EPA Proposes Simpler Title V Permit Revision Process

On August 31, 1995, EPA published a long-awaited supplemental proposal to streamline its Title V regulations.  60 Fed. Reg. 45,530.  The
focus of the proposal is to simplify the procedures for revising operating permits.  Instead of the cumbersome four-track permit revisions
approach EPA proposed in August 1994, EPA's newly proposed approach is far less complex.  It would establish two basic categories of
changes for the purpose of making permit revisions.  The first category includes all changes that are subject to state review (defined to
include review by all permitting authorities) under programs established pursuant to the Act, as long as Title V issues are addressed in
that review.  Qualifying changes would be automatically incorporated into the Title V permit upon completion of the concurrent review. 
The second category includes all other changes not subject to state review.

Changes Already Subject 
To State Review

        The premise of the supplemental proposal is that, for changes already subject to state
review (e.g., new source review), any necessary public process will have occurred during the
review of the underlying change, instead of in a subsequent Title V permit revision process. 
Under the supplemental proposal, such changes would be classified as "more
environmentally significant" ("MES") or "less environmentally significant" ("LES").  For MES
changes, the supplemental proposal is a vast improvement over the current rule, which
requires sequential permit processing -- first under the state program, then as a significant
permit modification (the latter taking up to 18 months) under the Part 70 program.  Under
the revised approach, contemporaneous permit processing would occur for the proposed
change.  MES changes would include any change subject to major NSR, certain net-out
transactions, and section 112(g) changes subject to prior public and EPA review.

        Under the supplemental proposal, states would have the discretion to categorize all
other changes as LES changes, including establishment of limits to achieve "synthetic minor"
status.  The proposal would provide states with the flexibility to tailor the process for LES
changes to the relative environmental significance of the change.  Furthermore, states would
be authorized, subject to EPA approval, to designate certain categories of minor NSR
changes as de minimis.  For such changes, states would be allowed to forego prior public,
affected state, and EPA review altogether.

        EPA's decision to authorize synthetic minor limits to be processed as LES changes
is particularly significant.  EPA takes the position that, under the current Part 70 rule, such
permit revisions are classified as significant permit modifications, and therefore require
sequential processing, first under the state's minor NSR program, then as a significant Part
70 permit modification. 
By contrast, under the supplemental proposal, states would determine the level of 
process appropriate for establishing synthetic minor limits consistent with the environmental
significance of the action.

        For all LES changes, EPA has proposed to waive its review right for at least five
years except in response to citizen petitions demonstrating that the permit revision would
likely cause a significant adverse environmental effect.  During this 5-year period, EPA
would audit the states' procedures for reviewing LES changes.  If the procedures are
determined to be adequate, EPA would continue the waiver.  This waiver of EPA's review
rights for LES changes improves on provisions in the current Part 70 rule for minor permit
modifications for which -- although the change may be made immediately upon sending a
notice to the permitting authority -- a 45-day review period by EPA and the opportunity for
EPA to object after the fact is provided.

        One aspect of the supplemental proposal relating to changes subject to state review
programs whose workability industry will need to address is the Agency's classification of
certain net-outs as MES changes.  Specifically, EPA proposes to classify as MES changes
net-out transactions where the prospective emissions increase from the physical changes or
changes in the method of operation from a project are greater than the major source
significance levels.  The requirement for a 30-day comment period and prior EPA review
for MES changes will undoubtedly interfere with at least some of such transactions being
made as quickly as needed for competitive reasons.

Changes Not Subject 
To State Review

        For changes not subject to state review, the supplemental proposal would require a
revision process at the Part 70 permitting stage.  Again, EPA has categorized changes as
MES and LES.  For the former, a process equivalent to that provided at permit issuance
would be required.  For LES changes, states could develop revision procedures that match
the environmental significance of the change.

