[Federal Register Volume 63, Number 55 (Monday, March 23, 1998)]
[Proposed Rules]
[Pages 13811-13816]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-7489]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[VA-022-5022; FRL-5984-9]


Approval and Promulgation of Air Quality Implementation Plans; 
Virginia; New Source Review in Nonattainment Areas

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to grant limited approval of a State 
Implementation Plan (SIP) revision submitted by the Commonwealth of 
Virginia to revise its new source review (NSR) regulations for 
nonattainment areas to bring them into conformance with the Clean Air 
Act (CAA) amendments adopted in 1990, and to make other changes desired 
by the Commonwealth. Virginia's NSR regulations for nonattainment areas 
require persons to meet certain requirements before constructing a new 
major source to be located in a nonattainment area, or constructing a 
major modification in such an area, if that source or modification is 
or would be major for the pollutant for which the area is 
nonattainment. The requirements include the installation of air 
pollution control technology capable of achieving the Lowest Achievable 
Emission Rate (LAER), and offsetting the increase in emissions from the 
new source or modification with decreases in emissions from other 
sources.

DATES: Comments must be received on or before April 22, 1998.

ADDRESSES: Comments may be mailed to Kathleen Henry, Chief, Permit 
Programs Section, Mailcode 3AP11, U.S. Environmental Protection Agency, 
Region III, 841 Chestnut Building, Philadelphia, Pennsylvania 19107. 
Copies of the documents relevant to this action are available for 
public inspection during normal business hours at the Air Protection 
Division, U.S. EPA, Region III, 841 Chestnut Building, Philadelphia, 
Pennsylvania 19107, and the Virginia Department of Environmental 
Quality, 629 East Main Street, Richmond, Virginia 23219.

FOR FURTHER INFORMATION CONTACT: Ray Chalmers, 3AT23, U.S. 
Environmental Protection Agency, Region III, 841 Chestnut Building, 
Philadelphia, Pennsylvania, 19107, (215) 566-2061. E-mail address: 
[email protected].

SUPPLEMENTARY INFORMATION:

I. General Description of CAA NSR Requirements

    The CAA requires that certain NSR requirements be met by any person 
seeking to construct a new major source to be located in a 
nonattainment area, or to construct a major modification in such an 
area, if the source or modification is or would be major for the 
pollutant for which the area is designated as nonattainment. The 
requirements which such persons must meet include installing LAER 
technology and obtaining emission offsets. Sections 172(c)(5) and 173 
of the CAA require States to adopt NSR permitting regulations and to 
establish NSR permitting programs to implement these requirements. When 
Congress revised the CAA in 1990, it modified certain NSR requirements, 
and directed States to revise their NSR regulations to incorporate 
these modifications.

II. General Description of Virginia's NSR Submittal

    As the CAA requires, Virginia's SIP includes a NSR regulation, 
entitled ``Permits--Major Stationary Sources and Major Modifications 
Locating in Nonattainment Areas,'' which specifies that new major 
sources or major modifications constructed in nonattainment areas must 
apply LAER and obtain emission offsets. This regulation is found in 
Virginia's Regulations for the Control and Abatement of Air Pollution 
at section 120-08-03. In response to the CAA revisions adopted in 1990, 
Virginia submitted, on November 9, 1992, a revision to this NSR 
regulation intended to update the requirements of the regulation.
    The revised regulation contains, among other things, a provision 
allowing the crediting of emission reductions from preapplication 
shutdowns or curtailments which occurred on or after January 1, 1991, 
and which are permanent, quantifiable, and federally and state 
enforceable. This provision is the reason EPA is proposing only limited 
approval of Virginia's revised NSR regulation, because it allows 
credits for emission reductions resulting from shutting down an 
existing source or curtailing production or operating hours below 
baseline levels in all nonattainment areas, even those for which EPA 
has not approved an attainment demonstration. This issue is discussed 
in more detail later in this notice in the EPA Analysis section.
    Virginia has one ozone nonattainment area. That area is Virginia's 
portion of the Metropolitan Washington DC serious ozone nonattainment 
area. At the time of its NSR SIP submittal, the Richmond area was 
classified as moderate ozone nonattainment area, and part of the 
Virginia portion of the Metropolitan Washington, D.C. area (Alexandria 
City and Arlington County) was designated as nonattainment for carbon 
monoxide. These two areas have since been redesignated to attainment. 
The remainder of Virginia is designated as attainment and/or 
unclassifiable with respect to all other criteria pollutant standards.
    Under the CAA, and the Commonwealth's NSR regulation, sources of 
VOC or NOX located in Virginia's serious ozone nonattainment 
area are considered major if they have the potential to emit 50 TPY or 
more of volatile organic compounds (VOC) or nitrogen oxides 
(NOX).

