## U.S. Environmental Protection Agency Region 9

R ESPONSE TO COMMENTS

Revisions to California State Implementation Plan; Bay Area Air Quality Management District; Stationary Source Permits

EPA’s Response to Public Comments on the Notice of Prop osed Rulemaking

Regulation 2, Rule 1

– Permits, General Requirements

Regulation 2, Rule 2

– Permits, New Source Review

Docket No. : EPA

- R09

- OAR

- 2015

- 0280

May 23 , 2016Bay Area AQMD SIP Revision Submittal Response to Comments May 23, 2016 Pag e ii 

### This page left intentionally blank.Bay Area AQMD SIP Revision Submittal Response to Comments May 23, 2016 Pag e iii 

### TABLE OF CONTENTS

1. INTRODUCTION

................................ ................................ ................................ ............. 1

2. COMMENTS AND RESPONS ES

................................ ................................ ................... 2

2.1 The Air District’s Discretion in Developing a Regulatory Program to Satisfy the Federal NSR Requirements

................................ ................................ ................................ .......................... 2

2.2. SIP Requirements to Prevent Construction of New and Modified Sources that would

Interfere with Attainment or M aintenance of a NAAQS

................................ ................................ 4

2.3. SIP Requirements to Ensure Compliance with the Air District’s Control Strategy

....................... 9

2.4. Calculation o f Offsets for Fully

- Offset Sources

................................ ................................ ............. 9

2.5. Providing Emission Reduction Credits for Shutdown of Fully

- Offset Units

............................... 16

2.6. Offset Requirements for SO 2 as a PM 2.5 Precursor

................................ ................................ ....... 18

2.7. Visibility Analysis for Sources that May Impact Federal Mandatory Class I Areas

.................... 19

2.8. Legal Effect of Limited Disapproval of Federal Enforceability of the Air District’s NSR Program Provisions

................................ ................................ ................................ ....................... 22Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 1 

### 1. INTRODUCTION

On August 28, 2015, the U.S. Environmental Protection Agenc y (EPA) provided notice of, and requested public comment on, a proposed Clean Air Act (CAA or Act) rulemaking to revise certain portions of the California State Implementation Plan (SIP) for the Bay Area Air Quality Management District (BAAQMD

, Bay Area or District ). 80 FR 52236. This document provides excerpts or summaries of the public comments received by EPA on our proposed action on the BAAQMD New Source Review (NSR) 1 SIP submittal. Our responses to the comments are provided below. BAAQMD submitted a c omment letter. The California Council for Environmental and Economic Balance (CCEEB) also submitted a comment letter although the substance of CCEEB’s comments was essentially identical to BAAQMD’s comment letter. EPA is responding to both comment letters in this document. EPA also received a late comment letter

from the Sacramento Metropolitan Air Quality Management District that we are exercising our discretion to accept and consider. Finally, we received an anonymous non

- substantive comment

letter and a comment letter submitted on behalf of the California Air Pollution Control Officers Association (CAPCOA) that was withdrawn during the comment period. We are not providing

response s to the anonymous, non

- substantive comment letter or the withdrawn CAPCOA l etter. The full text of all public comments and other documents relevant to this action are available in the docket (visit http://www.regulations.gov and search for Docket ID: EPA

- R09

- OAR

- 2015

- 0280).

Index of Com menter s
Name Title Organization

Jim Karas Director, Engineering

Division Bay Area Air Quality Management

District (BAAQMD)

William J. Quinn Chief Operating Officer California Council for Environmental and

Economic Balance (CCEEB)

Larry Greene Executive Director/Air

Pollution Control Officer Sacramento Metropolitan Air Quality Management District (SMAQMD)

Alan Abbs (Comment letter withdrawn) Executive Director California Air Pollution Control Officers

Association (CAPCOA)

We have copied some of the com ments verbatim and we have summarized others . We give equal weight to the comments whether they are copied verbatim or summarized in this document.

1 By “NSR” or “NSR program” we are generally referring to the collective requirements of the minor NSR, Prevention of Significant Deterioration (PSD) and n onattai nment NSR programs.Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 2 

### 2. COMMENTS AND RESPONS ES

2.1 T HE 

### A IR 

### D ISTRICT 

### ’ S 

### D ISCRETION IN 

### D EVELOPING A 

### R EGULATORY 

### P ROGRAM TO


### S ATISFY TH E 

### F EDERAL 

### NSR R EQUIREMENTS

2.1.1. Comment: BAAQMD notes that the C AA is designed to achieve “cooperative federalism” and that “EPA’s role is simply to determine whether the local permitting authority’s choices satisfy or do not satisfy the federal NSR program re quirements.” Bay

Area Comment Letter ( BA CL) p. 1. BAAQMD states: “As long as the agency’s regulatory program satisfies the federal requirement, then EPA is required to approve it, even if EPA would choose to implement the requirement in a different manner or believes that some alternative approach is preferable.” Id

.

BAAQMD quotes language from appellate cases from the 5 th and 11 th Circuits. BAAQMD highlights certain text from these cases, specifically from Luminant Generation Co., LLC v. United State s EP A, 714 F.3d 841, 845

- 46 (5 th Cir. 2013):

The Act confines the EPA to the ministerial function of reviewing SIPs for consistency with the Act’s requirements Id. at § 7410(k)(3). The EPA must approve the plan in its entirety if it meets the applicable requi rements of the Act. [Citations omitted]

BAAQMD then states:

In some aspects, however, EPA’s Proposal seems based on a concern that the Air District’s rules do not implement certain federal NSR requirements in EPA’s preferred manner, rather than on a fin ding that they do not satisfy a federal NSR program requirement. For example, with respect to certain items in the proposal, EPA’s justification for its position (both in the published Proposal documents and in subsequent informal

communication with EPA Re gion IX staff) has been based primarily on suggestions of a different way to implement a program element, rather than on an identification of what the federal NSR rules require and an explanation of why EPA believes that the Air District’s rule does not

sa tisfy that requirement.

Response: EPA understands its role under the cooperative federalism approach established by the structure of the CAA. However, cooperative federalism does not limit EPA’s review to a ministerial task of approving NSR rules if the rules under review do

not meet the substantive requirements of the federal regulations set forth in 40 CFR

51.160

- 51.166. The 9 th Circuit recently considered the State of Arizona’s challenge to EPA’s denial of Arizona’s Best Available Retrofit Technology ( BART) determination.Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 3 The court noted that the process for evaluating the State’s BART determination was similar to the SIP review process. The court stated: EPA may only approve SIPs, or portions of SIPs, that ‘meet[] all applicable requirements ’ of the Ac t. 42 U.S.C. 7410(k)(3). Thus, while the Act ‘gives states discretion in balancing the five BART factors, it also mandates that the state adhere to certain requirements when conducting a BART analysis.’ Oklahoma, 723 F.3d at 1208

. Consequently, when

review ing the regional haze SIPs, EPA may not approve ‘a BART determination that is based upon an analysis that is neither reasoned nor moored to the [Act]’s provisions. ’ North Dakota, 730 F.3d at 761 . In short, EPA is not limited to the ‘ministerial ’ role of ve rifying whether a determination was made; it must ‘review the substantive content of the

BART determination.’ Id

.

Ariz. Ex rel. Darwin v. United States EPA , 815 F.3d 519 (9 th Cir. 2016 ). EPA has applied the appropriate standard in reviewing the BAAQMD’s NSR rule s and fully understands its role in the CAA’s cooperative federalism approach

. EPA has proposed

– and is now finalizing

– a limited disapproval of a few provisions of the BAAQMD’s NSR rule s that do not meet EPA’s regulatory requirements ; this is no t a matter of a different policy

choice . EPA is finalizing some

, but not all of the rule deficiencies we cited in our proposed rulemaking.