        Three types of changes that are sometimes not subject to state review are the
establishment of potential to emit (PTE) limits and changes that trigger MACT or RACT. 
Regarding PTE limits, the supplemental proposal would classify the establishment of PTE
limits for the entire source as MES.  By contrast, revising source-wide limits or establishing
them for individual emission units would be classified as LES changes.  EPA has solicited
comment on whether the establishment of PTE limits for the purpose of establishing minor
source status should be classified as LES.  This would seem appropriate in light of EPA's
decision to classify the establishment of synthetic minor limits through a minor NSR
program as LES.  Any deficiencies in the state's procedures could be discovered in EPA's
audit of the state's program.

        Turning to MACT provisions, under the supplemental proposal, case-by-case
determinations under section 112(j) and the establishment of alternative emission limits
under either the early reductions program (section 112(i)(5) or pursuant to an approved
section 112(l) program, would be categorized as MES, if there were no state review
otherwise provided for.  MACT-related provisions proposed to be categorized as LES
include the incorporation of MACT compliance details and the establishment of emissions-
averaging restrictions pursuant to a section 112(d) standard.

        With regard to RACT-related changes, EPA proposes to classify the establishment
of an alternative limit authorized by an approved SIP to be an MES change.  States and
industry representatives will likely argue that full public, affected state, and EPA review are
unwarranted for such changes.

Proposals Unrelated 
To Permit Revisions

        The supplemental proposal addresses several issues unrelated to permit revisions. 
Some are definite improvements to the current Part 70 program.  For example, the proposal
would amend the definition of "major source" to exclude non-major R&D activities. 
Furthermore, it proposes to define the term "Title I modification" to exclude minor NSR
changes.

        All of the proposed changes are not improvements, however.  For example, the
supplemental proposal would modify the certification requirements to require responsible
officials to personally examine and be familiar with all the material in the Title V permit
application.  This approach was determined by EPA in 1983 to be unduly burdensome in
the NPDES and RCRA programs, which instead require that responsible officials have some
form of direction or supervision over persons gathering the data and preparing the forms,
and to make sufficient inquiry of those persons to satisfy themselves that the information
submitted is true, accurate, and complete.

        Other proposed changes to the Part 70 rule that warrant substantial attention pertain
to the Agency's proposal (1) to narrow the scope of the emergency defense to technology-
based limits established only in Part 70 permits, and (2) to amend the definition of "major
source" to consider fugitive emissions of all air pollutants, rather than pollutants that have
been regulated for the source category.  

        Comments on the supplemental proposal  must be submitted to the Agency by
October 30, 1995. þ


D.C. Circuit Invalidates Federal Enforceability Requirement in "Potential to Emit"
Definition in EPA's Air Toxics and New Source Review Programs 

On July 21, 1995, the U.S. Court of Appeals for the District of Columbia Circuit struck down
EPA's definition of "potential to emit" in the section 112 General Provisions Rule.  National
Mining Ass'n v. EPA, 59 F.3d 1351 (D.C. Cir. 1995). Under section 112(a)(1), a source is
classified as a "major source" if it has the "potential to emit considering controls" 10 tons per
year or more of any HAP or 25 tons per year or more of any combination of HAPs.  In
response to petitions for review filed by the Chemical Manufacturers Association (CMA)
and the American Petroleum Institute (API), the Court ruled that EPA's provision limiting
consideration of controls to those that are "federally enforceable" is impermissible in
determining a source's "potential to emit considering controls." 

        This ruling is likely to have a substantial impact on EPA's section 112 regulatory
program, as well as on other regulatory programs under the Act containing similar
definitions of "potential to emit."  In particular, the elimination of the "federal enforceability"
requirement should prevent numerous small sources from improperly being classified as
"major sources" or, alternatively, being compelled to submit to many additional requirements
not contemplated by Congress in obtaining federally enforceable limits to avoid being so
classified.  

        Moreover, on September 15, 1995, the D.C. Circuit issued an order in a separate case
vacating and remanding the "potential to emit" definition in EPA's new source review
regulations based on the National Mining Ass'n decision.  Chemical Manufacturers Assþn v.
EPA, No.  89-1514 (D.C. Cir.)

