[Federal Register Volume 63, Number 215 (Friday, November 6, 1998)]
[Proposed Rules]
[Pages 59924-59928]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-29818]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 52
[CA 102-0111; FRL-6185-9]
Approval and Promulgation of Implementation Plans; California
State Implementation Plan Revision, Bay Area Air Quality Management
District
AGENCY: Environmental Protection Agency (EPA).
ACTION: Proposed rule.
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SUMMARY: EPA is proposing a limited approval and limited disapproval of
revisions to the California State Implementation Plan (SIP). This
revision concerns Rules 1, 2 and 4 of Regulation 2--Permits, for the
Bay Area Air Quality Management District (BAAQMD or the ``District'').
This State Implementation Plan (SIP) revision was submitted by the
State of California for the purpose of meeting the requirements of the
Clean Air Act (CAA), as amended in 1990, with regard to new source
review (NSR) in areas that have not attained the national ambient air
quality standards (NAAQS). This SIP revision was submitted by the State
to satisfy Federal requirements for an approvable nonattainment area
NSR SIP for the District.
The intended effect of proposing a limited approval and limited
disapproval of these rules is to strengthen the federally approved SIP
by incorporating these updated provisions. EPA's final action on this
proposal will incorporate the rules into the SIP. EPA is proposing a
simultaneous limited approval and limited disapproval under provisions
of the Act regarding EPA action on SIP submittals and general
rulemaking authority. While strengthening the SIP, this revision
contains deficiencies which the BAAQMD must address before EPA can
grant full approval under Section 110(k)(3).
DATES: Comments must be received on or before December 7, 1998.
ADDRESSES: Comments may be mailed to: John Walser, Permits Office [AIR-
3], Air Division, U.S. Environmental Protection Agency, Region IX, 75
Hawthorne Street, San Francisco, CA 94105-3901.
Copies of the state submittal and rules are available for public
inspection at EPA's Region IX office during normal business hours and
at the following locations: Bay Area Air Quality Management District,
939 Ellis Street, San Francisco, CA 94109. California Air Resources
Board, Stationary Source Division, Rule Evaluation Section, 2020 ``L''
Street, Sacramento, CA 95812.
FOR FURTHER INFORMATION CONTACT: John Walser, Permits Office, [AIR-3],
Air Division, U.S. Environmental Protection Agency, Region IX, 75
Hawthorne Street, San Francisco, CA 94105-3901, Telephone: (415) 744-
1257.
SUPPLEMENTARY INFORMATION:
I. Applicability
The rules proposed for limited approval and limited disapproval
into the California SIP are the District's Regulation 2 Permits, Rule 1
General Requirements, Rule 2 New Source Review, and Rule 4 Emissions
Banking. These rules were submitted by the California Air Resources
Board on behalf of the District to EPA on September 28, 1994.
II. Background
The air quality planning requirements for nonattainment NSR are set
out in part D of title 1 of the Clean Air Act. 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. EPA has also proposed regulations to implement the
changes under the 1990 Amendments in the NSR provisions in parts C and
D of title 1 of the Act. [See 61 FR 38249 (July 23, 1996)]. Upon final
promulgation of those regulations, EPA will review those NSR SIP
submittals on which it has already taken final action to determine
whether additional SIP revisions are necessary.
Part D of the Clean Air Act (CAA), Sections 171 to 173, Section
182, Section 187, and Section 189, requires that States incorporate in
their State Implementation Plans an acceptable permitting program for
the construction and operation of new or modified major stationary
sources in nonattainment areas. The statutory permit requirements for
ozone nonattainment areas are generally contained in Section 173, and
in subpart 2 of part D. These are the minimum requirements that States
must include in an approvable
[[Page 59925]]
implementation plan. EPA's requirements are contained in 40 CFR 51.165,
revised as of July 1, 1992, and the Emissions Trading Policy Statement,
published December 4, 1986 under 51 FR 43814. EPA relied upon the
following materials in its review of the District's NSR rules: CAA, as
amended, 40 CFR 51.160 through 51.165, Emissions Trading Policy
Statement, General Preamble to Title 1, and the December 15, 1992,
draft comprehensive SIP checklist for all Part D NSR requirements.
