[Federal Register Volume 62, Number 7 (Friday, January 10, 1997)]
[Rules and Regulations]
[Pages 1387-1399]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-643]
=======================================================================
-----------------------------------------------------------------------
ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 70
[MI001; FRL-5674-1]
Clean Air Act Final Interim Approval of the Operating Permits
Program; Michigan
AGENCY: Environmental Protection Agency (EPA).
ACTION: Final interim approval.
-----------------------------------------------------------------------
SUMMARY: The EPA is promulgating interim approval of the operating
permits program submitted by the State of Michigan 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.
EFFECTIVE DATE: February 10, 1997.
ADDRESSES: Copies of the State's submittal and other supporting
information used in developing the final interim approval are available
for inspection during normal business hours at the following location:
EPA Region 5, Air and Radiation Division (AR-18J), 77 West Jackson
Boulevard, Chicago, Illinois 60604.
FOR FURTHER INFORMATION CONTACT: Beth Valenziano, Permits and Grants
Section (AR-18J), EPA, 77 West Jackson Boulevard, Chicago, Illinois
60604, (312) 886-2703. E-mail address: [email protected].
SUPPLEMENTARY INFORMATION:
I. Background and Purpose
Title V of the Clean Air Act Amendments of 1990 (title V), and the
implementing regulations at 40 Code of Federal Regulations (CFR) part
70 require that States develop and submit operating permits programs to
EPA by November 15, 1993, and that EPA act to approve or disapprove
each program within 1 year after receiving the submittal. The EPA's
program review occurs pursuant to section 502 of the Clean Air Act
(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
expiration of the interim approval period, it must establish and
implement a Federal program.
On June 24, 1996, EPA proposed interim approval of the operating
permits program for the State of Michigan. See 61 FR 32391. The EPA
received public comment from five organizations on the proposal and
compiled a Technical Support Document (TSD) responding to the comments
and briefly describing and clarifying aspects of the operating permits
program. In this document EPA is taking final action to promulgate
interim approval of the operating permits program for the State of
Michigan.
II. Final Action and Implications
A. Analysis of State Submission and Response to Public Comments
The EPA received comments on a total of 12 topics from five
organizations. The EPA's response to these comments as developed for
the response to comments TSD is included in this section.
1. Indian Country
The EPA proposed that the interim approval of Michigan's operating
permits program shall not extend to any sources of air pollution on
Indian lands, including lands within the exterior boundaries of any
Indian reservation in the State of Michigan. MDEQ commented that
Michigan's part 70 authority should extend to some lands within the
exterior boundaries of Indian reservations, and identifies a specific
[[Page 1388]]
source on an Indian reservation that the State believes is within its
jurisdiction. MDEQ states that it intends to develop legal arguments to
support its determination that lands within the exterior boundaries of
reservations that have been sold for non-tribal uses are within the
State's jurisdiction. MDEQ also states that it expects such sources to
submit operating permit applications in accordance with the State
regulations.
Because Michigan has not demonstrated the legal authority to
regulate sources in Indian country, including sources on non-Indian
owned fee lands within the exterior boundaries of Indian reservations,
the final interim approval of Michigan's part 70 program does not
extend to such sources. However, EPA will carefully consider any
evaluation Michigan submits in the future regarding State authority
over such sources. The EPA retains the authority to issue part 71
permits to all sources in Indian country until such time as EPA
approves a part 70 program. Part 71 application submittal deadlines for
Indian country are established in 40 CFR 71.4(b) and 40 CFR 71.5(a)(1),
and will be no later than November 15, 1998. Any sources located in
Indian country required to submit applications earlier than this date
will be notified in accordance with the requirements of part 71. The
EPA takes no position on the State seeking voluntary compliance with
State permitting requirements in Indian country.
2. Delegation of State Program to Local Governments
The proposed interim approval of Michigan's part 70 program
confirmed the State's authority to delegate the program to certain
county governments, such as Wayne County. MDEQ asked EPA to clarify
whether a delegation would require a part 70 program revision, and what
the timing and content of any required program revision would be.
Title V of the Act and the part 70 regulations specify the elements
of a State operating permits program. In addition to the criteria for
the permits themselves, these elements address various program
infrastructure and administration issues. Examples include the adequacy
of the agency's legal authorities and staffing. Thus, the delegation of
the program authorities to another agency would by its nature entail
revision of the State's part 70 program.
40 CFR 70.4(i) requires that program revisions be approved by EPA
before they become finally effective. However, EPA is developing a
program revision process that will meet the requirements of 40 CFR
70.4(i) while also providing continuity as States modify and update
their programs. Although the details of this process have yet to be
established, this process will focus on ongoing cooperation between the
State and EPA, with real-time evaluation of program revision efforts.
The EPA will work with Michigan as this process is developed so that
any program revision, including any delegation of the State program to
a local agency, can take advantage of this approach.
The content of a revised part 70 program submittal to EPA would
depend on the nature and scope of the actual delegation. The
information provided to EPA should address the changes and additions
that the delegation makes to the program that has already been approved
by EPA. The State should review the program submittal requirements in
40 CFR 70.4 and determine what elements are necessary to address the
delegation. For example, the submittal of State regulations would not
be necessary if they are not revised; however, the adoption of any
local regulations necessary for the delegation should be included in
the submittal. Similarly, a revised legal opinion from the Attorney
General would likely be needed to verify that the local agency has the
authority to carry out its part 70 program responsibilities established
by the delegation. The EPA will provide Michigan additional guidance as
necessary to address the program revision requirements for any
particular State delegation to a local agency.
3. Definition of Potential to Emit
As a condition of full approval, EPA proposed that Michigan must
revise its definition of ``potential to emit'' to require that limits
on potential to emit be federally enforceable. Two commenters noted
that a recent court case (Clean Air Implementation Project v. EPA, no.
96-1224 (D.C. Cir. June 28, 1996)) vacated the federally enforceable
requirement from the 40 CFR 70.2 definition of potential to emit. Both
commenters stated that this issue should be removed from Michigan's
list of interim approval issues. The EPA agrees with the commenters,
and has removed this issue as a condition of full approval. The EPA
intends to develop a rulemaking to address the enforceability
requirements on potential to emit limits for the title V program, the
New Source Review program, and the section 112 toxics program.
4. Research and Development (R&D) Activities
In the proposed interim approval of Michigan's part 70 program, EPA
acknowledged the State's regulatory provision that allows R&D
activities on the same contiguous site as manufacturing activities to
be treated as a separate source for purposes of determining operating
permit program applicability. Although EPA believes that R&D should be
treated as having its own industrial grouping for purposes of
determining major source status, EPA stated in the Michigan proposal
that separate treatment will not exempt R&D facilities in all cases.
This is because some R&D activities may be individually major, or
because they may be a support facility that makes significant
contributions to the product of a collocated major facility. One
commenter noted the R&D discussions in the part 70 supplemental
proposal preamble (60 FR 45556-45558), and asked EPA to clarify whether
EPA maintains its position in the supplemental proposal regarding the
applicability of the support facility test in the R&D context.
As discussed in the supplemental proposal preamble, EPA believes
that R&D activities should not generally be considered support
facilities to collocated industrial facilities, since the support
provided is directed towards development of new processes or products
and not to current production. However, if an activity does contribute
to the ongoing product produced or service rendered at a facility in
more than a de minimis manner, those activities should be considered
part of the source for applicability purposes.
5. Exemptions From Major Source Determinations
The EPA proposed as a condition of full approval that Michigan must
remove its exemptions of certain small activities from determining
major source status. Two commenters objected to this interim approval
issue. One commenter stated that there is no express regulatory
requirement mandating that insignificant activities be considered in
major source determinations under title V. The commenter also believes
the inclusion of such activities is inconsistent with EPA's July 10,
1995 guidance memorandum entitled ``White Paper for Streamlined
Development of Part 70 Permit Applications''.
Neither the applicability requirements in 40 CFR 70.3 nor the
``major source'' definition in 40 CFR 70.2 provide any exemptions for
insignificant activities in determining major source status. The
[[Page 1389]]
concept of insignificant activities originates under 40 CFR 70.5(c),
and only establishes reduced title V permit application requirements
for activities defined as insignificant. 40 CFR 70.5(c) does not modify
the title V applicability provisions, and specifically states that ``an
application may not omit information needed to determine the
applicability of, or to impose, any applicable requirement.'' In
addition, the White Paper provides guidance on the permit application
requirements for insignificant activities; it does not address major
source applicability considerations.
One commenter expressed concern that counting insignificant
activities in major source determinations would be very burdensome. The
commenter was also concerned that the use of engineering judgement in
determining emissions from insignificant activities does not provide
sources sufficient certainty and protection from lawsuits. The EPA does
not agree that the calculation of emissions from insignificant
activities need be a burdensome and resource intensive task. As
discussed in the proposed interim approval of Michigan's part 70
program, EPA expects that such emissions would only be examined in
those cases where the insignificant activity emissions might impact
whether the source is major. In addition, sources and permitting
authorities have significant discretion in determining the rigor of
analysis necessary for calculating insignificant activity emissions.
