shutdown or curtailment is creditable only if it occurred on or after the date specified for this purpose in the plan, and if such date is on or after the date of the most recent emissions inventory used in the plan's demonstration of attainment. Where the plan does not specify a cutoff date for shutdown credits, the date of the most recent emissions inventory or attainment demonstration, as the case may be, shall apply. However, in no event may credit be given for shutdowns which occurred prior to August 7, 1977. For purposes of this paragraph, a permitting authority may choose to consider a prior shutdown or curtailment to have occurred after the date of its most recent emissions inventory, if the inventory explicitly includes as current "existing" emissions the emissions from such previously shutdown or curtailed sources.

(ii) Such reductions may be credited in the absence of an approved attainment demonstration only if the shutdown or curtailment occurred on or after the date the new source application is filed, or, if the applicant can establish that the proposed new source is a replacement for the shutdown or curtailed source and the cutoff date provisions of section IV.C.3.(i) are observed.

4. Credit for VOC substitution. As set forth in the Agency's "Recommended Policy on Control of Volatile Organic Compounds" (42 FR 35314, July 8, 1977), EPA has found that almost all non-methane VOCs are photochemically reactive and that low reactivity VOCS eventually form as much ozone as the highly reactive VOCs. Therefore, no emission offset credit may be allowed for replacing one VOC compound with another of lesser reactivity, except for those compounds listed in Table 1 of the above policy statement.

5. "Banking” of emission offset credit. For new sources obtaining permits by applying offsets after January 16, 1979, the reviewing authority may allow offsets that exceed the requirements of reasonable progress toward attainment (Condition 3) to be "banked" (i.e., saved to provide offsets for a source seeking a permit in the future) for use under this Ruling. Likewise, the reviewing authority may allow the owner of an existing source that reduces its own emissions to bank any resulting reductions beyond those required by the SIP for use under this Ruling, even if none of the offsets are applied immediately to a new source permit. A reviewing authority may allow these banked offsets to be used under the preconstruction review program required by Part D, as long as these banked emissions are identified and accounted for in the SIP control strategy. A reviewing authority may not approve the construction of a source using banked offsets if the new source would interfere with the SIP control strategy or if such use would violate any other condition set forth

for use of offsets. To preserve banked offsets, the reviewing authority should identify them in either a SIP revision or a permit, and establish rules as to how and when they may be used.

6. Offset credit for meeting NSPS or NESHAPS. Where a source is subject to an emission limitation established in a New Source Performance Standard (NSPS) or a National Emission Standard for Hazardous Air Pollutants (NESHAPS), (i.e., requirements under sections 111 and 112, respectively, of the Act), and a different SIP limitation, the more stringent limitation shall be used as the baseline for determining credit for emission and air quality offsets. The difference in emissions between the SIP and the NSPS or NESHAPS, for such source may not be used as offset credit. However, if a source were not subject to an NSPS or NESHAPS, for example if its construction had commenced prior to the proposal of an NSPS or NESHAPS for that source category, offset credit can be permitted for tightening the SIP to the NSPS or NESHAPS level for such source.

D. Location of offsetting emissions. In the case of emission offsets involving volatile organic compounds (VOC), the offsets may be obtained from sources located anywhere in the broad vicinity of the proposed new source. Generally, offsets will be acceptable if obtained from within the same AQCR as the new source or from other areas which may be contributing to the ozone problem at the proposed new source location. As with other pollutants, it is desirable to obtain offsets from sources located as close to the proposed new source site as possible. If the proposed offsets would be from sources located at greater distances from the new source, the reviewing authority should increase the ratio of the required offsets and require a showing that nearby offsets were investigated and reasonable alternatives were not available."

Offsets for NO, sources may also be obtained within the broad vicinity of the proposed new source. This is because areawide ozone and NO, levels are generally not as dependent on specific VOC or NO, source location as they are on overall area emissions. Since the air quality impact of SO2, particulate and carbon monoxide sources is site dependent, simple areawide mass emission offsets are not appropriate. For these pollutants, the reviewing authority should consider atmospheric simulation modeling to ensure that the emission offsets provide a positive net air quality benefit. However, to avoid unnecessary consumption of limited,

The discussion in this paragraph is a proposal, but represents EPA's interim policy until final rulemaking is completed.

costly and time consuming modeling resources, in most cases it can be assumed that if the emission offsets are obtained from an existing source on the same premises or in the immediate vicinity of the new source, and the pollutants disperse from substantially the same effective stack height, the air quality test under Condition 4 of Section IV.A. of this appendix will be met. Thus, when stack emissions are offset against a ground level source at the same site, modeling would be required. The reviewing authority may perform this analysis or require the applicant to submit appropriate modeling results.

