Federal Operating Permits Program

 [Federal Register: July 1, 1996 (Volume 61, Number 127)]
[Rules and Regulations]
[Page 34201-34249]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]



ENVIRONMENTAL PROTECTION AGENCY
40 CFR Parts 9, 55 and 71
[FRL-5526-7]
RIN 2060-AD68
 
Federal Operating Permits Program

AGENCY: Environmental Protection Agency (EPA).
ACTION: Final rule.



SUMMARY: This action promulgates regulations setting forth the 
procedures and terms under which the Administrator will administer 
programs for issuing operating permits to covered stationary sources, 
pursuant to title V of the Clean Air Act as amended in 1990 (Act). 
Although the primary responsibility for issuing operating permits to 
such sources rests with State, local, and Tribal air agencies, EPA will 
remedy gaps in air quality protection by administering a Federal 
operating permits program in areas lacking an EPA-approved or 
adequately administered operating permits program. Federally issued 
permits will clarify which requirements apply to sources and will 
enhance understanding of and compliance with air quality regulations.

EFFECTIVE DATE: July 31, 1996.

FOR FURTHER INFORMATION CONTACT: Candace Carraway (telephone 919-541-
3189) or Kirt Cox (telephone 919-541-5399), U. S. Environmental 
Protection Agency, Office of Air Quality Planning and Standards, 
Information Transfer and Program Integration Division, Mail Drop 12, 
Research Triangle Park, North Carolina 27711.

SUPPLEMENTARY INFORMATION:

Docket

    Supporting information used in developing the promulgated rules is 
contained in Docket No. A-93-51. Supporting information used in 
developing 40 CFR part 70 is contained in Dockets No. A-90-33 and No. 
A-93-50. These dockets are available for public inspection and copying 
between 8:30 a.m. and 3:30 p.m. Monday through Friday at EPA's Air 
Docket, Room M-1500, Waterside Mall, 401 M Street SW, Washington, D.C. 
20460. A reasonable fee may be charged for copying.

Background Information Document

    A background information document (BID) for the promulgated rule 
may be obtained from the docket. Please refer to ``Federal Operating 
Permits Program - Response to Comments.'' The BID contains a summary of 
the public comments made on the proposed Federal Operating Permits 
Program rule and EPA responses to the comments.

Regulated Entities

    Entities potentially regulated by this action are major sources, 
affected sources under title IV of the Act (acid rain sources), solid 
waste incineration units required to obtain a permit under section 129 
of the Act, and those areas sources subject to a standard under section 
111 or 112 of the Act which have not been exempted or deferred from 
title V permitting requirements. Regulated categories and entities 
include:


             Category                  Examples of regulated entities

Industry..........................  Major sources under title I or
                                     section 112 of the Act; affected   
                                     sources under title IV of the Act  
                                     (acid rain sources); solid waste   
                                     incineration units required to     
                                     obtain a permit under section 129  
                                     of the Act; area sources subject to
                                     new source performance standards or
                                     national emission standards for    
                                     hazardous air pollutants that are  
                                     not exempted or deferred from      
                                     permitting requirements under title
                                     V.



    This table is not intended to be exhaustive, but rather provides a 
guide for readers regarding entities likely to be regulated by this 
action. This table lists the types of entities that EPA is now aware 
could potentially be regulated by this action. Other types of entities 
not listed in the table could also be regulated. To determine whether 
your facility is regulated by this action, you should carefully examine 
the applicability criteria in section 71.3(a) of the rule. If you have 
questions regarding the applicability of this action to a particular 
entity, consult the person listed in the preceding FOR FURTHER 
INFORMATION CONTACT section or the EPA Regional Office that is 
administering the part 71 permit program for the State or area in which 
the relevant source or facility is located.
    Outline. The information presented in this preamble is organized as 
follows:

I. Background

II. Summary of Promulgated Rule

III. Significant Changes to the Proposed Rule
IV. Administrative Requirements

    A. Docket

    B. Executive Order 12286

    C. Regulatory Flexibility Act

    D. Paperwork Reduction Act

    E. Unfunded Mandates Reform Act

I. Background

A. Background of EPA's Development of the Proposed Part 71 Rule

    Title V of the Act requires that if a permits program meeting the 
requirements of title V has not been approved for any State by November 
15, 1995, EPA must promulgate, administer, and enforce a Federal title 
V program for that State (42 U.S.C. section 7661a(d)(3)). Thus, from 
the date of enactment of the 1990 Amendments to the Act, EPA was 
subject to a 5-year deadline to establish a Federal program for States 
that do not obtain EPA approval of their State programs within that 
time. The Act had also placed EPA under a 1-year deadline to promulgate 
regulations establishing the minimum elements of approvable State 
permit programs (42 U.S.C. section 7661a(b)). The EPA promulgated its 
regulations establishing these criteria, codified at 40 CFR part 70 
(the part 70 rule), on July 21, 1992 (57 FR 32250). States were then to 
submit their title V programs for EPA review by November 15, 1993, and 
EPA was to approve or disapprove those submitted programs within 1 year 
of receiving them (42 U.S.C. section 7661a(d)(1)). Thus, under the 
temporal scheme of title V, EPA was to approve or disapprove timely 
submitted State title V programs by November 15, 1994, exactly 1 year 
before EPA's duty to establish a Federal program for unapproved States 
would ripen.

    Almost immediately upon promulgation of part 70, numerous industry, 
State and local government, and environmentalist petitioners challenged 
EPA's final rule in litigation in the Court of Appeals. See Clean Air 
Implementation Project v. EPA, No. 92-1303 (D.C. Cir.). Petitioners 
identified dozens of issues to which they objected in the part 70 rule, 
and EPA decided to conduct broad-based settlement discussions with all 
petitioners concerning these issues. These discussions occurred for 
over a year following the commencement of the litigation, and resulted 
in EPA, with the consultation of all of the litigants, developing 
proposed revisions to many provisions in the part 70 rule. These 
provisions mainly concerned the flexibility provisions of part 70, 
which governed when permits would need to be revised to reflect changes 
in operation at sources, and the procedures by which permits would be 
revised. On August 29, 1994, EPA published proposed substantial 
revisions to part 70 reflecting the outcome of these discussions (59 FR 
44460) (hereafter ``August 1994 proposed revisions to part 70''). That 
proposal reflected EPA's

[[Page 34203]]

most current thinking at the time concerning the proper implementation 
of title V, and departed in numerous respects from positions taken in 
the existing promulgated part 70 rule.

    When EPA began developing part 71 in the fall of 1993, settlement 
discussions concerning part 70 were still ongoing and were yielding 
what appeared to be fruitful results. The Agency believed at the time 
that any needed revisions to part 70 would be finalized well in advance 
of the deadline for establishing any necessary Federal programs, and so 
decided to develop part 71 based on contemplated proposed revisions to 
part 70, as EPA wished to model part 71 on its long-term implementation 
goals for title V, rather than on provisions of a part 70 rule that EPA 
did not believe would remain as promulgated in the current rule.
    When EPA published its proposed revisions to part 70 in August 
1994, the Agency still believed that the revisions would be finalized 
in time for EPA to base its part 71 Federal program rule on the revised 
part 70. Consequently, when EPA published its proposed part 71 
regulations on April 27, 1995, the proposal was based on the August 
1994 proposed revisions to part 70 (60 FR 20804; hereafter, ``part 71 
proposal''). The part 71 proposal thus contained provisions concerning 
critical definitions under title V, the scope of applicability of the 
program to sources, requirements governing applications and permit 
content, and, most significantly, operational flexibility and permit 
revisions that departed from the current part 70 rule's corresponding 
provisions. In the proposal notice, the Agency specifically solicited 
comment on whether the Agency had appropriately based part 71 upon the 
relevant provision of the existing part 70 rule and the recently 
proposed revision to part 70. See 60 FR at 20805.
    At the time of proposal of part 71, the Agency was aware of many 
adverse comments on the August 1994 proposed revisions to part 70, and 
EPA had engaged in discussions with stakeholders to obtain 
recommendations for publishing a supplemental proposal to revise the 
flexibility provisions of part 70. See 60 FR at 20805, 20817. The part 
71 proposal notice indicated that the Agency believed it might not be 
possible to promulgate final permit revision procedures for part 71, in 
light of the ongoing discussions to develop part 70 permit revision 
procedures in time to meet the statutory deadline for establishing 
Federal programs in States lacking approved part 70 programs. As a 
result, the notice suggested that EPA may have to finalize the part 71 
rule in two phases, the first without any provisions for revising 
permits, which would be addressed in a later supplemental proposal. Id. 
Indeed, EPA's supplemental proposal for both parts 70 and 71, published 
on August 31, 1995, described how part 71's future permit revision 
procedures would be modelled upon the part 70 procedures for permit 
revisions proposed in that notice (60 FR 45530; hereafter, ``August 
1995 supplemental proposal'').

B. The Need for Part 71 To Facilitate Transition

    In the part 71 proposal notice, EPA stressed the need for 
implementation of part 71 to facilitate a smooth transition to State 
implementation of title V through approved part 70 programs. See 60 FR 
at 20805, 20816. The EPA continues to believe that Congress envisioned 
that States would have primary responsibility for implementing title V, 
just as they do for implementing much of the rest of the Act. See, for 
example, section 101(a)(3) of the Act, in which Congress found that air 
pollution prevention and air pollution control at its source is the 
primary responsibility of States and local governments (42 U.S.C. 
section 7401(a)(3)). Note also that under title V of the Act, Congress 
gave States the initial opportunity to develop and administer title V 
programs, while directing EPA to function as a backstop if States are 
unable to adopt provisions under State law to take on title V 
responsibilities, rather than directing EPA to establish the Federal 
program first and then allowing States to apply to take over title V 
administration, as under prior permitting programs such as the 
prevention of significant deterioration (PSD) and the national 
pollutant discharge elimination system (NPDES) under the Clean Water 
Act.

    The EPA believes that granting States primary responsibility to 
implement title V makes good policy sense. States are far better 
positioned than EPA to administer permitting programs covering their 
resident sources for several reasons. First, States are more familiar 
with the operational characteristics of resident sources, and with the 
applicable requirements to which they are subject. In having had the 
lead on developing State implementation plans (SIP's) and implementing 
other provisions of the Act that apply to these sources, States have 
developed substantial expertise in, among other things, running air 
permit programs that govern new construction and changes in emissions 
of air pollutants such as the new source review (NSR) and PSD programs. 
States have developed enforcement programs based on this structure, and 
are able to coordinate their permitting programs with the goals and 
needs of their overall air pollution control programs. Finally, 
compared to EPA Regional offices, States are simply closer to their 
sources, have greater resources, and are better able to respond to the 
regulated community and its needs for expeditious permit processing.
    In light of this, EPA has repeatedly stated its belief that 
federally-implemented part 71 programs would be of short duration, 
lasting only until the few remaining States that have not developed 
approvable part 70 programs are able to submit title V programs that 
meet the requirements of the Act. Rather than viewing part 71 only as a 
means of exerting leverage in States that have not yet adopted adequate 
part 70 programs, EPA has also viewed part 71 as an opportunity to aid 
States in taking up responsibility to implement title V. To this end, 
EPA has attempted to structure the rule so that States in which part 71 
programs are established will be able to use the program as an aid to 
adopting and implementing their own part 70 programs. For example, 
today's rule provides that States can take delegation of administration 
of the Federal program in their States. If a State that for whatever 
reason has not been successful in developing its own statutes and 
regulations to implement title V is nevertheless capable of running a 
Federal program, EPA sees no reason not to offer the State the 
opportunity to more efficiently run the permit program than EPA 
believes the Agency could. The EPA also believes that the experience of 
running the Federal program may assist States in overcoming any 
remaining hurdles that have so far prevented them from adopting 
adequate title V programs under State law.