Such analysis may not even need to be performed on a source by source
basis, and could instead establish a general emission level for a
particular insignificant activity that can be used for all sources. For
example, a permitting authority could determine that sources may assume
1,000 pounds of emissions from a particular insignificant activity.
With respect to the commenter's concerns about protection from
lawsuits, EPA sees no distinction between the emissions calculations
for significant activities and insignificant activities. For example, a
source with a potential to emit that is just under a title V
applicability threshold should do what is necessary to ensure that the
source indeed is not subject to the operating permits program, as
additional emissions from either significant or insignificant
activities could make the source major.
Another commenter stated that Michigan's rule is consistent with
the actual application of major source determinations made throughout
the country, and commented that other States are not including
insignificant activities in determining applicability. The commenter
also stated that there is no EPA guidance for determining emissions
from such activities. The EPA is unaware of any other approved part 70
program that has regulatory exclusions for insignificant activities in
determining a source's potential to emit. If EPA determines that a
State's part 70 program is not being administered in accordance with
part 70, EPA has the authority under 40 CFR 70.10 to require the State
to correct the deficiencies. In addition, EPA has the authority to
pursue enforcement actions against sources for violations of the Act,
including the requirement to obtain a title V permit. With respect to
the lack of EPA guidance for determining insignificant activity
emissions, EPA generally issues emissions factor guidance on a source
category basis. The EPA will consider developing guidance for any
particular insignificant activities of concern that are not addressed
in current guidance.
6. Certification of Compliance
The EPA proposed a condition for full approval requiring Michigan
to adopt statutory or regulatory authority that ensures permit
applications include a certification of compliance and a statement of
the methods used for determining compliance. MDEQ commented that it
will work with EPA to resolve this issue during the interim approval
period. The EPA also agrees to work with MDEQ to resolve this issue,
and would like to clarify that this is a condition of full approval
because it is not clear that the underlying State requirements legally
obligate sources to include the compliance certification requirements
in their permit applications.1
---------------------------------------------------------------------------
\1\ Despite this regulatory deficiency, the State application
forms do include the compliance certification requirements.
---------------------------------------------------------------------------
Another commenter commented that Michigan's program does require
applications to include compliance certifications, and states that this
issue should be deleted. The following analysis addresses the
commenter's arguments.
40 CFR 70.5(c)(9)(i) and (iv) require permit applications to
include a statement of compliance for all applicable requirements. This
statement must be certified by a responsible official in accordance
with 40 CFR 70.5(d). Although Michigan's statute and regulations
require applications to include a certification by a responsible
official, they do not require applications to include a certified
statement of compliance for all applicable requirements.
40 CFR 70.5(c)(9)(ii) requires the compliance certification to
include a statement of the methods used for determining compliance.
Although section 324.5507(1)(f)(ix) of Michigan's Natural Resources and
Environmental Protection Act (NREPA) requires applications to include
proposed compliance method information, the State provision does not
associate this compliance method information to compliance
certification requirements. The compliance certification provisions
must therefore include a statement of the methods used for determining
compliance. Of course, this does not preclude Michigan from expanding
the scope of its current application requirement to serve this purpose
if the State provides a means by which a source can certify that it
made its compliance determination using its proposed compliance
determination method.
40 CFR 70.5(c)(9)(iii) requires applications to include a schedule
for submission of compliance certifications at least annually or more
frequently if specified by the underlying requirement or the permitting
authority. The EPA agrees that section 324.5507(1)(d) of NREPA
satisfies this requirement and is clarifying in the final condition of
full approval that this provision is not an issue.
7. Definition of Emergency
The EPA proposed as a condition of full approval that Michigan
revise its definition of emergency in section 324.5527(1) of NREPA to
ensure that the State's definition is not broader than that provided by
40 CFR 70.6(g)(1). Two commenters disagreed with this condition of full
approval. Both commenters stated that the Michigan definition is not
broader, and only clarifies what could be considered ``sudden and
reasonably unforeseeable events''. The EPA has reevaluated this issue
and agrees with the commenters that the State definition of emergency
meets the requirements of 40 CFR 70.6(g).
The additional language in the State definition of emergency
includes the following as events that could be considered an emergency:
``war, strike, riot, catastrophe, or other condition as to which
negligence on the part of the person was not the proximate cause''.
These situations are eligible for the affirmative defense only if they
meet all the provisions of 40 CFR 70.6(g). Specifically, such events
must arise from sudden and reasonably unforeseeable events beyond the
control
[[Page 1390]]
of the source; require immediate corrective action to restore normal
operation; and not include noncompliance to the extent caused by
improperly designed equipment, lack of preventative maintenance,
careless or improper operation, or operator error. Further, the
emergency defense only applies to exceedances of technology based
emission limitations that are due to unavoidable increases in emissions
attributable to the emergency. These provisions are important
qualifications, because the specific State examples would not qualify
as emergencies in all situations. For example, exceedances at a source
due to increased production would not qualify as an emergency even if
the increase is due to additional demand caused by a strike at another
source. Similarly, an exceedance at the source involved in a strike may
not qualify as an emergency if the strike was not reasonably
unforeseeable, or if the exceedance was not an unavoidable increase
attributable to the strike. The EPA believes that the additional
Michigan events are properly qualified because the State definition
includes all of the requirements of 40 CFR 70.6(g). Therefore, EPA is
removing this issue as a condition of full approval.
8. Source Category Limited Interim Approval
In its program submittal, the State of Michigan requested source
category limited (SCL) interim approval of its 4 year permit issuance
schedule. In the proposed interim approval notice for Michigan, EPA
acknowledged Michigan's 4 year schedule as part of the State's permit
fee sufficiency demonstration. However, EPA could only propose in the
alternative the State's request for SCL interim approval because
Michigan's regulations currently require a 3 year permit issuance
schedule. MDEQ requested that EPA clarify the State's obligations for
submitting a program revision once the 4 year schedule is incorporated
into the State's regulations.
The EPA proposed SCL interim approval in the alternative so that a
program revision would have been unnecessary if Michigan had been able
to finalize and submit its rule revisions prior to this final action on
Michigan's part 70 program. Because the State has not yet submitted the
regulatory revision that would change the State permit issuance
schedule from 3 to 4 years, this final action on Michigan's part 70
program fully approves the 3 year schedule contained in the current
State regulations.
Once Michigan finalizes its 4 year issuance schedule, the State
will be obligated to submit a part 70 program revision to EPA for SCL
interim approval. Although 40 CFR 70.4(i) requires that program
revisions be approved by EPA before they become finally effective, EPA
expects that it will be able to quickly process Michigan's request for
SCL interim approval. If the final 4 year schedule is identical to the
draft rule that EPA proposed for SCL interim approval, EPA will be able
to finalize SCL interim approval without having to repropose the
action. If there are changes to the schedule, EPA would still be able
to expedite the SCL interim approval through a direct final action. As
discussed above in section II.A.2., EPA is also developing a program
revision process that may help expedite the program revision process
for this situation.
9. Startup, Shutdown, and Malfunction (SSM) Provisions
The EPA proposed as a condition of full approval that Michigan
revise its SSM provisions to be consistent with the emergency defense
provisions in 40 CFR 70.6(g), or adopt an enforcement discretion
approach consistent with the Act. Two commenters expressed concern with
this interim approval issue. MDEQ disagreed that the SSM rules affect
the State's ability to enforce the requirements of title V, but agreed
to work with EPA to address the issue during the interim approval
period. The EPA believes it is important that MDEQ and EPA work
together during the interim approval period, and commits to working
with MDEQ to address this and other interim approval issues.
Another commenter stated that EPA's consideration of Michigan's SSM
rules is too inflexible, as the SSM rules provide an affirmative
defense only in narrowly defined and highly prescriptive circumstances.
The commenter also believes that EPA overlooked the potential for
environmental benefits resulting from the SSM requirements to use good
air pollution control practices and implement preventative maintenance
and malfunction abatement plans. Irrespective of the control and work
practice provisions that Michigan's SSM rules require for sources to be
eligible for the affirmative defense, EPA has no authority under its
part 70 rules to approve an affirmative defense that is less stringent
than that contained in 40 CFR 70.6(g). The commenter extolled the
benefits of the safeguards contained in Michigan's SSM rules, but did
not offer anything to counter EPA's finding that these rules are
broader than 40 CFR 70.6(g) and are therefore inconsistent with the
federal rule. As discussed in the Michigan proposal, however, EPA could
also consider an enforcement discretion approach as a means for
resolving this interim approval issue. Such an approach would allow
Michigan to retain the specific SSM provisions that may provide
environmental benefit.
