[Federal Register Volume 65, Number 181 (Monday, September 18, 2000)]
[Proposed Rules]
[Pages 56284-56287]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-23945]



[[Page 56284]]

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[CA 244-0259; FRL-6870-7]


Revisions to the California State Implementation Plan, Bay Area 
Air Quality Management District

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA proposes two actions on Regulations 1 and 2 submitted for 
the Bay Area Air Quality Management District (``BAAQMD'' or 
``District'') portion of the California State Implementation Plan 
(SIP). The Regulations were submitted for purposes of meeting 
requirements of the Clean Air Act, as amended in 1990 (``CAA'' or 
``Act''), with regard to new source review (NSR) in areas that have not 
attained the national ambient air quality standards (NAAQS). First, EPA 
proposes a full approval of Regulation 1--General Provisions and 
Definitions. Second, EPA proposes a limited approval and limited 
disapproval of three Regulation 2 rules: Rule 1--Permits, General 
Requirements; Rule 2--Permits, New Source Review; and Rule 4--Permits, 
Emissions Banking.
    Today's action also serves to stop the federal sanctions clock that 
started 18 months ago (February 25, 1999)--the effective date of EPA's 
final limited approval and limited disapproval rulemaking on an earlier 
version of Regulation 2, Rules 1, 2 and 4. EPA has stopped the 
sanctions clock associated with our 1999 rulemaking because BAAQMD has 
substantially corrected all deficiencies identified in that final 
rulemaking. However, despite the BAAQMD correction of the deficiencies 
in Regulation 2, EPA has identified two new deficiencies in Regulation 
2 preventing our full approval of it. We are taking comments on this 
proposal and plan to follow with a final action. Upon final action, if 
either of the deficiencies identified in today's rule remain, a new 18-
month sanctions clock will begin on our final action on the rule.

DATES: Any comments must arrive by October 18, 2000.

ADDRESSES: Mail comments to David Wampler, Permits Office (AIR-3), U.S. 
Environmental Protection Agency, Region IX, 75 Hawthorne Street, San 
Francisco, CA 94105-3901.
    You can inspect copies of the submitted Regulations and EPA's 
technical support documents (TSDs) at our Region IX office during 
normal business hours. You may also see copies of the submitted 
Regulations at the following locations:

California Air Resources Board, Stationary Source Division, Rule 
Evaluation Section, 2020 ``L'' Street, Sacramento, CA 95812.
Bay Area Air Quality Management District, 939 Ellis Street, San 
Francisco, California 94109.

FOR FURTHER INFORMATION CONTACT: David Wampler, Permits Office (AIR-3), 
U.S. Environmental Protection Agency, Region IX, (415) 744-1256.

SUPPLEMENTARY INFORMATION: Throughout this document, ``we,'' ``us'' and 
``our'' refer to EPA.

Table of Contents

I. The State's Submittal
    A. What rules did the State submit?
    B. What is the purpose of the rule revisions?
II. EPA's Evaluation and Action
    A. How is EPA evaluating the rules?
    B. What are the rule deficiencies?
    C. Proposed action and public comment.
III. Background information
    Why were these rules submitted?
IV. Administrative Requirements
    A. Executive Order 12866
    B. Executive Order 13045
    C. Executive Order 13084
    D. Executive Order 13132
    E. Regulatory Flexibility Act
    F. Unfunded Mandates
    G. National Technology Transfer and Advancements Act

I. The State's Submittal

A. What rules did the State submit?

    Table 1 lists Regulation 1 and the three rules in Regulation 2 \1\ 
addressed by this proposal, with the dates that they were adopted by 
the BAAQMD and submitted by the California Air Resources Board (CARB).
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    \1\ Regulation 2 also contains: Rule 3--Power Plants; Rule 6--
Major Facility Review; Rule 7--Acid Rain; Rule 8--Interchangeable 
Emission Reduction Credits. Rule 5 has not yet been adopted and 
Rules 7 and 8 are not in the current SIP.

