UNITED STATES ENVIRONMENTAL PROTECTION AGENCY REGION III 1650 Arch Street Philadelphia, Pennsylvania 19103 DATE: February

22, 2011 SUBJECT: Technical Support Document
- Virginia, Permits for Major Stationary Sources and Major Modifications L ocating i n Prevention of Significant Deterioration (PSD) Areas /s/ FROM: Sharon McCauley , Environmental Protection Specialist

Office of Permits and Air Toxics (3AP10) TO: File THRU: Kathleen Anderson , Associate Director

Office of Permits and Air Toxics (3AP10) I. BACKGROUND Virginia’s proposed SIP submission addresses changes needed in the part C PSD permit program. This SIP submission also corrects deficiencies identified by EPA in the March 27, 2008 Federal Register notice entitled, “Completeness Findings for Section 110(a) State implementation Plans for the 8 hour Ozone National Ambient Air Quality Standards (1997 Ozone NAAQS)”, (73 FR 16205). EPA’s proposed approval of this SI P submission addresses Virginia’s compliance with the portion of CAA S ection 110 (a)(2)(C) & (J) relating to the Part C permit program for the 1997 NAAQS Ozone NAAQS, because this proposed approval would approve regulating NOx as a precursor to Ozone in Virginia’s SIP in accordance with the Federal Register notice dated Nove mber 29, 2005 (70 FR 71612) that finalized NOx as a precursor for Ozone regulations set forth at 40 CFR 51.166 and in 40 CFR 52.21. EPA’s review of the VA DEQ Regulatory Revision Package was found to be acceptable for adding n itrogen o xides (NOx ) as a p recursor for Ozone ( O3 ) for PSD
. The current changes to the Virginia program, as described in detail in Section IV , are from 9 VAC
- 5
- Chapter 80 Article 8 , Permits for Major Stationary Sources and Major Modifications L ocating in Prevention of Significant D eterioration (PSD) Areas. This current change will add NOx as a precursor to Ozone , in addition to volatile organic compounds (VOC) , in the definitions of “ major modification ” , “ major stationary source ” , “ regulated N ew S ource R eview (NSR) pollutant ” and “ significant ” and to the list of exempted facilities. T he previous PSD S tate Implementation P lan (SIP) approval was provided to the Commonwe al th as a limited approval for other reasons as cited in Section II, below.2

The Federal PSD program has undergone s everal relevant changes since the last State SIP limited approval of its PSD permitting program dated October 22, 2008 in 73 FR 62897
. The following provides a summary of the final federal provision changes that occurred from the previous “limited appro val” which included federal PSD regulations as of September 1, 2006 through the present that will not be a part of this revision request to Virginia's regulatory PSD SIP approval of the “NOx as a precursor to Ozone ” element of their program . 1. Final Ch anges for Certain Ethanol Production Facilities Under Three Clean Air Act Permitting Programs On April 12, 2007 EPA’s final action modifie d the definition of a "chemical process plant" as it applies to three Clean Air Act permitting programs. 2. Preventi on of Significant Deterioration (PSD) and Nonattainment New Source Review (NSR): Removal of Vacated Elements On June 5, 2007 EPA removed provisions for pollution control projects (PCP) and clean units (CU) from its New Source Review (NSR) regulations. Thes e provisions were part of EPA’s NSR improvement rule issued on December 31, 2002. On June 24, 2005, the United States Court of Appeals for the District of Columbia Circuit vacated the portions of the 2002 and 1992 NSR rules that pertained to CU and PCP. 3
. Rule Clarification Assures that New Source Review Program is Applied Appropriatel y On December 14, 2007 EPA issue d a final rule to clarify when facilities must keep records and report emissions when a “reasonable possibility” test shows that projected emissions increases could equal or exceed 50 percent of the Clean Air Act’s NSR significant levels for any pollutant. This rule does not change permitting requirements. 4. EPA I ssues Final Rules Governing the Implementation of NSR for Fine Particulate Matter On May 8, 2008, the Environmental Protection Agency (EPA) issued final rules governing the implementation of the New Source Review (NSR) program for particulate matter less then 2.5 micrometers in diameter (PM2.5). PM2.5 also is known as fine particle s. This rule finalizes several NSR program requirements for sources that emit PM2.5 and other pollutants that contribute to PM2.5 5
. EPA Finalizes Rule Reconsidering Inclusion of Fugitive Emissions On December 10, 2008, EPA finalized revisions to the Dec ember 31, 2002 New Source Review (NSR) Improvement rules to change the requirements of the major NSR programs regarding the treatment of fugitive emissions. 6
. EPA issues an interpretive memorandum entitled "EPA's Interpretation of Regulations That Deter mine Pollutants Covered by Federal Prevention of Significant Deterioration (PSD) Permit Program." On December 18, 2008 the Administrator issued an interpretive memorandum entitled "EPA's3