        We discuss these two important rulings in more detail below.

Court Strikes Down "Federal Enforceability" Requirement In Section 112 General Provisions Rule

        In the National Mining Ass'n case, petitioners CMA and API argued that EPA's
requirement that only "federally enforceable" controls shall be considered in determining a
source's "potential to emit" conflicted with statutory language which provides, without
limitation, that controls are to be considered.  They also argued, among other things, that
EPA's existing scheme imposes burdensome requirements on minor sources which were not
intended by Congress.

        EPA contended that it possesses broad authority to determine which controls should
be considered in determining a source's "potential to emit" and that "federal enforceability"
is a permissible means of determining which controls should be considered.

        The Court held that Congress intended that controls must be "effective" in order to
be considered.  The Court noted that EPA's federal enforceability requirement goes "beyond
the mere effectiveness of particular constraint[s] as a practical matter."  It further noted that,
under EPA's approach, even a state program with unquestionably effective controls would
be ignored unless EPA's "federal enforceability" criteria had been met.  The Court
additionally concluded that the Act's legislative history does not support EPA's approach
and rejected EPA's. argument that Congress had ratified the Agency's approach in enacting
the 1990 amendments.  Finally, the Court concluded that EPA had not explained why it was
necessary to disregard all state and local controls which are not federally enforceable in
order to ensure that controls that are to be taken into account are effective.  Accordingly,
the Court granted the petitions for review of CMA and API.  

        The effect of the decision is to vacate the "federal enforceability" requirement in the
General Provisions Rule's definition of "potential to emit."  On August 2, Bill Lewis of
Morgan, Lewis & Bockius sent a letter on behalf of CMA and API to EPA officials
requesting that. the Agency issue guidance within 30 days stating that state and local
controls are to be considered in determining a source's potential to emit.  (See the related
article below.)  

        On August 31, EPA sought a rehearing of the decision from the three judges who
decided the case.  However, on September 21, the Court issued an order denying EPAþs
petition for rehearing.  The Court is expected to issue its mandate on September 28, and
that document will make the decision officially effective.

          Court Strikes Down "Federal Enforceability" Requirement in New Source Review Program

        The "potential to emit" definition in EPA's 1989 regulations implementing its new
source review (NSR) program contains a "federal enforceability" requirement similar to that
in the section 112 General Provisions Rule.  CMA had challenged the "federal
enforceability" requirement in the NSR regulations, but the litigation was stayed in light of
the passage of the 1990 Amendments to the Act and was not briefed until earlier this year.

        In a short order entered in the Chemical Manufacturers Assþn case on September 15,
the D.C. Circuit expressly vacated and remanded EPA's "potential to emit" definition in the
NSR regulations in light of the National Mining Ass'n decision.  The Court had earlier
canceled oral argument in that case, which had been scheduled for September 5, and EPA
had sought reconsideration of the order canceling oral argument.  The decision invalidating
the definition in the NSR regulations will become effective within 45 days unless EPA seeks
a rehearing of that decision. þ


D.C. Circuit Upholds Two Elements of the General Provisions Rule Dealing with the
Definition of "Major Source"

In the National Mining Ass'n decision discussed above, the Court also ruled on two other
significant issues arising under the General Provisions Rule.  First, the Court affirmed EPA's
position that it can aggregate all HAP emissions at a plant site to determine whether a
"major source" exists without considering emissions on either a source category or standard
industrial classification (SIC) code basis.  Second, the Court ruled that, under section 112,
EPA can consider fugitive emissions in determining whether a source is a "major source"
without conducting special rulemaking pursuant to section 302(j) of the Act.

        We discuss these two rulings in more detail below.

Court Upholds EPA's Approach to Aggregating Emissions At A Site To Determine Whether A "Major
Source" Exists 

        The Court was presented the question whether, in determining whether a site
constitutes a major source under section 112, EPA may aggregate HAP emissions from all
facilities on a contiguous plant site under common control.  The General Electric Company
maintained that EPA can aggregate emissions only on a "source category" basis; the National
Mining Association (NMA) and the American Forest and Paper Association maintained that
emissions can be combined only if the facilities fall within the same SIC code.

