[Federal Register Volume 61, Number 169 (Thursday, August 29, 1996)]
[Rules and Regulations]
[Pages 45330-45336]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-21950]



[[Page 45330]]

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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 70

[AD-FRL-5559-1]


Clean Air Act Interim Approval of Operating Permits Program; 
South Coast Air Quality Management District, California

AGENCY: Environmental Protection Agency (EPA).

ACTION: Direct final rule.

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SUMMARY: The EPA is promulgating direct final interim approval of the 
title V operating permits program submitted by the California Air 
Resources Board, on behalf of the South Coast Air Quality Management 
District (South Coast or District), for the purpose of complying with 
federal requirements for an approvable state program to issue operating 
permits to all major stationary sources and to certain other sources. 
Today's action also promulgates direct final approval of South Coast's 
mechanism for receiving delegation of section 112 standards as 
promulgated.

EFFECTIVE DATE: This direct final rule is effective on October 28, 1996 
unless adverse or critical comments are received by September 30, 1996. 
If the effective date is changed, a timely notice will be published in 
the Federal Register.

ADDRESSES: Copies of the District's submittal and other supporting 
information used in developing this direct final rule are available for 
public inspection (docket number CA-SC-96-1-OPS) during normal business 
hours at the following location: Operating Permits Section (A-5-2), Air 
and Toxics Division, U.S. Environmental Protection Agency, Region IX, 
75 Hawthorne Street, San Francisco, CA 94105.

FOR FURTHER INFORMATION CONTACT: Ginger Vagenas (telephone 415/744-
1252), Operating Permits Section (A-5-2), Air and Toxics Division, U.S. 
Environmental Protection Agency, Region IX, 75 Hawthorne Street, San 
Francisco, CA 94105.

SUPPLEMENTARY INFORMATION:

I. Background and Purpose

A. Introduction

    Title V of the 1990 Clean Air Act Amendments (sections 501-507 of 
the Clean Air Act (Act)), and implementing regulations at 40 Code of 
Federal Regulations (CFR) part 70 (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 1 
year after receiving the submittal. The EPA's program review occurs 
pursuant to section 502 of the Act and the part 70 regulations, which 
together outline criteria for approval or disapproval. Where a program 
substantially, but not fully, meets the requirements of part 70, EPA 
may grant the program interim approval for a period of up to 2 years. 
If EPA has not fully approved a program by 2 years after the November 
15, 1993 date, or by the end of an interim program, it must establish 
and implement a federal program.
    The EPA is publishing this action without prior proposal because 
the Agency views this as a noncontroversial action and anticipates no 
adverse comments. However, in a separate document in this Federal 
Register publication, the EPA is proposing interim approval of the 
operating permit program submitted by South Coast should adverse or 
critical comments be filed.
    If EPA receives adverse or critical comments, this action will be 
withdrawn before the effective date by publishing a subsequent document 
that will withdraw the final action. All public comments received will 
then be addressed in a subsequent final rule based on this action 
serving as the proposed rule. The EPA will not institute a second 
comment period. Any parties interested in commenting on this action 
should do so at this time. If no such comments are received, the public 
is advised that this action will be effective on October 28, 1996.

B. Federal Oversight and Sanctions

    This interim approval, which may not be renewed, extends until 
October 29, 1998. During this interim approval period, South Coast is 
protected from sanctions, and EPA is not obligated to promulgate, 
administer and enforce a federal operating permits program in the 
District. Permits issued under a program with interim approval have 
full standing with respect to part 70, and the 1-year time period for 
submittal of permit applications by subject sources begins upon the 
effective date of this interim approval, as does the 3-year time period 
for processing the initial permit applications.
    If South Coast fails to submit a complete corrective program for 
full approval by April 29, 1998, EPA will start an 18-month clock for 
mandatory sanctions. If South Coast then fails 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 South Coast has corrected the deficiency by submitting a complete 
corrective program. Moreover, if the Administrator finds a lack of good 
faith on the part of the District, both sanctions under section 179(b) 
will apply after the expiration of the 18-month period until the 
Administrator determines that South Coast has come into compliance. In 
any case, if, six months after application of the first sanction, the 
District still has not submitted a corrective program that EPA has 
found complete, a second sanction will be required.
    If EPA disapproves South Coast's complete corrective program, EPA 
will be required to apply one of the section 179(b) sanctions on the 
date 18 months after the effective date of the disapproval, unless 
prior to that date South Coast has submitted a revised program and EPA 
has determined that it corrected the deficiencies that prompted the 
disapproval. Moreover, if the Administrator finds a lack of good faith 
on the part of the District, both sanctions under section 179(b) shall 
apply after the expiration of the 18-month period until the 
Administrator determines that South Coast has come into compliance. In 
all cases, if, six months after EPA applies the first sanction, the 
District has not submitted a revised program that EPA has determined 
corrects the deficiencies, 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 South 
Coast 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 District's program by the expiration of 
this interim approval, EPA must promulgate, administer and enforce a 
federal permits program for South Coast upon interim approval 
expiration.