On March 3, 1978, EPA promulgated a list of ozone nonattainment
areas under the provisions of the 1977 Clean Air Act (1977 CAA or pre-
amended Act), that included the San Francisco Bay Area (43 FR 8964). On
May 26, 1988, EPA notified the Governor of California, pursuant to
section 110(a)(2)(H) of the pre-amended Act, that the Bay Area Air
Quality Management District's portion of the SIP was inadequate to
attain and maintain the ozone standard and requested that deficiencies
in the existing SIP be corrected (EPA's SIP-Call). On November 15,
1990, amendments to the 1977 CAA were enacted. Pub. L. 101-549, 104
Stat. 2399, codified at 42 U.S.C. 7401-7671q.
On November 12, 1993, BAAQMD submitted a request for redesignation
to attainment of the ozone standard. Subsequently, EPA approved
BAAQMD's request and the San Francisco Bay Area was reclassified as an
attainment area. 40 CFR 81.305. Subsequently, on July 10, 1998, EPA
revoked the Bay Area's attainment status and reclassified the area back
to nonattainment for ozone. 63 FR 37258. The Bay Area was redesignated
under Subpart 1 of Part D of the Act, and for this reason does not have
a classification. However, for purposes of the new source review and
Title V programs, moderate area requirements apply to the Bay Area
based on its design value of .138 ppm. See 62 FR 66581, December 19,
1997. Because the District is currently designated as nonattainment for
ozone and attainment or unclassifiable for NO2, PM-10, Pb,
CO, and SO2, the District's nonattainment rules must be
applied to all major new or modified stationary sources proposing to
emit ozone precursors, namely VOC and NOX.
This document addresses EPA's proposed action for BAAQMD Regulation
2 Permits, Rules 1, 2 and 4. The BAAQMD adopted these rules on June 15,
1994. These submitted rules were found to be complete on November 22,
1994, pursuant to EPA's completeness criteria that are set forth in 40
CFR Part 51, Appendix V;1 and are being proposed for limited
approval and limited disapproval.
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\1\ EPA adopted completeness criteria on February 16, 1990 (55
FR 5830) and, pursuant to section 110(k)(1)(A) of the CAA, revised
the criteria on August 26, 1991 (56 FR 42216).
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BAAQMD Regulation 2 clarifies the terms and requirements that apply
to the District's NSR regulation and emissions banking program. BAAQMD
Regulation 2 was originally adopted as part of BAAQMD's effort to
achieve the National Ambient Air Quality Standard (NAAQS) for ozone.
The following is EPA's evaluation and proposed action for BAAQMD
Regulation 2, Rules 1, 2 and 4.
III. EPA Evaluation and Proposed Action
In determining the approvability of a rule submittal, EPA must
evaluate the rule for consistency with the requirements of the CAA and
EPA regulations, as found in section 110 of the CAA and 40 CFR Part 51
(Requirements for Preparation, Adoption, and Submittal of
Implementation Plans).
The statutory requirements for nonattainment NSR SIPs and
permitting are found in sections 172 and 173 of the Act. The Act
requires States to address a number of nonattainment NSR provisions in
a SIP submittal to meet the requirements of part D of title 1 of the
Act.
EPA has evaluated District Rules 1, 2 and 4 of Regulation 2 and has
determined that the rules contain deficiencies and are not fully
consistent with CAA requirements, EPA regulations and EPA policy. A
more detailed analysis is contained in the Technical Support Document
for this submittal which is available for inspection at the Region IX
address listed above.
The following six items are issues that EPA has identified as
significant deficiencies (approvability issues) in BAAQMD Regulation 2.
1. Interpollutant Trading
Regulation 2, Rule 2 Sections 302.1, 302.2 and 303.1
Section 302.1 states that emission reduction credits (ERCs) of
nitrogen oxides (NOX) may be used to offset increased
emissions of precursor organic compounds (POC) at the offset ratio
specified in Section 2-2-302 (generally 1.15 to 1.0). Section 302.2
allows for emission reduction credits of POC to be used to offset
increased emissions of NOX at the offset ratio specified in
Section 302.2, and Section 303.1 allows ERCs of NOX and/or
sulfur dioxide (SO2) to be used to offset increased
emissions of particulate matter (PM10) at ratios deemed appropriate by
the Air Pollution Control Officer.
