Draft Do not cite, copy, or distribute February 14, 2006 1 6560 50

ENVIRONMENTAL PROTECTION AGENCY 40 CFR Part 49 [ Docket ID No. OAR 2003 0076 ( A 2002 17); FRL ] RIN 2060 AH37 Review of New Sources and Modifications in Indian Country AGENCY: Environmental Protection Agency ( EPA).

ACTION: Proposed rules.

SUMMARY: The Environmental Protection Agency ( EPA) proposes to promulgate a Federal Implementation Plan ( FIP) under the Clean Air Act ( the Act) for Indian country.

The FIP would include two basic air quality regulations for the protection of communities in and adjacent to Indian country. These rules would be implemented by EPA, or a delegate tribal agency assisting EPA with administration of the rules, until replaced by an EPA approved implementation plan for an area of Indian country.

In today= s rulemaking, we1 are proposing to fill a regulatory gap that currently exists in Indian country. We are proposing two new source review ( NSR) rules under which the reviewing authority will issue pre construction permits for certain stationary sources of air pollution in Indian country. The first rule would apply to minor stationary sources and minor modifications at major stationary sources in Indian country ( minor NSR rule). The second rule would apply to all new major stationary sources and major 1 In this preamble the term Awe@ refers to the EPA and the term Ayou@ refers to stationary sources of air pollution and their owners and operators. Draft Do not cite, copy, or distribute February 14, 2006 2 modifications located in areas of Indian country that are designated as not attaining the National Ambient Air Quality Standards ( NAAQS) ( nonattainment major NSR rule).

Under the latter rule, affected sources would be required to comply with the provisions of 40 CFR part 51, appendix S, a transitional rule which generally applies to areas that do not have a State Implementation Plan ( SIP). These proposed rules would provide additional regulatory tools for us to use in implementing the Act in Indian country. However, in any area within Indian country with an EPA approved NSR permitting program for minor or major sources, the proposed rules would not apply.

The minor NSR rule would apply to new and modified minor sources and to minor modifications at major stationary sources. Sources subject to this rule would apply control technology, if any, as determined by the reviewing authority on a case by case basis. In rare instances at the discretion of the reviewing authority, such sources may also be required to submit an air quality analysis as part of their permit application. We are proposing to establish minor NSR thresholds so that only minor sources with a potential to emit ( PTE) equal to or higher than these thresholds would be subject to this rule.

Additionally, this rule would allow otherwise major stationary sources in Indian country to voluntarily accept emission limitations on their PTE to become Asynthetic minor sources.@

Such synthetic minor sources would include sources that emit hazardous air pollutants ( HAP) so that they would not be subject to major source regulations under 40 CFR part 63. Any limitations on PTE must be enforceable as a practical matter ( that is, legally and practically enforceable).

Sources subject to the nonattainment major NSR rule would be subject to Draft Do not cite, copy, or distribute February 14, 2006 3 requirements for Lowest Achievable Emission Rate ( LAER) control technology, emissions offsets, compliance certification, and net air quality benefit analysis. Due to the limited number of sources in Indian country, offsets are not generally available. We have proposed options for addressing the lack of availability of offsets in Indian country.

DATES: Comments. Submit comments on or before [ INSERT DATE 60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]. " Under the Paperwork Reduction Act, comments on the information collection provisions must be received by OMB on or before [ INSERT DATE 30 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER]."

ADDRESSES: Comments. Submit your comments, identified by Docket ID No. OAR

2003 0076, by one of the following methods:

$ Federal eRulemaking Portal: http:// www. regulations. gov. Follow the on line instructions for submitting comments.

$ E mail: a and r docket@ epamail. epa. gov.

$ Fax: 202 566 1741.

$ Mail: Attention Docket ID No. OAR 2003 0076, U. S. Environmental Protection Agency, EPA West ( Air Docket), 1200 Pennsylvania Avenue, Northwest,

Mailcode: 6102T, Washington, DC 20460.

$ Hand Delivery: U. S. Environmental Protection Agency, EPA West ( Air Docket),

1301 Constitution Avenue, Northwest, Room B 102, Washington, DC 20004,

Attention Docket ID No. OAR 2003 0076. Such deliveries are only accepted during the Docket= s normal hours of operation, and special arrangements should be Draft Do not cite, copy, or distribute February 14, 2006 4 made for deliveries of boxed information.

Instructions. Direct your comments to Docket ID No. OAR 2003 0076. EPA's policy is that all comments received will be included in the public docket without change and may be made available online at www. regulations. gov, including any personal information provided, unless the comment includes information claimed to be Confidential Business Information ( CBI) or other information whose disclosure is restricted by statute. Do not submit information that you consider to be CBI or otherwise protected through www. regulations. gov or e mail. The www. regulations. gov website is an " anonymous access" system, which means EPA will not know your identity or contact information unless you provide it in the body of your comment. If you send an e mail comment directly to EPA without going through www. regulations. gov your e mail address will be automatically captured and included as part of the comment that is placed in the public docket and made available on the Internet. If you submit an electronic comment, EPA recommends that you include your name and other contact information in the body of your comment and with any disk or CD ROM you submit. If EPA cannot read your comment due to technical difficulties and cannot contact you for clarification, EPA may not be able to consider your comment. Electronic files should avoid the use of special characters, any form of encryption, and be free of any defects or viruses. { For additional information about EPA's public docket visit the EPA Docket Center homepage at http:// www. epa. gov/ epahome/ dockets. htm. " For additional instructions on submitting comments, go to I C & D of the SUPPLEMENTARY INFORMATION section of this document."} Draft Do not cite, copy, or distribute February 14, 2006 5 Docket: All documents in the docket are listed in the www. regulations. gov index.

Although listed in the index, some information is not publicly available, e. g., CBI or other information whose disclosure is restricted by statute. Certain other material, such as copyrighted material, will be publicly available only in hard copy. Publicly available docket materials are available either electronically in www. regulations. gov or in hard copy at the U. S. Environmental Protection Agency, Air Docket, EPA/ DC, EPA West, Room B102, 1301 Constitution Ave., NW, Washington, DC. The Public Reading Room is open from 8: 30 a. m. to 4: 30 p. m., Monday through Friday, excluding legal holidays. The telephone number for the Public Reading Room is ( 202) 566 1744, and the telephone number for the Air Docket is ( 202) 566 1742.

FOR FURTHER INFORMATION CONTACT: Raj Rao, Information Transfer and Program Integration Division ( C339 03), U. S. EPA Office of Air Quality Planning and Standards, Research Triangle Park, North Carolina 27711, telephone number ( 919) 541

5344, facsimile number ( 919) 541 5509, electronic mail e mail address: rao. raj@ epa. gov.

SUPPLEMENTARY INFORMATION:

The information presented in this preamble is organized as follows:

I. General Information A. What are the regulated entities? B. Where can I get a copy of this document and other related information? C. How should I submit Confidential Business Information ( CBI) to the Agency? D. What should I consider as I prepare my comments for the EPA? E. How can I find information about a possible hearing? II. Purpose III. Background A. The New Source Review ( NSR) Program 1. What are the general requirements of the major NSR program? Draft Do not cite, copy, or distribute February 14, 2006 6 2. What are the general requirements of the minor NSR program? B. Status of Air Quality Programs in Indian Country C. Consultation with Tribal Representatives IV. Proposed Rules for Indian Country A. Minor NSR Program 1. What is a minor source and which minor sources are subject to this rule? 2. What is a modification and what modifications are subject to this rule? 3. What are the minor NSR thresholds and how did we develop them? 4. Are any emissions units and activities at stationary sources exempt from this rule? 5. What are the permit application, control technology, and air quality analysis requirements, and what is the permit issuance process? 6. When are modifications subject to this rule? 7. Why do we believe that an allowable to allowable test is appropriate for minor sources? 8. Is your existing minor source subject to this rule? 9. How are Asynthetic minor sources@ subject to this rule? 10. How would 112( g) case by case MACT determinations be addressed by this rule? 11. What are the proposed requirements for public participation in the permitting process? 12. What are the monitoring, recordkeeping, and reporting requirements? 13. What are the criteria for general permits, what source categories generally qualify for them, and what are the permit application requirements for a general permit? 14. What is the administrative and judicial review process proposed for this program? B. Major NSR Program in Nonattainment Areas of Indian Country 1. What are the requirements for major source permitting under appendix S? 2. What are the options we are proposing to address the lack of available offsets in Indian country? 3. What are the proposed public participation requirements for this program? 4. How do I meet the statewide compliance certification requirement of the Act? V. Legal Basis, Statutory Authority, and Jurisdictional Issues A. What is the basis for our authority to implement these programs? B. How does a tribe receive delegation to assist EPA with administration of the Federal minor and major NSR rules? C. What happens to permits previously issued by States to sources in Indian country? VI. Statutory and Executive Order Reviews A. Executive Order 12866: Regulatory Planning and Review B. Paperwork Reduction Act Draft Do not cite, copy, or distribute February 14, 2006 7 C. Regulatory Flexibility Act ( RFA), as amended by the Small Business Regulatory Enforcement Fairness Act of 1966 ( SBREFA), 5 U. S. C. 601 et seq. D. Unfunded Mandates Reform Act E. Executive Order 13132: Federalism F. Executive Order 13175: Consultation and Coordination with Indian Tribal Governments G. Executive Order 13045: Protection of Children from Environmental Health & Safety Risks H. Executive Order 13211: Actions That Significantly Affect Energy Supply, Distribution, or Use I. National Technology Transfer Advancement Act VII. Statutory Authority I. General Information A. What are the regulated entities?

Entities potentially affected by this proposed action include owners and operators of emission sources in all industry groups located in Indian country, EPA, and tribal governments that are delegated administrative authority to assist EPA with the implementation of these Federal regulations. Categories and entities potentially affected by this action are expected to include:

Category NAICSa Examples of regulated entities Industry.............................. 4471 Gasoline station storage tanks and refueling.

5614 Lumber manufacturer support.

21211 Coal mining.

31332 Surface coating operation. Draft Do not cite, copy, or distribute February 14, 2006 8 33712 Furniture manufacture.

56221 Medical waste incinerator.

115112 Repellent and fertilizer applications.

211111 Natural gas plant.

211111 Oil and gas production.

211112 Fractionation of natural gas liquids.

212234 Copper mining and processing.

212312 Stone quarrying and processing.

212313 Stone quarrying and processing.

212321 Sand and gravel production.

221112 Power plant coal fired.

221119 Power plant biomass fueled.

221119 Power plant landfill gas fired.

221210 Natural gas collection.

221210 Natural gas pipeline.

321113 Sawmill.

321911 Window and door molding manufacturer.

323110 Printing operations.

323113 Surface coating operations.

324121 Asphalt hot mix plants.

325188 Elemental phosphorus plant.

325188 Sulfuric acid plant.

331314 Secondary aluminum production and extrusion.

331492 Cobalt and tungsten recycling.

332431 Surface coating operations.

332812 Surface coating operations. Draft Do not cite, copy, or distribute February 14, 2006 9 421320 Concrete batching plant.

422510 Grain elevator.

422710 Crude oil storage and distribution.

422710 Gasoline bulk plant.

486110 Crude oil storage and distribution.

486210 Natural gas compressor station.

562212 Solid waste landfill.

811121 Automobile refinishing shop.

812320 Dry cleaner.

Federal government ............ 924110 Administration of Air and Water Resources and Solid Waste Management Programs State/ local/ tribal government......................... 924110 Administration of Air and Water Resources and Solid Waste Management Programs a North American Industry Classification System.

This table is not intended to be exhaustive, but rather provides a guide for readers regarding entities likely to be regulated by this action. To determine whether your facility is regulated by this action, you should examine the applicability criteria in the proposed minor and major NSR programs for Indian country, proposed 40 CFR 49.153 and 49.168,

respectively. If you have any questions regarding the applicability of this action to a particular entity, contact the person listed in the preceding FOR FURTHER INFORMATION CONTACT section.

B. Where can I get a copy of this document and other related information?

In addition to being available in the docket, an electronic copy of this proposal will also be available on the WWW. Following signature by the EPA Administrator, a copy of this notice will be posted in the regulations and standards section of our NSR home page Draft Do not cite, copy, or distribute February 14, 2006 10 located at http:// www. epa. gov/ nsr.