II. Direct Final Action and Implications

A. Analysis of State Submission

    The analysis contained in this notice focuses on specific elements 
of South Coast's title V operating permits program that must be 
corrected to meet the minimum requirements of part 70. The full program 
submittal; the Technical Support Document (TSD), which contains a 
detailed analysis of the submittal; and other relevant materials are 
available for inspection as part of the public docket (CA-SC-96-1-OPS). 
The docket may be viewed during regular business hours at the address 
listed above.

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1. Support Materials
    South Coast's title V program was submitted by the California Air 
Resources Board (CARB) on December 27, 1993. The South Coast submittal 
included the following implementing and supporting regulations: 
Regulation XXX--Title V Permits; Rule 204--Permit Conditions; Rule 
206--Posting of Permit to Operate; Rule 210--Applications; Rule 301--
Permit Fees; Rule 518--Hearing Board Procedures for Title V Facilities; 
and Rule 219--Equipment not Requiring a Written Permit Pursuant to 
Regulation II. The EPA found the program to be incomplete on March 4, 
1994 because it lacked permit application forms. On March 6, 1995, the 
District submitted its forms and EPA deemed the program complete on 
March 30, 1995. On February 10, 1995, the District adopted a rule to 
implement title IV. EPA deemed the South Coast acid rain program 
acceptable on March 29, 1995 (see 60 FR 16127) and on April 11, 1995, 
it was submitted to EPA as part of the District's title V program. On 
August 11, 1995, the District amended the regulatory portion of its 
submittal. On September 26, 1995, EPA received from CARB, on behalf of 
the District, the revised Regulation XXX, revised Rule 518--Variance 
Procedures for Title V Facilities, and a new rule, Rule 518.1--Permit 
Appeal Procedures for Title V Facilities. Additional materials were 
received on April 24, 1996, including draft revised application forms, 
a demonstration of adequacy of the District's group processing 
provisions, and several additional rules, including the following, 
which are relied upon to implement the title V program: Rule 219--
Equipment not Requiring a Written Permit Pursuant to Regulation II, 
adopted August 12, 1994 (supersedes previously submitted version); Rule 
301--Permit Fees, adopted October 13, 1995 (supersedes previously 
submitted version); and Rule 441--Research Operations, adopted May 5, 
1976. In conjunction with its evaluation of the South Coast's title V 
operating permits program, EPA reviewed all of the rules, including 
Regulations XX and XIII, submitted by the District. While EPA is not 
specifically approving rules not directly relied upon to implement part 
70 as part of the District's operating permits program, changes to 
these rules will be reviewed by EPA to ensure implementation of the 
part 70 program is not compromised. See the TSD for a complete listing 
of rules submitted by the District. Rule 518.2, Federal Alternative 
Operating Conditions, adopted January 12, 1996, was also submitted and 
is discussed below under II.A.2.g.
    On May 6, 1996 application completeness criteria were received and 
on June 5, 1996 revised application forms were received. The District 
submitted a demonstration that shows South Coast will permit 60% of its 
title V sources and 80% of emissions attributable to title V sources 
within three years of program approval (see section II.A.2.d. below) 
along with a sample of facility permit application on May 23, 1996. 
Finally, on July 29, 1996, the District submitted revised application 
forms and completeness criteria.
    Enabling legislation for the State of California and the Attorney 
General's legal opinion were submitted by CARB for all districts in 
California and therefore were not included separately in South Coast's 
submittal. The South Coast submission now contains a Governor's letter 
requesting source category-limited interim approval, District 
