1
      \      UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
      I          '        WASHINGTON, D.C. 20460
                          March 19,  1996
                                                          OFFICE OF
                                                      THE INSPECTOR GENERAL
MEMORANDUM

SUBJECT:  Audit Report No. E1KAF5-11-0001-6100140
          Development of Maximum Achievable
          Control Technology Standards
FROM:     Edward Gekosky
          Divisional Inspectpr General  for  Audit
          Headquarters Audit -Division           .

TO:       John S.-Seitz
          Director, Office of Air Quality Planning        .
            and Standards  (OAQPS) , Office of  Air  and Radiation

     This report presents the results of  our  audit of the
development of Maximum Achievable Control Technology (MACT)
standards.  The audit objectives were to  identify efficiencies
that could be implemented to accelerate the MACT  standards
development process and to evaluate  the Agency' s  method of
determining the MACT floor for emission standards.  During this
review, we found that the Agency adopted  many initiatives to
improve the MACT standards development  process.   However, OAQPS
was behind schedule for completing MACT standards within the
statutory timeframes.  We also found that the Agency had not
established the required category for research and development
(R&D) facilities, and believe that EPA  should seek a
clarification of the method for computing the emission standard.
In response to our draft report, we  are pleased that you plan to
take actions to establish a source category for R&D facilities.
We also acknowledge your view that seeking  a  clarification of
calculating the MACT floor as not being a vital issue at this
time, but we continue to believe that a clarification should
occur as reauthorization of the Clean Air Act occurs.

ACTION REQUIRED

     In accordance with EPA Order 2750, you as the action
official are required to provide  this office  a written response
to the audit report within 90 days of the final audit report
date.  For corrective actions planned but not completed by your
response date', reference to specific milestone dates will assist


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                                     DEVELOPMENT OF MACT STANDARDS
this.office in deciding whether to close this report.  We have no
objections to the  further release of this report to the public.

     We appreciation the cooperation extended to our auditors
during this audit  by your staff.   Should you or. your staff have
any questions about  this report,  please contact Michael Prater,
Audit Manager, at  (703)  308-8222.  •

Attachment
                                 ii
Report No. E1KAF5-11-0001-6100140

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                  DEVELOPMENT OF MACT STANDARDS
     This report presents the results of an audit by the Office
of Inspector General on the development of Maximum Achievable
Control Technology (MACT) standards.  MACT standards are
performance criteria designed to significantly reduce air toxics
emissions.

SCOPE AND METHODOLOGY

     The audit objectives were to identify efficiencies that
could be implemented to accelerate the MACT standards development
process, and to evaluate the Agency's method of determining the
MACT floor for emission standards.  To achieve these objectives,
we reviewed available records for the MACT development process.
We also interviewed Agency personnel, State officials and other
interested parties.   We conducted our review activities from
October 1994 to August 1995, and performed the audit in
accordance with the Government Auditing Standards issued by the
Comptroller General of the United States (1994 Revision).

     We did not verify data from any management information
system and did not perform a comprehensive evaluation of internal
controls.  However, in March 1995, the General Accounting Office
(GAO) addressed internal controls in a report on Clean Air
Rulemakina which concluded that EPA did not have a systematic way
of measuring the impact of its efforts to reduce the time it
takes to issue rules.  GAO recommended that EPA implement a
tracking system to record key dates, resources, and historical
information needed to monitor and evaluate the Agency's clean air
rulemaking process.  In response to the GAO report, OAR plans to
develop a new resource management system.  We agree that a .
tracking system would assist management in identifying problem
areas in the rulemaking process and assessing their streamlining
efforts.  No other significant issues came to our attention that
warranted expanding the scope of our audit.

BACKGROUND

     One of the most extensive revisions in the Clean Air Act
Amendments (CAAA) of 1990 addressed the Air Toxics Program.  Air
toxics are those pollutants known or suspected of causing cancer
or other serious health effects.  Prior to passage of the 1990
Amendments, the air toxics program was at a standstill.  Since
1970, the Environmental Protection Agency (EPA) had regulated
only eight of the hundreds of toxic air pollutants emitted from
industrial processes.  The problem under the 1970 law was that
EPA was required to regulate air toxics based on risk to public*
health.  In setting control standards, EPA was to prevent adverse

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                                    DEVELOPMENT OF MACT STANDARDS
health effects associated with exposure to air toxics "with an
ample margin of safety."  Since EPA could not clearly define a
safe level of exposure to these cancer-causing pollutants, it
became almost impossible to  issue regulations.