C. Basing Part 71 on the Part 70 Program

    In the part 71 proposal notice, EPA stated its view that it is 
appropriate to model part 71 procedures on those required by part 70, 
in order to promote national consistency between title V programs that 
are administered throughout the country. See 60 FR at 20816. Such 
national consistency would ensure that sources are not faced with 
substantially different programs simply because EPA, as opposed to 
State agencies, is the relevant title V permitting authority, would 
promote uniformity in affected State and public participation, and 
would provide a level playing field for sources. Basing part 71 on part 
70 would also encourage States

[[Page 34204]]

that are still developing their title V programs to take delegation of 
the part 71 program, as it would be more consistent with the programs 
they are preparing to implement under State law. States taking 
delegation would in turn ensure smoother transition to State 
administration of part 70 programs, as sources would have already 
become familiar with the State as the title V permitting authority and 
would not need to restart their permit application process anew when 
the State program receives EPA approval.
    Since at the time the part 71 proposal was being developed it 
appeared to EPA that part 70 would soon be revised in many significant 
respects, EPA chose to base the proposal upon the recent proposed 
revisions to part 70, rather than on the existing promulgated rule. 
This was due in part to the fact that the August 1994 proposed 
revisions to part 70 addressed a number of basic issues under title V 
that necessarily would govern how those issues are addressed in part 71 
(such as the definition of major source and the necessary provisions to 
implement section 502(b)(10) of the Act), and in part to the Agency's 
wish to provide in the Federal rule many of the benefits of the August 
1994 proposed revisions to part 70. As noted above, however, EPA 
specifically asked commenters to address whether EPA had 
inappropriately either followed or departed from the approaches taken 
in both the current part 70 rule and its proposed revisions.
    Echoing their comments on the August 1994 proposed revisions to 
part 70, industry commenters unanimously argued that the permit 
revisions procedures contained in the part 71 proposal were too complex 
and confusing and would hinder sources' abilities to make rapid changes 
in response to market needs. In addition, most industry commenters 
presented three general arguments in response to EPA's proposal to 
establish a uniform national part 71 rule based on the August 1994 
proposed revisions to part 70. The first type of argument was that EPA 
should not promulgate a uniform national part 71 rule at all, but 
rather should develop part 71 programs case-by-case, taking into 
account the specific characteristics of the State's existing air 
program, and basing the State's part 71 program as much as possible on 
the State's part 70 program that it has developed to date and that EPA 
had not found to be inadequate. According to this argument, the best 
way to facilitate transition from Federal to State implementation of 
title V is to make sure the Federal and State programs are virtually 
identical in each relevant State, even if that means the Federal 
programs would differ from State to State. It would follow that EPA 
should approve whatever adequate elements a State had adopted for its 
title V program, and then only fill the remaining gaps with Federal 
provisions as necessary. This argument also held that section 502 of 
the Act actually requires a case-by-case approach to developing part 71 
programs for States, and that the Act does not authorize EPA to 
promulgate a nationally uniform rule.

    While EPA agrees that in theory the smoothest transition from 
Federal to State implementation might occur where the Federal program 
is identical to the State's, the Agency does not agree that it is 
inappropriate to promulgate a nationally uniform rule for part 71. At 
the outset, EPA disagrees with the assertion that the Agency lacks 
legal authority to establish a nationally uniform rule for part 71. 
While section 502(d)(3) of the Act does require EPA to promulgate, 
administer and enforce a title V program ``for'' any State that does 
not obtain part 70 approval, 42 U.S.C. section 7661a(d)(3), that 
language does not compel a separate State-by-State approach to 
establishing a Federal title V program; nor does it compel a Federal 
program that is based on the State's existing but as yet unapproved 
State program. Indeed, EPA would be hard-pressed to base a Federal 
program on a State program where no State program has ever been adopted 
or submitted for EPA evaluation. Even if a State had adopted and 
submitted a program, EPA stresses that the Agency can only evaluate the 
adequacy of State programs through notice and comment rulemaking, which 
might not occur before a Federal program is due. The EPA believes 
Congress must have recognized the possibility that EPA would be called 
upon to establish a Federal program even where a State has never 
adopted any State program of its own or where a program had not been 
submitted in time for EPA to find it adequate; in such situations, it 
would be impossible for EPA to base the Federal program on the State's. 
The EPA also believes that the resource burden of establishing and 
implementing different case-by-case programs for States would overwhelm 
EPA Regional offices and establishing a generic template for part 71 is 
a far more efficient use of Agency resources to get the Federal program 
up and running. The EPA has consequently concluded that a nationally 
uniform regulation is necessary for purposes of carrying out the 
Agency's functions under title V. Section 301(a)(1) of the Act 
authorizes EPA to prescribe such regulations as are necessary to carry 
out the Administrator's functions under the Act (42 U.S.C. section 
7601(a)(1)). Thus, EPA believes it has ample statutory authority to 
establish the most efficient and nationally consistent part 71 
regulation possible. Finally, EPA notes that EPA's other permitting 
programs under its environmental statutes, such as the NPDES program 
and the PSD program, are governed by nationally uniform regulations, 
implementation of which have been very successful. The EPA sees no 
reason to depart from this established approach for purposes of running 
Federal title V programs, especially since Congress clearly did 
anticipate that EPA would first address title V through establishing 
regulations that would govern the minimum elements of title V programs 
to be administered by any air pollution control agency. See section 
502(b) of the Act, 42 U.S.C. section 7661a(b).
    The second type of industry argument in response to basing the part 
71 proposal on the proposed revisions to part 70 stressed that EPA 
should delay promulgation of any part 71 rule until the revisions to 
part 70 are finalized. This argument pointed out that promulgating part 
71 based on the August 1994 proposed revisions to part 70 would result 
in the part 71 rule being based on an approach that the Agency itself 
had begun to revise in developing the supplemental proposed revisions 
to part 70 (which were eventually published just 4 months after the 
date of the part 71 proposal). The argument noted that since EPA is 
envisioning substantial changes to the part 70 rule, the part 71 rule 
should not finalize title V issues that will remain in transition until 
the part 70 rule is finally revised. This argument also specifically 
responded adversely to EPA's statement in the proposal that it may be 
necessary to split finalization of part 71 into two phases in which the 
operational flexibility and permit revision procedures would remain 
reserved until a second phase. In the view of these commenters, such 
provisions are critical components of any part 71 rule that is adopted, 
and it would not be appropriate to leave them out of part 71 for any 
unspecified time. This argument also stated that finalizing part 71 now 
based upon the proposed revisions to part 70 would actually impede 
transition to approved State part 70 programs, since the Federal 
program, and the approved State program based on the current part 70 
that replaces it, would take very different approaches to such 
fundamental issues as applicability of the program, operational 
flexibility

[[Page 34205]]

and permit revision procedures. Finally, this argument offered a theory 
that title V actually does not require EPA to adopt part 71 programs 
for States until May 15, 1997; under this theory, a commenter argued 
that the Act actually gives States until May 15, 1995, rather than 
November 15, 1993, to submit initial title V programs, since States 
have 18 months following the first ``due date'' to submit any remedies 
to deficient programs and avoid sanctions that would fall after that 
18-month period. The commenter would interpret the date on which the 
18-month period expires as the date referred to in section 502(d)(3) 
and argues that EPA is not required to promulgate a Federal program 
until 2 years after the expiration of the 18-month period.
    First, EPA is not persuaded by the commenter's argument that part 
71 programs are not due until May 15, 1997. Section 502(d)(1) of the 
Act clearly provides that States are to submit their title V programs 
``[n]ot later than 3 years after the date of enactment of the Clean Air 
Act Amendments of 1990,'' 42 U.S.C. section 7661a(d)(1), which occurred 
on November 15, 1990. Moreover, section 502(d)(3) clearly refers to 
``the date required for submission of such a program under paragraph 
(1) (of section 502),'' 42 U.S.C. section 7661a(d)(3), as the trigger 
for the 2-year period after which EPA must establish Federal programs. 
There is no reference to any 18-month grace-period in section 
502(d)(3), and EPA disputes the assertion that the date on which a 
sanctions clock expires under section 502(d)(2) can be viewed as the 
``real'' deadline for submission of State programs in the face of the 
plain language of section 502(d)(1) and section 502(d)(3)'s reference 
to the deadline in section 502(d)(1). Thus, while EPA is sympathetic to 
concerns that finalizing part 71 in advance of the Agency finally 
revising part 70 could result in the Agency promulgating provisions 
that are essentially moving targets in the Federal rule, EPA does not 
believe it has the authority to delay issuance of part 71 beyond the 
deadline prescribed by Congress. Moreover, as a policy matter, EPA 
believes it is necessary to put part 71 in place to aid States that to 
date have unsuccessfully struggled to develop approvable title V 
programs, as it is a potential vehicle for State administration of 
title V (through delegation of part 71) even where obstacles remain 
that block certain States from obtaining part 70 approval. The EPA does 
not believe that the environmental benefits of title V should be 
delayed simply due to the fact that some States have not been 
successful at developing title V programs. Moreover, EPA does not feel 
it would be appropriate to attempt to justify delaying promulgation and 
implementation of the Federal program because of the continuing 
difficulties in revising the part 70 rule. However, EPA is persuaded by 
commenters that the part 71 rule should not contain gaps to be filled 
in at a second stage for provisions for operational flexibility and 
permit revisions, and is sympathetic to concerns that basing these 
provisions on the August 1994 proposed revisions to part 70 might even 
interfere with transition to State programs approved under the current 
part 70 rule. These latter points are discussed in more detail below.
    The third general type of industry argument in response to basing 
part 71 on the August 1994 proposal was that if EPA must establish a 
Federal program now, it should do so based on the existing part 70 
rule, and revise the program later when part 70 is revised. This 
argument recognized that EPA may simply be unable in certain cases to 
base a State-specific part 71 program on an existing State program, but 
stressed the fact that any program that the State is still struggling 
to adopt would be based on the existing part 70 rule, rather than on 
the proposed revisions thereto. The argument pointed out the fact that 
under the August 1994 proposed revisions to part 70, EPA planned to 
allow States several years following final promulgation before States 
would be expected to implement new part 70 programs based on the 
revised rule. Thus, commenters observed, States would likely be 
developing and implementing part 70 programs based on the July 1992 
rule for considerable time. In light of this, it would actually 
interfere with smooth transition from Federal to State implementation 
to base part 71 on the future part 70 rule, especially in light of the 
fact that at this point how part 70 will be ultimately revised is only 
speculative; rather, transition could be facilitated only where the 
Federal rule resembles the model that the State rule is expected to 
follow. States might be less inclined to take delegation of a Federal 
rule that does not resemble existing part 70 and the State analogues 
that are being developed, and thus sources would be more likely to be 
faced with different permitting authorities under part 71 and part 70 
programs. Moreover, the relevant guidance that EPA had issued to date 
to aid implementation of the current rule, such as the Agency's ``White 
Paper for Streamlined Development of Part 70 Permit Applications'' 
(herein referred to as the ``first white paper'') and the March 5, 1996 
guidance document entitled ``White Paper Number 2 for Improved 
Implementation of the Part 70 Operating Permits Program, could be less 
valuable as an aid in implementing a Federal rule that is not based on 
the current part 70, and both sources and part 71 permitting 
authorities could be forced to start somewhat from scratch in 
implementing the program.

    The EPA agrees that the most appropriate course of action is to 
promulgate, on an interim basis, part 71 based on the current part 70 
rule. In reaching this conclusion, EPA was persuaded by concerns about 
impeding transition to part 70 approval under the current rule and by 
industry concerns about issuing a rule containing gaps regarding 
operational flexibility and permit revisions. Moreover, as many issues 
in part 70 are still outstanding following the August 1994 and August 
1995 proposals, and as many of those issues concern key definitions and 
procedures under title V, it would be premature for EPA to finalize 
part 71 based upon the proposed revisions to part 70 until it makes 
final decisions on these issues in part 70. Thus, the only way EPA can 
fulfill its mandate to step in as the title V permitting authority for 
States that have not obtained part 70 approval at this time, and to do 
so by establishing a complete part 71 program that provides the 
flexibility needed by industry and mandated by title V, is to 
promulgate the rule based upon the current part 70 regulation. The EPA 
stresses, however, that by finalizing this interim approach in part 71, 
the Agency does not preclude itself from revising part 71 in the future 
as based on appropriate aspects of either the August 1994, April 1995, 
or August 1995 proposals for parts 70 and 71. In fact, EPA intends to 
issue a second round of final rulemaking for part 71 (hereafter ``phase 
II rulemaking) in the future once the Agency has resolved with relevant 
stakeholders the outstanding issues and is prepared to promulgate final 
revisions to part 70. As a general matter, EPA stresses that the most 
current reflection of the Agency's intended policy regarding many of 
these provisions is the August 31, 1995 supplemental proposal. 
Consequently, while the provisions adopted today in part 71 that relate 
to outstanding issues under the definitions, applicability, permit 
application, permit content, permit revisions and reopenings, and 
affected State and EPA review sections are consistent with the 
corresponding

[[Page 34206]]

provisions in the existing part 70 rule, rather than with provisions in 
the proposals mentioned above, it should be expected that EPA will 
issue a second final rulemaking, without a second round of proposal, to 
conform part 71 to the revised part 70 rule when the Agency is prepared 
to issue it.

