December 18, 1992
MEMORANDUM
SUBJECT: Agency Review of State Fee Schedules for
Operating Permits Programs Under Title V
FROM: John S. Seitz, Director
Office of Air Quality Planning and Standards (MD-10)
TO: Air Division Director, Regions I-X
This memorandum outlines the Environmental Protection
Agency's (EPA's) basic approach for reviewing State fee
schedules for approval under Title V of the Clean Air Act (Act).
[As used herein, the term "State" includes local agencies.]
Section 502(b)(3) of the Act requires that each State collect
fees sufficient to cover all reasonable direct and indirect costs
required to develop and administer its Title V permits program.
The final Part 70 regulation contains a list of activities
discussed in the Preamble which must be funded by permit fees.
This memorandum and its attachment provide further guidance on
what types of activities must be funded through Title V permit
fees, as well as the procedure for demonstrating that fee
revenues are adequate to support the program. The policies set
out in this memorandum and attachment are intended solely as
guidance, do not represent final agency action, and cannot be
relied upon to create any rights enforceable by any party.
The attachment to this memorandum outlines the general
principles which, along with the Preamble and final rule, will
guide our review of fee submittals. These principles reflect the
intent of Congress that permit fees become the funding mechanism
for Part 70 permits programs, and the fact that the activities
mandated by the 1990 Amendments to the Act require these programs
to be more comprehensive than most existing State permits
programs. The attachment also discusses the nature of direct and
indirect permitting costs, the flexibility available for fee
schedule design, and future adjustments of approved fee
schedules. In addition, it contains a partial list of the
permitting-related activities required by the 1990 Amendments. 2
This document emphasizes that cost estimates for Title V
permitting are required to take into account these permitting-
related activities mandated by the 1990 Amendments and contained
in this guidance. We understand that knowledgeable State
permitting managers have found preliminary drafts of the attached
list very useful in assessing the full scope of direct and
indirect costs of Title V permitting. The list of activities
should provide a basis for your offices (and for States) to
assess the adequacy of fee schedules.
Given the scope of new permitting activities which are
mandated by Title V, Congress set a presumptive minimum aggregate
amount of fees which States must collect [equal to $25 per ton
per year (tpy), with Consumer Price Index (CPI) adjustments, or
$28.39/tpy as of August 31, 1992] in order to sufficiently fund a
Title V program. States which nonetheless propose to collect
less than that amount (in the aggregate) must provide a detailed
demonstration that their program fees will be adequate to fund an
effective program which complies with all relevant permit
requirements of the Act. These demonstrations will be subject to
close scrutiny by EPA. The EPA discourages States from expending
resources on detailed demonstrations unless there are specific,
compelling data which rebut the statutory presumption. On the
other hand, except where challenged, States which take advantage
of the statutory presumption can reexamine their program costs
once they have more experience with Title V programs. States may
adjust fees at a later date if the initial fee schedules produce
revenue which is more or less than is needed. Reliance on the
presumptive minimum also avoids a resource-intensive review
process for the State and EPA which may jeopardize the smooth and
timely approval and implementation of the Title V program.
However, if credible evidence is presented to EPA indicating that
the presumptive minimum amount ($25/tpy with CPI adjustments)
will not be adequate, the State must develop a higher fee
schedule which will generate the revenue necessary to adequately
fund the direct and indirect costs of the permits program.
There have been a number of questions about the continued
availability of section 105 grant monies in the future. Given
that funds must be collected from Title V sources to pay the full
direct and indirect costs of the permits program, the use of
section 105 grants to fund permits program costs that should be
covered by permit fees is inappropriate and is prohibited by the
Act. While there are other program costs which permit fees do
not address and for which continued section 105 grant funding is
appropriate, the States making a showing that less than $25/tpy
(with CPI adjustments) is adequate should not include any
section 105 grant funds in this showing. The EPA would not
expect to extend transitional support under section 105 for
permitting activities beyond the amount of time States have
under the Act to become self supporting.