Interpretation of Regulations That Determine Pollutants Covered b y Fe deral Prevention of Significant Deterioration (PSD) Permit Program." 7
. Final Rule Defines Approach for Grouping Projects under the New Source Review Permitting Program On January

12, 2009, EPA issued a final rule that revises the agency ’s policy on “aggr egation.” For the purpose of determining whether NSR applies, this rule directs facilities and permitting authorities to combine, or aggregate, emissions from plant modifications when those projects are related. Thus, total emissions for the related projec ts must be considered when permitting authorities determine whether NSR applies. 8
. Denial of Petitions to Reconsider Aspects of the PM2.5 NSR Requirements and Reasonable Possib i lity

Rule January 15, 2009
- EPA has denied two petitions for reconsideratio n of two final rules under the New Source Review permitting program for PM2.5 Requirements and Reasonable Possibility Rule
. 9
. EPA Reconsiders New Source Review Final Rule February 9, 2009
- To allow further review of the January 15, 2009, final rule mo difying the NSR air permitting program’s “aggregation” policy, EPA is extending the effective date of the rule. This action is in response to the White House’s January 20, 2009, and the Office of Management and Budget’s January 21, 2009, memoranda regardin g regulatory review. EPA also will reconsider one or more of the aspects of this final rule raised by the Natural Resources Defense Council in a petition for reconsideration. To allow time for the review and the reconsideration, EPA will stay the effective date of this rule for 90 day s, until May 18, 2009. 10
. Granting of Petitions to Reconsider Aspects of the Reasonable Possibility , Fugitive Emissions and PM2.5 NSR Permitting Rules April 24, 2009
- EPA notified petitioners of its intent to reconsider port ions of three rules under its New Source Review (NSR) permitting program. 11
. EPA extends effective date of the aggregation rule for 1
- ye ar May 8, 2009
- This final rule extends until May 18, 2010, the effective date of the January 12, 2009 aggregation ru le. During this time, EPA will reconsider the final aggregation rule. 12. Stay s the "Grandfathering" Provision for the PM2.5 NSR Permitting Rule for Nine Months September 16, 2009
- EPA staying until June 22, 2010 the "grandfathering" provision for parti culate mater less than 2.5 micrometers (PM2.5) requirements in the Federal Prevention of Significant Deterioration (PSD) program published in the Federal Register on May 16, 2008
.4

13
. Final Rule Facilitates the use of Flexible Air Permits September 25, 20 09
- Flexible air permits enable major air emissions sources to implement operational plans and make anticipated changes to these plans without further review and approval. These permits do not provide approval for operational changes outside the scope authorized in the initial permit and sources must still meet all Clean Air Act requirements that apply to them. Pilot studies have shown that flexible permitting approaches can minimize the need for permit revisions, provide significant economic benefits, enc ourage innovation, and increase public awareness
-- all while ensuring equal or greater environmental protection. 1 4
. Approval and Promulgation of Wisconsin NSR Reform Regulations: Denial of Petition for Reconsideration January 20, 2010
- EPA responded to a petition from the NRDC and Sierra Club. Their petition requested that EPA reconsider and stay of certain parts of the Wisconsin's SIP. After carefull y reviewing the petition for reconsideration, EPA has denied it. EPA also denied NRDC's request for a st ay of the final rule approving the Wisconsin state plan
. 1 5
. Stay of Fugitive Emissions Rule for 18 Months March 24, 2010
- EPA has stay ed for 18 additional months, the rule establishing how fugitive emissions should be treated for New Source Review perm itting. A previous stay will expire on March 30, 2010. 1 6
. Stay of Aggregation Rule May 6, 2010
- EPA extended the effective date of the January 15, 2009 final rule that modified the New Source Review air permitting program’s policy on “Aggregation.” 1 7. Final GHG Tailoring Rule May 13, 2010
- EPA sets greenhouse gas (GHG) emissions thresholds to define when permits under the New Source Review Prevention Significant Deterioration (PSD) and title V Operating Permit programs are required for new and exis ting industrial facilities. The State has the authority to regulate GHGs, however, the State will now need to adopt the equivalent federal threshold levels for GHGs based on the Tailoring Rule. 18. Final Rule to Establish Increments, Significant Impact L evels and a Significant Monitoring Concentration for Fine Particle Pollution September 29, 2010
- EPA ha d established key components for making PSD permitting determinations for fine particle pollution increments, significant impact levels (SILs), and a si gnificant monitoring concentration
.5