implementing and supporting regulations, and all other program 
documentation required by section 70.4. An implementation agreement is 
currently being developed between South Coast and EPA.
2. Regulations and Program Implementation
    South Coast's title V implementing regulation, District Regulation 
XXX, was first adopted on October 8, 1993. EPA reviewed Regulation XXX 
both before and after rule adoption and identified numerous regulatory 
deficiencies. These deficiencies were communicated to South Coast in 
letters dated October 7, 1993, December 7, 1994, April 6, 1995, April 
13, 1995, and May 1, 1995. In response, South Coast revised Regulation 
XXX and Rule 518. The amended rules were adopted on August 11, 1995 and 
submitted to EPA by CARB, on behalf of the District, on September 26, 
1995. EPA is therefore evaluating and acting on the August 11, 1995 
version of Regulation XXX and Rule 518.
    South Coast's title V implementing regulations substantially meet 
the requirements of 40 CFR part 70, sections 70.2 and 70.3 for 
applicability; sections 70.4, 70.5, and 70.6 for permit content, 
including operational flexibility; section 70.7 for public 
participation and permit modifications; section 70.5 for criteria that 
define insignificant activities; section 70.5 for complete application 
forms; and section 70.11 for enforcement authority. Although the 
regulations substantially meet part 70 requirements, there are a few 
deficiencies in the program that are outlined under section II.B.1. 
below as interim approval issues and further described in the TSD.
    a. Variances. South Coast's Hearing Board has the authority to 
issue variances from requirements imposed by State and local law. See 
California Health and Safety Code sections 42350 et seq. In the legal 
opinion submitted for California operating permit programs, 
California's Attorney General states that ``[t]he variance process is 
not part of the Title V permitting process and does not affect federal 
enforcement for violations of the requirements set forth in a Title V 
permit.'' (Emphasis in original.)
    EPA regards the State and District variance provisions as wholly 
external to the program submitted for approval under part 70, and 
consequently, is not taking action on those provisions of State and 
local law. EPA has no authority to approve provisions of state or local 
law, such as the variance provisions referred to, that are inconsistent 
with the Act.
    A part 70 permit may incorporate, via part 70 permit issuance or 
modification procedures, the schedule of compliance set forth in a 
variance. However, EPA reserves the right to pursue enforcement of 
applicable requirements notwithstanding the existence of a compliance 
schedule in a permit to operate. This is consistent with 40 CFR 
Sec. 70.5(c)(8)(iii)(C), which states that a schedule of compliance 
``shall be supplemental to, and shall not sanction noncompliance with, 
the applicable requirements on which it is based.''
    EPA does not recognize the ability of a permitting authority to 
grant relief from the duty to comply with a federally enforceable part 
70 permit, except where such relief is granted through procedures 
allowed by part 70. A part 70 permit may be issued or revised to 
incorporate those terms of a variance that are consistent with 
applicable requirements.
    b. Group Processing Provisions. Part 70 provides for the group 
processing of minor permit modifications, providing the cumulative 
emissions increases from the pending changes do not exceed 10% of 
allowable emissions for the unit, 20% of the major source threshold, or 
5 tons per year (tpy), which ever is lower. Section 70.7(e)(3)(i)(B) 
allows the District to establish and EPA to approve alternative levels, 
if such alternative levels would reasonably alleviate severe 
administrative burdens and the individual processing of changes below 
the levels would yield trivial environmental benefits.
    South Coast allows cumulative emissions increases of up to 5 tons 
per year under its group processing