C. How should I submit Confidential Business Information ( CBI) to the Agency?

Do not submit this information to EPA through www. regulations. gov or e mail.

Clearly mark the part or all of the information that you claim to be CBI. For CBI information in a disk or CD ROM that you mail to EPA, mark the outside of the disk or CD ROM as CBI and then identify electronically within the disk or CD ROM the specific information that is claimed as CBI. In addition to one complete version of the comment that includes information claimed as CBI, a copy of the comment that does not contain the information claimed as CBI must be submitted for inclusion in the public docket.

Information so marked will not be disclosed except in accordance with procedures set forth in 40 CFR part 2. Send or deliver information identified as CBI only to the following address: Roberto Morales, OAQPS Document Control Officer ( C404 02), U. S.

EPA, Research Triangle Park, NC 27711, Attention Docket ID No. OAR 2003 0076.

D. What should I consider as I prepare my comments for the EPA?

When submitting comments, remember to:

$ Identify the rulemaking by docket number and other identifying information ( subject heading, Federal Register date and page number).

$ Follow directions  The agency may ask you to respond to specific questions or organize comments by referencing a Code of Federal Regulations ( CFR) part or section number.

$ Explain why you agree or disagree; suggest alternatives and substitute language for your requested changes. Draft Do not cite, copy, or distribute February 14, 2006 11 $ Describe any assumptions and provide any technical information and/ or data that you used.

$ If you estimate potential costs or burdens, explain how you arrived at your estimate in sufficient detail to allow for it to be reproduced.

$ Provide specific examples to illustrate your concerns, and suggest alternatives.

$ Explain your views as clearly as possible, avoiding the use of profanity or personal threats.

$ Make sure to submit your comments by the comment period deadline identified.

E. How can I find information about a possible hearing?

Persons interested in inquiring if a hearing is to be held should contact Ms. Pam Long, New Source Review Group, Air Quality Policy Division ( C339 03), U. S. EPA,

Research Triangle Park, NC 27711, telephone number ( 919) 541 0641. If a hearing is to be held, persons interested in presenting oral testimony should notify Ms. Long at least 2 days in advance of the public hearing. Persons interested in attending the public hearing should also contact Ms. Long to verify the time, date, and location of the hearing. The public hearing will provide interested parties the opportunity to present data, views, or arguments concerning these proposed rules.

II. Purpose The purpose of today= s rulemaking is to ensure that air resources in Indian country will be protected in the manner intended by the Clean Air Act as amended in 1990 ( the Draft Do not cite, copy, or distribute February 14, 2006 12 Act) by establishing a permitting program for stationary sources in Indian country.

Currently in Indian country, there is no permitting mechanism for new or modified minor sources; minor modifications at major sources; or new major stationary sources or major modifications of regulated NSR pollutants in nonattainment areas. In addition, there is no minor source permitting mechanism for major stationary sources looking to voluntarily limit emissions to become synthetic minor sources2 or for approving case by case maximum achievable control technology ( MACT) determinations. Today= s proposed rules will fill this regulatory gap and provide certainty to allow for environmentally sound economic growth in Indian country. By establishing this FIP for Indian country, we will provide more consistency with the requirements and programs of the States and thus create a more level regulatory playing field for owners and operators within and outside of Indian country. We are proposing these permit programs pursuant to section 110( a)( 2)( C), part D of title I, and section 301( d) of the Act.

III. Background A. The New Source Review ( NSR) Program 1. What are the general requirements of the major NSR program?

The major NSR program contained in parts C and D of title I of the Act is a preconstruction review and permitting program applicable to new major stationary sources and major modifications at such sources. In areas not meeting health based NAAQS and 2 Sources located within the exterior boundaries of Indian reservations in Idaho, Oregon, and Washington can apply for a non Title V operating permit to establish synthetic minor status under the FIP established for those reservations. See 40 CFR 49.139 and 40 CFR part 49, subpart M. Draft Do not cite, copy, or distribute February 14, 2006 13 in ozone transport regions ( OTR), the program is implemented under the requirements of part D of title I of the Act. We call this program the " nonattainment" major NSR program. In areas meeting the NAAQS (" attainment" areas) or for which there is insufficient information to determine whether they meet the NAAQS (" unclassifiable"

areas), the NSR requirements under part C of title I of the Act apply. We call this program the Prevention of Significant Deterioration ( PSD) program. Collectively, we also commonly refer to these programs as the major NSR program. These rules are contained in 40 CFR 51.165, 51.166, 52.21, 52.24, and part 51, appendices S and W.

For newly constructed, " greenfield" sources, the determination of whether a source is subject to the major NSR program is based on the source= s PTE. The Act, as implemented by our rules, sets applicability thresholds for major sources in nonattainment areas. These thresholds are 100 tons per year ( tpy) of any pollutant subject to regulation under the Act, or smaller amounts, depending on the nonattainment classification. For attainment areas the thresholds are 100 or 250 tpy, depending on the source type. A new source with a PTE at or above the applicable threshold amount " triggers," or is subject to,

major NSR.

For existing major sources, major NSR applies to a Amajor modification.@ For a modification to be major, the following three criteria have to be met:

( 1) A physical change in or change in the method of operation of a major stationary source must occur;

( 2) The increase in emissions resulting from this change must be significant ( equal to or above the significance levels defined in 40 CFR 52.21( b)( 23)); and Draft Do not cite, copy, or distribute February 14, 2006 14 ( 3) The increase in emissions resulting from the change must be a significant net emissions increase. In other words, when the increase from the project is added to other contemporaneous increases or decreases in actual emissions3 at the source, the net emissions increase must be significant ( equal to or above the significance levels defined in 40 CFR 52.21( b)( 23)).

Major sources and major modifications subject to nonattainment major NSR must apply state of the art emissions control technologies, including any pollution prevention measures, to achieve the LAER. The LAER is based on the most stringent emission limitation in the implementation plan of any State, or achieved in practice, for the source category under review.

Each major source subject to nonattainment major NSR must also Aoffset@ its emissions increase by obtaining emissions reductions from other sources in the area, or in an area of equal or higher nonattainment classification that contributes to nonattainment in the subject source= s area. The ratio of the offset relative to the proposed increase must be at least one to one and is based on the severity of the area= s nonattainment classification.

For ozone and PM 10, the more polluted the air is where the source is locating or expanding, the greater is the required offset ratio. The emissions reductions to be used as offsets must be surplus ( not otherwise required by the Act), quantifiable, federally enforceable, and permanent. See sections 173( a) and ( c) of the Act and 40 CFR 3 In approximate terms, " contemporaneous" emissions increases or decreases are those that have occurred between the date 5 years immediately preceding the proposed physical or operational change and the date that the increase from the change occurs. See, for example, 40 CFR 52.21( b)( 3)( ii). Draft Do not cite, copy, or distribute February 14, 2006 15 51.165( a)( 3).

Additionally, each major nonattainment NSR permit applicant must also conduct an analysis of Aalternative sites, sizes, production processes, and environmental control techniques demonstrating that the benefits of the proposed emissions source significantly outweigh the environmental and social costs of its location, construction, or modification.@

Moreover, each major nonattainment NSR permit applicant must demonstrate that all other major stationary sources under her/ his control in the same State are in compliance or on a schedule of compliance with all emission limitations and standards of the Act.

Under the PSD program for attainment areas, a major source or modification must apply Best Available Control Technology ( BACT), which may be based on pollution prevention techniques. In addition, the source must analyze the impact of the project on ambient air quality to assure that no violation of the NAAQS or PSD increments will result, and must analyze impacts on soil, vegetation, and visibility. Sources or modifications that would impact Class I areas ( e. g., national parks) may be subject to additional requirements to protect air quality related values ( AQRVs) that have been identified for such areas.

2. What are the general requirements of the minor NSR program?

Section 110( a)( 2)( C) of the Act requires that every SIP include a program to regulate the construction and modification of stationary sources, including a permit program as required by parts C and D of title I of the Act, to ensure attainment and maintenance of NAAQS. As noted above, parts C and D address the major NSR program for major stationary sources, and the permitting program for minor stationary sources is Draft Do not cite, copy, or distribute February 14, 2006 16 addressed by section 110( a)( 2)( C) of the Act. We commonly refer to the latter program as the Aminor NSR@ program. A minor stationary source means a source whose PTE is lower than the major source applicability threshold for a particular pollutant as defined in the applicable nonattainment major NSR program or PSD program.

The Federal requirements for minor source programs are outlined 40 CFR 51.160 through 51.164. States must develop minor source programs to attain and maintain NAAQS. The Federal regulations for minor source programs are considerably less detailed than the requirements for major sources. As a result, there is a wider variety of programs and requirements for these Anonmajor@ preconstruction activities.

Section 110( a)( 2)( C) of the Act provides us with a broad degree of discretion in developing a program to regulate new and modified minor stationary source construction activities in Indian country.

B. Status of Air Quality Programs in Indian Country As we have discussed in previous rulemaking actions which affect Indian country,

in the absence of an EPA approved program, we are authorized to develop a FIP to protect air quality by directly implementing provisions of the Act throughout Indian country. See, e. g., 59 FR 43958 61 ( August 25, 1994), 63 FR 7262 64 ( February 12,

1998), and 62 FR 13750 ( March 21, 1997). Previously, we had already promulgated rules establishing requirements for major stationary sources in attainment areas and have issued PSD permits in Indian country ( see 40 CFR 52.21).

Under the Act and the Tribal Authority Rule ( TAR) ( see 40 CFR part 49, subpart A), eligible tribes may seek approval of their own PSD programs for their reservations Draft Do not cite, copy, or distribute February 14, 2006 17 and/ or for other areas under their jurisdiction. Currently, no tribe is administering an EPA approved PSD program. Therefore, we implement the PSD program in Indian country. Unlike for the PSD program, there is currently no FIP to implement either the nonattainment major NSR program or the minor NSR program in Indian country. Hence,

there is a regulatory gap in Indian country. Today= s proposed rule will allow us to fully implement the NSR program in Indian country. We are proposing the minor NSR program at 40 CFR 49.151 through 49.165 and the nonattainment major NSR program at 40 CFR 49.166 through 49.175. It is important to recognize, however, that even if we adopt a Federal program that applies in Indian country, the tribes may still develop Tribal Implementation Plans ( TIPs), similar to SIPs, to implement these programs. If a tribe develops a TIP to implement NSR, the TIP, once it is approved, will replace the Federal program as the requirement for that area of Indian country.

Sources that obtain enforceable emission limitations can avoid major source status by reducing their PTE below the applicable major source thresholds. Such sources are commonly referred to as Asynthetic minors.@ The practice of creating synthetic minor sources to avoid major NSR and title V is common under most State and local minor NSR permitting programs. However, outside of Idaho, Oregon, and Washington, no such minor source permitting mechanism is currently available in Federal regulations for Indian country. 4 We therefore believe that inclusion of this provision in the proposed rules would significantly benefit large sources in Indian country by providing them with a means to 4 See Footnote 2 for more information on the FIP that is in place in within the exterior boundaries of Indian reservations in these three States. Draft Do not cite, copy, or distribute February 14, 2006 18 legally avoid more stringent major NSR rules otherwise required by title I of the Act. We are establishing this mechanism for both stationary sources of regulated NSR pollutants and HAPs.

C. Consultation with Tribal Representatives Prior to undertaking this rulemaking, we sought to include tribes early in the rulemaking process. On June 24, 2002, we sent letters to tribal leaders seeking their recommendations for effective consultation and their involvement in developing this rule.

We received responses from 75 tribes. Of these 75 tribes, 69 designated an environmental staff member to work with us on developing the rules. Aside from the designated staff, many tribal leaders asked that we keep them informed of our progress through e mail, meetings with the EPA Regional Offices, newsletters, and websites.

However, 53 percent of the tribal leaders also requested direct phone calls or conference calls to discuss the subject. Only 16 percent of the respondents requested face to face consultation. Of these, only six tribes requested senior EPA staff to meet with tribal leaders.

