AIR POLLUTION CONTROL DISTRICT

COUNTY OF SAN LUIS OBISPO

STAFF REPORT

NEW RULE AND AMENDED RULES TO

IMPLEMENT EPA’S FEDERAL PREVENTION OF SIGNIFICANT DETERIORATION

AND PART 70 GREENHOUSE GAS TAILORING RULE

Rules 216 , 220 and 221

March 23, 2011 Hearing Date

BACKGROUND

The San Luis Obispo County Air Pollution Control District (District) proposes one new rule and two

amended rule s to implement the United States Environmental Protection A gency’s (EPA’s) requirements

on greenhouse gases and to seek delega tion of EPA ’s permit authority for the federal Prevention of Signification Deterioration (PSD) permit program. The r ulemaking is needed to provide the regulated industry relief from applying “criteria” pollutant emission thresholds to greenhouse gas (GHG) emissions and to avoid lengthy delays that result when EPA implements t he federal PSD program

. W ithout the proposed changes

, hundreds of local businesses c ould be subject to federal permitting at very low

emission levels and some larger projects could be come subject to EPA’s lengthy permit timelines and

onerous appeals process. T he prop osed rulemaking is expected to limit the additional federal GHG based permitting requirements to one source and allow the District to use local timelines and appeal proces ses for projects that are subject to federal PSD

.

On April 7, 2007, the U.S. Supreme Court found that GHGs are air pollutants covered by the federal Clean Air Act (CAA). The U.S. Supreme Court also found that EPA was required to determine whether

or not emissions of GHGs from new motor vehicles cause or contribute to air pollution that may reasonably be anticipated to endanger public health or welfare.

On December 9 , 2009, EPA’s Administrator made the finding that six key GHGs in the atmosphere

threate n the public health and welfare of current and future generations. EPA’s Administrator also found

that the combined emissions of these well

- mixed gases from new motor vehicle engines contribute to the greenhouse gas pollution which threatens public health and welfare. By determining that GHG emissions from mobile sources contribute or cause air pollution that endanger s public health or welfare, EPA also established that it is required to regulate GHG emissions from stationary sources.

At the time of the finding, the federal permitting thresholds for Prevention of Signification Deterioration (PSD) and Operating Permit (Part 70) were set at levels appropriate for the criteria pollutants for which they were intended; however, these thresholds were unreasonab le and im practic a l when applied to typical

GHG emission s ources

. The federal PSD and Part 70 permi tting levels for all pollutants were :

• PSD Permitting : 250 or 100 tons per year (tpy) (depending on the source type), and

• Part 70 Permitting (Title V) : 100 tpy.

These thresholds are based on a source’s potential to emit and are on a per pollutant basis. Sources above these levels are considered major sources. The above levels are also reflected in the District’s current

Rule 216 and Rule 221 (renumber ed from Rule 421) and will apply to GHG emissions if they are not changed. This would result in federal permitting requirements for sources as small as a medium sized, natural gas commercial water heater, which is impractical and inappropriate.To adjust the permit levels for GHGs, EPA issued the “ Greenhouse Gas Tailoring Rule” (Tailoring Rule)

o n May 13, 2010. EPA "tailored" thei r regulations by adjusting the GHG thresholds to much higher

levels than those for “criteria” and hazardous pollutants

.

The Ta iloring Rule establishes thresholds for permitting in two steps:

A. Step 1

- Beginning January 2, 2011 : This step applies to stationary sources that are major due to

their non

- GHG pollutant emission rates. The following provisions will apply:

PSD : For new major sources (of non

- GHG gases), permits will be required to address GHG Best Available Control Technology [BACT]) if they will emit or will have the potential to emit 75,000 tpy carbon dioxide equivalent (CO 2 e) or more ( NOx and VOC have 40 tpy th resholds )

.

For existing major sources, permits will be required to address GHG Best Available Control Technology [BACT]) if they:

1. Increase net GHG emissions by at least 75,000 tons per year of carbon dioxide equivalent (CO 2 e),

and

2. Have a significa nt net emissions increase in at least one non

- GHG pollutant. 1

Part 70 Sources : Sources must include GHG emission data in their applications and address any applicable GHG requirements when they apply for, renew, or revise their permits.

B. Step 2

- Be ginning July 1, 2011 : 2 Sources not already subject to federal PSD or Part 70 permitting may become subject to such permitting based solely on their GHG emissions. The following provisions will apply:

PSD : New sources with PTE emissions above the 100,0 00 tpy CO 2 e threshold must obtain PSD permits and address GHG BACT.

Existing sources that are major sources based on criteria pollutant thresholds or GHG emissions above 100,000 tpy CO 2 e will now become subject to PSD permitting if they undertake modifi cations that increase emissions of GHGs by at least 75,000 tpy CO 2 e or have a significant emissions increase

in at least one non

- GHG pollutant.

Part 70 : An existing or newly constructed source will become subject to Part 70 permitting if GHGs potential to emit equal s or exceed s 100,000 tpy CO 2 e . Such sources have one year to submit a Part 70 application. The Part 70 permits must include any applicable GHG requirements.

EPA has committed to developing a third step for the Tailoring Rule (effective Ju ly 1, 2013). In Step 3, additional sources may become subject to PSD and Part 70 requirements if GHGs thresholds are lowered.

To implement the EPA Tailoring Rule requirements, the Dist rict prop oses amending two existing r ule s, Rule 216, Federal Part 70 P ermits and Rule 421

, Federal Part 70 P otential to Emit Limitations and the adoption of a new Rule 220, Federal Prevention of Significant Deterioration (PSD)

.

With this rule revision, only one additional stationary source permit would become subject to Pa rt 70 permits during Step 2 if they chose not to accept emission limits that they currently meet because of future expansion needs.