For the District’s minor NSR program, we are finalizing only the deficienc ies in the rule’s definition of “Agricultu ral Source” in Section 2

- 1

- 239 , and the provision in Section

2

- 1

- 424 that cross

- references the definition of “large confined animal facility” in Regulation 2, Rule 10 which is not in the California SIP

. Our proposal cited two other

deficiencies in the mino r NSR program that we are not finalizing. We are not finalizing our proposal to find that BAAQMD Section 2

- 2

- 308 is deficient

, for reasons discussed

below in our responses to Comments 2.2

. 1 to 2.2. 8

. We are also not finalizing our proposal to find that the District’s rule is deficient b ecause it does not c ontain a prohibition on issu ing an ATC if the project does not meet all applicable requirements of the control strategy as discuss ed in in more detail in our response to Comment 2.3.1

.

For the District’s major attainment and nonattainment source programs, we are finalizing our limited disapproval based on the deficiencies cited in our proposal. Notwithstanding the BAAQMD characterization to the contrary, the rules we cite as deficiencies do not comply with federal requirements. These are not a difference in policy choices. The rules

deficiencies are discussed in more detail below.

2.1.2. Comment: BAAQMD commented that “ EPA should ensure that it is according appropriate deference to the Air District’s policy choic es on how to implement its NSR

program. ” BAAQMD also commented that “ EPA should ensure that it has considered the deference owed to the Air District in making policy choices on how to implement its NSR program ” and that “ any disapproval decisions are made only after carefully considering what the federal NSR requirement at issue is, and whether the Air District’s approach falls within the discretion that the District has to adopt its own policies, withinBay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 4 the bounds of the federal requirements. ” BAAQMD reque sted that any disapproval

decisions be made based on “ (i) a clear explanation of what the federal regulation requires; (ii) a description of how specifically the Air District’s rule does not satisfy the federal requirement; and (iii) an outline of the stan dards under which EPA will judge any revised submission, in order that the Air District can understand how to craft a revised submittal that EPA will be able to approve. ” BACL p. 2

Response: As discussed above, EPA understands the principl e of cooperative federalism and has applied that principl e appropriately in finalizing its limited approval and limited disapproval of the BAAQMD NSR rules. EPA’s proposal and this R esponse to
C omments document provides a clear explanation of the federal regulatory requir ements, a description of how the BAAQMD rules do not satisfy certain requirements, and suggestions for revisions to the rules with deficiencies that would be approvable. The provisions that EPA has determined do not meet federal regulatory requirements are not a
matter of differing policy choices.



### 2.2. SIP R EQUIREMENTS TO 

### P REVENT 

### C ONSTRUCTION OF 

### N EW AND 

### M ODIFIED


### S OURCES THAT WOULD 

### I NTERFERE WITH 

### A TTAINMENT OR 

### M AINTENANCE OF

A 

### NAAQS

2.2.1. Comment: BAAQMD argues that EPA’s approval of its NSR rule and the requirement for minor stationary sources to comply with it s NSR rule “satisfies the requirement in 40 CFR 51.160(b) to ensure that new and modified sources will not ‘interfere with the

attainment and maintenance of a national standard.’” BACL at p. 5. The District con tends that the enforceable measures, rules and regulations approved into it s SIP, including its NSR program “satisf [y] 40 CFR Sections 51.160(a) and (b).” Id. BAAQMD also cites to a statement in our Technical Support Document (TSD) at section 7.4.1 and app roval of exemptions in the San Joaquin Valley SIP as further support that it may omit a provision authorizing the APCO to prevent construction or modification of a ny minor stationary

sources if the project would interfere with attainment and maintenance of the NAAQS

.

Response: EPA is not finalizing its proposal to find that Section 2

- 2

- 308 is deficient for purposes of complying with 40 CFR 51.160 (b)(2)

. Because EPA is not finalizing our proposed limited disapproval to find that Section 2

- 2

- 308 is deficient , it is not necessary to respond to the detail s provided in this comment.

EPA is clarifying that our basis for finalizing approval of Section 2

- 2

- 308 is the analys i s cited in the District’s staff report 2 that the annual emission increases from new and

mo dified sources with project emissions below the emission levels specified in Section 2

-

2 Final Staff Report

- Updates To BAAQMD New Source Review a nd Title V Permitting Programs

. Regulation 2; Rules 1, 2, 4, And 6 (September 26, 2012), pg 88. (BAAQMD Staff Report)Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 5 2

- 227 3 may be exempt ed from the minor source permit program ’s public notice requirements because they represent environmentally in significant modifications. Projects wit h emissions that are small enough to qualify as exempt from the minor source public notice requirements may also be exempt ed from all minor source permitting requirements, including 40 CFR 160(b). See 40 CFR 51.160( e ).

Based on the District’s emissions a nalysis , EPA is now concluding that it is not necessary to apply the requirements in 40 CFR 51.160

– 51.164 to stationary sources with

emissions below the emissions levels specified in Rule 2

- 2

- 227

. Accordingly, EPA will finalize approval of BAAQMD Rule 2

- 2

- 308.

2.2.2. Comment: BAAQMD states that EPA’s proposed limited disapproval “would create an

entire new source

- specific air quality impact analysis requirement for minor NSR. The

C lean A ir A ct never envisioned requiring such analyses for sources and modificatio ns below the ‘major’ NSR thresholds, and EPA has never (to the Air District’s knowledge) held that such analyses are required.” BACL at p. 8. BAAQMD also states that EPA’s interpretation of 40 CFR 51.160(b)(2) would “create a new source

- specific air qualit y impact analysis requirement for major Non

- Attainment NSR as well.” Id . CCEEB stated that they disagree that the CAA requires a “NAAQS

- compliance demonstration for non

attainment pollutants, ” and that “it is hard to see how such a provision could be imple mented in non

- attainment areas without creating a de facto permit moratorium, as it would be very challenging if not impossible for sources to prove compliance using PSD

modeling methods.” [Footnote omitted]

Response: EPA has never indicated that complia nce with 40 CFR 51.160(b) (2) requires sources to provide a “NAAQS

- compliance demonstration” in the form of an air quality impact analysis or air quality modeling. EPA has not prescribed how a permitting agency

must make the determination required by 40 CFR 51.160(b)(2)

. Many California air districts have complied with the requirement in 40 CFR 51.160(b) (2) without prescribing air quality modeling for all stationary source permit applicants and EPA has approved

these rules . See Placer County APCD Rule 502, S ection 305.2 and Sacramento Metropolitan AQMD, Rule 214, Section 306. On the other hand, the approved NSR SIPs for Clark County, Nevada and the Nevada Department of Environmental Protection do

include such modeling provisions. See Clark County Rule 12.1.5. 1(a)(4) and NAC 445B.308(2)(a).

As discussed in prior responses, however, EPA is not finalizing our proposal to find that

Section 2

- 2

- 308 is deficient. Based on that determination, EPA is not responding to the

additional details set forth in this comment

.

3 It is coincidental that the emission levels in Section 2

- 2

- 227 are the same as those in 40 CFR 51.166(b)(23). The appropriate emission levels for exempting minor sources from public notice and other minor source requirements must be established for each area based on its particular emission inventory and other relevant air quality issues. The

District’s s taff r eport cites their analysis of emission data showing the annual emissions from new and modified projects that will be exempt from all of the 40 CFR 51.160

- 164 general permit requirements will account for o nly 0.02% to 0.34% of the region’s total emission inventory each year. BAAQMD Staff Report , pg. 88.Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 6 2.2.3. Comment: BAAQMD states that EPA has confused the standard for preventing construction or modification of a stationary source used in the PSD regulations at 40 CFR 51.166(k) with the standard used in 40 CFR 51.160(a) and (b). The District also contends

t hat EPA’s statement in section 7.4.1 of the TSD indicating the BAAQMD NSR rule complied with the requirement in 40 CFR 51.160(b)(2) was correct. BACL at p. 6.

Response: EPA agrees that our discussion of these issues confused the language used in

these tw o provisions and that our proposed limited disapproval of Section 2

- 2

- 308 was

erroneous albeit for somewhat different reasons tha n those asserted by the District . EPA apologizes for our limited inaccurate statements. EPA is not finalizing our proposal to

f ind that Section 2

- 2

- 308 is deficient for the reasons discussed in our response to
Comment 2.2.1 above

. Accordingly, it is not necessary to respond to the detailed comments in this section of the BAAQMD comment letter.