III. CAA's Specific NSR Requirements

    According to section 172(c)(5) of the CAA, SIPs must require that 
certain NSR requirements be met by any person seeking to construct a 
new major source to be located in a nonattainment area, or to make a 
major modification to a major source in such an area, if the source or 
modification is or would be major for the pollutant for which the area 
is designated as nonattainment. There are also special statutory permit 
requirements for ozone nonattainment areas, which are generally 
contained in revised section 173, and in subpart 2 of part D.

[[Page 13812]]

    On July 23, 1996, EPA published in the Federal Register a 
comprehensive rulemaking which proposed significant changes to both the 
current nonattainment NSR and the current Prevention of Significant 
Deterioration (PSD) requirements. See 61 FR 38311. Upon EPA 
promulgation of the final rulemaking at a later date, all states, 
including Virginia, will be expected to evaluate their new source 
review regulations in accordance with the new requirements and to 
revise such regulations accordingly.
    Important CAA requirements for new sources in nonattainment areas 
are found under sections 172, 173, 182, and 184 of the CAA, and are 
summarized below:
    1. According to section 173(a)(1), the state regulation must assure 
that calculations of emissions offsets are based on the same emissions 
baseline used in the demonstration of reasonable further progress (RFP) 
towards attainment.
    2. According to section 173(c)(1), the state regulation may include 
provisions which allow offsets to be obtained in another nonattainment 
area if that area has an equal or higher nonattainment classification 
and emissions from the other nonattainment area contribute to a 
National Ambient Air Quality Standard (NAAQS) violation in the area in 
which the source would construct.
    3. According to section 173(c)(1), the state regulation must 
provide that any emissions offsets obtained in conjunction with the 
issuance of a permit to a new or modified source must be in effect and 
enforceable by the time the new or modified source commences operation. 
This statutory condition for offsets augments the existing requirement 
under section 173 that provides that offsets must be federally-
enforceable before permit issuance, although the required emissions 
reductions need not occur until the date on which the new or modified 
source commences operations.
    4. According to section 173(c)(1), provisions of the state NSR 
regulation must assure that emissions increases from new or modified 
sources will be offset by real reductions in actual emissions. EPA's 
initial guidance interpreting general sections of the CAA is contained 
in the Title I General Preamble published in the Federal Register on 
April 16, 1992 (57 FR 13498). In the General Preamble, EPA reiterated 
that emission increases and decreases for netting are to be determined 
consistent with EPA's current new source rules and the December 4, 1986 
emissions trading policy statement (51 FR 43823). EPA's new source 
rules state that a decrease in emissions is only creditable if, among 
other requirements, the decrease has not been relied upon by the state 
for any permit, attainment demonstration, or reasonable further 
progress. Therefore, emission reductions made because of reasonably 
available control technology (RACT) or other requirements that have 
been taken into account in the state's demonstration of reasonable 
further progress or attainment demonstration are not creditable for 
netting purposes.
    5. According to section 173(c)(2), the state regulation must 
prevent emission reductions otherwise required by the CAA from being 
credited for purposes of satisfying part D offset requirements.
    6. According to section 173(a)(5), the state regulation must 
require that prior to any part D permit being issued there be an 
analysis of alternative sites, sizes, production processes, and 
environmental control techniques for proposed sources that demonstrates 
that the benefits of the proposed source significantly outweigh the 
environmental and social costs imposed as a result of its location, 
construction, or modification.
    7. According to section 328, the state regulation must assure that 
sources located on the Outer Continental Shelf (OCS) are subject to the 
same requirements applicable if the source were located in the 
corresponding onshore area.
    8. Section 173(a)(3) requires that the state regulation must assure 
that owners or operators of each proposed new or modified major 
stationary source demonstrate that all of their other major stationary 
sources in the state are in compliance.
    9. The state regulation must define major new and major modified 
sources in accordance with the area's nonattainment classification 
under section 181 for ozone.
    10. The state regulation must require emission offsets for major 
new and major modified sources in accordance with the area's 
nonattainment classification under section 181 for ozone.
    11. As discussed in Section 184 of the CAA, the state regulation 
must require all applicable new source requirements to be met by 
sources locating in the ozone transport region (OTR). These provisions 
must also ensure that new or modified major stationary sources obtain 
VOC and, presumptively, NOX offsets at a ratio of at least 
1.15 to 1 in order to obtain a NSR permit. Higher offset ratios apply 
in areas classified as serious or above.
    12. The state regulation must ensure that any new or modified major 
stationary source of NOx satisfies the requirements applicable to any 
new or modified major stationary source of VOC, unless a special NOx 
exemption is granted by the Administrator under CAA section 182(f).
    13. State plans must, for serious and severe ozone nonattainment 
areas, implement sections 182(c)(6), (7) and (8) with regard to 
modifications.

