[Federal Register Volume 71, Number 223 (Monday, November 20, 2006)]
[Rules and Regulations]
[Pages 67061-67065]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E6-19555]
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ENVIRONMENTAL PROTECTION AGENCY
40 CFR Part 70
[AZ-06-01; FRL-8243-8]
Notice of Resolution of Notice of Deficiency for Clean Air
Operating Permits Program; Maricopa County, AZ
AGENCY: Environmental Protection Agency (EPA).
ACTION: Notice of resolution.
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SUMMARY: EPA issued a notice of deficiency on May 17, 2005, in which
EPA identified problems with Maricopa County's Clean Air Act title V
operating permits program and a timeframe for the County to correct
these deficiencies. The Maricopa County Air Quality Department
submitted corrections to its permit program in quarterly updates
beginning in February 2006 and in a final submittal dated October 20,
2006. This notice announces that, based on information provided by
Maricopa County Air Quality Department, EPA concludes that Maricopa
County has resolved all of the issues identified in the May 17, 2005
Notice of Deficiency. As a result, EPA will not impose sanctions set
forth under the mandatory sanctions provisions of the Clean Air Act. In
addition, EPA will not promulgate, administer, and enforce a whole or
partial operating permit program pursuant to the title V regulations of
the Clean Air Act within two years after the date of the finding of
deficiency.
DATES: Effective Date: November 9, 2006. Because this Notice of
Deficiency is an adjudication and not a final rule, the Administrative
Procedure Act's 30-day deferral of the effective date of a rule does
not apply.
FOR FURTHER INFORMATION CONTACT: Anna Yen, EPA, Region 9, Air Division
(AIR-3), 75 Hawthorne Street, San Francisco, CA 94105, (415) 972-3976,
or [email protected].
SUPPLEMENTARY INFORMATION: Throughout this document, ''we,'' ``us'' and
``our'' refer to EPA.
Table of Contents
I. Background
II. Maricopa County's Submittal and EPA's Determination
III. EPA's Action
[[Page 67062]]
IV. Administrative Requirements
I. Background
On May 17, 2005, EPA issued a notice of deficiency (NOD) for the
title V operating permits program in Maricopa County, Arizona. (70 FR
32243, June 2, 2005). The NOD was based upon EPA's findings that the
County's title V program did not comply with the requirements of the
Clean Air Act (CAA or Act) or with the implementing regulations at 40
CFR part 70. The deficiencies EPA found were in two main categories:
(1) Permit fees and (2) permit processing.
Maricopa County was required to address these deficiencies within
18 months of the effective date of the NOD, or the County would be
subject to the sanctions under 40 CFR 70.10(b)(3) and section 179(b) of
the Act. In addition, 40 CFR 70.10(b)(4) provides that, if the
permitting authority has not corrected the deficiency within 18 months
of the date of the finding of deficiency, EPA will promulgate,
administer, and enforce a whole or partial program within 2 years of
the date of the finding.
Region 9 performed a title V program evaluation of Maricopa County
Environmental Services Department (MCESD) beginning May 27, 2004. On
May 18, 2005, Region 9 issued the final program evaluation report \1\
to MCESD. The deficiencies identified in the NOD are a subset of the
findings described in the program evaluation report. While the program
evaluation report was still being finalized, Maricopa County initiated
a number of changes. In November of 2004, Maricopa County created a new
Air Quality Department, separate from MCESD. In addition, Maricopa
County filled two key management positions in the Maricopa County Air
Quality Department (MCAQD): Department Director and Permit Engineering
Division Manager. In March 2005, Robert Kard was hired as the new
Department Director. In April 2005, Kathlene Graf was promoted to the
position of Permit Engineering Division Manager.\2\ With the
reorganization and new management, Maricopa County has implemented or
begun to implement many improvements to its title V program, in terms
of both accepted practices and formalized procedures.
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\1\ The report titled ``Maricopa County Environmental Services
Department Title V Operating Permit Program Evaluation,'' is
available at http://www.epa.gov/region09/air/titlevevals.html.
\2\ MCAQD has nine divisions, one of which is the Permit
Engineering Division.
