September 1996 Washington Report
EPA Issues Revised Draft CAM Rule
On August 2, 1996, EPA made available for comment its latest draft Compliance Assurance
Monitoring (CAM) rule. When EPA first introduced the CAM concept in May 1995, the
program was directed at promoting reasonable assurance of compliance through a program that
would provide for appropriate operation and maintenance of emissions controls. This approach
gained much support from industry. Industry voiced strong concern, however, that EPA's first
CAM rule draft, released in September 1995, was overly complex and converted CAM into a
program oriented toward creating enforcement opportunities. EPA expressed its intent that the
August 1996 draft final CAM rule would alleviate some of these concerns. While there are
improvements in the draft final rule, industry comments indicate there are a number of significant
areas of concern that need to be revised to return the CAM program to its original intent of
reasonable compliance assurance.
Scope of the Rule
The Agency proposes to apply the CAM program only to pollutant-specific emissions units
(PSEUs) that are located at sources required to obtain a Title V operating permit. As the term
PSEU suggests, a source must determine the applicability of the CAM rule to individual emissions
units with respect to each pollutant separately. In other words, the applicability determination is
made on a pollutant-by-pollutant basis for each emissions unit. For PSEUs located at Title V
sources, the CAM rule creates two separate categories of compliance monitoring requirements,
each applicable to different subsets of PSEUs.
The more rigorous CAM requirements, found in Subpart B of Part 64, apply to emissions
units that use control devices to achieve compliance. Subpart B covers any Title V source PSEU
that (1) is subject to an emissions limitation or standard; (2) uses a "control device" to meet its
compliance obligations; and (3) has the "potential pre-control emissions" of the regulated
pollutant at levels equal to or above 100% of the amount required to classify a source as major.
According to the rule, the term "potential pre-control emissions" has the same meaning as
"potential to emit" as determined under Part 70, except that the potential emissions are calculated
without accounting for any emissions reductions attributable to control devices. Because
applicability determinations are to be based on "potential pre-control emissions," Subpart B will
regulate not only emissions units that emit above the major source threshold, but also many other
units with emissions that are only a tiny fraction of that level.
Under the proposal, Subpart C, the other CAM applicability section, applies to all other
emissions units that are subject to emissions limitations or standards and are located at a Title V
source. All such emissions units would be subject to CAM monitoring requirements, regardless
of a unit's size or level of emissions. However, the Agency does provide that, for certain units
with potential emissions below the major source threshold, sources may propose that "no
monitoring" is needed to satisfy the CAM requirements.
Industry has expressed great concern that the scope of the CAM proposal is too broad. A
fundamental principle underlying the CAM program development has been that the rule should
focus on units where CAM monitoring has the potential to provide environmental benefits.
Expanding CAM coverage beyond major-emitting units and imposing the extensive and detailed
CAM monitoring requirements on smaller units will add tremendous costs to the program, while
monitoring only a very small additional amount of the emissions at major sources. Industry has
recommended that EPA revise the scope of the CAM rule to encompass a much smaller universe
of emissions units.
CAM Plans and Related Enforcement Issues
The central feature of the CAM rule remains the requirement for sources to prepare
monitoring plans that (1) identify indicator monitoring ranges that correspond to proper air
pollution control practices; (2) specify detailed monitoring performance standards; and (3)
provide procedures for taking corrective action when the indicator ranges are exceeded. EPA
establishes the general requirement that Subpart B and C monitoring plans must provide a
"reasonable assurance" that compliance with applicable requirements is being achieved. The draft
rule provides that all sources must include each of the CAM plan elements as Title V permit terms
or conditions.
The rule specifies various design standards and elements for Subpart B CAM plans. For each
unit subject to Subpart B, the source must monitor one or more indicators of the performance of
each control device used to reduce emissions at the unit. Each plan must specify ranges within
which the indicators will operate. Types of ranges will vary greatly depending on the types of
equipment and applicable requirements.