IV. Summary of Regulatory Revisions

    EPA discusses below the major changes by which Virginia has amended 
its NSR regulation. These changes include changes necessary to bring 
Virginia's NSR regulation into conformity with federal requirements and 
other changes not required by federal mandate. Because new subsections 
have been added, this SIP revision includes changes in the manner in 
which the regulation is codified. Listed below are the subsections in 
Virginia's regulation and the major proposed changes:

Section 120-08-03 A--Applicability (Amended)

    Virginia has modified this subsection by including a provision to 
deter a company from constructing or modifying a facility in increments 
to avoid permit requirements. The provision states that where a source 
is constructed or modified in contemporaneous increments which 
individually are not subject to approval and which are not part of a 
program of construction or modification in planned incremental phases 
approved by the board, all such increments shall be added together for 
determining applicability. It further states that an incremental change 
is contemporaneous with the particular change only if it occurs between 
the date five years before construction on the particular change 
commences and the date that the increase from the particular change 
occurs.

Section 120 08 03 B--Definitions (Amended)

    Virginia has modified many of the definitions found in this 
subsection. Key changes in the definitions are discussed below:
    1. Allowable Emissions--Virginia modified this definition to 
indicate that any limits on emissions used when calculating allowable 
emissions must always be federally enforceable.
    2. Building, structure, facility, or installation--Virginia 
modified its former definition of ``building, structure, or facility'' 
by now making this a definition of ``building, structure, facility, or 
installation. (Emphasis

[[Page 13813]]

added). In conjunction with this change, Virginia deleted its former 
separate definition of ``installation.''
    3. Federally enforceable--Virginia modified this definition to 
include permits issued under an EPA approved program that is 
incorporated into the SIP and expressly requires adherence to any 
permit issued under such program.
    4. Major Modification--Virginia made several modifications to this 
definition to indicate that certain provisions or changes must always 
be federally enforceable. In particular, the definition now states that 
any ``physical change or change in the method of operation'' shall not 
include ``[u]se of an alternative or raw material which a source was 
capable of accommodating before December 21, 1976, unless the change 
would be prohibited under any federally and state enforceable permit 
condition * * *'' (emphasis added). In addition the definition now says 
that such a change shall not include ``[a]n increase in the hours of 
operation or the production rate, unless the change in the hours of 
operation or the production rate would be prohibited under any 
federally and state enforceable permit condition * * *'' Virginia also 
deleted several items from its listing of items which do not qualify as 
physical changes or changes in method of operation.
    5. Major Stationary Source--Virginia revised this definition to 
make its major source thresholds for sources located in ozone 
nonattainment areas consistent with EPA's requirements. Virginia 
specifies that a major stationary source includes not only sources 
which emit, or have the potential to emit, 100 tons per year or more of 
any pollutant subject to regulation under the CAA, but also sources 
which emit ``50 tons per year or more of volatile organic compounds or 
nitrogen oxides in nonattainment areas classified as serious in 
Appendix K,'' or ``25 tons per year or more of volatile organic 
compounds or nitrogen oxides in ozone nonattainment areas classified as 
severe in Appendix K.'' Virginia also added to this definition a 
listing of the source categories from which fugitive emissions must be 
considered when determining if a source is major.
    6. Net emissions increase--Virginia modified this definition to 
specify when increases or decreases in actual emissions are 
contemporaneous and when they are creditable.
    7. Nonattainment pollutant--In this definition Virginia modified 
the statement ``For ozone nonattainment areas, the nonattainment 
pollutant shall be volatile organic compounds (including 
hydrocarbons)'' by adding ``and nitrogen oxides.''
    8. Potential to Emit--In this definition Virginia now requires 
limits on potential to emit to be federally enforceable.
    9. Reconstruction--In this definition Virginia removed a provision 
which stated that the assessment of whether or not a reconstructed 
stationary source is subject to a new source performance standard had 
to take into account any economic or technical limitations on 
compliance with applicable standards of performance which are inherent 
in the proposed replacements.
    10. Significant--Virginia includes a new provision indicating that 
in serious or severe ozone nonattainment areas a 25 ton per year 
increase in volatile organic compound or nitrogen oxide emissions would 
be considered a significant emissions increase.

