Santa Barbara County Air Pollution Control District STAFF REPORT – January 20, 2011

NEW RULE AND AMENDED RULES TO

IMPLEMENT EPA’S FEDERAL PREVENTION OF SIGNIFICANT DETERIORAT ION AND PART 70

GREENHOUSE GAS TAILORING RULE

Rules 102, 202, 370, 810, and 1301

BACKGROUND

The Santa Barbara County Air Pollution Control District (District) proposes new/amended rules to implement the United States Environmental Protection Agency’s (EPA’s) requirements on greenhouse gases. a Rulemaking is needed to provide the regulated industry relief from applying “criteria” pollutant emission thresholds to greenhouse gas (GHG) emissions. This rule action will implement the EPA emission thresholds for GHGs, which are higher than those for "criteria" air pollutants. “Criteria” pollutants include oxides of nitrogen, reactive organic compounds, particulate matter, oxides of sulfur, and carbon monoxide, but not

GHGs.

On April 2, 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 15, 2009, EPA’s Administrator made the finding that six key GHGs in the atmosphere threaten 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 public health or welfare, EPA also established that it is required to regulate GHG emissions from stationary sources.

On May 13, 2010, EPA issued regulations under the CAA to require permitting of larger stationary sources of greenhouse gases. These regulations

a “Title V” in the EPA rule title refers to the federal permit program of the Clean Air Act (CAA or Act). The District implements Title V through local Regulation XIII, Part 70 Operating Permits. Part 70 refers to the 40 CFR section that implements Title V. This Background Paper uses the term “Part 70” in lieu of “Title V,” for consistencies with terminology

in the local rules. trigger CAA permitting requirements under the federal Prevention of Signification Deterioration (PSD) and Operating Permit (Part 70) programs for

GHG emissions. Because GHG emissions from most sources generally exceed existing levels of significance for criteria pollutants, EPA "tailored" their regulations for when they included greenhouse gases. Without this tailoring, GHGs would be subject to the same permit thresholds as “criteria” air pollutants. The federal PSD and Part 70 permitting levels for non-GHG pollutants are:

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

 Part 70 Permitting: 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.

Treating GHGs as “criteria” air pollutants would greatly increase the number of permitted small sources.[Ref. 1 & 2] To pr ovide an alternative, EPA adopted a “Prevention of Significant Deterioration and Part 70 Greenhouse Gas Tailoring Rule” (Tailoring Rule). This rule, which became final on May 13, 2010 [Ref. 3], 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. c

b One ton equals 2,000 pounds.

c Carbon dioxide equivalent is described in item 3 of Appendix B. Click here to go to that description.STAFF REPORT - Tailoring Rules Project Page 2 January 20, 2011

Santa Barbara County APCD 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 tpy of carbon dioxide equivalent (CO 2 e), and

2. Have a significant net emissions increase in at least one non-GHG pollutant. a

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 - Beginning July 1, 2011: b 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 100,000 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

modifications 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 equal or exceed the 100,000 tpy CO 2 e (potential to emit) threshold. 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 Tailoring Rule Step 3 (effective July 1, 2013). In Step 3, additional sources may become subject to PSD and Part 70 requirements if GHGs th resholds are lowered.

a 40 CFR 52.21(b)(49)(iii) provides information on “significant emi ssions increase.”

b Sources subject to the Step 1 provisions will continue to be covered by those requirements. To implement the EPA Tailoring Rule requirements, the District proposes ame ndments to four rules and the adoption of one new rule:

1. Amended Rule 102, Definitions, 2. Amended Rule 202, Exemptions to Rule 201 3. Amended Rule 370, Potential to Emit

̶ Limitations for Part 70 Sources 4. New Rule 810, Federal Prevention of Significant Deterioration (PSD) 5. Amended Rule 1301, Part 70 Operating Permits

̶ General Information

The proposed new and amended rules include changes to incorporate the GHG applicability thresholds and the two step phase in requirement.