The EPA would also like to clarify that the Michigan SSM
regulations do not affect EPA's enforcement capabilities under the Act
during the two year interim approval period. The EPA reserves the right
to pursue enforcement of applicable requirements, in accordance with
EPA's enforcement discretion policy, notwithstanding the existence of
the State's SSM regulations. Similarly, the Michigan rules do not
affect citizen suit rights under section 304 of the Act. The interim
approval of Michigan's part 70 program establishes the mechanism for
the State to issue federally enforceable part 70 permits; EPA will
continue to implement the operating permits program in accordance with
Title V of the Act and the implementing Federal regulations.
10. Environmental Audit Privilege and Immunity Law
The EPA proposed several conditions for full approval based on the
enforcement deficiencies created by Michigan's Environmental Audit
Privilege and Immunity Law (audit law), part 148 of NREPA. Four
commenters disagreed with EPA's position that Michigan's audit law
adversely affects Michigan's ability to comply with the enforcement
requirements of part 70.2
---------------------------------------------------------------------------
\2\ One commenter also submitted comments on a fifth commenter's
behalf.
---------------------------------------------------------------------------
MDEQ generally commented that Michigan's law does not affect the
State's ability to enforce the requirements of title V. The Michigan
State Senator sponsoring the bill that became Michigan's audit law also
commented that the law does not adversely affect Michigan's authority
to assure compliance with and enforce permits. Both commenters stated
that regulated entities remain fully liable for any damages they cause,
and self reporting data, agency inspections, and other information
required by law is not privileged and remains available to the State
and the public. However, both commenters supported the interim approval
of Michigan's part 70 program, as it will allow the program to be
implemented while EPA and MDEQ resolve these issues during the interim
approval period.
For the reasons outlined in the Michigan proposal and as further
discussed below, EPA remains
[[Page 1391]]
concerned that Michigan's audit law affects the State's ability to meet
the enforcement requirements of part 70. The EPA recognizes that
Michigan may have a different interpretation of the provisions in the
audit law, and has provided as an alternative condition for full
approval that the State need only submit a revised title V Attorney
General's opinion that addresses EPA's concerns and certifies that
Michigan's operating permits program meets the part 70 requirements in
light of the audit law. The EPA believes that a new Attorney General's
opinion would be appropriate, as the Attorney General's opinion in the
original program submittal to EPA was developed prior to the passage of
the State audit law. The EPA appreciates Michigan's willingness to work
with EPA during the interim approval period to resolve these issues.
The EPA also received extensive adverse comments from two law firms
that represent nationwide trade organizations and industries. The
following subsections address the issues raised by these
commenters.3
---------------------------------------------------------------------------
\3\ These commenters also commented on various EPA documents,
including the memorandum entitled ``Effect of Audit Immunity/
Privilege Laws on States' Ability to Enforce Title V Requirements'',
April 5, 1996, and the policy entitled ``Incentives for Self-
Policing: Discovery, Disclosure, Correction and Prevention of
Violations'', December 22, 1995. These comments are addressed to the
extent that they are relevant to EPA's action on Michigan's title V
operating permits program.
---------------------------------------------------------------------------
a. Effect of the Michigan audit law on Michigan's enforcement
authority.
The commenters stated that nothing in the Act or part 70 prohibits
a State from establishing a new protection for audits, expanding
existing privileges, providing an additional affirmative defense, or
determining that criminal or civil prosecution is inappropriate in
certain defined situations, such as those specified in the Michigan
audit law.
The EPA disagrees. Section 502(b)(5)(E) of the Act lays out the
minimum enforcement authorities which Congress required a State to have
in order to secure Federal approval to implement and enforce a title V
operating permits program. That section requires, as a condition of
Federal approval, that a State have adequate authority to issue permits
and assure compliance; to terminate or revoke such permits for cause;
and to enforce permits, permit fee requirements and the requirement to
obtain a permit, including authority to recover civil penalties in a
maximum amount of not less than $10,000 per day for each violation and
to provide appropriate criminal penalties. The part 70 implementing
regulations, at 40 CFR 70.11, elaborate upon those authorities. Part 70
requires a State to have authority to issue emergency orders and seek
injunctive relief (40 CFR 70.11(a) (1) and (2)), to assess civil and
criminal penalties in a maximum amount of not less than $10,000 per day
per violation (40 CFR 70.11(a)(3)), and to assess appropriate penalties
(40 CFR 70.11(c)). Although neither title V nor part 70 expressly
prohibits State audit privilege and/or immunity laws, the analysis in
the proposed interim approval of Michigan's program shows how EPA
believes the Michigan audit law interferes with Michigan's general
enforcement authority and its civil penalty authority as required in
title V and the part 70 implementing regulations so as to preclude full
approval of Michigan's operating permits program.4 For example, as
EPA explained in the Michigan proposal, the immunity provisions of the
Michigan audit law alter and in fact eliminate the State's authority to
recover any civil penalties under the circumstances identified in the
State law. See 61 FR 32394-32395. Moreover, the privilege provisions of
the Michigan audit law prevent the State from obtaining potentially
important information on whether a civil or criminal violation occurred
or has been corrected. If the State, by virtue of such laws, surrenders
its ability to thoroughly investigate potential violations or its
discretion to assess appropriate penalties in the face of violations,
then the State's fundamental enforcement authority is significantly
compromised. The EPA believes that this is the case with the Michigan
audit law.
---------------------------------------------------------------------------
\4\ In addition, part 70 does not provide for any affirmative
defenses beyond that provided by the emergency defense provisions in
40 CFR 70.6(g). See subpart II.A.9. of this notice regarding
Michigan's affirmative defense for startups, shutdowns, and
malfunctions.
---------------------------------------------------------------------------
In a similar vein, the commenters argue that the State of Michigan
has the general authorities enumerated in section 502(b)(5)(E) and 40
CFR 70.11 to enforce permits, permit fee requirements and the
requirement to obtain a permit and to recover civil and criminal
penalties in a maximum amount of not less than $10,000 per day of
violation, and that nothing in the text of section 502(b)(5)(E) of the
Act or the part 70 regulations authorizes EPA to consider the effect of
State laws of general applicability on a State's title V civil and
criminal enforcement authorities. The commenters further argue that the
logical corollary of EPA's proposed action with respect to the Michigan
audit law is that every State procedural and evidentiary rule must be
evaluated and amended whenever EPA believes that it could in some
fashion, directly or indirectly, interfere with environmental
enforcement.
Laws of general applicability are an appropriate subject for EPA
review as is evident from the language of the part 70 regulations
themselves. The regulations require that a State applying for a title V
operating permits program include copies of ``all applicable State or
local statutes and regulations including those governing State
administrative procedures that either authorize the part 70 program or
restrict its implementation.'' 40 CFR 70.4(b)(2) (emphasis added). The
regulations also require a legal opinion from the State Attorney
General asserting that the laws of the State provide adequate authority
to carry out ``all aspects of the program.'' 40 CFR 70.4(b)(3). It is
certainly EPA's expectation that, in issuing such a legal opinion, the
Attorney General is certifying that no State laws, even laws of general
applicability or laws of evidence, interfere with the State's authority
to administer and enforce the title V program. See 59 FR 47105, 47108
(September 14, 1994) (requiring Oregon to revise or clarify meaning of
criminal statute appearing to limit criminal liability of corporations
as a condition of full title V approval); 59 FR 61820, 61825 (December
2, 1994) (accepting Oregon Attorney General's opinion regarding effect
of statute).5
---------------------------------------------------------------------------
\5\ One commenter argues that section 116 of the Act bars EPA
from seeking to preempt State audit privilege and/or immunity laws.
Section 116 states that, subject to limited exceptions, nothing in
the Act shall preclude or deny the right of any State to adopt or
enforce emissions standards or limitations or requirements
respecting the control or abatement of air pollution ``except where
such emission standard or limitation is less stringent than required
by the Clean Air Act.'' Such an interpretation would mean that EPA
had no authority to disapprove any State enforcement provisions as a
condition of title V approval. Section 502(b)(5)(E), which requires
EPA to promulgate minimum enforcement authorities required for
approval of a State title V program, clearly belies such an
argument.
---------------------------------------------------------------------------
Both commenters also argued that the Michigan audit law does not
interfere with the enforcement requirements of title V because it is
qualified in a number of important respects. The commenters note that
the Michigan audit law does not offer protection from disclosure for
information obtained by observation, sampling, or monitoring by any
regulatory agency; machinery and equipment maintenance records;
information legally obtained independent of the environmental audit;
and information required by law to be collected, developed, reported or
otherwise made available to a government agency. See section
[[Page 1392]]
14802(3), part 148 of NREPA. The commenters state that the privilege is
further limited because it only applies to an environmental audit
report as defined in the Michigan audit law. In addition, the
commenters state that the immunity provisions in the Michigan audit law
are limited by the provisions in section 14809 of NREPA, which, among
other things, require the source to promptly disclose violations, make
a good faith effort to achieve compliance, pursue compliance with due
diligence, and promptly correct the noncompliance.