19. Greenhouse Gas Emissions December 1, 2010
- Final rule which requires certain states to make changes to their state implementation plans to cover greenhouse gas (GHG) emissions in Clean Air Act permits. These changes will ensure that beginning in January 2011 GHG emissions sources can obtain permits. Virginia is not one of these States. 20. Clean Air Act Permitting for Greenhouse Gas Emissions On December 23, 2010, the U.S. Environmental Protection Agency (EPA) issued a series of rules that put the necessary regulatory

framework in place to ensure that 1) industrial facilities can get Clean Air Act permits covering their gree nhouse gas (GHG) emissions when needed and 2) facilities emitting GHGs at levels below those established in the Tailoring Rule do not need to obtain Clean Air Act permits. EPA has determined that the proposed amendments to Virginia's prevention of signifi cant deterioration (PSD) permit program at 9 VAC
- 5
- Chapter 80 Article 8 , as submitted on June 7, 2010 , meet the minimum requirements of 40 CFR 51.166 and the Clean Air Act for regulating NOx as a precursor to Ozone . This amendment alone is being proposed for full approval as a revision to the Virginia SIP. This action does not super s ede the prior “ limited approval ” of the Virginia PSD program for the following issues. II. PRIOR LIMITED APPROVAL OF VIRGINIA’S PSD PROGRAM The following is an explanation for the limited approval of the previous SIP revision by EPA. In Virginia’s regulations under 9 VAC 5
- Chapter 80
- 1615 (Article 8) d efinitions were added to reflect the necessary changes to the program found in the 2002 federal NSR Reform rule. Virginia’s definition for “baseline actual emissions” varie d from the federal definition at 40 CFR 51.166(b)(47) in two way s. First, for both electric generating units (EGUs) and non
EGUs, Virginia’s rule allow ed the use of different baselines for differ ent pollutants if the owner c ould demonstrate to the satisfaction of the Board that a different baseline period for a different pollutant(s) wa s more appropriate due to extenuating circumstances. EPA propos ed a full approval on this variation. However in the second instance, for non
- EGUs, the 24
- month baseline period must occur within the five
- ye ar period preceding the date the owner beg an actual construction or the permit application was deemed complete, whichever was earlier, unless the Board allow ed a different time period that it deem ed more representative of normal source operations. The allowance of a different or an extended time period by the Board was acceptable as it allow ed a time period past the more restrictive 5
- year period, however, the Commonwealth’s regulations d id not further limit the Board from allowing a time period which could extend past the 10
- ye ar period currentl y provided in the federal NSR Reform rule. The Virginia regulations therefore met the general federal criteria for expanding the lookback period beyond the old requirement of the most recent 24
- month period, and were thus equivalent to the federal requirement. The purpose of an extended lookback is to establish a period that is most representative of source operation. Establishment of the most representative6

operation not only

enables sources to plan effective emissions control strategies, it also provide d Virginia with more accurate information on which to base long
- term air quality planning strategies. The 5
- ye ar l ookback can be seen to be more restrictive or at times more stringent than the Federal rule. Requiring a 5
- year lookback instead of a 10
- ye ar lookback could , however, limit a source’s potential to find a higher baseline. This could in turn restrict a sou rce’s ability

to emit and is thus inherently more protective than the EPA regulations. The Commonwealth provided a more detailed explanation of the 5
- ye ar lookback period in their SIP revision request. The following was an excerpt from the Commonwealth’ s “Technical Support Document” for their last approval request
. “Virginia has numerous reasons for taking a somewhat conservative approach to revising its new source review program. These reasons cover a variet y of issues, from public health and air qu ality , to administrative and operational concerns, and are discussed in detail below. While many aspects of the EPA rule will likely result in some air quality benefit when applied in Virginia, the Commonwealth’s overall air quality situation can benefit f rom a certain changes to the EPA requirements. § 10.1
- 1308 of the Code of Virginia states, “The regulations shall not promote or encourage an y substantial degradation of present air quality in an y air basin or region which has an air quality superior to that stipulated in the regulations.” In other words, no regulation may contribute to the deterioration of air quality. Given the uncertaint y of specific impacts that implementing the federal rules will have on the areas of the state that are attaining the national standards, it is believed that a certain limitations on some aspects of the federal rules may

help ensure that this state
- specific need is met. In addition to ensuring that areas of the state that meet the national standards continue to do so, the Commonwealth is also obligated to actively improve air qualit y. Currently, approximately

