[Federal Register Volume 64, Number 242 (Friday, December 17, 1999)]
[Proposed Rules]
[Pages 70652-70659]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-32762]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[CA 172-0205; FRL-6511-5]


Approval and Promulgation of Implementation Plans; California 
State Implementation Plan Revision; South Coast Air Quality Management 
District

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is withdrawing its proposed approval of a revision to the 
California State Implementation Plan (SIP) and proposing to disapprove 
the revision. This revision concerns the federal recognition of 
variances from certain rule requirements. Based on comments received on 
its proposal to approve this revision, EPA now believes the revision 
does not meet applicable Clean Air Act requirements and is therefore 
proposing to disapprove the revision.


[[Page 70653]]


DATES: Comments on this proposed action must be received in writing on 
or before January 3, 2000.

ADDRESSES: Comments may be mailed to: Ginger Vagenas, Permits Office 
(AIR-3), Air Division, U.S. Environmental Protection Agency, Region IX, 
75 Hawthorne Street, San Francisco, CA 94105-3901.
    Copies of the rule and EPA's responses to comments received on its 
proposed approval of the rule are available for public inspection at 
EPA's Region IX office during normal business hours. Copies of the 
submitted rule are also available for inspection at the following 
locations:

Environmental Protection Agency, Air Docket (6102), 401 ``M'' Street, 
S.W., Washington, D.C. 20460.
California Air Resources Board, Stationary Source Division, Rule 
Evaluation Section, 2020 ``L'' Street, Sacramento, CA 95812.
South Coast Air Quality Management District, 21865 E. Copley Drive, 
Diamond Bar, CA 91765.

FOR FURTHER INFORMATION CONTACT: Ginger Vagenas, Permits Office (AIR-
3), Air Division, U.S. Environmental Protection Agency, Region IX, 75 
Hawthorne Street, San Francisco, CA 94105, Telephone: (415) 744-1252.

SUPPLEMENTARY INFORMATION:

I. Applicability

    The rule being proposed for disapproval is South Coast Air Quality 
Management District (SCAQMD) Rule 518.2--Federal Alternative Operating 
Conditions. Rule 518.2 was adopted on January 12, 1996 and was 
submitted to EPA by the California Air Resources Board (CARB) on May 
10, 1996. This rule was found to be complete on July 19, 1996, pursuant 
to EPA's completeness criteria that are set forth in 40 CFR Part 51 
Appendix V.1
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    \1\ EPA adopted the completeness criteria on February 16, 1990 
(55 FR 5830) and, pursuant to section 110(k)(1)(A) of the CAA, 
revised the criteria on August 26, 1991 (56 FR 42216).
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II. Background

    This document addresses EPA's proposed disapproval for SCAQMD 
Rule--Rule 518.2--Federal Alternative Operating Conditions. The rule 
would allow the SCAQMD to temporarily modify certain applicable 
requirements through the title V permitting process rather than through 
a SIP revision. These modifications are accomplished by establishing a 
mechanism for the creation of alternative operating conditions (AOCs), 
a means by which to offset any emissions in excess of the otherwise 
applicable requirements that would result, and provisions for EPA and 
public review and EPA veto of the proposed AOCs.
    On September 25, 1998 (63 FR 51325) EPA proposed approval of Rule 
518.2. At that time, EPA believed that the rule was consistent with the 
CAA, EPA regulations, and EPA policy. However, upon further review, EPA 
has reconsidered its position and now believes that certain 
demonstrations and rule revisions would be required for the rule to be 
proposed for approval. For additional background on EPA's original 
analysis, including a detailed discussion of the CAA requirements 
governing approval of Rule 518.2, please refer to the Federal Register 
notice cited above.

III. EPA Evaluation and Proposed Action

    In determining the approvability of Rule 518.2, EPA must evaluate 
the rule for consistency with the requirements of the Clean Air Act 
(CAA) and EPA regulations, including those found in sections 110, 172, 
173, 182, and 193 of the CAA and 40 CFR part 51 (Requirements for 
Preparation, Adoption and Submittal of Implementation Plans). EPA's 
interpretation of these requirements, which forms the basis for this 
action, appears in EPA policy guidance documents. In general, relevant 
and applicable guidance documents have been set forth to ensure that 
submitted rules meet Federal requirements, are fully enforceable, and 
strengthen or maintain the SIP.