As a result of this feedback, we developed a consultation plan that included three meetings held at the reservations of the Menominee Tribe in Wisconsin, the Mohegan Tribe in Connecticut, and the Chehalis Tribe in Washington. A fourth meeting was held in conjunction with the Institute of Tribal Environmental Professionals= ( ITEP) 10th anniversary meeting in Flagstaff, Arizona. In addition to conducting these meetings, we also visited tribal environmental staff in Indian country. Over 30 tribes attended these meetings. As part of our outreach efforts to the tribes, we participated in numerous Draft Do not cite, copy, or distribute February 14, 2006 19 national and regional forums including the National Tribal Forums sponsored by the ITEP,

two National Tribal Air Association meetings, and at meetings with tribal consortia, such as the National Tribal Environmental Council, United Southern and Eastern Tribes, Inter

Tribal Environmental Council, Inter Tribal Council of Arizona, and others.

Although much of our effort focused on outreach to the tribes, we also interacted with State and local air pollution control agencies during development of this rule. We had two meetings with the State and Territorial Air Pollution Program Administrators and the Association of Local Air Pollution Control Officers ( STAPPA/ ALAPCO) to present the draft rules.

IV. Proposed Rules for Indian Country A. Minor NSR Program Today= s action proposes provisions for a minor NSR program in Indian country.

We propose to codify these provisions at 40 CFR 49.151 to 49.165. Our primary goal in developing this proposed rule is to ensure that air resources in Indian country will be protected in the manner intended by the Act. In addition, we seek to establish a flexible preconstruction permitting program for minor stationary sources in Indian country that is comparable to that which applies outside of Indian country, in order to create a more level regulatory playing field for owners and operators within and outside of Indian country.

It is important to note, however, that outside of Indian country there is a great deal of variation among State minor NSR permitting programs. As a result, it would be impossible to create a single program that creates precisely equivalent regulations among all areas of Indian country and the surrounding State areas. Instead, we designed the Draft Do not cite, copy, or distribute February 14, 2006 20 proposed rules to ensure that stationary sources in Indian country would operate with a reasonable level of air pollution control, if necessary, and in such a manner to ensure that air resources in Indian country would be protected.

We are not attempting through this proposed rulemaking to establish a new set of minimum criteria that an eligible tribe, or a State, would need to follow in developing its own minor source permitting program. Rather, this proposal simply represents how we would implement the program in Indian country in the absence of an EPA approved implementation plan. However, if a tribe is developing its own program, this can serve as one example of a program that meets the objectives and requirements of the Act. We are proposing a minor source permitting program that addresses, on a national level, many environmental and regulatory issues that are specific to Indian country. We understand that States and eligible tribes may face different issues, and may therefore choose to develop different programs for their own State or Tribal Implementation Plans.

1. What is a minor source and which minor sources are subject to this rule?

A minor source means a source whose PTE is lower than an applicable major source threshold. For the NSR program in Indian country, the major source thresholds are defined in the PSD program ( see 40 CFR 52.21) and in today= s proposed nonattainment major NSR program ( see proposed 40 CFR 49.167), as applicable, and differ for attainment areas and nonattainment areas for the same pollutant. For example,

in attainment areas the major source threshold for NOx for a source is 250 tpy, unless the source belongs to a source category that is listed in the major NSR rules ( see 40 CFR 52.21( b)( 1)( i)( a)), in which case the major source threshold is 100 tpy. In contrast, the Draft Do not cite, copy, or distribute February 14, 2006 21 major source threshold for NOx in ozone nonattainment areas can vary from 10tpy in an extreme ozone nonattainment area to 100 tpy in a marginal ozone nonattainment area. A source can be a major source for some pollutants and a minor source for others.

Today, we are proposing to establish a minor NSR threshold as provided in section IV. A. 3 of this preamble. The proposed rule would apply to only those minor sources whose PTE is equal to or greater than the minor NSR threshold for the regulated NSR pollutant. Such sources would include ( 1) new minor sources, ( 2) modified minor sources, and ( 3) synthetic minor sources including HAP sources. A source= s PTE for a pollutant is expressed in tpy and generally is calculated by multiplying the maximum hourly emissions rate in pounds per hour ( lbs/ hr) times 8,760 ( which is the number of hours in a year), unless the source is restricted by permit conditions that are enforceable as a practical matter.

Section IV. A. 6 of this preamble includes detailed flowcharts to aid you in determining if a proposed new source would be subject to the proposed rule. The flowcharts differentiate between attainment areas and nonattainment areas because the applicability criteria are different for PSD and nonattainment major NSR.

2. What is a modification and what modifications are subject to this rule?

For the purposes of this rule, a modification is defined at proposed 40 CFR 49.152( d) as Aany physical or operational change at a stationary source that would cause an increase in the allowable emissions of the affected emissions units for any regulated NSR pollutant or that would cause the emission of any regulated NSR pollutant not previously emitted.@ The following exemptions would apply: Draft Do not cite, copy, or distribute February 14, 2006 22 $ A physical or operational change does not include routine maintenance,

repair, or replacement.

$ An increase in the hours of operation or in the production rate is not considered an operational change unless such increase is prohibited under any federally enforceable permit condition or other permit condition that is enforceable as a practical matter.

$ A change in ownership at a stationary source is not considered a modification.

Note that this definition differs from the term Amodification@ as used in the major NSR program, primarily in that it is based on an increase in allowable emissions rather than actual emissions. Parts C and D of title I of the Act ( the statutory basis for the major NSR program) refer to section 111( a)( 4) of the Act ( the definition of Amodification@ for purposes of the new source performance standards ( NSPS) program) to define Amodification@ for purposes of the major NSR program. In a recent decision, the D. C.

Circuit Court of Appeals ruled that, based on the wording of the definition of Amodification@ in section 111( a)( 4) of the Act, the applicability of major NSR to modifications must be based on changes in actual emissions ( State of New York, et al., v.

U. S. EPA, June 24, 2005). However, because the statutory basis for the minor NSR program is section 110( a)( 2)( C) of the Act, which does not define or refer to a definition of Amodification,@ we believe that we have discretion in defining the term as we think it best for the minor NSR program in Indian country that we are proposing today. We do not believe that the recent decision of the D. C. Circuit Court of Appeals applies to minor Draft Do not cite, copy, or distribute February 14, 2006 23 NSR programs.

This rule would apply to certain modifications at minor sources and to minor modifications ( not major modifications as defined in proposed 40 CFR 49.167 and in 40 CFR 52.21) at major sources. How such modifications would be addressed under the proposed rule is explained in section IV. A. 6 of this preamble. Section IV. A. 6 also includes detailed flowcharts to aid you in determining if a proposed modification would be subject to the proposed rule.

3. What are the minor NSR thresholds and how did we develop them?

A review of several State minor NSR programs indicated that a number of State programs have established cutoff levels or minor NSR thresholds, below which sources are exempt from their minor NSR rules. We believe that such an approach is also appropriate in Indian country. Section 110( a) ( 2)( C) of the Act requires minor NSR programs to assure that the NAAQS are attained and maintained. Applicability thresholds are proper in this context provided that the sources and modifications with emissions below the thresholds are inconsequential to attainment and maintenance of the NAAQS.

As discussed further below, the minor NSR thresholds that we are proposing today meet this criterion. In addition, these thresholds will result in a more cost effective program and reduce the burden on sources and reviewing authorities.

In today= s rulemaking, we are proposing to adopt minor NSR thresholds as emission rates in tpy. In setting the minor NSR thresholds for minor sources of regulated NSR pollutants, we decided to use emission rates, rather than air quality impacts, as the basis for the exemption. We chose this approach because we were concerned that Draft Do not cite, copy, or distribute February 14, 2006 24 applicability determinations based on projected air quality impacts would be excessively complex and resource intensive. In addition, it is consistent with the approach used in major NSR.

We are proposing minor NSR thresholds that we have developed based on a review of several State minor NSR programs. We found that there is variation in State approaches to minor NSR applicability. Some States do not prescribe source applicability thresholds, instead providing a list of emission units and activities that are excluded from minor NSR. Many of the States that do have applicability thresholds also provide a list of excluded emission units and activities. In today= s rulemaking, we propose threshold levels that we believe are neither the most stringent nor the least stringent of the levels found in existing State minor NSR rules. These threshold levels represent a reasonable balance between environmental protection and economic growth, since we did not want them to be so high that they were not environmentally protective or so low that they ensured environmental protection at the cost of discouraging economic growth. We consider the proposed thresholds to be representative of such thresholds in State minor NSR programs,

and we believe that these limits will be appropriate for use in Indian country. The proposed thresholds are listed in Table 1. Draft Do not cite, copy, or distribute February 14, 2006 25 Table 1. Minor NSR Thresholds Minor NSR thresholds for nonattainment areas ( tpy)

Regulated NSR pollutant Extreme ozone areas Other areas Minor NSR thresholds for attainment areas ( tpy)

Carbon monoxide 5 5 10 Oxides of nitrogen 0 5 10 Sulfur dioxide 5 5 10 VOC 0 2 5 PM 5 5 10 PM 10 1 1 5 PM 2.5 0.6 0.6 3 Lead 0.1 0.1 0.1 Fluorides NA NA 1 Sulfuric acid mist NA NA 2 Hydrogen sulfide ( H2S) NA NA 2 Total reduced sulfur ( including H2S) NA NA 2 Reduced sulfur compounds ( including H2S) NA NA 2 Municipal waste combustor emissions NA NA 2 Municipal solid waste landfills emissions ( measured as Non Methane Organic Compounds) NA NA 10 The selected minor NSR thresholds distinguish between minor stationary sources of regulated NSR pollutants located in nonattainment versus attainment areas and by Draft Do not cite, copy, or distribute February 14, 2006 26 pollutant. We believe this distinction is important because of the different air quality goals in nonattainment and attainment areas.

In some cases, a tribe= s area of Indian country may be divided between a nonattainment area and an attainment area. In this situation, the applicable threshold for a proposed source or modification would correspond to the designation of the area where the source would be located. If a source straddles the two areas, the more stringent thresholds would apply.

To evaluate how the proposed minor NSR thresholds might affect new sources locating in Indian country, we looked at the size distribution of existing sources. Using the National Emission Inventory ( NEI), which includes the most comprehensive inventory of existing U. S. stationary point sources that is available, we determined how many of these sources fall below the proposed minor NSR thresholds, how many are between the minor NSR and major NSR thresholds, and how many are above the major NSR threshold. 5 If we assume that the distribution of new sources will mirror the existing source distribution, this analysis approximates the fraction of new sources that will be exempt from minor NSR, subject to minor NSR, and subject to major NSR, respectively.

The results of this analysis by pollutant are summarized in Table 2.

5 For this analysis, we used the final1999 NEI, extrapolated to 2001. More on the 1999 NEI can be found at http:// www. epa. gov/ ttn/ chief/ net/ 1999inventory. html. Draft Do not cite, copy, or distribute February 14, 2006 27 Table 2. Distribution of Sources and Emissions under Proposed Minor NSR Thresholds Total facilities Unregulated minor sources Minor sources Major sources Pollutant No. ( x103) TPY ( x106) % of total % of TPY % of total % of TPY % of total % of TPY CO 28.9 4.43 65 0.8 29 11 6 88 SO2 21.2 13.90 76 0.1 16 1 8 99 PM10 33.9 1.69 65 1.3 32 22 4 76 PM2.5 33.8 1.33 59 0.8 38 23 3 76 Ozone  VOC 43.3 1.60 42 1.1 53 41 5 58 Ozone  NOX 30.5 7.93 53 0.4 36 6 11 93 NO2 30.5 7.93 59 0.6 32 7 9 92 As shown in Table 2, we performed the analysis for each of the criteria pollutants except lead, including VOC and NOX emissions as the precursors of ozone. 6 For each pollutant, the table gives the total number of facilities in the emission inventory for that pollutant and the total, nationwide annual emissions of the pollutant. The column labeled Aunregulated minor sources@ represents the percentage of total sources that fall below the minor NSR threshold, along with the percentage of total annual emissions that those sources emit. The Aminor sources@ column gives the same information for sources that fall 6 For the analysis, we used the major NSR and proposed minor NSR thresholds for each pollutant based on the attainment status and classification of the county in which each source is located. We made certain simplifying assumptions, including using the 250 tpy major source threshold for all sources in attainment areas, regardless of source category or major source status for other pollutants. For the details of the analysis, see AAnalysis of the Proposed Minor NSR Thresholds@ in the docket for this rulemaking. Draft Do not cite, copy, or distribute February 14, 2006 28 between the minor NSR threshold and the major NSR threshold, while the Amajor sources@

column addresses sources that exceed the major NSR threshold.

