Guidance on the Appropriate Injunctive Relief for
                   Violations of Major New Source Review
                          Requirements(Memorandum)

          Signed November 17, 1998

          MEMORANDUM

          SUBJECT:     Guidance on the Appropriate Injunctive
                       Relief for Violations of Major New Source
                       Review Requirements

          FROM:        Eric V. Schaeffer, Director
                       Office of Regulatory Enforcement

          TO:          Addressees

          This guidance sets forth the injunctive relief that the
          U.S. Environmental Protection Agency (EPA) should seek
          in settlements of major New Source Review (NSR)
          enforcement actions (1). Monetary penalties should
          continue to be determined pursuant to the Clean Air Act
          Stationary Source Penalty Policy and Appendices.

          Introduction

          To maintain a level playing field for regulated sources
          across the country, the Office of Regulatory
          Enforcement (ORE) is issuing this guidance setting
          forth the injunctive relief it expects to see in
          judicial Consent Decrees and in administrative case
          settlements concerning major NSR enforcement cases(2).
          In particular, this guidance addresses cases where
          either (1) a source failed to obtain a major NSR permit
          prior to commencing construction of a major source or a
          major modification or (2) a source with a synthetic
          minor limit(3) regularly violated that limit.

          As Congress stated in the Prevention of Significant
          Deterioration (PSD) portion of the Clean Air Act (CAA
          or Act), the general purpose of the NSR programs is to
          protect public health and welfare (including air
          quality) while "insur[ing] that economic growth will
          occur in a manner consistent with the preservation of
          existing clean air resources." 42 U.S.C. § 7470. One
          method relied on to achieve this purpose is to require
          the use of ever-improving control technology as new
          sources of air pollution are built. The NSR programs
          also are a means to phaseout the grandfathering of
          existing sources created in the 1977 Act. As the D.C.
          Circuit stated in Alabama Power v. Costle, "[t]he
          statutory scheme intends to ‘grandfather' existing
          industries; but the provisions concerning modifications
          indicate that this is not to constitute a perpetual
          immunity from all standards under the PSD program." 636
          F.2d 323, 400 (D.C. Cir. 1979). Thus, the NSR programs
          are instrumental in implementing the Act and in
          attaining the goal of clean air throughout the United
          States.

          In order to effectuate the purpose of the NSR programs,
          EPA generally should, at a minimum, require the
          installation and operation of control technology or
          process changes that result in emission reductions
          equivalent to the best available control technology
          (BACT) in PSD cases and the lowest achievable emission
          rate (LAER) in nonattainment cases when resolving NSR
          enforcement actions(4). When the case involves a source
          that failed to obtain any type of permit or limit at
          the time of construction, the source should not be
          allowed to avoid the installation and operation of
          pollution control equipment or process changes by
          obtaining a "synthetic" minor limit (usually a permit)
          after the fact unless compelling circumstances exist(5)
          (see below).

          Similarly, if a case involves a source that obtained a
          timely synthetic minor limit, but which regularly
          violates that limit, this document provides guidance
          regarding when it is appropriate to allow the source to
          merely come into compliance with the limit and when it
          is appropriate to require that the source achieve
          emissions reduction equivalent to those achieved by
          BACT/LAER-equivalent air pollution control equipment or
          process changes.

          Failure to Obtain a Permit Prior to Construction

          There are two scenarios addressed in this portion of
          the guidance; both involve a source with potential
          emissions above the applicable major source threshold
          that failed to obtain either a major NSR permit or
          synthetic minor limits prior to construction of a new
          major source or major modification(6). Under the first
          scenario, the source's actual emissions exceeded the
          major source threshold. Under the second, the source's
          actual emissions never exceeded the major source
          threshold. This guidance only reflects the position
          that EPA may adopt in settling the matter and, like the
          Stationary Source Civil Penalty Policy, considers many
          factors when resolving an enforcement action.
          Importantly, under both scenarios, the source has
          violated the NSR requirements and could be compelled to
          comply fully with the statutory NSR permitting process.
          As discussed above, NSR is a key component to ensuring
          that economic growth and expansion occur in a way that
          minimizes any adverse impact on air quality. Thus, NSR
          violations often result in hundred of tons of excess
          emissions. Moreover, sources that violate major NSR
          requirements often gain a competitive advantage due to
          their ability to (1) avoid the time involved with the
          permitting process and (2) invest money that should
          have been allocated to emission reduction efforts to
          other activities. These reasons, as well as others,
          necessitate strict enforcement of NSR requirements.

