[Federal Register Volume 71, Number 38 (Monday, February 27, 2006)]
[Rules and Regulations]
[Pages 9720-9723]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 06-1797]


-----------------------------------------------------------------------

ENVIRONMENTAL PROTECTION AGENCY

40 CFR Part 70

[WI-118-2; FRL-8037-5]


Notice of Resolution of Notice of Deficiency for Clean Air Act 
Operating Permit Program; Wisconsin

AGENCY: Environmental Protection Agency (EPA).

ACTION: Notice of resolution.

-----------------------------------------------------------------------

SUMMARY: EPA issued a notice of deficiency (NOD) on March 4, 2004 (69 
FR 10167), in which EPA identified problems with Wisconsin's Clean Air 
Act (Act) title V operating permit program and a timeframe for the 
State to correct these deficiencies. The Wisconsin Department of 
Natural Resources (WDNR) submitted corrections to its permit program on 
August 18, 2005, and revisions to a related rule on December 8, 2005. 
This document announces that based on information provided by the WDNR, 
EPA concludes that the State of Wisconsin has resolved all of the 
issues identified in the March 4, 2004, NOD. As a result, EPA will not 
impose sanctions set forth under the mandatory sanctions provisions of 
the Act. In addition, EPA will not promulgate, administer, and enforce 
a whole or partial operating permit program pursuant to the title V 
regulations of the Act within 2 years after the date of the finding of 
deficiency.

DATES: Effective February 16, 2006. Because this notice of resolution 
is an adjudication and not a final rule, the Administrative Procedure 
Act's 30 day deferral of the effective date of a rule does not apply.

ADDRESSES: The documents relevant to the above action are available for 
public inspection during normal business hours at the following 
address: Environmental Protection Agency, Region 5, Air and Radiation 
Division, 77 West Jackson Boulevard, Chicago, Illinois 60604. This 
facility is open from 8:30 a.m. to 4:30 p.m., Monday through Friday, 
excluding Federal holidays. We recommend that you telephone Susan 
Siepkowski, Environmental Engineer, at (312) 353-2654 before visiting 
the Region 5 office.

FOR FURTHER INFORMATION CONTACT: Susan Siepkowski, Environmental 
Engineer, Air Permit Section, Air Programs Branch (AR-18J), U.S. 
Environmental Protection Agency, Region 5, 77 West Jackson Boulevard, 
Chicago, Illinois 60604, (312) 353-2654, [email protected].

SUPPLEMENTARY INFORMATION: Throughout this document whenever ``we,'' 
``us,'' or ``our'' is used, we mean EPA. This supplementary information 
section is arranged as follows:

I. What Is the Background Information for This Action?
II. What Did Wisconsin Submit and What Did EPA Determine Regarding 
Each Deficiency?
    A. Demonstration of Sufficient Fees to Cover Program Costs
    B. Demonstration of Title V Fees Being Used Solely for the Title 
V Program
    C. Issuance of Title V Permits
    D. Program Implementation Issues
III. What Action Is EPA Taking and What Does This Mean?

I. What Is the Background Information for This Action?

    On March 4, 2004, EPA published a NOD for the title V Operating 
Permit Program in Wisconsin. (69 FR 10167). The NOD was based upon 
EPA's findings that the State's title V program did not comply with the 
requirements of the Act or with the implementing regulations at 40 CFR 
part 70 in the following four respects: (1) Wisconsin had failed to 
demonstrate that its title V program required owners or operators of 
part 70 sources to pay fees sufficient to cover the costs of the 
State's title V program in contravention of the requirements of 40 CFR 
part 70 and the Act; (2) Wisconsin was not adequately ensuring that its 
title V program funds were used solely for title V permit program costs 
and, thus, was not conducting its title V program in accordance with 
the requirements of 40 CFR 70.9 and the Act; (3) Wisconsin had not 
issued initial title V permits to all of its part 70 sources within the 
time allowed by the Act and 40 CFR 70.4; and (4) Wisconsin had other 
deficiencies with the implementation of its permit program.
    Wisconsin was required to address these deficiencies within 18 
months of the date of the issuance of the March 4, 2004 NOD, or the 
state would be subject to the sanctions under 40 CFR 70.10(b)(3) and 
section 179(b) of the Act. In addition, 40 CFR 70.10(b)(4) provides 
that, if the state has not corrected the deficiency within 18 months of 
the date of the finding of deficiency, EPA will promulgate, administer, 
and enforce a whole or partial program within 2 years of the date of 
the finding.