A. Compliance with Section 110(l) of the Clean Air Act

    EPA received comments that Rule 518.2 does not comply with section 
110(l) of the Act and cannot be approved for this reason. These 
commenters oppose approval of Rule 518.2 because it will allow sources 
to violate the new source review lowest achievable emission rate 
(``LAER'') and offsets requirements of the Act as well as the 
requirements of Title V, and therefore does not comply with section 
110(l).
LAER and Offset Requirements
    Section 110(l) provides that the Administrator shall not approve a 
SIP revision ``if the revision would interfere with any applicable 
requirement concerning attainment and reasonable further progress * * 
*, or any other applicable requirement of (the Act).'' LAER is a 
technology-based emission control requirement which is implemented 
through the nonattainment area new source review (``NSR'') permitting 
program mandated by sections 172(b)(5) and 173. LAER is defined in 
section 171(3), in pertinent part, as that rate of emission which 
reflects:

    (A) the most stringent emission limitation which is contained in 
the implementation plan of any State for such class or category of 
source, unless the owner or operator of the proposed source 
demonstrates that such limitations are not achievable, or
    (B) the most stringent emission limitation which is achieved in 
practice by such class or category of source, whichever is more 
stringent * * *.

In general, we agree with the commenters that, because Rule 518.2 would 
permit a source to exceed a LAER emissions limit contained in its NSR 
permit, it would violate LAER requirements and would not comply with 
section 110(l).
    However, because LAER is a technology-based standard, there is a 
limited subset of circumstances in which an AOC could apply to a LAER 
limit in compliance with the requirements of the Act. In Marathon Oil 
v. EPA, 564 F.2d 1253, 1272-73 (9th Cir. 1977), the Ninth Circuit held, 
in the context of a Clean Water Act case, that EPA must provide an 
upset defense for technology-based effluent limits to take into account 
the fact that even properly maintained technology can unexpectedly 
fail. Other cases adopted this reasoning, and they formed the basis for 
EPA's decision to include a malfunction provision in part 70. See 60 FR 
45558-45561 and 40 CFR 70.6(g). This provision applies across the 
board, even to emission limits that derive from LAER. Accordingly, we 
believe that Rule 518.2 could be redrafted to allow an AOC for LAER-
based limits only in the narrow instance where the source could 
demonstrate that an unavoidable malfunction caused the violation.
    The commenters' second argument that Rule 518.2 does not comply 
with section 110(l) focuses on the offset requirements under section 
173. As part of the NSR permitting requirements of section 173, new 
sources or modifications of existing sources located in nonattainment 
areas must obtain:

sufficient offsetting emissions reductions * * * such that total 
allowable emissions 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 * * * so as to represent * * * reasonable 
further progress. Section 173(a)(1)(A).

Further, section 173(c) requires that, ``a new or modified major 
stationary source may comply with any offset requirement in effect 
under this part for increased

[[Page 70654]]

emissions of any air pollutant only by obtaining emission reductions of 
such air pollutant from the same source or other sources in the same 
nonattainment area.''
    Section 182 of the CAA requires that offsets must be obtained in a 
ratio determined either by the severity of the air quality in the 
nonattainment area. The offset ratio required in the South Coast is 1.2 
to 1. Thus, when a new or modified source applies for an NSR permit, it 
must obtain offsetting emissions in an amount greater than the 
emissions it will add to the air. Therefore, not only are the new 
emissions not reflected in the attainment demonstration, but they 
should result in a decrease in the inventory due to the offset ratio. 
While the offset requirement is an entirely independent one, the offset 
ratio is the link to the reasonable further progress requirement--
allowing growth to occur at the same time that air quality improves.
    Based upon the above, if a source that was initially required under 
section 173 to offset its emissions applies for an AOC, that source 
must be required to offset the excess emissions in the same manner or 
it will violate section 173(c). Because Rule 518.2 does not require 
such offsets, we agree that it would violate section 173. Therefore, 
the current version of Rule 518.2 cannot be approved because it would 
not comply with section 110(l).
    We believe that the District could address this approvability issue 
by ensuring that sufficient offsets are set aside to cover any excess 
emissions associated with an AOC granted to sources subject to NSR.
Title V
    Finally, the commenters believe that 110(l) prohibits EPA from 
approving Rule 518.2 because the rule violates title V of the Act. The 
commenters make two arguments in this regard. First, they argue that 
section 502(a) prohibits sources from violating terms of their title V 
permits and that the AOCs contemplated by Rule 518.2 would allow 
sources to do so. We disagree with the commenters on this point. We 
believe that the combination of an approvable version of Rule 518.2 and 
the process for approving AOCs under the title V program provides a 
means by which an applicable requirement and the title V permit may be 
temporarily modified and thus does not violate or circumvent the 
requirements of section 502(a). This approach may, however, conflict 
with the provisions of 40 CFR 70.6(a)(1)(iii), which provides for the 
creation of alternatives to SIP emission limits via the title V permit 
revision process. This section appears to limit the opportunities for 
such flexibility to situations in which the applicable implementation 
plan allows for it and in which the alternative limit is equivalent to 
that contained in the plan. EPA solicits comment on this issue. See 
also ``White Paper Number 2 for Improved Implementation of the part 70 
Operating Permits Program, Attachment B,'' March 5, 1996.
    Second, the commenters argue that because section 502(a) provides 
EPA with discretion to exempt certain nonmajor sources from the title V 
program entirely, but prohibits EPA from doing so for major sources, 
EPA is prohibited from approving the AOC process for major sources. 
However, Rule 518.2 does not in any way exempt major sources from the 
title V program. Rather, it provides a process for temporarily revising 
an applicable requirement and the related title V permit conditions. 
The source remains subject to title V and must comply with the 
conditions of the AOC and all remaining conditions of the Title V 
permit.

