Chapter 10. The New Permit Program

Theodore L. Garrett and Sonya D. Winner

Editors' Summary: This Article is the third in a three-part series on the Clean Air Act and the 1990 amendments. The authors analyze the new permit program mandated by the 1990 amendments, which requires the creation of a state-administered permit program. The authors also analyze the enforcement mechanisms available under the Clean Air Act that are applicable to stationary sources, and the administrative procedures and judicial review provided for in the Act. The authors analyze the Act's new provisions concerning chemicals that destroy stratospheric ozone, and the new requirements for phasing out the production and consumption of ozone-depleting substances. Finally, the authors explore the legislative history of the 1990 amendments, identifying where possible the sources of statutory text, amendments to that text, and analysis of the various pieces of the legislative history.

Theodore L. Garrett is a partner in the law firm of Covington and Burling in Washington, D.C. Mr. Garrett has coordinated the firm's environmental practice and has been extensively involved in litigation and administrative proceedings. A former U.S. Supreme Court law clerk to Chief Justice Burger, Mr. Garrett has served as a featured speaker at numerous environmental law and litigation programs, and has written widely in the environmental area. He is a coauthor of the ALI-ABA book A Practical Guide to Environmental Law and the ABA book Environmental Litigation. Mr. Garrett is vice-chairman of the Solid and Hazardous Waste Committee of the ABA Section of Natural Resources, Energy, and Environmental Law; a member of the Steering Committee of the Environment, Energy, and Natural Resources Section of the District of Columbia Bar; a member of the Editorial Board of the Environmental Law Reporter; and a member of the Advisory Committee on Hazardous Waste of the Center for Public Resources.

Sonya D. Winner is a partner in the law firm of Covington and Burling, where she practices in the areas of environmental law, international trade, and antitrust. She is a graduate of Michigan State University (B.A. 1979) and Harvard Law School (J.D., magna cum laude, 1982). After graduation, she served as a law clerk to Judge Louis F. Oberdorfer of the U.S. District Court for the District of Columbia. She is a member of the adjunct faculty at the American University Washington College of Law, where she has taught courses in international commercial arbitration and legal ethics.

[22 ELR 10303]

The 1990 amendments to the Clean Air Act added Title V, a new title requiring the creation of a state-administered permit program. Under that program, operating permits will be required for most significant sources of regulated emissions. The pre-1990 version of the Act required individual federal permits only for new or modified sources;¹ existing sources were governed at the federal level only by general requirements embodied in state implementation plan (SIP), new source performance standard (NSPS), or national emission standards for hazardous air pollutants (NESHAP) regulations. Many states, however, have adopted programs that require some or all such sources to obtain state operating permits. These existing programs are expected to be modified and incorporated into the new federal permitting program.

The key deadlines for this new program are as follows:

* November 1991: U.S. Environmental Protection Agency (EPA) regulations establishing minimum elements of state permit programs

* November 1993: States submit permit programs

* November 1994: EPA approves or disapproves each state program, in whole or in part, within one year

* November 1995: Permit applications and compliance plans due within one year after approval of state permit program

* November 1995: EPA promulgates and administers programs for states that fail to submit approved programs

Permits will be required for a variety of sources, including all stationary sources defined as "major sources" under various provisions of the Act.² Sources subject to the permit program include the following:

* "Major sources"

* "Affected sources" as defined in Title IV (i.e., acid rain)

* Sources subject to § 111 NSPS

* Air toxics sources regulated under § 112

* Sources required to have new source or modification permits under Parts C or D of Title I

* Other sources designated by EPA in regulations

Under Title I of the Act, any source that emits more than 100 tons per year of regulated pollutants is a major source, with even smaller sources considered major in some non-attainment areas. The amended version of § 112 defines as major any source that emits more than 10 tons per year of any individual hazardous pollutant, or more than 25 tons per year of any combination of hazardous pollutants. Permits will thus be required for many sources that did not have to obtain permits before the 1990 amendments.