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II. Maricopa County's Submittal and EPA's Determination
On August 15, 2005, Maricopa County Air Quality Department (MCAQD)
submitted a corrective action plan entitled ``Response to EPA Notice of
Deficiency & Title V Audit'' to EPA. In the plan, MCAQD responded to
each deficiency noted in the May 17, 2005 NOD and to each finding in
EPA's title V program evaluation report by proposing a correction for
each deficiency and an action to address each EPA finding. The
submittal also included a timeline that showed milestones and dates for
completion of each milestone.
Beginning in February 2006, Maricopa County Air Quality Department
(MCAQD) submitted quarterly updates to EPA to show its progress in
correcting the deficiencies noted in the NOD and in addressing the
findings of the title V program evaluation report. The submittals
included numerous attachments, many of which were new policy documents,
guidance documents, and standard operating procedures. On October 23,
2006, EPA received MCAQD's submittal, the ``Response to the Notice of
Deficiency,'' (NOD Response), dated October 20, 2006. The NOD Response
is available to view in the docket, Docket ID No. AZ-Maricopa-06-1-OPS.
In the NOD Response, and the preceding quarterly updates, MCAQD
explained and documented how each of the deficiencies identified in the
NOD had been, or were being, addressed. The NOD Response contains
documented internal organizational and operational changes within
MCAQD, an interim guidance document for title V permit revisions, a
copy of the revised fee rule and new delinquent fee policy, a fee
demonstration, a description of the improved accounting system, a
workload assessment for title V, and other supporting attachments.
This notice focuses only on MCAQD's responses to correct the
deficiencies identified in the NOD. Based on the information in MCAQD's
NOD Response, and the preceding quarterly updates, EPA has determined
that MCAQD has demonstrated that it has resolved each of the issues
listed in the May 17, 2005 NOD, as discussed below.
A. Permit Fees
1. Demonstration of Sufficient Fees To Cover Program Costs and That
Fees Are Used Solely for Title V
a. Fee Demonstration
Pursuant to 42 U.S.C. 7661a(b)(3) and 40 CFR 70.9(a), a permitting
authority's title V program must require that the owners or operators
of part 70 sources pay annual fees, or the equivalent over some other
period, that are sufficient to cover the permit program costs. 42
U.S.C. 7661a(b)(3) and 40 CFR 70.9(b) provide that a permitting
authority may collect fees that cover the actual permit program costs,
or may use a presumptive fee schedule, adjusted for inflation.
Maricopa County's permit fee structure is a combination of an
application fee, hourly-based processing fee, annual administrative
fee, and annual emissions-based fee. The emissions-based fee is less
than EPA's presumptive minimum, and, since other components of the
permit fees are not assessed on a per-ton basis, it was difficult to
determine if the aggregate of the fees met the presumptive minimum. In
addition, though Maricopa County was able to account for title V
revenues quite accurately, it did not have a clear accounting of its
costs incurred under title V. Therefore, Maricopa County was not able
to demonstrate that title V permit fees collected were sufficient to
fund its title V program.
To address this issue, MCAQD provided a fee demonstration to show
that the aggregate of its title V fees is equivalent to a fee greater
than the presumptive minimum, as allowed by 40 CFR 70.9(b)(2)(i). MCAQD
charges a dollar-per-ton emissions-based fee for actual emissions of
all regulated pollutants emitted during the previous calendar year.
Therefore, the fee demonstration includes fiscal year 2006 (July 2005
through June 2006) title V revenue, the total reported emissions of
regulated pollutants for calendar year 2005, and the resulting dollar-
per-ton number, which was compared with EPA's presumptive minimum
adjusted for inflation. MCAQD showed that the equivalent of the
aggregate of its title V fees in fiscal year 2006 \3\ was greater than
EPA's presumptive minimum which, adjusted for fiscal year 2006, is
$39.48/ton.\4\ Therefore, by 40 CFR
[[Page 67063]]
70.9(b)(2)(i), EPA presumes that MCAQD's fee schedule results in the
collection and retention of revenues sufficient to cover the title V
permit program costs.
