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### Document

Number: 

# 73 ) IV-A- 6 Docket Number: 

# A-90-3 7

Printed 10/29/2008 10:46:21 AM Sheet 73 of 142P. 2

AtftOSB, ;

*ClfKSC" A-90-3 7 IV-A- 6 UNITE D STATE S ENVIRONMENTA L PROTECTIO N AGENC Y

WASHINGTON , D.C . 2046 0 NOV I 8 200 2 MEMORANDU M "~ i 

## W. ! EP A A R DOCKE T SUBJECT : FROM :
TO : EP A Flexibl e Permi t Implementatio n Revie w Initiativ e Repor t Rober t Brenner , Deputy Assistan t Administrato r Offic e o f Ai r an dRadiatio n (6103A ) Ja y Benforado , Deputy Associat e Administrato r Offic e o f Policy , Economic s an dInnovatio n (1804A ) EP A Deputy Regiona l Administrator s 

### OT^^U/V^X ^

Attache di s th e final repor t whic h contain s ou r

evaluatio n o f

si x innovativ e ai r

permits . W e woul dlik e t o than k

yo u for providin g comment s o n th e draf t report . Specia l thank s shoul dals o b e extende dt o Region s 3,4 , 5 , 6 , an d1 0 fo r hostin g th e evaluation s an dfo r devotin g considerabl e tim e an d effor t t o th e developmen t

o f th e actua l permits . Th e final report , a s wel l a s th e si x individua l permi t review s (whic h ar e als o attached ) wil l b e poste dfor th e publi c o n th e TT N We b a t http://www.epa.gov/ttn/oarpg/ . A s yo u know , EP A launche dthi s Flexibl e Permi t Implementatio n Revie w i n Apri l 2001 , t o evaluat e th e implementatio n o f innovativ e permittin g technique s develope dunde r pilo t permittin g efforts . Thi s effor t wa s initiate dboth i n respons e t o concern s raise db y environmenta l group s tha t EP A di dno t hav e an empirica l basi s for flexibl e permi t

guidance , a s well a s ou r

ow n desir e t o evaluat e th e outcome s o f flexibl e permittin g effort s acros s th e country i n away tha t woul dhel p informfutur e polic y an d guidanc e directions , includin g future innovatio n activities . W e ar e ver y please dwith th e positiv e finding s tha t

aros e ou t o f thi s effort . Namely , th e repor t ha s produce dclear

objectiv e evidenc e that flexible permit s assur e complianc e wit h al l applicabl e requirements , ca n produc e valuabl e benefit s t o al l partie s (including , i n man y cases , significan t emission s reductions) , an dar e considere dt o b e fully enforceable . W e believ e dia t

th e finding s fro mthi s evaluatio n highligh t significan t

opportunitie s for

th e future o f ai r permittin g polic y i n th e U.S. , an dw e loo k forwardt o workin g wit

h yo u furthe r

t o buil do n thes e results . I f yo u hav e an y question s concernin g thi s report , pleas e contac t Michae l Trutn aat

(919 ) 541 - 5345 , o r Dav e Dellarc o a t

(206 ) 553-4978 . Attachment s

RteyclM/Hwyciabl a ntrli d o n pap w(hi t cotwn * «l«M76WneyoMtll» r

Z00 ® Vd 3 Oi l DJ 0 609 S U S 6T 6 XV d SS:TT flH

I Z0/TZ/T TP. 3

cc : Bruc e Buckheit , OEC A Lis aFriedman , OG C EP A Regional Ai r

Divisio n Director s EP A Permi t

Revie w Team Davi dBeck , OAQP S Roge r Powell , OAQP S Davi dBray , Regio n 1 0 Gar y Rust , OAQP S Dav e Dellarco , OPE I Mik e Sewell , OAQP S Barrett Parker , OAQP S Michae l Trutna , OAQP S Crai g Haas , OEC A Shiri n Venus , OEC A Mari o Jorquera , OEC A Ann aWood , OPA R Patrici aMott , OEC A

eoo ® VJ 3 o n 0J 0 60S S U S 6T 6 xv d SS":"T T mil' zo/Fz'/f

FP. 4

EPA Revie w o f

Flexibl e Ai rPermit s - Summar y In 2001 , EP A launche dit s Flexibl e Permi t Revie w t o evaluat e th e us e o f innovativ e permittin g techniques . EP A conducte din-dept h review s o f

six pilo t permit s containin g flexibilit y provisions , whic h includ e plant-wid e emission s cap s an dadvanc e approval s for certai n changes . Th e review s include ddetaile danalyse s o f eac h compan y an dpermittin g authority' s experience s developin g an dimplementin g th e pilo t air permits . Th e companie s participatin g i n th e pilo t progra minclude : 3M , DaimlerChrysler , Imation , Intel , Lasc o Bathware , an dSaturn . Ke y Finding s o f