2.2.4. Comment: BAAQMD asserts that EPA’s l imited disapproval of Section 2

- 2

- 308 based on the NSR rule’s omission of authority for the District to prevent construction and modification of minor stationary sources that will interfere with attainment and maintenance of the NAAQS is contrary to the de minimis doctrine established in

Alabama Power Co. v. Costle , 636 F.2d 323 (D.C. Cir. 1979). The District reaches this

conclusion based on our discussion proposing to find BAAQMD Rule 2

- 2

- 308 deficient

and other issues discussed in the TSD. The District st ates:

The Air District further requests that, with respect to EPA’s statement that the Air District must apply Section 2

- 1

- 308 to all sources, EPA clarify that this is not consistent with the federal NSR program, and that 40 CFR Section 51.160, like

the r est of EPA’s NSR regulations, allow states to exclude de minimis sources from their NSR programs (for both minor and major NSR). BACL at p. 11

.

Response: EPA agrees that federal minor source permitting requirements are not

necessary for small new and modi fied projects in the Bay Area that do not exceed specified thresholds in Section 2

- 2

- 27 , as provided by 40 CFR 51.160(e)

. As noted above

in our response to Comment 2.2.1 , EPA agrees that the BAAQMD has provided an analysis showing that the emission levels specified in Section 2

- 2

- 227 may be used to

relieve new and modified small projects from complying with certain permitting requirements in the Bay Area

. 4 Because we are no longer citing Section 2

- 2

- 308 as a deficiency, we are not providing a detailed respo nse to the remainder of this comment. We assume that the BAAQMD reference to Section 2

- 1

- 308 in the quotation above is a typographical error. Section 2

- 1

- 308 concerns fugitive emissions and we did not cite that rule as a deficiency in our proposed approval of the NSR rule s into the SIP.

2.2.5. Comment: BAAQMD commented that EPA should confirm that “ Section 2

- 2

- 308 is approvable because it uses the very same de minimis thresholds that EPA adopted for the

4 Id.Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 7 federal NSR program in the wake of the Alabama Power decisio n. ” BACL p. 11 BAAQMD also points out that the same de minimis thresholds are used under EPA’ s PSD Delegation Agreement with BAAQMD pursuant to 40 CFR Section 52.21, and for major PM 2.5 sources in the Bay Area under its federal nonattainment NSR permitting program set forth in 40 CFR Part 51 Appendix S. BAAQMD also noted “ that if EPA requires the Air District to use lower de minimis thresholds under 40 CFR Section 51.160 than EPA requires for the federal PSD requirements under 40 CFR Section 51.166, that

wo uld set up two different standards that apply to major sources. ” BACL p. 13

.

Response: As stated in our response to Comment 2.2.1 above , EPA is finalizing approval

of Section 2

- 2

- 308 because the District may exempt certain small emitting projects from

th e general permit provisions as provided in 40 CFR 51.160(e). EPA disagrees with the BAAQMD’s statement that it is appropriate to use the “very same de minimis thresholds ” provided in the federal PSD program as the basis for this determination . See Footnote 2

above.

2.2.6. Comment: CCEEB comment ed that, while they disagreed with the District’s decision to

include Section 2

- 2

- 308 as part of the SIP revision because the air quality impact analysis is not required under federal NSR rules, they do agree that the BAAQ MD has authority to apply de minimis thresholds and they support the use of significance levels for major NSR purposes. CCEEB add s that requiring minor sources to conduct an air quality impact analysis would be administratively burdensome and costly, and t hat California State law already requires the application of Best Available Control Technology at 10 tpy. CCEEB also comment ed that “ Adding an air impact analysis requirement gains almost nothing additional in terms of air quality since, in total, minor so urces account for only 0.02% to 0.34% of the air basin’s total inventory.” CCEEB Comment Letter ( CCL ) p. 3

.

Response: See our response to C omment 2.2. 1 above

. We note that BAAQMD conducted an analysis of the contribution of small new and modified projects emitting

below the emission levels specified in Section 2

- 2

- 227 compar ed to the Bay Area’s overall emissions of criteria pollutants and found that these sources have historically accounted for only 0.02 to 0.34 percent of the Bay Area’s total annual emiss ions (from all sources). 5

2.2.7. Comment: BAAQMD commented that in further discussions with EPA Region IX , the

staff “ pointed to regulatory requirements adopted by other agencies that simply state that emissions from new and modified sources may not interfere wi th attainment or maintenance of any NAAQS, and then leave it entirely up to the permitting agency’s discretion to determine whether or not an analysis of a source’s emissions should be conducted for any particular permit application ” and suggested that Dis trict consider the same approach instead of establishing a bright

- line de minimis exemption threshold.

5 Final Staff Report

- Updates To BAAQMD New Source Review and Title V Permitting Programs. Regulation 2; Rules 1, 2, 4, And 6 (September 26, 2012), pg 88. (BAAQMD Staff Report)Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 8 BAAQMD stated that it believes such vague and open

- ended requirement s will be difficult to implement because they d o not specify the applicable standard for a decision on when an analysis is required and when it is not. BACL p. 15 BAAQMD stated that

this could lead to disagreements on whether or not the requirements apply in specific situations, which are often time

- consuming to resolve and can even result in litigation. BAAQMD stated that in South Terminal Corp. v. EPA , 504 F.2d 646, 670 (1 st Cir. 1974),

the courts have made clear that regulatory requirements of this type are not appropriate or

valid. BACL p. 16 BAAQMD further commented that EPA should spe cify that : 1) such

vague requirements

— “ which simply state that new and modified sources must not interfere with attainment and maintenance of the NAAQS, and do not specify how that

determination will be made ( or leave it entirely up to the permitting aut hority’s unfettered discretion as to how that determination will be made)

— are not required by 40 CFR

Sections 51. 16 [5] (a) and (b) ” ; 2) “ it is appropriate to adopt requirements aimed at preventing interference with attainment and maintenance that incorpora te bright

- line numerical exemption thresholds ” ; and “ the decision on whether a particular application is subject to the requirement or exempt from the requirement does not have to be based entirely on the permitting authority’s discretion. ” BACL p. 17

Re sponse: As discussed in response to Comment 2.2.1 , EPA has determined that the BAAQMD appropriately set emission levels below which permits do not need to be required for purposes of a federal minor new source review program. On that basis, EPA agrees that Section 2

- 2

- 308 is not deficient and for this reason it is not necessary to respond in detail to the additional assertions i n this comment

.

2.2.8. Comment: BAAQMD stated that the y are concerned that EPA has not explained what is required under 40 CFR Sections 51.160(a) and (b) with sufficient clarity, and that EPA has not provided sufficient guidance as to what is required under these provisions, and what the District needs to do to satisfy these requirements

. BACL p. 17 BAAQMD stated

that EPA should explain wh at the federal NSR program requires for a local agency’s SIP submission, and how the Air District’s rules satisfy or do not satisfy those requirements, in order to make any Final Decision legally supportable. T o the extent that EPA is going to disapprove a ny elements of the Air District program, the District will need to know the rules governing such determinations if it is going to have to revise its NSR program in

order to re

- submit a program that EPA will be able to approve. BACL p. 18

.