We believe that Table 2 provides excellent evidence that sources with emissions below the proposed minor NSR thresholds will be inconsequential to attainment and maintenance of the NAAQS. For each pollutant, only around 1 percent ( or less) of total emissions would be exempt from review under the minor NSR program. At the same time, the proposed thresholds will promote a cost effective program. According to Table 2, anywhere from 42 percent to 76 percent of sources ( depending on the pollutant) would be too small to be subject to preconstruction review.

We believe that the proposed minor NSR thresholds provide a reasonable approach to determining the applicability of the minor NSR program. These thresholds would prevent stationary sources that make negligible contributions to pollution from being regulated under this rule. However, this would not affect the applicability of other requirements, such as those found in an NSPS or a MACT standard. At the same time,

the limits would ensure that intermediate sized sources would be subject to reasonable control technology requirements. We seek comment on our approach to selecting the proposed minor NSR thresholds, on alternative approaches to selecting such thresholds,

and on alternative applicability provisions ( such as source category exemptions).

4. Are any emissions units and activities at stationary sources exempt from this rule?

Certain emissions units and activities at stationary sources either do not emit regulated NSR pollutants to the ambient air or emit these pollutants in negligible amounts.

We propose that such activities located at a minor source be exempt from the Draft Do not cite, copy, or distribute February 14, 2006 29 requirements of this rule ( see proposed 40 CFR 49.153( c)). We propose that such activities are limited to the following:

$ Air conditioning units for comfort that are not subject to applicable requirements under title VI of the Act and do not exhaust air pollutants into the ambient air from any manufacturing or industrial process;

$ Ventilating units for comfort that do not exhaust air pollutants into the ambient air from any manufacturing or other industrial process;

$ Heating units for comfort that do not provide heat for any manufacturing or other industrial process $ Noncommercial food preparation;

$ Consumer use of office equipment and products;

$ Janitorial services and consumer use of janitorial products;

$ Internal combustion engines used for landscaping purposes;

$ Bench scale laboratory activities, except for laboratory fume hoods and vents; and $ Any emissions unit or activity that does not have the potential to emit a regulated NSR pollutant or HAP, so long as that emissions unit or activity is not part of a process unit that emits or has the potential to emit a regulated NSR pollutant or HAP.

5. What are the permit application, control technology, and air quality analysis requirements, and what is the permit issuance process?

Permit Application Requirements. Under today= s proposed minor NSR program, Draft Do not cite, copy, or distribute February 14, 2006 30 as the owner or operator of a proposed new minor source or a proposed modification that is subject to this rule, you must submit a complete application to your reviewing authority requesting a minor NSR permit specific to your source ( unless you wish to seek a Ageneral permit,@ if eligible, as noted below). In addition to basic information identifying and describing your source, your application must include a list of all affected emissions units.

AAffected emissions units@ are defined as all the emissions units at your proposed new minor source or all the new, modified, and replacement emissions units that comprise your proposed modification ( excluding the exempt emissions units and activities listed above).

See proposed 40 CFR 49.152( d).

Your application also must document the increase in emissions of regulated NSR pollutants that will result from your new source or modification so that the reviewing authority can verify that you are subject to this proposed minor NSR program, rather than to major NSR. For each new emissions unit that you list, you must provide the PTE in tpy for each regulated NSR pollutant, along with supporting documentation. For any modified or replacement unit that you list, you must provide the allowable emissions of each regulated NSR pollutant in tpy both before and after the modification or replacement,

along with supporting documentation. For emissions units that do not have an established allowable emissions level prior to the modification, you must report the PTE. The allowable emissions for any emissions unit are calculated considering any emission limitations that are enforceable as a practical matter on the unit= s PTE. In calculating these emission levels, you must include fugitive emissions, to the extent that they are Draft Do not cite, copy, or distribute February 14, 2006 31 quantifiable. 7 You may include in your application proposed emission limitations for the listed emissions units. If you do, you must account for these limitations in your calculations of post construction PTE and/ or allowable emissions.

The application also must identify and describe any existing air pollution control equipment and compliance monitoring devices or activities relevant to the affected emissions units, as well as any existing emission limitations or work practice requirements to which any affected emissions units are subject. See proposed 40 CFR 49.154( a) for the complete requirements for your application for a minor NSR permit.

You may request that the reviewing authority establish an annual minor source plantwide applicability limitation ( minor source PAL) for one or more of the regulated NSR pollutants emitted by your new or existing minor stationary source. A minor source PAL is a source wide limitation on allowable emissions of a regulated NSR pollutant,

expressed in tpy, that is established under the proposed 40 CFR 49.155 and that is enforceable as a practical matter ( see proposed 40 CFR 49.152( d)).

For a new minor stationary source, you may request minor source PALs for some or all of the regulated NSR pollutants emitted by your source. For the other regulated NSR pollutants that your source emits ( i. e., the non PAL pollutants), your permit will contain annual allowable emissions limits for each emissions unit.

You may request a minor source PAL for one or more regulated PAL pollutants at the time that you are modifying an existing minor stationary source. Each PAL will apply 7 We are considering a notice of proposed rulemaking to address when fugitive emissions must be accounted for in determining NSR applicability. Draft Do not cite, copy, or distribute February 14, 2006 32 across all the emissions units at your source, whether or not they are affected by the modification. For the non PAL pollutants, only the emissions units that are affected by the modification will receive annual allowable emissions limits. If you request one or more minor source PALs for an existing minor stationary source at a time when no modification is planned, each PAL will apply across all the emissions units at your source, but your permit will include no new emission limits for the non PAL pollutants.

As noted above, if your source is in a source category covered by a Ageneral permit@ issued under proposed 40 CFR 49.156, you may apply for the general permit for that source category. A general permit is a permit developed by your reviewing authority for a general category of emissions units or stationary sources that are similar in nature,

have substantially similar emissions, and would be subject to the same or substantially similar requirements governing operations, emissions, monitoring, reporting, and recordkeeping. The permit application requirements for a particular general permit will be specified in that general permit. General permits are discussed further in section IV. A. 13 of this preamble.

Control Technology Review. As required under section 110( a)( 2)( C) of the Act,

the minor NSR permitting program that we are proposing today is primarily designed to assure that the NAAQS are achieved, and to prohibit any stationary source from emitting any air pollutant in amounts that would contribute to nonattainment or interfere with maintenance of the NAAQS. At the same time, we wish to provide flexibility in control technology requirements for minor sources located in Indian country to promote economic growth and development. Draft Do not cite, copy, or distribute February 14, 2006 33 Therefore, in today= s proposal, we are proposing that your reviewing authority perform a control technology review on a case by case basis when issuing the permit ( other than a general permit). By Acontrol technology,@ we mean pollution prevention techniques, add on pollution control equipment, design and equipment specifications,

work practices, and operational restrictions. This review would consider local air quality needs, typical control technology used by similar sources in surrounding areas, anticipated economic growth in the area, and cost effective control alternatives. At a minimum, the reviewing authority must require control technology that assures that the NAAQS are achieved and that each affected emissions unit will comply with all requirements of 40 CFR parts 60, 61, and 63 that apply. The required control technology resulting from such a review may range from technology that is less stringent than the reasonably available control technology ( RACT) level of control ( which is typically required for existing major sources in nonattainment areas), to technology that is the BACT level of control ( which is the level required for new major sources and major modifications in attainment areas),

depending on the air quality needs of the area, other applicable regulatory programs of the Act, and technical and economic feasibility.

Based on the results of the control technology review, the emission limitations required by the reviewing authority may consist of emission limits, pollution prevention techniques, design standards, equipment standards, work practice standards, operational standards, or any combination thereof. If it is technically and economically feasible, the reviewing authority must require an emission limit ( i. e., a limit on the quantity, rate, or concentration of emissions) for each affected emissions unit at your source. Draft Do not cite, copy, or distribute February 14, 2006 34 For a new minor source that is subject to this rule, the case by case control technology review would be conducted for all emissions units ( except the exempt emissions units and activities discussed above in section IV. A. 4 and listed in proposed 40 CFR 49.153( c)) that emit or have the potential to emit the pollutant for which the source is subject to this rule. However, for modifications, such control technology review would apply only to the affected emissions unit( s).

In establishing a case by case control technology review process to determine an appropriate level of control for minor sources and subject modifications in Indian country,

we considered a number of factors. On the one hand, we believe that the control technology review process should be as flexible as possible to provide for the specific needs and conditions of each area of Indian country, consistent with the requirements of the Act. On the other hand, we believe that a reasonable level of air pollution control for new minor sources and subject modifications in Indian country is generally warranted to ensure protection of air resources in Indian country. In addition, we wish to ensure that Indian country not be seen as a potential Apollution haven@ where minor stationary sources can go to escape air pollution control requirements. At the same time, we do not want to put tribes or owners and operators locating in Indian country at a competitive disadvantage by requiring substantially more stringent controls in Indian country than are required in the surrounding areas.

We are seeking comment on the proposed case by case control technology review for all new and modified sources subject to this minor NSR program. We also request comment on whether the program should have a control technology requirement at all. Draft Do not cite, copy, or distribute February 14, 2006 35 Section 110( a)( 2)( C) of the Act requires a minor NSR program that assures that the NAAQS are achieved, but does not mandate that the program include a control technology requirement. We are seeking comment on whether a control technology requirement is necessary to achieve the purposes of the Act, or whether other approaches can achieve these purposes just as well with less cost or administrative burden.

Air Quality Impacts Analysis. Typically, for a new or modified minor source permit application, your reviewing authority would not require an Air Quality Impacts Analysis ( AQIA). In rare instances, if your reviewing authority has reason to be concerned that the construction of your minor source or modification could cause or contribute to a NAAQS or PSD increment violation, to ensure protection of the NAAQS,

we are proposing that your reviewing authority may require you to conduct an AQIA using dispersion modeling in accordance with 40 CFR part 51, appendix W to determine the impacts that will result from your new source or modification. If the AQIA demonstrated that the construction of your source or modification would cause or contribute to a NAAQS or PSD increment violation, you would be required to further reduce its impact before you could obtain a permit.

Permit Issuance Process. Within 45 days after receiving your permit application,

your reviewing authority must either determine that the permit application is complete enough to commence a technical review or request additional information. If you do not receive a request for additional information or a notice of complete application within 50 days of your permitting authority= s receipt of your application, your application would be deemed complete. ( You should contact your reviewing authority to find out the date that Draft Do not cite, copy, or distribute February 14, 2006 36 it received your application so that you will know when this 50 day period is up.) Once the application is complete, your reviewing authority develops a draft permit and provides a public notice seeking comments on the draft permit for a 30 day period. After considering all timely, relevant comments, if your reviewing authority determines that your application meets all applicable requirements, it would issue you a final permit.

Otherwise, the reviewing authority would send you a letter denying your permit application with reasons for the denial.

We are proposing that your reviewing authority would issue you a permit with an allowable emissions limit in tpy for each affected emissions unit ( Option A). You have the alternative of requesting a minor source PAL or cap in tpy ( Option B), and your reviewing authority may issue such a permit. This type of permit can provide the flexibility to make frequent changes at your source without permit review. If you wish, you may request a minor source PAL for some pollutants and allowable emissions limits for each emissions unit for other pollutants.

Permit Term. A preconstruction permit does not expire. Your permit remains valid as long as you commence construction of your new source or modification within 18 months after the effective date of the permit, you do not discontinue construction for a period of 18 months or more, and you complete construction in a reasonable time. Your reviewing authority may extend the 18 month period where justified. The 18 month limit does not apply to the time period between construction of approved phases of a phased construction program; you must commence construction of each such phase within 18 months of the approved commencement date. Draft Do not cite, copy, or distribute February 14, 2006 37 6. When are modifications subject to this rule?