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provisions. This will in some cases exceed the levels set out in part 
70. For example, 20% of the major source threshold for NOX and VOC 
in the South Coast is 2 tons per year. Appendix C of the South Coast's 
April 24, 1996 submittal contains a demonstration that supports the use 
of a 5 ton per year cut-off for group processing. The District notes 
that its requirement that sources obtain a permit revision prior to 
making a change eliminates any environmental risk associated with 
delays allowed by group processing. It also points out that the ability 
to group several changes into one permit action alleviates the 
administrative burden of multiple rounds of processing and provides for 
a shorter period of time when a facility permit is in flux. EPA 
believes the District has met the requirements of 70.7(e)(3)(i)(B) and 
is therefore approving the alternative group processing level in the 
South Coast regulation.
    c. Provisions for Processing Certain Modifications Subject to Major 
NSR Via the Minor Permit Revision Track. The South Coast Air Quality 
Management District is the only extreme ozone nonattainment area in the 
country. Because of its nonattainment status, any increase of emissions 
of NOX or VOC from a discrete operation, unit or other pollutant 
emitting activity is a modification subject to major NSR. Such 
modifications are generally required by part 70 to undergo public 
review. Potentially several hundred to several thousand major NSR 
modifications can occur each year in the South Coast under applicable 
definitions of major source (10 tons per year) and major modification 
(any emissions increase). For perspective, a major modification in 
serious or severe ozone nonattainment areas is triggered by 25 tons of 
emissions accumulated over a five year period, and in most areas in the 
country, a major modification does not occur unless there is an 
emissions increase of 40 tons per year (tpy).
    The District has included in its rule provisions allowing 
modifications that result in cumulative (over the 5 year term of the 
permit) emissions increases of up to 40 pounds per day (about 7.3 tpy) 
of NOX and 30 pounds per day (about 5.5 tpy) of VOC to be 
processed via its minor permit revision procedures. South Coast does 
not allow applicants to implement minor permit revisions prior to final 
action by the District on the revision. Therefore, what distinguishes 
this treatment from the significant permit revision procedure that 
would otherwise be required is that there would be no public comment 
period during the permit issuance process. The public does have the 
opportunity, however, to review the revision after it is issued and to 
petition EPA to object to the permit. (See 70.8 and 3003(l).)
    EPA believes that this aspect of the South Coast program is 
approvable. Requiring full public participation procedures for 
modifications that result in emissions increases below the levels 
specified in the District's operating permits rule would be unworkable 
in the South Coast. The sheer number of notices that would be required 
if all major modifications were handled in this way would dilute 
attention that should be focused on the more significant of the changes 
that qualify as ``major.'' Although it makes sense that the scope of 
changes subject to prior public review should be broadest in areas with 
the greatest nonattainment problems, EPA believes that such a notice 
requirement ceases to yield a benefit, and may in fact be damaging to 
the purpose of a public review requirement, if applied to the smallest 
changes that would qualify as ``major'' in an extreme area. EPA further 
believes that the threshold levels for prior public review found in the 
South Coast program are reasonable, and will strike an appropriate 
balance between the need for broad public review on the one hand, and 
on the other, the administrative burden on the District and the 
quantitative limits on the public's ability to provide review that is 
meaningful. EPA notes that it has previously considered these 
``triggers'' for public notice in the context of the District's new 
source review program, and believes them to be adequate.
    EPA wishes to emphasize that this finding is unique to the South 
Coast. As the only extreme area in the nation, the South Coast District 
is subject to statutory constraints referred to above that affect NSR 
and title V. These constraints, which flow directly from the provisions 
of the CAA, result in both a volume and proportion of changes 
classified as ``major'' that distinguish the South Coast from all other 
title V programs.
    See section II.B.1.(3) below for a discussion of aspects of the 
South Coast permit modification procedures that are proposed for 
interim approval.
    d. Applicability and Duty to Apply: Two Phases of Permitting. While 
the ``title V facility'' definition in South Coast's title V program 
fully meets the applicability requirements of part 70, the District has 
allowed sources with actual emissions below certain thresholds to defer 
the obligation to apply for title V permits until no later than three 
and a half years after the program effective date (3000(b)(28), 
3001(b), and 3003(a)(3)). Ordinarily, part 70 requires sources to apply 
within one year of the program effective date. This deferral is 
effectively a request for source category-limited interim approval for 
sources with actual emissions below the given thresholds.
    EPA's policy on source category-limited interim approval is set 
forth in a document entitled, ``Interim Title V Program Approvals,'' 
signed on August 2, 1993 by John Seitz. In order to meet the interim 
approval criteria described in that memorandum, South Coast 
demonstrated that it would permit, during the first phase of the 
program, more than 60% of the District's title V sources and more than 
80% of the pollutants emitted by title V sources. This requirement is 
addressed in a letter from Pang Mueller, Senior Manager of Stationary 
Source Compliance, dated May 16, 1996. South Coast estimated that there 
are more than 1600 title V facilities located in the District and that 
the workload to permit all of those sources in the initial three year 
period would be ``excessively burdensome.'' The EPA believes that South 
Coast has demonstrated compelling reasons for a source category-limited 
interim approval. The Seitz memo also requires that source category-
limited interim approval be granted only if all sources will be 
permitted within five years of the date required for EPA final action. 
Because the South Coast program guarantees that all title V sources 
will be permitted within five years following program approval, and 
because South Coast has satisfied the criteria set forth in the August 
2, 1993 memorandum, EPA finds the District's program to be eligible for 
source category-limited interim approval.
    e. Enhanced New Source Review. South Coast's title V permit program 
provides for enhanced preconstruction review, an optional process that 
allows sources to satisfy both new source review and title V permit 
modification requirements at the same time. Any modification processed 
pursuant to South Coast's enhanced preconstruction review procedures 
may be incorporated into the title V permit as an administrative permit 
amendment. These enhanced procedures obviate the need to undergo two 
application, public notice, and permit issuance/revision processes for 
the same change. (See 3000(b)(1)(D).)
    f. Regional Clean Air Incentives Market (RECLAIM). RECLAIM is the 
South Coast's emissions-limiting economic incentives program. It 
targets facilities with four or more tons of NOX