E. Reasonable progress towards attainment. As long as the emission offset is greater than one-for-one, and the other criteria set forth above are met, EPA does not intend to question a reviewing authority's judgment as to what constitutes reasonable progress towards attainment as required under Condition 3 in Section IV.A. of this appendix. This does not apply to "reasonable further progress" as required by Section 173.

F. Source obligation. At such time that a particular source or modification becomes a major stationary source or major modification solely by virtue of a relaxation in any enforceable limitation which was established after August 7, 1980, on the capacity of the source or modification otherwise to emit a pollutant, such as a restriction on hours of operation, then the requirements of this Ruling shall apply to the source or modification as though construction had not yet commenced on the source or modification.

V. ADMINISTRATIVE PROCEDURES

The necessary emission offsets may be proposed either by the owner of the proposed source or by the local community or the State. The emission reduction committed to must be enforceable by authorized State and/or local agencies and under the Clean Air Act, and must be accomplished by the new source's start-up date. If emission reductions are to be obtained in a State that neighbors the State in which the new source is to be located, the emission reductions committed to must be enforceable by the neighboring State and/or local agencies and under the Clean Air Act. Where the new facility is a replacement for a facility that is being shut down in order to provide the necessary offsets, the reviewing authority may allow up to 180 days for shakedown of the new facility before the existing facility is required to cease operation.

A. Source initiated emission offsets. A source may propose emission offsets which involve:

(1) Reductions from sources controlled by the source owner (internal emission offsets); and/or (2) reductions from neighboring

sources (external emission offsets). The source does not have to investigate all possible emission offsets. As long as the emission offsets obtained represent reasonable progress toward attainment, they will be acceptable. It is the reviewing authority's responsibility to assure that the emission offsets will be as effective as proposed by the source. An internal emission offset will be considered enforceable if it is made a SIP requirement by inclusion as a condition of the new source permit and the permit is forwarded to the appropriate EPA Regional Office. 10 An external emission offset will not be enforceable unless the affected source(s) providing the emission reductions is subject to a new SIP requirement to ensure that its emissions will be reduced by a specified amount in a specified time. Thus, if the source(s) providing the emission reductions does not obtain the necessary reduction, it will be in violation of a SIP requirement and subject to enforcement action by EPA, the State and/or private parties.

The form of the SIP revision may be a State or local regulation, operating permit condition, consent or enforcement order, or any other mechanism available to the State that is enforceable under the Clean Air Act. If a SIP revision is required, the public hearing on the revision may be substituted for the normal public comment procedure required for all major sources under 40 CFR 51.18. The formal publication of the SIP revision approval in the FEDERAL REGISTER need not appear before the source may proceed with construction. To minimize uncertainty that may be caused by these procedures, EPA will, if requested by the State, propose a SIP revision for public comment in the FEDERAL REGISTER concurrently with the State public hearing process. Of course, any major change in the final permit/SIP revision submitted by the State may require a reproposal by EPA.

B. State or community initiated emission offsets. A State or community which desires that a source locate in its area may commit to reducing emissions from existing sources (including mobile sources) to sufficiently outweigh the impact of the new source and thus open the way for the new source. As with source-initiated emission offsets, the commitment must be something more than one-for-one. This commitment must be submitted as a SIP revision by the State.

10 The emission offset will, therefore, be enforceable by EPA under section 113 as an applicable SIP requirement and will be enforceable by private parties under section 304 as an emission limitation.

VI. POLICY WHERE ATTAINMENT DATES HAVE NOT PASSED

In some cases, the dates for attainment of primary standards specified in the SIP under section 110 have not yet passed due to a delay in the promulgation of a plan under this section of the Act. In addition the Act provides more flexibility with respect to the dates for attainment of secondary NAAQS than for primary standards. Rather than setting specific deadlines, section 110 requires secondary NAAQS to be achieved within a "reasonable time". Therefore, in some cases, the date for attainment of secondary standards specified in the SIP under section 110 may also not yet have passed. In such cases, a new source locating in an area designated in 40 CFR 81.3000 et seq. as nonattainment (or, where Section III of this Ruling is applicable, a new source which would cause or contribute to an NAAQS violation) may be exempt from the Conditions of Section IV. A. so long as the new source meets the applicable SIP emissions limitations and will not interfere with the attainment date specified in the SIP under section 110 of the Act.

