[Federal Register Volume 62, Number 61 (Monday, March 31, 1997)]
[Proposed Rules]
[Pages 15304-15322]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-7949]



[[Page 15303]]

_______________________________________________________________________

Part IV





Environmental Protection Agency





_______________________________________________________________________



40 CFR Parts 52, 60, 264, and 265



Merck & Co., Inc. (Stonewall Plant) Project XL Site-Specific 
Rulemaking; Proposed Rule

  Federal Register / Vol. 62, No. 61 / Monday, March 31, 1997 / 
Proposed Rules  

[[Page 15304]]



ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 52, 60, 264 and 265

[FRL-5803-7]


Project XL Site-specific Rulemaking for Merck & Co., Inc. 
Stonewall Plant

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: The EPA is proposing to implement a project under the Project 
XL program for the Merck & Co., Inc. (Merck) Stonewall Plant, in 
Elkton, Virginia. The terms of the project are defined in a proposed 
Final Project Agreement (FPA) which is being made available for public 
review and comment by this document. In addition, EPA is proposing 
today a site-specific rule, applicable only to the Merck Stonewall 
Plant, to facilitate implementation of the project. By this document, 
EPA solicits comment on the proposed rule, the proposed FPA, and the 
project generally.
    This proposed site-specific rule is intended to provide regulatory 
changes under the Clean Air Act and the Resource Conservation and 
Recovery Act (RCRA) to implement Merck's XL project, which will result 
in superior environmental performance and, at the same time, provide 
Merck with greater operational flexibility. The proposed site-specific 
rule would change the Clean Air Act requirements which apply to the 
Merck Stonewall Plant for the prevention of significant deterioration 
of air quality and certain new source performance standards. EPA also 
proposes a site-specific rulemaking under RCRA to provide regulatory 
changes pertaining to air emissions standards to implement this XL 
project.

DATES: Comments. All public comments must be received on or before 
April 30, 1997. If a public hearing is held, the public comment period 
will remain open until May 15, 1997.
    Public Hearing. A public hearing will be held, if requested, to 
provide interested persons an opportunity for oral presentation of 
data, views, or arguments concerning this proposed rule to implement 
Merck's XL project. If anyone contacts the EPA requesting to speak at a 
public hearing by April 10, 1997, a public hearing will be held on 
April 14, 1997. Additional information is provided in the section 
entitled ADDRESSES.
    Request to Speak at Hearing. Persons wishing to present oral 
testimony must contact Ms. Robin Moran at the EPA by April 10, 1997. 
Additional information is provided in the section entitled ADDRESSES.

ADDRESSES: Comments. Written comments should be submitted in duplicate 
to: Ms. Robin Moran, U.S. Environmental Protection Agency, Region III, 
Air, Radiation & Toxics Division, 841 Chestnut Street (3AT23), 
Philadelphia, PA, 19107-4431, (215) 566-2064.
    Docket. A docket containing supporting information used in 
developing this proposed rulemaking is available for public inspection 
and copying at U.S. EPA, Region III, 841 Chestnut Street, Philadelphia, 
PA, 19107-4431, (215) 566-2064, during normal business hours, and at 
EPA's Water docket (Docket name ``XL-Merck''); 401 M Street, SW, 
Washington, DC 20460. For access to the Water docket materials, call 
(202) 260-3027 between 9:00 a.m. and 3:30 p.m. (Eastern time) for an 
appointment. A reasonable fee may be charged for copying. A docket is 
also available for public inspection at the Virginia Department of 
Environmental Quality, Valley Regional Office, 4411 Early Road, P.O. 
Box 1129, Harrisonburg, Virginia 22801-1129, (540) 574-7800.
    Public Hearing. If a public hearing is held, it will be held at 
7:00 p.m. at the following location: Virginia Department of 
Environmental Quality, Valley Regional Office, 4411 Early Road, P.O. 
Box 1129, Harrisonburg, Virginia 22801-1129, (540) 574-7800. Persons 
interested in attending the hearing should notify Ms. Robin Moran, 
(215) 566-2064, to verify that a hearing will be held.

FOR FURTHER INFORMATION CONTACT: Ms. Robin Moran, U.S. Environmental 
Protection Agency, Region III, Air, Radiation & Toxics Division, 841 
Chestnut Street (3AT23), Philadelphia, PA, 19107-4431, (215) 566-2064.

SUPPLEMENTARY INFORMATION:

Outline of This Document

I. Authority
II. Background
A. Overview of Project XL
B. Overview of the Merck XL Project
    1. Introduction
    2. Merck XL Project Description
    3. Environmental Benefits
    4. Stakeholder Involvement
    5. Compliance

III. Clean Air Act Requirements

A. Summary of Regulatory Requirements for the Merck XL Project
B. Prevention of Significant Deterioration
    1. Requirements of the Clean Air Act
    2. Permit Modifications
C. State Implementation Plan Requirements
D. New Source Performance Standards
E. Title V Operating Permit

IV. Resource Conservation and Recovery Act Requirements

V. Additional Information

A. Public Hearing
B. Executive Order 12866
C. Regulatory Flexibility
D. Paperwork Reduction Act
E. Unfunded Mandates Reform Act

I. Authority

    This regulation is being proposed under the authority of sections 
101(b)(1), 110, 111, 161-169, 169A, and 301(a)(1) of the Clean Air Act, 
and sections 1006, 2002, 3001-3007, 3010, and 7004 of the Solid Waste 
Disposal Act of 1970, as amended by the Resource Conservation and 
Recovery Act, as amended (42 U.S.C. 6905, 6921-6927, 6930, and 6974). 
EPA has determined that this rulemaking is subject to the provisions of 
section 307(d) of the Clean Air Act.

II. Background

A. Overview of Project XL

    This proposed site-specific rule is designed to implement a project 
developed under Project XL, an important EPA initiative to allow 
regulated entities to achieve better environmental results at less 
cost. Project XL--for ``excellence and leadership''--was announced on 
March 16, 1995, as a central part of the National Performance Review's 
and EPA's effort to reinvent environmental protection. See 60 FR 27282 
(May 23, 1995). Project XL provides a limited number of private and 
public regulated entities an opportunity to develop their own pilot 
projects to provide regulatory flexibility that will result in 
environmental protection that is superior to what would be achieved 
through compliance with current and reasonably anticipated future 
regulations. These efforts are crucial to the Agency's ability to test 
new regulatory strategies that reduce regulatory burden and promote 
economic growth while achieving better environmental and public health 
protection. The Agency intends to evaluate the results of this and 
other Project XL projects to determine which specific elements of the 
project, if any, should be more broadly applied to other regulated 
entities to the benefit of both the economy and the environment.
    In Project XL, participants in four categories--facilities, 
industry sectors, governmental agencies and communities--are offered 
the flexibility

[[Page 15305]]

to develop common sense, cost-effective strategies that will replace or 
modify specific regulatory requirements, on the condition that they 
produce and demonstrate superior environmental performance. To 
participate in Project XL, applicants must develop alternative 
pollution reduction strategies pursuant to eight criteria--superior 
environmental performance; cost savings and paperwork reduction; local 
stakeholder involvement and support; test of an innovative strategy; 
transferability; feasibility; identification of monitoring, reporting 
and evaluation methods; and avoidance of shifting risk burden.1 
They must have full support of affected Federal, state and tribal 
agencies to be selected.
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    \1\ For more information about the XL criteria, readers should 
refer to the May 23, 1995 Federal Register notice (60 FR 27282) and 
the December 1, 1995 ``Principles for Development of Project XL 
Final Project Agreements'' document, both contained in the docket 
for this action.
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    The XL program is intended to allow EPA to experiment with untried, 
potentially promising regulatory approaches, both to assess whether 
they provide benefits at the specific facility affected, and whether 
they should be considered for wider application. Such pilot projects 
allow EPA to proceed more quickly than would be required to undertake 
changes on a nationwide basis. As part of this experimentation, EPA may 
try out approaches or legal interpretations that depart from or are 
even inconsistent with longstanding Agency practice, so long as those 
interpretations are within the broad range of discretion enjoyed by the 
Agency in interpreting statutes that it implements. EPA may also modify 
rules that represent one of several possible policy approaches within a 
more general statutory directive, so long as the alternative being used 
is permissible under the statute.
    Adoption of such alternative approaches or interpretations in the 
context of a given XL project does not, however, signal EPA's 
willingness to adopt that interpretation as a general matter, or even 
in the context of other XL projects. It would be inconsistent with the 
forward-looking nature of these pilot projects to adopt such innovative 
approaches prematurely on a widespread basis without first finding out 
whether or not they are viable in practice and successful in the 
particular projects that embody them. Furthermore, as EPA indicated in 
announcing the XL program, the Agency expects to adopt only a limited 
number of carefully selected projects. These pilot projects are not 
intended to be a means for piecemeal revision of entire programs. 
Depending on the results in these projects, EPA may or may not be 
willing to consider adopting the alternative interpretation again, 
either generally or for other specific facilities.
    EPA believes that adopting alternative policy approaches and 
interpretations, on a limited, site-specific basis and in connection 
with a carefully selected pilot project, is consistent with the 
expectations of Congress about EPA's role in implementing the 
environmental statutes (so long as the Agency acts within the 
discretion allowed by the statute). Congress' recognition that there is 
a need for experimentation and research, as well as ongoing re-
evaluation of environmental programs, is reflected in a variety of 
statutory provisions, such as sections 101(b) and 103 of the Clean Air 
Act. In some cases, as in this XL project, such experimentation 
requires an alternative regulatory approach that, while permissible 
under the statute, was not the one adopted by EPA historically or for 
general purposes.

B. Overview of the Merck XL Project

1. Introduction
    This proposed site-specific rule supports a draft permit and 
Project XL proposed Final Project Agreement (FPA) that have been 
developed by the Merck XL stakeholder group, namely Merck, EPA, 
Virginia Department of Environmental Quality (VADEQ), U.S. Department 
of the Interior (DOI)/National Park Service (NPS), and community 
representatives. Several environmental organizations offered valuable 
input during the stakeholder process, including Southern Environmental 
Law Center, the Virginia Consortium for Clean Air, and the Natural 
Resources Defense Council. The proposed FPA and draft permit are 
available for review in the docket for today's action and also are 
available on the world wide web at http://www.epa.gov/ProjectXL. The 
proposed FPA outlines how the project addresses the eight Project XL 
criteria, in particular how the project will produce, measure, monitor, 
report, and demonstrate superior environmental benefits. In today's 
action, the Agency is soliciting comment on proposed site-specific 
regulatory changes to implement the project. The draft permit is 
available on the world wide web and in the docket file for today's 
action; however the draft permit is made available for informational 
purposes only. The Commonwealth of Virginia is conducting the official 
comment period for the draft permit, and initiated a public comment 
period for the draft PSD permit and a proposed variance on January 28, 
1997.
    EPA also seeks comment on the proposed FPA, which is available on 
the world wide web and in the docket file for today's action, in light 
of the criteria outlined in the Agency's May 23, 1995, Federal Register 
notice (60 FR 27282) regarding Regulatory Reinvention (XL) Pilot 
Projects. Those criteria are: (1) Environmental performance superior to 
what would be achieved through compliance with current and reasonably 
anticipated future regulations; (2) cost savings or economic 
opportunity, and/or decreased paperwork burden; (3) stakeholder 
support; (4) test of innovative strategies for achieving environmental 
results; (5) approaches that could be evaluated for future broader 
application; (6) technical and administrative feasibility; (7) 
mechanisms for monitoring, reporting, and evaluation; and (8) 
consistency with Executive Order 12898 on Environmental Justice 
(avoidance of shifting of risk burden).
2. Merck XL Project Description
    The Merck Stonewall Plant is a pharmaceutical manufacturing 
facility, built in 1941, located near Elkton, Virginia. The facility is 
located approximately 2 kilometers from the Shenandoah National Park, a 
Federal Class I area under the Clean Air Act. Currently, the plant 
employs about 800 people in a range of pharmaceutical manufacturing 
activities such as fermentation, solvent extraction, organic chemical 
synthesis, and finishing operations. The facility's products include 
broad spectrum antibiotics, anti-parasitic drugs for human and animal 
health, a cholesterol lowering drug, a drug for the treatment of 
Parkinson's disease, and a new drug for the treatment of human 
immunodeficiency virus (HIV).
    To remain competitive in the worldwide pharmaceutical industry, the 
Merck Stonewall Plant must respond rapidly to changing market 
conditions and product demands. To get new pharmaceutical products to 
market quickly, Merck requires flexible manufacturing operations that 
can make a broad range of products with the same manufacturing 
equipment using a wide array of raw materials and solvents. Merck also 
continually evaluates existing products for yield and process 
improvements, which results in a need for frequent manufacturing 
changes. Thus, Merck's facilities often modify environmental permits 
after a product line is first permitted.
    The goal of this XL project is to develop a regulatory structure 
for the

[[Page 15306]]

