval, which may not be renewed, extends until July 
27, 1998. During this interim approval period, the State of Texas is 
protected from sanctions, and EPA is not obligated to promulgate, 
administer, and enforce a Federal Operating Permits program in the 
State of Texas. Permits issued under a program with source category-
limited interim approval have full standing with respect to part 70, 
and the one year time period for submittal of permit applications by 
subject sources begins upon the effective date of this interim 
approval. The State's transition schedule requires the State to take 
final action on applications for 400 sites each of the first two years, 
1,000 sites the third year, and 600 sites each of the last two years.
    If Texas fails to submit a complete corrective program for full 
approval by January 26, 1998, EPA will start an 18-month clock for 
mandatory sanctions. If Texas then fails to submit a corrective program 
that EPA finds complete before the expiration of that 18-month period, 
EPA will apply sanctions as required by section 502(d)(2) of the Act, 
which will remain in effect until EPA determines that the State of 
Texas has corrected the deficiency by submitting a complete corrective 
program.
    If EPA disapproves Texas' complete corrective program, EPA will 
apply sanctions as required by section 502(d)(2) on the date 18 months 
after the effective date of the disapproval, unless prior to that date 
Texas has submitted a revised program and EPA has determined that it 
corrected the deficiencies that prompted the disapproval.
    In addition, discretionary sanctions may be applied where warranted 
any time after the expiration of an interim approval period if the 
State of Texas has not timely submitted a complete corrective program 
or EPA has disapproved its submitted corrective program. Moreover, if 
EPA has not granted full approval to the Texas program by the 
expiration of this interim approval and that expiration occurs after 
November 15, 1995, EPA must promulgate, administer, and enforce a 
Federal permits program for the State of Texas upon interim approval 
expiration.

III. Administrative Requirements

A. Docket

    Copies of the State's submittal, other information relied upon for 
the final source category-limited interim approval, including the 27 
public comment letters received and reviewed by EPA on the proposal, 
and information referenced in this notice, are contained in docket 
number OPP-7-9-1 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 final source 
category-limited interim approval. The docket is available for public 
inspection at the location listed under the ADDRESSES section of this 
document.

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 section 502 of the Act do not create any 
new requirements, but simply address Operating Permits programs 
submitted to satisfy the requirements of 40 CFR part 70. Because this 
action does not impose any new requirements, it does not have a 
significant impact on a substantial number of small entities.

D. Unfunded Mandates

    Under Section 202 of the Unfunded Mandates Reform Act of 1995, 
signed into law on March 22, 1995, EPA must prepare a budgetary impact 
statement to accompany any proposed or final rule that includes a 
Federal mandate that may result in estimated costs to State, local, or 
tribal governments in the aggregate; or to the private sector, of $100 
million or more. Under Section 205, EPA must select the most cost-
effective and least burdensome alternative that achieves the objectives 
of the rule and is consistent with 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.
    The EPA has determined that the approval action promulgated today 
does not include a Federal mandate that may result in estimated costs 
of $100 million or more to either State, local, or tribal governments 
in the aggregate, or to the private sector. This Federal action 
approves pre-existing requirements under State or local law, and 
imposes no new Federal requirements. Accordingly, no additional costs 
to State, local, or tribal governments, or to the private sector, 
result from this action.

List of Subjects in 40 CFR Part 70

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Intergovernmental relations, Operating permits, 
Reporting and recordkeeping requirements.

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

    Dated: June 13, 1996.
Jane N. Saginaw,
Regional Administrator (6RA).

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

PART 70--[AMENDED]

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

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

    2. Appendix A to part 70 is amended by adding the entry for the 
State of Texas in alphabetical order to read as follows:

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

* * * * *

Texas

    (a) The TNRCC submitted its Operating Permits program on 
September 17, 1993, and supplemental submittals on October 28, 1993, 
and November 12, 1993, for approval. Source category-limited interim 
approval is effective on July 25, 1996. Interim approval will expire 
July 27, 1998. The scope of the approval of the Texas part 70 
program excludes all sources of air pollution over which an Indian 
Tribe has jurisdiction.
    (b) (Reserved)
* * * * *
[FR Doc. 96-16126 Filed 6-24-96; 8:45 am]
BILLING CODE 6560-50-P