I. SYNOPSIS OF THE CASE AM GENERAL CORPORATION OPERATES A VEHICLE MANUFACTURING FA CILITY LOCATED IN MISHAWAKA, ST. JOSEPH COUNTY, INDIANA. ITS PRINCIPAL PRODUCT IS A MILITARY VEHICLE KNOWN AS THE HUM MER. ITS OPERATIONS INCLUDE PAINTING THE VEHICLES. VOLA- TILE ORGANIC COMPOUNDS (VOC) ARE EMITTED IN THE PAINTING OPE RATIONS. THE COMPANY HAS NO CONTROL EQUIPMENT TO REDUCE ITS VOC EMISSIONS. THE PLANT IS A MAJOR STATIONARY SOURCE. ST. JOSEPH COUNTY HAS BEEN DESIGNATED A NONATTAINMENT AREA FOR OZONE; HOWEVER, ON JULY 22, 1986, USEPA PROPOSED REDESINA- TION. IN NOVEMBER, 1985, AM GENERAL APPLIED FOR A CONSTRUCTION PERMIT TO MODIFY THE PLANT SO AS TO INCREASE ITS VOC EMIS- SION BY 179.7 TONS PER YEAR. THE INDIANA STATE IMPLEMENTA- TION PLAN (SIP) REQUIRES THAT SUCH PERMIT CANNOT BE GRANTED UNLESS THE APPLICANT DEMONSTRATES, AMONG OTHER THINGS, THAT IT WILL APPLY THE LOWEST ACHIEVABLE EMISSION RATE ?LAER?. IN ITS APPLICATION AM GENERAL PROPOSED WHAT IT CLAIMED IS LAER; IT DID NOT PROPOSE TO INSTALL ANY CONTROL EQUIPMENT. USEPA INFORMED THE LOCAL PERMIT ISSUING AUTHORITY, THE ST. JOSEPH COUNTY HEALTH DEPT., THAT THE COMPANY HAD NOT DEMONST RATED COMPLIANCE WITH LAER. THE COUNTY DISAGREED AND ISSUED THE PERMIT IN VIOLATION OF SIP. THE PERMIT BECAME EFFECTIVE ON FEBRUARY 11, 1986, AFTER THE STATUTORY BAN ON NEW CONST