Merck Stonewall Plant that both facilitates flexible manufacturing 
operations and achieves superior environmental performance. The 
existing preconstruction air permitting regulations that govern 
modifications at the facility, specifically the Prevention of 
Significant Deterioration (PSD) permitting regulations and the minor 
New Source Review (NSR) regulations, require that most changes to 
Merck's manufacturing processes must be reviewed and approved in 
advance by the VADEQ. In reviewing permit changes, the VADEQ consults 
with the Federal Land Manager (FLM) for Shenandoah National Park in 
accordance with the Memorandum of Understanding between the DOI/NPS and 
VADEQ. Typically, the more changes that are made or the larger the 
change, the more time and resources are necessary for permit review. 
The complexity of the regulations requires a considerable effort by the 
facility as well as the regulators to prepare and review permit 
applications for process modifications.
    Merck's XL project seeks to replace this complex permitting system 
with a simpler system of compliance with criteria air pollutant 
regulations. Through a site-specific rulemaking and enforceable permit 
conditions, the facility's total emissions of criteria pollutants 
(except lead) 2 would be capped below the level at which the plant 
operated over recent years (at approximately 1500 tons per year (TPY)). 
Within the site-wide total emissions cap, the facility will also be 
subject to individual pollutant caps (subcaps), established near or 
below recent actual emission levels, for sulfur dioxide (SO2), 
nitrogen oxides (NOX), and particulate matter with an aerodynamic 
diameter less than 10 microns (PM10). In addition to accepting 
these site-wide emissions caps, Merck will modify its existing coal-
burning powerhouse to burn natural gas, a cleaner burning fuel that 
generates substantially fewer emissions than coal. Either propane or 
number 2 fuel oil would be used as a backup fuel. This multi-million 
dollar project is not otherwise required by regulations and the boilers 
do not need to be replaced for other reasons (e.g., operation, age or 
capacity). The powerhouse conversion would result in an up-front 
estimated reduction of over 900 TPY of actual criteria air pollutants, 
primarily SO2 and NOX emissions. After this powerhouse 
conversion, Merck would reduce its total emissions cap by 20 percent, 
thereby permanently retiring at least 300 TPY of criteria pollutant 
emissions. Further, Merck also will reduce the pollutant-specific 
subcaps for SO2 and NOX by 25 percent and 10 percent, 
respectively.
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    \2\ The criteria pollutants included in the total emissions cap 
are sulfur dioxide, nitrogen oxides, carbon monoxide, ozone (using 
volatile organic compounds as a surrogate), and particulate matter 
with aerodynamic diameter less than 10 microns. Thus, the total 
emissions cap includes all existing criteria pollutants except lead. 
Merck will comply directly with any applicable requirements for the 
control of lead emissions. Merck currently emits a very low amount 
of lead emissions (0.3 tons per year), which will be virtually 
eliminated when the facility converts the coal-burning powerhouse to 
natural gas. Merck also will comply directly with any applicable 
requirements for new criteria pollutants which are not included in 
the total emissions cap.
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    Merck's XL project would be implemented through issuance of a site-
wide PSD permit, authorized by this proposed site-specific rulemaking. 
For the reader's convenience, a copy of the draft PSD permit is 
included in the docket for today's action. Under the site-specific rule 
and permit, the Merck Stonewall Plant would be required to maintain its 
emissions below the total emissions cap, as well as the subcaps for 
SO2, NOX and PM10. Under the site-wide emissions caps, 
changes or additions to facility operations would no longer need prior 
approval under PSD or NSR. The subcaps will keep SO2 and NOX 
emissions below recent actual emission levels and PM10 emissions 
will not significantly increase above the recent actual emissions 
level. The statutory PSD requirements for the VOC and CO emission 
increases that are possible under the total emissions cap will be 
satisfied pursuant to this site-specific rule and the PSD permit. So 
long as the facility complies with the total emissions cap, subcaps, 
and other permit requirements, it would have the flexibility to make 
modifications and to operate in a manner that supports Merck's 
objective to deliver high quality products quickly and efficiently to 
improve human and animal health without undergoing permit review for 
each modification.
    As an alternative to the current PSD permitting system, the total 
emissions cap and subcaps will provide an incentive for Merck to 
identify and promptly implement ongoing emission reductions at the 
facility to provide operating room under the cap for future 
modifications and expansions. The XL project also provides an 
additional incentive for Merck to minimize emissions--a system of 
``tiered'' monitoring, recordkeeping and reporting requirements. The 
draft permit provides that the monitoring, recordkeeping and reporting 
requirements become more stringent as the facility's actual emissions 
approach the total emissions cap. This tiered monitoring system 
provides Merck another built-in incentive to minimize emissions and to 
find opportunities to implement emission reductions.
3. Environmental Benefits
    The Merck XL Project is designed to deliver superior environmental 
performance while allowing flexible operations at the facility. The 
site-specific rule and simplified air permit would provide significant 
benefits to the environment by substantially reducing pollutant 
emissions near the Shenandoah National Park and the surrounding 
community.
    The Merck Stonewall Plant is located within 2 kilometers of 
Shenandoah National Park, a Federal Class I area. The facility's 
proximity to this nationally significant resource highlights the need 
for serious consideration of opportunities for better protection of the 
environment. Air quality is of special concern in Shenandoah National 
Park. Under the Clean Air Act, as amended in 1977, Shenandoah National 
Park was classified as a mandatory Federal Class I air quality area. 
Under the PSD program, the Federal Class I designation allows very 
little additional deterioration of the air quality from established 
baseline concentrations of certain air pollutants, and none of National 
Ambient Air Quality Standards (NAAQS) are to be exceeded. The DOI's 
Assistant Secretary for Fish and Wildlife and Parks is the Federal Land 
Manager (FLM) charged with direct responsibility to protect the air 
quality related values (AQRVs) of the Park. In 1990, the FLM for 
Shenandoah National Park notified the public that visibility is 
seriously degraded, that sensitive streams and watersheds are being 
acidified, and that park vegetation is being injured by ozone and 
sulfur dioxide levels. See 55 FR 38403-38408 (September 18, 1990).
    Certain criteria pollutants have been demonstrated to have a 
significant adverse effect on the environmental quality of the 
Shenandoah National Park. In particular, SO2 emissions contribute 
to visibility problems in the region, and NOX emissions combine 
with other chemicals in the atmosphere to form ground-level ozone, 
which has been determined to cause vegetation damage. Emissions of 
SO2 and NOX also contribute to the formation of acid rain and 
associated adverse impacts. Merck's powerhouse conversion would achieve 
an up-front reduction of these pollutants--SO2 emissions are 
expected to decrease by 679 TPY (94 percent) and NOX emissions are 
expected to decrease by 254 TPY (87 percent), from baseline

[[Page 15307]]

actual emission levels. After the powerhouse conversion, the total 
emissions cap and subcaps would ensure a continuing, permanent 
reduction of these pollutants, as well as provide an ongoing incentive 
to minimize actual emissions to preserve the operating margin under the 
caps. Besides the significant reduction in criteria pollutants 
resulting from the project, the conversion to natural gas also will 
result in a reduction of about 47 TPY (65 percent) of hazardous air 
pollutants (HAPs), specifically hydrogen chloride and hydrogen 
fluoride. These two HAPs are generated by burning coal and are also 
associated with the formation of acid rain. Reducing emissions of these 
chemicals also will contribute to efforts to improve air quality in the 
Shenandoah National Park and the surrounding community.
    Although the facility's VOC and CO emissions would be allowed to 
increase above recent actual emission levels (but within the total 
emissions cap), there are no identified adverse effects from the 
maximum allowable levels of these pollutants under the total emissions 
cap. Moreover, the statutory PSD requirements for VOC and CO will be 
satisfied pursuant to this proposed site-specific rulemaking and 
issuance of the PSD permit. Section III.B.1 of the preamble describes 
the analysis of possible VOC and CO emission increases.
4. Stakeholder Involvement
    The Merck XL project enhances the involvement of the community and 
other stakeholders in understanding and evaluating environmental 
impacts of the facility. Stakeholders will have an unprecedented 
opportunity to participate in the ongoing evaluation of the project and 
to recommend any necessary changes to the project. The draft PSD permit 
provides that the stakeholders review and evaluate the project at least 
every five years. If the project signatories (i.e., signatories to the 
Final Project Agreement, namely EPA, VADEQ, Merck, DOI Federal Land 
Manager, and Rockingham County Board of Supervisors) give full consent 
to any necessary permit changes, the permitting authority may process a 
permit modification according to the requisite permit modification 
procedures (see Section III.B.2 of this preamble and proposed 
Sec. 52.2454(n)). Any stakeholder may raise issues about the project at 
any time for discussion by the stakeholder group. The draft permit 
(Condition 6.1) identifies numerous issues that may be considered by 
the project stakeholders during each five year review, including: (1) 
Significant changes in emissions calculation methods; (2) changes in 
the list of criteria pollutants or the NAAQS; (3) review of example 
``good environmental engineering practice'' control technologies 
required for significant new installations or modifications; (4) 
adequacy of the monitoring, recordkeeping and reporting requirements; 
(5) review procedure for compliance with newly-applicable criteria 
pollutant regulations; (6) review of the permit termination criteria; 
(7) review of ambient modeling for short-term PM10 and SO2 
emissions; (8) review of the determination that the area is NOx-limited 
for ozone formation; and (9) review of the periodic review criteria. In 
addition to these five-year review criteria, the stakeholders, 
including the National Park Service, also will be involved in 
considering project changes based on the review of the effects of VOC 
emissions on AQRVs in Shenandoah National Park and the review of the 
public health effects of VOC emissions, if VOC emissions at the site 
reach specified threshold levels. See Condition 6.2 of the draft PSD 
permit. The review criteria related to VOC emissions are described in 
more detail in Section III.B.1 of the preamble.
    The draft PSD permit (Condition 12.6) defines ``project 
stakeholders'' as the project signatories to the FPA (i.e., EPA, VADEQ, 
Merck, DOI Federal Land Manager, and Rockingham County Board of 
Supervisors), plus other parties as follows: (1) Up to three other 
community representatives shall be included as nominated by the 
Rockingham County Board of Supervisors, and agreed to by full consent 
of the project signatories to the FPA. Community representatives are 
defined as local government and/or community residents with an ongoing 
stake in the project; and (2) Up to one representative from a regional 
public interest group shall be included as nominated by any project 
signatory and agreed to by full consent of the project signatories. 
This group of stakeholders will convene every five years to review 
whether changes to the permit are required. As discussed above, the 
draft permit establishes that full consent from the project 
signatories, and not each member of the stakeholder group, is necessary 
before permit changes can be made. This stakeholder process for five-
year reviews is consistent with the process used in the development of 
the proposed FPA and draft permit. The Chairman of the Rockingham 
County Board of Supervisors is the signatory to the FPA (i.e., a 
project signatory) representing community interests. The three 
additional members of the community team (two neighbors of the Merck 
Stonewall Plant and the Town Manger of Elkton) also actively 
participated in the stakeholder group. The County was designated as a 
project signatory at the request of the community team in order to 
insure long-term representation and continuity of community 
interests.3 This model of stakeholder involvement provided all 
stakeholders with full information and ability to shape the development 
of the project. EPA believes that it is an appropriate model which 
should apply in the same manner for the future evaluation of the 
project.
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    \3\  See July 1, 1996 letter from the Merck XL community 
representatives to the County Administrator and Members of the 
Rockingham County Board of Supervisors (contained in the docket).
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    EPA has received comments expressing concerns about the adequacy of 
the role of the stakeholders who are not also signatories--the regional 
public interest group and the three community representatives other 
than the Rockingham County Board of Supervisors.4 As described 
above, the draft permit establishes that full consent from the project 
signatories is needed to make permit changes (i.e., to recommend that 
the permitting authority process a permit modification). EPA interprets 
the permit to be designed such that the non-signatory stakeholders will 
be fully involved in the deliberation of all permit issues, as in the 
development of the Merck XL project. During the development of the 
Merck XL project, all stakeholders, as well as several environmental 
groups that were not part of the stakeholder group, provided valuable 
comments on the draft permit. These comments were fully considered by 
the project signatories and helped to shape the project. EPA expects 
that the same interaction among stakeholders will occur during the 
five-year permit reviews, and that the project signatories will fully 
consider concerns and issues raised by all the stakeholders before 
reaching decisions on permit changes. EPA invites public comment on the 
approach to stakeholder involvement

[[Page 15308]]

during the implementation of this XL project.
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    \4\  See December 18, 1996 letter from David W. Carr, Jr., Staff 
Attorney, Southern Environmental Law Center, to EPA Administrator 
Carol Browner and Deputy Assistant Administrator Richard D. Wilson; 
December 18, 1996 letter from Betty S. Sellers, Community 
Representative-Merck XL Project, to EPA Administrator Carol Browner 
and Regional Administrator Michael McCabe; and December 20, 1996 
letter from Betty S. Sellers to EPA Administrator Carol Browner and 
Deputy Assistant Administrator Richard D. Wilson (contained in the 
docket).
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    This XL project also greatly improves the stakeholders' access to 
information about the site's environmental performance. Merck will 
provide the stakeholders, and other interested parties, an annual 
progress report that describes the site's environmental performance 
under the XL project. This report will include a summary of the site's 
actual emissions and the total emissions cap and subcaps, a description 
of emissions prevented as a result of operating under this proposed 
rule and the PSD permit, and other information about the site's 
operations.
5. Compliance
    Under the terms of this proposed rule and the draft PSD permit, 
Merck's actual emissions of criteria pollutants cannot exceed the total 
emissions cap, and emissions of SO2, NOx and PM10 cannot 
exceed the individual subcaps for the life of the permit. Compliance 
with the site-wide total emissions cap and the subcaps will be 
determined by using a 12-month rolling total calculation of the site's 
actual emissions. The site-wide emissions will be calculated by using 
methods described in the permit. In addition to submitting to the 
project signatories semi-annual reports documenting the site's 
emissions, Merck will submit an annual progress report to the project 
stakeholders and other interested parties (as described in the previous 
section).
    This proposed rule and draft permit will provide EPA and VADEQ with 
greater authority to enforce the terms of the permit. As with all 
permits, the permit terms can be enforced through standard procedures 
under the Clean Air Act (Act). In addition, unlike typical PSD permits, 
the draft permit expressly allows for termination of the permit under 
the following conditions: (1) If EPA or VADEQ determines that 
continuation of this permit is an imminent and substantial endangerment 
to public health or welfare, or the environment; (2) if Merck knowingly 
falsifies emissions data; (3) if Merck fails to implement the 
powerhouse conversion project within 30 months after the effective date 
of the PSD permit; (4) if Merck receives four consent orders or two 
judgments adverse to Merck arising from non-compliance with this permit 
in a five year period that are deemed material; (5) upon full consent 
of all project signatories; (6) if Merck's actual emissions exceed the 
total emissions cap; and (7) for other reasons for which the VADEQ has 
statutory authority to terminate the permit.
    EPA and VADEQ will continue to possess all the administrative and 
judicial authority to enforce the provisions of the site-specific rule 
and permit that is currently available under sections 113 and 307 of 
the Act and under Virginia law.5 This site-specific rule and the 
PSD permit would not limit the authority of EPA or VADEQ to take 
administrative enforcement measures or to seek legal or equitable 
relief to enforce the terms of this rule or the permit, including, but 
not limited to, the right to seek injunctive relief, and imposition of 
statutory penalties, fines and/or punitive damages. Further, this site-
specific rule and the permit would not limit the authority of EPA or 
VADEQ to undertake any actions in response to conditions which present 
an imminent and substantial endangerment to public health or welfare, 
or the environment.
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    \5\  EPA plans to delegate the site-specific PSD rule (40 CFR 
52.2454) to the VADEQ upon promulgation.
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III. Clean Air Act Requirements

