[Federal Register Volume 67, Number 108 (Wednesday, June 5, 2002)]
[Proposed Rules]
[Pages 38626-38629]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-14039]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[CA264-0348; FRL-7224-2]


Revisions to the California State Implementation Plan, South 
Coast Air Quality Management District

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: EPA is proposing to approve a revision to the South Coast Air 
Quality Management District's portion of the California State 
Implementation Plan (SIP). This revision concerns the federal 
recognition of variances from certain rule requirements. We are 
proposing to approve the revision under the Clean Air Act as amended in 
1990 (CAA or the Act). We are taking comments on this proposal and plan 
to follow with a final action.

DATES: Any comments must arrive by July 5, 2002.

ADDRESSES: Mail comments to Ginger Vagenas, Planning Office (AIR-2), 
U.S. Environmental Protection Agency, Region IX, 75 Hawthorne Street, 
San Francisco, CA 94105-3901.
    You can inspect copies of the submitted SIP revision and EPA's 
technical support document (TSD) at our Region IX office during normal 
business hours. You may also see copies of the submitted SIP revisions 
at the following locations:

California Air Resources Board, Stationary Source Division, Rule 
Evaluation Section, 1001 ``I'' Street, Sacramento, CA 95814.
South Coast Air Quality Management District, 21865 E. Copley Drive, 
Diamond Bar, CA 91765.


FOR FURTHER INFORMATION CONTACT: Ginger Vagenas, Planning Office (AIR-
2), U.S. Environmental Protection Agency, Region IX, (415)972-3964.

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


[[Page 38627]]



Table of Contents

I. The State's Submittal
    A. What Rule Did the State Submit?
    B. Are There Other Versions of This Rule?
    C. What Is the Purpose of the Submitted Rule?
II. EPA's Evaluation and Action.
    A. How Is EPA Evaluating the Rules?
    B. Do the Rules Meet the Evaluation Criteria?
    C. EPA Recommendations to Further Improve the Rules.
    D. Public Comment and Final Action.
III. Administrative Requirements

I. The State's Submittal

A. What Rule Did the State Submit?

    Rule 518.2, Federal Alternative Operating Conditions, was adopted 
by the South Coast Air Quality Management District (South Coast or 
District) on December 21, 2001 and submitted by the California Air 
Resources Board (CARB) on March 15, 2002. On April 9, 2002, this rule 
submittal was found to meet the completeness criteria in 40 CFR part 
51, appendix V, which must be met before formal EPA review.

B. Are There Other Versions of This Rule?

    There is one previous version of 518.2. It was adopted by the 
District on January 12, 1996 and CARB submitted it to us on May 10, 
1996. We proposed to approve the earlier version of Rule 518.2 into the 
SIP on September 25, 1998 (63 FR 51325). EPA later withdrew its 
proposed approval and proposed to disapprove the rule (64 FR 70652, 
December 17, 1999).

C. What Is the Purpose of the Submitted Rule?

    Rule 518.2 is designed to allow federal recognition of variances 
through a SIP-approved process that provides adequate public and EPA 
participation and that will ensure that the substantive requirements of 
the CAA continue to be met. In brief, this rule establishes a procedure 
through which an applicable requirement in the SIP may be temporarily 
modified as it applies to a particular source. The rule accomplishes 
this 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 proposed AOCs 
through the title V ``significant'' permit revision process rather than 
through the source-specific SIP revision process. The public will be 
notified of its opportunity to comment on each AOC and each AOC will be 
submitted to EPA for review. If EPA determines that the AOC does not 
meet applicable requirements it may veto the AOC thereby rendering it 
ineffective. See Rule 518.2(f).
    For additional background, including a detailed discussion of the 
CAA requirements governing approval of Rule 518.2, please refer to 63 
FR 51325 (September 25, 1998), where EPA proposed approval of the 
original version of Rule 518.2, and 64 FR 70652 (December 17, 1999), 
where EPA withdrew its proposed approval and proposed to disapprove 
Rule 518.2. In response to EPA's proposed disapproval, the District has 
substantially revised the original Rule 518.2 to address the Agency's 
concerns. By today's action, EPA proposes to approve the revised rule.