          When a violation involves the first scenario (the
          source's actual emissions exceeded the major source
          threshold) the source should be required to comply
          fully with all applicable NSR requirements, including
          major NSR permitting, control technology, air quality
          impact analysis and offsets. As part of an EPA
          settlement, the Consent Decree should require a minimum
          level of control which the Agency believes ensures
          BACT/LAER-equivalent emission reductions(7). The
          Consent Decree should be crafted to allow the source
          the option of installing and operating more effective
          control equipment if the permitting agency requires a
          different (e.g., more stringent) control technology,
          but it should not allow the source to obtain a permit
          with controls that are less stringent than required by
          the Consent Decree.

          If a violation involves a source with actual emissions
          that never exceeded the major source threshold, the
          source should be required to achieve BACT/
          LAER-equivalent emission reductions. If the source's
          potential emissions are below the applicable major
          source thresholds after application of
          BACT/LAER-equivalent controls or process changes,
          Regions have discretion to determine based on facts of
          the specific case whether to require full NSR
          compliance, or whether to allow the source to obtain a
          synthetic minor permit after it achieves
          BACT/LAER-equivalent emission reductions.

          Moreover, based on the Agency's experience with
          enforcing the NSR requirements for the past 20 years,
          ORE has determined that it is no longer appropriate
          merely to allow a source to "correct" an NSR violation
          by dismantling an illegal modification, unless
          emissions from the new or modified unit would
          essentially become zero (e.g., the entire process line
          was shutdown). Thus, a source generally should not be
          able merely to return to pre-violation conditions in
          order to avoid installation of control equipment or
          implementation of process changes. For example, a
          source that illegally began burning tires in a boiler
          could not avoid NSR review (under scenario 1), or
          installation and operation of BACT/LAER-equivalent
          control equipment or process changes (under scenario
          2), merely by agreeing to reducing the number of tires
          burned or by partial SO2 controls. If the source had
          properly permitted the boiler at the time it began
          burning tires, it would most likely have been required
          to install and operate pollution control equipment that
          would still be operational and control emissions after
          the source stopped burning tires because the boiler
          would still be operating after the "modification" was
          undone (e.g., there would be emissions from whatever
          fuel was burned in lieu of tires). Thus, ceasing the
          burning of tires would not necessarily bring the source
          to the same level of emissions that could be achieved
          with additional control equipment.

          Nonetheless, as stated above, the appropriate
          injunctive relief articulated for both scenarios is
          subject to consideration of compelling circumstances.
          Because it is a very case-specific, fact-intensive
          determination, it is not possible to define all
          potential compelling circumstances. For instance, a
          source's actual emissions may be so low that imposition
          of add-on control equipment would constitute economic
          waste (e.g., in the above example, total SO2 and
          PM/PM10 emissions after the source stopped burning
          tires were too low to control in a cost-effective
          manner). Or perhaps the source is replacing the
          violating units with cleaner, energy-efficient new
          units that emit air pollution at levels near those that
          would be achieved by the older units with
          BACT/LAER-equivalent controls or process changes. Other
          compelling circumstances may involve significant,
          case-specific litigation risks related to whether a
          violation of major source requirements actually
          occurred or whether the injunctive relief set forth in
          this memorandum is appropriate in a particular case
          (e.g., permit shield or equity concerns; duration of
          violation is extremely short). Importantly, because
          Headquarters must concur on most Consent Decrees
          involving major NSR violations, Regions are encouraged
          to coordinate with Headquarters early regarding
          consideration of compelling circumstances and prior to
          initiating settlement discussions with a defendant.
          After this guidance has been implemented for some time,
          ORE will consider supplementing it with any trends
          regarding what constitutes a compelling circumstance
          that may develop.