A. Summary of Regulatory Requirements for the Merck XL Project

    The alternate regulatory system that would be established under 
this proposed site-specific rule and the draft permit addresses the 
existing criteria pollutants (and does not include lead). Merck will 
fully comply with all requirements for the control of HAPs, including 
the forthcoming Maximum Achievable Control Technology (MACT) standard 
for the pharmaceutical industry. Merck also will comply with all 
existing and future environmental requirements not specifically amended 
pursuant to EPA's site-specific rulemaking for this project or pursuant 
to the variance expected to be approved by the Commonwealth of 
Virginia.
    In today's action, EPA proposes a site-specific PSD rule for the 
Merck Stonewall Plant in order to implement the proposed XL project for 
the site. See proposed Sec. 52.2454. This site-specific rule would 
replace (in most circumstances) the existing PSD rules at 40 CFR 52.21 
for the Merck Stonewall Plant only, and would establish the legal 
authority to issue the PSD permit to the Merck Stonewall Plant. The 
proposed site-specific PSD requirements are described in Section 
III.B.1 of this preamble.
    EPA also proposes a site-specific rule which establishes an 
alternative means of compliance for the Merck Stonewall Plant for two 
New Source Performance Standards (NSPS)--Subpart Db (Standards of 
Performance for Industrial-Commercial-Institutional Steam Generating 
Units) and Subpart Kb (Standards of Performance for Volatile Organic 
Liquid Storage Vessels). For NSPS other than Subpart Kb that may become 
applicable to the site in the future, EPA proposes an alternative 
compliance provision that would allow the facility the option of 
complying with the NSPS by reducing its site-wide emissions caps. 
However, under this latter approach, EPA has an opportunity to require 
Merck to comply directly with the applicable NSPS. These alternate 
compliance provisions are necessary to implement a simpler compliance 
approach for the facility that is more consistent with the principles 
of the site-wide emissions caps. The alternate compliance provisions 
are described further in Section III.D of this preamble.
    On January 28, 1997, VADEQ initiated public comment on a proposed 
variance for the Merck Stonewall Plant, pursuant to section 10.1-1307 
of the Virginia Air Pollution Control Law. 6 The VADEQ plans to 
request that the State Air Pollution Control Board approve the variance 
for Merck in April 1997. Among other things, the variance would provide 
Merck an alternate means of compliance with newly-applicable criteria 
pollutant regulations promulgated by the VADEQ. This alternate 
compliance option would allow Merck in most situations either to comply 
with new criteria pollutant regulations as written, or to reduce the 
total emissions cap (or subcaps, depending on the pollutant) by an 
equivalent amount of emission reductions. VADEQ also plans in the 
future to promulgate a source-specific regulation for the Merck XL 
project that would serve as an alternate to the regulations cited in 
the draft permit. EPA understands that VADEQ plans to submit this 
regulation to the EPA for approval as a source-specific SIP revision. 
EPA would then take action on the expected source-specific SIP revision 
in a future rulemaking action. This approach is described further in 
Section III.C of this preamble.
---------------------------------------------------------------------------

    \6\ This variance provision previously has been approved into 
the Virginia SIP at 40 CFR 52.2420(c) (15) and (89).
---------------------------------------------------------------------------

    In addition to Clean Air Act requirements, the Merck XL project 
would establish alternate regulatory requirements for the Resource 
Conservation and Recovery Act (RCRA) air emission standards. These 
requirements are described in Section IV of the preamble.

[[Page 15309]]

B. Prevention of Significant Deterioration

1. Requirements of the Clean Air Act
    The NSR program is a preconstruction review and permitting program 
applicable to new or modified stationary sources of air pollutants 
regulated under the Act. In attainment areas (i.e., areas meeting the 
NAAQS), the NSR requirements for the prevention of significant 
deterioration of air quality (PSD) under part C of title I of the Act 
apply. The PSD provisions of the Act are a combination of air quality 
planning and air pollution control technology program requirements for 
new or modified stationary sources of air pollution. Each SIP is 
required to contain a preconstruction review program for the 
construction and modification of any stationary source of air pollution 
to assure that the NAAQS are achieved and maintained; to protect areas 
of clean air; to protect AQRVs (including visibility) in national parks 
and other natural areas of concern; to assure appropriate emission 
controls are applied; to maximize opportunities for economic 
development consistent with the preservation of clean air resources; 
and to ensure that any decision to increase air pollution is made only 
after full public consideration of all the consequences of such a 
decision. See sections 101(b)(1), 110(a)(2)(C) and 160 of the Act.
    The Merck Stonewall Plant is located in an area that meets the 
NAAQS for all criteria air pollutants (attainment area) and, thus, the 
PSD program under part C of title I of the Act applies. Today, EPA 
proposes a site-specific PSD rule for the Merck Stonewall Plant in 
order to implement the proposed XL project for the site. Below, EPA 
describes how the proposed site-specific rule satisfies the statutory 
PSD permitting criteria in section 165(a) of the Act.
    Sections 165(a)(1) and 169(2)(c) require Merck to obtain a permit 
for a proposed modification setting forth emission limitations which 
conform to the requirements of part C of title I of the Act. The 
proposed site-specific rule would authorize a permit to be issued to 
Merck based, in part, on the establishment of a site-wide emissions cap 
for criteria air pollutants (total emissions cap). The criteria 
pollutants included in the total emissions cap are SO2, NOX, 
PM10, CO and ozone (using VOC as a surrogate). Thus, all existing 
criteria pollutants except lead are included in the total emissions 
cap. Merck would comply directly with any applicable requirements, 
including the existing PSD regulations at 40 CFR 52.21, for the control 
of lead emissions and any new criteria pollutants promulgated by 
EPA.7 Further, Merck will comply with any applicable requirements, 
including the existing PSD regulations at 40 CFR 52.21 for emissions of 
non-criteria air pollutants (e.g., hydrogen sulfide, total reduced 
sulfur).8
---------------------------------------------------------------------------

    \7\ The Commonwealth of Virginia currently implements 40 CFR 
52.21 under a delegation of authority from EPA. See 40 CFR 52.2451.
    \8\ If Merck were to emit significant quantities of non-criteria 
air pollutants regulated under 40 CFR 52.21, Merck would be required 
to comply directly with any applicable requirements for these 
pollutants. For the Merck Stonewall Plant only, EPA proposes in this 
rulemaking to extend the policy set forth in the October 16, 1995 
policy memorandum entitled ``Definition of Regulated Pollutant for 
Particulate Matter for Purposes of Title V,'' which is contained in 
the docket for this rulemaking, to consider PM10, and not 
particulate matter, as the regulated form of particulate matter for 
purposes of PSD applicability.
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    This proposed rule would require the PSD permit to contain initial 
site-wide emissions caps based on the site's actual emissions during a 
time period, within five years of permit issuance, which represents 
normal site operation, or a different time period if it is more 
representative of normal source operation. The PSD permit that would be 
issued in accordance with the proposed site-specific rule would require 
the baseline for establishing the site-wide emissions caps to be the 
annual average of the facility's actual criteria pollutant emissions 
during 1992 and 1993, the recent years considered most representative 
of typical operations. Under the total emissions cap, emissions of 
SO2, NOx and PM10 would also be capped (subcaps) at the 1992-
93 actual emissions baseline. After the facility converts its coal-
burning powerhouse to natural gas, the total emissions cap would be 
reduced by 20% from the baseline level. This cap adjustment will result 
in a permanent retiring of approximately 300 tons per year (TPY) of 
total criteria pollutants. Similarly, the subcaps for SO2 and NOx 
will be reduced by 25% and 10%, respectively, after the powerhouse 
conversion. Detailed information about the establishment of the 
emission caps, including documentation of the baseline emissions 
calculations, is contained in the docket for today's action.
    Merck will be allowed to vary its emission levels under the total 
emissions cap, constrained by the individual pollutant subcaps. 
Modifications at the facility that normally would be considered to 
result in emission increases would no longer need prior approval by the 
permitting authority under PSD or minor NSR, based on the facility's 
site-wide, federally-enforceable emission limitations. The emission 
limitations would keep SO2 and NOx emissions well below recent 
actual emissions. The emission limitations for PM10 will not 
significantly increase above the recent actual emissions level. 
Emissions of VOC and CO will not have subcaps, however, the statutory 
PSD requirements for increases of VOC and CO will be satisfied pursuant 
to this site-specific rulemaking.
    The individual pollutant subcaps for SO2, NOx, and PM10 
function similarly to plantwide applicability limits (PALs),9 but 
with important distinctions. A PAL is an emissions cap established for 
a particular pollutant for PSD (or nonattainment NSR) applicability 
purposes only. Under a PAL, a source could make modifications without 
triggering PSD as long as emissions remain below the PAL. If a source 
needed to make a modification that would increase emissions above the 
PAL, the source would be able to make the modification after undergoing 
PSD or NSR review and obtaining the necessary permits. Unlike a PAL, 
under the site-specific rule and permit Merck will no longer be able to 
obtain additional PSD permits to increase emissions above the caps. In 
fact, pursuant to this site-specific rule, if Merck's emissions were to 
exceed the site-wide total emissions cap, the EPA or VADEQ could 
terminate the permit (See section II.B.5 of this preamble).
---------------------------------------------------------------------------

    \9\ See New Source Review Reform proposal, 61 FR 38264-38266 
(July 23, 1996).
---------------------------------------------------------------------------

    Section 165(a)(2) of the Act requires the proposed permit to be 
subject to a review in accordance with section 165 of the Act, the 
required analysis to be conducted in accordance with regulations 
promulgated by the Administrator, and a public hearing to be held. This 
proposed site-specific rule would establish the applicable site-
specific PSD regulations for the Merck Stonewall Plant, and would 
therefore form the basis for the analysis required by section 165(a)(2) 
of the Act. The draft PSD permit that would be issued to the Merck 
Stonewall Plant under the authority of the new site-specific PSD rule 
is available to the public and contained in the docket file for this 
rulemaking. While the Agency may receive public comments on the draft 
PSD permit during the public comment period for this proposed 
rulemaking, in many instances the Agency may simply forward any such 
comments to VADEQ which will conduct the official public comment period 
and public hearing for

[[Page 15310]]

the proposed permit.\10\ On January 28, 1997, the VADEQ began a public 
comment period for the proposed PSD permit and a proposed variance that 
will serve as the Commonwealth's legal mechanism to issue the PSD 
permit to Merck. The VADEQ plans to request that the Virginia State Air 
Pollution Control Board approve the variance in April 1997. Once EPA's 
final site-specific rule for the Merck Stonewall Plant is promulgated, 
EPA plans to delegate to VADEQ the authority to issue the permit 
pursuant to the site-specific PSD rule. The VADEQ will have authority 
to issue the PSD permit to Merck after the Virginia State Air Pollution 
Control Board approves the variance and after this delegation is 
complete.
---------------------------------------------------------------------------

    \10\ The VADEQ currently implements the PSD program at 40 CFR 
52.21 under a delegation of authority from EPA. See 40 CFR 52.2451.
---------------------------------------------------------------------------

    Section 165(a)(3) of the Act requires the owner or operator of a 
proposed major emitting facility to demonstrate that emissions from 
construction or operation of the facility will not cause or contribute 
to air pollution in excess of any (a) maximum allowable increase (PSD 
increments), (b) national ambient air quality standards (NAAQS), or (c) 
any other applicable emission standard or standard of performance.
    Under the existing PSD rules at 40 CFR 52.21 (k) and (m), the Merck 
permit would not need a PSD increment or NAAQS compliance analysis, 
since emissions of SO2 and NOX will not be increased above 
baseline levels, and emissions of PM10 will not be increased 
significantly above baseline levels. Further, the subcaps for SO2 
and NOX will be reduced by 25% and 10%, respectively, below 
baseline levels after completion of the powerhouse conversion. EPA 
proposes that this site-specific rule also not require a PSD increment 
or NAAQS compliance analysis for pollutants which will be capped near 
or below baseline emissions levels.11 The draft PSD permit would 
not cause or contribute to emissions in excess of any other applicable 
emission standard or standard of performance. For more information, see 
the permit support document contained in the docket file and Sections 
III. C and D of this preamble.
---------------------------------------------------------------------------

    \11\ Although VOC and CO emissions may increase, there are no 
PSD increments for VOC and CO.
---------------------------------------------------------------------------

    To assure continued compliance with the NAAQS consistent with the 
minor NSR program, Merck conducted dispersion modeling to demonstrate 
that it does not cause or contribute to a violation of the short-term 
PM10 and SO2 NAAQS. This modeling was based on worst case 
emission rates. The modeling results added to background levels 
indicate that the short-term NAAQS for PM10 and SO2 would not 
be violated. Merck's maximum modeled impact was 15% of the 3-hour 
SO2 NAAQS, 13% of the 24-hour SO2 NAAQS, and 10% of the 24-
hour PM10 NAAQS. Merck also modeled the worst-case CO emissions 
that could be achieved under the total emissions cap. The modeling 
demonstrated that Merck's maximum modeled impact would not exceed 1% of 
the CO NAAQS. The permit support document contained in the docket 
includes a description of the modeling analysis.
    Based on the modeling results and other information provided in 
support of the draft permit, EPA believes that modifications at the 
site occurring within the first five year period of the permit that 
comply with this proposed rule and the permit will not cause or 
contribute to a violation of the NAAQS for the criteria pollutants 
included in the total emissions cap. Merck's ambient impact will be 
reevaluated as prescribed in the permit during each five year periodic 
review. Condition 6.1.7 of the draft permit requires that Merck perform 
an updated modeling analysis for SO2 and PM10 at each five 
year review period, if requested by EPA or VADEQ, if major changes have 
been made at the site that are not reflected in the most recent 
modeling analysis. Merck must submit to the project stakeholders 
information necessary to determine whether additional modeling is 
required. Such information includes, but is not limited to, the 
following: (1) The current plant configuration, including building 
locations and dimensions; and (2) information on emission sources, 
including stack dimensions, operating parameters, and emission rates 
for actual operating conditions as well as worst case short-term (3 and 
24-hour) operating conditions.
    As Merck operates under the total emissions cap, it is permissible 
that over time VOC emissions will increase above the baseline VOC 
levels. The Merck Stonewall Plant is located in an area that is 
generally recognized to be NOX-limited for ozone formation. The 
term ``NOX-limited'' means that the amount of NOX available 
is generally the controlling factor in determining how much ozone will 
be formed. In a NOX-limited area, reduced NOx emissions will 
result in reduced ozone formation, and increased NOX emissions 
will result in increased ozone formation. Further, increased VOC 
emissions generally will not result in additional ozone formation 
unless accompanied by additional NOX emissions.
    A report contained in the docket analyzed the worst case potential 
impact of VOC emissions on ozone formation in the area, based on an 
evaluation of urban airshed modeling developed for State Implementation 
Planning purposes in two urban areas. The potential for ozone formation 
was evaluated under the following worst case conditions: (1) If Merck 
were located in a VOC-limited area; (2) if the reactivity of Merck's 
VOC emissions were significantly higher than typical VOCs currently 
emitted at the facility (i.e., if the reactivity of Merck's VOC 
emissions were that of typical urban air or auto exhaust); and (3) if 
Merck's VOC emissions consumed the entire site-wide cap (i.e., a VOC 
emissions increase of approximately 600 TPY). Under this worst case 
scenario, which is highly improbable, the expected ozone increase from 
Merck's VOC emissions would be less than 1 g/m\3\ (.5 ppb), 
which is less than 0.5% of the ozone NAAQS. EPA believes that this is a 
highly conservative worst case analysis and that the potential ozone 
formation would be negligible under actual conditions. The worst case 
scenario is highly conservative because in actuality: (1) Merck is 
located in a NOX-limited area; (2) the reactivity of the typical 
VOC emissions currently emitted by Merck is much lower than that of 
typical urban air or auto exhaust; and (3) it is unlikely that VOC 
emissions could consume Merck's entire site-wide cap, since a portion 
of the cap necessarily will be consumed by SO2, NOX, 
PM10 and CO from combustion sources (e.g., the natural gas-fired 
boilers) and other sources at the facility. Moreover, the NOX 
emission reductions achieved as a result of Merck's powerhouse 
conversion and the establishment of permanent NOX subcaps should 
help to reduce local ozone formation. Therefore, EPA believes that the 
maximum potential VOC emission increases allowed under Merck's site-
wide cap will continue to provide protection of the ozone NAAQS.
    One of the five-year periodic review criteria in the draft permit 
provides that any project stakeholder may present technical papers or 
studies that change the recognized determination that the area is 
NOX-limited for ozone formation. Based on the stakeholders'' 
evaluation of this information, changes to the project may be 
considered if necessary.
    Section 165(a)(4) of the Act requires the proposed facility to be 
subject to the best available control technology for each pollutant 
subject to regulation