        EPA interpreted the "major source" definition in section 112(a)(1) as allowing it to
aggregate all emissions at a site regardless of whether the emissions units fall within the
same source category or SIC code.  Thus, under EPA's approach, a major source may
consist of emission units from multiple source categories or SIC codes.  

        In ruling against the challenges to EPA's approach, the Court opined that EPA's
reading of the statute is consistent with the language of section 112(a)(1) when viewed in
isolation.  The Court also found that EPA's interpretation is consistent with other provisions
of section 112 and with the approach EPA has taken in implementing Title V of the Act. 
Finally, the Court concluded that the legislative history does not compel a conclusion that
EPA must consider SIC codes in defining "major source."  The effect of the Court's decision
is to leave intact EPA's current approach to determining whether a site constitutes a major
source.

Court Holds That EPA, In Making Major Source Determinations, May Count Fugitive Emissions Without
Conducting Special Rulemaking

        NMA additionally argued that EPA may not count fugitive emissions of HAPs --
emissions which are emitted other than from a stack, vent, or similar opening -- in making
major source determinations unless it has conducted a special rulemaking pursuant to
section 302(j) of the Act.  In so arguing, NMA relied principally upon the Court's decision
in Alabama Power Co. v. Costle, 636 F.2d 323 (D.C. Cir. 1979).  In that case, the Court had
ruled in the context of new source review provisions that EPA could not, without such a
rulemaking, include fugitive emissions in a facility's aggregate emissions for purposes of
determining whether the facility was a "major emitting facility" under section 169(1) of the
Act.            

        In upholding EPA's approach to fugitive emissions under section 112, the Court ruled
that Alabama Power was not controlling with regard to section 112 and that EPA's
interpretation was permissible.  The Court noted that Title V of the Act and the statute's
legislative history draw a distinction between "major sources" under section 112 and "major
stationary sources" as defined in section 302.  In any event, the Court concluded that section
112(a)(1), which defines "major source,"  indicates that all emissions should be counted and
thus satisfies language in section 302(j) stating that special rulemaking is unnecessary if the
statute "otherwise expressly provide[s]" it need not be conducted.

        NMA petitioned the full court of appeals to reconsider this portion of the Court's
decision, but that petition was denied on September 21. þ


EPA Urged To Issue Guidance Providing That State And Local Controls Be Considered
In Calculating A Source's Potential To Emit

On August 2, Bill Lewis of Morgan, Lewis & Bockius sent a letter to high-ranking EPA officials urging that the Agency "issue guidance
within the next 30 days announcing that, in determining a source's 'potential to emit' under all federal clean air programs, permitting
authorities are to take into account state and local controls that they consider to be effective."  

        The letter, which was sent on behalf of the Chemical Manufacturers Association and the American Petroleum Institute, addressed
the manner in which EPA should implement the July 21 appellate court decision striking down the "federal enforceability" requirement
in EPA's "potential to emit" definition implementing section 112 of the Act.  National Mining Ass'n v. EPA, 59 F.3d 1351 (D.C. Cir. 1995). 
CMA and API had successfully argued in that litigation that EPA's definition conflicted with the statutory language and with congressional
intent that state and local controls ordinarily be considered.  (See the related article above.)  The letter was addressed to Mary Nichols,
Assistant Administrator for Air and Radiation; Jonathan Cannon, Acting General Counsel; and Steve Herman, Assistant Administrator
for Enforcement and Compliance Assurance.

        Because the rationale of the Court's decision applies to provisions of the Act beyond section 112, the letter calls upon EPA to
announce that the federal enforceability requirement should be disregarded in all federal clean air programs.  (On September 15, the D.C.
Circuit did, in fact, vacate the "potential to emit" definition in EPA's new source review regulations based on the National Mining Ass'n
decision.)  The letter states that "providing for permitting authorities to consider all effective controls (whether or not they are federally
enforceable), will thus dramatically simplify and streamline the federal clean air regulatory scheme under Titles I, III, and V of the Act."

