[Federal Register: October 6, 2009 (Volume 74, Number 192)]
[Rules and Regulations]
[Page 51417-51440]
[DOCID:fr06oc09-11]

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Part III

Environmental Protection Agency

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40 CFR Parts 70 and 71

Operating Permit Programs; Flexible Air Permitting Rule; Final Rule

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ENVIRONMENTAL PROTECTION AGENCY

40 CFR Parts 70 and 71

[EPA-HQ-OAR-2004-0087; FRL-8964-8]
RIN 2060-AM45

Operating Permit Programs; Flexible Air Permitting Rule

AGENCY: Environmental Protection Agency (EPA).

ACTION: Final rule.

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SUMMARY: We are revising the regulations governing State and Federal
operating permit programs required by title V of the Clean Air Act (CAA
or the Act) to promote flexible air permitting (FAP) approaches that
provide greater operational flexibility and, at the same time, ensure
environmental protection and compliance with applicable laws.
    The revisions to our title V regulations consist of adding
definitions for alternative operating scenario (AOS) and approved
replicable methodology (ARM) and codifying some clarifications to
existing provisions. These revisions are intended to clarify and
reaffirm opportunities for accessing operational flexibility under
existing regulations. We are not finalizing any revisions to our
existing minor or major New Source Review (NSR) regulations. In
particular, we are withdrawing that portion of the proposal which
relates to Green Groups and their potential inclusion in NSR programs
required by parts C and D of title I of the Act. Instead, we are
encouraging States and sources to investigate in more depth the
flexibilities currently available under the major NSR regulations.

DATES: This final rule is effective on November 5, 2009.

ADDRESSES: The EPA established a docket for this action under Docket ID
No. EPA-HQ-OAR-2004-0087. All documents in the docket are listed on the
http://www.regulations.gov Web site. Although listed in the index, some
information may not be publicly available, e.g., CBI or other
information whose disclosure is restricted by statute. Certain other
material, such as copyrighted material, is not placed on the Internet
and will be publicly available only in hard copy form. Publicly
available docket materials are available either electronically through
http://www.regulations.gov or in hard copy at the Air and Radiation
Docket, EPA/DC, EPA West, Room 3334, 1301 Constitution Avenue,
Northwest, 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<PHONE_NUMBER>, and the
telephone number for the Air and Radiation Docket is<PHONE_NUMBER>.

FOR FURTHER INFORMATION CONTACT: For general issues concerning this
action, please contact Michael Trutna, Air Quality Policy Division
(C504-01), U.S. Environmental Protection Agency, Research Triangle
Park, NC 27711; telephone<PHONE_NUMBER>; fax number<PHONE_NUMBER>; or
electronic mail at<EMAIL_ADDRESS>    For specific issues concerning the pilot permits used to support
this rulemaking, contact David Beck, Office of Policy, Economics, and
Innovation, Innovative Pilots Division (C304-05), U.S. Environmental
Protection Agency, Research Triangle Park, NC 27711; telephone (919)
541-5421; fax number<PHONE_NUMBER>; or electronic mail at
<EMAIL_ADDRESS>    For issues relating to monitoring, recordkeeping, and reporting for
FAPs, contact Barrett Parker, Sector Policies and Programs Division,
Measurement Policy Group (D243-03), U.S. Environmental Protection
Agency, Research Triangle Park, NC 27711; telephone<PHONE_NUMBER>; fax
number<PHONE_NUMBER>; or electronic mail at<EMAIL_ADDRESS>    For other part 70 issues, contact Juan Santiago, Operating Permits
Group, Air Quality Policy Division (C504-05), U.S. Environmental
Protection Agency, Research Triangle Park, NC 27711; telephone (919)
541-1084; fax number<PHONE_NUMBER>; or electronic mail at
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

    The information in this Supplementary Information section of this
preamble is organized as follows:

Table of Contents

I. General Information
    A. Does This Action Apply to Me?
    B. Where Can I Get a Copy of This Document and Other Related
Information?
II. Purpose
III. Background
    A. What Is a Flexible Air Permit?
    B. What Is the Title V Operating Permit Program?
    C. What Is the New Source Review (NSR) Program?
    1. Major NSR
    2. Minor NSR
IV. Overview of This Final Action
    A. What Specific Changes to Parts 70 and 71 Is EPA Finalizing?
    B. What Changes to Parts 51 and 52 Is EPA Finalizing?
    C. What Approach Is Being Used To Discuss the Final Actions?
    D. What Are EPA's Recommendations for Public Participation in
Flexible Permitting?
    E. What Types of Support Does EPA Intend To Offer?
V. Advance Approval of Minor NSR
    A. Background
    B. Final Action
VI. Alternative Operating Scenarios
    A. Background
    B. Final Action
VII. Approved Replicable Methodologies
    A. Background
    B. Final Action
VIII. Green Groups
    A. Background
    B. Final Action
IX. Statutory and Executive Order Reviews
    A. Executive Order 12866--Regulatory Planning and Review
    B. Paperwork Reduction Act
    C. Regulatory Flexibility Act
    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 and Safety Risks
    H. Executive Order 13211--Actions That Significantly Affect
Energy Supply, Distribution, or Use
    I. National Technology Transfer and Advancement Act
    J. Executive Order 12898--Federal Actions To Address
Environmental Justice in Minority Populations and Low-Income
Populations
    K. Congressional Review Act
X. Judicial Review

I. General Information

A. Does This Action Apply to Me?

    Entities potentially affected by this final action are facilities
currently required to obtain title V permits under State, local,
Tribal, or Federal operating permits programs, and State, local, and
Tribal governments that are authorized by EPA to issue such operating
permits. Potentially affected sources are found in a wide variety of
industry groups. In particular, we believe based on the collective
experience in implementing the pilot permit activity that these groups
will include, but are not limited to, the following:

------------------------------------------------------------------------
       Industry group                SIC \a\              NAICS \b\
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Aerospace Manufacturing.....  372.................  336411, 336412,
                                                     332912, 336411,
                                                     335413.
Automobile Manufacturing....  371.................  336111, 336112,
                                                     336712, 336211,
                                                     336992, 336322,
                                                     336312, 33633,
                                                     33634, 33635,
                                                     336399, 336212,
                                                     336213.
Industrial Organic Chemicals  286.................  325191, 32511,
                                                     325132, 325192,
                                                     225188, 325193,
                                                     32512, 325199.
Chemical Processes..........  281.................  325181, 325182,
                                                     325188, 32512,
                                                     325131, 325998,
                                                     331311.
Converted Paper and           267.................  322221, 322222,
 Paperboard Products.                                322223, 322224,
                                                     322226, 322231,
                                                     326111, 326112,
                                                     322299, 322291,
                                                     322232, 322233,
                                                     322211.
Magnetic Tape Manufacturing.  369.................  334613.
Petroleum Refining..........  291.................  32411.
Other Coating Operations....  226, 229, 251, 252,   313311, 313312,
                               253, 254, 267, 358,   314992, 33132,
                               363.                  337122, 337121,
                                                     337124, 337215,
                                                     337129, 37125,
                                                     337211, 337214,
                                                     337127, 322221,
                                                     322222, 322226,
                                                     335221, 335222,
                                                     335224, 335228,
                                                     333312, 333415,
                                                     333319.
Paper Mills.................  262.................  322121, 322122.
Pharmaceutical Manufacturing  283.................  325411, 325412,
                                                     325413, 325414.
Printing and Publishing.....  275.................  323114, 323110,
                                                     323111, 323113,
                                                     323112, 323115,
                                                     323119.
Pulp and Paper Mills........  262.................  32211, 322121,
                                                     322122, 32213.
Semiconductors..............  367.................  334413.
Specialty Batch Chemical      282, 283, 284, 285,   3251, 3252, 3253,
 Processes.                    286, 287, 289, 386.   3254, 3255, 3256,
                                                     3259, except 325131
                                                     and 325181.
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\a\ Standard Industrial Classification.
\b\ 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 affected by this
action. 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 final rule will also be available on the World Wide Web. Following
signature by the EPA Administrator, a copy of this final rule will be
posted in the regulations and standards section of our NSR home page
located at http://www.epa.gov/nsr.

II. Purpose

    The purpose of this rulemaking is to clarify and reaffirm
opportunities within the existing regulatory framework to encourage the
wider use of the FAP approaches. The Agency has learned a great deal
over the past decade through the implementation and evaluation of pilot
permits. In light of that experience and the comments we received on
the proposed FAP rulemaking (72 FR 52206, September 12, 2007),\1\ we
are finalizing certain elements of that proposal.\2\
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    \1\ In addition to written comments submitted on the proposal,
we have received input from stakeholders in outreach meetings held
to discuss the proposal. These meetings, and the topics discussed,
are documented in the docket for this rulemaking, Docket No. EPA-HQ-
OAR-2004-0087. For purposes of this preamble, we refer to input from
all these sources as ``comments.''
    \2\ On January 13, 2009, then Administrator Stephen L. Johnson
signed a final Flexible Air Permitting Rule and the signed rule was
made publicly available on EPA's Web site. The signed rule was
submitted to the Office of Federal Register for publication. Rahm
Emanuel, Assistant to the President and Chief of Staff, issues a
memorandum on January 20, 2009, directing Agencies to withdraw from
the Office of Federal Register ``all proposed and final regulations
that have not been published in the Federal Register so that they
can be reviewed and approved by a department or agency head.''
Administrator Lisa P. Jackson reviewed and approved the final
Flexible Permitting Rule, and this rule as published is identical in
substance to the rule previously signed January 13, 2009.
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III. Background

A. What Is a Flexible Air Permit?

    A FAP is a title V permit that by its design facilitates flexible
operations at a source, allowing it to be market-responsive while
ensuring equal or greater environmental protection than that achieved
by conventional permits. In particular, a FAP contains one or more
approaches that allow the source, under protection of the permit
shield, to make certain types or categories of physical and/or
operational changes without further review or approval of the
individual changes by the permitting authority as they subsequently
occur. Flexible air permit approaches, as discussed in this notice,
include advance approvals of minor NSR, AOSs, and ARMs. In pursuing a
FAP, the source must propose one or more of these approaches to the
permitting authority who then would accept those which are judged to be
appropriate in a particular situation. In order to be effective, the
combination of FAP approaches contained in the title V permit must
address all applicable requirements and requirements of part 70
relevant to the anticipated changes being authorized.\3\ Flexible air
permits cannot circumvent, modify, or contravene any applicable
requirement and, instead, by their design must assure compliance with
each one as it would become applicable to any of the authorized
changes.
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    \3\ ``Applicable requirements'' is a term that is used in title
V. The EPA has defined the term to include, among other things,
State implementation plan (SIP) rules, the terms and conditions of
preconstruction permits issued under a SIP-approved NSR program, and
requirements pursuant to the new source performance standards
(NSPS), national emission standards for hazardous air pollutants
(NESHAP), maximum achievable control technology (MACT), and Acid
Rain Programs. See 40 CFR 70.2.
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    For more than a decade, we participated in a pilot permit activity
with certain title V sources and permitting authorities through which
were tested and evaluated various

permitting approaches that afford operational flexibility. The lessons
learned through the pilot permit experience served, in part, as the
basis for our adoption of the plantwide applicability limitation (PAL)
provisions of the 2002 NSR Improvement rule. They also serve as a basis
for this rulemaking, in which we clarify and reaffirm existing
regulatory provisions that currently afford reasonable opportunities
for operational flexibility, while ensuring the required levels of
environmental protection. We intend that this rulemaking provide a more
positive foundation upon which FAPs can be considered by sources and
permitting authorities and, as appropriate, be designed and
implemented.