Additions and amendments include:

a. A new "greenhouse gases" definition in Rule 102;

b. References in several rules to federal provisions that specify when stationary sources of GHGs emissions are “subject to regulation”;

c. Amended definitions for terms like attainment pollutant, major stationary

source, and Part 70 Source ; and

d. An amendment to Rule 202.D.2 to exclude GHGs when calculating aggregate threshold

emissions.

It is important to note that mainly existing Part 70 permit sources in Santa Barbara County will be required to comply with GHG permitting requirements at this time. Most permit holders in the district will not be impacted by these new requirements. We only anticipate up to two additional stationary source permits that may become subject to Part 70 permits during Step 2.

The Tailoring Rule provisions benefit the regulated community by increasing the GHG emission threshold that would otherwise 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 source consisting of one boiler will not trigger the Part 70 provisions unless the boiler is 197 MMBtu/hour or greater. c

c Based on the boiler’s CO 2 e emissions alone.STAFF REPORT - Tailoring Rules Project Page 3 January 20, 2011

Santa Barbara County APCD PROPOSED RULES

The proposed rules are cont ained in Attachment 4 of the “EPA GHG Tailoring Rule Project” Board Package. The following summarize the new/amended rule provisions.

Rule 102, Definitions

The District proposes a new “Greenhouse Gas” or

“Greenhouse Gases” definition that refers to the state definition. In addition, the definition of attainment pollutant has been clarified to exclude

GHG.

Rule 202, Exemptions to Rule 201

Rule 202.D.2 includes a change to ensure existing permit exemptions will continue to apply to sources

of GHGs.

Rule 370, Potential to Emit

̶ Limitations for Part 70 Sources

Rule 370 provides for sources to be exempt from Rule 1303, Part 70 Permits

̶ Permits based on actual 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.

Definitions in Rule 370 are amended for consistency purposes and to reference the federal GHG permitting thresholds (i.e., the le vels at which GHGs are “subject to regulation”) sp ecified in the Greenhouse Gas Tailoring Rule. The Rule 370 amendments also incorporate the federal definition of GHGs, found in the Part 70 (Title V) regulation (40 CFR 70.2). Rule 810, Prevention of Significant Deterioration (PSD)

Proposed new Rule 810 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 810 is an EPA-approved model rule. If adopted exactly as proposed, EPA will accept the

rule.

The District has an existing PSD rule: Rule 803, Prevention of Significant Deterioration (PSD) . On March 3, 2003, EPA revoked the District’s PSD delegation authority. The District is retaining Rule 803 as a locally enforceable rule. This is consistent with Senate Bill 288 anti-backsliding provisions and the California Health and Safety Code, Section 42504(a). Rule 803 was adopted before December 30, 2002 and Section 42504(a) does not allow the District to make the rule less stringent. For these reasons, Rule 803 will continue to be a local PSD

rule and Rule 810 will be the federal PSD rule.

Rule 1301, Part 70 Operating Permits

̶ General Information

Similar to the changes made to Rule 370, definitions in Rule 1301 are amended for consistency purposes and to reference the federal GHG permitting thresholds (i.e., the le vels at which GHGs are “subject to regulation”) sp ecified in the Greenhouse Gas Tailoring Rule. The Ru le 1301 amendments also incorporate the federal definition of GHGs, found in the Part 70 (Title V) regulation (40 CFR 70.2).

Appendix A, Clarification of Rule Issues, provides additional information the implementation of the EPA Greenhouse Gas Tailoring Rule provisions.STAFF REPORT - Tailoring Rules Project Page 4 January 20, 2011

Santa Barbara County APCD EMISSION REDUCTION / COST-EFFECTIVENESS

Emission Reductions

The new and proposed amended rules are administrative in nature relative to permitting actions. They are not control measures. Hence, there are no emission reductions expected from the proposed rule action. Cost-Effectiveness and

Incremental Cost-Effectiveness

There are no cost-effec tiveness 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 from them. Thus, the requirements of California Health and Safety Code (H&SC) Section 40703 and Section 40920.6 do not apply.