    The EPA believes that this approach is a logical outgrowth of the 
part 71 proposal issued in April 1995. While that proposal only 
contained regulatory provisions based on the August 1994 proposed 
revisions to part 70, EPA explicitly solicited comment on whether the 
proposal was in any way inappropriately inconsistent with the current 
part 70 rule. Clearly, the commenters noted such inconsistencies, and 
the proposal facilitated meaningful comment on what approach the Agency 
should take in promulgating part 71 vis-a-vis the outstanding issues in 
the part 70 revision process. As discussed above, the proposal enabled 
industry commenters to fall into three basic categories in response to 
the proposal--in fact, many commenters advanced more than one of the 
basic types of arguments in their comments, realizing that the 
different arguments might have different force depending upon the 
extent to which States had actually developed and submitted their own 
programs. The approach adopted today was urged by numerous industry 
commenters as the most reasonable in light of the need to issue a part 
71 program now, as opposed to leaving gaps to be filled in later at a 
second stage of final rulemaking. In addition, today's rule is 
consistent with the existing part 70 rule under which States continue 
to submit programs, and under which EPA continues to approve those 
programs. Thus, EPA does not believe that a second round of proposed 
rulemaking is necessary before finalizing part 71 to conform to the 
Agency's currently effective regulation implementing title V, part 70.
    In the following sections of this notice, the specific provisions 
that are being finalized based upon current part 70 rather than upon 
the provisions of the part 71 proposal are identified and further 
discussed. For each of them, the general governing principle is that 
while the Agency has proposed to revise part 70 to modify many of the 
provisions corresponding to the part 71 provisions adopted today, EPA 
is not yet prepared to adopt final positions on those issues and so, in 
the interests of promoting smooth transition from Federal to State 
implementation of title V, is choosing to issue, on an interim basis, a 
part 71 rule that matches as closely as possible the existing part 70 
rule. The EPA's finalization of those provisions today in no way 
reflects the Agency's ultimate decision to renounce any of the 
positions articulated in the proposed revisions to part 70 or the 
corresponding proposals for part 71.

II. Summary of Promulgated Rule

A. Applicability

    The Federal operating permits program requires all part 71 sources 
to submit permit applications to the permitting authority no later than 
within 1 year of the effective date of the program. The operating 
permit program applies to the following sources:

 Major sources, defined as follows:
    a. Air toxics sources, as defined in section 112 of the Act, with 
the potential to emit 10 tons per year (tpy), or more, of any hazardous 
air pollutant (HAP) listed pursuant to 112(b); 25 tpy, or more, of any 
combination of HAP listed pursuant to 112(b); or a lesser quantity of a 
given pollutant, if the Administrator so specifies (501(2)(A)).
    b. Sources of air pollutants, as defined in section 302, with the 
potential to emit 100 tpy, or more, of any pollutant (501(2)(B)).
    c. Sources subject to the nonattainment area provisions of title I, 
part D, with the potential to emit, depending on the nonattainment area 
designation 10 or more tpy of volatile organic compound (VOC) or oxides 
of nitrogen, 50 or more tpy of carbon monoxide, and seventy or more tpy 
of particulate matter (501(2)(B)).

 Any other sources subject to a standard under section 111 or 
112.

 Sources subject to the acid rain program (501(1)).
 Any source subject to the PSD program or the NSR program under 
title I, part C or D.

 Any other stationary source in a category EPA designates, in 
whole or in part, by regulation, after notice and comment.
    For purposes of determining applicability, a source's total 
emissions of a pollutant are found by summing the potential emissions 
of that pollutant from all emissions units under common control at the 
same plant site. If a source is a major source, even if only due to the 
total emissions from one pollutant, then a source must submit (with few 
exceptions) a permit application that includes all emissions of all 
regulated air pollutants from all emissions units located at the plant.
    Part 71 follows the approach of part 70 in deferring nonmajor 
sources from permitting requirements. The permitting requirements for 
nonmajor sources subject to a standard under section 111 or 112 of the 
Act prior to July 21, 1992 are deferred for 5 years from the effective 
date of the first approved part 70 program that deferred nonmajor 
sources. The EPA may determine on a case-by-case basis permitting 
requirements for nonmajor sources when they become subject to new 
section 111 or 112 standards. Sources subject to the new source 
performance standard for new residential wood heaters or the national 
emission standards for hazardous air pollutants for asbestos as it 
applies to demolition and renovation activities are permanently exempt 
from permitting requirements.

B. Program Implementation

    The EPA will administer a part 71 program for those portions of a 
State that lack EPA approval for its operating permits program or for a 
State that fails to adequately administer and enforce an approved 
program. However, the requirement that EPA establish a Federal program 
for States lacking a fully approved program is suspended if a State 
program is granted interim approval. The EPA will also administer part 
71 programs in Tribal areas. Should a part 71 program become effective 
prior to the issuance of part 70 permits to all sources (under an 
approved part 70 program), EPA will require part 71 permit applications 
from sources that have not received part 70 permits. Applications shall 
be due within a year of the effective date of the part 71 program. The 
EPA will take final action on at least one-third of the applications 
annually.

    Section 71.4 also establishes procedures that would be used for 
issuing permits to certain sources located on the Outer Continental 
Shelf (OCS) and after EPA objects to a proposed or issued State permit.
    The EPA may also delegate the responsibility for administering the 
part 71 program to the State or eligible Tribe if the requirements of 
section 71.10 have been met. However, delegation will not constitute 
approval of a State or Tribal operating permits program under part 70.
    The EPA will suspend the issuance of part 71 permits upon 
publication of notice of approval of a State or Tribal operating 
permits program under part 70. The EPA or the delegate agency will 
continue to administer and enforce part 71 permits until they are 
replaced by permits issued under the approved part 70 program.
    The EPA will publish a notice in the Federal Register informing the 
public of the effective dates or delegation of any part 71 programs for 
States, Tribal areas,

[[Page 34207]]

and OCS sources. Where practicable, EPA will also publish notice in a 
newspaper of general circulation within the area subject to the part 71 
program and will notify the affected government.

C. Permit Applications

    Each source meeting the applicability criteria of this part is 
required to submit timely and complete information on standard 
application forms provided by the permitting authority. Streamlined 
forms for electronic formats may be provided.
    An initial part 71 permit application is required within 12 months 
of the later of:


 The effective date of this part in a State, Tribal area, or OCS 
area where a source is located, unless the source has an existing part 
70 permit;

 The expiration of any deferral for a nonmajor source;
 The date a source commences operation; or
 The date a source meets any of the applicability criteria of 
section 71.3.

    Sources with part 70 permits in force at the time part 71 becomes 
effective in the area where they are located would not have to apply 
for a part 71 permit until their part 70 permit expires. Prior to its 
expiration, the part 70 permit may be modified by EPA.
    Sources would be notified of the requirement to submit an 
application at least 180 days prior to when the application is due.
    The permitting authority will perform a completeness determination 
within 60 days of receipt of an application, or the application will be 
deemed complete by default. A complete application would contain all 
the information needed to begin processing the permit application, 
including, at a minimum, a completed standard application form (or 
forms) and a compliance plan.

    The compliance plan describes how the source plans to maintain or 
to achieve compliance with all applicable air quality requirements 
under the Act. This plan must include a schedule of compliance and a 
schedule for the source to submit progress reports to the permitting 
authority. Each source must submit a compliance certification report in 
which it certifies its status with respect to each requirement, and the 
method used to determine the status.

    Each operating permit application, report, or compliance 
certification submitted pursuant to part 71 must include a 
certification signed by a responsible official attesting to the truth, 
accuracy, and completeness of the information submitted.
    Applicants may be required to update information in the application 
after the filing date and prior to the release of the draft permit.

D. Permit Content

    Part 71 permits must meet all applicable requirements of the Act 
and, among other things, must contain:


 A 5-year term for acid rain sources, up to a 12-year term for 
certain municipal waste combustors, and up to a 5-year term for all 
other sources.

 Limits and conditions to assure compliance with all applicable 
requirements under the Act.

 A schedule of compliance, where applicable.
 Inspection, entry, monitoring, compliance certification, 
recordkeeping, and reporting requirements to assure compliance with the 
permit terms and conditions.

 A provision describing permit reopening conditions.
 Provisions under which the permit can be revised, terminated, 
modified, or reissued for cause.

 Provisions ensuring operational flexibility so that certain 
changes can be made within a permitted facility without a permit 
revision.

 A provision that nothing in the permit or compliance plan 
affects allowances under the acid rain program.
    All terms and conditions in a part 71 permit, including any 
provisions designed to limit a source's potential to emit, are 
enforceable by the Administrator and citizens under the Act.
    Like part 70, part 71 would allow sources to apply for a permit 
shield, i.e., a provision in the permit that states that if the source 
complies with terms and conditions of the permit, the source shall be 
deemed in compliance with any applicable requirements reflected in the 
permit as of the date of permit issuance.

E. Permit Issuance and Review

    Regulations concerning the processes for permit issuance, review, 
renewal, revision, and reopening are found in sections 71.7 and 71.11. 
Briefly, these include:


 Action on Applications for Permit Issuance and Permit Renewal
    Section 71.7(a) describes the conditions that must be satisfied 
before EPA or a delegate agency may issue a permit. These include 
receipt of a complete application, compliance with public participation 
requirements, and notification of affected States, Indian Tribes, and 
EPA (if the program has been delegated). Except during the initial 
phase-in of the program, the permitting authority is required to act on 
permit applications within 18 months after receiving a complete 
application.

    The timely submittal of a complete application and any additional 
required information creates a ``shield'' against enforcement for 
failure to have a part 70 or part 71 permit. Permits being renewed are 
subject to the same procedural requirements that apply to initial 
permit issuance, as provided in section 71.7(c). The administrative 
procedures for permit issuance are contained in section 71.11 and are 
generally based on analogous provisions governing other EPA permitting 
programs at 40 CFR part 124.

 Permit Revisions

    Sections 71.7 (d) and (e) outline the mechanisms for permit 
modification and administrative amendments that are needed to revise 
part 71 permits to accommodate changes that would otherwise violate 
terms and conditions of the permit.

    Administrative amendments can be accomplished by the permitting 
authority without public or EPA review. These permit revisions include 
correction of typographical errors, changes in address or source 
ownership, as well as incorporation of requirements established under 
State preconstruction review that meet certain procedural and 
compliance requirements.

    If a change is not prohibited or addressed by the permit, the 
permittee may make the change after submitting a notice, and the permit 
is revised at renewal.

    The regulations establish minor and significant permit modification 
procedures for changes that go beyond the activities allowed in the 
original permit or that increase the total emissions allowed under the 
permit.

    Minor permit modifications reflect increases in permitted emissions 
that do not amount to modifications under any requirement of title I 
and that do not meet certain other requirements. Minor permit 
modification procedures require a source to provide advance notice of 
the proposed change, but allow a change to take effect prior to the 
conclusion of the revision procedures.

    A source that makes a change before the minor permit modification 
has been issued does so at its own risk. It is not protected from 
underlying applicable requirements by any shield. It is only afforded a 
temporary exemption from the formal requirement that it operate in 
accordance with the permit terms that it seeks to change in its 
modification application. Should the proposed permit modification be 
rejected, the source would be subject to enforcement

[[Page 34208]]

proceedings for any violation of these requirements.
    Significant permit modifications are inherently more complex, and 
will require additional time to accomplish. Permitting authorities will 
initiate their review of the proposed changes after receipt of an 
application.

