January 22, 1996
MEMORANDUM
SUBJECT: Release of Interim Policy on Federal Enforceability of
Limitations on Potential to Emit
FROM: John S. Seitz, Director
Office of Air Quality Planning and Standards (MD-10)
Office of Air and Radiation
Robert I. Van Heuvelen, Director
Office of Regulatory Enforcement (2241A)
Office of Enforcement and Compliance Assurance
TO: Regional Office Addressees (see below):
The purpose of this memorandum is to notify you that the
Agency is today releasing detailed guidance (referred to below as
the "Interim Policy") clarifying the immediate impacts of two
recent decisions by the U.S. Court of Appeals for the D.C.
Circuit regarding EPA regulations requiring federal
enforceability of limitations on a sourcežs potential to emit
("PTE") under certain CAA programs. This cover memorandum
briefly summarizes the court decisions, and briefly summarizes
the immediate impacts of the decisions on current regulations. A
more detailed discussion of the impacts of the two court
decisions is attached. The policy will remain in place until
January 1997, but may be extended if necessary to coincide with
the promulgation of revised regulations.
The Court Decisions
In National Mining Association v. EPA, 59 F.3d 1351 (D.C.
Cir. 1995), the court addressed hazardous air pollutant programs
under section 112. The court found that EPA had not adequately
explained why only federally enforceable measures should be
considered as limits on a source's potential to emit.
Accordingly, the court remanded the section 112 General
Provisions regulation to EPA for further proceedings. 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, that is, the
court did not declare the regulations null and void. The
regulations remain in effect pending completion of new
rulemaking.
In Chemical Manufacturers Ass'n v. EPA, No. 89-1514 (D.C.
Cir. Sept. 15, 1995), the court, in light of National Mining,
remanded the PTE definition in the PSD and NSR regulations to
EPA. The court also vacated the federal enforceability
requirement of the PTE definitions in the PSD and NSR
regulations.
Summary of Immediate Impacts of the Court Decisions
EPA plans to propose rulemaking amendments in spring 1996
that would address the federal enforceability issue as it relates
to section 112, title V, and Prevention of Significant
Deterioration & New Source Review ("PSD/NSR") regulations.
Pending this rulemaking, the immediate impacts are as follows:
Effects on Section 112. Because the court did not vacate
the rule, the current part 63 regulations, requiring federal
enforceability, remain in effect.
Effects on title V. Although neither court case addressed
the title V regulations, industry challenges to the part 70
requirements are pending. Because the federal enforceability
provision of the title V regulations are closely related to the
regulations addressed in the two decided cases, EPA will ask the
court to leave part 70 in place as the rulemaking amendments are
being developed.
Effects on PSD/NSR. Because the court vacated the rules,
the requirements in the nationwide rules for PSD and major source
NSR concerning federal enforceability are not in effect. In many
cases, however, individual State rules implementing these
programs have been individually approved in the State
Implementation Plan (SIP). The court did not vacate any
requirements for federal enforceability in these individual State
rules, and these requirements remain in place. As discussed in
detail in the Interim Policy, the immediate practical impacts on
the PSD/NSR programs are not substantial for newly constructed
major sources. Greater impacts may exist for existing major
sources seeking to avoid review by demonstrating a net emissions
decrease.
Effects on January 25, 1995 Transition Policy. The
transition policy remains in effect with one change. For sources
emitting more than 50% of the major source threshold, and holding
State-enforceable limits, EPA is no longer requiring that the
source submit a certification to EPA.
Distribution/Further Information
The Regional Offices should send this memorandum to States
within their jurisdiction. Questions concerning specific issues
and cases should be directed to the appropriate Regional Office.
Regional Office staff may contact Tim Smith of the Integrated
Implementation Group at 919-541-4718, Adan Schwartz of the Office
of General Counsel at 202-260-7632, or Julie Domike of the Office
of Enforcement and Compliance Assurance at 202-564-6577. The
document is also available on the technology transfer network
(TTN) bulletin board, under "Clean Air Act, Title V, Policy
Guidance Memos." (Readers unfamiliar with this bulletin board may
obtain access by calling the TTN help line at 919-541-5384).