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\3\ Because changes and improvements were being made to MCAQD's
accounting system throughout fiscal year 2006, title V program
revenue and expenses may not be 100% accurate in reflecting the
title V program. However, MCAQD feels it is of sufficient acuracy to
show that the aggregate of its fees is substantially greater than
EPA's presumptive minimum. MCAQD is in the process of completing
reconciliation of fiscal year 2006 title V revenues and expenses to
the extent possible, and any corrections made will be reflected in
the title V reporting category being established to track the title
V fund balance.
\4\ September 19, 2005, Memorandum, Calculation of the Part 70
Presumptive Minimum Fee Effective from September 2005 through August
2006, from Jeff Herring, Operating Permits Group, ITPID, OAQPS, to
Operating Permits Contacts EPA Regions I-X.
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b. Demonstration of Title V Fees Being Used Solely for the Title V
Program
As stated above, Maricopa County was able to account for title V
revenues; however, it did not have a clear accounting of costs incurred
under title V. Furthermore, Maricopa County maintained a single account
for title V fees, non-title V fees, and enforcement penalties. Both
title V and non-title V costs were paid from this account. Section
502(b) of the Act, 42 U.S.C. 7661a(b), and 40 CFR 70.9(a) provide that
a permitting authority's title V program must ensure that all title V
fees are used solely for title V permit program costs.
To correct this deficiency, MCAQD started out by hiring a third
party to conduct an audit of its accounting system, department-wide.
MCAQD's existing accounting system was an activity-based system to an
extent; i.e., it did tag certain revenues with identifiers to
distinguish one program's revenue from another program's revenue.
However, the system did not provide enough detail such that title V
costs could be accurately identified. The audit findings led to
correction of existing accounting identifiers for costs and revenues
and creation of new accounting identifiers. Each title V direct revenue
and cost is now tagged with one of the following two activity codes:
LSPC (Large Source Permit Compliance) and LSPR (Large Source Permit
Engineering Review). These codes are now reflected in MCAQD's
financial, personnel, and budgeting systems for all revenues and costs.
MCAQD has also defined formulas to allocate title V indirect costs
(e.g., administrative, ambient monitoring, planning, modeling) to the
appropriate activity codes, thus allowing for a full accounting of its
title V program costs.
With this new accounting system, MCAQD has been able to submit to
EPA a table of title V revenues and costs, listed by activity code and
by general category of revenue/cost, for fiscal year 2006. MCAQD showed
that, for fiscal year 2006, its total title V revenues were more than
sufficient to fund total title V costs, thus confirming the results of
MCAQD's fee demonstration that used EPA's presumptive minimum as a
basis for comparison.
With the improvements to its accounting system, MCAQD only
partially addressed the issue of demonstrating that title V permit fees
are used solely for title V program costs. MCAQD realized that it still
needed to address the scenario of title V revenues exceeding title V
costs. Currently, all title V revenues and costs \5\ are coded before
being deposited into or withdrawn from the Air Quality Fee Fund. MCAQD
has the ability to identify and total the revenues originating from the
title V program and manually track costs against the title V revenue
total. However, to facilitate tracking of title V revenues and costs,
MCAQD plans to implement an automated method of tracking the title V
portion of the Air Quality Fee Fund by setting up a reporting category
code in the financial system, similar to the way its grant revenue and
costs are tracked. This reporting code will, in effect, generate a
``fund balance report'' on a regular basis to provide a year-to-date
total of title V revenues, a year-to-date total of title V costs, and
the net balance. It will also provide inception-to-date totals and net
balance. This will allow MCAQD to know immediately, upon receipt of the
report, the title V balance.
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\5\ Costs such as salaries and benefits are charged to the
organizational unit to which the employee belongs or supports. These
determinations are made jointly by MCAQD's Financial Administrator,
the applicable program manager, and the Planning and Analysis
Division Manager. Costs such as supplies, services, and capital
outlays are charged in the organizational unit that will use the
purchased items/services to the extent possible. The program manager
determines, with assistance from MCAQD's Finance Division, the
appropriate organizational unit and activity code to which the costs
should be charged. All expenditures require approval by a program
manager and the Financial Administrator. On a monthly basis, program
managers review revenue and costs charged to their organizational
unit and corresponding activity codes.