    Sources subject to requirements of the acid rain program must hold 
allowances to cover their emissions of sulfur dioxide (SO<INF>2). 
Allowance transactions registered by the Administrator will be 
incorporated into the source's permit as a matter of law, without 
following either the permit modification or amendment procedures 
described above.

3. Reopening for Cause

    The permitting authority may terminate, modify, or revoke and 
reissue a permit for cause. Reopening and reissuing procedures follow 
the same procedures as apply to initial issuance. Advance notice is 
required before permit reopenings may be initiated.
    Section 71.7(f) requires that permits issued to major sources with 
3 or more years remaining in the permit's term be reopened to 
incorporate applicable requirements which are promulgated after the 
issuance of the permit. Revisions must be made as expeditiously as 
practicable, but no later than 18 months after the promulgation of such 
additional requirements.

4. Permit Notification to EPA and Affected States
    Consistent with 40 CFR section 70.8(b), EPA or the delegate agency 
would be required to provide notice of draft permits to all affected 
States and to certain Indian Tribes.

    Affected States are those whose air quality may be affected and 
that are contiguous to the State in which the source is located, or 
that are within 50 miles of the source. The permitting authority must 
give affected States an opportunity to submit written recommendations 
for the permit and notify any affected State in writing of any refusal 
to accept all of its recommendations.

    Although Indian Tribes are not considered affected States unless 
they establish their compliance with criteria for being treated in the 
same manner as States pursuant to section 301(d) of the Act, the Agency 
believes federally recognized Tribes should be given notice of draft 
permits that may be issued to sources that could affect Tribal air 
quality. The regulation requires that the permitting authority send 
such notices.

    The Act authorizes EPA to object to any permit that would not be in 
compliance with the applicable requirements of the Act. In the case of 
a delegated program, the permitting authority may not issue a part 71 
permit if the Administrator has objected to its issuance in writing 
within 45 days of receipt of the proposed permit.
5. Administrative and Judicial Review

    After the close of the public comment period on a draft permit, the 
permitting authority will issue a final permit decision. Within 30 days 
of the final permit decision, anyone who filed comments on the draft 
permit or participated in the public hearing may petition the 
Environmental Appeals Board (EAB) to review any condition of the 
permit. In general, the objections in the petition must have been 
raised during the public participation period on the permit. The 
petition will stay the effectiveness of the specific terms of the 
permit which are the subject of the request for review, pending 
conclusion of the appeal proceedings.

    The EAB will issue an order either granting or denying the petition 
for review. To the extent review is denied, the conditions of the final 
permit decision become final agency action and are subject to judicial 
review in the United States Court of Appeals under section 307(b) of 
the Act. The decision of the EAB to issue or deny the permit is also 
subject to judicial review.

    Interested persons (including permitees) are authorized to petition 
the Administrator to reopen an already issued permit for cause. 
Petitions would be required to be in writing and to contain facts or 
reasons supporting the request.

F. Permit Fees

    Section 71.9 establishes the Federal operating permits program fee 
requirements for owners or operators of part 71 sources. The fees must 
be sufficient to cover the permits program costs, including the 
following:


 Reviewing and acting on any permit, permit revision, or permit 
renewal, and processing permit reopenings.
 Administering the permit program.

 Implementing and enforcing the terms of any part 71 permit.
 Monitoring, modeling, manipulating, and tracking emissions.
 Providing support to small business stationary sources.
    Consistent with the two-phased approach to part 71 promulgation 
described in this notice, EPA is today implementing a two-phased 
approach to part 71 fee requirements. Phase I fee collection will be 
sufficient to cover Phase I costs. Since Phase II fee collection is 
associated with permit revision procedures, a fee amount for Phase II 
cannot be finalized in today's rule. The Phase II fee will add the 
costs for the permit revision procedures that are finalized in that 
rulemaking.

    The dollar per ton fee will vary depending on the implementation 
mechanism EPA uses to administer a part 71 program. A program that is 
administered completely by EPA would charge $32 per ton per year (ton/
yr). Permit fees for a program for which EPA relies on contractor 
assistance to the greatest extent possible would be approximately $57 
per ton/yr. Program costs (and fees) would vary among part 71 programs 
depending on the hourly rate paid to the contractor for its work on the 
particular State's part 71 program. The costs of a program that is 
staffed in part by EPA employees and in part by contractors or by the 
delegate agency would vary in accordance with the percentage of 
personnel time allocated to non-EPA staff and the hourly rate paid to 
the contractor for its work on the State's part 71 program.
    The EPA may suspend collection of part 71 fees for part 71 programs 
which are fully delegated to States and for which EPA incurs no 
administrative costs.

    The EPA may promulgate a separate fee schedule for a particular 
part 71 program if the Administrator determines that the fee schedule 
in the rule does not adequately reflect the cost of administering the 
program.

    Sources are required to submit fee calculation worksheets and fees 
at the same time as their initial permit applications are due and 
thereafter on an annual basis.

    Part 71 program costs and permit fees will be reviewed by the 
Administrator at least every 2 years, and changes will be made to the 
fee schedule as necessary to reflect permit program costs.

G. Federal Oversight of Delegated Programs

    Section 71.10 establishes the procedures EPA would follow when 
delegating the authority to administer a part 71 program to a State, 
eligible Indian Tribe, or other air pollution control agency. The EPA 
will delegate authority to run the program where possible in order to 
take advantage of existing expertise of the delegate agency or where it 
seems probable that the delegate agency's submitted part 70 program 
will be approved within a short time by EPA, provided in both cases 
that the delegate agency has the authority to administer the program 
that would be delegated.

[[Page 34209]]

    A delegate agency must submit a formal request for delegation and 
other documentation that shows the agency or eligible Tribe has 
adequate legal authority and capacity to administer and enforce the 
part 71 program. If the request for delegation is accepted, EPA and the 
delegate agency will enter into an agreement that sets forth the terms 
and conditions of the delegation.

    As part of its oversight of delegated programs, EPA would review 
copies of applications, compliance plans, proposed permits and final 
permits that the delegate agency would be required to send to EPA. The 
EPA would have 45 days in which to review proposed permits. If EPA 
objects to the issuance of a permit within that time, the delegate 
agency would be required to revise and resubmit the proposed permit to 
EPA.

    Delegation of a part 71 program would not relieve a State of its 
obligation to submit an approvable part 70 program, nor from any 
sanctions that the Administrator may apply for the State's failure to 
have an approved part 70 program.

H. Enforcement

    The Federal enforcement authority available under section 113 of 
the Act for violations of title V and the regulations thereunder 
provides broader enforcement authority than States are required to have 
under the part 70 regulations. Examples of the Federal enforcement 
authorities available under the Act include, but are not limited to, 
the authority to: (1) restrain or enjoin immediately any person by 
order or by suit in court from engaging in any activity in violation of 
the Act that is presenting an imminent and substantial endangerment to 
the public health or welfare, or the environment; (2) seek injunctive 
relief in court to enjoin any violation of the Act; (3) issue 
administrative orders that assess civil administrative penalties; (4) 
assess and recover civil penalties; and (5) assess criminal fines.

III. Significant Changes to the Proposed Regulations

A. Section 71.2--Definitions

    The Agency has adopted definitions in today's rulemaking that are 
consistent with and are mainly modelled on corresponding definitions in 
the current part 70 rule, rather than on the part 71 proposal. 
Consequently, many of the definitions adopted today differ from those 
contained in the part 71 proposal which were largely based upon the 
August 1994 proposed revisions to corresponding definitions in part 70 
which the Agency is not yet prepared to finalize.
    Several definitions found in the proposed section 71.2 have been 
revised to conform more closely to the definitions used in the current 
part 70 rule. These include ``affected State,'' ``applicable 
requirements,'' ``final permit,'' ``major source,'' ``permit 
revision,'' ``permitting authority,'' and ``responsible official,'' 
each of which is discussed briefly below. Similarly, EPA adopted 
definitions for ``permit modification'' and ``section 502(b)(10) 
change'' from the current part 70 rule, because these terms are 
integral parts of today's rulemaking, which is based on the existing 
part 70 regulations. Also, several definitions in the part 71 proposal 
describe terms and concepts that the Agency has concluded are either 
not necessary or are not ready to be finalized in today's rulemaking. 
The terms for which EPA has not adopted a definition include 
``insignificant activity or emissions,'' ``major new source review,'' 
``minor new source review,'' ``potential to emit,'' ``title I 
modification,'' and ``Tribal area.'' To the extent these proposed terms 
were based on the August 1994 proposed revisions to part 70, EPA will 
finally address them in the Phase II rulemaking.
    In addition, the Agency has retained several definitions found in 
the part 71 proposal that are not found in the current part 70 rule, 
but are needed for part 71. These include definitions for ``delegate 
agency,'' ``part 71 permit,'' ``part 71 program,'' and ``part 71 
source.'' The Agency has also adopted definitions for ``eligible Indian 
Tribe,'' ``Federal Indian reservation,'' and ``Indian Tribe,'' which 
were added to clarify which Tribes would be eligible to receive 
delegation of the part 71 program and to be considered ``affected 
States.''

    The part 71 proposal and the August 1995 supplemental proposal 
reflect the Agency's position on what definitions would be appropriate 
in conjunction with the permit revision procedures, operational 
flexibility provisions, and other provisions that have been proposed 
for finalization in the Phase II rulemaking. Subsequent to reviewing 
all of the comments on both of these proposals, EPA may finalize 
definitions that differ from those adopted today.

 Affected States

    a. Indian Tribes. The EPA received numerous comments from Indian 
Tribes suggesting that federally recognized Indian Tribes should be 
considered to be ``affected States'' if their air quality may be 
affected or the Tribal area is contiguous to the State in which the 
permittee is located or is within 50 miles of the permittee. They 
contended that Tribes should not have to meet any type of eligibility 
criteria in order to be considered an ``affected State.'' Contrary to 
the view of these commenters, the EPA interprets section 301(d)(2) of 
the Act as authorizing the Agency to treat Indian Tribes in the same 
manner as a State for purposes of being an ``affected State'' only when 
EPA has determined that the Indian Tribe has demonstrated that it has 
met the eligibility criteria of section 301(d)(2) of the Act. The 
second paragraph of the proposed definition of ``affected State'' was 
inconsistent with this interpretation in that it would have treated 
Tribes in the same manner as States if the permitting action concerned 
a source located in a Tribal area, regardless of the Tribe's 
eligibility status. Therefore, EPA has amended this paragraph to 
include the same eligibility requirement as the first paragraph. That 
is, that the Indian Tribe must have demonstrated that it has met the 
eligibility criteria of section 301(d)(2). However, in the interest of 
furthering government-to-government relationships with Tribes, EPA has 
adopted a provision in section 71.8 that requires the part 71 
permitting authority to provide notice of draft permits to any 
federally recognized Indian Tribe whose air quality may be affected by 
the permitting actions and whose reservation or Tribal area is 
contiguous to the jurisdiction in which the part 71 permit is proposed 
or is within 50 miles of the permitted source. (See discussion at 
section III.G. of this notice.)

    b. Local agencies. The proposed definition of ``affected State'' in 
the part 71 proposal added language not found in the current part 70 
definition of ``affected State'' to the effect that, when a part 71 
permit, permit modification, or permit renewal is proposed for a source 
located within the jurisdiction of a local agency, that agency would be 
considered an affected State. Today's rulemaking retains this approach 
because it pertains to a situation which is unique to part 71, i.e., 
when EPA administers a part 71 program in an area where the local 
agency would normally be the permitting authority of record under an 
approved part 70 program. The proposal also differed from today's 
rulemaking in that under the proposal, local agencies would not 
otherwise be considered affected States. Since the approach taken to 
such jurisdictions is an issue for both parts 70 and 71, it will be 
addressed in the Phase II rulemaking. In the interim, the proposed 
language has been deleted to comport with the current part 70 
definition.