Section 120-08-03 C--General (Amended)

    Virginia modified the general subsection by adding a provision 
stating that it may combine in one permit the requirements for 
emissions units subject to more than one of Virginia's regulatory 
requirements applicable to permitting, and that Virginia may also 
require a combined application for such emissions units. The permitting 
requirements for which such combined permits and applications may be 
required include those of Virginia's NSR regulation for sources 
locating in nonattainment areas and those of two other Virginia 
regulations, entitled, ``Permits--New and Modified Sources,'' and 
``Permits--Major Stationary Sources and Major Modifications Locating in 
Prevention of Significant Deterioration Areas.''

Section 120-08-03 D--Applications (Amended)

    Virginia modified the applications subsection by revising its 
specification of the scope of permit applications. Virginia also added 
provisions defining who must sign permit applications and requiring the 
signer to certify that ``the information submitted is, to the best of 
my knowledge and belief, true, accurate, and complete.''

Section 120-08-03 F--Standards/Conditions for Granting Permits 
(Amended)

    Virginia made several changes in the standards and conditions 
subsection, which establishes the requirements which must be met before 
a permit can be issued. One major changed requirement pertains to 
offsets. Virginia now requires that a permit applicant demonstrate that 
``By the time the source is to commence operation, sufficient 
offsetting emissions reductions shall have been obtained * * * such 
that total allowable emissions of qualifying nonattainment pollutants 
from existing sources in the region, from new or modified sources which 
are not major emitting facilities, and from the proposed source will be 
sufficiently less than total emissions from existing sources, as 
determined in accordance with the requirements of this section, prior 
to the application for such permit to construct or modify so as to 
represent (when considered together with any applicable control 
measures in the State Implementation Plan) reasonable further progress 
* * *'' The only exception involves areas identified as zones where 
economic development should be targeted, in which emissions of a 
pollutant ``resulting from the proposed new or modified stationary 
source shall not cause or contribute to emissions levels which exceed 
the allowance permitted for such pollutant for such area from new or 
modified major stationary sources in the State Implementation Plan.'' 
Virginia also added a provision requiring that any emission reductions 
required as a precondition of the issuance of a NSR permit ``shall be 
state and federally enforceable before such permit may be issued.'' 
Virginia also modified its provision requiring applicants to 
demonstrate, through an analysis of alternative sites, sizes, 
production processes, and environmental control techniques for the 
proposed source, that the benefits of the proposed source would 
significantly outweigh the environmental and social costs imposed as a 
result of its location, construction, or modification.

Section 120-08-03 G--Action on Permit Application (Amended)

    Virginia amended this subsection to specify that Virginia must 
notify applicants in writing of deficiencies in their permit 
applications. Virginia also (1) deleted certain public participation 
provisions from this section which it now includes in a separate 
section of the regulation; and (2) revised its description of permit 
processing steps by including in the description a reference to public 
participation requirements found elsewhere in the regulation.

Section 120-08-03 H--Public Participation (Added)

    Virginia added a new subsection detailing public participation 
requirements. This subsection requires the applicant to provide the 
public with notice of its application for a permit and then, within 30 
to 60 days, to provide

[[Page 13814]]

a public briefing. In addition, the subsection provides that Virginia 
must provide a public comment period of at least 30 days, and hold a 
public hearing, before it makes a decision on a permit application. The 
Commonwealth's Board has the option of providing a public briefing 
prior to the public comment period. In all cases, the public must be 
provided with the opportunity to review relevant information.

