PROPOSED NEW RULE

RULE 5 18

, PREVENTION OF SIGNIFICANT DETERIORATION

STAFF REPORT

01/04/11

Executive Summary

Prevention of Significant Deterioration (PSD) is a federal permitting program for new major stationary facilities and significant modification to existing major facilities located

in areas classified as attainment or in areas that are unclassifiable for an y criteria air pollutant. As a District, we are more familiar with the Title V Federal Operating Permit Program which is for major s ources of pollutants regardless of attainment status

. Title V permits ultimately incorporate PSD permit requirements. The PSD permitting program is

a pre

- construction permit that is currently administered by EPA Region IX for Placer County. There is currently only one PSD permit in Placer County; held by Sierra Pacific

Industries.

Wit h the recent addition of Greenh ouse Gas es (GHG) as a regulated pollutant, which

makes these pollutants subject to federal permitting, EPA Region IX could possibly have a significant increase in PSD permit applications throughout the state . The EPA staff could be overwhelmed with these new perm it applications and the delay in processing

them could be two years or more . Consequently, EPA is encouraging local air districts to take on PSD permitting responsibility for projects that occur within their jurisdiction . For

an air district to take on P SD permitting, the district needs to adopt a PSD permitting rule that mirrors the federal requirements and have that rule ARB and EPA approved for incorporation into the State Implementation Plan (SIP).

The most straightforward way for an air district to take on PSD responsibility is to adopt a rule that incorporates the federal requirements by reference (IBR). CAPCOA has developed a model rule in conjunction with EPA and ARB staff, and the air district engineering managers committee.

Placer County Air Pollution Control District staff is proposing that the Board adopt this

CAPCOA model rule with various options in the model rule tailored to the District’s specifics.

Discussion

The federal PSD program i s detailed in 40 Code of Federal Regulations (CFR) Part

52.21. The details of the P SD program are quite involved. Below are some generalizations as they apply to Placer County.

Who is Subject to PSD Permitting?

A pre

- construction PSD permit is required for any new major source or a significant

modification of an existing major source of any air pollutant regulated under the FederalRule 518, PREVENTION OF SIGNIFICANT DETERIORATION Staff Report Proposed Board Date February 10, 2011

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Clean Air Act ; t hat is not a non

- attainment pollutant . Currently in Placer County , the PSD pollutants include PM, PM 10, Carbon Monoxide, Nitrogen Dioxide, Sulf ur Dioxide, Lead, Fluorides, Sulfuric acid mist, Total reduced sulfur, Reduced sulfur compounds, Greenh ouse Gases (GHG s ) , and other industry specific pollutants, such as

those f rom Municipal Waste Combustors

.

**•** A m ajor source is a facility that emits 250 tons per year of an applicable pollutant,

except for GHG s which the facility must emit 100,000 tons per year in terms of Carbon Dioxide equivalent units (CO2e) . There are 28 typ es of industries where a major source is defined as 100 tons per year of an applicable pollutant, with the same exception for GHGs. O nly two of these 28 source types are likely to be constructed in Placer County ; a fossil

- fuel fired steam electric plant or a boiler of over 250 million British Thermal Units per hour heat input.

**•** A significant modification of a n existing major source is defined as a modification

with an increase of as much or more than 100 tons per year (TPY) of Carbon Monoxide, 15 TPY of PM 10, 40 TPY of Nitrogen Dioxide or of Sulfur Dioxide, 0.6 TPY of Lead, or 75,000 TPY of GHGs.

With the recent addition of GHG as a pollutant that is subject to PSD regulation, there are three facilities in Placer County that are cla ssified as major sources because of their GHG

emissions ; Sierra Pacific Industries, Rio Bra vo, and Roseville Energy Park. However, these facilities will only have to obtain a PSD permit for GHG emissions if they

undertake a modification that will increase their GHG emissions by 75,000 tons per year

CO2e

.

What are the Primary Requirements of a PSD Permit?

There are two main requirements to be met before a PSD permit is issued; Best Available Control Technology (BACT) is employed, and an air quality impact analysis is conducted showing that the emissions increase from the source will not cause or contribute to an exceede nce of an National Ambient Air Quality Standard (NAAQS) or impact Class I areas

such as National Parks

.