The requirements for Subpart C monitoring contain many of the same elements mandated for
Subpart B CAM plans. EPA indicates in the preamble that certain provisions of the Subpart C
monitoring requirements attempt to establish more general monitoring requirements than those for
Subpart B sources by allowing sources the flexibility to propose certain recordkeeping,
production input restrictions, operating hour limitations, work practices, periodic verifications or
existing monitoring to satisfy the CAM requirements. For certain, very limited situations, Subpart
C provides that the owner or operator may propose that "no monitoring" is necessary to satisfy
the CAM requirements.
Including each of the detailed CAM monitoring terms as a Title V permit term will create
enforcement opportunities for source operations that often will, in reality, reflect compliance with
applicable requirements or highly insignificant deviations. Industry has also expressed concern
that the prescriptive nature of the monitoring requirements indicates a departure from the basic
CAM tenet supporting flexible rule parameters to encourage states and sources to create
monitoring programs that are tailored to particular units.
"Trigger Levels" and QIPS
The rule provides that deviating from an applicable emission limitation or departing from the
indicator range specified in a CAM plan for 5 percent of the operating time or total averaging
periods during any semiannual reporting period triggers a requirement to implement a Quality
Improvement Plan (QIP). A QIP is a written corrective action plan that must include procedures
for evaluating and resolving the control performance problems documented by the CAM
monitoring. The source must report the time period during which the QIP is being implemented
as a deviation of the permit in the annual compliance certification. Further, imple-menting a QIP
for any one PSEU more than once in any permit term is deemed a Title V permit violation.
The prescribed indicator range threshold level and the QIP requirements have drawn much
criticism. The original theory behind the corrective action approach was that sources should be
encouraged to make every possible effort to investigate any potential problems with control
technology and fix any problems that actually exist. Many industry representatives are concerned
that the proposed QIP approach is oriented toward creating enforcement opportunities and
creates a disincentive for sources to develop representative CAM plans.
Relationship with Periodic Monitoring
In the preamble, EPA expresses its intent for the CAM rule to address both enhanced
monitoring and periodic monitoring requirements for Title V sources. The draft CAM rule
includes revisions to Part 70 that will eliminate the current periodic monitoring requirement.
Nevertheless, EPA does not plan to finalize these changes to Part 70 until the CAM rule is
promulgated, which is now predicted for July 1997. Thus, sources and states will continue to be
subject to the periodic monitoring requirements until that time. Because tremendous effort and
resources will be expended by sources and states as they continue to grapple with the periodic
monitoring requirement, as well as assess the relationship of Part 70 monitoring to the anticipated
CAM requirements, industry has recommended that EPA act immediately to stay the Part 70
periodic monitoring requirement.
Compliance Certification
A significant component of the CAM rulemaking is EPA's interpretation of the statutory
requirements related to compliance certification and the appropriate information to include in the
certification. Of primary importance is EPA's clarification of its interpretation of the phrase
"continuous or intermittent" as used in section 114(a)(3) of the Act. EPA now interprets section
114 to not require sources to determine if compliance is "continuous" (e.g., compliance was
achieved during all averaging periods for a standard) or "intermittent" (e.g., one or more
unexcused deviations occurred during the certification period). Accordingly, the draft CAM rule
would revise Parts 70 and 71 to provide that section 114 requires sources to indicate in the
certification whether the methods used to determine compliance produce continuous or
intermittent data, and to certify compliance based on the results from the methods identified.
The rule would revise other important aspects of the compliance certification requirement.
Under the draft, the certification of compliance must identify as exceptions any period for which
the owner or operator identifies a deviation, which includes exceedances (e.g., indication by
emission limitation or standard monitoring that emissions are outside the bounds of the limitation
or standard) and excursions (e.g., departure from a CAM indicator range). The preamble to the
rule emphasizes that not all deviations constitute violations of a permit. However, this assurance
does not appear in the revised Part 70 rule language. Industry has recommended that EPA
provide Part 70 language specifying that deviations are not necessarily violations.
While most of the revisions to the compliance certification provision would alleviate concerns
industry has expressed regarding the complexities of the certification process, at least one change
would seem to expand the certification obligation. EPA proposes to revise the compliance
certification provision so that sources will be required to identify and include "if necessary . . . any
other material information." This standard would create an ambiguous obligation for sources to
determine what constitutes "material information" and when it is necessary to identify such
information. Many sources will generate a great deal of production data related to processes that
couldfit the "other material information" category. This provision will also raise issues regarding
its relationship to various environmental audit policies.