B. What Is the Title V Operating Permit Program?

    When Congress amended the Act in 1990, it established an operating
permit program in title V of the Act for major (and certain other)
stationary sources of air pollution. Title V mandates that each State
develop and implement an operating permit program, and requires EPA to
establish minimum standards for these programs. The purpose of the
program is to improve the enforceability, and thus the effectiveness,
of the Act's requirements by issuing to every covered source a permit
that lists all the requirements applicable to the source under the Act
and contains other terms as necessary to assure compliance with those
requirements. States may delegate program responsibility to local
agencies, and eligible Tribes may develop and implement a program at
their option. In 1992, EPA promulgated regulations setting forth
minimum requirements for State, local, and Tribal operating permit
programs in part 70 of title 40 of the Code of Federal Regulations (40
CFR part 70). Currently all States and many local agencies administer
operating permit programs approved by EPA pursuant to the part 70
requirements. There are 112 such State, territorial, and local
operating permit programs. These programs are typically referred to
interchangeably as ``title V programs'' or ``part 70 programs.''
    In addition, title V requires EPA to implement an operating permit
program in areas lacking an approved or adequately administered State,
local, or Tribal program. Accordingly, in 1996 EPA promulgated the
Federal operating permit program at 40 CFR part 71. In 1999, EPA
amended part 71 specifically to address Indian country. Currently, EPA
administers the part 71 program in Indian country, for sources located
on the outer continental shelf, and for deep water ports.\4\ There are
currently no Tribes with approved part 70 programs, although one Tribe
has received delegation to administer the part 71 Federal program.
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    \4\ The EPA may also issue a part 71 permit where a State
permitting authority fails to respond to an objection by the
Administrator to a part 70 permit. See CAA section 505(c), 40 CFR
71.4(e).
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    The concept of operational flexibility in title V permits is not a
new one. Since they were initially promulgated in 1992, the part 70
State operating permit program regulations have included operational
flexibility provisions. One of these is the AOS provision found at 40
CFR 70.6(a)(9), which is one subject of this rulemaking.5, 6
Section 70.6(a)(9) generally provides that any permit issued under part
70 must include terms and conditions for reasonably anticipated
operating scenarios identified in its application by the source and as
approved by the permitting authority. Over the years, we have proposed
rulemaking or guidance to address operational flexibility further, but
none has been finalized.\7\
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    \5\ The Federal operating permit program at part 71 addresses
reasonably anticipated operating scenarios in the same fashion as
part 70. See 40 CFR 71.6(a)(9). This rulemaking affects both parts
70 and 71, and the revisions to each part are virtually identical.
For ease of reference, this preamble discussion refers to the part
70 provisions, but the discussion applies equally to the part 71
program revisions. Section numbers given for the part 70 rules
correspond directly to the analogous sections in part 71. The term
``title V permit'' refers to permits issued under either part 70 or
part 71.
    \6\ The EPA included other operational flexibility provisions in
the final part 70 regulations, including 40 CFR 70.4(b)(12),
(b)(14), and (b)(15), which implement section 502(b)(10) of the Act.
This rule does not address those provisions.
    \7\ In the 1990's, we proposed certain clarifications and
modifications to the part 70 regulations. See generally 60 FR 45529
(August 31, 1995) and 59 FR 44460 (August 29, 1994). In those
proposals, among other things, we discussed the concept of ``advance
NSR'' in relation to AOSs, and proposed a definition for
``alternative operating scenarios.'' In August 2000, based in large
part on the experience gained through the pilot permit activity
discussed below, we issued a draft guidance document called White
Paper Number 3 (64 FR 49803, Aug. 15, 2000), on which we solicited
comment. That draft guidance addressed various flexible permitting
approaches, including the use of the AOS provisions, Clean
Buildings, and PALs. In fashioning the proposal on which this final
rule is based, we considered a summary of those comments received on
the prior proposals that addressed advance approval and AOSs (which
is available in the docket) and the relevant individual comments
received on the draft guidance (which are also in the docket).
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    Shortly after we promulgated part 70, we initiated and/or supported
pilot permit activities with interested States.\8\ Companies
participating in this activity sought to reduce the cost, time, and
delays associated with a permit revision for each operational change at
a facility. We and the States sought to increase the sources'
operational flexibility, while assuring compliance with applicable
requirements, ensuring environmental protection, and facilitating
pollution prevention (P2). These pilots typically allowed for both
changes to operations of existing emissions units and the addition of
new emissions units, provided that the changes were sufficiently well
described in the permit application so that the permitting authority
could confirm that all applicable requirements were identified and that
the permit contained terms and conditions assuring compliance with all
applicable requirements.
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    \8\ Sources at the following locations participated in the pilot
permit activity: (1) 3M (St. Paul, MN); (2) Intel (Aloha, OR); (3)
Lasco Bathware (Yelm, WA); (4) Imation (Weatherford, OK); (5) Cytec
(Connecticut); (6) DaimlerChrysler (Newark, DE); (7) Merck (Elkton,
VA); (8) Merck (Barceloneta, PR); (9) Saturn (Spring Hill, TN); (10)
BMW (Spartanburg, SC); (11) Eli Lilly (West Lafayette, IN); (12) 3M
(Nevada, MO); and (13) Imation (Camarillo, CA).
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    To evaluate the pilot permit activity, we conducted a thorough
review of the six pilot permits for which at the time there was
significant implementation experience.\9\ We reviewed on-site records
to track utilization of the flexible permit provisions, assessed how
well the permits worked, evaluated total emissions reductions achieved,
and analyzed the economic benefits associated with the permits.
Overall, we found that the flexibility approaches which States
implemented under their current authorities had worked well for both
the sources and the permitting authorities, with significant benefits
accruing as follows:
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    \9\ The six permits that we analyzed were: (1) Intel (Aloha,
OR); (2) 3M (St. Paul, MN); (3) Lasco Bathware (Yelm, WA); (4)
DaimlerChrysler (Newark, DE); (5) Saturn (Spring Hill, TN); and (6)
Imation (Weatherford, OK).
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     Environmental--The sources generally achieved 30 to 80
percent reductions in actual plantwide emissions or emissions per unit
of production.
     Informational--Permitting authorities and the public
received better information about the scope of planned changes at the
sources and the maximum, cumulative environmental effects of those
changes.
     Economic--Increased permitting certainty and reduced
transaction costs improved the participating companies' ability to
compete effectively in the market and enabled them to retain, and in
some cases, create jobs.
     Administrative--Even with the higher front-end design
costs associated with the pilot permits, permitting authorities
reported a net reduction in administrative costs over the life of the

permits as a result of a reduction in subsequent permit revisions.

For a more extensive discussion of the findings of the pilot permit
evaluation, see the evaluation report.\10\
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    \10\ ``Evaluation of the Implementation Experience with
Innovative Air Permits.'' A copy of this report is located in the
docket for this rulemaking, or can be accessed at http://
www.epa.gov/ttn/oarpg/t5/memoranda/iap_eier.pdf.
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C. What Is the New Source Review (NSR) Program?

    The NSR program is a preconstruction permitting program that
applies when a source is constructed or modified. The NSR program is
composed of three different programs:
     Prevention of Significant Deterioration (PSD);
     Nonattainment major NSR (NA NSR); and
     Minor NSR.
1. Major NSR
    We often refer to the PSD and NA NSR programs together as the major
NSR program because these programs regulate only major sources.\11\
These programs are mandated by parts C and D of title I of the Act.
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    \11\ The Act uses the terms ``major emitting facility'' to refer
to sources subject to the PSD program, and ``major stationary
source'' to refer to sources subject to NA NSR. See CAA sections
165, 169, 172(c)(5), and 302(j). For ease of reference, we use the
term ``major source'' to refer to both terms.
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    Part C contains the PSD provisions. The PSD program applies when a
major source that is located in an area that is designated as
attainment or unclassifiable for any criteria pollutant is constructed
or undergoes a major modification.12 13 Part D prescribes
the NA NSR program, which applies when a major source that is located
in an area that is designated as nonattainment for one or more criteria
pollutants is newly constructed or undergoes a major modification for
any of those pollutants. The implementing regulations for the PSD
program are found at 40 CFR 52.21, 40 CFR 51.166, and 40 CFR 51.165(b).
For NA NSR, the regulations are found at 40 CFR 52.24, 40 CFR 51.165,
and 40 CFR part 51, appendix S.
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    \12\ The term ``criteria pollutant'' means a pollutant for which
we have set a NAAQS.
    \13\ In addition, the PSD program applies to many noncriteria
regulated pollutants.
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    As noted above, parts C and D set forth the statutory requirements
for the PSD and NA NSR programs, and the implementing regulations
include requirements for State major NSR programs. As a result, major
NSR programs generally are similar across the States.
    The PSD requirements include but are not limited to:
     Installation of Best Available Control Technology (BACT);
     Air quality monitoring and modeling analyses to ensure
that a project's emissions will not cause or contribute to a violation
of any national ambient air quality standards (NAAQS) or maximum
allowable pollutant increase (PSD increment);
     Notification of Federal Land Manager of nearby Class I
areas; and
     Thirty-day public comment period and opportunity for a
public hearing on the permit.
    Nonattainment NSR requirements include but are not limited to:
     Installation of Lowest Achievable Emission Rate (LAER)
control technology;
     Offsetting new emissions with creditable emissions
reductions;
     Certification that all major sources owned and operated in
the State by the same owner are in compliance with all applicable
requirements under the Act;
     An alternative siting analysis demonstrating that the
benefits of the proposed source significantly outweigh the
environmental and social costs imposed as a result of its location,
construction, or modification; and
     Thirty-day public comment on the permit.
    Based on our pilot permit evaluation and our 1996 proposed
modifications to the major NSR program, in December 2002 we finalized
the NSR Improvement rule. In that rule, we promulgated regulations for
PALs in the PSD and NA NSR programs. As explained in the preamble to
the December 2002 final rule, a PAL is an alternative approach for
determining NSR applicability on a plantwide basis. See 67 FR 80206.
Sources with PALs can make changes without triggering the major NSR
preconstruction permitting requirements, provided such changes remain
below the limit established in their PAL and do not otherwise violate
the requirements of the PAL. A PAL is an important technique which is
often used in tandem with other FAP approaches such as advance
approvals for minor NSR.
2. Minor NSR
    Under section 110(a)(2)(C) of the Act, States are required to have
``minor'' NSR programs, which apply to new and modified sources that do
not meet the emissions thresholds for the NSR programs that apply to
major sources, as well as permit programs to meet parts C and D of the
Act. In addition, section 110(j) requires all applicants for permits
issued under title I of the Act to show that they will comply with
standards of performance and all other requirements of the Act. The
minor NSR program is part of each State's ``State implementation plan''
(SIP) and is designed to ensure that the construction or modification
of any stationary source does not interfere with the attainment of the
NAAQS. Aside from this requirement, which is stated in broad terms, the
Act includes no specifics regarding the structure or functioning of
minor NSR programs. The implementing regulations, which are found at 40
CFR 51.160 through 51.164, also are stated in very general terms. As a
result, SIP-approved minor NSR programs can vary quite widely from
State to State.

IV. Overview of This Final Action

    This final action is primarily a reaffirmation of currently
available flexibility options and the process for accessing them. This
action adds some new definitions and clarifications to existing parts
70 and 71 provisions in order to promote greater certainty and
reasonable consideration of these options. This notice discusses each
of the FAP approaches (e.g., advance approvals of minor NSR, AOSs, and
ARMs) and the common process for their consideration. In this process,
the source first proposes use of one or more of the FAP approaches to
the permitting authority who then evaluates the proposal on a case-by-
case basis.
    Commenters have generally found these options to be available to
the extent needed and appropriate under existing authorities.
Commenters have also found the common process to be sufficient and
effective in the reasonable consideration of the particular options
proposed for a FAP. These commenters have convinced the Agency that
more prescriptive approaches proposed to assure greater consistency may
well be counterproductive to our objective for greater consideration
and appropriate use of FAP approaches. While deciding not to prescribe
specific approaches to the design and implementation of FAPs, EPA does
intend to monitor State activities in these areas, to evaluate the
effectiveness of various FAP approaches periodically, and to assess, on
the basis of new experiences and other information, whether any
additional rulemaking would be appropriate in the future.

