[Federal Register Volume 68, Number 30 (Thursday, February 13, 2003)]
[Proposed Rules]
[Pages 7327-7330]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-3416]


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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 52

[CA086-SIP; FRL -7450-8]


Finding of Substantial Inadequacy of Implementation Plan; Call 
for California State Implementation Plan Revision

AGENCY: Environmental Protection Agency (EPA).

ACTION: Proposed rule.

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SUMMARY: Pursuant to our authority in section 110(k)(5) of the Clean 
Air Act (CAA or Act), EPA is proposing to find that the California 
State Implementation Plan (SIP) is substantially inadequate for all 
nonattainment air pollution control districts in the State and for all 
attainment area districts that have an approved Prevention of 
Significant Deterioration (PSD) program because the State cannot 
provide ``necessary assurances'' that it or the districts have 
authority to carry out the applicable nonattainment New Source Review 
(NSR) or PSD portions of the SIP. Specifically, sections 110(a)(2)(C) 
and (I) and 172 of the Act require the applicable implementation plan 
to contain a program for issuing permits to major stationary sources of 
air pollution pursuant to parts C and D of title I of the Act. In 
addition, section 110(a)(2)(E) requires that each SIP provide necessary 
assurances that the State or districts have adequate authority to carry 
out the SIP and that no state law prohibits the State or districts from 
carrying out any portion of the SIP. The California SIP does not meet 
these requirements because California Health & Safety Code section 
42310(e) exempts new and modified major agricultural sources from all 
permitting, including PSD and NSR permitting otherwise required by 
parts C and D of title I of the Act. If EPA finalizes this proposed 
finding of substantial inadequacy, California will be required to amend 
its state law to eliminate the permitting exemption as it pertains to 
major agricultural sources of air pollution and submit the necessary 
assurances by November 23, 2003 to support an affirmative finding by 
EPA under section 110(a)(2)(E). If the State fails to submit the 
necessary assurances of authority or if EPA disapproves any such 
submittal in response to a final SIP call, sanctions will apply 
statewide pursuant to section 179 of the Act.

DATES: Comments must sent by March 17, 2003. EPA will respond to 
comments in its final action on this proposal.

ADDRESSES: Send comments to: Gerardo Rios, Permits Office (AIR-3), Air 
Division, U.S. Environmental Protection Agency, Region 9, 75 Hawthorne 
Street, San Francisco, CA 94105-3901.
    You can review and copy the existing SIP rules at EPA's Region 9 
office from 8:30 am to 5 pm, Monday-Friday. A reasonable fee may be 
charged for copying.
    Copies of the SIP rules are also available for inspection at the 
following locations: California Air Resources Board, Stationary Source 
Division, Rule Evaluation Section, 1001 ``I'' Street, Sacramento, CA 
95814.

FOR FURTHER INFORMATION CONTACT: Please call Gerardo Rios, EPA Region 
IX, at (415) 972-3974 or send e-mail to [email protected].

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

Table of Contents

I. Background
    A. What action is EPA proposing?
    B. How does the California Health & Safety Code exemption affect 
the adequacy of the SIP?
    C. How can California correct the SIP inadequacy?
    D. Are individual districts required to revise approved SIP 
rules?
    E. What are the consequences if we finalize this proposed 
finding of substantial inadequacy?
II. Statutory and Executive Order Reviews
    A. Executive Order 12866, Regulatory Planning and Review
    B. Regulatory Flexibility Act
    C. Unfunded Mandates Reform Act
    D. Executive Order 13132, Federalism
    E. Executive Order 13175, Coordination with Indian Tribal 
Governments
    F. Executive Order 13045, Protection of Children from 
Environmental Health Risks and Safety Risks
    G. Executive Order 13211, Actions that Significantly Affect 
Energy Supply, Distribution, or Use
    H. National Technology Transfer and Advancement Act

I. Background

A. What Action Is EPA Proposing?

    CAA section 110(k)(5) provides that whenever EPA finds the 
applicable implementation plan ``is substantially inadequate to attain 
or maintain the relevant national ambient air quality

[[Page 7328]]

standard, * * * or to otherwise comply with any requirement of this 
Act, the Administrator shall require the State to revise the plan as 
necessary to correct such inadequacies.'' EPA today proposes to find 
that the approved California SIP is substantially inadequate because it 
cannot provide ``necessary assurances'' that the State or districts 
have the authority to issue permits under their PSD and nonattainment 
NSR SIPs to all major sources because Health & Safety Code section 
42310(e) exempts major agricultural stationary sources from these 
permitting requirements.