[[Page 15311]]

under the Act emitted from such facility. Section 169(3) of the Act 
defines ``best available control technology'' (BACT) as an emission 
limitation based on the maximum degree of reduction of each pollutant 
subject to regulation under the Act emitted from or which results from 
any major emitting facility, which the permitting authority, on a case-
by-case basis, taking into account energy, environmental, and economic 
impacts and other costs, determines is achievable for such facility 
through application of production processes and available methods, 
systems, and techniques, including fuel cleaning, clean fuels, or 
treatment or innovative fuel combustion techniques for control of each 
such pollutant.
    Under the existing PSD rules at 40 CFR 52.21(j), the Merck permit 
would be required to apply BACT only for pollutants which would be 
allowed to increase above the significance levels in 40 CFR 
52.21(b)(23). Under the site-wide emissions caps, VOC and CO are the 
only pollutants that can be increased above the existing PSD 
significance levels (i.e., 40 TPY for VOC and 100 TPY for CO). EPA 
proposes that this site-specific rule also require BACT (according to 
the interpretation proposed below) only for pollutants which will be 
allowed to increase significantly under the permit (i.e., VOC and CO). 
For purposes of this site-specific rule only, EPA proposes to interpret 
section 165(a)(4) to allow the BACT determination for the Merck 
Stonewall Plant to take into account the environmental impacts and 
benefits of foregoing traditional BACT for VOC and CO emission 
increases, and associated compliance costs, in favor of an innovative 
BACT determination for VOC and CO emission increases which relies on 
otherwise voluntary SO2 and NOX reductions from the 
powerhouse conversion and the site-wide emissions caps. Merck will 
implement the powerhouse conversion solely as a means of achieving 
superior environmental benefit under Project XL. There are no current 
or reasonably anticipated regulatory requirements that would require 
Merck to replace the coal boilers with natural gas boilers, and the 
boilers do not need to be replaced for other reasons (e.g., age, 
capacity, performance). The existing coal-fired boilers that will be 
replaced were installed in 1982 and have a useful life of about 40 
years. Merck estimates that the powerhouse conversion will cost 
approximately $10 million in capital cost, and an additional $1 million 
per year in increased operational costs due to the currently higher 
price of natural gas.
    The environmental benefits from the powerhouse conversion include 
over 900 TPY (60% of baseline) of up-front criteria pollutant emission 
reductions (SO2 and NOX) and about 47 TPY (65% of baseline) 
of HAP emissions reductions (hydrogen chloride and hydrogen fluoride). 
The 20 percent reduction of the total emissions cap after the 
powerhouse conversion will ``lock-in'' at least 300 TPY of these 
SO2 and NOX reductions. Further, Merck will have permanent 
site-wide emissions caps for SO2 and NOX, established at 
levels 25% and 10%, respectively, below recent actual emissions. These 
caps will permanently lock in a significant portion of the 
environmental benefit from the powerhouse conversion, and provide 
incentives for Merck to minimize actual emissions in order to preserve 
an operating margin for future growth. The environmental benefits from 
the powerhouse conversion and emissions caps include the following: (1) 
Visibility in nearby Shenandoah National Park should be improved from 
the SO2 reductions; (2) acid deposition should be reduced from the 
substantial SO2 and NOX reductions, as well as the hydrogen 
chloride and hydrogen fluoride reductions; and (3) local ozone 
formation should be reduced from the NOX reductions.
    EPA proposes that the significant environmental benefits from the 
powerhouse conversion and site-wide emissions caps should be considered 
when determining appropriate BACT for future VOC and CO emission 
increases under the total emissions cap. EPA believes this is an 
approach that, while not the one historically adopted by the Agency 
under section 165(a)(4), merits consideration on a pilot project basis. 
If the project demonstrates that such an approach leads to superior 
environmental and economic results and if EPA determines that such an 
approach is transferrable to other situations, it could be considered 
for broader application. EPA emphasizes that this innovative approach 
to BACT determinations is not being adapted at this time for any source 
other than the Merck Stonewall Plant, and that the decision to make it 
available at this facility takes into account the totality of the 
obligations undertaken by Merck in this project. Thus, EPA believes 
that the BACT determination may consider the innovative nature of the 
site-wide emissions caps, and the tiered monitoring approach, in 
providing incentives for Merck to minimize actual emissions. In 
addition, the proposed rule would require Merck to install ``good 
environmental engineering practice'' technology on significant new 
installations or significant modifications for pollutants covered by 
the site-wide emissions cap. The draft PSD permit includes examples of 
emission controls that qualify as good environmental engineering 
practice technology in the pharmaceutical or batch processing industry. 
For example, for VOC control, the draft permit lists carbon adsorption, 
condensation, or thermal oxidation as example control technologies that 
could be used depending on the concentration and flow rate of the VOC 
streams. The EPA believes that the combination of substantial SO2 
and NOX reductions, site-wide emissions caps, and the good 
environmental engineering practice requirement satisfy the statutory 
BACT requirement for possible VOC and CO emission increases as 
authorized in this site-specific rule.
    There are several other aspects of the Merck XL project that will 
serve to keep VOC emissions well-controlled as Merck operates under the 
site-wide cap. First, Merck will comply with all requirements for the 
control of HAPs under section 112 of the Act, including the forthcoming 
MACT standard for the pharmaceutical industry. EPA expects that the 
pharmaceutical MACT standard will require control of emissions from 
process vents, wastewater, equipment leaks, and storage tanks. Merck's 
compliance with the pharmaceutical MACT will also provide co-control of 
some VOC emissions. For example, if a process vent stream contains HAPs 
as well as VOCs (or HAPs that are also VOC), the VOCs emissions would 
likely be controlled in accordance with the MACT standard. Second, 
Merck will conduct property line modeling of non-HAP VOCs to determine 
whether the emission levels are protective of public health. This 
modeling will be conducted when VOC emissions reach 125% of the VOC 
baseline (i.e., 510 TPY) and whenever VOC emissions increase by 
additional 100 TPY increments (i.e., 610 TPY, 710 TPY, and 810 TPY). 
This draft PSD permit provision (Condition 6.2.2) was developed to 
address the community stakeholders' concerns about the potential public 
health effects of Merck's VOC emissions. Third, the tiered monitoring 
provisions were designed to create an added incentive for Merck to 
minimize actual emissions. The monitoring, recordkeeping and reporting 
requirements increase in stringency as Merck's actual emissions 
approach the cap. This approach creates an incentive for Merck to 
minimize VOC emission increases, through the use of

[[Page 15312]]

good emissions control technology, pollution prevention, or other 
techniques, so that site-wide emissions remain in the lowest tier of 
monitoring.
    The EPA acknowledges that the BACT provisions, as well as other 
provisions, of this proposed rule and the draft permit are in some ways 
in conflict with existing Agency guidance and interpretations of the 
Act. The Agency believes that it nonetheless has authority to apply 
today's proposed rule and the draft permit to Merck under Project XL as 
a unique, site-specific pilot project to explore and evaluate this 
innovative approach to environmental regulation consistent with the 
Act.
    Section 165(a)(5) of the Act requires that major emitting 
facilities comply with the provisions of section 165(d) with respect to 
Federal Class I areas. Section 165(d)(2) provides that the FLM and the 
Federal official charged with direct responsibility for management of 
any Federal lands within a Class I area have an affirmative 
responsibility to protect the AQRVs (including visibility) of such 
lands. The FLM has a responsibility to consider, in consultation with 
the EPA Administrator, whether a proposed major emitting facility will 
have an adverse impact on any AQRV.
    The U.S. Department of the Interior (DOI) is the FLM for the 
Shenandoah National Park, a Federal Class I area within 2 kilometers of 
the Merck Stonewall Plant. The DOI, specifically the National Park 
Service (NPS), is a key stakeholder in developing the Merck XL project. 
Issues involving the potential impacts of the project on AQRVs in the 
Park were discussed at length among the project stakeholders. Because 
Merck will convert its powerhouse from burning coal to natural gas, the 
proposed XL project will achieve significant up-front reductions of 
SO2 and NOX, two pollutants associated with existing adverse 
impacts on the Park.12 Another pollutant of concern is ozone, 
because of its potential effects on park resources, such as vegetation. 
However, ozone levels are not expected to increase as a result of this 
project. As explained above, the area generally is considered to be 
NOX-limited for purposes of ozone formation and, therefore, 
increases in VOC emissions are not expected to cause increased ozone 
levels without additional increases of NOX. Thus, the allowable 
increase of VOC emissions under Merck's total emissions cap is not 
likely to contribute significantly to ozone formation, as described 
above. Moreover, the Merck XL project should help reduce the formation 
of local ozone due to decreases in NOX emissions.
---------------------------------------------------------------------------

    \12\ See 55 FR 38403-38408 (September 18, 1990).
---------------------------------------------------------------------------

    Aside from the impact of VOC emissions as a precursor to ozone 
formation, the FLM also expressed concern during the Merck XL 
stakeholder discussions regarding the potential impacts of future VOC 
emissions increases directly on AQRVs in the Park. Therefore, the draft 
PSD permit for the Merck XL project requires Merck to evaluate the 
effects of VOC on AQRVs in the Park upon certain ``trigger levels'' of 
VOC emission increases. Merck will perform an AQRV assessment upon 
either of the following events: (1) After the first time the site-wide 
VOC emissions reach a level that is double the baseline VOC emissions 
(i.e., if site-wide VOC emissions reach 816 TPY); or (2) after 
installation of any individual new process or process modification that 
results in a net emissions increase of the site's actual VOC emissions 
of 100 TPY or more. Under condition 6.2.1 of the draft permit, if the 
project signatories agree that Merck's VOC emissions are the cause of 
adverse impact on any AQRVs at the Federal Class I area, Merck shall 
implement mitigation measures that are agreed to by the project 
signatories. However, Merck does not have the obligation under the 
permit to mitigate if there are other contributing sources to the AQRV 
adverse impact.
    EPA believes that it has the authority under the Clean Air Act to 
address adverse impacts on AQRVs in Federal Class I areas from both new 
and existing sources. EPA intends to undertake a future rulemaking to 
require State Implementation Plans to prevent significant deterioration 
of air quality by adopting mitigation measures to address such adverse 
impacts. Merck agrees that EPA should undertake the rulemaking 
approach, described above, to address environmental problems indicated 
by adverse impacts on AQRV's in Federal Class I areas.
    DOI also expressed an interest in further understanding the impacts 
of VOC emissions generally on resources in Shenandoah National Park. 
EPA and DOI have agreed to work cooperatively to better understand 
background VOC levels in the Park, through monitoring, sampling or 
other appropriate analyses, and their potential impacts on park 
resources.13
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    \13\ See October 16, 1996 letter from Richard D. Wilson, Deputy 
Assistant Administrator, Office of Air and Radiation, U.S. 
Environmental Protection Agency, to George Frampton, Assistant 
Secretary for Fish and Wildlife and Parks, U.S. Department of the 
Interior; and October 17, 1996 letter from George T. Frampton to 
Richard D. Wilson (contained in docket file).
---------------------------------------------------------------------------

    Section 165(a)(6) of the Act requires an analysis of any air 
quality impacts projected for the area as a result of growth associated 
with the proposed permit. The Merck Stonewall Plant is an existing 
source, in operation since 1941. There is not expected to be any 
significant growth associated with the Merck Stonewall Plant in the 
area that would affect air emissions.
    Section 165(a)(7) of the Act requires the owner or operator to 
conduct monitoring as may be necessary to determine the effect which 
emissions increases may have, or are having, on air quality. Under the 
Merck XL project, Merck will not have a significant increase of 
SO2, NOX or PM10 above baseline levels. Moreover, 
allowable SO2 and NOX emissions (i.e., subcaps) will be 
reduced from the actual emissions baseline levels by 25% and 10%, 
respectively, after the powerhouse conversion. As described above, 
Merck has conducted modeling to demonstrate that its maximum possible 
CO emissions under the cap would consume less than 1% of the NAAQS. 
Because the area is NOX limited for ozone formation and the Agency 
believes that the maximum potential VOC emission increases allowed 
under Merck's total emissions cap will not increase ozone levels (see 
previous discussion in this section of the preamble), EPA does not 
believe that Merck's allowable VOC emission increases warrant a 
requirement to conduct ambient ozone monitoring. Therefore, EPA 
believes that there are no ambient monitoring requirements necessary to 
satisfy this provision of the Act for the Merck project.
2. Permit Modifications
    As described in Section II.B.4 of the preamble, the stakeholders 
will periodically review the PSD permit and consider whether any 
changes are required. Changes to the permit may be made either after 
full consent of the project signatories and subject to the permit 
modification procedures promulgated in this site-specific rule, or 
pursuant to PSD permit modification procedures generally applicable to 
other PSD permits.14
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    \14\ EPA has not promulgated general procedures to modify PSD 
permits. See 40 CFR 124.5(g)(1). The language in the draft PSD 
permit is intended to provide that if the Agency were to promulgate 
generally applicable regulations, not solely applicable to the Merck 
PSD permit, establishing the procedures for sources and permitting 
authorities to modify PSD permits, then the Merck PSD permit also 
would be subject to such procedures.
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    As part of the site-specific PSD rule, EPA is proposing procedures 
to be followed by the permitting authority for

[[Page 15313]]

processing modifications to the Merck PSD permit. See proposed 
Sec. 52.2454(n). These provisions also define criteria for the types of 
changes that may be processed as PSD administrative permit 
modifications. See proposed Sec. 52.2454(n)(2). These procedures apply 
only to the permit issued pursuant to the site-specific PSD rule for 
the Merck Stonewall Plant.

