**MEMORANDUM**

DATE: August 20, 2012 TO: File / Public Docket EPA

–R09

–OAR

–2012

–0566 FROM: Jeanhee Hong , EPA Region 9, Office of Regional Counsel

Laura Yannayon, EPA Region 9, Permits Office RE: C all with Clark County Department of Air Quality regarding rule deficiencies

identified in EPA ’s proposed rule at 77 FR 43206 (July 24, 2012)
**Clark County Participants:** Tina Gingras , Michael Uhl , Dennis Ransel , Gary Mille r, Richard Beckstead , Russel l Roberts , Roger Ferland , Colin Campbell, Catherine Jorge n son. **EPA Region 9 Partipants:** Am y Zimpfer, Jeanhee Hong, Laura Yannayon, Gerardo Rios. EPA (Amy) requested that Clark County explain the roles of Roger Ferland and Colin Campbell

. Clark County

(Tina) explained that Roger Ferland ( Quarles & Brady) and Colin C ampbell (RTP Associates, LLC ) are legal and technical consultants on these permitting regulations

. EPA (Amy) noted that this conversation will be on the record because it relates to a pendin g SIP action for which we are in the middle of the public comment period

. EPA (Jeanhee) explained that the Sierra Club recently filed a deadline suit alleging that EPA has failed to take timel y action on several of these permitting rules , which constrains EPA’s schedule for action . Jeanhee stated that EPA expects final action by late September on the permitting rules will help in negotiations with the litigants in this case. Clark County

(Tina) explained that several of the identified deficiencies appear to be issues that developed since Clark Co unty submitted the rule s ( e.g. , requirements for the PM2.5 and lead NAAQS , and PM2.5 precursor requirements) and turned it over to Roger Ferland for specifics. Roger stated that a lot of the deficiencies appear to be based on new requirements b ut that Clark County thought the County had up to three years to submit a lot of these subsequent requirements. Roger also stated that in some cases, for example the stay , the status is very confusing and that even EPA conceded that the s t ay is very confusi ng. EPA (Amy) requested clarification on the latter point and Roger clarified he was referring to EPA’s stay

of the Fugitives Rule. Roge r stated the County

would delete the language in Section 12.1, subsection 12.1.3.6 (a)(5) that EPA had identified as problematic , b ut asked whether it was permissible for states to adopt provisio n s that have no ap plicability to the SIP and don ’t interfere with the control strategy ( i.e., don’t have an ything to do with SIP goals ) . For example, odor requirements, publ ic nuisance requirements.EPA (Jeanhee) responded that state/local agencies are free to develop regulations not required b y

the Clean Air Act (e.g., rules addressing odor, public nuisances) and that those regulations do not need to be submitted for approv al into the SIP, but that to the extent a rule is submitted to EPA for SIP approval as part of a minor NSR program, EPA would evaluate that rule for compliance with applicable CAA requirements. EPA (La ura) stated that 40 CFR 52.23, which was designed to a ddress Federally

- Enforceable State Operating Permit programs (FESOPs), states that all conditions of a permit issued pursuant to a SIP

- approved program are federally enforceable. EPA (Gerardo) stated that co nditions in a permit issued through a SIP

- approved program are federally enforceable, but if the County want ed to have state

- onl y conditions in a permit , this could be okay if the program makes clear that those conditions do not come from a SIP

- approved program. Roger asked wh y the County ’s “in significant activities ” list in its title V regulation (Section 12.5) cannot be incorporate d by reference into the minor NSR program and stated that the County had submitted the “insignificant activities” list in Section 12.5 to EPA as part of its title V program submission. EPA (Jeanhee) stated that incorporation b y reference (IBR) is a term that has specific legal effect and that a regulation must actually use those words in order to have the effect of incorporating separate rule provisions into it. Provided state law allows for IBR and the minor NSR rule (Section 12.1) uses the words “incorporation by reference,” EPA would treat those referenced provisions as part of Section 12.1, but Clark County would have to submit th e IBR’ ed provisions as part of the SI P submission, not as part of a title V submission. Roger stated that this sounded like a simple fix that Clark County could make. On the definition of “ allowable emissions” in Section 12.2 (PSD rule) : Roger acknowledged that the term “practicall y enforceable” is not defined in the rule and stated the County might use the term “federall y enforceable” instead, which is defined in EPA rules. Roger asked wh y EPA had objected to the language about “permit conditions with future co mpliance date” and stated that 40 CFR 51.166(b)(16)(ii ) explicitly allows for this. EPA agreed to review the language in 40 CFR 51.166(b)(16)(ii). On the definition of “b aseline actual emissions” in Section 12.2 : Clark County stated that EPA ’s preamble from 2002 (NSR reform rule) states that with respect to contemporaneous changes, “currently” doesn’t mean “currently .” Clark County referenced EPA ’s 2002 final rule at 67 FR 80186, 80197 and stated that according to the preamble, with respect to contemporaneous changes, “current” refers to limits, source operatio ns , etc . just prior to the date of the contemporaneous change. So, it doesn’t mean current but rather what “was” current just prior to the particular date of the contemporaneous change