Section 120-08-03 I--Compliance Determination and Verification by 
Performance Testing (Amended, Formerly Designated as Section 120-08-03 
H, This Section Replaces the Original Section 120-08-03 I, Which Was 
Deleted)

    Virginia modified this subsection by specifying that source owners 
are responsible for conducting tests if any such tests are required.

Section 120-08-03 J--Application Review and Analysis (Formerly 
Designated as Section 120-08-03 K, This Section Replaces the Original 
Section 120-08-03 J, Which Was Deleted)

    Virginia made no changes to this subsection.

Section 120-08-03 K--Circumvention (Formerly Designated as Section 120-
08-03 L)

    Virginia made no changes to this subsection.

Section 120-08-03 L--Interstate Pollution Abatement (Formerly 
Designated as Section 120-08-03 M)

    Virginia made no changes to this subsection.

Section 120-08-03 M--Offsets (Amended, Formerly Designated as Section 
120-08-03 N)

    Virginia allows the crediting of emission reductions resulting from 
shutting down an existing source or curtailing production or operating 
hours below baseline levels if the shutdown or curtailment is in 
effect, if it occurred on or after January 1, 1991, and if it is 
permanent, quantifiable, and federally and state enforceable. Virginia 
requires that the increased emissions of the air pollutant(s) from the 
new or modified source must be offset by an equal or greater reduction 
in the actual emissions of such air pollutant(s) from the same or other 
sources. In the case of sources emitting ozone precursors (VOC and 
NOx), the emission reductions must be greater than the 
increases by certain specified ratios, which are highest in the areas 
with the worst designated air quality levels. In most cases the 
reductions must be obtained from the same source or from other sources 
in the same nonattainment area. However, Virginia may allow reductions 
in ozone precursor emissions to be obtained from sources outside the 
nonattainment area if the other area has an equal or greater 
nonattainment designation than the area where the source is located and 
the emissions from the other area contribute to a violation of the 
ambient air quality standard(s) in the area where the new or modified 
source is to be located. Virginia allows reductions to be credited only 
if they are not otherwise required by its regulations. Virginia does 
allow incidental emission reductions to be credited, provided they are 
not required by regulation and meet certain other requirements. In this 
section Virginia also includes a special provision allowing increases 
in emissions from rocket engine and motor firing to be offset by 
alternative or innovative means.

Section 120-08-03 N--De Minimis Increases and Stationary Source 
Modification Alternatives for Ozone Nonattainment Areas Classified as 
Serious or Severe (Added)

    Virginia specifies in this new subsection that VOC emissions 
increases resulting from modifications at sources in serious or severe 
ozone nonattainment areas can not be considered de minimis unless the 
increase in net emissions does not exceed 25 TPY when aggregated with 
all other net increases in emissions from the source over any period of 
5 consecutive calendar years which includes the calendar year in which 
such increase occurred.

Section 120-08-03 Q--Reactivation and Permanent Shutdown (Added)

    Virginia specifies in this new subsection that a source which is 
reopened after having been determined to be shutdown must obtain a 
permit. Virginia also sets forth criteria by which sources are formally 
determined to be shutdown.

Section 120-08-03 R--Transfer of Permits (Added)

    Virginia establishes in this new subsection provisions pertaining 
to transfer of permits.

Section 120-08-03 S--Permit Invalidation, Revocation, and Enforcement 
(Added)

    Virginia sets forth in this new subsection the conditions under 
which owners of sources subject to permitting requirements may be 
subject to enforcement action and when permits may be invalidated or 
revoked.

Section 120-08-03 T--Existence of Permit No Defense (Added)

    Virginia specifies in this new subsection that the existence of a 
permit under this section shall not constitute a defense to a violation 
of the Virginia Air Pollution Control Law or these regulations and 
shall not relieve any owner of the responsibility to comply with any 
applicable regulations, laws, ordinances and orders of the governmental 
entities having jurisdiction.