     The 1990 Amendments reflected a different approach for
regulating air toxics.  EPA  was to identify categories of major
sources that emit any of the 189 toxic air pollutants listed in
the Act.  A major source is  one that emits more than 10 tons per
year of a single air toxic or 25 tons per year of any combination
of air toxics.  The CAAA also required EPA to establish a
separate category to cover air toxic emissions from research or
laboratory facilities.  In July 1992, EPA published a list of 174
source categories which included 166 major source categories and
8 area source categories (any source not considered a major
source).  Over the next 10 years, EPA was to develop technoloav-
based MACT standards for these categories.  These standards
require emitters to use the  best control technologies already
demonstrated by industry sources.  The new air toxics program did
not dictate the specific equipment that a facility mUst install,
but rather focused on the emissions standards that the facility
must achieve.  This approach allowed industry the flexibility to
develop its own methods of reducing air toxics emissions.

     The CAAA set forth the  basic methodology by which these
standards were to be developed.  The methodology required the
Agency to determine the emissions reductions of the various
sources and then average the top 12 percent to establish what is
commonly referred to as the  MACT floor or emission limitation.
There is an exception for small industries.  If a source category
has less than 30 sources, the best five performing sources are
averaged to arrive at the MACT floor.  To determine the MACT
floor, EPA ranks the existing sources in each source category
using emission reduction data gathered from questionnaires and
other sources.  The agency averages the best 12 percent of
emission reductions from the ranking list to arrive at the MACT
floor.
EMISSIONS FROM MAJOR SOURCES AT RESEARCH
AND DEVELOPMENT FACILITIES LACK REGULATION

     Section 112(c)(7) of the Clean Air Act requires EPA to
establish a separate category to cover air toxic emissions from
research or laboratory facilities whose primary purpose is to
conduct Research and Development (R&D) into new processes and
products.  During our review of the MACT standards development
process, we learned that a separate category did not exist..  As a
result, R&D facilities can operate without restriction in those

                                2     Report NO. B1KAF5-11-0001-6100140

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                                     DEVELOPMENT OF MACT  STANDARDS
states that have no  independent regulation.  Of nine completed
MACT standards, five explicitly exempted R&D facilities and  four
were silent.

     R&D operations  involve  not just research in laboratories but
full-scale production  facilities.  R&D production  facilities
operate for extended periods of time and can be major emitters of
air pollution.  An EPA official told us that some  R&D facilities
manufacture large quantities of products for sale  as test
products and that it is not  clear when an operation crosses  the
line between R&D and manufacturing.  In our opinion, the
possibility exists that with no air toxics controls required for
R&D, industry could  take advantage of R&D status to avoid
complying with air toxics regulations.

     Our discussions with Agency officials revealed that little
.is known regarding the number of major R&D facilities that exist
nor the emissions produced by these facilities.  However, no
effort was under way to include R&D facilities as  a separate
category.  As a result, we could not determine how many major
source R&D facilities  exist.  In one MACT we reviewed, an
industry spokesperson  told us his company has a sizeable R&D
facility in a metropolitan area.  The state environmental
official said that the R&D facility is a major source emitter
which she believes should be regulated.  In another MACT we
reviewed, a state official said they do not keep records of  major
sources of air toxics  at R&D facilities.  However, he was able to
list at least 24 R&D facilities that he believed were major
sources of Volatile  Organic  Compounds  (VOCs).  The VOCs were
Criteria Air Pollutants which are regulated under  Title I of the
CAAA.  An EPA official believes it is likely that  major
quantities of air toxics are emitted along with the VOC
emissions.  In that  case, those R&D facilities could potentially
meet the criteria for  major  sources of air toxics  and be excluded
from federal regulations.

Conclusion

     From our review of the  law, we concluded that the CAAA
intended that R&D facilities be categorized as a separate
category.  However,  from our discussions with Agency
representatives and  other stakeholders, we learned that R&D
facilities are not currently subject to MACT standards and that
no separate category for R&D facilities now exists.  We believe
one solution for covering unregulated R&D facilities would be to
create a separate category for R&D facilities.
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                                    DEVELOPMENT OF MACT STANDARDS
Recommendation

     We recommend that the Director, OAQPS, establish a separate
category covering research or laboratory facilities.