Response: As di scussed in our responses to prior comments raising the same substantive issue, EPA is finding Section 2

- 2

- 308 to be fully approvable. Because we are not finalizing our proposed limited disapproval of Section 2

- 2

- 308 on the basis stated in our proposal, we find it unnecessary to respond to the questions posed in this comment

. The questions have also already been answered in our TSD and previous responses.Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 9 

### 2.3. SIP R EQUIREMENTS TO 

### E NSURE 

### C OMPLIANCE WITH THE 

### A IR 

### D ISTRICT 

### ’ S


### C ONTROL 

### S TRATEGY

2.3.1. Comment: BAAQMD comment ed that our proposal found that the District’s NSR rule

wa s deficient because it did not contain a prohibition on the issuance of an ATC if the project does not meet all applicable requirements of the control strategy as required in 40 CFR 51.160( b ) (1) . BA AQMD stated that in subsequent discussions with EPA, EPA

indicated that the provisions in Sections 2

- 1

- 304 and 2

- 1

- 321 satisfy this requirement. Regulation 2

- 1

- 304 provides that the APCO will deny an Authority to Construct and Permit to Operate for a new o r modified source that will not comply with any requirement of any District regulation (or other applicable regulatory requirement). Regulation 2

- 1

- 321 further provides that issuance of an NSR permit does not relieve the permit

- holder from compliance with all applicable regulatory provisions. BAAQMD requested that EPA clarify in its final decision that the District’s NSR rules are not deficient with respect to this issue. BACL p. 19

Response: EPA apologizes for overlooking Section 2

- 1

- 304 as a provision t hat satisf ies the requirements to ensure that all new and modified sources will comply with all applicable requirements of the Air District’s control strategy . EPA will be finalizing approval of the BAAQMD minor new source review program (except for the de finition of “Agricultural Source” in Section 2

- 1

- 139 , and the provision in Section 2

- 1

- 424 which

cross

- references the definition of “large confined animal facility” in Regulation 2, Rule

10 which is not in the California SIP ) based on finding the Air Distr ict ’ s rules meet the requirements of 40 CFR 51.160

– 164, including 40 CFR 51.160 (b)(1)

.



### 2.4. C ALCULATION OF 

### O FFSETS FOR 

### F ULLY



### - O FFSET 

### S OURCES

2.4.1. Comment: BAAQMD stated: “ EPA has proposed a limited disapproval of the Air District’s NSR rules with respect to the calculation procedures for the amount of offsets required under District Regulations 2

- 2

- 302 (offsets for NO
x and VOC) and 2

- 2

- 303 (offsets for SO 2 , PM 2.5 , and PM 10 ). Specifically, EPA has proposed to disapprove the way

the Air District calculates the amo unt of additional offsets that need to be provided where a source has already provided offsets for its maximum permitted emissions

– i.e., its full potential to emit (PTE), or what EPA calls the source’s “allowable emissions.” (80 FR at 52241, col. 2

- 3; TS D § 6.2.6, pp. 68

- 69, § 7.3.22, pp. 117

- 120, and p. 137, Deficiency Item #13.) ” BACL p. 19

- 20

BAAQMD further stated: “ EPA has proposed to find this calculation for modifications to sources for which offsets have already been provided as set forth in Secti on 2

- 2

- 606.2 to be deficient (at least with respect to federal major new sources and major modifications). EPA stated that the calculation of how many additional offsets are required in such a

situation cannot be limited to increases in PTE. EPA stated tha t under 40 CFR Section 51.165(a)(3)(ii)(J), the amount of additional offsets that need to be provided in a case where offsets have already been provided for the source’s full PTE must be the differenceBay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 10 between the source’s actual emissions level before the modification and its PTE (“allowable emissions”) after the modification. (80 FR at p. 52241, col. 2

- 3; TSD § 7.3.22, pp. 117

- 120, § 11, p. 137.) ” BACL p. 20

Finally, BAAQMD contends: “ This interpretation is problematic because it would require

facilities to provide additional offsets even if they have already provided offsets for the full amount of their maximum possible emissions, based on the difference between their actual emissions before they implement a modification and their potential emissions aft er they implement the modification. Such an interpretation would require sources to provide far more offsets than they could ever actually emit, even under the worst

- case scenario.

The Air District refers to this as “double

- counting” the amount of offsets required, as sources could be required to offset their emissions two (or three or more) times over by providing two (or three or more) times as many actual emission reduction credits as the maximum amount of emissions they could ever possibly emit. The Air District disagrees with this interpretation of how the CAA requires States to implement the Act’s offsets requirements. ” BACL p. 21.

Response: EPA, not BAAQMD, is responsible for interpreting the federal regulatory requirements for nonattainment NSR rule s and ensuring rules submitted for the SIP comply with those requirements. See Arizona ex rel Darwin v. EPA , 815 F.3d. 519 (9 th
Cir. 2016) (stating: “From our determination that EPA has a substantive role in deciding whether state SIPs are compliant with t he Act and its implementing regulations follows the conclusion that the ordinary APA ‘arbitrary and capricious” judicial review standard applies, with the requisite deference to EPA’s determinations. Again, neither American

Corn Growers nor ADEC supports a contrary conclusion. In particular, neither ADEC nor American Corn Growers bolsters Arizona’s contention that upon judicial review, EPA bears the burden of proving that the State’s BART determinations are unreasonable.”) 40 CFR 51.165(a)(3) establishes t he federal requirements for SIP rules concerning offsets. 40 CFR 51.165(a)(3)(ii)(J) requires SIPs to include rules to provide that:

[t]he total tonnage of increased emissions, in tons per year, resulting from a major modification that must be offset in accordance with section 173 of the Act shall be determined by summing the difference between the allowable emissions after the modification (as defined by paragraph (a)(1)(xi) of this section) and the actual emissions before the modification (as defined in paragraph (a)(1)(xii) of this section) for each emissions unit.

EPA has consistently held, and continues to find, that this provision requires offsets for each major modification at a major source in an amount equal to the difference between

pre

- modifica tion actual emissions and post

- modification PTE (which are generally equivalent to allowable emissions). EPA interprets the language in the regulation referring to “the modification” to mean each major modification that is undertaken at a major source. EPA ’s interpretation of this provision is reasonable and consistent with our approval of NSR SIP rules as discussed in our TSD and this Response to Comments. BAAQMD’s interpretation would require an examination and consideration of, not only the currently req uested modification, but all prior modifications. As 40 CFRBay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 11 51.165(a)(3)(ii)(J) is plainly stated as a discrete requirement applicable to each proposed major modification, EPA disagrees with BAAQMD’s interpretation. Additionally, some major sources never u ndertake a major modification requiring additional offsets, while other major sources operate with actual emissions at levels close to the PTE where a major modification would increase the PTE. Given these considerations, the scope of the BAAQMD’s concern about “double counting” would be relatively narrow if BAAQMD chooses to limit this offset requirement to major modifications at major sources.

2.4.2. Comment: BAAQMD comment ed that the CAA only allows EPA to require offsets

sufficient to ensure reasonable furth er progress and does not allow EPA to “double

count” how many offsets are required. BAAQMD quotes statutory language in Section 173(a)(1)(A) of the CAA to assert “[t]he Act requires States to ensure that they obtain sufficient offsets from permitted source s subject to the offsets requirement as are necessary to ensure Reasonable Further Progress (RFP) towards attainment. ” BACL at p. 22. BAAQMD then states that it “has already achieved sufficient reductions from the total regional emissions inventory to brin g ambient concentrations back below the NAAQS, and no additional ‘annual incremental reductions in emissions’ are necessary to ensure attainment.” BACL at p. 22

- 23. The BAAQMD also contends that even if it were not demonstrating attainment, its program wou ld ensure reasonable further progress because the BAAQMD uses a ratio of 1:1 for offsets. BAAQMD states: “Instead of discussing the provision in CAA Section 173(a)(1) specifying the amount of offsets that a State needs to require, EPA instead cites the pro vision of CAA Section 173(c)(1) that specifies the criteria for determining what emission reductions qualify for use in providing the offsets.” The District summarizes: “Section 173(a)(1) specifies how to calculate the amount of offsets required

– which is the calculation addressed in District Regulation 2

- 2

- 606.2

– whereas Section 173(c)(1) addresses a different issue, which is what emission reductions can be used to satisfy the requirement once the amount of offsets is established under Regulation 2

- 2

- 606 .2” BACL at 23

- 24.

Response: EPA disagrees with BAAQMD’s position that federal CAA offsets are only required in a sufficient amount to show that an area is achieving reasonable further

progress. We also disagree with t he District’s opinion that it need n ot require federal offsets for federal major modifications at major sources once an area has a Clean Data

Determination

. EPA interprets the offset provisions in Section 173 of the CAA to require

NSR SIPs to meet two key criteria: that is (1) to achieve rea sonable further progress (CAA 173(a)(1)(A)

, and (2) to offset the “total tonnage of increased emission s of the air pollutant from the new or modification source . . . .” (CAA 173(c)). Non

- attainment NSR rules must require major modifications at major sourc es to calculate the amount of offsets based on the difference between pre

- modification actual emissions and post

- modification potential or allowable emissions for each major modification

. 40 CFR 51.165(a)(3)(ii)(J).