V. EPA Analysis

    EPA's has determined that the amendments to Virginia's NSR 
regulations are consistent with the CAA and currently promulgated 
federal NSR regulations with one exception. Virginia's NSR regulation 
allows persons who intend to build or modify a major source in a 
nonattainment area to take credit for emission reductions obtained from 
shutdowns or curtailments of production or operating hours which took 
place prior to the source's application for a new source review permit 
(prior shutdown or curtailment credits) even if EPA has not approved an 
attainment plan for the nonattainment area. Current EPA regulations, 
developed prior to the CAA Amendments of 1990, provide that States 
having nonattainment areas without EPA approved attainment 
demonstrations may allow persons intending to build or modify sources 
located in those areas to take credit for emission reductions resulting 
from shutdowns or curtailments of production or operating hours only 
if: (1) The reductions occurred on or after the date the new proposed 
source or modification files a permit application, or, (2) if the 
applicant can establish that the proposed new source is a replacement 
for the shutdown or curtailed source. See 40 CFR 51.165 
(a)(3)(ii)(C)(2). Thus, under current EPA regulations, states are 
prohibited from crediting emission reductions which occurred prior to 
the date the new proposed source or modification files a permit 
application (prior shutdown or curtailment credits) unless EPA has 
approved an attainment demonstration for the area. It is important to 
note that Virginia's current SIP regulations do not contain this so-
called ``shutdown prohibition.''
    Virginia's revised NSR regulation affirmatively allows persons 
seeking to build new major sources or major modifications to take 
credit for emission reductions resulting from shutdowns or

[[Page 13815]]