3
As a means of providing support for the Regional Offices and
States on fee approval issues, we invite early submittal of fee
analyses (separate from the entire program submittal) from
States, particularly those which propose to charge less than the
presumptive fee minimum. We will assist Regional Offices in
reviewing these submittals with respect to the requirements of
Title V. Case-by-case reviews of fee programs which you believe
are ripe for review offer a timely opportunity to provide
additional guidance on this issue.
If you would like us to assist with review of a State's fee
program, please contact Kirt Cox. For further information,
you may call Kirt at (919) 541-5399 or Candace Carraway at
(919) 541-3189.
Attachment
cc: Air Branch Chief, Regions I-X
M. Shapiro
J. Kurtzweg
A. Eckert
L. Wegman
J. Calcagni
B. Jordan
R. Kellam
J. Rasnic
ATTACHMENT
GUIDANCE FOR STATE FEE PROGRAM DEVELOPMENT
I. GENERAL PRINCIPLES
States must collect, from Part 70 sources, fees adequate to
fund the direct and indirect costs of the permits program.
Only funds collected from Part 70 sources may be used to
fund a State's Title V permits program. Legislative
appropriations and section 105 funds cannot be used.
The 1990 Amendments to the Clean Air Act (Act) generally
require a broader range of permitting activities than are
currently addressed by most State and local permits
programs.
Title V fees present a new opportunity to improve aspects of
current permits program implementation which may be
inadequately funded.
States have the discretion to collect fees beyond the
minimum amounts specified by this guidance.
Any fee program which collects aggregate revenues less than
the $25 per ton per year (tpy) presumptive minimum will be
subject to close Environmental Protection Agency (EPA)
scrutiny.
If credible evidence is presented to EPA which shows that
the presumptive minimum amount of fee revenue is not
sufficient to fund the permits program adequately, the State
must collect fees which exceed the presumptive minimum
amount.
The EPA encourages State legislatures to include flexible
fee authority in State statutes so as to allow flexibility
to manage fee adjustments if needed in light of program
experience, audits, and accounting reports. States should
be able to adapt their fee schedules in a timely way in
response to new information and new program requirements.
II. ACTIVITIES REQUIRED TO BE FUNDED BY PERMIT FEES
A. Overview.
- Permits program fees must cover all direct and indirect
costs of the Title V permits program incurred by State
and/or local agencies. For example, fees must cover
the cost of permitting affected units under section 404
of the Act even though such sources may be subject to
special treatment with respect to payment of permit
fees.
- In addition to funding activities that have
traditionally been associated with operating permits
programs, Title V permit fees must be sufficient to
fund the activities listed below. It is important to
note, however, that these activities may not represent
the full range of activities to be covered by permit
fees. Implementation experience may demonstrate that
additional activities are appropriately added to this
list. Additionally, some States may have further
program needs based on the particularities of their own
air quality issues and program structure.
- States may use permit fees to hire contractors to
support permitting activities.
B. Initial program submittal, including:
- Development of documentation required for program
submittal, including program description, documentation
of adequate resources to implement program, letter from
Governor, Attorney General's opinion.
- Development of implementation agreement between State
and Regional Office.
C. Part 70 program development, including:
- Staff training.
- Permits program infrastructure development, including:
* Legislative authority.
* Regulations.
* Guidance.
* Policy, procedures, and forms.
* Integration of operating permits program with
other programs [e.g., State implementation plan
(SIP), new source review (NSR), section 112].
* Data systems (including AIRS-compatible systems
for submitting permitting information to EPA,
permit tracking system).
* Local program development, State oversight of
local programs, modifications of grants of
authority to local agencies, as needed.
* Justification for program elements which are
different from but equivalent to required program
elements.
- Permits program modifications which may be triggered by
new Federal requirements/policies, new standards [e.g.,
maximum achievable control technology (MACT), SIP,
Federal implementation plan], or audit results.
D. Permits program coverage/applicability determinations,
including:
- Creating an inventory of Part 70 sources.
- Development of program criteria for deferral of
nonmajor sources consistent with the discretion
provided to States in Part 70.