As discussed above in section IV. A. 2 of this preamble, for the purposes of the minor NSR program proposed today, a modification means any physical or operational change at a stationary source that would cause an increase in the allowable emissions of the affected emissions units for any regulated NSR pollutant or that would cause the emission of any regulated NSR pollutant not previously emitted ( with the exclusions outlined in section IV. A. 2 of this preamble). The proposed rule would apply to certain modifications at your minor sources and minor modifications at your major sources. For such modifications, you would have to meet the application requirements and comply with any control technology requirements as discussed above in section IV. A. 5 of this preamble. In rare instances, if your reviewing authority has reason to believe that your modification could result in a violation of the NAAQS or PSD increment, you would be required to conduct an AQIA.

In all NSR applicability determinations, you must evaluate each regulated NSR pollutant individually. The area where your source is located may be attainment for some pollutants and nonattainment for others, which affects which pollutants are regulated as well as the major and minor NSR applicability thresholds. For a given modification, a particular pollutant may be subject to review under PSD, nonattainment major NSR, or minor NSR, or may not be subject to any of these programs.

The first step in determining whether your proposed physical or operational change is subject to the minor NSR program proposed today is to determine whether the change is subject to the applicable major NSR program ( i. e., proposed 40 CFR 49.167 or 40 CFR Draft Do not cite, copy, or distribute February 14, 2006 38 52.21 for nonattainment and attainment areas, respectively). If you are changing an existing major source, you would determine whether the change qualifies as a major modification using the procedures in the applicable major NSR program. If you are changing an existing minor source, you would determine whether the change would qualify as a major stationary source by itself under the applicable major NSR program. If your proposed physical or operational change is subject to review under major NSR for a regulated NSR pollutant, it is not subject to the minor NSR program for that pollutant.

If your proposed physical or operational change is not subject to major NSR, the next step is to determine whether the change qualifies as a modification under the minor NSR program. To be a modification, the change must result in an increase in allowable emissions at your source. Thus, the next step is to calculate whether, and by how much,

allowable emissions would increase as a result of the change. If your minor stationary source is subject to a minor source PAL for a regulated NSR pollutant ( Option B above in section IV. A. 5 of this preamble), the emissions increase for that pollutant would be the PAL level after the physical or operational change minus the PAL level prior to the change. For physical or operational changes at other minor stationary sources ( i. e., those with annual allowable emissions limits for each emissions unit ( Option A above), those that are unpermitted, and those with a combination of unpermitted emissions units and emissions units with annual allowable emissions limits) and at major stationary sources, the total increase in allowable emissions resulting from your proposed change would be the sum of the following:

$ For each new emissions unit that is to be added, the emissions increase Draft Do not cite, copy, or distribute February 14, 2006 39 would be the PTE of the unit.

$ For each emissions unit with an allowable emissions limit that is to be changed or replaced, the emissions increase would be the allowable emissions of the emissions unit after the change or replacement minus the allowable emissions prior to the change or replacement. This may be a negative value for an emissions unit if its allowable emissions would be reduced as a result of the change or replacement.

$ For each unpermitted emissions unit that is to be changed or replaced, the emissions increase would be the allowable emissions of the unit after the change or replacement minus the PTE prior to the change or replacement.

It is necessary to use PTE since these emissions units will not have a allowable emissions limit prior to the change. This may be a negative value for an emissions unit if its post change allowable emissions would be less than its pre change PTE.

This process of summing the emissions increases and decreases across all the affected emissions units is called Aproject netting,@ which is discussed later in this section of the preamble.

If your proposed physical or operational change qualifies as a modification ( i. e.,

causes an increase in allowable emissions), the final step in determining whether the proposed modification is subject to today= s proposed minor NSR program is to compare the increase in allowable emissions to the applicability criteria for the type of source and emission limits that you have. Your modification would be subject to the minor NSR Draft Do not cite, copy, or distribute February 14, 2006 40 program in the following circumstances:

$ If your minor source has a permit with a minor source PAL in tpy ( Option B above in section IV. A. 5 of this preamble) and the modification would result in any increase in the PAL level. To determine if an increase in the PAL level is necessary, you must evaluate whether your source= s actual emissions after the modification would exceed the PAL level by any amount. If you could construct and operate the modification without your actual emissions exceeding your minor source PAL, then no permit action would be required.

$ For other minor sources, if the modification would increase total allowable emissions from the affected emissions units by an amount that equals or exceeds any of the minor NSR thresholds listed in Table 1 of this preamble.

$ If the minor modification at your major source would increase total allowable emissions from the affected emissions units by an amount that equals or exceeds any of the minor NSR thresholds listed in Table 1 of this preamble.

$ In addition, if the modification would increase allowable emissions from any emissions unit above an established unit specific allowable emission permit limit, even if the total increase for your source would be less than the corresponding minor NSR threshold listed in Table 1 of this preamble.

In this case, the needed increase in the unit specific allowable emissions permit limit can be accomplished through an administrative permit revision Draft Do not cite, copy, or distribute February 14, 2006 41 ( see proposed 40 CFR 49.159( f)).

Flowcharts to aid in determining major and minor NSR applicability are presented below in Figures 1 through 5. These flowcharts illustrate the process for new sources and modifications in attainment areas and nonattainment areas. The flowcharts should be used to evaluate each regulated NSR pollutant individually since different flow charts may apply to different pollutants depending on the attainment status of the area for each pollutant. Draft Do not cite, copy, or distribute February 14, 2006 42 Draft Do not cite, copy, or distribute February 14, 2006 43 Draft Do not cite, copy, or distribute February 14, 2006 44 Draft Do not cite, copy, or distribute February 14, 2006 45 Draft Do not cite, copy, or distribute February 14, 2006 46 In addition, a physical or operational change may be subject to today= s proposed minor NSR program even if it is not classified as a modification ( i. e., it does not increase Draft Do not cite, copy, or distribute February 14, 2006 47 allowable emissions of a regulated NSR pollutant or result in emission of a pollutant not previously emitted). For example, a proposed change might increase allowable emissions from some emissions units and decrease emissions at others so that, overall, emissions from the affected units would stay the same or decrease. If the post change emissions at any emissions unit would exceed a permitted allowable emissions limit for that unit, you must apply to revise the existing permit limit before you may implement the change. The needed increase in the unit specific allowable emissions permit limit can be accomplished through an administrative permit revision ( see proposed 40 CFR 49.159( f)).

Similarly, other proposed physical or operational changes that could not be implemented within the requirements of an existing permit would necessitate a permit revision, even if they are not otherwise subject to major or minor NSR. We believe that this fact will serve to ensure that the types of changes that could significantly alter the dispersion characteristics of the air pollutants emitted by your source will be brought to the attention of your reviewing authority. Thus, the reviewing authority will be in the position to evaluate whether the change has the potential to increase ambient concentrations outside the boundaries of your source. If so, the reviewing authority can require measures to mitigate any unacceptable air quality impacts ( i. e., to protect the NAAQS and PSD increments) as part of the permit revision process.

7. Why do we believe that an allowable to allowable test is appropriate for minor sources?

As discussed above, we are proposing an Aallowable to allowable@ applicability test as the primary test for modifications under this minor NSR program. We evaluated the Draft Do not cite, copy, or distribute February 14, 2006 48 three basic types of applicability tests ( actual to potential, actual to projected actual, and allowable to allowable) and determined that the allowable to allowable test is most suitable for minor NSR in Indian country.

We rejected the actual to potential test for many of the same reasons that we have moved away from this test in the major NSR program. In this type of system, the emissions increase that results from a change is determined by comparing the emissions unit= s PTE after the change to its actual emissions prior to the change. If pre change actual emissions are well below the unit= s PTE, as is generally the case, any change will result in a large emissions increase when calculated in this manner. To avoid triggering NSR, a source must accept a limit on the unit= s post change PTE at a level that exceeds pre change actual emissions by less than the applicable NSR threshold.

As discussed in our December 2002 NSR Improvement rulemaking, there are numerous objections to the actual to potential test ( 67 FR 80194). Industry has long believed that the need to take a PTE limit to avoid NSR has the effect of unfairly confiscating the emissions unit= s unused operating capacity even though, in many cases,

the changed unit as a practical matter will function essentially as it did before the change and emissions to the environment will not increase. In addition, the actual to potential test discourages sources from making the types of changes that improve operating efficiency, implement pollution prevention projects, and result in other environmentally beneficial effects.

In the December 2002 NSR Improvement rulemaking, we replaced the actual

topotential test with the actual to projected actual test for most modifications under major Draft Do not cite, copy, or distribute February 14, 2006 49 NSR. However, we do not propose to adopt the same course for the minor NSR program in Indian country. We believe that determining emissions changes in terms of changes in allowable emissions typically will be easier and more straightforward for the minor sources subject to this program. In particular, the major NSR procedures for projecting and tracking future actual emissions may be somewhat complicated for minor sources. While we believe that this system is within the capabilities of major sources, we believe that a simpler system is more appropriate for the minor sources in Indian country, many of which are unaccustomed to any type of regulation.

We are proposing an allowable to allowable test for modifications in the Indian country minor NSR program. We believe that this relatively simple and straightforward system is most appropriate for the minor sources found in Indian country. In addition, we believe that it is beneficial to use allowable emissions as the currency for attainment planning, in that they represent the worst case post change emissions. This approach is consistent with section 173( a) ( 1) ( A) of the Act, which requires new and modified major sources to obtain offsets based on allowable emissions. ( While we are not requiring offsets for minor sources in Indian country nonattainment areas, we believe that the language in section 173( a) ( 1) ( A) provides validation for our proposed minor NSR modification test.) Finally, we understand that many State minor NSR programs use an allowable to allowable test.

As discussed above in section IV. A. 2 of this preamble, we believe that we have the discretion to use an allowable to allowable test for this minor NSR program because the statutory basis for minor NSR is section 110( a)( 2)( C) of the Act, rather than section Draft Do not cite, copy, or distribute February 14, 2006 50 111( a)( 4). We seek comment on using the proposed allowable to allowable test for addressing modifications and on the alternative of using the actual to projected actual test.

As laid out above in the second step for determining if a proposed modification is subject to minor NSR, we are proposing to allow Aproject netting.@ This means that both increases and decreases in allowable emissions are summed when determining the total emission increase that would result from a proposed modification.

The major NSR program uses a two step procedure for determining applicability.

First, the emission increases from the proposed project are summed. If the total emission increase from the project is Asignificant@ ( that is, equal to or greater than the major NSR threshold), the second step in the process is Acontemporaneous netting.@

In contemporaneous netting, the emission increase due to the proposed modification is summed with all other emission increases and decreases that have occurred at the major source during the contemporaneous period ( generally 5 years). If the net emission increase determined in this way is significant, the proposed modification is a Amajor modification@ that is subject to review under major NSR.

We considered including contemporaneous netting in today= s minor NSR program,

but have elected not to propose it as our preferred approach. Contemporaneous netting has proved to be a complicated and controversial aspect of the major NSR program.

While major sources are accustomed to contemporaneous netting and have built the capacity to track and carry out this procedure, many minor sources that would be covered by today= s proposed minor NSR program lack such capacity. We believe that a simpler Draft Do not cite, copy, or distribute February 14, 2006 51 system is more appropriate for the minor sources in Indian country.

Nevertheless, we believe that minor sources should be able to receive credit for the emission decreases that would result from a proposed modification. Hence, we are proposing to allow project netting in today= s minor NSR program.

We believe that project netting calculations are relatively straightforward and are within the capacity of most minor sources. For example, an existing minor source might wish to expand by adding a second production line to go with an existing, uncontrolled line. If the proposed project includes adding an air pollution control device to control emissions from both lines, it would result in an allowable emissions increase attributable to the new line, as well as an allowable emissions decrease from the existing, previously uncontrolled line. Determining the overall net emission change that would result from the proposed modification would be a straightforward exercise. However, to validate the project net emissions increase, as in the major NSR program, the source must take limits on allowable emissions for both lines that are enforceable as a practical matter.

