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1990 CLEAN AIR ACT AMENDMENTS
IMPACT ON SMALL BUSINESS

By JON S. FALETTO

Signed into law by President Bush on November 15, 1990, the Clean Air Act Amendments of 1990 enhanced existing programs and created new regulatory initiatives. Historically, the Clean Air Act addressed only major sources of air pollution and areas with severe air quality problems. Three elements of the 1990 Amendments however may have serious impact on smaller emission sources and small business, in general. These include Title I provisions designed to remedy chronic non-attainment ("dirty air") areas, Title III prohibitions on the emissions of hazardous air pollutants, and the Title V operating permit program.

Title I Non-Attainment Provisions

Ozone pollution, also referred to as "urban smog," is the most prevalent air quality problem today. It is caused by emissions of volatile organic compounds (VOCs) and nitrogen oxides associated primarily with urban areas and heavy industry. The 1990 Amendments redesignated the ozone non-attainment areas based upon the severity of the ozone pollution. The "non-attainment" designation means that levels of ozone in a particular geographic area exceed the federal standard. At the top of the list, with the worst ozone problem is Los Angeles, which is the only "extreme" ozone non-attainment area. Four other classifications of more general application consist of "severe," "serious," "moderate," and "marginal."

The redesignation by severity of pollution was accompanied by a reduction in the amount of emissions that will subject a particular source to stringent new control requirements. Before the 1990 Amendments, only sources with potential to emit more than 100 tons per year of VOCs were affected by the non-attainment program requirements. Much smaller sources of VOC emissions are not included within the regulatory program. In "moderate" and "serious" non-attainment areas, facilities that emit 50 tons of VOCs will now be subject to emission controls. In "severe" areas, which include the Chicago metropolitan area, sources that emit 25 tons of VOCs per year will become regulated.

In the "extreme" non-attainment area of Los Angeles, sources that emit as little as 10 tons per year of VOCs will be included.

New sources that intend to locate in ozone non-attainment areas, and which emit VOCs in amounts exceeding specific thresholds, are subject to the most stringent requirements. In addition, modifications of existing sources located in these areas, where the modification increases VOC emissions in excess of the threshold, will be treated as new sources subject to the same stringent requirements. New and modified major sources must install the most effective control equipment to reduce VOC emissions to the lowest achievable emission rate (LAER). The LAER standard does not consider the costs of installation and LAER controls must be utilized despite adverse economic impact.

In addition to installing expensive state-of-the-art controls, a new or modified major source must obtain offsets for the new emissions. In other words, for every ton of new VOC emissions, more than 1 ton of existing VOC emissions from sources located within the same ozone non-attainment area must be eliminated. For a large facility, offsets often can be obtained by shutting down or restricting existing processes or combustion sources. For small sources, however, obtaining offsets from existing sources within the same non-attainment area may be extremely expensive, if not impossible.

Existing sources located in ozone non-attainment areas may be required to reduce existing VOC emissions. Through state regulations, existing sources may be required to install reasonably available control technology (RACT) to reduce existing emissions. In metropolitan areas with severe ozone problems, these RACT rules will require substantial reductions from existing sources. Since regulated sources can now include much smaller emitters, small business located in ozone non-attainment areas should pay close attention to the development of state RACT rules.

Title III Hazardous Air Pollutants Provisions

Title III of the 1990 Amendments enhances the exist-

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ing toxic air pollution program by including smaller sources and many more toxic chemicals. Hundreds of toxic pollutants are released into the air by chemical manufacturing plants, oil refineries, sewage treatment plants, solid waste incinerators, and other sources. In the 1990 Amendments Congress included a list of 189 hazardous air pollutants ("HAPs") and directed EPA to establish a list of major source categories for the purpose of setting standards for HAP emissions. For sources within those categories, EPA must develop emissions controls amounting to the maximum achievable control technology (MACT).

In July of 1992, EPA identified 174 categories of sources to be regulated under the Title III air toxics program. EPA is now developing MACT emission standards for sources within the 174 categories. Facilities that emit as little as 10 tons per year of any one of the 189 IIAPs or that emit a total of 25 tons per year of any combination of the HAPs are deemed "major" sources subject to the new Title III program. By lowering the threshold of w^hat is considered a major source, the Title III program will affect much smaller industries than those previously regulated under the federal Clean Air Act programs.

All new and existing sources listed under the 174 source categories that emit 10 tons per year of any one HAP or 25 tons per year of any combination of HAPs are considered major sources and must institute MACT controls. For new sources, MACT is defined as the reduction achieved in practice by the best controlled similar source. For existing sources, MACT is defined as the average reduction achieved by the best performing 12 percent of existing sources in that category. This program will require existing sources to substantially reduce their HAP emissions.

For example, EPA recently issued standards for perchloroethylene (PCE) dry cleaning facilities. All new and existing dry cleaning facilities actually emitting or with the potential to emit greater than 10 tons per year of PCE, must control PCE emissions by the application of MACT. In addition, smaller sources of PCE emissions, which are considered "area sources," must control PCE emissions to a less stringent standard. The MACT standard requires owners to install costly new equipment and upgrade existing control equipment to

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minimize PCE emissions. Weekly leak detection and repair programs are required at all facilities with annual receipts greater than $75,000. Consumption of PCE must be recorded and maintained. Additional requirements include preconstruction review and record keeping. These new requirements for PCE dry cleaners illustrate the tremendous impact the Title III program can have on small businesses.