        The letter also urges the Agency not to attempt to justify the federal enforceability requirement in any subsequent proceeding. 
It points out that EPA could legally justify the requirement only if the Agency were prepared to attempt to demonstrate, among other
things, that state and local controls are ineffective -- a course of action that would be inconsistent with EPA's own regulatory initiatives
and with Congress' emphasis on requiring federal oversight only where necessary.

        The Agency has not yet responded to the August 2 letter.  þ


EPA Issues Ambitious Draft CAM Rule

EPA issued a draft Compliance Assurance Monitoring ("CAM") rule on September 13, which
is to be discussed at a meeting with EPA and stakeholders on September 22.  The purpose
of CAM has changed since it was first introduced by EPA in May 1995. Previously, the
purpose was to provide "reasonable assurance" that compliance with 

applicable requirements is being achieved. Under the September draft rule, the purpose of
CAM is to "promote ongoing compliance" with applicable requirements, and to "ensure the
detection of potential adverse changes in control technology performance."

        As before, CAM is intended to implement both the "enhanced" and "periodic"
monitoring requirements of the Act.  The central feature of the rule remains the
requirement for sources to prepare monitoring plans ("CAM plans") which identify operating
parameter levels corresponding to proper air pollution control practices, monitoring
frequency, and trigger levels and timeframes for taking corrective action.  (See the July 1995
Washington Report).

        At a June meeting with stakeholders, EPA identified several unresolved issues related
to CAM.  These issues included the scope of the CAM rule, integration with Title V
permits, and the content and enforcement-related aspects of compliance certifications.  The
draft rule addresses each of these issues, as described below.

                                          Scope of the CAM Rule

        Because periodic monitoring is required for all applicable requirements, the scope
of the draft rule is substantially broader than had been provided for under EPA's enhanced
monitoring proposal.  The draft rule would establish three tiers of units and corresponding
requirements.  Units in the first and second tiers would be subject to monitoring
requirements, although the frequency of monitoring and the extent of documentation to
justify the adequacy of monitoring would be lower for Tier II units.  The rule would not
impose monitoring requirements on Tier III units, but rather would require that sources
maintain records to show that the units qualify for Tier III status.

        Under the draft rule, Tier I units would include units subject to NSPSs or NESHAPs
that require monitoring, any "major" unit with required monitoring, and most units (subject
to applicable requirements) that would be subject to NSPS but are "grandfathered" because
of their date of construction or modification.  In defining the term "major" unit, EPA would
adopt both the Agency's traditional approach of comparing a unit's "potential to emit" (PTE)
to major source thresholds, as well as a more recent approach of allowing sources to
demonstrate that a unit is not major if its actual emissions are less than 50 percent of major
source thresholds.  This aspect of the rule will be of concern to those states that had urged
EPA to not determine applicability based on PTE or actual emissions, but rather to
authorize each state to determine which applicable requirements should be subject to CAM.

        The draft rule would classify as Tier II units major units not covered by Tier I, units
with required monitoring not covered by Tier I, and units that use control technology to
achieve compliance.  "Control technology" is broadly defined to include not only add-on
control equipment, but any method for limiting emissions to achieve compliance with an
emission limitation or standard.  Under the draft rule, all remaining units would be
classified as Tier III units. 


                                           Title V Integration

        The broad applicability of the requirement to develop CAM plans creates the
potential for the Title V permitting process to be overwhelmed by monitoring-related
decisions.  The draft rule would attempt to minimize this potential in two ways.  First, the
rule would require permitting authorities to conduct only completeness checks of CAM
plans at permit issuance.  Second, revisions to CAM plans could be made off-permit, i.e.,
without revising the permit.  The rule would require, however, that significant revisions to
CAM plans be submitted at least 60 days before instituting them, and would authorize
permitting authorities to disapprove proposed revisions during this 60-day review period.

