### 1 MEMORANDUM

From: The Office of Air Quality Planning and Standards U.S. Environmental Protection Agency

To: Combustion Turbine NSPS Docket (EPA-HQ-OAR-2004-0490)

Date: June, 2012

Subject: Exemption of non-major source subject to ne w source performance standards for stationary gas turbines under 40 CFR 60 subpart KKKK from Title V permitting requirements

Rational for Clean Air Act Title V Exemption

The U.S. Environmental Protection Agency (EPA) is proposing to exempt non-major source subject to new source performance standards (NSPS) for stationary combustion turbines under 40 CFR 60 subpart KKKK from the title V permitting requirements. Under authority of Clean Air Act (CAA) section 502(a), EPA may exempt non-major sources 1 subject to CAA section 111 (NSPS) standards from the requirements of title V if EPA finds that compliance with such requirements is “imprac ticable, infeasible, or unnecessarily burdensome” on such sources. The EPA determines whether to exempt a non-major source from title V permitting at the time the

relevant CAA section 111 standards are established (40 CFR 70.3(b)(2)). Under the proposed exemption, affected owners/operators of a stationary combustion turbine that is subject to subpart KKKK a nd is determined to be nonmajor sources (hereafter referred to as a ‘‘stationary co mbustion turbine NSPS non-majo r source’’) would not be required to obtain a title V permit under 40 CFR part 70 or 40 CFR part 71, provided that the affected source would not be required to obtain a permit under 40 CFR 70.3(a) or 40 CFR 71.3(a) for the sole reason that the affected source is a non-major source. Notwithstanding qualif ying for this exemption, the owner or operators of the exempted stationary combustion turbine would still be required to comply with the provisions of subpart KKKK, as applicable to the affected source.

Consistent with the statute, EPA has determined that compliance with title V permitting is ‘‘unnecessarily burdensome’’ for the stationary combustion turbine NSPS non-major sources. The EPA’s determination that this criterion was satisfied is based primarily upon considera tion of the following four factors: (1) whether title V would result in significant improvements to the complia nce requirements under subpart KKKK for the stationary combustion turbine NSPS non-major sources; (2) whether title V permitting would impose a significant burden on these non-major sources and whether that burden would be aggravated by any difficulty these sources may have in obtaining assistance from permitting agencies; (3) wh ether the costs of title V permitting for these non-major sources would be justified, taking into consideration any potential gains in compliance likely to occur for such sources; and (4) whether there are implementation and enfo rcement programs in place that are sufficient to assure compliance with subpart KKKK without relying on title V pe rmits. Not all of the four factors must weigh in favor of an exemption [See 70 FR 75320, 75323 (Title V Exemp tion Rule)]. Instead, the factors are considered in combination and EPA determines whether the factors, taken together, support an exemption from title V for the stationary combustion turbine NSPS non-major sources. A dditionally, consistent with the guidance provided by the legislative history of CAA section 502(a), 2 we considered whether exempting the stationary combustion turbine NSPS non-major sources would adversely affect public health, welfare or the environment. The first factor is whether title V would result in significant improvement s to the compliance requirements in the proposed NSPS. A finding that title V would not result in significant improvements to the compliance requirements in the proposed NSPS would support a conclusion that title V permitting is ‘‘unnecessary’’ for non-major sources subject to the stationary combustion turbine NSPS.

1 CAA section 502(a) prohibits title V exemption for any major so urce, which is defined in CAA section 501(2) and 40 CFR

70.2

2 The legislative history of section 502( a) suggests that EPA should not grant title V exemptions where doing so would adversely affect public health, welfare or the environment. (See Chafee-Baucus Statement of Senate Managers, Environment and Natural Resources Policy Division 1990 CAA Leg. Hist. 905, Compiled November 1993.)