Implementation
The draft rule ties implementation of CAM to the Title V permitting process. The rule
proposes different timetables for implementation based upon where the facility is in the Title V
process at the time EPA promulgates a final CAM rule. The implementation schedule is the same
for Subpart B and Subpart C units. Generally, six months after the CAM rule is promulgated a
source will be required to begin filing CAM monitoring information with any initial Title V
applications, or as a supplement to any applications that have already been submitted.
Many of industry's previous concerns with the implementation provisions remain unresolved
by the draft CAM rule. The proposed compressed implementation schedule will make it very
difficult for sources and states to process and implement CAM plans and monitoring proposals.
Burdening the initial Title V process with the monumental task of preparing CAM plans could
create serious problems for both programs. Industry commenters have recommended that EPA
contribute to the successful implementation of both CAM and Title V by providing that CAM
plans are to take effect upon permit renewal and are to be implemented through the Title V
process at that time.
EPA Is Expected to Promulgate "Credible Evidence" Rule in December
EPA recently indicated that it still intends to promulgate its controversial "credible evidence" rule
by December 13, 1996. EPA had earlier agreed to take action by that date in a settlement
agreement with environmental group litigants.
The "credible evidence" rule would authorize federal and state enforcement agencies, as well
as citizens, to rely on any "credible evidence" under the applicable rules of evidence to prove
Clean Air Act violations. The rule would amend current federal regulations by providing that a
standard's reference test method is no longer the exclusive means of proving a violation of that
standard. The "credible evidence" rule was originally included as part of the proposed enhanced
monitoring rule, which was published in 1993 but withdrawn last year.
Industry has questioned the legality of promulgating such a rule and has expressed numerous
concerns about the impact of the rule on the ability of sources to ascertain their compliance
obligations and to meet them. Industry's major concern is that, because the "credible evidence"
rule would authorize using different methods for determining compliance and proving violations,
the stringency of the underlying limits will be significantly increased. As a result, the "credible
evidence" rule would result in sources being found in violation of the Act under circumstances
previously deemed to constitute acceptable performance. See March 1996 Issue Analysis, pp.
EN-15 and 16.
Industry has also argued that promulgation of the "credible evidence" rule should be delayed so
that the Agency can consider the proposed "credible evidence" rule and the proposed compliance
assurance monitoring (CAM) rule at the same time.
Although industry representatives have participated in extensive discussions with EPA staff to
urge that the Agency make significant revisions in the "credible evidence" language initially
proposed in 1993, it appears that EPA is not likely to change its basic course. However, it is
possible that the final rule would contain a phased-in effective date, thereby providing a "period of
repose" for some or all sources. During that period of repose, sources would presumably have an
opportunity to clarify compliance obligations with regulatory authorities and to make changes in
emissions limits and compliance methodologies to address the implications of the "credible
evidence" rule.
Because EPA has declined to repropose the "credible evidence" rule, the precise language
which EPA is considering for inclusion in the final rule is unclear. Although the draft final rule
has not yet been sent to the Office of Management and Budget (OMB) for final review, that will
likely happen soon. At that time, it is expected that the draft rule and a portion of the preamble
will also be released to the public.
EPA Issues Additional Guidance on "Potential to Emit" Definition
On August 27, 1996, EPA issued a guidance memorandum which addresses two aspects of the
Agency's implementation of the definition of "potential to emit" (PTE) in light of new
developments. In particular, the memorandum extends the Agency's January 25, 1995 transition
policy for PTE limits to July 31, 1998 and addresses the impact of the D.C. Circuit's decision in
Clean Air Implementation Project v. EPA, Nos. 96-1224 et al. (June 28, 1996) on the Part 70
PTE definition.