          Failure to Comply with an Existing Synthetic Minor
          Limit

          Generally, when a source with limits that restrict its
          potential emissions below major source threshold levels
          violates those limits, EPA can enforce the limits
          and/or the major source NSR requirements. This guidance
          is not meant to restrict the Regions' ability to
          enforce the terms of an existing synthetic minor limit
          or permit. However, pursuant to the court's reasoning
          in United States v. Louisiana-Pacific, 682 F. Supp.
          1142, 1161-62 (D. Colo. 1988), when a source "knowingly
          and regularly" violates a synthetic minor limit, EPA's
          position is that it need not consider the limit when
          calculating the source's potential to emit and
          determining its major source status(8).

          EPA should take the position that a source's synthetic
          minor limit does not effectively limit the source's
          potential emissions when evidence indicates that the
          source has knowingly or regularly violated (or
          currently regularly violates) the limit. Thus, the
          source cannot simply claim that it has a limit that
          restricts its potential emissions; obviously this is
          not the case if the source's actual emissions have
          exceeded that "limit." A source should not be able to
          hold a limit up as a shield to major source status when
          it repeatedly violates the limit. As the court in
          Louisiana-Pacific stated,

               to hold that permit limitations which are
               repeatedly violated should nonetheless be
               considered in determining potential to emit would
               give better treatment to sources which knowingly
               violate such conditions than the treatment
               currently afforded sources which comply with the
               law.

          Id. at 1161. Allowing sources to merely come into
          compliance with the synthetic minor limits would
          encourage sources to make modifications without
          preconstruction review and even exceed existing permits
          until they were caught, rather than go through NSR
          review prior to making modifications. Treating the
          source as a major source or major modification should
          be EPA's position even when the source's actual
          emissions do not exceed major source thresholds or
          significance levels. To allow a source to violate a
          limit that restricts potential emissions until its
          actual emissions exceeded major source or significance
          levels would collapse potential and actual emissions
          and ignore the mandate of the Act to consider both.

               Nonetheless, there may be circumstances where the
               appropriate response is enforcement of the
               synthetic minor permit. Such circumstances may
               include situations where the permit violations are
               (a) relatively infrequent, (b) known to be minor
               in nature and (c) where the synthetic minor limit
               is significantly lower than the relevant
               applicability threshold(9). As with the first
               portion of this guidance, the Regions are
               encouraged to coordinate early with Headquarters
               regarding application of these distinctions.

          Conclusion

          The guidance is effective immediately with respect to
          all cases in which the first injunctive relief offer
          has not yet been transmitted to the opposing party. To
          the extent earlier guidance, memoranda or other EPA
          documents imply that injunctive relief requiring a
          source to come into compliance with existing
          "synthetic" minor source limits, or obtain synthetic
          minor limits, is an acceptable resolution of an
          enforcement case, it is superseded by this guidance. As
          stated above, many major NSR enforcement cases are
          already considered "nationally significant," due to
          either issues in the case or penalty amounts of
          $500,000 or more, and thus require Headquarters
          concurrence. In addition, to ensure consistent
          implementation of this guidance, each Region should
          consider the first three major NSR cases (civil and
          administrative), regardless of the size of the penalty,
          it begins negotiating after the date of this guidance
          as "nationally significant" for delegation purposes and
          include Headquarters in the concurrence chain.

          The policies set forth in this memorandum are intended
          solely as guidance to government personnel to be used
          to settle enforcement actions. They do not represent
          final Agency action, are not binding on any party, and
          cannot be relied upon to create any rights enforceable
          by any party. The EPA reserves the right to change this
          guidance at any time without public notice.