B. How Does the California Health & Safety Code Exemption for 
Agricultural Sources Affect the Adequacy of the SIP?

    For areas that fail to meet the National Ambient Air Quality 
Standards (NAAQS), section 110 and title I, part D of the Act require 
SIPs to contain a program for issuing ``permits for the construction 
and operation of new or modified major stationary sources anywhere in 
the nonattainment area, in accordance with section 173.'' CAA section 
172(c)(5). EPA regulations establish that an approvable SIP program for 
issuing preconstruction permits ``shall apply to any new major 
stationary source or major modification that is major for the pollutant 
for which the area is designated nonattainment * * * .'' 40 CFR 
51.165(a)(2). Neither the Act nor EPA regulations allow any exemptions 
from permitting for new major sources, and our regulations contain only 
limited exemptions for major modifications. 40 CFR 51.165(a)(1)(v)(C).
    For areas that attain the NAAQS, section 110 and title I, part C of 
the CAA require a PSD preconstruction permitting program for new and 
modified major stationary sources. See, e.g., CAA section 165. EPA 
regulations also set forth the requirements for PSD permitting 
programs. 40 CFR 51.166. Like nonattainment NSR, neither the Act nor 
the PSD regulations contain exemptions from permitting for new major 
sources, and our regulations provide only limited ones for major 
modifications. See 40 CFR 51.166(b)(2)(iii).
    California Health & Safety Code section 42310(e) exempts from all 
air permitting ``equipment used in agricultural operations in the 
growing of crops or the raising of fowl or animals.'' As a result, the 
State and districts cannot issue permits to these agricultural sources, 
even if they are major stationary sources under the Act. The CAA NSR 
and PSD permitting requirements do not provide for this exemption.
    Section 110(a)(2)(E) of the Act requires the State to provide 
assurances that it has ``adequate personnel, funding, and authority 
under State (and, as appropriate, local) law to carry out such 
implementation plan (and is not prohibited by any provision of Federal 
or State law from carrying out such implementation plan or portion 
thereof) * * * .'' California Health & Safety Code section 42310(e) 
effectively prohibits the State and districts from fully implementing 
the SIP-approved NSR and PSD permitting programs for agricultural 
sources. Thus, the SIP does not comply with the requirement for the 
State to have adequate legal authority to fully implement the SIP. 
Therefore, the SIP for nonattainment areas and approved PSD programs in 
attainment areas in California is substantially inadequate and must be 
corrected.

C. How Can California Correct the SIP Inadequacy?

    To correct the deficiency, EPA recommends that the State 
legislature amend Health & Safety Code section 42310(e) to remove the 
exemption as it applies to major agricultural sources. The State is 
already subject to a sanctions clock based on the Notice of Deficiency 
(NOD) that EPA issued on May 22, 2002, 67 FR 35990, with respect to the 
State's title V operating permits program. In that NOD, EPA explained 
that California Health & Safety Code section 42310(e) improperly 
exempted major agricultural sources from CAA title V permitting. The 
NOD stated: ``EPA has determined that significant action in this 
instance means the revision or removal of Health and Safety Code 
42310(e) so that local air pollution control districts have the 
required authority to issue title V permits to stationary agricultural 
sources that are major sources of air pollution.'' A similar correction 
with respect to NSR and PSD permitting is necessary to comply with this 
proposed action.
    The May 2002 NOD notes that the title V regulations instruct EPA to 
apply sanctions in accordance with section 179(a) of the Act if 
California has not corrected the deficiency (removal or revision of the 
permitting exemption in Health and Safety Code section 42310(e)) prior 
to November 23, 2003 (18 months after the effective date of the NOD). 
The State legislature is required to take essentially the same action 
(i.e., remove the agricultural permitting exemption for major 
stationary sources) to correct the SIP inadequacy discussed in this 
proposed action.
    If EPA finalizes this SIP call and determines the State has failed 
to submit the necessary assurances addressing the deficiency by the 
required date, a sanctions clock would start for this SIP deficiency in 
accordance with section 179 of the Act. EPA proposes that if EPA 
determines the State fails to submit the necessary assurances to 
address the SIP call by November 23, 2003, or if EPA subsequently finds 
the correction does not adequately provide such assurances, sanctions 
would apply as specified under 40 CFR 52.31.\1\
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    \1\ EPA is using its authority in section 110(k)(5) to set a 
deadline that is less then 18 months. We believe the November 23, 
2003, deadline is reasonable because action by this date is 
otherwise required to address the title V problems noted above.
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D. Are Individual Districts Required To Revise Approved SIP Rules?