Extension of Transition Policy for Sources Potentially Subject to Section 112
In its January 25, 1995 guidance memorandum, EPA established an interim transition policy
for sources which are potentially subject to section 112 or Title V requirements. See March 1995
Washington Report, p. WR-4. According to the memorandum, the policy was established
because EPA recognized that "sources may face gaps in the ability to acquire
federally-enforceable potential to emit limits due to delays in State adoption or EPA approval of
programs or in their implementation." Under the transition policy, state or local agencies may
treat the following types of sources as non-major sources:
(1) sources which maintain adequate records to demonstrate that their actual emissions are less
than 50 percent of the major source threshold, and
(2) sources whose actual emissions are between 50 and 75 percent of the major source
threshold if the sources are subject to state limits that are practicably enforceable.
In its August 27, 1996 memorandum, EPA acknowledges that it is unlikely that rulemaking
proceedings addressing EPA's PTE definition will be completed by January 25, 1997, the original
expiration date of EPA's transition policy. Because EPA believes that uncertainty regarding
establishing limits on PTE will remain for sources potentially subject to section 112 MACT
standards until the rulemaking proceedings are complete, the memorandum extends the transition
period for an additional 18 months, i.e., until July 31, 1998.
Impact of New D.C. Circuit Decision on Sources Potentially Subject to Title V
EPA states in the August 27 memorandum that the decision in Clean Air Implementation
Project v. EPA remanded and vacated the federal enforceability requirement for PTE limits under
the Part 70 regulations. The memorandum then provides that, in light of the D.C. Circuit's
decision, the term "federally enforceable" in 40 C.F.R. 70.2 should be read to mean "federally
enforceable or legally and practicably enforceable by a State or local air pollution control agency"
pending additional rulemaking by EPA. Moreover, the memorandum extends the January 25,
1995 transition policy to July 31, 1998 for purposes of the Part 70 permit program, just as it did
for the section 112 program.
In fact, the Clean Air Implementation Project decision actually remanded and vacated the
entire Part 70 PTE definition, not just the federal enforceability requirement as implied by the
August 27 guidance memorandum. Accordingly, there is presently no PTE definition for the Part
70 program. See July 1996 Washington Report, p. WR-71. Title V permitting authorities are
now in a position to take into account all "effective" state and local controls whether or not they
are federally enforceable. However, because state Title V programs already approved by EPA
presumably contain the federal enforceability requirement, further state action may be necessary
before sources may unqualifiedly rely on state or local controls which are not federally
enforceable.
Ozone Transport Assessment Group May Play Key Role in Addressing Ozone Nonattainment
Issues
Over the past decade, long range transport of ozone and ozone precursors has increasingly been
identified as a significant contributor to ozone levels in downwind areas, particularly in the eastern
half of the country. This increased focus on long range transport has led EPA to seek to address
ozone nonattainment through regional structures not expressly called for under the 1990
Amendments.
One such organization, the Ozone Transport Assessment Group (OTAG), is currently
addressing numerous issues concerning long range transport of ozone and ozone precursors and
compliance strategies for dealing with ozone nonattainment. As we discuss below, OTAG's
recommendations may have a substantial effect on EPA's ozone policy and on future requirements
that EPA may seek to have imposed on individual sources of VOCs and/or NOx.
Formation and Role of the Ozone Transport Assessment Group
On March 2, 1995, EPA issued a memorandum outlining a new phased approach for states to
meet their obligations under the 1990 Amendments to take specific measures to attain the ozone
standard[1] In that memorandum, EPA indicated that ozone transport is a cause of states' not
submitting SIP revisions providing for the requisite controls and attainment demonstrations.
Among other things, the memorandum calls for states "to participate in a consultative process to
address regional transport [of ozone and ozone precursors]."
Largely in response to the March 1995 memorandum, the Ozone Transport Assessment
Group (OTAG) was formed through the joint efforts of the Environmental Council of the States
(ECOS) and EPA. OTAG held its first meeting in May 1995 and has met on a regular basis since
then. The group's stated purpose is "to develop consensus regarding emissions inventories and the
type of regional modeling to be performed, and to devise national, regional and local control
strategies" to address ozone nonattainment problems. OTAG's activities focus primarily on the
impacts of long range transport on ozone levels in the Northeast, the Lake Michigan states, and
the Southeast. At the conclusion of its work, OTAG will develop recommendations on the issues
reflected in its statement of purpose and submit them to EPA. Recommendations are scheduled
to be made during the early or middle part of 1997.