These sections of Regulation 2, Rule 2 are not approvable in their
current form because they do not contain adequate safeguards to ensure
an overall air quality benefit from this type of trading. For example,
as currently drafted, the rule allows for the same trading ratio for
POC to POC trades as it does for POC for NOX trades, without
any demonstration that such trades will result in an equal air quality
benefit. EPA continues to discourage interpollutant trading due to the
scientific uncertainty of acceptable pollutant trading ratios. However,
if the District wishes to allow interpollutant trading, the rule must
be consistent with EPA guidance.2 For instance, the rule
must restrict interpollutant trading to precursor pollutants
contributing to the same secondary non-attainment pollutant (such as
trading POC for NOX). The District must either perform
adequate modelling studies to include a scientifically determined
pollutant trading ratio and define that ratio in the rule, or perform a
case-by-case analysis of the ratio, and state in the rule that the
ratio will be determined after adequate modelling, public notice, and
EPA concurrence.
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\2\ See letter from Dave Howekamp to Dan Speer of the San Diego
Air Pollution Control District dated April 13, 1995.
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Additionally, the District's interpollutant trading provisions may
allow inter-District trading without regard to the attainment status of
the District where the ERCs are created and used, because the rule is
silent on this issue. Therefore, the rule must be revised to prohibit
this type of trading, or be revised to explicitly include the
provisions of 173(c)(1) of the Clean Air Act.
2. Exemption List
Regulation 2 Permits, Rule 1 General Requirements
Sections 2-1-114 to 128, provide that ``any equipment that produces
air contaminants in excess of 150 lb/day of any single pollutant is not
exempt'' from permit review. EPA is concerned that the District
interprets this language to apply on an individual emissions unit
basis, rather than a facility-wide basis.
EPA's fundamental requirements with respect to permit exemptions
are threefold. First, the exemptions must not keep a major source from
appearing to be major. That is, emissions from
[[Page 59926]]
exempt equipment must be included in the determination of whether a
source is major (or whether a modification is major), whether for NSR
or Title V purposes. Second, emissions from exempt equipment must be
included in determining the offset liability for a source. Third,
substantive requirements, such as BACT, must generally apply to all
emissions units.
EPA continues to believe that if the 150 lb/day cap on exemptions
applies to any group of emissions units or pieces of equipment, and not
just to a single piece of equipment, the District is likely to be able
to satisfy the above requirements. For example, the District may be
able to argue that 150 pounds a day is de minimus from a BACT
standpoint. Also, a maximum 150 pound per day facility wide exemption
could be factored into offset requirements.
In addition, Regulation 2, Rule 1 exempts equipment such as
internal combustion engines or gas turbines of less than 250 horsepower
rating (Section 2-1-115.2) from authority to construct and permit to
operate requirements, and exempts certain other sources subject to
generally applicable requirements. These sources may have high
emissions and a greater likelihood of violating emission standards and
for these reasons should not be included on an exemptions list.
3. Functionally Identical Replacement
Regulation 2, Rule 2-NSR, Dated 6/15/94, Sections 2-2-225.4, 2-2-313,
2-2-241 and 2-2-608: Replacement Sources
EPA does believe that the sections in Regulation 2, Rule 2
concerning functionally identical replacement may not fully meet the
federal requirements found at 40 CFR 51.165. Specifically, section
51.165(a)(1)(v)(A) defines ``major modification'' as any physical
change in or change in the method of operation of a major stationary
source that would result in a significant net emissions increase of any
pollutant subject to regulation under the Act. Section 51.165
(a)(1)(v)(C)(1) excludes ``routine maintenance, repair and
replacement'' from the definition of physical or operational change.
Such assessments should be made on a case-by-case basis, but would
generally not include replacement of emissions units (``sources'' in
BAAQMD's nomenclature), or life extension projects.