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Currently, Maricopa County's Department of Finance generates a fund
balance report monthly for the existing funds with reporting codes
(e.g., grant funds). The fund balance report is reviewed, reconciled,
and certified for accuracy by MCAQD's Financial Administrator. A
written response to Maricopa County's Department of Finance is required
to certify/validate the information on the report. The procedure will
not differ once the title V reporting code is set up in the financial
system.
With its accounting system improvements, MCAQD has demonstrated
that it has the systematic ability to provide a detailed accounting of
title V program costs separately from other program costs. In addition,
the above new reporting code coupled with the existing review
procedures will reinforce MCAQD's ability to show that title V funds
are being used solely for title V program costs.
2. Revision of Maricopa County's Fee Rule
Maricopa County's fee rule, Rule 280, prevented the permitting
authority from issuing a final initial title V permit, permit revision,
or renewal permit if the source did not pay the balance of fees due.
Maricopa County's Rule 280 Sec. 301.1, at the time of NOD issuance,
stated, ``The Control Officer shall not issue a permit or permit
revision until the balance due on the itemized invoice is paid in
full.'' Maricopa County encountered problems with implementation of
this rule when several sources refused to pay the balance of permit
fees due when they were dissatisfied with certain conditions in their
permits. Existing sources retain the initial application shield granted
upon their submittal of a complete application; thus, these sources
claimed that they could continue to operate without an operating
permit. The problem was exacerbated by the fact that Maricopa County
did not enforce against those sources that refused to pay fees.
The first step MCAQD took in correcting this deficiency was to
implement a policy directive that required permit fee payment within 30
days of the conclusion of the month in which a source was billed. While
MCAQD worked on revising its Rule 280, it also created a policy
document to provide a consistent process for collecting unpaid fees
charged to owners, operators, applicants, and/or permittees of sources
of air pollution subject to the Maricopa County Air Pollution Control
Regulations. The document serves as guidance for MCAQD personnel.
MCAQD completed revisions to its Rule 280 in February 2006. It
added the following language to the rule: ``The Control Officer may
deny a permit, a permit revision, or a permit renewal in accordance
with Rule 200 of these rules if the applicant does not pay fees
required for billable permit actions within 90 days of the invoice
date.'' MCAQD also removed the $40,000 maximum fee for processing Title
V permit applications, thus enabling MCAQD to recover the full cost
associated with issuing a Title V permit. The Maricopa County Board of
Supervisors approved revisions to the rule on July 12, 2006, and the
Notice of Final Rulemaking was published in the Arizona Administrative
Register on
[[Page 67064]]
August 18, 2006. Though EPA did not include this step in the NOD as a
correction to the deficiency, MCAQD also plans to formally submit the
revised Rule 280 to EPA (through the State) as a revision to the title
V program once all formal rulemaking documents are available (e.g.,
Board of Supervisor's certification, publication affidavits, Notice of
Final Rulemaking).
B. Permit Processing
1. Implementation Guidance Document To Ensure That Title V Permits
Assure Compliance With All Applicable Requirements
Pursuant to 40 CFR 70.7(a)(1)(iv), title V permits must assure
compliance with all applicable requirements, including new source
review (NSR) requirements. Maricopa County issues combined
preconstruction/operating permits, with the intention of meeting both
the NSR requirements in its State Implementation Plan (SIP) and the
part 70 requirements in its title V program. Maricopa County, at times,
implemented its title V rule, Rule 210, without proper consideration of
the requirements of its NSR SIP Rule 20, resulting in the submittal to
EPA of title V permits that did not contain all applicable
requirements.
MCAQD has been working continuously over the past year, and
communicating regularly with EPA, on an implementation guidance
document. It has also given industry an opportunity to comment. MCAQD
submitted a final implementation guidance document entitled ``Interim
Guidance Document for Title V Permit Revisions'' in the NOD Response.
The guidance document explains how title V sources and MCAQD will
ensure that changes or modifications to an emissions unit or operation
at a title V source will comply with both the preconstruction
provisions in the NSR SIP and the permitting procedures in the current
Rule 210. Before making changes subject to the NSR SIP, title V sources
must obtain preconstruction approval from the County. By laying out
procedures for determining the appropriate processing track for title V
permit revisions and using flowcharts to step through the gatekeepers,
the guidance document provides guidance not only for distinguishing
between a significant revision and a minor revision under the title V
program, but also for determining whether preconstruction approval is
required pursuant to its SIP Rule 20. The guidance document also
suggests that a title V source use an attached checklist to document
how it proceeded through the flowcharts to reach a determination of the
type of permit it would need.