I. State Implementation

The new permit program is to be administered primarily at the state level. Section 502(b) of the Act requires EPA to promulgate by November 1991 regulations establishing the minimum elements to be included in each state's permit program. These elements include the following:

* requirements for permit applications

* monitoring and reporting requirements

* requirements for payment of an annual fee by the owner

* adequate personnel and funding

* authority to issue permits and assure compliance, and to terminate, modify, or revoke and reissue permits for cause

* authority to enforce permits (including civil penalties of up to $ 10,000 per day for each violation)

* authority to assure that no permit will be issued if the Administrator objects to its issuance in a timely manner

* adequate procedures for public notice and hearing and expeditious review of permit actions

* procedures to make available to the public permit applications, compliance plans, permits, and monitoring or compliance reports, subject to the trade secret provisions of § 114(c) of the Act

* provisions to allow changes in a facility without a permit revision if the changes are not modifications and do not exceed allowable emissions limits

As noted above, § 502(b) requires permittees to pay an annual fee to the state agency administering the program. The amount of the fee must be sufficient to cover the cost of the permit program and fees may be used by the state only for the purpose of administering the program.³ This is a substantial incentive for states to adopt approvable programs. It is estimated that $ 300 million in fees will be generated annually.

Section 502(d) requires each state to submit, by November 1993, a permit program that satisfies EPA's regulations.⁴ Each submission must be accompanied by a legal opinion from a responsible state legal official that the program is effective under state law. EPA must then review the state programs and within one year approve or disapprove them, in whole or in part. If EPA approves only part of a program, it may grant interim approval to the rest of the program pending the necessary revisions.

A state that fails to submit an approvable permit program may, at EPA's discretion, be subject to sanctions. Sanctions must be imposed on states that fail to submit approvable permit programs for nonattainment areas 18 [22 ELR 10304] months after the date required for submittal or the date of EPA disapproval.⁵ If a state still has no approved permit program two years after the date required for submission, EPA is required to promulgate a federal permit program for the state.

II. Permit Procedure

Within 12 months after a state's permit program is approved by EPA, all sources subject to permitting requirements must submit permit applications, together with detailed plans for compliance.⁶ State processing of the initial applications is expected to take several years, since a huge quantity of initial permit applications will be filed simultaneously. The states are required to provide for public comment and hearings on permit applications and, under § 503(c), must act on initial applications within three years.⁷

While its permit application is pending, a facility may continue to operate without a permit if its application is "timely and complete," unless the delay in final action was caused by the source's failure to submit information required.⁸ This provision will provide continuity for existing sources that, simply to maintain existing operations, require permits for the first time. However, new sources and major modifications, which require permit approval before construction begins, will not be exempted from the preapproval requirement. The heavy backlog in permit applications that is likely to occur shortly after the new permit programs are in place may create a substantial problem for new sources or modifications, unless states adopt a system that gives priority to them.

Section 504 requires each permit issued under an approved permit program to include the emissions limitations and standards applicable to the source, a schedule for compliance, and any other conditions or requirements applicable to the source.⁹ The permit requirements must include SIP, NESHAP, NSPS, prevention of significant determination (PSD), and any other applicable requirements. Provisions governing inspection, monitoring, compliance certification, and reporting requirements for the source must also be included.

An operating permit may be issued for up to five years, after which it must be renewed. Permits may also be periodically amended to take into account changes in the facility's operations or to incorporate new standards or regulations promulgated after the permit is issued.

III. EPA Veto Authority

Among the more controversial provisions of the 1990 amendments are those dealing with EPA's review of state-issued permits. Under § 505(a), the state must provide the Administrator of EPA with a copy of each permit application and must notify the Agency of any permit that it proposes to issue.¹⁰ Notice must also be given to affected contiguous states, states within 50 miles of the facility, and the public. The Administrator will then have 45 days to review the permit. The Administrator may veto the permit if he finds that it is "not in compliance" with the requirements of the Act or any applicable regulations, including the state's SIP. The Administrator may not delegate these responsibilities. The veto provision is patterned after the veto provision in the Clean Water Act, which EPA has exercised rarely.

If the Administrator does not veto the permit within 45 days, it may be issued immediately; affirmative approval is not required.¹¹ However, any interested party may, within 60 days after the end of the 45-day review period, petition the Administrator to veto the permit. Such petition may be based only on objections that were raised during the comment period, absent good cause. The Administrator is required to act on the petition within 60 days. The denial of such a petition is subject to judicial review. If the challenging party ultimately prevails, the permit must be revised.

In addition to its authority to veto the issuance of a permit, EPA is also authorized under § 505(e) to "terminate, modify, or revoke and reissue" a permit. If the Agency finds that "cause" exists for such an action, it must notify the state, and if the state does not resolve the problem to EPA's satisfaction within 90 days, EPA may act directly. The statute does not define what constitutes "cause" for the termination, modification, or revocation of a permit. A successful petition under § 505(b)(2) challenging EPA's failure to veto issuance of the permit would fall within this category, but it is not clear what other circumstances would justify termination of an existing permit.