Moreover, EPA’s discussion of offsets a nd reasonable further progress in our 1994 General Preamble does not support the interpretation offered by BAAQMD. The General Preamble notes that “[t]he 1990 CAA [Amendments] clarify and expand the basic requirements for emissions offsets already containe d in section 173 of part D.” 57 FR 13498, 13552. It continues, stating: “[t]he EPA interprets section 173(a)(1)(A) to ratifyBay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 12 current EPA regulations requiring that the emissions baseline for offset purposes be

calculated in a manner consistent with the emi ssions baseline used to demonstrate RFP.”

Id at 13552.

BAAQMD bases its planning documents on its actual emissions inventory. 6 Therefore, the baseline for determining the amount of offsets required is a source’s pre

- modification

actual emissions. EPA dis cussed this issue at length in its TSD. BAAQMD notes that EPA cited CAA Section 173(c) rather than 173(a). Both provisions of Section 173 apply to calculating the offsets required for major modifications.

2.4.3. Comment: BAAQMD stated that District Regulation 2

- 2

- 606.2 is consistent with

40 CFR 51.165(a)(3)(ii)(J) under any reasonable interpretation. BAAQMD makes several repetitive arguments in this portion of its comment l etter. First, the District contends that EPA must construe 40 CFR 51.165(a)(3)(ii)(J) to be consistent with the BAAQMD’s interpretation that Section 173(a)(1) limits offsets to an amount necessary to demonstrate reasonable further progress. The BAAQMD then cites to 40 CFR 51.165(a)(1)(xii)(C), stating that the permitting authority may presume ac tual emissions are the same as allowable emissions for purposes of the actual emissions baseline. BACL at p. 25. Second, the BAAQMD contends that its interpretation is correct because EPA’s method of quantifying offsets based on actual to PTE emissions for every major modification would require more offsets than is necessary for RFP, and, therefore, is void and unenforceable. Third, BAAQMD contends that because 40 CFR 51.165(a)(3)(ii)(J) was added during NSR Reform, EPA could not have intended to require ad ditional offsets over and above the source’s full PTE. BACL at p. 27. BAAQMD also states that the “regulatory history is fully consistent with interpreting the actual emissions before the modification” as being the source’s baseline actual emissions before it came into the offsets program, which is how the Air District’s ‘cumulative increase’ calculations work.” BACL at p. 27

- 28. Fourth, the District asserts that 40 CFR Part 51, Appendix S only requires “sufficient offsets to offset the project’s potential to emit and no more.” BACL at p. 28. The District appears to contend that Appendix S only requires offsets for the cumulative increase and that EPA is asking the BAAQMD to use a different method

than EPA would use to calculate the amount of offsets necessa ry for a major modification at a major stationary source. Fifth, BAAQMD argues that only requiring a source to offset its PTE once is consistent with EPA’s policy concerns. BACL at p. 29. Sixth, BAAQMD states that EPA has approved rules in other California Air District’s that use the same approach as the BAAQMD. BACL at p. 29

- 30.

Response: EPA disagrees with the six points articulated in this comment. First, as discussed above, EPA clearly interprets the requirement in 40 CFR 51.165(a)(3)(ii)(J) to
obtain offsets (for the difference between pre

- modification actual emissions and post

modification PTE for a major modification at a major source) to be independent of the requirement for nonattainment areas to demonstrate RFP. BAAQMD’s reliance on 40

CFR 51.165 (a)(1)(xii)(C) is misguided. 40 CFR 51.165(a)(1)(xii)(C) states that “[t]he

6 68 FR 42174, 42175 (July 16, 2003)Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 13 reviewing authority may presume that source

- specific allowable emissions for the unit are equivalent to the actual emissions of the unit.” BAAQMD cites this provision as

support to calculate PTE as “the difference between future ‘allowable emissions’ and past ‘allowable emissions’” rather than past actual emissions. BACL at 25. However, 40 CFR 51.165(a)(1)(xii)(C) is not a two way street. The provision permits the presumption that

a llowable emissions be equivalent to actual emissions, it does not, however, permit the presumption that actual emissions be presumed equivalent to allowable emissions, as required for BAAQMD’s interpretation.

Second, there is no prohibition in nonattainme nt NSR on obtaining more offsets than are necessary for RFP. Third, the fact that 40 CFR 51.165(a)(3)(ii)(J) was added as a part of

EPA’s NSR Reform rulemaking 7 does not support the BAAQMD’s interpretation. EPA agrees the intent was to continue to require offsets based on post

- modification PTE (rather than projected actual emissions). However, this addition only clarified that EPA would continue to calculate offsets by comparing the difference between pre

modification actual emissions and post

- modification PTE for each major modification at a major source. The addition of this regulation did not compel a change in EPA’s long

standing calculation methodology to the cumulative increase interpretation favored by BAAQMD for federal major modifications.

Fourth, EPA disagrees with BAAQMD’s reading of Appendix S. We note that Appendix S does not apply here because BAAQMD has an approved non

- attainment NSR program. In any event, EPA has consistently interpreted both 40 CFR 51.165(a)(3)(ii)(J) and Section IV.A, Cond ition 3 of Appendix S to require the amount of offsets for each major modification at a major source to be calculated as the difference between pre

modification actual emissions and post

- modification PTE. BAAQMD notes that EPA promulgated a FIP pursuant to Appendix S for the Tri

- Cities Landfill located on the Salt

River Pima

- Maricopa Indian Community and contends that the FIP was consistent with the District’s interpretation of the federal requirements. BAAQMD is incorrect. The FIP

allowed construction of a new major stationary source

- not a major modification

- because the owner/operator provided offsets for the PTE of the new major stationary

source. 64 FR 65660, 65661 (Nov. 23, 1999). There is no disagreement between the BAAQMD and EPA that a new major s ource must provide offsets up to the full PTE of the source. Our disagreement, and hence the narrow scope of our limited disapproval,

concerns the BAAQMD’s requirements only as they pertain to major modifications in accordance with the requirements of 40 C FR 51.165. EPA’s regulations require a comparison between the pre

- modification actual emissions and post

- modification PTE for each major modification. BAAQMD’s rules only require such a comparison when a modification causes a source’s initially offset PTE to be exceeded. The Tri

- Cities Landfill FIP is irrelevant to the offset calculation for a major modification.

BAAQMD’s fifth argument is that its interpretation is supported by policy

considerations. Because the language in Section 173 and 40 CFR 51.165 are clear

7 67 FR 8 0186 (December 31, 2002)Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 14 concerning the calculation of offsets for major modifications, it is not necessary to

examine these considerations.

Finally, the sixth assertion in this portion of the BAAQMD’s comment letter concerns

nonattainment NSR rules for other Californi a Air Districts, including Sacramento and San Joaquin Air Districts. Without citation or support, the District states that “most if not all of the other air districts in California calculate their offsets requirements the same way, and EPA has approved the ir NSR rules as well.” BACL at 29. We disagree with the District’s unsupported statement. We provided citations to California Air District rules that are consistent with the requirements in our TSD. With respect to Sacramento Rule 214, BAAQMD’s comment let ter mischaracterizes how that rule works, as confirmed by the late comment letter submitted by the Sacramento Metropolitan AQMD on December 22, 2015. The Sacramento Metropolitan AQMD states: “[W]hile [Rule 214] does allow major modifications to use potenti al to emit instead of actual emissions in offset calculations, it does so only in very limited circumstances. EPA accurately concluded that these limitations are reasonable restrictions. In fact, no sources have utilized the limited calculation procedure s ince Rule 214 was adopted five years ago.” 8 BAAQMD also cites EPA’s approval of Placer County and Feather River NSR rules. These two rules are consistent with our approval of Sacramento Rule 214. For the same reasons discussed in our TSD, our approval of t hose rules placed reasonable restrictions (a five year window) on using a PTE to PTE test.

Finally, the BAAQMD refers to our approval of the San Joaquin NSR rule that requires that District to demonstrate equivalency. This rule was also thoroughly discus sed in our TSD and the BAAQMD has not provided any new information concerning any other of

the California NSR rules in its comment letter.