EPA' s Flexibl e Permi tRevie w The flexible permits facilitated and encouraged

emissions reductions and pollution prevention 

### (P2L • Th e plant-wid e emission s cap s focuse dcompanies' attentio n o n reducin g th e overal l level o f plant-wid e emissions . A s aresult , th e companie s wit h flexibl e permit s significantly reduce dactua l plant-wid e emission s and/o r emission s pe r

uni t o f productio n (e.g. , thos e source s wit

h a t leas t 5 year s o f

implementatio n experienc e unde r th e flexibl e permit s achieve dfro m35 % t o 85 % reduction s i n annua l emission s o f

volatil e organi c compound s whic h contribut e t o th e formatio n o f ground-leve l ozone) . • Provision s allowin g advanc e approval fo r certai n change s reduce dth e administrativ e cost s associate dwit

h P2 , makin g P 2 mor e attractiv e fo r companie s t o undertake .
• Th e term s o f

several flexibl e permit s encourage dP 2 throug h explici t P 2 program , reporting , an dperformanc e requirements . The flexible permits worked as intended, assuring appropriate environmental protection under all applicable requirements. • EP A foun dthat

th e monitoring , recordkeeping , an dreportin g approache s establishe di n th e permit s wer e sufficien t t o assur e complianc e wit h al l applicabl e requirements , includin g thos e associate dwit

h th e advanc e approve dchanges . EP A independentl y verifie dth e abilit y t o determin e complianc e wit h th e permit s usin g actual emission s an dmonitorin g dat aan dprocedure s require db y th e permits .
• Mos t

o f th e flexibl e permit s provide dequivalen t o r greate r informatio n availabl e t o th e publi c whe n compare dt o conventional permits , althoug h th e flexibl e permit s shifte dth e timing , type , an dforma

t o f information . Th e flexibl e permit s typicall y require dmor e comprehensiv e an dfrequent emission s monitoring , reporting , andrecordkeeping . Companies and

permitting authorities experienced significant

benefits from the flexible permits. • Companie s wit

h flexibl e permit s experience dsignifican t financia l benefits . In mos t

cases , th e flexibl e permit s enable dth e companie s t o respon dt o new marke t opportunitie s an dt o sav e several hundre dhour s i n staf f tim e neede dt o negotiat e an dprepar e individualP. 5

constructio n permi t

applications . Th e flexibl e permit s save dstat e an dloca l permittin g authoritie s staf f tim e associate dwit

h processin g case-by-cas e constructio n permi t applications , enablin g the mt o reduc e permittin g backlog s an dfocu s resource s o n higher environmental priorities . All o f th e permittin g authoritie s reporte dthat the y "woul dd o i

t again " an dthat

the y hop e t o us e flexibl e permittin g approache s agai n i n th e future . Flexibl e Permittin g Backgroun d

• Sinc e 1993 , th e U.S . Environmental Protectio n Agenc y (EPA ) ha s worke dwit h participatin g stat e an dlocal permittin g authoritie s an dcertai n companie s t o develo p innovativ e approache s t o air permitting .
• EP A an dthes e state s initiate dpilo t permittin g effort s t o achiev e tw o goal s to : • bette r

alig n air permittin g t o encourag e emission s reduction s an dpollutio n preventio n whil e maintainin g o r

enhancin g environmental protection ; an d • provid e U.S . companie s with flexibilit y neede dt o compet e effectively i n global market s by reducin g potentia l dela y an dregulatory uncertainty associate dwit h operationa l an dequipmen t changes .
• Flexibl e permit s accomplis h thes e goal s by approvin g certai n categorie s o f change s i n advanc e withou t requirin g additional case-by-cas e review s a t th e tim e change s occur , provide dth e compan y maintain s plant-wid e emission s belo w establishe dcaps . Contac t Michae l Trutn aa

t EP A (919 ) 541-534 5 for mor e informatio n o n EPA' s Flexibl e Permi t Review .

Deliberative - Do not

cite or quote. 9/12/0 2P. 6

Fo r Interna l EP A Us e Only D O NO T DISTRIBUT E EPA' s Revie w o f Flexibl e Ai rPermit s Question s an d Answer s 1 . Ho w man y flexibl e permit s di d EPA review ?