II. What Did Wisconsin Submit and What Did EPA Determine Regarding Each 
Deficiency?

    On August 18, 2005, WDNR submitted to EPA the ``Wisconsin DNR 
Response to USEPA Notice of Deficiency Related to the `Title V Program' 
dated March 4, 2004'' (NOD Response). The NOD Response is available to 
view in the docket, Docket ID No. WI-118-2. In the NOD Response, and 
its accompanying attachments, WDNR explained and documented how each of 
the deficiencies identified in the NOD had been, or were being, 
addressed. The NOD Response contains documented internal operational 
changes within WDNR, a copy of the fee structure included in 
Wisconsin's 2005-07 biennial budget bill enacted into law as 2005 
Wisconsin Act 25 (published July 26, 2005), and numerous attachments 
describing WDNR's permit program, program costs, fee structure, and 
workload. Additionally, on December 8, 2005, WDNR submitted to EPA for 
approval, a SIP revision related to one of the deficiencies, ``Request 
to the USEPA to Revise Wisconsin's SIP Pertaining to the Permanency of 
Construction Permit Conditions'' (Permanency Revision).
    Based on the information in WDNR's NOD Response, and the Permanency 
Revision to Wisconsin's SIP, EPA has determined that Wisconsin has 
demonstrated that it has resolved each

[[Page 9721]]

of the issues listed in the March 4, 2004, NOD, as discussed below.

A. Demonstration of Sufficient Fees To Cover Program Costs

    As discussed in the NOD, pursuant to 42 U.S.C. 7661a(b)(3) and 40 
CFR 70.9(a), a state program must require that the owners or operators 
of part 70 sources pay annual fees, or the equivalent over some other 
period, that are sufficient to cover the permit program costs. 42 
U.S.C. 7661a(b)(3) and 40 CFR 70.9(b) provide that a state may collect 
fees that cover the actual permit program costs, or may use a 
presumptive fee schedule, adjusted for inflation.
    In a 2001 title V program revision submittal, WDNR disclosed that 
it had removed the inflation adjustment factor from its title V fee 
schedule. Instead of providing for inflation adjustments, Wisconsin's 
fee schedule now required the state to bill sources for each 1,000 tons 
of emissions in excess of the 4,000 ton cap allowed for by the 
presumptive fee schedule provided by 40 CFR 70.9(b)(2)(ii)(B).
    In light of this change, and, as provided by 70.9(b)(5), EPA 
requested from Wisconsin a detailed fee demonstration to show its 
collection of fees is sufficient to cover its permit program costs. 
However, the information subsequently provided by Wisconsin did not 
adequately demonstrate that the revised fee schedule resulted in the 
collection of fees in an amount sufficient to cover its actual program 
costs, as required by 40 CFR 70.9(b)(1). Additionally, Section 502(b) 
of the Act, 42 U.S.C. 7661a(b), and 40 CFR 70.4(b) provide that a state 
must have adequate personnel to ensure that the permitting authority 
can carry out implementation of its title V program. EPA also had 
serious questions regarding the adequacy of Wisconsin's ability to 
fully implement its title V program.
    To address these issues, WDNR provided in its August 18, 2005, NOD 
Response, the required fee demonstration. The fee information includes 
a description of the State's title V fee structure, a description of 
the title V permit program activities and costs, a demonstration that 
its fee schedule results in the collection of revenues sufficient to 
cover the title V permit program costs, and a description of the 
activities funded by part 70 fees, including personnel.
    In its NOD Response, WDNR elected to demonstrate that it collects 
fees that cover the actual permit program costs, rather than use a 
presumptive fee schedule, adjusted for inflation, as allowed by 40 CFR 
70.9(b)(5). WDNR provided detailed information regarding its program 
costs, which included, among other things, a Workload Analysis and a 
Fee Analysis for Wisconsin fiscal years 2005-2008. These documents 
describe the actual costs of implementing Wisconsin's title V program, 
a breakdown of how the costs were calculated, and permit funds WDNR 
anticipates will be collected. Additionally, the documents establish 
WDNR staffing requirements, including full time employee (FTE) hours 
needed, and corresponding funding needs, that WDNR concludes are 
necessary to operate a complete stationary source program over its 
fiscal years 2005-2008. The analyses do not cover all aspects of 
Wisconsin's Air Program, but instead, focus on the activities related 
to the permit program. WDNR provided further information regarding its 
permit streamlining efforts, which, if implemented as planned, will, 
over time, continue to reduce the costs of running its title V program 
beyond fiscal year 2008, and will allow staff redeployment.
    Upon review of the information submitted, EPA finds that WDNR has 
demonstrated that it has adequate staffing and funding levels to 
support a complete title V program through Wisconsin fiscal year 2008. 
Accordingly, WDNR has demonstrated that it collects fees that cover the 
actual title V program costs. Thus, the State's program complies with 
the requirements of the Act and 40 CFR 70.9. Also, based on the 
Workload Analysis and the information regarding its permit streamlining 
efforts, EPA determines that WDNR is adequately staffing its title V 
program. Accordingly, Wisconsin is also complying with the requirements 
of the Act and 40 CFR 70.4, and has resolved these issues raised in the 
NOD.