Title III also institutes an "accidental release program" which is likely to affect many small businesses and industries. On January 19, 1993, EPA listed 100 toxic chemicals and 62 flammable substances addressed by the accidental release program. If a facility stores, uses, or manufactures any of these toxic or flammable chemicals in quantities above designated thresholds, the facility must develop a Risk Management Plan and comply with. strict reporting requirements.

Facility owners who suspect they emit toxic compounds should quantify the extent of those emissions, determine whether they will be a "major source" included in one of the 174 categories to be regulated, and then rigorously monitor EPA's actions in developing standards applicable to your facility. A word of caution, EPA is authorized to add additional chemicals to the initial list of HAPs and can expand the categories of sources to be regulated under the Title III program.

Title V Operating Permit Programs

Title V of the 1990 Clean Air Act Amendments establishes a national program for issuing operating permits to all traditional major sources and certain smaller sources of air pollution. Under the pre-1990 Clean Air Act, requirements were often ambiguous, incomplete, and found throughout numerous hard-to-find provisions of state and federal regulations. The Title V operating permit will collect in one place all of the requirements, limitations and conditions imposed on the permitted source relating to regulated air emissions.

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The Title V operating permit program is intended to be administered by the state air pollution control authorities. Pursuant to Title V, EPA has issued federal regulations which specify the "minimum" elements for state implementation of the operating permit program. For the first time ever, many small businesses and industry will be required to obtain an operating permit for their air emissions. EPA estimates that 34,000 existing sources of air pollution will become subject to the Title V program, and many of these sources have never before been subject to permitting requirements.

The Title V program is procedural in nature; no new emissions controls are imposed on existing sources. Regulated sources must apply for and obtain an operating permit, comply with the final operating permit, and pay annual fees. The 1990 Amendments establish a minimum fee of $25 per ton per each regulated pollutant emitted, up to a maximum of 4,000 tons per year. In essence, this places a fee cap of $100,000 per year per source. States, however, are authorized to charge higher fees to implement the Title V program.

The Title V operating permit program will impact the economic resources of affected small businesses and industries. First, source owners will need to undertake a complicated analysis of the regulations applicable to the specific source to determine whether they are subject to the operating permit program. Second, regulated emissions from the facility must be characterized and quantified to determine whether a source is covered by the program and to prepare the permit application. Quantification of emissions should include considerations of alternative operating scenarios for the source as well as fluctuations based on production rates and level of plant activity. Third, the owner must survive the preparation of the permit application, responding to agency requests for additional information, and participating in the public review and comment process.

Many large industrial sources have already begun the process for identifying applicable air quality regulations and obligations, identifying regulated pollutants emitted by the facility, and quantifying those emissions under all reasonable operating scenarios. Small businesses and industries not routinely involved with Clean Air Act programs may find themselves with a limited amount of time to accomplish these critical activities.

The 1990 Amendments provided a specific time table for implementation of the Title V program. By November 15, 1993, each state was required to submit to EPA their proposed Title V operating permit program. EPA then has until November 15, 1994, to approve or disapprove the program. Once the state operating permit program is federally approved, all sources

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subject to the program must submit a complete permit application within 12 months of EPA approval.

In the midwest, state implementation of the Title V program has ranged from non-compliance to full compliance. EPA Region V officials report that Illinois and Minnesota submitted what appeared to be complete Title V operating permit programs by the November 15, 1993 deadline. Michigan and Wisconsin submitted partial Title V operating permit programs. Ohio has submitted only legislation authorizing development of the Title V program. Indiana has not submitted any portion of the required program.

All states will comply with the federal mandate to implement the Title V operating permit program. Sanctions for failing to establish an approved permit program include the withdrawal of federal highway funding, onerous requirements on new or modified sources, and federal assumption of the operating permit program. In those states where the federal EPA is forced to administer the Title V program, the federal government rather than the state agency will collect annual fees from local industries. These states will be deprived of control over sources within their jurisdiction and will lose a significant source of income. Given these consequences, it is almost certain that all states will implement an EPA-approved operating permit program.

Federally Mandated Assistance for Small Business

In developing the 1990 Amendments, Congress recognized that states will be regulating small businesses that lack the technical expertise and financial resources necessary for compliance. To alleviate this hardship, Congress added statutory provisions designed to provide technical assistance to small businesses. EPA has issued guidelines for implementation of the small business technical assistance program. State-sponsored assistance to small businesses must include the following: dissemination of information on compliance methods and technologies, designation of a state office to serve as Ombudsman, and a program to help sources identify applicable requirements under the Act.

The 1990 Amendments have the potential to impact the economic resources of small businesses and industries. Owners of potentially affected businesses should attempt to determine whether any of the programs will apply to them. A small business simply cannot afford to wait for formal contact from the EPA or the state enforcement agency.

Mr. Faletto received a Bachelor of Science in Environmental Science from the University of Illinois and his Juris Doctor from the Illinois Institute of Technology Chicago-Kent College of Law. Mr. Faletto is a member of the Natural Resources, Energy & Environmental Law Section of the American Bar Association as well as the Air & Waste Management Association. He is a former Assistant Regional Counsel with the U.S. EPA, Chicago, Illinois. Mr. Faletto concentrates his practice in environmental law at the law firm of Howard & Howard which has offices in Peoria, Illinois and Lansing, Kalamazoo and Bloomfield Hills, Michigan.

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