Representatives from 37 states -- many of which have no significant local ozone problems --
are currently members of the organization. EPA staff actively participate in all aspects of OTAG's
work and serve as Co-Chairs of some groups. Industry and environmental group representatives
participate as associate members.
Although OTAG has no formal role under the Act, [2] its recommendations could have a
significant impact on the manner in which EPA and the states address ozone nonattainment
problems. In particular, OTAG's recommendations regarding modeling approaches, compliance
strategies, and control measures to address long range transport impacts may cause many
individual states voluntarily to adopt some or all of the recommendations. Perhaps even more
importantly, OTAG's recommendations may well lead EPA to persuade or direct individual states
to adopt some or all of the recommendations. The fact that OTAG has reached particular
conclusions will make it easier for EPA to adopt those recommendations as its own policy and to
justify imposing additional controls on states to eliminate persistent ozone nonattainment
problems.
If EPA decides to implement some or all of OTAG's recommendations, the Agency has
several statutory tools at its disposal. EPA can couple its efforts to persuade states to adopt
recommended measures with its considerable authority to determine the content of SIPs and to
impose measures on states to achieve ozone attainment. EPA may apply leverage on states in
many ways, e.g., by disapproving required SIP submissions such as progress plans and attainment
demonstrations, by imposing mandatory or discretionary sanctions (loss of funds and/or increased
offset ratios), by promulgating FIPs, and by issuing "SIP calls."
Summary of the Status of OTAG's Activities
Various workgroups within OTAG have been working intensively to achieve a consensus
regarding (1) the modeling approaches to be used to analyze long range transport impacts, (2) the
proper interpretation of the modeling results, and (3) recommendations for control strategies
based on the modeling results. OTAG is currently grappling with a number of issues that have
arisen in this connection.
Although the initial round of modeling has been completed, there apparently are significant
disagreements within OTAG as to what that modeling showed and how the second round of
modeling should proceed. In particular, the results suggested that the relationship between NOx
reductions and downwind ozone levels is not well established. Although the models did show that
VOC reductions will reduce ozone levels, the results also suggest that regional NOx reductions
may have only a marginal impact on ozone levels in some areas. Furthermore, the results suggest
that NOx reductions may even result in "disbenefits" in some urban areas, i.e., NOx reductions
may actually increase ozone levels in those areas.
In light of these initial modeling results, some Midwestern states and a group of Midwestern
utilities have argued that the assumption that sources of NOx in the Midwest are significantly
affecting ozone levels in the Northeast may not be well-founded. They have called for OTAG to
undertake new modeling which focuses on more localized phenomena. OTAG recently agreed
that the second round of modeling should include some "subregional" models in order to address
these concerns.
OTAG is currently considering numerous other approaches proposed for inclusion in the
second round of modeling. Despite the divergence of opinions, OTAG intends to complete the
modeling by the end of this year.
Other OTAG workgroups are studying a range of compliance strategies for possible inclusion
in OTAG's final recommendations. For example, one workgroup is considering compliance
strategies based in part on increased controls on mobile sources. One possible approach being
considered is that all 37 states within OTAG would require the use of reformulated gasoline and
that more stringent vehicle inspection/maintenance programs would be enacted in certain urban
areas. Another workgroup is considering what impacts a recent FERC order deregulating the
electric utility industry will have on regional NOx emissions and what, if any, additional measures
should be adopted to compensate for resulting emissions increases.
OTAG officials recently confirmed that they still expect OTAG to make recommendations to
EPA during the early or middle part of 1997.
Federal Court Rules That Company Is Not Liable for Violations
Where EPA Regulation Did Not Provide "Fair Notice"
A recent judicial decision in a Clean Air Act enforcement case requires that regulations be written
clearly before the government can recover civil penalties from defendants for violating those
regulations. A federal district court judge in South Carolina has ruled that, even though a facility
was subject to a regulation and did not satisfy its requirements, the facility was not liable for civil
penalties because the regulation did not provide "fair notice" that the facility was covered. United
States v.Hoechst Celanese Corp., Civil No. 0:92-1879-17 (D.S.C. May 10, 1996). [3] The
decision arose from an enforcement action against a company for allegedly violating the
equipment leaks provisions of the Benzene NESHAP at one of its facilities over a seven-year
period.
