[Federal Register Volume 61, Number 146 (Monday, July 29, 1996)]
[Rules and Regulations]
[Pages 39335-39343]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-19091]


-----------------------------------------------------------------------


ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 70

[TN-96-01; TN-MEMP-96-01; FRL-5542-4]


Clean Air Act Final Interim Approval of Operating Permits 
Programs; State of Tennessee and Memphis-Shelby County, Tennessee

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final interim approval.

-----------------------------------------------------------------------

SUMMARY: EPA is promulgating interim approval of the operating permit 
programs submitted by the State of Tennessee on behalf of the Tennessee 
Department of Environment and Conservation and the Memphis-Shelby 
County Health Department for the purpose of complying with Federal 
requirements which mandate that authorized permitting authorities 
develop, and submit to EPA, programs for issuing operating permits to 
all major stationary sources and to certain other sources.

EFFECTIVE DATE: August 28, 1996.

ADDRESSES: Copies of the State of Tennessee and the Memphis-Shelby 
County submittals and the other supporting information used in 
developing the final interim approval are available for inspection 
during normal business hours at the following location: U.S. 
Environmental Protection Agency, Region 4, 345 Courtland Street, NE., 
Atlanta, GA 30365. Interested persons wanting to examine these 
documents, contained in EPA dockets numbered TN-96-01 and TN-MEMP-96-
01, should make an appointment at least 24 hours before the visiting 
day.

FOR FURTHER INFORMATION CONTACT: Kelly Fortin, Title V Program 
Development Team, Air Programs Branch, Air Pesticides & Toxics 
Management Division, U.S. Environmental Protection Agency, Region 4, 
345 Courtland Street, NE., Atlanta, GA 30365, (404) 347-3555, Ext. 
4223.

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 the implementing regulations at 40 
Code of Federal Regulations (CFR) part 70 require that permitting 
authorities 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. If the program 
submission is materially changed during the one-year review period, 40 
CFR 70.4(e)(2) allows EPA to extend the review period for no more than 
one year following receipt of the additional materials.
    EPA received the State of Tennessee's (``the State'') title V 
operating permit program submittal on November 10, 1994. The State 
requested, under the signature of the Tennessee Governor's designee, 
approval of its operating permit program with full authority to 
administer the program in ninety-one of the State's ninety-five 
counties. Four of the State's counties (Shelby, Davidson, Hamilton, and 
Knox) are regulated by local air pollution control agencies operating 
under certificates of exemption issued pursuant to Tennessee Code 
Annotated (T.C.A.) Section 68-201-115. The State's jurisdiction also 
does not extend to sources of air pollution over which an Indian Tribe 
has jurisdiction. The State of Tennessee supplemented its initial title 
V program submittal on December 5, 1994, August 8, 1995, January 17, 
1996, January 30, 1996, February 13, 1996, April 9, 1996, June 4, 1996, 
June 12, 1996, July 3, 1996, and July 15, 1996. Because the August 8, 
1995 supplement materially changed the State's title V program 
submittal, EPA extended the one-year review period.
    On June 26, 1995, EPA received the Memphis-Shelby County (``the 
County'') title V operating permit program submittal. The State 
requested, under the signature of the Tennessee Governor's designee, 
approval of the County's program on behalf of the Memphis-Shelby County 
Health Department. The Memphis-Shelby County Health Department has 
authority to administer the operating permit program in all areas of 
Shelby County, Tennessee, including the incorporated municipalities of 
Arlington, Bartlett, Collierville, Germantown, Lakeland, Memphis, and 
Millington. The County's jurisdiction does not extend to sources of air 
pollution over which an Indian Tribe has jurisdiction. The County 
supplemented its initial program on August 22, 1995, August 23, 1995, 
August 24, 1995, January 29, 1996, February 7, 1996, February 14, 1996, 
March 5, 1996, and April 10, 1996.
    EPA reviews title V operating permit programs pursuant to section 
502 of the

[[Page 39336]]

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 November 15, 1995, or by the end of an interim program, it 
must establish and implement a Federal operating permit program for 
that State or local agency.
    On March 11, 1996, EPA proposed interim approval of the State of 
Tennessee and Memphis-Shelby County title V operating permit programs. 
See 61 FR 9661. The March 11, 1996 notice also proposed approval of the 
State and County interim mechanisms for implementing section 112(g) and 
for delegation of section 112 standards and programs that are unchanged 
from the Federal rules as promulgated. Public comment was solicited on 
these proposed actions. EPA's detailed response to the comments is 
contained in the Response to Comment Document, which can be found in 
the dockets at the address given above. In this document, EPA is taking 
final action to promulgate interim approval of the State of Tennessee 
and Memphis-Shelby County operating permit programs.