A. What Specific Changes to Parts 70 and 71 Is EPA Finalizing?

    We are finalizing a proposed revision to the title V permit
application requirements at 40 CFR 70.5(c)(3)(iii) to facilitate the
use of emissions caps, including those for advance approvals of minor
NSR and for PALs, although

the wording has been changed slightly in the final rule. The final
revisions clarify that for emissions units subject to an annual
emissions cap, the application may report the units' emissions as part
of the aggregate emissions associated with the cap, except where more
specific information is needed, including where necessary to determine
or assure compliance with an applicable requirement.
    With respect to AOSs, after considering the comments we received on
the proposed rules, we are finalizing only those aspects of our
proposal that would preserve the current levels of flexibility and add
no new administrative burden. In particular, we are revising the rules
to:
     Add a definition of AOS, but eliminating the reference to
``physical and operational changes'' from the proposed definition.
     Clarify that the permitting authority shall require the
source to supplement its application with additional information when
necessary to define permit terms and conditions to implement a proposed
AOS as requested by the source.
     Clarify that the compliance plan requirements for
applications must address proposed AOSs when an application includes
them.
     Clarify that applications must contain documentation that
the source has obtained all authorizations required under the
applicable requirements relevant to a proposed AOS or a certification
the source has submitted all relevant materials for obtaining such
authorizations.
     Clarify that permits must contain all authorizations as
required under the applicable requirements relevant to an AOS.
     Use consistent terminology wherever the rules refer to
AOSs.
    We are not finalizing other proposed requirements relating to the
specific content of AOSs in logs and permits and to the need to report
AOS implementation every 6 months. We have been persuaded by the
commenters on the proposal that these potential new requirements would
not be necessary and may, in fact, be counterproductive.
    In the final rules with respect to ARMs, we are adding the proposed
definition of ARM and supplementing it with two clarifications added in
40 CFR 70.6(a)(1): (1) As is currently the case for AOSs, the source
must identify in its application a potential ARM and the permitting
authority must then choose to approve it before the ARM can be
effective; and (2) an ARM cannot be used to circumvent any other
applicable requirement. Although ARMs can reduce the number of
potential permit revisions that a source must otherwise request, an ARM
must be consistent with and implement an applicable requirement or
requirement of part 70. We are not finalizing the proposed requirement
for sources to identify in the 6-month monitoring report any ARMs
implemented during the reporting period. Instead, we are clarifying
that implementation records for all ARMs use must be kept on-site by
the source.
    Because the final rules represent clarifications to the existing
part 70 regulations, we believe that many States will be able to
implement the final rules without revising their regulations. This
belief is further based on the pilot experience and on the comments
received from States who affirmed that their current authority was
sufficient to implement both AOSs and ARMs (i.e., no State rulemaking
was thought to be needed to incorporate the new definitions and
clarified requirements).
    However, since the AOS provisions are impacted by the rule and are
one of the part 70 program minima, and State part 70 programs differ,
some States may revise their current part 70 program to add sufficient
authority to implement the final rule or opt to make current authority
on flexible permits more explicit.
    With respect to AOSs, for those States that believe they lack
authority under their current part 70 programs to implement the final
rule, or that chose to make current authority more explicit, such
States should submit proposed revisions to their title V operating
permits program to their EPA Regional Offices pursuant to 40 CFR
70.4(i). For other States if, based on their subsequent efforts to
implement the final rule, we determine in writing that a particular
part 70 program does not provide sufficient authority to implement the
final rule or is inconsistent with the final rule, then the relevant
State must revise the program pursuant to 40 CFR 70.4(i). Accordingly,
the State will have, from the date of our written determination, 180
days, or such other period as the Administrator may specify following
notification by the Administrator, or within 2 years if the State
demonstrates that additional legal authority is necessary to make the
required program revisions, to submit a proposed operating permit
program revision consistent with the final rule to us for review and
approval.
    With respect to ARMs, States may choose to send us specific
revisions to their current programs at any time. There is no mandate
for part 70 programs to contain provisions specific to ARMs. Thus,
States are not obligated to revise their part 70 programs in this
regard as a result of this final rule. However, optional rule changes
may be useful to some States in implementing the final rule more
effectively and to achieve the anticipated administrative benefits
attributed to ARM implementation.
    Regardless of whether States revise their rules to incorporate the
part 70 rule changes that are being finalized in this action, the
Agency wishes to reiterate that inclusion of AOSs or ARMs in a title V
permit remains an essentially voluntary activity. A source owner in
deciding whether to propose one must first determine that an AOS and/or
ARM would be useful in increasing certainty and flexibility and then
the permitting authority must determine whether or not to grant the
source's request for an AOS and/or ARM. The permitting authority, on a
case-by-case basis, may reject source proposals as inadequate to assure
compliance with the underlying applicable requirements or otherwise
inappropriate, depending on the specific facts of the situation.

B. What Changes to Parts 51 and 52 Is EPA Finalizing?

    We are not finalizing any changes to the NSR program in parts 51
and 52. We did not propose any changes to the regulations for minor NSR
based on our experience with several pilot States. Comments received on
the proposal affirmed that the relevant pilot experience was broadly
applicable and that States, in general, have sufficient existing
authority to advance approve minor NSR, where they determine it
appropriate to do so, and to incorporate the permit terms accomplishing
this approval into title V permits as applicable requirements. As a
result, we continue to believe revisions to our part 51 minor NSR
regulations are not necessary. Where States are considering revisions
to their current minor NSR programs to provide more explicit authority
for authorizing advance approvals, EPA is willing to discuss possible
revisions and to review any rule changes proposed by the State,
consistent with 40 CFR 51.160 through 51.164.
    We have also decided to terminate our rulemaking proposal for Green
Groups. As discussed more fully later in this preamble, we instead
intend to support States and sources who wish to explore the
flexibilities available under the existing major NSR regulations. Upon
request to do so, EPA is willing to assist States in an evaluation of
their current SIPs and to discuss possible

replacement provisions with them consistent with our 40 CFR 51.165 and
51.166 regulations governing NA NSR and PSD SIPs.

 C. What Approach Is Being Used To Discuss the Final Actions?

    The final actions relative to parts 70 and 71 and to parts 51 and
52 are subsequently discussed in four sections entitled: V. Advance
Approval of Minor NSR; VI. Alternative Operating Scenarios (AOSs); VII.
Approved Replicable Methodologies (ARMs); and VIII. Green Groups. Each
of these sections first summarizes what we proposed and the significant
reactions of commenters to our proposal, and then describes what EPA is
finalizing as a result. A more comprehensive summary and analysis of
the written comments received can be found in our Response to Comments
document, which is available in the public docket for this rulemaking
as described in the ADDRESSES section of this preamble.

 D. What Are EPA's Recommendations for Public Participation in Flexible
Permitting?

    Based on our experience with pilot permits, we believe that FAPs
provide at least as much environmental protection as conventional
permits and often promote superior environmental performance.
Nevertheless, we also recognize that FAPs will contain features, such
as AOSs, ARMs, or advance approval of minor NSR, that may not be
familiar to the reviewing public at least until these approaches are
more widely used. For this reason, we encourage permitting authorities
to consider using their discretion to enhance the relevant public
participation process (as currently required in both title V and NSR
regulations), as appropriate, for a particular FAP. Some
recommendations which we found to work well in the context of the pilot
permits are described below.
    During the permitting process, permitting authorities could
consider making the permit application available to the public soon
after receipt. We found in pilot permits that early outreach to the
community, rather than waiting until the draft permit was prepared, was
an effective public participation strategy. Some permitting authorities
have also found it useful to issue a local press release (in addition
to a conventional notice in the newspaper) when a permit containing
innovative approaches is released for comment. Press releases have
potential to reach more people and raise local awareness of FAP
approaches.
    The minimum public comment period required for a title V permit
renewal or significant permit modification is 30 days. Where a
significant amount of a permit's content consists of terms to
incorporate operational flexibility, we suggest that permitting
authorities consider expanding the comment period to 45 days or more.
Note, however, that for some pilot permits, an up-front outreach to the
public was sufficient to resolve community questions and comments early
in the process, so that by the time of the public hearing and comment
period no adverse comments were received.
    Finally, in order to ensure adequate technical support and
accessibility for the public in their efforts to understand and comment
upon FAPs, we suggest that permitting authorities provide a principal
point of contact for responding to technical questions and ensure the
availability of draft permits, applications, and technical support
documents on an Internet Web site. We believe that any additional costs
here will be offset by the subsequent administrative cost savings to
the permitting authority resulting from the reduced need to process
permit revisions for sources with FAPs.

E. What Types of Support Does EPA Intend To Offer?

    The Agency anticipates that the effort by States and sources to
investigate FAPs will involve a potentially wide spectrum of sources
(see section I.A). As a result, EPA intends to provide general support
to States, sources, and the public on this and other FAP topics,
potentially in the form of a Web site, workshops, and an EPA network of
contacts. In addition, we will consider other types of support to
individual States where requested to do so.

V. Advance Approval of Minor NSR

A. Background

    Pursuant to section 110(a)(2)(C) of the Act and its implementing
part 51 regulations (see 40 CFR 51.160 through 51.164), States are
required to adopt minor NSR programs that complement their major NSR
programs required under parts C and D of title I the Act. Given the
general nature of these requirements, the content of minor NSR programs
varies widely among the States. Regardless of their specific
provisions, through the pilot permit experience, we found that State
minor NSR requirements, where applicable, are among the most important
in designing a FAP for sources making frequent and/or rapid physical
and operational changes. Absent an up-front authorization for these
changes under minor NSR (usually categories or types of changes), an
individual review by the permitting authority typically is required at
the time each change would be approved.
    We refer to up-front, categorical authorizations as ``advance
approvals'' under minor NSR.\14\
---------------------------------------------------------------------------

    \14\ ``Advance approval'' generally refers to an authorization
to make certain categories or types of changes which is issued to a
source by its permitting authority pursuant to a specific applicable
requirement that requires approval prior to making subject changes
(e.g., minor and major NSR, section 112(g), etc.). Changes within
the types or categories of changes which are advance approved can
subsequently be made over the duration of the permit without further
review or approval by the permitting authority with respect to the
particular applicable requirement for which the changes are advance
approved. In order to explore use of a specific advance approval, a
source would first propose its use which then could be accepted or
rejected by the permitting authority, as appropriate. Advance
approvals authorized under one particular applicable requirement
(e.g., advance approvals under minor NSR) may also address
additional requirements which may or may not themselves require
prior approval before the specified changes can be made (e.g., MACT,
NSPS, and State air toxics requirements).
---------------------------------------------------------------------------