MACT STANDARDS DEVELOPMENT

     One of the objectives of this review was to identify
efficiencies that could be implemented to reduce the ruleroaking
time.  We found that OAQPS was addressing the problems and delays
they encountered.  We performed a detailed review of two
completed MACT standards and a MACT partnership pilot project
that is expected to be finished in 1996.  With assistance from
officials in the Office of Air Quality Planning and Standards
(OAQPS), we picked one MACT that worked well (Magnetic Tapes -
surface coatings), one that experienced problems (Petroleum
Refineries), and one of the MACT partnership pilot projects
(Bakers Yeast Manufacturing) .•

     MACT That Worked Well.  The MACT that worked well was
     promulgated in about 4 years.  The project leader told us
     the industry consisted of less than 30 plants and about half
     were major sources of air toxics.  This rule, was identified
     as nonsignificant (exempt from OMB review) and tier 3
     (exempt from high level EPA review), which likely speeded
     the process.  Industry became involved early in the process.
     An industry representative said that from prior experience
     with government regulations, they knew if they were not
     involved before the proposal they would not have much impact
     on the final outcome.  Though it was a long process, the
     industry representative said they ended up with a good rule
     that was flexible and responsive to industry.  We believe
     the factors that contributed to the success of this MACT
     were a relatively small industry, lower level review, early
     industry involvement, and limited or no controversy with, the
     industry.

     MACT .That Had Problems.  The MACT that experienced problems
     was completed under court order in four and a half years.
     An Agency official said that previously, with statutory
     deadlines, decisions were put off and few regulations were
     promulgated.  He said that court-ordered deadlines are very
     effective; decisions must be made and regulations are
     promulgated much more quickly.  The implication is that
     without a court-ordered deadline, this MACT would have taken
     considerably longer than four and a half years.  This MACT
     involved a large industry and a great amount of controversy
     including Congressional inquiries.  It was an industry that

                                4     Report No. E1KAP5-11-0001-6100140

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                                    DEVELOPMENT OF MACT STANDARDS
     was already heavily regulated.   The industry was split into
     two factions,  generally determined by company size.  Large
     companies,  .located mainly in urban areas,  had upgraded their
     control technology to meet prior regulations.  Small
     companies,  on the other hand, were located mainly in non-
     urban areas and were not previously required to update their
     control technology.  Also, the-small companies could least
     afford expensive control changes.  EPA estimated that
     approximately zero to seven companies would be put out of '
     business by the MACT requirements; the small companies
     argued that the number was understated.  This standard was
     delayed partly because industry had to respond to a second
     questionnaire after small companies complained that they
     were not represented in the first questionnaire.  In fact,
     the first questionnaire went only to the large companies
     because they had the most advanced technology which would be
     used to establish the MACT standard.  We believe the major
     factor that caused problems for this MACT was a politically
     strong and divided industry.

     MACT Partnership Pilot Project.   EPA officials expected this
     MACT to take 2 years from start to finish which was 2 years
     faster than any of the previous MACT standards.  It involved
     a relatively small industry of 13 plants (owned by about six
     companies)  located in ten states.  EPA formed a partnership
     with two states that had implemented state regulations.
     This MACT standard was scheduled for promulgation in the
     year 2000.   The project leader told us that industry
     supported the effort to get the MACT out 4 years before the
     deadline f*or economic reasons.   The improvements in
     technology required by the new rule could increase their
     yield and the improvements would more than pay for
     themselves.  On the down side,  a state official recalled a
     problem that arose because a company was concerned about
     providing confidential business information that might find
     its way to one of their competitors that was located in the
     state of one of the MACT partners.  He said the appearance
     of favoritism toward companies in the MACT partner's state
    . could be a problem for MACT partnerships.  Factors
     contributing to the success of this MACT partnership include
     having interested states and a cooperative industry.