Additionally, Section 2-2-313 of Regulation 2 states that offset
requirements for replacement sources of POC and NOX shall be
met either in accordance with Section 2-2-302 Offset Requirements, or
2-2-608 Alternate Emission Calculation Procedures, Replacement Sources,
which is an alternative to the calculation procedures outlined in
Section 2-2-605. EPA believes that the alternate emission calculation
procedures outlined in Section 2-2-608 may allow replacement sources to
construct without fully applying offsets that would be required by
Section 2-2-605, and by the federal regulations at 40 CFR 51.165. As
drafted, the rule does not require the replacement source to consider
the operating history of the replaced source, which could have been
operating at a capacity well below its maximum allowable limits (e.g.,
actual emissions 50 percent of potential emissions). Therefore, the
calculation appears to use a potential to potential emissions test, and
as a result no offsets would be needed. EPA's regulations and policy
(Emission Trading Policy Statement, FR 51 43838 and 40 CFR 51.165)
require an actual to potential test for determining emission changes,
and, consequently, offset requirements.
4. Ensuring Offsets Are Surplus When Used
Both Regulation 2, Rule 2 and Regulation 2, Rule 4 are silent
regarding the requirement to ensure that ERCs are surplus at the time
of use. All 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''). EPA has provided flexibility in the
implementation of these requirements in the August 26, 1994 memo from
John Seitz to David Howekamp entitled, ``Response to Request for
Guidance on Use of Pre-1990 ERCs and Adjusting for RACT at Time of
Use.'' For example, if an ERC is created and approved this year, but
the District subsequently proposes, passes and includes (implicitly or
explicitly) in its plan a control measure related to the source
category of the creator of the ERC, the District must, upon use of the
ERC, evaluate the effect the control measure would have had on the
source that created the reduction, and reduce the amount of the ERC
appropriately. Section 173 (a) of the Act requires that offsetting
emission reductions be federally enforceable at the time an NSR permit
is issued, and in effect by the time the source commences operation
(Section 173 (c)(1)). In addition, Section 173 (c)(2) requires that
offsets be surplus of all other requirements of the Act. The District
must adjust all emission reductions to ensure that the surplus
requirement of Section 173(c)(2) is met at the time that the reductions
are used to meet the offset requirements of Section 173 (a) and (c).
5. Exemption, Emissions From Abatement Equipment
Section 2-2-112 in Regulation 2, Rule 2
This section states that BACT requirements shall not apply to
emissions of secondary pollutants which are the direct result of the
use of an abatement device which complies with the BACT or BARCT
requirements for control of another pollutant. On July 1, 1994, EPA
issued guidance from John Seitz, Director of the Office of Air Quality
Planning and Standards, entitled ``Pollution Control Projects and New
Source Review (NSR) Applicability'', which states that a source must
secure offsetting reductions in the case of a pollution control project
which will result in a significant increase in nonattainment
pollutants.
Section 2-2-112 in Regulation 2, Rule 2 must be revised to make it
clear that significant emissions of secondary pollutants which result
from control devices or requirements are subject to the requirement to
obtain offsets.
6. Prevention of Significant Deterioration
EPA suggests that the District add lead to the PSD pollutant list
in Regulation 2, Rule 2, Sections 2-2-304, 2-2-305 and 2-2-306. The
rule lists CO, PM10, SO2, POC and NOX
as PSD pollutants, but excludes lead. EPA realizes that the District
has a 0.6 ton/yr BACT threshold for lead, and in Regulation 2, Rule 1,
Section 111.1 a 0.3 lb/day lead exemption threshold for authorities to
construct or permits to operate. However, the PSD pollutant list must
include all criteria pollutants, including lead.
Because the rule deficiencies described above are inappropriate for
inclusion in the SIP, EPA cannot grant full approval of this rule under
section 110(k)(3). Also, because the submitted rule is not composed of
separable parts which meet all the applicable requirements of the CAA,
EPA cannot grant partial approval of the rule under section 110(k)(3).
However, EPA may grant a limited approval of the submitted rule under
section 110(k)(3) in light of EPA's authority pursuant to section
301(a) to adopt regulations necessary to further air quality by
strengthening the SIP. The approval is limited because EPA's action
also contains a simultaneous limited disapproval. In order to
strengthen the SIP, EPA is proposing a limited approval of BAAQMD's
submitted
[[Page 59927]]
Regulation 2 under sections 110(k)(3) and 301(a) of the CAA.