IV. Permit Shield and Modifications

The so-called permit shield provision, § 504(f), provides that a source in compliance with its permit cannot be found to be in violation of any provision of the Act that is addressed in the permit.¹² Statutory requirements may be addressed in a permit either by incorporating them in the permit or by stating in the permit that a particular requirement is not applicable to the source. Permit silence thus can create difficulties, because a company cannot simply assume that [22 ELR 10305] its permit defines all of its compliance obligations. The limited scope of this shield provision contrasts with the comparable provision in § 402(k) of the Clean Water Act, which provides that compliance with a permit constitutes compliance with virtually all of the operative provisions of the Act, whether or not the permit includes the requirements or recites their non-applicability.¹³

Operational flexibility is critical to manufacturing companies, which must be able to quickly change their manufacturing processes in response to competitive pressures and customer demands. Section 502(b)(10) specifies the conditions under which a change in a facility's operations will require a revision of its permit.¹⁴ Under this provision, a revision will not be required if (1) the change is not a "modification" within the meaning of Title I, and (2) the resulting level of emissions does not exceed that allowed under the facility's existing permit. Section 111 defines a "modification" as "any physical change in, or change in the method of operation of, a stationary source which increases the amount of any air pollutant emitted by such source or which results in the emission of any air pollutant not previously emitted."¹⁵ With respect to the second qualification, it will be important to develop permits that expressly allow for operational flexibility (e.g., by permitting groups of sources or chemicals), otherwise the changes may conflict with the permit or be outside the scope of the permit shield. Even if a permit revision is not required, however, the facility must notify the state permitting authority in writing seven days before the change occurs.¹⁶

V. Permits and SIPs

One goal initially advocated for a Clean Air Act permit program was to provide a mechanism for implementing source-specific deviations from general SIP requirements outside the extremely cumbersome SIP-revision process, thereby giving states more flexibility in regulating individual sources. Unfortunately, this objective was thwarted as a result of Congress' rejection of a proposal that states be given authority to deviate from SIP requirements in issuing individual permits. However, states may be able to regain some of this flexibility by deleting many of the source-specific requirements in their SIPs and leaving such matters to the permit process.

One open issue is the extent to which individual permits can or will take the place of alternate compliance plans and similar mechanisms that are currently authorized under some SIPs. Under such a plan, an individual source may be authorized by the state to comply with SIP requirements through methods that, although different from those specified in the SIP, achieve "equivalent" results. Such plans, if approved under procedures established in the EPA-approved SIP, do not require separate EPA approval and may be challenged by EPA only through a SIP call.¹⁷ Since alternate compliance plans take the place of generic SIP regulations in establishing requirements for individual facilities, such plans, where they exist, should also determine the content of the operating permits for those facilities.

VI. Interpreting Permit Requirements

The relative authority of EPA and the states to interpret permit requirements has been a source of controversy. Although most permits are expected to be highly detailed, there will inevitably be situations in which EPA and a state interpret a particular permit differently. Such differences of opinion are likely to arise in the EPA veto and enforcement context. States and affected companies have argued that EPA should defer to plausible state interpretations, since the states are the drafters of their SIPs and have the primary role in implementing the national ambient air quality standards (NAAQS). The Agency's position is that the federal role in this program warrants deference to the Agency. In judicial decisions involving the interpretation of SIPs (which, like permits, are promulgated by the states and reviewed by EPA) the courts have differed as to which agency, state or federal, should receive greater deference in resolving such interpretation issues.¹⁸

VII. The Future of the Permit Program

It remains to be seen how the new permit program will work in practice. Although Title V is modelled after the Clean Water Act's permit program, regulating air pollution is much more complex than regulating water pollution, and the Clean Air Act permit program will inevitably be much more difficult to implement and administer.

It is clear, however, that many regulated facilities will, within a few years, find themselves subject to much more extensive and detailed regulation than they have ever faced before.¹⁹ Many facilities that before the 1990 amendments [22 ELR 10306] were required simply to comply with the requirements in the applicable SIP and other general regulations, will now receive permits specifying not only the general requirements they must meet, but many specific steps they must take to meet those requirements.

More detailed permit requirements may reduce the ability of many plants to vary operations that affect emissions. To do so will often require the plant to seek amendments to its operating permit. Even minor changes for which no permit revision is required will still require the plant to give the state permitting authority seven days notice of the change. At a minimum, therefore, the paperwork required of a plant whose operations are relatively complex is likely to increase dramatically.