Conclusion

     Our review of the MACT standards identified the complexities
involved in developing the various MACTs.  We found it difficult,
if not impossible,  to compare the current activities with the
MACTs begun under conditions that no longer exist.  For example,

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                                     DEVELOPMENT OF MACT STANDARDS
 many regulations no longer require OMB and high level  EPA review;
 later regulations also benefit by using parts of previously
 written rules;  and,  following the reorganization of OAQPS in
 early fiscal year 1995,  rules are now prepared in one  group
 rather than the former practice of starting in one branch and
 being completed in another.   We found that OAQPS was addressing
 the problems and delays they encountered.   The following section
 discusses many of the initiatives OAQPS staff adopted  to improve
 and speed the MACT development process.

 OAOPS ADOPTS INITIATIVES TO IMPROVE THE MACT DEVELOPMENT PROCESS

      Duririg the first four years of the new approach,  EPA made
 progress toward fulfilling the legislative mandate. However,  the
 Agency was falling behind schedule for completing MACT standards
 within the statutory timeframes.  The Act  required EPA to
.regulate 25 percent of the source categories by November IS,
 1994,  another 25 percent by "November 15,  1997, and. remaining
 source categories by November 15, 2000.   The Agency allocated 45
 source categories to be completed by the 1994 deadline,  42 by the
 1997 deadline,  and 87 by the year 2000 deadline.  As of March
 1995:          .'.

      Nine MACT standards had been promulgated which regulated 20
      source categories,  or about 11 percent of the total.  The
      remaining 25 source categories slated for completion by
      November 1994 were under court-ordered deadlines  with all to
      be promulgated by May 1996.

      All MACT standard projects due in November 1997 were
      started.  Twenty-eight MACT standards will be promulgated to
      regulate the 42 source categories.

      Work had started on 14 of the remaining 87 source categories
      that are due by November 2000.

      An attorney in EPA's Office of General Counsel said that EPA
 will not miss court-ordered deadlines.  An OAQPS official stated
 that EPA met all the courtBordered deadlines; however, extensions
 can be granted through agreements with plaintiffs.

      During our review,  OAQPS and other stakeholders discussed
 many initiatives and other factors that improved and speeded the
 MACT development process.  While recognizing that OAQPS is not
 meeting the statutorily mandated schedule established  by
 Congress, we believe OAQPS has been proactive in seeking and
 putting to use innovations to speed and improve the MACT
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                                                                      .   1
                                    DEVELOPMENT OF MACT STANDARDS
development process.  We discussed several of these initiatives
with OAQPS and other stakeholders,

     Futures-Team.  The Futures Team was formed by OAQPS in the
    "early 1990's to generate ways to shorten the MACT
     development process in response to expected budget cuts.
     Its mission was to analyze the roles and responsibilities of
     its Emissions Standards Division and to identify ways to
     streamline processes and achieve CAAA goals within the
     reduced budget.  The Futures Team resulted in (1) a system
     for typing the MACTs and (2) the MACT Partnership Program.

     Typing (Grouping) of MACTs.  OAQPS developed a system for
     grouping MACTs into Type A, B,. or C.  A representative told
     us that typing was their procedure for sorting MACTs with
     regard to the amount of information and resources it takes
     to complete the rule.  The Futures Team recognized that
     planning was an important element needed to speed and
     improve the overall process.  "Typing" formalized planning
     by setting the scope of each project up front and gaining a
     commitment by those involved.

     MACT Partnerships.  Probably the most well-known initiative
     adopted by OAQPS is the MACT Partnership Program.  The
     Partnership Program is characterized by EPA and states
     working together with industry and environmentalists to
     fulfill the mandate to set MACT standards for sources of air
     toxics.  This program is expected to reduce the time,
     resources, and funds needed for completing the MACTs.
     Partnerships are founded on the mutual interests of the
     major stakeholders in the air toxics program (EPA, state
     governments, industry, and environmentalists).

     Tiering of Agency Regulations.  Under this Agency-wide
     program,  all rules (both planned and under development) are
     classified into either Tier 1, 2, or 3.  For example, Tier
     1, requires the highest level of review of the three tiers
     and generally takes the longest to complete.  The
     characteristics of Tier 1 regulations include cross-Agency
     controversy, great impact on the public, high external and
     political interest, and controversy with other Federal
     Agencies.  Approximately half of the MACT Standards are
     categorized as tier 3, only one or two MACTs are categorized
     as tier 1, and the remaining .MACTs are categorized as tier
     2.