curtailments of production or operating hours if those shutdowns or 
curtailments occurred after January 1, 1991. Because Virginia's 
regulation allows persons seeking to construct new major sources or 
major modifications in a nonattainment area for which EPA has not 
approved an attainment plan to take credit for shutdowns or 
curtailments which occurred prior to the date they filed their permit 
application, Virginia's NSR regulation appears not to conform with the 
existing EPA prohibition on the use of prior shutdown or curtailment 
credits in nonattainment areas for which EPA has not approved an 
attainment demonstration. This prohibition is found at 40 CFR 
51.165(a)(3)(ii)(C)(2).
    However, on July 23, 1996, EPA published in the Federal Register a 
comprehensive rulemaking which proposed significant changes to the 
current PSD and nonattainment NSR rules. This proposed rulemaking is 
hereinafter referred to as the ``NSR Reform Rulemaking.'' See 61 FR 
38311. The NSR Reform Rulemaking proposes to revise regulations for the 
approval and promulgation of SIPs and the requirements for preparation, 
adoption, and submittal of implementation plans governing the NSR 
programs mandated by Parts C and D of Title I of the CAA. Specifically, 
Section VII.A of EPA's NSR Reform Rulemaking, entitled ``Emissions 
Credits Resulting From Source Shutdowns and Curtailments,'' proposes to 
eliminate the current restrictions on crediting of emissions reductions 
from source shutdowns and curtailments that occurred after 1990. In the 
NSR Reform Rulemaking, EPA proposes two different alternatives for 
eliminating the prior shutdown prohibition. The second of these 
alternatives, entitled ``Shutdown Alternative 2'', generally lifts the 
current offset restriction applicable to emissions reductions from 
source shutdowns and source curtailments for all nonattainment areas 
and all pollutants where such reductions occur after the base year of 
the emissions inventory used (or to be used) to meet the applicable 
provisions of Part D of the CAA. See proposed 
Sec. 51.165(a)(3)(ii)(C)(5) [Alternative 2], 61 FR 38314. Under this 
alternative, States could allow pre-application emission reductions 
from source shutdowns or curtailments to be used as offsets in all 
nonattainment areas and for all pollutants provided such reductions 
occurred after the base year of the emissions inventory used by the 
State to meet the applicable provisions of Part D of the CAA.
    As explained above, Virginia's NSR rule allows sources to take 
credit for emissions reductions from shutdowns or curtailments of 
production or operating hours which occurred after January 1, 1991. 
This is consistent with Alternative 2 of EPA's NSR Reform Rulemaking, 
which credits only those emissions reductions from source shutdowns and 
curtailments occurring after 1990, i.e., the base year of the emissions 
inventory used to meet the applicable provisions of Part D of the CAA. 
Thus, EPA believes that Virginia's NSR regulation is generally 
consistent with ``Shutdown Alternative 2'' as described in EPA's 
proposed NSR Reform Rulemaking, because both Virginia's rule and 
Alternative 2 allow sources to take credit only from emission 
reductions or curtailments occurring after January 1, 1991.
    Because Virginia's NSR regulation is generally consistent with 
Alternative 2 of EPA's proposed NSR Reform Rulemaking (as discussed 
above), and because approval of the revised version of Virginia's NSR 
regulation submitted on November 9, 1992 would strengthen the SIP to be 
consistent with the CAA's provisions for NSR, EPA believes that 
Virginia's revised NSR regulation warrants limited approval. If EPA 
promulgates Alternative 2, this limited approval of Virginia's NSR 
regulations would convert to a full approval.
    The alternative shutdown related provision set forth in EPA's NSR 
Reform Rulemaking proposal is entitled ``Shutdown Alternative 1.'' This 
alternative proposes, for ozone nonattainment areas, to lift the 
current offset restriction applicable to emissions reductions from 
source shutdowns and curtailments in such areas without EPA-approved 
attainment demonstrations, provided the emissions reductions occur 
after November 15, 1990 and the area has kept current with the CAA's 
scheduled Part D ozone nonattainment planning requirements. See 
proposed Sec. 51.165(a)(3)(ii)(C)(5) and (6) [Alternative 1].
    EPA acknowledges that either Alternative 1 or 2 may be eventually 
incorporated into the final NSR Reform Rulemaking upon its final 
promulgation. It is also noted that while EPA is with this rulemaking 
proposing to grant limited approval of Virginia's NSR regulation based 
on the rule's consistency with Shutdown Alternative 2 in EPA's NSR 
Reform rulemaking, the Commonwealth may need to amend its NSR 
regulation if Shutdown Alternative 1 rather than Shutdown Alternative 2 
is promulgated. If Alternative 1 is promulgated, EPA would determine 
the status of Virginia's conformance with Part D ozone planning 
requirements for any nonattainment area. If Virginia's SIP were not 
current with the Part D ozone planning requirements for any 
nonattainment area, EPA would make a SIP call for Virginia to amend its 
NSR rule to conform with Alternative 1 as provided in EPA's final NSR 
Reform Rulemaking.
    Virginia's regulation does not state that any emission reductions 
must also have occurred after the base year of the emissions inventory 
used (or to be used) to meet the applicable provisions of Part D of the 
CAA. If an area in Virginia is designated as a new nonattainment area 
in the future, the baseline year of the inventory used in the 
attainment demonstration for that area would likely be after the 
January 1, 1991 baseline year used for areas designated as 
nonattainment at the time of the 1990 CAA amendments. Because Virginia 
does not state in its NSR regulation that any emission reductions must 
also have occurred after the base year of the emissions inventory used 
(or to be used) to meet the applicable provisions of Part D of the CAA, 
Virginia would have to modify its NSR rule if, in the future, Virginia 
is required to do a new attainment demonstration because a new area in 
Virginia is designated as nonattainment or a current nonattainment area 
fails to meet its statutory attainment deadline.
    After making its NSR submittal to EPA on November 9, 1992, in 1995 
Virginia adopted legislation that provides, subject to certain 
conditions, for an environmental assessment (audit) ``privilege'' for 
voluntary compliance evaluations performed by a regulated entity. The 
legislation further addresses the relative burden of proof for parties 
either asserting the privilege or seeking disclosure of documents for 
which the privilege is claimed. Virginia's legislation also provides, 
subject to certain conditions, for a penalty waiver for violations of 
environmental laws when a regulated entity discovers such violations 
pursuant to a voluntary compliance evaluation and voluntarily discloses 
such violations to the Commonwealth and takes prompt and appropriate 
measures to remedy the violations. Virginia's Voluntary Environmental 
Assessment Privilege law, Va. Code section 10.1-1198, provides a 
privilege that protects from disclosure documents and information about 
the content of those documents that are the product of a voluntary 
environmental assessment. The privilege does not extend to documents or 
information that are: (1) Generated or developed before the 
commencement of a voluntary environmental assessment; (2) that are 
prepared independently of the assessment process; (3) that

[[Page 13816]]

demonstrate a clear, imminent and substantial danger to the public 
health or environment; or (4) that are required by law.
    On December 29, 1997, the Office of the Attorney General provided a 
legal opinion that states, with regard to the Privilege law: Virginia's 
Immunity law, Va. Code section 10.1-1199, provides that ``[t]o the 
extent consistent with requirements imposed by federal law,'' (emphasis 
added) any person making a voluntary disclosure of information to a 
state agency regarding a violation of an environmental statute, 
regulation, permit, or administrative order is granted immunity from 
administrative or civil penalty. Thus, EPA has determined that 
Virginia's Privilege and Immunity legislation will not preclude the 
Commonwealth from enforcing its NSR program consistent with the CAA's 
requirements.