We believe that in proposing to allow project netting, but not contemporaneous netting, we have struck an appropriate balance for the minor NSR program in Indian country. We believe that the resulting program properly allows you to receive credit for emission reductions that are achieved as part of an overall project, without introducing too much complexity into the program. We invite comment on this approach, as well as on other approaches that would allow minor sources in Indian country to take credit for emission reductions.

8. Is your existing minor source subject to this rule? Draft Do not cite, copy, or distribute February 14, 2006 52 States develop, adopt, and submit to us for approval a SIP that contains a broad range of measures to attain and maintain the NAAQS and to meet other requirements of section 110( a) of the Act. The SIPs typically include some emission limitations for existing sources, even those that do not modify their operations. Hence, a SIP provides an infrastructure to achieve the air quality goals of attaining and maintaining the NAAQS.

Tribes are not required to submit implementation plans, and to date, very few tribes have sought our approval of such plans. Consistent with our approach to Federal implementation of the Act= s requirements, we issue FIPs for areas of Indian country as necessary or appropriate. However, there is still a regulatory gap in relevant infrastructure in much of Indian country. Because of this unique situation, we are raising the question of whether it may be appropriate to regulate existing minor sources in Indian country under this minor NSR program to attain and maintain NAAQS. We are proposing Option 1 and soliciting comment on Options 2, 3, and 4, as discussed below.

Option 1. Exempt existing minor sources from this rule. This option would not affect any existing sources ( unless they propose a modification) and, thus, be the least burdensome for such sources in Indian country. Many State minor NSR rules do not apply to such sources; hence this would be consistent with many of the areas that surround Indian country. Under this option, we are seeking comment on whether such an exempt minor source should be allowed to opt for a permit under this program ( without being subject to any of the requirements) merely to establish enforceable limits and conditions associated with a consent decree or other enforcement mechanism.

Option 2. Require existing synthetic minor sources to become subject to the minor Draft Do not cite, copy, or distribute February 14, 2006 53 NSR program requirements ( including control technology and other requirements as provided in section IV. A. 5. of this preamble) and to submit a permit application within 1 year after the effective date of the program. This option would draw into the regulatory scheme the biggest minor sources and may result in large emissions reductions in instances where the required control technology review would result in new or more stringent controls. Option 2 would affect relatively few existing minor sources in Indian country.

Option 3. Require all existing minor sources to register within 1 year after the effective date of this program, but not be subject to the permitting requirements. This option would affect all minor sources in Indian country, but would involve very little burden to sources. Option 3 would allow your reviewing authority to collect information on the number and size of existing minor sources, which would assist with NAAQS maintenance and attainment planning in Indian country.

Option 4. Require all existing minor sources to be subject to the minor NSR program requirements ( as provided in section IV. A. 5. of this preamble). While this option would result in significant emissions reductions, it would also require significant EPA resources and may also be overly burdensome on minor sources in Indian country.

Additionally, we believe that subjecting all minor sources to this program is not necessary to achieve the NAAQS, as demonstrated by state minor NSR programs.

We also seek comment on any other approaches for addressing existing minor sources.

9. How are Asynthetic minor sources@ subject to this rule?

Some sources have the potential to emit one or more pollutant in major source Draft Do not cite, copy, or distribute February 14, 2006 54 amounts, but have actual emissions that are below the major source thresholds. One of our primary objectives for this rulemaking is to create a mechanism by which you can obtain emission limitations for such sources that are enforceable as a practical matter, so that they can become Asynthetic minor sources@ and avoid major source status. We are therefore proposing to create such a mechanism in 40 CFR 49.158 of the proposed rules.

The proposed rules allow for designation of synthetic minor sources ( for regulated NSR pollutants) and synthetic minor HAP sources. It is important to note that although you may choose to obtain such emission limitations at your own discretion, once you have accepted an enforceable emission limitation, you must comply with that limitation. This is necessary to ensure that you are legally prohibited from operating as a major source. We are taking comment on the proposal to allow your stationary sources to become synthetic minors in Indian country.

Our 1999 policy memo on synthetic minor sources in Indian country currently provides guidance on how sources that would otherwise be major sources under section 302 or part D of title I of the Act can become synthetic minor sources if their actual emissions remain below 50 percent of the relevant major source PTE threshold and they comply with all other requirements of the policy memo. 8 However, as the memo specifies, this PTE transition policy terminates when we adopt and implement a mechanism that you can use to limit your PTE, or we explicitly approve a tribe's program providing such a mechanism. Today's proposed minor NSR program would provide such 8 John S. Seitz and Eric V. Schaeffer. Policy memo. APotential to Emit Transition Policy for Part 71 Implementation in Indian Country.@ March 7, 1999. Draft Do not cite, copy, or distribute February 14, 2006 55 a mechanism. Therefore, upon the effective date of these rules when promulgated, the PTE transition policy will expire and you will have to obtain a permit under this minor NSR program for any subsequent synthetic minor sources.

Additionally, for your existing synthetic minor sources under the current policy,

you will have 1 year from the effective date of the final rules to apply for a permit under the proposed minor NSR program. If you submit a complete application in accordance with the requirements of proposed 40 CFR 49.158( c) by that date, we will continue to consider your source a synthetic minor source until we issue a permit with synthetic minor limits. The permit will contain monitoring, recordkeeping, reporting, and testing requirements as needed to assure compliance with your synthetic minor permit, but will not impose any additional requirements. Should you fail to submit an application within 1 year of the effective date of the final rules, your source will no longer be considered a synthetic minor source or synthetic minor HAP source ( as applicable), and will immediately become subject to all requirements for major sources.

10. How would section 112( g) case by case MACT determinations be addressed by this rule?

Section 112( g)( 2)( B) of the Act provides that you may not construct or reconstruct a major source of HAPs unless you install MACT. If the Administrator has not established a MACT standard for the source category, the Act requires that MACT must be determined on a case by case basis.

Where there is no EPA approved program in an area of Indian country, we are the reviewing authority for case by case MACT under section 112( g)( 2)( B). The requirement Draft Do not cite, copy, or distribute February 14, 2006 56 for a case by case MACT determination prior to construction or reconstruction of a major source of HAPs is found at 40 CFR 63.42( c). In 40 CFR 63.43( c), we provide a number of review options for these determinations. These options include using a title V permit,

applying for and obtaining a Notice of MACT Approval, and Aany other administrative procedures for preconstruction review and approval established by the reviewing authority for a State or local jurisdiction which provide for public participation....@ Currently, no tribes have an EPA approved title V permitting program or the Aother administrative procedures@ for this purpose, although one tribe has been delegated authority to assist us with implementation of the Federal part 71 operating permit program ( i. e., the Federal program for issuing title V permits). While we can permit a section 112( g) case by case MACT determination through a part 71 permit or a Notice of MACT Approval, we believe that if your source is major only for HAPs it would be administratively convenient for us and you to combine the construction permit process for both regulated NSR pollutants and HAPs under this proposed minor NSR program, rather than also go through the part 71 permit or Notice of MACT Approval process to address HAPs.

Therefore, we are proposing to allow for review of section 112( g) case by case MACT determinations through this minor NSR program and seek comment on this approach. See proposed 40 CFR 49.153( a)( 5) for the provisions related to section 112( g) case by case MACT determinations. Note that you ultimately will have to obtain a part 71 permit for your major source of HAPs.

11. What are the proposed requirements for public participation in the permitting process? Draft Do not cite, copy, or distribute February 14, 2006 57 Our requirements for State preconstruction review programs at 40 CFR 51.161 require such programs to provide for public availability of permit applications as well as the reviewing authority= s analysis of the application. In addition, State programs must provide opportunity for public comment on permitting actions. To be consistent with these requirements for State programs, we are proposing to require the reviewing authority to make non confidential information on the permit available to the public and to provide public notice and an opportunity to comment on the draft minor NSR permit. See proposed 40 CFR 49.157.

Specifically, we would require that the reviewing authority prepare a draft permit and provide adequate public notice to ensure that the affected community and the general public have reasonable access to the application and draft permit information. The reviewing authority must make such information available for public inspection at the appropriate EPA Regional Office and in at least one location in the area affected by the source, such as the tribal environmental office or a local library. The public notice must provide an opportunity for public comment and a public hearing on the draft permit. The appropriate types of notice may vary depending on the proposed project and the area of Indian country that would be affected.

In all cases, the proposed rule requires the reviewing authority to mail a copy of the notice to you, the appropriate Indian governing body, and the tribal, State, and local air pollution authorities having jurisdiction in areas outside of the area of Indian country potentially impacted by your source. The proposed rule lists optional approaches that the reviewing authority may elect to use to provide public notice as appropriate for a given Draft Do not cite, copy, or distribute February 14, 2006 58 situation, depending on such factors as the nature and size of your source, local air quality considerations, and the characteristics of the population in the affected area. The optional methods of notifying the public include the following:

$ Mailing or e mailing a copy of the notice to persons on a mailing list developed by the reviewing authority consisting of those persons who have requested to be placed on such a mailing list.

$ Posting the notice on its website.

$ Publishing the notice in a newspaper of general circulation in the area affected by the source. Where possible, the notice may also be published in a tribal newspaper or newsletter. We do not believe that such a notice is appropriate for every single minor source permit application since this would require a heavy resource commitment for the reviewing authority,

while not necessarily being as effective as some other measures.

$ Providing copies of the public notice for posting at locations in the area affected by your source. We expect that such locations might include Post Offices, libraries, tribal environmental offices, community centers, and other gathering places in the community.

$ Other appropriate means of notification.

We believe that this combination of mandatory and optional approaches to providing notice is appropriate for today= s proposed minor NSR program in Indian country. In addition, we believe that the proposal is consistent with 40 CFR 51.161,

which requires a Anotice by prominent advertisement in the area affected,@ but does not Draft Do not cite, copy, or distribute February 14, 2006 59 specify a newspaper advertisement. We believe that in many areas of Indian country,

notices posted in locations frequented by the local population and on agency websites, as well as mailed or emailed to concerned parties, will provide more Aprominent advertisement@ than would publication in a newspaper.

The reviewing authority must provide for a 30 day public comment period on the draft permit. After considering all relevant public comments, the reviewing authority will make a final decision to issue or deny your permit. The public ( including you, the permit applicant) will have an opportunity to appeal the final decision under 40 CFR 49.159 of the proposed rule.

These proposed public participation requirements would apply to preconstruction permits, minor source PAL permits, synthetic minor permits, and the initial issuance of general permits. We seek comment on the proposed public participation requirements in 40 CFR 49.157.

We are also proposing very similar public participation requirements for the nonattainment major NSR program. See section IV. B. 3 of this preamble.

12. What are the monitoring, recordkeeping, and reporting requirements?

Sections 110( a)( 2)( A) and ( C) of the Act require that a preconstruction permitting program provide for the enforcement of measures that include Aenforceable emission limitations@ and other control measures, means, or techniques Y as well as schedules and timetables for compliance.@ Section 110( a)( 2)( F) additionally requires that a permitting program may require Athe installation, maintenance, and replacement of equipment, and the implementation of other necessary steps by owners and operators of stationary sources Draft Do not cite, copy, or distribute February 14, 2006 60 to monitor emissions from such sources,@ as well as Aperiodic reports on the nature and amounts of emissions and emission related data from such sources.@

Generally, we are proposing that all permits issued under this minor NSR program contain emission limitations that are enforceable as a practical matter, as well as adequate monitoring, recordkeeping, and reporting requirements as may be necessary to assure compliance with those limitations. The requirements for monitoring, recordkeeping, and reporting are discussed below; see 40 CFR 49.155( a) of the proposed rule for the complete requirements.

Monitoring requirements. The permit must include monitoring requirements sufficient to assure compliance with any control technology requirements contained in the permit. Monitoring approaches may include continuous emissions monitoring systems ( CEMS), predictive emissions monitoring systems ( PEMS), continuous parameter monitoring systems ( CPMS), periodic manual logging of monitor readings, equipment inspections, mass balances, periodic performance tests, and/ or emission factors, as appropriate for your minor source based on the types of emissions units, magnitude of emissions, and air quality considerations. Such monitoring shall assure use of terms, test methods, units, and averaging periods consistent with the control technology and emission limitations required for your source. If the permit includes a minor source PAL for a pollutant at your minor stationary source, it must also include monitoring to determine the actual emissions from your source for each month and the total actual emissions for each 12 month period, rolled monthly, for that pollutant.