    Upon examining the provisions of their minor NSR programs, most of
the States in which pilot permits were conducted (``pilot States'')
found that they could issue advance approvals under existing minor NSR
authority for a wide spectrum of changes, provided that certain
boundary conditions were established in the minor NSR permit. The
conditions established in the minor NSR permit to accomplish such
approvals varied depending upon the requirements of the different State
minor NSR programs and the specific facts of the particular situation.
    The pilot permits employed several types of techniques to
authorize, in a practicably enforceable manner, a category of changes
under minor NSR. These techniques, while not necessarily transferable
in all aspects to other permitting situations, do represent field-
tested reference points from which similar advance approval approaches
can be considered by other permitting authorities. Ultimately, as with
all FAP approaches, in order for a minor NSR project proposing use of
an advance approval to be viable, the source must first propose it to
the permitting authority, and the permitting authority must then agree
to pursue it in the context of its own SIP-approved minor NSR rules and
the case-specific facts.
    Permitting authorities in pilot States employed the following
approaches and safeguards when authorizing the advance approval of
minor NSR:
     Scope of minor NSR project--Permitting authorities were
able to rely

upon available flexibility to interpret the relevant SIP-approved
definitions (e.g., emissions unit, facility, source) in order to
fashion a reasonable scope and duration of the minor NSR pilot project
(i.e., ones that provide appropriate operational flexibility for the
particular situation while ensuring environmental protection). In
general, these advance approvals (i.e., the minor NSR projects) consist
of several categories of potential changes anticipated to occur over an
appropriately defined period of time (e.g., a range of possible types
of changes, such as ``any of various physical changes to the rollers,
drive mechanism, and other components of the coating section within a
coating line''). In their permit applications requesting advance
approval of minor NSR, pilot sources described these changes in
sufficient detail to allow the permitting authority to conduct the
relevant ambient air impact and control technology reviews, to
determine relevant applicable requirements, and to assess the
compatibility of the changes with the approved emissions reduction and
monitoring approaches. The SIP-approved requirements concerning the
timeliness of the approved construction project vary among the pilots,
depending upon the content of the approved SIP and the ability to
characterize the project (as deemed appropriate by the permitting
authority) as a series of related ongoing changes.
     Non-applicability of major NSR--In order to assure the
types of changes authorized under the advance approvals for minor NSR
could subsequently occur without further review and approval by the
permitting authority, the pilot permits contain terms to prevent major
NSR from also applying to the same changes. These terms typically
involve either a PAL based on actual emissions or a potential to emit
(PTE) cap to prevent an existing source from becoming major, depending
on whether the source is already major or not for the pollutant(s)
involved in the advance approval of minor NSR.
     Control technology requirements--Permitting authorities
imposed terms in pilot permits as necessary to assure compliance with
all applicable control requirements. In all pilot permits, these terms
require compliance with Federal standards (e.g., MACT, NSPS, NESHAPs)
that continue to apply regardless of the approach taken to advance
approve minor NSR. In addition, the advance approved changes must meet
any applicable SIP requirements, including those in some States to
apply best available technology (BAT) to certain changes subject to
their minor NSR programs. In those pilot permits subject to a State BAT
requirement, permitting authorities also determined whether the advance
approval allowed discrete changes with later construction times and
whether any initial BAT determination for them would require re-
evaluation.
     Protection of ambient standards--Pilot permits contain
terms judged appropriate by the permitting authority to assure that the
minor NSR pilot project would not interfere with the attainment and
maintenance of the NAAQS. Typically, since the advance approvals
requested by the pilot sources involved VOC emissions, pilot projects
primarily focused on protecting the ozone NAAQS. The plantwide VOC
emissions caps used in the pilots were determined to be adequate for
purposes of safeguarding the ozone NAAQS, but for other pollutants
(e.g., air toxics) States sometimes required a replicable modeling
procedure to screen the impacts of individual emissions increases
relative to acceptable ambient levels. In the case of one pilot, an
ambient dispersion model, complete with implementation assumptions, was
included in the permit to evaluate any new air toxic pollutants of
concern, or increases in existing toxic pollutants. Failure of a
particular change to meet the screening levels triggered a case-by-case
review of that change by the permitting authority. Additional
safeguards were imposed to a varying extent, as applicable and as
deemed appropriate, by the permitting authority to address averaging
time concerns potentially applicable to NAAQSs other than ozone.
     Public participation--Each pilot permit project was
subjected to an opportunity for public comment. Often this process was
enhanced to facilitate better understanding and support for the
project. (See section IV.D.)
    To augment initial application information, pilot States, as part
of authorizing advance approvals under their existing minor NSR
programs, frequently decided to require sources to send a notice to the
permitting authority contemporaneous with the operation of any entirely
new emissions unit relying upon the advance approval. Pilot States were
also able to add other permit terms, where necessary, to make
enforceable any advance approvals of minor NSR that were authorized.
    Often the permitting authorities were able in pilot permits to
streamline various permit terms so as to accomplish multiple objectives
and to simplify the overall permit. For example, the pilot source
frequently requested its permitting authority to establish in the minor
NSR permit a plantwide VOC emissions cap at a particular level for two
purposes. First, the level was requested to prevent the applicability
of major NSR. In cases where the existing plantwide VOC emissions were
below the major source threshold, the permitting authority approved an
emissions cap to constrain the PTE of the source in a practicably
enforceable fashion so that it would not be a major source of VOC
emissions for purposes of PSD. In other cases, where the source was an
existing major stationary source for its VOC emissions, the source
requested a plantwide cap level to function as a PAL. In response, the
permitting authority approved the requested PAL consistent with the PAL
provisions of the major NSR regulations (see, e.g., 40 CFR 52.21(aa)).
Accordingly, compliance with the PAL ensures that major NSR would not
apply to any future changes made at the source during the time period
over which the PAL was effective. Second, the VOC emissions level
established in the PTE cap or in the PAL, as applicable, was
interpreted by the permitting authority as a sufficient safeguard to
prevent future changes approved under minor NSR, in combination with
existing source emissions, from interfering with the ozone NAAQS. As
such, the VOC emissions cap would both prevent major NSR from applying
to changes at the source and ensure that the advance approval of
changes under minor NSR does not jeopardize the NAAQS. Given the
strategic importance of such caps, pilot sources typically maintained a
significant margin of safety between their actual plantwide emissions
and the level required by their emissions cap(s).
    Under the current part 70 regulations, any permit terms
accomplishing an advance approval pursuant to a SIP-approved minor NSR
program must be incorporated into the title V permit as applicable
requirements, and combined with other permit terms established in the
part 70 permit as necessary to assure compliance with all requirements
that will apply when the approved changes are subsequently implemented.
Thus, the part 70 permit would include the requirements directly
addressed in the minor NSR permit, as well as other requirements that
the minor NSR permit did not address, if any. Changes advance approved
under minor NSR can then be implemented without any further review or
approval by the permitting authority, provided that the terms of the
authorizing minor NSR permit are effective upon its issuance and are
incorporated into the title V

permit as applicable requirements consistent with 40 CFR 70.2.
    In our evaluation of pilot permits,\15\ we found that the use of
advance approvals under minor NSR improved operational efficiency at
the plants because companies knew in advance what changes were
authorized, making resource allocation more efficient and accommodating
the typically incremental, iterative nature of industrial process
improvements. We also found that P2 projects approved in advance became
more attractive to the companies because such projects could be
undertaken without the delay and uncertainty of future case-by-case
approvals. In addition, P2-related projects reduced emissions and
enabled sources to comply more easily with emissions limits such as the
plantwide emissions caps that were often features of the pilot permits.
---------------------------------------------------------------------------

    \15\ See footnote 9 for information on where to obtain our
report ``Evaluation of the Implementation Experience with Innovative
Air Permits.''
---------------------------------------------------------------------------

    As mentioned above, pilot permit experience indicates that
obtaining advance approval under minor NSR is often a critical element
in the design of a FAP. This experience also suggests that many State
minor NSR programs may already provide, in situations judged to be
appropriate by the permitting authority, the legal authority necessary
to issue minor NSR permits that accommodate various types of
operational flexibility, which can be readily incorporated into title V
permits. Although we did not propose any revisions to the minor NSR
regulations at 40 CFR 51.160 through 51.164, we used the proposal
preamble to encourage States to implement advance approvals in response
to requests by sources under their existing minor NSR programs, as
appropriate, and to seek additional authority to consider source
proposals where they do not currently have such discretion. Based on
pilot experience, we also expressed our belief that permitting
authorities can often advance approve changes with respect to other
applicable requirements that require a specific authorization without
regulatory changes. See 72 FR 52215.
    We proposed one revision to part 70 to facilitate the use of
advance approvals under minor NSR, which, as mentioned, often rely upon
one or more emissions caps to accomplish their authorizations.\16\ This
revision to 40 CFR 70.5(c)(3)(iii) would clarify that for emissions
units subject to an annual emissions cap, the title V permit
application may report the units' emissions (in tons per year) as part
of the aggregate emissions associated with the cap, except where more
specific information is needed to determine and/or assure compliance
with an applicable requirement.
---------------------------------------------------------------------------

    \16\ In the proposal preamble, we discussed this proposed
clarification as a revision for purposes of AOSs (72 FR 52219). We
now believe that it is more appropriately portrayed as a revision in
support of advance approvals under minor NSR.
---------------------------------------------------------------------------

    As explained in the proposal preamble (72 FR 52219), the
introductory text in 40 CFR 70.5(c) states generally that the
application must include information for each emissions unit. Existing
40 CFR 70.5(c)(3)(iii) further requires that the application provide
the emissions rate in tons per year and in such terms as are necessary
to establish compliance consistent with the applicable reference test
method. We proposed to clarify this regulatory requirement as it
applies to sources subject to title V permitting requirements that
employ an annual emissions cap (e.g., caps which are PALs, limit PTE,
and/or enable advance approval for minor NSR). In particular, we
proposed that for the operation of any emissions unit authorized under
an annual emissions cap, a source can meet 40 CFR 70.5(c)(3)(iii) by
reporting the aggregate emissions associated with the cap.
    We noted in the proposal preamble that under the proposed approach,
an emissions cap could be thought of as a constraint on annual
emissions from each emissions unit under the cap as well as on the
aggregated emissions from the group of units. That is, in the extreme,
a unit could emit up to the full amount of the cap if all other units
under the cap had zero emissions. Thus, for a group of emissions units
under an annual emissions cap, the 40 CFR 70.5(c)(3)(iii) requirement
for unit-by-unit emissions figures could be met by reporting in the
permit application that the emissions cap represents the upper limit on
emissions both from each unit in the group and from the entire group.
The proposed revision to 40 CFR 70.5(c)(3)(iii) would simply clarify
that in this particular situation, more specificity is not needed in
the title V permit application (unless additional specificity is
necessary to determine applicability or to assure compliance with one
or more potentially applicable requirements). Reporting emissions data
in this manner would be permissible except where the permitting
authority determined that more specific emissions information was
needed (e.g., where an applicable requirement for a specific emissions
unit depends on the emissions type or level, or where annual emissions
figures are needed to assess compliance for the unit).
    We did not propose any other revisions to part 70 related to
advance approvals under minor NSR. Part 70 already requires
incorporation into a title V permit of the terms of any State minor NSR
permit, including those issued to advance approved changes. These
permit terms are themselves applicable requirements as defined in 40
CFR 70.2. Sometimes, however, the permitting authority may need to
include other terms in the title V permit, in addition to the terms of
a minor NSR permit authorizing advance approved changes, so that the
changes can be made without further review or approval. This would be
the case if there were other applicable requirements also implicated by
the advance approved changes that were not addressed in the minor NSR
permit. In such cases, the part 70 permit must assure compliance with
these applicable requirements as well.
    We pointed out in the proposal preamble that an advance approval
that is incorporated into a part 70 permit remains subject to all the
conditions of the underlying authorization. For example, if an
underlying minor NSR permit is contingent upon the source commencing
construction of the authorized change(s) within a certain period, the
part 70 permit must contain terms to ensure that the part 70 permit
does not authorize operation if the source fails to meet the required
deadline. The source is responsible for obtaining any extensions or
additional authorizations as necessary to keep the advance approval in
the part 70 permit in effect. See 72 FR 52217, footnote 23.
    In the proposal preamble we also noted that an advance approval
under minor NSR may be added to a title V permit through permit
issuance or renewal or through the permit revision process. When an
existing permit is to be revised to incorporate an advance approval of
minor NSR, the appropriate revision track depends on the nature of the
proposed advance approval and the process under which it was
established (e.g., whether the authorizing NSR process also addressed
title V requirements). See 40 CFR 70.7(d) & (e). Note also that the
permit shield (where available and granted by the permitting authority)
can be extended to advance approvals added through permit issuance or
permit renewal or to those added during a significant permit
modification, but not to those added through other permit revision
procedures.
    Commenters generally agreed that no Federal rulemaking is needed on
the advance approval of changes under minor NSR because States
currently can,

at their discretion, employ a variety of advance approval techniques
under their existing rules and authorities. Some commenters indicated
that any new Federal rules might actually constrain innovation by the
States in this area, rather than enable greater use of advance
approvals. A commenter noted that some State minor NSR programs require
contemporaneous minor source BACT determinations that are not
consistent with the advance approval of a wide spectrum of changes, and
some expressed concern about the burden and other costs that advance
approval permits could impose upon State agencies for uncertain
projects and uncertain environmental gain.
    Several industry commenters urged EPA to further encourage States
to issue advance approvals under minor NSR. On the other hand, an
association of State and local air agencies indicated that States do
not need our encouragement to use their minor NSR programs for advance
approvals as appropriate, and objected that the discussion in the
proposal preamble could be misinterpreted as having regulatory force.
This commenter believed that advance approvals cannot be issued under
some minor NSR programs.
    We received few comments on our proposal to revise 40 CFR
70.5(c)(3)(iii). One State agency indicated that for a combined NSR/
title V permit program unit-specific information is often needed for
several purposes, including control technology assessment, modeling,
compliance assessment, determining the appropriate level and frequency
of monitoring, etc., even if the unit is covered by an emissions cap.
This commenter wanted to retain the ability to require such information
as needed.