VI. Proposed Action

    EPA is proposing limited approval of the revisions to the Virginia 
SIP NSR regulations submitted on November 9, 1992 because such approval 
would strengthen the SIP so that it meets the NSR requirements of the 
CAA as discussed herein. EPA is soliciting public comments on the 
issues discussed in this document or on other relevant matters. These 
comments will be considered before taking final action. Interested 
parties may participate in the Federal rulemaking procedure by 
submitting written comments to the EPA Regional office listed in the 
ADDRESSES section of this document. Nothing in this action should be 
construed as permitting or allowing or establishing a precedent for any 
future request for revision to any state implementation plan. Each 
request for revision to the state implementation plan shall be 
considered separately in light of specific technical, economic, and 
environmental factors and in relation to relevant statutory and 
regulatory requirements.

VII. Administrative Requirements

A. Executive Order 12866

    The Office of Management and Budget (OMB) has exempted this 
regulatory action from E.O. 12866 review.

B. Regulatory Flexibility Act

    Under the Regulatory Flexibility Act, 5 U.S.C. 600 et seq., EPA 
must prepare a regulatory flexibility analysis assessing the impact of 
any proposed or final rule on small entities. 5 U.S.C. 603 and 604. 
Alternatively, EPA may certify that the rule will not have a 
significant impact on a substantial number of small entities. Small 
entities include small businesses, small not-for-profit enterprises, 
and government entities with jurisdiction over populations of less than 
50,000. SIP approvals under section 110 and subchapter I, part D of the 
Clean Air Act do not create any new requirements but simply approve 
requirements that the State is already imposing. Therefore, because the 
Federal SIP approval does not impose any new requirements, EPA 
certifies that it does not have a significant impact on any small 
entities affected. Moreover, due to the nature of the Federal-State 
relationship under the CAA, preparation of a flexibility analysis would 
constitute Federal inquiry into the economic reasonableness of state 
action. The Clean Air Act forbids EPA to base its actions concerning 
SIPs on such grounds. Union Electric Co. v. U.S. EPA, 427 U.S. 246, 
255-66 (1976); 42 U.S.C. 7410(a)(2).

C. Unfunded Mandates

    Under Section 202 of the Unfunded Mandates Reform Act of 1995 
(``Unfunded Mandates Act''), signed into law on March 22, 1995, EPA 
must prepare a budgetary impact statement to accompany any proposed or 
final rule that includes a Federal mandate that may result in estimated 
costs to State, local, or tribal governments in the aggregate; or to 
private sector, of $100 million or more. Under Section 205, EPA must 
select the most cost-effective and least burdensome alternative that 
achieves the objectives of the rule and is consistent with statutory 
requirements. Section 203 requires EPA to establish a plan for 
informing and advising any small governments that may be significantly 
or uniquely impacted by the rule. EPA has determined that the approval 
action proposed does not include a Federal mandate that may result in 
estimated costs of $100 million or more to either state, local, or 
tribal governments in the aggregate, or to the private sector. This 
Federal action approves pre-existing requirements under State or local 
law, and imposes no new requirements. Accordingly, no additional costs 
to state, local, or tribal governments, or to the private sector, 
result from this action.
    The Administrator's decision to approve or disapprove Virginia's 
NSR SIP revision will be based on whether it meets the requirements of 
section 110(a)(2)(A)-(K) and part D of the Clean Air Act, as amended, 
and EPA regulations in 40 CFR part 51.

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Hydrocarbons, 
Intergovernmental relations, Nitrogen dioxide, Ozone, Reporting and 
recordkeeping requirements.

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

    Dated: March 9, 1998.
W. Michael McCabe,
Regional Administrator, Region III.
[FR Doc. 98-7489 Filed 3-20-98; 8:45 am]
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