2.4.4. Comment: BAAQMD asserts that CAA Section 173(a)(1) requires local permitting

authorities to obtain offsets sufficie nt to achieve RFP, and that this principle applies generally to all aspects of the offset requirements, not just to the procedures for calculating the amount of additional offsets necessary when a source is modified. BACL at 31. BAAQMD stated :

EPA should clarify generally that with respect to all of the offsets requirements in the federal NSR regulations, local permitting authorities must implement these requirements in order to ensure that RFP is maintained. This is what the Clean Air Act requires under S ection 173, as EPA has itself recognized. (FN omitted) Furthermore, this is what EPA requires in its own Non

- Attainment NSR permitting regulations that it implements when it is the permitting authority under 40 CFR Part 51, Appendix S. (FN omitted) Requiri ng local permitting authorities to implement their offsets provisions in a manner that goes beyond this mandate is not contemplated or authorized under the Clean Air Act. EPA

8 See SMAQMD Comment Letter dated November 13, 2015.Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 15 should clarify that this principle is inherent in all of its approval/disapproval determinations in its Final Decision on the Air District’s NSR rules. EPA should further clarify that any revised Air District submittal will not be required to implement any offsets requirements beyond what is required to achieve RFP.

Response: EPA has explained above that the requirements for offsets under CAA 173(c)

represent independent requirement s of the CAA in addition to the requirement to

demonstrate RFP at CAA 173(a)(1) . EPA interprets the requirements of 40 CR Part 51, Appendix S to be consiste nt with the offset requirements in 40 CFR 51.165, including 51.165(a)(3)(ii)(J). EPA’s interpretation of its regulations is entitled to deference. Appendix S is intended to apply to an area that is newly designated nonattainment while the area develops reg ulations for nonattainment NSR. During implementation of Appendix S, EPA expects the permitting agency to require offsets for each major modification at a major source to be calculated as the difference between the pre

modification actual emissions and pos t

- modification PTE.

As noted above, EPA does not agree that the CAA offset requirements are satisfied once an area has demonstrated RFP. The CAA requires that new and modified sources do not interfere with RFP, not merely that demonstrating RFP satisfies NSR offset requirements. As the General Preamble provides, the baseline for NSR offsets must be consistent with the emissions used in the plan for RFP. But there are independent offset requirements in the CAA that must be met. In particular, the permitting authority must require offsets for each major modification at a major source based on the difference between the pre

modification actual emissions and the post

- modification PTE. BAAQMD can include a provision that is consistent with th e EPA’s offset requi rement and limit it’s applicability to major modifications as defined in 40 CFR 51.165(a)(1)(v) . Alternatively, BAAQMD can provide the difference in the amount of offsets required through its offset equivalency tracking system similar to the program approv ed in the San Joaquin nonattainment NSR rules (Rule 2201).

2.4.5. Comment: BAAQMD stated:

To the extent that EPA finds any aspect of the Air District’s offset requirements deficient with respect to satisfying the federal NSR program’s requirements, EPA should c larify that the Air District can address any such deficiencies by incorporating EPA’s own offsets requirement in Appendix S by reference. Incorporating elements of EPA’s own regulations that EPA uses to implement the Clean Air Act’s NSR requirements when i t does permitting at the federal level is an appropriate method for state agencies to implement their own NSR programs at the state level, and EPA has repeatedly approved SIP rules utilizing this approach. EPA should confirm that the Air District can use t he same approach for satisfying the federal NSR program’s offsets requirements

– i.e., by incorporating by reference the requirement in Condition 3 of Section IV.A. of Appendix S, which provides that offsets must beBay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 16 provided “such that there will be reason able further progress toward attainment of the applicable NAAQS.

Response: EPA disagrees. The provisions contained in Appendix S are not intended to satisfy the requirements for a SIP approved NSR program implementing the requirements

of 40 CFR 51.165. A ppendix S only applies to new and modified major sources when an area is newly designated nonattainment area for a specific pollutant. Appendix S no longer applies when EPA approves an NSR program for the area into the SIP. While Appendix S currently appli es to sources emitting PM 2.5 in the Bay Area (because the area was newly designated nonattainment for this pollutant) the District is required to obtain SIP approval of a NSR program that meets the requirements of 40 CFR 51.165, not Appendix S.

2.4.6. Comment: The APCO of the Sacramento Metropolitan Air Quality Management District (SMAQMD) commented that BAAQMD mischaracterized SMAQMD’s New Source Review rule. SMAQMD does not agree that EPA Region IX is “changing its position” regarding what is required for appr oval of districts NSR programs. SMAQMD also disagrees with BAAMQD’s statements that “in many cases” SMAQMD rules allow potential to emit (PTE) to be utilized in the offset calculation procedure for major

modifications instead of actual emissions.

SMAQMD s tated that its Rule 214 (Federal New Source Review) was approved by EPA allowing major modifications to use pre

- modification PTE instead of actual emissions in offset calculations only in very limited circumstances. EPA accurately concluded that

these limi tations are reasonable restrictions. In fact, no sources have utilized the limited calculation procedure since Rule 214 was adopted five years ago

.

Response: EPA acknowledges and agrees with SMAQMD’s response regarding the rule language and implementation of Rule 214.



### 2.5. P ROVIDING 

### E MISSION 

### R EDUCTION 

### C REDITS FOR 

### S HUTDOWN OF 

### F ULLY



### O FFSET 

### U NITS

2.5.1. Comment: BAAQMD asserted that District’s NSR rules provide that a “fully offset” source (i.e., a source for which offsets have been provided for the full amount of the source’s maximum permitted emissions or PTE) can claim ERCs based on the full amount of its pre

- shutdown PTE when it is shut down or curtailed. BAAQMD also stated

since its current EPA

- approved SIP allows a “fully offset” source to claim ERCs based

on the full amount of its pre

- shutdown PTE when it is shut down or curtailed, because it was approved by EPA in the past for BAAQMD’s SIP. BAAQMD stated this is “appropriate from an air quality perspective because it returns the situation to where it

was before t he source was ever built: there are no longer any emissions from the source, which was the situation before it was built; and the ERCs that were provided go back to the facility, which was the situation before the source was built.”Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 17 Response: This comment asserts that EPA should approve rules that allow offsets to be generated from the source’s PTE rather than actual emissions because (1) EPA previously approved such a rule in 1999 and (2) doing so will not worsen air quality, i.e. it will return the air q uality to status quo before the source generating offsets was built and operated. The comment does not provide any authority supporting the claim that the CAA allows offsets to be generated from a source’s PTE. In fact, CAA 173(c)(1) provides that the

offs et shall be “an equal or greater reduction, as applicable, in the actual emissions . . . ” The comment also does not provide any justification for EPA depart from our interpretation that 40 CFR 51.165(a)(3) requires offsets to be generated by actual

emissio ns reductions.

EPA explained in its TSD that the requirement for offsets to be generated from actual emissions rather than PTE is only applicable to offsets that are being used to allow construction of new major sources or major modifications. The Distric t may offset its minor sources and minor modifications differently. BAAQMD, consistent with the California Clean Air Act, does not distinguish between major modifications and major sources in the same manner as the federal CAA. During the 1990s, EPA tried to accommodate these discrepancies between the state and federal statutes. During the 17 years since our approval of the BAAQMD NSR program, we have gained experience establishing that EPA must apply the federal major source requirements based on the

feder al CAA. Thus, our prior accommodation of the differences between the state and federal statutes could not be continued. Our approval of NSR programs for nonattainment areas throughout California is now focused on ensuring that the federal offset requiremen ts are applied to new major sources and major modifications, even for those NSR programs for which we had approved provisions that were contrary to the federal CAA in the earlier years after the 1990 amendments.

BAAQMD’s second point is that air quality i n the area will not worsen based on generating offsets from a source’s PTE. As we have discussed above, the requirement for NSR offsets is independent of RFP or showing that an area’s air quality is not becoming worse. We have also noted that BAAQMD may re quest redesignation to attainment to avoid implementing federal offset requirements. Because BAAQMD remains nonattainment for certain pollutants, its NSR program is required to implement the federal requirements for offsets that will be used to construct n ew major sources and major modifications. These offsets are required to be generated from reductions in actual emissions. See CAA Section 173(a) and 40 CFR 51.165(a)(3).