[[Page 45333]]

or SOX emissions per year from permitted equipment for 
participation in a pollutant-specific market with the goal of reducing 
emissions at a significantly lower cost. The program subsumes fourteen 
SCAQMD Air Quality Management Plan (AQMP) control measures and is 
projected to reduce emissions by an equivalent amount. Sources are not, 
however, relieved from the duty to comply with new source review 
requirements and must comply with best available control technology 
requirements established pursuant to the District's new source review 
process.
    For the most part, RECLAIM facilities that are subject to 
Regulation XXX are treated the same as non-RECLAIM facilities. Certain 
aspects of the permit modification provisions do, however, set out 
different treatment for RECLAIM and non-RECLAIM facilities, and the 
regulation sets out different means for establishing applicability. EPA 
has evaluated the procedures for modifying part 70 operating permits 
that are issued to RECLAIM facilities along with the means for 
determining the applicability of Regulation XXX to RECLAIM facilities 
and has found them to be adequate for approval. For additional 
background and analysis, see Attachment J of the TSD.
    g. Alternative Operating Conditions. EPA has no authority to 
approve provisions of state or local law, such as the variance 
provisions discussed above, that are inconsistent with the Act. 
Districts, however, have always had the ability to make the terms of a 
variance federally enforceable by submitting a source-specific SIP 
revision to EPA that demonstrates, pursuant to section 110(l) of the 
Clean Air Act, that the proposed change will not interfere with any 
applicable requirement concerning attainment of the ambient air quality 
standards and reasonable further progress.
    As noted above, it is possible for a permitting authority to grant 
relief from the duty to comply with a federally enforceable part 70 
permit, where such relief is granted through procedures allowed by part 
70 and is consistent with applicable requirements, including section 
110(l) of the Act. South Coast has adopted and submitted Rule 518.2--
Federal Alternative Operating Conditions which, if approved, will 
enable the District to incorporate alternative operating conditions for 
certain requirements into part 70 permits. Alternative operating 
conditions are not available for federally promulgated rules, 
regulations, or permit conditions, including standards promulgated 
pursuant to section 111 or 112 of the Clean Air Act, title IV or title 
VI requirements, or requirements to obtain an operating permit or an 
authority to construct.
    Rule 518.2 is based on two fundamental concepts. First, in order to 
preserve the opportunity for public and EPA review, the SIP will be 
revised to incorporate Rule 518.2, which combines district variance 
procedures with the significant permit revision procedures of part 70. 
Second, to ensure that a federally enforceable alternative operating 
condition does not interfere with Clean Air Act progress or attainment 
requirements, the rule establishes an emissions bank. This bank 
provides the District with the ability to offset excess emissions 
resulting from the granting of an alternative operating condition.
    EPA believes Rule 518.2 meets the requirements of sections 110(l) 
and 193 of the Clean Air Act for approval in the SIP and is not 
inconsistent with the requirement under part 70 that operating permits 
must assure compliance with applicable requirements. EPA therefore will 
propose approval of this revision to the South Coast portion of the 
California State Implementation Plan in the near future.
3. Permit Fee Demonstration
    Section 502(b)(3) of the Act requires that each permitting 
authority collect fees sufficient to cover all reasonable direct and 
indirect costs required to develop and administer its title V operating 
permits program. Each title V program submittal must contain either a 
detailed demonstration of fee adequacy or a demonstration that 
aggregate fees collected from title V sources meet or exceed $25 per 
ton per year (adjusted annually based on the Consumer Price Index 
(CPI), relative to 1989 CPI). The $25 per ton amount is presumed, for 
program approval, to be sufficient to cover all reasonable program 
costs and is thus referred to as the ``presumptive minimum'' (40 CFR 
70.9(b)(2)(i)).
    South Coast has opted to make a presumptive minimum fee 
demonstration. By dividing the fees charged to facilities it believes 
will be subject to its title V program by those facilities' emissions, 
the District calculates its effective fee rate is $323 per ton of 
emissions. This amount is appreciably higher than the current 
presumptive minimum of $30.93.
4. Provisions Implementing the Requirements of Other Titles of the Act
    a. Authority and Commitments for Section 112 Implementation. South 
Coast has demonstrated in its title V program submittal adequate legal 
authority to implement and enforce all section 112 requirements through 
the title V permit. This legal authority is contained in the State of 
California enabling legislation and in regulatory provisions defining 
federal ``applicable requirements'' and requiring each permit to 
incorporate conditions that assure compliance with all applicable 
requirements. EPA has determined that this legal authority is 
sufficient to allow South Coast to issue permits that assure compliance 
with all section 112 requirements. For further discussion, please refer 
to the TSD accompanying this action and the April 13, 1993 guidance 
memorandum entitled, ``Title V Program Approval Criteria for Section 
112 Activities,'' signed by John Seitz.
    b. Authority for Title IV Implementation. On February 11, 1995, 
South Coast incorporated by reference part 72, the federal acid rain 
permitting regulations. The incorporation by reference was codified in 
Regulation XXXI. EPA determined Regulation XXXI to be acceptable on 
March 29, 1995 (See 60 FR 16127).