. Clark County said it was not sure how to address this issue given the County was trying to clarify

ambiguities in EPA’s rule , and EPA itself has acknowledged that the language in the rule is not clear.EPA (Jeanhee) stated that the most straightforward fix would be to simply track the federal definition, which is the language that EPA ultimately codified, and that t o the extent Clark County wants to explore language that depar ts from the federal rule, EPA is not in a position to opin e on that at this time

. EPA ( Gerardo ) stated that it seems we are all confused about which date appli es to which “particular action” and suggested that Clark C ounty take this opportunity to explain how it interprets its rules, and where it believes its language may provide clarification. Clark County

agreed to provide such an explanation in their comments

. Clark County

( Michael Uhl) stated that it was not clear wh y EPA thought the provisions in Section 12.3 (Nonattainment NSR rule) for ozone (NOx/VOC) and PM2.5 ( SO2/NOx ) interpollutant trades were deficie nt. Michael stated that the l anguage in subsection 12.3.6 provides 3 parts: (1) interpollutant trades are not allowed , (2 ) intra

- pollutant trades of NOx and VOC are not prohibited , and (3) intra

- pollutant trades of PM2.5 and SOx or NOx are not prohibited

. Michael also noted that Appendix S specificall y allows for intra

- pollutant trading (not interpollutant trading). EPA (Jeanhee) stated that Appendix S does not apply to this action and that Clark County ’ s rule i s inconsistent with EPA’s requirements in 40 CFR 51.165(a)(11) for PM.2.5 precursor trades. EPA (Laura) stated that for ozone, precursor trades are allowed where the offset ratio has been demonstrated and the rule requires c ase - by

- case EPA concurrence. Precursor trades for ozone are not approved into the SIP but the permitting actions generall y come in to EPA . So the rule must specify

that for interpollutant trading of o zone precursors , EPA concurrence is required. For PM2.5, EPA stated in th e preamble to the PM2.5 implementation rule that only SIP approved trading ratios would be allowed, and suggested approvable ratios for NOx and SO x . Since that time, EPA has retracted its suggested ratios and has stated in a m emo that only SIP approved trading ratios based on local modeling of appropriate trading ratios is allowed , and that the interpollutant trading ratios must be approved as part of SIP NSR program or part of the attainment demonstration for the area

. EPA an d Clark County

agreed that Clark County i s currentl y designated attainment/unclassifiable for the PM2.5 NAAQS, so offset requirements for PM2.5 don’t currentl y appl y. EPA (Jeanhee) asked whether Section 12.3 essentially allows for precursor trades at a 1: 1 ratio. Clark County

stated that the rule does not specifically establish a 1:1 ratio and that the County ’s intent was to bank PM2.5 credits in advance of a nonattainment designation

. Clark County

noted that it seemed the better solution would be to pull the se provision s out of the rule, and develop offset/banking provision s later upon nonattainment designation.EPA agreed.

Clark County

asked why

EPA thought the Section 12.3 provisions regarding emission reduction credits were deficient and stated that the definition of “surplus” tr acked the federal definition. EPA (Jeanhee) stated that CAA section 173(c) prohibited the use of any em ission reductions required b y the Act for offset purposes, and that Clark County’s definition of “surplus” was too nar rowl y drawn to cover NSPS and NESHAP under section 111 and 112 of the Act. Roger stated that this was a straightforward fix. With respect to other requirements related to offsets , Roger stated that the N SR rule (Section 12.3) should have incorporated S ection 12.7 into the rule, specificall y onl y subsection 12.7.5. Roger stated that this was Clark County ’s intent. Clark County

asked wh y EPA did not include Section 12.11 (general permits rule) in EPA’s July proposal.
EPA (Jeanhee) stated that the role of Section 12.11 in Clark County ’s minor NSR program was not clear from the text of Section 12.1, and that in the absence of an explanation of its role and how the rule complies with the requirements for minor NSR programs, EPA was unable to draft a rationale supporting a proposed action

. EPA (Laura) stated that it became apparent during EPA’s review that Section 12.11 was really part of the minor NSR program, but that it was not clear how the rule met the requirements for minor NSR programs in 40 CFR 51.160

- 51.164. Clark County

asked that EPA explain what needs to be done in resp onse. EPA (Laura) explained that Clark County could revise Section 12.11 as part of its rulemakings to revise Section 12.1 to address EPA’s concerns

. Clark County

( Russell ) said the County would comment on the record on oth er disapproval issues as well and would try to be as detailed in the comments as possible about its proposed fixes

. Russell stated that it w ould help if, in the final action, EPA gave some indication of whether Clark County ’s proposed fix es would be adequate

. EPA agreed to provide the se explanations

.