2.5.2. Comment: CCEEB stated that “ EPA’s proposed actual

- to

- PTE calculation is a departure

f rom its own federal program, which uses an actual

- to

- allowable emissions calculation

for offsets. ”

Response: EPA disagrees. EPA’s criteria contained in the federal regulations for reviewing NSR SIP programs in 40 CFR 51.165 has not changed with respect t o calculation of ERCs generated from a project. BAAQMD’s NSR rules allow ERCs to be

calculated based on a PTE

- to

- PTE calculation method (i.e., the PTE before and after the change). EPA requires that BAAQMD’s SIP comply with the federal regulations. UsingBay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 18 a n “actual

- to

- allowable emissions calculation” is generally the same as the actual to PTE calculation required by federal regulations; it is not the PTE

- PTE calculation in the BAAQMD rules.

2.5.3. Comment: BAAQMD asserts that EPA’s NSR regulation governing this i ssue in 40 CFR 51.165(a)(3) explicitly authorizes the District to use permitted emissions as the baseline for determining the amount of ERCs available from fully offset sources. BAAQMD stated that 40 CFR 51.165(a)(3) provides that the default requirement f or setting the baseline for calculating ERCs is to use the source’s PTE. BAAQMD also stated that this regulation “clearly states that an actual emissions baseline is required only in two specific circumstances: (i) where the demonstration of reasonable fur ther progress (RFP) and attainment is based upon the actual emissions of sources in the area; and (ii) where there is no emissions limitation in the SIP for a particular source or source category.” BAAQMD further states that neither of these circumstances apply to the Bay Area’s NSR program, and so the default rule applies, and that the amount of ERCs available may be

based on the source’s PTE. 9

Response: EPA disagrees that we may approve the BAAMQD PTE to PTE calculation for generating offsets . The Distri ct’s comment indicates that it is not required to use an actual emissions baseline because BAAQMD does not submit a demonstration of RFP based on actual emissions. As discussed in our TSD, BAAQMD is somewhat unusual because its nonattainment planning requi rements are suspended for both the ozone and

PM 2.5 NAAQS. Therefore, BAAQMD is not required to submit a RFP demonstration. This circumstance does not negate the requirement to require a reduction in actual emissions (not PTE) for offsets to be used in the major source nonattainment program. The BAAQMD emission inventories are based on actual emissions. 10 If BAAQMD were required to submit a RFP demonstration, it would be based on actual emissions. Therefore, the fact that BAAQMD is not required to make this p articular submission does not mean its major source offsets can be based on reductions in PTE.



### 2.6. O FFSET 

### R EQUIREMENTS FOR 

### SO 2 AS A 

### PM 2.5 

### P RECURSOR

2.6.1. Comment: BAAQMD commented that EPA cannot require nonattainment offset provisions for SO 2 because the San Fra ncisco Bay Area is not designated as

nonattainment for SO 2 , and because the District believes SO 2 does not significantly

contribute to the formation PM 2.5 in the area per CAA Section 189(e).

9 BAAQMD has not been not required to submit a RFP demonstration for the 1

- hour ozone, 8

- hour ozone, an d 24

- hour PM 2.5 NAAQS because of Clean Data Determinations for 1

- hour ozone and 24

- hour PM 2.5 (see 69 FR 21717 (April 22, 2004) and 78 FR 1760 (January 9, 2013) and because the San Francisco Bay Area is a marginal

nonattainment area for the 8

- hour ozone NA AQS. Thus, the requirement for BAAQMD to submit certain planning elements, including a RFP demonstration, does not apply or is suspended.

10 68 FR 42174, 42175 (July 16, 2003)Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 19 Response: EPA disagrees with the District’s characterization of EPA’s requirements

. 40 CFR 51.165(a)( 1 )(xxxvii), which provides the definition for the term “Regulated NSR pollutant” specifies in paragraph (C)(2) that “Sulfur dioxide is a precursor to PM 2.5 in all

PM 2.5 nonattainment areas. ”

EPA notes that BAAQMD may submit a request for EPA to redesignate the Air District to attainment. If EPA redesignates the area to attainment, the District would no longer be required to apply the federal nonattainment NSR program to PM 2.5 or its precursors

.

2.6.2. Comment: BAAQMD state d that EPA’s analysis for determining that ammonia does not

contribute significant ly to PM 2.5 levels that exceed the NAAQS in the Bay Area is sufficient to support the same conclusion for all PM 2.5 precursors (i.e., NO
x and SO 2 ). BAAQMD assert ed that if the re are no PM 2.5 levels that currently exceed the NAAQS, then by definition there can be no sources of any PM 2.5 precursors that contribute significant ly to any PM 2.5 levels that exceed the NAAQS. BAAQMD base d this assertion

on EPA’s discussion in the TSD r egarding the agency’s 2013 Clean Data Determination

for the San Francisco Bay Area for the 2006 24

- hour PM 2.5 NAAQS (TSD at Section 7.3.28, p. 125 (citing 78 FR 1760 (Jan. 9, 2013))

.

Response: For the reasons stated above, EPA disagrees. A determination that SO 2 does not contribute significantly to any PM 2.5 levels exceeding the PM 2.5 NAAQS requires a separate analysis . This analysis is required to determine if major stationary sources of a particular precursor can be exempted from nonattainment NSR requi rements per section 189(e) . Although EPA’s 2013 Clean Data Determination means that the Bay Area has

attained the 2006 24

- hour PM 2.5 NAAQS and suspends certain planning requirements for the area, BAAQMD is still required to meet the nonattainment NSR SIP r equirements

such as LAER and offsets for PM 2.5 and its precursors, VOC, SO 2 and NO
x , until BAAQMD requests and EPA re

- designates the Bay Area to attainment for PM 2.5

.

2.6.3. Comment: BAAQMD requested that EPA clarify that the PM 2.5 offset requirements apply onl y to directly

- emitted PM 2.5 , and not to NO
x and SO 2 as PM 2.5 precursor s

. BAAQMD also assert ed that EPA cannot find that there are any major sources of SO 2 or NO
x that can contribute significantly to any PM 2.5 levels in excess of the PM 2.5 standard

in the B ay Area, where it has determined that there are in fact no PM 2.5 levels in the Bay

Area that exceed the standard.

Response: EPA disagrees. See our responses to C omments 2.6.1 and 2.6.2.



### 2.7. V ISIBILITY 

### A NALYSIS FOR 

### S OURCES THAT 

### M AY 

### I MPACT 

### F EDERAL


### M ANDATORY 

### C LASS 

### I A REA S

2.7.1. Comment: BAAQMD and CCEEB commented that although EPA’s visibility regulatio ns at 40 CFR 51.307(b) require an analysis of visibility impacts on Class I areas

for any new major source or major modification project that “may have an impact onBay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 20 v isibility” in a Class I area , the regulations do not specify how States need to define what projects “may have an impact” for the purpose of triggering this requirement.

Response: BAAQMD is correct that EPA’s visibility regulations do not specify how a

S tate agency determines if a new major source or major modification “may have an impact on visibility” in a federal mandatory Class I area. In general, because a visibility impact analysis may be based on a number of factors, the applicant of a new major so urce or major modification must make a determination on a case

- by

- case basis in consultation with the applicable Federal Land Manager (FLM)

. EPA is aware that the FLMs use the Federal Land Manager’s Air Quality Related Workgroup guidance (FLAG) for

determi ning when a project may affect a Class I area. 11 EPA has also provided guidance

on this issue in a letter to the North Carolina Department of Justice and the North Carolina Department of Environment and Natural Resources regarding visibility impact

assessme nt requirements. 12 BAAQMD may consider referencing the FLAG guidance or incorporating the procedures from EPA’s letter to North Carolina into its rule for new major stationary source s or major modifications. EPA notes that we cited the rule as

deficient bec ause it limited the source ’ s responsibility to determine if a project “may have any impact on visibility” to projects that are located within 100 km of a Class I area. The District may choose to require all major sources within 100 km to perform an analysi s of visibility impacts and use these guidance documents to make a determination of the need for such analysis for sources located at distances greater than 100 km from the mandatory

Class I area. 13

2.7.2. Comment: BAAQMD and CCEEB stated that EPA’s own guidance recommends using a

100

- km proximity test to determine whether or not to require a new or modified source to conduct a visibility impact analysis for Class I areas. BAAQMD stated that this policy is on EPA Region 9’s web site for addressing the visibility im pact analysis requirements

. 14
BAAQMD stated that, based on this guidance, the District revised its Class I Area visibility protection requirement in Section 2

- 2

- 401.4 in its NSR rules to provide that any new major source or major modification located within 100 km of any Class I Area must prepare an analysis of potential visibility impacts in that Class I Area for consideration by

the area ’s FLM

.