B. Compliance With Section 193 of the Act

    In its 1998 FR document proposing to approve Rule 518.2, EPA 
solicited comment on whether allowing relaxations to pre-1990 rules 
2 would violate the requirements of section 193 of the CAA, 
which prohibits the modification of any control requirement in effect 
before November 15, 1990 in an area which is a nonattainment area for 
any air pollutant, unless the modification ensures equivalent or 
greater emission reductions of such air pollutants. EPA noted that 
offsetting excess emissions from variances with the Rule 518.2 bank 
does not ensure equivalent emission reductions because the bank is 
``funded'' with excess emissions included in the inventory rather than 
from real reductions.
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    \2\ By ``pre-1990 rules'' we mean rules in effect before 
November 15, 1990, the date of the enactment of the Clean Air Act 
Amendments of 1990.
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    Under the de minimis rule established by the D.C. Circuit in 
Alabama Power, unless Congress has been extraordinarily rigid, EPA may 
provide exemptions when the burdens of regulations yield a gain of 
trivial or no value. In its 518.2 proposal EPA noted that the language 
of section 193 and the legislative history associated with section 193 
appear to be quite rigid and expressed concern that application of the 
de minimis exemption under Alabama Power might not be appropriate. EPA 
has considered the comments submitted and has concluded that the de 
minimis rule does not apply in this situation.
Does the de minimis Rule Apply to Section 193?
    One commenter wrote that section 193 is clear on its face and that 
no backsliding from pre-1990 requirements is allowable. The commenter 
noted that the language in section 193 is very straightforward and 
rigid, and that any attempt to discount variances from pre-1990 
requirements as ``de minimis'' is contrary to the Act and to case law 
interpreting it. The commenter concluded that Rule 518.2 does not 
comply with section 193.
    After further consideration of this issue, EPA believes that the 
language of 193 is in fact ``extraordinarily rigid'' in its requirement 
to provide equivalent or greater emission reductions to offset 
relaxations to pre-1990 rules. The de minimis rationale for approving 
relaxations to pre-1990 rules is therefore unavailable.
    Two commenters wrote in support of interpreting section 193 as not 
being ``extraordinarily rigid'' and therefore allowing a de minimis 
exemption to pre-1990 requirements. One of these commenters went on to 
state that section 193 is an ambiguous statute and that EPA could 
easily support an interpretation that allows a de minimis exemption 
from the emissions at issue under rule 518.2.
    EPA believes that section 193 unambiguously requires any 
relaxations to control requirements or plans in effect prior to 
enactment of the CAA amendments of 1990 to be offset by equivalent or 
greater emission reductions. The clarity of the statutory language 
supported by the legislative history 3 evidences intent by 
Congress that relaxations to pre-1990 requirements should occur only 
where compensating strengthenings will result in no increase in 
emissions.
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    \3\ The Report on the House Energy and Commerce Committee on the 
1990 Clean Air Act Amendments noted that the ``anti-backsliding'' 
language in section 193 ``prohibits the relaxation of control 
requirements currently in effect or required to be adopted. * * * 
Although many nonattainment areas are allotted additional years 
before they must attain ambient air quality standards under these 
amendments, all areas must continue to use pollution control 
measures already put in place, as well as those additional measures 
required under this Act, in order to assure attainment as 
expeditiously as practical.''
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Does Rule 518.2 Relax pre-1990 Standards?
    In the Federal Register document proposing approval of Rule 518.2, 
EPA