                                            Table 1--Submitted Rules
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           Agency                 Rule No.           Rule title              Adopted              Submitted
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BAAQMD......................  Reg. 1..........  General Requirements  May 17, 2000........  August 3, 2000
BAAQMD......................  Reg. 2..........  Permits--General      May 17, 2000........  August 3, 2000
                              Rule 1..........   Requirements.
BAAQMD......................  Reg. 2..........  Permits--New Source   May 17, 2000........  August 3, 2000
                              Rule 2..........   Review.
BAAQMD......................  Reg. 2..........  Permits--Emissions    May 17, 2000........  August 3, 2000
                              Rule 4..........   Banking.
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    On August 17, 2000, Regulations 1 and 2 submittals were found to 
meet the completeness criteria in 40 CFR part 51, appendix V, which 
must be met before formal EPA review.

B. What is the purpose of the rule revisions?

    Regulation 1 and three rules in Regulation 2 (hereinafter ``Reg. 2 
rules'') were revised by the BAAQMD in May 2000, in part, to correct 
rule deficiencies we raised in the final limited approval limited 
disapproval rulemaking for Regulation 2, rules 1, 2 and 4 on January 
26, 1999 (64 FR 3850; see also our proposed rulemaking on November 6, 
1998 and the Technical Support Document (TSD) for that rulemaking). 
Regulation 1--General Provisions was last approved into the SIP on 
September 29, 1998 (63 FR 51833). BAAQMD made some revisions to 
Regulation 1 to clarify language. The revisions do not substantially 
change Regulation 1 as previously approved.

II. EPA's Evaluation and Action

A. How is EPA evaluating the rules?

    EPA evaluated Regulation 1 and the Reg. 2 rules for consistency 
with the requirements of the CAA and EPA regulations, as found in 
section 110 and part D of the CAA and 40 CFR part 51 (Requirements for 
Preparation, Adoption, and Submittal of Implementation Plans). Our 
interpretation of these requirements, which forms the basis for today's 
action,

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also appears in the various EPA policy guidance documents.
    EPA has issued a ``General Preamble'' describing EPA's preliminary 
views on how EPA intends to review SIPs and SIP revisions submitted 
under part D, including those State submittals containing nonattainment 
NSR SIP requirements (See 57 FR 13498 (April 16, 1992) and 57 FR 18070 
(April 28, 1992)). Because EPA is describing its interpretations here 
only in broad terms, the reader should refer to the General Preamble 
for a more detailed discussion.
    The Act requires States to comply with certain procedural 
requirements in developing implementation plans and plan revisions for 
submission to EPA. Section 110(a)(2) and section 110(l) of the Act 
require that each implementation plan or revision to an implementation 
plan submitted by a State must be adopted after reasonable notice and 
public hearing. Section 172(c)(7) of the Act requires that plan 
provisions for nonattainment areas shall meet the applicable provisions 
of section 110(a)(2).
    In addition, we reviewed the Reg. 2, rules to determine whether the 
BAAQMD revisions adequately corrected six deficiencies that we had 
identified in our final limited approval and limited disapproval action 
dated January 26, 1999. (See also our proposed action dated November 6, 
1998 at 63 FR 59924). Our review determined that the BAAQMD Reg. 2 rule 
revisions substantially corrected the six deficiencies we had earlier 
identified. However, in part because of the correction of the prior 
deficiencies, the Reg. 2 rules now contain two additional deficiencies 
(discussed below) which prevent full approval under part D of the CAA. 
Therefore, EPA today is proposing a limited disapproval of the Reg. 2 
rules. If EPA finalizes this limited disapproval of the Reg. 2 rules, 
BAAQMD will have 18 months from the date of the final action to correct 
any deficiencies to avoid federal sanctions. See CAA section 179(b). 
Further, the final disapproval triggers the Federal implementation plan 
requirements under 110(c).

B. What are the rule deficiencies?

    This discussion summarizes how certain provisions in the revised 
Reg. 2 rules conflict with section 110 and part D of the Act and 
prevent full approval of the SIP revision. We have included in our 
discussion suggested corrections to the deficiencies. A detailed 
discussion of the rule deficiencies is included in the Technical 
Support Document (TSD) for this rulemaking. The TSD is available from 
the EPA Region IX office.