(Secs. 101(b)(1), 110, 160-169, 171-178, and 301(a), Clean Air Act, as amended (42 U.S.C. 7401(b)(1), 7410, 7470-7479, 7501-7508, and 7601(a)); sec. 129(a), Clean Air Act Amendments of 1977 (Pub. L. 95-95, 91 Stat. 685 (Aug., 7, 1977)))

[44 FR 3282, Jan. 16, 1979, as amended at 45 FR 31311, May 13, 1980; 45 FR 52741, Aug. 7, 1980; 45 FR 59879, Sept. 11, 1980; 46 FR 50771, Oct. 14, 1981; 47 FR 27561, June 25, 1982; 49 FR 43210, Oct. 26, 1984; 51 FR 40661, 40675, Nov. 7, 1986; 52 FR 24714, July 1, 1987; 52 FR 29386, Aug 7, 1987; 54 FR 27285, 27299, June 28, 1989]

These guidelines are applicable to all metropolitan area regions or portions of regions where the national ambient air quality standards for ozone or carbon monoxide will not be attained by July 1, 1979. 1.2 Purposes.

The purposes of these guidelines include: 1. To recommend procedures and criteria for determining a lead agency to be responsible for coordinating the preparation of the implementation plan revisions called for by the 1977 amendments to the Clean Air Act (Pub. L. 95-95) in metropolitan area regions where carbon monoxide or ozone standards will not be attained by July 1979.

2. To assist state and local governments in identifying the initial planning, implementation, and enforcement responsibilities for the plan revisions and in establishing a process for further definition of responsibilities as development of the revisions progresses.

3. To encourage further coordination and consolidation of federally sponsored planning programs. This includes the integration of the new transportation related air quality requirements under Pub. L. 95-95 into the transportation planning process required by federal transportation grant statutes.

1.3 Background.

On August 7, 1977, President Carter signed into law the first comprehensive amendments to the Clean Air Act since 1970. Among the more important changes in the Clean Air Act are provisions encouraging local governments and organizations of local elected officials to assume additional responsibilities in the development, implementation, and enforcement of plans to attain national ambient air quality standards. Such plans were first required under the 1970 amendments to the Clean Air Act. The 1977 amendments require plan revisions for areas where standards have not been attained.

The assumption of additional responsibilities by local governments and local officials is specifically encouraged in those areas where ozone and carbon monoxide standards will not be attained by July 1, 1979 (section 174(a)). The first identification of nonattainment areas for these and other pollutants under the requirements of the 1977 amendments must have been made by states by December 5, 1977. The Administrator of the Environmental Protection Agency (EPA) must publish a list of these areas, with any modifications he deems necessary, by February 3, 1978.

For areas where standards for ozone and carbon monoxide will not be attained by July 1, 1979, state and local elected officials must jointly determine by February 7, 1978, their respective responsibilities for the plan revisions necessary to attain standards by the new deadlines in the 1977 amendments. The plan elements for which responsibilities are to be jointly determined encompass control measures for all pollutants for which standards have not been attained, not just ozone and carbon monoxide.

The amendments require that, where possible, the implementation plan revisions be prepared by an organization of local elected officials designated by agreement of local governments. The amendments strongly encourage preparation by the organization now responsible for transportation planning under section 134 of Title 23, U.S.C., or for air quality maintenance planning (or for both). The designated organization and its responsibilities must be certified by the state (or states if an interstate area is involved). Where local governments have not reached agreement by February 7, 1978, the governor must, in consultation with the elected officials of local governments in the affected area, designate an organization of local elected officials or a state agency to prepare the plan revisions. The designation by the governor must be in accordance with the joint determination of responsibilites made by state and local elected officials.

The governor must, under regulations which the EPA will propose during December 1977, submit a notice to the EPA certifying the designated agency for each nonat

tainment area or identifying the organization that he or she has designated. The notice must include a brief summary of the process involved in selecting the designated agency. A more detailed documentation of the selection process shall be included as part of the plan revisions to be submitted to the EPA by January 1, 1979. Evidence of the involvement of state legislatures and local governments is required as part of the plan revision submittal (section 172(b)(9)).

Only organizations of local elected officials of general purpose governments certified by the governor will be eligible for the grants authorized under section 175 of the amendments. In each urban area which is wholly or partially classified as a nonattainment area, only one organization will be eligible to receive a grant. The organization receiving the grant may use the grant funds to support plan revision activities carried out by other governmental organizations, public interest groups, or private consultants.