[[Page 34210]]

2. Applicable Requirements

    The part 71 proposal expanded the part 70 definition of 
``applicable requirement'' to include the provision that any 
requirement enforceable by the Administrator and by citizens under the 
Act which limits emissions for the purpose of creating offset credits 
or avoiding any applicability requirement is itself an applicable 
requirement. This addition, while helpful for understanding what 
constitutes an applicable requirement, was based on the August 1994 
proposed revisions to part 70, which EPA is not yet prepared to finally 
promulgate. As such, EPA believes it is not appropriate to finalize 
this change for purposes of part 71 at this time, but intends to 
address this issue in the Phase II rulemaking. It was therefore deleted 
to comport with the current part 70 definition.
    The definition of ``applicable requirement'' in the part 71 
proposal also differed from the definition in the current part 70 rule 
in that it limited the title VI requirements that would have to be 
included in a title V permit. This proposed language, while consistent 
with the August 1994 proposed revisions to part 70, which, again, EPA 
is not yet prepared to finalize, was removed so that the definition 
would conform to the definition in the current part 70 regulation.
3. Final Permit

    The proposal contained a proposed definition of ``final action or 
final permit action.'' The final rule changes this term to ``final 
permit'' in order to better harmonize the definition with the term 
``final permit'' in the current part 70 regulation promulgated at 
section 70.2.

4. Major Source

    The proposed part 71 rule contained a definition of ``major 
source'' that was based on the proposed change to the term contained in 
the August 1994 proposed revisions to part 70. Since publication of the 
part 71 proposal, EPA has also proposed additional changes to the term 
in the August 1995 supplemental proposal for parts 70 and 71. The EPA 
is currently in the process of reviewing, evaluating and developing 
positions in response to comments on this very important term and other 
issues raised in the August 1995 proposal. Consequently, EPA is not yet 
prepared to promulgate part 71 in general, or the major source 
definition in particular, as based on the August 1994, April 1995 or 
August 1995 proposals. The only exception to this approach is in regard 
to source categories for which fugitive emissions are to be counted in 
determining whether a source is a major source under section 302 of the 
Act.

    Consistent with PSD and nonattainment NSR, current part 70 requires 
the counting of fugitive emissions from source categories which have 
been listed pursuant to section 302(j) in major source applicability 
determinations. See the definition of ``major source'' at 40 CFR 
section 70.2. The one difference, however, between the list of source 
categories under PSD and nonattainment NSR and current part 70 is in 
regard to the 27th category of sources that are required to count 
fugitive emissions. In parts 51 and 52, the 27th category is stated as 
follows:

    Any other stationary source category which, as of August 7, 
1980, is being regulated under section 111 or 112 of the Act.

    In current part 70, the 27th category reads as follows:

    All other stationary source categories regulated by a standard 
promulgated under section 111 or 112 of the Act, but only with 
respect to those air pollutants that have been regulated for that 
category;

    As can be seen from the above, one of the principal differences 
between these two paragraphs is the date of August 7, 1980, which is 
specified in the PSD and nonattainment NSR regulations, but is absent 
from the current part 70 regulation. The result of this difference is 
that part 70 literally requires sources to count fugitives even where 
those sources are not required to do so in determining whether they are 
major for purposes of PSD or nonattainment NSR. As stated in the 
preamble to the August 1994 part 70 proposal, EPA acknowledges that it 
did not follow the procedural steps necessary under section 302(j) to 
expand the scope of sources in this category for which fugitives must 
be counted in part 70 major source determinations. See memorandum of 
June 2, 1995, entitled ``EPA Reconsideration of Application of 
Collocation Rules to Unlisted Sources of Fugitive Emissions for 
Purposes of Title V Permitting,'' from Lydia Wegman, Deputy Director, 
Office of Air Quality Planning and Standards, to Regional Air 
Directors. Instead of perpetuating this problem by following this 
aspect of current part 70, and even though the Agency is not yet ready 
to finalize the approach taken in the August 1995 supplemental proposal 
for parts 70 and 71, EPA believes that an appropriate interim solution 
is to finalize this category similar to how it was proposed in the 
April 1995 part 71 proposal and consistent with the provisions in the 
PSD and nonattainment NSR regulations. As a result, the 27th category 
will read as follows:

    Any other stationary source category which, as of August 7, 
1980, is being regulated under section 111 or 112 of the Act.

Use of the above language best ensures that, until EPA is prepared to 
finalize part 70's proposed revisions, there will be no discrepancy 
between the treatment of fugitive emissions under PSD and nonattainment 
NSR and the corresponding provision in this phase I part 71 rule. This 
language further ensures that sources which are considered major 
sources under PSD and nonattainment NSR are also major sources under 
part 71. This consistency is compelled by section 501(2) which requires 
any stationary source to be considered major under title V if it is a 
major source under section 112 or a major stationary source under 
section 302 or part D of title I.

    It is important to remember that EPA has proposed additional 
modifications to the list of source categories, including this 27th 
category, in the August 1995 proposal for parts 70 and 71. However, as 
EPA is currently in the process of reviewing and evaluating comments 
regarding these revisions, EPA cannot at this time finalize any of 
these proposed modifications.

    The EPA stresses that the definition of major source in today's 
rulemaking does not constitute a decision to reject other proposed 
changes to the term contained in the recent proposals. Rather, EPA 
expects the Phase II part 71 rulemaking to make whatever changes to the 
term are necessary in order to maintain harmonization with part 70, if 
the part 70 definition of major source is ultimately revised as the 
Agency intends. In the meantime, however, in order to avoid delay in 
fulfilling the Agency's responsibilities under title V, and in order to 
avoid repeating a procedural mistake that occurred in the development 
of the first part 70 rule, EPA has concluded, in response to the 
commenters, that at this point it is most reasonable to promulgate a 
definition that is consistent with the major source definition 
contained in the current part 70 rule, except for the 27th category of 
sources listed pursuant to section 302(j). As EPA has already told 
States that they may receive interim approval of their State programs 
even if they do not literally match with current part 70's 27th 
category, due to EPA's concession that the Agency did not take the 
procedural steps necessary in part 70 to constitute a section 302(j) 
rulemaking, EPA believes it is reasonable to take this limited 
departure from part 70. The EPA will respond to specific comments on

[[Page 34211]]

the major source definition as proposed in April 1995 and August 1995 
in the context of finalizing the Phase II part 71 rule.
5. Permit Modification and Permit Revision
    For the purposes of this rulemaking, EPA adopted the definition of 
permit modification in the current part 70 regulation and revised the 
definition of ``permit revision'' to be consistent with the current 
part 70 definition.

6. Permitting Authority

    The final rule changes the proposed definition of ``permitting 
authority'' to more closely match the definition of the term currently 
promulgated at section 70.2.

7. Potential to Emit

    Today's rule does not include a final regulatory definition of the 
term ``potential to emit.'' The part 71 proposal contained a proposed 
definition of potential to emit that was based on the August 1994 
proposed revisions to part 70. The current part 70 definition of the 
term provides that physical or operational limits on a source's 
capacity to emit an air pollutant shall be considered part of the 
source's design if the limitation is enforceable by the Administrator. 
Under the proposed definition, the phrase ``and by citizens under the 
Act'' would have been added. The EPA is still in the process of 
evaluating comments on the proposed revisions to part 70 with respect 
to this issue, and is not yet prepared to adopt the revision to the 
definition into a final rule. Consequently, it is premature to adopt 
this change into the final part 71 rule at this time.
    In addition, EPA also received substantial adverse comment on the 
proposed requirement that limitations on potential to emit be 
enforceable by the Administrator (i.e., ``federally enforceable''). 
Industry commenters noted that EPA's policy on Federal enforceability 
was the subject of several pending lawsuits against the Agency in the 
Court of Appeals. These commenters have long held that emissions 
limitations enforceable under State law should not have to be federally 
enforceable in order to be considered part of a source's physical or 
operational design and a valid limit on potential to emit. These 
commenters also urged EPA to codify the Agency's January 25, 1995, 
memorandum in which EPA stated it would not require certain sources 
that otherwise have the potential to emit an air pollutant in major 
amounts to obtain permits under state part 70 programs. See, memorandum 
of January 25, 1995, entitled ``Options for Limiting the Potential to 
Emit (PTE) of a Stationary Source Under Section 112 and Title V of the 
Clean Air Act (Act),'' from John Seitz, Director, Office of Air Quality 
Planning and Standards, to Regional Air Division Directors (hereafter 
``January 25, 1995 memorandum from John Seitz'').
    Since the close of the comment period, the U.S. Court of Appeals 
for the District of Columbia Circuit has ruled on two occasions that 
EPA in two separate regulations had failed to explain why the Agency 
had adopted a restrictive interpretation of ``potential to emit.'' See 
National Mining Association v. EPA, 59 F.3d 1351 (D.C. Cir. July 21, 
1995), and Chemical Manufacturers Association v. EPA, No. 89-1514 (D.C. 
Cir. Sept. 15, 1995). In response to these rulings, EPA has begun a 
rulemaking effort that would consistently apply to all of its 
regulations and programs that base applicability on sources' potential 
to emit. This rulemaking will address potential to emit not only in the 
regulations that were the subject of the two court rulings (EPA's 
``General Provisions'' regulations under section 112 of the Act 
promulgated at 40 CFR part 63, and the NSR and PSD regulations at parts 
51 and 52), but also to parts 70 and 71.
    In the meantime, however, the Agency believes it would not be 
appropriate to delay issuance of the part 71 regulation (and 
implementation of the Federal operating permit program in States that 
have not yet obtained part 70 approval) due to the pendency of the 
Agency's general potential to emit rulemaking. At the same time, EPA 
does not believe it would be appropriate to merely recodify the part 70 
definition of potential to emit in this Phase I part 71 rule, in light 
of the recent court decisions concerning the section 112 and NSR and 
PSD regulations. Consequently, for this interim part 71 rule, EPA is 
not adopting a regulatory definition of potential to emit for purposes 
of part 71. This definition will be added to part 71 at a later time, 
when the Agency completes its general rulemaking to define potential to 
emit for its various stationary source programs under the Act.
    Nevertheless, the absence of a regulatory definition of potential 
to emit in today's rule should not prevent sources from being able to 
determine whether they are subject to the part 71 program because they 
are major sources. The EPA stresses that the term ``major source'' is 
already defined as a statutory matter in title V at section 501(2) of 
the Act to mean a major source as defined in section 112 and a major 
stationary source as defined in section 302 or part D of title I of the 
Act. Moreover, the definition of major source adopted today also tracks 
these statutory provisions, and, as discussed in the recent memorandum 
entitled ``Interim Policy on Federal Enforceability Requirement for 
Limitations on Potential to Emit,'' from John Seitz, Director, Office 
of Air Quality Planning and Standards (hereafter January 22, 1996 
memorandum from John Seitz), most current regulatory requirements and 
policies regarding potential to emit, including the interim policy 
discussed in the January 25, 1995 Seitz memorandum, remain in effect 
while EPA conducts expedited rulemaking to address these issues in 
detail. Consequently, in determining whether a source is major, the 
part 71 permitting authority and source operator should look to the 
regulatory definition of major source adopted in today's rule and the 
statutory definitions in section 112, section 302, and part D of title 
I (as those provisions are implemented by applicable regulations 
thereunder) as controlling for purposes of this Phase I part 71 rule.
    In National Mining Association v. EPA, 59 F.3d 1351 (D.C. Cir. July 
21, 1995), the Court dealt with the potential to emit definition under 
the hazardous air pollutant programs promulgated pursuant to section 
112. In this decision, the Court agreed with EPA that only 
``effective'' State-issued controls should be cognizable in limiting 
potential to emit. In addition, the Court did not question the validity 
of current federally enforceable mechanisms in limiting potential to 
emit. However, the Court found that EPA had not adequately explained 
why only federally enforceable measures should be considered in 
assessing the effectiveness of State-issued controls. Accordingly, the 
Court remanded the section 112 General Provisions regulation to EPA for 
further proceedings. Thus, EPA must either provide a better explanation 
as to why Federal enforceability promotes the effectiveness of State 
controls, or remove the exclusive Federal enforceability requirement. 
The Court did not vacate the section 112 regulations, and they remain 
in effect pending completion of EPA rulemaking proceedings in response 
to the Court's remand.