BACT must be employed on each emissions unit that emits an applicable air pollutant in

excess of the significant modification threshold for that pollutant

. Because GHGs are a newly regulated pollutant, BACT for GHG has not been thoroughly developed. The m ost likely PSD source of GHGs would be a fossil

- fueled boiler of about 200 million Btu/h r or more operating full time. In this case, BACT would likely result in a fuel efficiency requirement in order to minimize Carbon Dioxide emissions.

An air quality impact analysis can be a very rigorous analysis which compares the background concentration of a pollutant plus the potential to emit of the new emissions units to the NAAQS on an hour by hour b asis over the course of a year. In order to determine theRule 518, PREVENTION OF SIGNIFICANT DETERIORATION Staff Report Proposed Board Date February 10, 2011

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backg round concentration of a pollutant, either a public monitoring site nearby which has collected three to five years of ambient data, or one year of site

- specific monitoring is required where the pollutant concentration and weather data is collected on an ho urly basis. If there are other facilities with issued Authorities to Construct that have not begun operation at the time of the site monitoring, the potential to emit of these other facilities

must be added to the background concentration.

If the air qua lity impact analysis shows an exceede nce of the NAAQS, additional emission controls or operational limitations must be imposed to prevent the exceed e nce

. If there is still concern that the NAAQS may be exceeded, then post

- project air quality monitoring

ma y be imposed on the applicant.

The federal regulations impose a maximum amount of concentration that a single source can increase the ambient air concentration regardless of whether the NAAQS is exceeded or not.

This is called an ambient air increment an d is different for each pollutant and is measured in micrograms per cubic meter.

There are no NAAQS or ambient air increment established for GHGs, therefore the air quality impact analysis is not required for GHG s

. Rule 518 exempts the applicant from

some of the air quality analyses for GHGs.

What are the Possible Benefits of the District Taking on PSD Permitting?

For a source within the District that is planning a new major facility, or an existing major facility planning a significant modification, the time to obtain a PSD permit from EPA under the current situation could take several years. If the District were to have PSD authority, then the permit process time would likely be much shorter

.

When EPA is the permitting authority for a PSD permit, then the federal Fish and Wildlife Service and the National Marine Fisheries Service must be consulted regarding the Endangered Species Act (ESA) requirements because issuance of the PSD permit is

cons idered a federal action . If the air district is the permitting authority, then this

consultation is not required , although the source is still required to comply with applicable ESA requirements

. However, such impacts may also be considered in CEQA by the lead

agency.

Any appeals of a PSD permit issued by EPA are heard by the f ederal Environmental Appeals Board (EAB) in Washington, DC. Appeals concerning a PSD permit issued by the

District are heard by the District Hearing Board. When the D istrict is the permitting authority, appeals are handled locally with more scheduling flexibility.

The downside of the District doing PSD permitting is additional cost to the applicant for

c osts incurred by the District. A downside to the District will be the need to acquire theRule 518, PREVENTION OF SIGNIFICANT DETERIORATION Staff Report Proposed Board Date February 10, 2011

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knowledge base to administer the PSD permitting program. The timing of gaining the PSD knowledge base is uncertain since there are currently no new PSD facilities on the horizon.

Scheduled Regulatory Measures

An air district is required by H ealth and Safety Code (H & SC) article 40923 to pu blish by January 1 of each year a list of regulatory measures scheduled or tentatively scheduled for consideration during the following year. A PSD permitting rule was included in the list for

201 1

.

Fis cal Impact

Adoption of Rule 5 18 will have a n additional fiscal impact on businesses that are proceeding with a new major source or a significant modification of an existing major source of an attainment pollutant. The District is proposing to impose an i nitial PSD permit filing fee and then charge actual expenditures in issuing the permit on a time and materials basis. Currently, EPA does not charge any fees for processing a PSD permit because EPA is funded with taxpayer doll ars. Rule 601, Permit Fees wa s amended in

December 2010 to add PSD fees.

The actual labor hours required to process the PSD permit are estimated to be approximately the same as for processing a Title V permit. For Title V permits, the

District a dvises applicants that the time requi red is approximately 68 hours. However, this could vary considerably depending on the level of public and EPA participation in the process. The loaded labor rate proposed is the Title V labor rate of $108.25 which is the rate of a Senior Air Quality Engi neer loaded with benefit and overhead costs. This nominal labor cost then is $7361.