C. State Implementation Plan Requirements

    The Merck XL project would involve alternative compliance 
provisions for several Virginia SIP requirements. In the next few 
months, prior to issuance of the Merck PSD permit, VADEQ plans to 
propose that the Virginia State Air Pollution Control Board approve a 
variance for the Merck Stonewall Plant, pursuant to section 10.1-1307 
of the Virginia Air Pollution Control Law. This variance provision 
previously has been approved into the Virginia SIP at 40 CFR 52.2420(c) 
(15) and (89). The variance would allow Merck to operate under the PSD 
permit, which represents compliance for the Virginia regulations cited 
in Section 3 of the draft permit. The permit support document contained 
in the docket file for this rulemaking describes the basis for 
determining that the XL project should serve as alternative compliance 
to these regulations. VADEQ also plans in the future to promulgate a 
source-specific regulation for the Merck XL project that would serve as 
an alternate to the regulations cited in the draft permit. VADEQ plans 
to submit this regulation to the EPA for approval as a source-specific 
SIP revision. EPA would then take action on the expected source-
specific SIP revision in a future rulemaking action.
    One of the key SIP requirements that the Merck XL project will 
replace is minor NSR permitting. The new PSD permit would replace the 
previously-issued minor NSR permits for the Stonewall Plant. Merck 
currently has 14 minor NSR permits for the Stonewall Plant. Pursuant to 
the variance and SIP revision procedure described above, this proposed 
rule and the draft permit would be substituted for the existing 
Virginia minor NSR SIP program for the Merck Stonewall Plant. The draft 
PSD permit requires Merck to continue to operate and maintain the 
emission control equipment that is currently permitted. By operating 
under the permit, including the site-wide emissions caps, modifications 
at the facility would not be required to undergo traditional minor NSR 
permit reviews.
    If the area in which the Merck Stonewall Plant is located becomes a 
nonattainment area for any of the criteria air pollutants included in 
the total emissions cap, the facility will be grandfathered from any 
new nonattainment NSR requirements, as long as the PSD permit issued 
pursuant to this proposed site-specific rulemaking is in effect. This 
is because the PSD permit authorizes construction and operation of any 
new or modified sources of emissions of the pollutants included in the 
total emissions cap. All changes at the facility covered by the PSD 
permit would not be subject to any additional major NSR permitting 
requirements, whether PSD or nonattainment NSR. This grandfathered 
status does not apply to any other Title I nonattainment requirements 
(see the following discussion pertaining to newly applicable criteria 
pollutant regulations).
    The draft permit also contains provisions for Merck to comply in an 
alternative means with applicable future criteria pollutant regulations 
15 including regulations promulgated pursuant to the AQRV SIP 
rulemaking described above. Under this approach, Merck would have the 
option of either complying with a new criteria pollutant regulation as 
written, or by reducing its total emissions cap or subcaps (depending 
on the pollutant). If Merck chooses the option of reducing its total 
emissions cap or subcaps, Merck would determine the reduction in total 
actual emissions that would result from complying with the regulation, 
and reduce its total emissions cap or subcaps by that amount. If the 
criteria pollutant regulation would result in the control of SO2, 
NOX, or PM10, Merck would reduce its subcaps for SO2, 
NOX, or PM10, respectively (or comply directly with the 
applicable regulation). If the criteria pollutant regulation would 
result in the control of VOC or CO, Merck would reduce its total 
emissions cap (or comply directly with the applicable regulation). The 
draft permit sets forth the process by which the administering agency 
(EPA or VADEQ) will approve Merck's emission reduction determination. 
For certain types of criteria pollutant regulations, namely, Federal 
Implementation Plans (FIP) and most NSPS, EPA will determine whether 
such alternative compliance provisions are appropriate, as discussed 
below. For SIP requirements, this approach is contingent on authorizing 
language in the Virginia SIP, which will be accomplished initially 
through Virginia's approval of a variance. (See previous discussion in 
this section). The permit support document contained in the docket 
describes this approach in more detail.
---------------------------------------------------------------------------

    \15\ These provisions apply only to regulations that would apply 
to the criteria pollutants included within the site-wide emissions 
cap and listed in Section 1.1 of the draft permit, namely SO2, 
NOX, PM10, CO, and ozone (using VOC as surrogate).
---------------------------------------------------------------------------

    This alternative compliance option is a significant element of the 
overall Merck XL project. Merck has expressed that this option could be 
useful when, for example, a rule requires controls on an emission 
unit(s) that Merck may be planning to shut down or replace soon after 
the rule's compliance date (e.g., phase-out of certain pharmaceutical 
products) and it would not be cost-effective to comply with the rule 
directly. As another example, Merck may decide that it should achieve 
actual emission reductions to keep site-wide actual emissions well 
below the cap (e.g., within Tier I monitoring), but the new rule will 
not result in cost-effective reductions. In this case, Merck could 
choose to reduce the cap in lieu of complying directly with the 
regulation, but may voluntarily install more effective emission 
controls on other emission units to minimize site-wide actual emissions 
and preserve its operating margin under the caps.
    The Commonwealth of Virginia plans to include this compliance 
option for the Merck Stonewall Plant for SIP rules in a future source-
specific SIP revision. EPA believes that it is acceptable to allow such 
a source-specific compliance option for SIP purposes as part of the 
Merck XL project, because it is the Commonwealth's responsibility to 
design SIP control strategies that ensure that the area attains and 
maintains the NAAQS, and the Commonwealth generally determines which 
sources must achieve emissions reductions. Virginia is making an up 
front decision that, for future SIP regulations, the Commonwealth may 
not achieve planned levels of actual emission reductions from the Merck 
Stonewall Plant as a result of such regulations (i.e., if Merck chooses 
to reduce its total emissions cap or subcaps instead). EPA has informed 
Virginia that the Commonwealth could not receive emission reduction 
credit in an attainment plan if Merck chooses the option of reducing 
its site-wide cap or subcaps. If the criteria pollutant regulation is 
promulgated by EPA in a FIP, it would be EPA's responsibility to ensure 
adequate emission reductions to attain and maintain the NAAQS. 
Therefore, if Merck is subject to a future FIP requirement for criteria 
pollutants covered by the total emissions cap the

[[Page 15314]]

draft permit provides that EPA will determine whether it is appropriate 
for Merck to have the option of reducing the total emissions cap or 
subcaps in lieu of complying with the FIP regulation.

D. New Source Performance Standards

    EPA is proposing a site-specific rule that would establish an 
alternate means of compliance for the Merck Stonewall Plant for two 
existing New Source Performance Standards (NSPS)--Subpart Db (Standards 
of Performance for Industrial-Commercial-Institutional Steam Generating 
Units) and Subpart Kb (Standards of Performance for Volatile Organic 
Liquid Storage Vessels)--as well as for future applicable NSPS. These 
alternate compliance provisions are necessary to implement a simpler 
compliance approach for the facility that is more consistent with the 
principles of the site-wide emissions cap.
    A key innovation in this XL project is to demonstrate that 
incentives to minimize emissions can be achieved through compliance 
with a site-wide total emissions cap, established at a level 20 percent 
below recent actual emissions (i.e., an ``actuals-based'' cap), as well 
as subcaps for SO2, NOX, and PM10. Thus, under this 
project, total criteria pollutant emissions must decrease substantially 
from recent actual emissions. Under this proposed rule and the draft 
permit, Merck would achieve significant environmental benefits by 
converting its coal-burning powerhouse to natural gas and by complying 
with the actuals-based site-wide emissions caps.
    Under the existing regulations, the new natural-gas fired boilers 
would be subject to NSPS Subpart Db. EPA proposes to promulgate a site-
specific NSPS rule establishing an alternate means of compliance for 
the Merck Stonewall Plant's planned natural gas-fired boilers that 
would be subject to NSPS Subpart Db. See proposed Sec. 60.49b(u). The 
key emission limitation requirement of NSPS Subpart Db for natural gas-
fired boilers is a NOX emissions standard of 0.10 lb/mmBTU heat 
input. The proposed alternate compliance provisions would require Merck 
to install low-NOX technology on the new natural gas-fired boilers 
instead of meeting a specific NOX emission standard for the 
boilers. See proposed Sec. 60.49b(u)(1)(i). The requirement to comply 
with the total emissions cap (established at a level 20 percent below 
recent actual emissions), as well as the NOX subcap, establishes 
an incentive to minimize actual emissions. In selecting low NOX 
technology for installation with the new natural gas boilers, Merck 
plans to install technology that will achieve a NOX emission rate 
of 0.035 lb/mmBtu--an emission rate well below the applicable NSPS 
standard. The docket file contains a letter from Merck stating its 
commitment to specify low NOX technology that will achieve a 
NOX emission rate of 0.035 lb/mmBtu or less when seeking bids for 
the new boilers.16
---------------------------------------------------------------------------

    \16\ See letter dated December 11, 1996 from Mr. Tedd Jett, 
Manager of Environmental Engineering, Merck & Co., Inc., Stonewall 
Plant, included as Appendix 4 of the PSD permit support document 
(contained in the docket).
---------------------------------------------------------------------------

    Under the alternate compliance provisions, Merck would be required 
to perform emissions testing and monitoring requirements that are 
substantively equivalent to the requirements of NSPS Subpart Db, 
including the emissions monitoring requirements in 40 CFR 60.48b. Merck 
would be required to perform a stack test within 180 days of completing 
the powerhouse conversion to quantify the criteria pollutant emissions 
from the new boilers. Merck also would be required to continuously 
monitor and record NOX and opacity using a continuous emissions 
monitoring system or predictive emissions monitoring system.
    EPA also proposes to promulgate a site-specific NSPS rule 
establishing an alternate means of compliance for volatile organic 
liquid (VOL) storage vessels (including petroleum liquid storage 
vessels) that would be subject to NSPS Subpart Kb. See proposed 
Sec. 60.112b(c). The recordkeeping provisions of 40 CFR 60.116b (b) and 
(c) require certain records to be kept depending on the size of the 
vessel and the vapor pressure of the VOL stored. At this time, the 
Merck Stonewall Plant operates VOL storage vessels that are subject 
only to these recordkeeping requirements. EPA believes that the 
monitoring, recordkeeping and reporting requirements of this proposed 
rule and the draft PSD permit are adequate to ensure compliance with 
the provisions of the draft PSD permit at the site. Therefore, EPA 
proposes that, for storage vessels not subject to the control 
technology requirements of Subpart Kb (see discussion below), the 
requirements of 40 CFR 60.116b (b) and (c) and the NSPS General 
Provisions (40 CFR Part 60, Subpart A) not be applicable to the Merck 
Stonewall Plant. See proposed Sec. 60.112b(c)(2).
    For storage vessels with a certain design capacity and storing a 
VOL with a certain vapor pressure, Subpart Kb (40 CFR 60.112b (a) and 
(b)) requires that the storage vessels be equipped with control 
technology. The control technology options of 40 CFR 60.112b(a) 
include: (1) A fixed roof tank with an internal floating roof; (2) an 
external floating roof; (3) a closed vent system and control device 
with 95% control efficiency; and (4) a system of equivalent control to 
options 1-3. In addition, certain EPA notifications are applicable for 
such new or modified facilities in accordance with the NSPS General 
Provisions (Subpart A). Storage vessels storing material with high 
vapor pressures do not have the option to use floating roof controls, 
but must be equipped with a closed vent system and control device or 
meet an equivalent standard (40 CFR 60.112b(b)). Merck currently has no 
storage vessels that are subject to the Subpart Kb control technology 
requirements. EPA also proposes to promulgate a site-specific NSPS rule 
establishing an alternate means of compliance that would apply if in 
the future Merck installs such storage vessels, or changes the 
operation of existing storage vessels, such that they would otherwise 
be subject to the control technology requirements of Subpart Kb (40 CFR 
60.112b (a) or (b)). EPA proposes that Merck would have the option of 
reducing the site-wide emissions cap in lieu of complying directly with 
the NSPS Subpart Kb requirements. This option would be implemented in 
the same manner as that described above for alternate compliance for 
SIP rules (see Section III.C of this preamble). See proposed 
Sec. 60.112b(c)(1) and condition 1.2.2.c.iii. of the draft PSD permit.
    For future applicable NSPS other than Subpart Kb, including future 
promulgated NSPS, this proposed rule and the draft permit would allow 
Merck to seek the same alternative compliance option as for Subpart Kb, 
that is, the option to reduce the site-wide emissions cap(s) in lieu of 
complying directly with the applicable NSPS rule. See proposed 
Sec. 60.1(d). However, the proposed rule and draft permit provide EPA 
an opportunity to require Merck to comply with the NSPS regulation as 
written, rather than exercise the option to reduce the site-wide 
emissions cap(s). See proposed Sec. 60.1(d)(3). Condition 1.2.2.c.iii. 
of the draft PSD permit provides that, for any NSPS other than Subpart 
Kb, Merck shall implement the regulation as written by the compliance 
date if: (1) EPA determines that compliance with the regulation instead 
of a cap adjustment is necessary for achieving the objectives of the 
regulation, and (2) EPA notifies Merck in writing within 60 days of 
Merck's notification that it is newly subject to the regulation.

[[Page 15315]]

    EPA emphasizes that the alternative approaches to compliance with 
Clean Air Act requirements adopted in this rule are being adopted only 
for this facility, on a pilot project basis. The approach is not 
available to other facilities, and the decision to make it available at 
this facility is linked to the full set of the facility's obligations 
in this project. Based on the experience in this project, EPA could 
propose to adopt such an approach more widely at some future time, but 
the rule proposed today is limited to the Merck Stonewall Plant and 
should not be interpreted as a more general revision of NSPS 
regulations, or even as initiating a process toward such a general 
revision.