The initial question in the case was whether the facility was subject to the relevant NESHAP
provisions as properly interpreted. The pertinent regulatory language provides an exemption from
the equipment leaks requirements for "any equipment in benzene service" that is "located at a
plant site designed to produce or use less than 1,000 megagrams of benzene per year." 40 C.F.R.
61.110(c)(2). The facility used benzene for quenching purposes and as a reflux agent in the
production of acetic anhydride. Once used, the benzene was purified and then recycled for
subsequent use for the same purposes. The company maintained that, because the benzene was
continually recycled and only a small amount was actually consumed during a year, the facility
used far less than 1,000 megagrams per year. However, EPA argued that each time the benzene
was used for those purposes that amount counted against the 1,000 megagrams per year threshold
regardless of whether the benzene was being recycled. Under EPA's approach, the facility was
allegedly "designed to use" more than two million megagrams per year an amount well in excess
of the applicability threshold level. These two very different approaches were characterized as the
"single counting" approach and the "multiple counting" approach, respectively.
The judge stated that his duty was to determine whether EPA's interpretation of the regulation
as contemplating a multiple counting approach for facilities which recycle benzene was
"permissible." Because he concluded that such an interpretation would not be "plainly erroneous"
based on the regulatory language, he upheld EPA's interpretation and ruled that the facility had
been subject to the equipment leaks provisions.
However, the judge, citing a number of cases including General Electric Co. v. EPA, 53 F.3d
1324, 1329 (D.C. Cir. 1995), [4] further ruled that the regulation did not provide "fair notice"
that such a facility would be covered by the equipment leaks provisions. Accordingly, the judge
ruled that the government could not recover any civil penalties because "due process precludes a
finding of liability in this case." In reaching this conclusion, the judge reviewed, among other
things, the rulemaking record for the NESHAP and letters sent by EPA officials to the company
stating that other essentially identical facilities were not covered by the equipment leaks
provisions.
An Appeal of the District Court's Decision Is Currently Pending
The government has appealed the judge's decision to the U.S. Court of Appeals for the Fourth
Circuit. No. 96-2051 (4th Cir. filed July 30, 1996). The government's decision to appeal the
decision is being viewed by many observers as somewhat surprising since an unpublished district
court decision typically would not be widely publicized nor serve as a strong precedent in future
enforcement actions. In addition, the facts in this case appear to be largely unfavorable for the
government. If the Fourth Circuit affirms the district court's decision and adopts its reasoning,
that court of appeals decision would likely create a very favorable precedent for defendants in
future Clean Air Act enforcement cases involving similar interpretation issues and would
constitute controlling law within the Fourth Circuit.
Endnotes:
1. "Ozone Attainment Demonstrations," Memorandum from Assistant Administrtor Mary D.
Nichols to EPA Regional Administrators (March 2, 1995). The document is available through the
Network's website under the "Ozone Nonattainment" Subcategory of the "Nonattainment Policy
and Guidance Documents" Category. It is listed under the heading of "Ozone Policy."
2. Unlike recommendations of the statutorily created Ozone Transport Commisstion (OTC),
OTAG's recommendations to EPA enjoy no special status under the Act. Moreover, OTAG lacks
authority to compel any member state to follow its recommendations. Thus, although OTAG may
identify problems and possible solutions to these problems, it can neither directly implement any
control strategies nor compel EPA or an individual state to take any particular action.
3. The decision has not been officially reported and has so far not been included on any of the
major online reporting services. If you wish to obtain a copy of the decision, please contact the
Network at (202) 467-7878.
4. The significance of the General Electric decision, which dealt with an enforcement action
under the Toxic Substances Control Act, was discussed in the July 1995 Washington Report.
Please e-mail any comments or questions to the Clean Air Act Information Network.
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