- Application of deferral criteria to individual sources.
- Development of significance levels (for exempting
certain information from inclusion on permits
application).
- Development and implementation of federally-enforceable
restrictions on a source's capacity to emit in order to
avoid it being considered a major source (i.e., the
creation of synthetic minors).
E. Permits application review, including:
- Completeness review of applications.
- Technical analysis of application content.
- Review of compliance plans, schedules, and compliance
certifications.
F. General and model permits, including:
- Development.
- Implementation.
G. Development of permit terms and conditions, including:
- Operational flexibility provisions.
- Netting/trading conditions [e.g., prevention of
significant deterioration (PSD)/NSR].
- Filling gaps within applicable requirements.
- Appropriate compliance conditions (e.g., inspection and
entry, monitoring and reporting).
- Screen/separate "State-only" requirements from the
federally-enforceable requirements. [Note, however,
that the cost of implementing State-only conditions
which are included in the Title V permits must be
recovered by Title V permit fees.]
- Development of source-specific permit limitations
[e.g., section 112(g) determinations].
- Optional shield provisions.
H. Public/EPA participation, including:
- Notices to public, affected States and EPA for
issuance, renewal, significant modifications and (if
required by State law) for minor modifications
(including staff time and publication costs).
- Response to comments received.
- Hearings (as appropriate) for issuance, renewal,
significant modifications, and (if required by State
law) for minor modifications (including preparation,
administration, response, and documentation).
- Transmittal to EPA of necessary documentation for
review and response to EPA objection.
- 90-day challenges to permits terms in State court,
petitions for EPA objection.
I. Permit revisions, including:
- Development of criteria and procedures for the
following different types of permit revisions:
* Administrative amendments.
* Minor modifications (fast-track and group
processing).
* Significant modifications.
- Analysis and processing of proposed revisions.
J. Reopenings, including those:
- For cause.
- Resulting from new emissions standards.
K. Sections 110, 111, and 112 implementation issues, including:
- Section 110 activities undertaken in support of the
Part 70 permitting process, such as:
* Emissions inventory compilation requirements.
* Equivalency determinations and case-by-case
reasonably available control technology
determinations if done as part of the Part 70
permitting process.
- Pre-construction permits issued pursuant to
section 110 to Part 70 sources.
* State NSR pursuant to a program approved into the
SIP.
* PSD/NSR pursuant to Parts C and D of Title I of
the Act.
- Section 111 activities undertaken in support of
permitting Part 70 sources.
- Development and implementation of certain section 112
activities which are addressed by permits. These
program areas include, where applicable:
* National Emission Standards for Hazardous Air
Pollutants (NESHAP) promulgated under
section 112(d) according to the timetable
specified in section 112(e).
* The NESHAP promulgated under section 112(f)
subsequent to EPA's study of the residual risks
to the public health.
* Section 112(g) program requirements for new and
modified sources to the extent done as part of the
Title V permit process.
* Section 112(h) design, equipment, work practice,
or operational standards.
* Section 112(i) early reductions.
* Section 112(j) equivalent MACT determinations.
* Section 112(l) State air toxics program activities
that take place as part of the Part 70 permitting
process.
* Section 112(r)(7) risk management plans if the
plan is developed as part of the permits process.
L. Enforcement of permits program requirements, including the
following to the extent they are related to the enforcement
of a permit, the obligation to obtain a permit, or the
permitting regulations:
- Schedule of compliance, compliance certification.
- Monitoring data report review (including continuous
emissions monitoring review, if applicable).
- Inspections for compliance with permit or permits
program requirements.
- Compliance monitoring activities such as stack tests,
State-conducted audits, requests for information.
- Civil and criminal enforcement.
* Development of enforcement legislation,
regulations, policy and guidance (such as penalty
policies).
* Administration.
- Excluding all enforcement/compliance monitoring costs
which are incurred after a facility is identified as a
violator and an enforcement action is initiated (such
as the issuance of an administrative order or notice of
violation or the filing of an administrative or
judicial complaint).