II. EPA's Evaluation and Action

A. How Is EPA Evaluating the Rule?

    In determining the approvability of Rule 518.2, EPA must evaluate 
the rule for consistency with the requirements of the Act and EPA 
regulations. Because this rule would authorize AOCs that allow a source 
to temporarily comply with an alternative requirement to the 
requirement approved into the SIP, we have analyzed the rule under CAA 
provisions that govern SIP revisions--sections 110(l) and 193--to 
determine whether the AOCs that would be allowed under the rule would 
be consistent with the requirements of the CAA that apply to SIPs and 
whether the process for establishing AOCs provides for public and EPA 
participation similar to that provided for SIP revisions. Generally, 
revisions to SIPs require reasonable notice and public hearing and must 
be submitted to EPA for review. SIP rules must be enforceable (see 
section 110(a) of the Act), must require reasonably available control 
technology (RACT) for existing sources and lowest achievable emission 
rates (LAER) and offsets for new major sources and modifications in 
nonattainment areas (see sections 182, 172, and 173), must not relax 
existing requirements in a manner that would result in interference 
with other requirements of the Act (see sections 110(l) and 193), and 
must require continuous compliance with emission limits (see section 
302(k)).

B. Do the Rules Meet the Evaluation Criteria?

    In our previous proposed rulemakings on the earlier, 1996 version 
of Rule 518.2 (63 FR 51325 (September 25, 1998) and 64 FR 70653 
(December 17, 1999)) we discussed in detail the CAA and regulatory 
requirements that apply to this rule and our assessment of whether the 
rule met them. The September 25, 1998 notice described several aspects 
of the 1996 version of the rule that rendered the rule not approvable. 
EPA believes that the December 12, 2001 amendments to Rule 518.2 have 
addressed the disapproval issues we identified and that the rule now 
complies with the applicable CAA requirements and implementing 
regulations. Our analysis of those revisions and their consistency with 
the CAA is summarized below.
1. Compliance With CAA Section 110(l)
    Section 110(l) of CAA provides that the Administrator of EPA shall 
not approve a SIP revision ``if the revision would interfere with any 
applicable requirement concerning attainment and reasonable and further 
progress * * * or any other applicable requirement of [the Act].''
    In our proposed disapproval of the 1996 version of Rule 518.2, we 
explained that the rule ran afoul of section 110(l) because the 
criteria that governed the circumstances under which an AOC could be 
granted would permit a source to violate certain applicable 
requirements of the Act, specifically, the technology-based LAER 
requirements and new source review (NSR) offset requirements that are 
mandated by sections 172 and 173 of the Act. (See 64 FR 70653). We 
noted that case law \1\ and EPA regulations \2\ can be read to provide 
for an upset defense in the situation where a malfunction is 
unavoidable and suggested that Rule 518.2 could be redrafted to narrow 
the circumstances in which an AOC for LAER-based limits would be 
allowed. We also noted that the District could solve the NSR offset 
problem by ensuring that sufficient reductions are set aside to 
compensate for any excess emissions covered by an AOC.
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    \1\ 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 fail.
    \2\ See 40 CFR 70.6(g).
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    The District has revised Rule 518.2 so that an AOC for LAER-based 
\3\ limits can only be issued in the narrow instance where the source 
can demonstrate that an emergency or a breakdown of