B. Final Action

    Consistent with our proposal, we are not revising any part 51
requirement in order to require or facilitate advance approvals under
minor NSR (or under any other applicable requirement). We continue to
believe that many States are able to advance approve changes under
their existing minor NSR programs, to the extent that they believe it
is appropriate to do so. As mentioned by a commenter, EPA recognizes,
however, that certain minor NSR rules are not as amenable to advance
approval as are others. In particular, advance approvals under State
rules that require sources to employ best available technology (where
such rules are judged to be open to advance approval by the permitting
authority and appropriate for use in a particular case) may require
additional permit terms as necessary to assure that best available
technology will be used.
    We would also like to emphasize that permitting authorities,
operating under their existing minor NSR regulations and authorities,
must include terms as necessary to ensure the practical enforceability
of advance approvals. For example, for purposes of tracking compliance
with an emissions cap established in minor NSR, the minor NSR permit
should contain sufficient terms that collectively act to monitor and
quantify the relevant emissions at the site over the applicable time
period.
    We are finalizing the proposed revision to the title V permit
application requirements at 40 CFR 70.5(c)(3)(iii) with minor changes.
As proposed, the final revisions clarify that for emissions units
subject to an annual emissions cap, the application may report the
units' emissions as part of the aggregate emissions associated with the
cap, except where the permitting authority determines that more
specific information is needed. The EPA agrees with the commenter who
wanted to assure that permitting authorities retained the ability to
require more unit-specific information as needed to develop permit
terms needed to determine or to assure compliance with all applicable
requirements relevant to emissions units included under the emissions
cap. As a result, the final rule language now indicates that unit-
specific information must be provided whenever it is needed, including
where necessary to determine or assure compliance with an applicable
requirement.
    We believe that the revised 40 CFR 70.5(c)(3)(iii) will facilitate
the use of advance approvals under emissions caps. This combination of
FAP tools was repeatedly validated in our evaluation of pilot permits.
In addition, emissions caps were clearly shown to promote emissions
reductions as sources sought to create ``head room'' under their caps
to allow for additional growth. No other changes to part 70 are being
made for the purposes of accomplishing advance approvals under minor
NSR or incorporating them into part 70 permits. However, we again
stress that an advance approval which is incorporated into a part 70
permit must include all the conditions of the underlying authorization.
The source is responsible for obtaining any extensions or additional
authorizations as necessary to keep the advance approval in the part 70
permit in effect.
    While we believe that appropriately crafted advance approvals of
minor NSR can, in certain cases, facilitate operational flexibility
while protecting the environment (at least as effectively as would the
individual review of each change as it occurs), we do not intend to
imply that States should issue such advance approvals in any cases that
would be inconsistent with their existing rules or, in their judgment,
would be inappropriate. As a general matter, the permitting authorities
have authority to decide, on a case-by-case basis, the merits of
granting an advance approval of minor NSR to a particular requesting
source. Additionally we do not intend to imply that States must revise
their current rules to facilitate advance approvals in the future.
Rather, where existing rules may limit advance approval opportunities,
EPA simply encourages States to consider the adoption of more flexible
minor NSR rules under the broad governing regulations in 40 CFR 51.160-
51.164. It is EPA's policy to support State use of advance approvals
under minor NSR, where they deem them appropriate, and particularly
where States expect benefits similar to those found in our evaluation
of pilot permits to occur.
    We also acknowledge that States, in order to respond to requests by
sources for advance approval of minor NSR, may incur additional up-
front development costs for which they may have to charge additional
service fees. However, based on the pilot permit experience, annual
administrative costs associated with FAPs should decline over time and,
over the life of the permit, be less than those for conventional
permits.

VI. Alternative Operating Scenarios

A. Background

    Since they were initially promulgated in 1992, the part 70 State
operating permit program regulations have included the AOS provisions
found at 40 CFR 70.6(a)(9).\17\ These provisions were promulgated
consistent with section 502(b)(6) of the Act, which requires permit
programs to include provisions for adequate, streamlined and reasonable
procedures for expeditious processing of the application and
expeditious review of permit actions. Accordingly, 40 CFR 70.6(a)(9) is
a mandatory part 70 program element, but its use is discretionary on
the part of both sources

and permitting authorities. In particular, 40 CFR 70.6(a)(9) provides
that any permit issued under part 70 must include terms and conditions
for reasonably anticipated operating scenarios identified by the source
in its application, as approved by the permitting authority.\18\
---------------------------------------------------------------------------

    \17\ As noted previously, our proposed and final actions related
to AOSs apply equally to part 70 and part 71. For simplicity, we
refer only to part 70 in this preamble discussion. The provisions of
part 71 generally mirror those of part 70, so the part 71 paragraphs
that correspond to the cited paragraphs in part 70 differ only by
designating part 71 instead of part 70 (unless otherwise noted). For
example, the AOS provisions of part 71 are found at 40 CFR
71.6(a)(9) rather than at 40 CFR 70.6(a)(9).
    \18\ Alternatively, if a title V permit is issued without an
AOS, it must nonetheless, pursuant to 40 CFR 70.6(a)(1), contain
terms sufficient to assure compliance with all applicable
requirements at the time of permit issuance. While permissible to do
so, failure to address anticipated changes in an AOS which are not
otherwise sufficiently addressed by the included applicable
requirements may result in the need for a permit revision or, if
available under the State's part 70 program, an off-permit action
which would require an advance notice and would not be eligible for
the permit shield. On the other hand, if an AOS were authorized in a
title V permit, then the source could subsequently implement it
without further review or approval, provided that such
implementation was contemporaneously recorded in an on-site log upon
making the relevant change(s).
---------------------------------------------------------------------------

    The Agency outlined broad policy on the design and implementation
of AOSs in our final part 70 rule and then further explained our policy
in the September 12, 2007 proposal. In the final part 70 rule, we
emphasized the importance of 40 CFR 70.6(a)(9), noting that a permit
that contains approved AOSs ``will be a more complete representation of
the operation at the permitted facility.'' See 57 FR 32276. We also
explained that once a permit with approved AOSs is issued, the need for
additional permit modifications will be substantially reduced since the
permit will already contain appropriate terms and conditions to
accommodate the approved operating scenarios. In the final part 70
rule, we did not place any restrictions on the types of operations that
could qualify as a reasonably anticipated operating scenario. Instead,
the Agency deferred to the process under which a candidate AOS would be
identified by the source and considered for approval by the permitting
authority to establish those AOSs which would be appropriate for
streamlining purposes.
    In the September 12, 2007 proposal, the Agency explained that, when
deciding to approve an AOS, the permitting authority must ensure that
the proposed operating scenarios are adequately described for each
relevant emissions unit such that all applicable requirements
19 20 associated with each scenario are identified and
appropriate terms and conditions to assure compliance with these
requirements (when they become applicable) are included in the permit.
We also noted that the source must obtain all specific authorizations
which are required under any applicable requirements (e.g., those under
minor NSR) in order to implement any AOS approved by the permitting
authority without any further review or approval on their part. In
addition, EPA affirmed that, while States must have sufficient
authority in their part 70 programs to grant an AOS, if proposed by a
source, permitting authorities retain the discretion as to the
appropriateness of doing so on a case-by-case basis, depending on the
specific facts of each situation. The Agency further conveyed that
changing to an AOS can not be used to circumvent applicable
requirements or to avoid an enforcement action. A switch to an AOS does
not affect the compliance obligations applicable to a source under its
previous operation.
---------------------------------------------------------------------------

    \19\ ``Applicable requirement'' as defined in 40 CFR 70.2
includes all the separate emissions reduction, monitoring,
recordkeeping, and reporting requirements of a particular standard
or SIP regulation and all the terms and conditions of
preconstruction permits issued pursuant to regulations approved or
promulgated through rulemaking under title I of the Act.
    \20\ Failure to anticipate and include a particular change in a
part 70 permit (including under an AOS) does not in and of itself
bar the source from implementing the change, without a permit
revision, if it can satisfy the requirements of the off-permit
provisions in an approved part 70 permit program. Cf. 40 CFR
70.4(b)(12) and (b)(14).
---------------------------------------------------------------------------

    As with advance approvals, we noted in the proposal preamble that
an AOS may be added to a title V permit through permit issuance or
renewal or through the permit revision process. When an existing permit
is to be modified, the appropriate modification track (significant or
minor) depends on the nature of the proposed AOS (or the proposed
revision to an AOS) and whether it would qualify for treatment as a
minor permit modification under existing 40 CFR 70.7(e)(2)(i). We noted
also that the permit shield (where available and granted by the
permitting authority) can be extended to AOSs added during permit
issuance or renewal or through a significant permit modification, but
not to those added through minor permit modification procedures (per
existing 40 CFR 70.7(e)(2)(vi)).
    In addition, we pointed out in the proposal preamble that the
contents of the AOS log, such as its description of requirements that
apply to a particular AOS, are not permit provisions for purposes of
the permit shield. Thus, a source would not be deemed to be in
compliance with the applicable requirements of the Act simply because
it was in compliance with the description of applicable requirements
contained in the log, if that description were inaccurate.
    On a few occasions prior to our September 2007 proposal, we
proposed rulemaking and guidance on AOSs. These proposals focused
primarily on how AOSs might relate to advance approvals. We did not
finalize our proposals.\21\
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    \21\ In the 1990s, we proposed certain clarifications and
modifications to the part 70 regulations. See generally 60 FR 45529
(August 31, 1995) and 59 FR 44460 (August 29, 1994). In those
proposals, among other things, we discussed the concept of ``advance
NSR'' in relation to AOSs, and proposed a definition for
``alternative operating scenarios.'' In August 2000, we issued a
draft guidance document called White Paper Number 3 (64 FR 49803,
Aug. 15, 2000), on which we solicited comment. That draft guidance
addressed various flexible permitting approaches, including the use
of the AOS provisions. In fashioning the proposal on which this
final rule is based, we considered a summary of the comments
received on the prior proposals that addressed AOSs (which is
available in the docket) and the relevant individual comments
received on the draft guidance (which are also in the docket).
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    In the preamble to our September 2007 proposed rulemaking we also
proposed several specific revisions to the existing part 70 and part 71
regulations as they apply to AOSs. The Agency stated that the primary
purpose of these revisions to parts 70 and 71 is to build upon the
existing regulatory framework and to ensure that the flexible
permitting approaches with which we have experience are more readily
and widely used.
    We specifically proposed to define the term ``alternative operating
scenario (AOS)'' in 40 CFR 70.2 and to codify certain related
requirements to promote consistency and a common understanding of AOSs.
The proposed definition read as follows:

    Alternative operating scenario (AOS) means a scenario authorized
in a part 70 permit that involves a physical or operational change
at the part 70 source for a particular emissions unit, and that
subjects the unit to one or more applicable requirements that differ
from those applicable to the emissions unit prior to implementation
of the change or renders inapplicable one or more requirements
previously applicable to the emissions unit prior to implementation
of the change.

