(a) If a municipality or a local air quality district has an approved local air quality control program and the department determines that the program is being implemented in a manner that fails to meet the terms of the cooperative agreement or is otherwise being inappropriately administered, the department shall give written notice setting out its determination to the municipality or local air quality district. Within 45 days after giving written notice, the department shall conduct a public hearing on the matter. The hearing shall be recorded by any means that ensures an accurate record.

(b) If, after the hearing, the department upholds the determination made in the written notice, the department shall provide the municipality or local air quality district with a written finding setting out the nature of the deficiencies and a description of the necessary action to be taken to ensure that the local air quality control program prevents or controls air pollution. The department shall provide its finding to the municipality or district within 45 days after closure of the public hearing record. The department shall set a reasonable period of time for the municipality or local air quality district to take corrective action in response to the department's finding.

(c) If the municipality or local air quality district fails to take corrective action within the time period set by the department under (b) of this section, the department shall terminate the cooperative agreement and resume management of air quality control in the affected jurisdiction. If the municipality or the local air quality district partially remedies, to the department's satisfaction, the deficiencies found in the determination, the department shall amend the cooperative agreement to reflect a modified allocation of responsibilities between the department and municipality or the local air quality district.

(d) A municipality or local air quality district that has had its cooperative agreement terminated may, with the department's approval, resume a local air quality control program if the municipality or district agrees to comply with AS 46.14.400 and with any corrective action plan required by the department.

(e) If the department finds that control of a particular class of stationary source or emissions unit, because of its complexity or magnitude, is beyond the reasonable capability of the municipality or the local air quality district or may be more efficiently and economically controlled at the state level, the department may assume and retain jurisdiction over the class of stationary source or emissions unit. Classifications under this subsection may be based on the nature of stationary sources or emissions units involved, their size relative to the size of the communities in which they are located, or another basis established by the department.