[[Page 70655]]

stated that it believes ``inclusion of pre-1990 rules in Rule 518.2 is 
justified because the variance bank is so small that any excused 
emissions would essentially be insignificant such that, in effect, no 
relaxation has occurred.'' Four commenters concurred with that 
statement, but others asserted that the statement was tantamount to 
saying those emissions increases are de minimis. EPA has reconsidered 
this issue and has concluded that it is not possible to draw a 
meaningful distinction between de minimis and insignificant in the 
context of this rule. EPA disagrees with the premise that Rule 518.2 
will not relax rules. Alternative operating conditions issued under 
518.2 do in fact modify the underlying requirement. The issuance of a 
variance, or in the case of 518.2, an AOC, temporarily allows a source 
to operate under a different set of requirements. For that particular 
source, the control requirement has been modified, regardless of the 
size of the emissions change allowed by the AOC.
Does the Emissions Bank in 518.2 Prevent Backsliding?
    Three commenters argued that the inclusion of an excess emissions 
credit bank would ensure that any temporary emissions increases allowed 
under 518.2 would be offset, and that therefore, the anti-backsliding 
provisions of section 193 would not be violated. Because of the nature 
of the bank, EPA must disagree with this comment. Offsetting excess 
emissions from variances with the Rule 518.2 bank does not ensure 
equivalent emission reductions because that bank is ``funded'' with 
excess emissions included in the inventory rather than from real 
reductions.
Does 518.2 Modify or Relax Underlying Requirements?
    Two commenters stated that Rule 518.2 would not delete any control 
measures that were already in place or scheduled to be put in place at 
the time of the 1990 CAA amendments. They argued that although Rule 
518.2 provides federal recognition of temporary AOCs, the underlying 
control measures would stay in place and no modification or relaxation 
of those measures would occur.
    EPA notes that the deletion of control measures is not at issue 
here: section 193 addresses the relaxation of pre-1990 control 
measures. The premise of Rule 518.2 is that it temporarily modifies a 
requirement with which a source is out of compliance by creating an 
alternative, less stringent set of conditions with which the source 
will comply. This will result in an increase of emissions beyond those 
allowed under the applicable requirement. Further, for the duration of 
the AOC, the underlying requirement is not enforceable against the 
source. This amounts to a relaxation.
Can EPA Provide de minimis Exemptions to pre-1990 Control Requirements?
    Two commenters said that the EPA had authority before and after 
November 15, 1990 to recognize de minimis exceptions to pre-1990 
requirements and that this authority was and is an integral part of 
each control requirement in effect on November 15, 1990. EPA disagrees 
with the premise that its authority to provide de minimis exemptions 
was or is an integral part of state or district adopted control 
requirements. Under Alabama Power, EPA may, under certain 
circumstances, approve control requirements that provide de minimis 
exemptions. EPA does not, however, agree that noncompliance with 
adopted control requirements can be overlooked because the violation 
resulted in relatively low excess emissions.
Can EPA Approve Variances From Control Requirements on a Case-by-Case-
Basis?
    Two commenters noted that EPA could approve a variance from a 
control requirement as a SIP revision on a case-by-case basis before 
1990, and still can. One of those commenters also said that CAA section 
193 does not prevent the recognition by EPA of variances from pre-1990 
requirements.
    EPA believes that if the appropriate procedural and substantive 
requirements 4 are met, including a demonstration that 
relaxations to pre-1990 rules will be offset by equivalent or greater 
emissions reductions, it can approve such variances. As discussed in 
this notice, Rule 518.2 does not fully meet these requirements. EPA is 
therefore proposing to disapprove it.
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    \4\ For a complete discussion of the procedural and substantive 
requirements that apply to EPA approval of relaxations to the SIP, 
see EPA's proposed approval of Rule 518.2. (63 FR 51325, September 
25, 1998).
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Are Variances an Integral Part of the Pre-1990 Rules?
    Several commenters noted that SCAQMD's variance rules were in the 
SIP in 1990. Two of those commenters said that variances were an 
integral part of the pre-1990 SIP rules relating to the SCAQMD.
    EPA acknowledges that variance rules were approved into the SIP in 
error. EPA has corrected this error by removing them. The fact that 
these rules were in the SIP is irrelevant and would not be recognized 
under section 193. Under Train, a variance would have to be submitted 
to EPA as an individual SIP revision to be effective. See Train v. 
NRDC, 421 U.S. 60 (1975).
Does the Anti-Backsliding Language of Section 193 Apply to Short-Term 
Variances?
    EPA received comment from one party that the ``anti-backsliding'' 
language of section 193 was not intended to prevent short-term, 
carefully controlled issuance of alternative operating requirement, 
such as those contemplated by rule 518.2.
    EPA believes the language of section 193 is very clear and that it 
does not allow for relaxations to pre-1990 rules without equivalent or 
greater emission reductions. There is no evidence that Congress 
intended to exempt alternative operating conditions from this statutory 
provision. Any AOCs that would relax pre-1990 rules are subject to 
section 193.
Would the Failure To Allow a de minimis Exemption Be Contrary to the 
Primary Legislative Goal of Section 193?
    One commenter stated that the literal meaning of section 193 need 
not be followed where failure to allow a de minimis exemption is 
contrary to the primary legislative goal. The commenter said that the 
purpose of section 193 is to prevent backsliding in a manner that will 
interfere with attainment or rate of progress in reducing emissions and 
that the carefully circumscribed provisions of rule 518.2 will not have 
any negative air quality impact.
    EPA does not believe that the literal meaning of section 193 is 
contrary to its primary legislative goal. The purpose of section 193 is 
to prevent backsliding and it sets out the means to do so: By requiring 
relaxations to pre-1990 control measures to be offset by equivalent or 
greater emission reductions.
Has EPA Previously Approved de minimis Exemptions of Much Greater 
Impact?
    EPA received one comment that case law and U.S. EPA policy indicate 
that the magnitude of excess emission previously excused by the de 
minimis exemption is much greater than the variance emissions allowed 
under Rule 518.2. This commenter went on to say that U.S. EPA itself 
has utilized the de minimis exemption to allow ``nonmajor'' sources to 
avoid substantial CAA requirements such as conformity and new source 
review requirements.