The EPA noted in the proposed interim approval of Michigan's
program that, although the Michigan audit law appears to contain
several exemptions from the otherwise broad scope of the privilege
protection, EPA is unable to determine the extent to which the
exemptions limit the application of the privilege. In other words, the
extent to which evidence of violations of title V permits and permit
program requirements would be exempted from the privilege provisions of
the Michigan audit law is not clear. For example, the Michigan audit
law appears to provide privilege protection for a source that
determines through an environmental audit that it is operating without
a title V permit. This violation appears eligible for the privilege
because part 70 does not have any source notification requirements
prior to the submittal of the permit application that would exclude
this violation from the privilege provisions. The EPA does not agree
with the commenters' assertion that the privilege is further limited by
the definition of an environmental audit report. The Michigan audit law
broadly defines such a report to include any documents created as a
result of an environmental audit, such as supporting information and
implementation plans that address correcting violations and improving
current compliance. In addition, the Michigan audit law's exemptions
from privilege protection do not appear to apply to the penalty
immunity in section 14809, part 148 of NREPA. Therefore, it appears
that any violation discovered during an environmental audit, regardless
of whether it is eligible for the privilege, is eligible for the
immunity as provided in section 14809. Despite the limitations on the
scope of the State's immunity provisions imposed by the requirement
that disclosure be ``voluntary'', EPA believes that application of the
immunity provisions is so broad that it potentially could apply to any
title V violation. Because the privilege and immunity exemptions could
apply to title V requirements, EPA must therefore infer that there
could be violations at a title V source discovered through an
environmental audit that would be entitled to the privilege or immunity
provided by the Michigan audit law. The EPA again notes that Michigan
may have a different interpretation of its audit law, in which case an
Attorney General's opinion may help to resolve these interim approval
issues.
The commenters also take issue with EPA's interpretation of the
title V and part 70 requirements for enforcement authority, as
evidenced in the April 5, 1996 memorandum entitled ``Effect of Audit
Immunity/Privilege Laws on States' Ability to Enforce Title V
Requirements'' (hereinafter, the ``April 5 Title V Memorandum'') and
the proposed interim approval of Michigan's part 70 program. The
commenters argue that EPA's interpretation and application of the title
V enforcement requirements improperly interferes with the States' role
as independent sovereigns, improperly divests States of their primary
responsibility for implementing and enforcing the Act, and conflicts
with the Clinton Administration's stated policy to allow States to
experiment with alternative approaches to achieve environmental
protection. The commenters further argue that the determination of the
Michigan legislature that criminal or civil penalties are inappropriate
under the circumstances set forth in the Michigan audit law is within
the statutory boundaries and flexibility provided by the Act. The
commenters continue that the immunity provisions of the Michigan audit
law reflect the Michigan legislature's judgment as to the
``appropriate'' penalty for companies that voluntarily disclose and
correct instances of environmental noncompliance and reflect a
reasonable allocation of the State's enforcement resources.
The EPA agrees that, in enacting the Act, Congress believed that
States and local governments should have the primary responsibility for
controlling air pollution at its source. See Section 101(a)(3) of the
Act. The EPA also agrees with the commenters that the States are to be
given broad flexibility to select alternative means to achieve the
minimum Federal requirements established in the Act by Congress and by
EPA in the part 70 regulations, and fully supports State
experimentation to achieve greater compliance with environmental laws.
Such flexibility and experimentation, however, must be, as the
commenters acknowledge, within the bounds of the statutes enacted by
Congress and the implementing regulations promulgated by EPA. It cannot
cancel out the requirement that States must meet some minimum Federal
requirements as a condition of Federal approval of their programs.
In the case of the operating permits program, those minimum Federal
requirements are set forth in title V and the part 70 regulations. It
is these requirements that EPA is insisting that the State of Michigan
meet as a condition of full approval of its title V program. In short,
EPA does not believe that the Michigan title V program is within the
statutory boundaries established by Congress or the flexibility
provided by the Act because the Michigan audit law would limit the
enforcement authority Congress and EPA required States to have as a
condition of Federal approval.
Moreover, the commenters' argument that the Michigan audit law
governs areas of law traditionally committed to States in their role as
independent sovereigns--if taken to its logical conclusion--would mean
that a State could not be required to have any civil or criminal
penalty authority to get approval for a title V program. It is an
argument that goes to the validity of section 502(b)(5)(E) and 40 CFR
70.11 themselves and therefore is untimely in this context. As stated
above, Congress through title V, and EPA through the part 70
implementing regulations, required States to satisfy certain minimum
requirements for enforcement authority as a condition of Federal
approval of a Clean Air Act operating permits program. By conditioning
full approval of the Michigan title V program on changes to the
Michigan audit law or a demonstration by the State satisfactory to EPA
that the Michigan audit law does not interfere with the enforcement
requirements of title V, EPA is simply seeking to assure that Michigan
has the required enforcement authorities before receiving Federal
approval of its program. Cf. Commonwealth of Virginia v. Browner, 80
F.3d 869, 880 (4th Cir. 1996) (in rejecting Virginia's argument that
requiring the State to change its judicial standing rules as a
condition of title V approval violated State's sovereignty, the Court
stated: ``Even assuming arguendo the accuracy of Virginia's assertion
that its standing rules are within the core of its sovereignty, we find
no constitutional violation because federal law 'may, indeed, be
designed to induce state action in areas that would otherwise be beyond
Congress' regulatory authority.''' citing FERC v. Mississippi, 456 U.S.
742, 766 (1982)).
[[Page 1393]]
The commenters also assert that EPA's use of its title V program
approval authority to ``force'' States to modify their audit privilege
and/or immunity legislation is contrary to Congress' general expression
of intent against the automatic use of audit reports for enforcement of
the Act, as expressed in the Joint Explanatory Statement of the
Conference Committee Report for the 1990 Amendments. S. Conf. Rep. 101-
952, 101st Cong. 2d Sess. 335, 348 (Oct. 26, 1990), reprinted in
Legislative History at 941-42, 955, 1798. The commenters further assert
that Michigan's decision to provide qualified audit immunity is
consistent with that Congressional intent.
As an initial matter, EPA disagrees that it is using the title V
approval process to ``force'' States to modify their audit legislation.
Instead, as stated above, EPA is simply analyzing to what extent the
audit privilege and/or immunity laws of a particular State compromise
the enforcement authorities required by Congress in title V and
interpreted by EPA through the part 70 regulations, as a condition of
Federal approval of the State's operating permits program.
With respect to the issue of Congress' intent, the language from
the Conference Report cited by the commenters does not clearly express
a desire that audit reports not be used for enforcement of the Act
requirements. Rather, the text expresses some general support for the
concept of auditing and a desire that the criminal penalties of section
113(c) ``should not be applied in a situation where a person, acting in
good faith, promptly reports the results of an audit and promptly acts
to correct any deviation. Knowledge gained by an individual solely in
conducting an audit or while attempting to correct deficiencies
identified in an audit or the audit report should not ordinarily form
the basis for intent which results in criminal penalties.'' (emphasis
added). The legislative history merely indicates that the circumstances
involving violations discovered through an audit report and voluntarily
disclosed by the company will generally not meet the requirements for
criminal liability. Importantly, Congress did not in any way suggest
that a company which self-disclosed violations discovered through an
environmental audit should be immune from civil penalties. In any case,
when Congress amended the Act in 1990, there were no audit privilege
and/or immunity laws on the books in any State. Any legislative history
on auditing and enforcement from that period must be read in light of
that reality. EPA does not believe Congress intended that the growth of
environmental auditing--in itself a laudable goal fully supported by
EPA--comes at the expense of the enforcement of environmental laws.
6 If Congress had wished to give special status to self-disclosed
violations detected during an environmental compliance audit or to
prohibit the use for general enforcement purposes of audits conducted
under the Act and EPA approved programs, Congress could have done so in
the language of the 1990 amendments. If anything, the legislative
history of the Act is evidence of Congress' intent that such incentives
for audits should be a basis for the exercise of prosecutorial
discretion, and not a legislative grant of immunity or protection from
disclosure.
---------------------------------------------------------------------------
\6\ That distinction is also reflected in EPA's Self-Disclosure
policy, which offers significant incentives for businesses to audit
and self-disclose violations, while at the same time retaining
safeguards to ensure the protection of public health and the
environment.
---------------------------------------------------------------------------
The commenters also argue that Congress intended to vest the States
with discretion in enforcing title V permit requirements and that the
part 70 regulations merely provide that penalties assessed under a
title V program must be ``appropriate'' to the violation. Nothing
requires a State to obtain a penalty for every violation or prohibits a
State from rewarding good actors who identify, disclose and correct
violations, the commenters continue.