    The EPA reiterates that independent from the decision in National 
Mining, current EPA policy already recognizes State-enforceable 
potential to emit limits under section 112 and title V in many 
circumstances under the

[[Page 34212]]

transition policy discussed in the January 25, 1995 John Seitz 
memorandum, as recently revised by the January 22, 1996 John Seitz 
memorandum. In recognition of the absence in some States of suitable 
federally enforceable mechanisms to limit potential to emit applicable 
to sources that might otherwise be subject to section 112 major source 
requirements or to title V, EPA's policy provides for the consideration 
of State-enforceable limits as a gap-filling measure during a 
transition period that extends until January 1997. Under this policy, 
restrictions contained in State permits issued to sources that actually 
emit more than 50 percent, but less than 100 percent, of a relevant 
major source threshold are treated by EPA as acceptable limits on 
potential to emit, provided that the permit and the restriction in 
particular are enforceable as a practical matter. In addition, sources 
with consistently low levels of actual emissions relative to major 
source thresholds can avoid section 112 major source requirements even 
absent any permit or other enforceable limit on potential to emit. 
Specifically, the policy provides that sources which maintain their 
emissions at levels that do not exceed 50 percent of any applicable 
major source threshold are not treated as major sources and do not need 
a permit to limit potential to emit, so long as they maintain adequate 
records to demonstrate that the 50 percent level is not exceeded.
    Under today's Phase I part 71 rule, sources that are not treated as 
major under this policy would also not be treated as major for purposes 
of part 71. However, if a source would be treated as major under the 
applicable regulations implementing section 112 and this policy, the 
source would be required to obtain a part 71 permit. The EPA notes that 
this policy is to end in January 1997. In conjunction with the general 
rulemaking on potential to emit, EPA will consider whether it is 
appropriate to extend the transition period beyond January 1997.
    In Chemical Manufacturers Association v. EPA, No. 89-1514 (D.C. 
Cir. Sept. 15, 1995), the Court addressed the potential to emit 
definition in the PSD and NSR programs. Specifically, this case 
challenged the June 1989 rulemaking in which EPA reaffirmed the 
requirement for Federal enforceability of potential to emit limits 
taken to avoid major source permitting requirements in these programs. 
In a briefly worded judgment, the Court, in light of National Mining, 
remanded the PSD and NSR regulations to EPA. In addition, in contrast 
to its disposition of the section 112 regulations in National Mining, 
the Court in Chemical Manufacturers vacated the federal enforceability 
requirement of the potential to emit definitions in the PSD and NSR 
regulations.

    The EPA interprets the Court's decision to vacate the PSD/NSR 
Federal enforceability requirement as causing an immediate change in 
how EPA regulations should be read, although EPA expects that the 
effect of this change will be limited. Specifically, regarding 
provisions of the definitions of potential to emit and related 
definitions requiring that physical or operational changes or 
limitations be ``federally enforceable'' to be taken into account in 
determining PSD/NSR applicability, the term ``federally enforceable'' 
should now be read to mean ``federally enforceable or legally and 
practically enforceable by a State or local air pollution control 
agency.''

    However, the effects of the vacatur will be limited during the 
period prior to completion of new EPA rulemaking on this issue. Thus, 
during this interim period, Federal enforceability is still required to 
create ``synthetic minor'' new and modified sources in most 
circumstances pending completion of EPA rulemaking. This is because EPA 
interprets the order vacating certain provisions of the PSD/NSR 
regulations as not affecting the provisions of any current State or 
Federal implementation plan (SIP or FIP), or of any permit issued under 
any current SIP or FIP. Thus, previously issued federally enforceable 
permits issued under such programs remain in effect.
    Moreover, new or modified sources that seek to lawfully avoid 
compliance with the major source requirements of PSD or nonattainment 
NSR by limiting potential to emit to achieve synthetic minor status 
must still obtain a general or ``minor'' NSR preconstruction permit 
under section 110(a)(2)(C) of the Act and 40 CFR section 52.23. (This 
requirement was not at issue in the Chemical Manufacturers case, and is 
unaffected by the Court's ruling.) Every SIP contains a minor NSR 
program that applies generally to new or modified sources of air 
pollutants, and permits issued under such programs are, like all other 
SIP measures, federally enforceable. In sum, the precise impact of the 
vacatur on PSD/NSR applicability in any State, and hence the 
applicability of part 71 under the section 302 and part D of title I 
prongs of the definition of major source adopted in part 71, can be 
definitively established only by reviewing the provisions of the 
particular SIP or FIP to which the source is subject.
8. Regulated Air Pollutant

    In the August 1995 supplemental proposal, EPA proposed a less 
inclusive definition than is currently promulgated in part 70 or was 
proposed for part 71 in the April 1995 notice. However, for purposes of 
today's rulemaking, EPA is retaining the definition in the part 71 
proposal, which is consistent with the current part 70 definition. The 
EPA intends to take final action on the term as proposed in the 
supplemental proposal in the Phase II rulemaking.
9. Responsible Official

    Although EPA has proposed, in the August 1994 proposed revisions to 
part 70, to clarify that the criteria for selecting the designated 
representative is the same at an affected source as at other sources, 
the Agency has adopted a definition of this term for purposes of 
today's rulemaking that is consistent with the definition in current 
part 70. The EPA will take final action in Phase II consistent with the 
Agency's final resolution of this issue in response to comments on the 
August 1994 notice.

10. Section 502(b)(10) Changes

    The part 71 proposal, in omitting the definition of ``section 
502(b)(10) changes'' from section 71.2, followed the approach used in 
the August 1994 proposed revisions to part 70. The Agency's reasons for 
the omission are articulated in that proposal at 59 FR 44467-8. As 
indicated in the August 1995 supplemental proposal, this is still the 
Agency position. However, EPA will not adopt a final position on 
proposed revisions regarding operational flexibility for part 70 or 71 
until the Phase II rulemaking. For purposes of today's rulemaking, EPA 
has adopted a definition of the section 502(b)(10) changes that 
comports with the current part 70 regulation, in order to better 
harmonize the Phase I part 71 rule and the current part 70 regulation.
11. Title I Modification

    The part 71 proposal, based on the August 1994 proposed revision to 
part 70, contained a proposed definition of the phrase ``Title I 
modification or modification under any provision of title I of the 
Act.'' Subsequently, EPA issued a revised proposed definition in the 
August 1995 supplemental proposal for parts 70 and 71. The EPA is in 
the process of reviewing and developing a position in response to the 
comments on the several proposals with respect to this issue, and is 
not yet prepared to define the term in a final rule. The EPA will add a 
definition in the Phase II rulemaking that is consistent with how

[[Page 34213]]

EPA ultimately defines the term under part 70.
    A detailed discussion of the history of this definition is 
contained in the preamble to the August 1995 part 70 proposal (60 FR 
45545). At issue is whether the phrase ``modifications under any 
provision of title I'' as used in section 502(b)(10) of the Act 
includes not only modifications subject to major NSR requirements of 
parts C and D of title I but also modifications subject to minor NSR 
programs established by the States pursuant to section 110(a)(2)(C).
    In August 1994, EPA proposed to interpret the title I modification 
language of part 70 to include minor as well as major NSR modifications 
(55 FR 44527). The EPA received many comments from industry and States 
contesting this interpretation. The commenters argued that EPA had 
defined title I modification in the preamble to the May 1991 proposed 
part 70 rule to exclude minor NSR (56 FR 21746-47 and footnote 6) and 
did not redefine it in the final July 1992 rule. As a result, they 
argued that they were relying on the current rule to be interpreted 
consistent with the proposed rule preamble and that EPA could not 
change its interpretation without undertaking further rulemaking.
    Based in part on the arguments raised by commenters, EPA revised 
its proposed interpretation of the definition of title I modification 
in the August 1995 supplemental notice to exclude modifications subject 
to minor NSR. In addition, EPA proposed regulatory language defining 
title I modification which excluded the reference to section 110(a)(2) 
of the Act.

    While EPA is not yet prepared to adopt a final definition for the 
term, in implementing the Phase I part 71 program EPA will treat the 
issue consistently with the approach the Agency has advised States to 
take under the current part 70 regulation. Consequently, it will not 
consider title I modifications to include changes subject to State 
minor NSR programs.

B. Section 71.3--Sources Subject to Permitting Requirements

    The final rule promulgates provisions regarding applicability of 
the program at section 71.3. These provisions are based on their 
counterparts in the currently promulgated part 70 rule at section 70.3. 
Consequently, in several aspects, they differ from section 71.3 as 
proposed, which was based on the August 1994 proposed revisions to 
section 70.3 which the Agency is not yet prepared to finalize.
    Paragraph (a)(1) of the part 71 proposal contained an exemption 
from title V for major sources that would be subject to title V only if 
they have the potential to accidentally release pollutants listed 
pursuant to section 112(r)(3) in major amounts. This exemption has been 
deleted, even though it garnered reviewer support, consistent with the 
decision to match the part 70 requirements except where unique 
circumstances make a change necessary. If EPA ultimately revises part 
70 to add the deleted language, the Agency would intend to revise part 
71 consistently.

    Proposed section 71.3(a)(4) which was modelled upon the August 1994 
proposed revisions to part 70 and would have stated that any source 
subject to title I parts C or D would be required to obtain a permit 
was also deleted from the final regulation to comport with the part 70 
regulation. The purpose of this provision was to ensure that all 
sources subject to preconstruction permitting as major sources under 
parts C or D of the Act are also subject to title V permitting. Again, 
if part 70 is ultimately revised to add this provision, EPA would 
intend to revise part 71 to add it as well.
    Similarly, paragraph (b)(2) has been changed to conform with 
section 70.3(b)(2), which addresses applicability for sources subject 
to section 111 or 112 standards promulgated after July 21, 1992. 
Proposed section 71.3(b)(2) differed from both existing section 
70.3(b)(2) and the August 1994 proposed revisions thereto. If section 
70.3(b)(2) is ultimately revised, EPA would expect to revise section 
71.3(b)(2) to harmonize it with part 70.
    Paragraphs (c) and (d) of this section, found in the proposal at 
sections 71.6(a)(1)(iv) and 71.5(f)(3)(i), respectively, were moved to 
this section for compatibility with the current part 70 provisions at 
sections 70.3 (c) and (d).

C. Section 71.4--Program Implementation

    The major issues raised by commenters on proposed section 71.4 
related to the need to base part 71 on finalized (as opposed to 
proposed) provisions of part 70, how the part 71 program should be 
customized to fit the unique needs of the State or area for which the 
program is administered, and jurisdictional issues with respect to 
programs on Tribal lands. The Agency's approach to the first issue is 
discussed at length in section II of this document. This section 
addresses the second and third issues in addition to several minor 
changes to the proposed rule that were adopted today.

 National Template Approach

    With respect to the second issue, EPA received divergent comments. 
For example, commenters suggested that a national template should be 
flexible, that a national template should be used only to fill in the 
gaps of deficient State programs, and that there should be no national 
template because title V does not authorize EPA to develop such a rule.
    The Agency carefully considered the statutory framework for the 
program and interprets title V as authorizing a national template 
approach. For a further discussion of this issue, see section II of 
this document. The EPA chose a national template approach because EPA 
believes the national template is flexible enough to be an effective 
program in nearly all areas, and individual rulemakings for each area 
that has a part 71 program would be needlessly burdensome on the 
Agency. Since the national template will serve the needs of most areas, 
it is more efficient to promulgate the program once while allowing for 
separate rulemakings, as needed, in some areas. The EPA recognizes the 
desirability of providing a flexible approach to administering the 
program, as the commenters have suggested, when the national template 
does not adequately fit the unique State or Tribal situation. Such 
flexibility is already contained in section 71.4. When EPA determines 
that the national template rule is not appropriate for a State, EPA may 
adopt, through a separate rulemaking, appropriate portions of a State 
or Tribal program in combination with provisions of part 71 in order to 
craft a suitable part 71 program, as provided in section 71.4(f). 
Furthermore, section 71.9(c)(7) provides that when the national fee 
structure would not reflect the cost of administering a part 71 
program, the Administrator shall through a separate rulemaking set an 
appropriate fee. Finally, as provided in section 71.5 and as discussed 
in section III.D of this document, EPA has designed part 71 to provide 
significant flexibility to accommodate the localized air quality 
issues. For example, EPA will use State application forms whenever 
possible and will try to match the list of trivial activities which may 
be left off application forms to the lists established in the State 
operating permit program.