[[Page 70656]]

    As noted previously, because section 193 is rigid, the de minimis 
rule under Alabama Power cannot be applied to this situation; 
therefore, other cases where EPA has applied the de minimis rule are 
not relevant.
Do the Reductions Required Under Section 193 Need To Come From Sources 
Regulated by the Same Rule From Which the AOC Is Being Sought?
    EPA received comment from one party regarding the source of 
emission reductions used to offset any increases allowed under Rule 
518.2. This commenter noted that, while some of the emission reductions 
will likely come from different sources than would occur (sic) under 
the rules under which the alternative operating condition is sought, 
this is also true of market trading programs. The commenter said that 
EPA has already approved market trading programs, such as RECLAIM, 
without insisting that emissions at each facility remain below levels 
authorized in 1990 and urged EPA to interpret section 193 similarly in 
this case.
    EPA finds this comment unclear. We have interpreted the comment to 
address the requirement under section 193 that any modification that 
would relax a pre-1990 control requirement, settlement agreement, or 
plan must provide for equivalent emission reductions. Specifically, it 
appears that the commenter is arguing that the offsetting reductions 
need not come from a strengthening of the same control requirement that 
the AOC will modify. The comment also seems to imply that the emission 
bank established in Rule 518.2 is funded with real reductions, however, 
this is not the case.
    EPA believes that the correct interpretation of section 193 is 
that, overall, the SIP must be strengthened so that increased emissions 
that result from any relaxations to pre-1990 requirements will be 
offset by decreases from modifications to other parts of the SIP. 
Because the statute prohibits modifications to pre-1990 requirements 
unless the modification ensures equivalent emissions reductions, the 
compensating reductions must be contemporaneous with the relaxation. If 
the district still wants rules enacted prior to 1990 to be a part of 
this program, we believe that the rule could be amended to cure this 
problem by funding the emissions bank with real emission reductions. 
EPA solicits comment on this proposal.