one half of the Commonwealth’s citizens live in areas that do not attain the national standards. Visibility problems have been identified in Virginia’s Class I (n ational park) areas. Additionally , nitrogen deposition from airborne emissions is contributing to serious water qualit y problems in Chesapeake Bay . In this larger context, it is clear that the state needs to take additional steps beyond the immediate leg al requirements for nonattainment and PSD areas if larger, statewide issues of air quality are to be addressed. Again, given the uncertainty surrounding the specific impacts of the federal rule, the state rule is exercising its responsibility to consider a somewhat more closely scrutinized process for implementing the basic elements of NSR reform. Virginia has a legal obligation to incorporate the federal regulations in a manner that will result in equal or better environmental benefit. In order to bal ance the need to meet Virginia’s specific air quality needs with the need to improve permitting certainty and flexibility , a number of revisions to the federal rules have been made... The 5
- ye ar period was selected in order to enable sources to utilize a moderatel y extended lookback while providing the board assurance that no unusually high or low periods would be selected. A conservative transition to the new sy stem will assure permitting, compliance, and enforcement reliability while allowing sources the enhanced7

flexibility of an extended lookback. Additionally , the regulation allows sources the use of a different time period in determining baseline actual emissions if a case can be made that the proposed alternative time period is more representativ e of normal source operation. This provision will provide sources with additional flexibility when appropriate, while providing the oversight necessary to monitor the program and avoid compliance issues.” Virginia further went on to provide additional re asoning for why a 5
- ye ar lookback period in lieu of the federal 10
- ye ar approach was selected for the facilities in the Commonwealth. In their revision request submittal, Virginia further add ed how data was used to compare the impacts of a 2
- ye ar, 5
- year and 10
- ye ar lookback period. This discussion can also be found in the Attachment to this Technical Support Document. Thus, Virginia ha d chosen to limit the lookback period to 5 y ears, as noted above, with the possibility of extending the lookback period past the 5 y ears upon Board approval. It d id not however, limit the possibility of extending the lookback period past the 10 ye ars allowed in the federal regulations. Though it was not Virginia’s intention to exceed the 10
- year lookback limitation, EP A’s decision to propose limited approval was based the Commonwealth’s interpretation of its regulations as provided in their discussion, above. Furthermore, EPA would look unfavorabl y upon any use of discretion by

Virginia that would allow for baselines that exceed ed a 10
- ye ar lookback period. EPA expects Virginia to correct these definitions at 9 VAC 5
- 80
- 1615 and 9 VAC 5
- 80
- 2010 by

limiting the discretionary lookback period to 10 y ears. When Virginia makes these amendments, they will be eligible for co nsideration for full approval of its NSR program. In conclusion, the impact of Virginia’s tailored approach to NSR Reform implementation will not be fully

known until the program has been in place for some time since implementation of some elements are le ft to the discretion of the Board. Until the Board has been given the opportunity

to exercise this discretion, EPA cannot say with certaint y that this variation from the federal rule has a measurable impact on implementation relative to the federal program. Therefore, EPA believe d it was appropriate that while EPA resolves the gaps in its own ability to assess the impact of the federal rules, that Virginia be given the opportunity to demonstrate that its program meets the overall objectives of NSR reform in a manner that they believe is environmentally

sound. EPA believe d that th e limited approval action was necessary to further strengthen the Virginia SIP. EPA continues to rely on the Commonwealth ’s interpretation of its regulations as noted above in this Section, and in part, the basis for the prior limited approval. III. SUMMARY OF ACTION This rule establishes a construction permit program consistent with the federal Clean Air Act’s Title Iprogram and implementing regulations at 40 CFR §51.166, “ Prevention of Significant Deterioration of Air Quality .” 9 VAC
- 5
- Chapter 80 Article 8 is part of the State Implementation Plan and sets forth the criteria and procedures for major stationary sources to obtain a permit to construct, operate and/or modify a major stationary

source. This revision simply

is adding new references to include NO x as a precursor to Ozone to comport8

with federal counterpart language. The Virginia Department of Environmental Quality (VADEQ) has now submitted a final rule 9 VAC
- 5
- Cha pter 80 Article 8 a s a proposed revision to the State Implementation Plan. EPA is now proposing to “fully” approve the regulatory changes made with this Revision Package A08 found at 9 VAC
- 5
- Chapter 80 Article 8 , Sections 1615 and 1695, and as referenced above, into the Virginia SIP
. The Commonwealth’s Regulatory SIP Revision Request Package was submitted by

the Virginia Department of Environmental Quality on June 7, 2010 . The regulations for this approval bec ame effective in the Commonwealth on December 31, 2008. I V . PROGRAM REVIEW A. Virginia Submittal The Virginia SIP submittal includes new references in the Commonwealth’s rule to include NO x as a precursor to Ozone to comport with federal counterpart language. B. Public Comment on the revised Commonwealth’s rules contained in this SIP approval