     Nonsignificant Rules Exempt from OMB Review.  In addition to
     time saved through OAQPS "typing" and Agency-wide "tiering,"

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                                    DEVELOPMENT OF MACT STANDARDS
     proposed rules can be classified "nonsignificant" and do not
     undergo OMB review.  Elimination of the OMB review can save
     up to six months during promulgation.

    • Regulatory Negotiation.  A regulatory negotiation brings all
     the stakeholders together to develop a regulation.  A
     regulatory negotiation requires the parties to reach a
     consensus.  Since everyone must agree on the final outcome,
     the development process can be very time consuming.
     However, once consensus is reached, the rest of the process
     goes very easily because the proposal is accepted and there
     is no need for public hearings and time consuming rewrites
     and litigation over the final rule.

     Workshops and Working Meetings.  OAQPS hosted implementation
     workshops and working meetings with regional, state, and
     local government representatives.  At these gatherings, EPA
     officials discuss the direction of the program and obtain
     ideas from outside parties.

Conclusion

     In summary, our review of the development process of the
MACTs showed that OAQPS was actively seeking and adopting
initiatives to speed and improve the process.  Since the
enactment of the CAAA in 1990, OAQPS issued regulations at a much
faster rate than clean air regulations issued prior to the CAAA.
However, to meet the deadlines set by Congress, they must
continue and even accelerate the issuance of regulations between
now and the year 2000.  Our review of these various initiatives
revealed that several have already proven effective (i.e.,
Tiering Program and Nonsignificant designation for OMB) and
others appear to have merit (i.e., MACT Partnerships and
Regulatory Negotiations).  We support OAQPS's efforts to seek and
implement any and all possible ways to speed and improve the
regulatory development process.

EVALUATION OF EPA'5 METHOD FOR DETERMINING THE MACT FLOOR

     Our other objective was to evaluate EPA's method for
determining the MACT floor.'  The method of calculating the MACT
floor as set forth in the CAAA required EPA to determine the
emission reductions of the various sources and then average the
top 12 percent  (or top five sources for industries with less than
30 sources) to establish the emission limit or standard.  We
found that the method for computing the emission limit, as
required by the CAAA, is not completely defined.  For example,
the emission limit calculated from the.top 12 percent could
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Report No. E1KAFS-11-0001-6100140

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                                    DEVELOPMENT OF.MACT STANDARDS
result in a standard which equals no. emissions control.  The
Agency refers to this as a "negative" standard.  Regardless of
its shortcomings, OAQPS officials believe that the current law
provides for set limits and strengthens their position when
dealing with industry.  They prefer to work with the law as it is
rathex than attempting a change even though there are situations
where strictly following the law results in ambiguities.  For
further discussion of calculating the MACT floor see Appendix 1.

Conelus ion

     Based on our review, we believe it would be helpful if the
Agency sought clarification of the method for effectively
determining the MACT floor.  An ideal time for seeking such
clarification would be during reauthorization of the Clean Air
Act.

OVERALL CONCLUSIONS OF THIS REVIEW

     From our review of Title III Section 112(c)(7) of the CAAA,
we concluded that the law intended that R&D facilities be
categorized as-a separate category.  However, from our
discussions with Agency representatives and other stakeholders,
we learned that no separate category now exists.  We believe one
solution for covering unregulated R&D facilities would be to
create a separate category for R&D.  We recommend that the
Director, OAQPS establish a separate category covering research
or laboratory facilities.  OAQPS officials stated that they would
take actions to establish a separate category for R&D.

     The results of this review indicated that though the Agency
was behind schedule for promulgating the MACT standards within
the statutory timeframes, they actively sought and put to use
many initiatives to speed and improve the MACT development
process.  Our review of the various initiatives revealed that
many have already proven effective and others have merit.  We
support these efforts and believe the Agency is making progress
toward meeting the legislative requirement for regulating air
toxic pollutants by the year 2000.

     We learned that calculating the emission limit as required
by the CAAA does not always result in an unambiguous emission
standard.  Regardless of its shortcomings, OAQPS officials
believe that the present situation strengthens their position
when dealing with industry.  They prefer to work with the law as
it is rather than attempting a change.  Based oh our discussions
with Agency officials, we concur with their position for the time
being but believe it would be helpful if t'he Agency could get

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                                    DEVELOPMENT OF MACT STANDARDS
clarification or a more effective method  of  establishing a floor
at a convenient time such as reauthorization of  the  CAAA.