ANALYSIS OF EXISTING FEDERA L AND DISTRICT REGULATIONS

H&SC Section 40727.2(a) requires districts to provide a wr itten 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 S ection 40727.2(a) are satisfied.

COMMENTS AND PUBLIC MEETINGS

Comments

Attachment 3 to the “EPA GHG Tailoring Rule Project” Board Package contains written public comments received before December 29, 2010. This attachment also contains the APCD’s responses to the

comments. Written comments received between December 29, 2010 and Ja nuary 20, 2011, will be provided to Board with the District’s response during the January 20, 2011 Board Hearing.

Public Meetings

STAKEHOLDERS MEETINGS

The District met individually with representatives of sources that are anticipated to require Part 70 permits

for the first time due to the rule action. Table 2 in the “Impacts to Industry and the District” section of this Staff Report provides a list of these sources. COMMUNITY ADVISORY COUNCIL MEETING, (DECEMBER 8, 2010)

Staff briefed the CAC on:

1. the EPA Tailoring Rule requirements, and 2. on how the new/amended rules will implement

them.

The Community Advisory Council passed a motion to recommend that the Board approve the proposed amended rules and new Rule 810 dated December 8,

2010.

PUBLIC HEARING ON THE ADOPTION OF THE PROPOSED AMENDED RULES, (JANUARY 20, 2011)

The Board is scheduled to consider the adoption of the new/amended rules at the January 20, 2011 Public Hearing.STAFF REPORT - Tailoring Rules Project Page 5 January 20, 2011

Santa Barbara County APCD COMPARISON OF ADJOINING AIR POLLUTION CONTROL DISTRICT RULES

The adjoining air districts are in the progress of adoptin g similar rule provisions to implement the EPA Tailoring Rule requirements.

IMPACTS TO INDUSTRY AND THE DISTRICT

Step 1 of the Tailoring Rule will only have a minor impact on existing Part 70 source permit holders. Table 1 identifies the sources that currently have Part 70 permits a nd will need to comply with Step 1 of the Tailoring Rule. In addition Table 1 lists EPA major sources that could poss ibly trigger PSD requirements for GHG in the future.

Table 1. EXISTING SOURCES EPA MA JOR SOURCES (250 tpy or Greater)

AND/OR PART 70 PERMIT SOURCES

Stationary

Source Stationary Source Name EPA Major

Source (250 tpy) Part

70

02667 BreitBurn Energy- Orcutt Hill 1 1
01735 Celite Corporation 1 1
08713 City of Santa Maria Landfill 1
03707 County of SB-Tajiguas Landfill 1
08003 Dos Cuadras - South County 1
01073 E & B - South Cuyama 1 1
01482 ExxonMobil - SYU Project 1 1
02658 Greka South Cat Canyon 1 1
08001 Pacific Operator s - Carpinteria 1
04632 Pt. Pedernales/Lompoc Oil Fields 1

05019 So Cal Gas - La Goleta 1 1
01325 The Point Arguello Project 1 1
00027 Venoco - Carpinteria 1 1

01063 Venoco - Ellwood 1

10344 Wm. Bolthouse Farms 1 1

TOTALS 9 15

Table 2 identifies the sources with CO 2 e of 100,000 tons per year and greater. These sources will be subject to Part 70 permitting requirements under the Tailoring Rule Step 2. If a qualifying modification is made to these sources, they will also be subject to federal PSD permitting requirements.STAFF REPORT - Tailoring Rules Project Page 6 January 20, 2011

Santa Barbara County APCD Table 2. EXISTING SOURCES THAT MAY BECOME SUBJECT TO THE PART 70 PERMITTING REQUIREMENTS

Stationary

Source Stationary Source Name

02795 UCSB
01195 Vandenberg Air Force Base

According to the EPA Overview of Part 70 [Ref. 1 & 2]:

A source generally must apply for a Part 70 permit within 1 year of first becoming subject to permitting - for new sources; this is usually within one year of commencing operation. The application must include, among other things, identifying information, a description of emissions and other information necessary to determine applicability of requirements and information concerning compliance with those requirements. The permitting authority uses this information to develop the source’s operating permit. [. . .]