1 40 CFR 52.21(b)(49)(iii) provides information on “s ignificant emissions increase.”

2 Sources subject to the Step 1 provisions will continue to be covered by those requirements. Comment [LRA1]: 221?The Tailoring Rule provisions benefit the regulated community by increasing the GHG emission

threshold that would otherw ise trigger PSD or a Part 70 permit. For example, without the Tailoring Rule provisions, a source with a mid

- size natural

- gas fired commercial water heater rated at 0.2 MMBtu/hour would require a Part 70 permit. Under the Tailoring Rule provisions, a sou rce consisting of one boiler will not trigger the Part 70 provisions unless the boiler is 197 MMBtu/hour or greater. 1

PROPOSED RULES

The proposed rules are contained in Appendix A

. The following summarize the new/amended rule provisions

.

Rule 220 , P revention of Significant Deterioration (PSD)

Proposed new Rule 220 will incorporate by reference the federal Prevention of Significant Deterioration of Air Quality rule requirements. Once approved, the District will request EPA to incorporate it into the State Implementation Plan. Proposed Rule 220 is an EPA

- approved model rule

. If adopted exactly as proposed, EPA will accept the rule

.

Rule 216

, Federal Part 70 Permits

Rule 216 will be amended for consistency purposes and to reference the federal GHG permitting

thresholds (i.e., the levels at which GHGs are “subject to regulation”) specified in the Greenhouse Gas Tailoring Rule. The Rule 216 amendments also incorporate the federal definition of GHGs, found in the Part 70 (Title V) regulation (40 CFR 70.2).

Rule 221, Federal Part 70 Potential to Emit Limitations (currently listed as Rule 421)

Rule 2 21, will be amend ed to allow Part 70 Permit exemptions based on actual emission levels or federally enforceable permitted emission levels. Exemptions may apply if actual stationary source emissions are maintained less than 50% of a Part 70 threshold, as demonstrated by 12 months of records consistent with the rule requirements.

EMISSION REDUCTION / COST

- EFFECTIVENESS

Emission Reductions

The new and p roposed amended rules are administrative in nature relative to permitting actions ; t hey are not control measures. Hence, there are no emission reductions expected from the proposed rule action.

Cost

- Effectiveness and Incremental Cost

- Effectiveness

Ther e are no cost

- effectiveness or incremental cost

- effectiveness figures relative to this rulemaking task. The new/amended rules are not implementing a control measure or retrofit control requirements. Further, there are no emission reductions anticipated f rom them. Thus, the requirements of California Health and Safety Code (H&SC) Section 40703 and Section 40920.6 do not apply.

1 Based on the boiler’s CO 2 e emissions alone.ANALYSIS OF EXISTING FEDERAL AND DISTRICT REGULATIONS

H&SC Section 40727.2(a) requires districts to provide a written analysis of existing regulations prior to adopting, amending or repealing a regulation. However, the proposed rule action is consistent with categories described in H&SC Section 40727.2(g). Hence, the requirements of H&SC Section 40727.2(a)

are satisfied.

COMME NTS AND PUBLIC MEETINGS

The only comments received were from EPA ; they were incorporated and appear in Attachment 1

. The District contacted the representative of one affected source individually and they had no comment.

COMPARISON OF ADJOINING AIR PO LLUTION CONTROL DISTRICT RULES

The adjoining air districts are in the pro c ess of adopting similar rule provisions to implement the EPA Tailoring Rule requirements.



### FINDINGS

As required in Section 40727 of the California Health and Safety Code (H&SC), th e District Board must make findings of necessity, authority, clarity, consistency, nonduplication, and

reference.

A. Necessity : The rulemaking is necessary to implement new federal requirements and to ensure consistency with neighboring Air Districts.

B. A uthority : Authority is given to the District to adopt rules pursuant to H&SC Sections 40001

and 40702.

C. Clarity : The proposed rules have been found by the District to be written in clear English and to be as easily understood as possible.

D. Consistency : The District has found that the proposed rules are consistent with existing District Rules and Regulations and with existing state and federal guidelines.

E. Nonduplication : The proposed rules doe not result in a duplication of any existing State or

Feder al statute or regulation where the requirements of any such statute or regulation would be the same. Proposed Rule 220 would implement a federal requirement through a local process and not duplicate it.

F. Reference : By adoption of the proposed rule, the District is implementing, and making specific by adoption, applicable provisions of H&SC Section 40001 et seq

.

CONCLUSION AND RECOMMENDATION

The proposed revisions will help reduce the procedural burden on our permit holders and align our

thresholds with new federal requirements. Staff recommends that the proposed rules be adopted as

written.ATTACHMENTS

Attachment 1 : includes th e full text of Proposed Rules 216 and 221

, with additions to the existing rule indicated by underline format

, and deletions in strikethrough format ; the full text of Proposed Rule 220

, a new rule , is also included

.

Attachment 2 : includes c omments r eceived and the District's response

REFERENCES

1. Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring R ule , 40 CFR Parts 51, 52, 70, and 71, Federal Register, Volume 75, No. 106, U.S. Environmental Protection Agency, June
3, 2010.

2. Federal Regulation citation: 75 FR 31514, June 3, 2010.

3. Fact Sheet, Final Rule: Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule , U.S. Environmental Protection Agency, April 13, 2010. (Available at: http://www.epa.gov/nsr/actions.html#may10 )ATTACHMENT 1

UNDERLINE/STRIKEOUT REVISION FORMATATTTACHMENT 2

COMMENTS RECEIVED AN D DISTRICT'S RESPONS E

H: \ BOARD \ 2011 \ 1

- jan \ Rules216_220_stf_rpt_jan_2011.doc