C. Criteria for Granting AOCs

    EPA received comments opposing approval of the California Health 
and Safety Code standards for granting variances as the basis for 
approving AOCs under Rule 518.2. These standards, which are 
incorporated into Rule 518.2(e)(2), are as follows:
     The petitioner is or will be in violation of any 
applicable requirement(s) listed in paragraph (c)(1) of this rule;
     Due to conditions beyond the reasonable control of the 
petitioner, requiring compliance would result in either (1) an 
arbitrary or unreasonable taking of property or (2) the practical 
closing and elimination of a lawful business. In making those findings 
pursuant to paragraph (4) where the petitioner is a public agency, the 
Hearing Board shall consider whether or not requiring immediate 
compliance would impose an unreasonable burden upon an essential public 
service. For purposes of this subparagraph, ``essential public 
service'' means a prison, detention facility, police or fire-fighting 
facility, school, health care facility, landfill gas control or 
processing facility, sewage treatment works, or water delivery 
operation, if owned and operated by a public agency;
     The closing or taking would be without a corresponding 
benefit in reducing air contaminants;
     The petitioner for the Alternative Operating Condition has 
given consideration to curtailing operations of the source in lieu of 
obtaining an Alternative Operating Condition;
     During the period the Alternative Operating Condition is 
in effect, the petitioner will reduce excess emissions to the maximum 
extent feasible;
     During the period the Alternative Operating Condition is 
in effect, the petitioner will monitor or otherwise quantify emission 
levels from the source, and report these emission levels to the 
District pursuant to a schedule established by the District;
     The Alternative Operating Condition will not result in 
noncompliance with the requirements of any NSPS, NESHAP;
     Or other standard promulgated by the U.S. EPA under 
sections 111 or 112 of the Clean Air Act, or any standard or 
requirement promulgated by the U.S. EPA under Titles IV or VI of the 
Clean Air Act, or any requirement contained in a permit issued by the 
U.S. EPA, or other requirement contained in paragraph (c)(2); and
     Any emissions (calculated pursuant to subparagraph 
(h)(3)(B) of this rule) resulting from the Alternative Operating 
Condition will not, in conjunction with emissions (calculated pursuant 
to subparagraph (h)(3)(B)) resulting from all other Alternative 
Operating Conditions established by the Hearing Board and in effect at 
the time, cause an exceedance of the monthly or annual SIP Allowance 
established pursuant to subdivision (i) of this rule.
    The commenters argue that these criteria are too vague, grant 
unfettered discretion to the district hearing board, and 
inappropriately focus on economic considerations. In addition, they 
argue, in practice these standards have failed to protect public health 
and to limit emissions growth.
    We believe that these comments are well-taken. Section 110(a)(1) of 
the Act requires SIPs to provide for attainment and maintenance of the 
national ambient air quality standards (NAAQS). Because the NAAQS are 
health and welfare-based standards, Congress intended that they must be 
met continuously, not just intermittently. Accordingly, section 
110(a)(2) of the Act requires SIPs to contain enforceable emission 
limitations, and section 302(k) of the Act defines ``emission 
limitations'' as a requirement ``which limits the quantity, rate, or 
concentration of emissions of air pollutants on a continuous basis'' 
(emphasis added).
    EPA explained its interpretation of the term ``continuous 
compliance'' in a June 21, 1982 memorandum from Kathleen M. Bennett, 
Assistant Administrator for Air, Noise, and Radiation, to the Regional 
Air Division Directors. That guidance states that ``continuous 
compliance is essentially the avoidance of preventable excess emissions 
over time as a result of the proper design, operation, and maintenance 
of an air pollution source.'' The guidance also emphasizes that excess 
emissions resulting from malfunctions or other emergency situations 
must be minimized and terminated quickly.
    On September 28, 1982, February 15, 1983, and September 20, 1999, 
EPA issued policy statements regarding the treatment of excess 
emissions arising during startup, shutdown, and malfunction. These 
memoranda are based on EPA's interpretation of the Act's requirements 
for continuous compliance and attainment and maintenance of the 
NAAQS.5 These

[[Page 70657]]

policies indicate that all excess emissions must be considered 
violations, although they clarify that SIPs may contain affirmative 
defenses that may excuse, under certain limited, unavoidable 
circumstances, the payment of civil penalties.
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    \5\ See September 28, 1982 and February 15, 1983 memorandums, 
both entitled ``Policy on Excess Emissions During Startup, Shutdown, 
and Malfunctions,'' from Kathleen M. Bennett, Assistant 
Administrator for Air, Noise, and Radiation, to the Regional 
Administrators and September 20, 1999 memorandum entitled ``State 
Implementation Plans: Policy Regarding Excess Emissions During 
Malfunctions, Startup, and Shutdown,'' from Steven A. Herman, 
Assistant Administrator for Enforcement and Compliance and Robert 
Perciasepe, Assistant Administrator for Air and Radiation, to the 
Regional Administrators.
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    These policy statements are consistent with EPA's view that SIP 
limits must be met continuously because they are intended to protect 
the NAAQS; any exceptions should be narrowly drawn and clearly place 
the burden on the source to demonstrate that an exceedance was 
unavoidable. In responding to petitioner's comments, we have 
reevaluated the AOC criteria and have concluded that they are 
inconsistent with the requirements for SIPs in section 110 of the Act 
regarding enforceability and continuous compliance. For this reason, we 
agree that the criteria for granting AOCs in section 518.2(e)(2) must 
be revised before the rule can be approved.
    Currently, the criteria in section 518.2(e)(2) provide that if, for 
reasons beyond the control of the petitioner, it would cause ``an 
arbitrary or unreasonable taking of property'' for the source to come 
into compliance, then the source should be able to obtain a variance. 
The criteria do not focus on the cause of the noncompliance. The lack 
of focus on the cause of noncompliance is a critical flaw because, 
given the words of the criteria, a variance can be granted even if the 
petitioner could have avoided the noncompliance in the first place.
    This lack of focus in the criteria on the cause of the violation is 
problematic because variances are, by their very nature, allowed 
periods of noncompliance, or in other words, exceptions to the 
continuous compliance requirement imposed by the statute on emission 
limitations. EPA has recognized that it is appropriate to interpret 
this requirement to allow sources not to be penalized when periods of 
noncompliance are caused by unavoidable circumstances, but beyond that, 
exceptions to the continuous compliance requirement are not allowed. 
Therefore, in order for Rule 518.2 to comport with the continuous 
compliance requirement, it must ensure that AOC's are only granted when 
the underlying cause of the violation is unavoidable. EPA's September 
20, 1999 policy on excess emissions provides helpful guidance on the 
precise provisions that should be added to Rule 518.2 to make it 
approvable.
    The changes suggested above will correct what EPA sees as a flaw in 
the South Coast's variance program. Under the variance program, the 
District can excuse a violation based on the adverse consequences that 
a source might suffer it had to come into compliance. Given the 
statute's mandate that emission limitations provide for continuous 
compliance, EPA addresses this issue of economic inability to comply in 
other ways.
    EPA has stated many times in several of its enforcement policy 
documents that it believes in enforcement responses that are 
commensurate with the seriousness of violations. In short, punishment 
should fit the crime. Minor violations might be addressed with a Notice 
of Violation, while more serious violations might be subject to civil 
or even criminal enforcement. Second, the focus of EPA's enforcement 
policies over the years has been returning sources to compliance as 
expeditiously as practicable, not shutting down companies.6
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    \6\ See Price, Courtney M., Assistant Administrator for 
Enforcement and Compliance Monitoring, Memorandum (Subject: Clean 
Air Act Enforcement Policy Respecting Sources Complying By Shutdown) 
Nov. 27, 1985) (``EPA has consistently interpreted the Act as 
requiring compliance as expeditiously as practicable.'').
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    At the same time, EPA does not let companies in violation of 
environmental laws completely off the hook just because immediate 
compliance might cause a financial hardship. Rather, when EPA has taken 
action against financially troubled companies, it has required them to 
come into compliance in accordance with a set schedule laid out in a 
consent decree and required them to pay a penalty they can afford, if 
appropriate.