 BAAQMD Regulation 2 Rule 2--Alternative Siting Analysis

    For a proposed new major facility or a proposed major modification, 
CAA section 173(a)(5) requires BAAQMD to analyze alternative sites, 
sizes, production processes, and environmental control techniques for a 
proposed source and determine if the analysis 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. Reg. 2, rule 2 has omitted the required 
alternatives analysis and determination.
    Discussion: When the District was developing the corrections to the 
Reg. 2 rules, we informally notified them that rule 2 should be amended 
to include the section 173(a)(5) alternative siting analysis 
requirement. The District had included the requirement in a April 12, 
2000 draft version of the rule and we had acknowledged it as approvable 
in our March 15, 2000 NSR Rule comment letter. However, prior to Board 
adoption of the rule, the District decided to remove the provision (see 
document in SIP submittal entitled ``Changes from the April 12 
Draft''). Therefore, the adopted rule does not contain the section 
173(a)(5) requirement. This omission is a rule deficiency that must be 
corrected before EPA can grant full approval of the submitted rule. To 
correct the deficiency, BAAQMD could re-insert the rule language that 
they had previously included in the April 12, 2000 draft rule.

 Rule 2-2-423. Demonstration of Offset Program Equivalence

    EPA's final January 26, 1999 limited disapproval found that rule 2 
was deficient because it did not require emission reductions to be 
surplus at the time of use. Instead, the rule only required emission 
reductions to be surplus when they were generated and banked. In 
response, BAAQMD added section 2-2-423 (and supporting section 2-2-
246). We find that these provisions substantially, although not 
completely, correct the deficiency. Therefore, the correction is 
sufficient to stop the sanctions clock and prevent imposition of 
immediate sanctions. However, to ensure that the deficiency is fully 
corrected, we are proposing to cite section 2-2-423 as a new 
deficiency. This new deficiency arises because it is not clear what 
steps the District will take (and by when) if the annual offset 
analysis fails to make the required demonstration of offset equivalency 
and the small facility bank does not have sufficient surplus emission 
reductions.
    Discussion: In our final rulemaking on January 26, 1999, EPA stated 
that all emission reduction credits (ERCs) ``must be adjusted at the 
time of use pursuant to the requirements of sections 173(a), 173(c)(1) 
and 173(c)(2) of the Clean Air Act (`Act').''
    In response, BAAQMD added section 2-2-423 requiring the District to 
provide an annual demonstration to EPA that the number of offsets 
provided for all new or modified sources,\2\ less adjustments to those 
offsets for federal purposes \3\ occurring between credit generation 
and use, exceed the number of offsets required that year under federal 
law for new major stationary sources (>100 tons per year) or major 
modifications (>40 tons per year). EPA believes that this system to 
demonstrate equivalency is acceptable for satisfying the CAA section 
173(c)(2) offset requirements.
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    \2\ BAAQMD requires more stationary sources to obtain offsets 
than is required under federal law. For example, for ozone 
precursors, federal law requires new stationary sources with a 
potential to emit (PTE) above 100 tons per year to be offset at a 
1.15:1 ratio. BAAQMD Rule 2-2-302 requires offsets at a 1.15:1 ratio 
for stationary sources with a PTE above 50 tons per year. For new 
stationary sources with a PTE between 15 and 50 tons per year, 
BAAQMD requires offsets at a 1.0:1.0 ratio.
    \3\ Adjustments for federal purposes are included in rule 2-2-
423.1 through 3 and are required if: BAAQMD adopts a rule to meet 
the federal attainment demonstration requirements (see CAA section 
171(c)); a measure is approved into the SIP and it applies to 
BAAQMD; or EPA promulgates a New Source Performance Standard or 
Maximum Achievable Control Technology standard. For more information 
on adjusting previously banked emission reduction credits, please 
see August 26, 1994 EPA memorandum entitled, ``Response to Request 
for Guidance on Use of Pre-1990 ERC's and Adjusting for RACT at Time 
of Use,'' from John Seitz, Director of OAQPS to David Howekamp, 
Director, Region IX, Air and Toxics Division.
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    Section 2-2-423 also includes a remedy if the annual analysis fails 
to make the required demonstration. If triggered, the remedy requires 
the District to provide sufficient offsets to make up the difference 
out of the small facility bank (see 2-4-414). If the small facility 
bank does not contain the necessary additional surplus emission 
reductions, the District, ``shall obtain the necessary emission 
reductions.'' EPA has determined that the District's unspecified 
commitment to provide additional surplus offsets limits our ability to 
fully approve the rule. The rule does not indicate what the District 
will do to find the necessary 1surplus reductions and does not identify 
a deadline.
    How the Deficiency Can be Corrected. To correct the deficiency the 
District must amend the provision at 2-2-423. Either of the two 
following options may be approvable:

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     If the small facility bank does not contain the necessary 
surplus emission reductions, the District must not issue permits to new 
major stationary sources or major modifications of non-attainment 
pollutants until the District demonstrates that the deficit has been 
balanced; or
     If the small facility bank does not contain the necessary 
surplus emission reductions, the District may continue to issue permits 
for new major sources or major modifications provided the offsets for 
those sources are demonstrated to be surplus at the time the permit is 
issued. This remedy would be in effect until the remaining shortfall is 
eliminated by securing the necessary emission reductions. EPA believes 
any shortfall must be eliminated in a timely manner not to exceed one 
year.

C. Proposed Action and Public Comment

    As authorized in sections 110(k)(3) and 301(a) of the Act, today's 
action is separated into two parts: first, EPA is proposing a full 
approval of Regulation 1 and; second, EPA is proposing a limited 
approval and limited disapproval of Regulation 2, rules 1, 2 and 4. 
Each of these actions strengthens the SIP. If finalized, this action 
would incorporate all the submitted rules into the SIP, including those 
provisions identified as deficient.
    EPA proposes full approval of Regulation 1 because the BAAQMD only 
modified the rule slightly to clarify some definitions and remove a 
regulatory exclusion for emergency standby engines. None of the changes 
significantly alter the existing SIP-approved version.
    The approval of the Reg. 2 rules is limited because EPA is 
simultaneously proposing a limited disapproval of the rules under 
section 110(k)(3). If this disapproval is finalized, sanctions will be 
imposed under section 179 of the Act unless EPA approves subsequent SIP 
revisions that correct the rule deficiencies within 18 months. These 
sanctions would be imposed according to 40 CFR 52.31. A final 
disapproval would also trigger the federal implementation plan (FIP) 
requirement under section 110(c). Note that the submitted rules have 
been adopted by the BAAQMD, and EPA's final limited disapproval would 
not prevent the local agency from enforcing them.
    We will accept comments from the public on the proposed limited 
approval and limited disapproval for the next 30 days.

III. Background Information

Why Were These Rules Submitted?

    These rules were submitted primarily to correct the six 
deficiencies identified in our January 26, 1999 final rulemaking (60 FR 
3850). Please refer to the TSD for more information on the rule changes 
that were made to correct the deficiencies.

IV. Administrative Requirements

A. Executive Order 12866

    The Office of Management and Budget (OMB) has exempted this 
regulatory action from Executive Order 12866, Regulatory Planning and 
Review.

B. Executive Order 13045

    Executive Order 13045, entitled 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 does 
not involve decisions intended to mitigate environmental health or 
safety risks.

C. 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 OMB 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 proposed 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 proposed 
rule.

D. Executive Order 13132

    Executive Order 13132, entitled 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 rule 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, 
because it merely acts on a state rule implementing a federal standard, 
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

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Executive Order do not apply to this proposed 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 SIP approvals under 
section 110 and subchapter I, part D of the Clean Air Act do not create 
any new requirements but simply act on requirements that the State is 
already imposing. Therefore, because the Federal SIP approval does not 
create any new requirements, 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 
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 proposed action 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 proposed Federal action acts on 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.

G. National Technology Transfer and Advancement Act

    Section 12 of the National Technology Transfer and Advancement Act 
(NTTAA) of 1995 requires Federal agencies to evaluate existing 
technical standards when developing a new regulation. To comply with 
NTTAA, EPA must consider and use ``voluntary consensus standards'' 
(VCS) if available and applicable when developing programs and policies 
unless doing so would be inconsistent with applicable law or otherwise 
impractical.
    EPA believes that VCS are inapplicable to today's proposed action 
because it does not require the public to perform activities conducive 
to the use of VCS.

List of Subjects in 40 CFR Part 52

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

    Authority: 42 U.S.C. 7401 et seq.

    Dated: August 25, 2000.
Keith Takata,
Acting Regional Administrator, Region IX.
[FR Doc. 00-23945 Filed 9-15-00; 8:45 am]
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