AGENCY COMMENTS AND PIG EVALUATION

     The Director of the Office of Air Quality Planning and
Standards regards our conclusions and recommendations as fair
assessments of the MACT standards development program and plans
to develop a separate source category for research and
development facilities at major sources.   A  copy of  OAQPS
comments is included as Appendix 2.
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                                    DEVELOPMENT OF MACT STANDARDS
                                                       APPENDIX 1
                                                      Page l of 4
EPA'S METHOD FOR CALCULATING THE MACT FLOOR
     The CAAA required the- Administrator to promulgate                    I
regulations establishing emission standards for each of the 174
source categories.  It set forth the basic methodology by which
these standards were to be developed.  The methodology required
the Agency to determine the emissions reductions of the various
sources and then average the top 12 percent to establish what is
commonly referred to as the MACT floor or emission limitation.
There is an exception for small industries.  If a source category
has less than 30 sources, the best five performing sources are
averaged to arrive at the MACT floor.  Most MACT regulations
require that existing sources meet the MACT floor within 3 years
after promulgation.               .                     '

     To determine the MACT floor, EPA ranks the existing sources
in each source category using emission reduction .data gathered
from questionnaires and other sources.  Emission reductions are
the. difference between having no controls and the amount that
escapes.  For example, 80 percent emission reduction means 80
percent of emissions is controlled and 20 percent escapes.  The
agency averages the best 12 percent of emission reductions from
the ranking list to arrive at the MACT floor.

Requirement for Averaging Emission Reductions Waa An.Unexpected  .
Addition to the CAAA

     An EPA official who recalled the legislative struggle said
the word "average* was an unexpected last minute change to the
Act.  Originally, the Senate version called for a cutoff at the
10 percent of the best performing sources, the House version
called for 15 percent, and the compromise was 12 percent.  The
final result in Section 112(d)(3) NEW AND EXISTING SOURCES
states:

     "Emission standards promulgated under this subsection for
     existing sources .  . . shall not be less stringent and may
     be more stringent than--(A) the average emission limitation
     achieved by the best performing 12 percent of the existing
     sources . .  . with 30 or more sources or  (B) the average
     emission limitation achieved by the best, performing 5
    • sources . .  . with fewer than 30 sources.

The requirement to average the emission reductions usually
results in a higher level of emission limitations than the 88

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                                      DEVELOPMENT OF MACT STANDARDS
                                                          APPENDIX  1
                                                       .  Page 2 of  4

percentile implied by  using the top 12 percent.   The issue of
whether Congress intended a lower or higher  floor (88th
percentile or the average percentile of the  top 12 percent)
resulted in controversy.   EPA's Office of General Counsel
determined that the language and the legislative history support
the higher floor interpretation.

Averaging Emission Reductions Results in Ambiguity

     EPA officials pointed out that computing the emission
limitation as required by the CAAA can result in ambiguity.  So
far, EPA managed to accommodate such situations.  For instance.,
the term average is not defined in the CAAA,  and they have
interpreted "averaging" to mean using either the arithmetic mean,
median,  or mode.1  An EPA official  said that  a precedent was set
when.the practice was  written into the Hazardous Organic NESHAP2
(HON),  the MACT standard  for the Synthetic Organic Chemical
Manufacturing Industry.   The official said that regulation
contained good references for EPA's position and the public
comments.

     Averaging the top 12 percent emission reductions complicates
the process of determining the emission limitation.  The
following hypothetical examples and problems demonstrate
situations that produce ambiguity when following the calculation
method  required by the CAAA.  In one example, the emission
limitation can promote the less efficient technology; and in the
other example, the emission limitation fits  only the outermost
conditions of two technologies.  Agency officials also told us
about another problem  associated with averaging emission
reductions that results in a "negative" MACT floor.

     In Example 1, the average emission limitation could be
either  74 percent  (the arithmetic mean) or 70 percent  (both the
median  and mode).  If  EPA uses 74 percent to- determine the MACT
floor,  the next most stringent technology would be fabric filters
   'Different kind* at average* are often u*ed to describe where cbe center, or tnoac typical value, of a »«t
of data li*«. They are called meaaure* of central tendency, and the three mo*t common and their definition*
are:   .                                   .