The EPA agrees that a State is not required to collect a penalty
for every violation or is precluded from using its discretion to reward
companies that conduct environmental audits and disclose and correct
any violations discovered through such an audit. The EPA disagrees,
however, that the only inquiry for title V approval is whether a State
has authority to assess ``appropriate'' penalties. The part 70
regulations first state that civil and criminal fines must be
recoverable ``in a maximum amount of not less than $10,000 per day per
violation.'' 40 CFR 70.11(a)(3)(i)-(iii) (emphasis added). 7
Section 70.11(c) then provides that ``[a] civil penalty or criminal
fine assessed, sought, or agreed upon by the permitting authority under
paragraph (a)(3) of this section shall be appropriate to the
violation.'' (emphasis added). By interpreting title V and part 70 to
require only that States have authority to assess ``appropriate''
penalties, the commenters are reading out of the regulations the
independent requirement that States have the authority to assess civil
and criminal penalties of an amount not less than $10,000 per day per
violation. Read together, 40 CFR 70.11(a)(3) and 70.11(c) require that
a State have authority to assess a civil or criminal penalty of up to
$10,000 per day per violation and that, in addition, the penalty
assessed in any particular case be ``appropriate'' to the violation at
issue. Thus, EPA agrees with the commenters that it is within
Michigan's discretion not to impose the statutory maximum penalty for
violations as to which a lesser penalty is appropriate or to determine
that criminal or civil prosecution is inappropriate under the facts and
circumstances of a particular case so long as the State has the
authority to assess penalties for each day of violation. The
legislative history cited by the commenters in support of their
position is, in fact, consistent with EPA's position on this issue. See
Legislative History at 5815 (``states are not going to be required to
impose these minimum fines of $10,000 for permit violations. Instead,
the bill is revised to make clear that states shall ensure that they
have the authority to impose this. It is not mandated, it is
authority.'') (emphasis added).
---------------------------------------------------------------------------
\7\ One commenter appears to assert that a State need only have
the authority to assess ``appropriate'' criminal penalties. In doing
so, the commenter ignores the clear language of the part 70
regulations. Section 502(b)(5)(E) requires States to have authority
to ``recover civil penalties in a maximum amount of not less than
$10,000 per day for each violation, and provide appropriate criminal
penalties.'' In promulgating part 70, EPA determined that to provide
``appropriate criminal penalties'' for purposes of title V approval,
a State must have authority to issue criminal penalties in a maximum
amount of not less than $10,000 per day per violation. See 40 CFR
70.11(a)(3)(ii) and (iii). If the commenter believes that the
enforcement authorities enumerated in the part 70 regulations,
including the requirement for criminal penalty authority of up to
$10,000 per day per violation, are excessive or in any way
inconsistent with the statutory authorities, the commenter should
have challenged the part 70 regulations at the time of promulgation
in 1992.
---------------------------------------------------------------------------
Several commenters stated that section 113(e) of the Act only sets
forth penalty factors that EPA or a Federal court must consider in
imposing civil penalties for noncompliance with the Act, that section
113(e) has no bearing on EPA's authority to approve or disapprove State
title V programs, and that nothing in section 113, title V or part 70
authorizes EPA to condition approval of a State's title V permit
program on the State's ability to consider penalty factors comparable
to those set out in section 113(e). The commenters further assert that,
although section 113(e) is inapplicable, section 113(a) authorizes EPA
in certain defined circumstances to take appropriate action, namely,
filing an action against a facility where EPA believes the State's
response was inadequate. This back-up
[[Page 1394]]
authority, and not wholesale invalidation of a State's title V permits
program, the commenters continue, is EPA's tool for ensuring to its own
satisfaction that State audit legislation does not allow egregious Act
violations to go unsanctioned. In any event, one commenter asserts that
the Michigan audit law does take into account a violator's full
compliance history in establishing the disclosure and immunity
provisions.
The EPA agrees that the purpose of section 113(e) is, as the
commenters assert, to set forth factors which EPA and the Federal
courts must consider in assessing civil penalties under the Act. The
EPA believes, however, that the section 113(e) factors can also serve
as guidance in determining what civil penalty authority is minimally
necessary in a State title V program.
In order for a State to have the authority to assess penalties that
are ``appropriate'' to the violation in any particular case as required
by 40 CFR 70.11(c), a State must have, in addition to the authority to
assess a penalty of at least $10,000 per day per violation, the
authority to consider mitigating or aggravating factors. In enacting
section 113(e), Congress set forth factors it believed EPA and Federal
judicial and administrative courts should consider in determining an
appropriate penalty under the specific facts and circumstances before
it. Although EPA believes that the factors enumerated by Congress in
section 113(e) are the most fundamental, EPA believes that States may
consider other factors as well. To the extent that a State has
surrendered its ability to consider factors such as those set forth in
section 113(e), EPA believes that a State does not have adequate
authority, on a case-by-case basis, to collect penalties that are
``appropriate'' to the violation, as required by 40 CFR 70.11(c).
Industry commenters argue that since the section 113(e) factors do
not apply to State programs, it must follow that Congress did not
prescribe factors a State must apply in assessing ``appropriate''
penalties under title V, and that a State must therefore be given full
approval as long as it possesses ``appropriate'' enforcement authority.
As explained above, the question for EPA at the program approval stage
is not how the State will exercise its enforcement discretion to assess
penalties in any particular case. Rather, it is whether the State has
sufficient authority to assess appropriate penalties in every case.
Before granting full approval to a title V program, EPA must ensure,
first, that the State has the general authority to assess penalties up
to the amounts specified in section 70.11. The EPA must also ensure
that the State has authority to consider factors, similar to those in
section 113(e), such that the penalty actually assessed in any case may
be appropriate to the violation. Because the immunity provisions of the
Michigan audit law preclude the State from considering the factors set
forth in section 113(e) or any other factors in determining an
``appropriate'' penalty in cases in which the source has disclosed and
corrected violations discovered in an environmental audit, EPA believes
that Michigan lacks this authority. The EPA also disagrees with the
commenters' assertion that EPA's sole remedy where EPA believes a State
does not have adequate enforcement authority is to take its own
enforcement actions to address violations in that State. Although EPA
does file Federal actions where the State fails to take enforcement
action or where State action is inadequate to address a particular
violation, before approving a State title V program EPA must also
ensure that the State has demonstrated the capacity to administer and
fully enforce the program as required by law and regulation. If Federal
action were the only remedy for situations in which a State does not
possess adequate enforcement authority, there would have been no need
for Congress to direct EPA to promulgate rules setting forth minimum
enforcement requirements for Federal approval of a State operating
permits program. See 59 FR 61825 (rejecting similar comment in acting
on Oregon's title V program).
Finally, regardless of one commenter's assertion that the Michigan
audit law does take into account a violator's full compliance history
in establishing the disclosure and immunity provisions, it is EPA's
position that the Michigan audit law nonetheless prevents consideration
of other critical factors in determining appropriate civil penalties,
including but not limited to serious harm or risk of harm to the public
or the environment, and substantial economic benefit to the violator.
To the extent the Michigan audit law prevents consideration of
mitigating or aggravating factors, EPA believes that Michigan has
surrendered its authority to assess appropriate penalties as required
by section 502(b)(5)(E) of the Act and 40 CFR 70.11.
The commenters stated that EPA's approach on State audit privilege
and/or immunity laws is bad policy and not supported by empirical
evidence. The commenters expressed strong support for environmental
auditing as a means of obtaining compliance with increasingly complex
environmental requirements. These commenters argue that EPA's reaction
against such audit statutes is a ``knee-jerk'' reaction that ignores
the potentially huge benefits that these laws offer. EPA has wrongly
concluded, the commenters continue, that the existence of a limited and
qualified affirmative defense to penalties for violations discovered
through environmental audits and protection for information in audit
reports weakens Michigan's authority to enforce the law or to ensure
compliance, and that the evidence to date in other States with such
laws shows in fact that audit privilege and/or immunity legislation
encourages self-correction and increased compliance. At the same time,
the commenters argue, EPA has not cited to any specific instance in
which the Michigan audit law or some other State audit privilege and/or
immunity law has compromised or inhibited enforcement of the Act or a
title V permit program.
The EPA has expressed strong support for incentives which encourage
responsible companies to audit to prevent noncompliance and to disclose
and correct any violations that do occur. See, e.g., EPA's Self-
Disclosure Policy. The issue involved in this Federal Register action,
however, is not whether environmental auditing is good or bad policy.
Rather, the issue is whether the Michigan audit law, in offering
privilege and immunity to companies conducting environmental audits, so
deprives the State of its authority to take enforcement action for
violations of title V requirements such that the State does not have
the necessary authority required for full title V approval.
Moreover, EPA believes that it is premature at this point to expect
significant empirical evidence to document whether environmental audit
privilege and/or immunity laws enhance or impede environmental
compliance. Most of the State audit statutes are little more than one
year old and only a few States have issued permits under approved title
V programs. In any event, EPA is aware of several on-going
environmental enforcement actions in certain States with audit
privilege and/or immunity laws in which the audit privilege appears to
be interfering with prosecutors' efforts to obtain and utilize certain
evidence. 8
---------------------------------------------------------------------------
\8\ The confidentiality prerequisites that attach to all on-
going enforcement actions, however, prevent the Agency from
revealing additional details at this time.