REFERENCES

1. Prevention of Significant Deterioration and Title V Greenhouse Gas Tailoring Rule , 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 )

APPENDIX

Appendix A: Clarification of Rule IssuesSTAFF REPORT - Tailoring Rules Project Page A-1 January 20, 2011

Santa Barbara County APCD Appendix A Santa Barbara County

Clarification of Rule Issues

The following text provides clarification of rule issues. To help the reader locate a specific issue, a table of contents is provided below.

Table 1. TABLE OF CONTENTS FOR THE CLARIFICATION OF RULE ISSUES

Rule Section or 40

CFR Part Topic Page

40 CFR 52.21 and 70 Request to Clarify PSD and Part 70 Requirements under Step 2 of the Tailoring Rule B-1

40 CFR 52.21 and 70 Availability of a Guidance Document on How PSD and Part 70 GHG Requirements Apply for the Two Phases B-2

40 CFR 51.166(b)(48)(ii), 52.21(b)(49)(ii), and

70.2 Meaning of the “Carbon Dioxide Equivalent” or “CO 2 e” term and a description of how it is calculated B-3

40 CFR 52.21 and 70

Request to Clarify PSD and Part 70 Requirements under Step 2 of the Tailoring Rule

Questions/Issues: The following is base d on information in an EPA fact sheet:

 Step 2 will build on Step 1. In this phase, PSD permitting requirements will cover for the first time new construction projects that emit GHG emissions of at least 100,000 tpy even if they do not exceed the permitting thresholds for any other pollutant. Modifications at existing major sources that increase GHG emissions by at least 75,000 tpy will be subject to permitting requirements, even if they do not significantly increase emissions of any other pollutant.

 based on their GHG emissions even if they would not apply based on emissions of any other pollutant. Facilities that emit at least 100,000 tpy CO2e will be subject to Part 70 permitting requirements.

1. Regarding the first bullet, if a new major source or a major modification results based on GHG emissions only, does the PSD analysis have to consider BACT and an Air Quality Impact Analysis (AQIA) for all pollutants, or solely GHG?

2. Regarding the second bullet, if GHG emissions alone cause a source to become a Part 70 source, we presume the permit has to address all applicable requirem ents in the Part 70 permit, and not just applicable requirements for GHG. Correct?

Answer/Response: Yes for a given project where the only significant increase in emissions is for GHG (not any other PSD pollutant, such as NOx at 40 tpy), then a BACT analysis is only required for GHG. No AQIA is required for GHG, since there is no National Ambient Air Quality Standard for GHG. In general, the PSD requirements apply to any pollutant for which a significan t increase occurs, even if th e source is not major for that particular pollutant, as long as they are major for at least one PSD pollutant.

For the second question, you are correct . Once the requirement to obtain a Part 70 permit is triggered, because the source is a major source of GHGs, then just like any other Part 70 permit, it must identify all applicable requirements and include them in the Part 70 permit.

Click here to return to the Table of Contents.STAFF REPORT - Tailoring Rules Project Page A-2 January 20, 2011

Santa Barbara County APCD Availability of a Guidance Document on How the PSD and Part 70 GHG Requirements Apply for the Two Phases

Questions/Issues: Is there a guidance document on how the PSD and Part 70 GHG requirements apply for the two phases? We think it may be a useful to have such a document to facilitate the explanation on how the different provisions are triggered and at what thresholds.

Answer/Response: The EPA Greenhouse Gas Tailoring Rule Federal Register (75 FR 31514, June 3, 2010) includes general information and an overview of the requirements. Also, the EPA document, “PSD and Title V Permitting Guidance For Greenhouse Gases,” November 2010, provides information on the permitting procedures. This document is available from this web page: http://www.epa.gov/nsr/guidance.html . The following summary tables and information are provided to help clarify the major EPA Tailoring Rule requirements.