    EPA is not calling for specific revisions to district rules at this 
time. We note that several districts may have exemptions for 
agricultural sources in their local SIP-approved rules.\2\ We believe 
it is reasonable to wait for the State legislature to correct Health 
and Safety Code section 42310(e) first so that it is clear whether any 
such exemptions at the district level represent authority problems 
under section 110(a)(2)(E).\3\ EPA, nonetheless, encourages districts 
to evaluate their SIP-approved rules to ensure that exemptions do not 
create potential authority problems. Once the State acts to address 
Health and Safety Code section 42310(e), EPA will work with the 
districts to determine if further rulemaking is necessary to address 
specific local deficiencies that remain after the State law change.
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    \2\ EPA has conducted a preliminary search for local rules 
exempting agricultural sources from NSR or PSD permitting 
requirements. The following districts may have one or more 
exemptions currently approved into the SIP: Bay Area, Butte, County, 
El Dorado, Feather River, Medocino, Placer, Sacramento and Yolo-
Solano. As noted below, EPA will continue to evaluate the rules for 
all of the districts to identify more accurately any potentially 
problematic rule provisions in the SIP.
    \3\ We note that certain local exemptions are tied to exemptions 
such as Health and Safety Code section 42310(e) provided under State 
law. Removal of the exemption at the State level could automatically 
resolve authority problems at the district level. In addition, if 
the State legislature were to not only revise the language of Health 
and Safety Code section 42310(e) but also to clarify that any such 
local exemptions were also void, no further action by the districts 
may be necessary., Depending on the action at the State level, EPA 
may be able to make the required finding under 110(a)(2)(E) that the 
authority to carry out the permitting programs is not prohibited by 
any State or local law.

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[[Page 7329]]

E. What Are the Consequences if We Finalize This Proposed Finding of 
Substantial Inadequacy?

    If EPA finalizes this SIP call, as proposed, the State would need 
to submit to EPA a SIP revision providing the necessary assurances that 
it (or the districts) can fully implement the required NSR and PSD 
programs within the State. If the State fails to submit the required 
assurances or if EPA finds the submittal incomplete or disapprovable, 
sanctions would apply in accordance with CAA sections 179(a) and (b) 
and EPA regulations at 40 CFR 52.31. There are two types of sanctions: 
highway funding sanctions (section 179(b)(1)) and offset sanctions 
(section 179(b)(2)). Pursuant to our regulations at 40 CFR 52.31, 
offset sanctions will apply 18 months following a finding by EPA under 
section 179(a); highway funding sanctions would apply six months later.

II. Statutory and Executive Order Reviews

A. Executive Order 12866, Regulatory Planning and Review

    Under Executive Order 12866 (58 FR 51735 (October 4, 1993)), the 
Agency must determine whether the regulatory action is ``significant'' 
and therefore subject to OMB review and the requirements of the 
Executive Order. The Executive Order defines ``significant regulatory 
action'' as one that is likely to result in a rule that may:
    (1) Have an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or State, local, or tribal governments or 
communities;
    (2) Create a serious inconsistency or otherwise interfere with an 
action taken or planned by another agency;
    (3) Materially alter the budgetary impact of entitlements, grants, 
user fees, or loan programs or the rights and obligations of recipients 
thereof; or
    (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
the Executive Order.
    The Office of Management and Budget (OMB) has historically exempted 
from Executive Order 12866 regulatory actions governing revisions to 
SIPs. It has been determined that today's proposed call for revisions 
to the SIP would not, in any event, be a ``significant regulatory 
action'' under the terms of Executive Order 12866 and is therefore not 
subject to OMB review.