B. Demonstration of Title V Fees Being Used Solely for the Title V 
Program

    One of the issues identified in the NOD was that the fee revenue 
information that WDNR provided to EPA in 2003 showed that the State was 
not distinguishing between fees collected from sources under different 
operating permit programs. Specifically, the information provided 
showed that WDNR did not account separately for or maintain separate 
accounts for fees collected under title V and fees collected from non-
title V sources. Section 502(b) of the Act, 42 U.S.C. 7661a(b), and 40 
CFR 70.9(a), which provide that a state's title V program must ensure 
that all title V fees are used solely for title V permit program costs.
    Additionally, 40 CFR 70.10(b) provides that states must conduct 
approved state title V programs in accordance with the requirements of 
40 CRF part 70 and any agreement between the state and EPA concerning 
operation of the program. Information provided to EPA by WDNR in 2003 
also disclosed internal fee management deficiencies that demonstrated 
that WDNR was not conducting its title V program in accordance with the 
requirements of the Act and 40 CRF part 70 and, therefore, was not 
adequately administering its title V program.
    In its NOD Response, WDNR provided documentation which demonstrates 
that it is using its title V fees only for title V permit program 
costs. The fee revenue information provided establishes that the State 
is now distinguishing between fees collected from sources operating 
under different Clean Air Act permit programs. Specifically, the 
information shows that WDNR now accounts separately for, and maintains 
separate accounts for, fees collected under title V and non-title V 
programs. This change is the result of legislative changes adopted as 
part of the Wisconsin 2005-07 biennial budget bill enacted into law as 
2005 Wisconsin Act 25. (Published July 26, 2005.) In 2005 Wisconsin Act 
25, Wisconsin created a new appropriation to separate title V from non-
title V funding and expenditures. The expenditure authority for the 
title V program specifies that permit fees be collected from sources 
with operation permits required under the Act. The expenditure 
authority for the non-title V program is for sources with state 
operation permits not required by the Act. Thus, the State now provides 
for an accurate description and accounting of its title V fee 
collections.
    The NOD Response and its attachments also demonstrate that WDNR is 
using title V funds only for title V work. EPA has evaluated the 
information WDNR provided regarding its accounting and timekeeping 
practices, including FTE Hours, Time Report Activities by Employees, 
Activity and Funding Codes, and changes to these activity codes to 
better account for tracking and billing employee time, and concludes 
that WDNR has demonstrated that it is not using title V funds to 
subsidize the work of employees performing non-title V work. Further, 
Wisconsin Act 2005 also created a new fee structure for the non-title V 
program to ensure that the non-title V program work was self funded. 
Accordingly, WDNR is ensuring that all title V fees that it collects 
are used solely for permit program costs as required by 42 U.S.C. 
7661a(b) and 40

[[Page 9722]]

CFR 70.9(a). Thus, WDNR is conducting its title V program in accordance 
with the requirements of the Act and 40 CRF part 70 and adequately 
administering its title V program.
    Regarding the potential grant matching issue raised in the NOD, 
WDNR has demonstrated it is not using title V funds for grant matching. 
Specifically, WDNR included in its NOD Response, ``FY05 Air Management 
Activity Codes, Funding Source and Air Pollution Control Grant Match 
Eligibility,'' which provides for each air program activity the funding 
source and whether it is eligible to use for 105 grant match. As 
discussed above, by separating the non-title V and title V accounts, 
WDNR is able to specifically track where the matching funds came from 
to ensure title V funds are not being used. Thus, EPA concludes that 
WDNR has ensured that all title V fees that it collects are used solely 
for permit program costs, consistent with 42 U.S.C. 7661a(b) and 40 CFR 
70.9(a).