B. Proposed Interim Approval and Implications

1. Title V Operating Permits Program
    The EPA is promulgating direct final interim approval of the 
operating permits program submitted by the California Air Resources 
Board, on behalf of the South Coast Air Quality Management District, on 
December 27, 1993 and amended on March 6, 1995, April 11, 1995, 
September 26, 1995, April 24, 1996, May 6, 1996, May 23, 1996, June 5, 
1996, and July 29, 1996. Areas in which South Coast's program is 
deficient and requires corrective action prior to full approval are as 
follows:
    (1) California State law currently exempts agricultural production 
sources from permit requirements. CARB has requested source category-
limited interim approval for all California districts. In order for 
South Coast's program to receive full approval (and to avoid a 
disapproval upon the expiration of this interim approval), the 
California Legislature must revise the Health and Safety Code to 
eliminate the exemption of agricultural production sources from the 
requirement to obtain a permit.
    (2) Section 70.5(c) states that EPA may approve, as part of a state 
program, a list of insignificant activities and emissions levels which 
need not be included in permit applications. Section 70.5(c) also 
states that an application for a part 70 permit may not omit 
information needed to determine the

[[Page 45334]]

applicability of, or to impose, any applicable requirement, or to 
evaluate appropriate fee amounts. Section 70.4(b)(2) requires states to 
include in their part 70 programs any criteria used to determine 
insignificant activities or emission levels for the purpose of 
determining complete applications.
    Under part 70, a state must request and EPA may approve as part of 
that state's program the activity or emission level that the state 
wishes to consider insignificant. Part 70, however, does not establish 
appropriate emission levels for insignificant activities, relying 
instead on a case-by-case determination of appropriate levels based on 
the particular circumstances of the part 70 program under review. South 
Coast submitted an extensive list of insignificant activities in the 
form of Rule 219--Equipment Not Requiring a Written Permit Pursuant to 
Regulation II. The District did not provide criteria that were used to 
determine that the listed activities are appropriately treated as 
insignificant. The regulation does not ensure that activities to which 
non-general applicable requirements apply are excluded from the list of 
insignificant activities, nor does the program demonstrate that 
emissions from the listed activities are truly insignificant.
    While many of the listed activities do appear to be reasonable 
candidates for such treatment, some do not. For instance, paragraph 
(d)(2) of Rule 219 exempts most refrigeration units regardless of size. 
Such units, if they have a charge rate of 50 pounds or more of a Class 
I or II ozone-depleting compound, may be subject to unit-specific 
applicable requirements and could not, therefore, be considered 
insignificant. EPA believes that, for the insignificant activities 
provisions to be fully approvable, the list must not create confusion 
regarding the regulated community's obligation to provide all 
information needed to determine the applicability of, or to impose, any 
applicable requirement, nor may the list interfere with the permitting 
authority's obligation to issue permits that assure compliance with all 
applicable requirements.
    For interim approval, EPA is relying on certain provisions in 
Regulation XXX that affect the scope and usage of insignificant 
activities. Specifically, paragraph (b) of Rule 3003 requires that 
applicants shall submit ``* * * all information necessary to evaluate 
the subject facility and the application, including all information 
specified in 40 CFR 70.5(c), to determine the applicability of and to 
impose any regulatory requirement * * *.'' The application forms 
require the listing of all equipment that is exempt from permitting. In 
addition, Rule 3001(b), (c) and (d), and Rule 3000(b)(15) ensure that 
the source's potential to emit, which does not exclude unpermitted 
activities, will generally determine title V applicability.
    For full approval, South Coast must provide supporting criteria and 
revise its list of insignificant activities, as appropriate. The 
District must remove any activities from its list of insignificant 
activities that are subject to a unit-specific applicable requirement 