MCAQD plans to accomplish the following implementation steps by
November 17, 2006: (1) Distribute a copy of the guidance document to
all current title V permit holders; (2) Include the guidance document
with all title V permit application forms provided to applicants; (3)
Publish the guidance document with printed and on-line versions of Rule
210, to be distributed by the County; and (4) Provide training to title
V permit staff on the administration of this guidance.
MCAQD plans to revise its rules when it makes the changes necessary
for NSR Reform. MCAQD states that it must wait for the Arizona
Department of Environmental Quality to make the changes to the State
rules before it can proceed. The Interim Guidance Document will be
effective only until the time MCAQD completes its NSR rulemaking to
codify the principles spelled out in the guidance document.
2. Written Procedures on Processing of Permit Revisions
EPA noted two deficiencies related to Maricopa County's processing
of permit revisions: (a) Maricopa County did not take adequate steps to
ensure that significant permit revisions were not incorrectly processed
as minor permit revisions; and (b) Maricopa County typically did not
issue a separate revised permit document or technical support document
when processing its minor permit revisions. Instead, it signed the
application for the minor permit revision and allowed it to serve as
the final minor permit revision.
MCAQD's implementation guidance document entitled ``Interim
Guidance Document for Title V Permit Revisions,'' which was part of the
NOD Response, provides a procedure for determining the appropriate
processing track for title V permit revisions. One of MCAQD's
objectives with this guidance document is to facilitate its own efforts
to ensure that significant permit revisions are not incorrectly
processed as minor revisions under the title V program. Regarding the
deficiency involving minor permit revisions, MCAQD has changed its
practices to ensure that a minor permit revision, and not just a signed
application, is issued. Furthermore, MCAQD has implemented a new
procedure which requires that all title V permit revisions be signed by
the Permitting Division Manager and Department Director, unless MCAQD
formalizes delegation of the authority to a management level official.
3. Adequate Administering of Fees To Provide Sufficient Staffing
Section 502(b) of the Act, 42 U.S.C. 7661a(b), and 40 CFR 70.4
provide that a permitting authority must have adequate personnel to
ensure that the permitting authority can carry out implementation of
its title V program. In the NOD, EPA identified the deficiency that
Maricopa County was not adequately staffing its title V program.
MCAQD's strategy for hiring and retaining adequate staffing for
successful implementation of its title V program included the following
elements, not necessarily in this order: (1) Conduct a countywide
market study to evaluate current job descriptions, career ladders, and
salaries, for an ``environmental engineering specialist'' position; (2)
implement salary increases based on the market study results; (3)
perform a workload assessment to estimate the number of permitting
staff needed; (4) recruit for the additional permitting staff
positions; and (5) address career development (e.g., review job
classifications, implement a formal training program for staff, provide
mentorship to staff).
Maricopa County has a history of high staff turnover within the
Permit Engineering Division. As will be described in further detail
below, EPA, in its title V program evaluation report, listed poor
compensation as one of the contributing factors to low morale at
Maricopa County. To address this issue, Maricopa County's general human
resources department conducted a market study countywide to evaluate
current job descriptions, career ladders, and salaries, for an
``environmental engineering specialist.'' Based on the results of the
study, salary increases were approved and became effective December 5,
2005.
MCAQD also analyzed its workload to determine the number of
additional staffpersons it would need in the Permit Engineering
Division. As part of the NOD Response, MCAQD submitted a title V-
specific workload assessment for fiscal year 2006 in which MCAQD
estimated that it would need a total of eight title V engineers. MCAQD
projected a need for three contract engineers to complete its backlog
of work. On March 1, 2006, the Board of Supervisors approved MCAQD's
request for an additional four full-time employees (FTEs) for the title
V group of the MCAQD Permit Engineering Division. In addition, the
Board of Supervisors approved three contract engineering positions,
each with a one-year contract, for title V work. If MCAQD is able to
fill the four FTE
[[Page 67065]]
positions, the resulting total number of title V engineers will be
eight, which is consistent with MCAQD's latest workload assessment.