          Questions concerning specific issues and cases should
          be directed to Carol Holmes of the Air Enforcement
          Division,, at 202-564-8709. This document will also be
          available on AED's Webpage at
          http://www.epa.gov/oeca/ore/aed.

          cc: John Seitz, OAQPS
          Bruce Jordan, OAQPS
          Lydia Wegman, OAQPS
          Alan Eckert, OGC
          Greg Foote, OGC

          Addressees:
          Regional Counsels, Regions I-X
          Director, Office of Environmental Stewardship, Region I

          Director, Division of Enforcement and Compliance
          Assurance, Region II
          Director, Division of Air Quality, Region III
          Director, Air, Pesticides, and Toxics Management
          Division, Region IV
          Director, Air and Radiation Division, Region V
          Director, Compliance Assurance and Enforcement
          Division, Region VI
          Director, Enforcement Coordination Office, Region VII
          Assistant Regional Administrator, Office of
          Enforcement, Compliance
            and Environmental Justice, Region VIII
          Assistant Regional Administrator, Office of Pollution
          Prevention,
            State, and Tribal Assistance, Region VIII
          Enforcement Coordinator, Office of Regional Enforcement

            Coordination, Region IX
          Director, Office of Air Quality, Region X
          Joel Gross, Chief, Environmental Enforcement Section,
          DOJ

          (1)New Source Review includes the Clean Air Act Part D
          nonattainment NSR and the Part C Prevention of
          Significant Deterioration (PSD) programs.
          (2)Many civil major NSR cases are deemed to be
          "nationally significant," and hence, require
          Headquarters concurrence. This guidance also applies to
          administrative major NSR cases. Thus, any reference to
          requirements of a "Consent Decree" in the context of a
          civil case applies equally to the resolution of an
          administrative major NSR case.
          (3)A "synthetic" minor limit restricts potential
          emissions at an otherwise major source to levels below
          applicable major source thresholds. These limits
          generally are in the form of operational or production
          limits. The term may also refer to limits an existing
          major source takes to restrict its potential emissions
          from a modification to levels below applicable
          significance thresholds (e.g., 40 tpy of SO2). See 40
          C.F.R. § 52.21(b)(23).
          (4)Generally, BACT and LAER require the installation of
          add-on pollution control equipment. There are
          instances, however, when BACT or LAER may be reflected
          in a change in processes equipment design or operation
          (e.g., material usage). References to BACT/LAER in this
          guidance include both control equipment technology and
          operational changes.
          (5)This reference to synthetic minor permits includes
          limits solely on operation and production (e.g., hours
          of operation) as well as limits that require
          installation and operation of control technology. In
          other words, a violating source may not avoid the
          injunctive relief required in this guidance by
          installing air pollution control equipment or making
          process changes emissions to the level possible with
          BACT/LAER-equivalent controls or process changes.
          (6)This guidance applies equally to new and existing
          sources. Thus, any and all references to new source
          construction and major source thresholds apply equally
          to modifications at existing sources and the applicable
          significance thresholds (e.g., 40 tpy of SO2). See 40
          C.F.R. § 52.12(b)(23).
          (7)This guidance does not alter EPA's current policy
          that the BACT or LAER determination is made at the time
          a source goes through NSR permit review. Thus, if a
          source violates NSR in 1995 (e.g., by constructing a
          major source without a major NSR permit) and finally
          applies for a permit in 1998, whatever technology is
          BACT or LAER in 1998 should be required in the NSR
          permit. See, e.g., "BACT/LAER Determination Cut-off
          Date" (Jan. 11, 1990) (BACT determination cut-off at
          date of final permit issuance) (document no. 8.43 in
          New Source Review Guidance Notebook).
          (8)Although all permit limits and conditions are
          enforceable, only operational or production limits that
          are "practically enforceable" will be used to determine
          a source's potential to emit. See, e.g.,, "Guidance on
          Limiting Potential to Emit in New Source Permitting"
          (June 13, 1989) (document no. 2.31 in NSR Guidance
          Notebook). The EPA is in the process of proposing a
          rule which would codify the elements of a practically
          enforceable limit.
          (9)EPA realizes that in some instances, a new source
          may not precisely know what its emissions will be until
          it has constructed and begun operations. Thus, a source
          which in good faith obtained synthetic minor source
          limits may find itself unable to meet those limits.
          Although this is a concern when determining the
          appropriate penalty, it should not affect the
          appropriate injunctive relief.