~os% UNITED STATES ENVIRONMENTAL PROTECTION AGENCY REGION IX

~ 75 Hawthorne Street San Francisco, CA 94105

~%L PROI

August 30, 2012
Jeffrey McKay, DeputyAir Pollution Control Officer BayAreaAir Quality Management District 939 Ellis Street San Francisco, California 94109

Dear Mr. McKay:

Thankyou forthe July 31, 2012 letterfrom Brian Bunger ofthe BayAreaAir Quality Management District (District) to U.S. Environmental Protection Agency Region 9 (EPA), which followed up on a letterfrom EPA dated July 26, 2012. We appreciatedthe opportunityto discuss this letterwith you and other District staffin ateleconference meeting on August 13, 2012, and during a meeting with the California Council for Environmental and Economic Balance (CCEEB) on August23, 2012.

In ourJuly 26 letter, we provided comments regardingthe approvabilityfor California State-~ Implementation Plan (SIP) purposes ofthe District draft revisions to the New Source Review (NSR) applicability procedures in District Regulation 2, Rule 1 (dated May25, 2012). The Districtuses these NSR applicability procedures to determine whethera project is a “modified source” and therefore subjectto additional NSR applicability tests and requirements.

The procedures fordetermining nonattainment NSR applicability are contained in 40 CFR 51.1 65(a)(2), and those for determining Prevention ofSignificant 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 ofparagraphs (a)(2)(ii)(A) through (F) ofthis section. Deviations from these provisions will be approved only ifthe State specificallydemonstrates thatthe submitted provisions are more stringent than orat least as stringent in all respects as the corresponding provisions in paragraphs (a)(2)(ii)(A) through (F) ofthis 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 ofthe proposed rule revisions.

In general, State NSR regulations that solely utilize a “potential to emitto 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 ifaproject will result in a significant emission increase and therefore trigger major modification permit requirements, are not approvable forfederal Clean AirAct purposes, because such regulations do not include, and are not at least as stringent in all respects as, the applicabilityprocedures specified in the Clean AirAct regulations at40 CFR 51.1 65(a)(2) and 40 CFR 51.166(a)(7). As we explained in detail in ourJuly 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 applicabilitytest at least as stringent in all respects as the Federal Modification Test provisions in 40 CFR 51.165 and 51.166.Your letter indicated thatyou believe that EPA has approved PTE to PTE tests similarto the District’s in

certain other Californiaairdistrict rules previously submitted to EPA for SIP approval. As stated in our July 26, 2012 comment letterand during our recentteleconference, 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 thattheirrules allowa PTE to PTE testto be applied only afteratestthat meets the Federal Modification Test is performed to verifythatthe project does not result in a“major modification.” We continue to workwith these and all ofthe other California air districts to ensure that theirrules are consistent with CAA SIP requirements.

As we previously noted in ourcomment letter and in ourteleconference, we believe thatthe revised “draft” language proposed in the District’s May 25, 2012 draft ofDistrict Regulation 2, Rule 1 pertaining to applicability determinations would meetthe Federal applicabilitytest requirements at issue here. Underthe 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 ifadditional requirements applyto the proposed project.

We lookforward to continuing to workwith 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.

Ifyou 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, CaliforniaAir Resources Board