M. The portion of the Small Business Assistance Program which
provides:
- Counseling to help sources determine and meet their
obligations under Part 70, including:
* Applicability.
* Options for sources to which Part 70 applies.
- Development of general information to support permits
program implementation.
- Direct Part 70 permitting assistance.
N. Permit fee program administration, including:
- Fee structure development.
- Fee demonstration.
* Projection of fee revenues.
* Projection of program costs if detailed
demonstration is required.
- Fee collection and administration.
- Periodic cost accounting.
O. Segregation of general air program costs.
- Permit program costs include the cost of the following
activities to the extent they are attributable to
Part 70 sources:
* Ambient monitoring.
* Modeling and analysis.
* Demonstrations.
* Emissions inventories, such as for SIP
development.
* Administration and technical support (e.g.,
managerial costs, secretarial/clerical costs,
labor indirect costs, copying costs, contracted
services, accounting and billing).
* Overhead (e.g., heat, electricity, phone, rent,
and janitorial services).
- States will need to develop a rational method based on
sound accounting principles for segregating the above
costs of the permits program from other costs of the
air program. The cost figures and methodology will be
reviewed by EPA on a case-by-case basis.
III. FLEXIBILITY IN FEE STRUCTURE DESIGN
A. A State may design its fee structure as it deems
appropriate, provided the fee structure raises sufficient
revenue to cover all direct and indirect permits program
costs.
B. Provided adequate aggregate revenue is raised, States may:
- Base fees on actual emissions or allowable emissions.
- Differentiate fees based on source categories or type
of pollutant.
- Exempt some sources from fee requirements.
- Determine fees on some basis other than emissions.
- Charge annual fees or fees covering some other period
of time.
IV. INITIAL PROGRAM APPROVABILITY CRITERIA
A. Elements of State program submittals which relate to permit
fees.
- Demonstration that fee revenues in the aggregate will
adequately fund the permits program.
- Initial accounting to demonstrate that permit fee
revenues required to support the direct and indirect
permits program costs are in fact used to fund permits
program costs.
- Statement that the program is adequately funded by
permit fees (which is supported by cost estimates for
the first 4 years of the permits program).
B. Methods by which a State may demonstrate that its fee
schedule is sufficient to fund its Title V permits program:
- Demonstration that its fee revenue in the aggregate
will meet or exceed the $25/tpy (with CPI adjustment)
presumptive minimum amount.
- Detailed fee demonstration.
* Required if fees in the aggregate are less than
the presumptive minimum or if serious questions
are raised during public comment on whether fee
schedule is sufficient or information casting
doubt on fee adequacy otherwise comes to EPA's
attention.
C. Computation of $25/tpy presumptive minimum.
- The emissions inventory against which the $25/tpy is
applied is calculated as follows:
* Calculate emissions inventory using actual
emissions (and estimates of actual emissions).
* From the total emissions of Part 70 sources,
exclude emissions of carbon monoxide (CO) and
other pollutants consistent with the definition of
"regulated pollutant (for presumptive fee
purposes)."
* States may:
Exclude emissions which exceed 4,000 tpy per
pollutant per source.
Exclude emissions which are already included
in the calculation (i.e., double-counting is
not required).
Exclude insignificant quantities of emissions
not required in a permit application.
* States have two options with respect to emissions
from affected units under section 404 of the Act
during 1995 through 1999.
If a State excludes emissions from affected
units under section 404 from its inventory,
fees from those units may not be used to show
that the State's fee revenue meets or exceeds
the $25/tpy presumptive minimum amount (see
paragraph IV.E below).
If a State includes emissions from affected
units under section 404 in its inventory, it
may include non-emissions-based fees from
those units in showing that its fee revenue
meets or exceeds the $25/tpy presumptive
minimum amount (see paragraph IV.E below.)