– The Regional Administrator for the U.S. Environmental Protection Agency was notified of the public comment period, as was each local air pollution control agency which will be significantly

affected by

th e revision and is located in the affected Air Quality Control Regions. In addition, the District of Columbia, Maryland and Tennessee, which share affected interstate Air Quality Control Regions with Virginia, were notified of the public comment period. T hese notifications follow ed the requirements of 40 CFR Part 51.102(d)(3), (4) and (5). No comments were received regarding this revision
.
C. Regulatory

Review of Proposed SIP VIRGINIA REGULATIONS 9 VAC 5 - 80 - 1615 Definitions. The following table brie fly summarizes the changes to this section of Article 8. Subsection Status Description A Modified Minor changes to direct reader to correct current Virginia citation B No changes C Modified See below for the changes to 9 VAC5
- 80
- 1615C “Definitions”
. Many of the definitions in the SIP ha d previously been revised and man y terms ha d been added to accommodate the NSR reform regulations in the limited approval of the PSD Article 8 SIP which was completed in October 2008. V irginia has now updated the text of some definitions9

(noted below) which adds NOx as a precursor to O3 for PSD. EPA has determined that th ese regulatory

changes are SIP approvable. The changes were made to the Commonwealth’s regulations, in part because of a completeness finding for Sec tion 110(a) of the Clean Air Act for PSD program elements needed under State infrastructure (March 27, 2008, 73 FR 16205 ). The following table summarizes the changes that have been made. Those terms appearing in bold text are NSR reform minimum program elements. Modified definitions at 9 VAC5
- 80
- 1615 C major modification (b) adds reference that NOx shall be considered a precursor for Ozone Modified definitions at 9 VAC5
- 80
- 1615 C major stationary source ( a ) (1)(x) Changed text to clarify meaning of f ossil fuel boilers
. Regulation is consistent to prior approved text. Modified definitions at 9 VAC5
- 80
- 1615 C major stationary source (b) adds reference that NOx shall be considered a precursor for Ozone Modified definitions at 9 VAC5
- 80
- 1615 C majo r stationary source ( c ) (21) Changed text to clarify meaning of fossil fuel boilers. Regulation is consistent to prior approved text. Modified definitions at 9 VAC5
- 80
- 1615 C regulated NSR pollutant (a) added words “and Nox” to show precursors for Ozo ne Modified definitions at 9 VAC5
- 80
- 1615 C Significant ( a) ( Ozone criteria in

pollutant chart) added words “and Nox” to show precursors for Ozone 9 VAC 5 - 80 - 1695. Exemptions. The following table describes how the section has been changed. Subsecti on in 1695 Changes A Changed text to clarify meaning of fossil fuel boilers. Regulation is consistent to prior approved text. B No changes. C No changes. D No changes. E Modified Section E. 1. No de minimus air quality level is provided for Ozone
. However, any net increase of VOCs or NOx subject to Article 8 would be required to perform an ambient impact anal ys is including gathering ambient air quality data.10

V. INFRASTRUCTURE Virginia’s proposed SIP submission addresses changes need ed in the part C PSD permit program. This SIP submission also corrects deficiencies identified by EPA in the March 27, 2008 Federal Register notice entitled, “Completeness Findings for Section 110(a) State implementation Plans for the 8 hour Ozone Nationa l Ambient Air Quality Standards (1997 Ozone NAAQS)”, (73 FR 16205). EPA’s proposed approval of this SI P submission addresses Virginia’s compliance with the portion of CAA Section 110 (a)(2)(C) & (J) relating to the Part C permit program for the 1997 NAAQ S Ozone NAAQS, because this proposed approval would approve regulating NOx as a precursor to Ozone in Virginia’s SIP in accordance with the Federal Register notice dated November 29, 2005 (70 FR 71612) that finalized NOx as a precursor for Ozone regulati ons set forth at 40 CFR 51.166 and in 40 CFR 52.21. V I . RECOMMENDED AGENCY ACTION EPA recommends “fully” approving the Virginia Regulatory Revision Package as a current revision to the Virginia SIP at 9 VAC
- 5
- Chapter 80 Article 8 Permits for Major Stat ionary Sources and Major Modifications L ocating in PSD Areas
. This SIP revision will establish NO x as a precursor to Ozone and will not supersede the previous “limited approval” status of those citations as noted in 73 FR 62897 ; and as previously discussed in Section II of this document
.