11 See Federal Land Manager’s Air Quality Related Workgroup (FLAG) Phase I Report (December 2000) and Federal Land Manager’s Air Quality Related Workgroup (FLAG) Phase I Report

– Revised (October 2010).

12 See letter (with attachments) from Beverly H. Banister, EPA Region 4, to Kathleen Waylett, North Carolina Department of Justice, and Sheila C. Holman, North Carolina Department of Environment and Natural Resources dated April 16, 2013.

13 See John S. Seitz Memo entitled Clarification of Prevention of Significant Deterioration (PSD) Guidance for Modeling Class I Area Impacts, dated Octobe r 19, 1992.

14 BAAQMD’s comments reference the webpages http://www.epa.gov/region9/air/maps/r9_clss1.html and http://www.epa.gov/r egion9/air/maps/flm.html . (We note that these web pages have been changed to https://www3.epa.gov/region9/air/maps/r9_clss1.html and https://www3.epa.gov/region9/air/maps/flm.html as of the date of this Response to Comments document).Bay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 21 Response: We acknowledge that the EPA Region 9 website for federal mandatory Class

1 areas and Class I FLMs con tained an inaccurate statement at the time of the public comment period for our rulemaking proposal

. We are now clarify ing that 40 CFR 51.307 does not specifically require a 100 km distance for review of any new major stationary source or major modificatio n located within that distance of a federal mandatory Class I area. It requires that the SIP provide for the review of any new major stationary source or major modification that may have any impact on any federal mandatory Class I area, regardless of wheth er it is located more or less than 100 km of a Class I area. We suggest that BAAQMD follow the recommendations in our response to C omment 2.7.1.

2.7.3. Comment: BAAQMD and CCEEB disagree with EPA’s proposed disapproval of the 100 km threshold requirement for det ermining when a visibility impact analysis is required. BAAQMD commented that EPA has not specified any basis for finding that the District cannot use its 100 km threshold to satisfy 40 CFR 51.307(b)(2). BAAQMD stated that the 100 km threshold is fully sup ported as an appropriate means through which to implement Section 51.307(b)’s “may have an impact on visibility” requirement. CCEEB requested that EPA provide further guidance to clarify when and why the 100

km test is insufficient.

Response: BAAQMD’s 10 0 km threshold is a “bright line” threshold, and does not

account for certain situations that may affect a Class I area

. F or example, a source that will emit substantial visibility impairing pollutants located 102 km from a federal mandatory Class I area m ay impact that area

. Because the provisions of 40 CFR 51.307(b)(2) are required to apply to any major source or major modification project that “may have any impact on visibility”, inclusion of a “bright line” threshold to satisfy this requirement is not p ermissible. We recommend that BAAQMD consider following the suggestions in o ur response to C omment 2.7.1

.

2.7.4. Comment: BAAQMD stated that the only specific policy that EPA has ever provided in any EPA guidance document is the 100 km threshold that the Distri ct uses in Section 2

- 2

- 401.4.

Response: EPA disagrees. See our response to Comments 2.7.1 and 2.7.2.

2.7.5. Comment: BAAQMD commented that the FLAG guidance is not a required approach for implementing the “may have an impact” language in EPA’s visibility regul ations in Section 51.307(b) since EPA has not required other California air districts to use this guidance. BAAQMD states that EPA suggested looking at the Rule 1303 of the Sou th Coast Air Quality Management, and the District stated that because South Coas t requires a different approach in its rule than the one provided in the FLAG guidance document demonstrates that that guidance cannot be mandatory or required in order to satisfy Section 51.307(b). BAAQMD asserts that the 100 km distance threshold on EPA’ s website is the required approach.

Response: EPA disagrees. As provided in our responses to Comments 2.7

. 1 and 2.7.2 above, 40 CFR 51.307(b)(2) does not provide a required approach for determiningBay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 22 whether a project “may have an impact” on visibility in a federal mandatory Class I area. However, as provided in our response to C omment 2.7.3, the “bright line” distance

threshold of 100 km is not approvable because it might exclude sources that are outside

that distance

, but that may still have an impact on visibility in a Class I area. EPA does not agree with BAAQMD that our approval in 1996 of Rule 1303 for the South Coast Air Quality Management District indicates that the requirements of 40 CFR 51.307(b)(2) may not be mandatory. There are numerous factors to consider in evaluating the compliance of a particular rule with our regulations. Here, BAAQMD has exempted any source located beyond 100 km with the requirements of 40 CFR 51.307 creating a deficiency that must

be corrected.

2.7.6. Comment: BAAQMD requested t hat if EPA continues to believe that the 100 km threshold is not approvable under 40 CFR 51.307(b)(2), th at EPA explain what exactly Section 51.307(b)(2) requires, in EPA’s interpretation; provide a legal justification for that interpretation

, explain with specificity why the Air District’s rule does not satisfy the requirement

, explain the standard under which EPA will evaluate any revised approach in

a future submittal.

Response: See our response s to C omment s 2.7.1 and 2.7.2.



### 2.8. L EGAL 

### E FFECT OF 

### L IMITED 

### D I SAPPROVAL OF 

### F EDERAL 

### E NFORCEABILITY OF

THE 

### A IR 

### D ISTRICT 

### ’ S 

### NSR P ROGRAM 

### P ROVISIONS

2.8.1. Comment: BAAQMD request s that EPA confirm that when the agency finalizes a limited approval and limited disapproval the legal effect of this action is to make the Air

Distric t’s NSR rules as a whole part of the California SIP and federally enforceable under the CAA. BAAQMD request s that EPA clarify that the limited disapproval does not carve out any specific provisions in the Air District’s NSR rules and exclude them from

the District’s approved SIP NSR program or from federal enforceability under the CAA. The BAAQMD further request s EPA to confirm that “ the effect of any “limited disapproval” would be to approve Regulations 2

- 1 and 2

- 2 in their entirety, but to require

the Air District to adopt revisions to certain provisions to address any identified deficiencies and submit them for approval by EPA by a stated deadline. ”

Response: EPA agrees. This rulemaking action is a limited approval and limited disapproval because, while strengthening the existing SIP, the BAAQMD SIP submittal did not fully meet the CAA provisions regarding plan submissions and requirements for

nonattainment areas. The rule as written will become federally enforceable under the SIP. The limited disapprova l does not carve out any specific provisions in the Air District’s NSR rules and exclude them from the Bay Area’s approved SIP NSR program or from federal enforceability under the CAA

.

However, as the District correctly alludes to, the limited disapprova l action triggers an obligation for EPA to promulgate a Federal Implementation Plan (FIP) unless California submits and we approve SIP revisions that correct the deficiencies that triggered ourBay Area AQMD SIP Revision Submittal Response to Comments May 23 , 2016 Page 23 limited disapproval within two years of the final action

. F or certain deficiencies the limited disapproval w ill also trigger sanctions under CAA s ection 179 unless California submits and we approve SIP revisions that correct the deficiencies within 18 months of

final action. The limited disapproval does not affect in corporation of the Regulation 2, Rules 1 and 2 into the approved, federally enforceable SIP. 15

15 See Memorandum from John Calcagni to Air Program Directors (Regions I through X) re “Processing of State Implementation Plan (SI P) Submittals” dated July 9, 1992.