[[Page 38628]]

technology caused the violation. Such an exemption is consistent with 
the CAA and case law interpreting it. See Rule 518.2(c)(4).
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    \3\ Under the District's rules the terms ``best available 
control technology'' and ``BACT'' are used in place of ``lowest 
achievable emissions rate'' and ``LAER.'' As provided in the 
District's rules, BACT is at least as stringent as LAER, as defined 
in the Clean Air Act section 171(3). See District Rules 1302(f) and 
1303(a).
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    While the above provision would ensure that the source continued to 
apply with the technology-based requirements of the CAA, it does not 
ensure that the SIP will continue to provide for attainment or 
maintenance of the NAAQS. To address this issue, Rule 518.2 has been 
revised to require compensating reductions for the purpose of 
offsetting all excess emissions, including those resulting from AOCs 
granted for LAER requirements. These reductions are in the form of 
Alternative Operating Condition Credits, which are emission reduction 
credits or mobile source emission reduction credits created pursuant to 
an EPA approved rule, or alternative credits or allowances approved 
into the SIP by EPA and held by the District. See paragraphs 
518.2(b)(3) and (e)(2)(H). Our criteria for judging the adequacy and 
approvability of emission reduction credits are based on fundamental 
CAA requirements and ensure that such credits are surplus, 
quantifiable, enforceable and permanent. See ``Emissions Trading Policy 
Statement,'' 51 FR 43814, 43831-43832 (December 4, 1986), and 
``Economic Incentive Program Rules,'' 59 FR 16690, 16691 (April 7, 
1994). Alternatively, sources may generate intra-facility emissions 
reductions to compensate for the increased emissions allowed under an 
AOC. Such reductions must also be real, quantifiable, permanent, 
enforceable, and surplus. See Rule 518.2(h). EPA believes the 
provisions under the revised version of 518.2 that require the 
offsetting of excess emissions allowed under an AOC Alternative 
Operating Condition ensure compliance with sections 173 and 110(l)of 
the CAA.
2. Compliance With CAA Section 193
    Section 193 of CAA prohibits the modification of any control 
requirement in effect before November 15, 1990 in an area that is a 
nonattainment area for any air pollutant unless the modification 
ensures equivalent or greater emission reductions of such air 
pollutants. The District has been classified as a nonattainment area 
for several air pollutants and is thus subject to the anti-backsliding 
provisions of CAA section 193.
    In our December 17, 1999 notice, we pointed out that the 1996 
version of Rule 518.2 did not meet this CAA requirement because it 
allowed the relaxation of pre-1990 rules \4\ without ensuring that 
equivalent, contemporaneous emissions reductions are provided to 
compensate for the emission increases allowed by AOCs (64 FR 70656). We 
stated that the rule could be amended to cure this problem by funding 
the emissions bank with real emission reductions.
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    \4\ By ``pre-1990 rules,'' we mean rules in effect before 
November 15, 1990, the date of the enactment of the CAA Amendments 
of 1990.
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    EPA has concluded that Rule 518.2 as revised complies with section 
193 of the CAA because it ensures that excess emissions allowed by AOCs 
are offset by equivalent or greater reductions that are real, 
quantifiable, permanent, enforceable, and surplus. As noted above, the 
reductions are either maintained in the form of Alternative Operating 
Condition Credits in the Alternative Operating Condition Credit Bank, 
or are generated by intra-facility reductions. See paragraphs 518.2 
(b)(3) and (4) and 518.2(h).
3. Compliance With 40 CFR 70.6(a)(1)(iii)
    40 CFR 70.6(a)(1)(iii) provides that ``[i]f an applicable 
implementation plan allows determination of an alternative emission 
limit at a part 70 source, equivalent to that contained in the plan, to 
be made in the permit issuance, renewal, or significant modification 
process, and the State elects to use such process, any permit 
containing such equivalency determination shall contain provisions to 
ensure that any resulting emissions limit has been demonstrated to be 
quantifiable, accountable, enforceable, and based on replicable 
procedures.'' Emphasis added.
    SIPs are not typically subject to part 70 regulations governing 
title V permits, but because Rule 518.2 uses the part 70 permitting 
process as the vehicle for establishing AOCs, the part 70 regulations 
establishing the requirements that pertain to the permit revision 
process, including 40 CFR 70.6(a)(1)(iii), apply.
    Because the 1996 version of Rule 518.2 did not require real 
reductions of air pollutants to compensate for any emissions increases 
allowed under an AOC, it did not meet the part 70 requirement that 
alternative limits established under the part 70 permit revision 
process must be equivalent to the limit in the plan. By revising the 
rule to require that excess emissions are offset by real reductions 
generated by EPA-approved rules or by intra-facility reductions the 
District has ensured that emission reductions equivalent to those 
required in the plan will be achieved. See Rule 518.2(e)(2)(H).
4. Conformity With CAA Requirement for Continuous Compliance
    Section 110(a)(2) of the CAA requires enforceable emission 
limitations and section 302(k) requires the limits must be met on a 
continuous basis. EPA's interpretation of the Act's requirement for 
continuous compliance is set forth in policy statements regarding the 
treatment of excess emissions arising during startup, shutdown, and 
malfunction. \5\ In brief, EPA's view is that SIP limits must be met 
continuously and any exceptions should be narrowly drawn and clearly 
impose the burden on the source to show that the exceedance was 
unavoidable.
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    \5\ See June 21, 1982 memorandum, entitled ``Definition of 
``Continuous Compliance'' and Enforcement of O&M Violations,'' from 
Kathleen M. Bennett, Assistant for Air Noise and Radiation, to the 
Regional Administrators; the September 28, 1982 and February 15, 
1983 memoranda, 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; 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; and December 5, 2001 memorandum, entitled 
``Re-Issuance of Clarification--State Implementation Plans (SIPs): 
Policy Regarding Excess Emissions During Malfunctions, Startup, and 
Shutdown,'' from Eric Schaeffer, Director, Office of Regulatory 
Enforcement--Office of Enforcement and Compliance Assurance, and 
John S. Seitz, Director, Office of Air Quality Planning and 
Standards, Office of Air and Radiation, to the Regional 
Administrators.
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    In our December 17, 1999 proposal to disapprove the 1996 version of 
Rule 518.2, we stated that the rule could not be approved because 
criteria for issuance of an AOC allowed a variance to be granted even 
if the petitioner could have avoided the violation. See 64 FR 70657. 
This provision was problematic because variances are, by their very 
nature, allowed periods of noncompliance; they create exceptions to the 
continuous compliance requirement imposed by the Act on emission 
limitations. EPA then recommended that the criteria be revised to allow 
AOCs only when the underlying cause of the violation is unavoidable, 
and pointed to the Agency's September 20, 1999 policy on excess 
emissions as a source of guidance. In response to our concerns, the 
District has revised the criteria for granting AOCs for breakdowns so 
that they focus on the cause of the violation. Thus, if a violation is 
caused by a