---------------------------------------------------------------------------
[[Page 1395]]
The commenters go on to argue that the reasoning set forth in the
April 5 Title V Memorandum and the proposed interim approval of
Michigan's program could have far-reaching and unintended effects on
the relationship between EPA and States in the implementation of the
Act and other environmental laws such as approvals of State
Implementation Plans and State programs under the Clean Water Act and
Resource Conservation and Recovery Act.
The EPA agrees that the rationale behind the April 5 Title V
Memorandum and EPA's action on the Michigan title V program has
implications for other Federal programs delegated to the States.
Because of that, the Agency has for some months been analyzing the
effects of State audit privilege and/or immunity laws on enforcement
authorities under the Clean Water Act, the Resource Conservation and
Recovery Act, and other statutes. The rationale behind the April 5
Title V Memorandum and EPA's action on the Michigan title V program as
it relates to the Michigan audit law, however, is dictated not by
political or policy considerations, but rather by statutes and
regulations that were finalized after public notice and comment.
The commenters also stated that EPA's proposed interim approval of
Michigan's program based on the Michigan audit law is inconsistent with
existing EPA and Department of Justice (DOJ) enforcement policies,
which reflect the appropriateness of limiting enforcement discretion.
The commenters point to ``Factors in Decisions on Criminal Prosecutions
for Environmental Violations in the Context of Significant Voluntary
Compliance or Disclosure Efforts by the Violator,'' DOJ, July 1, 1991;
``The Exercise of Investigative Discretion'', EPA, January 12, 1994;
``Policy on Flexible State Enforcement Responses to Small Community
Violations'' EPA, November 1995 (``EPA Policy on Small Communities'');
``Policy on Compliance Incentives for Small Businesses,'' EPA, May
1996; and EPA's Self-Disclosure Policy.
There is an important distinction between the policies cited by the
commenters, which adopt an ``enforcement discretion'' approach, and the
Michigan audit law.9 The EPA and DOJ have announced policies
guiding the exercise of their enforcement discretion under certain
narrowly defined circumstances, while preserving the underlying
statutory and regulatory authority.10 State audit privilege and/or
immunity laws, such as the Michigan audit law, by contrast, constrain
enforcement discretion as a matter of law, impermissibly surrendering
the underlying statutory and regulatory enforcement authorities
required for Federal approval of the State programs.
---------------------------------------------------------------------------
\9\ In addition, the criminal enforcement policies noted by the
commenters are irrelevant, as Michigan's audit law does not create
deficiencies in the State's part 70 criminal enforcement penalty
authority.
\10\ Although the EPA Policy on Small Communities does encourage
States to provide small communities an incentive to request
compliance assistance by waiving all or part of a penalty under
certain circumstances, it does not provide an unqualified waiver of
civil penalties. The policy directs States to assess a small
community's good faith and compliance status before granting any
relief from penalties and identifies a number of factors that a
State should consider in determining whether relief from civil
penalties is appropriate in the particular circumstances. In
addition, EPA's Policy on Small Communities directs a State to
consider the seriousness of the violation. See EPA's Policy on Small
Community Violations, page 4. Although the policy does not direct
the State to consider economic benefit in determining the
appropriate enforcement response, the policy is available only to
those small communities that are financially unable to satisfy all
applicable environmental mandates without the State's compliance
assistance.
---------------------------------------------------------------------------
Both commenters stated that EPA's proposed action on the Michigan
program is inconsistent with several previous title V approvals where
audit privilege and/or immunity legislation has not posed a bar to full
approval. As examples of previous title V approvals which the
commenters believe are inconsistent with EPA's proposed action on the
Michigan program, as it relates to the Michigan audit law, the
commenters cite to EPA's action on the Oregon, Kansas and Colorado
title V programs. Relying on the recent Ninth Circuit decision in
Western States Petroleum Association v. EPA, 87 F.3d 280 (9th Cir 1996)
(``WSPA''), the commenters state that, where EPA is departing from a
prior course of action, more is required of the Agency than conclusory
statements concerning the potential impact of the Michigan audit law on
the State's title V enforcement authority. Instead, the commenters
argue that EPA must provide a basis for deviating from its earlier
approaches in Oregon, Kansas and Colorado.
As an initial matter, EPA notes its action on Michigan's title V
program is consistent with its action on the Texas title V program, 61
FR 32693, 32696-32699 (June 25, 1996) (final interim approval), and the
Idaho title V program, 61 FR 64622-64635 (December 6, 1996) (final
interim approval). Moreover, EPA has notified the States of Ohio,
Arizona, and Florida that audit privilege and/or immunity laws that
these States have enacted or are contemplating enacting could interfere
with the enforcement requirements of title V and part 70.
With respect to the three programs cited by the commenters as
inconsistent with EPA's proposed action on the Michigan program, EPA is
still in the process of reviewing the audit privilege and/or immunity
statutes in Oregon, Kansas and Colorado and their effects on the title
V enforcement requirements in those States in order to determine
whether EPA acted inconsistently in approving those programs. If EPA
determines that it acted inconsistently, EPA intends to take
appropriate action to follow the WSPA Court's mandate that EPA act
consistently or explain any departures.
Finally, one commenter challenges the April 5 Title V Memorandum
itself arguing that the guidance document imposes requirements on EPA
approval of a State operating permits program in addition to those
required by section 502(b)(5)(E) of the Act and the part 70 rules.
Because the April 5 Title V Memorandum sets additional substantive and
binding standards for approval of State title V operating permits
programs not included in the part 70 regulations, the commenter
continues, the guidance is a rule disguised as guidance and must be
promulgated in accordance with the Administrative Procedures Act. This
requires, among other things, public notice and comment.
The EPA disagrees. The April 5 Title V Memorandum does not, as the
commenters assert, ``purport to change fundamentally the requirements
in section 70.11 by adding provisions that (1) effectively prohibit a
state from adopting an audit protection or immunity law and (2) impose
at least four new penalty criteria.'' Rather, the guidance simply
recounts and reiterates existing statutory and regulatory requirements
for enforcement authority under the title V program and shows how audit
privilege and/or immunity laws may prevent a State from meeting those
requirements. It creates no new ``substantive and binding standards''
for approval of title V programs, and therefore is not subject to
notice and comment rulemaking of the Administrative Procedures
Act.11
[[Page 1396]]
Moreover, in explaining why the Michigan audit law precludes full
approval, EPA is relying on the requirements of title V and part 70
themselves, and not the April 5 Title V Memorandum. Finally, EPA's
application of the title V and part 70 enforcement requirements to the
specific circumstances before EPA in the case of the Michigan audit law
is subject to notice and comment rulemaking.12
---------------------------------------------------------------------------
\11\ One commenter also stated that EPA expressly recognized in
its earlier approval of the Oregon title V program that EPA would
have to use rulemaking to modify its part 70 rules before EPA could
prohibit States from adopting audit privilege and/or immunity laws.
The commenter misstates the Agency's position. As an initial matter,
the Oregon audit statute, Oregon Revised Statute 468.963, contains
only an audit privilege and does not contain an immunity provision.
In proposing interim approval of the Oregon title V program, EPA
stated it was in the process of developing a national position
regarding EPA approval of environmental programs in States which
have environmental audit privileges, and that therefore, it proposed
to take no action on the Oregon audit provision in the context of
the Oregon title V approval. EPA noted, moreover, that it might
consider such a privilege grounds for withdrawing program approval
under 40 CFR 70.10(c) in the future if EPA later determined that the
Oregon audit provision interfered with Oregon's enforcement
responsibilities under title V and part 70. 59 FR 47105, 47106
(September 14, 1994). During the public comment period on EPA's
proposal, one commenter stated that EPA's suggestion that a State
audit privilege could be grounds for interim approval or withdrawal
was bad policy and that Oregon's audit privilege statute was
consistent with the Act. In addition to responding to the merits of
the comment, EPA stated that the commenter's concerns were premature
because, as the commenter acknowledged, EPA had not proposed to take
any action on Oregon's environmental audit privilege statute in the
context of final interim approval of the Oregon program. EPA further
stated that any such concerns about EPA's position on the Oregon
audit privilege statute would be properly made if EPA later proposed
to withdraw Oregon's title V approval based on Oregon's audit
privilege or if EPA ``revised part 70 to prohibit environmental
audit provisions such as Oregon's.'' 59 61820, 61824 (December 2,
1994). EPA did not say in that Federal Register notice that a
rulemaking would be required in order for the Agency to disapprove a
title V program in a State with an environmental audit privilege
and/or immunity statute.