• EP A reviewe dsi x flexibl e permits . Th e six permit s represen t asignificant

portio n o f

th e innovative , "flexible " ai

r permit s pilote db

y EP A thu s far . Th e companie s participatin g i n th e pilo t progra minclude : 3M , DaimlerChrysler , Imation , Intel , Lasc o Bathware , an dSaturn .
• EP A selecte dthes e permit s for revie w becaus e eac h hadsufficien t implementatio n experienc e t o asses s ho w wel l th e permi t worke di n practice . Th e evaluatio n o f th e si x permit s provide s informatio n t o draw meaningful conclusion s that ca n b e use dt o guid e future policy-making , rule-making , an dinnovatio n initiatives . 2 . D o th e flexibl e permit s provid e fo ra n adequat e opportunit y fo rpubli c participatio n an d comment ?

• Fo r

eac h o f th e si x flexible permits , EP A discusse dpubli c participatio n wit h permittin g authority representative s an dals o conducte dadetaile drevie w o f th e publi c record . Th e stat e an dlocal permittin g authoritie s di dno t receiv e an

y advers e comment s on th e pilo t permits . Moreover , th e permit s generall y increase dth e availabilit y o f informatio n t o th e publi c regardin g emission s performance , pollutio n preventio n activities , an dth e companies ' anticipate dchang e need s fo r th e duratio n o f

th e permi t

term .
• Th e si x Permi t

Revie w Report s an dth e Summar y Report includ e detaile daccount s o f th e availability , timing , an dforma t o f informatio n accessibl e b y th e publi c durin g permi t developmen t

an dimplementation . Th e report s als o discus s th e focu s o f an y publi c comment s and/o r complaint s receive ddurin g permi t developmen t

an dimplementation , a s well a s th e focu s o f newspape r

coverag e o f

th e permits . 3 . Ho w doe s th e us e o f

plant-wid e emission s cap s assur e environmenta l protection ?

• Fo r

eac h o f th e si x permits , th e emission s cap s wer e establishe da t level s sufficien

t t o safeguar dpubli c healt

h an dt o assur e appropriat e environmental protection . In all cases , th e plant-wid e emission s limit s wer e consisten t wit h th e provision s se t

i n th e Stat e Implementatio n Plans , whic h represen t th e states ' pla

n fo r assurin g that

emission s ar e maintaine da

t alevel consisten t

wit h th e Nationa l Ambient

Air Qualit y Standards .
• In additio n t o th e annua l emission s limits , th e permit s containe dshort-term(e.g. , dail y o r weekly ) emission s cap s t o preven t short-ter mspike s i

n plant emission s that

coul dhav e th eP. 7

Fo r Interna l EP A Us e Only D O NO T DISTRIBUT E potentia l t o adversel y affect loca l air quality . Th e flexible permit s als o include dprovision s that reasonabl y limite dth e exten t o f advanc e approve dchanges . 4 . Ho w d o flexibl e permittin g approache s affec tth e installatio n o f pollutio n control s a tth e facility ?

• Eac h o f

th e companie s wit

h flexibl e permit s use dver y goo dcontrols . Unde r

som e o f th e permits , pollutio n preventio n wa s deeme dt o b e a n acceptabl e componen t

o f acompany' s pollutio n contro l system s an dBes t Availabl e Contro l Technology .
• Th e plant-wid e emission s caps , whic h ar e typicall y set base do n pas t

level s o f actua l emission s (sometime s adjuste dt o addres s new requirement s o r approve dplan t

expansions) , creat e incentive s for

th e companie s t o instal l additional pollutio n control s and/o r t o reduc e emission s throug h pollutio n prevention .
• Companie s typicall y reduce demission s t o accommodat e productio n increase s rathe r than increasin g thei r

plant-wid e emission s caps . Th e plant-wid e emission s cap s als o prevente dth e emission s fro mincreasin g i n small amount s (e.g. , u p t o 4 0 ton s pe r year ) that ca n occu r unde r th e conventiona l permittin g approach . 5 . Wha teffec thav e th e pilo tpermit s ha d o n emission s performanc e an d pollutio n prevention ?

• Th e flexibilit

y provision s i

n th e pilo t permit s encourag e an dfacilitate pollutio n preventio n and emission s reductions . Whil e source s ar e no t require dt o reduc e emissions , ther e ar e powerfu l incentive s t o creat e amargi n for growth underneat

h th e cap . Thi s "complianc e margin " reduce s th e plants ' ris k

o f non-complianc e wit

h th e ca p an dcreate s roo mt o accommodat e increase dproductio n a

t th e facility . Th e resul t

i s les s emission s pe r

uni t o f economi c output . Th e permit s als o facilitate pollutio n preventio n b y makin g i

t easie r for source s t o make equipment , operational , an dra w material change s that

reduc e emissions . 6 . Di d th e companie s an d permittin g authoritie s tha tuse d flexibl e permit s realiz e economi c benefit s fro m th e flexibility provisions ?