[[Page 38629]]

breakdown of technology, a petitioner cannot receive an AOC unless the 
violation could not have been prevented through careful planning or 
design; the breakdown could not reasonably have been foreseen and 
avoided; the air pollution control equipment or processes were 
maintained and operated to minimize emissions at all times; repairs 
were or will be made in an expeditious fashion; and the breakdown is 
not part of a recurring pattern indicative of inadequate design, 
operation, or maintenance. See Rule 518.2(e)(3). The narrowing of the 
circumstances under which an AOC can be granted, along with the 
requirement for real emissions reductions that will offset any 
increases allowed under the AOC, result in a rule that satisfies EPA's 
concerns regarding continuous compliance.
5. Prohibition on Allowing Variances From Federal Standards
    In our 1999 Federal Register, we stated that while the 1996 version 
of Rule 518.2 in general prohibited the issuance of AOCs for federally 
promulgated standards, it did not clearly prohibit the issuance of AOCs 
for local or state rules that EPA has deemed equivalent to, and 
therefore may be substituted for, maximum achievable technology (MACT) 
standards under section 112 of the Act. See 64 FR 70657. The District 
has clarified its intent to prohibit such AOCs with the addition of 
language that exempts District rules that substitute for MACT standards 
from eligibility for AOCs. See 518.2(c)(2).
6. Concern With Disproportionate Impacts
    We received a comment on our September 28, 1998 proposal to approve 
the 1996 version of Rule 518.2 that opposed the approval of the rule 
because it could result in disproportionate impacts on communities of 
color and low income communities. In our 1999 proposal, we suggested 
that inclusion of language based on California Health and Safety Code 
section 41700 would address the commenter's concerns. See 64 FR 70657. 
This language was added to the revised version of the rule. See 
518.2(e)(2)(I).