\12\ EPA also disagrees with one commenter's assertion that the
Congressional review provisions of Subtitle E of the Small Business
Regulatory Enforcement Fairness Act of 1996, P.L. 104-121 (SBREFA),
requires EPA to submit the April 5 Title V Guidance Memorandum to
Congress. EPA does not believe that April 5 Title V Memorandum is
subject to Congressional review under SBREFA because it is not a
rule and it does not substantially affect the rights or obligations
of a nonagency party. Even if the Memorandum were subject to review,
EPA has not relied on that Memorandum as a basis for this action.
Therefore, any procedural defect with respect to the April 5 Title V
Memorandum would be irrelevant to the legal sufficiency of this
action.
---------------------------------------------------------------------------
b. Additional concerns regarding the effect of the privilege
provisions of the Michigan audit law on the State's enforcement
authority. Both commenters disagreed with EPA's position that the
Michigan audit law contains a privilege for environmental audit reports
which impermissibly interferes with the enforcement requirements of
title V and part 70. The commenters note that the Michigan audit law
does not prohibit the State from gaining access to underlying data not
prepared for or during the audit. One commenter states that EPA is
directly linking title V enforcement authority to State evidentiary
rules, and that every State procedural and evidentiary rule must
therefore be evaluated and amended whenever it interferes with
environmental enforcement. The commenters continue that EPA has singled
out audit privilege laws while not taking issue with State attorney-
client privilege provisions.
As discussed in the proposed interim approval of Michigan's part 70
program, EPA believes that the Michigan audit law prevents the State
from requiring an owner or operator to produce an environmental audit
report under the State's general information gathering authority.
Although a source must voluntarily disclose the relevant portions of
the audit report in order to obtain immunity from civil penalties, an
owner or operator can hold as privileged audit reports containing
information on violations in the hopes that the violations will not
otherwise come to the attention of the State agency. Further, a source
can rely on the privilege provisions to avoid disclosing criminal
violations, as the Michigan audit law does not provide immunity for
disclosed criminal violations (other than for negligent acts or
omissions). Similarly, a facility could elect to disclose the fact of a
violation under the immunity provisions, but not the related evidence
of whether the violation was knowing or intentional. Although EPA
agrees that the Michigan audit law does not preclude access to
information that is not part of an environmental audit report, EPA
remains concerned that the data that led the source to conduct the
environmental audit may by itself be insufficient to demonstrate either
compliance or noncompliance with an applicable requirement.
Furthermore, there may not be any documented information or event which
caused a source to conduct an environmental audit. In such a situation,
all information regarding a potential violation would exist only in the
environmental audit report. The EPA therefore believes that the
Michigan audit law so interferes with the State's information gathering
authority as to prevent the State from obtaining appropriate civil and
criminal penalties and assuring compliance with the Act, as required by
section 502(b)(5)(E) of the Act and 40 CFR 70.11.
As discussed previously in this notice, EPA agrees with the
commenters that State procedural and evidentiary rules are an
appropriate subject for EPA review, as provided by 40 CFR 70.4(b)(2)
and 40 CFR 70.4(b)(3). However, EPA does not agree with the commenters
that the attorney-client privilege and the privilege provisions in the
Michigan audit law are analogous. The attorney-client privilege merely
prevents an attorney from revealing information disclosed by a client
in a confidential communication made for the purpose of obtaining legal
advice. It does not preclude the enforcement authority from obtaining
the information from the source by any legal means. On the other hand,
the privilege created by the Michigan audit law completely prevents an
enforcement authority from obtaining any information labeled as an
environmental audit report.
One commenter also stated that adequate title V enforcement
authority cannot depend on access to voluntarily prepared audit
reports. If such were the case, the commenter reasoned, State
regulators would necessarily lack adequate enforcement authority over
those entities that do not conduct audits voluntarily.
The EPA agrees that access to voluntarily prepared audit reports is
not per se a prerequisite for adequate enforcement authority for title
V approval. However, such access is important if the report exists and
it contains information on violations or whether violations have been
promptly corrected. The lack of such access can adversely affect the
adequacy of enforcement authority.
One commenter also stated that State audit protection legislation
does not inhibit whistle blowers but instead merely prohibits
unauthorized disclosure of an audit report because whistle blowers are
free to disclose any ``non audit'' information to support their
allegations without fear of violating the laws.
As an initial matter, EPA notes that this concern is irrelevant in
EPA's action on Michigan's title V program. To EPA's knowledge, neither
the Michigan audit law nor any other provision of Michigan law
specifically restricts the information that a whistle blower may
disclose to a State agency, and EPA therefore did not raise this as a
concern in proposing action on Michigan's title V program.
The commenter appears to be responding to an issue discussed in the
April 5 Title V Memorandum. In that memorandum, EPA expressed concern
with State audit privilege and/or immunity statutes that impose special
sanctions upon persons who disclose privileged information. See April 5
Title V Memorandum, pp. 5-6. Although irrelevant to action on
Michigan's title V program, EPA believes, as stated in the guidance,
that the Act provision
[[Page 1397]]
which gives explicit protection to whistle blowers makes no
distinctions with respect to the source of the information relied upon
by the whistle blower. The EPA believes that it is inconsistent with
section 322 of the Act for States to remove audit reports from the
universe of information which employees may rely upon in reporting
violations to local or State authorities.
c. Summary. The EPA continues to believe that the privilege and
immunity provisions of the Michigan audit law impermissibly interfere
with the enforcement authorities required for full title V approval.
Accordingly, Michigan must narrow the applicability of the privilege
provided in section 14802, part 148 of NREPA, and narrow the
applicability of the immunity provided by section 14809, part 148 of
NREPA, to ensure that the State title V program has the authority to:
assure compliance with part 70 permits and the requirements of the
operating permits program [40 CFR 70.4(b)(3)(i)]; enforce permits and
the requirement to obtain a permit [40 CFR 70.4(b)(3)(vii)]; and meet
the general enforcement authority requirements of 40 CFR 70.11(a) and
(c), as addressed above. In addition, the State must submit a revised
title V Attorney General's opinion that addresses EPA's concerns in
subpart II.A.10. above and in subpart II.A.2.i. of the proposed interim
approval of Michigan's program [61 FR 32391-32398], in which the
Attorney General certifies that the revised part 148 does not affect
Michigan's ability to meet the enforcement requirements of 40 CFR
70.4(b)(3)(i), 40 CFR 70.4(b)(3)(vii), 40 CFR 70.11(a), and 40 CFR
70.11(c).
Alternatively, the State may submit a revised title V Attorney
General's opinion certifying that the current part 148 does not affect
the enforcement requirements of 40 CFR 70.4(b)(3)(i), 40 CFR
70.4(b)(3)(vii), 40 CFR 70.11(a), and 40 CFR 70.11(c). Such an opinion
must also specifically address why EPA's interim approval provision
requiring revisions to the currently enacted law is not valid. Finally,
Michigan must also submit a supplemental Attorney General's opinion
certifying that all other title V authorities that may be affected by
part 148 are met, including but not limited to: Michigan's authority to
bring suit to restrain any person from engaging in any activity in
violation of a permit that is presenting an imminent and substantial
endangerment [40 CFR 70.11(a)(1)]; Michigan's authority to seek
injunctive relief to enjoin any violation of any program requirement,
including permit conditions [40 CFR 70.11(a)(2)]; Michigan's authority
to recover criminal fines [40 CFR 70.11(a)(3)(ii) and (iii), and 40 CFR
70.11(c)]; and the requirement that the burden of proof for
establishing civil and criminal violations is no greater than the
burden of proof required under the Act [40 CFR 70.11(b)]. The
supplemental Attorney General's opinion must specifically address these
requirements in light of the provisions contained in the State's audit
law. Although EPA does not believe that the Michigan audit law affects
any title V requirements other than the ones specifically identified in
this action, a supplemental Attorney General's opinion is appropriate
because Michigan's current part 70 Attorney General's opinion was
written before the existence of the Michigan audit law.
11. Additional State Comments
MDEQ noted that it is pursuing changes to Michigan's operating
permit regulations to address the interim approval issues pertaining to
the definition of ``schedule of compliance'', the definition of
``stationary source'', and the applicability requirements for nonmajor
solid waste incineration units. The EPA has reviewed Michigan's
proposed rules revision package, and submitted comments to MDEQ during
the package's public comment period.
MDEQ also acknowledged the condition for full approval that
requires removal of section 5534 of NREPA. MDEQ agrees to pursue an
amendment to NREPA to remove section 5534.