Recordkeeping requirements. The permit must include recordkeeping Draft Do not cite, copy, or distribute February 14, 2006 61 requirements sufficient to assure compliance with the enforceable emission limitations in your permit. Records of required monitoring information must include all calculations using emissions factors, all stack tests or sampling information including date and time of test or sampling, the name of the company or entity that performed the analyses, the analytical techniques or methods used, the results of such analyses and the operating conditions existing at the time of sampling or measurement. All such records including support information must be retained for 5 years from the date of the record. Support information may include all calibration and maintenance records and all original strip chart recordings or electronic records for continuous monitoring instrumentation.

Reporting requirements. You must provide annual monitoring reports showing whether you have complied with your permit emission limitations. You also must provide prompt reports of deviations from permit requirements, including those attributable to upset conditions as defined in the permit, the probable cause of such deviations, and any corrective actions or preventive measures taken. Within a permit, the reviewing authority must define Aprompt@ in relation to the degree and type of deviation likely to occur.

13. What are the criteria for general permits, what source categories generally qualify for them, and what are the permit application requirements for a general permit?

A Ageneral permit@ is a preconstruction permit that may be applied to a number of similar emissions units or stationary sources. The purpose of a general permit is to simplify the permit application and issuance process for similar facilities so that a reviewing authority= s limited resources need not be expended for case by case permit development for such facilities. A general permit may be written to address a single Draft Do not cite, copy, or distribute February 14, 2006 62 emissions unit, a group of the same type of emissions units, or an entire minor source.

The minor NSR program proposed in this action would allow your reviewing authority to issue general permits for categories of emissions units or stationary sources that are similar in nature, have substantially similar emissions, and would be subject to the same or substantially similar permit requirements. ASimilar in nature@ refers to size,

processes, and operating conditions. To issue a general permit, the reviewing authority must provide the same opportunities for public participation and administrative and judicial review that apply to minor NSR permits issued to a specific source under this program. This is true with respect to all aspects of the general permit except its applicability to an individual source. See proposed 40 CFR 49.156( b).

Once a general permit has been issued for a source category or category of emissions units, you may submit an application to be covered under the general permit if your proposed new minor source or modification qualifies for coverage under that general permit. Your reviewing authority may grant or deny your request to construct under a general permit without further public participation. However, when you receive approval to be covered under a general permit, you must post a prominent notice at your source of this approval to construct under the general permit. Someone may seek judicial review only on the issue of whether your source qualifies for the general permit. See proposed 40 CFR 49.156( e). We believe that general permits offer a cost effective means of issuing permits and provide a quicker and simpler alternative mechanism for permitting your minor sources than the site specific permitting process discussed previously.

In setting criteria for sources to be covered by general permits, your reviewing Draft Do not cite, copy, or distribute February 14, 2006 63 authority would consider the following factors. First, categories of sources or emissions units covered by a general permit should be generally homogeneous in terms of operations, processes, and emissions. All sources or emissions units in the category should have essentially similar operations or processes and emit pollutants with similar characteristics. Second, the sources or emissions units should be expected to warrant the same or substantially similar permit requirements governing operation, emissions,

monitoring, recordkeeping, or reporting.

Your sources covered under a general permit would be issued a letter approving coverage under the general permit. You must maintain the general permit and the letter at your source location at all times to be made available for inspection by the reviewing authority.

General permits may be issued to cover any category of numerous similar sources,

provided that such sources meet the criteria set out above. For example, permits can be issued to cover small businesses such as gas stations or dry cleaners. General permits may also, in some circumstances, be issued to cover discrete emissions units, such as individual solvent cleaning machines at industrial complexes. We request comment on the use of general permits, eligible emissions units and source categories, and the process of issuing general permits.

14. What is the administrative and judicial review process proposed for this program?

We are proposing and seeking comment on two options for reviewing initial permit decisions by reviewing authorities under this program. We will discuss these options further below, but first we will present the proposed administrative procedures that we Draft Do not cite, copy, or distribute February 14, 2006 64 expect to be the same regardless of which review option we ultimately select.

The final permit issuance procedures and related notice requirements are proposed in 40 CFR 49.159( a). After decision on a permit, the reviewing authority must notify you of the decision, in writing, and if the permit is denied, of the reasons for the denial. If the reviewing authority issues a final permit to you, it must make a copy of the permit available at all of the locations where the draft permit was made available. In addition, the reviewing authority must provide adequate public notice of the final permit decision to ensure that the affected community, general public, and any individuals who commented on the draft permit have reasonable access to the decision and supporting materials.

Depending on the circumstances of your permit, the reviewing authority may elect to provide notice directly to the individuals who commented on the draft permit and/ or use any of the other methods of public notice discussed above in section IV. A. 11 of this preamble ( related to public notice of the draft permit).

We are proposing a requirement that the reviewing authority= s final decision on your permit be based on an administrative record and requirements on what must be in that record. See proposed 40 CFR 49.159( b) and ( c). The proposed rules also include provisions at 40 CFR 49.159( e) that address reopening a permit after it has been issued if it contains a material mistake or fails to assure compliance with the permit requirements.

In addition, proposed 40 CFR 49.159( f) contains provisions for administrative permit revisions to make minor changes in the permit without being subject to the permit application, issuance, public participation, or administrative and judicial review requirements of the program. Draft Do not cite, copy, or distribute February 14, 2006 65 As noted above, we are proposing two options for reviewing initial permit decisions by reviewing authorities. In Option 1, review of minor NSR permits would be similar to review of major PSD permits issued under 40 CFR 52.21. To challenge the terms of your permit, you or another party would have to file a petition for review with our Environmental Appeals Board ( EAB). Decisions by the EAB could be appealed to the Federal Court of Appeals for the tribal area. Alternatively, in Option 2, the reviewing authority= s initial permit could be appealed directly to the appropriate Federal Court of Appeals without a requirement to appeal to the EAB first. There are advantages and disadvantages to both approaches, which we will discuss below. We solicit comment on which option we should adopt.

Option 1. Under Option 1, the proposed administrative and judicial review process for the minor NSR program parallels the process for PSD permits issued under 40 CFR 52.21, which is found in 40 CFR part 124. Since not all of the provisions of part 124 need to apply to this program, rather than adding the minor NSR program to the list of programs to which part 124 applies, in this option we are proposing to include the desired provisions in 40 CFR 49.159. The proposed provisions are very similar to the part 124 provisions, although they have been modified to better suit the small sources that will be covered under the minor NSR program.

The major difference between Option 1 and Option 2 is that, under Option 1,

permit decisions may be appealed to the EAB within 30 days after a final permit decision has been issued, and a final permit typically would not become effective until 30 days after issuance. Upon filing of a petition for review, the permit would be stayed ( i. e., not go into Draft Do not cite, copy, or distribute February 14, 2006 66 effect) until the EAB decides whether to review any condition of the permit and the reviewing authority takes any action required by the EAB. When the EAB has issued its final order on an appeal, a motion to reconsider the final order may be filed with the EAB within 10 days. Only after all administrative remedies under proposed 40 CFR 49.159 have been exhausted could the person( s) filing the petition seek judicial review.

Option 2. Option 2 has two major differences from the appeals process we proposed in Option 1. First, we propose under Option 2 that permits would become immediately effective upon issuance by the reviewing authority unless a later effective date is specified. Second, there is no requirement for seeking EAB review before filing a petition for review in the Federal Court of Appeals with jurisdiction of the tribal area. The final agency action for purposes of judicial review is the issuance of the final permit by the reviewing authority. The permit is not stayed by the filing of a petition for review. If a party challenging a permit would like to have your permit stayed, that party may seek a stay under the provisions of the Administrative Procedures Act ( APA), 5 U. S. C. 705.

Because the regulatory language for Option 1 is more detailed than would be required for Option 2, the proposed regulatory text only addresses Option 1.

Advantages and Disadvantages of Options 1 and 2. The different approaches to appeals of reviewing authority decisions result from section 704 of the APA. This section provides that an agency action that is otherwise final is final for purposes of judicial review unless the agency otherwise requires by rule that a party must seek review by a superior authority within the agency and the agency= s action is meanwhile inoperative. Therefore,

if we were to require administrative review by the EAB or another part of EPA before Draft Do not cite, copy, or distribute February 14, 2006 67 allowing anyone to seek judicial review of a permit, then we would be required to stay the permit for the duration of the appeal. The two options balance the advantages of EAB review of permits with the desire to not unnecessarily and inappropriately delay your ability to construct or modify a new minor source.

On the one hand, minor NSR permits are for sources and modifications that emit less than new major sources and major modifications to major sources. An automatic stay would delay these smaller projects from going ahead when there is less environmentally at stake than in a challenge to a PSD or nonattainment major NSR permit. In those instances where there would be irreparable harm caused by a project proceeding under a flawed permit, there would still be available the opportunity to seek a stay under the APA.

On the other hand, review of permit decisions by the EAB serves as quality control over decisions by various parts of EPA. The EAB can ensure that the policies of the Administrator are applied consistently and appropriately in permit decisions. This may be important when a tribe receiving a delegation under this rule or an EPA Regional Office acting as the reviewing authority makes an error in applying the relevant rules.

One important consideration would be the timeliness of any review process. The EAB has specialized expertise in environmental issues, unlike courts with broader caseloads The EAB is likely to process a petition for review faster than a Court of Appeals.

Courts of Appeals necessarily give priority criminal appeals over civil regulatory matters and thus may delay addressing and resolving permit appeals. In either the EAB or the Courts of Appeals, it is unlikely that review of minor NSR permits will be expedited ahead of matters with greater environmental impact. Draft Do not cite, copy, or distribute February 14, 2006 68 Under Option 2, you may be placed in a difficult situation of having a permit revoked after proceeding with construction while an appeal was pending. However, under Option 1, your project cannot proceed so long as the EAB appeal is pending.

We seek comment on how to balance these issues. Which option do you prefer and why? We invite comment on whether either Option 1 or Option 2 is more appropriate for general permits than individual minor source permits. We also ask for comment on whether there should be a short delay of 30 days before a permit is effective under Option 1 in order to allow for parties to seek administrative stays during reconsideration or to obtain a judicial stay before a permit goes into effect. Should we establish a mechanism for administrative reconsideration though the EAB, even when a party is seeking judicial review in the Court of Appeals? Any input on these issues with supporting documentation will help us in structuring the final rule.

B. Major NSR Program in Nonattainment Areas of Indian Country In today= s rulemaking, we are proposing to establish a major NSR program for new major stationary sources and major modifications at existing major stationary sources in nonattainment areas of Indian country at 40 CFR 49.166 to 49.175. This program is designed to meet the requirements of part D of title I of the Act, and sources subject to this program would be required to comply with the requirements of 40 CFR part 51,

appendix S ( appendix S).

Appendix S is entitled AEmission Offset Interpretative Ruling@ and sets forth preconstruction review requirements for major stationary sources and modifications locating in nonattainment areas where the State does not have an EPA approved Draft Do not cite, copy, or distribute February 14, 2006 69 nonattainment major NSR program. In general, appendix S is a transitional nonattainment major NSR program that covers the period after an area has been newly designated as nonattainment, up until the State has amended its SIP= s nonattainment major NSR program, as needed, to address the new nonattainment area. The requirements under appendix S are essentially the same as our requirements for State nonattainment major NSR programs at 40 CFR 51.165.

Primarily, we believe it is appropriate to apply appendix S provisions in Indian country for administrative convenience. Additionally, since appendix S generally applies in nonattainment areas where there is no approved nonattainment major NSR program,

and since no tribe currently has such a program, we believe that appendix S should also apply in Indian country. Another reason for requiring sources subject to this program to comply with appendix S requirements is that the EPA Regional Offices ( which will be implementing the program until an EPA approved implementation plan is in place) and several major sources in Indian country are familiar with the implementation and provisions of appendix S.