    The other proposed revisions included the following:
     Revisions to 40 CFR 70.5(c)(7) to clarify that the
permitting authority may require the source to include in its
application additional information as necessary to define permit terms
and conditions implementing any AOS;
     Additional revisions to 40 CFR 70.5(c)(7) to clarify that
the application must include a demonstration that the source has
obtained all authorizations required under the applicable requirements
that apply to any AOS, or a certification that the source has submitted
a complete application for such authorizations;

     Revisions to the compliance plan requirements for
applications under 40 CFR 70.5(c)(8) to clarify that such plans must
address AOSs when an application includes them;
     Revisions to 40 CFR 70.6(a)(3)(iii)(A) to require the
source to identify in the 6-month monitoring report any AOSs
implemented during the reporting period;
     Revisions to 40 CFR 70.6(a)(9)(i) to clarify what specific
information must be included in the AOS log (already required under the
existing regulations) when an AOS is implemented;
     Revisions to 40 CFR 70.6(a)(9)(iii) to clarify what
constitutes an acceptable description in a title V permit for an AOS;
     Additional revisions to 40 CFR 70.6(a)(9)(iii) to make
clear that the permitting authority cannot grant final approval of an
AOS until the source has obtained all the authorizations required under
the applicable requirements relevant to that AOS; and
     Revisions to use consistent terminology wherever the rules
refer to AOSs.
    The commenters on our proposal generally indicated an overall
consensus that the proposed additional requirements for AOSs are not
necessary or useful. They pointed out that AOSs are already provided
for in part 70, and that permitting authorities have been implementing
these provisions without difficulty for years. On the other hand, some
commenters believe that use of AOS provisions, in their experience, has
not been necessary in some States. In these States, commenters assert
that permitting authorities have been able to address prospective
operating scenarios identified by the source by simply including in the
title V permit the applicable requirements and corresponding compliance
assurance terms (i.e., monitoring, recordkeeping, and reporting
requirements) related to these scenarios. Commenters further asserted
that in many cases, such terms are adequate to assure compliances at
all times without AOS-specific logs or reports. Therefore, they
objected to the level of detail proposed for the content of AOS logs
and permit terms, and to the requirement to document AOS implementation
in the 6-month monitoring reports. These commenters also claim that the
proposed requirements would be unnecessarily burdensome and would not
improve compliance assurance. Moreover, some States indicated the
rulemaking on AOSs, as proposed, might have the unintended consequence
of stifling innovative approaches to operational flexibility by
prescribing a rigid approach to AOSs. These commenters collectively
seek to preserve the current levels of available flexibility and the
avenues for accessing it.
    We also received a number of comments specific to our proposed
definition of AOS. Most of these commenters objected to the inclusion
of the phrase ``physical or operational change'' in the definition,
believing that this will cause confusion with the similar phrase
``physical change or change in the method of operation'' used in the
NSR program.

B. Final Action

    Based on the comments received, the States' current approach to
implementing existing AOS rules (described above) has proven to be
fundamentally sound and effective. We are persuaded that the proposed
specific revisions which would be new requirements would not promote
more widespread use of AOSs and other effective strategies than does
the current process-based approach and that these revisions might
instead be counterproductive. The Agency has therefore decided to not
impose any additional requirements onto an already working approach.
Rather, we intend to preserve the flexibility available under existing
rules by codifying a definition of ``AOS'' (as modified in response to
comments received) and promulgating a few minor clarifications to the
existing rules intended to improve certainty. The Agency believes that
these actions, in light of the comments received, are appropriate and
consistent with the basic streamlining tenets of section 502(b)(6) of
the Act on which the provisions for AOSs are based.
    Commenters have convinced us that permitting authorities are
currently able, in response to a request by a source for more
operational flexibility, to develop title V permits which allow the
source to shift among identified operating scenarios. Commenters
correctly point out that, under the current rule, in lieu of using an
AOS, this result might be achieved by relying on the authority and
provisions contained in the applicable requirements implicated by the
anticipated scenario. This would be true where the applicable
monitoring and/or reporting requirements assure compliance (including
requirements for records that effectively identify when the scenario
operates) or where the source and permitting authority have opted to
streamline the relevant applicable requirements consistent with White
Paper Number 2.\22\ Conversely, AOSs would be useful where additional
records are needed to document when a new scenario occurs. We are
therefore agreeing with commenters that, for flexibility purposes, the
current process is effective in developing: (1) Appropriate permit
design options to access the inherent flexibility under relevant
applicable requirements to provide for alternative modes of operation;
and (2) AOSs which are determined to be adequate and otherwise
appropriate by the permitting authority in reducing administrative
costs while assuring compliance with all applicable requirements.
---------------------------------------------------------------------------

    \22\ In streamlining, the compliance terms are based on the most
stringent requirement applicable to the proposed changes and are
effective upon permit issuance. In guidance generally referred to as
``White Paper Number 2,'' we interpreted our part 70 rules to allow
sources to streamline multiple applicable requirements that apply to
the same emissions unit(s) into a single set of requirements that
assure compliance with all the subsumed applicable requirements. See
``White Paper Number 2 for Improved Implementation of the Part 70
Operating Permits Program,'' March 5, 1996, (http://www.epa.gov/ttn/
oarpg/t5/memoranda/ wtppr-2.pdf). If all the applicable requirements
that apply to a set of changes are streamlined in the permit and the
permitting authority approves the proposed streamlining, the source
need only comply with the streamlined requirement. This benefits all
parties by simplifying and focusing the compliance requirements
contained in the permit. As a result, a source relying upon
emissions limit streamlining implicitly has chosen not to pursue the
use of AOSs, since the source would always be required to meet the
worst case scenario at all times regardless of which scenario was
actually operated.
    As explained in White Paper Number 2, sources that seek to
streamline applicable requirements should submit their request as
part of their title V permit application, identifying the proposed
streamlined requirements and providing a demonstration that the
streamlined requirements assure compliance with all the underlying,
subsumed applicable requirements. Upon approval of the streamlined
requirements, the permitting authority would place the requirements
in the title V permit (see White Paper Number 2 for the complete
guidance on the streamlining of applicable requirements). A source
can request in its title V permit application that the permitting
authority streamline an advance approval already authorized under
minor NSR with all other relevant applicable requirements. For the
complete text of the elements that must be included in a title V
application, see 40 CFR 70.5(c).
---------------------------------------------------------------------------

    In finalizing these limited revisions, the Agency wishes to make
some additional observations relative to AOSs. First, as in the past,
an AOS is essentially defined through the process used to establish it.
This allows AOSs to encompass situations in which the relevant
applicable requirements might be sufficient with respect to monitoring
and/or recordkeeping to determine the compliance status of the unit at
a given time but the source and permitting authority have nonetheless
opted to use an AOS for greater certainty. We continue to believe that
this result is acceptable if the source and permitting authority choose
to pursue it. Although a log is required to record

implementation of an AOS, the primary objectives of section 502(b)(6)
are still met, since the authorized changes can subsequently occur
without further review or approval by the permitting authority. On the
other hand, in the absence of an AOS, the title V permit authorizing
multiple operating scenarios at a particular emissions unit which
implicate different applicable requirements must require sufficient
records to determine, at any point in time, which requirements apply to
the unit and whether the unit is in compliance with each of them. If
permit terms ensuring this result can be written by relying upon the
authority contained in the relevant applicable requirements themselves
and not that in 40 CFR 70.6(a)(9), then there would be no need for the
permitting authority to approve an AOS. Conversely, if the permitting
authority would need the authority contained in 40 CFR 70.6(a)(9), for
example, to require the operational and/or material use records needed
to determine which scenario is operating at any time, then the
permitting authority, as appropriate, could either authorize these
changes as AOSs (if first proposed by the source) or reject the
operating scenario proposed without this recordkeeping and address
future changes under the applicable off permit (as available from the
permitting authority) or permit revision provisions.
    We have decided to finalize a definition for ``alternative
operating scenario (AOS)'' and to revise the various references to AOSs
to use consistent terminology. We believe that the term ``AOS'' should
be defined and used consistently in the regulations.
    The final definition reads as follows:

    Alternative operating scenario (AOS) means a scenario authorized
in a part 70 permit that involves a change at the part 70 source for
a particular emissions unit, and that either results in the unit
being subject to one or more applicable requirements which differ
from those applicable to the emissions unit prior to implementation
of the change or renders inapplicable one or more requirements
previously applicable to the emissions unit prior to implementation
of the change.

    The final definition is different from the proposed definition in
that we no longer define an AOS as involving a ``physical or
operational change.'' We agree with the commenters that inclusion of
the phrase ``physical or operational change'' invites confusion with
the major NSR provisions.
    The deletion of this phrase also helps to clarify the interface
between the concepts of advance approvals (e.g., advance approval of
minor NSR) and AOSs. As mentioned in the previous section, we
recognized, based on our evaluation of pilot permits, that potentially
many States could currently advance approve minor NSR and then
incorporate the terms of the authorizing minor NSR permit into the
title V permit as applicable requirements. While not proposing to do
so, the Agency nonetheless took comment on whether some aspects of such
advance approvals might also involve AOSs. Commenters strongly affirmed
the current abilities of States to authorize advance approvals of minor
NSR and that these authorizations should be kept generally separate and
distinct from AOSs. The EPA agrees with these commenters and finds that
the deletion of the phrase is useful in maintaining this
separation.\23\ Thus, in most cases, advance approval of minor NSR is
simply another example of how the inherent flexibility in an applicable
requirement can be accessed without the need for an AOS.
---------------------------------------------------------------------------

    \23\ Alternative operating scenarios, in contrast to advance
approvals of minor NSR, more often involve the reversible shifts in
operation of existing emissions units which implicate different
applicable requirements and require additional monitoring and/or
recordkeeping to determine what requirements apply at a particular
time. On the other hand, advance approvals of minor NSR generally
involve either: (1) The implementation of a modification to any
existing unit which irreversibly triggers new applicable
requirements such that the emission unit cannot return to its
preconstruction status in the future; or (2) the construction and
operation of a new unit which represents the beginning of the
initial or baseline operation of the unit. In some cases, however,
one or more AOSs may be used to complement an advance approval. For
example, a complementary AOS might be useful where the source
anticipates varying operation of the future or changed existing
emissions unit in a manner that would implicate a set of applicable
requirements different from those of the minor NSR advance approval.
    While AOSs and advance approvals of minor NSR are typically used
as separate FAP approaches, sources and permitting authorities are
not precluded from relying upon AOS authority to establish an
advance approval of minor NSR in a title V permit. For example, an
AOS might be appropriate where a different control approach would
not be effective until and unless a particular change were made to
an existing emissions unit.
---------------------------------------------------------------------------