           Arithmetic mean is the *um of the data divided by the number of piece* of data

           Median is the dividing point between.Che top half and bottom half of data

           Mode i* the mo*t frequent value


   'National Smiieion Standard* for Hazardous Air pollutant* (NBSHAP)


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                                    DEVELOPMENT OF MACT STANDARDS
                                                       APPENDIX 1
                                                      Page 3 of 4

at 80 percent.  Wet scrubbers would not meet the requirement and
would have to be replaced with better control technology.  If EPA
uses 70 percent to determine the MACT floor, wet scrubbers would
be the standard but not
the maximum achievable
control technology.
Either wet scrubbers or
fabric filters could be
used.  In this example,
the arithmetic mean
fits neither
technology, and the
median and mode promote
the less desirable
technology.  If
averaging was not
required, both
technologies would be
acceptable.
CONTROL EMISSION
SOURCE TECHNOLOGY REDUCTIONS
1
2
3
4
' 5
Fabric Filters
Fabric Filters
Wet Scrubbers
Wet Scrubbers
Wet Scrubbers. .
80%
80%
70%
70%
70%
Example 1
     In Example 2, the average emission limitation would be 75
percent using either the arithmetic mean, median, or mode.  In
this situation, a 75 percent MACT floor matches two control
technologies:  Wet scrubbers that are used very well and fabric
filters that are not used well.  EPA can require that all
existing sources either
(1) achieve 75 percent
emission reductions by
using either fabric
filters or wet
scrubbers or {2} use
fabric filters which is
the better technology
overall.  In this
example, the average
emission reductions
fits, only the outermost
conditions of two
technologies.  Again,
if averaging was not
required, both -   -
technologies would be
acceptable.
CONTROL EMISSION
SOURCE TECHNOLOGY REDUCTIONS
1
2
3
4
5
Fabric Filters
Fabric Filters
Wet Scrubbers
Wet Scrubbers
Wet Scrubbers
90%
75%
75%
70%
65%
Example 2
                                13
              Report No. E1KAF5-11-0001-6100140

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                                    DEVELOPMENT OF MACT STANDARDS
                                                       APPENDIX 1
                                                      Page 4 of 4

     OAQPS officials told us about another problem associated
with averaging emission reductions referred to as a "negative"
MACT floor.  A "negative" MACT floor determination happens when:

          the MACT floor  (calculated from the top 12 percent)
          equals "no emissions control,"

          the MACT floor can not be determined due to the nature
          of the pollutant or process, or

          not enough emissions information is available to
          compute the MACT floor.

For example, if only five sources exist in a source category and
two of the sources have controls and three do not, using the
median or mode would result in a "negative" MACT floor
determination.  There have been no instances of a "negative" MACT
floor, for the early MACTS since they were mostly made up of
larger industries that already had controls in place.  OAQPS
officials said that a good possibility exists that a "negative"
MACT floor could occur in the future MACTs since they are mostly
smaller industries that do not have controls in place.

     The above examples of MACT floor determination and the
"negative" MACT floor demonstrate situations where following the
CAAA requirements to average emission reductions can result in
ambiguity.                                                  .

Averaging Complicated MACT Floor Determination. However EPA Found
Solutions

     We spoke with Agency officials about attempting to change
the requirement to average emission reductions to arrive at a
MACT standard.  Officials believe they have been able to work
around the ambiguity, and would prefer not to seek legislative  •
clarification at this time.
                                14
Report No. ElKAPS-11-0001-6100140

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                                                                                   1
                                    DEVELOPMENT OF MACT STANDARDS
                                                            APPENDIX 2
                                                           Page 1  of 2
         ^^%

               \   UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
               |        RESEARCH TRIANGLE PARK. NC 27711
               f
                             Fffl 20 MK
                             ™^    """"          AM QUAUTV MANNING
                                                  ANO STANOAMOS
 SUBJECT:   Response to Draft Audit Report Mo.  BllBpSy-ll-OOOl
           Development off Maximum Achievable Coqt^oy Technology
        /t  Standards

 FROM:  I    John S.  Seitz, Direct*
     j£>-l5efice of Air Quality fanning a£|d  Standards  (MD-iO)

 TO:  ^    Edward Gekosky .
           Divisional Inspector General for Audit Headquarters
           Audit Division                 .               •

     This  is  in response to your January 19,  1996 memorandum ,
 concerning the subject draft audit report on  the development of
 ""turnip Achievable Control Technology (MACT)  standards under the
 Clean  Air  Act Amendments of 1990 (CAAA).  The report focused on
 four major topics:   (1)  emissions from major  sources at research
 and  development (R&D)  facilities lack regulation; (2)  MACT
 Standards  Development; (3)  OAQPS Initiatives  to improve the MACT
 development process,  and; (4)  evaluation of EPA's method for
 determining the MACT floor.   While the report provides a
 recommendation for only one of these topics,  emissions from R&D
 facilities lacking regulation,  I would like to briefly respond to
 each.