C. Issuance of Title V Permits

    The NOD cited Wisconsin for failure to comply with section 503(c) 
of the Act, 42 U.S.C. 7661b(c), and 40 CFR 70.4, which require that a 
permitting authority must act on all initial title V permit 
applications within three years of the effective date of the program. 
Pursuant to section 503 of the Act, Wisconsin was to have completed 
issuance of initial title V operating permits to all of its part 70 
sources by April 5, 1998.
    In an October 23, 2003 letter to EPA, ``Schedule for Completing 
Review of Title V Operation Permits,'' WDNR provided a schedule for 
completing issuance of its initial title V permits by December 31, 
2004. WDNR met this commitment and finished issuing its title V permits 
on December 30, 2004. WDNR notified EPA of its completion in a January 
14, 2005, letter to EPA, ``Update of Wisconsin Response to EPA Notice 
of Deficiency.'' Accordingly, EPA concludes that WDNR has resolved the 
NOD issue of failure to issue all of its initial title V permits.
    Additionally, WDNR has committed to issuing all remaining initial 
Federally Enforceable State Operating Permits (FESOP) prior to March 4, 
2006, with the majority of these permits to be issued by December 31, 
2005. WDNR provided in its NOD Response, ``FESOP Issuance and Other 
2005 Operation Permit Priorities,'' which includes its FESOP issuance 
strategy and deadlines. On January 17, 2006, WDNR also indicated to EPA 
that it completed issuance of these FESOP permits.

D. Program Implementation Issues

1. Expiration of Construction Permits
    40 CFR 70.1 requires that each title V source has a permit to 
operate that assures compliance with all applicable requirements. The 
definition of applicable requirement includes any term or condition of 
any preconstruction permit issued pursuant to programs approved or 
promulgated under title I, including parts C or D of the Act. These 
permits must remain in effect because they are the legal mechanism 
through which underlying preconstruction requirements become 
applicable, and remain applicable, to individual sources. If the 
construction permit expired, then the construction permit terms no 
longer would be applicable requirements and the permitting authority 
would not have the authority to incorporate them into title V permits. 
(See EPA's May 20, 1999 letter from John Seitz to Robert Hodanbosi and 
Charles Lagges.)
    Wisconsin statutes, Wis. Stat 285.66(1), provided that construction 
permits expired after 18 months. (WDNR had also interpreted NR 406.12 
to provide that construction permits expired.) Because Wisconsin's 
construction permits expired, resulting in terms in its title V permits 
that did not have underlying applicable requirements, Wisconsin's title 
V program did not meet the minimum requirements of part 70.
    In response to the NOD, Wisconsin has revised Statute 285.66(1) to 
make permanent all conditions in construction permits. WDNR submitted a 
SIP request, ``Wisconsin SIP Revision Pertaining to the Permanency of 
Construction Permit Conditions'' on December 8, 2005. Statute 285.66(1) 
was revised to provide that, ``Notwithstanding the fact that 
authorization to construct, reconstruct, replace, or modify a source 
expires under this subsection, all conditions in a construction permit 
are permanent unless the conditions are revised through a revision of 
the construction permit or through the issuance of a new construction 
permit.'' This statutory revision was adopted as part of the Wisconsin 
2005-07 biennial budget bill enacted into law as 2005 Wisconsin Act 25. 
(Published July 26, 2005.)
    EPA reviewed Wisconsin's December 8, 2005, SIP revision submittal 
and determined it was approvable because it makes Wisconsin's 
construction permit program consistent with Federal program 
requirements for state permit programs. This revision also resolves the 
deficiency identified in the NOD. EPA published its proposed approval 
of Wisconsin's Permanency Revision on January 12, 2006 (71 FR 1994), 
and no comments were received. EPA signed the final approval for this 
revision on February 16, 2006, and has submitted it to the Office of 
the Federal Register for publication.
    Unlike Wisconsin's statute, its rule governing the expiration of 
construction permits, NR 406.12, provides that ``[a]pproval to 
construct or modify a stationary source shall become invalid 18 months 
after the date when a construction permit was issued by the Department 
unless the permit specifies otherwise.'' Therefore, no revision is 
necessary to NR 406.12, since the rule itself does not provide that the 
permits expire.
    Based on our final approval of Wisconsin's statutory change to make 
all conditions in construction permits permanent, EPA concludes that 
WDNR has resolved this deficiency identified in the NOD.
2. Combined Construction and Operating Permits
    The NOD discussed that states have the option of integrating their 
pre-construction and title V programs as described at 57 FR 32250, 
32279 (July 21, 1992). Part 70 requires that, to implement an 
integrated permit program, the state permitting authority must, among 
other things, comply with the permit content requirements in 40 CFR 
70.6, including the requirement to specify the origin of and authority 
for each term or condition in a title V permit, and, ensure that the 
construction permit conditions do not expire, whether previously 
established in a separate pre-construction permit, or in the combined 
title V/pre-construction permit.
    Wisconsin has been issuing a version of a combined construction and 
title V permit for several years. However, Wisconsin was not complying 
with the requirements above in that it was not identifying the 
construction permit conditions or specifying the origin and authority 
of these conditions in the title V or combined permit. Furthermore, 
Wisconsin did not have any provisions to ensure that the construction 
permit conditions were permanent.
    In its NOD Resolution, WDNR included an internal guidance 
memorandum, ``Interface Between Construction and Operation Permits,'' 
dated June 3, 2004. This memorandum directs permit writers to identify 
conditions from the construction permit and specify the origin and 
authority of these conditions in the title V permit. In addition, the 
SIP revision discussed in the previous section ensures that all