        One controversial aspect of EPA's approach to implement CAM is the Agency's
decision to incorporate CAM plans by reference into Title V permits.  Sources would be
required to operate in compliance with each separate element of a CAM plan, and multiple
failures to comply with the plan would be separately enforceable.  Industry representatives
had urged EPA to adopt a different approach, whereby the requirement to have a CAM
plan would be the only term related to CAM included in Title V permits.   
                                        Role of "Trigger Levels"

        Another controversial feature of the September draft rule pertains to the revised role
of "trigger levels."  Under the draft rule, deviations from operating parameter levels
identified in a CAM plan as corresponding to proper air pollution control practices would
trigger a requirement to undertake corrective action.  In addition, EPA would require that
CAM plans specify the maximum number of discrepancies from an established range of
operating parameter levels.  Sources could elect to have the operating ranges be considered
as either independent enforceable requirements that must be achieved, or as triggers to
implement a "Quality Improvement Plan" ("QIP").  Under the second option, the draft rule
would allow sources to exceed the maximum number of discrepancies twice per reporting
period during the term of a permit without also being in noncompliance.  A third
exceedance would result in both a failure to comply with the CAM plan requirements and
a requirement to implement the QIP to improve performance.  Because of the enforcement
consequences of exceeding trigger levels, the data needed to identify these levels and the
resources required to negotiate this aspect of Title V permits may be substantial.  

                                        Other Enforcement Issues

         In addition to defining the role of "trigger levels," the draft rule addresses several
other important enforcement-related issues.  For example, with regard to deviations
identified when reference tests are performed, the preamble to the draft rule states that
CAM data, by documenting operating conditions at sources, can be used to establish the
duration and on-going nature of a violation.  

          A second key enforcement-related issue addressed in the draft rule concerns the
content of compliance certifications. In the proposed enhanced monitoring rule -- the
predecessor to the CAM rule -- sources would have been required to specify whether
compliance was continuous or intermittent.  Under the draft CAM rule, if the method used
by a source to achieve compliance is a continuous compliance determination monitoring
("CCDM") method, this fact would be required to be reflected in the source's certification. 
However, if the certification does not identify a CCDM method, then it would be presumed
that an intermittent method was used to determine compliance.  Sources would not have to
specify in certifications that an intermittent method was being used, nor whether compliance
was intermittent or continuous.  
        As under the current part 70 regulations, certifications would have to specify the
source's compliance status with each limitation and standard.  The draft rule would further
require that, where any information identifies an exceedance or period of noncompliance,
the certification indicate the information relied on, the duration and magnitude of the
exceedance or noncompliance, and any corrective action taken to achieve compliance.

                                CAM Guidance

        On September 15, EPA issued draft CAM guidance.  The guidance provides, among
other things, illustrations of the types of monitoring that provide "reasonable assurance" of
compliance with emission limitations.  According to EPA, the illustrations are intended to
show the kinds of parameters that can be used to monitor adverse changes in control
performance, and are not meant to be examples of CAM plans for specific categories of
emission sources.  In addition to illustrations of types of monitoring, the guidance document
provides flow diagrams and explanatory text corresponding to the 5 major steps of the CAM
process: (1) the applicability determination; (2) the tier determination; (3) CAM plan
preparation; (4) CAM plan submission and review; and (5) CAM plan updating and
revision.  

        EPA has scheduled a meeting with stakeholders on September 22 in Durham, North
Carolina to discuss the draft rule and guidance document.  EPA is currently accepting
comments on the draft rule and will continue to accept comments until 60 days after the
proposed rule is published in the Federal Register. þ

Federal District Court Decision Threatens To Expand Potential Liability In Clean Air
Act Citizen Suits

A July 21 decision of the federal district court in Colorado, if followed by other courts, could
significantly increase industry exposure in certain enforcement actions.  In a citizen suit
brought by the Sierra Club, a district judge ruled that violations of a standard contained
within a state implementation plan (SIP) may be established by reliance on data from
continuous emissions monitoring (CEM) even though the SIP expressly provides that
compliance is to be based on a different monitoring method.  Sierra Club v. Public Service
Co. of Colorado, Civ. No. 93-B-1749 (D.Colo.).