Attachment
Addressees:
Director, Office of Ecosystem Protection, Region I
Director, Air and Waste Management Division, Region II
Director, Air, Radiation, and Toxics Division, Region
III
Director, Air, Pesticides, and Toxics Management
Division, Region IV
Director, Air and Radiation Division, Region V
Director, Multimedia Planning and Permitting Division,
Region VI
Director, Air, RCRA, and TSCA Division, Region VII
Assistant Regional Administrator, Office of Pollution
Prevention, State and Tribal Assistance, Region VIII
Director, Air and Toxics Division, Region IX
Director, Office of Air, Region X
Regional Counsels, Regions I-X
Director, Office of Environmental Stewardship, Region I
Director, Division of Enforcement and Compliance
Assurance, Region II
Director, Enforcement Coordination Office, Region III
Director, Compliance Assurance and Enforcement
Division, Region VI
Director, Enforcement Coordination Office, Region VII
Assistant Regional Administrator, Office of
Enforcement, Compliance and Environmental Justice,
Region VIII
Enforcement Coordinator, Office of Regional Enforcement
Coordination, Region IX
EPA INTERIM POLICY ON FEDERAL ENFORCEABILITY REQUIREMENT
FOR LIMITATIONS ON POTENTIAL TO EMIT
January 1996
This document provides guidance clarifying the immediate
impacts of recent court decisions related to federal
enforceability of limitations on a sourcežs potential to emit
("PTE"). In brief, most current regulatory requirements and
policies regarding PTE, including the interim policy recognizing
state-enforceable limits under section 112 and Title V in some
circumstances, remain in effect while EPA conducts expedited
rulemaking to address these issues in detail. However, at
present, certain netting transactions involving PTE limits under
new source review programs may now take place without federal
enforceability. Today's guidance will be superseded upon
completion of the new rulemaking.
Background
Several important Clean Air Act programs apply to only major
sources, i.e., those that "emit or have the potential to emit"
amounts exceeding major source thresholds listed in the Act. The
EPA has promulgated regulations defining the term žpotential to
emitž for most of these programs. In particular, five sets of
regulations are in place implementing the major source prevention
of significant deterioration (PSD) and nonattainment area new
source review (NSR) permitting programs (40 CFR 51.166, 40 CFR
52.21, 40 CFR 51.165, Appendix S of 40 CFR Part 51, and 40 CFR
52.24). Regulations governing approvability of state operating
permit programs under Title V of the CAA are contained in 40 CFR
Part 70, and EPA has proposed regulations implementing a federal
operating permits program that are to be promulgated at 40 CFR
Part 71. Regulations implementing the requirements of section
112 of the Act related to major sources of hazardous air
pollutants are contained in 40 CFR Part 63, subpart A.
For each of the above Clean Air Act programs, the EPA
regulations provide that "controls" (i.e., both pollution control
equipment and operational restrictions) that limit a sourcežs
maximum capacity to emit a pollutant may be considered in
determining its potential to emit. Historically, large numbers of
new or modified sources that otherwise would be subject to PSD
and NSR permitting requirements have limited their PTE in order
to obtain "synthetic minor" status and thereby avoid major source
requirements. With the advent of operating permit programs under
Title V and the MACT program under section 112, many sources that
otherwise would be subject to these new requirements under the
Clean Air Act Amendments of 1990 also have obtained, or plan to
obtain, PTE limits to avoid coverage. For each of these
programs, EPA regulations have required that PTE limits be
"federally enforceable" in order to be considered in determining
PTE.
These federal enforceability requirements were the subject
of two recent decisions of the D.C. Circuit Court of Appeals.
The first decision, National Mining Association v. EPA, 59 F.3d
1351 (D.C. Cir. July 21, 1995), dealt with the potential to emit
definition under the hazardous air pollutant programs promulgated
pursuant to CAA section 112. In this decision, the Court
implicitly accepted EPA's argument 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 PTE.