[[Page 9723]]

construction permit conditions are permanent. Thus, WDNR has resolved 
this deficiency identified in the NOD.
3. Federal Enforceability
    The NOD cited Wisconsin for failure to comply with 40 CFR 70.6(b), 
which provides that all terms and conditions in a title V permit are 
federally enforceable, that is, enforceable by EPA or citizens. 
However, the permitting authority can designate as not federally 
enforceable any terms and conditions included in the permit that are 
not required under the Act or under any of its applicable requirements. 
40 CFR 70.6(b)(2). In contrast, EPA has determined that all conditions 
of a permit issued pursuant to a program approved into a state's SIP 
are federally enforceable. 40 CFR 52.23. (See the May 20, 1999 letter 
from John Seitz to Robert Hodanbosi and Charles Lagges.)
    Wisconsin had identified all permit requirements in title V permits 
originating from Wisconsin's air toxics program (Wis. Admin. Code NR 
445) as enforceable by the State only, even when the requirements were 
established in a permit issued pursuant to a SIP-approved program, such 
as a construction permit. Wisconsin's failure to include the terms 
established in a permit issued pursuant to a SIP-approved program into 
the federally enforceable side of its title V permits was contrary to 
40 CFR 70.6.
    In its NOD Resolution, WDNR included the internal guidance 
memorandum, ``Interface Between Construction and Operation Permits'', 
cited above. This memorandum directs the permit writers to make 
federally enforceable any requirement in the title V permit that was 
included in the source's construction permit issued pursuant to a SIP-
approved program. EPA has determined that WDNR has addressed this 
program implementation issue identified in the NOD.
4. Insignificant Emission Unit Requirements
    40 CFR 70.5(c) authorizes EPA to approve as part of a state program 
a list of insignificant activities and emission levels (IEUs) which 
need not be included in the permit application, provided that the 
application may not omit information needed to determine the 
applicability of, or to impose, any applicable requirement. Nothing in 
part 70, however, authorizes a state to exempt IEUs from the permit 
content requirements of 40 CFR 70.6.
    Wisconsin's regulations, at NR 407, contain criteria for sources to 
identify IEUs in their applications, and require that permit 
applications contain information necessary to determine the 
applicability of, or to impose, any applicable requirement. However, 
WDNR did not include in its title V permits federally enforceable 
applicable requirements to which IEUs are subject. Therefore, 
Wisconsin's interpretation and implementation of its regulations was 
inconsistent with part 70.
    WDNR included in its NOD Resolution an example of a revised title V 
permit template establishing the changes it has implemented in order to 
address this issue. WDNR has revised its title V permits to include the 
source's IEU's under the federally enforceable portion of the permit. 
WDNR has also included the requirements applicable to the IEU's as part 
of the general terms and conditions for each permit. Thus, EPA has 
determined that WDNR has adequately addressed this program 
implementation issue identified in the NOD.

III. What Action Is EPA Taking and What Does This Mean?

    EPA is notifying the public that based on the information provided 
by WDNR; internal operational changes within WDNR; and EPA's approval 
of statutory changes requested by Wisconsin, that EPA has determined 
that Wisconsin has resolved each of deficiencies identified by EPA in 
the NOD for Wisconsin's Operating Permit Program, 69 FR 10167 (March 4, 
2004). Therefore, based on the rationale set forth above, EPA is not 
invoking sanctions pursuant to section 179(b) of the Act, nor 
administering any portion of the State's operation permit program, 
pursuant to 40 CFR 70.10(b)(4).

List of Subjects in 40 CFR Part 70

    Environmental protection, Administrative practice and procedure, 
Air pollution control, Intergovernmental relations, Operating permits, 
Reporting and recordkeeping requirements.

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

    Dated: February 16, 2006.
Bharat Mathur,
Acting Regional Administrator, Region 5.
[FR Doc. 06-1797 Filed 2-24-06; 8:45 am]
BILLING CODE 6560-50-P