TYPE STEP 1: 01/02/2011 - 06/30/2011 STEP 2: 07/01/2011 - 06/30/2013

Part 70 Covers Existing Part 70 Sources All sources ≥ 100,000 tpy CO 2 e, including new construction projects.

PSD Covers Existing EPA Major Source (250 tpy or greater) Sources with

modifications that result in

emission increases ≥ 75,000 tpy

CO 2 e New construction projects with ≥ 100,000 tpy CO 2 e

Modifications at existing major

source facilities with increase of ≥ 75,000 tpy CO 2 e

Note: The 75,000 tpy and 100,000 tpy figures are in terms of potential to emit (not actuals).STAFF REPORT - Tailoring Rules Project Page A-3 January 20, 2011

Santa Barbara County APCD The following clarifying information is ba sed on correspondence from EPA staff:

It should be noted that for Part 70, there are only two things that changes come January 2, 2011. First, all new Part 70 applications must include sufficient GHG emission data in their application so that the District can determine if any GHG requirements apply. Second , for now, the only GHG applicable requirement are PSD permit terms and conditions related to GHGs. So, unless a source has a pending PSD permit action that will address GHGs, nothing will change for an exis ting Part 70 source. Come July 1, 2011, nothing changes for existing Part 70 sources, but if an existin g or new source is now classified as a major source because of their GHG emissions, then they have 12 months to submit a co mplete Part 70 application. For the PSD program, if a source that needs a federal PSD permit does not obtain it before January 2, 2011, then the PSD permit must also evaluate GHGs. If it would only need a PSD permit because of GHGs, it must either begin actual construction prior to July 1, 2011, or obtain a PSD permit.

Note: It is our understanding that the above statement, “For the PSD program, if a sour ce that needs a federal PSD permit does not obtain it before January 2, 2011, then the PSD permit must also evaluate GHGs,” means:

1. The existing major source requires a revised federal PSD permit because of an increase in emissions of a pollutant other than GHGs,

2. “Evaluate GHG” refers to calcu lating and verifying whether any GHG emission increases, based on potential to emit, are also subject to PSD requirem ents during the federal PSD permit process, and 3. The source will be subject to the PSD GHG BACT requirement if the GHGs have the potential to emit 75,000 tpy CO 2 e or more unless the source accepts a synthetic minor limit in their PSD permit to limit their PTE below the 75K tpy CO 2 e threshold.

40 CFR 51.166(b)(48)(ii), 52.21(b)(49)(ii), and 70.2

Meaning of the “Carbon Dioxide Equivalent” or “CO 2 e” term and a description of how it is calculated

Questions/Issues: What does the term carbon dioxide equivalent or CO 2 e mean and how is it calculated?

Answer/Response: This term is defined in various new 40 CFR subparts as follows:STAFF REPORT - Tailoring Rules Project Page A-4 January 20, 2011

Santa Barbara County APCD 1. 40 CFR Part 51.166(b)(48)(ii) and Part 52.21(b)(49)(ii): [. . .] the term tpy CO 2 equivalent emissions (CO 2 e) shall represent an amount of GHGs emitted, and shall be computed as follows: (a) Multiplying the mass amount of emi ssions (tpy), for each of the six greenhouse gases in the pollutant GHGs, by the gas’s associated global warming potential published at Table A–1 to subpart A of part 98 of this chapter— Global Warming Potentials. (b) Sum the resultant value from paragraph (b)(48)(ii)(a) of this section for each gas to compute a tpy

CO 2 e.

2. 40 CFR Part 70.2: The term tpy CO 2 equivalent emissions (CO 2 e) shall represent an amount of GHGs emitted, and shall be computed by multiplying the mass amount of emissions (tpy), for each of the six greenhouse gases in the pollutant GHGs, by the gas’s associated global warming potential published at Table A–1 to subpart A of part 98 of this chapte r—Global Warming Potentials, and summing the resultant value for each to compute a tpy CO 2 e.

Click here to return to the Table of Contents.

Click here to return to the list of Appendices in the Staff Report.