II. Final Action and Implications

A. Analysis of Approval Action and Response to Public Comments

    On March 11, 1996, EPA proposed interim approval of the State of 
Tennessee and Memphis-Shelby County title V operating permit programs. 
See 61 FR 9661. The program elements receiving approval in this action 
are unchanged from those discussed in the proposal notice and continue 
to substantially meet the requirements of title V and part 70. For 
detailed information on EPA's analysis of the State and County program 
submittals, please refer to the Federal Register notice cited above and 
to the technical support documents (TSD) contained in the dockets at 
the address noted above.
    EPA received seven letters during the 30-day public comment period 
held on the proposed interim approval of the State and County programs. 
Comments were received from the following agencies, companies and 
firms: TENNECO Packing; the Tennessee Department of Environment and 
Conservation; the Department of Energy, Oak Ridge Operations Office; 
Eastman Chemical Company; the Memphis Shelby County Health Department; 
the Tennessee Association of Business; and Tuke Yopp & Sweeney, 
Attorneys.
    All of the comments received during the public comment period were 
reviewed and considered by EPA prior to taking this final action. The 
original comment letters can be found in the dockets for this action, 
which are available at the address given above. EPA's response to the 
comments can be found in the Response to Comment Document, which is 
part of the dockets. In response to the comments, a few of the 
conditions for full program approval discussed in the proposal notice 
are being clarified or revised and are discussed below.
    Both the State and County addressed each of EPA's nine proposed 
interim approval issues in their comment letters and in most cases 
provided proposed language changes to address the interim approval 
issue and/or a commitment to adopt the necessary changes. EPA 
appreciates the State's and County's responses on these issues and will 
continue to work with these agencies to facilitate the adoption of 
regulatory changes necessary for full approval.
1. Certification of Compliance With Applicable Requirements
    Pursuant to 40 CFR 70.5(c)(9), a certification of compliance is a 
binding, regulatory requirement upon a source subject to title V. While 
the State's and County's application forms require a certification of 
compliance, the regulatory provisions of both programs do not 
specifically require the permit application to contain a compliance 
certification. As a condition of full approval, EPA requested that the 
State and County clarify in supplemental legal opinions that a source 
submitting an application for a title V permit is legally obligated to 
certify its compliance status with regards to all applicable 
requirements. Alternatively, the State and County could revise their 
regulations to directly incorporate this requirement.
    On April 9, 1996, the State submitted to EPA, as part of the 
State's response to EPA's proposal notice, a legal opinion supporting 
the State's operating permit application-based compliance certification 
approach as a method resulting in a binding, legally enforceable 
compliance certification. As such, EPA is removing the proposed interim 
approval issue regarding compliance certification for the State of 
Tennessee.
    This interim approval issue remains unchanged for Shelby County. 
The County indicated in their comment letter, dated April 10, 1996, 
that the County would develop a opinion letter on this issue and that 
they expect a conclusion similar to that of the State would be reached.
2. Insignificant Activities
    In the March 11, 1996 proposed interim approval notice, EPA 
discussed interim approval issues related to the State and County 
``exemptions'' rule, 1200-3-9-.04, that was included in the initial 
State and County title V program submittals. Until recently, EPA was 
unaware that when the State and County supplemented rule 1200-3-9-.04, 
in August of 1995, with a new subparagraph 1200-3-9-.04(5), entitled 
``Major Source Operating Permits Insignificant Emission Units,'' that 
the original subparagraphs 1200-3-9.04(1)-.04(4) were revised to 
exclude their applicability to the State and County title V programs. 
Because these paragraphs are no longer applicable to the State and 
County title V programs and are no longer State effective rules, EPA is 
withdrawing those interim approval issues related to subparagraphs 
1200-3-9-.04(1)-(4).
    EPA received several comments regarding the proposal to list 
certain aspects of the State's insignificant activities rule as grounds 
for interim approval. These comments addressed the ``gatekeeper'' 
issues regarding the structure of the State's exemptions, the list of 
exempted activities, and the State's exemptions from permit revision 
procedures.
    Regarding permit revision procedures, EPA proposed to require the 
State and County to eliminate the provisions in subparagraph 1200-3-9-
.04(5)(h) which would exempt insignificant activities from permit 
revision procedures. One commenter asserted that this exemption is 
appropriate in light of recent revisions that EPA has proposed to part 
70, and that it is therefore premature for the State to change its 
rules until changes to part 70 are finalized. EPA does not agree that 
this provision of the State's rules finds support in recent proposed 
revisions to part 70, since that proposal does not contemplate outright 
exemptions from the need for a permit revision for changes that trigger 
applicable requirements. However, EPA has stated elsewhere that it 
shares concerns regarding the need for separate rulemakings to address 
interim approval deficiencies and changes to part 70. As stated in a 
memorandum issued June 13, 1996, EPA plans to allow for the granting of 
extensions for interim approval periods so that these rulemakings can 
be combined. If this occurs, the State and County should be able to 
combine rulemakings as it requested.

[[Page 39337]]

    Regarding the list of insignificant activities in the State's 
rules, EPA proposed that the State and County must either demonstrate 
that exclusion from applications of activities on the list would not 
interfere with the determination or imposition of applicable 
requirements, or else impose an emissions cap on the activities that 
would be eligible for exclusion. One commenter asserted that EPA should 
not require such a demonstration, since the State's rule has the 
appropriate ``gatekeeper'' providing that activities may not be 
excluded from the application if they are subject to an applicable 
requirement. The commenter pointed out that, since the effect of this 
gatekeeper is that sources will always have to make the determination 
that a listed activity is in fact not subject to applicable 
requirements, it is inappropriate to require the State to make a 
demonstration of non-applicability at the program approval stage.
    EPA agrees that the gatekeeper language in 70.5(c), to the extent 
it is reflected in the State's rule, should function in this manner. 
Notwithstanding the existence of an insignificant activities list, a 
source remains obliged to submit an application that properly accounts 
for all applicable requirements, even where units subject to 
requirements can be found on the list.1 Given that applicable 
requirements may change, this will to some extent always be a 
situation-specific exercise, and EPA does not believe it appropriate to 
require States to show at program approval that conflicts between 
applicable requirements and activities listed as insignificant could 
never arise. At the same time, however, EPA believes that insignificant 
activities lists should avoid the potential for confusion created when 
an activity that is plainly subject to an applicable requirement is 
included. In the TSD for the proposed approval, EPA noted instances 
where it believes such a conflict exists, and other instances where the 
listed activities are so vaguely described that conflicts with 
applicable requirements appear likely. EPA believes that where problems 
such as these can be identified at the time of program approval, their 
correction should be a condition for receiving full approval.
---------------------------------------------------------------------------

    \1\ As EPA explained in its first ``White Paper'' guidance, this 
obligation to account for all applicable requirements in the 
application does not necessarily entail a description of every 
emissions unit that is subject. The more ``generic'' the 
requirement, the less need there is for a detailed description of 
the subject emissions units. For further explanation, see the White 
Paper guidance on streamlined treatment of applications.
---------------------------------------------------------------------------