        The case involves alleged violations of a 20% opacity standard in the Colorado SIP
by a fossil fuel-fired steam generating plant.  Based on publicly available data from a CEM
system at the plant, the Sierra Club argued that the plant had violated the standard over
19,000 times during a five-year period.  However, the utility countered by pointing out that
the SIP specifies a different means by which compliance is to be determined and that
therefore the CEM data could not be relied upon to establish violations.  The SIP provides
that compliance is to be based on visual inspections conducted under specified criteria by
a qualified observer.  Although the SIP requires installation of CEM devices, CEM data are
to be used only for pollutant tracking purposes and are not to be used to establish
violations.

        The district judge denied the utility's motion to dismiss the Sierra Club's claims.  The
Court concluded that the CEM data have a "high degree of probative reliability" and
therefore should be considered evidence of opacity violations.  The Court reasoned that
section 114 of the Act is intended, among other things, to ensure citizen access to
information necessary to prove violations of the Act.  Because citizens will not have access
to the results of visual observations conducted pursuant to the prescribed method, the Court
concluded that Congress intended for citizens to be able to rely upon publicly available data
to establish violations.  In addition, the Court cited the language and legislative history of
section 113(e) as providing support for its position.  That provision states that, in
determining the amount of a civil penalty, a court is to consider, among other things, "the
duration of the violation as established by any credible evidence (including evidence other
than the applicable test method)."  But the legislative history makes clear that a reference
test method violation must be demonstrated before such other evidence can be used in
assessing the penalty.

        Because the decision did not dispose of all issues in the case and determine a penalty
amount, it is not a final decision for appeal purposes.  The utility sought to have the United
States Court of Appeals for the Tenth Circuit hear an appeal from the decision on a
discretionary basis under a special procedure for non-final decisions.  On August 18, the
Tenth Circuit denied the request.  However, once the district judge enters a final decision,
it is clear that the Tenth Circuit will hear that appeal.

        The district judge's decision, once finalized, will be a controlling precedent only in
the State of Colorado.  However, if other courts adopt the same reasoning in other citizen
suits, serious compliance exposure will likely result.

        One concern caused the opinion is that, if CEM data are considered relevant in
establishing violations regardless of the test method provided by the SIP, companies will be
found to have violated standards where they did not believe compliance problems existed. 
Moreover, environmental groups may gain leverage to exact large penalties from companies
as a result of this change in how compliance is determined.  Finally, it is possible that the
decision might play a role in the ongoing debate concerning whether data generated under
EPA's future Compliance Assurance Monitoring ("CAM") Rule may be presented as
"credible evidence" of violations. þ

Court of Appeals Rules That Failure To Meet A Particular Notice Requirement Is Not
A Continuing Violation Of The Clean Air Act

On July 12, the United States Court of Appeals for the Ninth Circuit rejected EPA's
argument that a company's failure to provide notice of asbestos removal under the asbestos
NESHAP constitutes a continuing violation and thus subjects the company to civil penalties
for each day of violation until notice is provided.  United States v. Trident Seafoods Corp.,
60 F.3d 556 (9th Cir. 1995).

        In an enforcement action in federal district court, EPA contended that a failure to
provide advance notice of asbestos removal constitutes a continuing violation of the
regulatory requirement and accordingly sought penalties from the company for every day
between the day when notice should have been given and the day when the failure was
discovered by a state official.  Under this approach, potential civil liability could have
reached a total of $1,100,000.  The district judge agreed that there had been a continuing
violation, but reduced the civil penalty amount to $64,750.

        On appeal, the Ninth Circuit concluded that the crucial issue was whether either the
statute or the regulation stated that failure to provide such notice would constitute a
continuing violation.  Because there was no such language and the Agency  had an
obligation and opportunity to set forth its position in the regulations, the Court concluded
that the company could not be held liable for a continuing violation.  Accordingly, the Court
reversed the district court's decision and remanded the case for imposition of a civil penalty
for a violation on one day.