D. Compliance and Enforcement

    EPA received comments expressing concerns that Rule 518.2 would 
have adverse effects on enforcement, both by government entities and 
citizens, and that the rule might act as a disincentive to voluntary 
compliance. We believe these concerns would be addressed by the changes 
necessary for approval outlined elsewhere in this document.

E. Title III

    One commenter pointed out that, on its face, Rule 518.2(c)(2) does 
not prohibit the issuance of AOCs from title III requirements in 
situations where EPA has deemed a state or local rule to be equivalent 
to the federal requirements. While we believe that the intent of the 
rule is to include these requirements in the list of exemptions from 
applicability, we agree that the language is unclear and must be 
revised.

F. Environmental Justice

    One commenter opposes approval of Rule 518.2 on the basis that it 
would violate Executive Order 12898, ``Federal Actions to Address 
Environmental Justice in Minority Populations and Low-Income 
Populations.'' The commenter argues that communities of color and low 
income communities in the South Coast are disproportionately impacted 
by existing sources of air pollution, and by allowing existing sources 
to emit air pollutants in excess of their permitted levels, Rule 518.2 
will have disproportionate impacts on these communities.
    In the context of a workgroup drafting a version of Rule 518.2 to 
apply statewide, CARB has suggested addressing this issue by 
incorporating language based California Health and Safety Code section 
41700. This language would provide that no AOC shall be granted if:

operation under the AOC will result in the source discharging such 
quantities of air contaminants or other material which cause injury, 
detriment, nuisance, or annoyance to any considerable number of 
persons or to the public, or which endanger the comfort, repose, 
health, or safety of any such persons or the public, or which cause, 
or have a natural tendency to cause, injury or damage to business or 
property.

We believe that this language, incorporated into Rule 518.2, would 
address the commenter's concerns.
    In conclusion, rules submitted to EPA for approval as revisions to 
the SIP must conform with the CAA and EPA policy in order to be 
approved by EPA. As described above, SCAQMD Rule 518.2 is deficient 
because it is inconsistent with sections 110(a)(2), 110(l), 302(k), and 
193 of the CAA. Because of the identified deficiencies, EPA cannot 
grant approval of SCAQMD Rule 518.2 under section 110(k)(3) and part D. 
Therefore, in order to maintain the SIP, EPA is proposing a disapproval 
of this rule.
    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.

IV. Administrative Requirements

A. Executive Order 12866

    The Office of Management and Budget (OMB) has exempted this 
regulatory

[[Page 70658]]

action from Executive Order 12866, Regulatory Planning and Review.