    There is more than one way to remedy this deficiency. As suggested 
in the proposal, the State may be able to retain its activities list as 
is, but demonstrate that the listed items (at least those about which 
EPA is concerned) do not in fact conflict with applicable requirements. 
Preliminarily, EPA believes such a demonstration would have to account 
for the size of these activities in terms of potential emissions. One 
commenter pointed out that such a demonstration would be burdensome, 
and that the applicability of requirements frequently does not depend 
on size of the emissions unit. EPA does not rule out that such a 
demonstration might be made in a manner that does not quantify 
emissions. Whether this is possible will depend on the activity and the 
applicable requirements potentially implicated. EPA is willing to work 
with the State to arrive at a satisfactory method for such 
demonstrations.
    Another alternative proposed by EPA was that the State could impose 
an emissions cap on the listed activities. In response to the comment 
that the applicability of requirements does not necessarily depend on 
the potential emissions, EPA notes that this is a valid point, and one 
which underscores the need for appropriate gatekeeper language that 
obliges the source to make a determination of applicability 
notwithstanding the listing of an activity by the State as 
insignificant, or, for that matter, the use of a generic insignificant 
activities threshold like that found in Sec. 1200-3-9-.04(5)(a)(4)(i). 
Again, EPA's main objection to activities on the State's list were that 
several appeared on their face to implicate applicable requirements. 
EPA believes a reasonable approach for limiting the confusion that 
could result from this situation is to impose an emissions cap which, 
in combination with the appropriate gatekeeper language, would help 
ensure that applicable requirements are accounted for in the 
application and permit. Again, EPA is not mandating this as the only 
acceptable approach to resolving problems it perceives with the 
existing list.
    EPA's proposal for a quantification of emissions from the State, 
and the alternative for a tons per year cap, was not solely due to a 
concern over conflicts with applicable requirements, but also 
encompassed a concern that some of the listed activities could be quite 
large, possibly approaching major source levels. EPA is maintaining its 
position that the State must demonstrate that very large activities are 
not being listed as insignificant. Here again, EPA is willing to work 
with the State to narrow the group of activities for which an emissions 
quantification would be necessary.
    The final insignificant activities issue concerns the State's 
exemption from monitoring, recordkeeping, reporting, and compliance 
certification requirements for insignificant activities that are 
subject only to generic SIP requirements. EPA proposed that the State 
must remove this exemption in order to receive full approval. 
Commenters objected to this condition, asserting, first, that this 
condition was inconsistent with guidance issued by EPA, second, that 
the State rules did not create an exemption but instead were designed 
to meet these part 70 requirements, and third, that elimination of this 
exemption would create an unreasonable permitting burden.
    The commenters are correct that EPA's guidance entitled ``White 
Paper #2'' does specifically address the issue of how title V permits 
may be written with regard to insignificant activities subject to 
generally applicable SIP requirements.2 Briefly summarized, the 
guidance states that it is within the permitting authority's discretion 
to decide that no additional monitoring (beyond that provided in the 
applicable requirement itself) will be required in the title V permit 
for insignificant activities subject to generally applicable 
requirements, if there is little or no likelihood that a violation 
could occur from those activities. 3 However, this is in part a 
factual finding, and so White Paper #2 contemplates that this 
discretion would be exercised on a permit by permit basis, where the 
finding can be reviewed in a context that is specific enough to be 
meaningful. EPA does not rule out that a State might structure an 
insignificant activities list narrowly enough that such a finding could 
be made programmatically, thereby allowing for a categorical exemption 
from part 70 monitoring, recordkeeping, and reporting. However, EPA 
does not find this to be the case for the current Tennessee 
insignificant activities provisions.
---------------------------------------------------------------------------

    \2\ ``Generally applicable requirements'' are those that apply 
universally to all emissions units and activities, as opposed to 
requirements that focus on a category of units or activities.
    \3\ If no monitoring is required, it would follow that the 
permit can also dispense with recordkeeping and reporting for those 
units, since there is no compliance data being regularly generated.
---------------------------------------------------------------------------

    EPA thinks that more often than not it will be the case that part 
70 monitoring, recordkeeping, and reporting requirements will not be

[[Page 39338]]