    The deletion of the phrase ``physical or operational'' is also
consistent with our previously stated decision to preserve the scope
and operation of the current rule regarding AOSs. That is, the Agency
believes, in light of comments received, it is not necessary to
constrain the scope of AOSs by limiting them to those triggered by a
``physical or operational'' change when the current approach only
restricts the establishment of AOSs to those which both the source and
permitting authority must agree are appropriate and are consistent with
all underlying applicable requirements, including those involving NSR.
The existing process to establish an AOS in a title V permit also
addresses any potential concerns that too many AOSs might be proposed,
including, for example, those involving a switch from one compliance
option to another as provided for under a MACT (or other) standard. We
do not believe that the population of AOSs actually approved will be
impacted by the deletion. First, the deletion just preserves the status
quo. Moreover, sources and permitting authorities are unlikely to
establish alternative MACT compliance options as one or more AOSs,
since the extensive monitoring and recordkeeping requirements typically
found in MACT standards can themselves authorize shifts in compliance
options after being incorporated into a title V permit.
    In addition to adding a revised definition of AOS and standardizing
the part 70 references to AOSs to use consistent terminology, we have
decided to finalize three other aspects of our proposed rules which we
believe will also preserve the basic operation of the current rule
while improving certainty. First, we are essentially finalizing the
proposed revisions to 40 CFR 70.5(c)(7) to clarify that the permitting
authority shall require the source to include in its application
additional information as necessary to define permit terms and
conditions to implement any AOS. Note that the final version obligates
the permitting authority to require, as contained in the proposal,
additional information to develop and implement AOSs, but this
requirement only extends to situations where the permitting authority
believe such information is necessary. We believe that this obligation
has always been implicit in the previously existing language of the
section, but that an explicit clarification is appropriate. Second, we
are finalizing our proposed revisions to the compliance plan
requirements for applications under 40 CFR 70.5(c)(8) to clarify that
such plans must address proposed AOSs when an application includes
them. We believe that this clarification also merely codifies existing
policy and is appropriate to ensure that all applicants understand what
is required for AOSs when a source chooses to request one.
    Finally, we are finalizing our proposed revisions to 40 CFR
70.5(c)(7) to specify that the application must include a demonstration
that the source has obtained all authorizations required under the
applicable requirements that apply to any AOS being requested for
approval by the source, or a certification that the source has
submitted a complete application for such authorizations, and
additional revisions

to 40 CFR 70.6(a)(9)(iii) to make clear that the permitting authority
cannot grant final approval of an AOS until the source has obtained all
the authorizations required under the applicable requirements relevant
to that AOS. These actions again just codify existing policy and should
be manageable given the relatively few AOSs that may also involve an
advance approval (e.g., the preconstruction approval of a new unit
requiring AOSs for its multiple future operating modes or for its
involvement as a replacement component unit in an AOS for an existing
emissions unit at the same source). This clarification will also help
to ensure that any additional resources required for AOS development
are focused on sources which are likely to use them and to eliminate
any confusion over a provision approved without such authorizations.
    As noted above, we have been convinced by numerous commenters from
both State and local permitting agencies and industry that the other
more specific requirements proposed for AOSs are unnecessary and
potentially could undermine the streamlining objectives of the AOS
provisions. We have, therefore, elected to not finalize them. In
particular, proposed revisions that we are not finalizing are the
following:
     Revisions to 40 CFR 70.6(a)(3)(iii)(A) to require
additionally that the source identify in the 6-month monitoring report
any AOSs implemented during the reporting period;
     Revisions to 40 CFR 70.6(a)(9)(i) to clarify the type of
information that must be included in the AOS log when an AOS is
implemented; and
     Revisions to 40 CFR 70.6(a)(9)(iii) to clarify what
constitutes an acceptable description in a title V permit for an AOS.
    Based on comments received, the Agency is persuaded that the new
reporting requirements, as proposed for inclusion in the 6-month
monitoring report, would not be necessary or useful. We generally
believe that sufficient information about AOSs and their use already
exists from the combination of the AOS provisions contained in the
permit and the required reports concerning annual compliance
certification and the prompt reporting of deviations from achieving
compliance with the AOS terms of the permit. In addition, pursuant to
40 CFR 70.6(a)(9)(i), permits must require the source to keep an on-
site log that contemporaneously records the implementation of any AOS
which occurred during the duration of the title V permit. Pursuant to
40 CFR 70.6(a)(3)(ii)(B), the source owner must keep these records at
their site for at least 5 years. Under 40 CFR 70.6(a)(6)(v) the source
must submit to the permitting authority, upon their request, this and
any other on-site information which is required to be kept by the
permit or is needed by the permitting authority to determine compliance
with the permit.
    The Agency also agrees with commenters that there is no need to
standardize the content of AOS logs and permit provisions. While not
finalizing any specific content or format requirements for permits or
logs involving AOSs, the Agency notes that there remains an overall
obligation that the information which is required by the permitting
authority for AOSs must be adequate to assure compliance with all
applicable requirements. Thus, the structure of the AOS implementation
log required by the permitting authority is relatively flexible,
provided that the required records are, in total, sufficient to verify
the requirements applicable to a particular operating scenario and
whether the source was in compliance with them.

VII. Approved Replicable Methodologies

A. Background

    Under the Act, title V permits are required to assure compliance
with all applicable requirements. Sometimes, circumstances change for a
source that bring about the need to recalculate or update a value used
either in determining the compliance status of the source with an
applicable requirement or in determining the applicability of a
requirement. An advance approval under minor NSR or an AOS can
incorporate flexibility into a permit, but the scope of changes that
can be authorized in them can be severely limited with respect to a
particular applicable requirement, if such recalculations or updates
are involved and require case-by-case review/approval and a permit
revision to ensure ongoing implementation. To facilitate such
implementation, and to encourage additional permitting techniques that
reduce the need for permit revisions (in a manner consistent with part
70), we proposed the use of ARMs.
    In our September 12, 2007 proposal on flexible air permitting, EPA
included provisions dealing with ARMs. Therein we stated our belief
that ARMs are available now as one type of permit term described in 40
CFR 70.6(a)(1) that can assure compliance with all applicable
requirements at the time of permit issuance. In order to establish an
ARM, a source would first propose one to the permitting authority who
would then consider the appropriateness of authorizing it on a case-by-
case basis, depending on the specific facts of the situation. In all
cases, the implementation of the proposed ARM must be consistent with
all underlying applicable requirements.
    While we believed that ARMs as proposed are generally available
without any rulemaking (depending on the structure and content of
individual part 70 programs, as approved for States), we proposed to
codify certain additions to 40 CFR parts 70 and 71 in order to promote
greater certainty and use of ARMs, where the permitting authority
decides it is appropriate to do so.
    In particular, we proposed to define ARMs at 40 CFR 70.2 as part 70
permit terms that: (1) Specify a protocol which is consistent with and
implements an applicable requirement or requirement of part 70, such
that the protocol is based on sound scientific/mathematical principles
and provides reproducible results using the same inputs; and (2)
require the results of that protocol to be used for assuring compliance
with such applicable requirement or requirement of part 70, including
where an ARM is used for determining applicability of a specific
requirement to a particular change. In the proposal preamble we also
noted that within the scope of this definition, an ARM may be used to
assure that a given requirement does not apply in a particular
situation.
    As proposed, the terms of an ARM must specify when the ARM is to be
used, the applicable methodology (e.g., equation or algorithm), and the
purpose for which the output obtained upon the execution of the
prescribed methodology will be used (e.g., to determine compliance with
an applicable requirement or to modify the level of the parameters used
to determine compliance in the future). All necessary terms and
conditions must be included in the permit at the time the ARM is
approved so that no permit revision will be required in the future to
implement the ARM.
    We emphasized that an ARM, like any provision of a part 70 permit,
cannot modify, supersede, or replace an applicable requirement,
including, but not limited to, any monitoring, recordkeeping, or
reporting required under applicable requirements.\24\

Instead, we proposed ARMs as a strategic approach for incorporating
into a title V permit relevant applicable requirements and the
requirements of part 70. The ARM provides a method for obtaining and
updating information consistent with an underlying applicable
requirement(s) or requirement(s) of part 70 in such a manner so as to
avoid the need to reopen or revise the permit to incorporate the
updated information. As such, an ARM must work within and be consistent
with the applicable part 70 rules that govern permit revisions.
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    \24\ Under the authority of 40 CFR 70.6(a)(3), however, the
permit can also contain additional streamlined monitoring or gap-
filling periodic monitoring as needed to assure compliance with
applicable requirements. We pointed out that an ARM could operate on
the information gathered under these obligations as well.
---------------------------------------------------------------------------

    We further explained that the protocol to obtain information under
an ARM must be objective and scientifically valid and reliable--such as
an EPA test method or monitoring method (usually specified in the
applicable requirement itself). We noted that an ARM also includes the
instructions governing how the results of the protocol are to be used.
For example, an ARM could specify that firebox temperature measurements
taken during a performance test of a thermal oxidizer be used to: (1)
Define a temperature level that assures compliance with a particular
applicable requirement; and (2) revise and update the minimum firebox
operating temperature of the oxidizer previously relied upon to assure
compliance.
    We found permit terms containing ARMs to be useful in maintaining
the effect of the advance approvals found in the pilot permits.
Pervasively, all the pilot permits contained ARMs as the quantification
methodology by which the source would sum VOC emissions from individual
emissions units on an ongoing basis. These ARMs also included
requirements governing when the aggregation procedures for determining
total actual VOC emissions for the site would be compared to the
relevant plantwide emissions cap(s) in order to assess source
compliance. In some cases, the aggregation ARM relied on other ARMs to
assure that certain input values were replicably determined. For
example, two of the pilot permits contained replicable testing
procedures. These procedures, once implemented, determined the control
device operating parameter values that the source must monitor to
demonstrate compliance with capture and destruction efficiency
requirements (i.e., the applicable requirement). Without the replicable
testing procedures in the permit, those values would have been included
on the face of the permit, and the source would have had to seek a
permit revision each time it repeated the testing procedures and the
operating parameter values changed.\25\ Another pilot permit specified
the process (i.e., compliance method) by which a source-specific
emissions factor could be updated and used to determine whether
emissions remained under the source's PTE cap where both the emissions
cap and the ARM were established in its minor NSR permit. By including
these replicable processes (e.g., replicable testing and/or emissions
factor updating procedures) in the permit instead of specific operating
values and emissions factors, sources could update those values and
indicate compliance based on the latest results consistent with the
replicable testing procedures in the title V permit, and forego a
permit revision each time the values are changed.
---------------------------------------------------------------------------

    \25\ Although an ARM can reduce the number of permit revisions a
source must make, it cannot modify an applicable requirement. For
example, there are some instances where the applicable requirement
requires a notice to the permitting authority, such as where the
requirement calls for notice of a performance test or the submission
of certain performance test results. An ARM can not abrogate these
requirements.
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    In addition to proposing a definition of an ARM, we also proposed
that the 6-month monitoring reports (required under existing 40 CFR
70.6(a)(3)(iii)) must identify any ARMs implemented during the
reporting period, and that for ARMs generating values related to
parametric monitoring (e.g., an ARM used to determine the minimum
operating temperature of a thermal oxidizer during a performance test),
the source must also include the results of the ARM in the 6-month
monitoring report. We also proposed to modify 40 CFR 70.6(a)(1) to
include a reference to ARMs, because ARMs are an example of permit
terms that assure compliance with applicable requirements. Although we
believe that the proposed regulatory change to 40 CFR 70.6(a)(1) is a
relatively simple clarification, given that all permits must include
terms that assure compliance with applicable requirements and the
requirements of part 70, we proposed the change to promote increased
consideration of ARMs, where appropriate. We recognized that we could
have proposed to modify other provisions of part 70, such as 40 CFR
70.6(a)(9), to include a reference to ARMs, but given the structure and
content of the existing regulations, we did not believe that such
additional changes were needed.
    As with advance approvals and AOSs, we noted in the proposal
preamble that an ARM may be added to a title V permit through permit
issuance or renewal or through the permit revision process. When an
existing permit is to be modified, the appropriate modification track
(significant or minor) depends on the nature of the proposed ARM (or a
proposed change to an ARM which requires a permit revision) and whether
it would qualify for treatment as a minor permit modification under
existing 40 CFR 70.7(e)(2)(i). We also noted that the permit shield
(where available and granted by the permitting authority) can be
extended to ARMs added through a significant permit modification, but
not to those added through minor permit modification procedures (per
existing 40 CFR 70.7(e)(2)(vi)). In addition, we pointed out in the
proposal preamble that a source that incorrectly applies the procedures
and criteria for an ARM will be considered not to be in compliance with
the terms of the permit (and therefore not in compliance with the Act).
    In proposing ARMs, we stated our belief that ARMs are authorized
under title V of the Act and its implementing regulations. Section 502
sets forth the minimum elements for a State operating permit program.
Among other things, section 502 provides that for a State operating
permit program to be approved, the permitting authority must have
adequate authority to ``issue permits and assure compliance by all
sources required to have a permit * * * with each applicable standard,
regulation or requirement'' under the Act. See CAA section
502(b)(5)(A). Section 504(a) of the Act also requires that each title V
permit contain ``enforceable limitations and standards * * * and such
other conditions as are necessary to assure compliance with applicable
requirements of this Act, including the requirements of the applicable
implementation plan.'' The Act further provides that any State
operating permit program must include ``adequate, streamlined, and
reasonable procedures * * * for expeditious review of permit actions.''
See CAA section 502(b)(6).
    Several State commenters indicated that the rulemaking on ARMs is
unnecessary because States already issue permits with these sorts of
terms under existing authority, as evidenced by EPA's discussion of
ARM-like permit terms in some of the pilot permits. These commenters
also expressed concern that this Federal rulemaking on ARMs might have
the unintended consequence of stifling innovative approaches to
operational flexibility by prescribing a rigid approach to ARMs. Some
commenters expressed concern

that an ARM could be used to avoid the applicability of major NSR,
which might otherwise apply when the operating conditions of a control
device are altered and actual emissions are anticipated to increase as
a result.
    Several industry commenters indicated that the rulemaking and EPA's
expression of support for ARMs would help to clarify for States that
ARMs are supported by the Act and viewed favorably by EPA. However,
none of these commenters expressed support for the proposed 6-month
reporting requirements for ARMs, and one industry commenter objected to
the proposed 6-month reporting requirement for ARMs on the basis that
no additional reporting is warranted for what is simply a method for
showing compliance.