E. Title V Operating Permit

    Today's proposed site-specific rulemaking does not amend or add any 
new Title V requirements for the Merck Stonewall Plant. Merck will be 
required to obtain a Title V operating permit, pursuant to the 
applicable Title V program in the Commonwealth of Virginia. The 40 CFR 
Part 71 Federal Operating Permit Program is currently effective in 
Virginia.17 However, EPA plans in the near future to propose 
approval of Virginia's Title V program pursuant to 40 CFR Part 70 
(State Operating Permit Programs), which, when finalized, would replace 
the Part 71 program in Virginia. EPA expects that Merck's Title V 
permit would be issued under Virginia's Title V program after it is 
approved, rather than under the Part 71 program requirements. However, 
Merck has requested that EPA clarify some interpretations about how the 
Part 71 program would apply to the facility, particularly, how the 
provisions of the PSD permit would be treated as an underlying set of 
applicable requirements within the Title V permit.
---------------------------------------------------------------------------

    \17\ See 61 FR 34202-34249 (July 1, 1996).
---------------------------------------------------------------------------

    As part of Merck's Title V permit, the new PSD permit would become 
the principal set of applicable requirements for criteria pollutants 
for the facility. Other applicable requirements would include the 
future pharmaceutical MACT and any other requirements pertaining to HAP 
emissions, any SIP or NSPS rules that the facility complies with 
directly, as well as any other rules promulgated in the future that 
would apply to the facility.
    The draft PSD permit has substantial requirements for monitoring, 
recordkeeping and reporting in order to ensure compliance with the PSD 
permit. As described previously in this preamble, the monitoring, 
recordkeeping and reporting provisions of the PSD permit increase in 
stringency as Merck's emissions approach the total emissions cap. EPA 
does not believe that any additional monitoring requirements (e.g., 
periodic monitoring or ``gap-filling'') would need to be added to 
Merck's Title V permit in order to demonstrate compliance with the PSD 
permit. Therefore, EPA interprets that the monitoring, recordkeeping 
and reporting requirements of the PSD permit constitute compliance with 
the monitoring requirements of 40 CFR 71.6(a)(3) that would be 
applicable to the PSD permit (as a set of applicable requirements in 
the Title V permit). Similarly, EPA interprets that the recordkeeping 
and reporting requirements of the draft PSD permit satisfy compliance 
with the recordkeeping and reporting requirements of 40 CFR 
71.6(a)(3)(ii) and 71.6(a)(3)(iii)(A) that would be applicable to 
provisions of the PSD permit (as a set of applicable requirements in 
the Title V permit). See condition 3.4.2 of the draft PSD permit. 
Further, EPA intends that the forthcoming Compliance Assurance 
Monitoring (CAM) rule would not impose additional monitoring 
requirements through Merck's Title V permit for applicable requirements 
in the PSD permit.
    Merck also wants to ensure that the Title V permit modification 
provisions would not undermine the flexibility gained through the XL 
project. Because the draft PSD permit would not require modifications 
at the site to undergo case-by-case permitting approval, so long as 
Merck is in compliance with the site-wide emission caps, EPA expects 
that there would be relatively few changes at the site that would 
necessitate a Title V permit revision. Merck specifically asked EPA to 
clarify what type of Title V permit revision process would apply to an 
operational change that would add, delete or otherwise change Title V 
permit terms related to MACT standards promulgated under 112(d) of the 
Act (e.g., adding a process unit that would be subject to MACT permit 
terms already listed in the permit for other emission units). Under the 
existing 40 CFR 70 and 71, EPA interprets that the minor permit 
modification process generally would apply to a change at the site that 
would affect permit terms related to MACT standards, so long as the 
change did not specifically meet the conditions for a significant 
permit modification (e.g., relaxation of applicable monitoring, 
recordkeeping or reporting requirements). The minor permit modification 
would apply in a situation where a physical change or a change in 
method of operation of a source changed the applicability of a 112(d) 
standard by deleting an existing 112(d) requirement that no longer 
applied to the source. For example, if use of a storage tank is changed 
from storage of a high vapor pressure solvent to a low vapor pressure 
solvent, that change in method of operation may eliminate a 112(d) 
requirement to control emissions from the tank and perhaps add a new 
recordkeeping requirement. Such a change in the applicability of the 
112(d) standard to the source would not be considered a ``relaxation of 
monitoring, recordkeeping and reporting requirements,'' and therefore, 
would qualify for the minor permit modification procedure. The minor 
permit modification process allows the source to operate the change 
immediately after the source files the Title V permit application for 
the modification. EPA plans to promulgate final revisions to the Part 
70 regulations in the near future. EPA expects that the final Part 70 
rules may provide options for an even more streamlined permit revisions 
process for certain types of changes to MACT permit terms.

IV. Resource Conservation and Recovery Act Requirements

    The RCRA subpart AA, BB, and CC air emission standards under 40 CFR 
parts 264 and 265 are applicable to certain existing hazardous waste 
units at the Merck Stonewall Plant. These standards also may be 
applicable to equipment brought into hazardous waste service in the 
future. The RCRA air standards contain both substantive emission 
control requirements and administrative requirements (e.g., reporting 
and recordkeeping) applicable to certain hazardous waste management 
units. Under this XL project, the Merck Stonewall Plant will be subject 
to a site-specific exemption from the RCRA air emission standards under 
40 CFR parts 264 and 265. Additionally, the Merck Stonewall Plant will 
be subject to an enforceable PSD permit, as described in Section II.B.2 
of this preamble, and will continue to conduct a preventive maintenance 
program. Although the PSD permit and the preventive maintenance program 
address both inorganic and organic air emissions from many types of 
units located at the plant, the RCRA air emission standards only 
address organic air emissions from RCRA hazardous waste management 
units.
    The following hazardous waste management equipment is currently in 
operation at the Merck Stonewall Plant: A RCRA-permitted container 
storage area; three accumulation tanks; less than

[[Page 15316]]

90-day accumulation containers; three pumps; approximately 50 valves; 
and associated fittings (e.g., flanges and sampling connections). In 
absence of this XL project, this hazardous waste management equipment 
would be subject to both the substantive and administrative 
requirements contained in the RCRA air standards. Any new hazardous 
waste management units, or existing units newly placed in hazardous 
waste service, would also be subject to those substantive and 
administrative requirements.
    For hazardous waste tanks and containers located at the Merck 
Stonewall Plant, the PSD permit includes air emission control 
requirements that are identical to the substantive requirements under 
the RCRA air standards. For process vents that would otherwise be 
subject to the subpart AA process vent regulations, and for equipment 
that would otherwise be subject to the subpart BB equipment leak 
regulations, the Merck Stonewall Plant will implement air emission 
control requirements that are similar, though not identical, to those 
that are included in the nationwide standards.
    For all affected hazardous waste equipment, this site-specific 
regulation will exempt the Merck Stonewall Plant from the 
administrative requirements of the RCRA air standards; the PSD permit 
and, when issued, the Clean Air Act (CAA) Title V permit, will subject 
the plant to alternative administrative requirements. The nationwide 
RCRA air standards contain an allowance that a unit operated with air 
emission controls, in compliance with a CAA standard in 40 CFR parts 
60, 61, or 63, is exempt from the RCRA standards. Among other 
requirements, this nationwide allowance exempts a unit from the 
administrative requirements of the RCRA air standards, provided that 
the air emission controls on that unit are operated in compliance with 
the requirements of the CAA part 60, 61, or 63 standard, including 
administrative requirements. In such cases, the administrative 
requirements would ultimately be enforceable through a CAA permit. 
Under this XL project, the Agency is allowing the Merck Stonewall Plant 
to comply with the administrative requirements that will be contained 
in the plant's CAA PSD and Title V permits, which is analogous to the 
existing nationwide RCRA air standards provision that allows facilities 
the alternative to operate air emission controls in compliance with 
standards under 40 CFR parts 60, 61 or 63. Thus, the Agency considers 
the administrative requirements under this XL project for affected 
hazardous waste management units at the Merck Stonewall Plant to be 
equivalent to the administrative requirements of the nationwide RCRA 
air standards.
    The Merck Stonewall Plant does not currently have any units or 
emission points that would be subject to the subpart AA process vent 
standards. Over the life of the PSD permit, it is conceivable that the 
Merck Stonewall Plant may make facility or process alterations 
resulting in emission points that become newly subject to subpart AA. 
To address this possibility, the terms of the PSD permit require the 
Merck Stonewall Plant to route any hazardous waste process vent 
emissions to a secondary brine condenser or thermal oxidizer, and 
monitor the performance of these organic control devices. The subpart 
AA nationwide standards would require that these process vent emissions 
be routed to a 95% organic emission control device and monitor control 
device performance, only if the total facility-wide hazardous waste 
process vent emissions exceed 3.1 tons per year or 3 pounds per hour. 
However, under the PSD permit, all hazardous waste process vents which 
would otherwise be subject to subpart AA will be controlled for organic 
emissions, regardless of the facility-wide emission rates. Because the 
PSD permit will require organic air emission controls on each hazardous 
waste process vent operated at the Merck Stonewall Plant, the Agency 
considers that compliance with the PSD permit will achieve greater 
emission reductions from these hazardous waste process vents than would 
be achieved by compliance with the nationwide subpart AA standards.
    For subpart BB leak detection and repair requirements, the Merck 
Stonewall Plant does have hazardous waste management units that are 
subject to the RCRA air standards. Under this XL project, the Merck 
Stonewall Plant will be addressing the organic emissions which would 
otherwise be addressed through compliance with the subpart BB 
nationwide standards, through the continued performance of a preventive 
maintenance program that is in place at its facility. This maintenance 
program is applicable to all existing and future equipment that would 
otherwise be subject to the nationwide subpart BB standards. The 
program includes semi-annual, quarterly, and monthly visual 
inspections, depending on the equipment type, and routine maintenance 
and repair procedures. The Merck Stonewall Plant has submitted site-
specific leak rate data for subpart BB equipment which has been subject 
to this program; that data indicates low leak rates and low incidence 
of leaking equipment for all the hazardous waste components at the 
plant. For this XL project, the Agency is assuming that the continued 
performance of this program will result in similar leak rates over the 
life of the PSD permit.
    The sampling connection systems and open-ended valves or lines that 
would otherwise be subject to subpart BB standards are designed and 
operated in a manner consistent with the requirements of the subpart BB 
standards. The preventive maintenance program includes periodic visual 
inspections and subsequent repair of detected leaks for flanges and 
other connectors, which is consistent with the subpart BB requirements 
under 40 CFR part 264.1058(a) for that equipment. Because the Merck 
Stonewall Plant preventive maintenance program includes these 
requirements, the Agency is assuming that this program will effectively 
accomplish the same organic emission controls as the substantive 
subpart BB nationwide standards for flanges and other connectors, 
sampling connection systems, and open-ended valves or lines at that 
Plant.
    The EPA has reviewed facility-specific component leak rate data 
provided by the Merck Stonewall Plant and found that less than 2% of 
the affected valves leak, and none of the three hazardous waste pumps 
leak or have detectable emissions. Under the provisions of subpart BB 
in 40 CFR part 264.1061, a facility at which less than 2% of affected 
valves leak can choose to comply with subpart BB through a performance 
standard that includes an annual performance test using EPA Method 21 
instrument monitoring. Under subpart BB in 40 CFR part 264.1052, these 
hazardous waste pumps, which are in light liquid service, would be 
subject to monthly leak detection and repair monitoring using EPA 
Method 21. Under this XL project, this hazardous waste equipment will 
be exempt from the subpart BB standards. Instead, the Merck Stonewall 
Plant will include this hazardous waste equipment in their preventive 
maintenance program; this program includes visual inspection of all 
valves and pumps and repair of any detected leaks. In allowing this 
alternative for the Merck Stonewall Plant, the Agency is assuming that 
the preventive maintenance program for valves and pumps will maintain 
the low leak rates that have been previously demonstrated for these 
existing hazardous waste valves and pumps, and will achieve similarly 
low leak rates for any valves and pumps placed in hazardous waste 
service in the future. The component -

[[Page 15317]]

specific leak rates demonstrated for this equipment are within the 
range that the Agency would expect to be achieved by compliance with 
the subpart BB nationwide standards for hazardous waste valves and 
pumps. The preventive maintenance program has been in place at the 
Merck Stonewall Plant for several years, and the EPA is assuming that 
the very low leak rates for the affected equipment have resulted from a 
combination of: the effectiveness of the Merck Stonewall Plant 
preventive maintenance program; the quality of the valves, pumps and 
associated equipment that are used at the plant; the properties of the 
hazardous waste which this equipment contacts; and the specific 
parameters for the hazardous waste processes. The Agency is also 
assuming that requiring the Merck Stonewall Plant to continue this 
preventive maintenance program under this XL project will preserve the 
low component leak rates for hazardous waste management units at the 
plant.
    For subpart CC standards applicable to tanks and containers, the 
Merck Stonewall Plant is currently in compliance with the substantive 
organic air emission control requirements of those nationwide 
standards. For the hazardous waste containers at the Merck Stonewall 
Plant, the nationwide subpart CC standards would require that the 
containers be operated with covers that have no visible openings; the 
PSD permit includes this same requirement for all hazardous waste 
containers currently operated, or operated in the future, at the plant. 
For the hazardous waste accumulation and/or storage tanks at the Merck 
Stonewall Plant, the nationwide subpart CC standards would require that 
the tanks be operated with a cover that has no visible openings or 
gaps; the PSD permit contains this same requirement for all hazardous 
waste accumulation and/or storage tanks currently operated, or operated 
in the future, at the plant. The Merck Stonewall Plant does not operate 
any hazardous waste tanks that would be classified as Level 2 tanks 
under the RCRA subpart CC standards. However, it is conceivable that 
during the life of the PSD permit, the plant may operate this type of 
tank. To address this possibility, the PSD permit contains a 
requirement that any hazardous waste treatment tank operated at the 
plant must be equipped with a fixed cover and either a floating roof or 
a vent system that routes the tank emissions to a secondary brine 
condenser or a thermal oxidizer. These requirements are among the 
compliance options allowed under the nationwide subpart CC standards, 
and would constitute compliance with the substantive requirements of 
those nationwide standards. Therefore, the Agency considers the 
requirements of the PSD permit for the hazardous waste containers and 
tanks at the Merck Stonewall Plant to be the same as the substantive 
requirements of the nationwide RCRA air rules for those units.
    The Merck Stonewall Plant does not currently operate any hazardous 
waste surface impoundments, nor do they expect to operate any in the 
future. For this reason, the Plant is not seeking relief from the 
surface impoundment RCRA air emission standards. The Merck Stonewall 
Plant has agreed that any hazardous waste surface impoundment that may 
be operated at the facility in the future will be installed and 
operated to comply with the applicable requirements of the nationwide 
subpart CC air emission standards. Therefore, the site-specific 
regulation exempts the Merck Stonewall Plant from all the subpart CC 
requirements except for the requirements that are applicable to surface 
impoundments.
    Overall, the Agency considers this to be a viable approach to 
addressing organic air emission from hazardous waste units, which is 
worthy of further evaluation through the Project XL program.

V. Additional Information

A. Public Hearing

    A public hearing will be held, if requested, to provide opportunity 
for interested persons to make oral presentations regarding the 
proposed regulation in accordance with section 307(d)(5) of the Clean 
Air Act. Persons wishing to make oral presentation on the proposed rule 
to implement Merck's XL project should contact the EPA at the address 
given in the ADDRESSES section of this document. Any member of the 
public may file a written statement before, during, or within 30 days 
after the hearing. Written statements should be sent to EPA at the 
addresses given in the ADDRESSES section of this document. If a public 
hearing is held, a verbatim transcript of the hearing and written 
statements will be available for inspection and copying during normal 
business hours at the EPA addresses given in the ADDRESSES section of 
this document.

B. Executive Order 12866

    Under Executive Order 12866 (58 FR 51735, October 4, 1993) the 
Agency must determine whether the regulatory action is ``significant'' 
and therefore subject to Office of Management and Budget (OMB) review 
and the requirements of the Executive Order. The Order defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, of State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlement, grants, 
user fees, or loan programs of the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    Because the annualized cost of this final rule would be 
significantly less than $100 million and would meet none of the other 
criteria specified in the Executive Order, it has been determined that 
this rule is not a ``significant regulatory action'' under the terms of 
Executive Order 12866, and is therefore not subject to OMB review.