and adjust or add size cut-offs to ensure that the listed activities 
are truly insignificant. (See sections 70.4(b)(2) and 70.5(c).)
    (3) The South Coast rule (3005(b)(1)) allows the following types of 
changes, which are required under part 70 to be processed as 
significant permit modifications, to be processed under minor 
modification procedures:
    (1) NSPS and NESHAP (parts 60 and 61) modifications that result in 
emissions increases up to ``de minimis'' emissions thresholds (the de 
minimis levels are: HAP, VOC and PM10--5.5 tpy; NOX--7.3 tpy; 
SOX--11 tpy; and CO--40 tpy). (Any emissions increase resulting 
from an NSPS or NESHAP modification should be processed under the 
significant modification procedures);
    (2) Establishment of or changes to case-by-case emissions 
limitations, providing the changes do not result in emissions increases 
above the de minimis thresholds. (Part 70 requires that such actions 
must be processed as significant modifications, regardless of any 
resulting changes in emissions); and
    (3) Changes to permit conditions that the facility has assumed to 
avoid an applicable requirement, providing the changes do not result in 
emissions increases above the de minimis thresholds. (Part 70 requires 
that all such changes must be processed as significant modifications, 
regardless of any resulting changes in emissions.)
    The District must modify its program so that these changes will be 
subject to the procedural requirements of the significant modification 
track. (See 70.7(e)(2)(i)(3),(4), and (4)(A).)
    (4) Because the initial implementation of the South Coast program 
will not include all title V sources (see section II.A.2.d. above), the 
District is receiving a source category limited interim approval. The 
District's regulation, however, does include language that expands the 
applicability of the program after three years and ensures that all 
title V sources will be permitted within five years. Although this 
phase-in is considered to be an interim approval issue, no change to 
the regulation is required to resolve it.
    (5) The South Coast's group processing provisions are set out in 
paragraph (c) of Rule 3005. Subparagraph (c)(1)(B) provides that when 
emissions increases resulting from pending revisions exceed 5 tons per 
year for a given pollutant, the pending revisions must be processed. 
Rule 3005(c)(2), however, references 3000(b)(6) (South Coast's higher 
de minimis significant permit revision levels) when instructing the 
applicant of its responsibilities. This reference conflicts with 
3005(c)(1)(B) and must be amended. In order to properly implement its 
program, South Coast must adhere to the levels specified in 
3005(c)(1)(B).
    (6) The language in rule 3004(a)(3)(C) must be amended to conform 
with the part 70 language. It currently requires that the permit 
include ``periodic monitoring or recordkeeping * * * representative of 
the source's compliance for the term of the permit'' rather than ``with 
the terms of the permit.'' (See 70.6(a)(3)(i)(B).)
    (7) Rule 3004(a)(9) must be revised to specify that any trading of 
emissions increases and decreases allowed without changes to the permit 
must meet the requirements of the part 70 program. (See 
70.6(a)(10)(iii).)
    (8) The South Coast program must be amended to provide that a 
source that is granted a general permit shall be subject to enforcement 
action for operating without a permit if the source is later determined 
not to qualify for the conditions and terms of the general permit, 
regardless of any application shield provisions. (See 70.6(d)(1).)
    (9) 3002(g)(1) allows an emergency to constitute an affirmative 
defense if ``properly signed, contemporaneous operating logs or other 
credible evidence are kept at the facility.'' The rule must be amended 
to require that the logs or other evidence demonstrate that the 
conditions set out in the rule were met by the facility. (See 
70.6(g)(3).)
    (10) The definition of ``renewal'' in 3000(b)(22) must be modified 
to clarify that permits will be renewed at least every 5 years, 
regardless of whether renewal is necessary to incorporate new 
regulatory requirements.
    (11) Paragraph (g)(1) of Rule 3005 provides for Section 502(b)(10) 
changes (changes that violate an express permit term or condition). The 
South Coast rule appropriately limits the types of changes that can 
qualify for this treatment, except 3005(g)(1)(C)(i) excludes compliance 
plan requirements instead of compliance certification

[[Page 45335]]