MCAQD is actively recruiting to fill the four open title V engineer
positions, as well as the three contract engineer positions.
EPA noted in its title V program evaluation report that poor
compensation and lack of opportunity for career development contributed
to low morale at Maricopa County.\6\ So as part of its strategy to
retain existing staff, Maricopa County focused on these two main
issues. As noted earlier, Maricopa County addressed the first issue of
poor compensation through a market study and resulting salary
increases. To address the second issue of career development, MCAQD has
begun to develop or has already completed the following actions EPA
recommended in the title V program evaluation report: a review of the
job classifications that would apply to title V engineers,
implementation of a training program for staff, creation of standard
operating procedures (SOPs), and providing mentorship to staff.
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\6\ See Finding 7.6 of EPA's program evaluation report.
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Regarding job classifications, MCAQD has streamlined the number of
``environmental engineering specialist'' (EES) job classifications from
three to two and changed the definition of each classification in an
effort to clarify the criteria for salary increases and promotions.
MCAQD has placed more of an emphasis on number of years of experience
as well as having a professional engineering (P.E.) license. For
example, MCAQD decided to eliminate the former EES Intern
classification which required no experience; instead, the current
first-level EES classification requires at least two years of
experience, and the second-level EES classification requires a P.E.
license. In addition, as evidenced by the implementation of salary
increases on December 5, 2005, the range of salaries for each of the
current EES classifications is higher than that for any of the former
EES classifications. In fact, the range of salaries for the current
second-level EES classification is even higher than that for the former
EES Supervisor classification.\7\
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\7\ According to MCAQD Human Resources, the average salary
increase for the MCAQD Permit Engineering Division per employee
ranged from 0.21% to 21%.
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MCAQD has a contingency plan in place until the open title V
engineering positions can be filled. MCAQD's fee rule allows MCAQD to
bill a source for the cost of obtaining consultants for expedited
permit processing. Because MCAQD has an approved consultant list, the
entire process from sending requests for proposals (RFP) to selecting a
bidder takes only about 30 to 60 days, which is substantially faster
than the standard RFP process. Since 2005, one permitting action has
been completed by a consultant through this expedited process.
Currently, there are three consulting firms under contract, each one
working on a different permitting action. MCAQD estimates that the work
performed by the consultants for these four projects (the one completed
and the three still in progress) would be equivalent to the work
performed by 3 FTEs. MCAQD plans to continue to use consultants as
necessary.
MCAQD submitted to EPA a strategy to hire and retain adequate staff
to successfully implement its title V program. Included in the
submittal was an updated workload assessment specific to title V tasks.
MCAQD also described a contingency plan if it was unable to fill open
title V engineering positions. MCAQD has followed through on
implementation of its strategy and, though it has not completed all
steps, we are confident that MCAQD will continue its efforts until it
is able to fill all open title V positions.
III. EPA's Action
EPA is notifying the public that, based on the information provided
by MCAQD, internal operational changes within MCAQD, and a Maricopa
County rule change, EPA has determined that Maricopa County has
resolved each of the deficiencies identified by EPA in the NOD for
Maricopa County's title V operating permits program, 70 FR 32243 (June
2, 2005). Therefore, based on the rationale set forth above, EPA is not
invoking sanctions pursuant to section 179(b) of the Act, nor
administering any portion of the County's operating permits program,
pursuant to 40 CFR 70.10(b)(4).
IV. Administrative Requirements
Under section 307(b)(1) of the Clean Air Act, petitions for
judicial review of today's action must be filed in the United States
Court of Appeals for the appropriate circuit by January 19, 2007.
List of Subjects in 40 CFR Part 70
Environmental protection, Administrative practice and procedure,
Air pollution control, Incorporation by reference, Intergovernmental
relations, Operating permits, Reporting and recordkeeping requirements.
Dated: November 9, 2006.
Wayne Nastri,
Regional Administrator, Region 9.
[FR Doc. E6-19555 Filed 11-17-06; 8:45 am]
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