C. Regulatory Flexibility

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct a regulatory flexibility analysis of any rule subject to 
notice and comment rulemaking requirements unless the agency certifies 
that the rule will not have a significant economic impact on a 
substantial number of small entities. Small entities include small 
businesses, small not-for-profit enterprises, and small governmental 
jurisdictions. This proposed rule would not have a significant impact 
on a substantial number of small entities because it only affects one 
source, the Merck Stonewall Plant, which is not a small entity. 
Therefore, EPA certifies that this action will not have a significant 
economic impact on a substantial number of small entities.

D. Paperwork Reduction Act

    This action applies only to one company, and therefore requires no 
information collection activities subject to the Paperwork Reduction 
Act, and therefore no information collection request (ICR) will be 
submitted to the Office of Management and Budget (OMB) for review in 
compliance with the Paperwork Reduction Act, 44 U.S.C. 3501 et seq.

[[Page 15318]]

E. Unfunded Mandates Reform Act

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, EPA 
generally must prepare a written statement, including a cost-benefit 
analysis, for proposed and final rules with ``Federal mandates'' that 
may result in expenditures to State, local, and tribal governments, in 
the aggregate, or to the private sector, of $100 million or more in any 
one year. Before promulgating an EPA rule for which a written statement 
is needed, section 205 of the UMRA generally requires EPA to identify 
and consider a reasonable number of regulatory alternatives and adopt 
the least costly, most cost-effective or least burdensome alternative 
that achieves the objectives of the rule. The provisions of section 205 
do not apply when they are inconsistent with applicable law. Moreover, 
section 205 allows EPA to adopt an alternative other than the least 
costly, most cost-effective or least burdensome alternative if the 
Administrator publishes with the final rule an explanation why that 
alternative was not adopted. Before EPA establishes any regulatory 
requirements that may significantly or uniquely affect small 
governments, including tribal governments, it must have developed under 
section 203 of the UMRA a small government agency plan. The plan must 
provide for notifying potentially affected small governments, enabling 
officials of affected small governments to have meaningful and timely 
input in the development of EPA regulatory proposals with significant 
Federal intergovernmental mandates, and informing, educating, and 
advising small governments on compliance with the regulatory 
requirements.
    As noted above, this rule is limited to Merck's facility in Elkton, 
Virginia. EPA has determined that this rule contains no regulatory 
requirements that might significantly or uniquely affect small 
governments. EPA has also determined that this rule does not contain a 
Federal mandate that may result in expenditures of $100 million or more 
for State, local, and tribal governments, in the aggregate, or the 
private sector in any one year. Thus, today's rule is not subject to 
the requirements of sections 202 and 205 of the UMRA.

List of Subjects

40 CFR Part 52

    Environmental protection, Air pollution control, Carbon monoxide, 
Intergovernmental Relations, Lead, Nitrogen dioxide, Ozone, Particulate 
matter, Reporting and recordkeeping requirements, Sulfur oxides, 
Volatile organic compounds.

40 CFR Part 60

    Environmental protection, Air pollution control, Carbon monoxide, 
Intergovernmental Relations, Lead, Nitrogen dioxide, Particulate 
matter, Reporting and recordkeeping requirements, Sulfur oxides, 
Volatile organic compounds.

40 CFR Part 264

    Environmental protection, Air pollution control, Container, Control 
device, Hazardous waste, Monitoring, Reporting and recordkeeping 
requirements, Surface impoundment, Tank, Treatment storage and disposal 
facility, Waste determination.

40 CFR Part 265

    Environmental protection, Air pollution control, Container, Control 
device, Hazardous waste, Monitoring, Reporting and recordkeeping 
requirements, Surface impoundment, Tank, Treatment storage and disposal 
facility, Waste determination.

    Dated: March 21, 1997.
Carol M. Browner,
Administrator.

    For the reasons set forth in the preamble, parts 52, 60, 264 and 
265 of chapter I of title 40 of the Code of Federal Regulations are 
proposed to be amended as follows:

PART 52--APPROVAL AND PROMULGATION OF IMPLEMENTATION PLANS

    1. The authority citation for part 52 continues to read as follows:

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

Subpart VV--[Amended]

    2. Subpart VV is amended by adding a new Sec. 52.2454 to read as 
follows:


Sec. 52.2454  Prevention of significant deterioration of air quality 
for Merck & Co., Inc.'s Stonewall Plant in Elkton, Virginia

    (a) Applicability.
    (1) This section applies only to the pharmaceutical manufacturing 
facility, commonly referred to as the Stonewall Plant, located at Route 
340 South, in Elkton, Virginia (``site').
    (2) This section sets forth the prevention of significant 
deterioration of air quality preconstruction review requirements for 
the following pollutants only: carbon monoxide, nitrogen oxides, ozone 
(using volatile organic compounds as surrogate), particulate matter 
with an aerodynamic diameter less than 10 microns (PM-10), and sulfur 
dioxide. This section applies in lieu of Sec. 52.21 for the pollutants 
identified in this paragraph as well as particulate matter; however, 
the preconstruction review requirements of Sec. 52.21, or other 
preconstruction review requirements that the Administrator approves as 
part of the plan, shall remain in effect for any pollutant which is not 
specifically identified in this paragraph and is subject to regulation 
under the Act.
    (b) Definitions. For the purposes of this section:
    12-month rolling total for an individual pollutant or the total 
criteria pollutants, as specified in paragraph (d) of this section, is 
calculated on a monthly basis as the sum of all actual emissions of the 
respective pollutant(s) from the previous 12 months.
    Act means the Clean Air Act, as amended, 42 U.S.C. 7401, et seq.
    Completion of the powerhouse conversion means the date upon which 
the new boilers, installed pursuant to paragraph (g) of this section, 
are operational. This determination shall be made by the site based on 
the boiler manufacturer's installation, startup and shakedown 
specifications.
    Permitting authority means either of the following:
    (1) The Administrator, in the case of an EPA-implemented program; 
or
    (2) The State air pollution control agency, or other agency 
delegated by the Administrator, pursuant to paragraph (o) of this 
section, to carry out this permit program.
    Process unit means:
    (1) Manufacturing equipment assembled to produce a single 
intermediate or final product, and
    (2) Any combustion device.
    Responsible official means:
    (1) The president, secretary, treasurer, or vice-president of the 
business entity in charge of a principal business function, or any 
other person who performs similar policy or decision-making functions 
for the business entity; or
    (2) A duly authorized representative of such business entity if the 
representative is responsible for the overall operation of one or more 
manufacturing, production, or operating facilities applying for or 
subject to a permit and either:
    (i) The facilities employ more than 250 persons or have gross 
annual sales or expenditures exceeding $25 million (in second quarter 
1980 dollars); or
    (ii) The authority to sign documents has been assigned or delegated 
to such

[[Page 15319]]

representative in accordance with procedures of the business entity.
    Site means the contiguous property at Route 340 South, Elkton, 
Virginia, under common control by Merck & Co., Inc., and its successors 
in ownership, known as the Stonewall site.
    (c) Authority to issue permit. The permitting authority may issue 
to the site a permit which complies with the requirements of paragraphs 
(d) through (n) of this section. The Administrator may delegate, in 
whole or in part, pursuant to paragraph (o) of this section, the 
authority to administer the requirements of this section to a State air 
pollution control agency, or other agency authorized by the 
Administrator.
    (d) Site-wide emissions caps. The permit shall establish site-wide 
emissions caps as provided in this paragraph.
    (1) Initial site-wide emissions caps. The initial site-wide 
emissions caps shall be based on the site's actual emissions during a 
time period, within five years of the date of permit issuance, which 
represents normal site operation. The permitting authority may allow 
the use of a different time period upon a determination that it is more 
representative of normal source operation. Actual site-wide emissions 
shall be calculated using the actual operating hours, production rates, 
and types of materials processed, stored, or combusted during the 
selected time period.
    (i) Total criteria pollutant emissions cap. The permit shall 
establish a total criteria pollutant emissions cap (total emissions 
cap). The criteria pollutants included in the total emissions cap are 
the following: carbon monoxide, nitrogen oxides, ozone (using volatile 
organic compounds as surrogate), particulate matter with an aerodynamic 
diameter less than 10 microns, and sulfur dioxide.
    (ii) Individual pollutant caps. The permit shall establish 
individual pollutant caps for sulfur dioxide, nitrogen oxides and PM-
10.
    (2) Adjustments to the site-wide emissions caps.
    (i) The permit shall require that upon completion of the powerhouse 
conversion, the site shall reduce the site-wide emissions caps as 
follows:
    (A) The total emissions cap shall be reduced by 20 percent from the 
initial site-wide emissions cap established pursuant to paragraph 
(d)(1)(i) of this section.
    (B) The sulfur dioxide cap shall be reduced by 25 percent from the 
initial site-wide emissions cap established pursuant to paragraph 
(d)(1)(ii) of this section.
    (C) The nitrogen oxide cap shall be reduced by 10 percent from the 
initial site-wide emissions cap established pursuant to paragraph 
(d)(1)(ii) of this section.
    (ii) The permit may specify other reasons for adjustment of the 
site-wide emissions caps.
    (e) Operating under the site-wide emissions caps.
    (1) The permit shall require that the site's actual emissions of 
criteria pollutants shall not exceed the total emissions cap 
established pursuant to paragraph (d) of this section.
    (2) The permit shall require that the site's actual emissions of 
sulfur dioxide, nitrogen oxides and PM-10 shall not exceed the 
respective individual pollutant cap established pursuant to paragraph 
(d) of this section.
    (3) Compliance with the total emissions cap and individual 
pollutant caps shall be determined by comparing the respective cap to 
the 12-month rolling total for that cap. Compliance with the total 
emissions cap and individual pollutant caps shall be determined within 
one month of the end of each month based on the prior 12 months. The 
permit shall set forth the emission calculation techniques which the 
site shall use to calculate site-wide actual criteria pollutant 
emissions.
    (4) Installation of controls for significant modifications and 
significant new installations.
    (i) This paragraph applies to significant modifications and 
significant new installations. Significant modifications for the 
purposes of this section are defined as changes to an existing process 
unit that result in an increase of the potential emissions of the 
process unit, after consideration of existing controls, of more than 
the significance levels listed in paragraph (e)(4)(ii) of this section. 
Significant new installations for the purposes of this section are 
defined as new process units with potential emissions before controls 
that exceed the significance levels listed in paragraph (e)(4)(ii) of 
this section. For purposes of this section, potential emissions means 
process unit point source emissions that would be generated by the 
process unit operating at its maximum capacity.
    (ii) The significance levels for determining significant 
modifications and significant new installations are: 100 tons per year 
of carbon monoxide; 40 tons per year of nitrogen oxides; 40 tons per 
year of sulfur dioxide; 40 tons per year of volatile organic compounds; 
and 15 tons per year of PM-10.
    (iii) For any significant modification or significant new 
installation, the permit shall require that the site install, at the 
process unit, emission controls, pollution prevention or other 
technology that represents good environmental engineering practice in 
the pharmaceutical or batch processing industry, based on the emission 
characteristics (such as flow, variability, pollutant properties) of 
the process unit.
    (f) Operation of control equipment. The permit shall require that 
the site shall continue to operate the emissions control equipment that 
was previously subject to permit requirements at the time of issuance 
of a permit pursuant to this section. This equipment shall be operated 
in a manner which minimizes emissions, considering the technical and 
physical operational aspects of the equipment and associated processes. 
This operation shall include an operation and maintenance program based 
on manufacturers' specifications and good engineering practice.
    (g) Powerhouse conversion. The permit shall require that the site 
convert the steam-generating powerhouse from burning coal as the 
primary fuel to burning natural gas as the primary fuel and either No. 
2 fuel oil or propane as backup fuel.
    (1) The new boilers shall be equipped with low nitrogen oxides 
technology.
    (2) The site shall complete the powerhouse conversion (completion 
of the powerhouse conversion) no later than 30 months after the 
effective date of the permit.
    (h) Monitoring, recordkeeping and reporting.
    (1) The permit shall set forth monitoring, recordkeeping, and 
reporting requirements sufficient to demonstrate compliance with the 
site-wide emissions caps. The monitoring, recordkeeping and reporting 
requirements shall be structured in a tiered system, such that the 
requirements become more stringent as the site's emissions approach the 
total emissions cap.
    (2) At a minimum, the permit shall require that the site submit to 
the permitting authority semi-annual reports of the site-wide criteria 
pollutant emissions (expressed as a 12-month rolling total) for each 
month covered by the report. These reports shall include a calculation 
of the total emissions cap, as well as, the emissions of sulfur 
dioxide, nitrogen oxides, carbon monoxide, volatile organic compounds 
and PM-10.
    (3) Any reports required by the permit to be submitted on an annual 
or semi-annual basis shall contain a certification by the site's 
responsible official that to his belief, based on reasonable inquiry, 
the information submitted in the report is true, accurate, and 
complete.