     First, with respect to emissions from R&D facilities lacking
 regulation, I agree with the report's assessment and plan to
 establish,  a separate source category to cover research or
 laboratory facilities at major sources.   In order to do this we
 will have  to  add to the source category list  which will require
 internal EPA  review,  a possible, review by the Office of
•Management and Budget (OMB),  and publication  in the Federal
 Register  (PR).   (He currently have a FR notice to revise the
 source category list in OMB review;  thus,  the addition of R&D
 facilities will not occur until a later PR notice).   The R&D
 source category will most likely be added to  the 10-year source
 category bin,  which requires promulgation of  a standard by
 November is.  2000.   Once the source category  is added to the
 list,  we then assess the relative benefits of controlling
 emissions  from the category and prioritize the development of a
 standard accordingly.

     Regarding the second and third topics addressed in the
 report, MACT  standards development and OAQPS  developing
 initiatives to improve the MACT development process,  I concur
 with your  observation that the process has changed dramatically
                             15      Report No. E1KAF5-11-0001-6100140

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                                   DEVELOPMENT OF MACT STANDARDS
                                                           APPENDIX 2
                                                          Page 2 of 2
 since the passage of the CAM and I  appreciate the recognition
 of our initiative* and attempt* «o-4aprove the process.  Moat of
 the change* in the MACT development process were  Initiated a*  a
 remit of us attempting to find way* to achieve our goal* within
 a shrinking resource base.  Furthermore)  I also agree with your
 assessment'that in order to meet the statutory dates set forth in
 the CAAA, we will have to accelerate the issuance of MACT
 regulations.  Tfiis will be difficult given our inability to
 adequately plan due to'a lack of a fiscal year 199$ resource
 allocation.   Some budget scenarios that are being considered
 would require a rethinking of our entire philosophy toward
 meeting the seven and ten year MACT statutory deadlines.

      Finally,  the report suggests that  it would be a good idea
 for the Agency to seek clarification on the method for
 calculating the MACT floor or the original intent of the language
•describing how to do so.  Following the passage'of the CAAA, this
 issue was debated within .the Agency and our Office of General
 Counsel provided the ruling/interpretation with which, we
 currently comply.   We have been able to operate effectively
 within this ruling and thus,  I do not view this as a vital issue
 at this point in time.

      In summary, I believe that all of  the conclusions and'
 recommendations' presented the report are  fair assessments of the
 MACT standards development program.   The  QAQPS will continue to
 strive to meet the objectives contained in the CAAA, which
 include the  development of a •separate source category for
 research and laboratory facilities at major sources.  If you have
 any questions  concerning this response, please feel free to
 contact Mr.  Bruce Jordan,  the Director  of the Emission Standards
 Division. Thank you for the opportunity  to respond.
                             16
Report No. E1KAF5-11-0001-6100140

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                                     DEVELOPMENT OF MACT STANDARDS
                                                        APPENDIX 3
                                                       Page 1 of 1

                      DISTRIBUTION OF REPORT

Inspector General  (2410)

Deputy Inspector General  (2410)

Director, Emissions Standards Division,  OAQPS  (Durham,  NC)

Agency Followup Official  (3304), Attn:   Assistant Administrator
  for Administration and  Resources Management

Agency Followup Coordinator  (3304),  Attn:   Director,  Resources.
  Management Division

Audit Followup Coordinator  (3304), Attn:  Audit Management
  Branch .                    .                      •

Audit Followup Coordinator  (3802F),  Attn:   Office of  Policy,
  Training, and: Oversight Division

Audit Followup Coordinator  (1104), Attn:  Executive Support
  Office

Headquarters Library  (3404)
                                17     Report NO. E1KAF5-11-0001-6100140

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