necessary where the State's insignificant activities are subject only 
to generally applicable requirements. Therefore, Tennessee and Shelby 
County may address this interim approval condition by modifying the 
exemption from these requirements to a regulatory presumption that the 
monitoring, recordkeeping, and reporting requirements will not apply in 
those instances, but leaving the State with the authority to prescribe 
those requirements as needed on a permit by permit basis.
    White Paper #2 does not suggest that activities subject to 
applicable requirements may be exempted from compliance certification, 
even on a permit by permit basis. To the contrary, White Paper #2 
discusses a streamlined way in which compliance certifications may be 
made for these types of activities.
    Industry commenters and the State assert that the provisions being 
discussed here do not create an exemption from compliance 
certification, but rather meet it by requiring a certification of 
compliance to accompany applications for initial permit issuance, 
revision, or renewal. EPA disagrees. Both title V and part 70 (at 
Sec. 70.6(c)(5)(i)) require certification of compliance to be performed 
at least annually. The commenters fail to explain how a certification 
of compliance which could be as infrequent as once every five years 
meets this requirement.
    EPA also disagrees with the view, strongly asserted by State and 
industry commenters, that title V permitting will be unreasonably 
burdensome if an exemption of the sort currently contained in 
Tennessee's rules is not allowed. The commenters may have been under 
the impression that a strict monitoring, recordkeeping, and compliance 
regime would be needed for each insignificant activity subject to a 
generally applicable requirement. However, EPA has clarified in White 
Paper #2 that part 70 does not mandate this result.
    Part 70 does require sources to certify compliance at least 
annually with all applicable requirements, even as they apply to 
smaller activities subject to generally applicable requirements. 
However, EPA fails to see how an additional burden is created when a 
source must certify compliance with a requirement that it would be 
legally obligated to comply with even in the absence of title V. A 
burden would result only if, as a result of part 70, sources were 
required to expend additional effort to determine compliance. As White 
Paper #2 explains, if no additional compliance data is being generated, 
then the source is not expending any additional effort to determine 
compliance, and the compliance certification will be based on available 
information. The commenters did not suggest anything to counter this 
reasoning.
    Since EPA proposed interim approval, the Ninth Circuit Court of 
Appeals has decided a case addressing this same issue. Western States 
Petroleum Association v. EPA, No. 95-70034 (June 17, 1996) (``WSPA''). 
Because of the similarities between that case and this action, EPA 
believes it appropriate to address here how it plans to respond to that 
decision. EPA wishes to emphasize that the WSPA decision is very 
recent, and that EPA is still in the process of developing a more 
thorough response that addresses other title V programs. However, given 
the State's desire to avoid imposition of the Federal Part 71 operating 
permits program, EPA decided it is in the State's best interest not to 
delay approval until a more thorough response could be articulated.
    The WSPA case concerned EPA's approval of the Washington State 
program, which also contained an exemption from permit content 
requirements for insignificant activities subject to generic SIP 
requirements. Industry petitioners challenged EPA's identification of 
this exemption as grounds for interim approval, asserting that such an 
exemption was allowed by part 70, and that EPA had acted inconsistently 
by approving other title V programs with similar provisions. The 9th 
Circuit did not opine on whether EPA's position was consistent with 
part 70. It did, however, find that EPA had acted inconsistently in its 
title V approvals, and had failed to explain the departure from 
precedent that it perceived in the Washington approval.
    EPA accepts the broader holding of the WSPA decision, namely, that 
it should act consistently in its program approvals or else explain any 
departures. However, EPA does not necessarily agree with the specific 
findings of the Court regarding inconsistent actions in other State 
programs. Nor does EPA necessarily agree that the Washington interim 
approval constituted a departure from the precedent established 
generally in the title V program approvals nationwide. Just as 
importantly, EPA maintains that part 70 does not allow for outright 
exemptions from permit content requirements for activities subject to 
applicable requirements. EPA therefore plans to respond to the WSPA 
decision by determining exactly where inconsistencies may exist among 
title V programs and by addressing these programs as necessary to 
arrive at a nationally consistent approach in harmony with the part 70 
rule.
    The WSPA court found that EPA had acted to approve title V programs 
with exemptions from permit content requirements in eight instances. 
EPA at this time does not necessarily agree with the Court's finding 
that each of these eight programs represents an inconsistency. In some 
cases, the Court based its conclusion on language in the State rules or 
in EPA's approval notice that was merely ambiguous or imprecise. EPA is 
now in the process of investigating whether these programs present true 
inconsistencies. EPA expects that in some cases this will be answered 
from the plain meaning of the State's regulations. Where the State 
regulations at issue are ambiguous, EPA will seek confirmation from the 
States themselves as to how these regulations have been interpreted.
    EPA's investigation, though still in the early stages, has revealed 
that of the eight States identified by the 9th Circuit as subject to 
inconsistent treatment by EPA, three can be eliminated from this list 
based on the language of the State rules alone. The North Dakota 
program regulations contain no exemption from permit content 
requirements for activities subject to applicable requirements, and so 
EPA's statement in the approval notice, read by the Court as suggesting 
otherwise, appears to have been merely an imprecise statement of the 
effect of the State's insignificant activity provisions. Similarly, 
since the Knox County, Tennessee, rules exempt insignificant activities 
from permit applications but not permit content, EPA's statements in 
that approval notice appear likewise overbroad.
    The Massachusetts program does, in fact, exempt certain listed 
insignificant activities as exempt from title V permitting altogether. 
In analyzing this provision under its Part 70 regulations, EPA assessed 
each of the listed activities and determined that they either named 
activities that are not subject to applicable requirements, or that any 
applicable requirement implicated by the activity was not designed to 
be implemented by addressing emission units in the permit (i.e., open 
burning). EPA has reexamined this assumption, and continues to believe 
it is accurate.
    The Florida program regulations also appear to exempt insignificant 
activities from title V permitting. The Court concluded that EPA had 
not identified this provision as grounds for interim approval. EPA does 
not necessarily agree. In EPA's view, in order to remedy

[[Page 39339]]

the deficiencies identified by EPA in the Florida interim approval 
notice, which included the State's failure to include gatekeeper 
language that assured the completeness of permit applications, the 
State would necessarily have to address the exemption created from 
permit content requirements. It follows that, to the extent Florida's 
regulations can be read as creating an exemption from permit content, 
this should also be considered grounds for interim approval. EPA has 
yet to reach a tentative conclusion regarding Ohio, Hawaii, North 
Carolina, or Jefferson County, KY, all identified by the Court as 
inconsistent with EPA's action in Washington State. EPA is including a 
somewhat more detailed explanation of the preceding points in the 
Response to Comments document for this action.
    The WSPA opinion states that:

    The EPA may not depart, sub silentio, from its usual rules of 
decision to reach a different, unexplained result in a single case * 
* * To the contrary, the EPA must clearly set forth the ground for 
its departure from prior norms so that we may understand the basis 
of the EPA's action and judge the consistency of that action with 
EPA's mandate. Slip Op., at 6990 (emphasis added).