[[Page 15320]]

    (4) Any records required by the permit shall be retained on site 
for at least five years.
    (i) Air quality analysis. The permittee shall demonstrate, prior to 
permit issuance and on a periodic basis which shall be specified in the 
permit, that emissions from construction or operation of the site will 
not cause or contribute to air pollution in excess of any:
    (1) maximum allowable increase or maximum allowable concentration 
for any pollutant, pursuant to Sec. 165 of the Act;
    (2) national ambient air quality standard or;
    (3) other applicable emission standard or standard of performance 
under the Act.
    (j) Termination.
    (1) The permit may be terminated as provided in this paragraph for 
reasons which shall include the following, as well as any other 
termination provisions specified in the permit:
    (i) If the Administrator or the permitting authority determines 
that continuation of the permit is an imminent and substantial 
endangerment to public health or welfare, or the environment;
    (ii) If the permittee knowingly falsifies emissions data;
    (iii) If the permittee fails to implement the powerhouse conversion 
pursuant to paragraph (g);
    (iv) If the permittee receives four consent orders or two judgments 
adverse to the site arising from non-compliance with this permit in a 
five year period that are deemed material by the Administrator or the 
permitting authority; or
    (v) If the total emissions cap is exceeded.
    (2) In the event of termination, the Administrator or the 
permitting authority shall provide the permittee with written notice of 
its intent to terminate the permit. Within 30 calendar days of the 
site's receipt of this notice, the site may take corrective action to 
remedy the cause of the termination. If this remedy, which may include 
a corrective action plan and schedule, is deemed acceptable by the 
Administrator or the permitting authority (whichever agency provided 
written notice of its intent to terminate the permit), the action to 
terminate the permit shall be withdrawn. Otherwise, the permit shall be 
terminated in accordance with procedures specified in the permit.
    (3) Termination of the permit does not waive the site's obligation 
to complete any corrective actions relating to non-compliance under the 
permit.
    (k) Inspection and entry.
    (1) Upon presentation of credentials and other documents as may be 
required by law, the site shall allow authorized representatives of the 
Administrator and the permitting authority to perform the following:
    (i) Enter upon the site;
    (ii) Have access to and copy, at reasonable times, any records that 
must be kept under the conditions of the permit;
    (iii) Have access at reasonable times to batch and other plant 
records needed to verify emissions.
    (iv) Inspect at reasonable times any facilities, equipment 
(including monitoring and control equipment), practices, or operations 
required under the permit;
    (v) Sample or monitor any substances or parameters at any location, 
during operating hours, for the purpose of assuring permit compliance 
or as otherwise authorized by the Act.
    (2) No person shall obstruct, hamper, or interfere with any such 
authorized representative while in the process of carrying out his 
official duties. Refusal of entry or access may constitute grounds for 
permit violation and assessment of civil penalties.
    (3) Such site, facility and equipment access, and sampling and 
monitoring shall be subject to the site's safety and industrial hygiene 
procedures, and Food and Drug Administration Good Manufacturing 
Practice requirements (21 CFR 210 and 211) in force at the site.
    (l) Transfer of ownership. The terms of the permit are transferable 
to a new owner upon sale of the site, in accordance with provisions 
specified by the permit.
    (m) Permit issuance. The permitting authority shall provide for 
public participation prior to issuing a permit pursuant to this 
section. At a minimum, the permitting authority shall:
    (1) Make available for public inspection, in at least one location 
in the area of the site, the information submitted by the permittee, 
the permitting authority's analysis of the effect on air quality 
including the preliminary determination, and a copy or summary of any 
other materials considered in making the preliminary determination;
    (2) Notify the public, by advertisement in a newspaper of general 
circulation in the area of the site, of the application, the 
preliminary determination, and of the opportunity for comment at a 
public hearing as well as written public comment;
    (3) Provide a 30-day period for submittal of public comment;
    (4) Send a copy of the notice of public comment to the following: 
theTAdministrator, through the appropriate Regional Office; any other 
State or local air pollution control agencies, the chief executives of 
the city and county where the site is located; any State, Federal Land 
Manager, or other governing body whose lands may be affected by 
emissions from the site.
    (5) Provide opportunity for a public hearing for interested persons 
to appear and submit written or oral comments on the air quality impact 
of the site, the control technology required, and other appropriate 
considerations.
    (n) Permit modifications. The permit shall specify the conditions 
under which the permit may be modified by the permitting authority. The 
permitting authority shall modify the permit in accordance with the 
procedures set forth in this paragraph.
    (1) Permit modifications that require public participation. For any 
change that does not meet the criteria for an administrative permit 
modification established in paragraph (n)(2)(i) of this section, the 
permitting authority shall provide an opportunity for public 
participation, consistent with the provisions of paragraph (m) of this 
section, prior to processing the permit modification.
    (2) Administrative permit modification.
    (i) An administrative permit modification is a permit revision 
that:
    (A) Corrects typographical errors;
    (B) Identifies a change in the name, address, or phone number of 
any person identified in the permit, or provides a similar minor 
administrative change at the site;
    (C) Requires more frequent monitoring, recordkeeping, or reporting 
by the permittee;
    (D) Allows for a change in ownership or operational control of a 
source where the permitting authority determines that no other change 
in the permit is necessary, provided that a written agreement 
containing a specific date for transfer of permit responsibility, 
coverage, and liability between the current and new permittee has been 
submitted to the permitting authority.
    (E) Updates the emission calculation methods specified in the 
permit, provided that the change does not also involve a change to any 
site-wide emissions cap.
    (F) Changes the monitoring, recordkeeping or reporting requirements 
for equipment that has been shutdown or is no longer in service.
    (G) Any other change that is stipulated in the permit as qualifying 
as an administrative permit modification,

[[Page 15321]]

provided that the permit condition which includes such stipulation has 
already undergone public participation in accordance with paragraph (m) 
of this section.
    (ii) An administrative permit modification may be made by the 
permitting authority consistent with the following procedures:
    (A) The permitting authority shall take final action on any request 
for an administrative permit modification within 60 days from receipt 
of the request, and may incorporate such changes without providing 
notice to the public, provided that the permitting authority designates 
any such permit revisions as having been made pursuant to this 
paragraph.
    (B) The permitting authority shall submit a copy of the revised 
permit to the Administrator.
    (C) The site may implement the changes addressed in the request for 
an administrative permit modification immediately upon submittal of the 
request to the permitting authority.
    (o) Delegation of authority.
    (1) The Administrator shall have the authority to delegate the 
responsibility to implement this section in accordance with the 
provisions of this paragraph.
    (2) Where the Administrator delegates the responsibility for 
implementing this section to any agency other than a Regional Office of 
the Environmental Protection Agency, the following provisions shall 
apply:
    (i) Where the delegate agency is not an air pollution control 
agency, it shall consult with the appropriate State and local air 
pollution control agency prior to making any determination under this 
section. Similarly, where the delegate agency does not have continuing 
responsibility for managing land use, it shall consult with the 
appropriate State and local agency primarily responsible for managing 
land use prior to making any determination under this section.
    (ii) The delegate agency shall send a copy of any public comment 
notice required under paragraph (n) of this section to the 
Administrator through the appropriate Regional Office.

PART 60--STANDARDS OF PERFORMANCE FOR NEW STATIONARY SOURCES

    1. The authority citation for part 60 continues to read as follows:

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

    2. Section 60.1 is amended by adding paragraph (d) to read as 
follows:


Sec. 60.1  Applicability.

* * * * *
    (d) Site-specific standard for Merck & Co., Inc.'s Stonewall Plant 
in Elkton, Virginia. (1) This paragraph applies only to the 
pharmaceutical manufacturing facility, commonly referred to as the 
Stonewall Plant, located at Route 340 South, in Elkton, Virginia 
(``site'').
    (2) Except for compliance with 40 CFR 60.49b(u), the site shall 
have the option of either complying directly with the requirements of 
this part, or reducing the site-wide emissions caps in accordance with 
the procedures set forth in a permit issued pursuant to 40 CFR 52.2454. 
If the site chooses the option of reducing the site-wide emissions caps 
in accordance with the procedures set forth in such permit, the 
requirements of such permit shall apply in lieu of the otherwise 
applicable requirements of this part.
    (3) Notwithstanding the provisions of paragraph (d)(2) of this 
section, for any provisions of this part except for Subpart Kb, the 
owner/operator of the site shall comply with the applicable provisions 
of this part if the Administrator determines that compliance with the 
provisions of this part is necessary for achieving the objectives of 
the regulation and the Administrator notifies the site in accordance 
with the provisions of the permit issued pursuant to 40 CFR 52.2454.
    3. Section 60.49b is amended by adding paragraph (u) to read as 
follows:


Sec. 60.49b  Reporting and recordkeeping requirements.

* * * * *
    (u) Site-specific standard for Merck & Co., Inc.'s Stonewall Plant 
in Elkton, Virginia.
    (1) This paragraph applies only to the pharmaceutical manufacturing 
facility, commonly referred to as the Stonewall Plant, located at Route 
340 South, in Elkton, Virginia (``site'') and only to the natural gas-
fired boilers installed as part of the powerhouse conversion required 
pursuant to 40 CFR 52.2454(g). The requirements of this paragraph shall 
apply, and the requirements of 40 CFR 60.40b through 60.49b shall not 
apply, to the natural gas-fired boilers installed pursuant to 40 CFR 
52.2454(g).
    (i) The site shall equip the natural gas-fired boilers with low 
nitrogen oxide (NOX) technology.
    (ii) The site shall install, calibrate, maintain, and operate a 
continuous monitoring and recording system for measuring NOX 
emissions discharged to the atmosphere and opacity using a continuous 
emissions monitoring system or a predictive emissions monitoring 
system.
    (iii) Within 180 days of the completion of the powerhouse 
conversion, as required by 40 CFR 52.2454, the site shall perform a 
stack test to quantify criteria pollutant emissions.
    (2) [Reserved]
    4. Section 60.112b is amended by adding paragraph (c), to read as 
follows:


Sec. 60.112b  Standard for volatile organic compounds (VOC).

* * * * *
    (c) Site-specific standard for Merck & Co., Inc.'s Stonewall Plant 
in Elkton, Virginia. This paragraph applies only to the pharmaceutical 
manufacturing facility, commonly referred to as the Stonewall Plant, 
located at Route 340 South, in Elkton, Virginia (``site'').
    (1) For any storage vessel that otherwise would be subject to the 
control technology requirements of paragraph (a) or (b) of this 
section, the site shall have the option of either complying directly 
with the requirements of this subpart, or reducing the site-wide total 
criteria pollutant emissions cap (total emissions cap) in accordance 
with the procedures set forth in a permit issued pursuant to 40 CFR 
52.2454. If the site chooses the option of reducing the total emissions 
cap in accordance with the procedures set forth in such permit, the 
requirements of such permit shall apply in lieu of the otherwise 
applicable requirements of this subpart for such storage vessel.
    (2) For any storage vessel at the site not subject to the 
requirements of 40 CFR 60.112b (a) or (b), the requirements of 40 CFR 
60.116b (b) and (c) and the General Provisions (Subpart A of this part) 
shall not apply.

PART 264--STANDARDS FOR OWNERS AND OPERATORS OF HAZARDOUS WASTE 
TREATMENT, STORAGE, AND DISPOSAL FACILITIES

    1. The authority citation for part 264 continues to read as 
follows:

    Authority: 42 U.S.C. 6905, 6912(a), 6924, and 6925.

Subpart AA--[Amended]

    2. Section 264.1030 is amended by adding paragraph (d) to 
Sec. 264.1030 to read as follows:


Sec. 264.1030  Applicability.

* * * * *
    (d) The requirements of this subpart do not apply to the 
pharmaceutical manufacturing facility, commonly referred to as the 
Stonewall Plant, located at Route 340 South, Elkton,

[[Page 15322]]

Virginia, provided that facility is operated in compliance with the 
requirements contained in a Clean Air Act permit issued pursuant to 40 
CFR 52.2454. The requirements of this subpart shall apply to the 
facility upon termination of the Clean Air Act permit issued pursuant 
to 40 CFR 52.2454.
    3. Subpart BB is amended by adding paragraph (g) to Sec. 264.1050 
to read as follows:


Sec. 264.1050  Applicability.

* * * * *
    (g) The requirements of this subpart do not apply to the 
pharmaceutical manufacturing facility, commonly referred to as the 
Stonewall Plant, located at Route 340 South, Elkton, Virginia, provided 
that facility is operated in compliance with the requirements contained 
in a Clean Air Act permit issued pursuant to 40 CFR 52.2454. The 
requirements of this subpart shall apply to the facility upon 
termination of the Clean Air Act permit issued pursuant to 40 CFR 
52.2454.
    4. Subpart CC is amended by adding paragraph (e) to Sec. 264.1080 
to read as follows:


Sec. 264.1080  Applicability.

* * * * *
    (e)(1) Except as provided in paragraph (e)(2) of this section, the 
requirements of this subpart do not apply to the pharmaceutical 
manufacturing facility, commonly referred to as the Stonewall Plant, 
located at Route 340 South, Elkton, Virginia, provided that facility is 
operated in compliance with the requirements contained in a Clean Air 
Act permit issued pursuant to 40 CFR 52.2454. The requirements of this 
subpart shall apply to the facility upon termination of the Clean Air 
Act permit issued pursuant to 40 CFR 52.2454.
    (2) Notwithstanding paragraph (e)(1) of this section, any hazardous 
waste surface impoundment operated at the Stonewall Plant is subject 
to:
    (i) the standards in Sec. 264.1085 and all requirements related to 
hazardous waste surface impoundments that are referenced in or by 
Sec. 264.1085, including the closed-vent system and control device 
requirements of Sec. 264.1087 and the recordkeeping requirements of 
Sec. 264.1089(c); and
    (ii) the reporting requirements of Sec. 264.1090 that are 
applicable to surface impoundments and/or to closed-vent systems and 
control devices associated with a surface impoundment.

PART 265--INTERIM STATUS STANDARDS FOR OWNERS AND OPERATORS OF 
HAZARDOUS WASTE TREATMENT, STORAGE, AND DISPOSAL FACILITIES

    1. The authority citation for part 265 continues to read as 
follows:

    Authority: 42 U.S.C. 6905, 6906, 6912, 6922, 6923, 6924, 6925, 
6935, 6936, and 6937, unless otherwise noted.

    2. Subpart AA is amended by adding paragraph (c) to Sec. 265.1030 
to read as follows:


Sec. 265.1030  Applicability.

* * * * *
    (c) The requirements of this subpart do not apply to the 
pharmaceutical manufacturing facility, commonly referred to as the 
Stonewall Plant, located at Route 340 South, Elkton, Virginia, provided 
that facility is operated in compliance with the requirements contained 
in a Clean Air Act permit issued pursuant to 40 CFR 52.2454. The 
requirements of this subpart shall apply to the facility upon 
termination of the Clean Air Act permit issued pursuant to 40 CFR 
52.2454.
    3. Subpart BB is amended by adding paragraph (f) to Sec. 265.1050 
to read as follows:


Sec. 265.1050  Applicability.

* * * * *
    (f) The requirements of this subpart do not apply to the 
pharmaceutical manufacturing facility, commonly referred to as the 
Stonewall Plant, located at Route 340 South, Elkton, Virginia, provided 
that facility is operated in compliance with the requirements contained 
in a Clean Air Act permit issued pursuant to 40 CFR 52.2454. The 
requirements of this subpart shall apply to the facility upon 
termination of the Clean Air Act permit issued pursuant to 40 CFR 
52.2454.
    4. Subpart CC is amended by adding paragraph (e) to Sec. 265.1080 
to read as follows:


Sec. 265.1080  Applicability.

* * * * *
    (e)(1) Except as provided in paragraph (e)(2) of this section, the 
requirements of this subpart do not apply to the pharmaceutical 
manufacturing facility, commonly referred to as the Stonewall Plant, 
located at Route 340 South, Elkton, Virginia, provided that facility is 
operated in compliance with the requirements contained in a Clean Air 
Act permit issued pursuant to 40 CFR 52.2454. The requirements of this 
subpart shall apply to the facility upon termination of the Clean Air 
Act permit issued pursuant to 40 CFR 52.2454.
    (2) Notwithstanding paragraph (e)(1) of this section, any hazardous 
waste surface impoundment operated at the Stonewall Plant is subject to 
the standards in Sec. 265.1086 and all requirements related to 
hazardous waste surface impoundments that are referenced in or by 
Sec. 265.1086, including the closed-vent system and control device 
requirements of Sec. 265.1088 and the recordkeeping requirements of 
Sec. 265.1090(c).

[FR Doc. 97-7949 Filed 3-28-97; 8:45 am]
BILLING CODE 6560-50-P