1. Clean Air Act (CAA) §§ 165, 173, 42 U.S.C. §§ 7475, 7503, ELR STAT. CAA 68, 76; see supra chapter 6.

2. CAA § 502(a), 42 U.S.C. § 7661a(a), ELR STAT. CAA 168.

3. Section 502 establishes a presumption that the initial fee amount will be $ 25 per ton of regulated pollutants. However, a state may charge a lesser amount if it can demonstrate that it will receive enough to cover the actual administrative costs of its program. 42 U.S.C. § 7661a, ELR STAT. CAA 168.

4. 42 U.S.C. § 7661a(d), ELR STAT. CAA 169.

5. CAA § 502(d)(2)(B), 42 U.S.C. § 7661a(d)(2)(B), ELR STAT. CAA 169.

6. CAA § 503(c), 42 U.S.C. § 7661b(c), ELR STAT. CAA 170. Some sources that are not initially subject to permit requirements may become so at a later point (e.g., because of the promulgation of new regulations governing a previously unregulated type of emission). Such sources will be required to submit permit applications within 12 months of becoming subject to the new requirements.

7. Id.

8. CAA § 503(d), 42 U.S.C. § 7661b(d), ELR STAT. CAA 170.

9. 42 U.S.C. § 7661c(a), ELR STAT. CAA 170. Although some provisions of the Act use the term "source" to refer to each individual point source rather than to an entire facility, § 502(c) makes it clear that a facility may obtain a single permit for all point sources on its premises.

10. 42 U.S.C. § 7661d(a), ELR STAT. CAA 171.

11. This procedure is an important contrast to that established under § 110 for promulgation and approval of SIP revisions. Under § 110, all SIP revisions, including those establishing or revising source-specific requirements, require affirmative EPA approval before they can be put into effect. See General Motors Corp. v. United States, 110 S. Ct. 2528, 20 ELR 20959 (1990). As a result, since EPA has experienced extremely long delays in its SIP approval process, it has become all but impossible to obtain timely changes in source-specific requirements through SIP revisions. The new permit program, in contrast, should allow at least some source-specific requirements to be put into place relatively quickly without the long delays inherent in any process requiring affirmative EPA action.

12. 42 U.S.C. § 7661c(f), ELR STAT. CAA 171.

13. 33 U.S.C. § 1342(k), ELR STAT. FWPCA 059.

14. 42 U.S.C. § 7661a(b)(10), ELR STAT. CAA 169.

15. 42 U.S.C. § 7411(a)(4), ELR STAT. CAA 25. In comparing past and future emissions for purposes of this definition, it has been EPA's practice to compare actual past emissions from the source with potential future emissions after the change is put into place. This often has the result of creating a "modification" even where no increase in actual emissions is contemplated.

16. A state may provide in its regulations "a different time frame for emergencies." See § 502(b)(10), 42 U.S.C. § 7661a(b)(10), ELR Stat. CAA 169.

17. See United States v. Ford Motor Co., 736 F. Supp. 1539, 20 ELR 21126 (W.D. Mo. 1990); United States v. General Motors Corp., 702 F. Supp. 133, 19 ELR 20628 (N.D. Tex. 1988); United States v. Allsteel, No. 87C-4638 (N.D. Ill. Aug. 31, 1989).

18. See Wisconsin Envtl. Decade, Inc. v. Wisconsin Power & Light Co., 375 F. Supp 313 (W.D. Wis. 1975). Compare Florida Power & Light Co. v. Costle, 650 F.2d 579, 11 ELR 20836 (5th Cir. 1981) and United States v. Ford Motor Co., 736 F. Supp. at 1539, 20 ELR at 21126 and United States v. Interlake, Inc., 432 F. Supp. 985, 7 ELR 20669 (N.D. Ill. 1977) with General Motors Corp. v. United States, 110 S. Ct. 2528, 20 ELR 20959 (1990) and American Cyanamid Co. v. EPA, 810 F.2d 493, 17 ELR 20642 (5th Cir. 1987), overruled on other grounds and American Lung Ass'n v. Kean, 670 F. Supp. 1285, 18 ELR 20036 (D.N.J. 1987) and United States v. Congoleum Corp., 635 F. Supp. 174, 16 ELR 20905 (E.D. Pa.), on motion for reconsideration, 646 F. Supp. 1142, 17 ELR 20406 (E.D. Pa. 1986).

19. Congress was particularly concerned about the burdens that the new permitting program would impose on small businesses. However, while the amendments contain some provisions designed to give small businesses technical assistance and certain other types of limited relief, such facilities will not be exempted from the permitting requirements.