EPA reads this to mean that a regulatory interpretation proffered by 
the Agency is not entitled to judicial deference if it conflicts with 
the de facto policy established through the Agency's actions on 
specific programs. That is, if the ``norms'' established through 
program approvals are other than the Agency's articulated policy, 
courts will not uphold the Agency's efforts to impose the latter.
    EPA acknowledges that its investigation may reveal a small number 
of inconsistencies on this issue among approved title V programs. 
However, EPA believes that these inconsistencies, even when construed 
liberally and aggregated together, still would represent a relatively 
minor set of deviations from the normal policy manifested in the vast 
majority of title V program approvals.
    The Court in WSPA appeared to base its specific holding of 
inconsistency on its assumption that EPA had approved eight programs 
with exemptions from permit content, but had acted to impose the policy 
against permit content exemptions in only two instances.4 This 
assumption is incorrect. At the time the Washington State program 
received interim approval, EPA had approved 22 State and 39 local 
programs, and had proposed approval of another 13 State and 13 local 
programs. As of today, EPA has approved 38 State and 55 local programs, 
and has proposed approval of another seven State and four local 
programs.5 Each program submitted to EPA necessarily addresses 
this issue (though most do so simply by providing for permit content 
language consistent with part 70--that is, by not affirmatively 
establishing any permit content exemption). Of 104 title V programs 
approved or in the process of approval, EPA believes that there are at 
most four with regulations that present inconsistencies on this issue.
---------------------------------------------------------------------------

    \4\ ``[T]he EPA has identified only two Title V programs that in 
fact apply permitting requirements to IEU's * * *.'' Slip Op., at 
6988.
    \5\ Altogether, 116 State and local agencies will have title V 
programs.
---------------------------------------------------------------------------

    EPA believes it is clear from these totals that its ``prior norm'' 
has been to grant full approval only where activities subject to 
applicable requirements are not exempted from the permit, and that its 
interpretation of part 70, as manifested both in its articulated policy 
and in actual program approvals, is consistent with the position being 
taken in today's action. In those few instances where inconsistencies 
are confirmed to exist, EPA plans to take appropriate action to follow 
the WSPA Court's mandate that it act consistently or explain any 
departures.
3. Applicable Federal Requirements
    Subparagraph 1200-3-9-.02(11)(b) in the State and County programs 
restricts the domain of applicable Federal requirements referenced in 
Paragraph 1200-3-9-.02(11) to those in effect on December 15, 1993. As 
a result, neither program ensures that title V permits will address all 
applicable requirements in accordance with 40 CFR 70.6(a). As specified 
in the proposal notice, subparagraph 1200-3-9-.02(11)(b) of the State 
and County regulations must be revised so that the definition of 
applicable requirements is consistent with part 70. The State and 
County regulations must provide that all applicable requirements, as 
defined in 40 CFR 70.2 and as provided generally in the Clean Air Act 
and part 70, are included in the permit such that they can be 
implemented and enforced by the State and County.
    EPA received several comments on this interim approval issue, and 
hence we believe further clarification is necessary. Several 
commenters, including the State and County, concurred that the 
indicated change was necessary for the program to meet the requirements 
of part 70. However, one commenter stated that the regulation could not 
be revised because the State has specific requirements that Federal 
regulations cannot be adopted by reference to the Federal rule citation 
and because all new Federal requirements must be adopted by the 
Tennessee Air Pollution Control Board before becoming State effective. 
Another commenter indicated that new Federal standards that have not 
yet been adopted into State regulation and delegated to the State for 
implementation are Federally enforceable but not State enforceable 
unless the source has signed a mutual agreement letter giving the State 
enforcement authority.
    The commenters' statements are likely correct for new Federal 
requirements that have not been adopted by the State and have not been 
incorporated into a title V permit. Many State laws require that 
Federal requirements be adopted by the State prior to implementation 
and enforcement or may prevent incorporation by reference. Such 
requirements are generally intended to provide the public and regulated 
community with adequate notice of the new requirements and to allow the 
State and regulated sources access to the State court system for 
enforcement and appeals. However, the title V permitting program also 
provides a mechanism for new Federal requirements to be implemented and 
enforced by a State or local agency. In fact, one of the goals of title 
V is to consolidate all of the various air pollution control 
requirements that a source is subject to into one document that can be 
enforced by the designated State or local air pollution control agency.
    EPA would like to clarify that, although title V requires that 
applicable requirements be enforceable as a matter of State law, it 
does not require that they be adopted by the State or municipality 
through rulemaking prior to incorporation into a title V permit. 
State's generally have broad legal authority to incorporate permit 
conditions into properly issued State (or local) permits. The public 
notice and comment procedures, required by the title V permitting 
programs, provide the mechanism to ensure that the permit terms are 
necessary and reasonable; these procedures are in a sense analogous to 
the notice and comment rulemaking procedures under State law, to which 
the commenter alluded. In States with this broad authority, any permit 
term or applicable requirement incorporated into a valid title V permit 
can be enforced by the permitting agency. In any case, correction of 
the applicable requirements definition to eliminate the cutoff date 
will not constitute the adoption into State law of any additional 
requirements. That adoption will only occur in a separate

[[Page 39340]]