We considered and rejected the option of amending appendix S to extend its application to Indian country, since we believe that sources in Indian country are more likely to look for regulations applicable to them under part 49, which is solely dedicated to regulations that apply in Indian country. We also considered drafting a parallel major NSR regulation to apply to sources in Indian country, but rejected this option since it would essentially re propose appendix S provisions, which have been in effect outside of Indian country for many years. We wanted to avoid any potential confusion or possible Draft Do not cite, copy, or distribute February 14, 2006 70 perception that these parallel regulation requirements would be different than the appendix S requirements.

It is important to keep in mind that, in this rulemaking, we are only seeking comment on our general approach of requiring sources subject to the major NSR program in Indian country to be subject to the provisions of appendix S. While we will consider any compelling rationale or justification from a commenter that a particular provision in appendix S is not appropriate for Indian country, we will not entertain general comments on the appendix S provisions, since this transitional program has been implemented in States across the country for many years.

1. What are the requirements for major source permitting under appendix S?

Pursuant to paragraph IV of appendix S, a reviewing authority may issue a permit for a new major source or a major modification locating in a nonattainment area, if it complies with the following conditions:

$ The new major source or a major modification meets the LAER for that source utilizing add on controls or pollution prevention measures.

$ The applicant certifies that all existing major sources owned or operated by the applicant ( or any entity controlling, controlled by, or under common control with the applicant) in the same State as the proposed source are in compliance with ( or under a federally enforceable compliance schedule for)

all applicable emission limitations and standards under the Act.

$ Emission reductions ( offsets) from existing sources in the area of the proposed source ( whether or not under the same ownership) are obtained Draft Do not cite, copy, or distribute February 14, 2006 71 such that there will be reasonable progress towards attainment of the applicable NAAQS. Only intrapollutant emission offsets will be acceptable ( e. g., NOX for NOX).

$ The emission offsets provide a net air quality benefit in the affected area.

2. What are the options we are proposing to address the lack of available offsets in Indian country?

Tribal representatives have repeatedly stated that requirements for emission offsets are problematic in Indian country for the following reasons. Many tribes believe that transport is a major cause of pollution in Indian country. Tribes, with few exceptions, do not have many existing sources within their area of Indian country from which offsets can be obtained. In addition, administrative barriers may hinder tribal access to otherwise available offsets. Therefore, tribal representatives have advocated for additional flexibility to address offsets, such as the provision of NSR offset set asides ( which we expect would come from State offset pools or banks). Tribal representatives have raised these and other concerns in discussions on implementation of the 8 hour ozone and PM2.5 standards, and in comments on the 8 hour ozone implementation rule. 9 We recognize the unique circumstances that tribes face. Unlike States that have a SIP, a huge industrial base with several hundred existing sources, and a broad range of measures to attain and maintain NAAQS, a tribe generally has neither a TIP nor many 9 For example, see the letter from Bill Grantham, National Tribal Environmental Council, to docket OAR 2003 0079, providing comments on the proposed 8 hour ozone implementation rule ( 66 FR 32802). Draft Do not cite, copy, or distribute February 14, 2006 72 existing sources from which to generate offsets. Under these circumstances, we are proposing two options to address the lack of availability of offsets for tribes: ( 1) the Economic Development Zone ( EDZ) option and ( 2) the appendix S, paragraph VI option.

We also are requesting comment on other potential options for offset relief in Indian country.

Economic Development Zone Option. We would rely on section 173( a)( 1)( B) of the Act wherein the Administrator, in consultation with the Secretary of Housing and Urban Development ( HUD), would identify areas in Indian country as EDZs such that sources subject to major NSR located in EDZs in Indian country would be exempt from the offset requirement in section 173( a)( 1)( A) of the Act.

Section 173( a)( 1) of the Act provides for the issuance of permits to construct and operate a new or modified major stationary source if the reviewing authority determines that ( A) A... sufficient offsetting emissions reductions have been obtained ...@ or ( B) A in the case of a new or modified major stationary source which is located in a zone ( within the nonattainment area) identified by the Administrator, in consultation with the Secretary of HUD, as a zone to which economic development should be targeted, that emissions of such pollutant resulting from the proposed new or modified major stationary source will not cause or contribute to emissions levels which exceed the allowance for such pollutant for such area from new or modified major stationary sources under section 172( c).@

Once the Administrator has identified an area that should be targeted for economic development in consultation with HUD, major sources that construct or modify within that area are relieved of the offset requirement if the State/ tribe can demonstrate that the Draft Do not cite, copy, or distribute February 14, 2006 73 new permitted emissions are consistent with the achievement of reasonable further progress pursuant to section 172( c)( 4) of the Act, and will not interfere with attainment of the applicable NAAQS by the applicable attainment date.

We understand that HUD= s Initiative for Renewal Communities, Urban Empowerment Zones, and Urban Enterprise Communities generally require that participating communities demonstrate pervasive poverty, high unemployment, and general distress throughout the designated area. The U. S. Department of Agriculture requires similar eligibility criteria for participating communities located in rural areas. We believe that many areas of Indian country may meet these criteria and hence could qualify for this offset relief provision. We seek comment on whether these criteria are appropriate and if we should consider any other criteria for identifying parts of Indian country as EDZs.

We are also proposing to have the Administrator consult with HUD only once to develop a general set of approval criteria, such that a consultation is not required every time a tribe applies for its area of Indian country to be designated as an EDZ. Once the Administrator approves such a request from a tribe, a new major source or a major modification locating in that EDZ would be exempt from the offset provisions. We seek comment on this approach for providing offset relief.

Appendix S, Paragraph VI Option. Paragraph VI of appendix S notes that in some cases, the dates for attainment of the primary or secondary NAAQS may not have passed.

In such cases, appendix S provides that a new source locating in a nonattainment area may be exempt from the requirements of paragraph IV. A of appendix S ( discussed above Draft Do not cite, copy, or distribute February 14, 2006 74 in section IV. B. 1 of this preamble), including the offset requirement, if the following conditions are met:

$ The new source complies with the applicable implementation plan emission limitations;

$ The new source will not interfere with the attainment date for a regulated NSR pollutant; and $ We have determined that the preceding two conditions are satisfied and such determination is published in the Federal Register.

Tribes would be able to use this option for offset relief for the 8 hour ozone and PM2.5 NAAQS. For instance, the attainment dates for 8 hour ozone nonattainment areas range from 2007 for marginal areas to 2021 for severe areas. Hence, a new major source or a major modification locating in such a nonattainment area prior to the attainment date may be exempt from the requirements of paragraph IV of appendix S, if the associated conditions outlined above are met.

It is important to note that this option would provide only temporary offset relief because it would cease to be available once the attainment date for a pollutant has passed.

For instance, this option would not be available to marginal 8 hr ozone nonattainment areas after 2007. We seek comment on this paragraph VI option for offset relief.

We are seeking comment on other potential options for addressing the lack of availability of offsets in Indian country.

3. What are the proposed public participation requirements for this program?

We believe that the public participation requirements of 40 CFR 51.161 apply Draft Do not cite, copy, or distribute February 14, 2006 75 permitting under appendix S. Additionally, for the nonattainment major NSR program,

we are proposing detailed public notice requirements at 40 CFR 49.171. The proposed requirements for the nonattainment major NSR program are very similar to those proposed for the minor NSR program at 40 CFR 49.157. See section IV. A. 11 for more information on the proposed requirements.

4. How do I meet the statewide compliance certification requirement of the Act?

Pursuant to the statewide compliance certification requirements of section 173( a)( 3) of the Act, an owner or operator of a proposed new or modified major stationary source must demonstrate that all other major stationary sources under her/ his control in the same State are in compliance or on a schedule for compliance with all emission limitations and standards of the Act. It is important to recognize that the proposed rules will not impact this statewide compliance certification requirement.

However, in the context of Indian country, we are seeking comments on whether this requirement should be expressed as an Indian country wide compliance certification or remain a statewide certification. In other words, should you be required to certify that all your sources in the State where your proposed source is locating are in compliance, or that all your sources in all of Indian country are in compliance?

Note that we are proposing a minor change to appendix S that is related to the Aemission limitations and standards of the Act.@ Existing paragraph II. B of appendix S requires the reviewing authority to review each proposed new major source and major modification to determine whether it will meet Aany applicable new source performance standard in 40 CFR part 60, or any national emission standard for hazardous air pollutants Draft Do not cite, copy, or distribute February 14, 2006 76 in 40 CFR part 61.@ While we have incorporated this requirement into proposed 40 CFR 49.169( a), we believe that it should be expanded to include the newer national emission standards for hazardous air pollutants codified at 40 CFR part 63 ( commonly referred to as MACT standards). Accordingly, we are proposing to revise paragraph II. B of appendix S to add these standards under the Act, and proposed 40 CFR 49.169( a) would match the revised language of this paragraph.

V. Legal Basis, Statutory Authority, and Jurisdictional Issues A. What is the basis for our authority to implement these programs?

Today's proposed rules are intended to fill a regulatory gap in the protection of air quality in Indian country. Although many States have developed regulatory programs for minor sources, those programs do not apply in Indian country unless explicitly approved by EPA for such areas. In addition, there is no Federal minor NSR program or major nonattainment NSR program in Indian country. Part D of title I of the Act requires that each SIP include preconstruction review and permitting rules for the construction and operation of new and modified major stationary sources located in designated nonattainment areas. The TAR authorizes eligible Indian tribes to implement EPAapproved nonattainment NSR ( part D of title I of the Act), PSD ( part C of title I of the Act), and other programs under the Act in the same manner as States. However, if Indian tribes are unable, or choose not, to develop a nonattainment NSR program in a TIP, we will implement the program where necessary or appropriate. Today= s proposed requirements are intended to provide the mechanism for implementation of the Federal major nonattainment NSR and minor NSR programs in Indian country. Draft Do not cite, copy, or distribute February 14, 2006 77 The purpose of the proposed rules is to ensure that the NSR program is implemented throughout the United States and that any economic growth occurring in Indian country will do so in harmony with the preservation of existing clean air resources.

Today's proposed rules provide both Indian tribes and businesses operating or considering locating in Indian country an understanding of the NSR programs for stationary sources.

They also provide businesses and tribes procedures to comply with the major nonattainment NSR and minor NSR programs.

The Act gives us the authority to protect the Nation's air resources. Furthermore,

title I of the Act requires that the NSR program be established to protect public health and welfare, national parks, and wilderness areas as new sources of pollution are built or existing sources are modified. The program is designed to ensure that emissions will be well controlled and that there will be protection of the NAAQS in Indian country. We understand that not all tribes have the resources to design and implement NSR programs;

therefore, in today's proposal, we are providing a Federal program to apply in Indian country and that tribes may use as a model if they choose to develop their own implementation programs and obtain our approval.

Under today= s proposed rule, the Federal program at 40 CFR 49.151 through 49.165 for minor stationary sources would apply throughout Indian country, except where we explicitly approve an implementation plan for such programs. The Federal rule at 40 CFR 49.166 through 49.175 for new and modified major stationary sources in nonattainment areas located in Indian country would likewise apply in an area of Indian country until an implementation plan has been approved by us. Draft Do not cite, copy, or distribute February 14, 2006 78 As discussed previously, the Act provides us with broad authority to protect air resources throughout the Nation, including air resources in Indian country. See, for example, the preamble discussion for the proposed and final TAR ( 59 FR 43956, 43958

61, August 25, 1994; 63 FR 7254, 7262 64, February 12, 1998) and the preamble discussion for the proposed revisions to the part 71 Federal operating permits program for Indian country ( 62 FR 13748, 13750, March 21, 1997). In the preambles to the proposed and final TAR, we discussed generally the legal basis under the Act for EPA and tribal regulation of sources of air pollution in Indian country. We concluded that the Act constitutes a statutory delegation of Federal authority to eligible tribes over all sources of air pollution within the exterior boundaries of their reservations. Further, under the Act,

tribes may also apply to administer tribal air quality programs for non reservation areas over which they can show jurisdiction. 10 See 63 FR 7254 7259, 59 FR 43958 43960,