It should be noted that the rules covered by this proposed
rulemaking have been adopted by the BAAQMD, subsequently revised, and
are currently in effect in the BAAQMD. EPA's final limited disapproval
action will not prevent the BAAQMD or EPA from enforcing this rule.
Nothing in this action should be construed as permitting or
allowing or establishing a precedent for any future request for
revision to any state implementation plan. Each request for revision to
the state implementation plan shall be considered separately in light
of specific technical, economic, and environmental factors and in
relation to relevant statutory and regulatory requirements.
IV. Administrative Requirements
A. Executive Order 12866
The Office of Management and Budget (OMB) has exempted this
regulatory action from Executive Order (E.O.) 12866, entitled
``Regulatory Planning and Review.''
B. Executive Order 12875
Under E.O. 12875, EPA may not issue a regulation that is not
required by statute and that creates a mandate upon a state, local, or
tribal government, unless the Federal government provides the funds
necessary to pay the direct compliance costs incurred by those
governments. If the mandate is unfunded, EPA must provide to the Office
of Management and Budget a description of the extent of EPA's prior
consultation with representatives of affected state, local, and tribal
governments, the nature of their concerns, copies of written
communications from the governments, and a statement supporting the
need to issue the regulation. In addition, E.O. 12875 requires EPA to
develop an effective process permitting elected officials and other
representatives of state, local, and tribal governments ``to provide
meaningful and timely input in the development of regulatory proposals
containing significant unfunded mandates.''
Today's rule does not create a mandate on state, local or tribal
governments. The rule does not impose any enforceable duties on these
entities. Accordingly, the requirements of section 1(a) of E.O. 12875
do not apply to this rule.
C. Executive Order 13045
Protection of Children from Environmental Health Risks and Safety
Risks (62 FR 19885, April 23, 1997), applies to any rule that: (1) Is
determined to be ``economically significant'' as defined under E.O.
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 E.O. 13045 because it does not involve
decisions intended to mitigate environmental health or safety risks.
D. Executive Order 13084
Under E.O. 13084, EPA may not issue a regulation that is not
required by statute, that significantly affects 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. If the mandate is unfunded,
EPA must provide to the Office of Management and Budget, in a
separately identified section of the preamble to the rule, a
description of the extent of EPA's prior consultation with
representatives of affected tribal governments, a summary of the nature
of their concerns, and a statement supporting the need to issue the
regulation. In addition, Executive Order 13084 requires EPA to develop
an effective process permitting elected and other representatives of
Indian tribal governments ``to provide meaningful and timely input in
the development of regulatory policies on matters that significantly or
uniquely affect their communities.''
Today's rule does not significantly or uniquely affect the
communities of Indian tribal governments. This action does not involve
or impose any requirements that affect Indian Tribes. Accordingly, the
requirements of section 3(b) of E.O. 13084 do not apply to this rule.
E. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) generally requires an agency
to conduct a regulatory flexibility analysis of any rule subject to
notice and comment rulemaking requirements unless the agency certifies
that the rule will not have a significant economic impact on a
substantial number of small entities. Small entities include small
businesses, small not-for-profit enterprises, and small governmental
jurisdictions. This final 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 approve 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
annual costs to State, local, or tribal governments in the aggregate;
or to private sector, of $100 million or more. Under Section 205, EPA
must select the most cost-effective and least burdensome alternative
that achieves the objectives of the rule and is consistent with
statutory requirements. Section 203 requires EPA to establish a plan
for informing and advising any small governments that may be
significantly or uniquely impacted by the rule.
EPA has determined that the approval action promulgated does not
include a Federal mandate that may result in estimated annual costs of
$100 million or more to either State, local, or tribal governments in
the aggregate, or to the private sector. This Federal action approves
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.
List of Subjects in 40 CFR Part 52
Environmental protection, Air pollution control, Hydrocarbons,
Incorporation by reference, Intergovernmental relations, Nitrogen
dioxide, Ozone, Particulate matter, Reporting and recordkeeping
[[Page 59928]]
requirements, Sulfur oxides, Volatile organic compounds.
Authority: 42 U.S.C. 7401 et seq.
Dated: October 29, 1998.
Laura Yoshii,
Acting Regional Administrator, Region IX.
[FR Doc. 98-29818 Filed 11-5-98; 8:45 am]
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