C. EPA Recommendations to Further Improve the Rules

    The TSD describes additional rule revisions that do not affect 
EPA's current action but are recommended for future modification of the 
rule by the District.

D. Public Comment and Final Action

    Because EPA believes Rule 518.2 fulfills all relevant requirements, 
we are proposing to fully approve it in accordance with section 
110(k)(3) of the Act. We will accept comments from the public on this 
proposal for the next 30 days. Unless we receive convincing new 
information during the comment period, we intend to publish a final 
approval action that will incorporate these rules into the federally 
enforceable SIP.
    EPA notes that Rule 518.2 may not represent the only acceptable 
approach for variances from operating permit conditions. EPA also 
recognizes that various interested parties are currently considering 
alternative approaches to variances and will carefully consider and 
approve such alternatives, so long as they comply with all Clean Air 
Act requirements.

III. Administrative Requirements

    Under Executive Order 12866 (58 FR 51735, October 4, 1993), this 
proposed action is not a ``significant regulatory action'' and 
therefore is not subject to review by the Office of Management and 
Budget. For this reason, this proposed action is also not subject to 
Executive Order 13211, ``Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use'' (66 FR 
28355, May 22, 2001). This proposed action merely approves state law as 
meeting Federal requirements and imposes no additional requirements 
beyond those imposed by state law. Accordingly, the Administrator 
certifies that this proposed rule will not have a significant economic 
impact on a substantial number of small entities under the Regulatory 
Flexibility Act (5 U.S.C. 601 et seq.). Because this rule proposes to 
approve pre-existing requirements under state law and does not impose 
any additional enforceable duty beyond that required by state law, it 
does not contain any unfunded mandate or significantly or uniquely 
affect small governments, as described in the Unfunded Mandates Reform 
Act of 1995 (Public Law 104-4).
    This rule also does not have tribal implications because it will 
not have a substantial direct effect on one or more Indian tribes, on 
the relationship between the Federal Government and Indian tribes, or 
on the distribution of power and responsibilities between the Federal 
Government and Indian tribes, as specified by Executive Order 13175 (65 
FR 67249, November 9, 2000). This action also does not have Federalism 
implications because it does 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). This action merely proposes to approve 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. This proposed rule also is not 
subject to Executive Order 13045, ``Protection of Children from 
Environmental Health Risks and Safety Risks'' (62 FR 19885, April 23, 
1997), because it is not economically significant.
    In reviewing SIP submissions, EPA's role is to approve state 
choices, provided that they meet the criteria of the Clean Air Act. In 
this context, in the absence of a prior existing requirement for the 
State to use voluntary consensus standards (VCS), EPA has no authority 
to disapprove a SIP submission for failure to use VCS. It would thus be 
inconsistent with applicable law for EPA, when it reviews a SIP 
submission, to use VCS in place of a SIP submission that otherwise 
satisfies the provisions of the Clean Air Act. Thus, the requirements 
of section 12(d) of the National Technology Transfer and Advancement 
Act of 1995 (15 U.S.C. 272 note) do not apply. This proposed rule does 
not impose an information collection burden under the provisions of the 
Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.).

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 et seq.

    Dated: May 23, 2002.
Keith Takata,
Acting Regional Administrator, Region IX.
[FR Doc. 02-14039 Filed 6-4-02; 8:45 am]
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