process, either rulemaking or permit issuance, that should afford 
whatever level of process is due.
    In an opinion submitted to EPA, in support of the State's title V 
program, the Tennessee Attorney General indicated that the State of 
Tennessee has broad legal authority to incorporate all applicable 
Federal requirements, as defined by part 70, into the title V permit 
and to enforce those requirements. In a letter to EPA, dated June 12, 
1996, the State reaffirmed that the State does indeed have such 
authority and that during the interim approval period and until the 
necessary changes are made to the State regulations, the State will use 
such authority to include all applicable Federal requirements in the 
title V permit and to enforce those requirements.
4. Implementation of Section 112(g) During Transition Period
    As discussed in the proposal notice, on February 14, 1995, EPA 
issued an interpretive notice which outlines the Agency's revised 
interpretation of section 112(g) applicability (60 FR 8333). The notice 
postpones the effective date of section 112(g) until after EPA has 
promulgated a rule addressing that provision. The notice explains that 
EPA is considering whether the effective date of section 112(g) should 
be delayed beyond the date of promulgation of the Federal rule so as to 
allow permitting authorities time to adopt rules implementing the 
Federal rule, and that EPA will provide for any such additional delay 
in the final section 112(g) rulemaking.
    Unless and until EPA provides for an additional postponement of the 
section 112(g) effective date, the State of Tennessee and Memphis-
Shelby County must have Federally enforceable mechanisms for 
implementing section 112(g) during the period between promulgation of 
the Federal section 112(g) rule and adoption of implementing State and 
County regulations. Both program submittals contain Chapter 1200-3-31 
entitled ``Case by Case Determinations of Hazardous Air Pollutant 
Control Requirements'', which will serve as an adequate implementation 
vehicle during the transition period.
    The proposal notice also discussed that Chapter 1200-3-31 contains 
several discrepancies with respect to the provisions of section 112(g) 
of the Act. EPA proposed that as a condition of full title V program 
approval, the State and the County must correct the identified 
discrepancies. Several commenters indicated that, while they agreed 
that these changes would likely be necessary for approval of the 
State's and County's 112(g) programs, it is premature to condition the 
title V program approvals on these changes. EPA concurs with the 
commenters and is removing the proposed interim approval issues 
regarding the 112(g) transition period.
    EPA is approving the use of the State of Tennessee and Memphis-
Shelby County Chapter 1200-3-31 as a mechanism to implement section 
112(g) during the transition period between promulgation of EPA's 
section 112(g) rule and adoption by the State and County of rules 
specifically designed to implement section 112(g). This action does not 
approve Chapter 1200-3-31, in general, for purposes of 112(g), nor does 
it imply that Chapter 112(g) will be consistent with the final Federal 
112(g) rule, when it is promulgated. The duration of this approval is 
limited to 18 months following promulgation by EPA of the section 
112(g) rule to provide adequate time for the State and the County to 
adopt regulations consistent with the Federal requirements. This 
approval will be without effect if EPA decides in the final section 
112(g) rule that sources are not subject to the requirements of the 
rule until State or local regulations are adopted.
5. Conflict of Interest
    The Clean Air Act requires that States implementing and enforcing 
permitting programs approved pursuant to the Act must adopt 
requirements regarding conflict of interest that are at least as 
stringent as those set forth in the Act. CAA 128(a)(1)-(2), 129(e). 
State law must provide that no State board or body that approves 
operating permits, either in the first instance or upon appeal, shall 
be constituted of less than a majority of members who represent the 
public interest and who do not derive a significant portion of their 
income from persons subject to operating permits. State law must also 
provide that any potential conflicts of interest by members of such 
board or body or the head of any executive agency with similar powers 
be adequately disclosed. Pursuant to section 129(e) of the Act and 
section 70.4(b)(3)(iv) of the Federal operating permit regulation, 
State law must also provide that no permit for a solid waste 
incinerator unit may be issued by an agency, instrumentality or person 
that is also responsible, in whole or in part, for the design and 
construction or operation of the unit.
    In the State of Tennessee Attorney General's opinion that was 
submitted to EPA as part of the State's application for the title V 
program, and in a subsequent letter, dated September 29, 1994, the 
State made a commitment to submit a Board adopted rule that would 
satisfy the provisions of sections 128 and 129(e) of the Act to the 
Tennessee Attorney General for approval no later than March 30, 1995. 
In responding to a public comment addressing conflict of interest, it 
was brought to EPA's attention that the State conflict of interest 
rules are not yet State effective. While the necessary regulations were 
reviewed by EPA and adopted by the Board in April 1995, the rules have 
not yet been signed by the State Attorney General. The State has 
indicated to EPA that they expect such regulations to be made State 
effective in the near term. Hence, as a condition of full approval, the 
State must complete the adoption procedure and submit to EPA 
regulations that satisfy the provisions of section 128 and 129(e) of 
the Act.
6. Third Party Standing
    One commenter raised the issue of whether the State's title V 
program met the program approval requirements for standing, as outlined 
in Section 502(b)(6) of the Clean Air Act, 42 U.S.C. 7661a(b)(6). 
Standing is a critical component of the title V program. The United 
States Court of Appeals for the Fourth Circuit recently held, in the 
title V context, that States at a minimum, must extend judicial review 
rights to participants in the State public comment process who satisfy 
the standards for standing for the purposes of Article III of the U.S. 
Constitution. Commonwealth of Virginia v. Browner, 1996 U.S. App. LEXIS 
5334, *23 (March 26, 1996).
    In the commenter's opinion, the Tennessee Air Pollution Control 
Board's (``the Board'') relatively recent decision in In the Matter of 
Bayou Steel Corporation (Tennessee), Division of Air Pollution Control 
Case No. 95-0132, Docket No. 04.09-45-10788A (October 2, 1995), holds 
that the Board will require a party to demonstrate that the party had 
suffered an actual injury before it could ``appeal'' a permit to the 
Board, thereby effectively preventing third party ``appeals'' for 
permit actions.
    In response to the comment, EPA re-examined the State Attorney 
General's opinion submitted with the State's title V program. In 
addition, in a letter to the State dated May 22, 1996, EPA requested 
further clarification of the State law and interpretation of the 
State's standing requirements. The State's response to EPA's inquiries, 
dated June 4, 1996 and July 3, 1996, clarified the State's position on 
standing. These letters are available for public review in the dockets 
for this

[[Page 39341]]

action. In brief, the State made clear that the law of standing in 
Tennessee does anticipate situations where there is a threatened 
injury. Based on the State's responses to EPA's inquiries and the State 
Attorney General's opinion, EPA continues to believe that the State of 
Tennessee meets the title V requirements for standing. This analysis 
does not reflect an opinion on the State's Bayou Steel case.