B. 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.
    Today's proposed SIP call would not establish requirements 
applicable to small entities. Instead, it would require the State of 
California and several local air districts to develop, adopt, and 
submit SIP revisions that would provide the necessary assurances that 
the applicable NSR and PSD programs do not exempt major agricultural 
sources.
    This rule will not have a significant impact on a substantial 
number of small entities because the rule does not establish 
requirements applicable to small entities. Therefore, the Administrator 
certifies that this action will not have a significant impact on a 
substantial number of small entities.

C. Unfunded Mandates Reform Act

    Under sections 202 of the Unfunded Mandates Reform Act of 1995 
(UMRA), 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 the 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 action proposed does not include a 
Federal mandate that may result in estimated costs of $100 million or 
more to either State, local, or tribal governments in the aggregate, or 
to the private sector. The proposed action will require the State of 
California and several local air districts to revise laws and 
regulations governing exemptions for agricultural sources. This 
requirement, even if considered a federal mandate,\4\ would not result 
in aggregate costs over $100 million to either the state or local 
districts. In addition, this proposed rule, if finalized, will not 
significantly or uniquely impact small governments.
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    \4\ It is unclear whether a requirement to submit a SIP revision 
would constitute a federal mandate. The obligation for a state to 
revise its SIP that arises out of sections 110(a) and 110(k)(5) of 
the CAA is not legally enforceable by a court of law, and at most is 
a condition for continued receipt of highway funds. Therefore, it is 
possible to view an action requiring such a submittal as not 
creating any enforceable duty within the meaning of section 
421(5)(9a)(I) of UMRA (2 U.S.C. 658 (a)(I)). Even if it did, the 
duty could be viewed as falling within the exception for a condition 
of Federal assistance under section 421(5)(a)(i)(I) of UMRA (2 
U.S.C. 658(5)(a)(i)(I)).
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D. Executive Order 13132, Federalism

    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 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 
does not impose a new enforceable duty on the State (see infra note 1), 
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.

[[Page 7330]]

E. Executive Order 13175, Coordination With Indian Tribal Governments

    Executive Order 13175, entitled ``Consultation and Coordination 
with Indian Tribal Governments'' (65 FR 67249, November 9, 2000), 
requires EPA to develop an accountable process to ensure ``meaningful 
and timely input by tribal officials in the development of regulatory 
policies that have tribal implications.'' This proposed rule does not 
have tribal implications, as specified in Executive Order 13175 because 
it does not apply to any Tribes or otherwise have substantial direct 
effects on tribal governments, 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. 
Thus, Executive Order 13175 does not apply to this rule.
    EPA, nonetheless, specifically solicits additional comment on this 
proposed rule from tribal officials.

F. Executive Order 13045, Protection of Children From Environmental 
Health Risks and Safety Risks

    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.

G. Executive Order 13211, Actions That Significantly Affect Energy 
Supply, Distribution, or Use

    This rule is not subject to Executive Order 13211, ``Actions 
Concerning Regulations That Significantly Affect Energy Supply, 
Distribution, or Use'' (66 FR 28355, May 22, 2001) because it is not a 
significant regulatory action under Executive Order 12866.

H. 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.
    The EPA believes that VCS are inapplicable to this action. Today's 
action 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, New Source Review, Nitrogen dioxide, Ozone, Particulate 
matter, Reporting and recordkeeping requirements, Volatile organic 
compounds.

    Dated: January 31, 2003.
Wayne Nastri,
Regional Administrator, Region IX.
[FR Doc. 03-3416 Filed 2-12-03; 8:45 am]
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