- Computation of the presumptive minimum amount is a
surrogate for predicting aggregate actual program
costs. Once this aggregate cost has been determined,
the method used for computing it does not restrict a
State's discretion in designing its particular fee
structure. States may impose fees in a manner
different from the criteria for calculating the
presumptive amount (e.g., charging fees for CO
emissions and for emissions which exceed 4,000 tpy per
pollutant per source).
D. Establishing that fee revenue meets or exceeds the
presumptive minimum.
- Fee revenue in the aggregate must be equivalent to
$25/tpy as applied to the qualifying emissions
inventory.
- States have flexibility in fee schedule design as
outlined in paragraph III above and are not required to
adopt any particular fee schedule.
E. Fees collected from affected units under section 404.
- States may not use emissions-based fees from affected
units under section 404 for any purpose related to the
approval of their operating permits programs for the
period from 1995 through 1999. The EPA interprets the
prohibition contained in section 408(c)(4) of the Act
as preventing EPA from recognizing the collection of
such fees in determining whether a State has met its
obligation for adequate program funding. Furthermore,
such fees cannot be used to support the direct or
indirect costs of the permits program. States may, on
their own initiative, impose Title V emissions-based
fees on affected units under section 404 and use such
revenues to fund activities beyond those required
pursuant to Title V.
- States may collect fees which are not emissions based
(e.g., application or processing fees) from such units.
- Role of nonemissions-based fees in determining adequacy
of aggregate fee revenue.
* Such fees may be used as part of a detailed fee
demonstration (which does not rely on the $25/tpy
presumption).
* Such fees may not be used to establish that
aggregate fees meet or exceed the presumptive
minimum amount unless the State exercises its
discretion to include emissions from affected
units under section 404 in the emissions inventory
against which the $25/tpy is applied.
F. Fee program accountability.
- Initial accounting (required as part of program
submittal) comprised of a description of the mechanisms
and procedures for ensuring that fees needed to support
the direct and indirect costs of the program are
utilized solely for permits program costs.
- Periodic accounting every 2-3 years to demonstrate that
the direct and indirect costs of the program were
covered by fee revenues.
- Earlier accounting or more frequent accountings if EPA
determines through its oversight activities that a
program's inadequate implementation may be the result
of inadequate funding.
G. Governor's statement assuring adequate personnel and funding
for permits program.
- Submitted as part of program submittal.
- A statement supported by annual estimates of permits
program costs for the first 4 years after program
approval and a description of how the State plans to
cover those costs.
* Detailed description of estimated annual costs is
not required if the State has relied on the
presumptive minimum amount in demonstrating the
adequacy of its fee program.
* Detailed description of estimated costs for a
4-year period sufficient to show how the program
activities and resource needs will change during
the transition period is required if State
proposes to collect fee revenue which is less than
the presumptive minimum amount.
- Projection of annual fee revenue for a 4-year period
with explanation of how State will handle any temporary
shortfall (if projected revenue for any of the 4 years
is less than estimated costs).
V. FUTURE ADJUSTMENTS TO FEE SCHEDULE
A. Continuing requirement of fee revenue adequacy.
- Obligates the States to update and adjust their fee
schedules periodically if they are not sufficient to
fund the direct and indirect costs of the permits
program.
B. Changes in fee structure over time are inevitable and may be
required by the following events:
- Results of periodic audits/accountings.
- Revised number of Part 70 sources (discovery of new
sources, new EPA standards, expiration of the deferral
of nonmajor sources).
- Changes in the number of permit revisions.
- Changes in the number of affected units under
section 404 (e.g., substitution units).
- CPI-type adjustments.
- Different activities during post-transition period.
_______________________________________________________________
NOTICE
The policies set out in this guidance document are
intended solely as guidance and do not represent final
agency action and are not ripe for judicial review.
They are not intended, nor can they be relied upon, to
create any rights enforceable by any party in
litigation with the United States. The EPA officials
may decide to follow the guidance provided in this
guidance document, or to act at variance with the
guidance, based on an analysis of specific
circumstances. The EPA also may change this guidance
at any time without public notice.
Please e-mail any comments or questions to the Clean Air Act Information
Network.
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