B. Final Action

1. Title V Operating Permit Programs
    EPA is promulgating interim approval of the operating permit 
program submitted by the Tennessee Department of Environment and 
Conservation on November 10, 1994, and supplemented on December 5, 
1994, August 8, 1995, January 17, 1996, January 30, 1996, February 13, 
1996, April 9, 1996, June 4, 1996, June 12, 1996, July 3, 1996, and 
July 15, 1996. EPA is also promulgating interim approval of the title V 
program submitted by the Memphis-Shelby County Health Department on 
June 26, 1995, and supplemented on August 22, 1995, August 23, 1995, 
August 24, 1995, January 29, 1996, February 7, 1996, February 14, 1996, 
March 5, 1996, and April 10, 1996. The following changes must be made 
for full approval of the State and County programs.
a. Opt-in Provision for Exempted Sources
    Neither the State or the County program addressed 40 CFR 
70.3(b)(3), which allows exempted sources to apply for a permit. 
Justification of the omission of this part 70 provision is requested 
from the State and the County.
b. Certification of Compliance With Applicable Requirements
    The County must clarify in a supplemental legal opinion that the 
County's permitting program requires a source submitting an application 
for a title V permit to certify its compliance status with regards to 
all applicable requirements. In the alternative, the County regulations 
could be revised to directly incorporate this requirement.
c. Insignificant Activities
    The State and the County must complete the following:
    i. Remove the exemption from permitting requirements contained in 
Subparagraph 1200-3-9-.04(5)(f).
    ii. Revise subparagraph 1200-3-9-.04(5) to specify, consistent with 
40 CFR 70.5(c), that the application may not omit information needed to 
evaluate the fee amount required.
    iii. Revise Subparagraph 1200-3-9-.04(5)(c)(3) to eliminate the 
exemption from the certification requirements of 40 CFR 70.6(c) and to 
allow the permitting authority to require additional monitoring, 
recordkeeping, and reporting, as necessary, for sources subject to 
generally applicable SIP requirements.
    iv. Address EPA's concerns, as discussed in the TSD, about 
potential conflicts of certain activities and emission units, listed in 
Paragraph 1200-3-9-.04(5), with applicable requirements.
    v. Provide a description of the activities and emission units, and 
their associated emissions, listed in subparagraphs 1200-3-9-.04(5)(f) 
and (g), sufficient to allow EPA to determine that exclusion of the 
activities and units from permit applications will not interfere with 
the determination and imposition of applicable requirements and 
collection of fees. In the alternative, the State and the County could 
specifically limit or ``cap'' the emissions from the listed activities 
and emissions units to levels that are insignificant compared to the 
level of emissions that are required to be permitted or subject to 
applicable requirements.
    vi. Subparagraph 1200-3-9-.04(5)(h) must be revised, consistent 
with the criteria in 40 CFR 70.7 for administrative permit amendments 
and permit modifications, to eliminate the provisions that would exempt 
certain emission increases from permit amendment and modification 
requirements.
d. Applicable Federal Requirements
    Subparagraph 1200-3-9-.02(11)(b) in the State and County programs 
restricts the domain of Federal requirements referenced in paragraph 
1200-3-9-.02(11) to those in effect on December 15, 1993. Subparagraph 
1200-3-9-.02(11)(b) must be revised, consistent with part 70.6(a), to 
ensure that title V permits address all applicable requirements.
e. General Permits
    Subparagraph 1200-3-9-.02(11)(e)4, which provides for the issuance 
of general permits, allows a source to operate without a title V permit 
and not be subject to enforcement action. This provision must be 
revised in both the State and County programs to be consistent with the 
requirements of 40 CFR 70.6(d)(1).
f. Excess Emissions Due to Malfunction, Startup, and Shutdown
    The State must revise Chapter 1200-3-20 to make clear that it 
applies only to requirements in the Tennessee SIP. The revised rule 
must be submitted to EPA for approval in the SIP.
g. Permit Reopenings
    Subparagraph 1200-3-31-.04(1)(a) must be revised in both the State 
and County programs to be consistent with the permit reopening 
requirements in 40 CFR 70.7(f)(1)(i), which requires completion of 
permit reopenings not later than 18 months after promulgation of a new 
applicable requirement in cases of permits with remaining permit terms 
of three or more years.
h. Use of Title V Fees
    Memphis-Shelby County's fee provisions allow for use of operating 
permit fees for any purpose rather than solely for the funding of title 
V program activities, as required by 40 CFR 70.9(a). In addition, the 
County's program does not specify that the fees used to cover the 
direct and indirect costs of the operating permit program will be 
collected only from part 70 sources, as required by 40 CFR 70.9(a). 
Memphis-Shelby County, therefore, must revise its fee provisions to be 
consistent with the 40 CFR 70.9(a).
i. Conflict of Interest
    The State must adopt regulations, which at a minimum, satisfy the 
provisions of section 128 and 129(e) of the Act.
    The scope of the State and County's title V programs approved in 
this notice applies to all part 70 sources (as defined in the approved 
programs) within the ninety-one counties under the State's jurisdiction 
and in Shelby County, except any sources of air pollution over which an 
Indian Tribe has jurisdiction. See, e.g., 59 FR 55813, 55815-18 
(November 9, 1994).6
---------------------------------------------------------------------------

    \6\  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).
---------------------------------------------------------------------------

    This interim approval extends until August 31, 1998. During this 
interim approval period, the State of Tennessee and Memphis-Shelby 
County are protected from sanctions for failure to have a program, and 
EPA is not obligated to promulgate, administer, and enforce Federal 
operating permit programs in the State or the County. Permits issued 
under a program with interim approval have full standing with respect 
to part 70, and the one-year time period for submittal of permit 
applications by subject sources begins