The initial PSD permit filing fee is proposed to be the same as the Title V permit filing fee. This filing fee is currently $1070.25 and is equivalent to approximately 1 0 labor hours at the Title V labor rate. These labor hours will be expended in consulting with the applicant for a PSD permit while he is preparing the application. This will involve discussions on Best Available Control Technology, availability of backg round air monitoring data for the site, possible on

- site air and weather monitoring data, and potential requirements for an air quality impact analysis, among other requirements for application content.

Public Comment

One public comment was received by email concerning adoption of Rule 518. The comment deals with the air quality analyses required by CFR 52.21 and how that relates to GHGs. EPA guidance says that these analyses are not required for GHGs because EPA has

established no National Ambient Air Quality Standards or PSD increments for GHGs and therefore there is no unacceptable concentration of GHGs in the local atmosphere. TheRule 518, PREVENTION OF SIGNIFICANT DETERIORATION Staff Report Proposed Board Date February 10, 2011

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comment suggests that Rule 518 contain a specific exemption from these analyses for GHG to preclude any possible appeal s that might be made against an issued PSD permit due to not performing these analyses.

Staff agrees with this comment and explored the idea with EPA as to whether it would be approvable. After much discussion, EPA decided that two of the five subsections relating to air quality analyses could be exempted. Staff added the exemption from 40 CFR 52.21 subsections (k) and (m) as Section 104 of the rule.

Analysis and Findings

The following Analysis and the subsequent Findings are intended to addr ess the requirements set forth in the Health and Safety Code relating to adoption of a new or amended District Rule, as well as other State statutes referenced herein.

Cost

- Effectiveness of a Control Measure

California Health & Safety Code (H&S) Section 40703 requires a District to consider and make public “the cost

- effectiveness of a control measure”. The adoption of Rule 5 18 will have an additional cost on the applicant for a PSD permit beyond what that applicant would pay under the current situation w here the permit is issued by EPA. The additional cost would be the filing fee plus the actual District hours expended to process the permit, estimated to be $8433. There should be no difference in emissions from a PSD facility regardless if the permit we re processed by EPA or the district, therefore a cost

- effectiveness cannot be calculated. However, the advantage of the District issuing the PSD permit would

be in avoiding a possible EPA backlog that could delay EPA permit issuance by up to two

years.

Socioeconomic Impact

H&S Section 40728, in relevant part, requires the Board to consider the socioeconomic impact of any new rule if air quality or emission limits are significantly affected. However, Districts with a population of less than 500,000 per sons are exempted from the socioeconomic analysis. In 200 9 , the population of Placer County was approximately

3 40 ,000 persons.

California Environmental Quality Act (CEQA)

Applicants for PSD permits under the proposed rule are already required to obtain PSD permits under the Federal Clean Air Act. The requirements of the permit will be the same whether EPA or the District issues the permit.

California Public Resources Code Section 21159 requires that an environmental analysis of the reasonably foreseeab le methods of compliance be conducted. Compliance with theRule 518, PREVENTION OF SIGNIFICANT DETERIORATION Staff Report Proposed Board Date February 10, 2011

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proposed rule is expected to result in reduced emissions to the environment. Therefore, the proposed rule will reduce emissions from sources and will not cause any significant

adverse effects on t he environment. Staff has concluded that no adverse environmental impacts will be caused by compliance with the proposed rule.

According to the above conclusion, Staff finds that the proposed rule is exempt from the California Environmental Quality Act ( CEQA) because 1) it can be seen with certainty that there is no possibility that the activity in question may have a significant adverse effect on the environment (CEQA Guidelines §15061(b)(3)) and 2) it is an action by a regulatory agency for protection o f the environment (Class 8 Categorical Exemption, CEQA Guidelines §15308).

Findings

A. Necessity

– The adoption of Rule 5 18 is necessary in order for a potential applicant for a PSD permit to avoid an unacceptably long wait of up to two years for EPA to process the permit application and issue a PSD permit.

B. Authority

– California Health and Safety Code, Sections 40000, 40001, 40701, 40702, and 40716 are provisions of law that provide the District w ith the authority to adopt this r ule.

C. Clarity

– There is no indication, at this time, that the proposed r ule is written in such a manner that persons affected by the r ule cannot easily understand them.

D. Consistency

– The regulation is in harmony with, and not in conflict with or contradictory to, existing statu tes, court decisions, or state or federal regulations.

E. Non

- duplication

– The regulation does not impose the same requirements as an existing state or federal regulation.

F. Reference

– All statutes, court decisions, and other provisions of law used by PCAPCD in interpreting this regulation is incorporated into this analysis and this finding by referen ce.