        The decision is likely to have important consequences for future Clean Air Act
enforcement cases in that it establishes that a violation of a notification requirement is
presumed not to be a continuing violation unless either the Act or its implementing
regulations clearly states that it should be so regarded. þ


EPA Replies To House Subcommittee On Section 112(g) And Section 112(j) Issues

EPA outlined its current thinking on implementation of section 112(g) and section 112(j) in
an August 1 letter from Mary Nichols, Assistant Administrator for Air and Radiation, to
Rep. Joe Barton, Chairman of the oversight subcommittee of the House Commerce
Committee.  The letter responded to a letter sent by Rep. Barton in connection with a July
21 subcommittee hearing on those programs.  At that hearing, Nichols had been pressured
to provide more specific answers to questions posed in Barton's letter and raised at the
hearing.  We summarize some of the important points below.

        In response to a question about EPA's current schedule for issuing section 112(g)
guidance, EPA explained that it is reinventing the section 112(g) program and that its new
approach is still subject to change.  That new approach will rely heavily upon existing state
programs.  Because the new approach will be very different from the proposed rule, the
Agency plans to make a draft of the new approach publicly available around September 15
(now delayed to the end of the month) and to receive public comments on it.  EPA plans
to issue a final rule on section 112(g) in the spring of 1996.

        EPA's letter clarified that it expects that only "significant changes" at a major source
will be covered by the section 112(g) program.  The Agency indicated that it is exploring
ways of defining a "significant change" based on factors such as the capital cost of the change
(expressed as a percentage of the facility's value) or the amount of the resulting emissions
increase.  The letter also emphasized that the Agency does not intend that section 112(g)
cover either routine changes or the kinds of changes that could reasonably be anticipated
when a permit is issued.

        EPA explained that "once a major capital expenditure had been made for a new
piece of control equipment, there should rarely be a need to replace [the section 112(g)
case-by-case MACT determination] later to comply with a section 112(d) or 112(j) standard." 
However, the Agency also made clear that there may be some cases where it is appropriate
to apply a subsequent section 112(d) standard to a source that has complied with a prior
section 112(g) determination.  According to EPA, a source should be given up to eight years
in such 
cases to comply with the section 112(d) standard.

        Finally, in response to a question regarding the scope of EPA's ability to extend
compliance for MACT standards, the Agency agreed that it has "the flexibility in limited
cases to extend MACT compliance schedules beyond the one year extension provided by the
statute."


        Copies of EPA's August 1 letter may be obtained upon request from the Network.
þ


EPA Proposes Open Market Trading Rule For Compliance With Ozone Requirements

On August 3, 1995, EPA proposed its open market trading rule ("OMTR"), which is to serve
as a model for states in developing emission reduction credit trading programs.  60 Fed.
Reg. 39,668. 

        Under the proposal, sources are allowed to trade discrete emission reductions
(DERs), which are voluntary reductions that have already been made by a source beyond
those reductions necessary to achieve compliance with ozone requirements.  Unlike existing
trading programs, such emissions 
trades can be accomplished without the need to make source-specific revisions to state
implementation plans (SIPs) or to operating permits.  The validity of trades would not be
reviewed by EPA or the states prior to the trade taking place; instead, review would take
place primarily in the context of subsequent compliance determinations.  Facilities that buy
DERs for use in compliance would be responsible for ensuring the quality of the credits they
obtain from the generators of the credits.  In addition, for every 10 tons of emission
reductions that are traded, one ton would have to be retired for environmental benefit.

        The proposed OMTR does not change the states' obligations to meet deadlines under
the Act for ozone standards, but is intended to provide an alternative way of doing so.  Any
state that chooses to adopt the model rule for an open market trading program in its SIP
would receive automatic approval from EPA.  At the same time, the model rule is not
intended to modify or limit existing state programs, such as emissions offset programs for
the construction of new major sources.
        Comments on the proposed rule are due on October 2, 1995. þ