 Part 71 Programs in Tribal Areas

    The EPA is deferring promulgation of regulations that would 
describe how the Agency would determine the boundaries of a part 71 
program for a

[[Page 34214]]

Tribal area. The EPA has published a proposed rule, pursuant to section 
301(d)(2) of the Act, specifying the provisions of the Act for which 
EPA believes it is appropriate to treat Indian Tribes in the same 
manner as States and outlining the Agency's position on the authority 
of Indian Tribes to administer air programs under the Act. See 59 FR 
43956 (Aug. 25, 1994)(``Indian Tribes: Air Quality Planning and 
Management,'' hereafter ``proposed Tribal rule''). As indicated in the 
part 71 proposal, EPA intends to follow the approach of the Tribal rule 
with respect to issues of jurisdiction and resolution of jurisdictional 
disputes. The EPA agrees that it would be more practical to defer 
addressing jurisdictional issues until the promulgation of the Tribal 
rule. The Agency will finalize an approach to jurisdiction as well as a 
definition of Tribal area in the Phase II rulemaking or in conjunction 
with finalizing the Tribal rule. In the interim, the Agency will not be 
able to implement part 71 programs in Tribal areas unless it completes 
a rulemaking that establishes the boundaries of the part 71 program in 
the Tribal area. Rulemakings for the Tribal rule and Phase II will be 
completed well in advance of the November 1997 deadline for EPA to 
implement part 71 programs on Tribal lands. Therefore, EPA does not 
expect that the deferral of jurisdictional issues will delay 
implementation of the part 71 program. Although part 71 contains no 
definition of ``Tribal area,'' EPA will provide (and will require 
delegate agencies to provide) notice of proposed permitting actions 
pursuant to section 71.8(d) even prior to the Phase II rulemaking. In 
the interim, federally recognized Indian Tribes will receive notice 
with respect to permitting actions related to sources whose emissions 
may affect Tribal air quality and that are located in contiguous 
jurisdictions or are within 50 miles of the exterior boundaries of the 
reservation.

3. Expiration of Part 71 Permits

    The Agency received comments suggesting that part 71 permits should 
be rescinded automatically, without the Agency taking any action, when 
they are replaced by a part 70 permit. The EPA agrees that no separate 
agency action should be required when a part 71 permit is replaced by a 
part 70 permit issued under the approved part 70 program because unless 
the rescission happens simultaneously with the issuance of the part 70 
permit, a source could be subject to a part 70 and a part 71 permit 
which may contain different requirements. Accordingly, EPA has deleted 
proposed section 71.4(l)(3) which provided that the Administrator would 
rescind part 71 permits when they were replaced with part 70 permits. 
Further, the EPA has adopted section 71.6(a)(11) which provides that 
part 71 permits shall contain a provision to ensure that a part 71 
permit will expire when the source is issued a part 70 permit.
4. Suspension of Issuance of Part 71 Permits
    The EPA revised the first paragraph of proposed section 71.4(l) to 
clarify, consistent with EPA's original intent, that EPA may suspend 
issuance of part 71 permits whenever the Agency has granted full or 
interim approval to a State part 70 program. Section 502(e), which 
addresses suspension of the issuance of part 71 permits, provides that 
the triggering event for suspension is publication of notice of 
approval. Thus, there is no statutory requirement that a State program 
must ``fully'' meet the requirements of part 70 or be fully approvable 
in order for EPA to suspend permit issuance. The Agency believes it is 
appropriate to suspend issuance of part 71 permits when a State program 
substantially meets the requirements of part 70 and has received 
interim approval because it would be confusing and burdensome to have 
two title V permit programs operating simultaneously in the same 
jurisdiction. Therefore, EPA has deleted the word ``fully'' from the 
first paragraph of proposed section 71.4(l).
5. Delegation Agreements

    The final rule makes a minor change to proposed section 71.4(j) in 
parallel with a change to proposed section 71.10(b) to reflect the fact 
that under the final rule, EPA will not publish its delegation 
agreement with a delegate agency. Therefore, section 71.4(j) provides 
that the roles of the delegate agency and EPA in administering the part 
71 program will be defined in a delegation agreement, not in a Federal 
Register notice. The EPA will follow the procedures for delegation 
agreements established for the PSD program under which EPA does not 
publish its delegation agreements. Delegation agreements reflect the 
understanding of EPA and the delegate agency as to their respective 
responsibilities and are not subject to any notice requirement. This 
approach allows EPA and the delegate agency to modify their agreement 
as circumstances change, without the burden of publishing a Federal 
Register notice.

6. Early Reductions Permits

    The Agency retained in section 71.4(i)(3) the requirement that the 
permitting authority take action on complete permit applications 
containing an early reduction demonstration within 12 months of receipt 
of the complete application. Although the current part 70 regulation 
sets a 9 month deadline for State action, EPA Regional offices are 
allowed 12 months to take action on the permit applications submitted 
under the interim permitting rule for early reduction sources that EPA 
adopted prior to the approval of any State part 70 programs. See 40 CFR 
section 71.26(a)(2). The Agency believes that this time frame is 
reasonable given the effort required to process the permits and the 
need for sources qualifying for a compliance extension under the Early 
Reductions Rule to obtain a permit prior to certain deadlines set by 
the rule.

D. Section 71.5--Permit Applications

    The part 71 proposal addressed permit applications at proposed 
section 71.5 (a) through (i). This proposed section was based upon a 
combination of corresponding provisions in the existing part 70 rule 
and in the August 1994 proposed revisions to part 70, and was presented 
in a slightly different structure from the part 70 rule. In light of 
EPA's decision to promulgate part 71 on an interim basis, more 
consistently with the existing part 70 rule, the provisions based upon 
the August 1994 proposal are not being adopted today. Moreover, in 
order to facilitate transition from implementing part 71 to part 70 
programs, the final rule is being adopted in a structure that is more 
consistent with that of the current part 70 rule.

 Timely Application

    Under section 71.5(b)(1) of the proposal all initial permit 
applications would have to be submitted within 12 months or an earlier 
date after the source becomes subject to part 71. The proposal would 
have required that the permitting authority provide notice of the 
earlier date to the source and that this notice would be given at least 
120 days in advance of the application submittal date.
    Several commenters argued that the 120 days (4 months) minimum 
notice would not give sources sufficient time to prepare an 
application. They also argued that 4 months was insufficient time for 
sources to submit their applications early for purposes of addressing 
deficiencies and ensuring they receive the application shield.
    In response to these comments, EPA has lengthened the notice period 
from 4

[[Page 34215]]

months to 6 months. Section 503(c) of the Act requires the submittal of 
all applications within 12 months of the effective date of a permit 
program or such earlier date as the permitting authority may establish 
and that one-third of these applicants be issued permits in this first 
year. In order to issue one-third of the permits in the first year, EPA 
must receive at least one-third of the applications prior to 12 months 
after the effective date of the program.
    The EPA considered and rejected commenters' suggestions for 8 to 12 
months' advance notice because they would interfere with EPA's 
requirement to issue one-third of the permits in the first year. The 
EPA believes that the 6 month alternative will allow EPA enough time to 
process and issue permits. The EPA believes that 6 months is sufficient 
time for sources to prepare applications for several reasons that had 
not been announced at time of proposal. First, on July 10, 1995, EPA 
issued the first white paper that examines options for simplifying part 
70 permit applications and sets minimum expectations concerning how 
much information must be included in order for the application to be 
found complete. In today's notice EPA announces its intention to 
implement both of the white papers for part 71 program purposes. 
Second, EPA has revised the rule to clarify that part 71 permit 
application forms may be developed by the delegate agency or the EPA 
allowing a part 71 application form to be based on a State form 
developed for part 70 purposes, as long as the form meets the minimum 
requirements of part 71 (discussed in more detail below). Third, 
because the final rule more closely follows the part 70 program upon 
which most State operating programs are based, sources will be familiar 
with most part 71 permit application requirements.
    In addition, proposed sections 71.5(b) (2) and (3) have been 
deleted because they referred to off-permit changes and a four-track 
permit revision system which the Agency is not finalizing today.
2. Complete Applications

    The final rule adopts the language from the current part 70 rule 
concerning complete applications. However, EPA believes that several 
clarifications will help applicants understand the flexibility 
available for submitting simplified permit applications that can be 
found complete. The terms ``simplified permit application'' or 
``streamlined permit application'' refer to applications that require 
less information.

    In the part 71 proposal, EPA proposed to adopt language from the 
August 29, 1994 part 70 revision notice (59 FR 44518) that would have 
clarified that an application would be found complete if it contained 
information ``sufficient to begin processing the application.'' As 
stated previously, today's rulemaking is based on provisions of current 
part 70; therefore, this language does not appear in today's 
rulemaking. However, EPA believes, as stated more fully in the first 
white paper, that considerable flexibility already exists in the part 
70 rule to find simplified permit applications complete. Since the 
white papers will be implemented for part 71 purposes, this flexibility 
also exists in the part 71 permit program.
    Furthermore, the proposed revisions to part 70 (August 29, 1994) 
and the part 71 proposal discussed several additional options currently 
available to States for developing simplified permit applications and 
finding them complete, and did not propose any rule changes necessary 
to implement these options. These options were: (1) a two-step 
application completeness determination process for simplified 
applications and (2) simplified application content requirements for 
applicable requirements with future compliance dates. After the 
publication of these proposal notices, the first white paper included 
these two flexibility options, as well as many additional options, and 
reaffirmed EPA's interpretation that implementation of these options 
does not depend on making changes to the part 70 rule or State part 70 
programs.

    The EPA believes this approach will provide flexibility for sources 
to prepare simplified permit applications and for permitting 
authorities to find them complete. This approach will also promote 
consistency between the part 71 and part 70 programs, which in turn, 
will provide for a smoother transition between the programs. Guidance 
on the implementation of the white papers and other flexibility options 
for completeness determinations for a part 71 program implemented in a 
particular State may be provided by the EPA or delegate agency soon 
after the program takes effect.

    Additionally, proposed section 71.5(d), concerning the treatment of 
business confidential information, has been revised in the final rule. 
The language of the proposal discussed the responsibilities of 
permitting authorities to process requests for confidential treatment 
and included a general reference to 40 CFR part 2. Considering the 
structure of these regulations and this section's position in these 
regulations, the Agency believes that the promulgated language 
clarifies the procedures that applicants must follow to request 
confidential treatment for business information in applications, 
provides a more precise cross-reference to those procedures, and does 
not add any new requirements regarding the treatment of confidential 
information not intended by the proposal.
    Note also that certain technical changes are being made to part 
71's completeness provisions as a result of the final rule's greater 
harmonization with the existing part 70 rule. First, the completeness 
criteria are being promulgated at section 71.5(a)(2) while the proposal 
addressed completeness at section 71.5(c). In addition, the final rule 
references section 71.5(c) as the provision setting out required 
information in permit applications, while the proposal referenced 
proposed section 71.5(f). Moreover, the final rule cites section 
71.5(d) as the provision concerning certification by a responsible 
official, while the proposal cited proposed section 71.5(i). Finally, 
the citation in the proposal to section 71.7(a)(3) has been changed in 
the final rule to section 71.7(c)(4) as a result of the changes to 
section 71.7.