• Th e companie s an dpermittin g authoritie s wit h th e si x flexibl e permit s experienced , o r expec t t o experience , economi c benefit s becaus e o f th e flexible permi t

provisions . Th e companie s indicate dthat

th e reduce dpotentia l for

dela y an dth e increase dpredictability afforde db y th e flexibl e permi t

facilitate dcertai n operational , equipment , an dra w material change s t o respon dP. 8

Fo r Interna l EP A Us e Only D O NO T DISTRIBUT E quickl y t o marke t

demand s an dopportunities . Whil e thes e economi c benefit s ca n b e somewhat difficul t t o quantify , th e source s provide dexample s o f specifi c marke t opportunitie s that

wer e met usin g th e flexibilit

y provision s i

n th e permits .
• Th e flexibl e permi t provision s als o reduce dth e number o f staf f hour s neede dt o determin e i f apermi t wa s require do n acase-by-cas e basi s an dt o prepar e permi t applications .
• Permittin g authoritie s reporte dtha t th e implementatio n o f

th e flexibl e permit s have , o r ar e anticipate dto , reduc e th e staf f tim e necessar

y t o revie w an dproces s permittin g action s for th e sources . Thi s ha s helpe dth e permittin g authoritie s t o reduc e agenc y permittin g backlog s an dfocu s permittin g resource s o n higher environmental priorities . 7 . Ho w ca n EP A an d stat e permittin g authoritie s ensur e tha tflexible permi ttechnique s ar e appropriat e fo ral l sources ?

• Flexibl e permit s ma y no t b e appropriat e fo

r al l companies . A company' s pas t complianc e history can b e a

n importan t

indicato r o f sourc e capacit

y an dcommitmen t

for flexibl e permittin g techniques .
• Permittin g authoritie s ar e accustome dt o matchin g appropriat e permittin g technique s wit h a company' s uniqu e circumstances , emission s profiles , andmonitorin g capabilitie s t o ensur e environmenta l protectio n an dreduc e th e likelihoo do f non-compliance .
• Th e permittin g authoritie s state dthat th e bes t candidate s ar e thos e companie s that ca n demonstrat e anee dfo

r operationa l flexibility . Th e permittin g authoritie s als o state dthat goo d candidate s shoul db e prepare dt o demonstrat e sufficien t technical capacity an dcommitmen t t o operat e unde r

th e mor e rigorou s emission s an dchang e monitoring , recordkeeping, and reportin g requirement s that flexibl e permit s require . 8 . Wha tdoe s EPA pla n t o d o wit h finding s fro m th e flexible permi treview ?

• EP A undertoo k

th e Flexibl e Permi t

Revie w for

several reasons , includin g to :
• evaluat e th e effectivenes s o f akey innovatio n an dflexibl e permit s initiative , th e Pollutio n Preventio n i

n Permittin g Program , • identif

y lesson s for

improvin g th e effectivenes s o f future flexibl e permittin g efforts , an d • provid e appropriat e input into th e final developmen t o f correspondin g EP A policy , suc h a s Ne w Sourc e Revie w (NSR ) reform , flexibl e permittin g guidance , an d Preliminary - For

Deliberative Purposes Only 3P. 9

Fo r Interna l EP A Us e Only D O NO T DISTRIBUT E

operatin g permi t

rul e revisions .
• EP A i s currentl y developin g guidanc e t o addres s flexibl e permittin g techniques . In th e interim , EP A will continu e t o wor k wit h stat e an dloca

l permittin g authoritie s an dcompanie s t o develo p flexibl e air

permit s an dpionee r

additional techniques . 9 . Ca n state s an d permittin g authoritie s appl y thes e innovativ e permittin g technique s t o source s an d permit s i n thei row n jurisdictions ?

• Stat e an dlocal permittin g authoritie s intereste di n usin g thes e flexibl e ai r permittin g technique s i

n thei r jurisdiction s shoul dcontac t Michae l Trutn aa

t EPA' s Offic e o f

Air Qualit y Plannin g an dStandard s (919-541-5345 ; trutna.mike@epa.gov ) o r Dav e Dellarc o a

t EPA' s Offic e o f Policy , Economics , andInnovatio n (206-553-4978 ; dellarco.dave@epa.gov) .

Preliminary - For

Deliberative Purposes Only 4