requirements. The rule must be revised to state that changes that would 
violate compliance certification requirements are not allowed.
    (12) Paragraph (g) of Rule 3005 must be amended to specify that the 
District and the source must attach a copy of any notice of 502(b)(10) 
changes to the permit. (See 70.4(b)(12).)
    (13) Provisions must be added to Rule 3005(i) that specify the 
following: (1) Any change allowed under this section must meet all 
applicable requirements and shall not violate existing permit terms; 
(2) the source must provide contemporaneous notice to the District and 
EPA; and (3) the source must keep a record of the change. (See 
70.4(b)(14).)
    (14) Rule 3002(g) provides that, in addition to meeting the 
Regulation XXX requirements implementing 70.6(g), a source must comply 
with District Rule 430--Breakdown Provisions in order to avail itself 
of the affirmative defense set out in 70.6(g). Paragraph (5) of 70.6(g) 
states that the provisions of 70.6(g) are in addition to any emergency 
or upset provisions contained in any applicable requirement. Because 
Rule 430 is not SIP approved, however, it is not an applicable 
requirement. In order to resolve this issue, South Coast is required to 
either submit an approvable version of Rule 430 to EPA for inclusion in 
the SIP or to delete the reference to Rule 430. Note that the cross 
reference to Rule 430 included in 3002(g) does not alter the provisions 
of 70.6(g) and that Rule 430 is wholly external to the part 70 program.
    This interim approval, which may not be renewed, extends for a 
period of up to two years. During the interim approval period, South 
Coast is protected from sanctions for failure to have a program, and 
EPA is not obligated to promulgate a federal permits program in the 
District. 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 upon interim 
approval, as does the three-year time period for processing the initial 
permit applications.
    The scope of South Coast's part 70 program that EPA is acting on in 
this notice applies to all part 70 sources (as defined in the approved 
program) within South Coast's jurisdiction. The approved program does 
not apply to any part 70 sources over which an Indian tribe has 
jurisdiction. See, e.g., 59 FR 55813, 55815-18 (Nov. 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 (Aug. 25, 1994); 58 FR 54364 (Oct. 21, 
1993).
2. State Preconstruction Permit Program Implementing Section 112(g)
    The EPA has published an interpretive notice in the Federal 
Register regarding section 112(g) of the Act (60 FR 8333; February 14, 
1995) that postpones the effective date of section 112(g) until after 
EPA has promulgated a rule addressing that provision. The interpretive 
notice also 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 states 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 such an additional postponement of section 112(g), South 
Coast must be able to implement section 112(g) during the period 
between promulgation of the federal section 112(g) rule and adoption of 
implementing State regulations.
    For this reason, EPA is approving the use of South Coast's 
preconstruction review program as a mechanism to implement section 
112(g) during the transition period between promulgation of the section 
112(g) rule and adoption by South Coast of rules specifically designed 
to implement section 112(g). However, since the sole purpose of this 
approval is to confirm that the District has a mechanism to implement 
section 112(g) during the transition period, the approval itself will 
be without effect if EPA decides in the final section 112(g) rule that 
there will be no transition period. The EPA is limiting the duration of 
this approval to 18 months following promulgation by EPA of the section 
112(g) rule.
3. Program for Delegation of Section 112 Standards as Promulgated
    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 a 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 South Coast's program for receiving 
delegation of section 112 standards that are unchanged from federal 
standards as promulgated. California Health and Safety Code section 
39658 provides for automatic adoption by CARB of section 112 standards 
upon promulgation by EPA. Section 39666 of the Health and Safety Code 
requires that districts then implement and enforce these standards. 
Thus, when section 112 standards are automatically adopted pursuant to 
section 39658, South Coast will have the authority necessary to accept 
delegation of these standards without further regulatory action by the 
District. The details of this mechanism and the means for finalizing 
delegation of standards will be set forth in an implementation 
agreement between South Coast and EPA. This program applies to both 
existing and future standards but is limited to sources covered by the 
part 70 program.

III. Administrative Requirements

A. Docket

    Copies of South Coast's submittal and other information relied upon 
for this direct final action is contained in docket number CA-SC-96-1-
OPS 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 direct final rulemaking. 
The docket is available for public inspection at the location listed 
under the ADDRESSES section of this document.

B. 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.

C. Unfunded Mandates

    Under section 202 of the Unfunded Mandates Reform Act of 1995 
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA 
must prepare a budgetary impact statement to accompany any proposed or 
final rule that includes a federal mandate that may result in estimated 
costs to state, local, or tribal governments in the aggregate; or to 
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

[[Page 45336]]

statutory requirements. Section 203 requires EPA to establish a plan 
for informing and advising any small governments that may be 
significantly or uniquely impacted by the rule.
    EPA has determined that the approval action 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.

D. Small Business Regulatory Enforcement Fairness Act

    Under 5 U.S.C. 801(a)(1)(A) as added 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 5 
U.S.C. 804(2).

E. Executive Order 12866

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

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.

    Dated: August 9, 1996.
Felicia Marcus,
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 paragraph (dd) to the 
entry for California to read as follows:

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

* * * * *
    (dd) South Coast Air Quality Management District: submitted on 
December 27, 1993 and amended on March 6, 1995, April 11, 1995, 
September 26, 1995, April 24, 1996, May 6, 1996, May 23, 1996, June 5, 
1996 and July 29, 1996; approval effective on October 28, 1996 unless 
adverse or critical comments are received by September 30, 1996.
* * * * *
[FR Doc. 96-21950 Filed 8-28-96; 8:45 am]
BILLING CODE 6560-50-P