3. Standard Application Form and Required Application
    Proposed section 71.5(f) would have required part 71 sources to 
submit ``applications provided by the permitting authority, or if 
provided by the permitting authority, an electronic reporting method'' 
and did not include any preamble discussion of the interpretation of 
this phase. One commenter on the proposal encouraged EPA to use 
existing State forms in States where EPA assumes part 71 authority. 
Final section 71.5(c) has been revised to more closely follow the 
corresponding language of section 70.5(c). The EPA agrees with the 
commenter and will provide forms developed by delegate agencies 
(States), or the EPA, including electronic application methods, for 
purposes of applying for part 71 permits. This approach to application 
development is possible because ``permitting authority'' is defined in 
section 71.2 as including the EPA or the delegate agency. This approach 
to providing part 71 forms will lead to less disruption and a smoother 
transition for sources preparing initial part 71 applications because, 
in many cases, sources will be familiar with the State form on which 
the part 71 form is based. For example, sources may already be 
collecting information and drafting an operating permit using the State 
form in expectation of part 70 program approval by EPA. In addition, 
commenters asked

[[Page 34216]]

that EPA clarify and simplify the requirements for emissions-related 
information in part 71 applications consistent with EPA's guidance in 
the first white paper. In response to these comments, EPA intends to 
implement the white paper guidance with respect to the collection and 
reporting of emission-related information and EPA believes that no 
changes to part 71 are necessary to do so.
    Numerous technical changes have been made to the final rule 
regarding information to be required in permit applications to better 
match the current part 70 rule. In the proposal, information 
requirements were addressed at proposed sections 71.5(f) through (i), 
while the final rule follows part 70 by covering these requirements in 
sections 71.5(c) and (d). New citations to other provisions of part 71 
are also due to the final rule's harmonization with part 70.
4. Insignificant Activities and Emission Levels
    Extensive comments were received on the proposed insignificant 
activity and emission levels provisions of proposed section 71.5(g). 
Commenters argued, in part, that activities subject to applicable 
requirements should be eligible for the exemption for insignificant 
activities and emission levels, that the requirement that applications 
not exclude information needed to determine whether a source is subject 
to the requirement to obtain a part 71 permit would be too restrictive, 
that the list of insignificant activities in the final rule should be 
expanded, that the list of trivial activities in the first white paper 
should be codified in part 71, that the exemption for mobile sources as 
insignificant activities should be removed, that the single emissions 
unit emissions thresholds for insignificant emissions should be raised, 
and that the aggregate source-wide emission thresholds for 
insignificant emissions should be deleted.
    a. Eligibility for Insignificant Treatment and Information Required 
in Applications. Section 71.5(c) of the final rule addresses, in part, 
information that must not be omitted from permit applications. These 
requirements have special relevance for applicants when determining 
what information must be included in applications for emission units 
that are eligible for insignificant treatment. To be consistent with 
current part 70, final section 71.5(c) deletes certain proposed 
provisions that do not follow the corresponding language of section 
70.5(c) and that were based upon the proposed revisions to part 70 
published in August 1994. Accordingly, deleted from final section 
71.5(c) is the proposed language that would have not allowed the 
application to omit information needed to: (1) Determine whether a 
source is major, and (2) determine whether a source is subject to the 
requirement to obtain a part 71 permit. Notwithstanding these 
deletions, EPA continues to believe that the definition of major source 
at section 71.2 controls the determination of which units are counted 
for major source applicability purposes and that emissions of units 
that qualify for insignificant treatment in the application are not 
exempt from these determinations. Consistent with the Agency's approach 
in implementing the current part 70 rule, the EPA is reversing its 
interpretation, first expressed in the proposed preamble, that would 
have excluded the eligibility of activities for treatment as 
insignificant when such activities are subject to applicable 
requirements. The EPA believes that no change to the final rule is 
necessary to implement this new interpretation.
    Industry commenters were particularly concerned that EPA's 
interpretation that proposed section 71.5(g) would not allow activities 
with applicable requirements to be eligible for insignificant treatment 
would render the insignificant activity and emissions level provisions 
meaningless because few sources would be eligible for streamlined 
treatment in the application.

    The EPA now believes that it was overly broad in stating that 
emission units were precluded from eligibility as ``insignificant'' if 
such units would be subject to applicable requirements. As discussed 
below, EPA believes there are circumstances in which an emission unit 
or activity can be treated as ``insignificant'' under a Federal 
operating permits program, even if it is subject to an applicable 
requirement. However, a title V application must still contain 
information needed to determine the applicability of or to impose any 
applicable requirement or any required fee and a permit must still meet 
the requirements of section 71.6 for all emission units subject to 
applicable requirements, including those eligible for insignificant 
treatment.

    Both sections 71.5(c) and 71.5(c)(3)(i) require sufficient 
information to verify the requirements applicable to the source and to 
collect appropriate permit fees.

    This means that some of the information required by sections 
71.5(c) (3) through (9) may be needed in the permit application for 
insignificant activities in order for the permitting authority to draft 
an adequate operating permit. As an example, where an insignificant 
activity is not in compliance with an applicable requirement at the 
time of permit issuance, the permit application would need to contain a 
compliance plan, including a compliance schedule, for achieving 
compliance with the applicable requirement. As another example, if a 
source has some insignificant activities within a category that are 
subject to an applicable requirement and some within that same category 
that are not subject to that applicable requirement because the 
applicability criteria for the applicable requirement are different 
from the applicability criteria for insignificant activities, the 
permit application would generally be required to include sufficient 
information on the insignificant activity for the permitting authority 
to determine which units are subject to the applicable requirement and 
to include that applicable requirement in the permit for the subject 
insignificant activity. The EPA believes that a part 71 permit 
application may simply list the applicable requirements that apply to 
insignificant activities generally, rather than requiring the permit 
application to explicitly identify which insignificant activities are 
subject to which applicable requirements. The permitting authority 
would then issue a permit imposing the applicable requirements in the 
permit, but not specifically identifying which insignificant activities 
are subject to those applicable requirements. (For a more detailed 
discussion, see the first white paper and the proposed interim approval 
and proposed notice of correction for the State of Washington's part 70 
program, 60 FR 50166 (September 28, 1995).)
    b. Insignificant Activity Lists. Section 70.5(c), in part, allows 
States to develop lists of insignificant activities and emission levels 
that need not be included in applications and requires activities (or 
equipment) exempted due to size or production rate to be listed in the 
application. State part 70 program submittals were approved by EPA that 
implement this provision in a variety of ways. The structure of the 
proposed regulations was based on the structure of these State 
implementing regulations, and included a short list of insignificant 
activities and provisions setting insignificant emissions levels. The 
proposed list of insignificant activities, section 71.5(g)(1), included 
a list of specific source categories, activities, or equipment that 
could be left off the application. The proposed insignificant

[[Page 34217]]

emissions provisions, section 71.5(g)(ii), allowed sources the 
flexibility to treat additional source categories, equipment, or 
activities as insignificant, provided certain eligibility criteria were 
met, including not exceeding certain emissions levels, and provided 
that the activities were listed in the application. The EPA believed 
that the proposed insignificant emissions approach was flexible enough 
that extensive lists of insignificant activities would not be needed in 
the final rule. The EPA reasoned that no list of insignificant 
activities would ever be so inclusive as to list every type of activity 
potentially eligible for insignificant treatment at industrial sources, 
and therefore, additions to the list would require resource-intensive 
notice and comment rulemaking on an ongoing basis. The proposal asked 
for comment on its approach and asked whether the proposed approach 
would be compatible with approaches developed by States.
    Numerous industry commenters argued, in general, that the proposed 
part 71 list was not extensive enough to provide meaningful relief for 
industry from the administrative burdens associated with submitting 
detailed information for emission units or activities that pose little 
or no environmental risk and that the part 71 list was not as extensive 
as lists developed by States for their part 70 programs.
    The EPA is finalizing the proposed list of insignificant activities 
with one revision. The EPA believes that the commenters' concerns that 
there be more opportunities for streamlining the information required 
by part 71 permit applications is best addressed by implementing the 
white papers for part 71 purposes, and that no changes to the final 
rule are necessary to implement this approach. The EPA believes that 
the white papers provide for application streamlining that is 
comparable and, in many ways, superior to approaches based on omitting 
certain emission unit or activities from the application only when 
eligibility for insignificant treatment is established in a rule. In 
general, the white papers allow sources to provide little or no 
detailed source-specific information for emissions units or activities 
where the information is not reasonably available and to the extent the 
information is not needed to resolve disputed questions of major source 
status, applicability of requirements, compliance with applicable 
requirements, or needed to calculate fees.
    For example, section B.3. Insignificant Activities of the first 
white paper allows trivial activities to be completely omitted from 
applications. The white paper defines trivial activities as activities 
without specific applicable requirements (although they may have 
``generic'' applicable requirements, explained below) and with 
extremely small emissions and included a list of trivial activities in 
Appendix A. Many of the trivial activities identified in the first 
white paper are common to State lists of insignificant activities. 
Under part 71, sources may rely on this list, and EPA or the delegate 
agency may add to it without the need for Federal rulemaking. This 
allows EPA to expand the list of trivial activities for a part 71 
program in a specific location, consistent with trivial activity lists 
established in the State operating permit program, thus tailoring the 
program for a specific program implemented in a State.
    Also providing considerable streamlining is section B.4 Generic 
Grouping of Emission Units and Activities of the first white paper 
which allows emissions units or activities with ``generic'' applicable 
requirements to be omitted from the application, independent of 
eligibility for insignificant treatment. Under this section, sources 
may provide little or no detailed source-specific information, even for 
units with ``generic'' requirements, provided that the ``generic'' 
requirements are described in the application such that their scope and 
manner of enforcement are clear. ``Generic'' requirements are certain 
broadly applicable requirements that apply and are enforced in the same 
manner for all subject units or activities and that are often found in 
the SIP. Examples of such requirements include requirements that apply 
identically to all emissions units at a facility (e.g., source-wide 
opacity limits), general housekeeping requirements, and requirements 
that apply identical emissions limits to small units (e.g., certain 
process weight requirements). Where the applicable requirement is 
amenable to this approach, part 71 permitting authorities may follow 
this approach regardless of whether subject activities have been listed 
as trivial or insignificant. A lengthy list of the types of 
requirements suitable for this treatment is not possible here because, 
among other reasons, the examples of which EPA is aware are SIP 
requirements, and so vary from State to State. The EPA or delegate 
agency will decide which SIP requirements can be treated in this 
generic fashion for specific locations where part 71 programs are 
implemented.

    The EPA has determined that the insignificant activity exemption 
for air-conditioning units used for human comfort at final section 
71.5(c)(11)(i)(B) should be changed to clarify that substances other 
than class I or II substances may be regulated under title VI of the 
Act. This change is necessary because effective November 15, 1995, 
title VI requires recycling or recovery of substitute refrigerants 
regardless of whether or not they are ozone depleting substances (Class 
I and Class II substances) unless EPA makes a refrigerant-specific 
decision that the substitute will not harm human health or the 
environment and can, therefore, be vented.
    c. Insignificant Emissions Levels. In response to comments, EPA has 
revised proposed section 71.5(g)(2)(i), which is section 
71.5(c)(11)(ii)(A) of the final rule, to increase the insignificant 
emissions threshold for regulated air pollutants other than (HAP) from 
a single emissions unit from 1 tpy to 2 tpy and to delete the 1,000 
pounds (lb) per year threshold in extreme ozone nonattainment areas. 
The EPA believes this decision is appropriate since, as commenters 
pointed out, EPA has previously stated in part 70 approval notices that 
insignificant emissions thresholds set at 2 tpy would be approvable in 
most locations. The EPA believes that due to the similarity between 
part 70 and part 71 programs it can logically conclude that this level 
is also appropriate for a part 71 program, regardless of where it is 
located. This level will provide a measure of additional flexibility 
for sources to exempt insignificant activities, thus simplifying the 
application, with little additional risk that significant emission 
units will be excluded from the application. As further discussed 
below, there are several safeguards available in the final rule that 
should ensure that significant units are not excluded from applications 
due to their eligibility for insignificant treatment. In addition, EPA 
is deleting the proposed 1,000 lb per year threshold for extreme ozone 
nonattainment areas. This will simplify the rule by setting the same 
tpy emission thresholds for attainment and nonattainment pollutants, 
while requiring the thresholds in relative terms to be no more than 20 
percent of the major source threshold for nitrogen oxides and VOC and 2 
percent of the major source threshold for the remaining criteria 
pollutants. Two tpy is considered trivial by EPA for all pollutants 
other than HAP in relation to major source thresholds in all attainment 
or

[[Page 34218]]

nonattainment areas and will not prevent the EPA from collecting 
information of a consequential or significant nature. In addition, 
these levels are more commonly found in State part 70 programs and 
therefore should help to ease the transition from part 71 to part 70 
operating permit programs.

    In response to comments, EPA has decided to delete the aggregate 
source-wide emissions criteria for insignificant emissions of regulated 
air pollutants (sections 71.5(c)(11)(ii) (A) and (B) of the final 
rule). The EPA proposed these aggregate source-wide emissions criteria 
as an additional means to ensure that emissions that might otherwise 
trigger the applicability of applic