~os% UNITED STATES ENVIRONMENTAL PROTECTION AGENCY

REGION IX

~ 75 Hawthorne Street

San Francisco, CA 94105

~%L PROI

August 30, 2012

Jeffrey McKay, Deputy Air Pollution Control Officer

Bay Area Air Quality Management District

939 Ellis Street

San Francisco, California 94109

Dear Mr. McKay:

Thank you for the July 31, 2012 letter from Brian Bunger of the Bay Area Air Quality Management

District (District) to U.S. Environmental Protection Agency Region 9 (EPA), which followed up on a

letter from EPA dated July 26, 2012. We appreciated the opportunity to discuss this letter with you and

other District staff in a teleconference meeting on August 13, 2012, and during a meeting with the

California Council for Environmental and Economic Balance (CCEEB) on August 23, 2012.

In our July 26 letter, we provided comments regardingthe approvability for California State-~

Implementation Plan (SIP) purposes of the District draft revisions to the New Source Review (NSR)

applicability procedures in District Regulation 2, Rule 1 (dated May 25, 2012). The District uses these

NSR applicability procedures to determine whether a project is a “modified source” and therefore

subject to additional NSR applicability tests and requirements.

The procedures for determining nonattainment NSR applicability are contained in 40 CFR 51.1 65(a)(2),

and those for determining Prevention of Significant Deterioration (PSD) applicability are contained in

40 CFR 51.1 66(a)(7). Subparagraph 51.1 65(a)(2)(ii) states: “Each plan shall use the specific provisions

of paragraphs (a)(2)(ii)(A) through (F) of this section. Deviations from these provisions will be

approved only ifthe State specifically demonstrates that the submitted provisions are more stringent

than or at least as stringent in all respects as the corresponding provisions in paragraphs (a)(2)(ii)(A)

through (F) of this section.” (Emphasis added) Similar language appears in subparagraph

51.1 66(a)(7)(iv). Thus these specific procedures (referred to here as the Federal Modification Test) are

required plan elements which must be included for SIP approval of the proposed rule revisions.

In general, State NSR regulations that solely utilize a “potential to emit to potential to emit” (PTE to

PTE) test, i.e., emission increases calculated based on the difference between an emission unit’s PTE

before and after a change, to determine if a project will result in a significant emission increase and

therefore trigger major modification permit requirements, are not approvable for federal Clean Air Act

purposes, because such regulations do not include, and are not at least as stringent in all respects as, the

applicability procedures specified in the Clean Air Act regulations at 40 CFR 51.1 65(a)(2) and 40 CFR

51.166(a)(7). As we explained in detail in our July 26, 2012 comment letter, and discussed in our

August 13, 2012 teleconference, we have closely reviewed the District’s rule language, which

incorporates a PTE to PTE test, and determined that it is not at least as stringent in all respects as the

Federal Modification Test. Therefore, the District must revise the rule language to require an emission

increase applicability test at least as stringent in all respects as the Federal Modification Test provisions

in 40 CFR 51.165 and 51.166.
Your letter indicated that you believe that EPA has approved PTE to PTE tests similar to the District’s in

certain other California air district rules previously submitted to EPA for SIP approval. As stated in our

July 26, 2012 comment letter and during our recent teleconference, we do not agree with your

interpretation. As we noted, we have reviewed and discussed the rules you cited with the other

respective California air districts and they have confirmed that their rules allow a PTE to PTE test to be

applied only after a test that meets the Federal Modification Test is performed to verify that the project

does not result in a “major modification.” We continue to work with these and all of the other California

air districts to ensure that their rules are consistent with CAA SIP requirements.

As we previously noted in our comment letter and in our teleconference, we believe that the revised

“draft” language proposed in the District’s May 25, 2012 draft of District Regulation 2, Rule 1

pertaining to applicability determinations would meet the Federal applicability test requirements at issue

here. Under the District’s revised draft language, once a determination has been made that a project will

not result in a major modification as defined in EPA regulations, then a PTE to PTE test may be used to

determine if additional requirements apply to the proposed project.

We look forward to continuing to work with you to resolve this and any other outstanding issues with

your draft rule package before the revisions are adopted and submitted to EPA for approval into the

California SIP.

If you have any questions regarding this matter, please feel free to contact me at (415) 972-3974 or

rios . gerardo@epa.gov.

Si er ly,

Chief, Permits Office

Air Division

cc: Jim Karas, BAAQMD

Jean Roggenkamp, BAAQMD

Brian Bunger, BAAQMD

Alexander Crockett, BAAQMD

Carol Lee, BAAQMD

Gregory Stone, BAAQMD

Mike Tolistrup, California Air Resources Board