B. Final Action
1. Interim Approval
The EPA is promulgating interim approval of the Michigan operating
permits program received by EPA on May 16, 1995, July 20, 1995, October
6, 1995, November 7, 1995, and January 8, 1996. The scope of Michigan's
part 70 program approved in this notice applies to all part 70 sources
within Michigan, except for any sources of air pollution in Indian
country. The State must make the following changes to receive full
approval:
a. Revise the definition of ``schedule of compliance'' in R
336.1119(a) to provide that the schedule of compliance for sources that
are not in compliance shall resemble and be at least as stringent as
that contained in any judicial consent decree or administrative order
to which the source is subject. This provision is required by 40 CFR
70.5(c)(8)(iii)(C).
b. Revise the definition of ``stationary source'' in R 336.1119(q)
to provide that the definition includes all of the process and process
equipment which are located at one or more contiguous or adjacent
properties. The emphasized phrase is not currently included in the
State regulation. This provision is required in the definition of
``major source'' in 40 CFR 70.2.
c. Revise R 336.1211(1) to provide that nonmajor solid waste
incineration units required to obtain a permit pursuant to section
129(e) of the Act are subject to the title V permits program. The
permitting deferral for nonmajor section 111 sources in 40 CFR 70.3(b)
does not apply to solid waste incineration units required to obtain a
permit pursuant to section 129(e) of the Act.
d. Revise R 336.1212(1) to delete the exemption of certain
activities from determining major source status. Part 70 and other
relevant Act programs do not provide for such exemptions from major
source determinations. This interim approval issue does not apply to
the State's use of R 336.1212(1) as an insignificant activities list
pursuant to 40 CFR 70.5(c).
e. Revise the State statutes or regulations, as appropriate, to
require that permit applications include a certification of compliance
with all applicable requirements and a statement of the methods used
for determining compliance, as specified in 40 CFR 70.5(c)(9) (i),
(ii), and (iv).
f. Remove the provisions of section 324.5534 of NREPA, which
provide for exemptions from penalties or fines for violations caused by
an act of God, war, strike, riot, catastrophe, or other condition as to
which negligence or willful misconduct was not the proximate cause.
Title V does not provide for such broad penalty and fine exemptions.
g. Revise R 336.1913 and R 336.1914 to be consistent with the
affirmative defense provisions in 40 CFR 70.6(g). Alternatively, adopt
an enforcement discretion approach consistent with the Act. These State
regulations provide an affirmative defense that is broader than that
provided by 40 CFR 70.6(g). They are also inconsistent with agency
enforcement discretion permissible under the Act. These regulations,
therefore, affect the State's ability to enforce permits and assure
compliance with all applicable requirements and the requirements of
part 70 [40 CFR 70.4(b)(3)(i) and 70.4(b)(3)(vii)]. For the same
reasons, they also affect the State's general enforcement authority
under 40 CFR 70.11.
h. Address all of the following issues relating to the State's
audit privilege and immunity law, part 148 of NREPA. These conditions
are proposed interim approval issues to the extent that they affect the
State's title V operating
[[Page 1398]]
permits program and the requirements of part 70.
i. Narrow the applicability of the privilege provided in section
14802, part 148 of NREPA, and narrow the applicability of the immunity
provided by section 14809, part 148 of NREPA, to ensure that the State
title V program has the authority to: assure compliance with part 70
permits and the requirements of the operating permits program [40 CFR
70.4(b)(3)(i)]; enforce permits and the requirement to obtain a permit
[40 CFR 70.4(b)(3)(vii)]; and meet the general enforcement authority
requirements of 40 CFR 70.11 (a) and (c) as addressed in subpart
II.A.10. of this notice.
ii. Submit a revised title V Attorney General's opinion that
addresses EPA's concerns in subpart II.A.10. above and in subpart
II.A.2.i. of the proposed interim approval of Michigan's program [61 FR
32391-32398], and certifies that the revised part 148 does not affect
Michigan's ability to meet the enforcement requirements of 40 CFR
70.4(b)(3)(i), 40 CFR 70.4(b)(3)(vii), 40 CFR 70.11(a), and 40 CFR
70.11(c).
iii. In lieu of subparts i. and ii. above, submit a revised title V
Attorney General's opinion certifying that the current part 148 does
not affect the enforcement requirements of 40 CFR 70.4(b)(3)(i), 40 CFR
70.4(b)(3)(vii), 40 CFR 70.11(a), and 40 CFR 70.11(c). The Attorney
General's opinion must also specifically address why EPA's interim
approval provision requiring revisions to the currently enacted law is
not valid.
iv. Submit a supplemental Attorney General's opinion certifying
that all other title V authorities that may be affected by part 148 are
met, including but not limited to: Michigan's authority to bring suit
to restrain any person from engaging in any activity in violation of a
permit that is presenting an imminent and substantial endangerment [40
CFR 70.11(a)(1)]; Michigan's authority to seek injunctive relief to
enjoin any violation of any program requirement, including permit
conditions [40 CFR 70.11(a)(2)]; Michigan's authority to recover
criminal fines [40 CFR 70.11(a)(3) (ii) and (iii), and 40 CFR
70.11(c)]; and the requirement that the burden of proof for
establishing civil and criminal violations is no greater than the
burden of proof required under the Act [40 CFR 70.11(b)]. The
supplemental Attorney General's opinion must specifically address these
requirements in light of the provisions contained in the State's
privilege and immunity law.
This interim approval extends until February 10, 1999. During this
interim approval period, Michigan is protected from sanctions for
failure to have a program, and EPA is not obligated to promulgate,
administer, and enforce a Federal operating permits program for the
State. 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 the State of Michigan fails to submit a complete corrective
program for full approval by August 10, 1998, EPA will start an 18-
month clock for mandatory sanctions. If the State of Michigan 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 Michigan 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 State of
Michigan, both sanctions under section 179(b) will apply after the
expiration of the 18-month period until the Administrator determines
that Michigan has come into compliance. In any case, if, 6 months after
application of the first sanction, Michigan still has not submitted a
corrective program that EPA has found complete, a second sanction will
be required.
If EPA disapproves the State of Michigan'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 Michigan 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 Michigan, both sanctions under section
179(b) shall apply after the expiration of the 18-month period until
the Administrator determines that the State has come into compliance.
In all cases, if, 6 months after EPA applies the first sanction,
Michigan 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 the
State 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 Michigan's program by the expiration of this
interim approval because that expiration occurs after November 15,
1995, EPA must promulgate, administer and enforce a Federal permits
program for the State of Michigan upon expiration of interim approval.
2. Other Actions
Requirements for approval, specified in 40 CFR 70.4(b), encompass
section 112(l)(5) requirements for approval of a program for delegation
of section 112 standards as promulgated by EPA as they apply to part 70
sources. Section 112(l)(5) requires that the State's program contain
adequate authorities, adequate resources for implementation, and an
expeditious compliance schedule, which are also requirements under part
70. Therefore, EPA is promulgating approval under section 112(l)(5) and
40 CFR part 63.91 of the State's program for receiving delegation of
section 112 standards that are unchanged from Federal standards as
promulgated. This program for delegations only applies to sources
covered by the part 70 program.
The EPA is also promulgating approval of Michigan's preconstruction
permitting program found in Part 2 of Michigan's Air Pollution Control
Rules (R 336.1201-336.1299) under the authority of title V and part 70
solely for the purpose of implementing section 112(g) to the extent
necessary during the transition period between promulgation of the
Federal section 112(g) rule and adoption of any necessary State rules
to implement EPA's section 112(g) regulations. However, since the
approval is for the single purpose of providing 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 sources are not subject to the requirements of the
rule until State regulations are adopted. Although section 112(l)
generally provides authority for approval of State air programs to
implement section 112(g), title V and section 112(g) provide authority
for this limited approval because of the direct linkage between the
implementation of section 112(g) and title V. The scope of this
approval is narrowly limited to section 112(g) and does not confer or
imply approval for purposes of any other provision under the Act, for
example, section 110. The duration of this approval is limited to 18
months following promulgation by EPA of section 112(g) regulations, to
provide Michigan adequate time for the State to
[[Page 1399]]
adopt regulations consistent with the Federal requirements.
III. Administrative Requirements
A. Official File
Copies of the State's submittal and other information relied upon
for the final interim approval, including public comments on the
proposal received and reviewed by EPA, are maintained in the official
file at the EPA Regional Office. The file is an organized and complete
record of all the information submitted to, or otherwise considered by,
EPA in the development of this final interim approval. The official
file is available for public inspection at the location listed under
the ADDRESSES section of this document.
B. Executive Order 12866
The Office of Management and Budget has exempted this action from
Executive Order 12866 review.
C. Regulatory Flexibility Act
The EPA's actions under section 502 of the Act do not create any
new requirements, but simply address operating permits programs
submitted to satisfy the requirements of 40 CFR part 70. Because this
action does not impose any new requirements, it does not have a
significant impact on a substantial number of small entities.
D. Unfunded Mandates 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 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).
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: December 27, 1996.
Valdas V. Adamkus,
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 the entry for
Michigan in alphabetical order to read as follows:
Appendix A to Part--70-Approval Status of State and Local Operating
Permits Programs
* * * * *
Michigan
(a) Department of Environmental Quality: received on May 16,
1995, July 20, 1995, October 6, 1995, November 7, 1995, and January
8, 1996; interim approval effective on February 10, 1997; interim
approval expires February 10, 1999.
(b) (Reserved)
* * * * *
[FR Doc. 97-643 Filed 1-9-97; 8:45 am]
BILLING CODE 6560-50-P