### 2 One way that title V may improve compliance is by requiring monitoring (including recordkeeping designed to serve as monitoring) to assure compliance with permit terms and conditions reflecting the emission limitations and control technology requirements imposed in the standard [See 40 CFR 70.6(c)(1) and 40 CFR 71.6(c)(1)]. The ‘‘periodic monitoring’’ provisions of 40 CFR 70.6(a)(3)(i)(B) and 40 CFR 71.6(a)(3)(i)(B) require new monitoring to be added to the permit when the underlying standard does not already require ‘‘periodic testing or instrumental or non-instrumental monitoring (which may consist of recordkeeping designed to serve monitoring).’’ In addition, title V imposes a number of recordkeeping and reporting requirements that may be important for assuring compliance. These include requirement s for a monitoring report at least every 6 months, prompt reports of deviations, and an annual co mpliance certification [See 40 CFR 70.6(a)(3) and 40 CFR 71.6(a)(3), 40 CFR 70.6(c)(1) and 40 CFR 71.6(c)(1), and 40 CFR 70.6(c)(5) and 40 CFR 71.6(c)(5)]. To determine whether title V permits would add significant compliance requirements to the NSPS, EPA compared the title V monitoring, recordkeeping and reporting require ments mentioned above to those requirements for the stationary combustion turbines in subpart KKKK and c oncluded they are sufficient. Subpart KKKK requires annual compliance demonstration tests, and the notificati on requirements of §60.8 ensure that the Administrator and delegated authorities are aware of tests and other even ts before they are performed to provide opportunity for observation. In addition, records must be maintained and excess emissions and monitor downtime reports must be submitted in accordance with §60.7(c), and the results of performance tests must be submitted to EPA’s WebFIRE database. In light of the above, EPA determin ed that additional monitori ng through title V is not needed and that the monitoring, recordkeeping and reporting requirements in subpart KKKK are sufficient to assure compliance with the rule.

The second factor EPA considered is whether title V pe rmitting would impose significant burdens on stationary combustion turbine NSPS non-major sources and whether that burden would be aggravated by any difficulty these sources may have in obtaining assistance from permitting ag encies. Subjecting any source to title V permitting imposes certain burdens and costs that do not exist outsid e of the title V program. The EPA has estimated that the average cost of obtaining and complying with a title V pe rmit was $65,700 per source for a 5-year permit period, including fees [See Information Collection Request (ICR) for Part 70 Operating Permit Regulations, January 2007, EPA ICR Number 1587.07]. The EPA does not have specific estimates for the burdens and costs of permitting the stationary combustion turbine NSPS non- major sources; however, there are certain activities associated with the 40 CFR part 70 and 40 CFR part 71 rules that are mandatory and impose burdens on any facility subject to title V. They include reading and understanding permit program regulations; obtaining and understanding permit application forms; answering fo llow-up questions from permitting authorities after the application is submitted; reviewing and understanding the permit; collecti ng records; preparing and submitting monitoring reports; preparing and submitting prompt devi ation reports, as defined by the State, which may include a combination of written, verbal and other communication methods; collecting information, preparing and submitting the annual compliance certification; preparing app lications for permit revisions every 5 years; and, as needed, preparing and submitting applications for permit revisions. In addition, although not required by the permit rules, many sources obtain the contractual services of consultants to help them understand and meet the permitting program’s requirements. The ICR for 40 CFR part 70 provides additional information on the overall burdens and costs, as well as the relative burdens of each activity described here. Also , for a more comprehensive list of requirements imposed on 40 CFR part 70 sources (hence, burden on sources), see the requirements of 40 CFR 70.3, 40 CFR 70.5, 40 CFR 70.6, and 40 CFR 70.7. The activities described above, which can be extensive and time consuming, could be a significant burden on th e non-major sources that would be subject to subpart KKKK. Furthermore, some of the non-major sources th at would be subject to subpart KKKK may be small entities that may lack the technical engineering or mone tary resources and, therefor e, need assistance from the permitting authorities to comply with the title V permitti ng requirements. The Economic Impacts Analysis (EIA) of the 2006 final rule estimated that approximately 1 in 10 new combustion turbines would be owned by a small entity. These small entities could includ e combined heat and power (CHP) installations at small manufacturing

facilities and commercial and institutio nal buildings. Although EPA does not know the total number of non-major sources that would be subject to subpart KKKK, based on the growing interest in using natural gas-fired stationary combustion turbines for electric power ge neration, gas pipeline transmission, and CHP, EPA anticipates a significant increase in the number of permit applications that permitting authorities would have to process each year. This significant burden on the perm itting authorities raises a concern with the potential