B. Executive Order 13132

    Federalism (64 FR 43255, August 10, 1999) revokes and replaces 
Executive Orders 12612, Federalism and 12875, Enhancing the 
Intergovernmental Partnership. Executive Order 13132 requires EPA to 
develop an accountable process to ensure ``meaningful and timely input 
by State and local officials in the development of regulatory policies 
that have federalism implications.'' ``Policies that have federalism 
implications'' is defined in the Executive Order to include regulations 
that have ``substantial direct effects on the States, on the 
relationship between the national government and the States, or on the 
distribution of power and responsibilities among the various levels of 
government.'' Under Executive Order 13132, EPA may not issue a 
regulation that has federalism implications, that imposes substantial 
direct compliance costs, and that is not required by statute, unless 
the Federal government provides the funds necessary to pay the direct 
compliance costs incurred by State and local governments, or EPA 
consults with State and local officials early in the process of 
developing the proposed regulation. EPA also may not issue a regulation 
that has federalism implications and that preempts State law unless the 
Agency consults with State and local officials early in the process of 
developing the proposed regulation.
    This proposed action will not have substantial direct effects on 
the States, on the relationship between the national government and the 
States, or on the distribution of power and responsibilities among the 
various levels of government, as specified in Executive Order 13132 (64 
FR 43255, August 10, 1999), because it does not affect state 
enforceability, and does not alter the relationship or the distribution 
of power and responsibilities established in the Clean Air Act. Thus, 
the requirements of section 6 of the Executive Order do not apply to 
this rule.

C. Executive Order 13045

    Protection of Children from Environmental Health Risks and Safety 
Risks (62 FR 19885, April 23, 1997), applies to any rule that: (1) is 
determined to be ``economically significant'' as defined under 
Executive Order 12866, and (2) concerns an environmental health or 
safety risk that EPA has reason to believe may have a disproportionate 
effect on children. If the regulatory action meets both criteria, the 
Agency must evaluate the environmental health or safety effects of the 
planned rule on children, and explain why the planned regulation is 
preferable to other potentially effective and reasonably feasible 
alternatives considered by the Agency. This rule is not subject to 
Executive Order 13045 because it is does not involve decisions intended 
to mitigate environmental health or safety risks.

D. Executive Order 13084

    Under Executive Order 13084, Consultation and Coordination with 
Indian Tribal Governments, EPA may not issue a regulation that is not 
required by statute, that significantly or uniquely affects the 
communities of Indian tribal governments, and that imposes substantial 
direct compliance costs on those communities, unless the Federal 
government provides the funds necessary to pay the direct compliance 
costs incurred by the tribal governments, or EPA consults with those 
governments. If EPA complies by consulting, Executive Order 13084 
requires EPA to provide to the Office of Management and Budget, in a 
separately identified section of the preamble to the rule, a 
description of the extent of EPA's prior consultation with 
representatives of affected tribal governments, a summary of the nature 
of their concerns, and a statement supporting the need to issue the 
regulation. In addition, Executive Order 13084 requires EPA to develop 
an effective process permitting elected officials and other 
representatives of Indian tribal governments ``to provide meaningful 
and timely input in the development of regulatory policies on matters 
that significantly or uniquely affect their communities.'' Today's rule 
does not significantly or uniquely affect the communities of Indian 
tribal governments. Accordingly, the requirements of section 3(b) of 
Executive Order 13084 do not apply to this rule.

E. Regulatory Flexibility Act

    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 will not have a significant impact on 
a substantial number of small entities because EPA's disapproval of the 
state request under section 110 and subchapter I, part D of the Clean 
Air Act does not affect any existing requirements applicable to small 
entities. Any pre-existing federal requirements remain in place after 
this disapproval. Federal disapproval of the state submittal does not 
affect state-enforceability. Moreover, EPA's disapproval of the 
submittal does not impose any new Federal requirements. Therefore, I 
certify that this action will not have a significant economic impact on 
a substantial number of small entities. Moreover, due to the nature of 
the Federal-State relationship under the Clean Air Act, preparation of 
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).

F. 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 
annual 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 disapproval action being proposed does 
not include a Federal mandate that may result in estimated annual costs 
of $100 million or more to either State, local, or tribal governments 
in the aggregate, or to the private sector. This proposed disapproval 
would not change existing requirements under State or local law, and 
would include no Federal mandate. If EPA were to disapprove the State 
SIP submittal, pre-existing requirements would remain in place and 
State enforceability of the submittal would be unaffected. The action 
would impose no new requirements. Accordingly, no additional costs to 
State, local, or tribal governments, or to the private sector, result 
from this action.

[[Page 70659]]

List of Subjects in 40 CFR Part 52

    Environmental protection, Air pollution control, Intergovernmental 
relations, Reporting and recordkeeping requirements.

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

    Dated: December 10, 1999.
David P. Howekamp,
Acting Regional Administrator, Region IX.
[FR Doc. 99-32762 Filed 12-16-99; 8:45 am]
BILLING CODE 6560-50-U