[[Page 39342]]

upon the effective date of this final interim approval, as does the 
three-year time period for processing the initial permit applications.
    If the State or the County fail to submit complete corrective 
programs for full approval by March 2, 1998, EPA will start an 18-month 
clock for mandatory sanctions. If the State or the County fail to 
submit a corrective program that EPA finds complete before the 
expiration of that 18-month period, EPA will be required to apply one 
of the sanctions in section 179(b) of the Act, which will remain in 
effect until EPA determines that the State or the County has corrected 
the deficiency. If EPA disapproves the State or County corrective 
programs, and has not granted full approval within 18 months after the 
disapproval, the EPA must impose mandatory sanctions. In both cases, if 
the State or County has not come into compliance within 6 months after 
EPA applies the first sanction, a second sanction is required. In 
addition, discretionary sanctions may be applied where warranted any 
time after the expiration of an interim approval period. If EPA has not 
granted full approval to an operating permit program by the expiration 
of an interim approval and that expiration occurs after November 15, 
1995, EPA must promulgate, administer, and enforce a Federal operating 
permit program for that State or County.
2. Implementation of Section 112(g) During Transition Period
    EPA is approving the use of the State of Tennessee and Memphis-
Shelby County Chapter 1200-3-31 as a mechanism to implement section 
112(g) during the transition period between promulgation of EPA's 
section 112(g) rule and adoption by the State and County of rules 
specifically designed to implement section 112(g). This action does not 
approve Chapter 1200-3-31, in general, for purposes of 112(g), nor does 
it imply that Chapter 112(g) will be consistent with the final Federal 
112(g) rule, when it is promulgated. The duration of this approval is 
limited to 18 months following promulgation by EPA of the section 
112(g) rule to provide adequate time for the State and the County to 
adopt regulations consistent with the Federal requirements. This 
approval will be without effect if EPA decides in the final section 
112(g) rule that sources are not subject to the requirements of the 
rule until State or local regulations are adopted.
3. Program for Delegation of Section 112 Standards as Promulgated
    The requirements for title V program approval, specified in 40 CFR 
70.4(b), encompass section 112(l)(5) requirements for approval of an 
operating permit program for delegation of section 112 standards 
promulgated by EPA as they apply to title V sources. Section 112(l)(5) 
requires that operating permit programs contain adequate authorities, 
adequate resources for implementation, and expeditious compliance 
schedules, which are also requirements under part 70. Therefore, EPA is 
also approving, under section 112(l)(5) and 40 CFR 63.91, the State of 
Tennessee and Memphis-Shelby County programs for receiving delegation 
of section 112 standards and programs that are unchanged from the 
Federal rules as promulgated. In addition, EPA is delegating to the 
State and the County all existing standards and programs under 40 CFR 
parts 61 and 63 for part 70 sources and non-part 70 sources.7
---------------------------------------------------------------------------

    \7\ The radionuclide National Emission Standards for Hazardous 
Air Pollutant (NESHAP) is a section 112 regulation and therefore, 
also an applicable requirement under the State operating permits 
program for part 70 sources. There is not yet a Federal definition 
of ``major'' for radionuclide sources. Therefore, until a major 
source definition for radionuclide is promulgated, no source would 
be a major section 112 source solely due to its radionuclide 
emissions. However, a radionuclide source may, in the interim, be a 
major source under part 70 for another reason, thus requiring a part 
70 permit. EPA will work with the State in the development of its 
radionuclide program to ensure that permits are issued in a timely 
manner.
---------------------------------------------------------------------------

III. Administrative Requirements

A. Docket

    Copies of the State of Tennessee and Memphis-Shelby County 
submittals and other information relied upon for the final interim 
approval, including the comment letters received and reviewed by EPA on 
the proposal notice and EPA's response to these comments, are contained 
in the dockets numbered TN-96-01 and TN-MEMP-96-01 that are maintained 
at the EPA Region 4 office. The dockets are organized and complete 
files of all the information submitted to, or otherwise considered by, 
EPA in the development of this final interim approval. The dockets are 
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

    EPA's actions under section 502 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.

D. Unfunded Mandates Reform Act of 1995

    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.
    EPA has determined that the final interim approval action 
promulgated today does not include a Federal mandate that may result in 
estimated costs of $100 million or more to 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.
    Under section 801(a)(1)(A) of the Administrative Procedures Act 
(APAA) as amended by the Small Business Regulatory Enforcement Fairness 
Act of 1996, EPA submitted a report containing this rule and other 
required information to the U.S. Senate, the U.S. House of 
Representatives and the Comptroller General of the General Accounting 
Office prior to publication of the rule in today's Federal Register. 
This rule is not a ``major rule'' as defined by section 804(2) of the 
APA as amended.

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.


[[Page 39343]]


    Dated: July 16, 1996.
A. Stanley Meiburg,
Acting Regional Administrator.
    Part 70, title 40 of the Code of Federal Regulations is amended as 
follows:

PART 70--[AMENDED]

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

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

    2. Appendix A to part 70 is amended by adding paragraphs (a) and 
(e) to the entry for Tennessee to read as follows:

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

* * * * *
Tennessee
    (a) Tennessee Department of Environment and Conservation: submitted 
on November 10, 1994, and supplemented on December 5, 1994, August 8, 
1995, January 17, 1996, January 30, 1996, February 13, 1996, April 9, 
1996, June 4, 1996, June 12, 1996, July 3, 1996, and July 15, 1996; 
interim approval effective on August 28, 1996; interim approval expires 
August 31, 1998.
* * * * *
    (e) Memphis-Shelby County Health Department: submitted on June 26, 
1995, and supplemented on August 22, 1995, August 23, 1995, August 24, 
1995, January 29, 1996, February 7, 1996, February 14, 1996, March 5, 
1996, and April 10, 1996; interim approval effective on August 28, 
1996; interim approval expires August 31, 1998.
* * * * *
[FR Doc. 96-19091 Filed 7-26-96; 8:45 am]
BILLING CODE 6560-50-P