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 second decision, Chemical Manufacturers Ass'n v. EPA,
No. 89-1514 (D.C. Cir. Sept. 15, 1995), dealt with the potential
to emit definition in the PSD and NSR programs. Specifically,
this case challenged the June 1989 rulemaking in which the EPA
reaffirmed the requirement for federal enforceability of PTE
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 PTE definitions in the PSD and NSR regulations.
In a third set of cases, industry challenges to the federal
enforceability requirements in Part 70 are pending before the
D.C. Circuit. The Title V cases have not been briefed. However,
since the federal enforceability provisions of these Title V
regulations are closely related to the regulations addressed in
the two decided cases, EPA plans to ask the court to remand the
regulations to EPA for further rulemaking, and to leave Part 70
in place during the new rulemaking.
Plans for Rulemaking Amendments
EPA plans to hold discussions with stakeholders and propose
rulemaking amendments by spring 1996, and to issue final rules by
spring 1997, that would address the court decisions impacting
regulations promulgated pursuant to section 112 and the PSD/NSR
regulations. At the same time, EPA will propose a parallel
approach to cognizable PTE limits for major sources subject to
title V. EPA currently plans to address the following options,
after discussions with stakeholders:
(a) An approach that would recognize "effective" State-
enforceable limits as an alternative to federally
enforceable limits on a source's potential to emit. Under
this option, a source whose maximum capacity to emit without
pollution controls or operational limitations exceeds
relevant major source thresholds may take a State or local
limit on its potential to emit. In such circumstances, the
source must be able to demonstrate that the State-
enforceable limits are (1) enforceable as a practical
matter, and (2) being regularly complied with by the
facility.
(b) An approach under which the EPA would continue to require
federal enforceability of limits on a source's potential to
emit. Under this approach, in response to specific issues
raised by the court in National Mining, EPA would present
further explanation regarding why the federal enforceability
requirement promotes effective controls. Under this
approach, EPA would propose simplifying changes to the
administrative provisions of the current federal
enforceability regulations.
The remainder of this guidance memorandum addresses the
immediate impacts of the court decisions on each of the three
programs, in light of the upcoming rulemaking.
Effects on PSD/NSR
EPA interprets the court's decision to vacate the PSD/NSR
federal enforceability requirement in the Chemical Manufacturers
case 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, 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 practicably
enforceable by a state or local air pollution control agency."
For the reasons discussed below, however, the practical effects
of the vacatur will be limited during the period prior to
completion of new EPA rulemaking on this issue. During this
interim period, federal enforceability is still required to
create "synthetic minor" new and modified sources in most
circumstances pending completion of EPAžs rulemaking.
First, EPA interprets the order vacating certain provisions
of EPA regulations as not affecting the provisions of any current
SIP, or of any permit issued under any current SIP. Thus,
previously issued federally enforceable permits, such as permits
issued under federally enforceable state operating permit
programs under Title I ("FESOPPs") remain in effect. Likewise,
EPA-approved state PSD and NSR SIP rules requiring that all
pollution controls or operational restrictions limiting potential
to emit be federally enforceable remain in place, even though
such provisions may have been based on the now-vacated terms of
EPA regulations.
Second, a new or modified source that seeks to lawfully
avoid compliance with the "major" source requirements of either
PSD or nonattainment NSR by limiting its 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 C.F.R. 51.160-164. Every SIP contains a minor
NSR program that applies generally to new or modified sources of
air pollutants, without regard to whether those sources are
"major." Permits under such programs are, like all other SIP
measures, federally enforceable. See CAA section 113(b)(1); 40
CFR 52.23. The requirement under section 110(a)(2)(C) to
obtain a federally enforceable minor NSR permit was not at issue
in the Chemical Manufacturers case, and is unaffected by the
court's ruling.
As noted above, the court's action does not affect FESOPPs
that many states have adopted as an additional mechanism for
avoiding PSD/NSR or for creating an emissions reduction credit
that may be tradeable to another source. Permits issued under
such programs continue to be valid for purposes of limiting PTE.
States are free to submit SIP revisions to remove such provisions
in light of the vacatur, and to substitute mechanisms that are
legally and practicably enforceable by the state for limiting
potential to emit in some circumstances under the PSD/NSR
program. However, we expect few states to do so pending the
outcome of new EPA rulemaking on the broader federal
enforceability issue.