In addition to further defining the process for implementation of the Clean Air Act amendments, the EPA and the Department of Transportation also encourage in these guidelines further coordination and consolidation of federally sponsored planning programs. Such encouragement is consistent with President Carter's Environmental Message of May 1977 and with subsequent actions taken by the President to eliminate, consolidate, or simplify federal planning requirements. The Environmental Message in part stressed the need for improved implementation of environmental laws through more efficient delivery of federally funded programs. The encouragement for coordination and consolidation does not imply the advocacy of any particular institutional mechanism. A wide variety of mechanisms ranging from concentration of authority or responsibility in a single organization to development of memoranda of understanding among several organizations are available to achieve the same objectives.

2. SELECTION OF A LEAD PLANNING
ORGANIZATION

2.1 Criteria for Selecting an Organization.

These guidelines are intended to assist state and local officials in reaching agreement on the lead planning organization to be responsible for plan revisions called for by the 1977 Clean Air Act amendments. The role of the lead planning organization may vary from developing almost all elements of the plan revision to acting as a forum for decisionmaking by elected officials on elements developed almost entirely by other organizations. In most instances the lead organization will probably develop some elements, coordinate the development of other

elements, and serve as a forum for deciding the ultimate nature of the plan revisions.

The amendments require that, where feasible, the organization designated and certified to prepare the plan revisions shall be (1) the metropolitan planning organization (MPO) responsible for the continuing, cooperative, and comprehensive transportation planning process for the affected area; (2) the organization responsible for the air quality maintenance planning process; or (3) an organization responsible for both planning processes. Coordination of the development of a plan revision with the MPO transportation planning process is particularly important in those nonattainment areas where transportation control measures appear necessary to attain standards. Only through the MPO process can the federal funds available under Federal Highway Administration and Urban Mass Transportation Administration programs be used to implement necessary transportation management measures and capital projects.

The Administrator of the EPA also strongly encourages that, in addition to meeting the requirements described above, the designations made pursuant to section 174 contribute to a consolidation within a single organization of responsibilities for air quality planning and for other environmental planning carried out under Federal laws administered by the EPA. These laws include the Federal Water Pollution Control Act, the Safe Drinking Water Act, and the Resource Conservation and Recovery Act. The EPA believes that, where properly applied, consolidation of environmental planning efforts is an essential step in the development of comprehensive environmental strategies that are able to take into account the interrelated nature of environmental problems. Comprehensive strategies can also result in a more efficient and effective use of resources in achieving environmental benefits.

The following criteria should be considered by local elected officials and by the governor when determining the lead planning organization for urban nonattainment regions:

1. The organization should be the forum for cooperative decisionmaking by principal elected officials of general purpose local governments. The principal elected officials of general purpose local governments should have adequate (preferably majority or larger) representation in the organization but membership need not be limited to them or their designees. There should be participation by agencies that may be responsible for implementation of portions of the plan.

2. The organization should have a planning jurisdiction that includes the current urbanized area and the area likely to be ur

banized at least over the period to be covered by the revised plan.

3. The organization should have the ability to produce the necessary plan revision for the planning jurisdiction described above by the January 1, 1979 submittal deadline. The organization should have the capability to perform the necessary analysis and planning tasks itself or be able to enter into binding agreements with other organizations to perform such tasks.

4. The organization should have the capability to coordinate the development of the plan revision with other relevant planning processes, if it does not have responsibility for those processes, and with agencies that may have responsibility for implementation or enforcement. Relevant planning processes include the continuing, cooperative, and comprehensive planning process; other environmental planning processes assisted through EPA-administered programs; and comprehensive planning processes established in accordance with Part IV of the Office of Management and Budget Circular A-95 (41 FR 2052).

2.2 The Selection Process.

Local governments within a nonattainment area for photochemical oxidants or carbon monoxide may, by agreement, designate an organization of elected officials of local government to prepare the plan revision for the pollutants for which standards in that area have not been attained. A resolution by the governing body of an organization meeting the criteria in section 2.1 of these guidelines is sufficient to demonstrate agreement of local governments. Such a designation must be submitted to the governor by February 7, 1978. Local governments intending to designate an organization should consult with the state during the designation process.

If local governments agree on an organization by February 7, 1978, the governor shall certify that organization by April 1, 1978, unless he or she finds that the designated organization does not meet the criteria in section 2.1. If local governments have initiated, but have not completed, designation of an organization by February 7, 1978, they should inform the governor that an ongoing process exists.

If local governments are unable to agree by February 7 on a single lead organization of local elected officials to be responsible for the coordination of the plan revision, the governor shall, in consultation with local elected officials of general purpose local governments, designate an organization or a state agency by April 1, 1978. If more than one organization meeting the criteria in section 2.1 is self-designated in an area and proposed to the governor for certification, the governor shall certify the orga