### 3 difficulty or delay that the small entities may f ace in obtaining sufficient assistance from the permitting

authorities.

The third factor EPA considered is whether the co sts of title V permitting for these area sources would be justified, taking into consideration any potential gains in compliance likely to occur for such sources. The EPA concluded in considering the first factor, that the monito ring, recordkeeping and reporting requirements in subpart KKKK assure compliance with the standa rds, that title V would not result in significant improvement to these compliance requirements and, that, in some instance s, certain title V compliance requirements may not be appropriate. In addition, as discussed above in consideration of the second factor, there are concerns with the potential burdens that title V may impose on these sources. In addition, below in consideration of the fourth factor, there are adequate implementation and enforcem ent programs in place to assure compliance with subpart KKKK. In consideration of the above factors, the co sts of title V permitting are not justified for the sources proposed to be exempted. Accordingly, the third factor supports title V exemption for the stationary combustion turbine NSPS non-major sources.

The fourth factor is whether there are implementation and enforcement programs in place that are sufficient to assure compliance with subpart KKKK for stationary combustion turbine sources without relying on title V permits. The CAA provides States the opportunity to take delegation of NSPS. Before the EPA will delegate the program, EPA will evaluate the State programs to ensure that States have adequate capability to enforce the CAA section 111 regulations and provide assurances that they will enforce the NSPS. In addition, EPA retains authority to enforce subpart KKKK anytime under CAA sections 111, 113 and 114. Accordingly, EPA can enforce the monitoring, recordkeeping and reporting requirements, whic h, as discussed under the first factor, are adequate to assure compliance with subpart KKKK. Also, States and the EPA often conduct voluntary compliance assistance, outreach and education programs (compliance assistance programs), which are not required by statute. These additional programs will supplement and enhance the su ccess of compliance with subpart KKKK. The statutory requirements for implementation and enforcement of subpart KKKK by the delegated States, EPA and the additional assistance programs described above together are sufficient to assure complian ce with the rule without relying on title V permitting.

The balance of the four factors supports a finding th at title V permitting is unnecessarily burdensome for the stationary combustion turbine NSPS non-major sources. While a title V permit might add additional compliance requirements if imposed, there would not be significant improvements to the compliance requirements in subpart KKKK because these requirements are specifically designed to assure compliance with the rule. Given little or no potential gain in compliance if title V were required, the costs of title V permitting are not justified in this case. Finally, there are adequate implementation and enforcem ent programs in place to assure compliance with subpart

KKKK.

In addition to evaluating whether compliance with title V requirements is ‘‘unnecessarily burdensome,’’ EPA also considered, consistent with guidance provided by the legislative history of section 502(a), whether exempting stationary combustion turbine NSPS non-major sources fro m title V requirements would adversely affect public health, welfare or the environment. The title V perm it program does not impose new substantive air quality control requirements on sources, but instead requires that certain procedural measures be followed, particularly with respect to determining compliance with applicable requi rements. As stated in our consideration of factor one, title V would not lead to significant improvements in the compliance requirements for the proposed NSPS. For the reason stated above, we believe that exempting these non-major sources from title V permitting requirements would not adversely affect public health, welfare or the environment.

Based on the above analysis, title V permitting would be ‘‘unnecessarily burdensome’’ for stationary combustion turbine NSPS non-major sources. We are, therefore, proposing that these non-major sources be exempt from title V permitting requirements.