Likewise, states conceivably might now seek to reduce the
scope of SIP-approved minor NSR programs where they are presently
broader than minimum federal requirements (e.g., to no longer
cover changes at existing emissions units that reduce emissions
to create a netting credit or tradeable emission reduction
credit), and to substitute state-enforceable mechanisms. Here
also, however, EPA does not expect states to seek such changes
pending the outcome of EPA rulemaking. In addition, regarding
the minimum scope of minor NSR programs, section 110(a)(2)(C)
provides that state minor NSR programs must regulate all new or
modified sources "as necessary" to insure consistency with air
quality planning goals. Given the central role of new and
modified synthetic minor sources in the overall PSD/NSR
regulatory scheme, and the adverse environmental consequences if
controls were not effective in limiting PTE, it is unlikely that
states would have the legal ability to exclude from such programs
transactions that are intrinsic to the avoidance of major NSR
permitting requirements.
The principal immediate impact of the vacatur of the PSD/NSR
federal enforceability regulations likely will occur in cases
involving "netting" exercises at existing sources, where a source
seeks to internally offset an emissions increase at a new or
modified emissions unit by installing pollution controls or
accepting operational limitations at another unit within the
plant. For the reasons discussed above, in such cases the new or
modified unit would still need to obtain a federally enforceable
minor NSR permit. In contrast, the vacatur ordered by the court
may allow the unit that is limiting its emissions to rely in some
circumstances on controls that are legally and practicably
enforceable by the state. Note, however, that under the terms
of many state minor NSR programs, the unit undergoing an
emissions reduction would still need to be included in the minor
NSR permit. Also, if the state's SIP has a general requirement
that PTE limits be federally enforceable, the unit reducing
emissions would still need a federally enforceable limit. Such
programs would not be affected by the court's ruling. In sum,
the precise impact of the vacatur on PSD/NSR applicability in any
state can be definitively established only by reviewing the
provisions of a particular SIP.
Effects on Section 112 and Title V
The National Mining decision did not vacate the current
definition of a major source under section 112 program in the
General Provisions to Part 63, and neither of the court decisions
addressed the definition of a major source for the title V
program in 40 CFR part 70. Both of these current definitions,
therefore, remain in effect. As discussed above, however, these
regulations will be affected by the rulemaking EPA is conducting
in response to the court decisions.
EPA today reiterates that independent from the decision in
National Mining, current EPA policy already recognizes State-
enforceable PTE limits under section 112 and Title V in many
circumstances under a transition policy intended to provide for
orderly implementation of these new programs under the Clean Air
Act Amendments of 1990. This policy is set forth in a
memorandum, "Options for Limiting the Potential to Emit (PTE) of
a Stationary Source Under Section 112 and Title V of the Clean
Air Act" (January 25, 1995). The transition policy is summarized
below; as noted, EPA is now making one significant change in that
policy in light of National Mining.
In recognition of the absence in some states of suitable
federally enforceable mechanisms to limit PTE applicable to
sources that might otherwise be subject to section 112 or 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, for
the 2-year transition period, 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: (a) the permit and the restriction in particular
are enforceable as a practical matter; (b) the source owner
submits a written certification to EPA accepting EPA and citizen
enforcement. In light of National Mining, EPA believes that the
certification requirement is no longer appropriate as part of
this policy. Accordingly, EPA hereby amends the January 1995
transition policy by deleting the certification requirement.
In addition, under the transition policy, sources with
consistently low levels of actual emissions relative to major
source thresholds can avoid major source requirements even absent
any permit or other enforceable limit on PTE. 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 PTE, so long as they maintain adequate records
to demonstrate that the 50 percent level is not exceeded.
Under the terms of EPA's transition policy, the transition
period is to end in January 1997. In addition, completion of
EPA's rulemaking in response to the recent court decisions, which
EPA anticipates will occur by early 1997, may render the
transition policy unnecessary after that time. However, in
conjunction with the rulemaking, EPA will consider whether it is
appropriate to extend the transition period beyond January 1997.
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