B. Final Action

    In response to these commenters, EPA has decided to finalize the
proposed definition with minor changes and to add certain additional
clarifications to Sec.  70.6(a)(1). In doing so, we reaffirm the
proposal as summarized in the preceding section, except as described
below in this section. As previously mentioned, these final rules with
respect to ARMs do not affect any specific minima for part 70 programs,
and, due to their clarifying nature, we do not expect many States to
opt to revise their operating permit programs (see footnote 13).
    While we agree that States currently have authority to issue ARMs
in title V permits, we do not agree that placing a definition for ARM
in our part 70 rules will stifle innovation by the States. On the
contrary, we believe that finalizing the ARM definition will clarify
the availability of this aid to flexible permitting to those States and
sources that are not aware of it or have had prior issues concerning
its use.
    The final definition is nearly identical to the one proposed (i.e.
we added a minor clarification that the results of the ARM be recorded
as well as used for assuring compliance with any applicable requirement
or requirement of part 70). The final definition reads as follows:

    Approved replicable methodology (ARM) means part 70 permit terms
that:
    (1) Specify a protocol which is consistent with and implements
an applicable requirement, or requirement of this part, such that
the protocol is based on sound scientific and/or mathematical
principles and provides reproducible results using the same inputs;
and
    (2) Require the results of that protocol to be recorded and used
for assuring compliance with such applicable requirement, any other
applicable requirement implicated by implementation of the ARM, or
requirement of this part, including where an ARM is used for
determining applicability of a specific requirement to a particular
change.

    We wish to emphasize that, under the final definition, an ARM may
be used as a means to determine the applicability of a requirement, not
just as an aid for assuring compliance. The EPA has included other ARM-
like mechanisms in several of our national standards for MACT and NSPS.
If a source proposes an ARM to delineate which changes are subject to
one requirement instead of another, examples should be provided to the
permitting authority and to the record supporting proposed approval of
the ARM illustrating the prospective use of the ARM (if approved). We
believe that the permitting process is the best forum for clarifying
how a proposed ARM would work in the relevant situations reasonably
expected to occur over the duration of the permit. However, in the case
where the permitting authority has significant concerns over how an
applicability ARM would operate in certain situations, the permitting
authority should not authorize the ARM for those situations.
    We are also revising 40 CFR 70.6(a)(1) to acknowledge that ARMs may
be considered as one type of part 70 permit term that assures
compliance with applicable requirements. We are also adding two
clarifications that appropriately focus ARM implementation. The Agency
believes that these clarifications in combination with the mentioned
final definition will promote increased consideration of ARMs, where
appropriate.
    This final version of 40 CFR 70.6(a)(1) incorporates existing
policy that a source must first request an ARM in its part 70 permit
application before it can be considered by the permitting authority.
Note that this request could appear as part of the originally submitted
application or in the later submittal of supplemental application
material (e.g., a letter requesting consideration of a replicable
protocol as an ARM). As is the case for AOSs, the permitting authority
must then decide whether to accept the proposed ARM and may reject it
or modify it for several appropriate reasons, including concerns over
its replicability and/or value in lowering administrative costs. This
addition is consistent with the basic process required for the
establishment of AOSs which, based on comments received, is effective
in ensuring that FAP approaches are appropriately considered.
    Relevant to the first element of the final ``ARM'' definition,
sources will identify candidate protocols that if judged to be
replicable could be considered further as a potential ARM by the
permitting authority. Candidates for such protocols would frequently
arise from already established applicable requirements, such as MACT
standards, NSPS, or preconstruction permits (e.g., minor or major NSR).
If accepted by the permitting authority as an ARM, pursuant to the
second element of the final definition, the part 70 permit would
contain the ARM (i.e., the combination of the replicable protocol and
the instructions for its use, including the type of data to be
inputted).
    The second clarification to 40 CFR 70.6(a)(1) was added in response
to those commenters who were concerned that ARM implementation of one
applicable requirement might circumvent the applicability of another
applicable requirement. We believe that this final clarification
adequately conveys appropriately that an ARM created under part 70 to
streamline the implementation of one applicable requirement cannot be
used to contravene compliance with another requirement under the Act or
to circumvent its applicability as a result of implementing an ARM.
Accordingly, the terms of an NSR permit, which are applicable
requirements that must be incorporated into a title V permit, cannot
subsequently be changed using an ARM created under different authority.
Approved replicable methodologies can be used to update values only
when the applicable requirement allows for this to occur. For example,
if an existing NSR permit includes specific parametric monitoring
levels as compliance indicators, to automate the updating of such
levels the NSR permit would need to be revised to establish an ARM. The
title V process could not create an ARM to revise the NSR conditions
directly. Similarly, the potential applicability of other requirements
implicated by the implementation of an ARM (e.g., NSR) must be
independently evaluated and determined.
    As noted above, no commenters specifically supported our proposed
reporting requirements for ARMs, and one commenter specifically opposed
the reporting requirement. In addition, numerous States opposed the ARM
proposal in general as being unnecessary and likely to reduce, rather
than expand, the flexibility available under the existing rules.
Although these commenters did not specifically refer to the reporting
portion of the ARM

proposal (or most other specifics of the proposal), we believe that
this is one aspect of the proposal that was targeted as unnecessary and
potentially restrictive. Finally, several commenters raised concerns
regarding our similar proposal to require reporting the implementation
of AOSs in the 6-month monitoring report which we believe are also
appropriate to consider in deciding whether to require the 6-month
reporting of ARMs. As a result, we have concluded that the information
contained in the permit about the nature of any approved ARM and the
instructions for its use along with the required reports concerning
annual compliance certification and the prompt reporting of deviations
from achieving compliance with the ARM should generally be sufficient.
In addition, sources must keep on-site records of ARM
implementation.\26\ Moreover, any required on-site records must be
submitted to the permitting authority upon their request pursuant to 40
CFR 70.6(a)(6)(v). Therefore, we have decided to drop the proposed
requirement for the 6-month monitoring report to identify any ARMs
implemented during the reporting period.
---------------------------------------------------------------------------

    \26\ The authority to impose this requirement typically arises
from the ARMs themselves being applicable requirements (e.g.,
provisions within NSPS or MACT standards or terms of preconstruction
permits) but also can occur under other authorities such as 40 CFR
70.6(a)(9) authority where the ARM would be part of an AOS.
---------------------------------------------------------------------------

VIII. Green Groups

A. Background

    We proposed to modify the major NSR regulations in order to create
an alternative means to comply with major NSR. Specifically, we
proposed to allow a new pathway that would treat a number of emissions
activities as a single emissions unit (which we termed, a ``Green
Group'') where the emissions from each of these activities would be
routed to a common emissions control device meeting BACT/LAER, and
future emissions increases and other changes within the Green Group
would be approved for a 10-year period in a major NSR permit. The
proposed approach was described as an extension of our December 2002
NSR reform regulations (67 FR 80186, December 31, 2002). In particular,
Green Groups would complement the use of plantwide emissions caps
(termed, plantwide applicability limitations, or PALs) by providing a
flexible permitting option for a section of a plant. Like PALs, we
proposed that Green Groups would be a mandatory minimum element of a
State NSR program, but the permitting authorities would retain
discretion as to when to approve individual Green Groups requested by
sources.\27\ However, we also solicited comment on whether Green Groups
should be a voluntary, rather than mandatory, program element for
States.
---------------------------------------------------------------------------

    \27\ The major NSR rules refer to the ``reviewing authority,''
while part 70 refers to the ``permitting authority.'' For purposes
of consistency with the other sections of this preamble, we use the
term ``permitting authority'' in this section. In these discussions,
this term is intended to have the same meaning as ``reviewing
authority.''
---------------------------------------------------------------------------

    The Green Group provisions were proposed to encourage a wide
spectrum of sources to construct specified types of changes for a 10-
year period with greater certainty and flexibility in exchange for
implementing BACT/LAER, regardless of whether or to what extent the
source may have been subject to the current major NSR regulations. That
is, the Green Group provisions, as an alternative means to comply with
major NSR, did not require an evaluation of whether conventional major
NSR would otherwise apply.
    In its permit application, the source would be required to describe
the new and existing emissions activities to be included in a Green
Group in sufficient detail to allow the permitting authority to
determine BACT or LAER (as applicable) for the Green Group taken as a
whole and to conduct an ambient air impact analysis to safeguard
relevant ambient increments and standards (including the determination
of any offsets necessary in nonattainment areas) or to safeguard air
quality values in any relevant Class I areas. We further proposed that
the type of detail required in a permit to describe the authorized
changes in the Green Group must be sufficient to allow the permitting
authority to determine, when a change subsequently was implemented,
whether the permitting authority contemplated that change in the scope
of the advance approval contained in the major NSR permit.
    We proposed that, in general, two types of emissions limits must be
set in the major NSR permit for Green Groups: (1) An emissions limit to
constrain the overall emissions of the Green Group; and (2) a limit to
ensure that BACT/LAER technology is being employed and is effective
across the Green Group (e.g., lbs/gal, percent reduction). These two
limits would complement each other and collectively implement the core
requirements for the Green Group. The amount of any actual emissions
increase from authorized changes above previous actual emissions would
be limited by the annual emissions cap and by the BACT/LAER emissions
limitation, both of which would apply to the applicable emissions unit,
in this case designated as the Green Group, and would be placed in the
major NSR permit.
    The major NSR review process must determine the level of
monitoring, recordkeeping, reporting, and testing (MRRT) to assure
compliance with the control technology requirement and any other
emissions limit(s) imposed by the permitting authority on emissions
unit(s) as necessary to meet major NSR. We proposed specifically for
Green Groups that a source would be required to monitor all emissions
activities that comprise the Green Group to ensure compliance with the
Green Group limit using essentially the same approaches that would meet
our requirements for tracking emissions associated with a PAL. These
monitoring, recordkeeping, and reporting requirements would be
incorporated into the NSR permit that established the Green Group.
    We proposed that all NSR projects using a Green Group be of a 10-
year duration, for two reasons. First, we stated that this time frame
represents a balance between the useful life of the emissions control
system and the time frame in which additional major NSR review is
likely to result in little, if any, added environmental benefit.
Second, we stated that a 10-year duration for a Green Group is
supported by the same rationale we used in choosing a 10-year period
for the duration of PALs. For PALs we concluded that a 10-year period
was necessary to ensure that the normal business cycle would be
captured generally for any industry; to balance the need for regulatory
certainty with the administrative burden; and to align the PAL renewal
with the title V permit renewal. See 67 FR 80216, 80219. In proposing a
10 year duration for the Green Group, the Agency also solicited comment
on the appropriateness of a 15-year period.
    The Agency further proposed to exclude from application to a Green
Group the existing PSD part 52 requirements in 40 CFR 52.21(r)(2) for
timely construction and in paragraph (j)(4) of both parts 51 and 52 PSD
requirements for the BACT reevaluation of later independent phases of